6 Special contracts: Sales and consumer protection

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The Sale of Goods Act governs matters such as	title to goods, sales by description, sales by sample, and the suitability and quality of goods, and sets out remedies for breaches of the act.
For the Sale of Goods Act to apply, the following conditions must be present:	1. There must be a sale, which occurs where the seller of the goods agrees to transfer title of the goods to the buyer for consideration, called the price. 2. The contract must be for goods, which are tangible personal property. The Sale of Goods Act does not apply to real estate or choses in action (intangibles). 3. The contract applies to a sale, not services. The Sale of Goods Act does not apply to a contract for services; however, sometimes the sale of goods involves an element of labour or professional service. The factor that determines if the Sale of Goods Act applies is whether the contract on balance is a contract of sale or a contract of labour and materials. For example, it was determined that eating food in a restaurant is a contract that is governed by the sale of goods legislation, as the primary purpose of ordering food is to be sold food to eat. In some cases, the courts will sever the service portion of a contract. The Sale of Goods Act is then applied only to the goods portion of the contract. 4. Ownership of the goods must change, either through an immediate sale or by an agreement to sell where title passes at a future time (a time that is not the time the contract is formed). Consideration exchanged does not need to be entirely in money, but it may not be entirely a barter or gift. 5. The Sale of Goods Act covers transactions involving the exchange of money, although as long as some money is exchanged, the transaction may include traded goods as well. 6. Some jurisdictions require that the sale be evidenced in writing, depending on the value of the sale.
The primary purpose of the Sales of Goods Act is to	imply the terms that the parties to sale of goods transactions often leave out
For the Sale of Goods Act to apply, the following conditions must be present:	1 Goods and services 2 Transfer of goods 3 Monetary consideration – Act does not apply to barter 4 Requirement of writing – Some provinces require evidence in writing
isk for loss of the goods follows	ownership title
Possession of goods does not necessarily entail	ownership of those goods
Transfer of title and risk when delivery is made by a third party	General rules: a. The buyer takes delivery at the seller's premises. b. The buyer is responsible for costs of transportation.
Cost, insurance and freight (c.i.f.)	Risk borne by the buyer from the time of delivery to the carrier or country of destination Cost of insurance and freight paid by the seller and billed to the buyer
Free on board (f.o.b.)	Risk borne by the buyer from the time of delivery to the carrier Cost of insurance and freight paid by the buyer
Cash on delivery (c.o.d.)	Risk borne by the seller until delivery to the buyer Cost of insurance and freight paid by the buyer
Bill of lading	Risk borne by the buyer from the time of delivery to the carrier Cost of insurance and freight paid by the buyer
Specific goods are	goods in existence and agreed upon as the subject matter of the sale.
Unascertained goods are	goods that have not yet been set aside and agreed upon as the subject of a sale. They can be future goods (that is, goods which have not yet been manufactured) and can include any goods that satisfy the contractual obligation
Rule 1 Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment, or the time of delivery, or both, is postponed.	According to this rule, when the sale involves a specifically identified and finished item, the proprietary interest transfers to the purchaser at the time the contract is made. For example, if you have just paid for a shopping cart full of items, and leave them in the store while you go get your car, title and risk have passed to you and you will bear the loss if anything is stolen from the cart.
Rule 2 Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has received notice.	An example of this rule would be where you leave a ring you have just purchased with the jeweller, to have it polished and sized. Title to the ring does not pass until the jeweller has polished and sized the ring, and notified you that the work is done.
Rule 3 Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining their price, the property does not pass until such act or thing is done and the buyer has received notice.	This rule is similar to Rule 2, but in this case, there is an evaluative process to be done, such as measuring soil to determine how many yards the pile is, or measuring the number of yards of a bolt of fabric you are purchasing at $2 a metre
Rule 4 When goods are delivered to the buyer on approval, or on “sale-or-return” or other similar terms, the property passes to the buyer under the following circumstances: • when the buyer signifies his or her approval or acceptance to the seller or does any other act adopting the transaction; or • if he or she does not signify approval or acceptance to the seller but retains the goods without giving notice of rejection, and then, if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time, and what is a reasonable time is a question of fact.	This rule covers situations where goods are taken home “on approval.” For example, if you buy a suit to wear for your brother’s wedding but need it to be “approved” by his fiancée, and you are told you have three days to return the suit if necessary, if you then keep the suit for a week, or wear the suit, risk and title have passed to you. By wearing the suit, you implied acceptance of the contract, and title also would have passed after the three-day return period was over.
Rule 5 Where there is a contract for the sale of unascertained goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. If, pursuant to the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right to disposal, he or she shall be deemed to have unconditionally appropriated the goods to the contract.	This rule covers goods that have not yet been manufactured, or goods that exist but have not yet been separated out and identified as being the subject of the sale. Unconditional appropriation occurs when the goods are in such a deliverable state that the seller can no longer change his or her mind and deliver a different set of goods. For example, if a mechanic replaces a motor in a car, once the physical labour is completed and the motor is installed, even though the car has not been picked up, the motor will have been unconditionally appropriated to the contract.
The five rules	Rule 1 – Unconditional contract – title transfers immediately Rule 2 – Seller required to do something to put goods in deliverable state – title transfers when task completed and notice is given. Rule 3 – Seller required to ascertain price – title transferred when purchaser notified Rule 4 – Goods delivered subject to buyer’s approval – title passes when approval by acceptance is signified or a reasonable time has passed Rule 5 – When goods are not manufactured or identifiable as goods in question, title passes upon unconditional appropriation and assent.
A condition under the sale of goods is	an essential term of a contract. A breach of condition relieves the injured party from any further duty to perform the contract. If the harmed party decides to continue with the contract in spite of the breach of condition, this party will be entitled to damages as if there were a breach of a warranty.
A warranty is a	non-essential term, the breach of which does not relieve the injured party from the bargain; he or she must perform his obligations under the contract but can sue for damages suffered. For example, title to the goods, which is a condition, must be free from any encumbrances, which is a warranty issue.
there are four main areas in which terms will be implied into contracts of sale:	• the seller’s title • sale by description • the fitness and quality of the goods and their merchantable quality • sale by sample
Acceptance causes victims of breach to	lose right of discharge
Regarding title, it is a condition on the part of the seller that he or she has the right to	sell the goods, or that he or she will have the right to sell the goods when title passes. The Act implies a warranty that the buyer will have the right to quiet possession and that the goods will be free from any charges or encumbrances in favour of a third party not declared or made known to the buyer at the time of the contract. If there is a lien on goods, the buyer would be entitled to damages in the amount of the lien and the costs to remove it.
Where a contract is for sale by description, there is an implied condition that the goods will	correspond to that description. Most manufactured goods are sold by description. The manufacturer has produced many identical, essentially indistinguishable items, so the purchaser relies on the general description given by the manufacturer as to what those goods look like and what they can do. Internet sales and mail order goods are also often sold by description. The word description applies to a generic characteristic of the goods and does not include words of praise, such as superior.
It is implied that goods will be fit for the purpose they were purchased for when the following four criteria are met:	1. The buyer communicates expressly or by implication to the seller the particular purpose for which he or she requires the goods. 2. The buyer makes it known that he or she is relying on the seller’s skill and judgment. 3. If the buyer buys by a trade or patent name, the buyer is relying on his or her own judgment and the seller is not liable. 4. The buyer contracts for goods that are in the seller’s course of business to supply.
Goods must also be of merchantable quality; in other words	they must be free from any defects that would suggest to the buyer not to buy them without a reduction in price
Goods must also correspond with the sample. In the case of a contract for sale by sample, there is an implied condition that	the bulk shall correspond with the sample in type and description. The buyer is obligated to inspect the sample. If there is no inspection, the buyer is deemed to be aware of defects that would be apparent on a reasonable examination. This implied condition would be very handy if a large amount of paint was purchased and it turned out to be very different from the test sample viewed.
While it is possible to have an exemption clause in a contract, most consumer products in Canada come with a	non-excludable statutorily implied guarantee of fitness and merchantability, despite the product warranty that comes with the goods.
The law varies somewhat between provinces, but in most jurisdictions a dealer may exempt out of some of the conditions and warranties under the Sale of Goods Act (but never title) if any of the following conditions apply:	• the goods are used • the goods are sold to a purchaser for resale • the goods are sold for business use • the goods are sold by a trustee in bankruptcy or liquidation
The Sale of Goods Act may be exempted for private sales. Without an exemption clause, the Sale of Goods Act	applies. An exemption clause must precisely cover the type of liability disclaimed; if it says “all warranties implied are excluded,” then conditions still apply.
An exemption clause may not apply if there is a	fundamental breach, which is a breach so serious that it amounts to non-performance of the contract.
The courts will also not uphold exemption clauses that eliminate any liability where the goods delivered are substantially different from those contracted for, or	where the seller does not have the right to transfer clear title to the buyer
An exemption clause will not cover a situation where the buyer has been deprived of	the essential subject of what he or she bargained for.
A lien is	the right of the seller to refuse to deliver the goods that are the subject matter of the contract until payment is received, even if title has transferred. The goods are the seller’s security for the buyer’s performance. There is no right of lien in case of a sale on credit, as the seller will no longer have possession of the goods. The right of lien exists only as long as the seller retains possession of the goods. Once the seller has given up possession, the seller cannot retake possession in order to assert a lien.
If the seller has only delivered the goods to a carrier, the seller may exercise the right of	stoppage in transit. . This is the right of the seller to order the carrier not to deliver the goods to the buyer. However, the seller may only exercise this right if the buyer has become insolvent; he or she may not exercise it for late payment, for example.
Under certain conditions, the Bankruptcy and Insolvency Act allows the seller to ask for	repossession of goods if the seller has not been paid in full by the bankrupt or insolvent debtor. This demand must be made to the trustee in bankruptcy or receiver within 30 days of delivery of the goods; the goods must relate to the debtor’s business, still be in the debtor’s possession, be identifiable, and be in the same condition as when sold. If all the required criteria are present, the seller will have priority to the goods over all other creditors.
A seller may also retain a deposit, if it is	a true deposit and not a penalty
A deposit represents the amount of damages that	the seller will suffer as a result of the buyer’s breach
down payment is considered the first payment of a purchase, whereas a deposit is a	genuine estimate of anticipated losses should the contractual terms not be fulfilled
A buyer may use the remedies available for breach of contract previously discussed, such as	claiming damages, discharge of the contract, and rescission, as well as specific performance
Consumer transactions involve	goods or services purchased by individuals for personal use and not for resale or for business purposes.
The mission of the competition bureau is	The mission of the competition bureau is to protect and promote competitive markets and enable informed consumer choice in Canada. It is an independent law enforcement agency that administers and enforces the Competition Act

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6 Special contracts: Sales and consumer protection

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