Niblett Ltd v Confectioners' Materials Co Ltd

Facts

• The sellers agreed to sell a quantity of tins of condensed milk to the buyers.
• The tins delivered bore labels marked "Nissly brand."
• That mark infringed the registered trade mark of Nestlé.
• Nestlé threatened proceedings and the goods were detained by customs.
• The buyers were able to dispose of the milk only after stripping off the labels, which they did at a loss.
• They sued for breach of the implied conditions as to the right to sell and merchantable quality.

Issue

1. Whether a seller has a right to sell where the goods, though owned by him, cannot lawfully be sold without infringing a third party's rights.

Held

• The Court of Appeal held that both conditions were broken. On the right to sell, Scrutton LJ held that if a seller can be stopped by process of law from selling, he does not have the right to sell within the meaning of the section. Ownership is not the only question: the seller must be legally able to pass the goods without exposing the buyer to third party interference. On merchantable quality, tins which could not be sold as they stood, and had to be relabelled at expense, were not of merchantable quality.

Ratio Decidendi

The condition as to the right to sell protects the buyer's ability to deal freely with the goods he has bought. A seller whose sale can be restrained by an injunction has not conferred that ability, so the condition is broken even though he owned the goods.