The Seller’s Liability for Defective Goods at Common Law
Jacob S. Ziegel **
In the pages of the McGill Law Journal there took place a year
or so ago an interesting discussion between Professor Durnford and
Professor Gow with respect to the contractual liability of a seller
in Quebec law for defects in the goods sold by him. I In view of
the interest and obvious importance of the subject, it was suggested
to me that I might care today to discuss it from the point of view of
the common law and to this suggestion I readily acceded.
It may be helpful if I begin by briefly summarizing the contents
of the articles to which I have referred and the nature of the
difference of opinion between Professor Durnford and Professor
Gow. Article 1522 of the Quebec Civil Code provides that a seller
is obliged to warrant the buyer against latent defects (d6fauts
cach6s) in the thing sold. He is not, however, obliged to warrant
the thing against apparent defects
(vice apparents) which the
buyer might have known of himself. What then are “apparent
defects” or, to put it in a negative form, which defects are not
latent ? Professor Durnford submitted 2 that all defects are apparent
which a competent and careful buyer would have discovered in the
course of a serious and comprehensive inspection of the goods. If he
does not possess the requisite skill or knowledge to properly assess
the quality of the goods he is purchasing, Professor Durnford
maintained, the buyer must engage the services of an expert, or
perhaps even series of experts if the goods are of a particularly
complicated nature. Professor Durnford was critical of the Court of
Appeal decision in Bourget v. Martel [1955] Q.B. 659 because it
appeared to him to be contrary to established doctrine and the weight
of judicial and academic opinion. The only exceptions which are
*This paper was read at a special lecture in the Faculty of Law of
McGill University on November 12, 1965. It has been slightly revised for
purposes of publication. The term “common law” is used here in its generic
sense and includes the statutory rules as well as the judicially evolved ones.
* Associate Professor of Law, University of Saskatchewan.
1 See John W. Durnford, “What is an Apparent Defect in the Contract of
Sale”, (1963-64) 10 McGill L.J. 60; J.J. Gow, “A Comment on the Warranty
in Sale against Latent Defects”, (1964) 10 McGill L.J. 243; John W. Durnford,
(1964) 10 McGill L.J. 341; J.J. Gow,
“Apparent Defects in Sale revisited”,
“A Further Comment on Warranty in Sale”, (1964) 11 McGill L.J. 35.
2 See the summary of his views in 10 McGill L.J. at pp. 341-345 and 357-58.
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recognized to the aforegoing rules, according to Professor Durnford,
are those where the seller is the manufacturer or producer of the
goods, in which case the buyer is not obliged to retain expert opinion,
or where an express guarantee covering both latent and apparent
defects has been given. Professor Durnford insists that this is not
only an accurate summary of Quebec law, but he stoutly maintains
that it is also a satisfactory law and that it is in the interests of
society and the minimizing of litigation that a buyer should be obliged
to inspect the goods he is purchasing. Professor Gow’s reply to all
this was that if Quebec law was as it was represented to be by
Professor Durnford, then it was seriously out of step with the
character and needs of our mass production consumer oriented
society. He was particularly critical of the alleged need, under
Quebec law, for an unsophisticated buyer to retain the services
of an expert for the discovery of apparent defects, and he intimated
that on this and related points the common law was much more
favourable to the buyer than the civil law. The gravamen of the
dispute, then, between these two scholars is whether, as a matter
of sound social and commercial policy, the buyer should always be
under a duty to inspect the goods which are offered to him and
what the extent of that duty should be. Professor Gow also raised
several other interesting issues, but these are not germane to my
subject, and I shall not consider them. My own approach to the
controversy will be slightly different.
I shall first outline the
principal common law and statutory rules relating to the liability of
a seller for defective goods, and then I shall attempt to compare
them with those of the civil law in order to see whether the differences
are in fact as important as Professor Gow suggests they are.
L The Common Law Position
The modern rules governing this branch of the law of sale of
goods developed surprisingly late. The original rule concerning all
defects, latent as well as patent, was caveat emptor, and as late as
1802 3 an English court affirmed the rule in uncompromising terms.
The first major breach occurred in 1815 4 when it was held that
in a sale of goods by description by a person dealing in those goods
there was an implied condition that the goods would be of merchan-
table quality. What “merchantable” means we shall see in due
course. This rule was subject to the all important proviso that the
3 See Parkinson v. Lee (1802) 2 East 314.
4 See Gardiner v. Gray (1815) 171 E.R. 46.
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS
185
buyer had not had an opportunity to inspect the goods before the
sale. 5 In 1829 6 a second major breach occurred when it was held
that where goods were ordered by description from a manufacturer
to be used for a particular purpose, there was an implied condition
that the goods would be fit for that purpose. In 1868 7 the implied
condition of merchantability was applied in a modified form to a
sale by sample and in 1877 8 the formulation of the modern rules
it was held that the seller’s
was substantially completed when
liability for a breach of the implied conditions of merchantability
and fitness were absolute and did not depend on whether or not
the defects were latent or patent or could have been discovered by
the use of reasonable care or skill on the seller’s part. The law
relating to the sale of goods was codified in 1893 in the English Sale
of Goods Act of that year, 9 and the Act has now been adopted in
most, if not all, parts of the common law world, including all the
common law provinces of Canada. As we shall see, however, the
Act did more than merely restate the pre-1893 law; Parliament also
introduced a number of significant changes, of which the most
important is probably the one eliminating any duty on the part of
the buyer to examine the goods he intends to purchase. Sections 13
to 16 inclusive of the English Act contain the applicable rules govern-
ing defects in the goods sold, and I should now like to examine each
of these sections with greater particularity. 10
1. The Implied Condition of Description. Section 13 of the Sale
of Goods Act reads as follows:
13. Where there is a contract for the sale of goods by description, there
is an implied condition that the goods shall correspond with the description;
and if the sale be by sample, as well as by description, it is not sufficient
5 The pre-1893 rules concerning inspection are summarized by Mellor J. in
his classic judgment in Jones v. Just (1868) L.R. 3 Q.B. 197.
OJones v. Bright (1829) 130 E.R. 1167.
“Moldy V. Gregson (1868) L.R. 4 Ex. 49.
sRandall v. Newson (1877) 2 Q.B.D. 102.
9 56 & 57 Vic. c. 71.
10 The leading general English and American works on the sale of goods
are Judah Philip Benjamin, A Treatise on the Law of Personal Property, 8th
ed. (London, 1950; with Supplements); Chalmers’ Sale of Goods Act, 1898,
14th ed. (London, 1963); and Samuel Williston, The Law Governing Sales of
Goods at Common Law and under the Uniform Sales Act, Rev. ed., 4 vols.
(New York, 1948; with cumulative supplements). Professor Williston drafted
the Uniform Sales Act in 1902 at the request of the Commissioners on Uniform
State Laws, and this Act was adopted in some thirty odd states. It has now
been replaced by Article 2 of the Uniform Commercial Code. The Code is now
in force in some 38 states. The Uniform Sales Act closely followed the British
Act; Article 2 differs from both in numerous respects.
McGILL LAW JOURNAL
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that the bulk of the goods corresponds with the sample if the goods do not
also correspond with the description.
Typical examples of cases where this section has been applied are
where used goods have been delivered instead of new goods,” Giant
Sanfoin seed instead of Common English seed, 12 an asphalt plant
with a capacity of 3600 lbs. instead of the 4,000 pounds specified, 13
and so forth. You may ask, what have these examples got to do with
defects ? Surely they illustrate situations in which the buyer has
totally failed to perform his express contractual obligations ? The
answer is twofold. The first is that historically the courts never
clearly distinguished the implied condition of merchantability from
the implied condition of description. The terms were frequently
used interchangeably. 14 The second reason is that there is no simple
line of demarcation between goods which are defective and goods
which fail to correspond with their contractual description. A
“description” of goods not merely identifies and distinguishes them
from others but also describes their essential attributes. The term
automobile, for example, describes a four-wheeled self-propelled
vehicle used for carrying private passengers. Suppose therefore that
a used car dealer supplies an object which looks like an automobile
but which is without an engine, or with an engine so defective that
the vehicle will not move. The dealer in such a case will not have
fulfilled his undertaking to supply a car; he has merely provided
a simulation of the genuine article. 15 In recent years the English
courts 16 and, increasingly, the Canadian courts 17 have used this
line of reasoning with great effectiveness in order to avoid objection-
able disclaimer clauses. A disclaimer clause is a clause in which
the seller purports to exclude all or some of his implied statutory
obligations. It is well settled in England that a disclaimer clause,
“lAndrews Bros., Ltd. v. Singer & Co., Ltd. [1934] 1 K.B. 17 (C.A.). Cf.
MacHardy v. Alma Motors Ltd. (1963), 38 D.L.R. (2d) 761 (N.S.).
12 Wallis, Son and Wells v. Pratt [1911] A.C. 394.
13 R.W. Heron Paving Ltd. V. Dilv)orth Equipment Ltd. (1963) 36 D.L.R.
(2d) 462 (Ont.), applying Schofield V. Emerson Brantingham Implement Co.
(1918), 57 S.C.R. 203.
14 See, for example, the judgment of Brett L.J. in Randall v. Newson, supra
n. 8.
15 Cf. Karsales (Harrow) v. Wallis [1956] 2 All E.R. 866 (C.A.).
16 See, for example, the case cited in the previous note; Yeoman Credit, Ltd.
v. Apps [1962] 2 Q.B. 508; and cf. Smeaton Hanscomb v. Sassoon I. Setty [1953]
2 All E.R. 1471.
17 See, e.g., Pippy v. RCA Victor Co. Ltd. (1965) 49 D.L.R. (2d) 523 (N.S.);
R.W. Heron Paving Ltd. v. Dilworth Equipment (1963) 36 D.L.R.
(2d) 462
(Ont.); Knowles v. Anchorage Holdings Co. Ltd. (1963) 43 D.L.R. (2d) 300
(B.C.). Cf. Hart-Parr Co. V. Jones [1917] 2 W.W.R. 888 (Sask.).
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS 187
however widely drawn, cannot excuse a seller from performing his
essential undertaking. ‘s A promise to deliver goods of a given
description is such an undertaking. It follows from all of this that
if the defects are sufficiently serious a buyer will have breached
section 13, quite apart from any other implied obligation which he
may have assumed.
It will be noted that section 13 says nothing
about inspection, 19 but it is settled law that a seller is not excused
from delivering goods corresponding to their contractual description
simply because the buyer has seen the goods before he purchased
them. 20
2. The Implied Condition of Merchantability. 21 The next implied
condition which I should like to consider is the implied condition
It is contained in Section 14(2) of the Act,
of merchantability.
which reads as follows:
14(2): Where goods are bought by description from a seller who deals
in goods of that description (whether he be the manufacturer or not), there
is an implied condition that the goods shall be of merchantable quality;
provided that if the buyer has examined the goods, there shall be no
implied condition as regards defects which such examination ought to
have revealed.
It will be convenient for me to deal with the subsection in several
parts. First, when does the implied condition arise ? The answer is
when the goods are bought (a) by description, and (b) from a
seller dealing in goods of that description. Prima facie the term
“by description” might appear to exclude the sale of specific goods,
that is, goods which are agreed upon and identified at the time of
the contract. If this were correct, the buyer in a retail store, for
example, who selects his own goods would never be entitled to rely
upon the implied condition of merchantability. Fortunately, the
great majority of Anglo-Canadian 22 and American 23 courts have
18 See generally, Guest
(1961), 77 L.Q.R. 98; Reynolds
(1963), 79 L.Q.R.
534; and Coote, Exception Clauses (1964).
19 Though it does say that in a sale by sample the bulk must correspond with
the description of the goods as well as with the sample.
20 Presumably however he cannot complain if he appreciates that the goods
have been misdescribed and still proceeds to purchase them.
21 See generally, Prosser, “The Implied Warranty of Merchantable Quality”
(1943) 21 Can. Bar Rev. 446 (an excellent article).
22 See e.g., Varley v. Whipp [1900] 1 Q.B. 513; Morelli v. Fitch & Gibbons
[1928] 2 K.B. 636; Grant V. Australian Knitting Mills Ltd. [1936] A.C. 85
(P.C.); Benjamin, op. cit., pp. 609-627. Godsoe v. Beatty (1959) 19 D.L.R.
(2d) 265 (N.B. App. Div.) appears to have been wrongly decided on this point.
23 See e.g., Sams v. EsyWay Foodliner Co.
(1961) 170 A 2d 160
(Me);
Mead V. Coca Cola Bottling Co. (1952), 108 N.E. 2d 757 (Mass.). Cf. Torpey
v. Red Owl Stores (1955) 228 F. 2d 117; Williston, op. cit., 224, 225.
McGILL LAW JOURNAL
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not so restricted the meaning of sale “by description”, and the only
time in effect when goods will be deemed not to have been sold by
description is when they are sold “such as they are” or as “these
goods” –
in short, without any accompanying verbal designation. 2
The second requirement is that the seller must be in the business
of supplying goods of the description sold; a private seller is there-
fore, as he was at common law, 25 excluded, the reason for the
exclusion being that the buyer in such a case has no reason to
expect merchantable goods from one who, ex hypothesi, is not in
the business of supplying such goods.
What, then, is the meaning of “merchantable” ? Two frequently
cited definitions are the following:
“The phrase in section 14(2) is, in my opinion, used as meaning that the
article is of such quality and in such condition that a reasonable man acting
reasonably would after a full examination accept it under the circumstances
of the case in performance of his offer to buy that article, whether he
buys for his own use or in order to sell again”; 26
“Whatever else merchantable may mean, it does mean that the article
sold, if only meant for one particular use in ordinary course, is fit for
that use”. 27
These two definitions by no means comprehend all the possible mean-
ings of merchantability, 28 nor are they entirely consistent with
one another, but they do bring out the two essential features of
merchantability, namely, that the goods must have exchange value
or, in other words, be saleable in the market in their then condition,
and that they must be reasonably fit for the general purpose for
which such goods are used. Although these two conditions frequently
coincide, they are not identical. Thus a new car which is badly
scratched may be perfectly roadworthy but it will not be saleable
as a new car. A striking example of the difference is afforded by
a Saskatchewan decision, International Business Machines Corpora-
tion v. Shcherban, 29 in which it was held that the buyer was entitled
to reject a computing scale costing $294 because of a broken glass
dial, even though the glass could have been replaced for about 30
24 Grant’s case, supra n. 22, per L. Wright at p. 100.
25 La Neuville v. Nourse (1813) 170 E.R. 1407; Burnby v. Bollett (1847)
153 E.R. 1548.
26 Bristol Tramways Co. v. Fiat Motors Ltd. [1910] 2 K.B. 831 at 841. This
definition must be read subject to Lord Wright’s observation in Grant’s case
that goods are not merchantable because they look all right.
27 Grant’s case, supra n. 22, at p. 100.
28 For an exhaustive discussion of the term, see Prosser, supra n. 21, p. 450
et seq.
29 [1925] 1 D.L.R. 864 (C.A.).
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS 189
cents. This decision also illustrates that the defect which may make
the goods unmerchantable need not be a very remarkable one, so long
as it is still sufficiently significant to attract the disapproval of a
reasonable buyer. 30
Now let us look at some other aspects of the implied condition
of merchantability. The common law has never adopted the doctrine
of “price worthiness” in the sense in which it is apparently used
in some of the civil law systems, and price is not a governing
consideration in determining whether or not the goods are of
acceptable quality.31 The buyer of a new car at an end of season
sale is estitled to except the same product as one who pays the
normal price. However, this does not mean that price is unimportant.
To use Prosser’s example, 32 a woman who purchases jewellery at
Woolworth’s for a few cents cannot expect an article of the same
quality or craftsmanship as the woman who purchases jewellery at
Tiffany’s for a few thousand dollars; but she is still entitled to
expect that the cheaper jewellery will not fall apart as soon as she
wears it.
To what extent does the implied condition of merchantability
apply in the case of used goods ? It is by no means easy to say.
Section 14(2) does not distinguish between new and used goods,
but there are dicta in various Canadian decisions 33 which suggest
that the condition cannot be imported at all in the sale of used goods.
The reason is not clearly stated, 3- but it appears to be that the fact
that the goods are sold as used implies that they may be defective or
that they may develop defects at any time and that therefore the buyer
cannot expect a sound article. Clearly this reasoning is bad; the
30 For example, a single used screw or bolt in a new machine was held to
be a trifling defect in Everedy Machine Co. v. Hazle Maid (1939) 6 A. 2d 505.
Cf. Jackson v. Rotax Motor & Cycle Co. [1910] 2 K.B. 937, which held that new
goods are not merchantable simply because the defects can be rectified at trifling
cost. Quaere whether Article 1522 of the Code is as favourable to the buyer. The
prevailing opinion appears to be that “defects which only diminish the embellish-
ment of the thing are not taken into consideration”. Planiol & Ripert, Treatise
on the Civil Law, 11th ed., Vol. 2, 1463 (English transl., Louisiana State
Institute); Faribault, TraWit de Droit Civil du Qu6bec, Vol. XI, pp. 289, 294.
31 See, for example, Parkinson v. Lee (1802) 102 E.R. 389.
32 op. cit., p. 466.
33 See, for example, Godsoe v. Beatty (1959) 19 D.L.R. (2d) 265 (N.B. App.
Div.); Presley v. MacDonald (1963) 38 D.L.R. (2d) 237 (Ont.).
34 The New Brunswick court in Godsoe’s case relied on a passage in the
Corpus Juris Secundum, which is hardly a reliable guide as to Canadian law.
It is even doubtful whether the passage accurately represents American law.
See Prosser, op. cit., at p. 473.
McGILL LAW JOURNAL
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buyer of used goods will not expect an article of the same quality
as new goods but he is entitled to expect that the goods have been
kept in a state of proper repair and that there will be a reasonable
correlation between the age and amount of use of the goods and
their condition. “Used” goods and “defective” goods are not inter-
changeable terms. Surprisingly there was no English decision on
this important question until earlier this year, when it was discussed
in Bartlett v. Sidney Marcus Ltd. i The Court of Appeal there held
that, in the sale of a used automobile, the buyer was only entitled
to expect that the car is “in a roadworthy condition, fit to be driven
along the road in safety, even though not as perfect as a new car”. 80
This test is less generous than the one which I have suggested as
being the appropriate one, and there are difficulties about the way
the court applied it in the case before them, but it does at least
repudiate the Canadian notion that the buyer is completely at the
mercy of the dealer. You will also notice, however, that the general
obscurity which still surrounds the subject makes the Anglo-Canadian
law look substantially less attractive than the somewhat optimistic
picture which Professor Gow drew of it in his criticism of Quebec
law. 8 7
Finally, we must look at the important issue of inspection. Here
fortunately the law is clear and much more favourable to the buyer.
Unless the seller insists on his doing so, the buyer is not obliged to
examine the goods before the purchase at all and even less is he
obliged to retain the services of an expert. 88 If he does inspect the
goods he is not obliged to make a microscopic examination, to dis-
mantle the goods, or to subject them to such tests as the ingenuity
of a suspicious mind may suggest.3 9 He is apparently free to de-
termine for himself how extensive an examination he wishes to con-
35 [1965J 1 W.L.R. 1013.
361bid., per Denning L.J. at p. 1016.
37 The paucity of reasoned decisions is probably explained by the ubiquitous
use of disclaimer clauses in the sale of used vehicles. Even Bartlett’s case, supra
n. 35, turned very much on its special facts since there the buyer’s attention
had been drawn by the seller to the existence of some sort of defect and he
had been given the option between a reduction in price or having the defect
repaired by the seller. He chose the former. His real complaint was that the
character of the defect had been misrepresented to him. His reliance on the
implied conditions of fitness and merchantability was an auxiliary argument.
38 See the proviso to section 14(2). The Seller’s right to insist on the buyer
examining the goods flows from ordinary contract principles.
39 Mody v. Gregson (1868) L.R. 4 Ex. 49, esp. at p. 53 et seq; James Drummond
& Sons v. Van Ingen (1887) 12 A.C. 284 at 297. These leading cases actually
involved sales by sample, but they are generally regarded as also laying down
the applicable standard under s. 14(2).
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS
191
duct, for the proviso to section 14(2) expressly says that he will
only be deemed to have notice of such defects “which such examination
not, it will be noticed, such defects as a
ought to have revealed” 40 –
comprehensive examination would have revealed.41 In all these re-
spects, the section differs fundamentally from the law which obtained
at common law before 1893 42 and from the law as Professor Durn-
ford maintains it is in Quebec today.
3.
Implied Condition of Fitness for Particular Purpose.
The third great condition implied in the buyer’s favour is contained
in Section 14(1) of the Act, which reads:
14(1): Where the buyer, expressly or by implication, makes known to
the seller the particular purpose for which the goods are required, so as
to show that the buyer relies on the seller’s skill or judgment, and the
goods are of a description which it is in the course of the seller’s business
to supply (whether he be the manufacturer or not), there is an implied
condition that the goods shall be reasonably fit for such purpose, provided
that in the case of a contract for the sale of a specified article under
its patent or other trade name, there is no implied condition as to its
fitness for any particular purpose.
Time does not permit me to examine the elements of this condition
at length. Suffice it to say that very little evidence is required to
show that a buyer is relying on the skill and knowledge of the seller.
It has been held, for example, that the presumption arises in every
retail sale.43 Nor is the presumption excluded because the buyer
possesses some skill and knowledge of his own or even has the
benefit of expert advice.44 Finally, it should be noted that the “par-
ticular purpose” referred to in the subsection does not mean a “special”
purpose. It may in fact be the purpose for which the goods are nor-
mally used.45
40 Italics added by the writer.
41 It is of course possible for the parties to contract on the footing that there
has been a full examination by the buyer, even though he has in fact conducted
only a cursory examination, and this is probably the best explanation of
Thornett & Fehr V. Beers & Son [1919] 1 K.B. 486. It must be confessed, however,
that the stringent language of the proviso can bear hardly on the seller,
especially where he is not present to see how thorough an examination of his
goods the buyer conducted.
42 See supra, p. 185.
43 Grant v. Australian Knitting Mills, Ltd. [1936] A.C. 85 at 99, foll’d, inter
alia, in Godley V. Perry [1960] 1 All E.R. 36 and Buckley v. Lever Bros. Ltd.
[1953] 4 D.L.R. 16 (Ont.).
44 Cammell Laird & Co. v. Manganese Bronze & Brass Co. [1934] A.C. 402;
Hayes v. City of Regina [1959] S.C.R. 801.
45 Grant’s case, supra n. 43, at p. 99; Priest v. Last [1903] 2 K.B. 148 (C.A.).
192
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In practice the implied conditions of merchantability and fitness
frequently overlap, but the two conditions are by no means identical.
Thus the condition of merchantability applies to sale value as well
as to use value. It includes sales by trade or patent name as well
as by general description, and it is not necessary for the buyer to
show that he communicated to the seller the purpose for which he
intended to use the goods or that he relied on the seller’s skill or
knowledge. On the other hand, he is not entitled to expect that the
goods will be fit for any particular purpose and, if he has inspected
them, he takes them with such defects as his examination ought
to have revealed. Generally speaking, however, it is correct to say
that the implied condition of merchantability is the more powerful
and stronger of the two.46
4. Conditions Implied in Sales by Sample.
I turn finally to the conditions which are implied in a sale by
sample. This subject is covered in Section 15 of the Act, which
provides that:
15 (2) : In the case of a contract for sale by sample –
(a) There is an implied condition that the bulk shall correspond with the
sample in quality:
(b) There is an implied condition that the buyer shall have a reasonable
opportunity of comparing the bulk with the sample:
(c) There is an implied condition that the goods shall be free from any
defect, rendering them unmerchantable, which would not be apparent
on reasonable examination of the sample.
Here, it will be noted, is the only occasion on which the statute
imposes an obligation on the buyer to inspect and not merely a privi-
lege to do so, and even then the examination which must be under-
taken falls far short of the onus which generally rests on the buyer
under Quebec law. In the words of Lord MacNaghten, rendered in
a leading case,4 7
“The office of a sample is to present to the eye the real meaning and
intention of the parties with regard to the subject matter of the contract
which, owing to the imperfections of language, it may be difficult or
impossible to express in words. The sample speaks for itself. But it cannot
be treated as saying more than such a sample would tell a merchant of
a class to which the buyer belongs, using due care and diligence, and
appealing to it in the ordinary way and with the knowledge possessed by
46 Denning, M.R., in Bartlett’s case, supra n. 35, expressed the opposite view,
but he was limiting his comparison to the question of fitness.
47Drummond V. “Van Ingen (1887) 12 A.C. 284 at 297.
No. 2]
SELLER’S LIABILITY FOR DEFECTIVE GOODS 193
merchants of that class at the time. No doubt the sample might be made
to say a great deal more. Pulled to pieces and examined by unusual tests
which curiosity or suspicion might suggest, it would doubtless reveal every
secret of its construction. But that is not the way in which business is
done in this country.”
Subject, then, to such defects as a reasonable examination ought
to have revealed, the buyer is still entitled to obtain merchantable
goods and the goods must also conform to the description under
which they were sold.
This concludes my summary of the principal provisions in the
Sale of Goods Act relating to the seller’s liability for defects, but
in order to present a balanced picture of the common law I must
briefly refer to certain other matters.
What are the remedies of an aggrieved buyer for breach of the
above conditions? The answer is that it depends partly on the nature
of the breach involved and in part on whether or not the goods were
specific goods at the time of the sale. The Sale of Goods Act classifies
the seller’s obligation as being either “conditions” or “warranties”.
A “condition” constitutes an essential term of the contract 4 8 and, in
the event of a breach, entitles the buyer to reject the goods and to
sue for damages (if he has suffered any) or to retain the goods and
again to sue for damages.4 9 The right to reject, however, must be
exercised promptly and dates not from the time when the defects
were first discovered but from the time the goods are delivered.50
The common law rule is therefore more stringent than the interpret-
ation which has been placed on the “reasonable diligence” rule in
Article 1530 of the Civil Code.r’ Moreover, the right to reject ap-
parently only exists in the case of unascertained goods; it does not
apply to a sale of specific goods, that is, goods that are identified
48 The Sale of Goods Act also uses it in other senses, though the Act nowhere
defines the term. See further, Wallis v. Pratt [1910] 2 K.B. 1003, per Fletcher
Moulton, L.J., and Chalmers, op. cit., Appendix II, Note A.
49 SGA, ss. 11(1) (b), 51-52; Benjamin, op. cit., p. 953 et seq; Chalmers, pp.
149-161.
50 SGA, ss. 34-5; Chalmers, op. cit., pp. 120-23.
61 See Durnford, “The Redhibitory Action and the ‘Reasonable Diligence’ of
Article 1530 C.C.”, (1963) 9 McGill L.J. 16, esp. at p. 25. Note, however, that
the Quebec law is less favourable to the buyer than the common law, insofar
as under Quebec law the buyer must commence action promptly after discovering
the defect. At common law the buyer has the usual period of limitations
appropriate to actions in simple contract in which to bring his suit, viz. 6 years.
Indeed, if he is merely resisting the seller’s claim for the price he need bring
no action at all. His rightful rejection of the goods ipso facto rescinds the sale.
McGILL LAW JOURNAL
[Vol. 12
and agreed upon at the time of the contract.5 2 In such a case the buyer
may have to content himself with a claim in damages.5 3
A “warranty” is a lesser or collateral term of the contract and
a breach of it only entitles the buyer to claim damages –
never to
reject the goods.5 4 However, the implied terms in Sections 13 to 15
of the Sale of Goods Act are all conditions. Where the buyer maintains
an action for damages – whether it arises out of breach of a con-
dition or breach of warranty matters not –
his claim is not limited
to the return of the purchase price or to the diminution in value of
the goods by reason of their defective state. He is also entitled to
claim “consequential damages”, by which is meant all damages arising
naturally out of the seller’s breach of contract and which were reason-
ably foreseeable by him.5 i Here then is another striking difference
from the Quebec rule 56 and one which enormously enlarges the scope
of the seller’s liability. In Buckley v. Lever Brothers, 7 for example
the defendant sold the plaintiff some plastic clothes pins for fifty
cents and a couple of box tops from the defendant’s soap products.
One of the pins contained a latent defect; the pin broke and severely
injured one of the plaintiff’s eyes. The Ontario court held that there
had been a breach of the implied conditions of merchantability and
fitness and that the plaintiff was therefore entitled to recover
damages in respect of her personal injuries. The defendants were
not the manufacturers of the pins and the evidence showed that
about five hundred million of them had been sold without mishap.
At common law it was always possible for the seller to exclude
any implied conditions or warranties, and this right is preserved in
the Act.58 However, the phenomenon of contrats d’adh~sion, the
frequent unconscionability of such disclaimer clauses, and the un-
52 SGA, ss. 11(1) (c) and 18, Rule 1.
53Home Gas Ltd. V. Streeter [1953] 2 D.L.R. 843 (Sask. C.A.). American
law does not impose this limitation. The limitation is an unjust one and a
Divisonal Court, in Varley v. Whipp [1900] 1 Q.B. 513, held that it does not
apply where the goods which are supplied do not correspond with the description
under which they were sold. The decision has been much criticised.
54 SGA, ss. 52 & 62, definition of “warranty”; Chalmers, op. cit., Append. II,
Note A, p. 244 et seq. American law does not distinguish between warranties
and conditions, but treats them alike. See UCC 2-601, -02, -06, -08, -713-5.
5 SGA, s. 53(2), the wording of which differs slightly from the one used
in the text. This rule is also frequently referred to as the ‘first rule in
Hadley v. Baxendale’ (1854), 9 Ex. 341, after the case in which the rules
governing damages for breach of contract were authoritatively laid down.
56 C.C. 1526, 1528. See also post, p. 197.
57 [1953] 4 D.L.R. 16.
58 Section 55.
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS
195
equal bargaining strength of sellers and consumers has caused the
common law courts and legislatures alike to cast an increasingly
jaundiced eye on their use. 9 So far as the Anglo-Canadian courts
are concerned, disclaimer clauses are usually interpreted very narrowly
and the courts are astute in finding loopholes in them. Where the
interpretative method fails, a court may be willing to invoke the
doctrine of the fundamental term of a contract, to which I referred
to earlier.00 The American courts have gone a step further and,
since the now celebrated judgment of the New Jersey Supreme Court
in Henningsen v. Bloomfield Motors Inc.”‘ in 1960, have frequently
held disclaimer clauses to be contrary to public policy. Section 2-302
of the American Uniform Commercial Code now also empowers the
state courts to refuse to enforce any contract, or any clause in any
contract, which the court finds to be unconscionable at the time it
was made. Legislative developments of a similar but more limited
character have also occurred in other parts of the common law world.
The English Hire-Purchase Act of 1938 02 implied certain conditions
and warranties concerning the goods in every hirepurchase agreement
which came within the Act, 3 and, save in the case of used goods,
these could not be excluded at all or excluded only if the seller or
owner could show that before the contract was made the provision
was brought to the attention of the hirer and its effect made clear
to him. 4 These provisions have been widely copied in other parts
of the Commonwealth. 5 In Canada, however, only Saskatchewan has
so far adopted them, 6 although the recently published report of the
9 See generally, Brian Coote, Exception Clauses (London, 1964). For an
admirable comparative law treatment of the problem, see Wilson, “Freedom
of Contract and Adhesion Contracts”, (1965) 14 I. & C.L.Q. 172.
00 Supra, p ………
01 (1960) 161 A. 2d 69.
02 1 & 2 Geo. 6, c. 53.
63 Ibid., s. 8. The original limits were 50
in the case of motor vehicles,
limits
500 in the case of livestock, and 100
were substantially raised in 1954 and 1964. The current Hire-Purchase Act
1965, s. 2, applies, generally speaking, to all hire-purchase, conditional sale,
and credit-sale agreements in which the hire-purchase price or total purchase
price does not exceed 2,000 (approx. $6,000).
in every other case. The
64 These provisions were enlarged in 1964 as a result of the recommendations
in the Final Report of the (Molony) Committee on Consumer Protection (Cmnd.
1781, July 1962). See now the Hire-Purchase Act 1965, ss. 17-18. Section 18
is reproduced below, at pp. 186-187.
065 As, for example, in the Australian Uniform Hire-Purchase Bill, clause 5
(1959). See Ziegel, “New South Wales Hire-Purchase Legislation”, (1962) 25
Mod. Law Rev. 687.
06 See The Conditional Sales Act, Stat. Sask. 1957, c. 97, s. 19. See also The
Agricultural Machinery Act, Stat. Sask. 1958, c. 91, s. 19 & Sch. A.
McGILL LAW JOURNAL
[Vol. 12
Ontario Select Committee on Consumer Credit 67 contains recommen-
dations for the adoption of similar legislation in Ontario. In 1962 the
Molony Committee on Consumer Credit in England also recom-
mended 68 that the English Sale of Goods Act be amended so as to
prohibit the exclusion of the implied conditions and warranties in
that Act in the same way as their exclusion was then prohibited in
the Hire-Purchase Act. Finally reference should be made to the fact
that a substantial number of provincial Motor Vehicles Acts contain
a provision making it an offence for dealers in vehicles to sell a
vehicle that is unroadworthy.0 9 I mention these legislative develop-
ments because, it seems to me, they have a direct bearing on the
controversy between Professor Durnford and Professor Gow.
II. The Quebec Civil Law Position Compared
I have said all I have time to say about the common law rules
and I should now like to attempt a brief comparison between them
and the civil law rules:
1. The implied warranty in Article 1522 of the Code applies to sales
by all persons; whereas the implied conditions of merchantability
and fitness in the English Act are limited to sales by persons
dealing in goods of the description sold.
2. The implied warranty in Article 1522 is limited to latent defects;
the common law rules are not so limited. On the other hand, the
Anglo-Canadian courts have substantially limited the scope of the
implied condition of merchantability in the case of used goods,
although the precise extent of the limitation is not yet settled. 70
3. By virtue of Article 1523, the buyer is obliged to examine the
at any rate where they are “in his presence”; 71 and
goods –
he is deemed to buy the goods with such defects as a serious
examination by an alert buyer would have revealed. Moreover,
if he lacks the necessary skill and knowledge he must retain expert
67 June 10, 1965, Sessional Paper (No. 85), 138-151.
08 Supra n. 64, ch. 12. See further, Ziegel, “Report on Consumer Protection”,
(1962) 106 Sol. Jour. 801, 824, 847, 869.
69 See, for example, Stat. Sask. 1957, c. 93, s. 125. The common law courts
are, however, divided as to whether or not a breach of such provisions confers
a civil remedy on the buyer. Cf. Schmidt v. International Harvester Go. (1962)
38 W.W.R. 180 (Alta.) with Presley v. MacDonald (1963) 38 D.L.R. (2d) 237
(Ont.).
70 Supra, pp. 189-190 and infra, pp. 200-201.
71 See Durnford, 10 McGill L.J. 60 at 66, and cf. Faribault, op. cit., pp. 277-78.
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS 197
advice, unless the goods are sold to him by a manufacturer or,
possibly by a trader, where the trader has done something to the
and his examination need not be a through one nor is he obliged
to examine the goods at all, except in the case of a sale by sample,
and his examination need not be a through one nor is he obliged
to engage expert advice.
4. So far as the remedies of an aggrieved buyer are concerned,
Quebec
law does not distinguish between “conditions” and
warranties”. Under Quebec law, the buyer is obliged to bring his
redhibitory action with reasonable diligence, which apparently
means within a reasonable time after the defect comes to light.7
The common law, on the other hand, only allows rescission for
breach of condition and only then if the rescission occurs promptly
after delivery of the goods. However, all the important implied
terms amount to conditions.
5. The civil law only entitles the buyer to claim the return of the
purchase price or a reduction in the price,74 but this is subject
to an important exception where the vendor knows or is deemed
to know of the defects.7 5 He is apparently deemed to know where
he is the manufacturer or, quaere, a specialized dealer in the
goods.76 In such cases he is apparently responsible for consequential
damages. At common law, the buyer can always recover such
consequential damages as were reasonably foreseeable, whether
or not the seller knows or is deemed to have known of the defects.
6. Under Quebec law the seller is entitled to exclude the legal
warranties unless he was guilty of dolt. He is deemed to be
guilty of dol if he knew of the defects, or, as a dealer in the
goods, ought to have been aware of them.78 At common law the
seller prima facie has the same right of exclusion, but he cannot
exclude his obligation to comply with the main undertaking of
the contract. This position is now reinforced by statutory pro-
visions in an increasing number of common law jurisdictions.
From this all too superficial comparison I draw the conclusion
that the main areas of difference between our two legal systems, so
72 See Durnford, 10 McGill L.J. 341 at 358.
73 Supra, pp. 193-194.
74 C.C. 1526.
75 C.C. 1527.
76 Faribault, op. cit., s. 321, pp. 294-95.
77 C.C. 1524.
78 Touchette v. Pizzagalli [1938] S.C.R. 433, esp. at pp. 438-39; Faribault,
op. cit., pp. 288-89.
McGILL LAW JOURNAL
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far as commercial sales are concerned, lie in the quantum of damages
recoverable by an aggrieved buyer and with respect to the duty to
inspect.
Time does not permit me to examine the first difference in any
detail, though it is of great importance, and I will restrict myself
to a few comments. The civil law appears to limit the buyer’s damages,
in the absence of actual or constructive fault on the seller’s part,
because it conceives the buyer’s action as resembling an action for
unjust enrichment. The buyer has not received his money’s worth
and therefore it is unjust that the seller should be able to retain
the purchase price or be able to retain all of it. The common law,
on the other hand, emphasizes the promissory character of the
transaction. The seller impliedly ppromised to deliver merchantable
goods. He did not do so and in consequence the buyer (let us assume)
suffered direct and consequential damages –
damages that are di-
rectly attributable to the seller’s breach. He must therefore make
good the breach by compensating the buyer.
From the practical point of view I think the common law rule
better serves the needs of modern society.79 Take, for example, the
English case of Godley v. Perry,80 whose facts were strikingly simi-
lar to those in the Ontario decision in Buckley v. Lever Bros.8’ to
which I referred to earlier. A small boy walked into a newsagent’s
store and purchased a plastic catapult for a few pence. The store
had purchased the toy from a wholesaler, who in turn had purchased
it from an importer and he had bought it from the Hong Kong
manufacturers. The catapult contained a latent defect and when the
boy tried to use it it broke and either a fragment of the catapult
or the stone which he was trying to eject struck one of his eyes
and he lost the sight of it. The boy, through his father, successfully
sued the newsagent for breach of the implied conditions of fitness
and merchantability and recovered general damages. Under Quebec
law, if I understand it correctly, he would not have been able to do
so since the newsagent neither knew of the latent defect nor could
he reasonably have been expected to know of it.s2 How unfair there-
79 For a contrary view, see Waite, “Retail Responsibility and Judicial Law
Making”, (1936) 34 Mich. L. Rev. 494.
80 [1960] 1 All E.R. 36.
81 [1953] 4 D.L.R. 16.
82 Cf. Blais v. United Auto Parts Ltd. [1944] B.R. 139, cited in Faribault,
op. cit., pp. 294-95. HELD, a distributor of antifreeze who dealt in the product
for the first time after he had received favourable reports about it from other
users could not be deemed to have known of its alleged defects, even assuming
their existence had been proved.
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS
199
fore, you may say, that he should have been held liable in damages
amounting to many times the price of the toy. My answer is there
was no unfairness.
In the first place, the newsagent joined the wholesaler as a ‘third
party’ 83 to the action and obtained judgment over against him. He
was therefore not left out of pocket after all. Secondly, the newsagent,
had he thought it prudent, could have covered himself against this
type of contingency by some form of insurance. Thirdly –
and I
regard this as the governing consideration –
it would have been
very difficult for the boy to recover his damages from any one
but the newsagent. He could not have sued the wholesaler, the
importer, or the manufacturer in contract because there was no
contractual relationship between him and them.8 4 Nor could he have
sued the first two for the tort of negligence 5 because there was
no evidence of any negligence on their part. 0 Whether or not the
manufacturer was negligent is not clear, but even if he was he
carried on business outside the United Kingdom and it would have
been a long and tortuous process to sue him and to prove that he
was negligent and then to enforce the judgment outside the juris-
diction. All these difficulties were avoided here by the common law
rule regarding the scope of a seller’s liability. True, it does mean
that when the chain of third party actions reaches the manufacturer
he may himself liable in contract to his immediate buyer even though
he was not negligent, but this should cause no misgivings since he
can easily insure himself against such risks or treat it as one of
his overheads.
Let me turn now to the question of inspection. Here, it seems to
me, the difference between the common law and the Quebec law
may be more apparent than real. In the case of new goods, the
occasions when the buyer will have an opportunity to inspect them
before delivery are likely to be in a minority, so that presumably
Article 1523 will not apply in such cases in any event. To the extent
83 This is a proceeding open to a defendant who claims to be entitled to
contribution or indemnity from another person in the event of the plaintiff
obtaining judgment against him. See Rules of the Supreme Court, Order 16;
The Annual Practice 1965, Vol. I, p. 321. The common law Provinces have
generally adopted similar rules.
84 Cf. Johnson v. Relland Motors [1955] 2 D.L.R. 418 (Sask. C.A.).
85 Under the doctrine in Donoghue v. Stevenson [1932] A.C. 562.
s6 The far reaching advances made in recent years by the American courts
in imposing strict liability for defective goods on manufacturers, distributors
and retailers towards users and consumers of their products, without regard
to any contractual links, has no counterpart in the Anglo-Canadian common
law jurisprudence. See Prosser, Handbook of the Law of Torts, 3rd ed., 97.
McGILL LAW JOURNAL
(Vol. 12
that inspection is possible, and therefore mandatory, I assume that
an enlightened court would not require the buyer to conduct anything
more than the most cursory examination. The apparent absence of
contrary decisions would appear to support this conclusion, although
I must confess my ignorance of the Quebec law on this question. 87
I do however strongly dissent from Professor Durnford’s view that
the widespread use of manufacturer’s guarantees provide adequate
protection for the buyer against defective goods. Most guarantees
are so limited in character as to be almost useless.88 They also frequent-
ly purport to exclude the buyer’s common law (or civil law) remedies
against the seller and manufacturer (where the two differ), and from
this point of view are doubly objectionable.
So far as used goods are concerned, the restrictive application
given by the English Court of Appeal in Bartlett v. Sydney Marcu
Ltd.s 9 to the implied conditions of fitness and merchantability makes
it almost imperative for the buyer to examine the goods beforehand
for his own protection or, preferably, to have them examined by an
expert. From the practical point of view, therefore, the common law
rule is hardly more favourable to the buyer than the civil law rule.
In my opinion the position under both systems is unsatisfactory.
The civil law rule is unsatisfactory because it presuppose that the
buyer is able to look after his own interests. This may have been
true in Roman times and may still be true in dealings between
merchants, but it is pathetically untrue of the modern consumer who
is constantly assailed on all sides by a barrage of seductive sales
talk urging him to buy this or that on easy credit terms. The common
law rule is unsatisfactory because it assumes that all that a reason-
able buyer expects, and is entitled to expect, when he buys used
87 Professor Durnford does not deal with the question in his articles, and
in the short time at my disposal I have not found any reference to it in the
other Quebec sources which I have consulted.
88″.
The terms of the warranty are a sad commentary upon the auto-
mobile manufacturers’ marketing practices. Warranties developed in the law
in the interest of and to protect the ordinary consumer who cannot be expected
to have the knowledge or capacity or even the opportunity to make adequate
inspection of mechanical instrumentalities, and to decide for himself whether
they are reasonably fit for the designed purpose… But the ingenuity of the
Automobile Manufacturers Association, by means of its standardized form, has
metamorphosed the warranty into a device to limit the maker’s liability. To call
it an ‘equivocal’ agreement, as the Minnesota Supreme Court did, is the least
that can be said of it”. Henningsen v. Bloomfield Motors, Inc. (1960) 161
A. 2d 69 at 78 (N.J.). For a similar indictment, see Johnson v. Relland Motors,
supra n. 84.
89 [19651 1. W.L.R. 1013.
No. 2] SELLER’S LIABILITY FOR DEFECTIVE GOODS 201
goods is a chattel that is in apparent working condition at the time
of purchase even though it may cease to operate a couple of weeks
later. Needless to say, the average buyer expects something better.
He expects a chattel that is in a reasonable state of repair and in
as good a condition as can reasonably be expected in all the circum-
stances.
I think the dealer should be obliged to provide him with such a
chattel and only be excused from meeting this standard if he can
show that he drew the buyer’s attention to any existing or impending
defects or that the buyer appreciated that the goods were being sold
to him without any warranty. No responsible dealer should cavil at
having to assume one of these several duties, and in any event he
can distribute any potential loss arising from a breach of his duty
over all his sales. The English Hire-Purchase Act of 1965 contains
provisions which appear to me to embody substantially this degree
of protection for the consumer. Section 17 of the Act implies in
every hire-purchase and conditional sale agreement coming within
the Act a condition of merchantability and fitness. Section 18 then
provides in part:
18 (1): Where under a hire-purchase agreement or a conditional sale
agreement goods are let or agreed to be sold as second-hand goods and –
(a) the agreement contains a statement to that effect, and a provision that
(2) of this Act is excluded
the condition referred to in section 17
in relation to those goods, and
it is proved that before the agreement was made the provision in the
agreement so excluding that condition was brought to the notice of
the hirer or buyer and its effect made clear to him,
(b)
that condition shall not be implied in the agreement in relation to those
goods.
(2) Where under a hire-purchase agreement or a conditional sale
agreement goods are let or agreed to be sold as being subject to defects
specified in the agreement (whether referred to in the agreement as defects
or by any other description to the like effect), and
(a) the agreement contains a provision that the condition referred to in
in relation to those goods in
section 17(2) of this Act is excluded
respect of those defects, and
it is proved that before the agreement was made those defects, and
in the agreement so excluding that condition, were
the provision
brought to the notice of the hirer or buyer and the effect of that
provision was made clear to him,
(b)
that condition shall not be implied in the agreement in respect of those
defects. 9o
90For a decision applying s. 8(3) of the Hire-Purchase Act 1938, the
predecessor of s. 18(1) (b), see Lowe v. Lombank Ltd. [1960] 1 All E.R. 611
(C.A.).
