Arcos Ltd v E.A. Ronaasen & Son [1933] AC 470 is a landmark case that deals with the implications of non-compliance with contractual specifications in the sale of goods. The case is particularly important for law students who are studying contract law, as it sheds light on the legal consequences that may arise when goods supplied do not precisely meet the contractually agreed standards, even if the variation is minor. The ruling in this case has been widely cited and has had significant implications for the interpretation and enforcement of contracts in various industries.

  • In the case of Arcos Ltd v E A Ronaassen Son [1933] AC 470, marginal contractual deviations that did not undermine the commercial value of some staves of timber were held to be a contractual condition, which was breached

Facts of the Case Arcos Ltd v E A Ronaassen Son

  • Two written contracts dated 1929 provided that As (the appellants) agreed to sell Rs (the respondents) redwood and whitewood staves of Russian timber with a thickness of half an inch
  • Upon arrival in London, the Rs rejected the staves, claiming that they were thicker than the ones ordered, even though the deviation from the original measurements was really small
  • The matter was submitted to arbitration and it was held that despite the inaccuracy in the measurements, the staves were still commercially within, and merchantable under, the contract specification, hence, the Rs could not reject the goods
  • During the initial hearing, the judge held that the goods were not those contracted to be sold and the Court of Appeal affirmed this stance

Issues in Arcos Ltd v E A Ronaassen Son [1933] AC 470

  • The test in this case was not whether the goods were merchantable under the contracts so as to satisfy the contractual description
  • Deciding on what test to adopt to reach a verdict would, ultimately, determine the key issue: were As entitled to reject the contract, and in doing so, violate it?

Held by the House of Lords

  • Held – the Rs’ rights under the contracts had not been limited; the word ‘commercially’ indicated that although the goods did not match the description, they could still be dealt with in commerce
  • Appeal dismissed – the Rs’ could still reject the goods as they did not match the description in the contract in full
  • Essentially, the specified original measurement of half an inch was so important to the Rs that it became a contractual condition

Lord Buckmaster

Accepted that although the measurements were near the requested one, they were not the ones provided for in the contract; upheld the Court of Appeal’s decision; also presented the agreement of Lord Blanesburgh and Lord Macmillan that the appeal should be dismissed

  • ‘It is not necessary to examine again the actual difference between the goods shipped and those defined in the specification; nor is it possible to fix the exact extent to which the exposure of the staves, for which the respondents were responsible, has altered their size. For the real question is whether the statement of the arbitrator that the staves, when shipped, were commercially within and merchantable under the contract shows that the arbitrator has found that, according to its proper construction, the contract has been satisfied. The very wording of the phrase leads strongly to the conclusion that it does not bear that interpretation.’ [at p.648]

Lord Warrington

Rejected the appeal and believed that there was no need to add a qualification of commerciality to justify the small inaccuracies

  • ‘It is not suggested that this is a case in which the deviations from the contractual thickness were so slight as to be negligible. In such a case a simple finding that they answered the description would be proper without the addition of such a qualification as above mentioned. I agree that the appeal fails, and should be dismissed, with costs.’ [at p.649]

Lord Atkin

Referred to s.13 of the Sale of Goods Act 1893 and rejected the appeal the staves ought to have matched their original description in the contract; argued that exact measurements covered by contracts must be met with an utmost precision

  • ‘The simple question is whether the goods when shipped complied with the implied condition (Sale of Goods Act 1893, s 13) that they should correspond with the description.’ [at p.650]
  • ‘The decisions of the learned judge and of the Court of Appeal appear to me to have been unquestionably right. On the facts as stated by the umpire as of the time of inspection only about 5 per cent of the goods corresponded with the description, and the umpire finds it impossible to say what proportion conformed at the time of shipment. It was contended that in all commercial contracts the question was whether there was a “substantial” compliance with the contract; there always must be some margin, and it is for the tribunal of fact to determine whether the margin is exceeded or not. I cannot agree. If the written contract specifies conditions of weight, measurement, and the like, those conditions must be complied with.’ [at p.650]

Significance of the Case in Legal Development

The case underscores the importance of exact adherence to contract terms:

  1. Hadley v Baxendale (1854): Established the rule for foreseeable damages arising from contract breaches, relevant for understanding compensatory expectations in Arcos.
  2. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962): Explored contractual obligations and breaches, providing context on how contract terms must be fulfilled.
  3. Re Moore & Co Ltd and Landauer & Co (1921): Similar to Arcos, highlighted the strict compliance with contractual descriptions in commercial agreements.

Exam Questions and Answers

Below you will find answers to questions that are most commonly asked based on this case.

How does contemporary UK law treat minor deviations in contractual specifications?

Contemporary UK law typically applies a reasonableness test to minor deviations in contract specifications, influenced by the Sale of Goods Act 1979, which allows for rejection of goods that do not conform to contract descriptions. This approach considers whether deviations materially affect the value or usability of the goods. An example is R&B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] where the court assessed the fitness for purpose of the goods.

What are the potential legal remedies for buyers if the goods delivered slightly deviate from contractual descriptions?

When goods slightly deviate from contractual specifications, buyers may seek remedies such as repair, replacement, or a price reduction under the Consumer Rights Act 2015. For more substantial non-conformity, buyers might claim damages or contract rescission. The key is proving that the deviation sufficiently impacts the intended use of the goods, as seen in J & H Ritchie Ltd v Lloyd Ltd [2007].

How have modern cases further defined or altered the principles set out in Arcos Ltd v E.A. Ronaasen & Son?

Modern cases continue to refine the principles set out in Arcos Ltd v E.A. Ronaasen & Son. For example, in Bunge SA v Nidera BV [2015], the Supreme Court emphasized the importance of proportionality in claiming damages for non-conforming goods, which indicates a more balanced approach towards minor non-conformities, contrasting with the stringent expectations from Arcos.

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