IMPLIED TERM

IMPLIED TERMS.

Stipulations in the contract may be conditions or warranties depending on the construction of the contract despite being called otherwise.

Implied Terms.

      Implied terms applies only when the parties have not excluded or modified them (Sec 62)

      provided by sec 14 to sec 17 of SoGA.

      1. Title.

      2. Quiet possession of the goods.

      3. Unencumbered goods.

      4. Correspond with description.

      5. Fit for buyer’s purpose.

      6. Merchantable quality

      7. Sale by sample.

1. Title.

Sec 14(a) requires the seller to have the rights to sell the goods which is based on the rule - Nemo dat quod non habet - one cannot gives what one does not have.

Breach of term will entitled the buyer to repudiate the contract and recover the price in full even though he has used the goods.

ROWLAND v. DIVALL

Divall bought a motorcar and later resold it to Rowland. Rowland repaired and painted it, and sold it to Colonel Railsdon. It later appeared that the person who sold it to Divall had stolen the car from the true owner. Rowland refunded to Railsdon the price paid in that contract, and sought to recover the price paid to Divall, being £334 only. The car was in Rowland’s possession for about two months, and in the Colonel’s possession for about two months.

The first instance judge held that, because the car had been in the possession of Rowland and the Colonel, there had been no ‘total failure of consideration’, and the price paid to Divall was therefore not recoverable in an action for money had and received.

On appeal it was decided that there has been a total failure of consideration, that is, the buyer has not got any part of what he paid for – property.  The fact that he had possession is irrelevant. It is also irrelevant that the buyer has used the car. The buyer accepted the car under the representation of the seller that he had a right to sell. The seller had no such right.  He cannot say the buyer nevertheless ‘had a benefit'. The buyer got nothing of what he was entitled to receive, namely, title and the right to possession. Therefore notwithstanding that he had the use of the car, the consideration had totally failed, and he was entitled to get the purchase money back.

2. Right to enjoy quiet possession of the goods.

Sec 14 (b) provides buyer shall have an enjoy quiet possession of the goods. This is a warranty rather than a contract. The term is provided to protect the buyer from unnecessary claims from any third party or the seller himself.

3. Free from encumbrance.

Sec 14 ( c) provides goods must free from any encumbrance in favour of any third party in form of charge or mortgage. To avoid the buyer liable the liability of the seller.

STEINKE v EDWARDS (1935)

C purchased a car from B and then sold to D. Without the knowledge of the parties involved, the car’s road tax had not been paid yet by the previous owner, A. The car was forfeited by Government. D had to pay the road tax to get the car back and he claimed the money of the road tax.

Held – there was a breach of implied warranty that the car must free from encumbrances. Therefore D could get his money from C who also entitled to get from B and B also entitled to claim from A.

4. Correspond with description.

            - Sec 15 - implied condition.

            - absolute condition - latent defect not a defense

            - covers sale of unascertained goods and sale of specific goods from catalogue or mail order

ARCOS LTD v E.A. RONAASEN & ORS [1933] AC 470

Staves of ½ inch thick were ordered. Only 15% conformed with the requirement and the balance were nearly less than 9/16 inch thick. Despite the fact that the goods were reasonably fit for their purpose.

Held – the buyers were entitled to reject them for failing to correspond with contract description.

BEALE V TAYLOR (1967)

The seller advertised his car as “Herald Convetible, white, Year 1961”. The purchaser made an inspection before deciding to buy the car. After purchasing he revealed that the car was not 1961 model, only the back portion was 1961’s model and the front portion was older model.

Held – Eventhough the purchaser had made inspection, the seller still breached the implied terms on the description because the purchaser still relied on the description given by the seller when making decision to purchase. The purchaser still had rights to terminate the contract and to claim damages.

ASSOCIATED METAL SMELTERS v THAM CHEOW TOH [1971] 1 MLJ 271

The defendants agreed to sell a metal melting furnace to the plaintiff and had given the undertaking that the furnace will have a temperature of at least 2600 degrees Farenheit. The furnace supplied by the defendants did not meet the required temperature.

Held – The failure on the part of the defendants to supply a furnace which would meet the required temperature constituted a breach of the condition of the contract entitling the plaintiffs to treat such breach as a breach of warranty.

5. Fit for buyer’s purpose.

            - the common law rule is -caveat emptor or let the buyer beware.

            - if the buyer does not exercise prudence - he have to bear the consequence.

            - Sec 16 - no implied warranty or condition as to the fitness or fitness of goods supplied under the contract of sale.

            - Exception :

            - sec 16 (a):

•          When there’s disclosure, express or implied of the purpose for which the goods is bought.

•          The buyer is relying on the seller’s skills or judgement.

•          The goods are of a description which is in the course of the seller’s business to supply

•          If the goods are specific - not bought under their patent or trade name

Cases:

CAMEL LAIRD v MANGANESE BRONZE & BRASS CO LTD [1934] AC 402

There was a contract by A to build a propeller for B in accordance with B’s specifications and design and to fit a particular ship and its engine. But details as to the thickness of the blades were left to the seller’s skill and judgment. The propeller supplied complied with the specification but did not suit the ship’s engine.

Held – A was liable for breach of an implied condition since the buyer had informed the seller of the purpose for which he needed the propeller and relied on the seller’s skill and judgment to provide them.

GRIFFITHS v PETER CONWAY [1939] 1 All ER 685

A woman with an unusually sensitive skin bought a Harris twead coat without disclosing that fact to the seller.

Held – The claim could not succeed under this section as the coat would not harm a normal person.

BALDRY v MARSHALL [1925] 1 KB 260

The Buyer had asked the dealer for a car suitable for touring and the dealer recommended a Buggati car. A contract for the sale of a Buggati car was entered into and it was later found that the car was unsuitable for touring.

Held – Court of appeal found the dealer liable because the buyer had relied on the dealer’s judgment in the selection of a car suitable for the buyer’s stated purpose even though it was sold under a trade name.

6. Of Merchantable Quality.

•           Sec 16 (b) - where goods are bought by description  from a seller who deals in such goods.

•           What is merchantable quality?

            - generally means the goods sold are fit for the particular use to which they were sold.

            - specifically - per Lord Reid in HENRY KENDALL v. WILLIAM.

            - to be applicable - buyer bought goods based on description, the seller is a person who deals in such good and the buyer has not been given the opportunity to examine the goods.

•          If buyer had given a chance to examine - the implied term no longer applicable though the examination is superficial

THORNET & FEHR v BEER & SONS [1919] 1 KB 486

Facts: B bought some barrels of vegetable glue from S. By arrangement, and before he purchased the glue, B visited the warehouse of S for an inspection. While every opportunity to inspect the glue was offered to B, he merely looked at the outside of the barrels in which the glue was stored. Had he looked inside, a defect in the glue would have been quite apparent.  Issue: Was this an "examination" of the goods?

Held: It was an examination such as to preclude B from relying upon the implied condition as to merchantable quality. In the opinion of the court if there has been some examination then the buyer cannot complain about defects which a full examination would have revealed.

Though the buyer had conducted a superficial look at the outside of some barrels of glue, there was an examination and therefore, the condition did not apply. A proper examination such as opening the barrel would have revealed the defect.

            This implied term covers even goods sold under patent or trade name. –

WILSON v RICKET,COCKERALL & CO [1954] 1 All ER 868

Fuel by its trade name ‘coalite’ was ordered from a fuel merchant. The consignment was contaminated in that a detonator was embedded in the coal, resulting in an explosion in the fire place when used.

Held - The consignment as a whole was unmerchantable , having defects making it unfit for burning.

Sec 16 (2) - allows implied warranty or condition as to quality or fitness to be construed against a custom or trade usage.

7. Sale by Sample

Sec 17 - a contract of sale is a contract by sample where there is a term in the contract express or implied to that effect.

The implied conditions:

- the bulk shall correspond with the sample in quality

- the buyer have reasonable opportunity of comparing the bulk with the sample.

- the goods are free form any defect which are not apparent on reasonable examination that would make them unmerchantable

The three conditions are independent of each other - breach of any one entitled the buyer to reject the goods.

However to apply the terms - parties must show intention to contract a sale by sample.

Cases:

DRUMMOND v VAN INGENUE (1887)

Facts: S (seller) submitted a sample of cloth to B (buyer). B ordered a quantity of the material which was delivered and made into clothes as intended. It transpired that the material could not stand the wear and tear of ordinary use.

Issue: Were the goods unmerchantable even though they corresponded with the sample?

Held: The goods were not merchantable for the purpose required and B could recover. S could not rely on the fact that the goods corresponded with the sample because the defect in the material could not be discovered on a reasonable inspection of the sample. The defect only became clear once clothes, which were made from the material, were worn.

The function of sample is just to show the real intention of the seller on the goods under the contract of sale. Sometimes, it was difficult to describe something verbally, therefore sample would explain by itself.

GOLDLEY v PERRY [1960] 1 WLR 9

A boy bought a catapult. While using it, the catapult broke and he lost the sight of an eye. The shopkeeper had bought it from a wholesaler by sample and tested it by pulling back the elastic. The shopkeeper was sued and the court held that the catapult was not fit for the purpose for which the buyer wanted it and that it was of unmerchantable quality. The shopkeeper than filed an action against the wholesaler.

Held – Although the shopkeeper had made reasonable examination, the defect was not one which was apparent on such examination. Thus, he had an action against the wholesaler.