Scottish Court of Session Decisions

The Sale of Goods Act 1893 (56 and 57 Vict. cap. 71) enacts—Section 11 (2)—“In Scotland failure by the seller to perform any material part of a contract of sale is a breach of contract which entitles the buyer either within a reasonable time after delivery to reject the goods and treat the contract as repudiated, or to retain the goods and treat the failure to perform such material part as a breach which may give rise to a claim for compensation or damages.” Section 17—“(1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.” Section 18—“Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.” Rule 5 (1)—“Where there is a contract for the sale of an ascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.” Section 35—“The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.” Section 53, which gives the remedy for breach of warranty, enacts—“(5) Nothing in this section shall prejudice or affect the buyer's right of rejection in Scotland as declared by this Act.”

On 7th November 1911 Ian Theodore Nelson of Glenetive, pursuer, brought an action against William Chalmers & Company, Limited, shipbuilders, Rutherglen, defenders, in which he craved the Court to ordain the defenders—“(First) to make payment to the pursuer of the sum of £131, 5s. sterling with interest thereon at the rate of 5 per centum per annum from the 24th day of August 1911 until payment; (second) to deliver to the pursuer within such short time as the Court may fix ( a) the forty B.H.P. two-cylinder ‘Bolinders’ direct reversible crude oil marine engine with silencer and spares complete in packing case; ( b) Manganese bronze shafting, steel half coupling, gun metal propeller, and brass stern tube; ( c) bilge pump fitted on engine; ( d) strainer for circulating water inlet; ( e) galvanised iron tank; ( f) No. 0 Wellcox quad, acting pump with copper pipe connections; ( g) copper service tank fitted with gauge glass, two fuel cocks, and two hand pumps, all the property of the pursuer and presently in the possession or under the control of the defenders, and all as specified in the account produced herewith; and, in the event of the defenders failing so to deliver the said articles, to make payment to the pursuer of the sum of £526, 6s. 9d. sterling, with interest thereon at the rate of 5 per centum per annum from the 24th day of August 1911 until payment; and (third) to make payment to the pursuer of the sum of £150 sterling, with interest at the said rate from the date of citation to follow hereon until payment.”

The following narrative is taken from

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the opinion of Lord Mackenzie—“The question here is whether the pursuer is entitled to reject a motor yacht, built for him by the defenders, because of failure by the builder to perform a material part of his contract. The contract provided that the workmanship was to be of the highest class, hull, sheer, &c., to be perfectly fair, all to designer's or owner's satisfaction. Counsel for the defenders did not dispute that if the matter rested there the evidence in the case contained sufficient to warrant the owner in saying he was not satisfied with the boat tendered. The Lord Ordinary has dealt with the facts bearing on this point. There is enough evidence from experts who examined the boat to show the bona fides of the pursuer in saying he was not satisfied. There is, no doubt, evidence on the defenders' side which contradicts what the pursuers' experts say, but as the contract expressly provides that the work was to be to the owner's satisfaction, it is not necessary to go into the evidence upon this matter. The case was argued by the defenders as depending ultimately upon a question of law. The contract contains these provisions—‘1. The contractors on the one hand agree to have built and equipped a motor yacht to the approximate dimensions given. The yacht to be built in first-class style to plans and specifications got out by the designer, a copy of the specification being appended and signed as relative hereto, and while in course of construction to be superintended by the said designer or his inspectors. The contractors agree to put right within the time stipulated for the construction of the yacht any part of the work considered unsuitable either in material or workmanship by the said designer. 6. The right of property in the yacht will pass from the contractors to the owner on payment of the first instalment of the price, subject to the contractor's lien for the balance of the price, and extras.’ The specification provides, inter alia—‘Payments will be made in four instalments: one-fourth when in frame, one-fourth when plated, one-fourth when decks laid and caulked, and one-fourth when vessel is handed over complete according to plans and specification. No ‘extras’ will be allowed unless ordered in writing by owner or designer.’ The first instalment of the price was paid on 27th June 1911, when the boat was in frame, and the work thereafter proceeded until 16th August 1911, when the defenders say she was finished. The yacht was inspected on behalf of the pursuer on 16th August and again on 24th August. On the latter date she was rejected on the ground that the plating was defective.”

After a proof, the substance of which appears from his opinion, the Lord Ordinary ( Dewar) pronounced the following interlocutor:—“Decerns against the defenders (1) to make payment to the pursuer of the sum of £131, 5s. sterling, with interest thereon as concluded for; (2) to deliver to the pursuer within the next thirty days the following articles, viz.—( a) manganese bronze shafting, steel half coupling, gunmetal propeller and brass stern tube; ( b) strainer for circulating water inlet; ( c) galvanised iron tank; and ( d) No. 0 Wellcox quad, acting pump, with copper pipe connections, all the property of the pursuer, and presently in the possession and under the control of the defenders, and failing their doing so decree will be pronounced for the value of the foresaid articles; and (3) to make payment to the pursuer of the sum of £75 sterling in full of the conclusion of the summons for damages.”

Opinion.—“The question in this case is whether the defenders Messrs Chalmers & Company, Limited, shipbuilders, Glasgow, are in breach of a contract which they entered into to build and equip a motor yacht for the pursuer, Mr Nelson of Glenetive, Argyllshire, and are bound to pay the instalment of the purchase price paid by him, and to deliver the engines, fittings, and accessories which he supplied, and to pay damages for the loss incurred in respect of said breach.

The contract, in which Mr Mylne, naval architect, Glasgow, acted on behalf of the pursuer, is dated 25th April 1911, and provides that the yacht shall be built in first-class style and completed to the satisfaction of the designer not later than twelve weeks from the receipt of the first building plans. The price was to be £525, payable in instalments, the pursuer to supply the engines, propeller, shafting, &c. The pursuer's case is that the building plans were delivered to the defenders on 27th April 1911, and in terms of the contract the yacht ought to have been delivered on 20th July; that it was not in point of fact ready on 24th August, when it was inspected and found disconform to contract, in respect that the shell plating was of very inferior workmanship and was not fair, but was uneven and faired up with cement to an extent which was quite inconsistent with good workmanship; that these defects had in course of construction been repeatedly pointed out to the defenders, and that they had promised to remedy them, but when the yacht was inspected in August it was discovered that these promises had not been fulfilled and were incapable of fulfilment, and that the pursuer accordingly was compelled to reject the vessel as disconform to contract. The pursuer paid the first instalment, amounting to £131, 5s., on 27th June, and he now sues for repayment of that sum, and for delivery of the engines and other accessories which he supplied, and for damages, which he estimates at £150.

The defenders admit that the yacht was not completed within the time specified in the contract, but they maintain that they are not responsible for this, as it was due to the fault of Mr Mylne, the designer, who did not timeously supply the necessary plans, and they deny that the yacht was of inferior workmanship or disconform to contract in any way.

Parties are thus at issue on two matters of fact—the cause of the delay and the quality of the work—but before examining the

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evidence it is necessary to consider the precise terms of the contract.

The first clause provides that the yacht shall be built in first-class style to plans and specifications got out by the designer, and a copy of the specification is appended and signed as relative thereto; the construction is to be superintended by the designer or his inspectors, and the defenders agree to put right ‘within the time stipulated for the construction of the yacht any part of the work considered unsuitable either in material or workmanship by the said designer.’ And the specification (page 4) provides ‘workmanship to be of the highest class. Hull, shell, &c., to be perfectly fair, all to designer's or owner's satisfaction.’ … By the fourth clause the defenders bind and oblige themselves to have the yacht completed in accordance with the specification, and to the satisfaction of the designer, not later than twelve weeks from the receipt of the first building plans, unless prevented by strikes or other causes outside their control, and they further agree to pay £1 per day of liquidate damages for every day's delay in delivery. Clause six provides that the right of property in the yacht will pass from the contractors to the owner on payment of the first instalment of the price, subject to the defenders' lien. And finally, on the eleventh page of the specification it is set forth that ‘it is to be clearly understood the vessel is to be finished and ready for sea with everything complete and as fitted in first-class motor yachts, and all to the owner's satisfaction.’

Parties appear to have had two questions prominently before them, viz., (1) What was to be the quality of the work? and (2) within what period was the yacht to be delivered? And they came to a definite agreement on both points. I think the true meaning of the contract is shortly this:—The defenders agreed to build the yacht in first-class style with workmanship of the highest class, and to deliver it within twelve weeks; and they further agreed that the question whether the workmanship was satisfactory or not should be finally decided by the pursuer or designer. And I think it follows that if the vessel was not delivered within the stipulated time, or if the pursuer or the designer were dissatisfied with the workmanship, the conditions of the contract have not been fulfilled, unless it can be shown that the delay in delivery was due to causes outside the control of the defenders, and that the decision as to the quality of the workmanship is corrupt.

The portion of the workmanship to which the pursuer takes exception is the shell plating. The plates, it appears, in a yacht of this kind are very thin, and it is difficult and delicate work to rivet them in such a manner as to prevent bulging irregularities. Parties evidently had this in view when they entered into the contract, for it is specially referred to in the specification—‘Hull shell, &c., to be perfectly fair, all to designer's or owner's satisfaction.’ The difficulty in getting this perfect fairness began to appear at an early stage of the construction. When some of the plates had been rivetted, Mr Mylne on the 28th of June pointed out to the defenders that they were not fair, and he was informed by Mr Douglas Eadie that the irregularities would be faired out before the work was completed. Sometime afterwards Mr Mylne had occasion to leave Glasgow and did not return until the middle of August. In his absence Mr James—his principal assistant—superintended the work, and he also complained on several occasions of the unfairness of the plates, and he got the same answer as Mr Mylne. And Mr Nelson, who occasionally visited the yard during the construction, also mentioned the unfairness and was told that it would be put all right.

When Mr Mylne returned to Glasgow in the middle of August he was informed by Mr James that the work was not in a satisfactory condition, so he telegraphed to the pursuer, and on the 16th of August they went to inspect the yacht. Mr Mylne states that he found the plating on the whole hull was so unfair that he was exceedingly doubtful whether the plating was watertight, and he at once advised the pursuer not to take delivery of the vessel. He states—‘I communicated to Mr Douglas Eadie my view as to the unfairness of the plating. I said it was a shocking job. He said he did not think it was so bad. I walked round with Mr Eadie and the pursuer and said pretty well what I thought about it—that it was really so very bad that we could not think of taking delivery of the boat.’ Mr Nelson does not pretend to have expert knowledge, but he agrees that the plates were unfair; he states—‘I was very much disappointed with it; it was exceedingly bad. I do not think it was so good as it had been on the former occasion when I complained about it. In my view Mr Eadie had not implemented the promise he had made that it would be put all right.’ Now the defenders specially agreed that this particular piece of work must satisfy the owner or designer, and both are very much dissatisfied. That appears to me to be conclusive. It is not suggested that they are actuated by any corrupt motive; it is admitted that both are honestly of opinion that the work is unsatisfactory, and it is further admitted that Mr Mylne is an experienced and competent naval architect. The defenders' case is that the designer's and pursuer's opinions are not well founded. I do not think that is a good defence in view of the terms of the contract, but in any case I am satisfied on the evidence that the plating was not in a satisfactory condition, and that the pursuer was justified in refusing to take delivery.

After the pursuer had formed his own opinion and got the advice of Mr Mylne on 16th August he called upon Mr Barnett, senior partner of Messrs G. L. Watson & Company, a naval architect of acknowledged standing, and asked him to inspect the yacht, and Mr Barnett did so on the

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afternoon of the same day. Mr Barnett is asked—‘(Q) What opinion did you have with regard to the state of the hull?—(A) It was shocking. The plating of the hull was such as I have never seen before. The unfairness was not such as you would usually call unfair—it was beyond that. There was a coating of stuff on the plating and that prevented one seeing the exact rivetting of the seams, but the seams looked all right. They may have been sound enough so far as the water-tightness was concerned, but they were so uneven that I could not pass the job—the plating of the hull generally on no account could I accept.’ And Mr Peck, also a naval architect, made an inspection and says—‘The impression I formed regarding the outside of the plating of the hull was that it was a very inferior job. I should say that applied to the hull all over. Some parts were worse than others. (Q) Had you ever in your experience seen so inferior a job before?—(A) I do not think I ever did; I cannot call to recollection anything so bad.’ It is clear from this evidence that the opinion which the pursuer and Mr Mylne formed was neither capricious nor unreasonable.

But the defenders also brought a number of expert witnesses who gave evidence to a contrary effect and spoke to the excellence of the workmanship, but none of them, I think, went the length of saying that the hull was ‘perfectly fair.’ Mr Douglas is asked—‘(Q) Would you describe the plating above and below the water line at the present time as perfectly fair?—(A) No, with the qualification I have given. The plating cannot be made fair; the outside surface can be made fair by pigment. Above the water line, in my opinion, there is not enough rivet composition. (Q) Too much below and too little above?—(A) Yes.’ Mr M'Guffie, however, does not agree with this view. He thought the rivet composition was just right both above and below the water line, and he explains that any unfairness he saw was due to the thinness of the plates. While Mr Miller does not appear to agree with either; he says—‘Any little unfairness I saw was caused, so far as my knowledge goes, by the rivets being too large in diameter;’ and far from thinking that there was too much composition below the water line, he says ‘that he found none at all.’

I think it was probably just to avoid the difficulties created by such diversity of opinion amongst experts that the contract provided that the workmanship must be to the satisfaction of the pursuer or designer.

But the defenders maintain that even if the plating were not conform to contract on the 24th of August the pursuer was not entitled to reject the yacht, because it was the duty of the designer to superintend the construction and point out defects as the work proceeded, and if the plating was not to Mr Mylne's satisfaction he ought to have insisted on its removal at an earlier stage. But, as I have said, I think it is proved that the defects were pointed out, and the defenders gave the assurance that they would be put right. I am aware that Mr Douglas Eadie denies this, but I was not favourably impressed with the manner in which he gave his evidence, and I regret that I cannot put any reliance upon what he says. If the vessel was disconform to contract on 24th August—and I am of opinion that it was—I do not think that the pursuer was bound to give the defenders further opportunity of putting it right; indeed they never asked him to do so. They knew that it was required for the shooting season, and that time was an essential element in the contract. They admit that they received the contract because they agreed to deliver within twelve weeks. It is true that pursuer was prepared to accept delivery on 24th August if the workmanship had been satisfactory, but he was not bound to wait indefinitely. He had, I think, been very reasonable throughout—he gave them every opportunity, and they failed to give satisfaction, and I formed the impression that the real cause of their failure was that they had not sufficient experience for delicate work of this kind.

The defenders further founded on clause 6 of the contract, which provides that the right of property in the yacht will pass from the contractors to the owner on ‘payment of the first instalment of the price,’ and argued that, as the first instalment had been paid, the yacht was now the property of the pursuer, and he was not entitled to refuse delivery and sue for repayment of the instalment. This appears to me to be an argument on relevancy, and if the defenders intended to insist on it they ought to have taken it at an earlier stage. They gave no indication of it until the proof was closed and pursuer's counsel had been heard on the evidence. But in the view I take of the contract the argument is unsound. The contract is for a completed yacht to be built in terms of a specification to the satisfaction of the pursuer. Clause 6 is intended merely as a security. Under such a contract I do not think that the pursuer is bound to accept delivery unless the vessel is completed conform to the contract. The defenders contracted to make and deliver a specified article within a definite time. They have not done so, and I see no reason why the pursuer should not be entitled to demand repayment of the instalment of the price he paid in advance for an article he has not received.

If I am right in thinking that the workmanship was not conform to contract, I do not think that it is necessary to examine in detail the question as to the cause of the delay; but I think the defenders have failed on this part of the case also. On record (answer 5) they aver that the delay in delivery was due to three causes—(1) Mr Mylne's failure to furnish the plans; (2) the dilatoriness of the engineers; and (3) a strike of ironworkers in defenders' yard. At the proof there was no evidence that any delay was caused by a strike, and the averments as to this

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were formally withdrawn. There was very little evidence regarding the alleged delay on the part of the engineers, and counsel for the defender did not even refer to it in his speech, and I understood that this averment was also abandoned—in any event it was not substantiated. There was, however, a good deal of evidence led on behalf of the defenders regarding the alleged delay on the part of Mr Mylne, but I am of opinion that the defenders failed to substantiate this averment also. The chief witness was Mr Douglas Eadie. He went into the matter at length, but his statements in the witness-box were quite inconsistent with the whole tenor of the correspondence. For example, on 7th July Mr Mylne wrote to the defenders in the following terms:—‘Mr Nelson is much disappointed with the stage the building of his launch is at. I could hardly believe you had made so little progress when he told me. Can nothing be done to hurry up matters? Can you not put some overtime into it? Mr Nelson has been the gentleman throughout, and I think you might on your part put forward some special effort. You will remember there is a penalty attached to the contract, and the delay is so considerable that the penalty will be enforced to the full. It is now five weeks since the plating started, and from all accounts there seems little of it completed.’

If it had been true, as the defenders now allege, that Mr Mylne was himself the cause of the delay about which he is here complaining, I should have expected the defenders to reply to this letter and tell him so. But they sent no reply at all, and the only explanation which Mr Douglas Eadie offers is that as this was the first order he had received from Mr Mylne, he was anxious—with a view to obtaining other orders in the future—to keep on good terms with him. That is to say, he not only accepted—without protest—responsibility for Mr Mylne's fault, but he was prepared to sacrifice Mr Nelson's interest in the hope that he might ultimately advance his own. Such an explanation does not appear to me to be either convincing or satisfactory, and I do not believe that it is true. I think the real truth is that the long delay was caused partly by the defender's inexperience, and partly because they did not employ a sufficient number of men. In any event I am satisfied on the evidence that they have failed to prove that it was due to any of the causes which they allege on record.

On the question of damages the defenders did not, I think, dispute that if there was a breach of contract some damages were due. I have carefully considered the evidence, and I think the pursuer's loss may be fairly estimated at £75.

On the whole matter, I am of opinion that the defenders are in breach of their contract, and that the pursuer is entitled to decree in terms of the first and second conclusions, and to decree for £75 in terms of the third conclusion of the summons, with expenses.”

The defenders reclaimed, and argued—The intention of the owner was that the property should pass after the payment of the first instalment, and that thereafter each bit should be inspected before it was adopted, with the idea of getting a good boat by a definite time. The boat became the pursuer's by sections, and as he had never objected, for example, to the frame, the frame had become his property and he could not now reject it. The property had passed irrevocably and had been accepted, and this distinguished the present case from all those founded on by the pursuer, for in them the property was not accepted— Barclay, Curle, & Company v. Sir James Laing & Sons, Limited, 1908 S.C. 82, and (H.L.) 1, 45 S.L.R. 87. Therefore rejection was now barred and the pursuer had mistaken his remedy. A contract which provided for the passing of the property after the payment of the first instalment was not a contract for a completed article, but a contract to do work on the owner's property— M'Bain v. Wallace & Company, January 7, 1881, 8 R. 360, and July 27, 1881, 8 R. (H.L.) 106, 18 S.L.R. 226 and 734; Seath & Company v. Moore, March 8, 1886, 13 R. (H.L.) 57, 23 S.L.R. 495. Under the Sale of Goods Act 1893 (56 and 57 Vict. cap. 71) the Scottish law had become absolutely the same as the English. The result was that while the purchaser could insist on each new part as it was put on being made conform to contract, he could not reject it, for it became his property, accessione, as it was put on. The meaning of the contract was that the purchaser had agreed to take the incomplete article as his property, and so could not ever afterwards reject it—Sale of Goods Act ( cit.), secs. 17 and 18, rule 5 (1). In regard to the machinery which had been supplied by the pursuer, it had now been built into the yacht, and consequently the defenders had a lien over it for the unpaid portion of the price of the yacht— Meikle & Wilson v. Pollard, November 6, 1880, 8 R. 69, 18 S.L.R. 56; Moore's Carving Machine Company v. Austin, June 6, 1896, 33 S.L.R. 613; Clendinning v. Hope, 1911 SC (HL) 73, 48 S.L.R. 775.

Argued for the pursuer—If the purchaser did not get what he contracted for, he was entitled to reject, and in this case the yacht admittedly did not conform to contract, in that it did not satisfy either the owner or the designer. The defects had been pointed out to the builders, but had not been put right within the contract time. Under the Sale of Goods Act ( cit.) the buyer's remedy was clearly, by section 11 (2), “either to treat the contract as repudiated or to retain the goods and claim damages”—see also section 53 (5). The right of rejection was carefully preserved all through this Act. The property under the contract could only pass subject to the condition that it was up to contract standard. When a buyer has taken delivery he may possibly be barred afterwards from rejecting, but only if he has dealt with it as his own— Spencer & Company v. Dobie & Company, December 17, 1879, 7 R. 396, 17

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S.L.R. 370; Aird & Coghill v. Pullan & Adams, December 14, 1904, 7 F. 258, 42 S.L.R. 292; Vigers Brothers v. Sanderson Brothers, [1901] 1 QB 608. Here, as the builders had not delivered to the pursuer the full dominium over a completed yacht which was conform to contract, they were in breach. The defenders' argument came very near to saying that this was a contract locatio operis, and not sale, but such a contract implied that the materials must be furnished by the employer—Bell's Com. (7th ed.) i, 275. The whole question here was whether what had been done was equivalent to acceptance, and this it obviously could not be held to be. Reference was also made to Bell's Com. (7th ed.) i, pp. 176 and 485, and to Orr's Trustees v. Tullis, July 2, 1870, 8 Macph. 936, 7 S.L.R. 625.

At advising—