In Dalmare SpA v Union Maritime Ltd (The “Union Power”), the court was required to decide whether a term as to satisfactory quality was to be implied into an MOA on the Norwegian Saleform 1993.
The MOA provided at clause 11 that the vessel was to be “delivered and taken over as she was at the time of inspection, fair wear and tear excepted”. When a dispute arose, the buyers argued that a term as to satisfactory quality was to be implied into the MOA by way of s.14(2) of the Sale of Goods Act 1979 (the “Act”). The sellers argued that the provision of clause 11 that the vessel was to be sold “as she was” was inconsistent with implying such a term.
The arbitrators found in favour of the buyers, finding that a term as to satisfactory quality should be implied into the MOA.
Arguments on Appeal
On appeal, the sellers argued that the words “as she was” were similar to phrases such as “as is” or “as is, where is”, the settled meaning of which was that the buyer took the goods as he found them. There was no warranty or condition as to quality or fitness for purpose. This was inconsistent with the implied terms set out in the Act, and so excluded their application.
The buyers, on the other hand, argued that the implied terms applied unless the parties either expressly contracted out of them or provided for a clear alternative regime which was wholly inconsistent with the implied terms (for example, a whole agreement clause).
The Court’s Findings
The Court found in favour of the buyers, and agreed that the implied terms would apply unless the parties specifically contracted out of them. In this case, they had not done so.
As regards the phrases such as “as is” or “as is, where is”, the judge noted that the only comments on these words excluding the implied terms set out in the Act were made obiter. There was no binding decision on this point. Further, even if one meaning of the phrase “as she was” was to exclude the implied terms, the sellers could not establish that this was the only meaning the words were intended to have. This was fatal to the sellers’ case.
This is the first decision on the application of the Sale of Goods Act implied terms to the Norwegian Saleform 1993. The judge maintained the general position under English contractual law, i.e. that terms as to quality and fitness for purpose will be implied unless the parties clearly and specifically contract out of them.
Such contracting out must be clear and unequivocal. It was fatal to the sellers’ case that the words which they said excluded the implied terms (“as she was”) were capable of having more than one meaning. This emphasises the importance of clarity in drafting contract terms, and ensuring that the terms are precise in reflecting the intentions of the parties.