5â Sale of Goods Act 1979, section 14(2): satisfactory quality

5â Sale of Goods Act 1979, section 14(2): satisfactory quality

Section 14(2) of the 1979 Act details the provisions as to satisfactory quality, both for generic sales of goods and for sales by sample, this latter aspect having been inserted in 199452 having previously been contained in section 15. The twin concepts of satisfactory quality and fitness for purpose are inextricably linked if only because of the fact that section 14(2B) identifies fitness for all the purposes for which goods of the kind in question are commonly supplied as one of the factors to be considered when assessing the satisfactory quality of the goods. However, while section 14(2) deals with the fitness of goods for common purposes, section 14(3) deals with the particular purposes for which goods might be required and is dealt with later in this chapter

(a)â Sale in the course of a business

The implied conditions in section 14(2) only apply when the goods are sold in the course of a business, unlike the other implied conditions in sections 12, 13 and 15, which apply in all contracts of sale. This business requirement, introduced in 1973,53 limits the applicability of the section to business dealings and excludes private sales from liability. The interpretation of the section 14 business requirement is considerably wider, however, than the corresponding criminal law approach evident in the now defunct section 1 of the Trade Descriptions Act 1968, which required that the supply in question formed an integral part of the business of the supplier.54 This had the potential to restrict the applicability of the section when dealing with the first sale by a business,

(b)â Merchantable quality

The legal need for quality in goods is traceable back into common law with the oft quoted dicta of Lord Ellenborough in Gardiner v. Gray,60 that a buyer does not buy goods simply ‘to lay them on a dunghill’. Adopted into statute law in 1893 as the requirement that the goods be of ‘merchantable quality’ the condition meant little more than that the goods were commercially saleable. Throughout the next eighty years until the introduction of a statutory definition of the term in 1973,61 there was no standard interpretation of the phrase ‘merchantable quality’, although two different approaches developed: the ‘acceptability’ approach as illustrated in Grant v. Australian Knitting Mills62 and the ‘usability’ approach evidenced in Kendall v. Lillico.63 The former depended on whether the buyer:

fully acquainted with the facts, and therefore knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of price obtainable for such goods if in a reasonable sound order and condition and without special terms.64

This approach considered quality from the perspective of the reasonable buyer while, by contrast, the usability approach adopted in Kendall considered it from the perspective of the use of the goods, such that the House of Lords held that the animal feed in question was merchantable as it was suitable for feeding to cattle even though it was toxic when the plaintiff fed it to his pheasants. Further, the usability approach only required that the goods were merchantable for one of their common purposes,65 as opposed to the current statutory requirement that the goods are fit for all the purposes for which goods of the kind in question are commonly supplied.66 It is hardly surprising that neither Parliament nor case law produced an all-encompassing definition of merchantable quality given the breadth of the transactions to which it applied, covering not merely commercial sales but also, until 1979, private sales, and being equally applicable to the purchase of factory machinery, vehicles of all shapes and sizes, household furniture and a box of matches. Indeed, Rougier J opined that any definition, however exhaustive or positive, was likely to be ‘put to mockery by some new undreamt of set of circumstances’.67

In 1973, however, the first attempt at a statutory definition appeared in section 14(6) of the 1979 Act, showing a clear bias towards the usability approach and stipulating that goods were of a merchantable quality if:

60(1815) 4 Camp. 144.

61Sale of Goods Act 1979, s.14(6), as inserted by Supply of Goods (Implied Terms) Act 1973, s.3.

62[1936] AC 85.â 63â [1969] 2 AC 31.

64Per Dixon J in Australian Knitting Mills v. Grant (1933) 50 CLR 387, 418 as quoted in Kendall v. Lillico [1969] 2 AC 31, 51.

65See Aswan Engineering Establishment Co. v. Ludpine Ltd [1987] 1 All ER 135.

66Sale of Goods Act 1979, s.14(2B)(a).

67Bernstein v. Pamson Motors (Golders Green) Ltd [1987] 2 All ER 220, 222.

they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.

Applying this approach, the court in Aswan Engineering v. Ludpine68 held that plastic pails ordered for export and used to carry a liquid waterproofing compound were merchantable despite their collapse in the Kuwaiti heat. However, other cases such as Rogers v. Parish (Scarborough) Ltd,69 while stating that the statutory definition could be applied without reference to pre-definition case law, nonetheless considered non-usability factors such as appearance and finish in deciding merchantable quality.

(c)â Introduction of ‘satisfactory quality’

The statutory definition changed, both in emphasis and detail, with the introduction of the current section 14(2) in 1994.70 While introducing implied conditions about quality and fitness, section 14(1) makes clear that no other implied conditions as to quality or fitness exist other than those in sections 14 and 15 or in any other enactment. Hence, there is no resort to any common law implied conditions and caveat emptor will apply to situations not covered by sections 14 and 15. This does not, of course, restrict the right of Parliament to include implied conditions in other legislation, as any attempt to do so would be contrary to parliamentary sovereignty.

The basic requirement is that goods sold in the course of a business must be of a satisfactory quality,71 being goods which a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances. The change of the requirement from merchantable quality to satisfactory quality followed on from the deliberations of the Law Commission72 who recommended a move that would be ‘sufficiently flexible to be able to apply to all the many types of sale which can take place’.73 They advocated a move to a generic term such as ‘acceptable’ combined with a non-exhaustive list of criteria to be used in assessing the acceptability of the item.74 In the event, Parliament preferred the term ‘satisfactory quality’, which is an objective term to be assessed by a reasonable man but has raised comment as to whether, in common parlance, the term ‘satisfactory’ actually denotes a relatively low standard.75 On the other hand, concern has been expressed that buyers might accept goods without them really being satisfactory. For example, if buyers were to consistently accept goods with minor

68 [1987] 1 All ER 135.â 69â [1987] QB 933.

70Inserted by the Sale and Supply of Goods Act 1994, s.1.

71Sale of Goods Act 1979, s.14(2)

72Law Commission Sale and Supply of Goods (Report No. 160, 1987).

73Ibid. para. 3.11.â 74â Ibid. para. 8.1.(3).

75See Atiyah, Adams and MacQueen, above n. 9, at 166, where the authors argue that the term satisfactory ‘tends to be associated with mediocrity’.

96 The implied conditions in sale of goods contracts

not unreasonable as it would be inequitable to allow a buyer to purchase goods knowing of a defect and then allow him to reject the goods and repudiate the contract for the same defect, although, naturally, knowledge of one defect would not prevent a buyer from rejecting goods if another defect rendering the goods unsatisfactory were to come to light.

The potential for examination of the goods also plays a part in determining whether the implied condition applies, although the test varies depending on whether it involves a sale by sample. Where the contract is one of sale by sample, there is no liability for any defect that would have been apparent on a reasonable examination of the goods77 and thus the implied condition only relates to inherent defects. This is an objective standard for examination and applies irrespective of whether an examination has actually occurred.

By contrast, in contracts of sale other than sales by sample, the test is subjective, with liability only being excluded where the buyer has examined the goods and, further, only in respect of defects which that particular examination ought to have revealed.78 Liability remains for latent defects that would not have been apparent on examination.79 Thus, the extent of the liability of the seller will depend on the quality of the examination, if any, undertaken by the buyer. A cursory examination will result only in an exclusion of liability for defects which that cursory examination would reveal. There is an argument for saying that a buyer should not examine goods at all in order to protect himself from the loss of remedy for any defect which an examination might have revealed, although it is possible that a court might view such wilful ignorance of defects as ‘a relevant circumstance’ under section 14(2A).80 Indeed, in Bramhill v. Edwards,81 the Court of Appeal allowed the seller to benefit from the protection offered by section 14(2C)(b) when the plaintiff sought to reject a second-hand motor-home which, at an external width of 102 inches, contravened the appropriate UK regulations and thus was not legal for use on UK roads, where the maximum legal width was 100 inches. The buyer had not measured the external size of the vehicle but the decision is nonetheless justifiable as the buyer had measured the internal measurements of the vehicle at 100 inches and so must have known that the external measurements were greater.

Q7 Do the statutory exceptions under section 14(2C) provide for a sensible approach to liability?

concluded and was aware of a defect which the seller undertook to repair but did not complete satisfactorily. The Court of Appeal allowed the buyer to reject the goods.

77Sale of Goods Act 1979, s.14(2C)(c).

78Ibid. s.14(2C)(b).

79See Wren v. Holt [1903] 1 KB 610 (arsenic in beer) and Godley v. Perry [1960] 1 WLR 9 (a defect in a child’s plastic catapult).

80See J.K. Macleod, Consumer Sales Law (2nd edn, Abingdon, Routledge-Cavendish, 2007) ch. 14 n.238.

81[2004] 2 Lloyd’s Rep. 653, CA.

(e)â Goods included in requirement of satisfactory quality

The implied condition82 under section 14(2) provides that the requirement that goods be of a satisfactory quality applies to ‘the goods supplied under the contract’. This does not simply mean the actual goods that were the subject of the contract but includes any containers or the like that are supplied with those goods, irrespective of whether the container is being purchased and will become the property of the buyer or whether it remains the property of the seller and must be returned in due course. Thus, in Geddling v. Marsh,83 the defendant manufacturer was liable for the damages caused when a bottle of mineral water burst and injured the plaintiff’s hand. The defendant was held liable even though it was a refundable bottle and remained his property throughout. On the same basis, if a glass jar was faulty and pieces of glass found their way into the product, or if a bottle containing carbonated drink were to explode and, in either instance, the buyer was to be injured, he would have a valid claim under section 14(2). Naturally, if the injured person was not the buyer and thus lacked privity of contract, he would have to make a claim under product liability or negligence, as appropriate.84

In the same vein, liability will also cover any extraneous matter supplied under the contract. Thus, in Wilson v. Rickett Cockerell Ltd,85 the defendant coal merchant supplied the plaintiff with some Coalite, which exploded due to the presence of a detonator in it. The Coalite was merchantable by itself, as was the detonator. However, when combined they became unmerchantable (now unsatisfactory) and the defendant was liable for the resultant damage.

Finally, any item supplied as a free gift with the goods must also be of a satisfactory quality as it has been supplied under the contract.

(f)â Meaning of satisfactory quality

Section 14(2) of the 1979 Act makes clear that the goods must reach the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all other relevant circumstances. The ‘reasonable person’ test is, of course, an objective test, which considers what the normal reasonable buyer, as opposed to the subjective actual buyer, would think of the goods supplied under the contract and whether he would consider them to be of a satisfactory quality.

Satisfactory quality and fitness must be assessed by reference to the Âcontract description, an approach echoed in the Sale and Supply of Goods to Consumers Regulations 2002,86 which, in giving effect to Directive

82Sales of Goods Act 1979, s.14(2) refers to an implied term but, by virtue of s.14(6), it is an implied condition in England, Wales and Northern Ireland.

83[1920] 1 KB 668.

84For a discussion of negligence and product liability see Part 4 Chapter 1.

85 [1954] 1 QB 598.â 86â SI 2002/3045.

1999/44/EC,87 requires that the goods supplied conform to the contract. This approach is reasonable and allows all goods to be measured against a general standard for the product in question while allowing for the particularities of the item to be assessed. Thus, both ballet shoes and mountain boots would satisfy the description ‘footwear’ but the ballet shoes, if described as such, will not be deemed unsatisfactory because they cannot withstand the rigours of being used for mountain climbing.

Price may be relevant in determining quality but the mere fact that goods are cheap does not allow them to be unsatisfactory, as held in Godley v. Perry,88 in which a cheap plastic catapult was found to be unmerchantable. The plaintiff child, who was injured when the item broke, recovered thousands of pounds in damages for being blinded in one eye. The catapult had cost sixpence in predecimal currency (equivalent to two and a half pence in decimal currency). The price paid for an item may raise expectations as to a level of quality and is relevant in deciding value for money. Hence, the price may be indicative of what the buyer has a right to expect from the goods he has purchased, as held in Rogers v. Parish.89 However, caveat emptor rules as the 1979 Act does not require any particular quality but simply provides for a lower threshold of quality below which goods are not allowed to fall. As Salmond LJ stated in Taylor v. Combined Buyers Ltd :90

The term ‘merchantable’ does not mean good, or fair, or average quality. Goods may be inferior or even bad quality but yet fulfil the legal requirement of merchantable quality. For goods may be in the market in any grade, good, bad, or indifferent, and yet all equally merchantable.

While this dicta expressly discusses merchantable quality, there is no reason to assume that the underlying philosophy is not equally applicable to the modern notion of satisfactory quality.

‘All the other relevant circumstances’ provides a catch-all for the courts and now statutorily includes public statements made about the specific characteristics of the goods by the seller, producer or his representative.91 However, no liability will arise under this latter provision if the seller can show that he was not and could not reasonably have been aware of the statement at the time the contract was made, or that the statement had been withdrawn or corrected in public before the contract was made or that the decision by the buyer to buy could not have been influenced by the statement.92 ‘Relevant circumstances’ would also include factors such as whether the goods were second-hand93 and

87Directive 1999/44/EC on certain aspects of the sale of consumer goods and consumer guarantees.

88 [1960] 1 WLR 9.â 89â [1987] QB 933.â 90â [1924] NZLR 627.

91Sale of Goods Act 1979, s.14(2D) bringing into effect Art. 2(2)(d) of Directive 1999/44/EC.

92Sale of Goods Act 1979, s.14(2E).

93Bartlett v. Sydney Marcus Ltd [1965] 1 WLR 1013; Crowther v. Shannon Motor Co. [1975] 1 All ER 139.