Save where agreed otherwise, goods supplied under contract must generally be both fit for purpose and of satisfactory quality. In one case, polymer seals used in the car manufacturing industry failed to match up to that standard and the company that made them was ordered to pay more than £11 million in damages.
The company supplied seals to a client who made and fitted axles for a major vehicle manufacturer. They were designed to prevent oil leaks and to minimise ingress of dirt and other external contaminants. Over a period of about two and a half years, their premature failure rate was many times higher than the industry norm. The client responded by launching proceedings alleging breach of contract.
In upholding the claim, the High Court found that seals provided over the relevant period were of unsatisfactory quality and not fit for the purpose for which they were commonly used. They also fell short of the durability requirement contained in Section 14(2B)(e) of the Sale of Goods Act 1979.
As a result of the seals’ premature failure, the client was obliged to reimburse the vehicle manufacturer for its repair costs. The company was ordered to pay the client £11,243,026 in damages and to indemnify it against any further losses arising from defective seals manufactured during the relevant period.