Opinion was heretofore filed in this case on January 24, 1922, in which the judgment of the trial court was affirmed, and the plaintiff in error filed a petition for rehearing herein in which it strenuously objects to what it calls a "rule of damages" which this court recognizes in said opinion in upholding the trial court in this, to wit; That the plaintiff, after selling to her customers the inferior grade of oil, was permitted to prove injury to her trade by reason thereof and recover the same as damages against the defendant company, and which rule of damages it claims to have been in contravention of the principle laid down in 35 Cyc. 547 in the following language:
"Consequential damages resulting from continued use after knowledge of defects cannot be recovered"
— and then the plaintiff, in its brief, says if the court will say that this is a correct rule of law, then the plaintiff in error will abide by the results and enter no complaint.
The court has no objection to this rule of damages, and it is, no doubt, good law when applied to a proper state of facts. The rule of law announced by the plaintiff in error applies where the defects are discoverable to the senses and upon inspection and where at the time of the attempted delivery the purchaser has the option of refusing to take *Page 16 the goods. Under such circumstances he cannot recover consequential damages such as a loss of profits if he does accept them; but that is not this case.
The attorneys for the plaintiff in error in quoting the above provisions from 35 Cyc. only give a portion of the paragraph. The whole paragraph of the section has application in this case, and the same in full is as follows:
"Defendant may also in such an action plead damages due to a default in the performance of the contract by the seller, as, for example, a failure to deliver the goods contracted for, or delay in delivery, or deficiency in quantity, or quality, fitness, and condition, even when the goods have been accepted and used, especially if the defects are discoverable only by use. There can, however, be no recoupment for consequential damages resulting from continued use after knowledge of defects. The fact that there has been a partial payment does not affect the right to recoup."
The correct rule of law applicable to the facts in the instant case is stated as follows in 35 Cyc. 617-18, together with the authorities shown in the notes, and is as follows:
"Delivery of Inferior Goods. If the goods tendered or delivered are not of the kind or quality contracted for, the buyer may refuse to receive them and sue for damages for breach of the contract; but if the goods are delivered and accepted, there is a direct conflict of authority as to the right of the buyer to recover damages on the ground that they do not conform to the contract. In some cases it is held that it is the duty of the buyer to inspect the goods at the time of delivery, or within a reasonable time, according to the circumstances of the case, and that in the absence of fraud or warranty he cannot subsequently recover damages for breach of contract on the ground of defects, unless the goods are rejected at the time of delivery, or are returned or tendered as soon as the defects are discovered. The rule is, however, subject to certain exceptions, and is more particularly applicable to cases where no part of the purchase price has been paid and the buyer is in a position to reject the goods without sustaining any loss other than what might grow out of the difference between the contract and the market prices. In the application of the rule a distinction is also to be made according to the character of the defect and the opportunity of the buyer to discover it; and while the buyer cannot ordinarily recover for defects of which he knows or which he could have ascertained by, inspection, he may recover for defects which could not be ascertained upon ordinary inspection at the time of delivery, or which are not apparent, until the goods are applied to some use which precludes a return thereof, such as a defect in paint not apparent until it is applied up on a house, or in coal not apparent until the coal is burned. In other cases, however, it is held that while an acceptance or retention of the defective goods would preclude a rescission, the buyer may accept and retain them and sue for damages because of such defects, and that the acceptance is without effect except as evidence that the goods were not defective or that the defect was waived."
In the instant case, the quality of the product sold, the gasoline, was not discoverable to the senses and upon mere inspection, and the defects were only discoverable after the gasoline was received and tested by use. The facts show that the defendant in error, plaintiff below, upon discovery of the defective quality of the gasoline, notified the seller and offered to return the gasoline at her expense, and this was refused. What else was the purchaser to do, except either pour out the gasoline and let it run to waste or dispose of it if she could? And this she did at a greatly reduced price.
The seller was at fault in the first instance in selling the defective gasoline, the quality of which was warranted by such seller, and the seller knew, besides, that it was purchased for the purpose of resale. The second fault of the seller was in refusing to receive back a return of this on or make disposition of it satisfactory to the plaintiff after plaintiff had discovered the defective quality and made offer to return the gasoline.
This court sees no reason to reverse the former opinion in this case; the petition for rehearing is, therefore, overruled.
HARRISON, C. J., PITCHFORD, V. C. J., and McNEILL and NICHOLSON, JJ., concur.