Richard Thorold Grant v. Australian Knitting Mills Ltd (1936)

Jones v. Just gives the historical map of caveat emptor. Grant v. Australian Knitting Mills gives the modern application of the two exceptions to an ordinary consumer purchase, and it is the case to cite for four propositions students constantly need:

1. Reliance on the seller's skill or judgment is usually inferred, not expressly stated.
2. The buyer need not spell out the purpose when the goods have only one ordinary use.
3. Merchantable does not mean saleable; it means fit for the goods' only proper use.
4. A sale is a sale by description even where the buyer picks a specific article off the counter.

Lord Wright also gives the phrase examiners like to quote: s. 14 of the English Act — s. 16 of ours — begins by a general enunciation of the old rule of caveat emptor and proceeds to state by way of exception the two implied conditions by which it has been said the old rule has been changed to a rule of caveat vendor; the change has been rendered necessary by the conditions of modern commerce and trade.

The appellant was a fully qualified medical man practising at Adelaide in South Australia.

On 3 June 1931 he bought underwear — two pairs of underpants and two singlets — at the shop of John Martin and Co. Ltd, retailers who dealt in such goods. The retailers had in the ordinary course purchased them, with other stock, from the manufacturers, Australian Knitting Mills Ltd. The garments were of the manufacturers' make known as Golden Fleece.

He put on one suit on the morning of Sunday 28 June 1931. By the evening he felt itching on the ankles; the next day a redness appeared on each ankle over an area of about two and a half inches by one and a half. He treated himself with lotion, but the irritation was such that he scratched until he bled. He changed his underwear on 5 July and again on the following Sundays, washing the sets in between. On 13 July a dermatologist advised him to discard the underwear, which he did, returning the garments to the retailers with the intimation that they had given him dermatitis.

His condition got worse and worse. He was confined to bed from 21 July for seventeen weeks; the rash became generalised and very acute. He became convalescent in November and went to New Zealand to recuperate; he returned in February, resumed practice, relapsed, and by March was so serious that he went into hospital in April and stayed until July. The illness was most severe, involving acute suffering, and at times his doctor feared he might die.

He sued the retailers and the manufacturers, claiming that the disease was caused by the presence, in the cuffs or ankle ends of the underpants, of an irritating chemical — free sulphite — whose presence was due to negligence in manufacture, and which also involved on the retailers' part a breach of the relevant implied conditions under the Sale of Goods Act.

The Chief Justice of South Australia, after a trial lasting twenty days, gave judgment for the appellant against both respondents for £2,450 and costs. The High Court of Australia set that judgment aside by a majority, Evatt J. dissenting.

The garments were manufactured by putting webs of wool through six processes. The second was for shrinking and involved treatment with a solution of calcium hypochlorite and hydrochloric acid; the third removed those chemicals by a solution of bisulphite of soda; the fourth neutralised the bisulphite with bicarbonate of soda; the fifth washed and the sixth dried and finished. If the fourth process did not neutralise the added bisulphite, free sulphites would remain, which the subsequent washing might not entirely remove.

Free sulphites in a garment worn continuously next the skin set a powerful irritant in operation: sweat combines with them to form successively sulphur dioxide, sulphurous acid and sulphuric acid, an irritant which would produce dermatitis on a normal skin. It was admitted that the garments contained sulphur dioxide when delivered to the retailer, indicating the presence of free sulphites.

The manufacturers' evidence was that the process was properly applied and, if properly applied, was bound to be effective; that in the previous six years they had treated by a similar process 4,737,600 garments without any recollection of complaints. Against this, one of the scourers accepted that if there were an excess of one chemical or the other it would be bound to be somebody's fault; and an expert called by the appellant agitated a singlet of the same make in unheated water for two minutes and found a sulphite percentage that he considered free in the fabric and readily soluble in cold water — showing that however well designed the manufacturers' system may be, it may not invariably work according to plan. Some employee may blunder.

The respondents argued that the appellant reasoned in a circle: the garments must have caused the dermatitis because they contained excess sulphites, and must have contained excess sulphites because they caused the disease; and that nought added to nought is still nought.

The Board rejected that as doing justice neither to the process of reasoning by probable inference which has to do so much in human affairs, nor to the nature of circumstantial evidence. Mathematical or strict logical demonstration is generally impossible; juries are told they must act on such reasonable balance of probabilities as would suffice to determine a reasonable man to take a decision in the grave affairs of life. Pieces of evidence, each by itself insufficient, may together constitute a significant whole and justify by their combined effect a conclusion. The coincidences of time and place, and the absence of any other explanation than the presence of free sulphite, pointed strongly in the appellant's favour.

The appeal was allowed. The retailers were liable in contract and the manufacturers in tort, for the same damage but on different causes of action.

The retailers: both exceptions were satisfied

Counsel for the respondents conceded liability only under the merchantable quality exception. Their Lordships held that liability was made out under both exceptions, and said so out of deference to the views expressed below.

On fitness for purpose. The exception applies only if the purpose is made known to the seller so as to show that the buyer relies on the seller's skill or judgment, and it is clear that the reliance must be brought home to the mind of the seller expressly or by implication. The reliance will seldom be express; it will usually arise by implication from the circumstances. In a purchase from a retailer, the reliance will in general be inferred from the fact that a buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment. The retailer need know nothing about the process of manufacture, and it is immaterial whether he is the manufacturer or not: the main inducement to deal with a good retail shop is the expectation that the tradesman will have brought the right goods of a good make.

Nor need the buyer specify the purpose in terms. There is no need to specify the particular purpose for which the buyer requires the goods, which is nonetheless the particular purpose within the meaning of the section because it is the only purpose for which anyone would ordinarily want the goods. The garments were naturally and only intended to be worn next the skin.

The proviso about a patent or trade name did not apply, because Golden Fleece is not a patent or trade name within its meaning. And the conversation at the shop, in which the appellant discussed price and different makes, did not affect the fact that he was substantially relying on the retailers to supply him with a correct article.

On merchantable quality. The second exception in truth overlaps the first. Whatever else merchantable may mean, it does mean that the article sold, if only meant for one particular use in ordinary course, is fit for that use. Merchantable does not mean that the thing is saleable in the market simply because it looks all right. It is not merchantable if it has defects unfitting it for its only proper use which are not apparent on ordinary examination — as is clear from the proviso, which shows that the implied condition applies only to defects not reasonably discoverable by the buyer on such examination as he made or could make.

The appellant was satisfied by the appearance of the underpants; he could not detect and had no reason to suspect the hidden presence of the sulphites. The garments were saleable in the sense that the appellant, or anyone similarly situated who did not know of the defect, would readily buy them; but they were not merchantable in the statutory sense, because their defect rendered them unfit to be worn next the skin. The proviso does not apply where no examination that the buyer could or would normally have made would have revealed the defect.

Sale by description

The Board added the proposition that is quoted more often than any other in this case. There is a sale by description even though the buyer is buying something displayed before him on the counter: a thing is sold by description, though it is specific, so long as it is sold not merely as the specific thing but as a thing corresponding to a description — woollen undergarments, a hot water bottle, a second-hand reaping machine, to take a few obvious illustrations.

The manufacturers

Against the manufacturers there was no privity of contract, so the liability had to be in tort and the gist of the action was negligence. On the facts, negligence in manufacture was shown: the method was correct and the danger of excess sulphites being left was recognised, but the system had failed on these garments.

Under the implied conditions of fitness for purpose and merchantable quality, reliance on the seller's skill or judgment is normally inferred from the fact of buying goods of a description the seller deals in; the buyer need not state a purpose which is the goods' only ordinary purpose; merchantable quality means fitness for that use, not mere saleability in appearance; the proviso about examination does not apply to a defect no examination the buyer could normally make would have revealed; and goods bought over the counter are still bought by description if bought as answering a description.