First Principles of Business Law

4. Enforcement of terms implied into sale contracts

4.2. Remedies provided by the sale of goods legislation 

Read the facts and the question and then choose the best answer.

A, a retailer, agrees to pay $50 each for 200 fashion bags to be made by B, a manufacturer. Under the contract A has the right to inspect the bags during manufacture. When the bags are being made, A goes to B's factory. She finds the quality of the stitching so poor that the bags will not be saleable as fashion wear. A says this is a breach of the condition regarding merchantable quality implied by the sale of goods legislation and tells B she will not accept delivery of any bags or pay for them.

Assuming A is correct in saying that there has been a breach of the implied condition regarding merchantable quality, is A entitled to reject the bags?

(a) No. In the circumstances of this case, A must still accept the bags but may claim damages for any loss arising from the breach.

(b) Yes. In the circumstances of this case, A is entitled to reject the goods and may also claim damages for any loss arising from the breach.