THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

Case number : 119/05
Reportable

In the matter between :

D & H PIPING SYSTEMS (PTY) LIMITED

APPELLANT

and

TRANS HEX GROUP LIMITED AND ANOTHER

RESPONDENTS

CORAM :

HOWIE P, MTHIYANE, CLOETE JJA, MAYA et

CACHALIA AJJA

HEARD :
27 FEBRUARY 2006

DELIVERED :
24 MARCH 2006

Summary:   Contract ─ (1) purchase and sale: The concept of a ‘manufacturing
seller’ liable for consequential loss arising from a latent defect in the article
sold, defined and expertise held irrelevant; (2) incorporation of standard terms
and conditions by a course of dealing on the basis quasi-mutual assent,
discussed.

Neutral citation: This judgment may be referred to as D & H Piping Systems
(Pty) Ltd v Trans Hex Group Ltd [2006] SCA 31 (RSA).
___________________________________________________________________

JUDGMENT

CLOETE JA/

CLOETE JA:

[1] The present appeal concerns primarily the liability of a manufacturing seller
for consequential loss arising out of a latent defect in goods sold by him to a
customer.

[2] The appellant manufactures concrete products including concrete pipes. It
has for more than thirty years purchased dolomitic aggregate and sand from the
respondent1 for this purpose. The respondent’s business is primarily the manufacture
of lime products for the building industry. Aggregate and sand are also produced
which are of no use to the respondent for its principal activity and these are screened
out, stockpiled and sold to customers, such as the appellant. During the second half
of 1998 the appellant purchased aggregate and sand from the respondent which it
used to manufacture concrete sewerage pipes for one of its customers, a company
in the Stocks group. The appellant alleges that the aggregate and sand purchased
by it was latently defective, in consequence of which part of the pipes failed with
result that it incurred liability of more than R13 million to its customer. The appellant
claims this amount from the respondent.

[3] Certain issues were by consent separated out for decision and the court a quo
(Van Zyl J) made the appropriate order in terms of rule 33(4). The learned judge then
found for the respondent on these issues and refused leave to appeal. The appeal is
accordingly with the leave of this court.

[4] It is necessary to set out in some detail the contractual relationship between
the parties and the responsibilities of the appellant’s three employees called to testify
on its behalf. Mr Lombard was the works manager of the appellant. He was duly
authorised to contract on its behalf with the respondent for the supply of aggregate

1 The appellant sued two defendants in the court below but withdrew its claim against the first
defendant during those proceedings. It is therefore not clear to me why the first defendant has been
cited as the first respondent on appeal. I shall simply refer to the second respondent, Trans Hex
Mining Limited who was the second defendant, as the respondent.

and sand. He said that his practice was to contact a representative of the respondent
and agree a price for the supply of these products to the appellant for the ensuing six
months. He would then send what was termed a ‘bulk order’, in which quantities
were not specified, to the respondent. The bulk order in question, dated 3 July 1998,
read:
‘BULK ORDER FOR PERIOD JULY TO DEC 1995
DOLOMITIC SAND D-6

DOLOMITIC STONE 6-20

AS PER AGREED GRADING ENVELOPE’.
None of this evidence was challenged.

[5] After the order had been placed by Lombard the appellant’s storeman, Mr
Gordon, would from time to time telephone Ms Cynthia Hugo, the sales clerk of the
respondent, and order specific quantities of the products referred to in the bulk order
to be delivered to the appellant. On each occasion when aggregate and sand arrived
at the appellant’s factory, Gordon was presented with the respondent’s delivery note.
Gordon in turn filled in a goods received note and forwarded this document together
with the respondent’s delivery note to Ms Rust, the appellant’s accounts clerk.

[6] Ms Rust would, in addition to the documents sent to her by Gordon, also
receive invoices from the respondent. Ms Rust’s function was to check that the
information on the invoices accorded with the information on the goods received
notes sent to her by Gordon and capture this information on her computer. She then
waited for the respondent’s monthly statement, reconciled what appeared there with
the record on the computer, prepared a draft cheque for signature by Lombard and
forwarded the cheque, the reconciliation and the respondent’s statement to him.
Neither the respondent’s delivery notes nor its invoices were part of this bundle of
documents.

[7] The correct analysis of the contractual relationship between the parties is this.
During the six month period referred to in the bulk order, there was a pactum de
contrahendo, ie an agreement to make a contract in the future, in existence. The

respondent undertook to the appellant that it would supply such quantities of
aggregate and sand, of the sizes specified at the price agreed, as the appellant
might order during the six month period.2 All that remained for contracts of purchase
and sale to come into existence, was for the amounts of aggregate and sand to be
determined. That was done on each occasion when the appellant’s storeman,
Gordon, requested delivery of specified quantities by telephoning the respondent’s
sales clerk, Ms Hugo.

[8] The appeal raises the following issues:
(i)
Whether it was a term of the contracts of purchase and sale between the
parties that the respondent undertook to supply to the appellant dolomitic aggregate
and sand for use in the manufacture of concrete piping.
(ii)
Whether the respondent was a manufacturing seller of the aggregate and
sand and therefore liable to the appellant for any consequential loss that the
appellant might prove it suffered in consequence of alleged latent defects in the
goods sold; or whether the respondent’s general terms and conditions, which contain
exclusion clauses in wide terms, formed part of the contracts of purchase and sale
concluded by the parties.
(iii)
Whether the parties tacitly agreed to exclude liability on the part of the
respondent for consequential loss.
The appellant has sued in contract and claimed contractual damages. The basis of
the liability of a manufacturing seller has not been authoritatively determined.3 It was
not argued in this appeal, it is not necessary for a determination of the issues raised
and I shall accordingly refrain from expressing any view on the question.

[9] The first issue can be disposed of briefly. The appellant originally contended
in its particulars of claim for an express, alternatively an implied, alternatively a tacit
term that:

2 See Hirschowitz v Moolman and others 1985 (3) SA 739 (A) at 765I-766D.
3 See Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3) SA 670 (A) at 686F-
687B.

‘The defendant would supply to the plaintiff dolomitic aggregate and sand for use in the manufacture
of concrete piping with a sacrificial layer of calcium aluminate cement.’
The allegation that the term was express, was abandoned in the court below. During
the hearing before this court counsel representing the appellant sought an
amendment to the formulation of the term to delete the words ‘with a sacrificial layer
of calcium aluminate cement’ and a consequential amendment to the notice of
appeal. Counsel representing the respondent found himself unable to contend that
any prejudice to his client would result if the amendments were granted. There can
be no doubt that in terms of the contractual arrangement between the parties the
respondent expressly undertook to supply dolomitic aggregrate and sand to the
plaintiff. Mr Conradie, the production manager of the respondent, said in his
evidence in chief that it was generally known that the appellant manufactured
concrete pipes and that the respondent knew this at the time relevant to the action.
He in fact went further and said that he had known that the appellant manufactured
concrete sewerage pipes. That disposes of the first issue. The amendments took up
an insignificant amount of court time and no order as to costs in this regard is
warranted.

[10] I now propose dealing with the question whether the respondent’s general
terms and conditions governed the contractual relationship between the parties.
Those terms and conditions provided inter alia:
‘7.
Trans Hex [the respondent] does not give any warranty or guarantee or make any
representations whatsoever in respect of the goods or the fitness of the goods or any part of it for any
particular purpose whether or not that purpose is known to Trans Hex or accept any liability for any
defect (latent or patent) in the goods or any part of it. Trans Hex does not give any warranty that any
specifications, weights, dimensions or any technical information relating to the goods that may be
given by Trans Hex to the purchaser is correct. In no event shall Trans Hex’s liability exceed the
liability to replace defective or wrongly delivered goods or the value thereof. All warranties or
guarantees otherwise implied by common law or claims by the purchaser are hereby expressly
excluded.
8.
Trans Hex shall be exempt by the purchaser from and shall not be liable under any
circumstances whatsoever for any direct, indirect or consequential damages of any nature whatsoever
or any loss of profit or market share or any special damages of any nature whatsoever and whether in

the contemplation of the parties or not, which the purchaser may suffer as a result of any breach by
Trans Hex of its obligations under the contract or from the use or application of the goods.’
I pause to remark that the evidence did not establish for how long these clauses
formed part of the respondent’s general terms and conditions or even for how long
the respondent had general terms and conditions.

[11] The respondent’s case was pleaded as follows:
‘The general terms and conditions of sale were printed on the reverse of the Second Defendant’s
delivery notes and invoices. The documents in question will be discovered by the Defendants. The
front of the delivery notes and invoices stated the following “for branch addresses and conditions see
reverse side”. As a matter of consistent practice the Plaintiff was provided with delivery notes and
invoices containing the general terms and conditions of sale on the reverse thereof. The general
terms and conditions of sale were incorporated in each agreement relating to the supply of dolomitic
aggregate and sand. The Plaintiff was aware, alternatively is deemed to have been aware, that the
supply of dolomitic aggregate and sand was subject to such general terms and conditions.’
The onus was on the appellant to prove that the general terms and conditions did not
govern their relationship: Topaz Kitchens (Pty) Limited v Naboom Spa (Edms)
Beperk;4 Stocks & Stocks (Pty) Limited v T J Daly & Sons (Pty) Limited;5 Union
Spinning Mills (Pty) Limited v Paltex Dye House (Pty) Limited and another.6

[12] No-one on the appellant’s behalf expressly assented to the incorporation of
the respondent’s general terms and conditions. The time for this to be done, was
when the oral agreement which preceded the bulk order was concluded by Lombard,
who had authority to agree to them; and his evidence, which was accepted by the
court a quo and not challenged on appeal, was that he was unaware of their
existence before this litigation.

[13] Nor can there be any question of the appellant’s other two employees tacitly
consenting to the respondent’s general terms and conditions. The individual orders
placed by Gordon were made pursuant to the oral agreement confirmed (in part) in

4 1976 (3) SA 470 (A) at 474A-C.
5 1979 (3) SA 754 (A) at 762E-767C.
6 2002 (4) SA 408 (SCA) para 6 at 441A.

the bulk order by Lombard. Gordon merely had to fix the quantities to be supplied
from time to time and acknowledge receipt of what was delivered. The delivery notes
received by Gordon and sent by him to Ms Rust and the invoices received by Ms
Rust from the respondent did have the words pleaded by the respondent at the foot
of the front page; but only the invoices had the respondent’s general terms and
conditions printed on the back. Gordon said that he never saw the writing at the foot
of the delivery notes and he was believed by the court a quo. It was nevertheless
submitted by the respondent’s counsel that he probably did. The evidence of Ms
Rust was that she must have been aware that something was printed on the back of
the invoices but she paid no attention to what this might be; and she did not realise
that the printing set out contractual terms. She was unable to say whether she had
noticed the reference to the terms and conditions at the foot of the front page of the
invoices. But even assuming that both Gordon and Ms Rust knew that the
respondent had standard terms and conditions, this takes the matter no further for
the respondent. Lombard’s evidence that neither Gordon nor Ms Rust had authority
to bind the appellant to any terms and conditions went unchallenged. If they knew of
the existence of the respondent’s terms and conditions, such knowledge cannot
accordingly be attributed to the appellant.

[14] No ostensible authority on the part of Gordon or Ms Rust was relied on and no
estoppel was raised. The question then arises whether the respondent was
reasonably entitled to assume that the appellant assented to the respondent’s
general terms and conditions. The answer depends upon whether in all the
circumstances the respondent did what was reasonably sufficient to give the
appellant notice of them ─ an objective test: Durban’s Water Wonderland (Pty) Ltd v
Botha and another.7

[15] Neither a delivery note nor an invoice is a contractual document ie the type of
document in which the recipient would expect to find terms and conditions intended

71999 (1) SA 982 (SCA) 991G-992A; and see also Cape Group Construction (Pty) Ltd t/a Forbes
Waterproofing v Government of the United Kingdom 2003 (5) SA 180 (SCA) para 22.

to form part of the contract between the sender of the document and the recipient.8
Both the delivery notes and the invoices received by the appellant’s employees
reflected performance, or part performance, of a contract already concluded. Neither
constituted an offer to do business. They would therefore not have required the
attention of a person authorised by the appellant to negotiate and agree to the terms
of any contract with the respondent. The respondent could accordingly not
reasonably have expected that they would come to the attention of such a person, as
opposed to the person(s) who would acknowledge receipt of goods delivered or
process invoices for payment; and this is particularly so both because the
respondent must have known that the appellant is a large company, with different
employees authorised to perform different functions on its behalf and also because,
to the knowledge of the respondent, the terms of its contractual relationship with the
appellant had already been negotiated with Lombard. Once it is established that no
person authorised to bind the appellant to the respondent’s general terms and
conditions ever became aware of them, or could reasonably have been expected to
do so, it does not avail the respondent to point to the number of occasions on which
such documents were sent to the appellant or the period of time over which this was
done.9

[16] The respondent’s counsel relied in argument on the English case of Circle
Freight International Ltd (t/a Mogul Air) v Medeast Gulf Exports Ltd (t/a Gulf
Export).10 The facts in that matter were the following. The plaintiff was a freight
forwarding agent. The defendant was an exporter of various goods. The defendant in
a counterclaim sued for the loss of goods which the plaintiff had agreed to export.
The plaintiff pleaded that the defendant’s loss was covered by certain clauses in the

8 Union Spinning Mills (Pty) Limited v Paltex Dye House (Pty) Limited (above n 6) para 6 at 411B;
Micor Shipping (Pty) Limited v Treger Golf and Sports (Pty) Limited and another 1977 (2) SA 709 (W)
at 716A-B.
9 Cf Dyer v Melrose Steam Laundry 1912 TPD 164 at 167-8; R v Thompson 1926 OPD 141 at 143;
Frocks Ltd v Dent and Goodwin (Pty) Ltd 1950 (2) SA 717 (C) at 723-4; the Micor Shipping case
(above, n 8) at 717H; Bok Clothing Manufacturers (Pty) Ltd and another v Lady Land (Pty) Ltd (under
provisional judicial management) 1982 (2) SA 565 (C) at 569E-57C; Christie The Law of Contract 4 ed
p 207.
10 [1988] 2 Lloyd’s LR 427 (CA).

standard conditions of the Institute of Freight Forwarders (IFF), which the plaintiff
contended were incorporated into the contract between the parties. The test applied
by the court was whether the plaintiff had given reasonable notice of the terms in
question. The court held that it had, inter alia because eleven invoices had been sent
to the defendant on previous occasions, all of which referred to the IFF terms.

[17] Taylor LJ said:11
‘[I]t is not necessary that notice of the conditions should be contained in a contractual document
where there has been a course of dealing.’
In the absence of actual knowledge of conditions this statement does not reflect the
South African law, which is as stated in para [15] above.

[18] The Circle Freight case is also distinguishable on the facts on three bases.
The first is that in that matter the trial judge had found,12 and the Court of Appeal
accepted,13 that the defendant’s managing director Mr Zacaria knew that freight
forwarders (such as the plaintiff) normally dealt on standard terms. In the matter
before this court there was no cross-examination whatever directed at Lombard to
establish that he knew that there were usual terms and conditions for the type of
business carried on by the respondent. The second point of distinction appears from
the judgment of Bingham LJ14 as follows:
‘[H]e [ie Mr Zacaria] must have seen some writing on the invoice.’
In the present matter, the person authorised to contract on behalf of the appellant, ie
Lombard, did not even see the invoices or the delivery notes. The third point of
distinction is that the plaintiff in the English case, unlike the present appellant, was a
small company which employed only four people.15

[19] I therefore conclude that the court a quo was wrong in finding that the
respondent’s general terms and conditions formed part of the contracts of purchase

11 At 433 col 2.
12 See 429 col 2.
13 Taylor LJ at 433 col 2; Bingham LJ at 435 col 2  ─ 436 col 1.
14 At 435 col 1.
15 See 429 col 1.

and sale concluded by the parties.

[20] The next question is whether the respondent manufactured the aggregate and
sand which it sold to the appellant. The appellant alleged in its particulars of claim
that the respondent ‘produced’ the aggregate and sand and in the alternative, that
the respondent ‘publicly held itself out to be an expert seller of the dolomitic
aggregate and sand for use in concrete products’. The appellant abandoned reliance
on the second allegation in the court a quo. So far as the first allegation is
concerned, although ‘produce’ is a wider concept than ‘manufacture’,16 it is clear
from the approach followed in the court a quo and the argument advanced in this
court that the appellant seeks to hold the respondent liable as a manufacturing
seller. Two questions arise:
(i)
Does liability attach to a manufacturing seller without more for consequential
damages caused by a latent defect in the article sold? If so:
(ii)
Did the respondent manufacture the aggregate and sand it sold to the
appellant?

[21] It would be convenient before considering these questions to set out the
process which was followed by the appellant at the relevant time at its factory.
Dolomitic rock mined from a quarry was delivered by trucks where it was tipped into
a bin. The rock in the bin was pushed into a crushing machine which crushed the
larger rocks. Once the rock had been crushed it was fed onto a conveyor belt. The
conveyor belt transported the rock to the top of a screen house. At the top of the
screen house were two vibrating screen tables, each of which was fitted with two
different size screens. The one set of screens had a coarse screen with holes in it
that permitted stones 20 millimetres or less to pass through, and a fine screen
situated below the coarse screen with holes in it that permitted stones of six
millimetres or less to pass through. The other set of screens had a coarse screen

16 Berman Brothers (Pty) Limited v Sodastream Limited and another 1986 (3) SA 209 (A) at 244A-B:
‘“Produce” is a wider concept than “manufacture”. It would include the fabrication or manufacture of
goods, but it would also include, for example, the raising of animal products and the growing of
agricultural products (operations which would not fall under the description of “manufacture”) ....’

that permitted stones of less than 16 millimetres to pass through and a fine screen
that permitted stones six millimetres or less to pass through.

[22] Stones that were larger than 20 millimetres or 16 millimetres were transported
by a conveyor belt to a stockpile and were later used to make lime. Stones that were
six millimetres or less were designated as crusher dust and transported via a
conveyor belt to a stockpile; it was from this stockpile that the respondent supplied
the appellant with the ‘dolomitic sand D-6’ referred to in the bulk order. (The ‘D’
obviously refers to dust and the ‘6’ to 6mm.) Stones that were between six and 20
millimetres and between six and 15 millimetres were stockpiled separately. It was
from these two stockpiles that the respondent supplied the appellant with the
‘dolomitic stone 6-20’ referred to in the bulk order.

[23] I turn to consider the concept of a manufacturing seller. The learned judge in
the court a quo held that the production of aggregate and sand by the respondent
‘could not have required any special skill or expertise such as that envisaged by
Pothier’ in para 214 of his work on sale (quoted in para [25] below). The
respondent’s counsel submitted (I quote from the heads of argument filed in this
court):
‘The aggregate and sand is not the result of any process of manufacture of these products involving a
degree of expertise.’
The question which arises is whether the passage in Pothier must be interpreted as
requiring a manufacturing seller to have these attributes.

[24] Voet in his chapter on the Edict of the Aediles, redhibition and the actio quanti
minoris, says:17
‘A seller however who was aware of a defect is held liable in addition to make good the whole loss
which has been inflicted upon the purchaser as a result of the defective things; though one who was
ignorant is not put under obligation for this unless he was a craftsman.’
The word translated by Gane as ‘craftsman’ was artifex in the original text and it

17 Ad Pandectas 21.1.10, Gane’s translation vol 3 p 655.

implies skill.18 It is a combination of ars (skill) and facere (to make) and may be
contrasted with opifex, a workman, which is a combination of opus (work) and
facere.

[25] Pothier in para 214 of his treatise on sale to which the learned judge a quo
referred is wider than Voet in two respects: he includes the artifex, but adds a
merchant who sells articles of his own manufacture as well as a merchant who sells
articles of commerce which it is his business to supply, as being persons liable for
consequential loss. Pothier’s para 214 was translated by Jones J (with whom
Centlivres J agreed) in Young’s Provision Stores (Pty) Limited v Van Ryneveld19 as
follows:
‘[T]here is one case, in which the seller, even if he is absolutely ignorant of the defect in the thing
sold, is nevertheless liable to a reparation of the wrong which the defect caused the buyer in his other
goods; this is the case where the seller is an artificer, or a merchant who sells articles of his own
make, or articles of commerce which it is his business to supply20. The artificer or tradesman is liable
to a reparation of all the damage, which the buyer suffers by a defect in the thing sold in making a use
of the thing for which it was destined, even if such artificer or tradesman were ignorant of the defect.
For example, if a cooper or a dealer in casks sells me some casks, and in consequence of defects in
any of the casks the wine which I put in them is lost, he will be liable to me for the price of the wine
which I have lost. Similarly if the wood of the cask, by its bad quality, communicates a bad odour to
the wine, the custom is in such a case that the seller is condemned to take the damaged wine for his

18 Cf Voet 19.2.14 Gane’s translation vol 3 p 419 under the heading ‘Damages for defect when lessor
a craftsman, or knew of defect’:
“Fourthly and finally the object [of the actio conducti] is the making good of reparation for the whole of
the loss which the lessee has suffered from a defect in the property hired. As often as the property let
is concerned with craftsmanship, and the lessor is a craftsman [artifex], this applies whether the lessor
knew or did not know of such a defect; inasmuch as in such a case he certainly ought to have known
things which were part of his craft. Here belongs what the jurist says of defective jars from which wine
has flowed away being let out, namely that the ignorance of the lessor was by no means excused.
But if a thing has been let out in regard to which no profession of craft is usually concerned, as when
it was a glade for pasturage where ill weeds were growing which caused the dying off or worsening of
the lessee’s animals, the lessor can only be sued for damages if he knew that the defect existed. If he
did not know he is relieved to this extent, that he is freed by a remission of rent.”
19 1936 CPD 87 at 91-2.
20 The three categories in the original French (taken from Pothier’s Oeuvres: Les Traités du Droit
Français compiled by Dupin) are: ‘c’est le cas auquel le vendeur est un ouvrier, ou un marchand qui
vend des ouvrages de son art, ou du commerce dont il fait profession’. Cushing translates this
passage as ‘and this is the case, where the seller is an artisan, or a tradesman who sells the
manufactures of his own trade, or of the kind of dealing of which he makes a business.’ (That Pothier
has the artifex in mind as constituting the first category, appears from the second part of para 214
where the reasons for holding such a person liable, are set out.)

own account and to pay me for it according to the price of that which remains undamaged.
The reason is that the artificer by the profession of his art spondet peritiam artis. He renders
himself in favour of those who contract with him responsible for the goodness of his wares for the use
to which they are naturally destined. His want of skill or want of knowledge in everything that concerns
his art is imported to him as a fault, since no person ought to publicly profess an art if he does not
possess all the knowledge necessary for the proper exercise: want of skill is attributed to him as a
fault (Dig. 50.17.132). It is the same in regard to the merchant whether he makes or does not make
the article which he sells. By the public profession which he makes of his trade he renders himself
responsible for the goodness of the merchandise which he has to deliver for the use to which it is
destined. If he is the manufacturer, he ought to employ for the manufacture none but good workmen
for whom he is responsible. If he is not the manufacturer he ought to expose for sale none but good
articles; he ought to have knowledge of his wares and ought to sell none but good.’

[26] Pothier’s third category, that of the merchant seller, was considered by this
court in Kroonstad Westelike Boere Ko-operatiewe Vereniging Bpk v Botha and
another.21 Holmes JA said:22
‘Reviewing all the foregoing, it seems to me that it can safely be said that, as a general proposition,
sec.214 of Pothier on Sale, in so far as it deals with the liability of a merchant seller, is recognised as
being part of our law’
but limited the field of application of the rule by saying:23
‘In my opinion the preponderant judicial view, and which this Court should now approve, is that liability
for consequential damage caused by latent defect attaches to a merchant seller, who was unaware of
the defect, where he publicly professes to have attributes of skill and expert knowledge in relation to
the kind of goods sold.’

[27] The conclusion reached in the Kroonstad case was questioned in Langeberg
Voedsel Bpk v Sarculum Boerdery Bpk24 but the correctness of the decision was not
debated before us, nor is it necessary to consider it for the purposes of deciding the
present appeal. What is of importance, however, is the statement in the Langeberg
case25 repeated by this court in Graf v Buechel26 that, where a rule of law is clear

21 1964 (3) SA 561 (A).
22 At 571E.
23 At 571G-H.
24 1996 (2) SA 565 (A), Hefer JA at 568J and Schutz JA at 570ff.
25 At 570I and 571D-E.
26 2003 (4) SA 378 (A) para 15.

and in general terms, it is unnecessary to enquire in each instance whether the
considerations which motivated the rule are present. Pothier in the first part of para
214 states the rule in regard to the three categories of persons and then goes on in
the second part to give the reason why each category of person he identifies, is
liable. The approach of the court a quo and of the respondent’s counsel elevates the
reasons for the rule (want of skill or want of knowledge) to part of the rule itself,
which is not correct.

[28] In three decisions of this court Pothier’s second category has been accepted
without the qualification that the manufacturing seller has to possess, much less
publicly profess, attributes of skill and expert knowledge in relation to the goods he
sells. In the Holmdene Brickworks case27 Corbett JA said:
‘The legal foundation of respondent’s claim is the principle that a merchant who sells goods of his own
manufacture or goods in relation to which he publicly professes to have attributes of skill and expert
knowledge is liable to the purchaser for consequential damages caused to the latter by reason of any
latent defect in the goods. Ignorance of the defect does not excuse the seller. Once it is established
that he falls into one of the abovementioned categories, the law irrebuttably attaches this liability to
him, unless he has expressly or impliedly contracted out of it . . . . The liability is additional to, and
different from, the liability to redhibitorian relief which is incurred by any seller of goods found to
contain a latent defect . . . .’
In Sentrachem Bpk v Wenhold28 F H Grosskopf JA said:29
‘Die Hof a quo het bevind dat die eiser hom ook op ‘n ander skuldoorsaak kon verlaat het, nl op die
basis dat die verweerder, as handelaar wat openlik voorgegee het dat hy oor bedrewendheid en
deskundige kennis met betrekking tot die produk beskik, regtens aanspreeklik is vir enige
gevolgskade veroorsaak deur ‘n verborge gebrek in die produk wat hy verkoop het . . . .  Die
verweerder kon natuurlik ook vir gevolgskade aangespreek word op grond van die feit dat hy die
vervaardiger was van die Classic [the product sold to the plaintiff by the defendant] wat hy verkoop
het.’
In Consol Ltd t/a Consol Glass v Twee Jonge Gezellen (Pty) Ltd and another30 Brand
JA said:31

27 Above n 3,at 682 in fine – 683C.
28 1995 (4) SA 312 (A).
29 At 318H-I.
30 2005 (6) SA 1 (SCA).
31 Para 56.

‘It will be remembered that Twee Jonge Gezellen relies, as an alternative basis for its damages claim,
on the principle of our law of contract that merchants who sell goods of their own manufacture or
goods in relation to which they publicly profess to have attributes of skill and expert knowledge, are
liable for consequential damages caused to the purchaser by reason of a latent defect in the goods
….’

[29] There does not appear to be any academic criticism of the rule as formulated
by this court. On the contrary, academic authors have accepted it without adverse
comment.32

[30] The liability of a manufacturing seller as stated by this court is clear. The
addition of qualifications requiring such a person to have some degree of skill or
expertise would lead to confusion and uncertainty and there is no warrant for it. The
respondent’s counsel submitted that such a conclusion would expose manufacturing
sellers to enormous risk. The answer is that they are free to contract out of it.

[31] I therefore conclude that a vendor who sells goods of his own manufacture is
liable for consequential loss caused by a latent defect in the goods sold even if he is
ignorant of the latent defect, irrespective of whether he is skilled in the manufacture
of such goods and irrespective of whether he publicly professes skill or expertise in
that regard.

[32] The next question is whether the respondent was a ‘manufacturer’ of the
aggregate and sand it sold to the plaintiff. There appear to be no decided cases on
the point in the context of liability for consequential loss. It is not necessary or
desirable to attempt a comprehensive definition. Some guidance is to be found in
income tax cases which deal with the phrase ‘process of manufacture’ which occurs

32 See eg De Wet & Van Wyk Kontraktereg en Handelsreg 5 ed p 341; Gibson South African
Mercantile and Company Law  8 ed pp 140 and 143; Lotz in Zimmerman & Visser (eds), Southern
Cross, Civil Law and Common Law in South Africa p 379; Mackeurtan’s Sale of Goods in South Africa
5 ed by Hackwill para 11.4 p 162; McQuoid-Mason in McQuoid-Mason (ed) Consumer Law in South
Africa p 89; Wille’s Principles of South African Law 8 ed by Hutchison, Van Heerden, Visser & Van der
Merwe p 538.

in the Income Tax Act.33

[33] In Secretary for Inland Revenue v Hersamar (Pty) Limited34 Williamson JA
said:35
‘Some judicial dicta seem to emphasise “a change of the character of the raw materials” out of which
something is made. Others again state that the “difference” must be “substantial” or “essential”’
and went on to say:36
‘But it must be recognised that the term “essentially” obviously imports an element of degree into the
determination of the sufficiency of the change that must be effected for a process to be one of
“manufacture”. As a result of being processed, a change may take place in regard to the nature or
form or shape or utility, etc., of the previous article or material or substance. There can be no fixed
criteria as to when any such change can be said to have effected an essential difference. It is a matter
to be decided on the particular facts of the case under consideration. The most exhaustive
examination of imaginary examples of change really does not carry the matter further.’
The learned judge did however refer37 to two examples taken from the judgment of
Van Winsen J in ITC 1052:38
‘The one is that of the nail made out of wire. The physical make-up or nature of the wire is in no way
altered; merely the shape or form of a small segment is altered by being flattened on one end and
sharpened on the other, but, though it is the same piece of steel wire, it is clearly a different thing that
has eventuated ─ a thing with a definitely different utility and object. It can be said therefore to be
essentially different. The freezing of water into blocks of ice for sale or for commercial or industrial use
is also the making of an article essentially different.’

[34] In Secretary for Inland Revenue v Safranmark (Pty) Ltd39 Galgut AJA40 quoted
with approval the following remarks of Miller J in ITC 1247:41
‘That the ordinary connotation of the term “process of manufacture” is an action or series of actions
directed to the production of an object or thing which is different from the materials or components
which went into its making, appears to have been generally accepted. The emphasis has been laid on

33 Act 58 of 1962 s 11.
34 1967 (3) SA 177 (A).
35 At 187B-C.
36 At 187C-E.
37 At 182F-G.
38 26 SATC 253 at 255-6.
39 1982 (1) SA 113 (A).
40 At 122G – in fine.
41 38 SATC 27 at 31 and 32.

the difference between the original material and the finished product.
. . .
Invariably, in cases in which plant or machinery has been found to have been used in a process of
manufacture, the result of such process has been the creation of a substance or an article which,
although it might have contained all the various components from which it evolved in the process of
manufacture, became upon completion an essentially different entity in its own right.’

[35] I turn to the facts of the present matter. The respondent did not simply dig up
sand or pebbles from a riverbed. The processes used by the respondent at its
factory changed the nature of the rock which arrived from the quarry from uneven
lumps of stone into (amongst other things) stockpiles of dust and sand. The dust and
sand had a commercial utility which the raw material did not, as is evidenced by the
fact that there was a market for these products: apart from the appellant, customers
who purchased them included Frazer Fyfe and Cape Concrete who manufactured
concrete products, and Kynoch who manufactured fertilizer from them. Because the
aggregate and sand were separated into different stockpiles of consistent size (D-6
millimetres; 6-15 millimetres and 6-25 millimetres) customers of the respondent
could select and specify the size suitable for their requirements; and this is precisely
what the appellant did.

[36] It was submitted on behalf of the respondent that it manufactured lime
products (as held by this court in Secretary for Inland Revenue v Cape Lime Co
Limited42 ─ it was the respondent in that matter) and that because the aggregate and
sand sold to the appellant were merely by-products of this process, the appellant did
not manufacture either. It is true that the aggregate and sand in question were
screened out of the lime production process. But it does not follow that because a
process is designed to manufacture one product, another product which is produced
incidentally as part of the process is not also manufactured. It is the result, not the
intention of the producer or the primary purpose of the process, which is relevant;
and here, as I have said, the result of the respondent’s process is the production not
only of lime but also of sand and aggregate which are different in nature to the

42 1967 (4) SA 226 (A).

original raw material from which they were produced and which have a commercial
utility in consequence of the process to which they were subjected.

[37] There is one final matter which must be dealt with. The respondent’s counsel
submitted ─ for the first time on appeal ─ that the respondent should not be held
liable for consequential loss as a manufacturer because such liability was excluded
either tacitly or on the basis referred to by Macdonald ACJ in J K Jackson (Pvt)
Limited v Salisbury Family Health Studios (Pvt) Limited,43 namely:
‘The second class comprises those cases where the exclusion arises not from the contract itself as
alleged in the declaration but from the facts of the case on which the defendant relies. Those facts
would properly comprise the terms, the subject matter and the nature of the contract: the
circumstances surrounding its formation, the position and means of knowledge of the parties, the
nature of the defect and any “other facts relevant to the question of exclusion”.’
The learned Acting Chief Justice went on to say:44
‘In the circumstances of this case, the parties could not, in my judgment, have intended the contract to
be subject either to the normal warranty against latent defects or the manufacturer’s or merchant’s
warranty. Both these warranties were excluded tacitly as well as by necessary implication arising out
of the surrounding circumstances.’
It must be accepted, in view of the passage in the Holmdene Brickworks case quoted
in para [28] above, that the liability which attaches to a manufacturing seller can be
excluded expressly or tacitly. But I have, with respect, difficulty with the phrase ‘as
well as by necessary implication arising out of the surrounding circumstances’ in the
passage just quoted from the judgment of Macdonald ACJ. Either the plaintiff was a
manufacturing seller or he was not; and if he was, then, as appears from the same
passage in the Holmdene Bricks case, the law irrebuttably attaches liability to him or
her for consequential loss flowing from a latent defect unless he or she has
contracted out of it. The ‘surrounding circumstances’ to which Macdonald ACJ refers
are relevant only in deciding whether or not there has been a tacit exclusion.

[38] It is not open to the respondent to contend for a tacit exclusion in this case.
Despite the argument to the contrary advanced by the respondent’s counsel, there is

43 1974 (2) SA 619 (R, AD) at 623E-G.
44 At 623G.

an obvious difference between a denial that the respondent was a merchant seller,
which was pleaded, and the assertion that if it was, liability was tacitly excluded ─
which was not. Nor was the issue canvassed in evidence. It is too late to raise it in
argument before this court. As Christie says:45
‘Because the surrounding circumstances have to be investigated it is difficult to see how the issue of a
tacit term could ever be raised successfully for the first time on appeal.’

[39] To sum up: It is clear that the respondent agreed to supply dolomitic
aggregate and sand to the appellant for use by the appellant in the manufacture of
concrete piping. The respondent was a manufacturing seller and its liability as such
to the appellant for consequential loss rising out of any latent defect(s) in the goods
sold was not excluded by the provisions of the respondent’s general terms and
conditions, because they did not form part of the contracts between the parties; and
the respondent cannot now contend for a tacit exclusion of such liability. The appeal
must accordingly succeed, with costs. The appellant’s counsel asked in this event for
the costs of the hearing to date in the court a quo to be awarded to his client. The
respondent’s counsel made no submission in this regard but I did not understand
him to have conceded liability for such costs. The appellant has a number of hurdles
still to overcome before the relief it seeks can be awarded to it. It may not succeed in
recovering anything at all. I cannot conceive of any prejudice to either party if the
costs of the hearing on the preliminary issues in the court below were to be made
costs in the cause.

[40] The following order is made:
1.
The appeal succeeds, with costs, including the costs of two counsel.
2.
The order of the court a quo is set aside and the following order is substituted:
‘(a)
It is declared
(i)
that it was a term of the contracts of purchase and sale concluded by
the plaintiff and the second defendant that the second defendant would supply
to the plaintiff dolomitic aggregate and sand for use in the manufacture of

45 In the work referred to in n 9 above, p 198.

concrete piping;
(ii)
that the second defendant’s general terms and conditions did not form
part of the contractual relationship between the plaintiff and the second
defendant; and
(iii)
that the second defendant is liable to the plaintiff as a manufacturing
seller for any consequential damages which the plaintiff might prove it
suffered in consequence of any latent defect(s) which the plaintiff might
establish existed in the said goods.
(b)
The costs of the hearing to date are made costs in the cause and the costs of
two counsel shall be allowed on taxation.’

______________
T D CLOETE
JUDGE OF APPEAL

Concur:
Howie P
Mthiyane JA
Maya AJA
Cachalia AJA