What do you do if someone gives you defective goods?
Liability in contract: express terms
It might be thought to be a relatively simple task to decide whether or not a seller has made express undertakings about the goods. In fact, this is not the case and English law has managed to make this a much more difficult question than it would appear at first sight.
Liability for misrepresentation
Where the seller has made statements about the goods but the court has held that these statements are not terms of the contract, such statements may give rise to liability in misrepresentation.
What is a misrepresentation?
Basically, a misrepresentation is a statement of a fact made by one party to the contract to the other party before the contract is made which induces that other party to enter into the contract but is not characterized as being a term of the contract. It should be noted, however, that not all of the terms of a contract are concerned with making statements of fact.
For such a promise to give rise to liability, it must be a term of the contract. This principle is well established but it is subject to one very important qualification. Hidden within many statements which look like statements of intention or opinion or undertakings as to the future, there may be a statement of fact.
Types of misrepresentation
Originally, misrepresentation created liability only where it was fraudulent; that is, where the person making the statement did not honestly believe that it was true. The narrow common law definition was applied by the House of Lords in the famous case of Derry v Peek (1889). To establish liability in fraud, it had to be shown that the person making the statement knew that it was untrue or at least did not care whether it was true or false.
Remedies for misrepresentation
A claimant who has entered into a contract as a result of a misrepresentation by the defendant can recover damages by showing that the defendant was fraudulent, as in Derry v Peek, or by showing that the defendant owed a duty of care and was in breach of that duty, as in Esso v Marlon, or if the defendant is unable to show that it was not negligent in making the misrepresentation. A claimant, if she wishes, can rely on all three of these theories. In practice, prudent claimants do not usually make allegations of fraud unless they have a very strong case since English courts, traditionally, are reluctant to stigmatize defendants as fraudulent.
Obligations of the seller as to description
The first thing to note about s 13 is that, unlike, it applies to contracts for the sale of goods of all kinds and is not limited to the case of the seller who sells goods in the course of a business. So, even a private seller is bound by this section. Secondly, we should note that the section involves a paradox. If one contracts to sell a horse and delivers a cow, one might say that the cow does not fit the description of the horse contained in the contract and applies. But, one might also say that, the failure to deliver a horse is a breach of an express term of the contract.
Alternatively, the goods may be capable of being used for a range of purposes which are different. For instance, as in Kendall v Lilac (1969), where the goods were suitable for feeding cattle but not suitable for feeding poultry. A buyer could recover on these facts if, but only if, he made it clear to the seller that the purpose was to buy food for feeding poultry. In fact, in that case, it was held that the seller did have a sufficient knowledge of the buyer’s purpose to make him liable and this case is therefore a good example of goods which were merchantable because they were commercially saleable as cattle feed but which were not fit for the buyer’s purpose.