Brown (B S) & Son Ltd v Craiks Ltd

Goods sold by description may be of merchantable quality although unsuitable for the buyer’s undisclosed intended purpose. Where goods of the general character and description are reasonably capable of an ordinary use and are commercially saleable for that use, proof of an established market or previous sales of goods made to the precise specification is unnecessary.

Price remains relevant. A mere difference between the contract price and the price obtainable for an alternative ordinary use does not establish unmerchantability. A substantial reduction suggesting that the goods are saleable only at a throwaway price may do so.

Textile merchants ordered rayon cloth from manufacturers under a detailed description. The merchants intended to resell it for making dresses, while the manufacturers understood that it was required for industrial purposes. The cloth complied with the contractual description and was suitable for several industrial uses, but irregularities in its weave made it unsuitable for dresses.

The Lord Ordinary rejected claims under sections 14(1) and 14(2) of the Sale of Goods Act 1893. The merchants abandoned the section 14(1) claim and reclaimed only on merchantable quality. The First Division unanimously refused the reclaiming motion. The central question before the House was whether cloth suitable and commercially saleable for industrial use was of merchantable quality despite its unsuitability for the buyer’s undisclosed purpose and its lower industrial value.

1. Appeal dismissed unanimously. The appellants had not proved that the cloth was not of merchantable quality under section 14(2) of the Sale of Goods Act 1893. Lord Guest delivered reasoning expressly accepted by Lord Hodson and Lord Wilberforce. Lord Reid and Viscount Dilhorne reached the same result in separate speeches.

2. Per Lord Reid, goods sold by description are unmerchantable where, in the form tendered, they are of no use for any purpose for which goods complying with that description would normally be used and are consequently not saleable under the description. Judicial formulations of merchantable quality must be read in the light of the facts and issues in which they were expressed. They are not exhaustive definitions applicable mechanically to every case.

3. Per Lord Guest, the relevant comparison was with goods of the same general character and description, not goods made to every detail of the precise specification. The cloth was reasonably capable of industrial use, and the Lord Ordinary had found an industrial market for it. The absence of proof that cloth of the precise construction had previously been sold for industrial purposes did not establish unmerchantability. Viscount Dilhorne similarly held that actual prior sales for an alternative purpose were unnecessary where the evidence established saleability for an ordinary use.

4. Price could not be omitted entirely from the assessment. Per Lord Guest, where goods have more than one ordinary purpose, the contract price should not be compared too closely with the price obtainable for the secondary purpose. A discrepancy is material if it indicates that the goods could be sold only at a throwaway or unreasonably low price. His earlier approval of the requirement that goods be saleable without any abatement of price was too broad. Viscount Dilhorne agreed that a mere difference in price was insufficient, although a sufficiently large abatement could demonstrate that the goods were not commercially saleable.

5. The industrial value found by the Lord Ordinary, approximately 30d. to 30.5d. per yard against a contract price of 36.25d., was not a throwaway price. The evidence did not justify disturbing the finding that the cloth was commercially saleable for industrial purposes. The interlocutor assoilzieing the respondents was therefore affirmed.

1. House of Lords: Dismissed the purchasers’ appeal unanimously and affirmed the decision of the First Division.
2. First Division of the Court of Session: Unanimously refused the reclaiming motion and adhered to the Lord Ordinary’s interlocutor.
3. Lord Ordinary: Assoilzied the sellers after holding that the claims under sections 14(1) and 14(2) of the Sale of Goods Act 1893 failed. He assessed damages contingently at £1,003.