If the court decided that the contract was not one of sale by description or even if it was one, Ed did not breach the implied condition; Dick can further rely on s. 14 of SGA 1979 to terminate the contract.
SGA 1979 s. 14---the tyres
S.14(2) implied a condition in the contract that the goods supplied under the contract are of satisfactory quality. The point Dick would like to rise is that the breakdown of the refrigeration unit and the tyres which busted constitutes a breached in this implied condition. The test for satisfactory quality is stated in s.14(2A). Dick can claim that the vehicle was not of satisfactory quality as a reasonable person will not expect the tyres to burst on its first journey. However, this claim is unlikely to succeed, because Ed has warned Dick that the vehicle needed new tyres. Under s.14.2C(a), the implied term does not extend to any matter making the quality of goods unsatisfactory which is specifically drawn to the buyer’s attention before the contract is made. The warning has waived the responsibility of Ed. Moreover, Ed can rely on the exclusion clause in the contract which excludes all liability concerning the roadworthiness of the vehicle. Exclusion clauses are governed under UCTA and the UTCCR. Under s. 6 UCTA, a person dealing in the course of business can rely on the exclusion clause if the term satisfies the requirement of reasonableness. Schedule 2 gives the court guidelines as to how the reasonable test can be applied. The court will take into account of the bargaining power of Dick and Ed and whether the Dick knew or ought reasonably to have known of the existence and extent of the term. In this case, Dick signed Ed’s standard contract. Although Dick might not have read the exclusion clause, the court might expect him to have read it as he is a businessman. Ed can also argue that this term is reasonable, as he warned Dick that the tyres of the vehicle needs to be changed. If the tyres of the vehicle is seriously worn out, it seems logical for Ed not to give warranty to the raodworthiness of the vehicle. The court might also take account to the fact that it is must easier for Dick to insure his vehicle then for Ed to insure it.
SGA 1979---the refrigeration unit
Depending if Dick has informed Ed about he was going to use the vehicle for the transportation of 20 tonnes of strawberries, two separate sections of s. 14 can be applied. S.14 (2) and s. 14.(3).
S.14(2) applies if Ed was not aware of the particular purpose in which Dick was going to use the vehicle for. The court when considering if a piece of good is of satisfactory quality will use the guidelines in s. 14(2B). The court will take note of the price paid by Dick, the durability of the refrigeration unit and the fact that the vehicle was not fit to transport 20 tonnes of fresh food (the court might attach little value to the defects on tyres as Dick was warned about them). Ed can defend himself by relying on s. 14.2C(b) that Dick was given the chance to examine the vehicle before he signed the contract; and that Dick ought to have realized the defect. From the evidence given, it is hard to conclude if Ed can rely on this section, as it is unclear to me that if the difference of 15 tonnes and 20 tonnes can be detected by inspection. If it could be, then Dick is more likely to lose on this point.
If Dick has told Ed that he was going to use the vehicle to transport 20 tonnes of strawberries, then Dick will have a much stronger case. As under s. 14(3), if the seller know about the particular purpose which the goods are being bought for, there will be an implied condition that the goods will be reasonably fit for that purpose unless it is unreasonable to rely on the judgment of the seller.
If the court concludes that there was no breach of condition under s. 14, Dick will not be able to terminate the contract. Under s. 15A(1)(b) of SGA, if the breach of a condition is so slight that it would be unreasonable for the buyer to reject the good, then the breach is not to be treated as a breach of condition but may be treated as a breach of warranty. The court might think that the difference in capacity is not a strong enough reason for Dick to reject the vehicle. Under s. 53 of SGA Dick will then be able to claim the difference between the value of the vehicle at the time of delivery and the value the vehicle would have had if Ed had fulfilled the warranty i.e. the difference in the value of a 15 tonne capacity vehicle and a 20 tonne capacity vehicle.
Besides terminating the contract or claiming the difference in value of the vehicle; Dick is also entitled to claim expectation damages resulting from the loss of profit in the strawberry delivery causing indirectly from the failure of the refrigeration unit and the broken tyres. His aim is to claim the loss of profit so that he will be placed in the same situation, with respect to damages, as if the contract had been performed. S 53(4) allows Dick to claim for loss of profit. In this case, Dick suffered a loss of profit of 7000 pounds resulted form the rejection of goods by Fiona. If is found by the court that Fiona had the right to reject the strawberries, then Dick would seek to claim the loss of profit from ED, but it is doubtful whether if the court will allow it. As it was held in Victoria Laundry v Newman that there is a restriction on recovery for loss of profits from use of machinery to normal profits and not profits from non-notified especially lucrative contract. If 7000 pounds is significantly more than what Dick normally earn in one journey of delivery of goods, the court will not ask Ed to compensate Dick for the full amount. Ed will only be liable for the loss of normal profit and not exceptionally high profit. This rule might not apply if Dick has informed Ed that the reason why he was buying the vehicle was to enter into a business of exceptionally high profits. If it is found by the court then Fiona should not have rejected the strawberries, any damages recovered from Fiona would be taken into account in the claim against Ed.
Dick and Fiona
Dick can claim that Fiona was not entitled to reject the strawberries. To quality for rejection, there must be a breach of condition. We do not know the terms in the contract; however, in every sale of goods contract, SGA 1979 s. 14 (2) will imply a condition into the contract that the goods are of satisfactory quality. Under s. 14(2A), if the strawberries are so rotten that no reasonable person will purchase them then it will be obvious that there was a breach. If that is the case, there will be no remedy against Fiona. However, if the strawberries have just started to rot and it is possible for Fiona to sell all of them at a slightly lower price, the court might decide that there was no breach of condition and only breach of warranty.(The Hansa Nord)
Under s. 15A(b), Fiona will not be entitled to reject the strawberries if the breach is so slight that it would be unreasonable for her to reject them and the breach will not be treated as a breach of condition but a breach of warranty. A breach of warranty will only allow claims for damages but not rejection. Dick could argue that Fiona should not have rejected the strawberries as those strawberries were bought by her again ( though she might not know those were the same strawberries). Of course, all these depends on the facts, as Fiona might say she was looking for a different quality of strawberries and that had nothing to do with Dick's strawberries, but if it could be shown that Fiona bought the strawberries for the same purpose, there will be strong support that there is only slight defect and Fiona should not have rejected the strawberries.
S50 provides for damages for non-acceptance. As Dick managed to sell the strawberries to Gavin and Gavin managed to sell the strawberries purchased from Dick to Fiona, there was an available market for the strawberries in question. S50(3) provides that where there is an available market for the goods in question , the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted. In this case, there appeared to be two market prices, the cost of strawberries and the cost of strawberries with profit of 2000, it would be a matter of fact in the determination of the market price taking into the factor of whether Dick’s sale price is on the low side because he was very keen to sell the rejected strawberries or that Fiona was willing to pay a higher price because she had to use the strawberries or supply the strawberries to another purchaser. Having determined the market price, the damages would be the difference between the cost of strawberries plus 7000 and the market price at resale ie cost of strawberries plus 0 to 2000. As there should also be a reduction for the slight defect eg for the inferior quality due to insufficient refrigeration, a reduction in this respect should be made and this sum should be deducted from the sum as calculated.
