Previous updates have discussed the commercial aspects of the Chubb Case (Background to Landmark Case Explained) and studied the concurrent claims by the homeowners in contract and tort (delict) (Key to Suing for Tort). This update considers another decision made by the judge in the Chubb Case on the concept of 'merchantable quality', explaining its essential features and contrasting it with the operative concept of 'satisfactory quality' under the existing sale of goods regime in Singapore.
The judge in the Chubb Case studied the law applicable to the sale of goods in Singapore and found that the applicable law was the version of the Sale of Goods Act which contained the implied terms of 'merchantable quality' and 'reasonable fitness for purpose'. Describing the nature of the implied term of 'merchantable quality', the judge stated:
"When the seller sells goods in the course of a business, there is an implied condition that the goods supplied under the contract are of merchantable quality. In other words, the goods must be as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect, having regards to any description applied to them, the price (if relevant) and all other circumstances." [emphasis added]
The judge adopted the principle established in an English case (Cammell Laird and Co v Manganese Bronze and Brass Co), and decided that for the purpose of determining 'merchantable quality', it is unnecessary to establish exclusive reliance on the seller's skill and judgment. If matters such as the choice of sufficient and necessary components and the nature and properties of the components are peculiarly within the skill and judgment of the seller, the seller assumes the responsibility.
The judge also recognized the statutory implied term in sale of goods transactions that when a seller sells goods in the course of business and the buyer makes known to the seller any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, irrespective of whether that is a purpose for which such goods are commonly supplied. This is known as the implied term of 'reasonable fitness for purpose'.
In the course of examining the rights and liabilities of the homeowners and Chubb Singapore, the judge highlighted several important distinctions relating to the implied term of 'merchantable quality' and the implied term of 'reasonable fitness for purpose' which are frequently forgotten or glossed over:
- While merchantability governs the sale of a particular item, which can be applied to a range of possible uses, fitness for purpose governs the sale of a particular item (whether ascertained or not) for a particular purpose.
- The determination of the issue of whether the goods sold were of merchantable quality is not to be made only on the basis of what was known at the time of the sale; it may also include knowledge that is subsequently revealed. In short, the time for determining whether the goods sold are of merchantable quality is at the date of trial (ie, the substantive court hearing).
- There is a close connection between the requirements of merchantable quality and fitness for purpose and the requirement that goods must also be capable of enduring for a reasonable period and must be free from any propensity to deteriorate seriously or break down. To the judge's mind, this means that goods must not unduly break down during their normal life-span and that if they do, the breakdown is often a clear symptom of their inappropriate quality.
The judgment in the Chubb Case with respect to the implied terms of 'merchantable quality' and 'reasonable fitness for purpose' is a good indicator of the manner in which the Singapore court approaches claims arising from goods that are said to be of unmerchantable quality and/or not reasonably fit for their purpose. It demonstrates the likelihood that the Singapore court will apply a degree of common sense in its overall determination of what was or was not of merchantable quality, or reasonably fit for the purpose.
Many sale of goods transactions in Singapore will be governed by the later version of the Sale of Goods Act containing the implied term of 'satisfactory quality', which replaced the term 'merchantable quality' through an amendment to the act in 1996. 'Satisfactory quality' is defined in similar terms as "meet[ing] the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances". Assessment of the quality of the goods includes:
- their state and condition;
- fitness for all the purposes for which goods of the kind in question are commonly supplied;
- appearance and finish;
- freedom from minor defects;
- safety; and
- durability.
The old concept of 'merchantable quality' was thought to focus too much on fitness for purpose without accommodating the concept of reasonable durability. It is felt that the issue of reasonable durability has now been addressed in legislation by the implied term of 'satisfactory quality'. As noted, the judge's decision on 'merchantable quality' in the Chubb Case did in any event consider the concept of reasonable durability. As such, it is consistent with the current implied term of 'satisfactory quality' and is thus relevant to the law of the sale of goods in Singapore.
Finally, Singapore is a party to and has enacted legislation to give effect to a substantial part of the United Nations Convention on Contracts for the International Sale of Goods concluded in Vienna on April 11 1980. Under Singapore law, the convention will only apply to contracts for the sale of goods between those parties whose places of business are in different states where those states are contracting states, and not where private international law stipulates that the laws of a contracting state are applicable.
For further information on this topic please contact Lawrence Teh or P Selvadurai at Rodyk & Davidson by telephone (+65 225 2626) or by fax (+65 225 1838) or by email ([email protected]).