Where an agent sells goods on behalf of an undisclosed principal the buyer can sue the principal under s.14(5) for breach of s.14(2) or (3) even though the principal is a private seller. If the principal is a private seller then he can only escape liability if, according to s.14(5), 'the buyer knows that fact or reasonable steps are taken to bring it to the notice of the buyer before the contract is made.'
Lord Jauncey said that the defender had been the owner of a cabin cruiser that he had instructed Harbour Marine and Leisure, Kirkcaldy, to sell on his behalf under a brokerage and agency agreement.
The plaintiff had bought her. The parties agreed that she had had defects rendering her unseaworthy which meant that she had been unfit for the purpose for which she had been bought.
The judge had found in fact that the plaintiff had known that the boat was being sold under a brokerage scheme but had thought that it was owned by Harbour Marine.
The plaintiff had not been told the name of the owner nor that the owner was not selling in the course of a business nor that Harbour marine were acting as agent only. The plaintiff had been under the impression that they were the owners of the boat.
The judge had found in law that Harbour Marine had sold the boat in the course of their business. The appeals had proceeded on the basis that Harbour Marine had been an agent acting for an undisclosed principal (the seller).
The Court of Appeal had concluded that the defendant was within the ambit if s.14(5) and rejected an argument that the subsection enabled action to be taken only against an agent acting for an undisclosed principal and not against the principal himself.
S.14(5) had first been introduced into the Sale of Goods Act 1893 by the Supply of Goods (Implied Terms) Act 1973 (s.3) following recommendations of the Law Commissions of England and Scotland.
The commissions' report, Exemption Clauses in Contracts First Report: Amendments to the Sale of Goods Act 1893 (1969, Law Com No 24, Scot law Com No 12) had drawn attention to the fact that no sale of goods by private individuals was subject to any implied condition of fitness even where such individuals sold through auctioneers or agents, a situation that could cause hardship where buyers relied on the agent's reputation.
S.14(5) was applicable to any sale by an agent on behalf of a principal, whether disclosed or undisclosed, where circumstances giving rise to the exception did not exist.
When the subsection applied, the normal common law rules of principal and agent also applied.
Lord Lloyd, Lord Nolan, Lord Nicholls and Lord Hoffmann agreed.