Filobake Ltd v Rondo Ltd & Anor

A contractual performance obligation must be construed by reference to the language used and the relevant background. A recipe identifying ingredients and approximate proportions may define the material to be processed without warranting that the finished food will possess every desired characteristic.

Terms are implied only where the parties must have intended them, including where necessary to give the contract business efficacy. A supplier is not ordinarily responsible for the quality or fitness of equipment supplied under a separate contract by another supplier. A tortious duty mirroring a contractual obligation cannot be wider than the contract, and a duty to volunteer advice requires an assumption of responsibility.

A minor defect may constitute breach without giving the buyer a right to reject. Rejection may also be lost by acceptance, inconsistent dealings or continued commercial use.

Filobake purchased pastry-production equipment from Rondo Ltd and an oven and cooler from Frampton International Ltd. The equipment was intended to form a production line for samosa pastry. Filobake alleged that the line could not produce commercially acceptable pastry in accordance with the performance provision and recipe in Rondo’s quotation.

It alleged breaches of express and implied contractual terms, negligence by Rondo, and a right to reject the equipment. The defendants maintained that the equipment was satisfactory and that difficulties resulted from the recipe, dough preparation, mixing method, operating conditions and cooling requirements.

The central issues were the construction of Rondo’s performance obligation, the implication of contractual and tortious duties, the quality and fitness of the equipment, and whether Filobake had validly rejected it.

1. Construction of Rondo’s obligation. Applying the approach in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, the performance provision concerned the Rondo equipment specified in the quotation. It did not warrant that the complete line, including equipment supplied by Frampton, would produce a finished samosa suitable for every subsequent use.
2. Recipe 2 was not a complete culinary recipe. It identified ingredients and approximate proportions, but omitted material matters such as the type and temperature of ingredients, mixing method and time, resting time, heating and cooling conditions. Its contractual significance was to identify dough which, when appropriately prepared, could be extruded and processed through the Rondo equipment at the specified width, thickness and speed.
3. Implied terms and tort. Applying Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601, the disputed implied terms were not necessary and did not represent an unspoken intention of both parties. The separate contractual arrangements did not justify implying into Rondo’s contract responsibility for Frampton’s oven or cooler, or for Filobake’s existing equipment and procedures.
4. Under Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191, any duty of care corresponding to a contractual obligation was co-extensive with that obligation. Rondo had not assumed responsibility for guaranteeing third-party equipment or for volunteering general bakery and packaging advice. The claim against Rondo therefore failed.
5. The Rondo equipment was of satisfactory quality and reasonably fit for its contractual purpose. It could process suitably prepared dough and produce commercially acceptable samosa pastry. The claims against Rondo consequently failed in their entirety.
6. The oven supplied by Frampton had a defective belt-tensioning device which caused the conveyor belt to fray. This amounted to breach of the implied term as to satisfactory quality, but the defect was slight. Under Sale of Goods Act 1979 sections 14(2A) and 15A(1)(b), rejection would have been unreasonable, although nominal damages remained recoverable. Filobake had also accepted, or waived rejection of, the equipment by its conduct, including mortgaging and continuing to use it commercially.
7. The claim against Frampton therefore succeeded only in respect of the defective belt-tensioning device. Nominal damages of £2 were awarded.