Gregg & Co. (Knottingley) Ltd. & Anor v Emhart Glass Ltd.

A contract for the supply, installation and commissioning of specialist machinery may be concluded orally during negotiations, with later purchase orders merely confirming the agreement. Standard terms are not incorporated where they were not discussed, clearly referred to or sufficiently brought to the other party’s attention, particularly when onerous.

Goods must satisfy the contractual description, be of satisfactory quality and be fit for a purpose made known to the seller where reliance on the seller’s skill and judgment is reasonable. A supplier may also assume a common-law duty of care through extensive diagnostic, repair and after-sales services. Prolonged commercial use may prevent rejection under the Sale of Goods Act 1979, although repudiation may still be accepted and damages claimed.

Emhart supplied Gregg with six cold-end glass inspection machines and related installation, commissioning and after-sales services. After prolonged operational problems, Gregg purported to reject the machinery and claimed damages for breach of contract and duty. Allied Glass, which had acquired Gregg’s business, was also a claimant.

The first trial concerned liability only. The issues included contract formation, incorporation of standard terms, statutory fitness and quality obligations, the scope of any common-law duty of care, the machinery’s defects, rejection, assignment and estoppel. Causation and quantum were reserved for a later trial.

1. Contract and terms. A single contract for all six machines and the associated services was concluded orally on 2 July 1999 and extended on 5 August 1999. The purchase orders and acknowledgements confirmed arrangements already made. Neither party’s standard terms was incorporated. The terms were not discussed or sufficiently brought to the other party’s attention, and the potentially onerous clauses required particular notice.
2. Statutory obligations and purpose. The implied terms under sections 14(2) and 14(3) of the Sale of Goods Act 1979, and section 13 of the Supply of Goods and Services Act 1982, applied. The intended purpose included operation on coiled cold-end lines near the hot end and lehrs, without an insulating barrier, at temperatures up to 40°C, in a dirt- and grease-contaminated atmosphere, and inspection of containers made by both forming processes. That purpose was known to Emhart, and Gregg reasonably relied on Emhart’s skill and judgment.
3. Duty of care. Emhart voluntarily assumed a duty to provide diagnostic, remedial, part-replacement and repair services with reasonable skill and care, and to advise on faults and appropriate corrective measures. The claimed economic losses were, in principle, foreseeable and within the scope of that duty.
4. Defects and breach. The machines suffered from design deficiencies, inadequate software, defective components, inadequate cabinet ventilation, defective light and camera arrangements, unreliable inspection functions and unsuitable arrangements for non-round containers. They were neither of satisfactory quality nor fit for their known purposes. Gregg’s maintenance, operation, training and working environment did not cause or materially reduce Emhart’s liability.
5. Rejection and negligence. Gregg could no longer reject the machinery under the statutory return-and-repayment remedy after nearly 30 months’ commercial use. It was nevertheless entitled to treat Emhart’s continuing failures as repudiation, accept that repudiation in May 2002 and claim directly incurred damages. Emhart was also negligent in failing, within a few months of commissioning, to investigate and diagnose the recurring problems and provide a comprehensive remedial plan.
6. Assignment. The machinery contract was a current trade contract assigned to Allied Glass. Alternatively, Emhart was estopped from denying Allied’s contractual standing. Judgment was entered for Allied Glass, with damages to be assessed.

This was a first-instance liability judgment in the Technology and Construction Court. The Part 20 claim was tried first, with causation and quantum reserved for a possible second trial.