General Motors Products of Canada v. Kravitz

General Motors Products of Canada v. Kravitz
Collection
Supreme Court Judgments
Date
1979-01-23
Report
[1979] 1 SCR 790
Judges
Laskin, Bora; Martland, Ronald; Spence, Wishart Flett; Pigeon, Louis-Philippe; Dickson, Robert George Brian; Estey, Willard Zebedee; Pratte, Yves
On appeal from
Quebec
Subjects
Sale
Decision Content
Supreme Court of Canada
General Motors Products of Canada v. Kravitz, [1979] 1 S.C.R. 790
Date: 1979-01-23
General Motors Products of Canada Limited (Defendant) Appellant;
and
Leo Kravitz (Plaintiff) Respondent.
1978: February 14 and 15; 1979: January 23.
Present: Laskin C.J. and Martland, Spence, Pigeon, Dickson, Estey and Pratte JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Sale—Motor vehicle—Hidden defects—Legal warranty—No-warranty stipulation—Conventional warranty—Liability of manufacturer—Civil Code, arts. 1491, 1522, 1527 to 1530.
In November 1967 respondent (“Kravitz”) bought from an authorized dealer (“Plamondon”) of appellant (“G.M.”) a new 1968 Oldsmobile manufactured by G.M. Kravitz complained of certain defects in his car from the moment he took delivery of it. On a number of occasions Plamondon, with G.M.’s knowledge and at its expense, caused some repairs to be made to the automobile, but failed however to correct the defects observed by Kravitz and of which he continued to complain. In October 1968, as he had not yet obtained satisfaction, Kravitz tendered the automobile to G.M. and Plamondon upon reimbursement of the purchase price. A few days later, he renewed his tender at the same time as he delivered possession of the automobile. On November 1, he brought an action against Plamondon and G.M. in which he prayed (i) that the tender of the automobile be declared valid, (ii) that the sale of the automobile to him by Plamondon be cancelled, and (iii) that Plamondon and G.M. be condemned jointly and severally to pay him the purchase price of the automobile ($3,485.50) and damages amounting to $2,648.21. The Superior Court allowed Kravitz’ action in accordance with his conclusions, except that it reduced the amount of damages by $862.95, fixing the amount of the condemnation at $5,270.76. Plamondon and G.M. both appealed from this decision, but the Court of Appeal unanimously upheld the Superior Court judgment. Only G.M. appealed to this Court. It raised only points of law, which presented the question of the extent to which an automobile manufacturer is liable to the buyer of a new vehicle from one of its dealers for the latent defects in such vehicle.
Held: The appeal should be dismissed.
Kravitz put forward three separate grounds of liability in support of his action against G.M., the first being the legal warranty against latent defects provided for in the Civil Code. For the purposes of art. 1527 C.C., the manufacturer and the professional seller are always presumed to be in bad faith, and their liability is the same as that of the seller who is aware of the defects of the thing sold. The manufacturer cannot avoid his liability for latent defects in the thing he has manufactured when he sells it to a dealer. In the case at bar, by selling the vehicle to Plamondon, G.M. became liable to it for the warranty against latent defects. Hence Plamondon could have brought a redhibitory and damage action against G.M., based on this legal warranty. Kravitz could have exercised the remedy himself through an action in subrogation. However, this is not what he elected to do: he sought to exercise against G.M. a personal right which he would have acquired with the automobile and whereby he could avail himself directly against the manufacturer of the legal warranty against latent defects resulting from the sale by the latter to its dealer. This approach raises three major difficulties: the first results from the no-warranty stipulation; the second has to do with the effect of G.M.’s conventional warranty; and the third stems from the fact that Kravitz is relying on a right flowing from a contract to which he was not a party.
(1) The no-warranty clause contained in the contract of sale between Plamondon and Kravitz seeks to repudiate the legal warranty of the dealer and the manufacturer against defects. Although our courts accept the validity of non-liability clauses more readily than their French counterparts, there is no reason to choose a solution different from that adopted by the French courts in the case of the sale of a new product by a professional seller to a non‑professional buyer. Both the professional seller and the manufacturer must notify the purchaser of the latent defects in the thing sold. Nowadays, when sales are frequently standard-form contracts, it is important not to permit a manufacturer or a professional seller to systematically ignore the warranty against latent defects or limit its effects, to the detriment of the non-professional buyer. This solution, which has already been adopted by the courts of Quebec, is also consistent with the majority decision of this Court in Touchette v. Pizzagalli, [1938] S.C.R. 433. The no-warranty stipulation therefore cannot be a bar to Kravitz’ remedy against G.M.
(2) When Kravitz took possession of the automobile, Plamondon, acting as G.M.’s agent, gave him two booklets published by G.M., certain clauses of which constituted a conventional warranty by G.M. By this war- ranty, G.M. wanted to eliminate its own legal warranty as well as that of its dealer, and limit the extent of its liability. Under the rule already shown, whereby neither a manufacturer nor a professional seller can contract out of the legal warranty against the latent defects or limit the liability resulting from such warranty, any provision of the conventional warranty the effect of which would be to relieve G.M. from its liability under the legal warranty must be held to be null and void. Accordingly, the conventional warranty cannot be opposed to Kravitz’ claim against G.M.
(3) In order to decide on the merits of a direct remedy by Kravitz against G.M., it must be decided whether the legal warranty against latent defects resulting from the sale between G.M. and Plamondon has effect only as between the immediate parties to the contract, or whether it can also benefit a subsequent purchaser of the thing sold. In support of the argument that respondent cannot avail himself of a right that flows from a contract to which he is not a party, appellant cited art. 1023 C.C., under which a contract has effect only between the contracting parties. However, the rule set forth in that article is not absolute, for it is subject to exceptions (arts. 1028 to 1031 C.C.) which lay down different rules depending on whether a right or an obligation is involved. While in general a contract binds only the contracting parties, it seems to have always been recognized that some rights are so closely related to a thing that they can benefit only its owner. In light of this principle of the transfer of rights that are identified with the thing or accessories thereto, it must be said that the warranty against latent defects is owed not only to the immediate purchaser, but also to any subsequent purchaser of the thing. The sub-purchaser may therefore proceed directly against the first seller for both cancellation and damages. However, the cancellation in question is that of the first sale, since it is the one which gives rise to the warranty of which the sub‑purchaser is availing himself. The price that the first seller must reimburse is thus that of the first sale, namely the price it received. The difference between the price of the first sale (wholesale price) and that of the second sale (retail price) is included in the damages owed under art. 1527 C.C. In the case at bar, although Kravitz expressly asked only that the sale to him by Plamondon be cancelled, his conclusions against G.M. necessarily imply that Kravitz did not intend that the sale between G.M. and Plamondon should continue to exist. On the other hand, Kravitz asked that G.M. be required to reimburse the price he paid to Plamondon, and the evidence does not indicate what was the price of the sale by G.M. to Plamondon. However, this omission is not important; if the price received by G.M. were equal to or greater than that paid to Plamondon, G.M. must reimburse the price it received; if the price received by G.M. was (as is likely) less than that paid to Plamondon, G.M. must also pay the difference between the two prices in damages. Accordingly, under the legal warranty for latent defects which it owed, G.M. must pay Kravitz the amount of the selling price which the latter paid Plamondon and the damages resulting from the latent defects. G.M. is jointly and severally liable with Plamondon for payment in full of the sum owed Kravitz, since this was a commercial transaction for G.M. and Plamondon.
As G.M. is liable on the legal warranty for latent defects, there is no need to express an opinion on the other two arguments relied on by Kravitz, the conventional warranty and delictual liability.
Samson & Filion v. Davie Shipbuilding & Repairing Co., [1925] S.C.R. 202; Société Intermat v. Entreprise Lèbre et autre, J.C.P. 1971, II, 16555; Glengoil Steamship Co. et al. v. Pilkington et al. (1897), 28 S.C.R. 146; Canada Steamship Lines Ltd. v. The King, [1952] A.C. 192; Lucas v. Société Aciéries de Maromme, J.C.P. 1972, II, 17280; Bonato v. Société des Etablissements Zryd, J.C.P. 1975, II, 17912; Michaud v. Létourneux, [1967] C.S. 150; Rioux v. General Motors Products of Canada Limited et al., [1971] C.S. 828; Désaulniers v. Ford Motor Company of Canada Ltd., [1976] C.S. 1609; Comp. métallurgique belge v. Comp. des chemins de fer du Nord et autres, D.1885.1.357; Entreprise moderne de canalisations et de travaux publics v. Silvestre et autres, S. 1963.1.193; Ross v. Dunstall (1921), 62 S.C.R. 393; Epoux Nicolas v. Miran et autre, Bull., 1973, IV, N° 105, 89, referred to; Touchette v. Pizzagalli, [1938] R.C.S. 433, followed; Gougeon v. Peugeot Canada Ltée, [1973] C.A. 824, distinguished.
APPEAL against a decision of the Court of Appeal, affirming a judgment of the Superior Court. Appeal dismissed.
Keenan Lapierre and Jean Turgeon, for the appellant.
Morris Chaikelson, for the respondent.
The judgment of the Court was delivered by
PRATTE J.—The problem raised by this appeal, which is here by leave of this Court, has to do with the extent to which an automobile manufacturer is liable to the buyer of a new vehicle from one of its dealers for the latent defects in such vehicle.
By written contract dated November 8, 1967, respondent (“Kravitz”) purchased a new 1968 Oldsmobile (“the automobile”) from Plamondon Chevrolet-Oldsmobile Ltée (“Plamondon”). The automobile was delivered on January 6, 1968. It was manufactured by appellant (“G.M.”), and Plamondon was one of its authorized dealers.
Appellant complained of certain defects in his car from the moment he took delivery of it. On a number of occasions Plamondon, with G.M.’s knowledge and at its expense, caused some repairs to be made to the automobile, but failed however to correct the defect observed by Kravitz and of which he continued to complain.
Kravitz had not obtained satisfaction as yet in October 1968. On October 18, he tendered the automobile to G.M. and Plamondon upon reimbursement of the purchase price. On October 31 he renewed his tender to Plamondon at the same time as he delivered possession of the automobile. On November 1, he brought an action against Plamondon and G.M. in which he prayed (i) that the tender of the automobile be declared valid, (ii) that the sale of the automobile to him by Plamondon be cancelled, and (iii) that Plamondon and G.M. be condemned jointly and severally to pay him the sum of $6,133.71, which included the purchase price of the automobile ($3,485.50) and the amount of certain damages ($2,648.21).
The Superior Court (Perrault J.) held that the automobile had serious latent defects that justified the cancellation of the sale. The trial court commented as follows on the two points of law raised by defendants:
Defendants have raised two points of law:
(1) The legal relation between Plaintiff and the two Defendants was different as there was a contract entered into with Plamondon but none with General Motors; (2) The clauses of the sale contract P-l, in particular No. 4 on the front page of that contract and the provisions of General Motors’ warranty, which appear on pages 5, 7 and 9 of Exhibit P-l5, would relieve them of any liability.
It has been held by our Courts that it is of no great importance whether a fault committed by a party is contractual or delictual. It has also been held that traders or manufacturers are presumed to know the defects of a thing they sell or manufacture and cannot escape legal warranty or quasi-offence liability.
The Superior Court allowed respondent’s action in accordance with his conclusions, except that it reduced the amount of damages to be paid jointly and severally by defendants by $862.95 to $5,270.76. Both Plamondon and G.M. appealed from this judgment of the Superior Court.
The Court of Appeal upheld the judgment of the Superior Court, the unanimous reasons of that Court being written by Tremblay C.J.Q.
With respect to the existence of latent defects, Tremblay C.J.Q. was of the opinion that the trial judge had not erred in assessing the facts. He concluded [TRANSLATION] “the judgment as regards Plamondon is clearly correct”.
Tremblay C.J.Q. disposed of G.M.’s appeal as follows:
[TRANSLATION] General Motors maintains in particular that it should not be held liable jointly and severally with the seller of the automobile. The question of the manufacturer’s liability in the case of an automobile with latent defects was considered by this Court recently in Dame Gougeon v. Peugeot Canada Limitée et al., [1973] C.A. 824. In a unanimous decision, the Court found in the purchaser’s favour. I see no reason to reopen the discussion here.
Only G.M. is appealing to this Court from the decision of the Court of Appeal. In support of its appeal appellant raises only points of law, and none of them is based on a lack of evidence or an incorrect assessment of the facts. It is now common ground that, when it was delivered to Kravitz, the automobile had latent defects that rendered it unfit for the use for which it was intended. The amount of damages established by the Superior Court is not being challenged; these damages were claimed as compensation for the loss sustained by respondent because the automobile was not of the quality that the latter was entitled to demand, not because of the loss caused by the thing. Otherwise, the evidence is in many respects far from satisfactory. However, the uncontradicted presumptions indicate that the automobile was purchased by Plamondon from G.M., and that at the time of its delivery by G.M. to Plamondon, it had the same latent defects which led to the cancellation of the sale by Plamondon to Kravitz; in any event, these facts are not disputed by appellant; indeed, the grounds relied on in support of its appeal imply that it takes them as proven.
With respect to the relationship between G.M. and Plamondon, all we know is that the latter was the former’s dealer. The record does not indicate anything as to the nature of the legal relationship between the two parties. Plamondon must therefore be deemed to be an independent seller.
Kravitz put forward three separate grounds of liability in support of his action against G.M.: (i) the legal warranty against latent defects provided for in the Civil Code; (ii) the conventional warranty given by G.M. to Kravitz when he purchased the automobile; and (iii) the delict that G.M. would have committed in marketing a motor vehicle with latent defects. According to Kravitz, G.M.’s liability would therefore be legal, contractual and delictual.
Let us first consider whether Kravitz can successfully, as against G.M., avail himself of the legal warranty against latent defects.
In a contract of sale, the seller has two principal obligations: the delivery and the warranty of the thing sold (art. 1491 C.C.). The warranty obligation, which is essentially the complement to or corollary of the delivery obligation, has in turn two objectives: warranty against eviction and warranty against latent defects. Article 1522 of the Civil Code reads as follows:
Art. 1522. The seller is obliged by law to warrant the buyer against such latent defects in the thing sold, and its accessories, as render it unfit for the use for which it was intended, or so diminish its usefulness that the buyer would not have bought it, or would not have given so large a price, if he had known them.
If the thing sold has latent defects that render it unfit for the use for which it was intended, the buyer may, inter alia, have the sale cancelled, which entails the reimbursement of the price and of the expenses caused by the sale; if the seller knew or was presumed to know of the latent defects, the buyer is also entitled to the payment of all damages he has suffered (art. 1527 C.C.).
The seller who knows of a latent defect in the thing sold has the obligation to so inform his buyer (Gross, La notion d’obligation de garantie dans le droit des contrats, at p. 195, No. 203): this is required by the most elementary honesty. If he remains silent, he is necessarily in bad faith and commits a “dol” that makes him liable for “all damages suffered by the buyer” (art. 1527 C.C.).
The second paragraph of art. 1527 C.C. (this paragraph is not to be found in the Code Napoleon) provides that the seller is similarly liable if, although not actually aware of the latent defects, he is nevertheless presumed to know them. The Code does not specify to whom this presumption should apply. However, the jurists and the courts both agree that the professional seller dealing in similar goods and the seller-manufacturer both fall under the presumption. Neither one may be ignorant of the defects of the things they manufacture or in which they are dealing; because of their trade they are equated with the seller who is aware of the defects of the thing sold, and their liability is the same as his: Domat, Livre 1, Tit. II, section XI, No. 7; Pothier, Tome 3, Nos. 212 and 213; Com., May 15, 1972, Bull. 1972, IV, No. 144 at p. 143; D. 1965.389; D. 1967.99; Samson & Filion v. Davie Shipbuilding & Repairing Co.[1], at p. 207; Touchette v. Pizzagalli[2], at p. 439.
For the purposes of art. 1527 C.C., the manufacturer and the professional seller are always presumed to be in bad faith (3e civ., June 23, 1971, Bull. 1971, III, No. 403, at p. 286); their liability for the damages sustained by the buyer is based on “dol”, actual or presumed. Anglin C.J. made this point in Samson & Filion v. Davie Shipbuilding & Repairing Co., at p. 208: “The basis of the liability under art. 1527 C.C. is dol, actual or presumed”.
What is the situation when, as in the case at bar, the manufacturer has sold a new thing to a dealer who is himself a professional seller? If the latter is presumed to be aware of the defects when he resells the thing, does it not follow that he is also presumed to be aware of them when he buys it from the manufacturer? While this reasoning could have some appeal in certain circumstances, it cannot serve to exempt the manufacturer from his liability for latent defects in the thing he has manufactured when he sells it to a dealer who is responsible for reselling it. The manufacturer of a defective thing must assume the ultimate responsibility for his incompetence, actual or presumed. The bad faith of the professional seller toward the non-professional buyer does not convert the “dol” of the manufacturer toward his dealer into an act of good faith. In a decision of October 27, 1970,[3] the Cour de cassation ruled as follows:
[TRANSLATION] The company that manufactures a machine must be accountable for its defects as a professional seller in dealing with its buyer, the dealer. It must guarantee the latter against judgments for latent defects rendered in favour of the buyer of the machine.
In the case at bar, therefore, there is no doubt that in selling the vehicle to its dealer G.M. became liable to it for the warranty against latent defects (see Cass. Com., December 17, 1973, J.C.P. 1975, II, 17912). Hence Plamondon could have brought a redhibitory and damage action against G.M., based on this legal warranty against latent defects. In the appropriate circumstances, Kravitz could have exercised this remedy himself through an action in subrogation.
However, this is not what Kravitz elected to do. He sought to exercise against G.M. a personal right which he would have acquired with the automobile and whereby he could avail himself directly against the manufacturer of the legal warranty against latent defects resulting from the sale by the latter to its dealer. This approach raises three major difficulties: the first results from the no-warranty stipulation contained in the contract of sale between Plamondon and Kravitz; the second has to do with the effect of G.M.’s conventional warranty; and the third stems from the fact that Kravitz is relying on a right flowing from a contract to which he was not a party.
I
The contract of sale between Plamondon and Kravitz contains the following no-warranty provision:
[TRANSLATION] 4. It is expressly agreed that there are no legal, conventional or contractual conditions or warranties, including the legal warranty for latent defects, or representations expressed, implied or otherwise, made by the dealer or manufacturer, their representatives or on the motor vehicle, body or parts hereafter supplied, and that no collateral agreement shall be the dealer’s responsibility unless it be in writing.
The purpose of this clause, by its very wording, is to repudiate the legal warranty of the dealer and the manufacturer against latent defects.
The problem therefore arises as to whether in the circumstances of the case at bar this clause should be held to be valid.
The French courts have consistently held that any clause avoiding or limiting the liability of a professional manufacturer or seller is void. Although our courts generally accept the validity of non-liability clauses more readily than their French counterparts (Glengoil Steamship Co. et al. v. Pilkington et al.[4], Canada Steamship Lines Ltd. v. The King[5]), I see no reason to choose a solution different from that adopted by the French courts in the case of the sale of a new product by a professional seller to a non‑professional buyer. The principle that the parties to a contract may stipulate as they wish is not absolute; it necessarily assumes that the parties are in good faith and it cannot be used to allow one of them to stipulate in a contract against the consequences of the “dol” he has committed when making this very contract.
Some legal commentators question this solution in the case of a clause excluding warranty against latent defects. They contend that there is no “dol” or fault in not performing something that has not been promised. However, this opinion is not generally followed. French case law refuses to accept this distinction and equates no-warranty clauses made by a manufacturer or professional seller to clauses avoiding or limiting liability: in both cases it considers them as not having been written. In a decision of January 20, 1970,[6] the Cour de cassation held:
[TRANSLATION] Any manufacturer is required to be aware of the defects of the thing manufactured, and despite any provision excluding in advance his warranty against latent defects, must make good the damages resulting from the defects.
More recently, in a decision of December 17, 1973,[7] the Cour de cassation applied the same rule to a professional seller:
[TRANSLATION] …A professional seller is required to know the defects of the thing sold by him and hence cannot rely on a provision excluding, in advance, his warranty for latent defects.
Ripert, in his Traité élémentaire de droit commercial (8th ed., T. 2, No. 2540, at p. 424), wrote: [TRANSLATION] 2540. Conventional warranty.—Contracts of sale often contain specific clauses designed either to extend or to limit or eliminate the legal warranty.
…
Restrictive clauses are more frequent. They sometimes eliminate the seller’s warranty completely, or limit the seller’s obligation to a certain length of time, for example, or to the replacement of parts acknowledged to be defective, exclusive of any additional damages. However, clauses of this type are valid only if the seller was unaware of the defect at the time of the sale (Civ., art. 1643). According to the approach taken by the courts, such clauses cannot be relied on by a professional seller or manufacturer.
Moreover, a manufacturer or professional seller is not permitted by the courts to establish that it was impossible for him to know of the latent defect; the presumption of knowledge that flows from the professional status is considered to be not rebuttable:
[TRANSLATION] …It must be made clear that this presumption of knowledge of the defect is not rebuttable; indeed, it would appear that no decision has allowed a manufacturer to take refuge behind the technical impossibility of detecting or preventing the defect. Although the absolute nature of the presumption has been criticized by some commentators, it has continued to be asserted with the same force in recent decisions of the courts.
(Malinvaud, La responsabilité civile du fabricant en droit français, G.P. 1973, II, doc. 465, No. 10)
It must therefore be concluded that in France, even though the Code Napoléon contains no provision corresponding to the second paragraph of art. 1527 C.C., the professional seller and the manufacturer are not allowed to set aside the warranty against latent defects or to limit its effects (Gross, ibid., Nos. 167 and 168, at pp. 153 et seq.). In an obvious effort to protect the non-professional buyer, the courts have more or less made the warranty against latent defects a matter of public policy in cases where the sale is made by a manufacturer or professional seller. Savatier wrote thus (J.C.P. 1975, II, 17912):
[TRANSLATION] Since this rule relates to public policy, it is binding on the professional seller, in spite of all clauses excluding or limiting his liability that he may directly or indirectly stipulate. In point of fact he is generally skilful enough to present such clauses to his customers (who have no legal experience) as a gratuitous warranty, while at the same time limiting it to a short period and guaranteeing only repair work unilaterally limited by him. This is deception because, as far as the customer is concerned, the warranty against latent defects is a legal right and not a contractual favour subject to limitation.
For the purposes of the case at bar, it is not necessary to go as far as French case law. We do not have to rule, for instance, on the nature of the presumption of knowledge mentioned in art. 1527 C.C. Neither appellant nor Plamondon have attempted to rebut this presumption. Moreover, it is clear from the record that it would have been impossible for them to do so successfully.
The only problem is as to whether the no-liability clause contained in the contract of sale between Plamondon and Kravitz should be given effect, or whether it should rather be ignored because it was stipulated by a professional who has not rebutted (assuming that such rebuttal was legally permissible) the presumption of knowledge flowing from his status.
When a non-professional buyer purchases a new thing from a dealer of the manufacturer, he is entitled to receive a thing which is free of latent defects, i.e. which is not unfit for the use for which it was manufactured or sold. In my view, the solution adopted by the French courts in this regard is completely justified, and I see no reason to depart from it especially because it is in accord with the very principles underlying the relevant provisions of the Civil Code, and is also in conformity with the text thereof.
Consequently, both the professional seller and the manufacturer must notify the purchaser of the latent defects in the thing sold (Cass. 1er civ., October 4, 1977, G.P. 1977, II, Pan. 359). By keeping silent they commit a “dol” that nullifies the clause which excludes all warranty or only the consequences thereof. They cannot escape their liability by resorting to a general provision that negates the warranty. Moreover, it is obvious in the case at bar that neither the dealer nor the manufacturer intended that the sale be made at the buyer’s own risk: the stipulation in the contract of sale between Plamondon and Kravitz does not suggest this.
Nowadays, when sales are frequently standard-form contracts, it is, in my view, important not to permit a manufacturer or a professional seller to systematically ignore the warranty against latent defects or limit its effects, to the detriment of the non-professional buyer, who certainly needs as much protection today as he did in Pothier’s time. This solution, which has already been adopted by the courts of Quebec (Michaud v. Létourneux[8], Rioux v. General Motors Products of Canada Limited et al.[9], Désaulniers v. Ford Motor Company of Canada Limited[10], is also consistent with the majority decision of this Court in Touchette v. Pizzagalli[11]. That case involved a redhibitory action brought against a professional seller by the buyer of a new automobile who complained that the side windows of his vehicle were not watertight. The seller maintained, inter alia, that he was not bound by the legal warranty against latent defects because the contract of sale contained a clause limiting the seller’s liability, under which the buyer had agreed at the time of the purchase that the manufacturer’s warranty [TRANSLATION] “was the only explicit or implicit warranty pertaining to the said automobile”. By its undertaking the manufacturer had warranted the vehicle [TRANSLATION] “against any defect in material or workmanship”, but it had limited its liability to replacing the parts considered to be defective. It was first held that the defects complained about by the buyer and which the seller had not repaired were grounds for the redhibitory action, even though it seems clear that the defects were not so serious as not to be correctible. It was also held—and this is the point of particular interest here—that since the manufacturer’s warranty had not been honoured (the automobile was still defective), the seller could not rely on such conventional warranty to repudiate its own legal warranty against latent defects. After reviewing the French case law, Duff C.J. added at p. 439:
In other words, the appellant ought not to be permitted, under cover of the stipulation, to repudiate all responsibility in warranty, even the obligation to perform the stipulation itself: and I agree with the judges of the Court of King’s Bench that by reason of this repudiation the respondent is entitled, by force of article 1065 C.C., to be relieved of his agreement to substitute the obligations under this stipulation for the legal warranty which, in the absence of such an agreement, would bind the appellant. It follows that the respondent is entitled to invoke the provisions of articles 1522-1529 C.C. in which the reciprocal rights of seller and purchaser are stated in respect of warranty against latent defects.
I am therefore of the opinion that the no-warranty stipulation contained in the contract of sale between Plamondon and Kravitz must be held to be null and void; it cannot be a bar to Kravitz’s remedy against G.M.
II
But what about the conventional warranty given by G.M. when the automobile was delivered to Kravitz?
When Kravitz took possession of the automobile Plamondon, then acting as G.M.’s agent, gave him two booklets published by G.M. and bearing G.M.’s trademark. One was entitled “Owner’s Manual” (booklet No. 1) and the other “Owner Protection Plan and New Vehicle Warranty” (booklet No. 2); both related to 1968 Oldsmobiles. Booklet No. 1 contained the following clause:
To OUR NEW OLDSMOBILE OWNERS
…
When purchased new, your Oldsmobile is covered by the New Vehicle Warranty and the policy on Oldsmobile Owner Service, both of which are contained in your Owner Protection Plan booklet given to you by your Authorized Oldsmobile Dealer at the time of delivery.
1968 Warranty Booklet No. 2 contained certain information on the warranty covering the vehicle. The following provisions are of particular interest here:
There are no warranties, expressed or implied, made by any authorized Oldsmobile Dealer or General Motors Products of Canada, Limited, on new 1968 Model Oldsmobile passenger cars or passenger car chassis except the warranty against defects in material and workmanship set out below:
NEW VEHICLE WARRANTY
General Motors Products of Canada, Limited, (herein referred to as General Motors) warrants to the Warranted Owner only (as herein defined) each Vehicle (as herein defined) to be free from defects in material and workmanship under normal use and service during the time and mileage limits and subject to all other provisions and limitations hereinafter set forth.
VEHICLE
For purposes of this Warranty, the term “Vehicle” means each new and unused 1968 Model Oldsmobile passenger car and passenger car chassis including all equipment and accessories thereon (except tires), manufactured or supplied by General Motors.
…
WARRANTED OWNER
For purposes of this Warranty, the term “Warranted Owner” means the owner of the Vehicle who holds such Vehicle for use and not for resale, who is registered as a Warranted Owner with General Motors and possesses a Protect-O-Plate issued by General Motors in owner’s name for such Vehicle.
Any authorized Oldsmobile Dealer selling a new and unused Vehicle will register the first owner thereof with General Motors as first Warranted Owner. The first Warranted Owner shall be entitled to all the benefits of the 24 month/24,000 mile and 5 year/50,000 mile provisions of this Warranty without further registration with General Motors.
…
LIMITATIONS
GENERAL MOTORS OBLIGATION—General Motors obligation under this Warranty is limited to repairing or replacing, at its option, any part of parts which are returned to an authorized Oldsmobile Dealer at such Dealer’s place of business and which examination shall disclose to General Motors reasonable satisfaction to have been defective in material or workmanship. Repair or replacement under this Warranty shall be performed by any authorized Oldsmobile Dealer at such Dealer’s place of business without charge for replacement parts or labor.
…
SOLE WARRANTY
This Warranty is the only warranty applicable to the Vehicle and is expressly in lieu of all other warranties, expressed or implied, including any implied warranty of mercantability or fitness for a particular purpose, and of any other obligation or liability on the part of General Motors Products of Canada, Limited, and General Motors Products of Canada, Limited, neither assumes nor authorizes any other person to assume for it any other obligation or liability in connection with such Vehicle.
We must now determine the effect of this conventional warranty on the legal warranty which, as we have seen, is owed by G.M. as a result of the sale to Plamondon.
The first and last paragraphs above-quoted leave no doubt that by its warranty contained in booklet No. 2 G.M. wanted to eliminate its own legal warranty as well as that of its dealer. After warranting that the vehicle was free from “defects in material and workmanship”, G.M. attempted to limit its liability to the replacement or repair of defective parts as appears from the clause entitled “Limitations”. In this way G.M. wanted to avoid any liability for the reimbursement of the price and the payment of damages.
I have already shown that neither a manufacturer, nor generally a professional seller, can contract out of the legal warranty against latent defects or limit the liability resulting from such warranty. Consequently, any provision of the conventional warranty contained in booklet No. 2 the effect of which would be to relieve G.M. from its liability under the legal warranty for latent defects for which it is liable must be held to be null and void. It follows that G.M.’s conventional warranty, stipulated in booklet No. 2, cannot be opposed to Kravitz’s claim against G.M.
III
We must now determine whether Kravitz can exercise a direct remedy against G.M. based on the legal warranty against latent defects resulting from the sale between G.M. and Plamondon. In other words, the question is whether the warranty has effect only as between the immediate parties to the contract or whether it can also benefit a subsequent purchaser of the thing sold.
Appellant contended that respondent cannot avail himself of a right that flows from a contract to which he is not a party; to support this contention, it referred to the principle expressed in art. 1023 C.C. (which corresponds to art. 1165 C.N.), under which a contract has effect only between the contracting parties.
Article 1023 reads as follows:
Art. 1023. Contracts have effect only between the contracting parties: they cannot affect third persons, except in the cases provided in the article of the fifth section of this chapter.
The very wording of this article makes it clear that the rule therein set forth is not absolute: it is subject to exceptions. In fact, there are so many exceptions that after analysing the corresponding provisions of the Code Napoléon, Savatier concluded as follows (“Le prétendu principe de l’effet relatif des contrats”, (1934) 33, Rev. trim. dr. civ. 525, at p. 544):
[TRANSLATION] Hence art. 1165 in itself has almost no useful meaning, and it would be particularly dangerous and inaccurate to take it literally. It cannot be narrowed down to a specific area until so many exceptions have been carved out which include most cases where there are strong reasons why contracts should have some effects on third parties.
The exceptions to the rule stated in art. 1023 C.C. are based primarily on the interpretation of arts. 1028 to 1031 C.C., contained in Section V of the Civil Code, which are to the same effect as the corresponding provisions of the Code Napoléon. There is no need to study each article in detail; be it sufficient to point out that the rules differ depending on whether a right or an obligation is involved. While it is generally true that a contract binds only the contracting parties, and their successors either universal or by general title, this does not necessarily mean that a contract can never benefit a successor by particular title. Indeed, it seems to have always been recognized that some rights are so closely related to a thing that they can benefit only its owner. Pothier, who was the source of these provisions in our Civil Code and those in the Code Napoléon, states clearly that successors by particular title benefit from the stipulations pertaining to the thing they acquire (Pothier, Tome 2, No. 67):
[TRANSLATION] 67. Case four—What one stipulates with respect to a thing one owns may be validly stipulated not only in one’s favour and one’s heirs but for all one’s successors by particular title to this thing, which are included under the term “successors” used in contracts. In this case we are by no means stipulating for another …For example, I could validly agree “that you shall never exercise against me, or against my heirs or successors, the rights of substitution that may someday be available to you with respect to such an inheritance”. This agreement has effect, even with respect to those who acquire the inheritance by particular title through me.
This is indisputable with respect to those who acquire it by onerous title, because since I am obligated to them b