Chapter 10 Interactive flashcards of key cases

Chapter 10 Interactive flashcards of key cases

F manufactured a vinyl product, which was sold to B, who printed identification marks on it for resale to customers for use in labelling bulk containers. It was a condition of the contract that the vinyl would remain in good condition for five years. However, owing to a defect it degraded, resulting in the marks becoming illegible. B sought to recover the whole of the purchase price or, alternatively, an indemnity against claims from customers.

The Court of Appeal held that in the circumstances of the case, where F would have known that any defect would not be detected until after B had sold on the subject matter of the contract, it was appropriate that damages should be assessed on the basis of B’s liability to the ultimate consumer and not under the prima facie rule in s 53(3) SGA, which should be displaced. Where the buyer sustains no loss, then damages will not be awarded.

The seller contracted to sell a quantity of tinned fruit which was to be packaged in cases each containing 30 tins. The overall correct quantity was delivered but some of the tins were packed in cases containing 24 tins. The Court of Appeal held that this was a sale of goods by description and that the statement in the contract that the goods were to be packed 30 tins to a case was part of the description. As some of the goods tendered did not correspond with that description, the buyer was entitled to reject the entire consignment.

This case was discussed in Chapter 2, ‘The description must amount to a term in the contract’, p 21. The breach was exceptionally minor. It seems very likely that had s 15A SGA been in force at that time, the court would have held that the breach was so slight that it would have been unreasonable for the buyer to have rejected the goods.

The buyer bought a consignment of corn. Before the due date for delivery, he resold the corn at a profit. When the vessel arrived with the delivery of corn, the market price of corn had fallen and the seller refused to deliver. Under the normal prima facie rule for calculating damages for non-delivery of goods, it is the market price itself that determines loss and the fact that the buyer buys the goods for the purpose of resale is generally ignored for the purpose of calculating damages for non-delivery.

The House of Lords made four exceptions to the prima facie rule which, if all are present, will see it displaced, the court will instead take account of the buyer’s resale of the goods and any loss which the buyer sustains in connection with the resale will be recoverable. (a) The parties to the first contract must have contemplated that the buyer was to resell the goods. Therefore the first seller will have known that their buyer would sustain loss in the event of non-delivery. (b) The resale contract must have been made before the delivery due date on the first contract. (c) The resale contract must be for the exact same (not just similar) goods as were to be supplied under the first contract. (d) The resale contract must be in accordance with the market and not be an extravagant or unusual bargain.

The contract of sale was to deliver 3,000 tons of moist wood pulp to the buyer between 1 September and 1 November 1990. The contract price of the goods was 25s per ton. The buyer had resold the goods for 65s per ton. The market price of the goods when delivery should have been made was 70s per ton but had dropped to 42s 6d by the time delivery had actually been made. The buyer claimed 27s 6d a ton, which was the difference between the market price at the due date of delivery (70s) and the market price at the date of actual delivery (42s 6d).

The general intention of the law in giving damages for breach of contract is that C should be placed in the same position as they would have been in if the contract had been performed. In the case of late delivery, the measure of damages in order to indemnify the purchaser is the difference between the market price at the respective dates of due and actual delivery of the goods purchased. However, in cases where the purchaser has resold them at a price in excess of that prevailing at the date of actual delivery, then they must give credit for that excess when estimating their damages. The Privy Council held that since they had sold the goods at 65s a ton, their loss was only 5s a ton and that was all they were entitled to recover.

Back to top