PROVIMI FRANCE S.A.S. v STOUR BAY COMPANY LIMITED

Where a commercial contract is formed partly orally, partly in writing and partly by conduct, the court may examine the parties’ dealings as a whole to identify the objective bargain. A specification attached to contractual documentation will not govern where the parties’ dealings objectively show that the goods ordered were a different, previously approved product.

Standard terms may be incorporated by a course of dealing where their application is objectively obvious, reasonable notice has been given, and the dealings are sufficiently numerous, recent and consistent. Under sections 14(2) and 14(3) of the Sale of Goods Act 1979, the assessment of quality and fitness is objective and depends on the purpose communicated to the seller, the circumstances and the buyer’s reliance.

The claimants purchased vitamin D3 feed-grade product from the defendant under a series of transactions between 2013 and 2015. The product was incorporated into poultry pre-mixtures. In 2015, vitamin D3 degraded after the pre-mixtures were exposed to high temperatures, causing poultry losses and customer claims.

The claimants alleged breach of an express gelatin-coating specification and breach of implied terms under sections 14(2) and 14(3) of the Sale of Goods Act 1979. The defendant contended that the specification was not incorporated, that its standard terms had been incorporated by a course of dealing, and that the implied terms were excluded. The central issues were contractual incorporation, statutory quality and fitness, causation and recoverable loss.

1. Contract formation and specification. The relevant contracts were the individual sales contracts concluded between the defendant and the claimant companies, rather than a freestanding contract between the defendant and the claimants’ central purchasing entity. They were formed partly orally, partly in writing and partly by conduct. The court was therefore entitled to consider the parties’ dealings from start to finish.
2. The gelatin specification was not incorporated. The parties had negotiated for the defendant’s approved FBL vitamin D3 product, which was known to be gelatin-free and uncoated. Incorporating the attached specification would objectively require supply of a different product from the only product submitted to and approved by the claimants. If the specification had been incorporated, the supplied product would have breached it.
3. Course of dealing. The defendant’s standard terms were incorporated. Over approximately five years there had been about 28 prior transactions involving the claimant companies and the wider group. The terms were consistently printed on, or sent with, invoices which were received and paid without objection. Objectively, the parties must have intended the contracts to be made on those terms. The terms therefore excluded the implied terms under section 14 of the Sale of Goods Act 1979, as permitted by section 55.
4. Alternative statutory conclusions. If the standard terms had not been incorporated, the product would nevertheless have been of satisfactory quality under section 14(2). It had operated satisfactorily for more than two years, and the assessment had to take account of the product’s price, instructions, known limitations and the range of uses for which such goods were supplied. The product was also fit for the general purpose of use in an animal pre-mixture.
5. The claimants had not communicated the more specific purpose of using the product in poultry pre-mixtures containing aggressive ingredients and exposed to temperatures above 25°C. They could not reasonably rely on the defendant’s skill or judgment for that specific use, particularly because they knew the formulation and had approved the product themselves.
6. The critical cause of the 2015 degradation was the high temperatures to which the pre-mixture was exposed. Alleged manufacturing changes were speculative. If breach had been established, the absence of a protective coating would at least have been an effective cause of the losses.
7. The mitigation argument was not pleaded and was unavailable. In any event, the claimants acted reasonably in investigating an unusual problem before withdrawing the pre-mixture. The settlements were reasonable on the evidence. The separate claim for a refund of returned product was insufficiently pleaded and unsupported.
8. Disposition. The claim was dismissed.