J Murphy & Sons Ltd v Johnston Precast Ltd (Formerly Johnston Pipes Ltd)

A contract for the manufacture and supply of goods may be inferred where the transaction has been fully performed and the parties, price and workscope are sufficiently agreed. In a battle of forms, the court must construe all relevant communications; the last document is not automatically decisive.

A fitness-for-purpose term under section 14(3) of the Sale of Goods Act 1979 requires the particular purpose to be made known and reliance on the seller’s skill or judgment. A specialist supplier may nevertheless owe an implied contractual duty to warn of a danger which it knew or ought reasonably to have known about. Causation is established where a contractual breach is one of two concurrent causes of approximately equal efficacy.

The claimant supplied and installed GRP water pipes manufactured by the defendant in a tunnel forming part of a major water-main project. The tunnel was later backfilled with foam concrete. In 2004 the 900mm pipe burst. A 21-metre void in the foam concrete was found around the burst, and testing showed alkaline attack on the pipe in that area.

The claimant had settled the employer’s arbitration claim for £3.9 million and incurred £270,000 in costs. It sought recovery from the defendant in contract and tort, alleging defective manufacture, breach of British Standard 5480, breach of implied terms under the Sale of Goods Act 1979, failure to warn, and causation of the burst. The principal issues were contract formation, contractual terms, the duty to warn, causation and responsibility for the alkaline attack.

1. Contract formation. The parties had a binding contract by late 21 or early 22 April 1999. The transaction had been fully performed, and the parties, price, workscope, British Standard and pressure requirements were sufficiently agreed. The claimant’s printed reference to conditions overleaf did not incorporate those conditions. Alternatively, the defendant’s acknowledgement of order was a counter-offer incorporating its conditions, which the claimant accepted by performance.
2. Contractual terms. The contract required compliance with BS 5480 and included an implied term of satisfactory quality under section 14(2) of the Sale of Goods Act 1979. No term arose under section 14(3) requiring fitness for operation in a foam-concrete environment. The claimant had not made that purpose known before contracting and had not relied on the defendant’s skill or judgment concerning the chemical interaction.
3. Duty to warn. As a specialist supplier, the defendant owed an implied contractual duty to warn if it knew or ought reasonably to have known that foam concrete would or might create problems for the pipe. The duty continued through manufacture, supply, installation and testing. On the evidence, however, the defendant neither knew nor ought reasonably to have known that foam concrete differed materially from ordinary concrete or grout or created a risk of alkaline attack. There was no breach.
4. Causation. The void increased hoop and shear stresses and was an effective cause of the failure. Alkaline attack in the same area was the other effective cause. The two causes were of approximately equal efficacy. The void was attributable to the claimant’s backfilling operations, and the alkaline attack was not legally attributable to the defendant. The claimant’s case that failure below the contractual pressure automatically established breach was rejected.
5. UCTA alternative analysis. If the defendant’s conditions applied, the clauses were severable. The warranty in clause 14(i) was reasonable, but the short notification period in clause 14(ii) and the wide exclusion in clause 15(ii) failed the reasonableness requirement under the Unfair Contract Terms Act 1977. Clause 15(i), leaving the foam-concrete fitness issue with the buyer, was reasonable on these facts.
6. The claim was dismissed. Costs and ancillary matters were left for agreement or further determination.