Action No.100 of 1992
27th March, 1995
G. D. MEERABUX, P.J.
Williams for the Plaintiff.
Mr. E. Courtenay for the Defendant.
for $63,000.00 as liquidated damages against the defendant
for breach of an agreement for supply of compact disc carrier
cases - Cases found to be defective by eventual purchaser
- Sale of Goods Act Chapter 214 - Nature of sale - Ccontract
for resale of goods - Contract sale by sample - Time and
place for examination of goods by buyer - Duty to return
rejected goods - No obligation on buyer to return rejected
bags - defects in carrier bags - Breach of condition of
agreement - Measure of damages - Section 54(1)(b)(2) and
(3) of Sale of Goods Act - Judgment for the plaintiff -
Damages of $63,000. awarded - Costs to be taxed or agreed.
U D G M E N T
action the plaintiff claims the sum of $63,000.00 BZE. as
liquidated damages against the defendant for breach of an
agreement made between the plaintiff and the defendant under
which the defendant was to manufacture and supply to the plaintiff
for resale a quantity of compact disc carrier cases.
Castillo managing director of the plaintiff company testified
that he made an agreement with the defendant company to manufacture
36,000 units of compact disc carry cases for Dynasound Organizer
a company in the U.S.A. in accordance with a sample unit which
he had shown to them for a price of $1.00 U.S. per unit. It
was also agreed that all materials would be provided by Dynasound.
Dynasound had agreed to pay him $1.50 U.S. per unit and the
profit would have been $1.00 BZ. on each unit. The defendants
having assured him of the quality and standard of work manufactured
10 compact disc carrier cases which were approved by Dynasound.
The defendants had previously manufactured satisfactorily
4,000 units and he was assured of the same quality and standard
of workmanship of the 36,000 units; 20,000 units to be labelled
Realistic and 16,000 units to be labelled Dynasound.
had their own inspection system and he did not necessarily
inspect the finished units before shipping, although he made
a physical random inspection. The defendants manufactured
the 36,000 units which he shipped overseas to Dynasound and
paid the defendants $36,000.00 U.S.
Dynasound faxed him letters dated 18/9/91 and 29/9/91 intimating
their anger with the poor quality of the units in respect
of those with the Realistic labels pointing out the following
some had pleats;
(b) some of the front pouches were twisted;
some of the zippers were not sewn in properly;
some had loose stitches;
some had bottom hole problems.
rejected these 20,000 units with the Realistic Labels but
accepted the 16,000 units with the Dynasound Labels. Two thousand
five hundred of the rejected cases were returned to Belize,
the plaintiff and defendants agreeing to share the costs for
the return shipment. The defendants inspected the units, accepted
the units as their products, verified that the units were
of poor quality, carried out the repairs at their expense
and he shipped the units back to the U.S.A. However, in respect
of the remainder of the units (17,000) the defendants and
the plaintiffs could not agree on payment of the freight for
return of these units. Dynasound would not agree to pay the
return costs. The defendants were willing to repair these
units but the problem was getting them back to Belize, which
he failed to do inspite of many efforts on his part.
cross-examination the witness stated that the sample unit
was prepared by the defendant and approved by him and Dynasound
which sample was varied by an oral agreement in respect of
the button hole. That the manufacture of these units were
partially by sample and partially by description.
that there were two sales, one for 4,000 units and the other
for 36,000 units, that the sample units were in respect of
the first sale for 4,000 units and that no samples were prepared
in respect of the 2nd sale for 36,000 units but that he told
the defendants to make the 36,000 units in the same way
in which the 1st order was made and that it was a sale
by description and not by sample. The units were produced
in the defendants' Ladyville factory as well as in the Orange
Walk factory. He admitted that he visited the defendants'
factory in Ladyville on Fridays and that no one prevented
him from inspecting the cases of units.
that he has 15 years experience in the garment Industry and
that random selections are made of the finished products and
that if random selection are inspected and approved the bulk
is basically accepted. He admitted that on each occasion when
he visited the factory at Ladyville he went to inspect the
final product he had a fair opportunity to inspect the articles.
He stated that "it was the practice of the trade that
a party accepts goods when he act in relationship to those
goods. However, he denied that he ever inspected the goods
at the Orange Walk factory. Dynasound was his customer not
Radio Shack but the goods were shipped to Dynasound who shipped
them to various clients including Radio Shack. He is unable
to say what happened to the 17,000 bags which were never returned
to Belize and he cannot prove that they were rejected or "what
was wrong with them". However, the goods which
he inspected were of merchantable quality. The bags
that were ordered were based on the sample and as far
as he was concerned this was a sale by sample. "It
is virtually impossible to check everything 100% so you make
a random selection and would hope that that random selection
reflects the quality of the lot. There is still a final inspection
by the customer - Dynasound or which customer I am selling
Shen testified that he worked for the defendant company during
1990 - 1993. He knew Mr. Castillo represented the plaintiff
company as Executive Secretary and Sales Manager and placed
orders in April 1991 with the defendant for 4,000 bags which
order was carried out satisfactorily. Mr. Castillo placed
a second order around June 1991 for sewing 40,000 units. Castillo
was to supply all the materials and the defendant Company
was responsible for sewing the units at a price of $1.00 U.S.
agreement in relation to the 2nd order was once the bags
were sewn and finished Mr. Castillo would come to our factory
and carry out an inspection over the bags to decide if these
bags are good for shipment or not and if he approves for
the shipment we would issue an invoice to him to let
him know the amount he should pay. Then he would bring
back the equivalent cash to us and take the goods away.
Mr. Castillo usually come into our factory on a weekly basis
and he would inspect these finished bags in the inspection
section. He did the inspection by picking at random in my
Mr. Castillo rejecting some bags which problem the company
corrected. He admits that some of the labels to be placed
on the bags were "Realistic" and "Dynasound".
Some of the bags were prepared in the Ladyville factory and
others in the Orange Walk branch. The bags produced in Orange
Walk were sent to Ladyville in bulk for Mr. Castillo to inspect
and to give OK for shipment. He recalled Mr. Castillo inspecting
the bags from the Orange Walk branch and shipping them out.
1991 Mr. Castillo complained that his customer had rejected
some bags as not being properly sewn. Two thousand five hundred
were returned to Belize. On inspection defects were discovered,
corrected and returned back to Mr. Castillo. The defendants
paid part of the freight.
further complained about some 20,000 units had similar defects
and wanted the defendant company to pay the freight for their
return to Belize but the plaintiff and the defendant did not
pay the freight and he never saw this 20,000 units again in
he saw the bags before they were shipped and that he compared
them with the sample provided by Mr. Castillo and that
the "finished bags were as per the sample".
cross-examination he admitted that he "compared the finished
bags with the sample because that is the regular procedure.
I was the sales manager and I have to know what is going out.
I know that the bags had to be like the sample. I got the
sample from Mr. Castillo. The 2nd order I did not consider
to be a re-order of the 1st order. The 1st order was for some
small bags and big bags. The 2nd order was for some small
that the defendants agreed to pay "one half of the freight
of the bags to Belize before seeing any of the defective bags"
but this was not because we were accepting that we were liable
for them. It was partly a good will gesture".
he signed the Invoices and Customs entry for the bags shipped
to the U.S.A. and that he only wrote the words "bags
on my invoices" but that Mr. Castillo prepared
these Invoices and Entries and he denied that Mr. Castillo
informed him that the bags were "compact disc carrier
bags" but when shown Invoice (Exh. F. S. 1) he
admitted he saw his signature and description of the product
as "Compact Disc Carrier Case".
order placed by Mr. Castillo all the bags had the label "Made
in Belize" but he admitted he did not check the bags
individually to see if they all had this label. He admits
that one of the problems was the defective button hole which
was closed and not opened as on the sample. He cannot recall
if the sample bag was Exh. M. C. 2 (bag).
that when he dealt with Mr. Castillo in 1991 he had only been
in the garment business for 2 1/2 years.
random checks is the practice but states that if you do random
checks and find the bulk defective it was not the practice
to say "by words" that they are defective.
Because you have not seen the approximately 17,000 units
you would not accept that they are not defective.
is not the reason.
Castillo had brought the bags back to me and I go through
them and find the bulk to be defective and they were my
goods I would be prepared to repair them"
paid 50% for the costs of the return of the 2, 500 units but
the defendant was not prepared to pay for the return of the
balance. It was not his responsibility to bring the units
back. He admitted he knew that Mr. Castillo was selling
the units to someone else in the U.S.A.
of the defendant company in Ladyville and Orange Walk had
that he told Mr. Castillo that "we can produce the
bags in the kind of quality that he requested". He
stated that the complaint was made about 3 months after they
as a fact that there is no dispute that the plaintiffs purchased
36,000 compact disc carry cases from the defendants at a price
of $1.00 U.S. per case.
find as a fact that the plaintiff -
made random checks of some finished cases; although the
defendant had their own inspection unit;
accepted the 36,000 finished cases;
paid for the said 36,000 cases; and
resold the cases to Dynasound in the U.S.A.
find as a fact that some 2,500 units of the cases were rejected
by Dynasound and returned to Belize where they were inspected
by the defendants and the necessary repairs carried out at
the defendant's expense, the freight for such transportation
by agreement shared by both parties to this action.
The lst issue I have to decide is what was the nature of the
sale, e.g. -
a contract of sale for future goods;
a contract of bale subject to a warranty;
a contract for resale to a third party.
of the sale is quite important to enable me to decide what
relevant portion of the Sales of Goods Act or other law is
applicable to this case.
I find from a careful perusal of the evidence that the defendants
knew that the compact disc carrier cases were to be sold to
Dynasound a company in the U.S.A. In this regard I believe
and accept the evidence of Mr. Castillo.
Mr. Shen's evidence that if Mr. Castillo having inspected
the bags -
he approves for the shipment we would issue an Invoice
to him to let him know the amount he should pay",
this finding of fact that the defendant company knew that
the bags were to be sold to Dynasound.
confirms in his evidence that he not only signed the said
Invoices but he wrote the word bags on the invoice. He denied
he wrote the words "Compact Disc Carrier Case".
A careful perusal of Exh. F.S. (Invoice) reveals
that the defendants actually made out the Invoice to Dynasound
Organizers Inc. of the U.S.A.
find that the evidence is overwhelming that the defendants
knew that the goods were for resale to this U.S. company
and therefore the contract was a contract for the resale of
goods to Dynasound.
2nd issue I have to decide is whether the agreement between
the parties to make these bags was a contract sale by sample
or by description or both.
evidence was that a sample of the carrier bag was prepared
by the defendants and approved by him and Dynasound which
was varied orally by both parties in respect of the button
further testified that the 1st sale of 4,000 units were made
in accordance with this approved sample and that the 2nd sale
of 36,000 units were to be made in the same way as the 1st
order and that this was a sale by description.
evidence in this regard was that -
compared the finished bags with the sample because that
is the regular procedure. I was the Sales Manager and had
to know what is going out. I knew that the bags had to be
like the sample I got from Mr. Castillo. The 2nd order I
did not consider to be a re-order of the 1st order. The
2nd order was for some small bags".
find that since the bags were for resale in the U.S.A. to
Dynasound it followed that Dynasound had to approve the sample.
find and believe Mr. Castillo's evidence that the 1st order
4, 000 bags were to be made similar to the approved sample
bag, which fact is admitted by Mr. Shen, and that the 2nd
order for 36,000 were to be made in the same manner as the
1st order for 4,000 bags.
find that the compact disc carrier bags were made from a sample
agreed by both parties and approved by Dynasound.
The third issue I have to decide is when is the time and place
for examination of the goods by the buyer-
Laws 4th Ed. Vol. 41 para. 791 p. 707 states as follows -
Time and place of examination. The time and place of
delivery is prima facie the time and place for the examination
of the goods by the buyer, but the circumstances of the
case may indicate some other place and time, especially
where the goods contain a latent defect not discoverable
by ordinary diligence at the place of delivery. In the last
case an examination of the goods at the place of delivery
is not binding upon the buyer, and he may, on a subsequent
inspection, reject the goods if they are not in conformity
with the contract. Where a buyer is to the knowledge
of the seller purchasing the goods for resale to an ultimate
buyer, the inspection is postponed, if the place at which
delivery to the immediate buyer takes place is unsuitable
for inspection or the nature or packing of the goods makes
inspection there unreasonable.
facie rule does not, however, apply to c.i.f. and f.o.b. contracts
where mercantile usage has imported a different rule".
reveals that Mr. Castillo made random samples of the finished
bags at the Ladyville factory but never inspected the finished
bags at the Orange Walk branch. He further testified that
when he visited the Ladyville factory on Fridays the defendants
would call the Orange Walk branch to inquire how many cases
would be sent for shipment and as a result he would prepare
the document and collect the bags for shipment. When he picked
up the bags they were in sealed cartons.
and accept the plaintiff's evidence in this regard. I find
that in respect of the bags produced at the defendants' Orange
Walk branch these finished bags were in sealed cartons when
the plaintiff went to collect them for shipment which made
the inspection unreasonable at the Ladyville factory. If Mr.
Castillo was to conduct random checks of the samples from
the Orange Walk branch how could he do so when the finished
items were in sealed cartons ready for shipment.
find that it was not unreasoanble for the inspection to be
postponed until the finished goods arrived at Dynasound the
ultimate buyers in the U.S.A. where inspection revealed various
of the bags produced at the Ladyville factory I find that
Mr. Castillo made random selections of the finished bags to
ascertain if they reflect the quality of the entire order.
I also find that Mr. Shen the Manager of the defendant Company
admitted that he saw the bags before they were shipped and
compared them with the sample as part of the regular procedure
because "the bags had to be like the sample".
it astonishing that inspite of these checks the finished bags
were rejected by Dynasound as being of poor quality and as
not conforming to the approved sample.
find that these bags contained latent defects not discoverable
by ordinary diligence at the place of delivery in Belize to
Mr. Castillo the immediate buyer.
find that although "the time and place of delivery is
prima facie the time and place for the examination of the
goods by the buyer" my finding of latent defects in the
said bags and further that both parties knew that the said
bags were for resale to Dynasound are circumstances which
indicate that the examination of the said bags be carried
out by Dynasound in the U.S.A.
4th issue I have to decide is whether Dynasound the ultimate
buyers having rejected the 20,000 carrier bags as being of
poor quality and not conforming to the approved sample had
a duty to return the rejected goods.
Laws 4th Ed. Vol. 41 para. 795 states as follows -
of rejected goods unnecessary.
otherwise agreed, where goods are delivered to the buyer
and he refuses to accept them, having the right to do so,
he is not bound to return them to the seller, but it is
sufficient if he intimates to the seller that he refuses
to accept them".
as a fact that 2,500 carrier bags were returned to the defendants
who rectified the said bags at their own expenses. Both parties
shared in the freight expenses incurred. However, the remainder
of the bags, 17,000, were never returned because both parties
to this action were unable to foot the financial freight costs
that there is no agreement before me that the carrier bags
were to be returned if rejected for poor quality.
find that Dynasound having rejected the bags because of their
poor quality had no right to return them to the defendants
and it was sufficient for them to intimate this fact to Mr.
Castillo which they did by E. Fax Exhs. M.C. 5 and 6.
I also find that Mr. Castillo showed these Fax messages to
the defendants who became aware of the rejection of the bags.
find that Dynasound having informed both parties of the rejection
was under no obligation to return the bags to Belize.
5th issue I have to decide is whether the fact that the 17,000
bags were not returned to Belize for inspection of the defects
is proof that they were defective.
issue I have to decide is whether the failure to return the
17,000 bags for inspection for defects is proof that were
of proof required in civil cases is generally expressed as
proof on the balance of probabilities. Denning J. as he then
was in Miller v. Ministry of Pensions  2 All E.R.
372, 373-374 puts it thus succinctly -
the evidence is such that the tribunal can say 'we think
it more probable than not, the burden is discharged, but
if the probabilities are equal it is not".
that a careful perusal of Exhs. M.C. 5 and 6 discloses grave
defects and disappointment by Dynasound when they inspected
the finished bags in the U.S.A.
also considered that the entire 2,500 of the rejected bags
returned to Belize and were found to be defective by both
parties in Belize - an unusually high percentage of the total
quantity inspite of the random sample checks by Mr. Castillo
and Mr. Shen.
find that the remainder of the bags were not returned to Belize
because both parties could not bare the costs or were unwilling
to do so.
find that on a balance of probabilities that the remaining
17,500 bags were also defective. I find that these defects
in the carrier bags amounted to a breach of the condition
of the agreement.
sixth issue I have to decide is what is the measure of damages
for breach of the agreement between the parties in this action.
In deciding this issue I am guided by Sec. 54(1)(b) (2) and
(3) of the Sale of Goods Act Chapter 214 which states -
(1) Where there is a breach of warranty by the seller, or
where the buyer elects, or is compelled, to treat any breach
of a condition on the part of a seller as a breach of warranty,
the buyer is not by reason only of such breach of warranty
entitled to reject the goods, but he may:-
... ; or
maintain an action aqainst the seller for damages for the
breach of warranty.
measure of damages for breach of warranty is the estimated
loss directly and naturally resulting, in the ordinary course
of events, from the breach of warranty".
The evidence reveals and I so find as a fact that the plaintiff
paid the defendants $1.00 U.S. for the manufacture of each
carrier bag - 20,000 bags for a total of $20,000.00 U.S.
or $40,000.00 BZ.
The evidence further reveals and I so find as a fact the
plaintiff told the defendants that he was selling each of
the completed carrier bags to Dynasound at $1.50 U.S. each
representing a profit of $10,000.00 U.S. or $20,000.00 BZ.
The evidence further reveals which I find as a fact that
both parties shared the costs of $3,000.00 U.S. for the
return to Belize of the rejected 2,500 carrier bags - $1,500.00
U.S. or $3,000.00 BZ.
estimate and find as a fact that the loss to the plaintiff
"directly and naturally resulting in the ordinary cause
of events from the breach of warranty" to be $31,500.00
U.S. or $63,000.00 BZ.
give judgment for the plaintiff for $63,000.00 BZ. as damages
for breach of the agreement with the defendant with costs
to be taxed or agreed.