Sale of Goods - Sale of
Goods Act, 1962, (Act 137) -
Contract of sales -
Pro forma invoice -
Sections. 8(1) and 13(1) (b)
HEADNOTES
In 1988 the parties herein,
who were in timber business
in Ghana, entered into a
business transaction worth
about DM1.2 million for the
supply and installation of a
saw-mill for The transaction
was not covered by a
properly drawn up and
executed contract document
as the parties must have
placed trust in each other.
Unfortunately, events
shortly after the
installation of the sawn
mill proved that trust
alone, without properly
executed contract, was not
enough to ensure a smooth
business relationship and
they ended up in litigation
which has lasted for about
twenty years. , The
litigation commenced in 1994
in the High Court at Akim
Oda where defendants are
based and after judgment
there was an appeal to the
Court of Appeal. This is an
appeal against the decision
of the Court of Appeal dated
3rd April 2008
which set aside part of the
judgment of the High Court.
The High Court had in its
judgment granted the
counterclaim of the
defendants. After the
installation of the saw-mill
plant in 1991, defendants
experienced some technical
problems, some of which the
plaintiff rectified and the
others defendants had to
repair by themselves.
Contrary to what was agreed,
the defendants initially did
not supply timber products
to the plaintiff in payment
for the saw-mill so
plaintiff demanded payment
of the amount as stated in
the pro forma invoice it had
sent to defendants.
Defendants then paid DM30,
000 but afterwards they
supplied plaintiff some
timber products as further
payment. The timber products
supplied did not fully
settle the claim of
plaintiff but defendants
stopped further payments so
plaintiff sued for its
balance. When defendants
were served they filed
defence and counterclaimed
for damages in diminution.
-
HELD -
When the
payments acknowledged are
deducted from the invoice
value, we get DM 844,127.66.
We therefore set aside the
judgment of the High Court
and in its place grant
plaintiff the sum of DM844,
127.66 being the balance of
the cost of reconditioned
Saw milling equipment,
Machinery, Spare Parts and
Installation. The amount of
DM844,127.66 granted to
plaintiff and the DM250,000
awarded to Defendants shall
attract interests from the
date of the judgment of the
High Court i.e. 20/12/1999
to the date of this judgment
at the prevailing bank rate
of interest in Germany
STATUTES REFERRED TO IN
JUDGMENT
Sale of Goods Act, 1962,
(Act 137).
CASES REFERRED TO IN
JUDGMENT
ACHORO AND ANOR V. AKANFELA
[1996-97] SCGLR 209
KOGLEX LTD (NO.2) V. FIELD
[2000] SCGLR 175
Rockson v. Armah [1975] 2
GLR 166 CA,
Bartlett v. Sidney Marcus
Ltd [1965]2 All ER 753 CA
Yirenkyi v Tormekpe
[1987-88] 1 GLR 533 CA
Ashington Piggeries Ltd v
Christopher Hill Ltd [1972]
A.C. 441
Davies v Summer [1984] 3 All
ER 831
R & B Customs Brokers Co Ltd
v United Dominions Trust Ltd
(Saunders Abbott (1980) Ltd,
third party) [1988] WLR 321.
Jones v Bright (1829) 130 ER
1167 at 1171
Crowther v Shannon Motor Co.
[1975] 1 All ER 30
Attorney-General v. Faroe
Atlantic Co. Ltd [2005-2006]
SCGLR 271
Hadley v. Baxendale [1854] 9
Ex. 341, 156 ER 145
Royal Dutch Airlines & Anor
v. Farmex Ltd (No.2)
[1989-90]2GLR 682, SC.
BOOKS REFERRED TO IN
JUDGMENT
The Longman Dictionary of
Contemporary English, Third
Edition
DELIVERING THE LEADING
JUDGMENT
COUNSEL
J. K. AGYEMANG
ESQ. (WITH HIM OSMAN GYAN)
FOR THE DEFENDANTS
/RESPONDENTS/APPELLANTS.
JUSTIN AMENUVOR
ESQ. FOR THE
PLAINTIFF/APPELLANT/RESPONDENT.
J U D G M E N T
-------------------------------------------------------------------------------------------------------------------------------------------------
PWAMANG, JSC.
In 1988 the parties herein, who
were in timber business in
Ghana, entered into a business
transaction worth about DM1.2
million for the supply and
installation of a swan mill for
the
defendants/respondents/appellants,
hereafter referred to as the
defendants, to be paid for with
the supply of timber products to
the
plaintiff/appellant/respondent,
hereafter referred to as the
plaintiff. The transaction was
not covered by a properly drawn
up and executed contract
document as the parties must
have placed trust in each other.
Unfortunately, events shortly
after the installation of the
sawn mill proved that trust
alone, without properly executed
contract, was not enough to
ensure a smooth business
relationship and they ended up
in litigation which has lasted
for about twenty years.
The litigation commenced in 1994
in the High Court at Akim Oda
where defendants are based and
after judgment there was an
appeal to the Court of Appeal.
This is an appeal against the
decision of the Court of Appeal
dated 3rd April 2008
which set aside part of the
judgment of the High Court. The
High Court had in its judgment
granted the counterclaim of the
defendants.
After the installation of the
sawn mill plant in 1991,
defendants experienced some
technical problems, some of
which the plaintiff rectified
and the others defendants had to
repair by themselves. Contrary
to what was agreed, the
defendants initially did not
supply timber products to the
plaintiff in payment for the
sawn mill so plaintiff demanded
payment of the amount as stated
in the pro forma invoice it had
sent to defendants. Defendants
then paid DM30, 000 but
afterwards they supplied
plaintiff some timber products
as further payment. The timber
products supplied did not fully
settle the claim of plaintiff
but defendants stopped further
payments so plaintiff sued for
its balance. When defendants
were served they filed defence
and counterclaimed for damages
in diminution.
After a full trial the High
Court gave judgment on 20th
December, 1999 and held that the
plaintiff did not deliver all
the machinery listed in the pro
forma invoice. The court further
held that plaintiff breached an
implied condition of the
contract of sale by supplying a
plant that was not of the
quality and fitness for a swan
mill. The court based its
decision on the provisions of
the Sale of Goods Act, 1962,
(Act 137). The High Court
judge therefore awarded damages
to the defendants on their
counterclaim to be deducted from
the amount due to plaintiff as
stated in the pro forma invoice.
The trial judge refused to grant
plaintiff interest on the sum
allowed. The judgment failed to
take into account the payments
made by defendants before the
case was filed in court so
defendant applied for a review
of the judgment for those
payments to be deducted from
what was due plaintiff.
When the Arithmetic was done to
set off what was awarded
defendants on their counterclaim
with what was allowed for
plaintiff on its claim, the
plaintiff became the judgment
debtor in sum of about DM80,
074.58. Being aggrieved,
plaintiff appealed against the
judgment.
The Court of Appeal allowed the
appeal and dismissed defendant’s
counterclaim in its entirety.
The court held that, per the pro
forma invoice tendered in
evidence, defendants bought
reconditioned, used and second
hand machinery and having
retained it for 20 months, they
were not entitled to avoid the
contract and refuse to pay. The
Court of Appeal also held that
plaintiffs did not sell the
sawmill plant to defendants in
the normal course of its
business so the provisions of
the Sale of Goods Act
were not applicable to the
contract in this case. The court
further held that, in any case,
the defendants did not strictly
prove the special damages they
claimed so the High Court was
wrong in awarding special
damages to defendants.
One week after the judgment of
the Court of Appeal the
defendants appealed to this
court setting out 7 Grounds of
Appeal as follows:
i.
The Court of Appeal erred in law
and caused a miscarriage of
justice when the Court of Appeal
Judges failed to advert their
minds to the defects admittedly
contained in the machinery
supplied by the Respondents.
ii.
If the Judges of the Court of
Appeal had adverted their minds
to the fact that the first
breakdown occurred after 11 days
and not 20 months they would
definitely have concluded that
there had been a breach of a
fundamental obligation.
iii.
The Appellate Court erred in law
when the Court of Appeal set
aside the lower court’s finding
of fact on the breach of the
fundamental obligation as well
as conditions and warranties
without adequate reasons.
iv.
That the Court of Appeal’s
decision that there could not be
an implied condition or warranty
where there is an express
condition contained in the
contract is wrong in law but it
disabled the Court of Appeal
from coming to the right
conclusion on the question of
breach of contract by the
plaintiff.
v.
The judgment of the Court of
Appeal is against the weight of
the evidence record.
vi.
The Court of Appeal’s negligent
or deliberate refusal to
acknowledge that Plaintiff
failed to supply the goods they
contracted to supply disabled
the Court from arriving at the
correct conclusion that the
Plaintiff/Respondent has
breached the contract to supply
the goods they contracted to
sell. The respondent company has
ceased to exist as it has been
dissolved.
vii.
The Court of Appeal erred in law
and caused a miscarriage of
justice when it failed to
consider the legal effect of the
Review of the judgment of the
lower court by the said Court
itself, even though the Court of
Appeal had decided that the
lower court had jurisdiction to
review its own judgment.
viii.
Additional grounds of Appeal
shall be filed on the receipt of
the record of proceedings.
No additional grounds of Appeal
have been filed. We shall
consider all the grounds of
appeal together.
It is well-settled that an
appeal is by way of rehearing
and this means an appellate
court is required to review the
whole evidence on the record of
appeal and come to its own
conclusion whether the findings
both of law and facts by the
court below were properly made.
Where the appellate court comes
to the conclusion that findings
of fact by the court below are
not supported by the evidence on
the record or where the findings
are perverse, then it may set
those findings aside. Another
ground on which an appellate
court will set aside findings
and conclusions arrived at by a
lower court is where the
findings and conclusions are
based on a wrong proposition of
law.
See the cases of ACHORO AND
ANOR V. AKANFELA [1996-97] SCGLR
209and KOGLEX LTD (NO.2) V.
FIELD [2000] SCGLR 175
As we consider this appeal it
bears reminding ourselves that
the Sale of Goods Act, 1962
is the main source of our law as
far as contracts for Sale of
Goods are concerned and that the
rules of the common law and
equity are subservient to the
statutory provisions.
The Sale of Goods Act contains
some implied terms that must be
read into any contract of sales
of goods in Ghana. These terms
are promises which are deemed by
law to be made by the parties to
a contract of sale and are
classified into three categories
namely; fundamental obligations,
conditions and warranties. These
categories are also applicable
in general Law of Contract. The
consequences of a breach of a
promise under the Act depends on
the category the promise comes
under. A breach of either a
fundamental obligation or a
condition entitles the party not
in default to repudiate the
contract of sale, and if it is
the seller who is in breach, the
buyer can reject the goods.
However the breach of a warranty
cannot lead to repudiation or
rejection of goods, but will
entitle the party not in breach
to only damages. But a party who
is entitled under the Act to
repudiation and rejection of
goods may, nevertheless waive
that right and opt for damages
instead. See Sections 49 and 55
of Act 137.
Defendants in this case contend
that though plaintiff breached a
fundamental obligation and
condition stated in Sections.
8(1) and 13(1) (b) of the
Act respectively, they
did not reject the goods but
opted for damages. Whether the
claim of defendants is an
afterthought, as contended by
plaintiff, or not can only be
determined upon an evaluation of
the merits of the case.
Sections 8 (1) and (3) and 13(1)
(b) of Act 137
are as follows;
S. 8. Duties of the Seller
(Fundamental Obligations of the
Seller)
(1) In a sale of specific goods
the fundamental obligation of
the seller is to deliver those
goods to the buyer.
(3) Any provision in a contract
of sale which is inconsistent
with, or repugnant to, the
fundamental obligation of the
seller, is void to the extent of
the inconsistency or repugnance.
S.13 Quality and Fitness
(1) Subject to the provisions of
this Act and any other enactment
there is no implied warranty or
condition as to the quality or
fitness for any particular
purpose of goods supplied under
a contract of sale except as
follows—
(b) Where the goods are of a
description which are supplied
by the seller in the course of
his business and the buyer
expressly or by implication
makes known the purpose for
which the goods are required
there is an implied condition
that the goods are reasonably
fit for that purpose.
(2) The condition implied by
paragraph (a) of subsection (1)
is not affected by any provision
to the contrary in the agreement
where the goods are of a
description which are supplied
by the seller in the ordinary
course of his business and the
condition implied by paragraph
(b) of subsection (1) is not
affected by any provision to the
contrary in the agreement unless
the seller proves that before
the contract was made the
provision was brought to the
notice of the buyer and its
effect made clear to him.
(3) An implied warranty or
condition as to quality or
fitness for a particular purpose
may be annexed by the usage of
trade.
Specific goods as defined in
Section 81, the interpretation
section, of Act 137, is “goods
identified and agreed upon at
the time a contract of sale is
made,” In this case there is
consensus by the parties that
the Pro Forma invoice, Exhibit
“A” constitutes the basis of the
contract of sale of the swan
mill machinery and contains the
list of goods to be supplied. It
therefore means the contract is
one for the sale of specific
goods so Section 8(1) is
applicable in this case.
Consequently the fundamental
obligation of plaintiff was to
deliver all the machinery listed
in Exhibit “A”. Defendants
claimed that plaintiff did not
deliver in strict accordance
with that list. Plaintiff on its
part stated that they supplied
all the equipment on Exhibit
"A". So it becomes a matter of
proof and the burden is on
defendants who made the
allegation to prove that there
was wrong or non-delivery.
Defendants claim that instead of
a Brenta Band Saw 1800 that was
listed in the pro forma invoice,
plaintiff supplied and installed
a Brenta Band Saw 1600.
Plaintiff’s managing director in
his evidence-in-chief stated
that it supplied all the
machinery listed on the pro
forma invoice. He tendered
invoices, packing lists, the SGS
reports and the bills of laden
for each installment of
machinery delivered. Mr. Joseph
Mensah who testified on behalf
of defendants stated in his
evidence that plaintiffs
delivered a Brenta Band Saw 1600
and not 1800. This witness had
worked with the defendants for
only five months prior to
testifying and had no firsthand
knowledge of what happened. It
was therefore to be expected
that he would tender some
documents to support his
testimony but he did not.
In their statement of case in
this court, counsel for
defendants has referred to a
Barclays Bank foreign payment
dated 24th January
1994 (page 42 vol 2 of record)
in respect of Brenta Band Saw
which the Managing Director for
defendants referred to in his
testimony. On its face, and from
the record (pages111 to 114 vol
1) when defendant’s lawyer
sought to tender that document
in evidence through plaintiff's
managing director, an objection
was raised and the court upheld
the objection on 27/11/96 so it
was rejected and marked “RJ2”.
It is noticed that the number
‘2” is also written on the
document but Exhibit “2” is
different. It is a Pro forma
invoice of magnet valves, bolt
blades etc. That document
cannot be used as evidence.
Defendants called one Mohammed
Ntim Kusi as DW1, apparently to
corroborate their case that
plaintiffs supplied and
installed a Brenta Band Saw 1600
for defendants in 1991. His
evidence does not in any way say
that he was present and saw
plaintiff’s engineers install a
Brenta Band Saw 1600 at
defendant’s Sawn mill. He said
“I have gone to Birim Wood
Complex on a visit.” When was
this visit? His evidence does
not say. Then he said “The
pulley at Sabbah is 1600. One
Brenda has been installed at
Birim Wood Complex.” There are
two Sabbah’s in this case, DW1
and the Director of defendants.
Which of them is the witness
referring to?
Defendants’ managing director in
his testimony also claimed that
plaintiff failed to deliver to
them Hydraulic under table cross
cut, Forklift, Exhaust system,
and Electro cables and Circuit
relays; which were all listed in
Exhibit “A”. Plaintiff rejected
this contention at trial and
relied on the invoices and
parking list it tendered in
evidence.
Exhibit ‘U’ is the letter dated
22nd July 1993 by
Lawyer E. A. Oduro written on
behalf of defendants in answer
to plaintiff demand for payment
before this suit was filed.
That letter did not make any
mention of a wrong supply of
Brenta Band Saw 1600 instead of
1800 and a failure to deliver
the Forklift and the other
items. That letter strongly
stated the case of defendants
that the plaintiff was in breach
of an implied warranty of
quality and fitness. Since the
dispute was eminent at the time
that letter was written, one
would have expected the letter
to raise the issues of wrong and
non- delivery if indeed they had
had occurred.
More fundamental is the fact
that in the amended statement of
defence and counterclaim of the
defendants filed on 7/3/97,
apart from the allegation of
wrong-delivery of a Brenta Band
Saw 1600, there is no pleading
of non-delivery of any of the
other items. This claim is in
the nature of special damages
and specific losses ought to
have been specifically pleaded
and strictly proved.
Having regard to the burden of
proof which was on the
defendants in respect of the
averments of wrong-delivery of
items covered by documents
tendered by plaintiff at the
trial, we hold that defendants
failed to discharge the burden
of proof on them so we affirm
the holding of the Court of
Appeal which set aside the
awards of damages for
wrong-delivery of Brenta Band
Saw 1600 and the non-delivery of
Forklift and other items.
We now turn to defendant’s case
based on S. 13(1) (b) of Act
137. The Court of Appeal in
their judgment rejected the
trial judge’s application of
that provision to the facts of
this case and said a buyer of
used goods has no remedy in law
if the goods do not meet
expected standards. As legal
authority for that proposition
of law, the Court of Appeal
relied on the case of Rockson
v. Armah [1975] 2 GLR 166 CA,
which quoted Lord Denning in
Bartlett v. Sidney Marcus Ltd
[1965]2 All ER 753 CA as
saying that;
“a buyer should realise that
when he buys a second hand car,
defects may appear sooner or
later and in the absence of
an express warranty, he has no
redress.” (emphasis mine)
What the defendants are saying,
and which we agree with, is that
there is a condition as to
fitness for purpose implied by
law that applies even to sale of
secondhand goods if the seller
sells them in the ordinary
course of his business and the
buyer makes him aware of the
purpose for which he requires
the goods. With all due respect
to the justices of the Court of
Appeal, if they had read the
case of Bartlett v Sidney
Marcus closely, they would
have realized that the court
accepted that the seller in that
case was under a statutory
obligation pursuant to the
English Sale of Goods Act,
1893, to ensure that the
used car was fit for purpose,
except that it was held on the
evidence that the car met the
fitness test.
In Rockson v. Armah(supra)
the issue before the Court of
Appeal was the right of a
purchaser to repudiate a sale
upon discovery of latent defects
so Francois J A in his judgment
discussed Sections 51, 52(b) and
13(1)(a) of Act 137 but not
Section 13(1)(b) which is the
provision relied upon by
defendants in this case. In
Yirenkyi v Tormekpe [1987-88] 1
GLR 533 CA, the plaintiff
bought a second-hand Toyota
truck for ¢l57, 000 from the
defendant. He then spent
¢56,860 to make substantial
repairs to rehabilitate the
truck. In a subsequent action he
brought against defendant to
recover both sums and for
damages for loss of use, he
pleaded that after taking
delivery of the truck he found
that contrary to the warranty
given to him, the truck was not
roadworthy. The High Court
entered summary judgment for him
and held that the defendant was
in breach of Section 13(1)(b) of
Act 137 on the implied condition
of fitness for purpose. On
appeal, the Court of Appeal held
that, whether the truck was fit
for purpose or not was a
question of fact and could not
be determined without the taking
of evidence.
It is therefore an erroneous
statement of the law of Ghana,
and of England, to say that in
all cases a buyer of used or
secondhand goods has no redress
if the goods fail to meet the
quality and fitness for the
purposes for which the buyer
required them. The grounds for
the condition as to fitness for
purpose to be applicable are
that the seller should sell the
goods in the normal course of
his business and the buyer
should have made the seller
aware of the purpose for which
he requires the goods.
The question that needs to
answered is; what is meant by “the
goods are of a description which
are supplied by the seller in
the course of his business”
in section.13 (1) (b) of Act
137? In his submissions in
the Court of Appeal, counsel for
plaintiffs argued that the
provision refers to goods sold
as the main business of the
seller. He did not refer to any
legal authority but the Court of
Appeal appears to have accepted
that interpretation. In
considering our judgment, we did
not come across a Ghanaian case
in which the provision was
construed so we shall consider
some English authorities for
their persuasive effect.
In the case of Ashington
Piggeries Ltd v Christopher Hill
Ltd [1972] A.C. 441, the
House of Lords, in an appeal
considered the interpretation of
Section 14(1) of the Sale of
Goods Act, 1893 of England which
is worded just like our Section
13(1)(b) as follows; “goods of a
description which it is in the
course of the seller’s business
to supply”. The Court of Appeal
had held that the provision
referred to a dealer in the
goods in question and since the
respondent was not a dealer in
mink food, the provision did not
apply to it. The House of Lords
overturned the decision, holding
that the interpretation of the
provision by the Court of Appeal
was wrong. This is what Lord
Wilberforce said at page 494 of
the report;
‘I would hold that (as to
subsection (1)) it is in the
course of the seller’s business
to supply goods if he agrees,
either generally or in a
particular case, to supply the
goods when ordered…… But,
moreover, consideration with the
preceding common law shows that
what the Act had in mind was
something quite simple and
rational: to limit the implied
conditions of fitness or quality
to persons in the way of
business, as distinct from
private persons……I would have no
difficulty in holding that a
seller deals in goods ‘of that
description’ if he accepts
orders to supply them in the way
of business and this whether or
not he has previously accepted
orders for goods of that
description.’
There have been other
interpretations of similar
provisions to the effect that
the provisions do not only
relate to situations where the
goods are sold as an integral
part of the business of the
seller but include cases where
there is a certain degree of
regularity by the seller in the
supply of goods of the
description as distinct from a
one off sale. See the cases of
Davies v Summer [1984] 3 All
ER 831 and
R & B Customs Brokers Co Ltd
v United Dominions Trust Ltd
(Saunders Abbott (1980) Ltd,
third party) [1988] WLR 321.
The origin of the condition of
merchantability and fitness for
purpose is a statement by Best
CJ in the case of Jones v
Bright (1829) 130 ER 1167 at
1171 where he gave the
policy behind the law as
follows;
“It is the duty of the court in
administering the law to lay
down rules calculated to prevent
fraud, to protect persons
necessarily ignorant of the
qualities of a commodity they
purchase, and to make it the
interest of manufacturers and
those who sell, to furnish the
best article that can be
supplied. ... I wish to put the
case on a broad principle. If a
man sells an article he thereby
warrants that it is merchantable
— that is fit for some purpose.
... If he sells it for some
particular purpose he thereby
warrants it fit for that
purpose.”
So the purpose of the statutory
condition of quality and fitness
is to protect buyers when they
rely on the skills and knowledge
of business sellers. We will
therefore broadly construe
Section13 (1) (b) of Act 137
and give effect to the purpose
of the provision by including
any sale where there is an
element of regularity showing
the seller has been selling
goods of that description as
part of his business, whether it
is his main business or not; or
where the seller accepted an
order from the buyer to supply
goods of that description. Where
the goods were sold on “where
is” basis or as a private sale,
the provision is not applicable.
The evidence in this case shows
that as part of its timber
trading business, plaintiff
installed sawn mill plants for a
number of timber companies in
Ghana. In his evidence-in-chief,
the Managing Director of
plaintiff, Kimberly Michael,
said as follows:
“Sabbah came to Germany to see
us at our organization. There
was a discussion on how we could
find the necessary machines and
the cost of same. He said he
wanted machines in a practical
way. He discussed how practical
it would be for him. We had
established machinery for four
other companies in Kumasi –
S.P.S., S.T.P. (Specialised
timber products). He asked for
a second hand reconditioned
machines for his company. He
had realised that new machines
would cost three to four times
and beyond. I agreed with
defendant and I came here two or
three times because of the
agreement. We agreed to set
sawmilling machinery for him.
We sent him a pro forma
invoice.”
Under cross examination
plaintiff’s Managing Director
said as follows:
“Q. So you supply timber
machinery to those who supply
you with timber?
A. Yes
Q. Mention the names of
timber companies you have
supplied machinery?
A. South B. S. Kumasi
Wood Industries in Kumasi,
Atwima Timber in Kumasi
Q. Can you tell us the
others you have dealt with?
A. Western timbers at
Takoradi, TDC Takoradi”
He mentioned other companies
they had supplied sawn mill
machinery as; Birim Timber, Oda
Sawn Mills, Fast Forest, W.S.I.
Sawn Mills, S. B. S. All these
supplies of sawn mills machinery
were made between 1978 and 1991.
That plaintiff had installed
sawn mills for many timber
companies was corroborated by
the evidence of PW1.
In this case, plaintiff supplied
the complete set of Sawn mill
machinery and sent a team of
engineers to install it and test
run the plant for a few days.
The circumstances show clearly
that the defendants were relying
on the knowledge and skill of
the plaintiff in the acquisition
of the machinery.
We have no doubt in our minds
that plaintiff sold the Sawn
Mill machinery to defendants in
the ordinary course of its
business and we so find. The
Court of Appeal made the finding
that plaintiff did not sell the
sawn mill in the ordinary course
of its business without
reviewing the evidence and
properly construing Section.
13(1) (b) of Act 137. We
therefore reverse that finding
by the Court of Appeal.
The effect of our finding that
plaintiff sold the machinery in
the course of its business is
that the machinery was sold on
the condition that it will be
fit for the purpose of sawn
milling. But the next question
is; what is meant by the term
fitness for the purpose as used
in Section.13 of Act 137. If a
seller sells used goods will the
implied condition of fitness be
the same as new goods?
We shall use two English cases
to illustrate the principles the
English courts have applied in
determining fitness for purpose
in respect of secondhand
vehicles;
In
Bartlett v Sidney Marcus Ltd
[1965] 1 WLR 1013,
the dealer’s salesman told Mr
Bartlett that the clutch of a
second-hand Jaguar was not
operating properly, but that he
thought it could be put right by
a minor repair. The price was
reached on the understanding
that the plaintiff would have
the clutch repaired at his own
garage. He drove it for about
200 to 300 miles over a period
of four weeks and then took it
to his garage, where it was
found that the defect was far
more serious and that the engine
would have to be dismantled to
repair the clutch system. The
judge found that the clutch was
not of merchantable quality. The
defendants successfully
appealed. Lord Denning said at
page 1017 as follows:
“A second-hand car is
‘reasonably fit for the purpose’
if it is in roadworthy
condition, fit to be driven
along the road in safety, even
though not as perfect as a new
car. Applying those tests here,
the car was far from perfect. It
required a good deal of work to
be done on it. But so do many
second-hand cars. A buyer should
realise that when he buys a
second-hand car, defects may
appear sooner or later; and, in
the absence of an express
warranty, he has no redress.
Even when he buys from a dealer
the most he can require is that
it should be reasonably fit for
the purpose of being driven
along the road. This car came up
to that requirement”
In
Crowther v Shannon Motor Co.
[1975] 1 All ER 30,
an eight-year-old Jaguar had a
mileage of 82,165 at the date of
purchase. The dealer commended
it, saying “it would be
difficult to find a 1964 Jaguar
of this quality inside and out”
and adding, that for a Jaguar
“it is hardly run in”. It passed
an MOT test. Mr Crowther drove
the car for three weeks and
covered over 2,000 miles. He
found that it used a lot of oil.
The engine then seized up and
the car came to a full stop. The
engine was found to be in an
extremely bad condition. So much
so that it had to be scrapped
and replaced by a reconditioned
engine. At the trial in the
county court, Mr Crowther called
as a witness a previous owner of
the car who had bought it from
the same dealers about eight
months before. He had used it
for those eight months and then
sold it back to the dealer. His
evidence was that the engine was
“clapped out”.
Lord Denning MR after
distinguishing the decision in
Bartlett v Sidney Marcus said as
follows at page 33 of the
report: “If the car does not go
for a reasonable time, but the
engine breaks up within a short
time, that is evidence which
goes to show it was not
reasonably fit for the purpose
at the time it was sold. On the
evidence in this case, the
engine was liable to go at any
time. It was ‘nearing the point
of failure’; said the
expert...The time interval was
merely ‘staving off the
inevitable’. That shows that at
the time of the sale it was not
reasonably fit for the purpose
of being driven on the road. I
think the judge on the evidence
was quite entitled to find there
was a breach of section 14(1) of
the Sale of Goods Act, 1893 and
I would therefore dismiss the
appeal. ”
What the authorities show is
that a machine is said to be fit
for purpose if it is able to
perform the task for which it
was acquired safely and for a
reasonably period before major
defects appear. What is
reasonable period will depend on
the condition of the machine,
whether new or used, whether any
defects were disclosed by the
seller, the level of assurance
given by the seller, etc. So it
is a question of fact to be
determined by the court on a
case by case basis. See
Yerinkyi v Tormekpe (supra).
Though in the High Court
defendants’ case was that they
contracted for the supply of new
sawn mill machinery, their
counsel in his statement of case
in this court has submitted as
follows;
“The evidence justifies a
finding that the parties agreed
on the supply of
Reconditioned machinery
generally, with some of the
machines being new, but
certainly NOT on the
supply of used or secondhand
machinery simpliciter.”
On its part, plaintiff has
always maintained that they were
required to supply reconditioned
machinery. In a letter written
by lawyer for the plaintiff
tendered in evidence as Exhibit
“Y”, he described the
transaction between the parties
as a “Turn Key” agreement. It is
therefore in order to apply the
implied condition of fitness for
purpose to the plant as one unit
and to determine if it met the
reasonable man’s expectation of
a Reconditioned Sawn Mill.
The Longman Dictionary of
Contemporary English, Third
Edition defines recondition
as follows:
“to repair something, especially
an old machine so that it works
like a new one.”
In our considered view, the
reconditioned plant that
plaintiff contracted to supply
was supposed to work as a
sawmill, even if not like a new
one, but work effectively for a
reasonable period before
breakdowns would occur. The
expectation is thus higher than
what would be expected of a
secondhand plant though it will
not be as high as a new one. The
evidence on record shows that
within 10 to 11 days after the
installation the whole plant
ceased operating. Plaintiff’s
Managing Director made the
following admissions under cross
examination:
“Q. I put it to you that
ten or eleven days after
installation the
machines ceased to be
functional. This was
communicated to you through Mr.
Testling?
A. Yes
Q. Were you ever made
aware of the fact that the main
carriage drive also broke down
barely two months after the
installation?
A. I don’t know whether
after two months.
Q. It was communicated to
you through Mr Testling
A. No
Q. Who did?
A. I myself was here.
Q. You directed that
replacement should be sent from
Cream Timbers, Takoradi
A. Yes
Q. The main carriage
drive was second hand machine?
A. Not secondhand,
reconditioned.
At pages 103 of the record, the
cross-examination of plaintiff’s
representative continued as
follows;
Q. It was communicated to
you that the top pulley shaft of
the bund mill broke into 2 and
almost damaged the mill?
A. Yes, it was mentioned
to me verbally by Mr.
Fascaller.”
The main carriage drive
certainly is a critical part of
the sawn mill and without it a
swan mill cannot operate as a
swan mill. In the expectation of
a reasonable person, a
reconditioned plant should not
break down within 11 days of
operation. In the same vein, for
the main carriage drive of a
reconditioned sawn mill to break
down within two months of use is
evidence that at the time of the
sale it was not fit for the
purpose of swan milling. The
evidence on the record gives us
the irresistible impression that
the plant supplied by plaintiff
did not meet the standard of a
reconditioned plant. We
accordingly find that plaintiff
was in breach of the implied
condition that the reconditioned
plant it sold to defendants was
fit for its stated purpose of
swan milling timber logs.
PROOF OF DAMAGES
That brings us to a
consideration of the part of the
judgment of the Court of Appeal
that set aside the trial Court’s
award of damages in diminution
in the sum of DM700, 000.00 to
defendants for breaches of the
contract. We will like to quote
what the Court of Appeal stated
in its judgment on the issue of
the damages in diminution;
“In
my opinion, I think that the
learned trial judge was wrong in
upholding the counter-claim of
the respondents and awarding the
sum of DM700, 000 since this was
special damages and the
Respondents should have been put
to strict proof.
They neither tendered any
documents or receipts to support
their claim that they had been
put to extra expense in
replacing broken down machinery
supplied by the Appellants, and
that in order to replace the
defective items, they had had to
look to other well-established
timber firms in the country.
It is trite law that a claim for
special damages must be
explicitly claimed in the
pleading with full particulars
of how it is made……
In the instant case, I find that
the Respondents did not do any
of these things. The only
evidence on record alleges that
as the machines broke down they
needed to be replaced, and
therefore the broken down parts
were acquired from other sister
timber firms e.g. saoud etc.
Prah vrs Okai [1966] GLR 560
holds that “special damages
should be strictly proved”.
Having failed to prove special
damages, the learned trial judge
should have dismissed the
Respondents’ counter-claim for
special damages just as he did
with the defamation.”
We have perused the record and
carefully considered the
evidence of defendants and their
witnesses and we fully endorse
the above findings of the Court
of Appeal that defendants did
not sufficiently prove special
damages. Defendants are
nevertheless entitled to General
Damages for plaintiff’s breach
of the implied condition that
the reconditioned plant was fit
for the purpose for which
defendants acquired it.
The principles that guide the
courts in the award of General
Damages have been repeatedly
stated by the Courts. In the
case of Attorney-General
v. Faroe Atlantic Co. Ltd
[2005-2006] SCGLR 271 Dr.
Twum JSC stated as follows
at page 290 of the Report;
“General Damages are such as the
law will presume to be natural
or probable consequence of the
defendant’s act. They arise by
inference of the law and need
not therefore to be proved by
evidence.”
The settled position of the law
is that General Damages are at
large, meaning the court will
award a reasonable amount having
regard of the circumstances of
the case. A court may award
nominal damages under General
Damages where no real loss has
been occasioned by the
infringement of a right, or
award substantial damages where
actual loss has been caused to
the plaintiff. In this case our
job is cut for us by s.56 of
Act 137 which provides as
follows;
S.56.
Assessment of Damages under S.
55.
The measure of damages in an
action under section 55 of this
Act is the loss which could
reasonably have been foreseen by
the seller at the time when the
contract was made as likely to
result from his breach of
contract.
S. 55 of Act 137
states the common law principle
of remoteness of damages that
limits damages to only losses
that arise naturally from the
breach of the contract and
losses that can be said to have
reasonably been within the
contemplation of the parties as
likely to be suffered in the
event of a breach of the
contract. The locus
classicus on the
principle of remoteness of
damages is Hadley v.
Baxendale
[1854] 9 Ex. 341, 156 ER 145.
In that case Alderson B. made an
observation which is very much
applicable to the facts of this
case. He stated as follows at
page 151:
“Now, if the special
circumstances under which the
contract was actually made were
communicated by the plaintiffs
to the defendants, and thus
known to both parties, the
damages resulting from the
breach of such a contract, which
they would reasonably
contemplate, would be the amount
of injury which would ordinarily
follow from a breach of contract
under these special
circumstances so known and
communicated.”
The evidence on record is that
the plaintiff supplied the
reconditioned plant for
defendants to use as a sawn mill
in processing their timber logs
for export. The natural
consequence of a failure of the
plant to run smoothly is that
defendants’ production of sawn
timber from that mill will be
adversely affected and they will
lose sales. It is also a
natural result that in order to
put the mill back into operation
defendants will incur
expenditure on repairs and
replacements. It is clear from
the evidence that the operation
of the Sawn mill was interrupted
on a number of occasions due to
breakdowns. There is evidence
that on the eleventh day of
operating the sawn mill it broke
down in the presence of
plaintiff’s representative and
plaintiff had to send spare
parts in order for it to be
repaired and production to
resume. There is evidence that
the main carriage drive broke
down within two months in the
presence of plaintiff’s managing
director. We have given
consideration to the fact that
plaintiff undertook this
contract as a turnkey agreement
and defendants placed total
trust in them that what they
supplied and installed would
meet their requirements for a
reasonable period.
Having taken all the above
circumstances into account, we
award General Damages of DM250,
000 in favour of defendants
against plaintiff for breach of
the implied condition as to
fitness of the plant they
supplied and installed for
defendants.
The defendants in their
statement of case have called
our attention to discrepancies
on the record as to the correct
amount plaintiff is entitled to
by the decisions of the High
Court and the Court of Appeal.
Defendants have called on us to
correct and clarify the amounts
on the basis of the evidence on
the record.
The trial judge in his judgment
said as follows at page 305 of
the record;
“Of the plaintiff’s claim (a) of
DM1,172,654.76, DM 193,354.76
has been granted.”
The judge did not expressly
state in his judgment whether he
had dismissed the claim for
DM1,172,654.76 and awarded only
DM 193,354.76, or whether that
figure was arrived at after
deducting the awards he made in
favour of defendants on their
counterclaim. The evidence on
the record is that plaintiff
tendered Exhibit ‘A’ in proof of
his claim for DM1, 147,557.00.
But in his evidence-in-chief he
admitted that out of the invoice
value, DM 30,000 was first paid
and timber products worth
DM273,429.34 was supplied to
their subsidiary company by
defendants. (See page 53 of the
record).
When the payments acknowledged
are deducted from the invoice
value, we get DM 844,127.66. We
therefore set aside the judgment
of the High Court and in its
place grant plaintiff the sum of
DM844, 127.66 being the balance
of the cost of reconditioned
Sawn milling equipment,
Machinery, Spare Parts and
Installation.
The amount of DM844,127.66
granted to plaintiff and the
DM250,000 awarded to Defendants
shall attract interests from the
date of the judgment of the High
Court i.e. 20/12/1999 to the
date of this judgment at the
prevailing bank rate of interest
in Germany in line with this
court’s decision in Royal
Dutch Airlines & Anor v. Farmex
Ltd (No.2) [1989-90]2GLR 682, SC.
G. PWAMANG
JUSTICE OF THE
SUPREME COURT
W.
A. ATUGUBA
JUSTICE OF THE SUPREME COURT
J.
ANSAH
JUSTICE OF THE
SUPREME COURT
A. A. BENIN
JUSTICE OF THE SUPREME
COURT
J. B. AKAMBA
JUSTICE OF THE SUPREME COURT
COUNSEL
J. K. AGYEMANG ESQ. (WITH
HIM OSMAN GYAN) FOR THE
DEFENDANTS
/RESPONDENTS/APPELLANTS.
JUSTIN AMENUVOR ESQ. FOR THE
PLAINTIFF/APPELLANT/RESPONDENT.
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