I. INTRODUCTION
Jurisdictions all across the world have different sapproaches to warranties in the contract for the sale of tangible goods. This article aims to describe and analyze the difference between the English law approach to warranties and that of United Nations Convention on Contracts for the International Sale of Goods (“CISG”), also known as the Vienna Convention. More specifically, the topic of discussion in this article is that of implied warranties in the contract for the sale of goods.
The liability of the seller under these implied warranties cannot be excluded by the incorporation of an exclusion clause. This was highlighted in the Mercini Lady case where the clause read “There are no guarantees, warranties or representations, express or implied, [of ] merchantability, fitness or suitability of the oil for any particular purpose or otherwise which extend beyond the description of the oil set forth in this agreement”.
The main principle behind the implied warranties to be discussed below is to protect and ensure that the consumer is able to purchase a product that meets a minimal standard of consumer expectation.
II. COMMON LAW APPROACH
In Common law jurisdictions, the Seller is deemed to have made certain assurances, which are classified as implied warranties, to the Buyer in a contract for the sale of goods. English Law has incorporated implied terms in their contracts for centuries and a case from 1781, Schoolbred v Nutt, Lord Mansfield ruled that ‘it is an implied warranty that a ship is seaworthy’. The law on implied warranties has moved on and developed further in the following centuries and we find that English law imposes a number of implied warranties on the seller when contracting with a buyer for the sale of tangible goods. A few of the key implied warranties derived from case law are: warranty of merchantability, warranty of fitness for a particular purpose and warranty of title. There are further implied conditions that are derived from statute, namely the Sale of Goods Act 1979, which are designed to protect the buyer in sale of goods contracts. They are: sale by description (s. 13), satisfactory quality (s. 14/2), fitness for the purpose of the buyer (s. 14/3) and an obligation that the goods must correspond with their sample (s. 15) (if the goods were sold by sample). Other terms can be implied such as terms implied in fact (s. 62/2) and trade usage (s. 14/4). These are classified as implied contractual conditions rather than implied warranties. However, for the purposes of this article, the topic of discussion is implied warranties and the three implied warranties for the sale of tangible goods (mentioned above) will be examined more closely below.
As mentioned above, implied warranties have played an increasingly prominent role in the law governing the contract for the sale of goods. One of the main reasons for this is the move to increase the protection afforded to consumers and purchasers of goods, especially when the buyer is acting in the course of their business. Also, it is a move that facilitates the ease of business transactions. This was stated by LJ Bowen in The Moorcock. He stated that any implied warranties must be based on the presumed intentions of the parties.
An implied warranty may be read into a contract for reasons of “business efficacy” and in order to maintain the presumed intention of the parties. Perhaps this is one of the main underlining reasons for the adaptation of implied warranties, which is an inherently Common Law invention, in many leading Civil Law jurisdictions that are also ‘major players’ in international sale of goods (such as Germany, France, China and Russia). There is little doubt that these Civil Law countries are motivated to implement these implied warranties in their jurisdictions for the sake of efficiency in business transactions.
One of these implied warranties is that of the warranty that the goods sold by the Seller to the Buyer are ‘fit for a particular purpose’. What this means is that the Seller is bound by the representations he makes about the product to the Buyer. For example, if a particular washing machine model is recommended to a customer as being able to wash ten kg of laundry and yet can only effectively wash five kg of laundry, then the implied warranty provided by the Seller, which the Buyer relied on, has been breached. Even though the washing machine is still functioning as a washing machine, it is still considered to be a breach of the implied warranty of the washing machine being fit for the purpose of washing ten kg of laundry. In relation to goods being ‘fit for a particular purpose’, three main requirements apply. First, if the Seller is not made aware of the particular purpose for which the goods are needed, the doctrine will not be applied. The only exception to this is where the goods have only one purpose, in which case the Buyer makes the particular purpose known to the seller by asking for the goods by their ordinary description, as was the case in Frost v Aylesbury Dairy C. Secondly, there must be a reliance on the Seller’s skill or judgment in making the purchase of the goods. Third, the condition will be implied of the Seller dealt in goods of the same kind before he sold the goods to the Buyer (Ashington Piggeries Ltd v Christopher Hill Ltd).
Another of the implied warranties is that of the warranty that the goods being sold by the Seller to the Buyer are of a ‘merchantable quality’. This is inherently linked with the previously mentioned warranty that the goods sold are ‘fit for a particular purpose’. Like ‘fitness for a particular purpose’ this is also a protection given to the consumer from the misrepresentation of the Seller. The reason for this is that in order for a particular product to be merchantable it also needs to be fit for the purpose it is being sold. However, the legislature and the courts have given the doctrine of merchantability the meaning that the goods sold need to be of a ‘satisfactory quality’. This shift in the interpretation of good being ‘merchantable’ to goods being of a ‘satisfactory quality’ was seen as a ‘taming’ of the Sale of Goods Act 1979 and was introduced by the Sale and Supply of Goods Act (“SSGA”) 1994. Thus, one can make the argument that there has been a demise of the ‘merchantability’ doctrine in favor of the ‘satisfactory quality’ standard. The courts used 2 tests to determine whether a product is of ‘satisfactory quality’ within the meaning of the SSGA 1994. The first test is that of acceptability, which was determined in Grant v Australina Knitting Mills. It was clearly stated by Dixon J that acceptability is established where the Buyer is fully aware of at the facts (knowing the existence of hidden defects and not being limited by the apparent condition of the goods) would still purchase the goods without reducing the purchase price. If that standard is met, then the goods are deemed to be acceptable. The second test is the usability test, which has become more dominant, established in the Henry Kendall & Sons Ltd v Wiiliam Lillico & Sons Ltd case. In this case it was ruled that the merchantability of the goods was determined in accordance as to whether it was of ‘use for any purpose for which goods which complied with the description under which these goods were sold would normally be used.’ In relation to goods bought for business purposes, it seems that the “usability test” has tended to apply.
A further implied warranty is a warranty of title. This implies that the Seller of the goods has the right to sell them. The Seller is deemed to have the right to sell the goods in that the Buyer is relying on the Seller not having stolen the goods, infringed any patent or already sold them to another Buyer. The rationale behind this doctrine is to ensure that the Buyer does not pay for the goods twice in case it the goods are confiscated by the rightful owner, but only if the seller can be found and makes restitution. This also applies to cases where the Seller had no right or title to sell the goods as was the case in Rowland v Divall where the Seller purported to sell goods which, unknown to the Seller, were stolen when they were sold to him.
The CISG approach to implied warranties is somewhat similar, though there are some noticeable differences. Article 35/2 of the Convention states the four implied warranties. The first one under Article 35/2/a is very similar to the utility test for merchantability in English Law. That particular subsection of the Article provides that the goods sold will not conform with the contract unless they are ‘fit for the purposes for which goods of the same description would be used’. Part (b) of the same Article and subsection states that the goods sold won’t conform with the contract unless they are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract. It goes on to apply the same exemption highlighted above under the English warranty of ‘fit for a particular purpose’ to state that the Buyer needs to rely on the Seller skill in order for this particular section of the Article to apply. Article 35/2/c states that the goods will not conform with the contract unless they possess the qualities of goods which the Seller has hold out to the Buyer as a sample or model (in cases of sales based on a sample). This is not seen as an implied warranty under the English system but it is treated as an implied term of the contract. Article 35/2/d deals specifically with packaging of the goods and adequate preservation and protection of the goods, which is not covered in the English system.
Some examples have shown that there is some international uniformity in the application of these implied warranties. A significant precedent was set in an arbitral tribunal in Stockholm that an ‘express warranty’ concerning the quality of new machinery did not derogate from Article 35/2 and the implied warranties contained under that Article of the CISG. A similar approach was taken by a US District Court in a case concerning a contract for the sale of a furnace. The Court rejected the Canadian Seller’s argument that the ‘repair or replace’ clause in the contract should be interpreted as a disclaimer of any express or implied warrant for the conformity of the goods with the contract.
The implied obligations set forth in Article 35/2 apply ‘except where the parties have agreed otherwise’. A seller who, by virtue of its standard terms, ‘claims no responsibility that the goods are fir for ordinary purposes or any particular purpose’ purports to disclaim the implied fitness for purpose warranties under Article 35/2/a and 35/2/b. Whether such a disclaimer of the implied warranties will be given effect depends on the letter and the spirit of the applicable validity rule. For example, it has been argued that such a liability disclaimer might be more likely to survive judicial censorship if judged by the American Uniform Commercial Code. The corresponding German statutory rules, however, are clearly applicable within the CISG context. The same is true of the Scandinavian ‘reasonableness test’ as well as similar standards applicable in other European States, such as the new Dutch Civil Code.
In browsing through the case law applying the CISG, a European observer trained in the civil law tradition is bound to focus his attention on the requirement of conformity of the goods delivered by the Seller. The French solution concerning the passing of property when a contract of sale is concluded. Therefore, the general rule is that as soon as the parties agree on the goods to be transferred and the price to be paid, the property passes to the buyer, as long as the goods are identified and cannot be mixed with similar goods. For example, Italian lawyers have drawn the conclusion that once the goods have been selected and separated from the larger group which they belong, the property passes to the Buyer and from that moment, the only conceivable obligation for the Seller is to deliver those goods, however defective they may be. Italian authors often insist that it is hard to justify an obligation for the Seller to perform a second delivery with conforming goods. In addition, some authors ask how many times should the seller correct his delivery to bring the result up to the expectations of the Buyer.
Looking at the case law reported on the CISG, one of the striking features is how often the judges of various jurisdictions of European tradition have been willing to declare the autonomous nature of the obligation of conformity set out in Article 35 of the CISG. One example of this statement is the CLOUT Case No. 219 in Switzerland concerning an Italian party.
From a brief study of some of the cases concerning the CISG, one can clearly see that everyone is interested in uniformity in the application of the Convention. The goal of the CISG itself is to reach a higher level of coherence between the laws of different States. However, there are bound to be single divergences between decisions delivered by judges belonging to various legal cultures. One is inclined to think these divergences are not so worrying as long as they do not result in trends firmly established in one country rather than another. This would bring with it dangers of ‘forum shopping’, which is not in the interest of a system that is designed to promote harmonization.
There are many similarities between the application of implied warranties between the English and the CISG systems. The English system contains implied warranties of merchantability, fitness for a particular purpose and good title. The CISG contains similar implied warranties, but also requires that the goods match up to those held out to the buyer as a sample or model and that the goods must be contained or packaged in the manner usual for such goods or, where there is no such manner, in a way adequate to preserve and protect them.
