Grant v Australian Knitting Mills Ltd
Rule established
A latent defect in goods breaches both the implied condition of fitness for purpose and the implied condition of merchantable quality. Where goods have an obvious use, disclosure of purpose is implied and reliance on the seller is inferred.
Facts
- The appellant bought two sets of woollen underwear from a retailer.
- He wore them in the ordinary way.
- The garments contained an excess of free sulphite, a chemical used in manufacture which should have been washed out.
- The appellant contracted a severe and prolonged dermatitis.
- The defect was not discoverable by any examination the buyer could reasonably have made.
- He sued the retailer for breach of the implied conditions and the manufacturer in negligence.
Issue
- Whether a latent chemical defect in garments breached the implied conditions of fitness for purpose and merchantable quality, where the buyer could not have discovered it.
Held
- The Privy Council held both conditions breached. The purpose of underwear being obvious, the buyer made it known merely by asking for the garments, and as the retailer dealt in such goods reliance on his judgement was to be inferred. Garments containing a hidden irritant were neither fit for that purpose nor of merchantable quality. The proviso relating to examination did not assist the seller, since no reasonable examination would have revealed the defect. The claim against the manufacturer in negligence also succeeded, applying the neighbour principle.
Ratio Decidendi
Latent defects fall squarely within the protection of the implied conditions, because the buyer's inability to discover them is precisely the situation in which the statutory terms displace caveat emptor. The examination proviso excludes only defects which the examination made ought to have revealed.
How to use it in an exam
- The standard illustration of overlap between S.16(1) and S.16(2) of the Sale of Goods Act 1930.
- Key propositions: purpose implied from the obvious use of the goods, reliance inferred from the seller being a dealer, and the examination proviso confined to apparent defects.
- Frequently paired with Priest v Last (1903) on implied disclosure of purpose.
- Also cited in the law of torts as an application of Donoghue v Stevenson to a manufacturer of goods.
Source
Source: [1936] AC 85; leading authority on latent defects breaching both implied conditions; citation and bench checked against Indian Kanoon and reported sources, audit of 12 August 2026
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.