Sale of Goods Act, 1893 – sellers liable for the consequences of selling toxic animal feed
A mink farmer (the buyer) contracted with an animal feed manufacturer (the sellers) for the composition and ongoing supply of mink food mixed to the buyer’s specifications. The buyer was an expert in the specific feeding requirements of mink whereas as the sellers were not.
Regular supply continued without incident for about one year.
At the sellers’ suggestion, Norwegian herring meal was substituted for the buyer’s preferred protein ingredient.
Shortly after the introduction of the Norwegian herring meal, the mink, to which it had been fed, died in large numbers.
Initially the cause of death was unknown, but after a considerable period and after a trial had commenced in which sellers claimed payment of the purchase price and buyers counter claimed for damages arising from the death of the animals, reliable scientific opinion was formed that the cause of the death was a specific consignment of herring meal from Norway which had been mixed into the feed given to the mink.
The contaminant was formed by a chemical reaction in fresh fish when sodium nitrite was added as a preservative.
Although mink were particularly susceptible to poisoning by this chemical, it was potentially harmful to all livestock.
After the scientific opinion had been formed, buyers were allowed to amend their pleadings to allege ingestion of the chemical as the cause of death, and sellers were allowed to join the Norwegian suppliers as third parties.
The relevant statutory provisions were as follows:
Sale of Goods Act,1893
“Section 13. Where there is a … sale of goods by description, there is an implied condition that the goods shall correspond with the description …”
“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 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”
“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 …”
The sellers’ contract with the Norwegian 3rd party contained the following provision:
“3. The goods to be taken with all faults and defects, damaged or inferior, if any, at valuation to be arranged mutually or by arbitration”
Milmo J in the Queen’s Bench Division, in a trial lasting 50 days, found the sellers liable to the buyer and the suppliers liable to the sellers.
His findings were based on an application of the provisions of the Sale of Goods Act.
He found that the contamination disqualified the feed sold from corresponding with the “description” of the goods sold. Sellers were therefore liable for breach of section 13.
On section 14(1), despite the buyer being an expert in mink nutrition, relied on the seller’s skill and judgment to provide uncontaminated ingredients.
On section 14(2) he found the goods to be unmerchantable by reason of their contamination.
On the third party claim, Milmo J found that the suppliers were liable under sections 13 and 14(1) but not 14(2) because it had not been proved that the contaminated herring meal could not have been fed to other livestock with impunity despite the contamination/ toxicity.
Milmo J dismissed points relating to the exemption clause (clause 3) and remoteness raised by the 3rd party.
He found that the parties could not have intended clause 3 to apply to fundamentally defective goods. In doing so he followed the approach laid by Pearson LJ in UGS Finance and Lords Reid and Wilberforce in Suisse Atlantique.
The Court of Appeal (Davies, Russell and Megaw LJJ) in a combined judgment upheld an appeal by the sellers and the third party.
Based on the fact that the contaminated meal could conceivably have been fed safely to other livestock, they held that the buyer had failed to discharge the onus resting on him in respect of the relevant sections of Sale of Goods Act. They also found that Milmo J had been wrong in his finding of fact that the Norwegian parties knew of the practice of feeding herring meal to mink.
The House of Lords (Lords Hodson, Guest, Visount Dilhorne, and Lords Wilberforce and Diplock) in varying individual degrees restored the judgment at first instance.
The difference in approach between Milmo J and the Court of Appeal regarding the effect of the contamination was continued in the House, exemplified by the speeches of Lords Wilberforce and Diplock.
Lord Wilberforce’s straightforward approach is preferable to Lord Diplock’s (rare) exhibition of sophistry.
Lord Wilberforce quoted the maxim “Natura expellas furca, tamen usque recurret” in rejecting an artificial argument of the seller’s regarding the role of the “description” in the Act. Lord Wilberforce’s point was that the common law remained the point of reference for Sir Mackenzie Chalmers’ codification.
Milmo J quoted key passages from Suisse Atlantique demonstrating the relationship between construction/ interpretation of a contract and fundamental breaches of the contract.
Although there is no universally applicable doctrine of “fundamental breach”, courts almost invariably reject the application of exception clauses in situations of fundamental breach. The rationale is the presumed intention of the parties and business efficacy.
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