Clegg v Olle Andersson (t/a Nordic Marine)

Under Sale of Goods Act 1979, section 14(2), satisfactory quality is judged objectively by reference to the description, price and all relevant circumstances. A new yacht with an overweight keel was not of satisfactory quality where the excess adversely affected rig safety and required more than minimal remedial work. The cost of repair and a built-in safety margin did not alter that conclusion. A buyer entitled to reject need not choose cure or damages as the reasonable course. Seeking agreed information needed to choose between acceptance, rejection and cure does not amount to acceptance. Insurance and registration were not acts inconsistent with the seller’s reversionary interest after property had passed. The rejection was valid, entitling the buyers to repayment and consequential loss.

The appellants bought a new yacht from the respondent under a contract requiring compliance with the manufacturer’s standard specification. After delivery, they discovered that the keel was substantially overweight. The respondent and the manufacturer proposed remedial options, but the buyers sought further calculations and professional advice before deciding whether to retain or reject the yacht.

The trial judge, HH Judge Seymour QC, rejected claims under sections 13(1) and 14(2) of the Sale of Goods Act 1979. He also held that, even if there had been a breach, the buyers had lost their right to reject. The buyers appealed on breach, acceptance, the effect of their understanding of the excess weight, damages and costs. The central issues were whether the yacht was of satisfactory quality and whether the right to reject had been lost before 6 March 2001.

1. Appeal allowed. The Vice-Chancellor’s leading judgment, agreed by Lady Justice Hale and Lord Justice Dyson, held that the overweight keel constituted a breach of the implied condition of satisfactory quality under section 14(2) of the Sale of Goods Act 1979. The reasonable-person test in section 14(2A) is objective and takes account of the description, price and all relevant circumstances. The yacht’s adverse effect on rig safety and the need for more than minimal remedial work meant that it was not of satisfactory quality. The low cost of repair and the rig’s safety margin did not provide a reliable answer.
2. The claim under section 13(1) did not require determination because the section 14(2) claim succeeded. As Lady Justice Hale explained, once breach of condition is established, the buyer is not required to choose the course which appears reasonable to the seller. The buyer may reject rather than accept cure or damages.
3. Under section 35, the relevant questions were whether the buyers intimated acceptance, acted inconsistently with the seller’s reversionary interest, or retained the yacht beyond a reasonable time without intimating rejection. Their correspondence showed that they were seeking information to make an informed choice, not accepting the yacht. Asking that remedial work not proceed pending information was not acceptance.
4. Where property has passed, the seller’s relevant interest is the reversionary interest arising from the possibility of rejection. Insurance and an attempt to register the yacht were not inconsistent with that interest. The approach in Bernstein v Pamson Motors (Golders Green) Ltd [1987] 2 AER 220 did not represent the law after the amendments to section 35. Time spent obtaining the necessary modification information was relevant, and the three weeks between receiving it and rejection was reasonable. The later letters did not withdraw or invalidate the rejection.
5. The buyers were entitled to repayment of the price and acquisition costs, together with consequential losses. Assessment of damages was referred to the Master. The trial judge’s order, including the indemnity-costs order, was discharged.

• Court of Appeal (Civil Division): Allowed the appeal, discharged the trial order and referred assessment of damages to the Master.
• Queen’s Bench Division: HH Judge Seymour QC dismissed the claim, holding that there was no breach of sections 13(1) or 14(2), and alternatively that the right to reject had been lost. Costs were ordered on the indemnity basis.