A wool broker in Boston sent to a dealer in wool at Hartford
samples of foreign wool in bales which he had for sale, on
commission, with the prices, and the latter offered to purchase the
different lots at the prices if equal to the samples furnished. The
wool broker accepted the offer, provided the wool dealer in
Hartford would come to Boston and examine the wool on a day named,
and then report if he would take it. The wool dealer went to
Boston, and after examining certain of the bales as fully as he
desired and being offered an opportunity to examine all the
remaining bales and to have them opened for his inspection
(which
Page 77 U. S. 384
offer he declined) purchased. The wool proved, the vendor
knowing nothing of it, to have been deceitfully packed, rotten and
damaged wool and tags being concealed by an outer covering of
fleeces in their ordinary state. On action brought to recover
damages,
held:
1. That the sale was not one by sample, and there having been no
express warranty that the bales not examined should correspond with
those which were, nor any circumstances from which the law could
imply such a warranty, that the rule of
caveat emptor
applied.
2. That proof could not be received to control the said rule,
that by the custom of merchants and dealers in wool in bales at
Boston and New York, the two principal markets of the country for
foreign wool, there is an implied warranty of the seller to the
purchaser that the same is not falsely or deceitfully packed;
especially where the parties did not know of the custom.
3. The office of a custom or usage in trade is to ascertain and
explain the meaning and intention of the parties to a contract,
whether written or in parol, which could not be done without the
aid of this extrinsic evidence. It does not go beyond this, and is
used as a mode of interpretation on the theory that the parties
knew of its existence and contracted with reference to it.
In the summer of 1864, Barnard, a commission merchant residing
in Boston, Massachusetts, placed a lot of foreign wool, received
from a shipper in Buenos Ayres, and on which he had made advances,
in the hands of Bond & Co., wool brokers in Boston, to sell,
with instructions not to sell unless the purchaser came to Boston
and examined the wool for himself. These brokers sent to E. N.
Kellogg & Co., merchants and dealers in wool, in Hartford,
Connecticut, at their request, samples of the different lots of
wool, and communicated the prices at which each lot could be
obtained. Kellogg & Co., in reply, offered to take the wool,
all round, at fifty cents a pound, if equal to the samples
furnished, and Bond & Co., for their principal, on Saturday,
the 6th day of August, by letter and telegram, accepted this offer,
provided Kellogg & Co. examined the wool on the succeeding
Monday and reported on that day whether or not they would take it.
Kellogg & Co. acceded to this condition, and the senior member
of the firm repaired to Boston on the day
Page 77 U. S. 385
named and examined four bales in the broker's office as fully as
he desired, and was offered an opportunity to examine all the
bales, and have them opened for his inspection. This he declined to
do, and concluded the purchase on the joint account of all the
plaintiffs. Some months after this, on opening the bales it was
ascertained that a portion of them were falsely and deceitfully
packed, by placing in the interior rotten and damaged wool and
tags, which were concealed by an outer covering of fleeces in their
ordinary state. This condition of things had been unknown to
Barnard, who had acted in good faith. It was, however, communicated
to him, and he was asked to indemnify the purchaser against the
loss he sustained in consequence of it. This he declined to do, and
the purchaser brought this suit. The declaration counted:
1st. Upon a sale by sample.
2d. Upon a promise, express or implied, that the bales should
not be falsely packed.
3d. Upon a promise, express or implied, that the wool inside of
the bales should not differ from the samples by reason of false
packing.
The court below, trying the cause without the intervention of a
jury, held that there was no express warranty that the bales not
examined should correspond to those exhibited at the brokers'
store, and that the law under the circumstances could not imply
any. But the court found as matters of fact, that the examination
of the interior of the bulk of bales of wool generally, put up like
these, is not customary in the trade, and though possible, would be
very inconvenient, attended with great labor and delay, and for
these reasons was impracticable, and that by the custom of
merchants and dealers in foreign wool in bales in Boston and New
York, the principal markets of this country where such wool is
sold, there is an implied warranty of the seller to the purchaser
that the same is not falsely or deceitfully packed, and the court
held as a matter of law, that the custom was valid and binding on
the parties to this contract, and gave judgment for the
purchaser.
Page 77 U. S. 386
This writ of error was taken to test the correctness of this
ruling.
Page 77 U. S. 388
MR. JUSTICE DAVIS delivered the opinion of the Court.
No principle of the common law has been better established, or
more often affirmed, both in this country and in England, than that
in sales of personal property, in the absence of express warranty,
where the buyer has an opportunity to inspect the commodity, and
the seller is guilty of no fraud, and is neither the manufacturer
nor grower of the article he sells, the maxim of
caveat
emptor applies. Such a rule, requiring the purchaser to take
care of his own interests, has been found best adapted to the wants
of trade in the business transactions of life. And there is no
hardship in it, because if the purchaser distrusts his judgment he
can require of the seller a warranty that the quality or condition
of the goods he desires to buy corresponds with the sample
exhibited. If he is satisfied without a warranty, and can inspect
and declines to do it, he takes upon himself the risk that the
article is merchantable. And he cannot relieve himself and charge
the seller on the ground that the examination will occupy time, and
is attended with labor and inconvenience. If it is practicable, no
matter how inconvenient, the rule applies. One of the main reasons
why the rule does not apply in the case of a sale by sample, is
because there is no opportunity for a personal examination of the
bulk of the commodity which the sample is shown to represent. Of
such universal acceptance is the doctrine of caveat
Page 77 U. S. 389
emptor in this country, that the courts of all the states in the
Union where the common law prevails, with one exception (South
Carolina), sanction it.
Applying this acknowledged rule of law to this case, it is easy
to settle the rights of the parties, and to interpret the contract
which they made. That the wool was not sold by sample clearly
appears. And it is equally clear that both sides understood that
the buyer, if he bought, was to be his own judge of the quality of
the article he purchased. Barnard expressly stipulated, as a
condition of sale, that Kellogg should examine the wool, and he did
examine it for himself. If Kellogg intended to rely on the samples
as a basis of purchase, why did he go to Boston and inspect the
bales at all, after notice that such inspection was necessary
before the sale could be completed? His conduct is wholly
inconsistent with the theory of a sale of sample. If he wanted to
secure himself against possible loss, he should either have
required a warranty or taken the trouble of inspecting fully all
the bales. Not doing this, he cannot turn round and charge the
seller with the consequences of his own negligence. Barnard acted
in good faith, and did not know or have reason to believe that the
wool was falsely packed. The sale on his part was intended to be
upon the usual examination of the article, and the proceeding by
Kellogg shows that he so understood it, and it is hard to see what
ground of complaint even he has against Barnard. It will not do to
say that it was inconvenient to examine all the bales, because if
inconvenient it was still practicable, and that is all, as we have
seen, that the law requires. The case of
Salisbury v.
Stainer, reported in 19th Wendell [
Footnote 1] is similar in its facts to this case, and the
court applied to it the rule of
caveat emptor. There bales
of hemp were sold which turned out to be falsely packed. The
purchaser wished to treat the sale as a sale by sample; but the
court said to him,
"You were told to examine for yourself, and having opened one
bale, and at liberty to open all, and omitting to do it, you cannot
be permitted
Page 77 U. S. 390
to allege that the sale was a sale by sample, nor to recover
damages as on an implied warranty."
It is, therefore, clear by the general principles of law,
adopted in the interests of trade and commerce, that the seller in
this instance was not answerable over for any latent defects in the
bales of wool.
But the learned court below having found that by the custom of
dealers in wool in New York and Boston there is a warranty by the
seller implied from the fact of sale, that the wool is not falsely
packed, and having held Barnard bound by it, the inquiry arises
whether such a custom can be admitted to control the general rules
of law in relation to the sale of personal property.
It is to be regretted that the decisions of the courts, defining
what local usages may or may not do, have not been uniform. In some
judicial tribunals there has been a disposition to narrow the
limits of this species of evidence, in others to extend them, and
on this account mainly the conflict in decision arises. But if it
is hard to reconcile all the cases, it may be safely said they do
not differ so much in principle, as in the application of the rules
of law. The proper office of a custom or usage in trade is to
ascertain and explain the meaning and intention of the parties to a
contract, whether written or in parol, which could not be done
without the aid of this extrinsic evidence. It does not go beyond
this, and is used as a mode of interpretation on the theory that
the parties knew of its existence, and contracted with reference to
it. It is often employed to explain words or phrases in a contract
of doubtful signification, or which may be understood in different
senses, according to the subject matter to which they are applied.
But if it be inconsistent with the contract, or expressly or by
necessary implication contradicts it, it cannot be received in
evidence to affect it. [
Footnote
2] Usage, says Lord Lyndhurst, "may be admissible to explain
what is doubtful; it is never admissible
Page 77 U. S. 391
to contradict what is plain." [
Footnote 3] And it is well settled that usage cannot be
allowed to subvert the settled rules of law. [
Footnote 4] Whatever tends to unsettle the law,
and make it different in the different communities into which the
state is divided, leads to mischievous consequences, embarrasses
trade, and is against public policy. If, therefore, on a given
state of facts, the rights and liabilities of the parties to a
contract are fixed by the general principles of the common law,
they cannot be changed by any local custom of the place where the
contract was made. In this case the common law did not, on the
admitted facts, imply a warranty of the good quality of the wool,
and no custom in the sale of this article can be admitted to imply
one. A contrary doctrine, says the court, in
Thompson v.
Ashton, [
Footnote 5]
"would be extremely pernicious in its consequences, and render
vague and uncertain all the rules of law on the sales of
chattels."
In Massachusetts, where this contract was made, the more recent
decisions on the subject are against the validity of the custom set
up in this case. In
Dickinson v. Gay, [
Footnote 6] which was a sale of cases of satinets
made by samples, there were in both the samples and the goods a
latent defect not discoverable by inspection, nor until the goods
were printed, so that they were unmerchantable. It was contended
that by custom there was in such a case a warranty implied from the
sale that the goods were merchantable. But the court, after a full
review of all the authorities, decided that the custom that a
warranty was implied, when by law it was not implied, was contrary
to the rule of the common law on the subject, and therefore void.
If anything, the case of
Dodd v. Farlow, [
Footnote 7] is more conclusive on the point.
There forty bales of goat skins were sold by a broker, who put into
the memorandum of sale, without authority, the words "to be of
merchantable quality and in good order."
It was contended that by custom, in all sales of such skins,
there was an implied warranty that they were of merchantable
Page 77 U. S. 392
quality, and, therefore, the broker was authorized to insert the
words, but the court held the custom itself invalid. They say,
"It contravenes the principle, which has been sanctioned and
adopted by this Court, upon full and deliberate consideration, that
no usage will be held legal or binding on parties, which not only
relates to and regulates a particular course or mode of dealing,
but which also engrafts on a contract of sale a stipulation or
obligation which is inconsistent with the rule of the common law on
the subject."
It is clear, therefore, that in Massachusetts, where the wool
was sold and the seller lived, the usage in question would not have
been sanctioned.
In New York there are some cases which would seem to have
adopted a contrary view, but the earlier and later cases agree with
the Massachusetts decisions. The question in
Frith v.
Barker [
Footnote 8] was,
whether a custom was valid that freight must be paid on goods lost
by peril of the sea, and Chief Justice Kent in deciding that the
custom was invalid, says:
"Though usage is often resorted to for explanation of commercial
instruments, it never is, or ought to be, received to contradict a
settled rule of commercial law."
In
Woodruff v. Merchants' Bank, [
Footnote 9] a usage in the City of New York, that
days of grace were not allowed on a certain description of
commercial paper, was held to be illegal. Nelson, chief justice, on
giving the opinion of that court, says:
"The effect of the proof of usage in this case, if sanctioned,
would be to overturn the whole law on the subject of bills of
exchange in the City of New York,"
and adds,
"if the usage prevails there, as testified to, it cannot be
allowed to control the settled and acknowledged law of the state in
respect to this description of paper."
And, in
Beirne v. Dord, [
Footnote 10] the evidence of a custom that in the sale of
blankets in bales, where there was no express warranty, the seller
impliedly warranted them all equal to a sample shown, was held
inadmissible, because contrary to the settled rule of law on the
subject of chattels. But the latest authority in that
Page 77 U. S. 393
state on the subject, is the case of
Simmons v. Law.
[
Footnote 11] That was an
action to recover the value of a quantity of gold dust shipped by
Simmons from San Francisco to New York on Law's line of steamers,
which was not delivered. An attempt was made to limit the liability
of the common carrier beyond the terms of the contract in the bill
of lading by proof of the usage of the trade, which was well known
to the shipper, but the evidence was rejected. The court, in
commenting on the question, said:
"A clear, certain, and distinct contract is not subject to
modification by proof of usage. Such a contract disposes of all
customs by its own terms, and by its terms alone is the conduct of
the parties to be regulated and their liability to be
determined."
In Pennsylvania this subject has been much discussed, and not
always with the same result. At an early day the supreme court of
the state allowed evidence of usage that in the City of
Philadelphia, the seller of cotton warranted against latent defects
though there were neither fraud on his part or actual warranty.
[
Footnote 12] Chief Justice
Gibson at the time dissented from the doctrine, and the same court
in later cases, has disapproved of it, [
Footnote 13] and now hold that a usage, to be
admissible, "must not conflict with the settled rules of law, nor
go to defeat the essential terms of the contract."
It would unnecessarily lengthen this opinion to review any
further the American authorities on this subject. It is enough to
say as a general thing that they are in harmony with the decisions
already noticed.
See the American note to
Wigglesworth
v. Dallison, 1 Smith's Leading Cases, where the cases are
collected and distinctions noticed.
The necessity for discussing this rule of evidence has often
occurred in the highest courts of England on account of the great
extent and variety of local usages which prevail in that country,
but it would serve no useful purpose to review the cases. They are
collected in the very accurate English note
Page 77 U. S. 394
to
Wigglesworth v. Dallison, and are not different in
principle from the general current of the American cases. If any of
the cases are in apparent conflict, it is not on account of any
difference in opinion as to the rules of law which are
applicable.
These rules, says Chief Justice Wilde in
Spartali v.
Benecke, [
Footnote
14]
"are well settled, and the difficulty that has arisen respecting
them, has been in their application to the varied circumstances of
the numerous cases in which the discussion of them has been
involved."
But this difficulty does not exist in applying these rules to
the circumstances of this case. It is apparent that the usage in
question was inconsistent with the contract which the parties chose
to make for themselves and contrary to the wise rule of law
governing the sales of personal property. It introduced a new
element into their contract, and added to it a warranty, which the
law did not raise nor the parties intend it to contain. The parties
negotiated on the basis of
caveat emptor, and contracted
accordingly. This they had the right to do, and by the terms of the
contract the law placed on the buyer the risk of the purchase and
relieved the seller from liability for latent defects. But this
usage of trade steps in and seeks to change the position of the
parties and to impose on the seller a burden which the law said, on
making his contract, he should not carry. By this means, a new
contract is made for the parties and their rights and liabilities
under the law essentially altered. This, as we have seen, cannot be
done. If the doctrine of
caveat emptor can be changed by a
special usage of trade in the manner proposed by the custom of
dealers of wool in Boston, it is easy to see it can be changed in
other particulars, and in this way the whole doctrine frittered
away.
It is proper to add in concluding this opinion that the conduct
of the parties shows clearly that they did not know of this custom,
and could not therefore have dealt with reference to it.
Page 77 U. S. 395
Judgment reversed and the cause remanded with directions to
award a venire de novo.
BRADLEY and STRONG, JJ., dissented.
[
Footnote 1]
Page 158.
[
Footnote 2]
See Notes to
Wigglesworth v. Dallison, 1
Smith's Leading Cases, 498; 2 Parsons on Contracts, ยง 9, 535;
Taylor on Evidence 943 and following.
[
Footnote 3]
Blackett v. Royal Exchange Assu. Co., 2 Crompton &
Jervis 249.
[
Footnote 4]
See Note to 1st Smith's Leading Cases,
supra.
[
Footnote 5]
14 Johnson 317.
[
Footnote 6]
7 Allen 29.
[
Footnote 7]
11 Allen 426.
[
Footnote 8]
2 Johnson 327.
[
Footnote 9]
25 Wendell 673.
[
Footnote 10]
1 Selden 95.
[
Footnote 11]
3 Keys 219.
[
Footnote 12]
Snowden v. Warder, 3 Rawle, 101.
[
Footnote 13]
Coxe v. Heisley, 19 Pa.St. 243;
Wetherill v.
Neillson, 20
id. 448.
[
Footnote 14]
10 Common Bench 222.
