M. Venkatasubra Rao, Kt., O.C.J.
1. On the important questions of law relating to the sale of goods which this appeal raises, able arguments have been addressed to us by the Counsel on both sides. The suit has been brought for the price of certain skins sold and the defendants have counterclaimed for damages on the ground that the goods supplied do not fulfil the description in the contract. The plaintiff against whom damages have been awarded by the learned Trial Judge, has filed this appeal.
2. The contract is obviously not for sale of specific goods and this has been conceded by Mr. Radhakrishnayya for the appellant. We must therefore proceed upon the footing that the sale was by description and that the contract is governed by Section 16 of the Indian Sale of Goods Act. The first question that arises is, what is the effect of the stipulation in the contract that runs:
To be fair average quality of description and to be passed by Messrs. Gordon Woodroffe & Co., Ltd., Aladras, as such'.
3. In other words, does it, upon a true construction, mean that if the goods are passed by Messrs. Gordon Woodroffe & Co., there is an end to the matter or, does the clause impose a further condition, namely, that the goods should in addition be of the quality mentioned The case which both sides have strongly relied upon, is Bird v. Smith (1848) 12 Q.B. 786: 116 E.R. 1065. The contract there was for sale of iron rails
to be inspected and certified as then agreed upon between the parties and to be equal in quality to any rails made in Staffordshire.
4. It was urged there, as here, that the goods had been inspected before delivery and thereupon approved and accepted in performance of the agreement. It was held that this was a bad plea, as being no complete answer to the declaration. Lord Denman, C.J., who delivered the judgment of the Court, declares that there were two stipulations, each being in its terms distinct, in other words, that in addition to the provision for inspection and approval, there was an absolute warranty for quality to guard against defects which inspection could not discover. The position in the present contract is very similar, indeed, the only difference is, that the order of the terms is reversed. Here the first term related to the quality, the second to the inspection; whereas in the case cited, after the stipulation for inspection and approval, came the undertaking as to the quality. The question is ultimately one of construction and as observed in Bigge v. Parkinson (1862) 7 H. & N. 955: 158 E.R. 758 if it could be gathered from the contract that the articles were to be supplied to the satisfaction of the buyers or their agents, so that they were to be the sole judges whether the articles answered the description or not, such an undertaking would be inconsistent with the absolute condition implied by the law. On the facts of that case, the contention by the defendant that the express condition in the contract excluded any implied condition, was overruled. M'Clelland v. Stewart (1883) 12 L.R. Ir. 125 strongly relied upon by Mr. Radhakrishnayya, is distinguishable and does not contravene the principle enunciated in Bigge v. Parkinson (1862) 7H. & N. 955 : 158 E.R. 758. Turning to the clause in question, to construe it reasonably, we must give effect to what must be regarded the decisive word, 'and', occurring in it; the superadding of the provision as to inspection does not reduce the importance of the independent undertaking as to the quality.
5. In support of the contention that the goods having been passed by the buyers, they could no longer rely upon any defect later discovered in regard to the quality, another argument is put forward, namely, that the clause should not be so construed as to cast too heavy a burden on the vendor. The argument is put thus: the contract of sale being conditional on the goods being approved by the buyers, they are constituted, as it were, judges in their own cause: that is onerous enough; why should the Court further so construe the contract as to superadd to this term, the absolute condition as to quality? But as observed by Cockburn, C.J., in Stadhard v. Lee (1863) 3 B. & Sec 364: 122 E.R. 138:
The duty of the Court in such cases is to ascertain and give effect to the intention of the parties as evidenced by the agreement; and though, where the language of the contract will admit of it, it should be presumed that the parties meant only what was reasonable, yet, if the terms are clear and unambiguous, the Court is bound to give effect to them without stopping to consider how far they may be reasonable or not'. (Benjamin on Sale, 7th dition, p. 605.)
6. Mr. Radhakrishnayya next contends that this contract should be considered with reference to the surrounding circumstances. But in the case of a document which is plain and unambiguous, the intention of the parties should be gathered from the language of the document itself.
7. Then comes the question as to the quality of the goods supplied, which must be considered in two aspects. First, if Section 16(2) applies and there is an implied condition that the goods shall be of merchantable quality, was that condition complied with?; secondly, if the express provision in the contract ' to be fair average quality ' should prevail, did the goods answer that description? On the evidence on the record, our finding on this point must be against the plaintiff, the vendor. There has been some dispute as to the meaning of the word ' merchantable ' occurring in the Sale of Goods Act. It is not sufficient that the goods are marketable or saleable (that is, no doubt the dictionary meaning of the word) for, in the statutory sense the significance of the word 'merchantable' is relative, the test being, are the goods merchantable or not under the particular description in the contract? The same idea may be expressed differently by stating that the term, that the goods shall be of merchantable quality is fulfilled when they do not differ from the normal quality of the described goods, including under the term 'quality ' the state or condition as required by the contract. (See Drummond v. Van Ingen (1887) 12 A.C. 284 Grant v. Australian Knitting Mills (1936) A.C. 85 Bristol Tramways, etc., Co., Ltd. v. Fiat Motors, Ltd. (1910) 2 K.B. 831 Jackson v. Rotax Motor & Cycle Co (1910) 2 K.B. 937 and Sumner Permain & Co. v. Webb & Co. (1922) 1 K.B. 55)
8. The appellant's Counsel then contends that the defects, such as they were, were patent or discoverable defects and that the proviso to Section 16(2) which, he urges, governs the contract, protects the seller. He relies upon certain passages in Mr. Cook's deposition and at first sight they seem to support him. But if his evidence is read as a whole and critically examined, it shows beyond doubt, that the true condition of the skins could not have been ascertained at Madras by such examination as dry salted skins are generally subjected to. There is one circumstance which places the matter beyond doubt. When the skins were first inspected at Northampton, Mr. Cook not only approved the goods but complimented Mr. Taylor on their excellent quality. (This incidentally disproves the theory that the skins became deteriorated after they had been taken delivery of at Madras and before they reached England.) What then emerges from the evidence of the various witnesses, through which we have been carefully taken? No reasonable examination of the skins in their dry salted state could have revealed the defect; only when the skins were 'put into work' that is 'put into water', was their true condition discovered. On the question as to what are discoverable as distinguished from latent defects, the decision of the House of Lords in Drummond v. Van Ingen (1887) 12 A.C. 284 already cited, contains a valuable pronouncement. As Lord Herschell observes, the implied warranty will be excluded as regards any defects which a buyer of ordinary diligence and experience would have detected by ' due diligence in the use of all ordinary and usual means '--what is due diligence, depending upon the circumstances (p. 294). If merchants possessed of ordinary skill, using due care and diligence, would not have thought of the existence of the particular defect which gives rise to the action, such a defect would be a latent or hidden one as distinguished from a patent defect (see Lord Macnaghten, p. 297). CI. 2 of Section 16 and the proviso thereto runs thus:
Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality:
Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.
9. The language of this proviso may be usefully compared with Section 17 which deals with sale by sample. That enacts:
In the case of a contract for sale by sample there is an implied condition that the goods shall be free from any defect rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. [S. 17(2) (c).]
10. Though these two clauses are worded differently, there can be little doubt that they are intended to convey the same meaning; in other words, the defects contemplated in Section 16 are those 'apparent on reasonable examination' within the meaning of Section 17. In this connection, we must observe that Lord Herschell, while dealing with the implied condition as to any defects, makes no distinction between inspection of bulk or of sample, although in the case under discussion the sale was by sample (see p. 294). Then again, in Grant v. Australian Knitting Mills (1936) A.C. 85 to which we have already referred, the sale was not by sample, but yet Lord Wright, delivering the judgment of the Judicial Committee, in dealing with the question of patent defects uses language, which more or less occurs in the section, relating to sale by sample (see p. 100). On the question as to what are discoverable defects, these two decisions, one of the House of Lords and the other of the Judicial Committee, are of binding authority and it is unnecessary to enquire whether a different principle has been laid down in the cases relied on by Mr. Radhakrishnayya, namely (1) Thornett & Fehr v. Beers & Son (1919) 1 K.B. 486 and (2) Pinnock Bros. v. Lewis & Peat, Ltd. (1923) 1 K.B. 690.
11. This brings us to the question, what is the effect of Section 16(2) read along with the proviso? As Mr. Doraiswami Aiyar contends, the combined effect of the clause and the proviso is, that the implied condition extends to merchantability less patent defects. From our finding that the defects in the present case were not patent or discoverable, the conclusion follows that the seller, who under the section is answerable from latent defects, remains liable. Granting then that Section 16(2) applies, we must hold that the defendants are bound to succeed.
12. Mr. Doraiswami Aiyar urges in the alternative (thereby taking a higher stand), relying on the clause extracted above, that here is an express condition as to quality and that being so, it is unnecessary to invoke Section 16(2). In our opinion, this contenion also is well founded. Section 16(4) reads thus:
An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
13. Now, what is the express condition here that the goods shall be of 'fair average quality '. That clearly is inconsistent with the condition arising by implication, namely, that although the goods are warranted merchantable, discoverable defects are excluded. The position therefore comes to this, that the express condition gives the purchaser a higher right than he would possess under a contract where the term would be merely implied in law. The next step in the argument is, that the buyer might treat the condition as a warranty, a breach of which would give rise to a claim for damages, although he would be precluded from rejecting the goods. That is, Mr. Doraiswami Aiyar urges, what has precisely happened here. The provisions of law relevant to this argument are Sections 12, 13, 42 and 59 of the Indian Sale of Goods Act. The quality warranted being part of the description of the goods, the term in question becomes a condition under Section 12. Next, it follows from Section 13 that when the buyer has accepted the goods, he can treat the breach of a condition only as a breach of warranty. In the present case the defendants accepted the goods within the meaning of Section 42, for, after the skins had been delivered to them, they 'put them into work' an act inconsistent with the ownership of the seller. Now comes Section 59 the last of the four sections to which we have referred. Where the buyer elects or is compelled as here, to treat any breach of a condition as a breach of warranty though he is not entitled to reject the goods, he has a right to sue the seller for damages. It is this right which by the counter-claim the defendants are seeking to enforce. They are entitled to do so and on this ground also our judgment must be for the defendants.
14. As to the measure of damages, out of 18,000 skins supplied, 3,920 were found tainted. 1,483 of these were perfectly worthless and no question arises. As to the balance, the only question is, were the defendants in the circumstances bound to sell them by auction for estimating the loss? When the skins ' were 'put into work', the salt would no longer be there to 'arrest the putrefaction. How could one reasonably expect that such skins would find a market? In the circumstances though the evidence on the point is somewhat obscure and unsatisfactory, we are not prepared to differ from the learned Trial Judge.
15. As to the costs of the auction, the question is not what we consider right, but whether there are grounds to justify our interfering with the learned Judge's discretion. There is something to be said, as the appellant's Counsel urges, against the conduct of Messrs. Gordon Woodroffe & Co. It was their servant who, by agreement, was employed by the plaintiff to cure the skins. Again, the case is one of a string of contracts and much of the trouble has arisen by reason of their having wrongly represented to their buyers that the skins were of their 'own cure'. In spite of these facts, we do not feel that we ought to disturb the Trial Judge's order.
16. In the result, the appeal fails and is dismissed with costs.
17. The Memorandum of Objections is not pressed and is likewise dismissed with costs.