Commercial law

Critically assess the case of Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd [1934] AC 402

Aisha works for Ponds Ltd (Ponds) as sales staff. DIY Gardens Ltd (Gardens) sells ponds and water features to members of the public. Aisha visited Gardens head office and provided examples of Ponds best combined pond and water feature at a cost of £700 retail. Aisha informs Gardens that Ponds would be willing to sell the water features for a price of £200 per item wholesale if Gardens was to order 1000 units. As Gardens has 800 stores it ordered 3 units per store and negotiated a reduced fee of £180 per unit wholesale.

Ponds does not manufacture its own products as it is more cost effective to allow a third party to manufacture them. Ponds ordered 2400 units from H2O Supplies Ltd (H2O). Delivery was to commence on 1 May 2016 in instalments delivered to Gardens.

Ponds had previously placed large orders from H2O and H2O had always delivered a high-quality product on time.

On 1 May 2016 delivery of the orders commenced directly to Gardens, with the goods bearing the Ponds branding. Gardens was very happy with these new water features. There was a high customer demand for this product and Gardens ordered another 2400 units, to be delivered on 1 July 2017.

Unfortunately, the pumps used in these water features were unsafe. This was due to a faulty switch component. This meant that the water feature could give electric shocks to anyone touching the water. Gardens issued a product recall of all units sold on 1 August 2016. Gardens refunded all customers their purchase costs plus additional amounts for time, traveling and inconvenience. Gardens also cancelled the order for the additional 2400 units placed on 1 July 2016.

Gardens wrote to Ponds demanding compensation not only for the amounts that it had paid its customers, but also for the damage to its reputation. Ponds notified H2O that it intended to sue them for any sums that it would have to pay Gardens. The contract between Gardens and Ponds made no special mention about the quality of the goods supplied. The contract between Ponds and H2O states that “No implied term about the quality of the goods supplied is given or applies between the parties.” H2O also informs Ponds that it will enter liquidation if Ponds seeks to make it a party to any legal action.

 

 

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