Sect. 10. Warranties. Conditions in Suspensive and resolutive. right to claim damages in diminution or extinction of the price.1 The term "warranty" is used in the Act in a peculiarly English sense. It is defined as regards England and Ireland as "an agreement with reference to goods which are the subject of a contract of sale, but collateral to the main purpose of such contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated."2 In Scotland, however, the word "warranty" is generally used in its natural sense of guarantee (i.e. condition), and it is practically so defined as to Scotland in Sect. 62 (1).3 Conditions in Scotland are divided into "suspensive' and "resolutive," corresponding to what are termed in England conditions "precedent" and "subsequent." 4 A suspensive condition holds the sale in suspense until the condition is fulfilled. A resolutive condition implies that a sale has taken place, but that in a certain event it will be resolved or "dissolved," and the subject of sale become unsold, res fit inempta. In the event of the sale 1 Sects. 11 (2) and 53 (1). 2 Sect. 62 (1). Anson points out no less than six different meanings of the word "warranty" in English law (Contracts, 6th ed. p. 303). The definition given above is the one usually recognised in connection with sale. It is founded on the judgment of Lord Abinger in Chanter v. Hopkins (1838), 4 M. & W. 399, where warranty is distinguished from condition. Both are parts of the contract, but a condition is fundamental and essential, while a warranty is only collateral. But both condition and warranty are to be distinguished from mere representation, which has no effect on the contract of sale except where the representation is fraudulent. The use of a particular word will not, however, affect the substance of the thing intended. "A stipulation may be a condition, though called a warranty in the contract [Sect. 11 (1) (b)], and in like manner a representation may amount to a warranty. When a contract is entered into between two parties every representation made at the time of entering into the contract may or may not be intended as a warranty or as a promise that the representation is true." -Per Bowen, L.J., in Bentsen v. Taylor, Son, and Co. [1893], 2 Q. B. at p. 281. 3 The use of the word "warranty" in Sect. 12 (2) is exceptional in the case of Scotland, at least in connection with the sale of goods. 66 In the bill as introduced in 1891 the interpretation clause bore, "A condition includes a resolutive as well as a suspensive condition." In Committee of the Lords the words were changed to "condition means a condition precedent," but at the report stage in 1892 all reference to "condition' was deleted from the clause. 5 Stair, i. 14. 3 to 5; Bell's Com. i. 256 et seq.; M. P. Brown, pp. 32 et seq. and 427 et seq. As an example of a resolutive condition, see Graham v. Wilson (1836), 14 Sh. 866. In Macartney v. Macredie's Creditors (1799), being resolved, the rights of parties will be extricated accord- Sect. 10. ing to agreement, or failing agreement by restoring each party as nearly as possible to his former position. The rights of third parties are affected differently by the two kinds of conditions. A suspensive condition will be good against third parties acquiring a title from a person to whom the property in the goods has not passed, and who is consequently not the true owner.1 A resolutive condition, on the other hand, does not prevent the buyer from giving a title to others which will prevent the seller from reclaiming the property.2 If a condition is truly suspensive of the sale it will not be affected by Sect. 25 (2). There is no sale pending the condition, and therefore no buyer to whom the terms of the section referred to can be applied. Thus, under Sect. 18, Rule 4, where goods are delivered to the buyer on "approval" or on "sale or return," the property does not pass till the occurrence of the events mentioned in the section, which in each case is practically a condition suspensive of the sale. It is true that one of the parties will be bound irrevocably in the event of the other exercising the option conferred upon him. If, however, the option is not exercised, not only does the property not pass, but both parties are as free as if the contract had never been entered into.1 There may, however, be a condition, not suspensive of Conditions not Mor. Sale, App. No. 1, the Lord Ordinary (Meadowbank) thought the condition resolutive, but the Court altered and found it suspensive. The final judgment was, however, founded on an erroneous view of stoppage in transitu. The delivery was to the buyer himself, hence there could be no transitus. More (notes to Stair, lxxxviii.) views the condition in Macartney's Case as resolutive. 1 See Sect. 21. But the holder of the goods, if a "mercantile agent," will be subject to Sect. 2 of the Factors Act, 1889 (52 & 53 Vict. c. 45). 2 Stair, i. 14. 4 and 5; Bankton, i. 19. 29 et seq.; Ersk. iii. 3. 11; M. P. Brown, p. 427 et seq. Where delivery has been obtained under a resolutive condition the condition is not effectual against the buyer's creditors. See Ersk. iii. 3. 12, and Ivory's note, p. 648; Pothier, Oblig., No. 224; Bell's Com. i. 259,260; Bell's Prin., Sect. 110. In Allan and Co.'s Trustee v. Gunn and Co. (1883), 10 Ret. 997, a resolutive condition of the nature of a pactum de retrovendendo was held effectual against creditors of the buyer, but the case is of doubtful authority. See post, p. 278. 3 The sub-section referred to is taken almost verbatim from Sect. 9 of the Factors Act 1889 (52 & 53 Vict. c. 45), extended to Scotland by the Factors (Scotland) Act 1890 (53 & 54 Vict. c. 40). See Coм., Sect. 18, Rule 4 post, p. 94. suspensive of the sale. Sect. 10. Stipulations as to time of payment. Time of payment in connection with continuing contracts. the sale, but merely suspending the passing of the property, as to which see COM., Sect. 17 post, p. 83. 1 This section deals with stipulations as to time of payment, and is founded on the English case of Martindale v. Smith (1841). The law of Scotland is not changed. Unless expressly so agreed, payment of the price upon delivery of the goods, or upon a day named, is neither a condition of the sale nor of the passing of the property.2 But, as we have seen, the stipulation may be so expressed as to be suspensive, and such a stipulation may also be imported into the contract by usage of trade.1 3 The question whether time of payment is an essential condition may arise in connection with a continuing contract. Thus where coal was to be delivered in monthly instalments, and the price settled monthly, it was held that the sellers were not bound to continue deliveries into another month while the price of the deliveries for the previous month remained unsettled. "The completion of the monthly delivery," says Lord Justice-Clerk Moncreiff," and the obligation to pay the monthly price, were in this contract concurrent, both from its general import and because it was plainly contemplated that the sellers, who were not coalmasters, were to be assisted in their monthly deliveries by the settlement of the price from time to time. It therefore 1 1 Q.B. 389. 2 In Linn v. Shields (1863), 2 Macp. 88, the contract, as interpreted by the Court, was "cash on delivery.' Cash not having been paid on the delivery of a small portion of the goods, the seller maintained that his obligation to deliver the remainder was at an end; in other words, that in his option the contract was rescinded. This plea was negatived on the ground that the mode and time of payment had not been made an express condition. Lord Justice-Clerk Inglis held that the seller had mistaken his position. (2 Macp. at p. 93). The mere fact that payment by draft forms a term of the contract, and that the buyer has not accepted the seller's draft, will not prevent the property passing unless a jus disponendi (see Sect. 19) has either been reserved in the contract, or is to be inferred from the circumstances. Compare Clarke and Co. v. Miller and Sons' Trustee (1885), 12 Ret. 1036, with Brandt and Co. v. Dickson (1876), 3 Ret. 375. Time of payment was, however, held to be of the essence of the contract in Young v. Dunn (1785), Mor. 14191; Hills v. Buchanan (1785), Mor. 14200; Affd. H. of L. (1786), 3 Pat. App. 47; Brodie v. Todd and Co. (20th May 1814), F.C. 3 Stair, i. 14. 4; Ersk. iii. 3. 11; Bell's Com. i. 149. See also Sect. 19 as to reservation of jus disponendi. 4 E.g. Turnbull v. M'Lean and Co. (1874), 1 Ret. 730. cannot be said that the time of payment was less of the essence Sect. 10. of the contract than the payment itself." 1 should immediately to time other Stipulations as to time other than time of payment are Stipulations as entirely matter of construction. "Where a purchaser than time of means to make it an essential condition of his bargain that payment. certain things should be done by a given day, he must take care to express this condition in the most distinct terms, and on failure to fulfil the condition he declare his bargain to be at an end." 2 (1877) a provision of the contract that rice was to be shipped during the months of March and [or] April" was held to import an essential condition of time, so that rice shipped during February did not fall under it. In giving judgment in the Divisional Court Blackburn, J., said: "It was argued, or tried to be argued, that it was immaterial when the rice was shipped . . its being shipped at another and a different time, being (it was said) only a breach of stipulation which could be compensated for in damages, but I think that that is quite untenable.' This judgment was reversed in the Court of Appeal, but was restored in the House of Lords." 4 11.—(1.) In England or Ireland— Sect. 11. (a.) Where a contract of sale is subject to any WHEN CONcondition to be fulfilled by the seller, the 1 Turnbull v. M'Lean and Co. (1874), 1 Ret. 730, at p. 738. See also Cом., Sect. 31 post, p. 152, and cases there discussed. 2 Per Lord Balgray in Raeburn v. Baird (1832), 10 Sh. 765. The condition founded on was held not essential in Raeburn v. Baird, supra, and in Forbes v. Campbell (1885), 12 Ret. 1065; but it was held otherwise in Hannay v. Stothert (1788), Mor. 14194; Robb v. Cruickshank (1840), 2 D. 988; Colvin v. Short (1857), 19 D. 890; M'Bride v. Hamilton and Son (1872), 2 Ret. 775. See Bell's Com. i. 258, and remarks of Lord Shand in Grieve, Son, and Co. v. Konig (1880), 7 Ret. 521, at p. 524. 32 App. Cas. 455. The circumstances of the Scottish case, Whitson v. Neilson and Co. (1828), 6 Sh. 579, bear a certain resemblance, but the specialties fully justified the finding of the Court that the seller's obligation as to delivery had been implemented. 1 Q.B.D. at p. 480. 62 Q.B.D. 112. 7 2 App. Cas. 455. See especially per Lord Cairns at p. 463, and see also Reuter v. Sala (1879), 4 C.P.D. 239, per Cotton, L. J., at pp. 246, 249. E DITION TO BE Sect. 11. buyer may waive the condition, or may elect to treat the breach of such condition as a breach of warranty, and not as a ground for treating the contract as repudiated. (b.) Whether a stipulation in a contract of sale is a condition,(a) the breach of which may give rise to a right to treat the contract as repudiated, or a warranty," the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the con tract. (c) A A stipulation may be a condition, though called a warranty in the contract. (c.) Where a contract of sale is not severable, and the buyer has accepted the goods, or part thereof; or where the contract is for specific goods, the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of the contract, express or implied, to that effect. (2.) In Scotland, failure by the seller to perform any material part of a contract of sale is a breach of contract, which entitles the buyer either within a reasonable time after delivery to reject the goods. and treat the contract as repudiated, or to retain the goods and treat the failure to perform such material (i) S |