30/10/2008

James, who owns a factory manufacturing mechanical engines, was careful enough to make sure that the machine he placed an order for almost quarter of a million dollars was exactly what he had in mind.  Clear written indications were made as to the purpose for which the machine was acquired and our client was assured by the seller that although no exact match to our client’s existing machine was available, a substitute model could do the job just as well.  Relying on this information James entered into a contract.

The machine was delivered (from interstate) only to be found that it wasn’t actually compatible with the rest of the manufacturing plant.  Faced with an imminent project to be undertaken for which the machine was originally purchased, our client had no choice but to rectify the problem by modifying the machine incurring a very substantial fee.

S19 of the Sale of Goods Act deals squarely with James’ scenario.  It stipulates that where the buyer communicates to the seller the purpose for which the goods are bought, there is an implied term in the agreement that the goods being sold are fit for the purpose of which the seller has been informed and on which his or her skill or judgment is being sought.

In a nutshell, the requirements for the implication of a condition as to fitness are that:

- the buyer must make known, not necessarily expressly, to the seller, at or before the time when the  contract is made, the particular purpose for which the buyer wants the goods;

- the particular purpose must be disclosed in such a way that it is clear that the buyer is relying on the seller's skill or judgment, and the buyer does in fact rely on it;

- the goods must be of a description which it is in the course of the seller's business to supply; and

- if the goods are specific goods, they must not be bought under their patent or other trade name.

We were able to establish that James met the above conditions and he had an actionable claim against the seller.

The question at the end of the day becomes whether the reliance upon the seller’s skill or judgment was substantial enough to constitute the buyer’s decision to purchase the goods.  It is on the consumer to prove that the goods were not ‘fit for purpose’ and the longer you’ve had the goods the more difficult it becomes to prove.  If you believe you may have an actionable claim against a seller, please contact Townsends & Business Corporate Lawyers on (02) 8296 6222.