Contracts for the supply of goods and services – statutory implied terms

A decision of Sheriff Principal Young in Aberdeen Sheriff Court has provided some food for thought on statutory implied terms in contracts for the supply of goods and services.  The case is Aberdeen Joinery Windows and Doors Limited v Salaam, decided on 16 October 2009.

The case concerns replacements windows and doors which had been (allegedly) unsatisfactory.  The contract involved eighteen replacement windows and one door.  The total contract price was £23,341.37 (including VAT).  The company was called on to return to the pursuer’s house 10 times to rectify what were described as snagging problems.  Eventually, an independent report confirmed that £3,000 of work was required to put right these snagging problems.

Sheriff Principal Young’s decision confirms that the applicable legislation is s11D(2) of the Supply of Goods and Services Act 1982.  He also confirms that the test of satisfactory quality must be considered not only in relation to the goods themselves, but also in relation to the work supplied under the contract:

“I understand it to be accepted on both sides that the implied term in section 11D(2) that the goods supplied under the contract were of satisfactory quality imported a requirement also that the pursuers’ work in supplying and installing the windows should be of satisfactory quality – or, in other words, that the windows as supplied and installed by the pursuers should be of satisfactory quality.” 

The sheriff had, however, taken an unduly restrictive approach to the issue of whether the goods supplied were of satisfactory quality.  The sheriff had stated:

“Using the objective test, the question would be, would a reasonable person, looking at the work immediately on installation of the windows, or at the stage in July 2005, when the pursuers had remedied all that the defender had asked to be put right, have regarded the word as satisfactory.”

The approach is restrictive because it limits the analysis to specific points in time only. Rather, section 11D(3) directs our attention to “all the relevant circumstances.”   Sheriff Principal Young commented:

“…in this case the pursuers cannot escape the fact that when their own expert Mr Johnstone inspected the defender’s property in October 2007 he concluded that snagging work (which, it will be recalled, he had described as “a significant amount of snagging/repair items”) still required to be put right and he estimated the cost of which to be £3,000 exclusive of VAT. This was in the context of a contract in which the original contract price was £19,865 exclusive of VAT, and in these circumstances I am at a loss to understand how it could be maintained that the goods supplied by the pursuers under the contract were of satisfactory quality.  On the contrary, in my opinion they plainly were not and it follows that the pursuers were in breach of the term implied by section 11D(2) of the Act.”

The case also provides a useful lesson in the operation of the principle of mutuality in contracts.  It seems that Mr Salaam had managed to avoid paying one penny of the cost of installation throughout the whole sad story.  The company had sought to enforce payment of the contract price minus the £3,000 which it had been agreed represented the cost of the work still to be carried out to ensure that the installation met the standard of satisfactory quality.  Sheriff Principal Young held that the company was not entitled to demand payment from the defender given that they were in breach of contract.  Thus, the price could be payable only once all work under the contract had been completed.  The consumer could not be forced to accept a damages award comprising the contract price minus what it would take financially to put defects right.  He could insist on non-defective and properly installed windows and doors, and only then could the contract price be payable. 

Finally, the company’s attempts to use the law of enrichment to enforce payment also failed.  This is perhaps not surprising, there being in force a contract to govern the parties’ relationship.

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