1980 PLP 1153 (CLC)

MUSHTAK ALI KAZI, J.

These are two connected Letters Patent Appeals arising from two separate Judgments. The first Judgment is by Mr. Justice Feroze Nana Ghulamally delivered on 14th October, 1968 whereby he found in favour of plaintiffs/respondents' claim for a sum of Rs. 24,773-14-0 on account of damages and Rs. 8,174-10-0 as compensation for loss of bonus vouchers, in an action brought by the plaintiffs against the defendants for goods sold and delivered under a contract of sale. The other Judgment was delivered by Mr. Justice Ghulam Rasool K. Shaikh on 6th October. 1969 decreeing the claim in another suit for a sum of Rs. 18,369.44 on account of damages and Rs. 6,896.90 on account of loss due to reduction of bonus vouchers arising from a similar contract of sale of goods. Since these two judgments involve similar questions of law, they will both be disposed of by this Judgment.

2. In the suit brought by M/s. Hussaini Company the plaintiffs/ respondents in July, 1961 purchased a product commercially known in the market a, "Decorticated Cotton Seed Cake Expellers". The purchase was made in two lots each of 3,000 bags at Rs. 11.50 and Rs. 12 per maund respectively through broker Abdul Shakoor. This purchase had been made on the clear understanding that the goods were meant for export to United Kingdom. Under the contract the defendants/ appellants, in the sale note, mentioned that the goods were sold under "un-percent" guarantee. The exporters' certificate showing that these goods, namely, Pakistan Decorticated Cotton Seed Oil Cakes Expeller containing not less than 43% of oil and Albuminoids combined were being exported to M/s. Louis Dreyfus & Co. Ltd., London, was signed by one Ali Muhammad as Principal Official for Managing Director of M/s. Bengal Oil Mills Limited, the defendants/appellants. These goods, according to the trade practice or usage in the United Kingdom, had to contain a minimum of 43 to 45% of oil and albuminiods or proteins. The buyer got the goods analysed in the U.K. and they were found to contain 34.36% oil and albuminiods. At the desire of the sellers the goods were got analysed a second time in the result was worse they -were found to contain 33.80% of oil and proteins. Therefore, the average contents were found to be 34.08%. Hence, for the deficiency of 8.92% the buyers deducted compensation amounting to about 1851-10-6=Rs. 24,773 paisa 1.74. The plaintiffs also suffered a loss of Rs. 8,174.10 on bonus vouchers. Since this loss was suffered as the goods did not conform to the description and damages had to be paid for the deficiency, the plaintiff filed a suit for damages claiming this amount. The defendants/appellants took the stand that the protein contents of the gods according to the sale note had not been guaranteed and they were not, therefore, liable for damages on account of this defect or deficiency. The-learned Single Judge of this Court, however, came to the conclusion that the product known as Decorticated Cottonseed Oil Cakes Expellers' were required under the custom and usage of trade to contain a minimum of 43% of oil and albuminoids and since it was a sale by description, there was an implied condition that the goods shall correspond with the description and they were of merchantable quality. He accordingly decreed the suit as prayed against the defendants/appellants.

3. In the other suit the plaintiffs, Messrs Fairland Export Syndicate, purchased 5000 bags of the product commercially known as Decorticated Cottonseed Oil Cake Expellers' from the defendants/appellants, M/s. Bengal Oil Mills Limited, who were the manufacturers. of this product, in two lots at the rate of Rs. 11.50 and 12 respectively. These goods were also exported 2o the United Kingdom and on being analysed at the instance of the buyers in the U.K., they were found to contain oil and albuminoids to the extent of 36.35% only. The plaintiffs having suffered 'a loss on account of deficiency in quality, claimed Rs. 18,369.44 as damages and Rs. 6,896.90 on account of actual loss of bonus vouchers.

4. The defendants/appellants contended, that in the sale note of the broker the sale was without any guarantee as to percentage of oil and proteins. That the defendants had no knowledge that he goods had been purchased for export to United Kingdom ; that the defendants were not therefore, responsible for any liability incurred by the plaintiffs due to sale of these goods in the U. K.

5. The learned Judge trying the suit on the original side, found these issues in favour of the plaintiffs/respondents and held that the goods having been sold by description as the goods commonly known commercially as Decorticated Cottonseed Oil Cakes Expellers', the defendants had agreed to supply the goods of that description with all the qualities usually to be found in the goods of that description that although no guarantee of quality or analysis was given, the goods had to conform to the minimum requirements and the guarantee clause only extended to the variations in the quality. Even in the absence of the guarantee when the article sold was `Decorticated Oil Cake' it trust necessarily contain the minimum percentage of oil and albuminoids. Since the article actually did not contain even this minimum requirement, it was not considered as merchantable under that description. The learned Single Judge accordingly decreed the suit with cost and interest as prayed.

6. The main question that arises for consideration in these cases is whether the goods sold had to conform to minimum standards as to quality regarding goods of that description inspite of the sale being under no guarantee as to the percentage of oil and protein contents.

7. Mr. Khalid M. Ishaque has argued that under the latest decisions of even foreign Courts, the goods not being of merchantable quality would mean such goods as were of no use being unsaleable for any purpose That even if the goods purchased for a particular purpose could still be sold for some other purpose due to deficiency in quality, they could be regarded as being merchantable or saleable. It has on the other hand been argued by the learned counsel on behalf of the respondents, that an article containing less than 43% of oil and albuminoids no longer answers to the description of decorticated cottonseed oil cakes expeller and under sections 15 and 16(2) of the Sale of Goods Act the contract of (?) was fir goods of that description of merchantable quality that the guarantee. If any, would apply only to variations permitted in goods of that description and if the goods did not conform to the minimum standard then there was breach of condition of the contract of sale in spite of there being no guarantee as to the percentage of the oil contents. The question then arises as to what is meant by 'decorticated cottonseed oil cakes expeller' in the Pakistan market and what are the standard specifications in the market of this commodity ins the United Kingdom. A pamphlet (Exh. 32) has been produced in evidence issued by Pakistan Standards Institution for Cotton-seed Oil Cakes Expeller in Karachi. . The publication is by the Committee of which Bengal Oil Mills Limited are also the members. The members include representatives from Ministry of Commerce and Directo rate of Health Services apart from the dealers manufacturing this product. This Pakistan Standard Specification was adopted by the Pakistan Standards Institution on 31st January, 1961 which is prior to the sales in question. According to this booklet the `Decorticated Oil Cake' shall comply with the acquirement of total oil and proteins percentage 39, total crude fiber percentage 15 and husk nil. While the undecorticated oil cakes shall have the minimum percentage of oil and protein as

27. Thus according to these specifications when the article contains 39 /fl and above of oil and protein it could be regarded as 'Decorticated Oil Cake' but if the percentage vas below 39 and above 27 it would be 'delinted' undecorticated oil cake'. So that the product ceases to be of the specified description of `Decorticated Oil Cake' if the percentage falls below 39%0 The minimum requirement for Decorticated Cotton Seed Oil Cake Expeller as fixed by London Cattle-food Traders Association would be 43% and this has not been disputed. This standard is laid down in all certificates of export etc. and even in Pakistan these trade requirements are known. The product known in the market commercially as Decorticated Cotton Seed Oil Cake Expeller is not consumed locally in Pakistan but is manufac tured for export purposes, mainly, to the U.K. The evidence of broker Abdul Shakoor is also very clear on this aspect of the case. He has stated in Suit No. 1511 by the plaintiff's Mrs. Hussaini Company (Exh. 23), that the commodity is sold in the market on the understanding that it must contain a minimum of 43% of Oil and Albuminoids. If the minimum contents are less, than damages have to be paid. His deposition in the suit filed by M /s. Fairland Export Syndicate is also similarly -worded, There toe he has stated that `Decorticated Cotton Seed Oil Cakes Expellers are known to have 43% of oil contents and protein. He has further stated that goods of that description contains 43 jo oil and protein as a market practice. He was orally assured by the defendant Company that these goods were of the first quality and the contents were satisfactory. D.W. Raza Ali, Exh. 33, in the same case was examined by the defendant company. He has definitely stated the market practice that the Decorti cated goods art, meant to be exported to England, and they are not sold within the country ; it would normally be presumed that these goods are meant for export and normally the goods are exported only to U.K. That once in a while order may be placed by continental countries. The witness has further emphasised, that United Kingdom imports these Decorticated goods only if they contain minimum of 43% of oil and proteins.

8. There is also evidence of Official Analyst in the U.K. examined on commission. Miss Chamberlin. Consulting Analytical Chemist has deposed that a satisfactory Decorticated Cake contains not less than 45% of Oil and Protein combined. That every rarely the content went below 43%, The other analyst R A. Rabnott also gave similar evidence on the point.

9. The Indian Sale of Goods Act was similar to the English Sale of Goods Act, 1893 and the law on subject is identical being based on English decisions and cases. Sections 13 and 14 of the English Act are similarly worded as sections 15 and If of our Sale of Goods Act. Under section 13 of the English Act, where there is a contract for the sale of goods by description it is provided that there is an implied condition that the goods shall correspond with the description. The word "description" has reference to character. Implied condition as to correspondence with des cription, can be taken as meaning that goods of right identity and right character possessing the right characteristics must be delivered by the seller. The seller must deliver not only the right kind of goods but also goods of that kind with the appropriate characteristics or qualities. If the article purchased is not in fact the article that has been delivered, the buyers are entitled to reject it even though it is the commercial equivalent of that which they have got.

10. Apart from section 15 of the Sale of Goods Act providing that there is an implied condition that the goods shall correspond with the description, the other requirements under section 16(2) is that where the goods are sought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality. The term merchantable quality" has not been defined anywhere either in the English Sale of Goods Act or in the Pakistan Sale of Goods Act. In England this phrase 'merchantable quality' became so uncertain due to different decisions, that in Supply of Good (Implied Terms) Act, 1973 an attempt was made to give a definition a follows:-- "Goods of any kind are of merchantable quality within the meaning of this Act if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all other relevant circumstances and any reference in this Act to unmerchantable goods shall be construed accord ingly." This definition also appears to a large extent to have been based upon the result of A body of case-law doctrine. In Cammel Laird & Company Limited v. The Manganese Brouze and Brass Company Limited (1934 A C 402) it was explained that by "merchantable quality is meant that the goods in the form in which they were tendered were of no use for any purpose for which such goods would normally be used and hence were not saleable under that description. This test was set by Lord Reid in Henry Kendell & Sons v. William Lillico & Sons Ltd. ((1969) 2 A C 31) to need modification, in that it gave the impression that an article might be merchantable if saleable at any price and for any purpose. It would be a better test if it read "no use for any purpose for which goods which complied with the description under which these goods were sold would normally be used, and were not saleable under that description." This is an objective test. "Were of the use for any purpose" must mean, would not have been used by a reasonable man for any purpose. "Marchantable quality" means that the goods complied with the description in the contract, that to a purchaser buying goods of that description, the goods would be `'good tender. It does not mean that there shall in fact be ready to buy the goods. Where there has been a breach of an implied condition of marchantability under the second exception of section 16 implied condition of conformity with description under section 15, in either case the vendee can under section 13 treat such a breach as breach of warranty and claim damages.

11. It has been argued that since there was a contract to the contrary in express terms that the percentage of oil was not guaranted, the requirement as to quality could not be insisted upon in terms of the; Sale of Goods Act. The answer to that argument is, that so long the article conformed to the description in accordance with the trade usage or commercial practice, the buyer could not insist upon the variations in quality permitted under article of that description. For instance, if decorticated cotton-seed oil cake were required to contain quantity of oil and protein from 43% to say 45% then the buyer could not insist that the article should be of the best quality in that range with 45% oil and protein contents. But if the percentage of oil and protein fall below 43% then the article no longer answer to the description and there would, therefore, be a breach of condition under contract of sale of article of that description. If the goods are accepted the breach of condition could be regarded as a breach of warranty with the option to bring an action for damages.

12. It has then been argued in case of M/s. Fairland export Syndi cate that the defendants were not aware that the goods were inquired for purpose of export, to the United Kingdom and they would therefore be liable to Supply goods with the oil and protein requirements of 43% when ordinarily the goods of that description sold in Pakistan required to contain a minimum of 39%. It has however, been admitted evidence that decorticated oil cases are not ordinarily sold are meant for export mostly to the United Kingdom. It is goods are ordered by any other European country. It any case, even under the Pakistan specifications, these goods were not of the description com monly known as decorticated cotton seed oil cakes as the oil percentage was actually 36.35% 2.65% less than the minimum, so that the article sold was not of the description mentioned in the contract of sale. Under these circumstances the defendants would still be liable to reimburse the purchasers for the actual damages suffered by them.

13. The result, therefore, is that both the appeals are dismissed with costs. M. Y. M. Appeals dismissed.