Dalmare SpA v Union Maritime Ltd & Anor

Statutory terms as to satisfactory quality apply to an English-law contract for the sale of a second-hand vessel unless clearly excluded. Under Sale of Goods Act 1979, section 55, exclusion requires express wording or another recognised contractual basis, and an express term is ineffective if it is not inconsistent with the statutory term.

Words requiring delivery of a vessel as she was at inspection ordinarily describe the vessel’s condition at two different times. They do not, without more, amount to an as is exclusion of the statutory quality term. Express class obligations may supplement, rather than replace, the statutory standard. The court left open the wider effect of a free-standing as is clause.

The sellers appealed, with permission, from an arbitral award concerning the sale of a second-hand tanker under a Norwegian Saleform 1993 memorandum of agreement.

The buyers alleged that a latent crankpin defect caused an engine breakdown shortly after delivery. The arbitrators held that the term implied by section 14(2) of the Sale of Goods Act 1979 applied and that the sellers were in breach. The sellers argued that the wording requiring delivery of the vessel as she was at the time of inspection excluded that statutory term.

The central issue was whether the wording was inconsistent with, and therefore negatived, the implied term.

1. Appeal dismissed. The arbitrators correctly held that the section 14(2) term as to satisfactory quality was implied and was not excluded by clause 11.
2. The statutory implied terms apply to English-law contracts for the sale of ships, including second-hand ships. Under section 55 of the Sale of Goods Act 1979, exclusion requires express agreement, and section 55(2) requires inconsistency between the express and implied terms.
3. Clear language is required before valuable statutory rights are treated as abandoned. The phrase as she was at the time of inspection described a temporal obligation to deliver the vessel in the same condition as at inspection. It did not address the seller’s obligations as to quality and was not equivalent to a free-standing as is, where is clause.
4. The class obligations in clause 11 supplemented, rather than displaced, the statutory term. Classification did not guarantee that the vessel was free from significant defects or of satisfactory quality.
5. The wider question concerning a genuinely free-standing as is clause was unnecessary to decide. The judge provisionally favoured reading such wording as excluding rejection but not damages for breach of statutory implied terms, while leaving the issue open.

The judgment records an appeal, with permission granted by Hamblen J, from a final arbitral award dated 8 May 2012. The High Court (Commercial Court) dismissed the appeal.