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Oscar Chess Ltd v Williams

[1956] EWCA Civ 5; [1957] 1 WLR 370; [1957] 1 All ER 325

Overview

Mrs Williams bought a second hand Morris car on the basis that it was a 1948 model. The registration book showed the car was first registered in 1948. The car was used by her son over the next 14 months. Her son then sold the car to Oscar Chess Ltd (via Mr Ladd, a salesman employed by Oscar Chess). Mr Williams described the car as a 1948 ten horse power Morris and showed Mr Ladd the registration book.

Several months later Oscar Chess discovered it was not a 1948 model but rather a 1939 model. The 1939 looked the same as the 1948 on the outside, but its value was substantially less and Oscar Chess would not have paid the sum they did for it had they known its true age. Williams honestly believed the car to be a 1948 model.

Liability turned on whether it was a term of the contract that the car was a 1948 model or a mere innocent representation.

The court held that it was an innocent misrepresentation only. The seller did intend (objectively) to promise that the car was a 1948 model. Importantly, Mr Williams had no personal knowledge of the year of the car, other than what was recorded in the registration book and Oscar Chess (through Mr Ladd) must have known this.

Morris car

 

Facts

Mrs Williams bought a second hand Morris car on the basis that it was a 1948 model. The registration book showed the car was first registered in 1948. The car was used by her son over the next 14 months. Her son then sold the car to Oscar Chess Ltd (via Mr Ladd, a salesman employed by Oscar Chess). Mr Williams described the car as a 1948 ten horse power Morris and showed Mr Ladd the registration book.

Several months later Oscar Chess discovered it was not a 1948 model but rather a 1939 model. The 1939 looked the same as the 1948 on the outside, but its value was substantially less and Oscar Chess would not have paid the sum they did for it had they known its true age. Williams honestly believed the car to be a 1948 model.

 

Held

Lord Justice Denning

After noting that the trial judge focused incorrectly on the distinction between whether there was a condition or warranty in this case, he continued:

... the crucial point in the case which is whether it was a term of the contract at all. The crucial question is: was it a binding promise or only an innocent misrepresentation? The technical distinction between a "condition" and a "warranty" is quite immaterial in the case, because it is far too late for the buyer to reject the car. He can at best only claim damages. The material distinction here is between a statement which is a term of the contract and a statement which is only an innocent misrepresentation. This distinction is best expressed by the ruling of Lord Holt, "Was it intended as a warranty or not?", using the word warranty there in its ordinary English meaning: because it gives the exact shade of meaning that is required. It is something to which a man must be taken to bind himself.

In applying Lord Holt's test, however, some misunderstanding has arisen by the use of the word "intended". It is sums times supposed that the tribunal must look into the minds of the parties to see what they themselves intended. That is a mistake.

Lord Moulton made it quite clear that "The intention of the parties can only be deduced from the totality of the evidence". The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice. ...

It is instructive to take some recent instances to show how the Courts have approached this question. When the seller states a fact which is or should be within his own knowledge and of which the buyer is ignorant, intending that the buyer should act on it and he does so, it is easy to infer a warranty. .... So also if he makes a promise about something which is or should be within his own control. .... But if the seller, when he states a fact, makes it clear that he has no knowledge of his own but has got his information elsewhere, and is merely passing it on, it is not so easy to imply a warranty. ...

[emphasis added]

Turning to this case:

... much depends on the precise words that were used. If the seller says "I believe it is a 1948 Morris. Here is the registration book to prove it," there is clearly no warranty. It is a statement of belief, not a contractual promise. But if the seller says "I guarantee that it is a 1948 Morris. This is borne out by the registration book, but you need not rely solely on that. I give you my own guarantee that it is," there is clearly a warranty. The seller is making himself contractually responsible, even though the registration book is wrong.

In this case much reliance was placed by the Judge on the fact that the buyer looked up Glass's Guide and paid £290 on the footing that it was a 1948 model: but that fact seems to me to be neutral. Both sides believed the car to have been made in 1948 and in that belief the buyer paid £290. That belief can be just as firmly based on the buyer's own inspection of the log book as on a contractual warranty by the seller.

Once that fact is put on one side, I ask myself: What is the proper inference from the known facts? It must have been obvious to both that the seller had himself no personal knowledge of the year when the car was made. He only became owner after a great number of changes. He must have been relying on the registration book. It is unlikely that such a person would warrant the year of manufacture. The most he would do would be to state his belief, and then produce the registration book in verification of it. In these circumstances the intelligent bystander would, I suggest, say that the seller did not intend to bind himself so as to warrant that it was a 1948 model. If the seller was asked to pledge himself to it, he would at once have said "I cannot do that. I have only the log-book to go by, the same as you".

... If an oral representation is afterwards recorded in writing, it is good evidence that it was intended as a warranty.

If it is not put into writing, it is evidence against a warranty being intended. But it is by no means decisive. There have been many cases where the Courts have found an oral warranty collateral to a written contract ... But when the purchase is not recorded in writing at all, it must not be supposed that every representation made in the course of the dealing is to be treated as a warranty. The question then is still: Was it intended as a warranty? ...

One final word: It seems to me clear that the motor dealers who bought the car relied on the year stated in the log-book. If they had wished to make sure of it, they could have checked it then and there, by taking the engine number and chassis number and writing to the makers. They did not do so at the time, but only eight months later. They are experts, and not having made that check at the time I do not think they should now be allowed to recover against the innocent seller who produced to them all the evidence he had, namely the registration book. ... The best course in all these cases would be to "shunt" the difference down the train of innocent sellers until you reached the rogue who perpetrated the fraud: but he can rarely be traced, or if he can, he rarely has the money to pay the damages. So you are left to decide between a number of innocent people who is to bear the loss. That can only be done by applying the law about representations and warranties as we know it; and that is what I have tried to do. If the rogue can be traced, he can be sued by whomsoever has suffered the loss: but if he cannot be traced, the loss must lie where it falls. It should not be inflicted on innocent sellers, who sold the car many months, perhaps many years before, and have forgotten all about it and have conducted their affairs on the basis that the transaction was concluded. Such a seller would not be able to recollect after all this length of time the exact words he used, such as, whether he said" I believe it is a 1948 model" , or "I warrant it is a 1948 model". The right course is to let the buyer set aside the transaction if he finds out the mistake quickly and comes promptly before other interests have irretrievably intervened, otherwise the loss must lie where it falls: and that is, I think, the course prescribed by law.

 

Lord Justice Hodson

Agreed that the question was whether the statement that the Morris car was a 1948 model was a term or a mere innocent representation.

I am of opinion that there was no evidence to support the conclusion that the statement that the Morris car was a 1948 car was a term of the contract. The registration book, showing that the car was first registered in 1948, was produced by the defendant to the plaintiff's representative, a motor salesman, who was familiar with the car having often had lifts in it, thought it looked line a 1948 car and checked up on the registration book.

The defendant was stating an opinion upon a matter of which he had no special knowledge or on which the buyer might be expected also to have an opinion and to exercise his judgment.

This is not a decisive test ... but it is a feature which he said may be a criterion of value in guiding a jury in coming to a decision whether or not a warranty was intended.

There is in my opinion nothing in this case to set against the criterion to which I have referred. That is to say, there is nothing to indicate that the statement as to the date of the car amounted to a promise or guarantee that the information given was accurate.

...

Lord Justice Morris (dissenting)

Lord Justice Morris did not believe the trial judge had misapplied any principle of law and therefore saw no reason to disturb his findings.

The only point taken on behalf of the defendant was that the statement that was made did not form a part of the contract. The learned Judge rejected this. He held that it was not only a term but an essential term. In my judgment he was correct. The statement that the car was a 1948 car was not a mere representation in respect of the subject matter of the contract: the statement was adopted as the foundation of the contract that they made.