Commercial Transactions
**Bring SGA and CPBPA to class**
Rowntree, Lenore (call her Lenore)
o Think about fairness in case (“is it fair what this side is arguing?”)
o Often no way to reconcile cases – tensions between cases, some don’t say the same thing
o Most commercial cases going to BCSC are $200,000+
o Case Book doesn’t reflect the reality of today’s practice
o Note: pp. 441-448 OMITTED
EXAM:
o 2-3 Qs on exam
o There will be an extra Q for those who didn’t write paper
o Don’t have to write citation of SGA on exam.. :S
o Underline case name
o Eg. Your client is Janice Pubtree – doesn’t mean you have to just advise her BUT also talk
about the other side and anticipate what it might argue.
o Might be short-answers: what are the 4 things you need to put in a buyer’s K to satisfy his needs?
o Not all cases reconcile – just take the case that assists your position, then take opposite case and
say why it shouldn’t apply when the other side argues it
Sale of Goods Act
o Stable Act – has remained the same over centuries
o Learn how to read a statute and apply it to a fact pattern
o Asset purchase transaction = includes real ppty and personal ppty and IP
Midterm Paper
o Due day after reading week is over
o Succinct argument, don’t have to include all issues of what’s wrong with the legislation
o Practical paper – don’t take a case and analyze it and compare it with the statute etc
o Has to be from the desk of a commercial lawyer
o Can be an argument for the reform of one or more aspects of ANY commercial statute (eg. SGA,
PPSA, ITA) – CAN just look at the SGA if you want but other(s) too OR you can argue why
there shouldn’t be reform
o Prof cares about spelling, grammar
o DUE WED FEB 28!! Change
o Eg. You can propose that you should abolish the SGA altogether
o Can be form of a Memo to eg. The AG, a newsletter to a commercial lawyer
o Or you can tackle more than 1 piece of legislation and say that the SGA doesn’t work together
with the PPSA
o Or you can talk about a certain area where there isn’t a lot of statutory protection but there
should be
o She looks for beginning, middle, end – brief intro, the things I will explore in this paper are 1, 2,
3… Middle part – explanation/content… Conclusion/recommendation
Exam:
o Will all be stuff that has been raised in the class, no surprises
o If you don’t want to write paper, can write an extra exam Q
I. INTRODUCTION
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o Sale laws provide framework for regulation of commercial relationships involved in a mass
production and consumption society
Sale of Goods Act:
o SGA passed in British parliament in 1893 – BC statute very similar to British ancestor
o SGA is not comprehensive – must look at other acts
o SGA is not a Code – you can’t say that it’s the code of commercial law in BC b/c you have
to add other statutes to get a complete kit of what is commercial law (ie. PPSA, Banking Act,
Competition Act, LTA etc etc)
o Reform in Canada – focus on consumer level transactions
o SGA codified the CL
o Bank of England v. Vagliano Bros (Lord Herschell) on statutory interpretation: must take
“natural meaning”
o No recognition of equitable title in SGA – BUT buyer of future goods obtains an equitable
interest in the goods when they come into existence
o Pre-1893 is before there was a SGA
o The Act that was put in place in England in 1893 is the Act that was adopted in all CL
countries/states (except Scotland)
o SGA is primarily a statute about formation of Ks
Examination of SGA:
o “Buyer” means a person who buys or agrees to buy goods – no def’n of what is a person (look at
Interpretation Act for def’n of person)
o Person = person, corporation, joint venture, partnership etc
o “Seller” means a person who sells or agrees to sell goods
o This Act works for consumers too but consumers are given the additional remedy of going to
the BPCPA
Examination of BPCPA:
o “Consumer” means an individual who participates in a consumer transaction
o “Consumer transaction” = a supply of goods/services/RP by a supplier to a consumer for
purposes that are primarily personal, family or household
o This is not for business; only for your house
o “Supplier” means a person who in the course of business participates in a consumer transaction
o This Act doesn’t work for me if I sell you my car and you don’t like it – you’re stuck with the
SGA
II. THE CONTRACT OF SALE OF GOODS
Transaction
a) Sale of Goods 
Document
Sale of Goods K
b) Buying & selling a
business 
1. Asset Purchase K
o Can have in it all or any
of personal ppty, real
ppty, IP and intangibles
2. Share Purchase K
o Talks about the transfer
Nature
o Personal ppty
o Low value Ks
o Personal ppty
o Real ppty
o Intellectual ppty
o Intangibles (eg.
Goodwill)
o Shares
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c) Financing
of shares
o This type of agreement
is more common –
vendors prefer to sell
shares for tax reasons
o Land Mortgage
o General Security
Agreement etc
Security (not examinable)
Pre-1989

o
o
o
o
o
Most lenders want security on
everything (intangibles, accounts
receivables, personal ppty)
1 a) Mortgage of lands
1 b) Chattel Mortgages (series)
1 c) Assignment of Book Accounts (the
assignment of the accounts receivables
– ie. the things that other ppl owe a
business)
2) OR Debenture (ie. put a debenture
into the LT system and get it registered)
Sale of goods on condition – lease to
buy – sale of goods on the condition
that they’re paid out over time
o Promise to pay
Current Situation (Post-PPSA) PPSA
changed the way financing was structured
 1 a) General Security Agreement
(GSA), (referred to in PPSA)
o 1 b) Mortgage of Land
o 2) Debentures (aka Trust Deeds, very
rare) – they’re for mega deals, multijurisdictional
A. The Concept of “Goods” in the SGA - SGA s. 1 “goods”
“Goods” includes a) all chattels personal, other than things in action and money
 No def’n of chattels
o Things in action = choses in action: litigation (things that are in legal action, legal action,
mortgages etc – not physical)
o This means if you try to sell hot litigation or judgments to someone and things go wrong you
can’t go to the SGA for a remedy
o Note: a share is a thing in action (b/c it gives you the right to litigate in a company)
b) growing crops, whether or not industrial, and things attached to or forming part of the land that
are agreed to be severed before sale or under the K of sale
o This includes trees, not just crops
o What about software? Is it a good? The SGA doesn’t address modern things like electronics etc.
o PPSA defines goods:
o “goods” means tangible personal ppty (ie. chattels) and includes fixtures and crops
 Does NOT include chattel paper (ie. promise to pay, security interest in specific
goods, shares, package of mortgages), document of title, an instrument, security,
money and trees other than crops. Eg. If I’m a lender and I sell you some mortgages
and they turn out to be no good, you can’t go to the SGA b/c they’re not goods.
 If you look up the def’n of all of those things, in total they all add up to things like
cheques, accts receivable, mortgages
Fact Pattern:
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o Client lives in a condo, age 3. Communal water boiler is broken. There is hot water all over the
basement, nobody has hot water. What can you do?
o Facts: Would be a fixture, not personal chattel but common ppty so should probably bring
action as the strata corp. Must find out about warranty (going after manufacturer is useless).
If the developer still owned a few units in the building you can go after him.
Marshall v. Green Pre-1893 – s. 1 of SGA intends to codify the ratio of this case
Facts: P leased ppty with timber trees on it. P entered into negotiations with D to sell the trees to D
– they orally agreed on number and price of trees and started cutting down. After some trees had
been cut down, the P changed his mind and wrote to the D countermanding the sale. If there was a
valid K, the P’s claim must fail.
Issue: Was this a sale of goods or a sale of land? (If it’s sale of goods, the D wins, if it’s a sale of
land the P wins b/c the sale isn’t in writing.)
Held: The K was for the sale of goods, not for the sale of an interest in land – for the D
Reasoning:
o Was this a K for “sale of lands, tenements, or hereditaments, or any interest in or concerning
them”?
o Duppa v. Mayo: “… wherever at the time of the K it is contemplated that the purchaser should
derive a benefit from the further growth of the thing sold from further vegetation and from the
nutriment to be afforded by the land, the K is to be considered as for an interest in land; but
where the process of vegetation is over, or the parties agree that the thing sold shall be
immediately withdrawn from the land, the land is to be considered as a mere warehouse of the
thing sold, and the K is for goods.”
o Test – No interest in land: if the natural product sold is to be delivered/picked up at once, then
the buyer is to derive no benefit from the land and the K is NOT a K for interest in land
o Test – interest in land: if the natural things sold were intended to remain in the land for the
advantage of the purchaser and to derive benefit from so remaining, the subject matter of the K
is an interest in land
o Note: under Statute of Frauds (Law and Equity Act), the sale of land requires evidence in
writing
Ratio: K for sale of a growing thing (eg. Trees, fruits, corn) is not a K for sale of any interest
in land but merely for the sale of goods. A K of sale for crops and growth of the earth
produced by labour and industry (fructus industriales), while they are still growing, is not a K
for the sale of any interest in land, but merely for the sale of the goods. If growth is wild
(fructus naturales), the distinction is made at the time K is entered into whether the thing is to
be harvested now (goods) or later (land).
Note:
o This case is outdated – there’s a historical basis for it but it’s no longer right
Fredkin v. Gliens - 1908
Facts: P purchased crop of grass from D’s land to turn into hay. Dispute whether he had bought
natural grass (would be land) or hay (would be good).
Issue: Was the K for sale of the grass an interest in land or for sale of goods?
Held: Sale of goods
Reasoning:
o Goods includes “emblements [cultivated crops], industrial growing crops, and things attached to,
or forming part of, the land which are agreed to be severed before sale, or under the K of sale”
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o If growing trees or natural grass is sold for purpose of being cut/taken away pursuant to a K 
they are goods (there is no time limit for this to take place)
o There was a K for the sale of the grass + right to go upon the land to cut it (implied condition
and warranty)
o Intention of P was to purchase the grass; intention of D was to sell the grass
o The rules of the CL are preserved only if they are not inconsistent with the express provisions of
the Act (s. 73 of the SGA) the CL is gone (Marshall v. Green is dead) EXCEPT to the extent
that it’s not inconsistent with the express provisions of the SGA
Ratio: Intention of parties was for K of sale of goods, not interest in land. The CL only lives in
so far as it isn’t inconsistent with the express provisions of the SGA (now s. 73).
Note:
o Look at last para – relates to a section of the SGA
o S. 73 of SGA – CL only is preserved to the extent that it’s not inconsistent with the express
provisions of the SGA
o S. 36(2), 36(4), 37, 38(2) – note the language here, “unless otherwise agreed” etc
o If the parties wanted to put the law of Marshall v. Green into their K, they CAN – they can put
whatever they want into their K and it will override the SGA
o The CL is trumped by the SGA BUT the SGA is trumped by what the parties agree to
o Anything that has to do with private contractual rights will allow you to come to another
agreement
Carlson v. Duncan
Facts: R’s predecessors entered into agreement with A’s predecessors to cut timber on A’s land.
Predecessors had as much time as they wanted but never exercised the right. A wanted an injunction
but didn’t get it – TJ held that the interest had been for chattels and gave right to go claim them.
Heriling (former owner) sold to Carlson (appellant). Heriling contracted with Kelliher for timber
rights to Kelliher. Kelliher’s heirs quit claimed (but this quit claim wasn’t registered). Duncan is the
respondent. Carlson argues the interest was one in land, not good; Duncan says no it was an interest
in a good.
Issue: Is the predecessors’ agreement an interest in land or agreement for sale of goods?
Held: Interest in land, not sale of goods
Reasoning:
o The land here was not a mere warehouse for the trees – the trees were not immediately
withdrawn (the parties had an indefinite time to withdraw the trees)
o Timber is within def’n of “goods” in s. 2 BUT the agreement did not state that the timber should
be “severed before the sale” nor “under the K of sale”
Ratio: The agreement here gave the right to enter upon the land for an indefinite period of
time to claim the trees. The land was not a mere warehouse so there was no sale of goods but
an interest in land.
Note:
o “goods” – b) growing crops.. things attached.. to the land agreed to be severed 1) before 2)
under a K of claim
o Quit claim = document affecting land. In order for the quit claim to be effective, it would have
to be registered in the LTO.
o A doc used for people who might have some ownership interest (it wasn’t clear who owned
Blackacre). Quit claim = I quit my claim and give up my rights to the ppty.
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o Kelliher had an interest in land (a timber registration, which is a registrable interest in the timber
on the land)
o Prof says the lesson here is when you’re drafting a K, make sure to read the statute and adhere
to the def’n of “goods” and be clear that it’s an interest in land, not goods
o Also, when you quit claim, make sure you put it in the LTO
Eg. Guy who found meteorite on crown land and sold it off to 3 different buyers:
o Issues: Is the meteorite a good or is it land? Does it belong to the guy?
o He found it on the frozen lake – isn’t that the Crown’s?
o What kind of K are we going to make here?
o Maybe it’s not a “good” but it may be an item we can make a K for.
B. Sale Distinguished from Other Transaction
o a) Service K (K for labour & material) – you hire somebody to use their skills to build
something for you
o b) Lease of Goods
o c) Agency/Consignment K
SGA s. 1 “sale”, “property” & s. 6
o In BC the SGA covers not only the sale of goods but also some leases
o S. 14(2) SGA: vendor is under an implied obligation to warrant to his purchaser the quality of
his goods against latent and patent defects
1. Sale of Goods or K for Labour and Materials (Service Ks)
o If you’re trying to decide whether something is a sale of goods OR Service K: balancing act
o What is the predominant thing happening? Is it the work that’s being sold or the thing that
you’re getting at the end?
o Eg. Lawyer working on a will – it’s the thinking that you buy, not the 6 pieces of paper. If a
lawyer sells you a will and it’s terrible, you can’t sue under the SGA but for breach of K &
negligence (will fell below standard of care). It could also be a disappointed beneficiary suing
under the will – they can’t sue under K (no privity) but they can sue under negligence.
o Just b/c something is a service K and it doesn’t fit under sale of goods, it doesn’t mean you’re
out of luck, but you would just have to resort to another action.
o Difference between bringing sale of goods action and breach of service K action: once you fit
yourself under sale of goods, it’s strict liability.
o Eg. If a carpenter were hired to make you a coffee table, at the end of the day the thing being
bought would be the coffee table. So if the table breaks and hot coffee spills on you and your
guests, you can sue the carpenter b/c the thing wasn’t fit for its purpose.
o Service K has the due care & skill test
o Other issues: when do I actually own the good (when does title pass to me)?
o Under a service K, you can NEVER get the remedy for specific performance (ie. can’t order the
lawyer to write a good will) but there IS specific performance under sale of goods (ie. the
carpenter might be ordered to build a better coffee table).
Robinson v. Graves [1935] CA
Facts: Gentleman commissioned a portrait of himself from an artist – he didn’t like it. Gentleman
wanted it to be determined a sale of goods, not a service K.
Issue: Whether a person commissioning a portrait from an artist is a bargain for a good under s. 4 of
the SGA? No.
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Held: Not a K for sale of goods but K for work and labour and materials
Reasoning:
o The painting of a portrait would not be deemed a purchase and sale of that which is produced by
the artist – but an undertaking by the artist to exercise such skill as he was possessed of in order
to produce for reward a thing
o An artist using his labour to create a piece of art – this is not a K for sale of a good but a K for
work and labour
o Must look at each individual case separately: just b/c labour is involved doesn’t mean that it’s
automatically a K for work and labour and not a K for sale of goods
o In this case, there was an agreement for the exercise of skill and it was only incidental that some
materials (ie. parchment, paint) would pass from the artist to the purchaser
o Thus, not a K for the sale of goods within s. 4 of SGA but K for work and labour and materials
o Balancing Test: balancing of labour vs. materials - in the case of a work of art where the
application of skill and labour is of the highest description and the material is of no importance
as compared with the labour, it will be service K.
Ratio: The K was for the artist’s work and labour and the materials used to create the
painting – the painting was only incidental to the work/labour. Thus, it was a K for work and
labour and not a K for the sale of a good.
Note:
o The appeal ct here started awarding damages even though there weren’t submissions on it
Gee v. White Spot (1987), BCSC
Meal purchased in a restaurant is goods.
Facts: The P claims he suffered botulism after eating at the D’s restaurant.
Issue: Is the purchase of a meal from a restaurant a K of sale? Is the meal a “good”? Yes. If this is a
K for sale of goods, then there’s an implied warranty that the good is fit for purpose.
Reasoning:
o “Goods” includes all chattels personal and “sale” is sale and delivery
o Sale of items of food is a K for sale of goods
o When the P purchased the food he impliedly made it known to the D that he would consume the
food and relied on the D’s skill and judgment in the preparation of it. The K includes an implied
warranty that the food would be reasonably fit for human consumption
o “In order to come within a SGA, a K need not be one exclusively for the sale of goods.”
o An offering for a menu item at a fixed price is an offering of a finished product and is primarily
an offering of the sale of a good, NOT sale of services
o Primary purpose for being in the restaurant is to consume food/meal – so it’s a sale of goods
o Balancing act: the primary purpose is for the sale of goods
Ratio: Consumption of a meal in a restaurant is a K for sale of goods – the labour involved is
only incidental to the purchase of the food item so it’s not a K for sale of services. The test is a
balancing act: labour/service vs. a good/product/material.
Note:
o This is not trial – only a preliminary application to determine a Q of law arising out of the
proceedings
3. Sale of Goods or Lease or Hire-Purchase K
o Hire Purchase K = is a conditional sales agreement
o Lease of Goods:
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o
o
o
o
o i) Lease to Purchase (mandatory that you buy it at the end of the day) – s. 1 “contract”, s.
6(5)(b)
 An agreement to sell
 S. 6(6)- an agreement to sell becomes a sale when the time elapses or the conditions
are fulfilled
o ii) Lease to Purchase (don’t have to buy at end of day - optional)
 Consumer transaction – s. 1 “lease”, s. 15-20
S. 1 “lease” – falls under the SGA if it’s primarily for family or household purposes
Any lease will fall under the SGA if it’s for personal or family purposes
Ss. 15-20 of SGA:
o  “If a K of sale or lease of goods…”
o Lease has very limited application but it does exist in the SGA
o Re: if you’re acting for a client who is in the business of lease purchase for consumers to
households, if you’re making up the lease to purchase (optional or not), those lease to
purchase are going to be impacted by ss. 15-20 of the SGA; they will have those conditions
implied into them
But for commercial transactions, if it’s not a lease within def’n of SGA (ie. for commercial
purposes) and it’s an optional purchase, it does not fall within the SGA
Lee v. Butler [1893] CA
Facts: Mrs. Lloyd agreed to buy furniture (hire and purchase agreement – ie. a lease to purchase)
from the owner. She then sold the goods to the D without notice that they were not hers and the D
received them, without notice that they were the P’s.
Issue: Is this an agreement for purchase? Yes. (she has to buy it, no option)
Reasoning:
o This case falls within the “disposition by sellers and buyers of goods” section
o The agreement was an agreement for purchase
o S. 9 of Factors Act says that if someone receives goods without notice that they are not the
seller’s, they shall be owner of them as though they had been sold by the true owner’s.
o Translation: Mr. Butler, having received these goods in good faith, and without notice of any
lien, he is entitled now to assume that he got possession of these goods as if the original owner
had consented to this transfer
o There was nothing discretionary about this – Mrs. Lloyd at the end of the day HAD to buy this
furniture (lease to purchase, mandatory) so it is a K for the sale of goods
Ratio: Where you have a mandatory situation, you have a lease to purchase, which is
mandatory and which is a K for the sale of goods. Parties can call a lease, but law looks
behind K to see whether it really is a lease or not. Hire payments actually part payments
under a conditional sales K.
Note:
o The Factors Act is now part of our SGA
o Def’n of “factor” = a commercial/mercantile agent who takes goods and sells them for you (ie.
pawnbroker, used clothing salesperson).
Helby v. Mathews [1895] HL
Facts: The appellant owned a piano and loaned it to Brewster who inappropriately pledged it as a
security to a pawnbroker. The pawnbroker said they had received the piano from Brewster in good
faith and w/o notice of the appellant’s claim. Helby brought an action in trover (theft).
Issue: Is this an agreement to sell or is it a lease of goods that doesn’t fit under the sale of goods?
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Held: This is a lease
Reasoning:
o If Brewster had agreed to buy the piano, the parties cannot, by calling it a hiring, escape from
the consequences of the K they entered into
o Brewster had loaned the piano and paid the appellant a monthly fee for its use for as long as he
kept the piano it cannot be said that this he did or agreed to buy the piano
o It was up to Brewster whether he wanted to keep leasing the piano or not – he could change his
mind and thus the intention to purchase was not made out K of hiring only
o It was a K for the seller to sell and a K by the purchaser if he doesn’t change his mind – this is
an OPTIONAL option to purchase – if Brewster was to continue making monthly payments, the
piano would have become his
o An agreement to buy imports an obligation to buy which did not exist in this case – Brewster
was not under an obligation to buy the piano – the arrangement was more of a lease.
o S. 9 does not apply – “A person who is in possession of a piano… is no more its apparent owner
than if he had merely hired it, and in the latter case any one taking it as security would have no
claim to hold it as against the owner.”
o This case is distinguishable from Lee v. Butler
Ratio: There is an OPTIONAL option to purchase, not mandatory. It is at the discretion of
the person hiring (leasing). In this case, Mr. Matthews has to return the piano (whereas in Lee
v. Butler, Mr. Butler got to keep the piano). An agreement to buy imports an obligation to buy.
In order for s. 30(3), SGA to apply to confer title to an innocent purchaser w/out notice, the
purchaser must buy the goods from a person in possession of the goods in question who has
bought or agreed to buy the goods from a seller. If the person who sells the goods to the
innocent purchaser did not buy or agree to buy the goods in question from the owner and is in
possession for some other reason – i.e. under a lease agreement (or a hire purchase
agreement), bailment etc. this section will not apply to protect the innocent buyer.
o Obtaining possession of property in consideration for monthly payments, which if continued for
a certain period would result in a true sale is not a sufficient agreement for sale if the person
making payments can cease to do so at any time, returning the property to the owner. Such an
agreement is more akin to a lease.
Note:
o Crucial diff from Lee v. Butler, where payments were required under K: altho monthly
payments that would pass title at the end, and intention of all that title would pass, here,
lessee could opt to cut K off and not make payments—therefore it can’t be said that the
essence of K was to pass title under the K, i.e. passing of title was only likely, and not
certain, there was no legal obligation to buy. At the relevant time, no guarantee that
property would eventually pass.
4. Agency Ks for Sale, Consignment Ks, and Ks of Sale or Return
 1) A true consignment is NOT a sale of goods: what it involves is a seller (consignor) who
owns some goods
o The only K formed in a true consignment is between the seller and the buyer (not the
middleman consignee)
o Eg. A stockbroker will sell stocks from the Seller to the Buyer but he is only the middleman
and he does not make any reps and warranties
 2) Sale of goods, Consignment. Intended as security.
o Here there is a sale to an apparent consignee who then has a sale to the buyer
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o Eg. Car brokers are in this category – I give my car to the car broker under a K of sale, the car
broker now owns that car and then resells it. If there is something wrong with the car, he can sue
me for a lousy car. If the Buyer discovers the car is crap, he can sue the broker who can sue me.
o I can take this K and register it in the PPSA b/c my security is the car itself and I want to be able
to trace it if I never get paid for it. Really what I’ve entered into here in addition to a sale of
goods K is a security agreement.
o Seller Ks w/ Consignee
o Consignee Ks w/ Buyer
Re Stephanian’s Persian Carpets (1980) Ont SC (consignment case won’t be on exam)
Facts: Anglo consigned to Stephanian. The fight here is going on between Anglo and Stephanian’s
Trustee in bankruptcy. The bankrupt has 14 rugs in possession that Anglo had provided to it. The
bankrupt sold oriental rugs on a retail basis; Anglo sold rugs on a wholesale basis and supplied rugs
to the bankrupt for sale. Anglo has not registered its interest in the rugs under PPSA.
Issue:
1) Were the 14 rugs sold or consigned to the bankrupt?  No sale.
2) If the rugs were consigned and not sold, was such consignment intended as security under
PPSA?
Reasoning:
o Consignment is the sending of goods to another – one party will sell them to a third party and
then remit the profits to the other party
o If the rugs had been sold, they belong to the Trustee in bankruptcy
o Here there was no obligation for Stephanian to pay for the rugs until they sold it to a 3rd party
o From the language of the agreement between the bankrupt and Anglo it can be inferred that
there was no sale of the rugs
o Anglo was able to expose its goods for sale at the bankrupt’s premises – the bankrupt profited
from this by having his cash flow problems minimized
o The second Question the Court asked is whether this is a True Consignment or a sale of goods
involving a “consignment intended as security”
o If it’s a true consignment, then there was only a K for Sale of Goods between the Seller
and the End Buyer (not Stephanian)
o The Trustee wants it to be a sale of goods AND also a security – ie. there would be no
payment until the rugs are sold but as soon as they’re sold they will be a binding sale and
the security that the vendor took should have been registered in the PPSA registry. If he
didn’t register it then the Trustee will be first in line to take the money.
o In a Consignment intended as security situation there are always 2 Ks: a K between
Seller and Trustee and the Seller and the End Buyer (but we never got there b/c the rugs
were never sold)
o The court concludes that this was NOT a sale of goods in any way – not outright NOR
involving security it was a True Consignment and Stephanian was simply holding it as
a middleman and therefore the rugs should go back to the Seller, Anglo
o The unsold rugs remaining in the inventory do not provide any security to Anglo
o The legislature did not intend for all consignment agreements to be intended as security –
security cannot be implied as a condition
o The arrangement with Stephanian gave Anglo a method to market its products – it was NOT an
consignment intended as security the whole reason they set up the arrangement is b/c
Stephanian didn’t have the money to BUY the rugs from Anglo, so it took them into
consignment
11
Ratio: This was a consignment, not a sale. It was not intended as security within the meaning
of s. 2 of the PPSA. Thus, Anglo does not receive security from the rugs.
C. Elements of the Contracts
1. Common Law Preserved – SGA s. 73:
o Most sales transactions are governed by the rules of K, including offer & acceptance (Note: the
SGA does not restate basic rules of K)
o 73 (1) Except so far as they are inconsistent with the express provisions of this Act, the rules of
the common law, including the law merchant and in particular the rules relating to the law of
principal and agent and the effect of fraud, misrepresentation, duress or coercion, mistake or
other invalidating cause, continue to apply to contracts for the sale of goods
2. Capacity – SGA s. 7
Capacity to buy and sell
7 (1) In this section, "necessaries" means goods suitable to the condition in life of a person, and to
the person's actual requirements at the time of the sale and delivery.
(2) Capacity to buy and sell is regulated by the general law concerning capacity to contract and to
transfer and acquire property.
(3) Despite subsection (2), if necessaries are sold and delivered to a person who because of mental
incapacity or drunkenness is incompetent to contract, that person must pay a reasonable price for
them.
3. Formalities – SGA s. 8 (Prof: important)
Contract of sale
8 (1) Subject to this or any other Act, a contract of sale may be made in writing, either with or
without seal, or by word of mouth, or partly in writing and partly by word of mouth, or may be
implied from the conduct of the parties.
(2) Nothing in this section affects the law relating to corporations.
Note:
 You can have a written K or a K by word of mouth – word of mouth K is risky b/c no evidence
 Most commercial Ks are written
 All Ks have: 1) parties, b) Consideration (price), c) Terms/Types of obligation, d) Executed
4. Price – SGA ss. 12 & 13
 S. 6(1) a K of sale of goods is a K by which the seller transfers or agrees to transfer the ppty in
goods to the buyer for a money consideration, called the price
 Price = money consideration
 S. 12(1) – the Price in a K may be a) set by K, b) left to be set as agreed in the K, or c)
determined by the course of dealing between the parties.
12

The SGA is saying you don’t have to set a clear price in the K – we can let it be a matter of
reasonableness BUT in K law courts will often find a K voidable for uncertainty if price is not
defined
12—Ascertainment of price
 (1) Price in a K of sale may be:
o (a) set by the K
o (b) left to be set as agreed in the K, or
o (c) determined by the course of dealing b/w the parties
 (2) If price is not determined in accordance with sub(1), the buyer must pay a reasonable price
 (3) What is a reasonable price is a q of fact dependent on the circumstances of each case.
13—Agreement to sell at valuation
 (1) If there is an agreement to sell goods on the terms that the price is to be set by the valuation
of a 3rd party, and 3rd party cannot or doesn’t do so, the agreement is avoided
 (2) If goods or any part of them have been delivered to and appropriated by the buyer, sub(1)
doesn’t apply and buyer must pay a reasonable price for the goods
 (3) If 3rd party is prevented from making the valuation by the fault of the seller or buyer, party
not in fault may maintain an action for damages against party in fault
Montana Mustard Seed Co. v. Gates (1963) Sask. Q.B. (s. 12(3) SGA)
Facts: The P, a dealer in mustard seed, and the D, a farmer, entered into a K in writing for the
farmer to grow mustard seed for the dealer. The K said that the buyer wanted grade 1 seeds but the
seller grew mostly grade 3 seeds that year. A clause in the K said: we’ll sell you all the seed for a
certain price but then later the K said we’ll sell you only grade 1 seed.
Issue: Is it a K for all of the seed at an undetermined price for the court to determine OR should the
K be held void for uncertainty?  not void.
Reasoning:
 The SGA assumes that it is always possible to determine what is a reasonable price
 On reading the K, it is apparent that there was a K to buy/sell the farmer’s entire crop
 There was no agreement on price but by this condition alone, the K cannot fail – the doctrine of
reasonable price applies
 The buyer had a K for all of the seed at a reasonable price
 An agreement to agree is not a K (ie. I’ll sell you my seed for a price we’ll agree upon), it is not
the law that the mere difficulty to determine what is the price renders a K void. It is always
possible to determine a reasonable price – here there was a K to sell the ENTIRE crop of
mustard seed
 S. 12(3) says what is a reasonable price is a Q of fact dependent on the circs of each case – the
K is not void for uncertainty
Ratio: Looks at entirety of K and parties’ intentions to determine existence of the K. K not
held void for uncertainty b/c of uncertain price but court inferred a reasonable price,
pursuant to s. 12(3) of SGA.
5. Categorization of the Subject Matter of Contract
 Existing vs. future SGA s. 9:
o Goods can be “existing” or “future”
o Goods can also be “specific” or “unascertained” or “ascertained”
13

o S. 1 “future goods” = goods to be manufactured or acquired by the seller after the
making of the K for sale
Goods in SGA can be classified in 2 ways:
o “existing” OR “future”
 s. 1 SGA defines “future goods”: goods to be manufactured or acquired by the
seller after the making of the K of sale
 goods might be in seller’s possession but seller doesn’t own the goods—in this
case this is still “future goods”
 s. 9(3) makes it clear that such a K initially takes effect as an agreement to sell
o “specific” OR “unascertained” or “ascertained”
 If unascertained, then later on the goods in the K will become ascertained
 Goods cannot start out being ascertained. If they are in the K that must mean at
an earlier pt in the K, they were unascertained
 Goods change from unascertained to ascertained WHEN the property passes
 Therefore a K for unascertained goods is an agreement to sell
 Therefore a K for ascertained goods is a sale
 “specific goods” defined s. 1: goods identified or agreed on at time K of sale is
made
 K for specific goods can be an agreement to sell or a sale
 If you know exactly what you are going to get, e.g. this loaf of bread and not a
loaf like this one, then the goods are specific goods
 Significant b/c court can order specific performance b/c the goods are unique
 A used car counts as specific goods (used in a specific way)
 Unascertained goods e.g. I want 100 bushels of oats from your land. Although
from your land it’s not a particular 100 bushels
 When buyer/seller allocates a particular thing to that K, then goods become
ascertained
6. Perished Goods – SGA. ss. 10-11.
Goods that have perished
10 A contract for the sale of specific goods is void if, without the knowledge of the seller, the
goods have perished at the time when the contract is made.
Goods perishing before sale but after agreement to sell
11 If there is an agreement to sell specific goods, and subsequently the goods, without any fault on
the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is avoided.
7. Types of Obligations
SGA:
 a) Condition = an operative fact, one which the existence of some legal relation depends
o S. 15(4) – very nb/ very fundamental – entitles repudiation
o s. 15(4) SGA – a condition is such a fundamental term – SO important, we’re going to
say that a Buyer is entitled to repudiate (terminate, end the obligations), unless the Buyer
has accepted the goods and then he’s only entitled to damages
o s. 15(1) – the Buyer can choose not to treat a condition as a condition but as a warranty
and choose not to repudiate
14
o “Condition” is not defined but from this section it’s clear that it’s a very fundamental
term
o If a term is strictly a condition, this means that its full performance is a CONDITION of
the other party’s obligations; his duties are CONDITIONAL on the performance of the
conditions.
o Options: Repudiation + damages
 b) Warranty = an agreement, collateral to the main purpose of the K
o S. 1 – lesser term, entitles damages
o s. 1 – warranty is “collateral to the main purpose of the K” – not as important as a
condition – the breach does not lead to the ability to repudiate but only to ability to claim
for damages
o Options: damages only
===OR===
 c) “Intermediate”, “innominate” – Hansa Nord, goes to root
o Something BETWEEN condition and warranty – it’s neither – it’s something that goes
to the root of the K
o If it goes to the root of the K you can repudiate + get damages
o If it does not go to the root of the K you cannot repudiate, only damages
 Note: Prof thinks these terms do a disservice to the SGA b/c they’re not defined and the terms
often have double meanings, causing confusion
Written Commercial Ks:
 a) “Covenants” – promise to do (or not to do)
 b) Representation & warranty – reps as to status
o “warranty” here is NOT the same meaning as “warranty” in the SGA
o Statement as to status
 c) “Condition” (precedent) – eg. It is a condition of the K that the buyer must pay for the car on
the day of closing if he doesn’t pay then the condition precedent isn’t met and I don’t have to
meet my end of the K.
o Again, not the same meaning as in the SGA
o Events that must occur before some or all obligations under K come into full effect
 d) “exclusion/limitation”
o eg. “There are no warranties and conditions, express or implied, in this K” this
excludes the SGA from the K
o limits or excludes terms implied by CL, statute etc
o Doctrine of Fundamental Breach – Hunter Engineering
 e) definitions, general provisions
Terms in a written commercial K
Covenants: mostly put up front
- the first few paras are usually the most
important
- cash or certified cheque is the most common
form of payment
-taxes: make sure the K always says who is
responsible for the taxes
-“ad valorem” tax (added value tax) – this is
outdated, bad drafting
Examples in handout K
 “The Seller will sell, and the Buyer will buy,
the Goods on the terms set out in this
Agreement.”
 “The Buyer will pay and satisfy the Purchase
Price by the delivery to the Seller on the
Closing Date of cash or certified cheque in
the full amount of the Purchase Price.
 “The Buyer will pay directly to the tax
authority on closing date all outstanding
taxes.”

15
“The Goods will be delivered to the Buyer on
the Closing date at the Seller’s place of
business…”
“The Seller reps and warrants to the Buyer as
follows…”
“The Buyer reps and warrants to the Seller
that the execution and delivery of this
Agreement constitutes a legal, valid, and
binding obligation of the Buyer and is
enforceable…”
Reps and Warranties
-if you deal with a corp, make sure the person
signing the K has the authority to do so under
its articles
- in a sale of goods K you shouldn’t include
“reps AND WARRANTS” – just say reps (b/c
warrants are less than a condition)

Condition (precedent)
-Usually necessary b/c when the Buyer wants
the option to get out of the agreement between
the time the K is signed and the deal closes
Exclusion/limitation clause

The reps are true on the day the K is signed
and on the day the deal closes…

Definitions, general provisions: if you have
long definitions you should have a def’n
section.

“The Buyer acknowledges the Goods are sold
in working order and that no condition, rep or
warranty has been given by the Seller
concerning the Goods…”
The 2 page handout doesn’t strictly need a
def’n section b/c it’s so short

Leaf v. International Galleries [1950] CA *s. 15(4) SGA*
Breach of a condition or a misrepresentation allows the buyer to repudiate but only w/in
reasonable time.
Facts: Leaf bought a painting from International Galleries – Galleries said it was a painting by a
famous artist, Constable. 5 years later Leaf found out that it wasn’t a Constable. Now he wants to
repudiate the K and get his $$ back.
Issue: Is the buyer entitled to rescind the K on account of the painting not being by Constable? No.
Held: Term was a condition, but “reasonable” acceptance time had lapsed, therefore no repudiation
only damages.
Reasoning:
 This was a K for the sale of goods
 There was a mistake about the quality of the subject-matter (innocent misrepresentation)
 The fact that it wasn’t a Constable was a condition that was breached
 s. 15(4) SGA – once the goods have been accepted, you can’t repudiate the K
 “Such a mistake, however, does not avoid the contract.”
 The term of the K was either a condition or a warranty
o If it was a condition buyer can reject the picture for breach of the condition at any
time before he accepted it.
o If it was a warranty  he can NOT reject it but can only bring a claim for damages
 The term here was a condition – if the buyer had come in proper time, he could have rejected
the picture but once he had accepted it, he cannot thereafter reject the goods in performance of
the K and is limited to a claim for damages
 Bringing a claim 5 years later is far too late to reject the picture – he can only ask for damages
 An innocent material misrepresentation may sometimes lead to rescission, even after a K has
been executed, but not in this case
16
Ratio: Even though this term was a condition, it was treated as a warranty under s. 15(4) of
SGA – he had accepted the goods, it was too late to repudiate the K. Would have been entitled
to damages but never pleaded for damages.
Note:
 The Buyer only wanted to repudiate – didn’t ask for damages (wrong pleadings)
 Prof – SG cases should ALWAYS be pleaded in the alternative b/c you never know if a court
is going to go with condition or warranty or innominate
Cehave NV v. Bremer Handelsgesellschaft – “The Hansa Nord”[1975] CA
TEST – Warranties, conditions and intermediate terms
Facts: The seller, a German company, agreed to sell to the buyers 12,000 tons of US citrus pulp
pellets. There were 2 Ks of sale. On deliver, some of the cargo was found to be damaged. There was
an express clause in the K that said the goods were to be “shipped in good condition.” The Seller
said the damage isn’t their problem – the Buyer should go talk to the insurance company. The
Buyer wants to repudiate the K due to breach of a condition – the condition is that the pellets would
be in good condition and they’re not. The Buyer ended up getting the pellets slightly damaged but
for a much, much lower price than was initially agreed.
Issue:
1. Are the buyers entitled to reject the entire cargo in this case? No (defects not very serious)
2. Is breach of “shipped in good condition” a breach of condition or warranty?
Held: Not strictly a condition or warranty but an intermediate term which gives no right to reject
unless breach goes to root of K
Reasoning - Denning J:
 There was an implied condition as to merchantability in the sales K
 Anticipatory breach: when a party declares he will not perform his end of the K, his declaration
can be breach going to the root of the K
 The breach of a condition can lead to the other party being entitled to treat himself as discharged
 Then look at the extent of the breach – if it goes to the root of the K, the other party is entitled to
treat himself as discharged, but not otherwise
 The term “shipped in good condition” was not a condition strictly so called, nor was it a
warranty strictly so called: it was one of those intermediate stipulations which gives no right
to reject unless the breach goes to the root of the K
 Prof thinks that Denning came up with intermediate term b/c he didn’t want the Buyer to win –
Denning thought he was a crook who concocted the whole deal to pay less
 The breach of an innominate term may discharge the other party if the nature and consequences
are sufficiently serious to justify this result
 The buyers should not have a right to reject the whole cargo unless the breach was serious and
substantial.
 “If a small portion of the whole cargo was not in a good condition and arrived a little
unsound, it should be met by a price allowance. The buyers should not have a right to
reject the whole cargo unless it was serious and substantial.”
Test:
 1) Look to see if it’s a condition? If so, you can repudiate.
 2) If not, it could be an intermediate term, which gives no right to reject unless it goes to the
root of the K.
Ratio: The breach did not go to the root of the K. It was neither a condition nor warranty –it’s
an INNOMINATE TERM. When something is inherently not fair, Js are likely going to try to
find a way to avoid the state of the law as it has been to arrive at the fair result.
17
Note:
 Case about innominate/intermediate terms
 Note court’s attention to fairness and willingness to change the state of the law to arrive at fair
result
8. Implied Terms – SGA s. 69
 Implied terms can go into a commercial K
 You can have terms implied by law – but it can also be negated by the usage of the parties
(usage, dealing etc)
 S. 69: if a term is implied into a K (if you know there is a common custom), you can expressly
negate it or the way the parties are dealing with each other can negate it or the usage of using
the term can negate it (circular logic)
 Terms can be implied into a K on 1 of 3 basis:
o Custom or usage - i.e. past practice, how industry is known to operate;
o Implication of law - i.e. a law puts it in the K, nothing to do with party’s intentions;
o Necessary for business efficacy.
S. 69 Exclusion of implied terms and conditions
 Any right, duty or liability that would arise under a contract of sale by implication of law may
be negatived or varied
o (a) by express agreement,
o (b) by the course of dealing between the parties, or
o (c) by usage, if the usage is such as to bind both parties to the contract.
CP Pacific Hotels Ltd. v. Bank of Montreal (1987) SCC
Facts: CP Hotels’ employee was forging cheques and put them into his personal bank accounts. CP
and Bank of Montreal had a K – one term that wasn’t express – Bank tried to argue that there’s an
implied term that CP Hotels ought to review its statements and report back to Bank if there are
errors. Bank of Montreal took a fall on those losses and tried to say that there was an implied term
in their K with CP Hotels that the customer (especially it being a sophisticated customer) was
required to review the statements with care and report discrepancies to the bank within a reasonable
time.
Reasoning:
 There is no sound basis in law for implying a duty in the banker and customer relationship
 Bank Ks are usually silent as to their contents – the parties rely on commercial customs and the
law
 Customary clauses must be implied in Ks, even if they’re not expressed
 There is no doubt that the implication of terms in a K on the basis of custom or usage is a well
recognized category of implication that has been particularly important wrt to commercial Ks
 Where there is, on the face of it, a complete, bilateral K, the courts are sometimes willing to ad
terms to it, as implied terms (common in mercantile Ks)
 There is no such term here – the duty contended for cannot be implied as a term of the banker
and customer relationship
 Implied terms will be inserted into Ks when:
o 1) When there is an established custom in this business – when parties didn’t mean to
express it into writing. If it’s well known in the industry that certain things happen, you
don’t have to put it in express writing in the K b/c it will be implied.
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 If you don’t have it in your agreement the customer doesn’t owe any duty to
the Bank to review their statements.
o 2) Terms will also be implied where it’s necessary to make the banking relationship
work – if there is no way to have the bank/customer relationship without this term, then
it will be implied.
 A duty in the absence of a verification agreement to examine bank statements
and report errors within a reasonable time is not present in this case – it has to
be NECESSARY in order for the term to be inserted/implied in the K.
Ratio: To argue that an implied term should go into a K, it’s irrelevant if it’s a sophisticated
customer. This is not a SGA case BUT it’s a recent SCC decision about when terms will be
implied into Ks. Terms will be implied either if it’s a) a well-established custom in a business
or b) it’s necessary to make the relationship between the K’ual parties work. Otherwise, terms
will not be implied - Terms can’t be implied into a K just b/c they are reasonable.
Note:
 This is not a sale of goods case – but if it WERE, this case has an impact on s. 69 of the SGA
 Atiyah: pp. 87-100 talks about conditions vs. warranty
9. Exclusion and Limitation Clauses
 The SGA provides for implied obligations on the part of the seller – it also recognizes the right
to K out of these obligations in certain kinds of transactions
 SGA is based on the principle that ppl are free to K
 Exclusion clauses:
o 1) Clauses which deny that express reps & warranties are included in a sales K;
o 2) Clauses which limit or negative a buyer’s rights in the event of non-performance or
defective performance by the sellers
 Exclusion clauses are often attacked on 2 grounds:
o 1) A buyer is seldom aware of the presence or legal significance of such clauses when
they are included in a sales K (is often deceived);
o 2) A fully informed buyer is powerless to protect himself against the use of an exclusion
clause in a standard form sales K.
Hunter Engineering v. Syncrude Canada Ltd. (1989) SCC
Facts: *most up to date decision on Fundamental Breach*
Hunter designed some gears. Chalmers made conveyor belts. Both weren’t working. The K for the
gears contained a 2 year limit for liability – Hunter said if cracks occur, we are not liable. The lower
courts said this warranty is no good b/c we’re past 2 years. The issue that was taken from lower
courts to the SCC is that the lower courts also found that there was an implied fit for purpose
condition, which had been breached. The SCC is now looking at the language of the exclusion
clause in the Chalmers K which says: “neither the Seller or Buyer shall be liable to each other for
breach of K, fundamental or otherwise.”
Issues:
1) Is Hunter responsible for the damage?
2) Does the doctrine of Fundamental Breach apply to Canadian K law and if so, what’s its effect?
Held: Hunter is liable - b/c he didn’t have the clause that excluded him from the SGA we don’t
know what the law should be in Canada. There is the unconscionability and the unreasonableness
approach.
Reasoning:
 As a result of this case, we have 2 different views of Fundamental Breach in Canada
19
 The Js want there to be freedom of K and they’re going to use either their own made-up law or
they’re going to force a weird double-speak argument on the existing law and keep the
traditional law intact
 Dickson says don’t need fundamental breach – would follow the Photo Production line and rely
on unconscionability instead (though what he does doesn’t really look like he is actually getting
rid of it).
o May be unconscionable if there’s inequality in bargaining position when parties entering
the K. Dickson asks whether there was pressure / undue influence by Allis on the Alta
company (which there wasn’t here). Says you also have to consider if clause is clear and
unambiguous (which is was here). unconscionability approach
o There is no doctrine of fundamental breach – should be all based on unconscionability
(this is b/c he is in favour of freedom of K)
o Wants to lay the doctrine of fundamental breach to rest and ONLY deal with
unconscionability
o Sophistication of parties: in this particular case, parties are sophisticated parties and
knew what they were doing they were excluding liability
 Wilson (dissent) says that there are legislative differences that make the British solution
inappropriate; she agrees with Dickson that the exemption of statutory warranty is okay, since
both parties intended to contract out of liability.
o Wilson says to determine if exclusion clause should operate you have to look at whether
it was reasonable when agreed to, and the nature of the breach.
o To determine if clause is fair and reasonable, consider if language is plain, natural, and if
you can figure out what parties really contemplated.
o Brings subjective element into the test. So clause might be enforceable even with
fundamental breach if that’s what parties really intended.
o In dictum, she says that unconscionability is not enough, that fundamental breach is not
great but maybe it’s okay (a ringing endorsement)unreasonableness approach
o Wilson wants to maintain Doctrine of Fundamental breach and overlay a reasonableness
argument and an unconscionability argument
o Even if the breach of K was fundamental, there was nothing unfair, unreasonable or
unconscionable about it she is trying to have everything here – wants the court to have
the ability to have access to all mechanisms
 There is no Doctrine of Fundamental breach so you have to go through the following steps to
see if a clause applies:
Ratio: There is freedom to K. Dickson = no doctrine of fundamental breach. Wilson = we
want to keep it but mix it up with unreasonableness and unconscionability. Courts still have
fundamental right what’s unreasonable, unconscionable  ie. FAIR. The DOCTRINE OF
UNCONSCIONABILITY is used to protect weaker parties - It asks:
o 1) whether a disparity in power b/w the bargaining parties exists?
o 2) was there pressure by stronger party or did stronger party take advantage of
their position such that the deal was unfair.
Note:
 Eg. If there is an exclusion clause on your ski ticket and the ski lift collapses and you injure
yourself, the court will deem this to be a Fundamental Breach and hold the exclusion of liability
clause not effectual.
 Principle: If 2 people sit down and put their minds to a K, write it, sign it and exclude liability
and agree to it, they should be free to do that.
 This case takes a scenario where 2 parties write a K with some exclusion clauses
20


Dickson’s view has prevailed in courts but Wilson’s judgment is still good law
s. 8 of BPCPA – Unconscionable acts or practices
o s. 8 (3)(e) – adds inequitable requirement (to unreasonableness, unconscionability)
basically all of this comes down to fairness
Sale of Goods K (handout):
 Recitals don’t form part of the K
 Binding part of agreement starts with “agreements”
 “In consideration of blablabah” – lawyers trying to ensure that consideration is there, even
though this clause alone might not be sufficient
II. THE PASSING OF PROPERTY AND RISK
A. Significance of Situs of Property
 The location of ppty in the goods may be relevant to a number of sales issues (eg. s. 15(4), s. 25,
s. 51) but in general isn’t very important
 Also relevant to whether there is an insurable interest
 s. 43: the mere right that the buyer has become the owner does NOT (of itself) confer the
immediate right to possession
o Sometimes a Seller may confer a good title on a third party, even though the ppty had
previously passed to the buyer (s. 30(1))
 K’s that are governed by SGA will essentially deal with
o Property [general property  ownership]
 this is crucial
 the central laws on the passing of property are s. 22 and 23
 s. 16 is incidental
o Risk
 this is allocation of responsibility, who is responsible for something happening to
subject matter of K, which is 1) goods, and 2) price
 also of importance
o Possession [delivery]
 2ndary in importance
o Payment
 Several facets in terms of how, when, quantity of payment
B. Rules Governing Passing of Property – SGA ss. 22 & 23
 It’s not clear what it means for ppty to pass
 Sometimes it’s enough for ppty to pass that the goods are ascertained, but not always
 In unascertained goods, ppty can’t pass BUT risk CAN pass (eg. before marking the 100 boxes
of frozen salmon (making them ascertained), you can contract to say that risk will pass to the
Buyer immediately, before they are ascertained)
 s. 15(4) – defines conditions
o (4) If a contract of sale is not severable and the buyer has accepted the goods or part of
them, or if the contract is for specific goods the property in which has passed to the
buyer, the breach of any condition to be fulfilled by the seller can only be treated as a
breach of warranty, and not as a ground for rejecting the goods and treating the
contract as repudiated, unless there is a term of the contract, express or implied, to that
effect.

o
o
o
o
o
o
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o
o
o
o
o
21
o If you have a K for specific goods and the title has passed to the Buyer, then the breach
can only be treated as a breach of warranty
s. 21: “ascertained” - In a K for sale of unascertained goods, ppty may NOT pass until the
goods are ascertained
s. 21: If there is a contract for the sale of unascertained goods, no property in the goods is
transferred to the buyer unless and until the goods are ascertained.
s. 21 will override s. 22 and 23 (but NOT s. 25)
Goods must be ascertained for ppty to pass
There can be no ppty in goods transferred UNTIL the goods are ascertained
“ascertained” is not defined
In s. 1, “specific goods” are defined = goods that are identified and agreed on at the time a
contract of sale is made (so we assume that this will be similar to ascertained goods)
s. 22: When ppty passes depends on parties’ intention- (deals with specific or ascertained
goods) - The time at which ppty is transferred from Seller to Buyer is a function of the parties’
intention
o The parties’ intention in s. 22 is subject to the qualification in s. 21 that, in a K for the
sale of unascertained goods, ppty may not pass until the goods are ascertained
o s. 22: If there is a contract for the sale of specific or ascertained goods, the property in
them is transferred to the buyer at the time the parties to the contract intend it to be
transferred.
o (2) For ascertaining the intention of the parties, regard must be had to the terms of the
contract, the conduct of the parties and the circumstances of the case. (Test for
intention of parties – if we can’t ascertain when the ppty should pass, look at the
subrules in s. 23)
s. 23: When ppty passes – Intention of parties as to passing when not ascertainable under s.
22 (you only go to s. 23 where you can’t impute intention using s. 22)
S. 22: For ascertaining the intention of the parties, regard must be had to the terms of the
contract, the conduct of the parties and the circumstances of the case.
S. 23: Can impute intention on behalf of the parties where intention is not discoverable within s.
22
s. 23(1) – If any of the tests in s. 22(2) give you a different intention, then you can ignore the
rules in s. 23 (applies when intention can’t be determined under s. 22)
If we can’t figure out by the terms of the K, conduct, cirs when the ppty will pass (s. 22(2)),
then we will look at the subrules in s. 23 when the ppty should be passing
o 23 (1) Unless a different intention appears, the intention of the parties as to the time at
which the property in the goods is to pass to the buyer is governed by the rules set out in
this section.
o (2) If 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, are postponed.
o (3) If 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 that thing is done and the buyer has notice of it.
o (4) If 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 the price, the property does not pass until that act
or thing is done and the buyer has notice of it.
o (5) When goods are delivered to the buyer on approval or "on sale or return", or other
similar terms, the property passes to the buyer as follows:
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(a) when the buyer signifies approval or acceptance to the seller or does any
other act adopting the transaction;
 (b) if the buyer does not signify approval or acceptance to the seller, but retains
the goods without giving notice of rejection, then, if a time has been set for
returning the goods, at the end of that time, and, if no time has been set, at the
end of a reasonable time.
o (6) For the purposes of subsection (5), what is a reasonable time is a question of fact.
o (7) If there is a contract for the sale of unascertained or future goods by description, the
property in the goods passes to the buyer when goods of that description and in a
deliverable state are unconditionally appropriated to the contract unascertained goods
can pass when they are unconditionally appropriated
 (a) by the seller with the assent of the buyer, or
 (b) by the buyer with the assent of the seller.
o (8) For the purposes of subsection (7), the assent may be express or implied, and may be
given either before or after the appropriation is made.
o (9) If, in pursuance of 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 transmission to the buyer,
and does not reserve the right of disposal, the seller is deemed to have unconditionally
appropriated the goods to the contract.
Eg. A K for 100 boxes of frozen salmon from 1000 stocks = “unascertained”
o Marking the boxes for commercial law class = “ascertained”
o Delivering the ppty to the Buyer = “unconditionally appropriated”
s. 25: when ppty passes, so does risk
o s. 25: Unless otherwise agreed, the goods remain at the seller's risk until the property in
them is transferred to the buyer, but when the property in them is transferred to the
buyer the goods are at the buyer's risk, whether delivery has been made or not.
o When it’s gone from the Seller to the Buyer, the damage/loss lies with whoever has the
ppty
o What this often means is that the Buyer or Seller’s insurance will pay this
Most of the time, when ppty passes, so does title but not all the time
s. 30 – title can be defeated – ppty can pass to one party, but if the ppty has not actually
physically gone to the buyer, under s. 30 the seller can then sell the same goods and good title
will then go to that third party
s. 52: If, under a contract of sale, the property in the goods has passed to the buyer, and the
buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract,
the seller may maintain an action against the buyer for the price of the goods.
o An action in price = just have to show what your price was and you get paid (much
lower standard than showing damages)via summary trial
Atiyah: bundle of characteristics and rights created under the SGA
o The term “ppty” is commonly used to signify title/ownership YET the SGA talks about
the transfer of ppty and contrasts that with the transfer of title
o The def’n of ppty is circular: ppty means ppty
o Another one of the situations where the CL has developed the situation of ppty passing
and the SGA codifies this BUT you have to look at how ppty passes under the SGA
Property passing:
o Who bears the risk of the seller going insolvent?
s. 69 – Freedom to contract (unless it’s illegal)
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1. Specific Goods
 “Specific goods” = goods identified and agreed upon at the time a K of sale is made
 If A contracts to deliver 1000 tonnes of wheat to B, this is NOT a sale of specific goods and A’s
obligations are unaffected by the fact that he had a particular 1000 tonnes in mind, which have,
unknown to him, perished before the date of the K
Kursell v. Timber Operators and Contractors [1927] CA *s. 21 SGA*
Facts: The K said “all the trees in a Latvian forest” that gets to be 6 inches wide, that will be cut
over 15 years. The vendors argued the ppty has passed to the purchaser and they are suing for the
price of the forest. The purchaser says the ppty has not passed. The time the trees have to be logged
as set out, the price was defined. The D says the trees were not specific goods that could be
ascertained at the time the K was formed. 6 days after the K was executed, the Latvian gov’t passed
a law saying the forest now belongs to the Latvian gov’t.
Issue: Did the ppty pass? No – the goods are not ascertained
Was the ppty identified at the time the K was made?
Held: for the D (the goods weren’t specific/ascertained b/c some of them were still saplings – they
wouldn’t become specific until they became 6 inches)
Reasoning:
 “Specific goods” = goods identified and agreed upon at the time a K of sale is made – the
goods in question were neither identified nor agreed upon
 Not every tree in the forest passed – only those of a specific measurement
 The timber was not deliverable until the buyer severed it
 Thus, he can’t be bound to take delivery of an undetermined part of a tree not yet identified
 What could the P have done to protect himself?
o Put in a clause saying the trees are at the risk of the D
Ratio: The ppty had not passed and thus the timber was not at the risk of the purchaser.
Goods could not be ascertained – thus the ppty did not pass.
2. Unascertained Goods
 In a K for the sale of unascertained goods, the goods are not yet physically identified at the date
the K was formed
 Goods can be unascertained b/c:
o a) They are only generically described (eg. 100 tons of white wheat);
o b) They have not yet been separated from a larger bulk of which they form a part (eg.
500 of the 1000 pounds of white wheat)
o c) The goods do not yet exist (eg. 4 of the chairs I will manufacture next week)
 Until the goods are selected, separated, manufactured etc there can be no transfer of ppty
under s. 21 of SGA the K can only operate as an agreement to sell
 Ascertainment is a condition precedent to passing of ppty BUT mere ascertainment does not
cause ppty to pass (necessary but not sufficient)
 Test for passing of ppty: ascertainment + intention of parties
 If no intention is discoverable in accordance with s. 22(2), s. 23(6) applies
 Until such time as the goods have been selected, separated, or manufactured, there can be
no transfer of property b/c s. 21 SGA provides that property shall not pass until goods
ascertained  until this time “agreement to sell”
 Mere ascertainment will not cause property to pass
 Intention of parties is governing factor
24
Carlos Federspiel Co. v. Charles Twigg Ltd. [1957] QBD *s. 23 SGA*
Facts: The D company carried on business in Costa Rica and manufactured kids’ bikes. The Ps
agreed to buy some of these bikes and other goods. There was O & A and the P paid and the D
acknowledged receipt of payment. Patience became the receiver of the company and he refused to
deliver the goods to the P. The D claims that the ppty hadn’t passed to the Ps.
Issue: Whether the ownership of certain goods passed from the Seller to the Buyer?
Held: for the D –the goods are unascertained
Reasoning:
 Test for whether ppty has passed (unconditional ascertainment):
o 1) Intention of the parties
 Parties must intend to attach Ks irrevocably to the goods
 Parties must have had, or reasonably be supposed to have had, an intention to
attach the K irrevocably to those goods, so that those goods and no others are the
subject of the sale and become property of the buyer. Q of common intention.
o 2) Was there a change of ownership?
o 3) Was there actual or constructive delivery? Is the Seller only a bailee of the goods?
 If the bikes had been removed or delivered OR if there had been bills of lading
for the particular bikes then they would be constructively delivered (this didn’t
happen)
 Eg. constructive delivery is putting it in the hands of the UPS truck OR once you
give somebody a bill of lading (you now have the right to pick up the bikes at the
wharf)
o 4) Were the goods at the Buyer’s risk (look at the K)? If so, indication of passing.
look at s. 20
o 5) Were the goods appropriated/shipped? (this is usually the last act of the Seller)
 All the contractual dealings between the parties showed an intention that the
ownership would pass on shipment
 Since these goods were not sent to Liverpool, there was no appropriation and no
ppty passed
 Here, the intention was that the ownership should pass on shipment
 There was no actual or constructive delivery – the Seller had not become a bailee
 There was no appropriation of the gods – the action fails
 S.23, SGA is used to determine whether title has passed – these were unascertained future goods
and the title does not pass until the goods are unconditionally appropriated to the K, under
s.23(7), SGA.
 It wouldn’t have been enough if in the Seller’s mind he was going to put it away
 If the K had said, Carlos was buying bikes # 1, 2, 3, and 4 that would have been enough
 Carlos loses – first he has to pay out the debenture holder (Receiver) and if there’s any money
left, Carlos might get a portion of his money back. He loses his money and doesn’t get the bikes
either.
 Carlos couldn’t show that the goods were ascertained – so he is just an unsecured creditor
Ratio: See above test for whether goods are ascertained.
Note:
 Carlos (Buyer of Bikes) ----price paid to Turig (Seller) Bikes + $ ---went insolvent and put
a receiver in (a party who comes along to run a party’s business)
 (P = specific goods and passed to them, D = unascertained at time, so had no passed to P)
 s. 23(7)+(8) – Unconditionally appropriated
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o (7) If there is a contract for the sale of unascertained or future goods by description, the
property in the goods passes to the buyer when goods of that description and in a
deliverable state are unconditionally appropriated to the contract
(a) by the seller with the assent of the buyer, or
(b) by the buyer with the assent of the seller.
 (8) For the purposes of subsection (7), the assent may be express or implied, and may be
given either before or after the appropriation is made.
Prof thinks the result of this case is really unfair
Caradoc Nurseries Ltd. v. Marsh (1959) Ont. CA *ss. 23(7)+(8) “unconditional appropriation
and ss. 52+53*
*S.23(7), SGA – what constitutes unconditional appropriation by the seller
Facts: The D, Marsh, agreed by written agreement to purchase shrubs and trees from the P, Caradoc.
Marsh agreed to pay a price, Caradoc agreed to deliver the shrubs. When the shrubs were delivered,
Marsh refused them b/c he said they were delivered in the fall, not the spring.
Issue: Whether the goods passed to the D? Yes.
Held: The goods passed
Reasoning:
 The TJ said, the spring delivery date was correct – therefore, Caradoc was entitled to its price.
Didn’t argue price vs. damages.
CA:
 Marsh appealed on whether the TJ erred for giving judgment to the P w/o proof of damages –
Marsh says we’re in a s. 53 “damages” situation – the P should have proved the damages.
Caradoc argued we’re in a s. 52 “price” situation.
 s. 53: damages are awarded for non-acceptance (has nothing to do with ppty passing)
 In s. 52, the condition on which this section will operate is that ppty has passed to the Buyer.
The issue is, did ppty pass to the buyer? If not, then damages under s. 53 would be appropriate.
 So the court looked at s. 23(7) and (8) (rules of whether ppty passed) – it’s not enough that the
shrubs were uprooted and on the back of the P’s truck. That’s not enough. The ppty does not
pass until it’s actually DELIVERED to the P. Because the shrubs were delivered (albeit late),
they actually did go to the D, which means that they were unconditionally appropriated.
 It was right for the TJ to look at s. 52 “price” and give an award for price
 The K was one for the sale of unascertained goods
 If the goods passed to the D, the P is entitled to the sale price
 The appropriation by the P was not final, not unconditional – the D could have changed his
mind and asked for different shrubs/trees
 When the truck arrived at the D’s house and the goods were tendered, then the appropriation
became unconditional and the ppty in the goods was transferred to the D
 “It is not essential for a final appropriation by a seller that the delivery be completed by the
buyer’s acceptance; tender is sufficient.”
 No evidence that the goods tendered were not those described in the K
 P. 132: “when the truck arrived at the D’s house and the goods were tendered, the appropriation
became unconditional and the ppty was transferred to the P.”
Ratio: The goods were delivered and tendered and thus were transferred to the buyer. There
is no unconditional appropriation of goods to the K by the seller until it is impossible for the
seller to recall the goods and substitute them for different goods under the K.
Note:
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s. 52: If, under a contract of sale, the property in the goods has passed to the buyer, and the
buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract,
the seller may maintain an action against the buyer for the price of the goods.
s. 53: If the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may
maintain an action against the buyer for damages for nonacceptance.
This case is about the diff between an action in price vs. an action in damages
Marsh had to pay the price
Sells v. Thomson (1914) BCCA
*S.23(7), SGA – Withdrawal of assent to appropriation
Facts: The D, a Vancouver bookstore, ordered 25 volumes of a book from the P, a London
publisher. 12 volumes were sent out – they were appropriated & delivered. The Ds then cabled the
Ps to cancel the order for 13 of them. At the time the order for the books came in, the books weren’t
ascertained (there were tons of the books).
Issue:
1) Whether or not the implied assent of the Ds, to the future appropriation of the goods to the K,
was withdrawn or destroyed by the notice that they would not accept the goods? Yes.
2) Can the Buyer have ppty pass to him against his will? No – BUT this case is confined to its facts.
Held: Cannot convert the executory K into an executed one
Reasoning:
 This K is a K for the sale of unascertained goods
 The implied assent to an appropriation of the goods was withdrawn by the notice – the Ps
couldn’t without the D’s assent convert the executory K into an executed one
 There was a cancellation notice given – THIS buyer here couldn’t have ppty appropriated to him
against his will (but don’t take this principle to apply universally)
 What should the lawyer have done here?
o Done a SGA pleading and in the alternative, a breach of executory K pleading.
Ratio: Where there is a K for sale of future unascertained goods by order, and where the
buyers cancel the rest of the order upon receipt of part of the order, the cancellation amounts
to a withdrawal of assent to appropriation of goods by the buyer.
Note:
 This case is useful for “executory K” – ie. something still has to be done/completed, like
passing of the ppty or appropriation of the goods
 This case has very limited application – limited to its facts
 There was a cancellation notice – it’s rare for a K to be half completed
Summary:
 When ppty passes risk passes (as a rule)
 The distinction between ppty/title passing is not so important – most of them it will be one of
the same
 In most Ks, delivery ppty passing title passing will happen at the same time
 Delivery is just the physical act
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PART IV – THE SELLER’S TITLE OBLIGATION
Seller’s obligations:
o 1) Seller’s obligation to pass title – s. 16(a)
 s. 16(a) means a right to sell (title and more)
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o 2) “Right to sell”, quiet possession, s. 16(a) [right to sell], (b) [quiet possession], (c)
 Enforceable against all
o 3) Goods sold by description – s. 17 (if you sell a good by description, then there’s a
condition that the good will accord with its description)
 Enforceable against all
 Most goods are sold by some sort of description (eg. “Wool gloves” –
implied condition that the gloves are made of wool)
 It’s easy to fit into a sale by description BUT doesn’t afford a lot of
protection
 Ashington – sale by description has some limits around it, it’s really only for
purposes of identification
o 4) Merchantable quality – s. 18(b)
 Can only enforce against commercial seller
 In order to fit under s. 18(b) the goods have to be bought by description AND
they must be bought from a seller who deals in goods of those description
o 5) Fit for a purpose – s. 18(a)
 “Satisfactory quality”
 Can only enforce against commercial seller
 This one is seller friendly
 Requirements: Buyer must make purpose known, buyer must show reliance
on seller’s skill, only in commercial trans, must be sold in seller’s ordinary
course of business
o 6) Durability – s. 18(c)
 Enforceable against all? (but not sure b/c the rest of s. 18 is enforceable only
against COMMERCIAL seller)
 This section has never been litigated in Canada, doesn’t exist in England
o 7) Sale by Sample – s. 19
 Enforceable against all/commercial? (not clear – by its nature it’s mostly
commercial b/c usually only commercial sellers sell by sample)
 If you sell by sample, there is an implied condition that the bulk of the goods
will correspond with the sample
o 8) Delivery/Payment (ie. right quantity/payment)
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All these are conditions but if the buyer has accepted the goods already then the conditions turn
into warranties and you can get damages only
But remember, some Js just want to deal with condition/warranty as intermittent term
All of these conditions are subject to freedom to K – s. 69 (pervasive over the SGA) – also, s.
18(b) gives you some latitude over these sections
s. 20(1) – Retail Sale = sale of a seller in the course of a seller’s business to an individual
20 (1) For the purpose of this section, retail sale or lease includes every contract of sale or
lease made by a seller or lessor in the ordinary course of the seller's or lessor's business but
does not include a sale or lease of goods
(a) to a purchaser for resale or to a lessee for subletting,
(b) to a purchaser or lessee who intends to use the goods primarily for business
purposes,
(c) to a corporation or an industrial or commercial enterprise, or
(d) by a trustee in bankruptcy, a liquidator or sheriff.
Note: s. 20(1) does not apply to corporations
s. 20(2) says you can’t diminish/negate it:
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(2) Despite section 18 (e) or 69, in the case of a retail sale or lease of goods, other than
goods that on reasonable inspection appear to be used goods or goods that are described or
represented by the seller or lessor to be used, any term of a contract of sale or lease, or any
collateral or contemporaneous contract or agreement, that purports to negative or in any way
diminish the conditions or warranties under sections 17, 18 and 19 of this Act, is,
(a) if a term, severable from the contract and void, or
(b) if a collateral or contemporaneous contract or agreement, void.
s. 20(3)- for used goods, you can diminish and negate ss. 17, 18 – b/c they’re used to they
don’t necessarily have to be merchantable quality and fit for purpose but they DO have to give
you the right to quiet possession:
3) Despite section 18 (e) or 69, in the case of a retail sale or lease of new or used goods,
(a) any term of a contract of sale or lease, or
(b) any collateral or contemporaneous contract or agreement,
that purports to negative or in any way diminish the condition or warranty under
section 16 is,
(c) if a term, severable from the contract and void, or
(d) if a collateral or contemporaneous contract or agreement, void.
s. 17: Sale by description
(1) In a contract for the sale or lease of goods by description, there is an implied condition that
the goods must correspond with the description.
(2) If the sale or lease is by sample, as well as by description, it is not sufficient that the
bulk of the goods correspond with the sample if the goods do not also correspond with the
description.
Note: if you’re dealing with a private sale, have to fit yourself in under s. 17 b/c s. 18 is not
going to apply
s. 18 – harder to get into s. 18(a) or (b)
Eg. If I sell you my “Subaru Car” and you get it and you don’t like it – it’s a private sale so its’
not merchantable or fit for purpose. But since you have a private sale, you could try to fit under
sale by description s. 17 BUT if the only description I’ve given you is “Subaru car”, then you
have no remedy b/c that’s the only description.
A. The Nature of the Right to Sell Goods
 s. 16-20
 s. 16: Implied condition as to title, and implied warranty of quit possession
o Seller is obliged to have good title to his goods – must have “right to sell”
o In a contract of sale or lease, unless the circumstances of the contract are such as to show
a different intention, there is
o (a) an implied condition on the part of the seller or lessor that
 (i) in the case of a sale or lease, the seller or lessor has a right to sell or lease the
goods, and
 (ii) in the case of an agreement to sell or lease, the seller or lessor will have a
right to sell or lease the goods at the time when the property is to pass or the
lessee is to take possession of the leased goods,
o (b) an implied warranty that the buyer or lessee is to have and enjoy quiet possession of
the goods, and
o (c) an implied warranty that the goods are free from any charge or encumbrance in
favour of any third party, not declared or known to the buyer or lessee before or at the
time when the contract is made.
o The important part of this section is that the seller has to be able to pass title to the buyer
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o Right to sell = good title
s. 17: Obligation that goods correspond to their description
s. 18: Goods must be fit for their purpose
Rowland v. Divall [1923] CA *s. 16*
Stolen car – K repudiated for lack of consideration (s.57 SGA) or breach of condition of the
seller’s right to sell (s.16, SGA).
Facts: The P purchased a car from the D and then sold it to a third person. It turned out that it was a
stolen car – it was stolen before the D was in its possession so he never had title to it. Rowland
wants rescission – he wants to give the car back to Divall (it’s been driven about 3-4 months) and
get his full price back. Divall argued that a) the car is gone and you can’t give it back to me and b)
you drove the car for 3-4 months so it’s not the same car I sent to you.
Held: The P is entitled to recover the whole of the purchase money b/c of total failure of
consideration
Reasoning:
 The D gave an implied condition that he had the right to sell the car – Divall had no right to sell
the car. It’s a fundamental thing that if you have no right to sell something it’s a total failure of
consideration (this is CL, not s. 16(a) directly).
 In a case of rescission for the breach of the condition that the seller had a right to sell the goods,
it cannot be that the Buyer is deprived of his right to get back the purchase money b/c he cannot
restore the goods which, from the nature of the transaction, are not the goods of the Seller at all,
and which the Seller therefore has no right to under any circumstances
 There was a total lack of consideration here (ie. the Buyer didn’t get anything he paid money for)
 There can be no sale of goods which the seller has no right to sell
 In every sale of goods K there is an implied term that a breach of the condition that the Seller
has the right to sell the goods may be treated as a ground for rejecting the goods and repudiating
the K
 In this case there must be a right to reject AND a right to sue for the purchase price
 There is a fundamental obligation of the Seller to have title to the good sold
 Court here imports CL and says there was a failure of consideration and therefore he the P was
entitled to the sale price (Prof: arguably 3-4 months’ use IS consideration)
 s. 15(4), which is the section that says once you’ve accepted goods, it was argued that Rowland
can’t have rescission/repudiation b/c s. 15(4) says you’re only entitled to damages
o The court said that s. 16 TRUMPS s. 15(4) b/c it’s such a fundamental obligation of the
Seller to have title
o Any breach of s. 16(a) is such a severe breach, it makes an exception to s. 15(4)
o No right to sell = total failure of consideration, which entitles you to rescission
o s. 16(a) is an exception to s. 15(4)
Ratio: There can be no sale of goods which the seller had no right to sell. Right to title is a
condition – there is an implied term in every K that the Seller has the right to sell the goods. If
this condition is breached, the Buyer has the right to reject the goods, repudiate the K and sue
for the purchase price. When you have no title pass to you, you have a failure of consideration
and s. 15(4) becomes irrelevant and is trumped by s. 16.
Note:
 The Rowland ratio was applied to Butterworth and led to a very unjust result
 A total failure of consideration is a breach of a K such that nothing at all that was supposed to
be done under the K actually got done.
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The very essence of the K was not performed (akin to former doctrine of fundamental breach).
For K for sale of goods, the essence of the K is the transfer of title from seller to buyer.
Where subject matter of K is stolen, seller has no title at all, and can pass no title to buyer.
Legally, there is no K at all, it is void.
This is not a breach of a condition (altho it can contain a breach of a condition).
s.15(4) does not apply.
There is nothing in the CL to limit ability to repudiate the K. Can’t bring a claim for damages in
K b/c there is no K, it never existed.
Butterworth v. Kingsway Motors Ltd. [1954]
S.57 SGA – rescission for failure of consideration
Facts: Rudolph bought a car off Bowmaker on a hire-purchase agreement with the option to
purchase. Rudolph had only made some payments so didn’t own the car yet when she sold the car to
a car dealer, Kennedy. Kennedy then sold to Hayton in good faith. Hayton sold the car to Kingsway
Motors. Kingsway Motors then sold to Butterworth. Then Butterworth wrote to Kingsway, saying
that Kingsway isn’t the rightful owner and asked for their $$ back. In the meantime, Rudolph kept
making monthly payments to Bowmaker. Butterworth says this is rescission, failure of
consideration as per Rowland.
Issue: Whether there was a right to rescind in this case for failure of consideration under s.57? Yes.
Reasoning:
 Sale of everybody from Rudolph to Butterworth was wrongful b/c the car still belonged to
Bowmaker – clear breach of the implied condition that the Seller has title to the good sold
 There was a fundamental breach by the Ds – the P elected to treat that breach as a repudiation of
the K of sale the P was entitled to repudiate and get his $$ back
 However, with respect to the other parties, they did not assert their claim until after Rudolph had
made the final payment to Bowmaker.
 The final payment was considered to have “perfected” the deficiency of title, so by the time the
others got around to complaining about it, Rudolph did have title, so it passed down to all
parties.
 Therefore Kingsway did actually have title by the time Butterworth commenced action, so
although there was a previous breach of s.16(a), it is no longer a breach, so no reason to reject
the goods.
 Kingsway had to pay the $$ back to Butterworth but eventually got title of the car
 Kingsway is entitled to claim damages against Hayton for breach of condition as to good title to
the car – but that breach of the condition is now reduced to a breach of warranty so can claim
damages
 Court affirms that s. 16(a) overrules the effect of s. 15(4)
Ratio: Follows Rowland. There is only a right to reject goods under Rowland (i.e. total failure
of consideration) if the complaint of lack of consideration is made before title passes. A party
not making the complaint in time could still collect damages.
Note:
 This resulted in a law reform commission in England
 Commission said it can’t be bothered to fix s. 16(a)
 Note that Rudolph ended up paying for Butterworth’s use of the car – unfair!
PART IV: The Seller’s Title Obligations – The Scope of s. 16(a)
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s. 16(a) does not state that the seller has the title to the goods sold, but that the seller has the
right to sell the goods which may or may not mean that the seller has title
16—Implied undertaking as to title, and implied warranty of quiet possession
In a K of sale or lease, unless the circumstances of the K are such as to show a different
intention, there is
a) an implied condition on the part of the seller or lessor that
o in the case of a sale or lease, the seller or lessor has a right to sell or lease the goods
o in the case of an agreement to sell or lease, the seller or lessor will have a right to sell or
lease the goods at the time when property is to pass or lessee is to take possession of the
leased goods
s. 16(a) does not state that the seller has the title to the goods sold, but that the seller has the
right to sell the goods, which may or may not mean that the seller has title
This section is really about having the right/ability to sell, rather than ownership
16(a) is focused on the time the K is entered into (e.g. if we have a K for an agreement to sell,
and b/w the time of actual sale, a law arises that makes me not able to sell the goods, s.16(a)
does not apply)
Recall s. 15(4): if buyer has accepted specific goods, breach of any condition can now only be
treated as breach of warranty. This means that even for conditions, like that of s.16(a), in many
cases you cannot terminate the K for breach, all you get are damages. If K is for specific goods,
then property has passed as soon as K entered in to, which means you can never terminate the K.
Niblett Ltd. v. Confectioner’s Materials Co. Ltd. [1921] CA *s. 16(a) SGA*
Facts: Parties entered into a K for the sale of 3000 cases of condensed milk. 2000 cases were
delivered without problems. 1000 arrived called “Nissly” instead of Nestlé – British customs
detained it b/c of trademark infringement. The Respondent had given an undertaking not to sell any
condensed milk under that fake name – so clearly, they don’t have a right to sell this and Nestlé had
the right to get an injunction to sell the milk.
Issue: Was there a breach of s. 16(a)? Yes.
Reasoning:
 The TJ found that the Respondents had no right to sell the goods as they were
o The A never had enjoyed quiet possession of the goods
 In a K for the sale of goods there is an implied condition that the seller has the right to sell the
goods, unless the circs of the K are such to imply a different intention
 The Seller did NOT have the right to sell these goods – they had given an undertaking not to and
were in infringement of the Nestlé TM
 Court here can’t really decide whether it’s a breach of the condition right to sell or warranty of
quiet possession
 There was no legal right to sell b/c of the trademark infringement – so violation of s. 16(a)
o If the seller can be stopped from sale of the goods by law, the seller does not have a right to
sell for the purposes of s.16(a), SGA. Ownership of the goods is not enough if there is some
obstruction to the free disposition of the goods, such as trademark infringement.
Ratio: The words ‘a right to sell the goods’ mean not only a right to pass the ppty to the buyer
but also a right to confer on the buyer the undisturbed possession of the goods. If you don’t
have the legal right to sell something, you will have offended s. 16(a).
J. Barry Windsor & Assoc. v. Belgo Cdn. Mfg. Co. Ltd. (1976) BCCA *s. 16(a) SGA*
Facts: K for sales of imported lamps, but they didn’t meet Canadian Standards Association
approval (BC law that says you can’t sell lamps not meeting CSA approval – not safe). It was illegal
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to sell these lamps. Buyer rejected on this ground, and sued for return of monies paid, or damages
in equivalent amount, claiming that D did not have the right to sell the goods b/c such a sale was
prohibited.
Issue: Is this a breach of s. 16?
Reasoning:
 There was an implied warranty that the seller has the right to sell the lamps – he didn’t have this
right
 If a vendor can be stopped by a process of law, he does not have the right to sell – if the vendor
doesn’t have the legal right to sell (whether it’s a civil/statutory/criminal problem), then no legal
right to sell is going to dictate that s. 16(a) prevails
 Even though the vendor could pass on title, he didn’t have the legal right to sell the lamps b/c
they weren’t CSA approved
 Buyer has right to reject
Ratio: A seller will not have the right to sell goods, and will have breached s. 16(a) if laws or
regulations prohibit the selling of the goods in the jurisdiction.
Note:
 Case stands for same thing as Niblett
PART IV: The Seller’s Title Obligations – Exclusion of the Implied Condition of the Right to
Sell – SGA ss. 16(a) & 20
 Can you exclude s. 16(a) with an exclusion clause?
Sloan v. Empire Motors Ltd. (1956) BCCA
Facts: Under conditional sales agreement, D Empire agreed to sell car to P. Balance payable in
installments and secured by reservation of title, ownership, and right of property to the seller until
payment. Possession delivered to P, but then Vancouver Finance seized car under a right asserted
to arise from an earlier conditional sales K. P sued Empire as seller for breach of warranty of title,
and alternatively against co-D Vancouver Finance for wrongful seizure of car.
Issue:
1) Did Vancouver Finance have a valid conditional sales K that allowed them to seize the car?
Yes – court allowed them to seize the car from Sloan
2) Did the seizure constitute a breach of warranty?
Reasoning:
 There was no indication in the agreement of an intention to pass only a mere chance or special
ppty in the car the intention was for Sloan to buy the car from Empire Motors
 s. 15(4) says if you accepted a good, a condition is reduced to a warranty
 Empire said there’s no warranty b/c we have an exclusion clause: “There are no reps, warranties,
conditions other than those contained in this agreement, express or implied…” Empire said
it’s not warranting good title
 Court said it agrees that we can’t look to the SGA here (b/c of the exclusion clause) so it looked
at the K to see if there is something in this K. What it finds is that despite the exclusion clause
there is an implied warranty in this K, which comes out of the reservation clause
 Court implied that there is a warranty that where there is full payment that once Sloane has fully
paid, title will pass there was an implied warranty
 The term “implied” in the exclusion clause referred to things outside the K – there was an
implied warranty IN the K (in the reservation clause)
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 There shall be no sale at all of goods which the seller has no right to sell – the object of a sale is
to transfer ppty from one person to another (shows that the court was going to find a way
somehow that despite the exclusion clause, Sloane would get his car somehow)
Ratio: Courts can look not only at the language in the K, but also the language used by the
seller when the rights are handed over to the buyer. Clear title can be promised in a
subsequent agreement (e.g. conditional sales agreement). The court finds that the parties
can’t possibly be taken to have agreed to a provision where seller is not liable for selling goods
he has no right to sell. Court quotes Rowland.
Note:
 Rowland is taken to mean: 1) you can’t K out of s. 16(a), despite what s. 16 says, and 2) a
breach of s.16(a) doesn’t attract the operation of 15(4) the way that it can the operation of other
conditions.
 Exclusion clause COULD work but it has to be really carefully drafted so it’s not overridden
like in this case
PART IV. THE SELLER’S TITLE OBLIGATIONS – The Warranties of Quiet Possession
and Freedom from Encumbrances *SGA s. 16(b) + (c)
 s. 16(b) – warranty given by the Seller for quiet possession (free of disturbance to possession)
16—Implied undertaking as to title, and implied warranty of quiet possession
 In a K of sale or lease, unless the circumstances of the K are such as to show a different
intention, there is
o b) an implied warranty that the buyer or lessee is to have and enjoy quiet possession of the
goods, and
o c) an implied warranty that the goods are free from any charge or encumbrance in favour of
any 3rd party, not declared or known to the buyer or lessee before or at time K is made
Microbeads AC v. Vinehurts Road Marketings Ltd. [1975] CA. *s. 16(a) & (b) SGA&
P could not use bought goods b/c there was a breach of patent by the seller
Facts: After sale, 3rd party asserted patent rights on machine that applied markings on road, causing
machine not to be able to be used without permission. Although the machine was useable at the
time K was made, it then became unusable by the buyer.
Issue: Does the D company have an action against the P Microbeads? Was there a breach of quiet
possession or of right to sell?
Held: Breach of s. 16(b)
Reasoning: - Denning J.
 s. 16(a) means that the seller has, at the time of the sale, a right to sell the goods – there was no
breach of this section b/c at the time of the sale, there was no subsisting patent
 s. 16(b) – the words “shall have and enjoy” apply not only to the time of sale but also to the
FUTURE if a patentee comes 2-3 years later and gets an injunction to restrain the use of the
goods, there is a breach of warranty
 When a buyer has bought goods quite innocently and later on he is disturbed in his possession
b/c the goods are found to be infringing a patent, then he can recover damages for breach of
warranty against the seller
 The seller may be innocent too – but he must bear the loss b/c the buyer is not able to enjoy the
quiet possession which the seller impliedly warranted he shall have
 s. 16(b) + (c) cover different circumstances than s. 16(a). S. 16(b) + (c), however, can only
offer damages and therefore can only be used when there is an actual loss suffered (vs.
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claim under s. 16(a) can be made even if no loss suffered b/c is a condition and gives right
to aggrieved buyer to rescind, to recover the purchase price (if paid), or refuse to pay it (if
not paid), and also to claim damages (if suffered), or he may elect to treat the breach of
condition as breach of warranty and only claim damages).
 Also, 16(a) is limited to be used at time of agreement.
Roskill LJ.
 S. 16(a) deals only with Qs of defect of title – implied a condition as to title
o Breach of condition can give the buyer a right to rescind, to recover the purchase price,
or to refuse to pay it (if not paid) and also claim damages OR he can elect to treat the
breach of condition as warranty and claim only damages
 s. 16(b) is expressed to be warranty – the remedy for breach of which is damages
o Breach of warranty can never give to the aggrieved buyer more than a remedy in
damages
 Here there was only a breach of s. 16(b), NOT of s. 16(a)
Ratio: When the buyer has bought goods quite innocently and later on he is disturbed in his
possession b/c the goods are found to be infringing a patent, then he can recover damages for
breach of warranty against the seller. It may be that the seller is innocent himself, but the loss
nonetheless should fall on the seller. If there is a possibility of an infringement suit against the
buyer for his use of the purchased goods, that is clear disturbance of quiet possession of the
buyer. The buyer is not able to enjoy the quiet possession which the seller impliedly
warranted that he shall have.
Note:
 s. 16(b), (c) are about breach of warranty
 s. 16(a) is about breach of condition
 s. 16(c) – implied warranty that goods free of encumbrance (see if it’s so devastating that it
restricts the right to sell)
 If an encumbrance deprives the right to sell s. 16(a) but if it’s just a minor charge that won’t
prohibit you from selling it, then it can be a breach of warranty under s. 16(c) so the buyer can
pursue you for damages for breach of warranty
PART V. SELLER’S OBLIGATION AS TO DESCRIPTION AND QUALITY - SGA ss. 1720
17—Sale by description
 (1) In a K for the sale or lease of goods by description, there is an implied condition that the
goods must correspond with the description. [Note that this does not mean the provision caveat
emptor does not apply]
 (2) If the sale or lease is by sample, as well as by description, it is not sufficient that the bulk of
the goods correspond with the sample if the goods do not also correspond with the description.
20—No waiver of warranties or conditions
 (1) For the purpose of this section, retail sale or lease includes every K of sale or lease made by
a seller or lessor in the ordinary course of the seller’s or lessor’s business but does not include a
sale or lease of goods
 to a purchaser for resale or to a lessee for subletting
 to a purchaser or lessee who intends to use the goods primarily for business
purposes
 to a corporation or industrial or commercial enterprise
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

 by a trustee in bankruptcy, a liquidator or sheriff
(2) Despite s. 18(e) or 69, in the case of a retail sale or lease of goods, other than goods that on
reasonable inspection appear to be used goods or goods that are described or represented by the
seller or lessor to be used, any term of a K of sale or lease, or any collateral or contemporaneous
K or agreement, that purports to negative or in any way diminish the conditions or warranties
under s. 17, 18, 19 is
 if a term, severable from K and void
 if a collateral or contemporaneous K or agreement, void
(3) Despite s. 18(3) or 69, in the case of a retail sale or lease of new or used goods,
o any term of a K of sale or lease, or
o any collateral or contemporaneous K or agreement
that purports to negative or in any way diminish the condition or warranty
under s. 16 is
o if a term, severable from the K and void, or
o if a collateral or contemporaneous K or agreement void.
A. Sales by Description – SGA ss. 17, 18(b)
 The provisions dealing with correspondence and description are among the least satisfactory in
the SGA
 s. 17 – applies to private AND corporate sale
 Why is s. 17 necessary given the CL idea of strict liability in K and given the term of a K are
already labeled as conditions, intermediate terms or warranties?
 If you’re inspecting the goods you may be negating the sale by description – b/c you have
looked at it so defaults may be apparent to you
 How much of the description can you import into the K? - Ashington
Frey v. Sarvajc (2000) SKQB “sale by description case” *s. 17 SGA*
Facts: The P seeks damages for the cost of repairs and for the diminution of vale of his Dodge truck
he purchased from the D. The P claimed that the D failed to warn him that the truck was previously
a “total loss” vehicle (repaired using parts of 3 other vehicles). The D says the bill of sale stated that
the truck is “as is.” The D said there had been only 1 repair made, the truck is no trouble and there
was no accident (which is untrue). The P is relying on a misrepresentation argument – the D says
he never made misrepresentations but if he did, then the K says “as is” so that overrides everything.
Issue:
1) Does the “caveat emptor” principle apply or is it ousted by fraudulent misrepresentation on
part of the D?
2) Was the “as is” clause ousted by a fraudulent misrepresentation? No.
3) Was this a “sale by description” and was that description a misrepresentation? Was this
condition breached? Yes.
Reasoning:
 The truck was not completely unroadworthy that it can be said there was a fundamental breach
going to the root of the K
 If the Buyer wants an express warranty that the vehicle has never been in an accident, he must
include that in the bill of sale
 Defects as to quality = can be patent or latent
 The defects in the truck were patent/discoverable by inspection and ordinary vigilance thus,
the rule of caveat emptor applies
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 The truck was advertised as a truck with “58,000 km” – this is a misrepresentation as it indicates
that all its parts are of the same age/origin, which they weren’t (the engine was replaced so the
truck was no longer under warranty)
 The P has accepted the goods so the breach of condition can only be treated as a breach of
warranty, so he can get damages for breach of warranty
 The “as is” clause is not ousted b/c the P had enough information to discover that the misreps
were wrong the “as is” clause stands (it was a patent misrep)
 This was a sale by description, it was a misleading description
o There was an implied warranty that there was 1 truck with 58,000 km and this was
breached (b/c 3 trucks and engine whose kms were unknown)
 What damages flow from this?
 The words from the advertisement were brought into the K
 The effect of the decision here is to bring all the descriptions from the ad into the K
Ratio: Deficiencies that are patent are discoverable, so the buyer must beware of those
caveat emptor. But misleading statement as to condition of a good is misrepresentation.
Breach of condition after acceptance of good = breach of warranty which gives rise to claim
for damages.
 Patent defects caveat emptor
Note:
 Caveat emptor = buyer beware (buyer must make inspection and inquiry as to that which he is
proposing to buy)
 Patent defects = the buyer can discover them using ordinary vigilance
 Latent defects = defects would not be revealed using ordinary vigilance
Torpey v. Red Owl Stores US Case (looking at equivalent of s. 18(b)) OUTDATED
Facts: The P was injured when a jar of Mott’s applesauce shattered when she was closing it. She
purchased the jar from the D’s supermarket. Jar had been purchased from D’s self-service
supermarket. P claimed “goods were not of merchantable quality”; however this provision only
applies when there is a sale by description.
Issue: Is a sale by description a necessary condition precedent to using s. 18(b)?
Reasoning:
 There is an implied warranty of merchantability
 This is not purchase by description
 When an article is identified by its physical presence, how can you say it’s described?
Ratio: No sale by description was found b/c buyer walked into a self-service store and chose
what she wanted without hindrance from the dealer or anyone else. As a result, buyer
couldn’t argue under 18(b) breach of condition of merchantable quality.
Note:
 s. 18(b) of SGA talks about goods bought by description
 This is an example of a self-service store
Sams v. Ezy-Way Foodlines Co. US Case (1961) (looking at equivalent of s. 18(b))
Facts: Buyer purchased from self-service supermarket frankfurters containing glass. Frankfurters
were in plain sealed plastic bag. There were signs on the store window and near like bags
indicating a sale of “Jordan’s Hot Dogs.”
Issue: Is there a “sealed container” exception from the implied warranty of merchantability?
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Held: Less description on bottle than in previous case but a sale by description was found and
s.18(b) could therefore be used.
Reasoning:
 The glass in the frankfurter caused the P’s injury
 A wiener containing glass is not fit to eat and therefore not of merchantable quality
 The test for merchantability: whether the good was in fact merchantable (not whether the buyer
treated it as such)?
Ratio: The printed word of a sign or label was ruled to equal a salesperson and court also
noted that even an item without any words could be a sale by description.
Note:
 This case has trumped the Red Owl case – they’re irreconcilable
 Most things are sold by description – if you just pick something off the shelf it will have some
sort of description (“woolen gloves”) if they’re not wool then you can bring breach of
condition for description (but they’ll probably still be merchantable and fit for their purpose – so
this is easier to sue under)
 This is a self-service store – the person picked up the hotdog BUT it didn’t fit the description –
it was in a store for human consumption and it was not good for that
Varley v. Whipp [1900] QB “sale by description – s. 17 SGA”
Sale by description – implied condition – test – when is there a sale by description?
Facts: The P brought an action to recover the price of a second-hand self-binder reaping machine –
he was expecting a “nearly new” machine. The D had never seen the machine – when he got it by
train he wrote the P that it’s too old and rejected it. The TJ held that this was a K for sale by
description and that the D could only treat the misdescription as a breach of warranty but NOT as a
ground for rejecting the machine for the P at trial.
- TJ said the description was only a collateral warranty
Issue: Was the description a condition that was breached or a mere collateral warranty?
1) Did the ppty pass? No.
2) Whether the words used by the seller with regard to the machine were part of the description or
were merely a collateral warranty (does not give rise to the right to repudiate the K)? Sale of
goods by description.
Held: for the D – the ppty never passed so he doesn’t have to pay the price for the machine
Reasoning:
 “Sale of goods by description” = where the purchase has not seen the goods but is relying on the
description alone
o This applies in the case at bar where the purchaser has not seen the goods but is relying
on the description alone
o There is an implied condition that goods shall correspond with the description given
o Sale of description has to apply to all unascertained goods – it also applies to specific
BUT UNSEEN goods
 When did the ppty pass? Not when it was put on the train – the earliest date was when it was
accepted by the purchaser. BUT it was never accepted the purchaser immediately rejected it
by letter.
 The property in the case of goods sold on description would have passed to the purchaser
when he accepted the property – which never happened here – he never accepted the property
and b/c this was a sale by description the buyer is entitled to reject the property b/c it does not
correspond to the description.
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o Usually the ppty passes when the good is delivered BUT when you have a breach of the
condition of the description, then no ppty passes until the goods have been ACCEPTED
by the buyer
o If you’re going to put something forward that breaches the condition of the description,
then mere delivery will not pass the ppty it has to be accepted by the buyer
o The buyer here never accepted the good – he is entitled to reject the good, does not have
to pay for it
 “The term ‘sale of goods by description’ must apply to all cases where the purchaser has not
seen the goods, but is relying on the description alone.
Ratio: Sale of goods by description applies to all unascertained goods but also to specific but
unseen goods. If you’re going to put something forward that breaches the condition of the
description, then mere delivery will not pass the ppty – the buyer has to accept it.
Beale v. Taylor [1967] CA * s. 17 SGA*
This was sale by description although the buyer saw the car and test-drove it.
Facts: The D, Mr. Taylor, had a car that he advertised as a “Herald convertible white 1961”– the
buyer saw the ad, went to see the car and made an offer which the seller accepted. It turns out the
car was in fact a car made up of 2 cars (one was older than 1961) and it was not running properly.
The Seller denies that it was sale by description – the Seller says he let the Buyer take the car for
inspection so the sale wasn’t based on his description.
Issue: Was this a sale by description or a sale of a particular thing by the buyer on his own
assessment of the value of the thing to him? Sale by description.
Held: for the P – it was a sale by description
Reasoning:
 SGA: “Where there is a K for the sale of goods by description, there is an implied condition that
the goods shall correspond with that description.”
 The Seller’s description of the car was false – it was not apparent to anyone looking at the car
that his representations were false
 The law is that if the buyer has not seen the goods then in the ordinary K, the buyer relies on the
description alone and the SGA applies providing that the description is an implied term of the K.
 Doesn’t matter that the Buyer took the car for inspection – if defects aren’t discoverable, they’re
latent defects
 Breach of condition occurred here b/c the deviation from the Seller’s description wasn’t easily
discoverable the P is entitled to remedies
Ratio: Sale by description applies to specific and seen goods with latent defects (that aren’t
discoverable by normal inspection). S. 17 takes another step forward as it applies to ALL
specific goods, even if the buyer has seen them.
Note:
 Deals with a specific and seen good that has a defect that’s not apparent upon inspection
 This is a private sale so you have to look only at s. 17 (b/c s. 18 applies to commercial sales)
 Sale by description applies to:
o unascertained goods
o specific but unseen goods
o specific and seen goods with latent defects
 Most things, even seen goods (ie. leather coat), does qualify under sale by description
 You get protection when there’s latent defect or where there have been words brought into the
description
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Arcos Ltd. v. E.A. Ronaasen & Son [1933] H.L * deals with overlap of s. 17, s. 18(a) and (b)*
Description must be strictly complied with. S.17, SGA – Condition that goods will be of
contractual description is breached even when the goods are nonetheless fit for their purpose.
Facts: The A agreed to sell to the R a quantity of redwood and whitewood having very specific
measurements, to be shipped in the summer of 1930. There were 2 Ks – very precise. The wood was
left out in the weather. The wood was shipped in October and the Buyer rejected on the ground that
the wood was not shipped in the summer in accordance with the terms of the K. Also, the
measurements were off (partly b/c they were left out in the weather).
TJ:
- the wood is merchantable & fit for their purpose (s. 18(a) and (b)) – so the buyer has no grounds to
reject
Issue: Whether the goods when shipped complied with the implied condition that they should
correspond with their description?
Held: The Buyer can reject the goods
Reasoning: - Lord Buckmaster
 TJ/CA: held in favour of the buyers – found that the difference in the size of the wood was not
of such a trivial character as would justify its being disregarded by the Court
 The fact that the goods were merchantable under the K is not the proper test
 The wood did not satisfy the specification affirms judgments of CA and TJ
Lord Adkin:
 “PERFECT TENDER RULE”: If the written K specifies conditions of weight,
measurement and the like, those conditions must be complied with. A ton cannot mean
about a ton and a yard, about a yard. If the seller wants a margin, he must stipulate for it.
Thus, apart from minor exceptions and microscopic deviations, conditions of the K must
be strictly performed (minor exception). If a condition is not performed the buyer has a
right to reject the goods. The fact that the goods are fit for the particular purpose for
which they were required does not change the fact that the buyer has a right to reject the
goods when a condition (such as the implied condition that the goods will be of the
description given by the seller) is breached. The implied condition under (our) s.17, SGA
(sale by description) is in addition to the condition that the goods will be fit for their
purpose. There is no reason why the buyer cannot reject goods that do not correspond
with the given description merely b/c they are fit for the purpose that the buyer initially
had in mind.
Ratio: Under s. 17 the goods must strictly and precisely comply with specified measurements
and quantity. Even if the goods are adequate, s.17 can be used to give the buyer the right to
reject the goods, even if no breach of s.18(a) or (b).
Note:
 s. 18(a) – fit for purpose
 s. 18(b) – merchantable
 This case has been criticized for being too technical – making no margin for error
 When dealing with a product like wood there should be a margin of error b/c it can’t be exactly
½ inch
 Prof: this case shows how Js can be very precise
Ashington Piggeries v. Christopher Hill [1971] HL *s. 17, 18(a) & (b)*
No failure of description b/c a chemical not put on the list of ingredients b/c it was not initially in
the feed was produced by a chemical reaction.
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Facts: Ps and Ds entered into a sale K by which the Ps would supply the Ds herring meal, a special
cereal feed for mink – described as “best quality”. The Ds suffered losses because herds of mink
started dying from liver disease. The Ds suspected that the food supplied by the Ps was to blame.
The Ps attempted to recover the sale price for the feed. One of the issues the Ds argued was that the
food supplied did not correspond with the description given by the Ps. The Ds contended that the
chemical that affected the mink was not listed as one of the ingredients on the product b/c it was
never added to the product. The Ps argued that this was irrelevant b/c although the chemical was
not added to the feed by them it resulted from a chemical reaction in the food. The
Issue: Whether there was a breach of an implied condition b/c the mink food supplied did not
correspond with the description? No.
Held: for Ashington
Reasoning:
 SGA was not designed to provoke metaphysical discussions as to the nature of what is delivered
as opposed to what is sold.
 The test of description is intended to be a broader, more common sense, test of mercantile
character.
 The defect in the meal was a matter of quality of condition rather than description.
 There was no failure in the description – the ingredient was herring meal the fact that it reacted
and produced at toxic substance does not result in the failure to correspond with the description.
 The Ds do not succeed on this ground there was no breach of the SGA
 Ashington says about s. 17 that he did not receive herring meal he says he had contracted to
buy herring meal only. The other guy says all he gave was herring meal and that the toxic
substance developed by itself.
 The essential point of s. 17 is identification: what Ashington got was herring meal with nothing
added so it fit the description
 The court rejects the importing of “best quality” – you only bring in words that are needed for
identification purposes (even though this was a term used by the seller to describe the herring
meal)
 Ashington got a remedy based on s. 18(a) and (b)
o s. 18(b) – if goods are bought by description – the court says this was not a sale by
description but it IS something that qualifies under s. 18(b) a sale by description is
slightly different than a buying by description
Ratio: not all words of description are necessarily going to be brought into the description for
purposes of s. 17. The essential part of s. 17 is the identification of the good. As long as the
goods delivered generally meet the description, there is no basis for a s.17 complaint. A
common sense approach must be taken when deciding whether there is a correspondence with
a description given (i.e. ask what was supposed to be delivered, not what it was supposed to
do).
Note:
 s. 17 description – private sale & commercial
 Ashington was successful under s. 18(a) and (b) – the bulk of this decision goes to the
arguments under (a) and (b)
 After this case, “best quality Subaru” might mean that all you’re getting is “Subaru” if it’s a
piece of junk then you might be able to get relief under s. 18(a)/(b) but if you’re a private seller
then the “best quality” becomes irrelevant under s. 17
Summary of Sale by description:
 Most sales are sale by description – the Red Owl case is NOT how courts look at sales here
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Caution: not all words of description are necessarily going to be brought into the description for
purposes of s. 17
If they’re words in a K they’re more likely to be brought in. If they’re words that come in by an
advertisement, they may or may not be brought in.
If the purchaser has an ascertained, seen good that they’ve been given ample opportunity to
inspect, they’re going to have a difficult time to say there’s a breach of description b/c they’ve
had an opportunity to discover (so it’s not a latent problem)
Always be really aware of whether you have a private OR commercial seller
o If you have a commercial seller you’re going to be a lot more able to bring in arguments
that go beyond sale of description b/c you’ll be able to use ss. 18(a) and (b)
If you are relegated to s. 17 sale by description b/c you have a private sale or don’t fulfil certain
criteria in s. 18, then you have the 2 ways of looking at it: Arcos (technical way) vs. Ashington
(broad way of looking at it)
Also be aware that you can argue certain sections in the alternative always look at all three of
s. 17, 18(a) and (b) and then choose one or all of them
PART V: The Seller’s Obligation as to Description and Quality – B. The Implied Condition of
Merchantable Quality
 S.18, SGA – Implied conditions as to quality or fitness: Subject to this and any other Act,
there is no implied warranty or condition as to quality or fitness for any particular purpose of
goods supplied under a K of sale or lease, except as follows:
o (a) FITNESS FOR USE - if the buyer or lessee, expressly or by implication, makes
known to the seller or lessor the particular purpose for which the goods are required, so as
to show that he relied on the seller’s skill or judgment, and the goods are of a description
that it is in the course of the seller’s or lessor’s business to supply, whether the seller or
lessor is a manufacturer or not, there is an implied condition that the goods are reasonably
fit for the purpose; except in the case of a K for the sale or lease of a specific article under
its patent or trade name, there is no implied condition of fitness in that case.
o (b) MERCHANTABLE QUALITY - if goods are bought from a seller or lessor who
deals in goods of that description, whether it is the manufacturer or not, there is an implied
condition that the goods are of merchantable quality; but if the buyer or lessee has
examined the goods there is no implied condition as regards defects that the examination
ought to have revealed;
o (c) DURABILITY - there is an implied condition that the goods will be durable for a
reasonable period of time having regard to the use to which they would normally be put
and to all the surrounding circumstances of the sale or lease;
o (d) an implied warranty or condition as to quality or fitness for a particular purpose may be
annexed by the usage of trade;
o (e) an express warranty or condition does not negative a warranty or condition implied in
this Act unless inconsistent with it.
 In this chapter we focus on s.18(b), SGA – MERCHANTABLE QUALITY.
o S.18(b), SGA implies the condition of merchantable quality when there is a sale by
description and where the goods are purchased from a seller who deals in goods of
that description.
o Note that s.18 does not distinguish b/w manufacturers, retailers, and other types of
merchants.
o It has been suggested that this is a harsh rule and that it is not fair to hold a retailer
liable for defects in goods manufactured by someone else, especially since liability
under this section is strict and does not depend on any showing of negligence.
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o However, other authors have rejected this argument – large retailers are just as
powerful as the manufacturers. To limit the liability of retailers would be unfair to
the consumers. In many instances the retailers have choice as to the manufacturer
they choose. The fact that the retailer can be held liable along with the manufacturer
will encourage the retailer to spur the manufacturer to greater responsiveness to the
consumer’s complaint.
o S.18(a) and (b), SGA only applies to merchant sellers, not private sellers. The
traditional reasons for this are as follows: (1) the merchant seller holds himself out
as possession special skill and knowledge with respect to the goods; (2) he sells for
profit; (3) he is in a better position to absorb, or to pass on, any loss resulting from
undiscoverable defects than the average buyer.
1. The Standard of Merchantable Quality – SGA s. 18(b) **commercial application ONLY*
 Courts have tended to give a generous scope to what can be considered “merchantable” thus
reducing the usefulness of s. 18(b) to buyers
 Note: other prerequisites to a buyer’s use of s. 18(b)
 For it to fit under the merchantable section in 18(b), you have to have bought by description
from a seller who deals in goods
 In 18(a), buyer has to make purpose known, reliance on the seller’s skill, goods of that
description on course of seller’s business
 Sections 18(a) and (b) apply to commercial sellers only
 It’s easier for a seller to fit into the 18(b) section – merchantable is a much lower standard than
fit for purpose
 3 criteria necessary for s. 18(a)
o 1) Buyer has to make purpose known;
o 2) Buyer has to show that buyer relied on the Seller’s skill;
o 3) Goods of that description are sold in the course of the Seller’s business.
Bartlett v. Sidney Marcus Ltd. [1965] CA (commercial case)
Effect of implied conditions in sales of used vehicles from dealers.
Facts: The P traded in his Ford for a used Jaguar with the D car dealers. During the test drive, the D
salesman noticed there were some things wrong with the clutch and oil pressure gauge – then told
the P about this. They agreed that the P would buy the car and fix the clutch himself – “bleed the
clutch” (they put this in the K). The P bought the car and took it to the garage where they
determined that the problem was much graver. The P claimed the repairs from the D – alleged that
there was an express term that the car was in perfect condition OTHER THAN that the clutch
needed bleeding. It turns out that the repairs to the clutch were more expensive than just bleeding.
Buyer alleges he was told the car is in perfect condition except for the clutch – pursued on both s.
18(a) and (b).
Issue: Was the car in merchantable condition? Yes.
Held: The car was reasonably fit for use on the road, in merchantable condition
Reasoning:
TJ: TJ held there is no express term that the car was perfect other than the bleeding of the clutch –
both 18(a) and (b) were breached – the Dealer appealed
CA: Neither 18(a) nor (b) were breached
 It’s easier to use so 18(b) than (a)
 There was an implied condition that the goods were reasonably fit to be driven along the road
 The goods were bought by description from a seller who dealt in goods of that description
therefore, there was an implied condition that the goods be of merchantable quality
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
Cammell Laird Test for merchantability: goods are unmerchantable if they are “of no use” for
any purpose for which such goods would normally be used
 Grant Test for merchantability: the article is “fit for that use” (ie. fit for the use it’s supposed to
be fit for)
 Denning: a secondhand car is merchantable if it is in usable condition, even though not
perfect (must be “reasonably fit for its purpose” – ie. in roadworthy condition, even if it’s not as
perfect as a new car)
 Merchantable: something better than of no use at all but less than entirely fit.
 The car was far from perfect BUT a buyer of a secondhand car should be aware that defects may
appear sooner or later – he has no redress in the absence of an express warranty
 There was no breach of implied conditions
Ratio: When a buyer buys a secondhand car, defects will appear sooner or later. The fact that
the defect was more expensive than anticipated does not mean that there was a breach of
implied condition. On a sale of a second-hand car, the car is merchantable under s.18(b), SGA
if it is in a usable condition even if it is not perfect. A second-hand car is ‘reasonably fit for
the purpose’ under s.18(a), SGA if it is in a roadworthy condition, fit to be driven along the
road in safety for a reasonable time, even though not as perfect as a new car and even though
later on more work is necessary than was originally anticipated.
Note:
 Distinguishable from Crowther v. Shannon
 Note: UK SGA - s. 14(1) fit for purpose; 14(2) merchantable
 There is more chance for success under s. 18(a). As long as the object works, there is no cause
for complaint under 18(b) (merchantable quality) but s. 18(a) (reasonably fit for purpose) will
go further for the buyer. Under 18(a) the fact the object is useful for some purpose is not
enough.
 The goods are of “merchantable quality” if the goods that seller provides could be used by some
buyer for a purpose that is within the description of the goods, even tho the purpose that actual
buyer wants to use the goods for are such that the goods can’t be used.
Henry Kendall & Sons v. William Lillico & Sons, Ltd. [1968] HL
Facts: The P bred pheasants– a number of them died from eating feed contaminated with a toxin
that was found in nuts that was in the food. The description said it contained “ground nut
extractions.” The toxin was not discovered by either seller or buyer until some time after (latent
defect)– so the question is how much did the seller know at the time of the sale? The P claimed
under 18(b) first.
Issue: Was the pheasant food merchantable despite the toxins? Yes.
When can a latent defect be taken to affect merchantability?
Reasoning: Reid J.
 s. 18(b) applies to all sales by description where the seller deals in such goods here, it was
clearly sale by description
 If there is sale of description, then there is a condition (unless excluded by K) that the goods
must be of merchantable quality
 Merchantable = commercially saleable
 What s. 18(b) means by “merchantable quality” is that the goods in the form in which they
were tendered were of no use for any purpose for which goods which complied with the
description under which these goods were sold would normally be used, and hence were
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not saleable under that description objective test: “of no use by any person” would not
have been used by a reasonable man for ANY purpose
 BUT if goods are sold under a general description, then the goods would be merchantable under
the description if they were fit for ANY of those purposes
 Contaminated nut extractions are merchantable under the general description of nut extractions
b/c the buyer bought it under that description
 The J imports later knowledge – at the time of the sale neither party knew the nuts were bad.
The later knowledge was that some cattle producers had bought this nut mixture and fed it to the
cattle and they were ok.
 Was the ground nut mixture of any commercial use? Yes.
Dissent:
 Merchantability is concerned not with purpose but with quality
 The absence of a warning was in itself a serious defect which can make goods unmerchantable
even though they would have been merchantable if sold with due notice of the hidden defect
 The real question was whether the ground nut meal which its toxicity but without warning to the
buyer was merchantable as ground nut meal which is normally fit for consumption by poultry
 Whether goods of that description were of no use by a reasonable person for a NORMAL
purpose (slightly higher test than the majority)
Ratio: You can bring in later knowledge to determine merchantability (but it has to be ALL
later knowledge – so even that the cattle were ok with the nuts). The only way goods are not
merchantable is if a reasonable person would not have been able to use the goods by that
description for ANY purpose.
Note:
 Even though the nutmeal was merchantable, it was not fit for its purpose under s. 18(a) (see
below)
 1. It is not necessary to show reliance on the seller to get the protection of 18(b) [this favours
the buyer].
 2. Under 18(b) one must ask what the description is and whether a range of goods can be sold
under this description. If a range of goods can fit the description then the lowest quality
commonly sold is what is meant by “merchantable quality.”
 3. If description in K was so limited that goods sold under it would normally be used for only 1
purpose, then the goods would be unmerchantable under that description if they were of no use
for that purpose. If description so general that goods sold under it were normally used for
several purposes then goods would be merchantable under that description if they were fit for
any one of these purposes. If buyer wanted goods for one of those several purposes for which
goods delivered did not happen to be suitable, tho they were suitable for other purposes for
which goods bought under that description were normally bought, then buyer cannot complain;
should have either taken the necessary steps to bring 18(b) into action, or to have insisted that a
more specific def’n be inserted in K. [favours the seller, in that many goods will satisfy 18(b)]
 4. It is appropriate for the court to take into account subsequent knowledge in determining
whether the goods are of “merchantable quality.” [this can favour the seller]
B.S. Brown & Sons Ltd. v. Craiks Ltd. [1970] HL *s. 18(b) SGA*
Goods capable of being used for more than one purpose – no breach of merchantable quality if
the goods are of sufficient quality to be used for any one of their normal purposes.
Facts: The As gave the R cloth manufacturers an order for rayon cloth to a detailed specification.
There was a misunderstanding as to why the As wanted the cloth: the manufacturer thought it was
for industrial use; the Rs actually wanted it to make dresses. The As sued for damages – they allege
45
breach of conditions implied by ss. 18(a) and (b). The price that the A had paid was more a dress
material price than a commercial price.
Issue: Was the cloth of merchantable quality? Yes.
Held: for the R manufacturer
Reasoning:
 The cloth was not suitable for making dresses (irregular weave) – is it therefore of merchantable
quality within the meaning of s. 18(b)? Yes.
 The goods were bought by description – but the As did not make it known to the Rs for what
purpose the cloth was required
 There is no evidence that the Rs knew or ought to have known that the goods were not intended
for industrial use
 Kendall v. Lillico: “If the description is a familiar one, it may be that in practice only one quality
of goods answers that description – then that quality and only that quality is merchantable
quality. Or it may be that various qualities of goods are commonly sold under that description –
then it is not disputed that the lowest quality commonly so sold is what is meant by
merchantable quality; it is commercially saleable under that description.”
 Test: whether the cloth ‘would normally be used’ for industrial purposes?
o The cloth was suitable for that use
o The Rs thought in good faith that it was for industrial purpose – no other cloth
manufacturer would have assumed it was for anything other than industrial
o Thus, the cloth is of merchantable quality
 The court considers price – can’t fulfill a K by tendering lower quality goods when you have
charged a very high price for them. But the evidence in this case wrt to the price is too indefinite.
The difference between the commercial price and the dress making price is not enough to say
that there was an unmerchantable aspect here.
Ratio: The As did not make the purpose for which they required the goods so the Rs did not
know that they were for a purpose other than the lowest quality (industrial). The lowest
quality that something is commonly sold under is merchantable quality. Thus, the goods here
are merchantable. Goods MAY be unmerchantable if they can only be resold at a
substantially LOWER price – if they can be resold at approx. in the range of what they were
paid for, that’s not enough to make them unmerchantable.
2. Durability – SGA. s. 18(b) & (c)
 s. 18(c) – implied condition that the goods will be durable for a reasonable period of time
having regard to the use to which they would normally be put and to all the surrounding
circumstances of the sale or lease
 There is no BC case law on s. 18(c) – s. 18 is otherwise all about commercial sellers but s. 18c
doesn’t say anything about commercial sellers (so maybe it should have been its own section?)
 Does 18c provide any additional benefits to buyers – anything in addition to s. 18(a) or (b)? Prof:
who knows.
 Mash – gives us some indication how s. 18(c) works
Mash & Murrell v. Joseph Emanuel [1961] QBD *s. 18(c) SGA*
Where goods are sold and there is a period of transit b/f use – s.18(c), SGA implies a condition of
merchantable quality for some time after the goods are in actual use – reasonable durability.
Facts: The Ps purchased the D’s crop of potatoes that were on the way to England on a ship from
Cypress. When they arrived they were found to be rotten – they were rotten when they were loaded
in Cypress.
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Issue: Does merchantability in a K require that the goods should remain merchantable from the
time of shipment until arrival at the destination? Yes
Held: Goods must be merchantable for a reasonable time after property passes under 18(b).
Reasoning:
 The goods were not fit for any purpose which potatoes would normally be used for (ie. human
consumption)
 The condition that the goods are merchantable means that they must be in that condition when
appropriated to the K and that they will continue so for a reasonable time (maybe not if the
buyer directs them sent by a long and unusual transit)
 The condition of merchantability was broken – it was reasonable to expect them to be
merchantable upon arrival in England
 Given the knowledge of the parties, the potatoes should have remained merchantable for a
reasonable time in the transit to Liverpool (has to be NORMAL transit to destination)
Ratio: The condition that the goods are merchantable means that they must be in that
condition when appropriated to the K and that they will continue so for a reasonable time
after arrival – they must be durable past the time at which risk passes to the buyer.
Note:
 Illustrates how durability works with merchantability – shows the extra that 18c adds
3. Effect of Inspection or Opportunity to Inspect – SGA s. 18(b)
 Merchantable under s. 18(b) requires goods to be greater than no use and less than entirely fit: 1)
brought by description, 2) seller deals BUT if the buyer or lessee has examined the goods there
is no implied condition as regards defects that the examination ought to have revealed;
Thornett & Fehr v. Beers & Son [1919] KB
Facts: The P (dealer in vegetable glue) sued the D for the balance of the price of certain barrels of
vegetable glue. The D said it was a sale by sample and that the glue was not equal to sample.
Claimed in the alternative that the glue was not merchantable – alleged that the glue is of no value.
The Ds did not look inside the barrels before buying – just inspected the outside, although they had
the opportunity to do so (they were late for the appointment).
Issue: Is looking at the barrels from the outside really an examination under s. 18(b)?
Held: for the P – no breach of condition
Reasoning:
 It is not sufficient that a buyer have the opportunity to inspect goods – he must actually have
inspected them but this D had in fact inspected the goods and that he was satisfied by the
inspection and that he was willing to take the risk of not giving a complete inspection b/c the
price was so low
 If the Ds had inspected inside the barrels they would have detected the defects
 There was no implied condition that the glue is merchantable– the Ds had full opportunity of
making an inspection to ascertain the condition of the glue
 The D misled, took the conscious decision not to inspect fully – so the court deems that the
visual scan from the outside was enough
Ratio: Caveat emptor – buyer had the chance to inspect the goods but did not. There was no
implied condition of merchantability. This was not a sale by sample. It is not enough that a
buyer have the OPPORTUNITY to inspect – he must have actually inspected them but if the
buyer doesn’t want to do a proper inspection then the court will deem the inspection to have
been complete (and thus. 18(b) examination condition fulfilled).
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Van Doren v. Perlman et al. [1956] Nfld. S.C. *s. 18(b) SGA*
Facts: The P bought a fur coat from the D – the P claims that there was a breach of implied
condition that the coat was of good quality and fit for the purpose for which it was required. The P
wants refund of the purchase price or damages. When the P bought the coat she noticed on the same
day that it had bald spots and took it back to the D’s shop. The D sent it off to repair but it came
back looking even worse.
Issue: Did she examine/inspect the goods? No – should have been given a reasonable opportunity to
inspect.
Held: for the P – gets back the price of the coat
Reasoning:
 The coat was defective – this is NOT a caveat emptor case
 The D argued s. 18(b) – if a buyer has examined the goods, there shall be no implied condition
as regards defects which such examination ought to have revealed (he argued that the P had
inspected the coat in his shop and should have seen the defects she is complaining of)
 Did the ppty pass to the P?
o The buyer must be allowed reasonable time for examination and acceptance – here it
took only a few minutes for the P to realize the coat was defective
o The coat was not worn
o It was returned in the same condition in which it had been delivered
 The P should have been given a reasonable chance to inspect the coat – she didn’t accept the
coat
Ratio: s. 18(b) is no defence to the D here – caveat emptor does not apply. The Buyer rejected
the goods within a reasonable time so the ppty had not yet passed to her – she could reject it
and get her purchase price back. The P should have been given a reasonable chance to inspect
the coat.
Note:
 Difficult to reconcile how looking at a barrel from the outside is enough to inspect the barrels
but putting a coat on is not inspection – the difference is that Beers was a sophisticated customer,
he had misrepresented that he inspected
 But here the P had been hoodwinked (the furrier misrepresented to say the furs were really good)
C. The Implied Condition of Suitability for a Particular Purpose – SGA s. 18(a)
18—Implied conditions as to quality or fitness
Subject to this and any other Act, no implied warranty or condition as to quality or fitness for any
particular purpose of goods supplied under a K of sale or lease, except:
a) If buyer or lessee, expressly or by implication, makes known to seller or lessor the particular
purpose for which the goods are required, so as to show that the buyer or lessee relies on the
seller’s or lessor’s skill or judgment, and the goods are of a description that it is in the course
of the seller’s or lessor’s business to supply, whether seller or lessor is manufacturer or not,
there is implied condition that the goods are reasonably fit for that purpose; except that in
the case of a K for the sale or lease of a specified article under its patent or other trade name,
there is no implied condition as to its fitness for any particular purpose
Crowther v. Shannon Motor Co. [1975] CA *s. 18(a) SGA*
There will be a breach of s.18(a), SGA if the car does not run at least for a reasonable time.
Facts: The P bought a Jaguar from the D car dealers who said “it would be difficult to find a 1964
Jaguar of this quality inside and out” and that it was “hardly run in.” The P looked carefully at it,
48
took it for a trial run and had it tested by the Ministry of Transport. The P bought it and used it for 3
weeks and then the engine broke so it had to be replaced by a new one. P got damages at trial – now
the D appeals, claiming there was no justification for a finding that the car was not reasonably fit for
the purpose.
Issue: Was there a breach of the fit for purpose condition? Yes (the car was a piece of crap)
Held: for the P (got price back for the car + 70 pounds towards a new engine)
Reasoning: - Denning J.
 There was an implied condition under s. 18(a) that the car was reasonably fit for the purpose for
which the P required it and which he made known to the seller
 Bartlett v. Sidney Marcus: when a buyer buys a secondhand car, he should realize that defects
may appear sooner or later. In Bartlett there was only a minor repair after extensive driving –
here it’s a quite different situation.
 The repair in the case at bar was extensive – the D admitted one can get 100,000 miles out of a
Jaguar engine, this engine only gave 80,000 miles
 At the time of the sale, the car was not reasonably fit for the purpose of being drive on the road
 There was a breach of s. 18(a)
Ratio: Illustration how fit for purpose s. 18(a) is easier to use by buyers (than s. 18(b)) –
Bartlett). If the car does not run for a reasonable time but the engine breaks up w/in a short
time that is evidence which goes to show it was not reasonably fit for the purpose at the time it
was sold. Thus, the car has to be driven for a reasonable period of time w/out defects to be fit
for the purpose.
Note:
 Distinguishable from Bartlett v. Sidney Marcus (minor repair after 300 miles) – that case was
under s. 18(b) merchantability and the case at bar is 18(a) fit for purpose
 The applicable standard is that the car must ‘at the time of sale and for a reasonable time
thereafter be free of any material defect making it incapable of safe and lawful use.
‘Reasonable time’ will be determined by price, age and condition of the car but the buyer
may expect to incur incidental but possibly expensive repairs.
 This corresponds with s.18(c), SGA – which provides that goods must be usable for a
reasonable amount of time after sale.
 What is the economic effect of holding a used car dealer responsible for defects of which he
could not reasonably have been aware at the time of sale?
Marshall v. Ryan Motors (1922) Sask. CA *s. 18(a) SGA*
Facts: The P bought a new Overland car from the D dealer – from the start it wasn’t working well
and required extensive repairs. The P claims damages for breach of express warranty in the K, for
breach of implied condition or warranty that the car was reasonably fit for the purposes of the P, in
the alternative.
Issue:
1) Is the car fit for the P’s purpose? No.
2) What is required for the buyer to make his particular purpose known?
Held: Breach of s. 18(a) – for the P.
Reasoning:
 Where an article which is prima facie applicable to one purpose only (ie. driving on the road) is
sold by its ordinary recognized description, then the fact that the buyer does not make known to
the seller the particular purpose for which the article is required (otherwise than by the ordinary
description of the article), does not exclude the K of sale from s. 18(a)
49
 The car is not reasonably fit to go from place to place – it was used for the ordinary purposes for
which a car of this class is used and it is not reasonably fit for that work
 There was an implied condition that the D should supply the P with a car that was reasonably fit
for the particular purpose for which the P required the car – ie. to get him from place to place
 Chanter: P bought a crappy furnace – the P had made the mistake for buying that furnace b/c he
didn’t make his purpose known to the D (he needed it for a brewery, not a home).
 The use the P was going to use in the case at bar was for an ordinary use (just driving) – if it’s
an ordinary use, you don’t have to make your purpose known
Ratio: There was an implied condition that the Seller would supply the Buyer with a car that
was reasonably fit for the purpose that the Buyer required the car for – ie. getting him from
place to place. The car did not do this. Therefore, breach of s. 18(a). If the buyer wants to use
the good for an ordinary use, he does not have to make his purpose known to the seller.
Merely by asking for the good, the buyer will have relied on the seller’s skill.
Note:
o If you have an exceptional purpose, you have to let the seller known
o If you have an ordinary purpose in mind, merely by being in the store, you have made your
purpose known and implicitly shown that you relied on the seller’s skill
Henry Kendall v. Lillico [1968] HL
Facts: Re – nutmeal compounded into feed given to poultry, which died. Lillico had made it known
that his purpose for buying the feed was for resale to make into a compound for poultry. Now court
considers whether result would be different under 18(a).
Issue:
1) Was Kendall aware that Grimsdale’s purpose was to resell the feed to be turned into
cattle/poultry food? Yes – a condition resulted under s. 18(a) from this knowledge.
2) If you make your particular purpose known, is that enough to show that the buyer is relying
on the seller’s skill? Yes.
Held: for Grimsdale – Kendall is liable for breach of condition under s. 18(a) – a particular purpose
was known
Reasoning:
 The scope of s. 18(a) is narrow: it requires that the buyers…
o 1) shall have required the goods for a particular purpose,
o 2) made known this purpose to the seller in circumstances where the seller realized or
ought to have realized that the buyer was relying on using his skill/judgment to select
goods fit for that purpose.
 Whenever a purpose is stated so as to trigger s. 18(a), the seller must supply goods reasonably
fit to enable the buyer to carry out his purpose in any normal way
 BUT the purpose must be stated with sufficient particularity to enable the seller to exercise his
skill/judgment in making or selecting appropriate goods.
 Reliance must be affirmatively shown – expressly or by implication (it is seldom express though)
 It is enough that a reasonable seller in the shoes of Kendall would have realized that he was
inviting Grimsdale to rely on his skill and judgment – this is what Kendall was doing. Therefore,
s. 18(a) applies to this case and the limitation of liability clause does not apply.
 Grimsdale’s purpose was a “particular purpose” within s. 18(a) – ie. to resell as cattle and
poultry feed
 If a particular purpose is made known, that is sufficient to raise the inference that the
buyer relied on the seller’s skill and judgment (unless there is something to displace this
inference)partial reliance is sufficient
50

It was reasonable that the buyer should rely on the seller to deliver ground nut meal which
would be healthy and not a harmful ingredient in the feed
 There was reliance by Grimsdale on Kendall – therefore, a condition was created
 Kendall is liable in breach of the condition under s. 18(a) – the harm to the pheasants was
not too remote
Ratio: The Buyer made his particular purpose known to the seller – this is sufficient to raise
the inference that he was relying on the seller’s skill and judgment. The Buyer relied on the
Seller – therefore a condition was created, which was then breached. Reliance must be
brought home to the seller either expressly or by implication (here it was by implication, so
that was enough).
1. Displays courts willingness to imply in the particular purpose for which goods are
required (even b/w 2 commercial parties as here).
2. Court finds no reason why buyer, even when parties in 2 equal positions, cannot
demonstrate a reliance on seller.
3. Case also stands for the proposition that here, price is relevant, which goes back to the
issue of whether purpose has been stated: if there is a particular price paid, esp a high
one, one can assume that goods were intended to do a certain thing that lower priced
goods would not be expected to do.
Note:
 Under s. 18(b), the nutmeal was merchantable b/c other users of it were able to use it (for cattle)
Baldry v. Marshall [1925] CA - Exception to s.18(a) implied condition – sale under trade name
Exception to s.18(a) implied condition – sale under trade name.
Facts: The buyer contacted the sellers inquiring about an 8 cylinder Bugatti car which he was
interested in buying. The buyer told the seller the purpose for which he wanted the car. The seller
sold the car and the car was not adequate for the buyer’s purpose. The buyer claimed a breach of
condition of fitness for use. The sellers claimed that the condition did not apply under the trade
name exception. The dealer had an exclusion clause in the K that said there are no warranties about
this car, except as is offered by Bugatti, the manufacturer.
Issue: Is the implied condition of fitness for use excluded b/c the car was sold under its trade name?
Legislation: 18(a) “implied condition about fitness of purpose…except that in the case of a K for
the sale or lease of a specified article under its patent or other trade name, there is no implied
condition as to its fitness for any particular purpose”
Reasoning:
 The mere fact that an article sold is described in the K by its trade name does not
necessarily make the sale a sale under a trade name.
 Whether a sale is under a trade name depends on the circumstances:
o 1) Where the buyer asks the seller for an article which will fulfill some particular
purpose and the seller sells him an article of a well known trade name, the trade
name exception will not apply.
o 2) Where the buyer asks the seller for the article with a well known trade name on
recommendation from someone else and again asks the seller if it will fit the purpose
for which the buyer wants it, and the seller sells the article, the exception again does
not apply.
o 3) Where the buyer asks for the trade name article and says to the seller that the
article was recommended to him for his particular purpose and the seller sells the
article, the exception will apply.
51
 Here the buyer wanted an 8 cylinder Bugatti car. But, he communicated the purpose for
which he wanted it and there is no evidence that he did not rely on the seller’s skill or
judgment. The buyer merely used the trade name to describe the goods he was interested
in buying.
 The exclusion clause the D was relying on only said “warranty”, NOT “condition” – so the sale
by description exclusion was not covered – so the exclusion clause doesn’t really work
 BUT the D can rely on the proviso at the end of s. 18(a) – this excludes any condition b/c he is a
purchase who bought a Bugatti by trade name description
Ratio: When an article is sold under its patent or trade name the implied condition of fitness
for purpose will not apply. The TEST is: Did the buyer specify the article under its trade
name in such a way as to indicate that he is satisfied, rightly or wrongly, that it will answer his
purpose, and that he is not relying on the seller’s skill or judgment, however great it may be?
Note:
 By ordering an article under its patent or trade name, the buyer is explicitly not relying on the
skill and the judgment of the seller – thus, there is no implied condition as to fitness for purpose
under s.18(a), SGA.
 There’s only 1 instance where the proviso will apply and allow the seller to defeat the condition:
where the buyer asks for the good by the tradename OR by whatever conversation went on was
implicitly saying that he’s not relying on the seller’s skill and that the trade mark was sufficient
for him… THEN the seller can rely on the proviso.
PART V: THE SELLER’S OBLIGATIONS AS TO DESCRIPTION AND QUALITY – E.
Sale by Sample – SGA. s. 19
 The sale by sample provisions were more significant when “description” was defined more
narrowly in the SGA
 MOST sales transactions are probably sales by sample – in many situations that are, the buyer
can have recourse to ss. 17 and 18 to address the problem that has arisen
 19 (1) A contract of sale or lease is a contract for sale or lease by sample if there is a term in
the contract, express or implied, to that effect.
o (2) In a contract for sale or lease by sample,
 (a) there is an implied condition that the bulk must correspond with the
sample in quality,
 (b) there is an implied condition that the buyer or lessee must have a
reasonable opportunity of comparing the bulk with the sample, and
 (c) there is an implied condition that the goods must be free from any defect
rendering them unmerchantable that would not be apparent on reasonable
examination of the sample.
 No def’n for sale by sample in section
 Sale by sample = is a type of description
Cudahy Packing Co. v. Narzisenfeld USCA (1924) *explains what is a sale by sample*
Facts: The D inquired with the P whether he has a “carload” of eggs for sale (that’s usually 400
cases). The D asked if the eggs had been inspected by the Mercantile Exchange – the P said yes, so
the D took one of the inspection certificates, went to the warehouse where the eggs were store to
inspect them, then told the P that he would buy a carload that he had inspected (specific one).
Issue: What is a sale by sample?
Held: This is not a sale by sample b/c seller offered opportunity to inspect all eggs
Reasoning:
52

In the case of a K to sell or a sale by sample there is an implied warranty that the bulk shall
correspond with the sample in quality.
 If the seller is a dealer in goods of the kind sold there is an implied warranty that the goods shall
be free from any defect which renders them unmerchantable and which a reasonable
examination of the sample would not disclose.
 The sale here cannot be regarded as sale by sample when a small quantity of the goods then in
existence in bulk is exhibited as a specimen of a larger quantity called the bulk which is not
present for examination
 A sale by sample is not accomplished when the specimen of the thing under consideration is
exhibited to the buyer in the course of the negotiationsit must be understood by both parties
that the goods exhibited constituted the standard with which the goods not exhibited
corresponded and to which deliveries would conform
 If the buyer inspects a portion of goods and fails to examine the remainder which he is given the
opportunity to inspect, he can’t (in the absence of an express agreement), claim that what he did
examine was a SAMPLE to which the remainder was warranted to conform
 In a sale by sample the seller selects the sample – he knows/ is presumed to know the condition
of the goods he is proposing to sell
 If the seller selects a sample he uses it as a standard and thereby warrants that is corresponds to
the remainder of the goods which are not exhibited
 You have to show that it is a sale by sample and that it was a term of the agreement. It is not
enough that seller allows buyer to come and inspect the goods.
Ratio: Sale by sample has to be a term of the agreement. Where there is a sale by sample there
is an implied warranty by the seller that the remainder of the goods are of the same standard
as the sample. But Buyer can’t claim that the Seller warranted that the remainder would
conform to the sample unless there is an express agreement or the Buyer failed to inspect the
rest of the goods.
Note:
 It’s the seller’s prerogative to establish the sale by sample
 The buyer can’t unilaterally turn a sale of specific goods into a sale by sample by selecting a
sample from a whole that he has been given an opportunity to look at
 Eg. if a buyer looks at a small part of a huge lot of stuff, what can you do to make it a sale by
sample? Say “the buyer will inspect 5% of the goods, which will represent a sample for the
purpose of the SGA”
PART V. THE SELLER’S OBLIGATIONS AS TO DESCRIPTION AND QUALITY – E.
Sale by Sample – 2. The Function of the Sample: Reasonable Inspection – SGA s. 19(2)
 s. 19(2)
 (2) In a contract for sale or lease by sample,
o (a) there is an implied condition that the bulk must correspond with the sample in
quality,
o (b) there is an implied condition that the buyer or lessee must have a reasonable
opportunity of comparing the bulk with the sample, and
o (c) there is an implied condition that the goods must be free from any defect rendering
them unmerchantable that would not be apparent on reasonable examination of the
sample.
Steels & Busks v. Bleecker Bik & Co. Ltd. [1956] QB *s. 19(2) SGA*
53
Facts: The Buyers wanted rubber for making suspenders and corsets. The first deliveries were fine
but the final delivery was unsuitable b/c the rubber stained the garments due to the presence of a
chemical. At the time of the sale, neither party was aware that this chemical might be present and
that it might be harmful. The sample did not contain the chemical.
Issue: Is the presence of the chemical a breach of the sample clause? No (b/c not apparent upon
inspection)
Reasoning:
 19 (2) In a contract for sale or lease by sample,
o (a) there is an implied condition that the bulk must correspond with the sample in quality,
o (b) there is an implied condition that the buyer or lessee must have a reasonable
opportunity of comparing the bulk with the sample, and
o (c) there is an implied condition that the goods must be free from any defect rendering
them unmerchantable that would not be apparent on reasonable examination of the
sample.
 Where there is a defect not apparent on reasonable examination of the sample, the buyer’s rights
arise under 19(2)(c ) and not under 19 (2)(a)
 The purpose of a sample is to present to the eye the real meaning and intention of the parties
with regard to the subject matter of the K – the sample speaks for itself
 The chemical was not detectable by visual examination – so the presence or absence of the
chemical cannot in itself be a breach of the sample clause
 The bulk does not correspond with the sample, and there is a breach of the ‘sample condition’
only when the bulk does not comply with the sample in some manner which reasonable
examination of the sample initially used by the buyer would have uncovered.
 Thus, if the buyer used visual examination of the sample and was satisfied with it, but when the
bulk arrived, although visually it corresponded with the sample, it had a defect not present in the
sample but which was not apparent by visual examination, there will be no breach of the sample
condition.
Ratio: The bulk does not correspond with the sample, and there is a breach of the ‘sample
condition’ only when the bulk does not comply with the sample in some manner which
reasonable examination of the sample initially used by the buyer would have uncovered. Thus,
if the buyer used visual examination of the sample and was satisfied with it, but when the bulk
arrived, although visually it corresponded with the sample, it had a defect not present in the
sample but which was not apparent by visual examination, there will be no breach of the
sample condition.
Note:
 Court focuses on s. 19(2)(a) – how to satisfy it
Godley v. Perry et al. [1960] QB *reasonable inspection*
Facts: The P is an infant suing the D toy seller – a toy catapult broke and injured the P’s left eye.
The P claimed that the D was in breach of the implied condition of sale that the
catapult would be reasonably fit for the purpose for which it would be required and would be of
merchantable quality. The D 3rd partied the wholesaler – claimed that the sale to the D was a sale
by sample and that the wholesaler was in breach of the condition in s. 19(2). The 3rd party sued the
4th party toy importer, alleging breach of condition under s. 19(2).
Issue:
1) Was this a sale by sample? Yes.
2) What is a reasonable examination? Yes.
Held: for the P; for the D against the 3rd party; for the 3rd party against the 4th party
54
Reasoning:
 This was a sale by sample – the implied condition that it shall be free from defect rendering it
unmerchantable existed
 The 4th party submitted that a reasonable examination of the toy would have revealed its defects
and that thus no such condition should be implied – court agrees, no liability to the 4th party
under s. 19(2)
 Between the 3rd and 4th party there was sale by sample with the implied condition
 What a reasonable inspection is one that would be understood by the common-sense
standards of every day lifehere the testing was reasonable and every-day and no defect was
apparent; therefore, that implied condition was broken
Ratio: The examination must be “reasonable” not “practical.” (This is a low threshold).
PART VI. DELIVERY – SGA. s. 1 “delivery”, ss. 5, 14, 31-41.
 SGA on delivery:
o 1) Specifies the place of delivery (ss. 33(1), 33(3), 36(1));
o 2) Time of delivery (s. 33(4)); and
o 3) obligations with respect to care of the goods in transit (ss. 36(2), 36(3), 37)).
 “Delivery” is defined as “the voluntary transfer of possession from 1 person to another” (SGA, s.
1)so what is a VOLUNTARY TRANSFER?
 However, it does not purport to set out what constitutes “transfer of possession” (except in ss.
33(3) and 36(1)) so must rely on CL
 S. 31 has obligations for both sellers and buyers in it
 Duties of seller and buyer:
o 31 It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for
them, in accordance with the terms of the contract of sale.
 Sections 31-41: freedom to K
 c.i.f. London= cost insurance freight (prima facie the seller will pay for insurance AND the
transportation to get it to London, can be rebutted)
 f.o.b. London= free on board (prima facie the seller is responsible for getting the goods on the
train/plane but is NOT paying for the transportation, can be rebutted)
PART VI. DELIVERY – B. Time of Delivery – SGA ss. 14, 32
 Stipulations as to time – time of the essence
o 14 (1) Unless a different intention appears from the terms of the contract, stipulations
as to time of payment are not deemed to be of the essence of a contract of sale.
o (2) Whether any other stipulation as to time is of the essence of the contract or not
depends on the terms of the contract.
o (3) In a contract of sale, unless there is evidence to the contrary, "month" means
calendar month.
 Courts generally construe commercial Ks as being time of the essence
 Payment and delivery are concurrent conditions
o 32 Unless otherwise agreed, delivery of the goods and payment of the price are
concurrent conditions; that is to say, the seller must be ready and willing to give
possession of the goods to the buyer in exchange for the price, and the buyer must be
ready and willing to pay the price in exchange for possession of the goods.
 s. 31 Duty of Seller to deliver and duty of buyer to accept and pay
55

ss. 32-41: set of implied rules regarding these obligations. But these rules will only come into
play if there is an absence of specifics in the K. If you don’t deliver within a timely way you run
the risk of breaching the condition of delivery.
Bowes v. Shand (1877) HL
Facts: There was a K for the sale of rice to be shipped in “March and/or April.” Most of the bags
were shipped in February, some in early March.
Held: for the D - Rice was not shipped according to the requirements of the K
Reasoning:
 “March and/or April” can mean that the rice is to be shipped in those months or that shipment is
to be made continuously in such a way as that it is to come to a conclusion in one of the months
in question
 The material thing is the completion of putting the rice on board
Ratio: Condition of the rice was fine BUT the buyer can reject the rice b/c it should have been
shipped either in March and/or April and the fact that it was shipped in February means that
was a breach of a condition.
Note:
 Should have read “March and April, or either of them”
Charles Rickards Ltd. v. Oppenheim [1950] CA
Facts: Oppenheim placed an order for a Rolls Royce with Rickards, the car dealer. Rickards subcontracted with Jones Brothers for the construction of the body of the car. Jones said it would take
about 6-7 months to build it. They took around 12 months. Now Oppenheim doesn’t want the car
anymore – but acquiesced to the delay before. He said that unless he gets the car by July 25 he does
not want it. Rickards is suing for the price of the car.
Issue: Can the D, having waived the time of essence clause, reinstitute it? Yes.
Whether the D had a right to reject the goods due to the late delivery?
a) Was the timing of the delivery of the essence to the K? YES.
b) If so, was the stipulated time waived by the D? YES.
c) Was the D entitled to give the notice of the revocation of the waiver? YES.
d) Did the D give reasonable notice of the revocation and insistence on delivery giving the P
enough time to comply with the set date for delivery? YES.
Held: for the D – he was entitled to cancel the K (time was of the essence)
Reasoning – Denning J.
 There was a time of the essence stipulation in the K (ie. between 6-7 months)
 Where a D leads the P to believe that he would not insist on the stipulation as to time, and
that if the P carried on the work, D would accept it, and the P did, the D cannot
afterwards set up the stipulation of time against the P. In this case, by his conduct, the D
evinces an intention to affect the legal relations. He makes a promise not to insist on his
strict legal rights, creating an estoppel if that promise was intended to be acted on and is in
fact acted on. The D cannot afterwards go back on the promise.
 However, while this occurred here, the inquiry does not end there.
 In this case, time and time again the D pressed for delivery and time and time again he was
assured he would have early delivery; but, he never got satisfaction; and eventually at the end he
gave notice saying that, unless the car were delivered by a certain date he would not accept the
delivery.
56
 The D was entitled to give a notice to the P that even though he waived his strict right to a
timely delivery b/f, he was enforcing his right now. The D was entitled in this case to give
reasonable notice that the timing of delivery was once again of the essence.
 4 weeks was reasonable notice that the D gave to the P considering that the P told the D that the
car would in fact be delivered in 2 weeks.
Ratio: Even when the time of delivery is of the essence to the K for sale of goods, the buyer
may be estopped from rejecting the goods if the delivery is late if the buyer waived his strict
legal rights to enforce the timing stipulation by his not repudiating the K even though the
seller failed to deliver the goods on time (estoppel). The buyer, however, can invoke his rights
under the K again by giving subsequent reasonable notice to the seller that delivery must be
made w/in certain period of time or the goods will not be accepted.
Note:
 This case explores how “time of the essence” works in a sale of goods K
 If you have a K that’s time of the essence and the time comes, if you do nothing and you let the
time passed, you have implicitly waived time of the essence
 If you don’t want to let time of the essence be waived, you have to give reasonable notice
PART VI. DELIVERY. C. Documentary Sales
 S. 21: No ppty in goods passes until the goods are ascertained
 S. 25: Goods remain at the risk of the seller until the ppty passes
 Risk is intervening circumstances from outside sources – eg. fire, theft, spoliation (Beaver –
note, spoliation from outside sources, not b/c of the seller’s fault)
 S. 23: Unless a different intention appears either in the K itself or in the circs or is implied
between the dealings of the parties, then these rules for ppty passing do not come into play. If
there IS a different intention, then s. 23 sets out a list of rules to determine when ppty passes.
 S. 23(7): In a K for unascertained goods, the property in the goods passes to the buyer when
goods of that description and in a deliverable state are unconditionally appropriated to the
contract
 Mere ascertainment is usually not enough
 In some cases unconditional appropriation doesn’t occur until the goods are delivered to the
buyer
 It’s the last act of a buyer who determines it
Beaver Specialty Ltd. v. Donald H. Bain Ltd. et al. (1973) SCC *ss. 18(a) & (b) SGA*
Facts: P (Bain) refused to accept delivery of Chinese walnuts shipped by the D (Beaver) b/c the
walnuts had become unmerchantable in the course of transit b/w Vancouver and Toronto. P is suing
for the purchase price. Buyer complains under s.18(a) and (b)—not fit for merchantable quality.
There is no dispute b/w Beaver and Bain that the walnuts arrived in the Toronto in a seriously
damaged state due to freezing during transport (they were supposed to stay at a higher temperature).
The K said “price as above f.o.b. Toronto.”
Issue: Did the seller or the buyer have title to the walnuts while in transit? Seller.
Reasoning:
 S. 38 says If goods are delivered to the buyer that the buyer has not previously examined, the
buyer is not deemed to have accepted them unless and until the buyer has had a reasonable
opportunity of examining them for the purpose of ascertaining whether they are in conformity
with the contract. so buyer says he doesn’t have to accept them
57

The seller says that s. 23(7) says that since the nuts were good when I put them on the truck, I
don’t have to suffer the consequence of the nuts freezing during the transport
 The common meaning of “f.o.b.” is just a connotation of cost
 Bain is arguing that f.o.b. is used here to merely indicate the price and that it’s an expression
only of cost and that it has no other connotation to it
 Beaver says that f.o.b. is the classic meaning of f.o.b. which used to mean a lot in the 1800s:
used to mean not only cost but also the method of delivery, where it is to be delivered and when
risk passes (so was a lot broader def’n that had a lot more to do with method of delivery, place
of delivery etc, whereas it’s now commonly just used as a short form for cost)
 Court wants f.o.b. to have a classic meaning b/c that imports words connoting risk, which then
ousts s. 23 – court wants s. 38 to prevail
 Court says that s. 23(1) (ppty passing) isn’t clear BUT s. 38 is clear: if you have ordered
something you’ve never had a chance to look at, you shouldn’t be deemed to be responsible for
it if it’s not in the condition you ordered it in
Ratio: Under shipment ‘f.o.b. destination’ the presumption is that the property interest was
not meant to pass until the goods reached the destination. The nature of f.o.b. K is that
delivery takes place/possession transferred when reaches hands of buyer, giving ample time
for an inspection of goods. Court ousted s. 23 here to make s. 38 prevail. In f.o.b destination K,
title and therefore risk, does not pass to the buyer until the goods are delivered at the destination. If
the f.o.b. destination K is somewhat ambiguous the circumstances of the case may resolve the issue
in favour of the primary meaning of such Ks.
Note:
 f.o.b. = free on board
 S.37, SGA – Risk if goods are delivered at a distant place: Unless otherwise agreed, if the
seller of goods agrees to deliver them at the seller’s own risk at a place other than that where
they are when sold, the buyer must nevertheless take any risk of deterioration in the goods
necessarily incident in the course of transit.
 Therefore, in f.o.b. Ks the buyer bears the risk of damage or deterioration that is
necessarily incident in the course of transit. Thus, ordinary wear and tear risk is born by
the buyer.
 S.36, SGA – Delivery to carrier:
o (1) If, in pursuance of the K of sale, the seller is authorized or required to send the goods
to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for
transmission to the buyer is deemed, unless there is evidence to the contrary, to be a
delivery of the goods to the buyer.

Therefore the risk to goods during transit is on the buyer unless there is
evidence to the contrary.
o (2) Unless otherwise authorized by the buyer, the seller must make such K with the carrier
on behalf of the buyer as may be reasonable, having regard to the nature of the goods and
the circumstances.

In Ks where the risk is on the buyer the seller must make a reasonable K
with the carrier of goods on behalf of the buyer.
o (3) If the seller fails to act in accordance with (2), and the goods are lost or damaged in
course of transit, the buyer may (a) decline to treat the delivery to the carrier as a delivery
to the buyer, or (b) hold the seller responsible in damages.

If goods are damaged b/c the seller did not make a reasonable K with the
carrier the buyer has recourse – can reject the goods or seek damages.
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o (4) If goods are sent by the seller by route involving sea the seller must give sufficient
notice to the buyer to insure the goods.
o (5) If the seller fails to give such notice the goods are deemed to be at seller’s risk during
the seal transit.

38 Buyer's right of examining goods
o (1) If goods are delivered to the buyer that the buyer has not previously examined, the
buyer is not deemed to have accepted them unless and until the buyer has had a
reasonable opportunity of examining them for the purpose of ascertaining whether they
are in conformity with the contract.
o (2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, the
seller is bound, on request, to afford the buyer a reasonable opportunity of examining the
goods for the purpose of ascertaining whether they are in conformity with the contract.
PART VI. DELIVERY – D. Delivery of the Proper Quantity – SGA. s. 34
 34 (1) Delivery of Wrong Quantity - If the seller delivers to the buyer a quantity of goods
less than the seller contracted to sell, the buyer may reject them.
(2) If the buyer accepts the delivered goods, the buyer must pay for them at the contract rate.
(3) If the seller delivers to the buyer a quantity of goods larger than the seller contracted to
sell, the buyer may
(a) accept the goods included in the contract and reject the rest, or
(b) reject the whole.
(4) If the seller delivers to the buyer a quantity of goods larger than the seller contracted to
sell and the buyer accepts the whole of the goods delivered, the buyer must pay for them at
the contract rate.
(5) If the seller delivers to the buyer the goods the seller contracted to sell mixed with the
goods of a different description not included in the contract, the buyer may
(a) accept the goods that are in accordance with the contract and reject the rest, or
(b) reject the whole.
(6) This section is subject to any usage of trade, special agreement or course of dealing
between the parties. [freedom of K prevails]
 S. 34 is about the obligation to deliver the proper quantity
 Buyer can accept the goods or reject
In Re Moore & Co. and Landauer & Co [1922] CA *s. 34 SGA*
Facts: The seller sold to the buyer about “3100 cases of Australian canned fruits with 30 tins to the
case…”. When the goods arrived, the seller tendered the cases with 30 tins in them but sent back the
ones with 24 tins in them.
Issue: Was the buyer entitled to send the goods back that didn’t match the description as to quantity?
Yes.
Reasoning:
 The size of the goods may be important to the buyer
 The buyer and seller have put “3100 cases with 30 tins to the case” in the K and that is what the
sellers must tender to the buyers
Ratio: Delivery of wrong quantity triggered s. 34 and buyer was allowed to reject.
Note:
 This case was actually decided under s. 17 (description)
 Atiyah says this case is too technical and not good law (prof kind of agrees)
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
s. 34 talks only about quantity – the fact that they got the right total quantity means that s. 34
would actually not apply and allow the buyer to reject the pears
PART VI. DELIVERY – C. Delivery by Installments – SGA. s. 35
 35 (1) Installment Deliveries - Unless otherwise agreed, the buyer of goods is not bound to
accept delivery by installments.
(2) If there is a contract for the sale of goods to be delivered by stated installments, which
are to be separately paid for, and the seller makes defective deliveries in respect of one or
more installments, or the buyer neglects or refuses to take delivery of or pay for one or more
installments, it is a question in each case depending on the terms of the contract and the
circumstances of the case whether the breach of contract is
(a) a repudiation of the whole contract, or
(b) a severable breach giving rise to a claim for compensation but not to a right to
treat the whole contract as repudiated.
 Unless the buyer agrees, the buyer is not bound to accept delivery by installments
Maple Flock v. Universal Furniture Products (Wembley) Ltd. [1934] CA
Facts: The sellers contracted to sell rag flock to the buyer under an installment K (a number of
deliveries to be made over a period of time and paid for separately). The 16th delivery was
contaminated. The buyers wanted to reject the entire K.
Issue: Whether the installment K, in its entirety, can be repudiated by the buyers due to one
contaminated delivery under one installment under s. 35(2), SGA?
Held: The breach here was severable
Reasoning:
 A K for the sale of goods by installments is a single K, not a complex of as many Ks as there are
installments under it
 Whether there can be a repudiation of the whole K or a severable breach depends on the terms
of the K and the circs of the case
 The deciding factor here is the extreme improbability of the breach being repeated
 Look at 2 things: 1) Gravity of the breach in relation to the whole K (1.5 tonnes out of 100); 2)
what’s the probability of it happening again (here not very high)?
 Therefore, the breach here was severable
Ratio: Under s. 35(2), SGA where there is a breach as to one installment under an installment K,
whether this breach will give rise to a right to repudiate the entire installment K is a question of fact.
In deciding whether the buyer has a right to repudiate the entire installment K when one or
several deliveries involve non-conforming goods the chief considerations are:
1. The ratio quantitatively which the breach bears to the K as a whole, and
2. the degree of probability (or improbability) or a reasonable likelihood that such a
breach will be repeated as inferred from the circumstances and the kind of the breach.
Note:
 If the 16th load had been contaminated with anthrax, the court might have considered that as a
third factor
 In the right case, serious probability of potential prosecution might be a third ground causing the
entire K to be repudiated (eg. anthrax)
PART VII. OBLIGATIONS OF SUPPLIER AND MANUFACTURERS
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

The SGA omits specific mention of obligations which may be owed by ppl who are not
immediate parties to the K of sale
Trade Practice Act imposes liability upon suppliers who engage in deceptive or unconscionable
practices
PART VII. OBLIGATIONS OF SUPPLIERS AND MANUFACTURERS – A. The Privity
Problem
 Privity used to be a much bigger deal
 Consumer Protection Act – 1977
o Applies to deceptive and unconscionable
o Deals with practice of suppliers (commercial vendors)
o No need for privity in this statute (b/c of nature of stuff covered – ie. deception)
 SGA:
o ss. 16-19: all in a “K for sale”
o Privity is very much alive
Lyons v. Consumer Glass Co. Ltd. et al. (1981) BCSC
Facts: The infant P’s mother bought a glass baby bottle from Senum (store owner)– the bottle fell
and struck the P in the eye. It is argued that the P was entitled to the benefit of the SGA even though
there was no privity of K between the P and the merchant. The P argued that even though the infant
didn’t have privity, he should be able to rely on the K on one of the following grounds: 1) the
mother is the agent of the child; 2) given that there was privity between the mother and store, the
def’n of “buyer” in the SGA should extend to include those for whose benefit the purchase was
made court rejected both grounds.
Issue: Whether Lyons can bring an action against Senum for breach of K or for breach of warranty
or condition implied by the provisions of the SGA? No.
Held: Horizontal privity, therefore baby cannot sue. Baby bottle not for the child but for the benefit
of the mother. (Mother could sue, but she would only receive the cost of the bottle).
Reasoning:
 In Lockett, wife and husband both got food poisoning at hotel and wife recovered, even though
husband paid for the meal – this is b/c court had treated them both as contracting parties with
the restaurant
 Persons who use or consume or are affected by a consumer product have a right of action
against the seller – that right is also extended to the manufacturer
 The P cannot rely on the SGA to support his claim for personal injuries against the seller b/c
there is no privity of K between him and the D, Senum
Ratio: Privity of K must exist in order for a P to bring an action under the SGA.
Note:
 Right after the Consumer Protection Act brought in – but the action brought under SGA
 This was not the trial – just a preliminary application
 Case was overturned
Chabot v. Ford Motor Co. of Canada Ltd. et al. (1982) High Court of Justice
Facts: The P bought a vehicle from a dealer who purchased it directly from a manufacturer – there
was a clause in the Dealer’s K that said “There are no warranties… the new vehicle warranty is the
only warranty that applies here”. Manufacturer’s warranty warranted that the selling dealer would
repair/replace/adjust any parts that are found defective (so the dealer will fix it – the exclusion
61
clause excludes all other warranties and conditions). Shortly after purchase, the vehicle was
destroyed in a fire caused by a defectively installed drain plug in the oil pan. The P sued all the Ds
in damages for loss of the vehicle: he sued the dealer in K for breach of warranty; sued the other
defendants in tort for negligent manufacture of the vehicle and in K for breach of manufacturer’s
express warranty.
Chabot v. Ford + South Park (dealer)
Action in K between the P and South Park; action in tort and K between the P and Ford
Issue:
1. Is the manufacturer liable in negligence to the P? YES.
2. Can tort liability be excluded by the manufacturer’s warranty exclusionary clauses? NO.
3. What’s the effect of the new vehicle warranty?
4. What is the effect of the exclusionary language of the dealer on the P?
Held: Everybody liable against Chabot
Reasoning:
 An inclusion of conditions can, and in this case does, survive an exclusion of warranties
 In the instant case the P is not suing merely for economic loss due to having to repair the
defective parts of the truck. He is claiming compensation for the loss of his property (the truck)
due to the manufacturer’s negligence.
 In this case the defect has not just caused an economic loss – loss of profit or an expense,
but has caused an accident – destroyed P’s property.
 The only way the manufacturer can shield himself from liability in this case is by the
manufacturer warranty exclusion clauses, if they apply not only to contractual liability but also
tortious liability.
 The courts should be reluctant to impose additional tort liabilities on a party whose position and
obligations are already spelled out in a K.
 However, in this case the tort of which the P complains of did not arise in performance of the
manufacturer’s warranty – the damages did not flow from any promise in the warranty but from
an entirely separate and antecedent tort.
 If the warranty has this effect, it does so w/out the assent of the P.
 The purchase agreement told the P that he was getting a warranty from the manufacturer which
is an additional benefit.
 He was never told that his rights in tort against the manufacturer would be taken away from him.
 Thus, the exclusionary clauses do not apply regardless of their ability to protect the
manufacturer from tortious liability by their interpretation.
Ratio: Cause of action against the manufacturer exists in negligence when the danger inherent
in a defectively made product causes an accident (results in injury to the P or his property).
Manufacturer’s warranty can protect the manufacturer from tortious liability only if the P,
buyer, understood, at the time of the purchase, that this was the effect of the warranty.
Note:
 There was a type of fundamental breach here
 Claim in K against South Park: Judge found as fact that 1) P did not touch underhood area of
truck; 2) no abuse of vehicle by P; 3) no warning of the fire by way of odour or signal; 4)
manner and circumstances of driving at time fire occurred were not abusive of vehicle, which
was being operated at the time within the range of conditions for which vehicle designed.
Warranty was in addition to the implied conditions (as to fitness for use). Therefore South Park
liable in K for loss of vehicle due to fire.

Claim in tort against Ford: Ford had duty of care in relation to P, as it was Ford’s
responsibility for oil pan and drain plug to reach P in good condition, and it was common

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knowledge that if improperly installed could result in damage, and no reasonable possibility of
intermediate examination. Installation of drain plug exclusive province and control of Ford, and
occurrence is such that it would not have happened without negligence. Therefore jointly and
severally liable with South Park; cannot take advantage of exemption clause b/c cannot show
that P renounced CL rights, and complaint arose before the effective date of the warranty (altho
damages did not occur until after warranty came into effect).
Claim in K against Ford: Thru new vehicle warranty, Ford promised that D South Park
would repair, replace or adjust free of charge any parts (except tires) found to be defective in
workmanship or materials. Therefore Ford is liable, in warranty, for cost of defective parts.
Actions in SGA:
 1) Cause of action  liability
o Breach of K
o Tort
 2) Remedy damages
Remedies in SGA:
 Remedies of the Buyer (can get all of combination of)
o 1) Rejection of goods/repudiation/rescission
 This is a self-help remedy
 Client has the right to say that he will not take the goods, that he will rescind
the K etc – this is the end of the matter
o 2) Injunctions (usually interim, not permanent)
 Used in the commercial context as a stepping stone
o 3) Specific Performance
o 4) Statutory remedies (Part 9 – consumer)
o 5) Damages
 How do you measure damages?
o 6) Interest
 Remedies of the Seller (more statutory remedies for sellers – see Part 5 of SGA)
o Unpaid seller’s liens
BUYING AND SELLING A BUSINESS
 Fact Pattern:
o Janice Pubtree wants to buy one of the three Dar by Dawe’s locations (pub & small
brewery) for $500,000
o Dar by Dawe’s (individual) owner of 100% of business
o Kits – rented premises – 10 year lease
o Janice concerned that Darby not be set up elsewhere in Kits
o Brewmaking equipment in good shape
o Liquor license to be obtained
o Brewmaster to be retained
o She wants the name “Dar by Dawes” to be kept on
 Prof’s blabbing:
o Watch out for unsophisticated client (who doesn’t have the $$ to pay for the retainer but
wants to pay ½ mill for a business)
o Don’t paper the deal after the fact (cheap client)
o Don’t hold funds for client to legitimize his business
 Purchasing a business:
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





1) Personal ppty (goods: liquor, tables, glasses etc – SGA applies)
2) Real ppty
3) Contracts (right) (with suppliers, customers)
4) Debt Contracts (obligation)
5) Intangibles (software licenses, computer systems, name of the business, goodwill, liquor
license)
6) Employees (they are independent agents – can’t be bought/sold, they can all quit the day
before the closing under both share and asset transaction)
Share Purchase: (Vendors want to sell shares)
 Purchaser will get assets AND liabilities (can’t pick and choose – you get everything)
 Current liabilities: line of credit, short-term loans
 Long-term liabilities: leasehold mortgage
 Assets: all the real and personal ppty, the name of the business, the goodwill
 If she buys the shares from Dar by Dawes Ltd. then she had to buy it from the individual SH –
what she’s buying is the shares, the company
 3rd party Ks – the landlord may have a choice whether to give 3rd party consent but the K with
the brewers will probably just go along
 Tax: most share sales will garner capital gains so the vendor will have a better after tax position
than selling assets. So vendors like share purchase agreements b/c of this.
o Also, purchaser doesn’t have to pay sales tax of ppty transfer tax when buying shares.
o No GST.
Asset Purchase: (Purchasers want to buy assets)
 You get the same stuff – assets etc BUT you won’t be taking the liabilities
 There may be some assets the purchaser doesn’t want (eg. the ugly dishes)
 The purchaser isn’t buying the outstanding liabilities (law suits, tax debts, mortgage)
 One of the negative things about asset purchase is that you don’t automatically get the name of
the business b/c Dawes owns the name, so you’ll have to get his permission
 You also don’t get the benefit of the Ks and leases unless you get 3rd party consents (eg. the
landlord, the brewers under the K)
 Vendor is the limited company – what she is buying (the target) is the assets
 The covenantor: Dar by Dawes Ltd will make a bunch of promises but on the day of the closing,
the purchase $$ will go to the company, which the individual Dawes will take and run off to
Mexico. So what you want is to have the individual Dawes be a covenantor alongside the
company.
 Tax: as a purchaser of assets, you get capital cost allowance, whereas if you buy shares you
inherit the vendor’s capital cost allowance, which will not allow you to reallocate. So purchasers
like to buy assets.
o Purchase will have to pay provincial sales tax (PST) and ppty transfer tax.
o No GST.
 When will an asset transaction happen? 1) when the purchaser wants to, 2) when vendor has
liabilities, 3) if Dar by Dawes Ltd. is the company that runs all 3 of the locations; in other words,
the assets for all 3 locations is mixed up on the balance sheet and if somebody buys only one
location, they can only buy the assets of that one (note: in reality, there would be 3 separate
corporate entities to keep the accounting nice and separate).
 Note: a buyer will get to cherry-pick the assets/liabilities (will want certain ones but not others)
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
Searches that you have to do: LT search (what encumbrances might be on the lease); PPR
search (search for Dar by Dawes Kits Ltd – see if it owns the assets); do a company search
(make sure the company exists and is in good standing); make sure there’s no bankruptcy, WCB
claims, assume lease from landlord, material Ks; make sure health inspection is up to par; figure
out if the company is indebted
Terms of a K:
 1) Covenant (promise to do or not to do something)
o Most Ks will use the words “The buyer/seller AGREES” (the word “covenant” is rare)
 2) Reps & Warranties (reps as to the condition or status of something)
o Eg. The vendor warrants that the dishes are in good condition
 3) Exclusion clauses (either limit or completely exclude liability)
 4) Conditions precedent (events that must occur before some or all obligations of a party come
into effect)
 5) Definition sections (clauses that are there for purpose of creating a defined term)
 6) Boilerplate (general provisions)
o Eg. time of the essence, conflict of law clauses
 7) Recitals, background
 8) Indemnity (a promise to compensate someone for a future anticipated potential loss)
Asset Purchase Agreement:
 Assumption of Liabilities clause – in asset purchase K, you can pick and choose here
 Things that are missing from the above facts:
o Non-competition clause: nothing stops Darby Dawes from going down the street and set
up another store (can be a separate K or built into the asset purchase K)
o Janice has to get rights to his name
o New K with the brewmaster
o Obtain the liquor license (make it a condition precedent)
o Warranty re fit for purpose (brewmaking equipment has to be fit for purpose)
o Insurance will last until closing and then will terminate and the buyer will take out her
own insurance
PART VIII. THE BUYER’S REMEDIES – SGA ss. 15(2)(3), 34-35, 38-39, 40, 70
 Possible remedies:
o 1) Reject Goods/Repudiation
o 2) Injunction
o 3) Specific Performance
o 4) Statutory Remedies
o 5) Damages
A. The Right to Reject the Goods Tendered
1. The Right to Reject
 Breach of a condition or breach of an intermediate term where the consequences of breach are
serious lead to the buyer’s right to reject the goods tendered
2. Loss of the Right to Reject: Specific Goods – SGA ss. 15(4), 23



65
The right to reject need not be exercised in any particular way – it is a self-help remedy (doesn’t
involve the courts in the way damages necessitate)
The buyer need simply notify the seller that the goods are not in conformity with the Kand
can reject
Several things can lead a buyer to lose his right to reject (leaving only possibility of claiming
damages):
o Specific goods: b/c of the wording of s. 15(4), the right to reject the goods is lost as soon
as the ppty passes. In some Ks, ppty in specific goods passes immediately the K is
entered into (see s. 23(2)) so the buyer never has the right to reject the goods.
Wajakowki v. Pembina Dodge Chrysler Ltd. [1975] Man Q.B.
Facts: The P sued for rescission of an agreement which she made to purchase a Dart automobile
from the D car dealer and for the return of the purchase money paid to the D. The car did not
operate to the satisfaction of the P and also had some painting defects.
After a week, she tried to return the car but the D would not take it back BUT sold her a new Dart
automobile to replace the first one – the P wasn’t satisfied with this either (it had major defects).
The D eventually agreed to fix whatever was wrong with the car for free under the manufacturer’s
warranty. When she picked up the car again, much of the repairs weren’t done and the car totally
broke this time.
Issue: does the P have the right to reject the goods? Yes.
Held: P was entitled to rely on implied condition of fit for purpose (s. 18(a))
Reasoning:
 The P is not sophisticated (can’t read/write) : it is clear that she did not know or ought to have
known that she agreed that the manufacturer’s new car warranty was to be in lieu of all other
warranties whether to fitness or merchantability of the car
 The car was not reasonably fit for its purpose – the D knew that the P would use it drive around
Thus, there was a breach of the implied condition in s. 18(a)
 The K was for specific goods – BUT the ppty of the automobile never passed to the P
 A literal application of s. 23(2) would mean that the purchaser of specific goods would be
unable EVER to reject the goods and treat the K was repudiated thus, no literal interpretation
should be given to this section
 Therefore, until the goods are accepted by the purchaser, only a CONDITIONAL ppty passes.
The evidence shows that the P never unconditionally accepted the 2nd car – she only ever
accepted either car on the condition that they be repaired.
 There is an onus on the vendor to establish that the defect which is the cause of the unfitness for
the purpose can be remedied – if it CAN, the measure of damages is the cost of repairs together
with any other loss directly resulting from the breach of warranty. If the vendor fails to establish
that the defect can be remedied, the measure of damages is, prima facie, the amount of the full
purchase price
 Court also finds that there was a fundamental breach of K entitling the P to repudiate and
recover the amount of the purchaser price
 The D says that s. 15(4) says that this is specific goods so the ppty has passed so the P is not
entitled to reject the goods, even if s. 18(a) fit for purpose is violated
 The K between the P and D WAS for specific goods BUT the P had never unconditionally
accepted the 2nd car. Even if s. 15(4) had applied and limited the P to damages, the court would
have awarded the maximum amount.
Ratio: Court comes up with notion of “conditional property” to allow buyer to defer
acceptance. [There is no statutory basis for this!]. The Court said to now allow the buyer to
66
reject in this case would mean that a purchaser of specific goods can NEVER reject, which is
not the case.
Note:
 s. 1 “specific goods” – goods identified & agreed upon at the time a K of sale is made
 s. 15(4) – i) and the buyer has accepted goods; or ii) the K is for specific goods, the ppty has
passed in this case the buyer is limited to remedy of damages (the 2nd part of this section is no
longer in our act??)
 s. 23(2) – in a K for sale of specific goods, ppty will pass on making of a K
 In an unconditional K for specific goods, ppty will pass immediately when K made, which
means that under s. 15(4) the buyer will never have the right to reject the goods
3. Loss of Right to Reject: Acceptance – SGA. 38, 39
 Whether the goods in a K are specific or ascertained the buyer loses the right to reject if there
has been acceptance
 s. 39: sets out what constitutes acceptance
 Hardy v. Hillerns addresses to what extent s. 39 is qualified by s. 38
Buyer's right of examining goods
 38 (1) If goods are delivered to the buyer that the buyer has not previously examined, the buyer
is not deemed to have accepted them unless and until the buyer has had a reasonable
opportunity of examining them for the purpose of ascertaining whether they are in conformity
with the contract.
o (2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, the
seller is bound, on request, to afford the buyer a reasonable opportunity of examining the
goods for the purpose of ascertaining whether they are in conformity with the contract.
Acceptance
 39 The buyer is deemed to have accepted the goods when
o (a) the buyer intimates to the seller that the buyer has accepted them,
o (b) the goods have been delivered to the buyer, and the buyer does any act in relation to
them which is inconsistent with the ownership of the seller, or
o (c) after the lapse of a reasonable time, the buyer retains the goods without intimating to
the seller that the buyer has rejected them.
Hardy & Co. v. Hillerns and Fowler [1923] CA
Facts: Hillerns bought a large quantity of wheat to be shipped from Uruguay to Hull – when the
wheat arrived, they dispatched certain quantities to sell in sub-contracts. They had taken samples of
the wheat before dispatching and had the suspicion that the wheat was not according to the K
description (but they dispatched anyways). Then they took another sample and told the sellers that
they are rejecting the wheat – the seller said that the buyer is deemed to have accepted the goods
and had lost his right to rejection.
Issue: Whether the buyers by reselling and forwarding the wheat to sub-purchasers, they lost the
right to reject and were confined to the remedy of damages?
Held: Buyers lost the right to reject; limited to claim in damages
Reasoning:
 Reselling the goods will be considered an act inconsistent with ownership (i.e. equaling
acceptance), and cause the buyer to lose the right to reject under 15(4), even if buyer was in the
middle of an examination which later proved the goods to be defective.
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 Court essentially decides s. 38 rights are subject to s. 39, i.e. if meet acceptance under s. 39 then
s. 38 can no longer be used to say acceptance hasn’t occurred. Whether or not buyer has had
reasonable opportunity to examine the goods, if buyer fits within s. 39, then buyer loses right to
reject under s. 38.
 If the possession was transferred by the buyers to third persons in circs which were inconsistent
wither with the goods being the ppty of the sellers at the time of such transfer, or inconsistent
with their being restored to the sellers upon the notice of rejection being given, it appears that
the transfer was an act which was inconsistent with the ownership of the sellers
Ratio: The buyer will be deemed to have accepted the goods under s.39(b), SGA if the buyer
does some act that is inconsistent with the ownership of the seller – any action which prevents
the seller from obtaining possession of the goods immediately is an action inconsistent with the
ownership of the seller. Re-selling the goods is one such action – it is not sufficient that the
buyer can allow the seller to get possession of the goods at some later date – he must be able to
do so immediately and if the buyer cannot b/c of his own action (reselling) he is deemed to
have accepted the goods. The buyer will in this case lose the right of rejection even if he did
not have a reasonable time to expect the goods. Where there is a conflict b/w s.38 and s.39, the
s.39 prevails.
Note:
 Case deals with interaction of ss. 38 and 39
Rafuse Motors Ltd. v. Mardo Construction Ltd. (1963) NSSC
Facts: The P/A is a dealer in Ford cars and the D/R is a contractor. The D needed to rent a tractor to
finish a job and ordered a tractor from Oxner, salesman for Rafuse Motors. He agreed to buy a
Fordson Major but then was told that Oxner couldn’t get his hands on that and that the D would get
a Ford tractor instead (would do everything he needed). The D said he would accept the Ford if it
did the same thing the Fordson would have. The D thought the tractor was too light – then several
of its parts broke. The D had paid $1500 and owed $3555 in a promissory note – he then refused to
pay the balance.
Issue:
1. Was there a rejection of the tractor amounting to repudiation of the K? Yes.
2. Was there acceptance of the tractor by the D?
3. Did the D do any acts in relation to the tractor inconsistent with the ownership of the seller or
did he retain the tractor for an unreasonable time w/out intimating to the P its rejection? No.
Reasoning:
 There is no evidence that the D ever intimated to the P that he accepted the unit
 It was represented to the D that the Ford tractor would be as good if not better than the other one
 The machine was never fit for its purpose – the settlement (ie. the D accepting the Ford over the
Fordson) was obtained with certain representations which proved incorrect
 The P had encouraged the D to give the tractor a fair trial – any delay in rejection of the tractor
was due to the inducements of the P
 There is nothing to indicate that the D accepted the tractor
 Court says s. 39 has nothing to do with this case
Ratio: Where the reason a buyer delays in rejecting the goods or uses the goods is b/c of
inducements and assurances of the seller, the buyer’s conduct will not be deemed to be an
acceptance of the goods in question for the purposes of s.39, SGA.
Note:
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s. 40 Unless otherwise agreed, if goods are delivered to the buyer and the buyer refuses to
accept them, having the right so to do, the buyer is not bound to return them to the seller, but it
is sufficient if the buyer intimates to the seller that the buyer refuses to accept them.
William Barker (Junior) & Co v. Edward Agius Ltd. [1927] KB
Facts: The vessel carrying charcoal briquettes was detained in Liverpool. The buyers couldn’t
examine their cargo which was in the hatch, until the cargo on the deck was removed. Then the
buyers realized that the cargo was not the right size. The buyer sold part of the cargo already.
Buyers make a claim to reject the cargo that was below deck. Seller raises the argument that buyer
can’t reject it b/c buyer has accepted part goods under 15(4) and thus has lost the right to reject any
of the goods. Buyer asserts that 15(4) does not govern; rather 34(5) does: right quantity delivered
but part of it was in conformity with K, but part wasn’t. Seller responds that no, goods under 34(5)
are truly mixed.
Issue:
1. Whether the applicant had the right to reject the cargo?
2. Did the buyer lose the right to reject when the cargo left Hamburg? No.
3. Did they validly exercise it?
Reasoning:
 There was still the right to examine and reject after the arrival at Liverpool
 This is not a severable K
 The buyer has accepted part of the goods – he sold and delivered 25 tons of it, so the breach of
condition can only be treated as a breach of warranty and not as a ground for rejecting the goods
and treating the K as repudiated
 Where a buyer has accepted the whole of the goods there can be no question that after that he
cannot claim to reject and rescind
 A purchaser who has resold part of the goods delivered in performance of one inseverable K
cannot after that throw back that part which is bad upon the seller – he is limited to the remedy
of damages
 s. 39(b) prevails over s. 38(1) (Hardy) – but court here also looks at s. 34(5) – we have a mixed
load here, where some of the goods are in accordance with the K and some are not and the buyer
has exercised the remedy of accepting some of the goods but not all and he’s entitled to do so
under s. 34(5). so s. 34(5) prevails here and gives the buyer a remedy.
Ratio:
1. Court holds that s.34(5) applies to scenarios where 1) part of the goods are not in
conformity with K and part of the goods are, AND 2) goods not in conformity are mixed
together with goods that are in conformity.
2. Where goods are delivered and part is immediately sold, and what is left is clearly not in
conformity with the K, absence strong evidence to the contrary, sold goods will be assumed to
be in conformity with the K, and thus you can split the goods for purposes of rejecting the
remaining goods that are not in conformity.
Note:
 s. 34 (5) If the seller delivers to the buyer the goods the seller contracted to sell mixed with the
goods of a different description not included in the contract, the buyer may
o (a) accept the goods that are in accordance with the contract and reject the rest, or
o (b) reject the whole.
B. The Right to Damages and Specific Performance – SGA ss. 54-57
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Order for specific performance is very rare – have to convince the J that damages are not
adequate
K for personal service will not be ordered to be specifically performed
Section 55: written in a neutral way, can be used by buyer OR seller (but generally is a buyer’s
remedy)
Specific performance
o 55 (1) In any action for breach of contract to deliver specific or ascertained goods, the
court may, if it thinks fit, on the application of the plaintiff, order that the contract be
performed specifically without giving the defendant the option of retaining the goods on
payment of damages.
o (2) The order may be unconditional, or on terms and conditions as to damages, payment
of the price, and otherwise, as the court thinks just, and the application by the plaintiff
may be made at any time before judgment.
o so this section says specific performance can be in combination with other things
Section 56: buyer’s remedy for breach of warranty
Section 57: can be both buyer OR seller’s remedy (both can get interest on their awards in the
right circs)
o Special damages: loss of earnings
These sections are just restating the CL – eg. 54(2), 56(2) repeat the CL principle from Hadley v.
Baxendale
Sky Petroleum Ltd. v. VIP Petroleum Ltd. Ch.D. [1974]
Facts: The P buyer brought a motion for an injunction under a K made between the P and the D
seller – the K was to last 10 years and obliged the P to buy its entire requirement of gas and diesel,
with certain stipulated minimum requirements, under the K. The market changed and the terms of
the K are now disadvantageous to the D, so the D tried to get out of it. The D argued that the P is
indebted to the D.
Issue: Can the court order specific performance for goods that are not specific/ascertained? Yes, in
this case (b/c otherwise, the buyer would have gone broke).
Held: Injunction granted to protect the P company in the interim – forces the D to perform under
the K and restrains it from withholding supplies of gas/diesel
Reasoning:
 The court says the buyer is actually seeking an order for specific performance
 The court wonders how it can order specific performance for the purchase of BULK of stuff
that’s not ascertained
 Unless the court interferes, the P company will be forced out of business – in those reasons, it is
ok to grant an injunction to restore the former position under the K
 Doctrine: the court refuses specific performance of a K to sell & purchase chattels not specific
or ascertained. Under an ordinary K for the sale of non-specific goods, damages are a sufficient
remedy.
 BUT here the D company appears to be the P company’s sole means of keeping its business
going – so the court is prepared to depart from the general rule as to try to preserve the position
under the K until a later date and will order an injunction
Ratio: Due to harm to the P company arising out of non-performance of a K, court orders
injunction to prevent the D company from not performing the K’s terms. This case suggests
that specific performance can be given even for unascertained goods – but this will rarely
succeed in practice.
Note:
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It is hard to convince a court to go against the principle of specific performance in s. 54(2) like
the court did in this case
1. The Measure of Damages
 Damages = the monetary award to compensate for a loss
 Sections 54(2) & 56(2) – Hadley v. Baxendale principle of damages
o S. 54(2): 2) The measure of damages is the estimated loss directly and naturally
resulting, in the ordinary course of events, from the seller's breach of contract.
 This is specifically about damages for non-delivery
o S. 56(2): The measure of damages for breach of warranty is the estimated loss directly
and naturally resulting, in the ordinary course of events, from the breach of warranty.
 Hadley v. Baxendale: damages must be generally foreseeable
 Section 54:
 Damages for nondelivery
o 54 (1) If the seller wrongfully neglects or refuses to deliver the goods to the buyer, the
buyer may maintain an action against the seller for damages for nondelivery.
o (2) The measure of damages is the estimated loss directly and naturally resulting, in the
ordinary course of events, from the seller's breach of contract.
o (3) If there is an available market for the goods in question, the measure of damages is
to be ascertained, unless there is evidence to the contrary, by the difference between the
contract price and the market or current price of the goods at the time or times when they
ought to have been delivered, or, if no time was set, then at the time of the refusal to
deliver.
Wertheim v. Chicoutimi Pulp Co. [1911] HL *s. 54(2) SGA*
Facts: The D was a manufacturer of wood pulp. The P is a German merchant in Hamburg. He has
an agent at Manchester named Reichenbach where he trades in the pulp he imports from Canada.
The goods were delivered late and b/c they were delivered late, the price had gone down. P claims
to recover damages under 3 separate breaches of K – the fact that delivery was late did not affect the
time when the buyer resold
Issue: What is applicable here – s. 54(2) or 54(3)?
Held: P is not entitled to damages b/c he didn’t suffer financial loss
Reasoning:
 Court applied s. 54(2) – the loss was only 5 shillings/pound (so reward for the loss
NATURALLY FLOWING)
 The P never sustained loss b/c he sold the goods under the Ks at a high price (almost market
price – 5 shillings less)
 In giving damages for breach of K, the party complaining should, so far as it can be done by
money, be placed in the same position as if the K had been performed
 However, the buyer in this case did not suffer any loss from delay in delivery – the buyer re-sold
the goods prior to their delivery – the delay did not affect the price the buyer got for reselling
the goods
 In this case the buyer is already in the same position he would have been in had the delivery
been on time – no loss was suffered
Ratio: The main principle upon which damages are awarded is that the buyer must be put in
the same position he would be in had the breach not occurred. In case of failure to deliver the
goods, the buyer should receive by way of damages enough to enable him to buy similar goods in
an open market – therefore the market value of the goods is the measure of damages. When
there is a delay in delivery the damages are equal to the difference in the market price of the goods
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at the time when the delivery should have been made and the market price at the time of delivery. If
the price is higher at the time of delivery, the buyer, by reselling at a later date is actually at an
advantage – and if the prices are the same – no loss has been suffered by the buyer (perhaps only
nominal damages). If the buyer resells the goods prior to delivery he cannot claim damages for late
delivery b/c the price for which he resold the goods was unaffected by the fact that the delivery was
late.
Therefore, the buyer is not entitled to recover more than his actual losses in the case of a subsale.
Note:
 This case is about LATE delivery, not non-delivery: if it was non-delivery then the goods would
not have been delivered and there could have been no resale at all
 Normal assessment of damages: put P in condition he would have been w/out the breach
 Failure to delivery goods: market value of goods
 Delay in delivery: difference between K price and market value of goods
 If price is higher or the same at time of delivery: only nominal damages
Bowlay Logging Ltd. v. Domtar Ltd. (1978) BCSC
Facts: The D, Domtar, is a pole manufacturer. It wished to increase its quota so entered into a K
under which the P, Bowlay, was to log timber for it. Domtar did not log all of the timber it was
supposed to (didn’t provide enough trucks) – the P brought an action for compensation for
expenditures made in part performance.
Issue: May a claim for expenses made in part performance be sustained where the D shows that the
P was engaged in a losing operation and even if there had been no breach and K had been fully
performed, the P would inevitably have suffered loss on the K?
Held: for the P – but gets only notional damages
Reasoning:
 It was shown that Bowlay was not efficient in its logging and was going to lose money, even if
Domtar had provided all the trucks
 Bowlay is claiming for expenses incurred in part performance of the K – a P has the right to do
this
 Domtar is arguing that even if there was breach of K, it is not bound to compensate Bowlay for
their expenses b/c the operation was losing money
 The law of damages compensates a P for damages resulting from the D’s breach – it does not
compensate a P for damages resulting from his making a bad bargain
 Damages will not be awarded for the consequences of entering into an unprofitable K (this
would render the D the insurer of the P’s enterprise)
 The fundamental principle upon which damages are measured is restitution in integrum
 If the P had fully performed the K its losses would have continued so award can only be made
for the notional loss (had there been full performance) - $250.
Ratio: If a breach of K prevents a loss, then the innocent party cannot collect damages. Again,
the overarching consideration for damages is compensation. If it can be proved that a loss
would have occurred anyways, damages will not be awarded for this (law of damages won’t
make up for you making a bad bargain).
Note:
 The court says if you make a bad K that loses you money, we’re not going to make it up to you
by awarding you damages
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Note – this is not a SGA case
Cullinane v. “Rema” Manufacturing Co. Ltd. [1953] CA
P can either claim capital loss or loss of profit but not both. Hadley v. Baxendale was applied
here.
Facts: The P agreed to buy from the Ds a pulverizing and drying plant to be built according to
specification. The Ds warranted that the plant would be capable of pulverizing the P’s clay at a rate
of 6 tons per hour. It could only handle 2 tons per hour and was therefore commercially useless to
the P. The P kept the machine and brought an action for damages for breach of warranty – sued for
cost of the plant and for lost profit. The Ds, in their defence, denied the warranty and any breach
thereof and also alleged that the P had failed to mitigate his damages by failing to take steps to
procure another plant.
Issue: Can the P get damages for BOTH capital loss AND lost profits? No – either or.
Held: for the P – can claim either capital loss OR for lost profits
Reasoning:
 Sections 56(2) and 54(2) – damages must flow naturally from the breach
 Hadley v. Baxendale: Where two parties have made a K which one of them has broken, the
damages which the other party ought to receive in respect of such a breach of K should be such
as may fairly and reasonably be considered arising either naturally or such as may reasonably be
supposed to have been in the contemplation of both parties, at the time they made the K, as the
probable result of its breach.
 Here, the Ds knew that this machine was required to perform a particular function (evidence: the
warranty given) – so fulfills the Hadley test (ie. damages such that may reasonably be supposed
to have been in the contemplation of the parties if the K is breached)
 A person who has obtained a machine like the P which was mechanically in accordance with the
order given BUT unable to perform the function it was warranted to perform, has 2 options:
o 1) P may claim to recover the capital cost he has incurred less anything he can obtain by
disposing of the material that he got (puts the P in the same position as though he never
made the K); or,
o 2) Make a claim on the basis of the profit he lost b/c the machine as delivered fell short
of its warranted performance (if he chooses this route, depreciating has nothing to do
with it).
 Where the P claims capital loss – worth of the plant is less than contracted for he cannot at
the same time claim total loss of profit.
Ratio: The P can choose to claim on the basis that he wasted capital when he purchased goods
that are in fact not as warranted, and that he ought to be put in the position he would have
been in had he never bought the machine or had the capital not been wasted. However, the P
cannot claim both the capital loss AND the lost profits in this casethis would be doubledipping.
Note:
 Loss of profit is harder to prove than capital loss – often have to get an expert W in
Koufos v. C. Czarnikow Ltd. [1967] HL
Delay in delivery – fall in the market price of sugar – profit loss was recoverable.
Facts: The buyers chartered a vessel from the sellers to carry sugar. The seller was unaware of
the specific circumstances of the buyer and the fact that if the sugar did not arrive at its destination
on time the price for it would fall down and the buyers would lose profits. However, the seller was
aware of the fact that there was a market for sugar at the destination. It was found that a reasonably
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accurate prediction of the length of the voyage was 20 days. But, the vessel had in breach of K
made deviations which caused a delay of nine days. The buyers sold the sugar, but at the price
which was lower than had the sugar arrived earlier. The buyers claim that they are entitled to
damages equal to the difference in the market value of the sugar that was sold.
Issue: Could the buyer recover loss of profits due to delay in delivery?
Reasoning:
 The court Hadley did not hold that any possible damage which may be reasonably foreseeable
can be said to have been in the contemplation of the parties or arising out of usual course of
things  The test for damages is not whether it was foreseeable but whether the parties could
have realized that such loss was sufficiently likely to result from the breach of K
 The parties are not supposed to contemplate as grounds for the recovery of damage any type of
loss or damage which on the knowledge available appear as only likely in a very small minority
of cases.
 It is therefore not enough that the loss arose directly from the breach. The crucial
question is whether, on the information available to the D when the K was made, he should
or the reasonable man in this position would, have realized that such loss was sufficiently
likely to result from the breach of K to make it proper to hold that the loss flowed
naturally from the breach of that kind should have been w/in his contemplation.
 Thus, the scope of liability is much narrower than tort (test for damages in K is NOT reasonable
foreseeability)
Ratio: For damages to be awarded in K the court has to consider whether the consequences
were of such kind that a reasonable man at the time of the K would contemplate them as
being of a substantial degree of probability to occur as a result of a breach. If the loss
suffered by the P it is reasonably foreseeable and likely (cannot be a very small chance of
happening), the court will hold that it is / should have been in the reasonable contemplation of
the parties.
Note:
 The other law lords expressed the test in slightly different terms: is there a ‘serious possibility’
or a ‘real danger’ of the type of damages occurring or whether the damage were not unlikely to
result; was it not merely ‘on the cards’ etc?
Parsons Ltd. v. Uttley Ingham & Co. [1978] CA.
Facts: Ds sold hopper (feed storage thing) to the D pig owners – when installing it, the D forgot to
leave a valve open and when feeding nuts some of the pigs died (b/c nuts moldy). Ps claiming for
loss of pigs and lost profit.
Held: for the P – Dead pigs compensated (but loss of profit on future sales or opportunities of gain)
Reasoning:
Denning J:
 Court makes distinction between lost profit and physical damage case
 Tests are more similar for a physical damage case – the test of remoteness should be the same as
tort imports torts into K
 It was foreseeable that there would be compensation on the physical damage side
 Lord Denning in his judgment draws a difference b/w the test of remoteness for loss of profit
cases as opposed to physical damage cases.
 Loss of profit cases: (test: not unlikely, serious possibility)
o The defaulting party is only liable for the consequences if they are such as, at the
time of the K, he ought reasonably to have contemplated as a serious possibility or
real danger.
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o The question is: ought the party in default reasonably have contemplated that there
was a serious possibility that such a breach would involve the P in loss of profit?
 Physical damage cases: (FULL liability – test: foreseeability)
o The defaulting party is liable for any loss or expense which he ought reasonably to
have foreseen at the time of breach as a possible consequence, even if it was only a
slight possibility.
Ratio: For physical damages in breach of K or SGA, the test is one of foreseeability: whether
a reasonable man would foresee the damages (looser test, like torts). For lost profits and
damages, the test is “not unlikely” (Reid) or “serious possibility” (Upjohn)
4. Breaches of Conditions or Warranties of Quality – SGA ss. 56, 57
 S. 56(1): if there is a breach of warranty, the buyer may use the breach to reduce or extinguish
the price OR b) maintain an action for damages
 56(2): the measure for damages is the loss resulting from the breach of warranty
 56(3): the loss, unless evidence to the contrary, is the difference in value of goods at delivery;
 56(4): The fact that the buyer has set up the breach of warranty in diminution or extinction of
the price does not prevent the buyer from maintaining an action for the same breach of warranty
if the buyer has suffered further damage.
Ford Motor Company of Canada Ltd. v. Haley (1967) SCC
Facts: Haley purchased 3 new Ford trucks from Ford, stored at Universal Garage in Edmonton (but
Universal had no pat or interest in the transaction). The purchase was financed through Traders
Finance Corp – Traders subsequently sued Haley on this K and recovered judgment. By way of
counterclaim, Haley alleged breach of warranty and claimed damages, having experienced difficulty
with the trucks.
Issue: What is the quantum of damages to be awarded to the P? Who has the onus to establish the
residual value, if any, in the trucks?
Reasoning:
 Ford argues that the damages should be the purchase price minus the value: the court rejects this
 Court says it will look at the loss that flows naturally here
 Where there is a complete failure to perform, the prima facie onus for the loss shifts and it’s up
to the person who has breached the warranty to establish whether or not there is any residual
valueso loss will be FULL purchase price UNLESS the person who breached the warranty
can prove there is some residual value in the trucks
 The onus shifts to the seller to establish the value of the trucks – failing this, the value will be
considered the purchase price
 P has burden of showing goods delivered where in breach, but then the onus turns to party in
breach to show goods delivered in breach have value. This is CL presumption, not in statute.
Ratio: Upon a breach of an implied condition for fitness of purpose, where the buyer is
compelled by the circs of the case to seek his remedy in damages rather than rescission, the
damages are prima facie the amount of the full purchase price, subject to diminution by such
residual value (the seller has to show such diminution) this only happens where there is a
COMPLETE FAILURE (Q of fact).
Note:
 Court dealing with s. 56(1) here
Sunnyside Greenhouses Ltd. v. Golden West Seeds [1972] Alta. CA
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Facts: Golden West supplied rooftops to Sunnyside to build greenhouses. Golden West had a new
roof cover called P.V.C., which Sunnyside purchased – Golden West said that the PVC would allow
sunlight to pass through for 7-10 years. Latent defects of the PVC caused the panels to become
opaque, killing plants. Claim under s.56 and 57 for general and special damages relating to breach
of warranty. P wanted cost of removing the panels. D contends that this expenditure was not the
direct and natural consequence of the breach, since it was in contemplation by both parties that the
panels would in any event have to be replaced after a period of time.
Held: Sunnyside gets damages (in part)
Reasoning:
TJ – CA agrees:
 There was an implied condition that the goods were reasonably fit for the purposes of Sunnyside
 There was a condition of merchantable quality
 There was an express warranty relating to the fitness for purpose
 There was an express warranty that the PVC would be transparent for 7-10 years
CA:
 Can’t get damages for labour cost of replacing the panels – b/c would have had to be done
sooner or later anyways
 Court applied a formula of 3/7ths use (ie. used 3 years of 7) – so did look at some residual value
here
 All the money they paid for initial installation – got all of it back
 On the replacement labour side – didn’t get that back b/c they would have to be replaced
anyways – BUT they did have to be replaced earlier so got $500
 Got a little bit on the lost profit but not very much – the P had a duty to mitigate
Ratio: If an expense would have had to be incurred eventually, despite the breach, then it
cannot be claimed for under special damages (e.g. labour costs of removing panels that would
have to be removed in 7 years anyway). Also, the onus is on the innocent party to mitigate the
damages to what is “reasonable in the circumstances.”
Note:
 S. 56(3) not paid much heed by the courts – court didn’t use the formula in 56(3) here
 It’s not like the s. 54 non-delivery situation
 Lost profits is general damages – general damages are harder to prove than special damages
Sum:
 The SGA has SOME statutory remedies in Part 9 but those are for consumers only – not looking
at that
Buyer’s Obligations:
 s. 31: to accept and pay for the goods
 s. 32: buyer is supposed to pay for the goods when he receives them, unless contrary intention
Payment:
 Payment usually made by certified cheque or bank draft or money order
 Letter of credit: very rare, hardly used in domestic situation (mostly in int’l where there’s clash
of banking systems) buyers don’t like to use letters of credit
 Certified cheque is passed on to seller. In order for buyer to get a cert. cheque, there’s usually
another transaction between the buyer and the bank/lender to get the cash. Lender might ask for
an “all pap security agreement” (all present and acquired ppty), also real estate.
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PART XI. THE SELLER’S RIGHTS ANDS REMEDIES
A. Real Remedies – SGA s. 3, 42-51
 The seller has 2 sets of remedies:
o 1) Personal: action against the buyer for the price or for damages;
o 2) Real: actions the seller can take wrt to the goods.
 What real remedies has come to mean is that you’re looking to a REAL thing/good/ppty to
satisfy your claim with respect to goods
o Eg. liens, stoppage in treatment
o Sections 42-51
 Section 42:
o 42 (1) Unpaid seller: In this Part, "seller" includes any person who is in the position of
a seller, as, for instance, an agent of the seller to whom the bill of lading has been
endorsed, or a consignor or agent who has himself or herself paid or is directly
responsible for the price. so the unpaid seller or the equivalent of is can constitute an
unpaid seller
o (2) The seller of the goods is deemed to be an unpaid seller within the meaning of this
Act
 (a) when the whole of the price has not been paid or tendered, or
o [Unpaid seller is someone who doesn’t have the whole of the price paid
to him.]
 (b) when a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has not been
fulfilled because of the dishonour of the instrument or otherwise.
o Section 43: Unpaid Seller’s rights
o (1) Subject to this or any other Act, even if the property in the goods may have passed
to the buyer, the unpaid seller of goods, as such, has by implication of law
 (a) a lien on the goods or right to retain them for the price while the seller is
in possession of them,
 (b) in case of the insolvency of the buyer, a right of stopping the goods in
transit after the seller has parted with the possession of them, and
 (c) a right of resale as limited by this Act.
o (2) If the property in goods has not passed to the buyer, the unpaid seller has, in
addition to any other remedies, a right of withholding delivery similar to and coextensive
with the seller's rights of lien and stoppage in transit where the property has passed to the
buyer.
o 44 Unpaid Seller’s Lien:
o (1) Subject to this Act, the unpaid seller of goods who is in possession of them is
entitled to retain possession of them until payment or tender of the price in the following
cases: [key here is the seller still has to be in possession!]
 (a) if the goods have been sold without any stipulation as to credit;
 (b) if the goods have been sold on credit, but the term of credit has expired;
 (c) if the buyer becomes insolvent.
o (2) The seller may exercise the right of lien even if the seller is in possession of the
goods as agent or bailee for the buyer.
o 45 Part Delivery: An unpaid seller who has made part delivery of the goods may
exercise the right of lien or retention on the remainder, unless that part delivery has been
made under circumstances that show an agreement to waive the lien or right of retention.
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o 46 Termination of lien
o (1) The unpaid seller of goods loses the lien or right of retention
 (a) when the seller delivers the goods to a carrier or other bailee for
transmission to the buyer without reserving the right of disposal of the goods,
 (b) when the buyer or the buyer's agent lawfully obtains possession of the
goods, and
 (c) by waiver of it.
o (2) The unpaid seller of goods, having a lien or right of retention, does not lose the lien
or right of retention merely because the seller has obtained judgment or decree for the
price of the goods. [if you have a lien on some goods and you sue the buyer and get a
judgment against the buyer for unpaid price, you don’t lose the lien just b/c of the
judgment. If there is a judgment that you’re given and the judgment is satisfied, the lien
is lost.]
1. Unpaid Seller’s Lien
 The seller must actually have the goods in order to have the lien
 Modern liens can be exercised w/out the lienholder actually possessing the subject matter of the
lien
Snagproof Ltd. v. Brody [1922] Alta CA *s. 45 SGA*
Facts: The P Seller is a company that manufactures overalls and the D is a merchant in Edmonton.
The Seller’s traveling salesman received an order for overalls for $1,130. There was no delivery
dates and no time for repayment. Seller sent half the clothes, which were accepted by buyer, the rest
to be sent as soon as seller was able to fill the order – sent an invoice for the half order, buyer sent
cheque for part of it and said it would send the balance later. Seller then demanded payment for 1st
shipment before they would send the 2nd shipment, but buyer refused to pay until seller sent entire
amount of goods (so basically the seller was trying to turn this K into an installment K). Seller
brings action to exercise a lien on the 2nd shipment of the clothes b/c 1st shipment not paid for.
Issue:
1. Is the seller entitled to a lien on the undelivered goods for the balance owing in respect of
those delivered? NO.
2. Was the buyer entitled to withhold payment for the 2nd shipment until it was delivered? YES.
Held: Breach by the P seller of his agreement to deliver the whole order
Reasoning:
 The P breached the agreement to deliver the whole order, entitling the D to damages
 This was an “entire K” – NOT a K for installments
 The D was entitled to reject the partial delivery and insist on the delivery of the whole – the D
held back payment for the 2nd lot to ensure delivery
 A lien cannot be claimed for a balance owing in respect of an installment already delivered
against installments still to be delivered – the P lost any right to a claim of lien
 The P was basically going on the plain reading of s. 45 (balance owing)- the court rejected this
 The P relied on an implied installment K so he has to play with all the rules of it – a lien only
extends to each installment/portion of the K this was NOT an installment K
Ratio: This was not a K for installments. Where goods are delivered in installments and
separate payment is to be made for each installment, as a general rule and in the absence of
specific agreement, a lien cannot be claimed for a balance owing in respect of an installment
already delivered against installments still to be delivered.
Note:
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
Deals with how s. 45 might be interpreted
2. The Right of Stoppage in Transitu
 Goods can be stopped in transit only when the buyer is insolvent (as defined in s. 3)
3. The Right of Resale
 The most significant real remedy is the right of resale (s. 51, SGA)
 Sale not generally rescinded by exercise of right of lien or stoppage in transit
 51 (1) Subject to this section, a contract of sale is not rescinded by the mere exercise by an
unpaid seller of the right of lien, or retention or stoppage in transit.
 (2) When an unpaid seller who has exercised the right of lien, or retention or stoppage in transit,
resells the goods, the [new] buyer acquires a good title to it as against the original buyer.
o If you do a resale as an unpaid seller, you can pass title on to the new buyer and the
new buyer doesn’t have to worry about any claim the original buyer might have
 (3) If the goods are of a perishable nature, or if the unpaid seller gives notice to the buyer of the
seller's intention to resell, and the buyer does not within a reasonable time pay or tender the
price, the unpaid seller may resell the goods and recover from the original buyer damages for
any loss occasioned by the buyer's breach of contract.
o If goods or perishable OR if they’re not but notice is given, the seller may resell &
recover damages.
o Part of the problem in Ward is that this section says nothing about rescission but (4) does
 (4) If the seller expressly reserves a right of resale in case the buyer should default, and on the
buyer defaulting resells the goods, the original contract of sale is rescinded by that act, but
without prejudice to any claim the seller may have for damages.
 Note: the effect of rescission is to revest ppty in the seller
o In order to maintain an action in price, the ppty has to be with the buyer
R. V. Ward v. Bignall [1967] QB *s. 51(3) SGA*
Where a seller in possession resells under the s. 51(3), his action is for damages for non-acceptance,
not for the price, because the resale rescinds the contract. This applies even where only part of the
goods has been resold.
Facts: P agreed to sell a Ford and a Vanguard to D for a single price, GBP 850. D refused to take
the Vanguard, because he said P had misrepresented its age, and offered to take the Ford alone for
GBP 500, but P rejected that offer and gave notice to pay and take delivery, failing which P would
resell. P resold the Vanguard, not the Ford, and sued for the GBP 850 price, less the deposit paid by
D and the price obtained on the resale of the Vanguard, plus expenses. The P argued that the ppty
had passed under s. 23(2). The seller refused and the buyer then offered to take only one of the cars
for 500 pounds, but the seller refused that as well.
Issue: Whether unpaid seller who retains possession of goods the property of which has passed to
the buyer, exercises his statutory right to resale, has elected to treat K as rescinded but is still
entitled to recover purchase price from buyer minus credit for sale of goods seller has resold?
Held: P was not entitled to this sum, based on the GBP 850 price, but only to damages for nonacceptancenot entitled to price, only damages
Reasoning:
 The P argued that he was owed the price – s. 52 – ppty is with the buyer (condition precedent to
claim for price) – wants the balance of the price for the 2 cars, only liable to give credit for any
sales the actually happened, we are entitled to our price.
 The D argued that this was a resale and the P rescinded the K and b/c he rescinded the K, ppty
has gone back to the seller and the seller is not entitled to take an action for price but for
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damages under s. 53. the seller tried to rebut that argument, saying s. 51(3) says nothing about
rescission, therefore the ppty is still with the buyer and therefore we are entitled to our price.
 If the P succeeds on this argument, he gets to keep the car AND gets full price of it – so really
unfair. So the court said that it doesn’t matter that s. 51(3) doesn’t talk about rescission.
 Section 51(3) – don’t need the word “rescission” b/c by its nature, once you’ve given notice of
your intention to resell, you’ve made time the essence of the K and that entitles you to rescission
and therefore that kind of K is just by nature of law, one that leads to rescission once it’s
breached.
 So court implied rescission into s. 51(3) so the P can’t get double damages
 This subsection allows the seller in possession of the goods to make time of payment of the
essence to the K whether the property has passed or not. Therefore, the seller here was entitled
to resell the goods.
 By reselling the goods which the unpaid seller is entitled to do, the seller exercises his right
to treat the K as repudiated by the buyer with the consequence that the buyer is
discharged from any further liability to perform his primary obligation to pay the
purchase price and becomes subject only to the secondary obligation to pay damages for
non-acceptance of the goods.
Ratio: Regardless of whether the property in the goods has passed to the buyer, unpaid seller
has a right to resell the goods when the buyer refuses or neglects to pay for the goods if notice
of resale is given to the buyer and he does not act w/in reasonable time. When the seller
exercises his right to resell the goods (or part of the goods) he treats the K with the buyer as
repudiated and the buyer is discharged from his obligations under the K – the buyer is only
liable to the seller for damages for non-acceptance (not the purchase price).
o Court reads in that K is rescinded in s. 51(3) circumstances as how it is explicit in s. 51(4)
circumstances—seller gets back property before it is passed to 3rd party. By exercising
lien, giving notice, time expiring, this constitutes rescission. Property reverts back to seller
and therefore in claim for damages seller must make credit for market value of the goods,
i.e. damages are the difference b/w K price and market price.
Note:
 This case is basically about an action in price vs. action in damages
 The court doesn’t want the buyer to be liable for price, only for damages – so they want to make
clear that the K is rescinded, so that the ppty does revest in the seller
 There’s a lot more implied in s. 51 than is actually there
 Any kind of resale, whether or not it’s in the statute, results in rescission – that has the effect
that you can’t maintain an action in price b/c the ppty is no longer with the buyer, so you will be
reduced to damages.
 Unpaid seller only resold part of the goods which he had K’d to sell to original buyer. Seller’s
primary duty under the K was to deliver both cars to buyer. If he delivered only 1, buyer would
be entitled to reject it. By seller’s conduct in selling 1 car, unpaid seller put it out of his power
to perform his primary obligation under the K. Seller thereby elected to treat K as rescinded.
Property in the car thereby reverted to seller, and seller’s only remedy against buyer was for
damages for non-acceptance of the 2 cars, of which the prima facie measure is the diff b/w the K
price and their market value at date of breach.
 COMMENTS: What if seller resells b/f notice is given under s. 51 (3)? MacD  51 (2)
operates to protect the new buyer from action from the original buyer. Seller could still bring
action against the original buyer BUT if the buyer is caused damage by the seller not complying
w/ the statute, the buyer could counterclaim.
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B. Personal Remedies – SGA ss. 41, 52-53, 57
 Personal remedies: an action against the buyer – action in damages or action in price (debt)
o Sections 53 (damages); 52 (price)
 2 broad categories in personal rems:
o 1) Action in price (s. 52)
 What is debt/price – easily ascertained sum
 Eg. price of a good (it’s whatever it costs)
 Eg. the money on a cheque that didn’t go through
 Eg. BUT if the price changes after a certain date, then you have to go to the
market after that.
 Why bring an action in price instead of damages?
 a) Can proceed in a summary proceeding
 b) It’s easier to prove – don’t have to apply any principles of equity to
debt (no issues of remoteness, mitigation)
 c) Usually higher award than in damages action.
 What is an action in price?
o 2) Action for damages for non-acceptance of goods (s. 53)
o 53 (1) If the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller
may maintain an action against the buyer for damages for nonacceptance.
o (2) The measure of damages is the estimated loss directly and naturally resulting, in the
ordinary course of events, from the buyer's breach of contract.
o (3) If there is an available market for the goods in question, the measure of damages is
to be ascertained, unless there is evidence to the contrary, by the difference between the
contract price and the market or current price at the time or times when the goods ought
to have been accepted, or if no time was set for acceptance, then at the time of the
refusal to accept.
Standard Radio Inc. v. Sports Central Enterprises Ltd. 2002 BCSC *s. 52 SGA*
Facts: The P owns Z-95 and the D is a sports facility in Richmond. Z-95 sues the D for advertising
costs – the D denies liability for the debt and counter-claims for $ he said he overpaid the P by
accident. D further claims that the P has suffered no damages and has failed to mitigate its loss.
However, the P has not claimed for breach of K but sues on outstanding amount under which it
granted the D 30 days credit which had long expired.
Reasoning:
 An action in debt does not take into account the equities of the situation OR the doctrines of
remoteness or mitigation (those are damages concepts)
 The D had attempted to pay certain funds, thereby acknowledging the debt
 The D has insufficient funds available – this is NOT a defence to a debt action
 Action in debt: the remedy in respect of such promise to pay a liquidated sum of money that the
CL specifically enforces (so debt is an action which in effect is an order for specific
performance for the promise to pay a sum)
o So if you make a promise to pay a sum like the sports facility did, anyone taking an
action in price against you is getting an order in specific performance to pay that sum
that you promised to pay
 In order for the P here to succeed, must show: (both satisfied in this case)
o 1) That the services were provided/delivered; and
o 2) That the D received the services in circumstances where a reasonable person would
know they have to pay.
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
S. 52(1): if under a K, the ppty in goods has passed to a buyer and the buyer refuses to pay in
accordance with the K, the seller may pursue an action in price.
Ratio: Contrast between action for debt vs. action for damages: action in debt does not take
into account the equities of the situation OR the doctrines of remoteness or mitigation.
Insufficient funds is not a defence to failure to pay debt.
-Action in price requires a) that ppy has passed and b) buyer refused to pay.
Colley v. Overseas Exporters [1921] KB *s. 52 SGA*
Buyer not in possession; property did not pass to the buyer; goods not ascertained at the time of
sale – no specific performance
Facts: The P is a leather merchant – the P sold leather belting to the Ds at certain sizes and prices
“f.o.b. Liverpool.” The goods were not specific and they were unascertained at the date of the K.
Buyer had obligation to put goods on board. P sent goods to dock, but due to a series of
misfortunes, no ships were available to put them on board. D committed no deliberate breach of K;
they suffered a series of misfortunes; however they failed to organize a ship. P did all he could to
carry out his obligations. P now seeks to recover price of goods. The goods had not passed b/c they
were not put on board.
Held: The P seller cannot bring action for price (b/c goods have not passed) – P is limited to an
action in damages in s. 53
Reasoning:
 Mackay v. Dick General Rule: Where in a written K it appears that both parties have agreed that
something shall be done, which cannot effectually be done unless both concur in doing it, the
construction of the K is that each agrees to do all that is necessary to be done on his part for the
carrying out of that thing (even if no express words to that effect)
 Normally, unless there is an agreement otherwise, delivery of goods and payment of the price
are concurrent conditions under s. 32, SGA.
 By special bargain the price of goods may be payable b/f delivery or b/f ppty has passed from
the vendor to the buyer.
 The ppty in the goods has not passed in this case to the buyer and the buyer was not in
possession of the goods.
 S. 52, SGA provides when a seller can maintain an action for price against the buyer:
when the buyer has title to the property but refuses to pay, or where irrespective of
delivery there is a contractual stipulation as to the time of payment and the buyer fails to
oblige, although the title has not passed.
 The section, therefore, does not apply in the present case b/c the title to the goods never passed
to the buyer and there was no express time set for payment. This was an f.o.b. K and the settled
intention of the parties is for title to pass when the goods are actually put on board to be shipped.
This did not happen here.
Ratio: Seller will have a right to sue the buyer for the purchase price only when the
requirements of either s.52(1) or (2), SGA are met. There will be no action for the price if the
property in the goods has not passed to the buyer unless there is an express provision
stipulating time of payment irrespective of delivery – if goods have not passed, limited to
damages in s. 53.
Note:
 f.o.b. back in the day meant that the buyer had to name the ship and get the ship organized (now
it’s just a connotation of price)
 s. 52(2) is an exception to property having to pass – if a K for sale contains a price payable on a
certain day (time of the essence), irrespective of delivery, the seller may maintain an action in
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price EVEN THOUGH no ppty passed – AND THE BUYER HAS WRONGFULLY
REFUSED TO PAY
o There are a lot of time of the essence Ks – so this is troublesome
o The date of deliveyr is usually the date of acceptance – if goods haven’t been delivered
then they can’t have been accepted
o So where you have a time of the essence K which stipulates that goods are to be paid for
before delivery, you have a catch 22 – so this section was necessary
o Prof doesn’t know how wide a latitude has been given to this
o this section won’t be on the exam
Stein Forbes and Co. v. County Tailoring Co. [1916] KB
Buyer not in possession, title had not passed, sale of unascertained goods – No specific
performance
Facts: The D agreed to buy from the P several shipments of sheepskin. Payment was to be ‘net
cash on arrival of the shipment’. On arrival of the third shipment the D refused to take up the
documents of title and pay the price. There was NO set date for payment! The P sued for the price
of the shipment.
Issue: Whether the seller can sue for the price of the shipped goods in this case? NO.
Reasoning:
 The D, buyer, in this case broke the K. The material question is what remedy the seller has.
 The seller sues only for the price.
 The property in the goods had not passed to the P – they refused delivery and payment.
 The seller is arguing that the buyer is liable for price under s.52(2), SGA b/c there was a
contractual stipulation as to the time of payment and the buyer failed to make the payment
preventing passing of the title.
 The court rejects this argument – this was not a case of a specific day being set for payment of
money irrespective of delivery. On the contrary, the payment is payable expressly against
delivery.
 The seller also tried to argue that the property in the goods had passed, thus giving rise to right
to sue for price under s.51(1), SGA – but this argument was rejected. The title had not passed
b/c the goods were not unconditionally appropriated to the K – the seller never meant the buyer
to have the goods unless the buyer paid for them and he did not.
 In this case the intention of the parties revealed that the seller did not intend to part with the title
except against payment.
 Unless the ppty has passed, the P cannot sue for price – so the P’s claim is limited to damages
Ratio: S.52(2), SGA will allow the seller to sue for the price of goods only if there was a set day
for the payment, irrespective of delivery, and the buyer failed to pay, even though the title to
the goods had not passed to the buyer. Where payment is payable expressly against delivery
the section will not apply.
Principle:
 In order to have an available market you need more cars than buyers
Charter v. Sullivan [1957] CA *s. 53 SGA*
Facts: The seller and buyer entered into a K for sale of Hillman Minx car. At the agreed price, the
seller was to make 97 pounds of profit. A term of bargain was that the buyer would give in part
exchange his van valued at 350 pounds by the parties and that he would pay the rest of the purchase
price in cash (total of which was set to 773 pounds). After the sale K was entered into the buyer
refused to take the Hillman b/c he found a better deal elsewhere, thus repudiating the K. The seller
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then resold the car to another buyer for the same price. The seller sued the buyer for damages for
wrongful non-acceptance (s.53, SGA).
Issue: How are damages going to be assessed here? Is there an available market?
Held: for the D – no damages awarded
Reasoning:
 The P has a duty to mitigate the damages – he resold the car at the contract price
 If a seller can prove that a profit has been irretrievably lost on a sale of goods by the buyer’s
default, it would be recoverable as damages BUT where there has been a resale of goods, the
seller has the burden of proving a loss of profit beyond that which has been recouped in whole
or in part by the resale the P has failed to prove loss
 S.53(3) –If there is an available market for the goods in question, the measure of damages is to
be ascertained, unless there is evidence to the contrary, by the difference b/w the K price and the
market price at the time when the goods ought to have been accepted, or if the time of
acceptance was not set, then at the time of the refusal to accept.
o To show that there is NO available market, must show that there are more cars than
buyers – the P wasn’t able to show thsi
 The court gives the following statement: “The language of s.50(3) postulates that in the cases
in which it applies there will, or may, be a difference b/w the K price and the market or current
price, which cannot be so where the goods can only be sold at a fixed retail price”.
 Therefore, in this case s.50(2) should be applied to the exclusion of s.50(3) in determining
damages.
 Therefore, it must be ascertained whether the loss (if any) naturally resulted in the ordinary
course of events from the D’s breach.
 In this case, where the market price of the goods is fixed, excess supply will result in a loss of a
sale – loss or profits should be awarded in this case.
Ratio: S.53(3) will operate only when the price at which the goods are sold is a market or
current price, not a price fixed by the manufacturer (ie. fixed retail price). This is b/c, for the
section to apply, there has to be a possibility of a difference b/w the market price and the K
price – impossible when the price is a fixed retail price. When the price is fixed, damages are
to be determined only in accordance with s.53(2). When there is a fixed retail price, and the
repudiation of the sale by the original buyer results in a lost volume of sales and therefore lost
profits, damages should be awarded to compensate for the loss of profit.
Note:
 The principle that a lost-volume seller is entitled to recover his lost profit from a repudiating
buyer in the situation described above has also been adopted in Canada (Victory Motors Ltd. v.
Bayda, Sask. Div. Ct.).
Victory Motors v. Bayda [1973] Sask. District Ct. *s. 53 SGA*
Facts: The P car dealer brings an action to recover a commission of $700 it alleges the D owes it.
The D had contracted to buy a car from the P, then declined to take delivery, so the P sold it to
someone else. The P claims that even though he resold the car and didn’t lose money, he should still
get the commission from the D (ie. the other buyer would have bought another car so the P would
have sold 2 cars, not just the one).
Issue: What is the estimated loss directly and naturally resulting in the ordinary course of events
from the buyer’s breach of K?
Held: for the P – damages awarded
Reasoning:
 The supply of cars at the dealership did not exceed demand
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
The P is entitled to judgment against the D for the amount of profit lost as a result of the D’s
breach of K this amount is the “estimated loss directly and naturally resulting in the ordinary
course of events from the buyer’s breach of K”
Ratio: Where the seller’s supply of goods outweighs the demand for the goods (ie. more cars
than people), the seller may be able to establish a loss of profit, and therefore can claim for
damages.
Lazenby Garages v. Wright
Facts: The P had a used BMW (unique car) and he sold it to the D for 1670 pounds – the D reneged.
The P eventually ended up selling the car for 100 pounds more. But the P tried to sue the D for the
difference between what he had paid when he had originally purchased it and what he wanted to sell
it for (totally ignored that he had resold!).
Held: Prima facie presumption in s. 53 is rebuffed – P gets nothing
Reasoning:
o The P suffered no loss
o A second-hand good is a unique good, can only be sold once – if the seller resells it, there is no
market for it b/c the goods are already sold
o There can only be one profit for the car, that is especially given that there WAS a profit here
Ratio: In the case of a used car which the buyer rejects and the seller resells the car to
someone else, seller can’t maintain an action in damages for profit that would have resulted
from an extra car sold. If seller resells car for a lower price, they can recover the price
difference.
Note:
 s. 53 doesn’t apply to used goods (prof.. )
 The lost volume seller principle does not apply to the sale of used goods.
XII. TRANSFER OF TITLE BY NON-OWNER (this is the extra stuff on exam for non-paper
writers)
 Basic Principle Nemo Dat: one can give no better title than one possesses (comes in by way of
codification in s. 26(1)) (estoppel)
 Exceptions (Protection of Commercial Transactions)
o 1) s. 26(1)… unless the owner’s conduct precludes the owner from denying the seller’s
authority to sell
 Sale by person not owner - 26 (1) Subject to this Act, if goods are sold by
a person who is not the owner of them, and who does not sell them under the
authority or with the consent of the owner, the buyer acquires no better title
to the goods than the seller had, unless the owner's conduct precludes the
owner from denying the seller's authority to sell.
 The typical scenario where you have transfer of title by non-owner is when
you have 2 innocent parties harmed by a third party fraudster – eg. a thief
steals my car and sells it to another person, then the 2 innocent parties will be
the car’s owner and the purchaser.
 Eg. where the actual owner resells the same good twice (the first sale goes to
A and then sell it to B)
 The third party purchaser has to be a bona fide purchaser for value w/out
notice (bfpfvwn)
o 2) s. 30(1), (3) Seller or buyer in possession after sale
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 (1) If a person having sold goods [fraudster] continues or is in possession of
the goods, or of the documents of title to the goods, the delivery or transfer
by that person, or by a mercantile agent acting for that person, of the goods or
documents of title under any sale, pledge or other disposition of them, or
under any agreement for the sale, pledge or other disposition of them, to any
person receiving the same in good faith and without notice of the previous
sale has the same effect as if the person making the delivery or transfer were
expressly authorized by the owner of the goods to make the delivery or
transfer.
 (3) If a person [fraudster] having bought or agreed to buy goods obtains,
with the consent of the seller, possession of the goods or the documents of
title to the goods, the delivery or transfer by that person, or by a mercantile
agent acting for that person, of the goods or documents of title under any sale,
pledge or other disposition of them, or under any agreement for the sale,
pledge or other disposition of them, to any person [bfpfvwn] receiving the
same in good faith and without notice of any lien or other right of the original
seller in respect of the goods has the same effect as if the person making the
delivery or transfer were a mercantile agent in possession of the goods or
documents of title with the consent of the owner.
 s. 1 “mercantile agent” – any agent who has in the customary course
of his business the authority to sell/consign/buy another person’s
goods
o 3) s. 59 – Disposition by mercantile agent
 59 (1) If a mercantile agent is, with the consent of the owner, in possession
of goods or of the documents of title to goods, any sale, pledge or other
disposition of the goods made by the mercantile agent when acting in the
ordinary course of business of a mercantile agent is, subject to this Act, as
valid as if the mercantile agent were expressly authorized by the owner of the
goods to make the sale, pledge or other disposition, if the person taking under
the disposition acts in good faith, and has not at the time of the disposition
notice that the person making the disposition has not authority to make it.
Shaw v. Commissioner of Police [1987] England CA *deals w/ interaction of s. 26(1) and 30(3)
Facts: N, a student from Indonesia, bought a red porsche and after deciding to go back home,
decided to sell it. He advertised the sale in the newspapers. A man, L [the rogue!], called him and
said that he was a car dealer and was interested in purchasing the porsche. N let L have the car. L
agreed to sell to another dealer, Shaw. Shaw trades with another company. Shaw paid L by
banker’s draft. The bank would not cash the draft early and L disappeared. Shaw never suffered
any loss, but still claims title to the car. After L disappeared the police were called – it was then
determined that the car actually belonged to N (the car was in essence stolen by L). Both Shaw and
N claim title. Shaw relied on s. 26(1) and s. 30(3) to say that he is the owner of the car.
Summary:
N bought a red porsche  sells to L  sells to S (pays L by banker’s draft). Draft is never cashed.
N and S claim title.
Issue: Who has title to the Porsche?  N.
Reasoning:
 What makes the present case unique is that Shaw will if he succeeds have obtained the car w/out
having had to pay for it – yes, he did have an agreement to buy the car and that has been
breached by L by taking off, but they didn’t lose any money.
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
s. 30(3): Shaw didn’t qualify as a person who bought goods – he talked about trying to get the
car from N but he never actually bought the car, so can’t use this section. Also, he didn’t receive
the title doc from N.
 S would fall under the section if they could show that L (rogue) had bought or agreed to buy the
car from N.
 s. 26(1): Court asked whether N should be estopped from claiming that he should be
compensated as the owner b/c of his conduct? No, estoppel is irrelevant here b/c S never
suffered loss – Shaw never paid anything for this car.
 Court applies nemo dat principle – N is not estopped from claiming ownership – he will be put
back into the position he should have been in. This is fair in this case b/c the bona fide purchaser,
Shaw, never actually paid any money.
Ratio: For s. 30(3), SGA to apply the person selling to an innocent purchaser must have
bought the goods or agreed to buy the goods of which he is in possession with consent of the
seller. If the person is in possession of the goods under some other arrangement the section
will not apply. S. 26(1), SGA only applies when the goods are sold to the innocent purchaser
not when there is a mere agreement to sell.
B. Seller in Possession
Pacific Motor Auctions Pty., Ltd. v. Motor Credits (Hire Finance) Ltd., [1965] *s. 30(1)*
Facts: The fraudster Motordom is a car dealer and sold vehicles to Credit – they used a display
agreement (allows someone to stay in possession of car for display purposes and the credit co will
pay 90% of the price – you can stay in possession of the car and display it to the public in the hopes
of getting more $). Credit revoked their authority to sell, but Motordom ignored that and continued
to sell – they sold to auctioneer (Pacific Motor). They sold 16 cars to Pacific Motor w/out authority
to sell. Now there is a contest between Pacific Motor (3rd party) and the Credit co (the owner).
Pacific Motor DID know about the display agreement but didn’t know that the agency agreement
between Credit and Motor Dame had been revoked and Motordom was selling w/out authority.
Held: The seller was in continuous unbroken possession of the goods in this case.
Reasoning:
 Court looks at what does it means when a “person who sold goods when they are no longer in
possession” means: the court distinguishes between PHYSICAL possession and CONTINUITY
of legal possession. Anyone in this position has to show that the fraudster stayed in continuous
legal possession in the same form. You have to continue in your position as a seller – can’t be a
bailee and then go back to be a seller, must be continuous. court holds that must stay in
continuous PHYSICAL possession; change in legal title doesn’t change possession
 “The object of the section is to protect an innocent purchase who is deceived by the vendor’s
physical possession of goods or documents and who is inevitably unaware of legal rights which
fetter the apparent power to dispose.”
 Motordom changed in law its form of possession – it was no longer clothed in authority to sell.
They were simply holding the goods for Credit (b/c no longer authority).
 S. 30(1), SGA - protects the innocent buyer who buys from the seller who no longer has
title to the goods b/c he sold them in a previous sale but has retained possession of the
goods. This section does not require the sale to the new buyer to be in the ordinary course
of the seller’s business.
 This provision is intended to protect the innocent purchaser when s.26(1), estoppel protection is
inadequate.
 This section is applicable where the seller simply keeps the goods as a bailee of the buyer.
Ratio: Physical possession, not legal possession is what is necessary.
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S. 30(1), SGA protects the innocent buyer who buys from a seller who has retained possession
to documents of title or goods title to which has passed to a previous buyer. The sale to a new
innocent buyer does not have to be in the ordinary course of business of the seller. The buyer
is protected so long as he takes the goods in good faith and for value w/out notice. This section
applies to any kind of seller – not applicable only to a particular type of seller. Unbroken
continuation of possession by the seller after sale is necessary for the section to apply. The
section applies when the seller continues in the possession (when he was in possession at the
time of the first sale) or when he gets possession (when he was not in possession at the time of
first sale but later came into possession) – but in both cases, there must be an unbroken
possession after the first sale.
Worcester Works Finance Ltd. v. Cooden Engineering Co. Ltd. [1972] England CA
When rogue re-sells goods and remains in possession as bailee of the innocent buyer, but the
original owner repossess goods during this time, this is a ‘disposition’ under s. 30(1), SGA and
the original owner retakes title to the goods.
Facts: Cooden is the owner of a Ford. Griffiths, a dealer [fraudster] wanted to buy the car from
Cooden. Cooden agreed to sell the car and the fraudster gave Cooden a cheque and took delivery of
the car - he registered as the owner. The cheque was dishonoured. Worcester Ltd., through a man
called Millerick (suspected to be another fraudster) entered into a hire purchase agreement with the
fraudster and became the owner of the car. Worcester Ltd. never actually got the car – they simply
received documents from Millerick, assumed them to be genuine and made a payment. Cooden
repossessed the car from the fraudster after the cheque was dishonoured, believing the car was his
as the fraudster did not pay for it. Worcester Ltd. claims title to the car.
Summary of facts:
1. Cooden sold car to fraudster - Griffiths (cheque bounced).
2. Rogue resold to Worcester (finance company) through Millerick (another fraudster) under an
agreement whereby Worcester was to finance the purchase and would have title to the car.
3. While the car was still in possession of the rogue, Cooden repossessed the car.
Worcester claims title and so does Cooden.
Issue:
1. Who has title? Original owner – Cooden.
2. Is repossession by original owner sufficient ‘disposition’ by the seller in possession?
Reasoning:
 Court said Griffiths had continuity of physical possession, so that’s enough to satisfy the first
part of s. 30(1)
 So the issue became whether this is a sale by disposition – the car was basically SEIZED back.
 The court said that the re-transfer back to Cooden was a disposition under s. 30(1), so yes it
qualifies for Cooden to get his car back.
 Griffiths continued in possession at the time of sale to Worcester – Cooden repossessed the
goods after the sale.
 When Cooden retook the car from Griffiths that was another disposition by the seller (rogue)
who remained in possession and Cooden took back the property in the goods.
 In doing so Cooden acted in good faith and w/out notice of sale to Worcester.
Ratio: If seller can remain continuously in possession of the goods that he has sold to the
purchaser, he can pass a good title to a bona fide 3rd person, and the original purchaser will be
ousted—but there must be a continuity of physical possession. “Disposition” is to be given a
very broad meaning: when Cooden retook the car, b/c the cheque hadn’t been met, there was
a transfer back to him of property in the goods.
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For the purposes of s. 30(1), SGA, it does not matter what private arrangement may be
made by the seller with the original purchaser – such as whether the seller remains bailee or
trespasser, or whether he is in lawful possession or not. It is sufficient if he remains
continuously in possession of the goods that he has sold to the subsequent buyer. If so, the
seller can pass title to the subsequent innocent buyer and the original purchaser will be ousted. If
there is a substantial break in continuity of possession, the section might not apply. If the new
purchaser leaves the goods in possession of the seller and the original purchaser (or any
person with actual title to the goods) repossesses the goods in question, this is a disposition for
the purposes of s. 30(1) and there will be re-vesting of the title back to this person if the person
acts in good faith and w/out notice of the sale to the new purchaser.
C. Buyer in Possession
St. John v. Horvat BCCA *s. 59(1) SGA*
Mercantile agent exception - requirements
Facts: Ms. St. John delivered her car to E&E travel who are mercantile agents [fraudster]. She
wanted them to sell it for her on consignment BUT she didn’t actually sell the car to her – she didn’t
authorize them to sell the van w/out coming back and getting her authority first. E&E then sold the
car to an innocent 3rd party, Horvat. A few days after, E&E forged a transfer doc from Ms. St. John
to itself. Horvat had asked E&E to keep the car on its lot b/c he wanted to use E&E to show the van
so he could flip it. Horvat then decided he wanted to just keep it and asked E&E to transfer title to
him. E&E then gets charged and convicted of theft. Ms. St. John brings an action against Horvat
and asks the van to be returned to her – successful at trial, but Horvat appeals.
Issue: Who should get title, the innocent owner or the bfpfvwn?
Reasoning:
 Horvat has to show that ENE is a mercantile agent
 In order to avail himself of the protection in s.59(1), Horvat (buyer) must show that the
following elements exist:
o 1) A mercantile agent;
o 2) who was in possession of goods;

Note that it is not necessary for the mercantile agent to obtain transfer papers in
order to be in possession of goods for the purposes of SGA.
o 3) with the consent of the owner;
o 4) made a sale in the ordinary course of business of a mercantile agent;
o 5) where the buyer has acted in good faith and w/out notice that the mercantile
agent did not have authority to enter into such transaction.

The test here is: would a reasonable buyer have believed that the mercantile
agent was disposing of the goods in the ordinary course of business?

What takes a sale out of the ordinary course of business, is not that the seller did
not have actual authority to sell, but circumstances that would put a reasonable
buyer on notice that this was not a sale in the ordinary course of business.
 There was nothing Horvat knew that would take it out of the ordinary course – it depends on
HIS point of view, doesn’t matter that the fraudster did something sneaky in the background.
 The test is whether a reasonable person would have thought the sale wasn’t occurring in the
ordinary course. Here, Horvat couldn’t have known.
Ratio: S. 59(1), SGA creates an exception to the preserved nemo dat rule in s. 26(1), SGA when
the sale in question is made by a mercantile agent in possession of the goods in question with
the consent of the owner in the ordinary course of seller’s business (as perceived by a
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reasonable buyer) to a buyer who acted in good faith and w/out notice. In this situation, the
buyer is protected and gets the title to the goods.
EXAM:
 Consumer Protection Act not tested
 Sale of goods vs. Ks for labour; sale of goods vs. lease/hire/consignment: case on p. 33 taken
out, Re Stephanians NOT examinable
 Sales distinguished from toher transations NOT examinable are 4 cases: Canada Bank Note case;
Messenger v. Green; Weiner v. Harris; Re Stephanians
 2.5 hours
 4 questions:
o 1) 45 marks (60 minutes) – full sentences, legal analysis
o 2) 20 marks (27 minutes) – with this Q you CAN use short-form answers for this, don’t
need long, elaborate explanation
o 3) 25 marks (34 minutes) [not for papers writers]
o 4) 10 marks (14 minutes) [not for papers writers]
Review:
 s. 69: forget everything in this Act, you have freedom to K
 s. 73: when inconsistency between Act and CL, Act prevails
 First thing you have to think about is the concept what is a good – defined in s. 1
o Not clear whether software is a good and things on the net
o Doesn’t include things in action (ie. shares, portfolios of judgments, real ppty)
 Types of obligations that arise out of the sale of goods
 Conditions (more important, fundamental term) vs. warranties (collateral things, damages)
 s. 15(2)(4) – a breach of a condition will give us more than damages, it will also give us the
right to reject goods (“repudiate”)
 Intermediate term – don’t have to discuss this on the exam (she doesn’t care) – it’s a
fundamental term in the case law, not even defined or mentioned in the SGA. If you’re going to
rely on the implied conditions in the Act (ss. 16-19), you have to be aware of what s. 15(2)(4)
says
 s. 15(4): If K is not severable and the buyer has accepted OR the K is for specific goods and the
ppty has passed to the buyer, breach of condition = breach of warranty
 Property passing: what is it?
o Pretty vague
o Sometimes when a buyer has accepted something is the same as when ppty passes (even
if title doesn’t get completely merged with the buyer)
o s. 21 says ppty can’t pass unless goods are ascertained
o s. 23(1) Unless a different intention appears, the following rules will apply…
o s. 23(2) Specific goods.. the ppty passes upon the K being made
o s. 23(7) No ppty passes until unconditional appropriation (some unconditional act where
the seller can’t change his mind and take them back – when they’re out of his hands)
o Why does it matter?
 s. 25 says that risk passes with ppty
 s. 15(4) If specific goods ppty has passed to the buyer, breach = warranty
only
 Seller’s Obligations:
o A. s. 16(a): Title obligations (s. 15(4) will be trumped by this section)
o s. 16(b): Quiet possession – TM



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o s. 16(c): if it was a small charge or mtg, you should go to (a) instead of (c) b/c it means
that the seller doesn’t have a right to sell at all
o B. s. 17: goods must correspond with condition – we came to the conclusion that most
goods will be sold under some kind of description
 Eg. “leather gloves” – must actually be LEATHER GLOVES
 The issue here is how many of these words can you import into the
description for testing whether or not good quality has been met
 Ashington Piggeries: the “herring meal” came into the description but NOT
the “fair average quality”
 In s. 17, ask: how many of these words will come into the description?
 Also, can you apply a sale of description in a situation where a buyer has
actually seen the goods?
 Applies to ALL specific goods with latent defects, even if the buyer has seen
the goods
o C. s. 18(b) Goods must be merchantable – applies only when goods bought by
description AND only when goods bought from seller who deals with this description
o D. s. 18(a) Fit for purpose
o E. Durability – s. 18(c) [prof doesn’t know what the hell this is about]
o F. s. 19 - Sale by Sample
o G. Delivery
 Starts with s. 31 – seller has obligation to deliver goods
 s. 38(1): goods delivered to a buyer not previously examined are not deemed
accepted until the buyer has inspected the goods
 s. 39
 Note: there is tension between s. 23(7) and s. 38(1) – delivery will occur after
unconditional appropriation [eg. on the truck of the courier going to the
buyer], ppty has passed BUT s. 38(1) says that you’re not deemed to have
accepted the thing until you have accepted it.. so even though the ppty has
passed (the risk is with you), you’re not deemed to have accepted it until you
have inspected it
Buyer’s Remedies:
o A. Right to reject the goods (s. 15(4))
 s. 23(2) (specific goods… the ppty passes upon K being made) – if you
follow this section, then the buyer is NEVER going to have the chance to
reject the good
 So there is tension between 23(2) and 15(4) – 15(4) will prevail
 When goods delivered to the buyer (and they haven’t inspected OR there’s a
latent defect) and before they have a chance to reject they did something to
them inconsistent with rejection, so the courts have looked at this and said s.
39 will prevail.
o B. Damages
 s. 54
 s. 56
Buyer’s Obligations:
o A. s. 31: duty to accept and pay
Seller’s Remedies:
o A. Real Remedies (action brought in respect to goods) –s. 42-51 - POSSESSION
o B. Personal Remedies (action against the buyer)
 s. 52 – action in price
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


s. 53 – damages for non-acceptance - Damages for non-acceptance
If ppty doesn’t pass, seller restricted to s. 53 damages
53 (3) Formula: IF there is an available market, the formula will be the K
price minus the market price at the time the goods ought to have been
accepted – onus on seller to establish whether or not there is available market