Commercial Law

Group: B
FORMATIVE ASSESSMENT I: PROBLEM QUESTION
This is a sale of specific goods identified at the time of the contract and owned or
possessed by the seller (s.5(1) Sale of Goods Act 1979 as amended (SGA)). This
is usually a sale by description (s.13 SGA) of which there seems to be no breach
since, presumably Foxglove and Track agreed the sale of rails, which is what passed
under the contract.
Section 14 contains exceptions to the general rule of caveat emptor, which assess
whether the rails are of satisfactory quality and fit for purpose. For the application of
these sections it is first necessary to determine whether the seller is selling in the
course of business. Based on the facts, Track are railway operators and not in the
business of selling rails, however, as shown in Stevenson v Rogers1, courts take a
broad view of this requirement so the seller does not need to deal in the goods of the
type sold for the transaction to fall within s.14.
The next question is whether the rails are of satisfactory quality under s.14(2).
S.14(2A) states that the general standard of satisfactory quality is what a reasonable
person would regard as satisfactory. Bramhill v Edwards2 holds that the
reasonableness test is objective and consists of what a reasonable person in the
position of the buyer with knowledge of all the background facts would expect, taking
account of any description of the goods, the price (if relevant) and all the other
relevant circumstances. We have limited knowledge on what was agreed, however,
if the rails were described to Track as second-hand or used rails, then they would
have expected a lower standard of quality to be satisfactory3.
Section 14(2B) provides determinant factors to consider when assessing satisfactory
quality. The first relevant factor is s.14(2B)(a) regarding whether the goods are fit for
all the purposes for which they are commonly supplied. Therefore, if the standard is
fitness for all normal purposes, the rails should be fit to be used as a track for very
high speed trains without causing derailment. Furthermore, s.14(2B)(c) provides that
the goods must be free from minor defects. In the past, courts were likely to hold
goods as merchantable despite minor defects, however, this has changed in cases
like Rogers v Parish4 where the courts take a strict approach to minor defects
rendering goods as unsatisfactory. Goode reinforces this approach when he states
1

[1999] 1 All ER 613

[2004] EWCA Civ 403
3
Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013
4
[1987]QB 933
2

Commercial Law
Group: B
FORMATIVE ASSESSMENT I: PROBLEM QUESTION
that the purpose of the new formulation of s.14(2B) is to hold defective goods as
unsatisfactory despite the fact that the defect could be remedied at trifling cost.5
Therefore, cracking would constitute a minor defect rendering the rails unsatisfactory.
Additionally, the possibility of derailment means that the reasonable buyer would
consider the goods inherently unsafe and therefore unsatisfactory under s.14(2B)(d).
If the seller had warned the buyer of the potential for derailment this might have
rendered the rails safe6, however, we cannot conclude this from the facts. Finally, it is
clear that the defect was a latent one that manifested itself afterwards. The test for
latent defects in Kendall v Lillico7 is whether a reasonably buyer with full knowledge
of the defect would regard the rails as satisfactory. In my opinion, the risk of
derailment would have prevented a reasonable buyer from doing so. Overall, there is
no evidence that any of the exceptions of s.14(2C) exclude Tracks obligation to
provide goods of satisfactory quality. Unless Track had drawn Foxgloves attention to
the gauge corner cracking8 or Foxglove had conducted an examination that ought to
have revealed the gauge corner cracking9, there has been breach of condition under
s.14(2).
The next question is whether the rails were fit for their particular purpose (s.14(3)).
For s.14(3), the buyer must make known, either expressly or impliedly, the particular
purpose for which the goods are bought and the goods must then be reasonably fit
for this purpose. Since the only purpose of rails is to make a railway, it is held that
Foxglove has impliedly made known the particular purpose of the rails.10 Although
Track may have been aware that the rails would be used for a railway, they may
argue that they thought the railway was recreational and therefore expected it to be
subject to less intensive use and not as it was subsequently used for high-speed
trains. In response, parallels can be drawn with Ashington Piggeries11 where the
sellers knew that the herring meal was to be used for animal feed but not that it was
to be used to feed mink, however, the making of mink food fell within the broader
category of animal feed and was not an unforeseeable use. Similarly, the use of a
railway for high-speed trains falls within the umbrella of the rails being used for a
5

Goode, Commercial Law, 4th edn (2010)

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31
7
Ibid
8
Stephenson v Cookson [2009] EWCA Civ 1270
9
Thornett & Fehr v Beers & Sons [1919] 1 KB 486
10
Priest v Last [1903] 2 KB 148
11
Ashington Piggeries v Christopher Hill [1972] AC 441
6

Commercial Law
Group: B
FORMATIVE ASSESSMENT I: PROBLEM QUESTION
railway and it is reasonably foreseeable that trains of varying speeds will travel on the
railway.
Based on the facts, the rails are not fit for the buyers particular purpose and would
therefore constitute a breach of s.14(3) unless Track proves that the transaction falls
under the exceptions that the buyer has not relied or that it was unreasonable for him
to rely on the skill and judgment of the seller. Since we have established that the
seller in this case knew the particular purpose, the reliance of Foxglove on Track is
assumed. The burden is on Track to rebut this presumption. Track may argue that
they, as railway operators, are no more an expert on rails than Foxglove Railway
Society and therefore there is no disparity of skill or judgment to justify liability under
s.14(3). However, per Lord Reid in Kendall v Lillico12, if Foxglove are buying rails
from Track for the first time, then Track were exercising skill and judgment in putting
them on the market, thus vouching that they were generally fit. Although facts are
very limited, it could be possible for Track to prove that any reliance on them for the
rails was unreasonable by relying on Jewson v Boyhan.13 It is clear that Foxglove had
relied on them for the intrinsic qualities of the rails being fit for a railway under
s.14(2), however, they could argue that Foxglove had not made known the particular
purpose of the rails for high speed trains and even if they had done, such reliance
would be unreasonable since analogous to the manner in which Jewsons were
unaware of the particular characteristics of the flats and their SAP ratings in order
to know that the rails may cause derailment they would need to know extrinsic14
factors such as train speed. This argument seems tenuous on the limited facts and
Foxglove are likely to be successful in claiming that their use of high speed trains on
the railway was reasonably foreseeable and thus there was reliance on the seller.
Therefore, although facts are limited I would consider s.14(3) breached.
Breach of both s.14(2) and s.14(3) is strict liability. Since the breach is not slight it
seems unnecessary for the purposes of s.15A to determine whether or not Foxglove
is dealing as a consumer or not. In terms of remedies, Foxglove will be entitled to
reject the goods, the return of the price and damages for any loss.
1199 words

12

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31, at 84
[2003] EWCA Civ 1030
14
Twigg-Flesner, The relationship between satisfactory quality and fitness for
purpose, [2004] 63 CLJ 22
13

Commercial Law
Group: B
FORMATIVE ASSESSMENT I: PROBLEM QUESTION