When discussing contracts and transactions, two terms that are frequently used are condition and warranty. These terms are used when a seller makes certain representations about a good with the intent of ultimately selling the good. The distinction between these two terms is not always clear to someone unfamiliar with both, but there are several key differences.
- Definition
When a contract is drafted regarding the sale of something, there are typically stipulations that refer to the nature and quality of the sold good. These are usually considered to be either conditions or warranties. A stipulation that is more important to the development of the contract is known as a condition while a stipulation of lesser importance in the development of the contract is considered a warranty. Essentially, in regard to a condition, the contract of sale would not be fulfilled without the condition being fulfilled, whereas with a warranty, the stipulation is only of secondary concern and is not of vital importance. The contract may be fulfilled without the warranty being fulfilled.
The formal definitions of both are found in Section 12 of the Sale of Good Act, which was written in 1930. The text of this Act details several things about warranties and conditions, including that a stipulation may exist as either. It also says that a condition is imperative or the contract may be denied. A warranty, however, is secondary to the primary purpose of the contract and the contract may not be renounced if the warranty is not met. There may still be a claim for compensation, or damages, though. Finally, this Act indicates that the determination of whether a stipulation exists as a condition or a warranty will depend upon the language of the contract. In this regard, a stipulation may be called a warranty in the contract, but still be a condition. These differences in the definitions of condition and warranty are the basis for the distinction between the two terms.
- Recourse for breaching
Within business law, a definition of a condition is a stipulation essential to the primary purpose of the contract, the breach of which gives rise to treat the contract as renounced. The definition of a warranty would be a stipulation collateral to the primary purpose of the contract, the breach of which gives rise to a claim for reimbursement but not to a right to refuse the goods and renounce the contract. When a breach of a condition occurs, the injured party may also claim compensation in addition to repudiating the contract and with a breach of warranty, there can only be a claim for compensation.
- Interchangeability
When a breach of either a condition or warranty occurs, the path to move forward must be determined. With respect to this, there are more options with a breach of condition than a breach of warranty. A breach of condition may be approached as one of warranty under certain circumstances, but a breach of warranty can never be approached as a breach of condition. There are several circumstances that would allow a breach of condition to be considered as a breach of warranty. These include when a there is a voluntary waiver of the condition. This require that the buyer elects to treat the breach as one of warranty and is voluntary in nature and depends solely on the will of the buyer. If the buyer does not repudiate the contract, it is presumed that he has waived his right to do so. This scenario may also occur when the buyer has accepted the goods. This occurs when he indicates that he has accepted the goods, they have been delivered and have not been returned or refused within a reasonable amount of time. Under these circumstances, a breach of condition would be considered a breach of warranty and only reimbursement may be claimed. The final circumstance occurs when fulfillment of the condition is determined by law as impossible to fulfil.
- Ability to be implied
A condition can be either express or implied. An express condition is one that the parties to the contract include in the contract language by stating that performance is conditional upon one or several events occurring. Express conditions are easy to detect and are very valuable in protecting a party from unforeseen circumstances that may prevent their performance. These conditions are commonly found in homebuying contracts.
A condition may also be implied, further, it may be implied-in-fact or implied-in-law. Those that are implied-in-fact are similar to express conditions in that the events must occur and that the parties to the contract are aware of this, but they are different because they are not stated expressly in the contract. They can only be inferred from the terms of the contract, the nature of the sale and the conduct of the parties. Those that are implied-in-law conditions, also known as construction conditions, are different from express conditions and implied-in-fact conditions in two primary ways. First, the condition may not necessarily be contained within the contract language, or be inferred from it. And secondly, it only need be substantially performed, rather than completely. This is because these situations occur when the courts are trying to seek a fair and just result.
Generally speaking, warranties only exist in an expressed condition, although there are some exceptions. And when they are implied, it is generally a condition of an expressed warranty. For instance, if there is a warranty on a new car, the language of that warranty is expressed, but it may be implied that the vehicle would only be used under normal conditions. This is much more limited than a condition’s ability to be implied.