Case 13

to claim that the harvesting machine be replaced. A claim for compensation of the loss of the harvest will be available, according to the new §933a ABGB, only if A is at fault, which he will be here since, as an expert,1 he should know the correct capacity of the harvesting machine he sells to B.

It does not matter whether A made an express stipulation, or whether he remained silent when he was faced with B’s expectations about the capacity of the machine during the negotiations. By not reacting to B’s disclosure that he expects that the machine would be able to harvest one acre a day, A has violated his precontractual duty of care vis-a`-vis B. He was under an obligation to disclose to the buyer B that the harvesting machine did not have the capacity B expected. Thus, A implicitly attributed that capacity to the harvesting machine. Since the machine does not comply with the contract, A is liable under warranty principles, with the same legal consequence as discussed above.

Denmark

This is a typical example of contractual liability for information given in precontractual negotiations, dealt with in the unwritten rules on liability for information and in the Danish Sale of Goods Act. The rule that statements which are made before the contract is concluded give rise to contractual obligations if they are important for the other party and if they are made by a party who, as here, must be presumed to be a professional, appears to be part of the common core of the European legal systems.2

In Danish law the result is the same, whether A made the statement or was silent in response to B’s statement.

England

B has a range of remedies against A in contract, or in tort, or under statute for misrepresentation.

B has various possible claims in contract. If A is selling the harvesting machine in the course of a business, the contract of sale will by statute contain an implied condition that the machine will be fit for its purpose, since B has made clear the purpose for which he requires it.3

1§1299 ABGB.

2Principles of European Contract Law Part I and II (The Hague, 2000) art. 6.111, p. 299ff.

3Sale of Goods Act 1979, s. 14(3), which implies such terms into contracts of sale of goods entered into by sellers in the course of a business where the buyer has expressly or impliedly made known the purpose.

364 precontractual liability in european private law

A’s assurance that the machine will harvest one acre a day is likely also to be an express term of the contract, whether or not A is selling it in the course of a business.4 Since the machine is not fit for its purpose, and cannot harvest one acre a day, A is in breach of contract. The breach of a condition of the contract entitles the innocent party either to reject the goods and claim damages for loss he suffers, or simply to claim damages whilst retaining the goods. But it is too late to reject the goods if he ‘accepts’ them, a term which includes not only intimating to the seller that he accepts them in spite of the breach, but also the lapse of a reasonable time during which he could have examined the goods and discovered the defect.5 It appears from the facts that B has continued to use the machine after he has discovered the defect, in order to harvest as much of his crop as he can; he will therefore now not be able to reject the machine on this basis.

However, B is a ‘consumer’ for the purposes of the legislation which implemented in the United Kingdom the Consumer Sales Directive, and so he will have the right to require A to replace the harvesting machine with a machine which conforms with the seller’s statutory implied obligation as to quality and fitness for purpose;6 or, if the buyer fails to replace it within a reasonable time, rescission of the contract.7

4The test is whether the parties can be taken to have intended the promise to be incorporated into the contract: Heilbut, Symons & Co. v. Buckleton [1913] AC 30; but this will normally be inferred where, as here, it is a clear statement about a quality of the good on a matter which is within the seller’s (but not the buyer’s) knowledge, and which is intended by the seller to influence the purchaser’s decision to enter into the contract: Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd [1965] 1 WLR 623.

5Sale of Goods Act 1979, s. 35, amended by Sale and Supply of Goods Act 1994, s. 2(1). The buyer is not deemed to have accepted the goods merely because he asks for, or agrees to their repair: s. 35(3); time taken to ascertain what would be necessary to modify or repair the defective goods, and in carrying out the repairs, is therefore not to be counted against the purchaser: Clegg v. Andersson [2003] 2 Lloyd’s Rep 32 at [63]–[64].

6Sale of Goods Act 1979, Part 5A, inserted by Sale and Supply of Goods to Consumers Regulations 2002, SI 2002/3045, implementing Directive 99/44/EC. B is a ‘consumer’ within the UK implementing legislation even if he buys the harvester for his business, as long as he (a) is not in the business of entering into that type of contract (he is a farmer, not a dealer in harvesters); and (b) this is a type of contract that he enters into only occasionally, rather than with a degree of regularity to make it integral to his business (presumably, he buys a harvester only rarely): R & B Customs Brokers Co. Ltd v. United Dominions Trust Ltd [1988] 1 WLR 321.

7Sale of Goods Act 1979, s. 48C. Reimbursement to B of the price may be reduced to take account of the use he has made of the machine: s. 48C(3). In practice, B may simply prefer to claim damages (below), which will give him control over the selection of a satisfactory replacement machine, and enable him to charge to A the additional costs, as well as his consequential losses.

B could claim damages for breach of contract. Damages in contract are calculated so as to protect the injured party’s expectations: in the case of a claim for breach of a contract for the sale of goods based on the defect in the quality of the goods, this generally means, broadly, such a sum of money as would allow the claimant to go into the market and obtain goods equivalent to those which the defendant has failed to deliver – here, therefore, the cost of obtaining an alternative machine (giving credit for the value of the machine he has, which he can sell).8 In addition, B can recover such consequential losses as he can show flowed from the breach, as long as they are of such a kind as were in the defendant’s contemplation at the time of the contract as the likely consequences of a breach: so, here, the value of the lost part of this year’s crop (including the lost profit he would have made on that part of the crop) will be recoverable.

As an alternative to claiming damages for breach of contract, B has a claim against A for damages on the tort measure: but this will not enable him to obtain compensation to cover the cost of buying a suitable harvesting machine for next year (since that is his ‘expectation’ loss, which is recoverable only in contract), but will only cover his out- of-pocket losses as a result of relying on A’s misrepresentation about the qualities of the machine. A claim for tort damages would most easily be brought under section 2(1) of the Misrepresentation Act 1967, which imposes a liability to pay damages, calculated on the same measure as in the tort of deceit but without the claimant’s having to prove fraud, on a party who made a false statement to the other in the course of negotiations for a contract and where the contract was in due course concluded on the faith of the representation. Under the statute, the defendant has a defence if he can show that he believed his statement was true, and had reasonable grounds for that belief (the defendant has the burden of showing that he was not, in effect, negligent). However, since this remedy is not as helpful to B as the claim for breach of contract, he is unlikely to wish to pursue it.

Where A makes no statement but fails to respond to B’s statement about his own expectation about the capacity of the machine, B still has the same claim against A for damages for breach of contract under the contract of sale, as long as A is selling the harvesting machine in the course of a business. As in the case (above) where A made a statement

8Sale of Goods Act 1979, s. 53(3), which sets the time of assessment, prima facie, as the date of delivery of the non-conforming goods.