When is Satisfactory not "Satisfactory Quality"? 

A recent case, Jewson Ltd v Kelly (ICLR, 2 August 2002), illustrates the ambit of the principle of “satisfactory quality” imposed by section 14 of the Sale of Goods Act 1979.  

K, the buyer bought a dozen boilers for installation into flats that it intended to sell.  The boilers operated satisfactorily but the energy efficiency rating of the boilers was not as high as potential purchasers of the flats might expect. K refused to pay for them arguing that it had lost profits and that the boilers were of unsatisfactory quality. 

The contract terms implied by section 14 of the Sale of Goods Act 1979 states, among other things, that goods must meet the standard that a reasonable person would regard as satisfactory, taking account any description of the goods, price and all the other relevant circumstances (emphasis added). 

The Court had to decide if the seller was in breach of contract. The Court held that it was for the following reasons: 

1.  “Other relevant circumstances” included the circumstances of the particular buyer and the background of the particular transaction.  In this case, the installation into flats for onward sale was relevant.

2. The seller was aware of K’s intended use.

3. The ability of the boilers to pass energy efficiency tests was a factor that a reasonable person would take into account in determining whether the boilers were of satisfactory quality.

4. The boilers would not pass the energy efficiency tests. This would have an effect on the price a purchaser was willing to pay for a flat.

5. K had relied on the skill and judgment of the seller in its selection of the boilers.

6. K had not been advised by the seller to take professional advice from a third party.

7. The seller had not notified the buyer of the limitation on the boilers’ efficiency.

8. The seller had not excluded his responsibility for energy efficiency compliance in the contract.