'Satisfactory quality', 'Fit for Purpose' and the Sale of Goods Act 1979 - Keith Lowe & Ann Lowe -v- W Machell Joinery Ltd [2011]EWCA Civ 794.
August 2011

The Claimant’s (“Lowe”) were in the process of converting a barn for residential use and placed an order with the Defendant (“WMJ”) for the supply of a bespoke oak staircase complete with balustrades and galleries for the sum of £16,000.00 (plus VAT). When the staircase arrived however, for one reason or another Lowe rejected the goods under cover of a letter to WMJ, claiming that the staircase did not comply with the contract.

Having already paid WMJ for the staircase Lowe commenced proceedings for recovery of that sum, together with other damages. Although not stated within its letter to WMJ; it was later submitted by Lowe that the staircase failed to comply with the Building Regulations which in turn was a breach of contract that permitted Lowe to reject the staircase.

The alleged breach of the Building Regulations concerned Schedule 1, Part K. The Approved Document to which states at paragraph 3.3:

“Where buildings are likely to be used by children under 5 years the guarding should prevent children being held fast by the guarding. The construction should be such that a 100mm sphere cannot pass through any opening on the guarding and so that children will not readily be able to climb it...”

The aforementioned rule is commonly referred to in the industry as the ‘baby’s head’ rule, aiming as it does to ensure that a child cannot get stuck between the balusters. It was common ground that the staircase supplied by WMJ would have failed the ‘baby’s head’ rule, but that it was as per the contract between the parties. The burden of satisfying the Building Regulations rested with Lowe.

The Technology and Construction Court in Leeds held that as the staircase, more specifically the balustrade, would have failed to comply with the Building Regulations there was therefore a breach of contract on the part of WMJ. However the failings inherent in the balustrade were found to be minor, in that it could be easily modified (illustrated with the assistance of expert evidence) to avoid the breach of Building Regulations and therefore Lowe was not justified in rejecting the goods out of hand. The claim failed and costs were awarded against Lowe, who the judge commented had acted with “petulance bordering on childishness”. Lowe sought an appeal.

There is much discussion within the judgments of Lord Justice Lloyd, Mr Justice Lewison and Lord Justice Rix regarding the legal basis upon which the appeal was brought. Although such discussions provide useful and interesting insight into whether or not a ‘new’ case was brought in this instance; for the sake of brevity this summary shall deal only with the legal application of the sale of goods law which provided the outcome of the appeal and upon which the judges were unanimous.

The leading judgment in this regard was given by Lord Justice Lloyd, which can be summarised as follows:

1)	Implied Terms of the Contract
	S.14 of the Sale of Goods Act 1979 (“the Act”) at subsection (2) provides that where a seller is selling goods in the course of a business; it is an implied term that the goods supplied are of satisfactory quality. Subsection (3) of the Act provides that where the seller sells goods in the course of a business and the buyer makes known to the seller (expressly or by implication) that there is a particular purpose for the goods being supplied, there is an implied term that those goods are fit for the purpose for which such goods are commonly supplied. In this case it had been made clear to WMJ that the barn was to be converted in residential use and that the staircase was to be used for that purpose. It followed that it was reasonable for Lowe to rely upon the skill and judgement of WMJ, in this regard.
2)	Was the staircase of ‘satisfactory quality’ and ‘fit for purpose’?
	Put simply; no. Lord Justice Lloyd stated: “if the purpose for which the goods are to be used ... is one for which compliance with the Building Regulations is or may be essential, fitness of the goods for their purpose must surely include the compliance of the goods, when installed and used, within the Building Regulations”. Also: “on the basis that the goods, supplied in exact conformity with the contract, could not lawfully be used for their intended purpose, known to the seller, it does not seem to me that they were reasonably fit for the purpose, nor that a reasonable buyer would find them satisfactory”.

Lowe’s appeal succeeded and it was entitled to recover the sum paid to WMJ for the staircase.

It is easy to sympathise with WMJ on these facts; it was bound to supply the goods as per the design provided to it, thus leaving Lowe with a product which was non-compliant with the Building Regulations. If on the other hand it had altered the design to comply with the Building Regulations then the staircase would have been non-compliant with the contract between the parties, and WMJ could not have forced Lowe to accept a revised design. Lord Justice Lloyd provided the following helpful guidance:

“That situation could have been resolved by the Defendant pointing out the Building Regulations problem to the Claimants, before accepting the order or at any rate before the design was finalised. That would have left the Claimants with the choice as to whether to take the risk and proceed with the order, or to try to sort out the problem with the building control office before committing themselves to the design as a matter of contract, or agreeing on a design which did not pose the problem”.

In addition to the guidance given above as to the action that should have been taken by WMJ to avoid liability in this case, Lord Justice Lloyd also makes the following important point that should be noted by parties looking to enter into such contracts:

“Part of the problem presented by this case can be attributed to the fact that there is no document setting out the terms of the contract. There was evidently a serious mismatch of assumptions on each side as to, for example, the way in which the goods would be delivered, and what would remain to be done on site in order to install the staircase. It is necessary to resort to inference and implication as to any terms of the contract other than the identification of the design, materials and (presumably) dimensions of the goods, and the price payable”.

In order to avoid such ‘inference and implication’ becoming necessary, in this case to WMJ’s detriment, party’s would be well advised to draft contracts which deal with the various obligations and liabilities highlighted within this case.

We are able to assist with any such considerations and encourage parties to call our Conflict Clinic on 0800 840 4025 to arrange a FREE one hour consultation to help you assess how to resolve your situation.