Putnam's Handy Law Book for the Layman

by Albert Sidney Bolles

With respect to warranties the Sales Act provides that when the sale is made on a condition which is not performed, the party for whose benefit the condition was made may refuse to proceed with the contract or sale, or may waive performance of the condition. The nonperformance may be treated as a breach of warranty. Thus time may be an important element in a contract, and an agreement to deliver goods by a specified time is a condition or warranty. And if there is a delay in delivering, unless it may be a trifling one, the buyer may refuse to accept the goods.

A common condition in more recent times qualifying the obligation of the buyer is that the goods shall be satisfactory to him. By this is meant the satisfaction of the buyer after the exercise of an honest judgment. In New York and some other states a somewhat different rule prevails. Unless the things covered by the contract involve personal taste, the contract imposes on the seller the requirement only that a reasonable man would be satisfied with performing it, thus not leaving the question of its satisfactory performance entirely to the buyer. This, Williston says, is an arbitrary refusal of the court to enforce the contract that the parties made and seems unwarranted.

Warranties may be express or implied. By the Sales Act any affirmation of fact or any promise by the seller relating to the goods is an express warranty if the natural tendency of such affirmation or promise is to induce the buyer to purchase the goods, and if the buyer purchases the goods relying thereon.

In a contract to sell or a sale, unless a contrary intention appears, there is an implied warranty on the part of the seller that in the case of a sale he has the right to sell the goods, also, in the case of a contract to sell them, he will have the right to do this at the time of passing the property. More briefly the seller warrants the title to the property which is the subject of sale. Whether the seller is in or out of possession of the property, he can by appropriate words sell such interest as he may have therein. But persons also sell property not owned by themselves by authority of others or of the law. Unless they expressly warrant the title they are not liable for lack of it. Sales of this nature are made by a sheriff, or other judicial officer, auctioneer or mortgagee, assignee in bankruptcy, executor or administrator, guardian, or simply an agent.

When there is a contract to sell, or a sale of goods by description, there is an implied warranty that they shall correspond with the description; and if the contract or sale is by sample, as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if these do not also correspond with the description. The Sales Act contains elaborate provisions relating to implied warranties of the quality of things sold. There is no implied warranty of the quality or fitness of goods for any particular purpose unless the buyer makes known to the seller the purpose for which they are required, and he also relies on the seller's judgment of their fitness for the use he intends to make of them. Again, if the buyer has examined the goods there is no implied warranty of the defects which such an examination ought to have revealed. An implied warranty as to quality or fitness for a particular purpose may also be annexed by the usage of trade. There is an implied warranty that the bulk shall correspond with the sample in quality, and that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

When does the transfer of ownership occur? When there is an unconditional contract to sell them the property therein passes to the buyer on the making of the contract, regardless of the time of payment or delivery or both. When goods are delivered to the buyer "on sale or return," giving the buyer an option to return them instead of paying the price, the property passes to the buyer on delivery, but the property may go back to the seller by returning or tendering the goods within the time specified in the contract. When the goods are delivered to the buyer on approval or on trial or other similar terms, the property passes to the buyer, (1) when he signifies his approval or acceptance of them, (2) or if he retains them beyond the time fixed for their return, or if none has been fixed, beyond a reasonable time.

It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, the seller, therefore, must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be willing and ready to pay the price in exchange for the possession of the goods.

Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer, is a question depending in each case on the contract, express or implied, between the parties. Apart from contract, or usage of trade to the contrary, the place of delivery is the seller's place of business, if he have one, and if not, his residence. Again, when by the contract of sale of goods no time for sending them has been fixed, the seller must send them within a reasonable time.

Vast quantities of goods are bought and sent forward to buyers, which are not to be delivered until payment. The Sales Act provides that where goods are shipped and by the bill of lading that is given for them they are to be delivered to the order of the buyer or of his agents, but possession of the bill of lading is to be retained by the seller or his agent, he thereby reserves his right to the possession of the goods as against the buyer. Very often a buyer of wheat, for example, will draw a bill of exchange on his principal or company living in the place where the goods are to be delivered and will have it discounted by a bank using the money to pay the seller. The wheat may be in an elevator, or it may be in transit. In either case the bank receives a document, elevator receipt, or bill of lading, and thus becomes the real owner of the wheat, and can control it afterward until it is actually delivered to the consignee, whoever he may be. This is the bank's security for making the loan. The bank sends forward the bill of exchange to its correspondent bank in the place where the consignee lives and the wheat is to be delivered with instructions to deliver it when the bill is paid.

With respect to speculative sales of stock, so well known by every one, a contract, says Williston, giving one party or the other an option to carry out the transaction or not at pleasure, is not a wager, unless forbidden, as in some states is done by statute. A contract to sell goods in the future, which the seller does not own at the time is, aside from the statute, not only legal but common. "The test," says Williston, "adopted in the absence of statute, distinguishes between contracts to buy and sell in which the actual delivery of the property is contemplated, and similar contracts in which it is contemplated merely that a settlement shall be made between the parties based on fluctuations in the market price. A contract of the former kind is legal; one of the latter kind is a wagering contract, and illegal."