CASES. Caveat Emptor? L.A. Lawrenson *

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1 CASES The Sale of Goods by Description - A Return to Caveat Emptor? L.A. Lawrenson * Few decisions are reported on the provisions of Section 13 of the Sale of Goods Act 1979, so any such case which is reported should rouse some interest. The Court of Appeal decision in Harlingdon & Leinster Enterprises Limited v Christopher Hull Fine Art Limited is all the more important in that it sets out to define a sale of goods by description. The ramifications of the decision may prove to be far reaching, especially as it appears to undermine the very spirit of the Sale of Goods Act and, in respect of Section 13, indicate a return to caveat emptor. The facts of Harlingdon are these. The Defendants were London art dealers. They specialised in young contemporary British artists, but had come into possession of two oil paintings by Gabriele Munter, an artist of the German expressionst school. The paintings were taken to Christie s, who agreed to handle the sale. The Defendants then contacted the Plaintiffs, stating that they had two paintings by Munter for sale. The Plaintiffs had a special interest in the German expressionist school. It was found that the Defendants expressly stated that they knew very little about the paintings, and that they were not experts in them. Negotiations on price for one of the paintings then commenced but the Defendants would not accept less than the f6,000 originally set down. Agreement was reached and the Defendants drew up an invoice for f6,000, and which expressly referred to the purported artist, namely Munter. The painting was later discovered to be a forgery, and the Plaintiffs sought repayment of the f6,000 claiming, inter alia, that the contract had been for the sale of goods by description within Section 13( 1) of the Sale of Goods Act Breach of Section 13( 1) would entitle the Plaintiffs to repudiate the contract and to claim damages for loss of bargain. The decision turned on the meaning in Section 13( 1) of the phrase sale of goods by description. It was held (Stuart-Smith LJ dissenting) that, for there to be a sale by description, it must be established that the parties shared a common intention that the description should be a term of the contract. In seeking to establish whether or not there was such a common intention between the parties, the Court could look at whether or not the buyer placed any reliance on the descriptive words used by the seller. Nourse LJ said* that there cannot be a sale of goods by description unless it is... within the reasonable contemplation of the parties that the buyer is relying on the description. SIade LJ concurred. He stated that: the presence or absence of reliance on the dcscription may be very relevant insofar as it throws light on thc intentions of the parties at the time of the contract. If there was no such reliance by the purchaser, this may be powerful evidence that the parties did not contemplate that the authenticity of the description should constitute a term of the contract, in other words, that they contemplated that the purchaser would be buying the goods as they were.r *Trainee Solicilor, Biddle & Co. I [I All ER ibid at ibid at w Murlani Imv Review 54: I January

2 January 199 I 1 The Sule of Goods by Description Having so defined sale of goods by description as amounting to a reliance by the buyer on the description, Slade and Nourse LJJ then concluded that, on the facts of the case, the buyer had not relied on the description applied to the painting, but had in fact relied on his own assessment of the authenticity of the painting. In other words, a sale by description under Section 13 had not arisen because the buyer had placed no reliance on the initial statement by the seller that the painting was an original. Furthermore, Slade LJ dismissed the reference to Munter in the invoice as merely being a convenient mode of reference to a particular picturc which both parties know to have been attributed to Gabriele Munter. 4 The decision in Hurlingdon further blurs the distinction between sales by description under Section 13, and misrepresentations of fact. The distinction is important in that a breach of Section 13 will entitle a party (usually the buyer) to rcpudiatc the contract and claim damages, whereas by merely establishing a misrepresentation of fact, the buyer may be limited to a claim for damages. By virtue of the Misrepresentation Act 1967, Section 2(2), a court may award damages in lieu of rescission of the contract. Thus the court has a discretion whether or not to grant rescission. It will be noted that the buyer has a right to reject goods for breach of Section 13 of the Sale of Goods Act In Leaf v International Gallerie~,~ a case whose facts bear some resemblance to those in Hurlingdon, a claim for rescission was defeated because there had been a lapse of five years between the initial purchase of the painting and eventual discovery of the forgery. A claim for breach of Section 13 of the Sale of Goods Act was not brought in that case. What is more disturbing about the decision, is that it appears to undermine the spirit of the Sale of Goods Act 1979 which, in its original incarnation, did much to redress the balance of bargaining power between buyer and seller. Sections of the Act imply into every contract for the sale of goods conditions such as will insure that the buyer receives what he has bargained for, without having to reduce every contract into express written terms. A buyer should be able to rest assured that, if he agrees to purchase goods to which a particular description has been applied, he can expect those goods to correspond with that description. If those goods do not correspond with the description, then he is entitled to cancel the contract and get his money back; he may even be entitled to damages. A misrepresentation is altogether a different thing. A misrepresentation is a false statement of fact which induces a party to enter into an agreement to his or her detriment. Misrepresentations are not limited to contracts for the sale of goods but can arise in any type of agreement. As indicated above, the distinction between the two is not crystal clear. Perhaps the best way to view the distinction is to say that a breacah under Section 13 of the Sale of Goods Act goes to the very root of the contract - the buyer does not get what he bargained for - whereas a misrepresentation may simply refer to one aspect of the contract. As with many of these issues the distinction begins to blur when one attempts to circumscribe the boundary separating the differing concepts. Harlingdon, it must be said immediately, was not concerned with drawing a distinction between, on the one hand a breach under Section 13 and on the other, a misrepresentation of fact. However, by defining Section 13 in terms of the reliance the buyer places on the words of the seller, their Lordships succeeded in drawing up a test for the application of Section 13 which looks very much like the inducement test for misrepresentations. The effect is that the balance of bargaining power has 4 ibid HI [I KB 56. I23

3 The Modern Lrrw Review [Vol. 54 been tipped in favour of the seller, who can now conveniently side-step Section 13 by pleading ignorance at the time the contract is struck. The buyer now, is put on guard and should be extremely wary of what the seller says or does. In other words, caveat ernpfor! Not only does this undermine the spirit of the legislation, it also pays little regard to the realities of the market place. But way of explanation, let us look at an example. A, who is a jeweller, calls B knowing that he is looking for a Cartier watch, and states; I have a Cartier watch, are you interested? B agrees to meet A and to inspect the watch. At the meeting, A further states; I deal in Rolex watches and know nothing about Cartier watches and, anyway, 1 don t like them. B asks for a price, and A replies $6,000 (which we may assume is the market price for Cartier watches). Despite the subsequent negotiations between the parties, A will not accept a lower price. The bargain is struck and A drafts an invoice in these terms: Cartier watch at $6,000. The watch proves to be a worthless fake. One would like to assume that B has a claim under Section 13 of the Sale of Goods Act Notwithstanding the fact that A had renounced any knowledge of Cartier watches, he led, or invited, B to assume that he was in fact purchasing the genuine article, and he still insisted on charging a price commonly reserved for the genuine article. One can think of few other situations where the description of type is so much the essence of the contract. The buyer simply does not want any type of watch; he wants a Cartier. Neither does he want any type of painting; he wants one painted by the named artist. It surely cannot be sufficient that a buyer be conveniently permitted to side-step the provisions of Section 13 merely be renouncing any knowledge or expertise in the article for sale. The example may further be analysed in the following manner. Suppose that the ubiquitous officious by-stander (that great alter-ego of contract law) were to come along at the very moment our buyer was reaching into his pocket for his wallet, and were to ask: Sir, would you part with your money if you knew that the watch you are buying is not a Cartier, but a cheap imitation, albeit a mechanically sound one? Are we to believe that our buyer would answer: No, but that s the chance I alone am taking? Surely, if such a notion was ever seriously and openly suggested to the buyer, he would seek express assurances from the seller. The realities of the market place are such that, with name brands or works of art, the buyer is usually no better placed than the seller to spot clever forgeries, and would probably not even give the possibility of his being sold a forgery a second thought, unless his mind was brought specifically to bear on the point at the time the contract was made. In his dissenting judgment, Stuart-Smith LJ summarized this argument by stating that: It would, in my judgement, be a serious defect in the law if the effect of a condition implied by statute could be excluded by the vendor s saying that he was not an expert in what was being sold or that the purchaser was more expert than the vendor. That is not the law; it has long been held that conditions implied by statute can only be excluded by clear words.6 It was found as a matter of fact in Hadingdon, that the buyer placed no express reliance on the painting being by Munter, and much is made of the fact that the dealer denied any expertise in the matter. It is, therefore, implicit in the majority decision of their lordships that the buyer should have been put on guard against I All ER 737,

4 January he Sule of Goods by Description receiving a forgery. Is it reasonable to assume that a buyer should, as a matter of course, investigate the authenticity of his purchases? Or is this rather a matter to which the seller should attend? In the famous case of Beale v Taylor,7 for example, ought the buyer to have investigated the authenticity of the claim that the car he was buying was a Herald 1961? Would the description, applied by the seller, have in any way been reduced in importance by the seller renouncing expertise in the matter? Afier all, the seller had volunteered the description, and to all intents and purposes the car looked like a 1961 model. Finally, the majority decision took no account of the price paid for the painting. Section 13 does not specifically provide that price should be a consideration, but price is a relevant factor to be taken into account in all the circumstanccs of the case under general contract law. In Hurlingdon, we are told that the seller would not accept a price lower than the f6,000 originally asked for. Assuming that f6,000 was a competitive price for a Munter painting in 1984, it must have been implicit in the negotiations leading up to the moment of sale that the seller was selling the genuine article. It was, surely, reasonable for the parties to assume, having regard to the price being asked, that the description Munter applicd to thc painting, was a vital part of the contract, If this were not so, then the seller would not have insisted on the original price, and neither would the buyer have been confident in parting with his f6,000. It is suggested that in the circumstances the buyer was entitled to rely on the initial description attributed to the painting, whether or not the buyer did in actual fact rely on this description. That the seller was not an expert should not affect his liability under Section 13; the painting was described as a Munter by an art dealer, and the buyer should be entitled to accept the validity of this description. To return to my earlier example, the jeweller might very well say that he is a Rolex dealer, and knows nothing of Cartiers, but if he insists on taking f6,000, the effect on the buyer is that he is getting a Cartier watch and not a worthless imitation. The protestations of ignorance on the part of the seller are greatly reduced in significance by his insistence on receiving a good price. Furthermore, although the invoice was drafted after the contract, and therefore could not form part of it, it must surely amount to conclusive evidence that the parties had addressed their minds to the sale and purchase of a particular type of painting, namely one by Munter. Whereas Slade LJ saw the description in the invoice as merely a convenient mode of reference, it is more likely that the description was used to justify a price tag of f6,000. Again, the buyer must reasonably be allowed to assume that a seller would not expect him to pay a competitive price for anything other than the genuine article. In Ashington Piggeries v Christopher Hill Limited,n Lord Diplock said: ultimatcly the test is whether the buyer could fairly and reasonably refuse to accept the physical goods proffered to him on the ground that their failure to correspond with what was said about them makes them goods of a different kind from thosc he had agreed to buy. The key to Section 13 is identification. Lord Diplock s test, couched in such terms as what a buyer can fairly and rcasonably expect from a contract of sale by description, is more in accordancc with our perceptions of commercial reality than the concept of reliance put forward in Hurlingdon. The purchaser in Harlingdon could fairly and reasonably expect to 7 (19671 I WLR (19721 AC 441. S04.

5 7% Modern Law Review [Vol. 54 refuse to accept the painting proffered to him on the ground that it was not by Munter, and was therefore a different kind of painting from the one he had agreed to buy; notwithstanding any reliance he may or may not have placed on the description volunteered by the seller. It is to be hoped that the decision in Hadingdon will be confined to its own particular facts. The provisions of section 13 of the Sale of Goods Act 1979 cannot be allowed to be side-stepped, otherwise than by clear words, unless it is the intention of the Courts, albeit unwittingly, to re-introduce the notion of caveat emptor back into the law of the sale of goods. A Woman s Work... Simon Gardner* Mrs and Mrs Rosset decided to buy a derelict farmhouse to be their family home. It was bought in Mr Rosset s sole name. Mrs Rosset helped with the renovation work. Unknown to her, Mr Rosset had charged the house to his bank as security for an overdraft. When he defaulted the bank sought possession. Mrs Rosset contended that she had a beneficial interest in the house which bound the bank. The House of Lords decided against her: Lloyds Bank Plc v Rosset. The judgments of the Court of Appeal2 had dealt with some interesting questions about ovcrriding interests. That of Nicholls W was especially impressive. Before the House of Lords, however, those questions were diverted into Abbey Narional Building Society v C ~nn,~ which was heard in tandem with Rosset. So far as Rosset itself was concerned they became irrelevant, for their Lordships held that Mrs Rosset had no beneficial interest in the first place. The single opinion was delivered by Lord Bridge. It uses the standard modern framework regarding constructive trusts of family homes. Expressed in terms of the usual fact situation, the law requires an agreement (arrangement, understanding, common intention...) between the couple that they will share the ownership of the property which is held in the man s name, followed by the woman s acting to her detriment or significantly altering her position in reliance on the agreement. The finding of the required agreement may come about in one of two ways. There may be evidence of express discussion between the couple leading to the agreement. Alternatively, an implied agreement may be inferred from their conduct - though only certain types of conduct, known as referable, are permitted to count for these purposes. Like the majority of wives whose name does not appear on the title, Mrs Rosset s most realistic chance of success was through the latter route. But in the House of Lords view she lost. Lord Bridge disclaimed any intention of conducting a major review of the authorities, let alone adjusting the law.4 But in fact he seems to have tightened the referability rules, albeit less by way of complete innovation than by a firm statement where the law had previously remained open. The tightening took two forms. *Lincoln College. Oxford. I 11990) 2 WLR [ I9891 Ch [ WLR [ WI,R 867, 876H 126