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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> KG Bominflot Bunkergesellschaft Für Mineralöle mbh & Co Kg v Petroplus Marketing AG [2009] EWHC 1088 (Comm) (22 May 2009) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2009/1088.html Cite as: [2009] 2 All ER (Comm) 827, [2009] EWHC 1088 (Comm), [2009] 2 Lloyd's Rep 679, [2009] 1 CLC 791

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Claim No 2008 Folio 378 Royal Courts of Justice Strand, London, WC2A 2LL
		22/05/2009

Mr Justice Field:

Introduction

1. This is a trial of four preliminary issues. The necessary factual background is as follows. By a contract dated 9 January 2007, the defendants ("the sellers") sold to the claimants ("the buyers") 38,500 MT of EU Gasoil (+/-10% at buyer's option) which was to be shipped on board the "Mercini Lady" ("the vessel") or substitute FOB Antwerp.
2. The contract was governed by English law. Clause 4 set out various specifications that the gasoil had to meet at the time of shipment, including as to total sediment. Clause 12 provided (so far as is relevant):

Quality and quantity, basis shoretank, to be determined by a mutually agreed independent inspector at the loading installation, in the manner customary at such installation. Such determination shall be final and binding for both parties, except in case of fraud or manifest error.

3. Clause 15 provided that "each delivery shall be completed and title shall vest absolutely in buyer when the product passes the vessel's permanent hose connection at the port of loading at which time buyer assumes all risks pertaining thereto".
4. Clause 18 reads (so far as is relevant):

There are no guarantees, warranties or representations, express or implied, or (sic) 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.

5. Loading of the gasoil was completed on 17 January 2007 and the vessel arrived at the destination port, El Ferrol, in Spain, four days later.
6. An analysis of a composite sample made up of samples taken prior to loading from the five shore tanks from which the gasoil was loaded showed that the composite sample met the stipulated specifications, including the sediment specification. However, it is alleged by the buyers that when the gasoil arrived at El Ferrol after an incident-free voyage, it did not conform to the contract specifications, particularly as to sediment. It is further alleged that the receivers of the cargo accordingly rejected it and the buyers have brought these proceedings in which they claim that the sellers are in breach of an implied term that the cargo would be of satisfactory quality following a normal voyage pursuant to s. 14 (2) the Sale of Goods Act 1979 ("the 1979 Act"); and/or (ii) a term that the goods would be reasonably fit for their purpose following a normal voyage pursuant to s. 14 (3) of the 1979 Act; and/or (iii) a term to be implied at common law that the gasoil would be of satisfactory quality and/or in accordance with the contractual specification following a normal voyage and for a reasonable time thereafter.
7. The reasonable fitness term is pleaded in paragraph 5 of the Particulars of Claim as follows:

Further or alternatively, the Defendant knew (from the terms of the contract) that the goods were to be carried from Antwerp on board the MERCINI LADY ("the Vessel") or substitute and knew, implicitly, that they were likely to be on board the vessel and stored thereafter before use for a reasonable period. In the premises, pursuant to s.14 (3) of the Sale of Goods Act 1979, it was an implied condition of the sale contract that the goods would be reasonably fit for the purpose of remaining, during their time on the vessel and for a reasonable time thereafter, within the specifications set out in the sale contract.

8. The damages claimed exceed US$3million and include the difference between the FOB Antwerp value of the goods had they been in accordance with the pleaded implied terms and the FOB Antwerp value of the goods in the condition they were actually in when delivered under the sale contract.
9. In their Defence the sellers rely on clause 18 and deny that the contract contained the implied terms asserted by the buyers.
10. On 23 October 2008 it was ordered by consent that there be a trial of the following preliminary issues:

(1) Was there an implied term of the sale contract, pursuant to section 14 (2) of the Sale of Goods Act 1979 and/or at common law that the goods would, on delivery under the sale contract, be capable of enduring a normal voyage such that upon arrival at their destination following such a normal journey (and for a reasonable time thereafter) they would still be of satisfactory quality and/or in accordance with the contractual specification?

(2) On the assumption the Defendants knew from the terms of the sale contract that the goods were to be carried on board the "MERCINI LADY" or substitute, was it an implied condition of the sale contract, pursuant to s. 14(3) of the Sale of Goods Act 1979, that the goods would, on delivery under the sale contract, be reasonably fit for the purpose of remaining, during their time on the vessel and for a reasonable time thereafter, within the specifications set out in the sale contract?

(3) Were the Defendants' obligations under the Sale of Goods Act under s. 14 (2) and/or at common law limited to the supply of goods which complied with their contractual specifications upon shipment FOB Antwerp?

(4) Does clause 18 of the sale contract preclude the implication of the terms referred to in paragraphs 1 and 2 above?

11. The relevant provisions of the Sale of Goods 1979 (as amended)

14 (1) Except as provided by this section and section 15 below and subject to any other enactment, there is no implied term about the quality or fitness for any particular purpose of goods supplied under a contract of sale.

(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if they meet 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.

(2B) For the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods—

(a) fitness for all the purposes for which goods of the kind in question are commonly supplied,

(b) appearance and finish,

(c) freedom from minor defects,

(d) safety, and

(e) durability.

(2C) The term implied by subsection (2) above does not extend to any matter making the quality of goods unsatisfactory—

(a) which is specifically drawn to the buyer's attention before the contract is made,

(b) where the buyer examines the goods before the contract is made, which that examination ought to reveal, or

(c) in the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample.

(6) As regards England and Wales and Northen Ireland, the terms implied by subsections (2) and (3) above are conditions.

33. Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer must nevertheless (unless otherwise agreed) take any risk of deterioration in the goods necessarily incident to the course of transit.

55 (1) Where a right, duty or liability would arise under a contract of sale of goods by implication of law, it may (subject to the Unfair Contract Terms Act 1977) be negatived or varied by express agreement, or by the course of dealing between the parties, or by such usage as binds both parties to the contract.

(2) An express term does not negative a term implied by this Act unless inconsistent with it.

The buyers' submissions

12. Mr Edey for the buyers accepted, as he had to, that under an FOB contract the goods are delivered when they pass the ship's rail or (as in this case) the ship's flanges, and that thereafter, the goods are at the buyer's risk. Mr Edey also recognised that if all cargoes of gasoil with these particular specifications would have inevitably deteriorated after four days, the buyers might have some difficulty in holding the sellers liable for the deterioration suffered during the voyage to El Ferrol. In his submission, the buyers' case was not inconsistent with either of these premises. He contended that, pursuant to the pleaded implied terms, this particular cargo of gasoil had to be capable of continuing to be of satisfactory quality and/or reasonably fit for the pleaded purpose after delivery for a reasonable period of time including the duration of a normal voyage and a reasonable period of time thereafter.
13. Mr Edey relied heavily on the reasoning of Diplock J in Mash & Murrell Limited v Joseph I. Emanuel Limited [1961] 1 Lloyd's Rep 46^[1]. There, 50 tons of Cyprus potatoes were sold c&f Liverpool on 8 July 1957. The potatoes had been loaded on 29 June 1957 at Limassol whence the vessel had sailed for Liverpool via Famagusta, which was held to be a "normal voyage". When the vessel arrived at Liverpool on 18 July 1957, however, the potatoes were found to be rotten.
14. Having set out his findings of fact, Diplock J said in a well-known passage:

I have so far travelled through my legal life under the impression, shared by a number of other Judges who have sat in this Court, that when goods are sold under a contract such as a cif contract, or fob contract, which involves transit before use, there is an implied warranty not merely that they shall be merchantable at the time they are put on the vessel, but that they shall be in such a state that they can endure the normal journey and be in a merchantable condition upon arrival. But it has been strenuously argued by Mr Roskill, for the defendant sellers, that the impression under which I have been for so long is quite erroneous and, like a similar impression of Lord Atkin when he was Mr Justice Atkin, is founded upon a misreading of the famous old case about rabbits, Bear v Walker (1877) 46 L.J. (CP) 677.

15. The plaintiff buyers contended that at the time of shipment: (i) pursuant to s. 14 (1) of the Sale of Goods Act 1893 ("the 1893 Act"), the goods ought to have been but were not reasonably fit for the purpose of being carried by the vessel to Liverpool for sale for use after arrival for human consumption; (ii) pursuant to s. 14 (2) of the 1893 Act, the goods ought to have been but were not merchantable as potatoes sold for carrying and delivery to Liverpool by the vessel; and (iii) pursuant to a term implied at common law in a cif, c&f or fob contract, the goods should have been fit to stand the voyage from Cyprus to Liverpool, a normal voyage, so that they should have arrived sound and fit for human consumption.
16. Diplock J was of the view that there was no very great distinction between these three alternative contentions. Ss 14 (1) and 14 (2) were two sides of the same coin depending on whether the buyer makes known a particular purpose so as to show that he relies on the seller's skill and judgement; and if it were possible for the coin to have three sides, the implied term contended for was a third side of the same coin.

[M]erchantability in the case of goods sold cif or c&f means that the goods must remain merchantable for a reasonable time and that in the case of such contracts a reasonable time means time for arrival and disposal upon arrival.^[2]

17. Diplock J proceeded to hold that the buyers had made known their purpose for which the goods were required namely for use in England for human consumption after arrival and upheld the buyers' first contention. He went on, however, to consider the other two contentions.
18. In his judgement, Mr Justice Atkin had not misread Beer v Walker, a pre-1893 Act case, in Ollet v Jordan [1918] 2 KB 41. In Beer v Walker, a quantity of Ostend rabbits had been sold that was to be shipped by the seller from London to Brighton. The rabbits were in good order and condition, and merchantable, when delivered to the railway company in London, but were not fit for human food when they arrived at their destination. Giving the principal judgement of the Common Pleas Division, Grove J held that when a person undertakes to supply another with goods which are not specific goods, there was an implied warranty that the goods shall be fit for the purpose for which they ordinarily would be intended to be used, and that warranty had not been satisfied by delivering to the railway company in London rabbits that were merchantable; instead, the implied warranty extended to the time at which, in the ordinary course of transit, the rabbits should reach the buyer and thereafter until he had had a reasonable opportunity of dealing with them in the ordinary course of business.
19. In Diplock J's view, the Court in Beer v Walker was dealing with a warranty which in 1961 would be called a "warranty of merchantable quality" and that therefore there was a warranty that the potatoes remain merchantable for a reasonable time, which meant a time for the normal transit to the destination, Liverpool, and for disposal thereafter.^[3]
20. In Ollet v Jordan, the respondent was charged under s. 117 of the Public Health Act 1875 with having exposed herrings for sale at Eastbourne that were not fit for the food of man. The respondent had supplied herrings ordered on behalf of a hospital in Eastbourne. They were not unfit for human food when put on the railway at Hull but they were unfit for human food when delivered at the hospital at Eastbourne. The King's Bench Division (Darling, Avory and Atkin JJ) held that "exposure for sale" included exposure for the purpose of completing an agreement for sale. Beer v Walker was cited on the question whether the herrings at the material time were the property of the respondent. Atkin J said:

…..I think that the effect of the decision in Beer v Walker is that the condition that the goods must be merchantable means that they must be in that condition when appropriated to the contract and that they will continue so for a reasonable time. That does not necessarily mean that goods shall be merchantable on delivery if the vendee directs them to be sent by a long and unusual transit. It is, however, unnecessary to decide that.

21. Diplock J also upheld the third contention on the basis of a dictum of McCardie J in Evanghelinos v Leslie and Anderson (1920) 4 Ll.L.Rep 17 at 18, which Diplock J held did no more than apply the law stated in Beer v Walker. In his opinion, the decision of the High Court of Australia in Bowden Brothers & Co. Ltd v Little [1907] 4 CLR (Part 2) 1364 did not detract from Beer v Walker. In that case, Japanese onions were shipped from Japan to Sydney cif and on arrival were found to be rotten. The High Court's decision that the jury's verdict in favour of the buyers could not stand turned on the way the case had been pleaded and presented at trial, the buyers having pleaded that: (i) the onions were deliverable in Sydney, not over the ship's rail; and (ii) the sellers were in breach of a term that the onions on arrival at Sydney would be in merchantable condition except for such deterioration as would be the necessary and inevitable result of the transit. In the view of Diplock J:

It is extraordinary deterioration of the goods due to abnormal conditions experienced during the transit for which the buyer takes the risk. A necessary and inevitable deterioration during transit which will render them unmerchantable on arrival is normally one for which the seller is liable.

22. Mr Edey contended that Diplock J's reasoning applied whether the contract was C&F, CIF or, as in the instant case, FOB. He pointed out that in the passage set out in paragraph 14 above, Diplock J includes FOB contracts with CIF and C&F contracts and he referred to numerous text books, including Benjamin's Sale of Goods,^[4] Chitty on Contracts^[5] and Debattista's Bills of Lading in Export Trade^[6], where Mash & Murrell is treated as applying to FOB contracts.
23. Mr Edey referred me to an unreported decision of Colman J in Navigas Ltd v Enron Liquid Fuels Ltd 22^nd May 1998. There the defendant buyers bought 20,000 tonnes of commercial propane FOB one safe port Yanbu. In the course of the voyage it was discovered that the propane delivered under the contract was off-specification due to the excessive level of corrosive compounds. Relying on the judgement of Diplock J in Mash & Murrell, the buyers applied for permission to amend the Points of Defence and Counterclaim to plead an implied term that the propane to be shipped should, on delivery to the vessel, be fit to endure the normal incidents of the intended voyage so as to comply with the contractual specification and/or remain merchantable upon discharge.
24. Colman J granted leave for the proposed amendment. The matter not having been fully argued as would be the case at a trial, he was not prepared to conclude that the plea of such an implied term had no chance of success. He went on:

However, what I would say for present purposes is that, whatever may be the position under a CIF or C&F contract the implication of such a term under a FOB contract is a very different matter. In the case of a classic FOB contract the seller may well not know the destination of the goods or therefore the duration of the voyage. It may be days or it may be weeks. Unless something in the contract tells him, it is of no concern whatever to him. It is not his duty to know. What the buyer does with the goods after loading on the vessel at the delivery port is entirely a matter for the buyer. He can change his mind about the destination. In these circumstances, I would consider it extremely difficult to imply into such a contract any term as to suitability of the goods to withstand a voyage. In any event, whether such implication should be made might depend on the nature of the goods.

25. Mr Edey noted that Colman J did not hear full argument on the point and submitted that the judge's reasoning ought not to be adopted for the following reasons : (i) the proposed term is not that the cargo is capable of surviving the specific voyage undertaken (of which the seller may have been unaware) but of surviving a normal voyage i.e. one of reasonable duration, such a voyage being one that the seller would have reasonably contemplated; (ii) there was no good reason why the fact that the precise duration of the intended voyage following delivery under an FOB is not known by the seller should preclude the implication of the term for which the claimant buyers contend; (iii) it is only reasonable that the seller should have to ensure that the goods not only meet the contractual specification at the time of shipment but also that, at that moment, their state is not such that they will inevitably deteriorate so as no longer to meet those specifications within a period that the seller would reasonably have contemplated; and (iv) even if the absence of knowledge on the part of the seller of the precise voyage is relevant for the purposes of the implication of the term of fitness for purpose under s. 14 (3) of the 1979 Act, it is not relevant to the implication of a term that the goods would be of satisfactory quality and/or in accordance with the contractual specification for the duration of a voyage of reasonable length.
26. In relation to the term that the goods be of satisfactory quality pursuant to s.14 (2) of the 1979 Act, Mr Edey noted that, by s.14 (2B), the quality of goods includes, inter alia, durability, and submitted that if the gasoil was incapable of remaining fit for all the purposes for which gasoil is commonly supplied, it lacked the durability required to render it of satisfactory quality.
27. Finally, Mr Edey submitted that there were no terms in the contract that precluded the implication of the term for which the claimant contended. In particular, clause 4 was not inconsistent with the proposed term and nor was clause 12. Further, the proposed term in the guise of a condition is not excluded by clause 18 since clause 18 uses the word "warranties" and such wording is insufficient to exclude a condition: see Wallis, Son & Wells v Pratt & Haynes [1911] AC 394, where the House of Lords held that the words "Sellers give no warranty express or implied as to growth, description, or any other matters" did not exclude liability on the part of the sellers for breach of an implied condition as to description.

The sellers' submissions

28. Mr Jacobs QC for the sellers argued that if Mash & Murrell applied to FOB contracts, that would only be where the contract involved a specific transit before the goods were to be used. Where the contract did not identify the journey, the reasoning of Colman J in Navigas Ltd v Enron Liquid Fuels Ltd should be adopted.
29. Mr Jacobs further submitted that Mash & Murrell did not apply where the contract, as here, contains a detailed specification. He also argued that in two respects Diplock J expressed himself too broadly and for this reason Mash & Murrell ought not to be applied in the instant case. The first of these instances was where Diplock J, relying on Manchester Liners, Ltd v Rea, Ltd [1922] 2 AC 74, proceeded on the basis that:

[I]f the particular purpose is made known by the buyer to the seller, then, unless there is something in effect to rebut the presumption, that in itself is sufficient to raise the presumption that he relies upon the skill and judgment of the seller…

30. In Tehran-Europe Co Ltd v Belton (Tractors) Ltd [1968] 2 QB 545 at 560D Diplock LJ said these observations were expressed with "incautious wideness", although in the context of Mash & Murrell where the description of the goods was generic, he thought they were correct. They were too wide because in Henry Kendall & Sons v William Lillico & Sons Ltd (the Hardwicke Game Farm case) [1969] AC 31, the House of Lords held that Manchester Liners was not authority that there was a presumption that if the purpose is made known to the seller by the buyer he (the buyer) relies on the seller's skill and judgement.
31. The second instance is the passage in Diplock J's judgement set out in paragraph 20 above, where he said:

It is extraordinary deterioration of the goods due to abnormal conditions experienced during the transit for which the buyer takes the risk. A necessary and inevitable deterioration during transit which will render them unmerchantable on arrival is normally one for which the seller is liable.

32. Citing Sasson's article Deterioration of Goods in Transit [1962] JBL 351, Mr Jacobs submitted that these words went too far because they were inconsistent with s. 33 of the 1893 Act (now s. 33 of the 1979 Act) and because the buyer and not the seller would plainly be liable for deterioration which was generic to the cargo, i.e. deterioration to which all goods of the contract description would have been subject.
33. Next, relying on Cordova Land Co Ltd v Victor Brothers Inc [1966] 1 WLR 793 at 796 D-F Mr Jacobs submitted that Mash & Murrell applied only to contracts for the sale of perishable goods such as potatoes.
34. Mr Jacobs also argued that the proposed term was too uncertain to be implied because it was not possible to define the nature and extent of a "normal voyage" or "normal journey" or what would constitute a "reasonable time" after discharge from the vessel.
35. Mr Jacobs claimed that it was because the proposed term was inconsistent with s. 33 and too uncertain that it had not been accepted in business circles (it is not contained in the 2000 Incoterms or included in the US Uniform Commercial Code).
36. Mr Jacobs went on to contend that the proposed implied term, whether under the 1979 Act or common law, was precluded by clause 18, which he submitted was plainly directed at excluding the whole range of contractual promises including anything to be implied by statute or common law dealing with merchantability, fitness for purpose or suitability. The distinction between conditions and warranties was wholly uncommercial in this case and did not reflect the obvious intention of the parties. The quality of the goods was governed exclusively by clause 4. There was nothing unfair about that and it rendered certain what the sellers' obligation was. That the parties intended that quality at the load port was to be determinative was clear from clause 12.
37. Mr Jacobs contended that Wallis v Pratt was to be distinguished because there the only type of term referred to in the relevant clause was a "warranty". Further, in contrast to the 1893 Act, s. 14 (2) and s. 14 (3) of the 1979 Act used the word "term".

Discussion

38. In my judgement, in the absence of any term inconsistent therewith, there is to be implied into an FOB contract a term under s. 14 (2) of the 1979 Act that the goods will be of satisfactory quality not only when the cargo is delivered on to the vessel but also for a reasonable time thereafter. Such a term is also to be implied at common law with the additional dimension that the goods should not only be of satisfactory quality for a reasonable time but also should remain in accordance with the contractual specification (if any) for such a period. I reach this conclusion for the same reasons that Diplock J gave in Mash & Murrell for upholding the buyer's alternative claims under s. 14 (2) of the 1893 Act and at common law. At the heart of that reasoning was the acceptance of Atkin J's view based on Beer v Walker that the condition that the goods must be merchantable means that they must be in that condition when appropriated to the contract and that they will continue so for a reasonable time. Hence Diplock J's words quoted in paragraph 16 above:

[M]erchantability in the case of goods sold cif or c&f means that the goods must remain merchantable for a reasonable time and that in the case of such contracts a reasonable time means time for arrival and disposal upon arrival. [Emphasis supplied].

39. So far as the term to be implied under s. 14 (2) of the 1979 Act is concerned, my conclusion is fortified by the fact s. 14 (2B) makes "durability" an aspect of "satisfactory quality". And in respect of the term to be implied at common law, if the seller has bound himself to supply goods of a particular specification, I think it plain that in the absence of any inconsistent term he is to be taken to have agreed that the goods should remain on specification for a reasonable time after delivery.
40. In CIF and C&F contracts, where the seller knows the destination of the goods, Mash & Murrell is accordingly authority for the proposition that the time taken to complete a normal voyage will be the basic measure of what is a reasonable time. However, where the seller does not know the destination of the goods, it is not appropriate in my opinion to adopt the concept of a "normal voyage" as the measure of what is a reasonable time. To this extent, I agree with the approach of Colman J in Navigas Ltd v Enron Liquid Fuels Ltd, but if he meant to go further and to cast doubt on the proposition that goods sold under an FOB contract must be merchantable not only at delivery but also for a reasonable time thereafter, I respectfully disagree with him. Thus, suppose that goods sold FOB contain an ingredient that does not render them of unsatisfactory quality or off-specification when delivered but it has these consequences within a short period of time thereafter: is it not right and just that the buyer should be entitled to hold the seller to account for such an outcome? Put another way, is not the buyer entitled to expect that in exchange for the price he will receive goods that will be of satisfactory quality for a sufficient time to enable him to have some beneficial use of the goods or to sell them on?
41. What will be a reasonable time will depend on the circumstances of the individual contract in question, including the fact that there is to be delivery on board a vessel, which renders it likely but not inevitable that the goods are to be carried by sea before they will be used by the buyer or sold on. Other relevant factors will be the nature of the goods and whether the seller knows that the buyer is a merchant dealing in goods of the type sold or is buying the goods for his (or its) own use. The courts are used to applying the yardstick of reasonableness in determining the content of obligations arising under commercial transactions and it is seldom that considerations of certainty preclude resort to the reasonableness yardstick. In my judgement, there is no question of the proposed implied terms being too uncertain to be enforceable.
42. What of the pleaded term pursuant to s. 14 (3) of the 1979 Act? Mr Edey did not address me in any detail on preliminary issue (2). In my opinion, even if the sellers knew what it is pleaded they knew in paragraph 5 of the Particulars of Claim, it does not follow that the goods had to be reasonably fit for the purpose of remaining within the specifications set out in the contract of sale whether for the time they were on the vessel or thereafter. Further, even if there were a purpose for which the goods had to be reasonably fit, since the sellers did not know the destination of the goods, the sellers' obligation would not have been to provide goods fit for this purpose for the length of the voyage actually undertaken, but for what in all the circumstances was a reasonable time.
43. In my opinion, there is no good reason in logic, common sense or commerce for confining Mash & Murrell to sales of perishable goods. Nor does s.33 of the Sale of Goods Acts or the width of Diplock J's proposition quoted in paragraph 29 above throw any doubt on his conclusion that goods must be merchantable for a reasonable time after delivery. Reading the judgement as a whole, it is plain that he did not intend to hold that the seller should be liable if all goods of the contract description would deteriorate in the same way that the goods in question have, or if the deterioration is due to the fault of the buyer or the shipper. Further, the fact that in upholding the buyers' primary claim under the then s. 14 (1) Diplock J presumed that the buyers had relied on the sellers' skill and judgement does not detract from the reasons he gave for upholding the buyers' alternative contentions.
44. Two questions remain. (1) Are the proposed terms inconsistent with any of the other terms of the sale contract? (2) Are the proposed terms excluded by clause 18? The only clauses said to be inconsistent with the proposed terms are clause 4 (specification) and clause 12 (quality to be determined by mutually agreed inspector). The requirement in clause 4 that the goods answer a detailed specification is not in my view inconsistent with an obligation that the goods be of satisfactory quality both at the point of delivery and for a reasonable time thereafter. Nor is the contractual specification inconsistent with an obligation that the goods remain on spec post delivery for a reasonable time. As to clause 12, I accept Mr Edey's submission that this clause is not inconsistent with the proposed implied terms since the specification does not require the gasoil to be otherwise than on spec at the point of delivery and the loadport certificate would only be and was only ever intended to be final as to the matters referred to under clause 4.
45. Turning to clause 18, the contract was expressly governed by English law. The parties are accordingly to be taken to know of the distinction drawn in English law between conditions and warranties and of the requirement resulting from cases such as Wallis v Pratt that if liability for breach of a condition as distinct from a warranty is to be excluded this must be very clearly spelled out in the relevant clause.
46. Nowhere in clause 18 is the word "condition" used. As recorded above, Mr Jacobs submitted that by referring to "guarantees", "warranties", and "representations", express or implied, the clause covered all the different types of contractual terms, including conditions. I disagree. In my judgement, so deeply ingrained is the status of a condition in English law as an obligation the breach of which gives the counterparty the right to terminate the contract or to affirm the contract and sue for damages, that clause 18 is not to be construed as extending to conditions, particularly the conditions implied under s. 14 of the 1979 Act. As Lord Wright said in Camell Laird & Co v The Manganese Bronze and Brass Co [1934] 402 at 431:

The principle of these authorities [Wallis v Pratt and Baldry v Marshall^[7]]is that though a condition is deemed to be and can be treated as a warranty, if it is not availed of to reject the goods, still it remains a condition; once a condition always a condition: hence apt and precise words must be used to exclude it: the words guarantee or warranty are not sufficiently clear.

47. I also reject Mr Jacobs' submission that the obligations implied pursuant to s. 14 (2) and (3) are not "conditions" for the purposes of clause 18 because those provisions, in contrast to the equivalent provisions in the 1893 Act, speak of "terms" and not "conditions". Section 14 (6) provides: "As regards England and Wales and Northern Ireland, the terms implied by subsections (2) and (3) above are conditions." Thus, so far as England, Wales and Northern Ireland are concerned, the position is the same post the 1979 Act as it was under the earlier statute: the terms implied pursuant to s. 14 (2) and (3) are conditions for the purposes of construing clause 18.
48. Further, in my judgement, the term that I have held stands to be implied at common law is a condition rather than a warranty because it is so similar to the condition implied under s. 14 (2).
49. If the failure to use the word "condition" renders clause 18 of little or no effect, so be it. The sellers agreed to the wording of clause 18 in the face of Wallis v Pratt and must live with the consequences.

Conclusion

50. For the reasons given above I answer the preliminary issues as follows:

(1) No, but there was an obligation on the seller under s. 14 (2) of the 1979 Act and at common law to deliver gasoil that was of satisfactory quality not only when the cargo was delivered on to the vessel but also for a reasonable time thereafter. In addition, under the term implied at common law, the gasoil had to remain in accordance with the contractual specification after delivery on the vessel for a reasonable period.

(2) No.

(3) No.

(4) Clause 18 does not preclude the implication of the terms identified in the answer to (1).

Note 1   The decision was overturned by the CA ([1961] 2 Lloyd’s Rep 361) on the ground that the voyage was not a normal voyage because the potatoes had not been ventilated during loading at Famagusta. The CA did not deal with whether the contract contained the warranties and implied term contended for by the buyers.    [Back]

Note 2   At p 51    [Back]

Note 3   At p 53    [Back]

Note 4   7th ed at paras 18-255-257    [Back]

Note 5   30th ed Vol 2 at para 43-304    [Back]

Note 6   3rd ed at para 4.7    [Back]

Note 7   [1925] 1 KB 260    [Back]