Oscar Chess v Williams, the facts, reasoning and appeal

Keywords: oscar chess ltd v williams, oscar chess v williams misrepresentation, denning lj

Oscar Chess Ltd v Williams [1957] 1 ALL ER 325

1. What were the material facts of the case and the legal issues on which the appeal was based?

In June 1955, the defendant sold to the plaintiff, who were motor dealers, a second-hand Morris motor car for £290, this sum being credited to the defendant on the purchase of a new car through the dealers. The car sold to the dealers had been obtained by the defendant’s mother in 1954 under a hire-purchase contract, and was shown in the registration book to have been first registered in 1948. There had been five changes of ownership between 1948 and 1954. The defendant, who honestly believed that the car was a 1948 model, described it as such to the salesman who acted for the plaintiffs in the matter and showed the salesman the registration book. The salesman, who had frequently been given lifts in the car, also believed that it was a 1948 model, and the purchase price of £290 was calculated on this basis. In January 1956, the plaintiffs sent the chassis and engine numbers of the car to the manufacturers and were informed by them that the car was a 1939 model. If the plaintiffs had known at the time of the purchase that the car was a 1939 model, they would have paid only £175 for it. In an action brought by them against the defendant eight months after the sale the plaintiffs claimed the sum of £115 as damages for breach of warranty, either on the basis that it had been a condition,^[1] i.e. an essential term, of the contract that the car was a 1948 model or that there had been a collateral warranty that it was.

The judge at trial awarded the plaintiffs £115 in damages based on his finding that the defendant had breached an essential term of the contract, i.e. a condition, that the Morris car was a 1948 model. Consequently, the trial judge did not go on to consider the alternative claim on a warranty.

Upon appeal by the defendant, the crucial issue for the Court of Appeal was whether the defendant’s statement that the car was a 1948 model was a binding promise (i.e. a contractual term) or only an innocent misrepresentation. If it was an innocent misrepresentation, the respondent would not be entitled to any remedy.

2. What was the reasoning behind the trial judge’s decision to award damages to the plaintiffs?

At trial, the plaintiffs claimed the sum of £115 in damages from the defendant, representing the difference in value between a 1939 Morris car and a 1948 Morris car. The evidence submitted at trial to determine whether the defendant gave a binding promise to the salesman that the car was made in 1948 was limited. During examination-in-chief, the salesman stated: “He offered me a 1948 10 hp Morris in part exchange. He produced the registration book.” In cross-examination, he said: “I had often had lifts in the defendant’s car. I thought it looked like a 1948 model. I checked up in the registration book.” The salesman’s evidence was accepted, aided by the fact that the defendant did not go into the witness-box to contradict it. On those facts alone, counsel for the plaintiffs submitted that the defendant’s representation that the car was a 1948 model was an essential term of the contract, i.e. a condition. The trial judge agreed with this and stated that defendant had promised that the car was a 1948 car and that there was a breach of this promise. He said that the allowance of £290 was made by the salesman “on the assumption that the Morris was a 1948 model”, and that “…this assumption was fundamental to the contract, a condition which, if not satisfied, would have caused him to rescind the contract if he had known it to be unsatisfied before the property in the Morris car passed to his principles.” In short, one of the terms of the deal was that the car was guaranteed to be a 1948 model. Breach of this promise would entitle the dealer to damages. Based on this finding, the trial judge awarded £115 in damages to the plaintiffs.

3. Why did the Court of Appeal overrule the trial judge’s decision and what was the difference in approach adopted by the Court of Appeal?

The Court of Appeal refused to get bogged down in a technical differential analysis of the legal definitions of “condition” and “warranty”, as the trial judge had done, because it was far too late for the buyer to reject the car. He could only claim damages at best. Indeed, in the Court’s leading judgment, Denning LJ stated that the trial judge was so concerned with the legal definitions of “condition” and “warranty” that he failed to address the crucial issue of whether the defendant’s statement was a term of the contract at all. To get damages, it was necessary to show that the description of the car was a promise or term of the contract. Denning LJ used slightly different language. He used the word “warranty” but he explained that he was not using the word in its technical legal sense but, instead, was using it in its popular sense as one word to describe a promise. As he pointed out, the crucial question in this case was: “was it a binding promise [i.e. a term of the contract] or only an innocent misrepresentation?” If it was only an innocent misrepresentation, then the dealer would not be entitled to any remedy in the circumstances of this case.

This then leads to the question: how do you know if it was a promise? Denning LJ stated that whether the appellant’s statement was intended to be a promise (i.e. a contractual term) could only be addressed by taking into account all the evidence of the case and the conduct of the parties throughout their dealings.^[2] He went on to state that the objective test for determining a promise is by applying the standard of the ‘intelligent bystander’ and, based on this test, he concluded that the statement by the appellant as to the age of the car was not intended as a promise. After all, given that the appellant only became the owner after several changes in ownership, he must have been relying on what was stated in the registration book. It is unlikely that such a person would warrant the year of manufacture. The most that he would do would be to state his belief, and then produce the registration book in verification of it. In these circumstances, according to Lord Denning, the intelligent bystander would say that the seller did not intend to bind himself so as to warrant that the car was a 1948 model. The most he would do would be to state his belief.

4. What did the Court of Appeal say about the trial judge’s application of the earlier decisions in Heilbut² and Routledge^[3]to the present case?

In finding in favour of the appellant, Denning LJ made reference to the case of Heilbut in which the House of Lords used the word “warranty” in its ordinary meaning of a binding promise. He stressed that, in Heilbut, Lord Moulton made it clear that “The intention of the parties can only be deduced from the totality of the evidence…” In other words, to determine whether a statement was intended as a contractual warranty, it is necessary to evaluate the overall conduct of the parties, not just their thoughts. However, the trial judge did not adopt this approach and distinguished Heilbut and Routledge on the basis that, in those cases, there was a written memorandum of the contract, before which words were used by one party inducing the other party to enter into the contract. Denning LJ stated that there was no need to distinguish between written and oral statements in the present case because the purchase was not recorded in writing at all but, instead, it was necessary to look at the overall conduct of the parties in order to ascertain intention.

Hodson LJ, in accordance with Denning LJ, felt that the Routledge decision should not be distinguished from the present case because, in his opinion, the court in the Routledge case did not base its decision on the distinction between words used before the conclusion of the contract and words used at the time of the contract. He felt that this distinction was a fine point and had no bearing in the current case. Instead, Hodson LJ concurred with Denning LJ and stated that it was necessary to follow the principle in Heilbut and assess the overall conduct of the parties in order to ascertain contractual intention.

Morris LJ (dissenting), on the other hand, supported the reasoning of the trial judge and felt that the judge was correct to distinguish Routledge from the current case. He specified three grounds for the distinction: (i) in the present case there was a statement made at the time of the transaction; (ii) there was no written contract; and (iii) although there was no contract, there was an invoice addressed to the appellant which expressly described the car as a “1948 Morris 10 Saloon”. He felt that the fact that the invoice specifically referred to the year 1948 was sufficient evidence that it was intended to be a contractual term.

5. What is the significance of the respective parties’ special knowledge of the subject-matter of the contract? How has this been applied in this and subsequent cases?

Another influential factor in this case was that the person making the statement (i.e. the appellant) was a non-expert when compared with the dealer who was the recipient of the statement and, presumably, an expert. According to Denning LJ, the respondents, rather than simply relying on the year stated in the log-book, could quite easily have checked it at the time of sale by taking the engine number and chassis number and writing to the manufacturers. They only did so eight months after the sale. Given that the respondents were experts, Denning LJ felt that this delay in making the check could not be excused, particularly because the innocent appellant produced to them all the evidence which he had (namely, the registration book). The appellant, as a private seller, had no special knowledge and had relied on the car’s registration book for his belief. The respondents, as experts, were in a position to discover the truth of the statement prior to contract. Hodson LJ agreed with this point and stated that the appellant was stating an opinion on a matter of which he had no special knowledge, whereas the respondent could have been expected to have an opinion and to exercise its judgment. This tends to support the view that the non-expert would be unlikely to be promising something which was in the other party’s area of expertise, and therefore strengthens the proposition that the appellant’s statement was indeed a representation and not a contractual term.

The significance of a parties “special knowledge” was considered by the Court of Appeal in the subsequent case of Dick Bentley Productions and Another v Harold Smith (Motors) Ltd.^[4] In that case, a car dealer stated that a car had an engine which had done only 20,000 miles. This was in fact untrue. The buyer sought damages alleging breach of contract. However, in that instance, the statement was treated as a term of the contract. The apparent distinction between the Dick Bentley case and the Oscar Chess case is the status of the person making the statement. A private seller did not have the special knowledge which indicated an intention that the statement be treated as a contractually binding promise, but a car dealer did. This distinction led Lord Denning MR to suggest in Dick Bentley that the presence of fault was the basis for the distinction. However, it seems wrong to suggest that fault is the only test, and arguably what Lord Denning was stating was simply that the obligation broken was an obligation to exercise reasonable care and skill. The true test ought therefore to be that the dealer was in a better position to discover the truth and therefore impliedly took personal responsibility for the truth of statements made.

6. Why did dissenting Judge Morris LJ disagree with the conclusion of the majority of the Court of Appeal?

Morris LJ disagreed with the findings of Denning LJ and Hodson LJ and felt that the appellant’s statement that the car was a 1948 model was a fundamental term of the contract, i.e. a contractual condition. What persuaded Lord Morris was that the car was described in the invoice specifically as a 1948 Morris. The dealer did not get any such thing and so, according to Lord Morris, there was a breach. He arrived at this conclusion based on his assertion that the respondent’s promise to pay the appellant £290 for the car (a figure arrived at by reference to the value of 1948 cars) was the consequence (i.e. a counterpart) of a term of the contract that the particular car was a 1948 model. Thus, Morris LJ felt that the application of the so-called ‘importance attached’ test rendered the appellant’s statement a term of the contract for sale as opposed to a mere representation. In other words, Morris LJ believed that the appellant’s statement related to a vitally important matter: it described the subject-matter of the contract then being made, and directed the parties to, and was the basis of, their agreement as to the price to be paid or credited to the respondent. He made reference to the words used by Scott LJ in Couchman v Hill^[5] and stated that, in his opinion, the appellant’s statement was “an item in [the] description” of what was being sold and that it constituted a substantial ingredient in the identity of the thing sold.

Whereas Denning LJ felt that the trial judge was unnecessarily bogged down with the technical legal translation of “condition” and “warranty”, Morris LJ stressed that he saw no need to depart from the original verdict because he could not see that the trial judge in any way misdirected himself or misapplied any principle of law.

Bibliography

Cases Consulted

• Oscar Chess Ltd v Williams [1957] 1 ALL ER 325 (CA);
• Dick Bentley Productions and Another v Harold Smith (Motors) Ltd [1965] 2 All ER 65 (CA);
• Couchman v Hill [1947] 1 All ER 103 (KB);
• Heilbut, Symons & Co v Buckleton [1913] AC 30 (HL);
• Routledge v McKay [1954] 1 All ER 855 (CA).

Legislation Consulted

• Sale of Goods Act 1893 (22 Halsbury’s Statutes (2^nd Edition) 991).

Text Consulted

• Poole, J. – Textbook on Contract Law (6^th Edition), Blackstone Press (2001), pp155-6;
• Poole, J. – Casebook on Contract (4^th Edition), Blackstone Press (1999), pp249 and 252-4.

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Footnotes

^[1] Under section 11 of the Sale of Goods Act 1893 (22 Halsbury’s Statutes (2^nd Edition) 991), the plaintiffs would have been entitled to treat such a condition as a contractual warranty, breach of which would give rise to an action for damages.

^[2] Heilbut, Symons & Co v Buckleton [1913] AC 30 (HL).

^[3] [1954] 1 All ER 855 (CA).

^[4] [1965] 2 All ER 65 (CA).

^[5] [1947] 1 All ER 103 (KB).