Carleton v. Lombard, Ayres & Co.

The plaintiffs concede that the oil delivered by the defendants was of the kind and quality called for by the written contract, and possessed the qualities and sustained the tests required thereby, but they insist that there were latent defects in the article, causing the damages recovered by Graham & Co. They assert that the law implies a warranty by manufacturers that their products are free from latent defects caused by imperfect or unskillful workmanship, which is collateral to the contract of sale. Originally, the word “warranty,” as used in connection with sales, was applied solely to contracts for the sale of existing articles, identified at the time of sale, the title to which passes under the contract; and the obligation arising from a warranty was held to be a purely collateral undertaking, which survived the delivery of, and the payment for, the article sold. The nature of a warranty is clearly stated in Cutter v. Powell, 2 Smith, Lead. Cas. (6th Ed.) 27:

“A warranty, properly so called, can only exist where the subject-matter of the sale is ascertained and existing, so as to be capable of being inspected, at the time of the contract, and is collateral engagement that the specific thing so sold possesses certain qualities; but, the property passing by the contract of sale, a breach of the warranty cannot entitle the vendee to rescind the contract, and revest the property in the vendor without his consent. * * * But where the subject-matter of the sale is not in existence, or not ascertained, at the time of the contract," an engagement that it shall, when existing or ascertained, possess certain qualities, is not a mere warranty, but a condition, the performance of which is precedent to any obligation upon the vendee under the contract, because the existence of these qualities, being part of the description of the thing sold, becomes essential to its identity, and the vendee cannot be obliged to receive and pay for a thing differ■ent from that for which he contracted.”

But in tile modern cases the word lias been used as synonymous with stipulations in executory contracts prescribing the qualities of the goods to be sold, the title to which is to be vested in the vendee at a future day. In the case of executed sales, the warranty is a ■collateral undertaking, but in the case of executory sales the agreement to deliver articles of a specified standard of excellence is not a collateral undertaking, but is part of the contract to sell and deliver. Warranties are express or implied. An express warranty arises when the vendor makes an affirmation in respect to the quality of the goods sold. An implied warranty arises: (1) When fin examination of the goods is impracticable, a warranty will be implied, that they are merchantable. (2) On an executory contract for the sale of goods to be manufactured or procured for a particular purpose or use, a warranty will be implied, that they are fitted for such purpose or use. (3) A warranty is implied that there are no latent defects, in case the seller, being a manufacturer or producer, might have provided against the existence of the defects. There are other cases in which warranties áre implied, but they are not germane to the case at bar. The contract is full and explicit. By it, the vendors were bound to deliver a specified quantity and kind of oil, having prescribed qualities, and it makes no difference in this ease whether the stipulations relating to quality be called “warranties” or “conditions,” for they have all been performed by the

The discussion of this case might well be ended at this point, but there are rulings excepted to which are fatal to the judgment. This contract was, by its terms, “subject to the rules of the New York Produce Exchange,” of which association the contracting parties are members. These rules must be taken as part of the contract, and given the same effect as though incorporated therein. Rule 46 provides:

“When goods are delivered to vessel by buyers’ orders, the acceptance of them by buyers’ inspector shall be an acknowledgment that the goods are in accordance with the contract.”

Rule 59, quoted in the statement of facts, provides that the certificate of the inspector “that the oil is in conformity with the contract shall be accepted.” In this case the goods were delivered to the Corby by the buyers’ orders, and they were accepted by the buyers’ inspector, which is an acknowledgment that the goods were in accordance with the contract. The inspection and acceptance must be deemed to be an assent that the goods comply with all of the conditions of the contract, whether those conditions are expressed or implied. When a manufacturer enters into a contract to make and deliver specified articles, which are to be identified and inspected by the vendee, with the right of rejection in case they do not conform to the contract, a right of action for defects in the article does not arise, unless the defects could not have been discovered by the ordinary tests known to the trade, or unless there is a warranty or stipulation in regard to the quality which is manifestly intended by the parties should survive acceptance. Studer v. Bleistein, 115 N. Y. 316 , 22 N.

The evidence given by the plaintiffs tended to show that the defects complained of could have been easily ascertained at the time when, and at the place where, the oil was delivered to them. The defendant offered to show that these defects could have been ascertained at the time and place of delivery by well-known tests. This offer was excluded, and an exception taken. Neither express nor implied warranties cover known defects. When a manufactured article is tendered in performance of a contract of sale under which it is the duty of the vendee to inspect and accept or reject, the vendor does not remain liable for patent defects, or defects discoverable by the application of known tests, unless he so agrees. Milk Pan Co. v. Remington, 41 Hun, 218 ; Studer v. Bleistein, 48 Hun, 577 , 1 N. Y. Supp. 190 ; affirmed, 115 N. Y. 316 , 22 N. E. Rep. 243 . The dissenting opinion in the Milk Pan Co.’s Case was placed on the ground that it was conceded that, when the pans were inspected and delivered, the parties to the contract knew of no test by which the defect subsequently developed by actual use could have been discovered. In that case the defendant’s expert testified that he did not know of any test which would have determined whether the enameling was well done or not. In that case the referee found that the test by lactic acid was unknown to both parties at the time of inspection, was not then in practical use, and that there was no evidence that it was then known, except to scientists. The judgment roll in the action brought by Graham & Co. was neither proof nor evidence on this question, because no such issue was involved in that action. The oil was not sold to Graham & Co. subject to the right and duty on their part to inspect or reject, nor did they purchase it subject to the rules of the New York Exchange. The plaintiffs in this action allege in their complaint that it was ruled on the trial between Graham & Co. and Carleton & Moffatt “that the only question for determination in said case was whether or not said oil, at the time of its shipment on board the Corby at Bayonne, was merchantable oil, of good quality, and in good condition.” In the face of this allegation, it cannot be successfully contended that the former judgment was. evidence bearing upon the question whether the defects in the oil could have been discovered by inspection.

The view we have taken of this case renders it unnecessary for us to determine whether rule 46, which was made part of the contract, is an arbitration clause. The judgment should be reversed, and a new trial granted, with costs to the appellant, to abide the-event. All concur.