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Lloyd's Maritime and Commercial Law Quarterly


Djakhongir Saidov *

257. Bajaj Healthcare Ltd v Fine Organics Ltd 1

Unidentified substance in the goods—breach of express terms—Sale of Goods Act 1979 (SGA), ss 14(2) and (3)—satisfactory quality—fitness for purpose—reliance on seller’s skill and judgement—buyer’s damages
The claimant, Bajaj Healthcare Ltd (BHL), based in India, manufactured 2-Amino-4-Hydroxyacetophenone (AHA) for the defendant, Fine Organics Ltd (FOL). FOL used the AHA as an intermediate stage in the process of manufacturing a chemical known as Octopamine. FOL’s customer for Octopamine was a German company (Evonik). The first purchase orders were issued by FOL on 12 September 2011 (for 1,500kg) for the trial factory production which was to be manufactured in accordance with the First Specification. The purchase orders for the full commercial quantities of AHA (30MT) were issued on 2 February 2012 pursuant to the Amended Specification (to which they referred). There were amended purchase orders for 2014 AHA, issued on 6 and 13 December 2013, to include the words “must be manufactured at same site as previous” and changing “same quality” to “similar quality”. BHL claimed for its unpaid invoices totalling US$513,946.23 plus interest. FOL refused to pay these invoices and counterclaimed for damages on the basis that the AHA supplied to it in 2014 was contaminated by an unidentified substance (referred to as the “Green Contaminant”), which caused loss to FOL.
Decision: Claim dismissed; counterclaimed allowed.
Held: (1) The express terms of the contract were contained in the purchase orders, which incorporated the terms set out in the Amended Specification. (2) The purchase orders required BHL to supply AHA that had a similar quality and impurity profile as that supplied by it in 2012 and 2013 and this was not limited to the Amended Specification. (3) The Green Contaminant clearly should not have been in the AHA supplied in 2014 but none of the tests in the Amended Specification could have picked up its presence; it does not come down to the commercial basis of the contract between the parties and the expertise being all on FOL’s side. (4) Considering that the terms of the purchase orders as to similar quality and impurity were terms of the contract that went wider than the Amended Specification, a reasonable person in the context of SGA, s.14(2A)2 would,


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