Fitness for purpose

A recent case is a valuable reminder of the general law on fitness for purpose, and will be of interest to both buyers and sellers of goods.

Background

The claimant was a contractor responsible for designing and installing a water main under a main contract with Thames Water in the Holland Park area of London. A sub-contractor manufactured and supplied the contractor with a pipe for use in the main works. The contractor laid the pipe in a tunnel and surrounded it with foam concrete, which is highly alkaline. The pipe burst four years later due to alkaline attack, causing extensive damage to homes and businesses. Under arbitration proceedings, the contractor paid damages to Thames Water for the damage caused, and then sought to recover this money from the sub-contractor.

Among other things, the contractor argued that the sub-contractor should have ensured that the pipe was fit for a foam concrete (i.e. alkaline) environment on the basis that the sub-contract between them contained an implied term under the Sale of Goods Act 1979 that the pipe would be fit for that particular purpose. Under the Act, there is an implied term that goods will be reasonably fit for a particular purpose where a buyer makes that purpose known to the seller (either expressly or by implication) whether the purpose is that for which those goods are commonly supplied, except where circumstances show that the buyer does not rely on the seller, or that it is unreasonable for him to rely on the seller’s skill and judgement.

Outcome

The court didn’t accept the contractor’s argument in relation to fitness for purpose for the following main reasons:

• It was an express term of the sub-contract that the pipe’s purpose was to carry potable water (i.e. water which was fit for drinking), rather than to be fit for a foam concrete (i.e. alkaline) environment, since the sub-contractor had expressly qualified its tender with the promise that the pipe would be fit for the purpose of carrying potable water
• There was no clear evidence that, either before or at the time of entering into the sub-contract, the contractor had told its sub-contractor that the pipe was to be fit for a foam concrete (i.e. alkaline) environment or that foam concrete might be used around the pipe
• There was also no clear evidence that, either before or at the time of entering into the sub-contract, the contractor had relied on the sub-contractor’s skill and judgement in relation to the decision to use foam concrete
• There was nothing which the sub-contractor knew or ought reasonably to have known about foam concrete in general

Therefore, the sub-contract did not include an implied term under the Sale of Goods Act 1979 that the pipe would be fit for the particular purpose of a foam concrete (i.e. alkaline) environment.

Comment

If you are a buyer of goods, and you intend the goods which you are buying to be fit for a particular purpose, the safest option is probably to make this purpose an express term of the contract. Otherwise, you will need to identify clearly that particular purpose to the seller and be able to show clear evidence of having done so (in drawings, specifications, method statements and meeting notes, for example).

Reference: J Murphy & Sons Ltd v Johnston Precast Ltd [2008] EWHC 3024 (TCC)