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Commercial Transactions CANS
Sales of Goods Act (SGA): Statutory Interpretation ........................................................ 5
Problems with Contract Law for Consumers ................................................................... 5
S. 1 The Concept of “Goods” .......................................................................................... 5
Marshall v. Green ........................................................................................................ 5
Friedkin v. Gliens (1908 Manitoba) .............................................................................. 5
Carlson v. Duncan (1931 BC) ...................................................................................... 5
S. 1, 6: Distinguishing Sale of Goods from other Transactions ....................................... 5
Sale of Goods or Contract for Labour and Materials? ..................................................... 6
Robinson v. Graves ..................................................................................................... 6
Canada Bank Note v. Toronto Railway (1895) ............................................................ 6
G v. White Spot............................................................................................................ 6
Sale of Goods or Barter? ................................................................................................. 6
Messenger v. Greene .................................................................................................. 6
Sale of Goods or Lease or Hire-Purchase Agreement? .................................................. 6
Lee v. Butler ................................................................................................................ 7
Helby v. Mathews ........................................................................................................ 7
Agency Contracts for Sale, Consignment Contracts ....................................................... 7
Weiner v. Harris 1910 .................................................................................................. 7
Re: Stephanian’s Persian Carpets (1980) ................................................................... 7
S. 73: Common law, bills of sale and mortgages ............................................................ 7
S. 7: Capacity to buy and sell, and to enter into legal relationships ................................ 7
S. 8: Contract of sale: Formalities ................................................................................... 8
S. 12: Ascertainment of price .......................................................................................... 8
S. 13: Valuation of Goods ............................................................................................... 8
Montana Mustard Seed Co v. Gates (1963) ................................................................ 8
S. 9 Categorization of Subject Matter: Goods are either Existing or Future .................... 8
Re Wait ........................................................................................................................ 9
S. 10, 11: Perished Goods .............................................................................................. 9
Conditions vs. Warranties and Intermediate Terms ........................................................ 9
S. 15 Conditions Being Treated as Warranties ............................................................... 9
S. 16: Implied warranties and conditions ......................................................................... 9
Leaf v. International Galleries ...................................................................................... 9
Hong Kong Fir Shipping v. Kawasaki (1962) ............................................................... 9
The Hansa Nord (1975) ............................................................................................. 10
Bunge v. Tradax (1981) ............................................................................................. 10
S. 69: Exclusion of Implied Terms and Conditions ........................................................ 10
Canadian Pacific Hotels v. Bank of Montreal ............................................................. 10
Exclusion and Limitation Clauses .................................................................................. 10
Hunter v. Syncrude (1989)......................................................................................... 11
S. 16 Implied Undertaking as to title, and implied warranty of quiet possession ........... 11
S. 18 Implied conditions as to quality or fitness ............................................................. 11
Consumer Protection and the Contract of Sale: S. 20, 69, Acts, and common law ....... 11
S. 20: No waiver of warranties or conditions ................................................................. 11
Business Practices and Consumer Protection Act ..................................................... 11
Stubbe et al v. PF Collier & Son Ltd. (1978) .............................................................. 12
Roa v. Bonanza Ventures (2002) .............................................................................. 12
Consumer Protection Act .............................................................................................. 12
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Levasseur v. Whitney Canada Inc. (2002) ................................................................. 12
The Common law and Consumer Protection ................................................................. 12
Gaertner v. Fiesta Dance Studios (1972 BCSC) ....................................................... 13
Tilden Rent-a-Car v. Clendenning (1978 Ont. CA) .................................................... 13
Harry v. Kreutzinger (1978 BCCA)............................................................................. 13
The Passing of Property: Risk, Insolvency, and Rights of the Seller ............................. 13
Rules Governing the Passing of Property ..................................................................... 14
S. 21 Goods must be ascertained ................................................................................. 14
S. 22 Property passes according to intent of parties ..................................................... 14
S. 23 Intention of parties as to the passing of the property in the goods ....................... 14
Specific Goods .............................................................................................................. 14
Kursell v. Timber Operators and Contractors (1927) ................................................. 14
Unascertained Goods.................................................................................................... 14
Carlos Federspiel & Co. v. Charles Twigg & Co. (1957 QBD) ................................... 15
Caradoc Nurseries v. Marsh (1959 Ont. CA) ............................................................. 15
Sells v. Thomson (1914 BCCA) ................................................................................. 15
Flynn v. Machin (D1) and Mahon (D2) (1974) ........................................................... 15
Risk and Frustration ...................................................................................................... 15
S. 10: Goods that have perished ................................................................................... 16
S. 11: Goods perishing before sale but after agreement to sell ..................................... 16
S. 25: Risk passes with property ................................................................................... 16
S. 23: Intention of the parties as to the passing of the property in the goods ................ 16
Jerome v. Clements Motor Sales (1958 Ont. CA) ...................................................... 16
Ocean Tankers v. V/O Sovfracht (Suez Canal) ......................................................... 16
The Sellers’ Title Obligations ......................................................................................... 16
S. 16: Implied Undertaking as to Title............................................................................ 16
S. 20: No waiver of warranties or provisions ................................................................. 16
The Nature of the Right to Sell Goods........................................................................... 17
Rowland v. Divall ....................................................................................................... 17
Butterworth v. Kingsway Motors (1954) ..................................................................... 17
The Scope of S. 16(a) ................................................................................................... 17
Niblett v. Confectioners’ Materials Co. (1921) ........................................................... 17
J Barry Windsor v. Belgo Manufacturing (1976 BCCA) ............................................. 18
Exclusion of the Implied Condition of the Right to Sell .................................................. 18
Sloan v. Empire Motors ............................................................................................. 18
The Warranties of Quiet Possession and Freedom from Encumbrances ...................... 18
Microbeads v. Vinhurst Road Markings (1975) .......................................................... 18
The Seller’s Obligations as to Description and Quality .................................................. 18
S. 17: Sale by Description ............................................................................................. 18
Frey v. Sarvajc (2000 SKQB) .................................................................................... 18
Torpey v. Red Owl Stores (US 1955) ........................................................................ 19
Sams v. Ezy-Way Foodliner ...................................................................................... 19
Hart-Parr Company v. Jones (1917 Sask. SC) .......................................................... 19
Varley v. Whipp (1900 QB) ........................................................................................ 19
Beale v. Taylor ........................................................................................................... 19
Taylor v. Combined Buyers (1924 New Zealand) ...................................................... 19
S. 18: Implied conditions as to quality or fitness ............................................................ 20
Arcos Ltd. v. E.A. Ronaasen (1933) .......................................................................... 20
Ashington Piggeries v. Christopher Hill (1971 HL) ..................................................... 20
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Merchantability: The Implied Condition of Merchantable Quality ................................... 21
Bartlett v. Sidney Marcus ........................................................................................... 21
Henry Kendall v. William Lillico (Hardwick v. SAPPA) (1968 HL) .............................. 21
Brown v. Craiks (1970 HL) ......................................................................................... 21
IBM v. Shcherban (1925 Sask. CA) ........................................................................... 21
Mash & Murrell v. Joseph Emanuel (1961) ................................................................ 21
Buckley v. Lever Bros (1953 Ont. HC) ....................................................................... 22
S. 18(b) Effect of Inspection or Opportunity to Inspect .................................................. 22
Thornett & Fehr v. Beers & Sons (1919).................................................................... 22
Van Doren v. Perlman (1956 Nfld. SC) ...................................................................... 22
S. 18(a) Implied Condition of Suitability for a Particular Purpose .................................. 22
Crowther v. Shannon Motor (1975 Sask. CA) ............................................................ 22
Marshall v. Ryan Motors (1922 Sask. CA) ................................................................. 23
Kendall v. Lillico (1968 HL) ........................................................................................ 23
Baldry v. Marshall (1925 CA) ..................................................................................... 23
Allergies and the Idiosyncratic User .............................................................................. 23
Esborg v. Bailey Drug (1964) ..................................................................................... 23
Griffiths v. Peter Conway Ltd. (1939) ......................................................................... 23
Ingham v. Emes (1955 CA) ....................................................................................... 24
S. 19 Sale By Sample ................................................................................................... 24
What is a “Sale By Sample”? ........................................................................................ 24
Cudahy Packaging Co. v. Narzisenfeld (1924 US CA) .............................................. 24
The Function of the Sample: Reasonable Inspection .................................................... 24
Steels & Busks v. Bleecker Bik & Co. (1956 QB) ...................................................... 24
Godley v. Perry .......................................................................................................... 24
Delivery: Voluntary transfer of possession from one party to another ........................... 25
S. 31 Duties of seller and buyer .................................................................................... 25
S. 32 Payment and delivery are concurrent conditions ................................................. 25
S. 33 Rules as to delivery.............................................................................................. 25
S. 14 Stipulations as to time .......................................................................................... 25
Time of Delivery ............................................................................................................ 25
Bowes v. Shand ......................................................................................................... 25
Charles Rickards v. Oppenheim ................................................................................ 25
Documentary Sales ....................................................................................................... 25
Beaver Specialty v. Donald H. Bain (1973 SCC) ....................................................... 25
S. 34: Delivery of the Proper Quantity ........................................................................... 25
In Re Moore & Co. and Landauer & Co. (1922 CA) ................................................... 26
S. 35: Delivery by Installments ...................................................................................... 26
Maple Flock v. Universal Furniture Products (Wembley) (1934 CA) .......................... 26
Obligations of Suppliers and Manufacturers: The Privity Problem ................................ 26
Lyons v. Consumers Glass Co. (1981 BCSC) ........................................................... 26
Chabot v. Ford Motor co. (1982) ................................................................................ 27
The Buyer’s Remedies .................................................................................................. 27
S. 15: Condition may be treated as warranty (Right to Reject Goods) .......................... 27
Loss of the Right to Reject Goods ................................................................................. 27
Wojakowski v. Pembina Dodge Chrysler (1976 Manitoba QB) .................................. 27
S. 39: Loss of Right to Reject Goods because of Acceptance ...................................... 27
Hardy v. Hillerns and Fowler ...................................................................................... 27
Rafuse Motors Ltd. v. Mardo Construction Ltd. ......................................................... 28
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Barker v. Agius .......................................................................................................... 28
Damages ....................................................................................................................... 28
The Measure of Damages ............................................................................................. 29
Wertheim v. Chicoutimi Pulp Co. (1911 HL) .............................................................. 29
Bowlay Logging v. Domtar (1978 BCSC) ................................................................... 29
Cullinane v. “Rema” Manufacturing Co. (1953) ......................................................... 29
Hadley v. Baxendale .................................................................................................. 29
Koufos v. Czarnikow (“The Heron II”) (1967 HL) ....................................................... 29
Parsons v. Uttley Ingham ........................................................................................... 30
Severability .................................................................................................................... 30
Recovery of damages for loss of enjoyment ................................................................. 30
Wharton v. Tom Harris Chevrolet (2002 BCCA) ........................................................ 30
Compound Interest ........................................................................................................ 30
Bank of America Canada v. Mutual Trust Co. (2002 SCC) ........................................ 30
Damages for Non-Delivery and Late Delivery ............................................................... 31
Re Hall and Pim ......................................................................................................... 31
Breach of Condition or Warranty of Quality ................................................................... 31
Ford Motor Co. v. Haley (1967 SCC) ......................................................................... 31
Sunnyside Greenhouses v. Golden West Seeds (1972)............................................ 31
S. 55: Specific Performance .......................................................................................... 31
Re Wait (1926) .......................................................................................................... 31
Sky Petroleum v. VIP Petroleum (1974) .................................................................... 31
Statutory Remedies ....................................................................................................... 32
S. 75 Buyer’s lien (security interest) .............................................................................. 32
Business Practices and Consumer Protection Act ........................................................ 32
S. 31: Buyer’s Obligations ............................................................................................. 32
Kay Corporation v. Dekeyser (1977 Ont. CA) ............................................................ 32
Letter of credit ............................................................................................................... 32
Michael Doyle v. Bank of Montreal ............................................................................ 32
United City Merchants Investments v. Royal Bank of Canada (1983 HL) .................. 33
S. 42-51: Seller’s Rights and Remedies ........................................................................ 33
S. 44 Unpaid seller’s lien ............................................................................................... 33
S. 43(1)(b) Unpaid seller’s rights ................................................................................... 33
S. 51 The right of resale ................................................................................................ 33
Snagproof v. Brody .................................................................................................... 33
Ward v. Bignall .......................................................................................................... 34
Personal Remedies: Price and Damages...................................................................... 34
S. 52 Action for Price..................................................................................................... 34
S. 53: Seller’s right to Damages for non-acceptance .................................................... 34
Standard Radio v. Sports Central Enterprises ........................................................... 34
Colley v. Overseas Exporters .................................................................................... 34
Stein Forbes v. County Tailoring Co. ......................................................................... 35
Charter v. Sullivan (1957 English CA) ....................................................................... 35
Victory Motors v. Bayda (1973 Sask. District Court) .................................................. 35
Lazenby Garages v. Wright (1976 HL) ...................................................................... 35
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Sales of Goods Act (SGA): Statutory Interpretation
- Default set of rules when the contract doesn’t say otherwise
- Not always binding: parties may contract out of these rules
- Intended to re-state common law, not modify/replace it, resolve common disputes
- General principles of contract common law still apply
Problems with Contract Law for Consumers
- Standard form contracts: effects diminished by Consumer Protection Act
- Offer and acceptance, invitations to treat: doesn’t really work with how sales
operate, especially with online shopping
- Exclusion clauses
- Privity: what happens if you buy something and later there’s a problem with the
item – claim against retailer or manufacturer? What if the shop goes out of
business? Buyer has no contract with the manufacturer…
S. 1 The Concept of “Goods”
- “Includes” chattel and crops that are agreed to be severed
“Goods” does not include:
- Money
- Things in Action or Money (intangible right), legal right to something
o Cheque, bills of exchange, stocks, shares, bonds, good will, debts (like
mortgages, you can buy and sell a right to collect on a debt)
- Interest in land/property or lease
o Things that are permanently affixed to the land (like buildings), unless they
are to be severed under sale of the land or upon contract of sale
o Crops, minerals, gravel
- Labour, services
Marshall v. Green
- If parties agree to sever and sell the trees, it’s a contract for sale of goods, not
interest in land
- Industrial crops: produced by labour/industry, always contract for sale of goods
- Natural crops: not planted or cultivated, produce spontaneously, so need to
determine if they’re “goods” – if harvested now, goods; if later, “land”
Friedkin v. Gliens (1908 Manitoba)
- Contract for sale of naturally growing grass
- Naturally occurring crop: if it’s growing and intended by parties to be treated like
chattel (cut/severed), it’s sale of goods, SGA applies
Carlson v. Duncan (1931 BC)
- Contract for the right to access land, cut timber: interest in land or sale of goods?
- In order to consider trees “goods”, contract must take place within a reasonable
time, then SGA applies
- If contract doesn’t require haste to remove trees, it’s contract for sale of land
S. 1, 6: Distinguishing Sale of Goods from other Transactions
S. 1: "sale" includes a bargain and sale as well as a sale and delivery
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S. 6: Sale and agreement to sell
Sale is different from contract for labour/materials, transfer of possession, gift,
barter, lease, consignment
S. 6 only applies if it’s a contract for sale of goods, intention to transfer property for a
price (not barter, not trade in goods, not contract for labour or materials)
Sale of Goods or Contract for Labour and Materials?
- Look at true purpose or essence of transaction, what the parties subjectively
intended, where the bulk of the $ is being spent
- Contract that’s primarily for labour and materials (vendor’s service) is not sale of
goods, even if it involves goods that could be sold individually/separately
- Sale of goods over certain amount: need to show something (proof) to enforce it
Robinson v. Graves
- Look at contract as a whole: is passage ancillary to the main part of the contract?
- Test: if the materials were incidental/secondary to the exercise of skill, labour
- Contract for printed book: involved application of skill, not just supplies
- Dentist selling dentures: sale of goods
Canada Bank Note v. Toronto Railway (1895)
- D hired P to print bonds, which weren’t made properly
- Sale of goods: transfer X to buyer where buyer didn’t have title to before
- Doesn’t matter that bonds were custom made, not a generic product
- Analogy: lawyer draws up an agreement for contract: labour, not goods
G v. White Spot
- Diners at White Spot got sick from the food, wanted to rely on SGA s. 16-19
- Contract for sale of goods can also include service, as long as the essence or
primary purpose is sale of goods (not services) as per the parties’ intentions
- Sale of goods: offer to sell finished product at a fixed price
Sale of Goods or Barter?
- A Barter is a contract of sale, but not covered by SGA b/c doesn’t satisfy s. 6
“money consideration” (so need to attach monetary value to what’s being traded)
- Both parties are buyers and sellers (2 sales happening here)
Messenger v. Greene
- Even if goods form part of the consideration, if the value is fixed in monetary
terms and assigned a specific value, SGA applies
Sale of Goods or Lease or Hire-Purchase Agreement?
- Lease will end in transfer of property/title to lessee  conditional sale
- Lease is for total useful life of goods  sale
- Lease with option to purchase at end  depends
- Lease with obligation to purchase  sale (rent payments are mandatory, title
passes at the end, or else there’s no useful life left in the goods, like computer)
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Lee v. Butler
- When you pay rent towards the ultimate purchase, it’s contract for sale of goods
b/c once you pay it all, you own it (but must have obligation to buy)
- Even if seller calls it a lease, can’t take goods back b/c “lease” is actually
conditional sale under SGA s. 30
- Sale is different from lease and long-term agreement w/possible sale at the end
Helby v. Mathews
- Contract for sale: Not just the right or option to buy, but the obligation to buy
- Pay rent towards the option to purchase at the end: lease, b/c no obligation to
purchase (even if all parties anticipated that renter will purchase at the end)
Agency Contracts for Sale, Consignment Contracts
- Consignor (owner: A)  Consignee (agent: B)  Buyer (3rd party: C)
o A is 3rd party beneficiary, Privity applies (A can’t sue C)
- True consignment: agency contract for sale
o A pays B (agent) commission for selling goods, B has incentive to sell high
- Disguised sale: SGA applies, B has obligation to buy if no C buyer
- Sale or return: A leaves goods w/B, if no buyer, B returns goods to A
o Risk of transaction falls on B, only B can sue A
Weiner v. Harris 1910
- Contract said: W still owns the jewelry until F sells it, goods aren’t ever owned by
F. When F sold the goods, he would get 50% of the profits
- F was agent for sale, not purchaser (no contract for sale between F and W)
- Reasons: W never intended to sell the goods to F; F only got portion of the profits
from the sale; F couldn’t set the price for the goods; F had no right to buy, only
duty to sell; F would receive remuneration for his part in selling the goods
Re: Stephanian’s Persian Carpets (1980)
- Anglo (wholesaler) supplied S with Persian rugs to sell, S went bankrupt
- Held: title of carpets still with Anglo, not S, protecting A from S’s creditors:
o Anglo had the right to come in, inspect the carpets, take them back
o S had to account for any rugs that weren’t sold
o S could sell the rugs but had to use the money to reimburse Anglo
o S did not have an obligation to buy the rugs
- It was a means to market Anglo’s product, a mutually beneficial arrangement
S. 73: Common law, bills of sale and mortgages
- General rules of contract still apply. SGA may modify the common law IF it’s an
expressed provision, or if the Act is inconsistent with common law
S. 7: Capacity to buy and sell, and to enter into legal relationships
- If “necessities” are delivered to person who’s not full capacity (drunk, mentally
incapacitated, minors), contract is enforceable, IF it’s for a reasonable price
- Protects sellers (enforces contracts), encourages them to enter into contract
- Supplier is entitled to recover a reasonable amount from these people, but not to
take advantage of their intoxicated state, youth, etc.
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Issues: at what stage are you incompetent? What items are considered
necessities? Depends on person’s condition in life & actual condition at the time
What’s necessary for one might not be necessary for another… depends on the
buyer, doesn’t matter if the seller is aware that it’s a necessity
S. 8: Contract of sale: Formalities
- Contracts can be in writing, oral, or mixed… but some contracts must be in
writing & provide supplier’s contact info, details of payment etc. to protect buyers
- Sometimes, not binding if supplier doesn’t give a copy of the contract to the
consumer at the time of sale with “certainty of terms”
S. 12: Ascertainment of price
- Price may be set by contract, left to be set, or determined by course of dealings
- If price not determined, buyer must pay “reasonable price” (depends on circums)
- Price is important: what happens if there’s not an agreement on the price?
- An agreement to agree is not a contract: can’t say, let’s agree on price to be
agreed on later… that’s not a contract
- (2) “Reasonable price” only applies if contract is completely silent about price
S. 13: Valuation of Goods
- If contract says, Price to be set by 3rd party, 3rd party can’t/won’t, contract is void
Montana Mustard Seed Co v. Gates (1963)
- Price for grade 3 seeds hadn’t been set b/c contract was for grade 1 seeds
- Buyer (MMS) must pay “reasonable price” for goods, which was price for grade 1
seeds (even though poorer quality, b/c there was a shortage)
- Don’t want to reward seller for having a poorer quality product
- It’s possible that, had it been a normal mustard seed year, the MMS company
would have refused to pay full price for anything below grade 1 quality
S. 9 Categorization of Subject Matter: Goods are either Existing or Future
- Future goods:
o To be manufactured or acquired by seller after contract is formed
o Contract for future goods: agreement to sell until goods exist
o Contract of sale: when seller gets possession of the goods
- Existing: owned or possessed by seller
Goods are either:
- Specific, (e.g. that used blue car, those 10 bushels)
o S. 1 Specific: Identified or agreed on when the contract of sale is made
o S. 23(2) Property passes when contract is entered into, if no conditions
o Can only get specific performance for specific goods
- Ascertained, or
o 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
- Unascertained (e.g. 10 bushels from your 50)
o Agreement to sell, not a contract for sale, until goods are ascertained
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Re Wait
- Can’t get specific performance if goods are not specific
S. 10, 11: Perished Goods
S. 10 Goods that have perished
o If seller had no knowledge, buyer can’t get damages for breach
o If seller knew, damages are possible (more than a refund for breach)
S. 11 Goods perishing before sale but after agreement to sell
o If conract 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, no more obligations
o No more obligations… unless the seller knew that the goods had perished
or there was some kind of fault on either end
Conditions vs. Warranties and Intermediate Terms
- Breach of warranty entitles you to damages, not the right to repudiate contract
- Breach of a condition entitles you to rescind or reject the entire contract,
- Implied or explicit
- Depends on interpretation of the contract, regardless of what term is used
S. 15 Conditions Being Treated as Warranties
- (2) Whether it’s a condition or a warranty depends on construction of the contract
- (3) Damages or rescind? Determine by looking at the contract itself
- Just because a contract calls something a warranty doesn’t make it so; courts will
look at construction of the contract as a whole, won’t be bound by terms used
- Problem: lawyers like certainty, so if you both agree it’s a warranty, and the court
says it’s a condition, there’s uncertainty
- Condition
o If not satisfied, stops the contract from forming
o Goes to nature/root of the contract
o Breach of condition: ends the contract, allows you to reject
- Warranty: Remedy is damages (can’t get out of the contract)
S. 16: Implied warranties and conditions
Leaf v. International Galleries
- Leaf wanted to rescind contract 5 yrs later b/c painting wasn’t a “Constable”
- If there’s breach of condition, buyer’s right to rescind contract is limited to:
o when the buyer has accepted the goods, property has passed
o a “reasonable” period of time
- Otherwise, it would create uncertainty and would be commercially unworkable
Hong Kong Fir Shipping v. Kawasaki (1962)
- Intermediate term: If the contract doesn’t call it a warranty or condition, let’s call it
an intermediate term, and wait until breach of contract… then, measure the
severity of the consequences of the breach, and decide if it’s a condition
- Test for warranty or condition: Look at severity of consequences of the breach
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o If the breach gave rise to an event which deprived the party substantially
of the whole benefit of the contract which it was intended, goes to essence
of the contract  condition
Critics: Tension between certainty and fairness: giving judges discretion to
measure severity if breach leads to uncertainty, courts interfering with
commercial freedom, people don’t often contemplate a breach and the results
The Hansa Nord (1975)
- Citrus pellets didn’t arrive in good condition, so buyer rejected, then bought the
same pellets for cheaper and used them for their original purpose
- Need to look at the effects/extent/nature of the breach and determine if it’s
serious and substantial that goes to the root of the entire contract
- If the quality is inferior, buyer is entitled to damages, not to rescind
- Ormrod: sometimes the whole K is affected such that party is entitled to reject:
1. If the contract expressly say what the results will be if there’s a breach of
this condition, go with the contract
2. Sometimes, either b/c of statute or common law, know/assume there’s a
right to reject the contract if there’s a breach, regardless of how significant
3. If nothing expressed in the contract, then look at what words are used:
 If the word “condition” is used, fine, but not determinative
Bunge v. Tradax (1981)
- Need for certainty and predictability
- Time stipulations in commercial contracts (between merchants) are conditions
- Precise measurements are also conditions
- Where one party’s obligation must be fulfilled in order for the other party to fulfill
their obligation, any delay in fulfilling the first obligation entitles the other party to
reject the contract, because they’d be at risk of breaching their end of the bargain
- Hong Kong Fir: there are certain terms, or conditions, that allow the innocent
party to repudiate the contract. Must look at the true construction of the case:
o Some terms/clauses are conditions because it’s the law, and the result is
that any breach allows you to repudiate, no matter how severe the breach
o If it’s not a condition, you can still reject the contract IF the breach goes to
the essence of the contract (look at the extent of the breach)
S. 69: Exclusion of Implied Terms and Conditions
- Implied terms: default rules re: obligations unless varied by expressed agreement
Canadian Pacific Hotels v. Bank of Montreal
- Implied terms/obligations can’t go beyond what’s necessary, b/c don’t want to
interfere with freedom of contract
- Test for implying terms:
1. Presumed intentions (custom or usage, business efficacy)
2. Incidental to the type or class of the contract
Exclusion and Limitation Clauses
- SGA provides a default position, but it’s still up to the contracting parties to set
terms of agreement, include limitation or exclusion clause
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One party reduces their exposure, the other party gets favorable terms in return
Concern: if there’s no equal bargaining power, no freedom of contract
Where there was a fundamental breach such that the basis of the contract was
fundamentally destroyed, then the exclusion or limitation clause doesn’t count
Hunter v. Syncrude (1989)
- Dickson: if, on true construction of the contract, the limitation or exclusion clause
was meant to apply, then the court should respect that… unless it would be
unconscionable
o Equal bargaining power, large sophisticated companies, no evidence of
undue pressure, contract was not rushed
- Wilson: even if there’s no unconscionability or inequality of bargaining power,
let’s still retain the notion of fundamental breach
S. 16 Implied Undertaking as to title, and implied warranty of quiet possession
- If there’s nothing else in the contract, it’s a default position/implied condition that
a seller has a right to lease or sell goods if they have title
S. 18 Implied conditions as to quality or fitness
- Implied term in contract that goods will be fit for a particular purpose, durable for
a reasonable time, merchantable quality
- Buyer might agree to contract out of the s. 18 implied term if the seller is willing to
sell the goods at a lower price (negotiation)
- However, if you don’t contract out of it, s. 18 applies
Consumer Protection and the Contract of Sale: S. 20, 69, Acts, and common law
S. 20: No waiver of warranties or conditions
- Parties can’t contract out of SGA condition warranty protections (s. 17, 18, 19 for
new goods, s. 16 for used goods) of a retail transaction: sale or lease in the
ordinary course of the seller’s business to consumer
- Retail sales “in ordinary course” does not include:
o sale to purchasers who re-sell the items
o sale to corporations or a trustee
o sale to commercial enterprise
- E.g. if you buy a bed from the Bay, they can’t contract out of the implied
conditions, but if you run a hotel and purchase 25 beds, they can contract out
Business Practices and Consumer Protection Act
- s. 3: cannot waive or release your rights, benefits or protections under this Act
- s. 4: deceptive acts or practices
- s. 5: supplier must not commit or engage in deceptive act or practice (like
misrepresentation about goods or price)
o Reverse onus: once supplier is alleged to have committed deceptive
practice, must prove their innocence
- s. 8: unconscionable acts: undue pressure, taking advantage (unequal
bargaining power), price disproportionate
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s. 10: court can reopen transaction, relieve consumer from obligations, order
supplier pay, set aside
s. 11: unsolicited goods: not unsolicited if consumer knew or ought to have
known for somebody else, free…
s. 14: remedy if unsolicited goods: refund w/in 2 years
Stubbe et al v. PF Collier & Son Ltd. (1978)
- Collier salesmen selling encyclopedias conducted themselves deceptively:
misrepresentation about the nature or true purpose of the visit
- Deception took place before any contract was formed to purchase the goods
(don’t have to enter contract in order to commit an offence of deceptive practice)
Roa v. Bonanza Ventures (2002)
- Bonanza advertised goods at discounted price, signed up membership
- Court: can’t have contract that is contrary to Consumer Protection Act
- Deceptive practice: saying goods are available when they’re not
Consumer Protection Act
- S. 1 refers to consumer transactions (similar to SGA s. 20 but broader)
- Protection from deceptive acts or practices, misleading representation or conduct
- Doesn’t matter if there was an intention to deceive, but whether the act was
capable of deceiving the consumer, or if it had the effect of deceiving
Levasseur v. Whitney Canada Inc. (2002)
- L attended “wealth seminar” presentation, then they were selling a “build your
wealth” kit (for $1134 each), there was notice of cancellation, L wanted to cancel
- Direct sales contract:
o Consumer contract entered into in a location other that at seller’s place of
business (doesn’t include small amounts or funeral home)
o Protects consumer if there’s no regular place of business
o Certain information must be included in the contract: Guarantors,
signatures, names, address, contact info
o Must provide the consumer with a copy of the contract or it’s not
enforceable
o Consumer can cancel transaction by giving notice within 10 days
o If there’s a problem (e.g. if the Act was breached), sometimes the
consumer can cancel the contract even a year later
- Direct sales contract applies to booths, kiosks (not just door-to-door salespeople)
- Direct Sales Contract: entered into in person, in a location other than a regular
place of business, purchased by a consumer
The Common law and Consumer Protection
- In a sale of goods, in addition to SGA and consumer legislation, there are also
common law mechanisms to protect consumers if a contract is induced by fraud,
hoax, onerous exclusion clauses, or unconscionability or breach from commercial
morality (inequality of bargaining power)
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Gaertner v. Fiesta Dance Studios (1972 BCSC)
- G was fraudulently induced to pre-pay for dance lessons.
- Court (common law) will only protect consumers where there’s fraud,
exploitation, unconscionability
Tilden Rent-a-Car v. Clendenning (1978 Ont. CA)
- Hurried consumer transaction, C didn’t know about onerous clause which was
inconsistent with the overall contract (it negated the whole “extra insurance” idea)
- Signature is not always assent: not always bound by what you sign because you
are only bound by what you reasonably think you agreed to
- Standard form contract: if there’s unusual or onerous clause, vendor has
obligation to bring it to attention of the consumer, or signature is not binding
Harry v. Kreutzinger (1978 BCCA)
- H sold boat to K, then wanted to void the contract because of unconscionability
- To show bargain is unconscionable, need to show:
o Inequality of bargaining power (stronger exploited weaker)
o Substantial unfairness of the bargain
o Ignorance
o Need and/or distress of the weaker party
- If above is shown, a presumption of fraud, and it’s up to the stronger party to
rebut this presumption, show that it fair and reasonable
- Court: this isn’t a case of undue influence (Lloyd Bank v. Bundy)
- Lambert: unconscionability depends on community standard. Must ask: was
whole transaction so divergent from community moral standards that the contract
should be void, rescinded? (more flexible, but less certain/predictable test)
The Passing of Property: Risk, Insolvency, and Rights of the Seller
- S. 1 property defined as ‘not something particular’
- It’s not “title” or possession
- Right to reject: seller can sue for the price if property has passed
Risk
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Default rule: Risk passes when property passes – so it matters who owns it,
because the owner has to insure it, or incur the loss if it’s damaged/destroyed
Creditors/Insolvency (rights of liquidators: where most of the case law happens)
- If property has passed to buyer, but seller still has possession of the goods,
buyer is entitled to the goods
o If the seller goes insolvent, buyer is protected from seller’s creditors, but
buyer has the risk!
- If the goods are in the possession of the buyer, and the buyer goes insolvent (but
the seller still has property), the seller is usually protected
Rights of the Sellers
- Rights of seller: Seller can sue for the price only if the property has passed
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Rules Governing the Passing of Property
S. 21 Goods must be ascertained
- Specific Goods: Property doesn’t pass unless/until the goods are ascertained
(separated from the bulk)
- Not necessarily passed when the goods are ascertained, depends on intention
S. 22 Property passes according to intent of parties
- Determine intentions by looking at factors such as the terms of the contract, the
circumstances of the case, and the parties’ conduct
S. 23 Intention of parties as to the passing of the property in the goods
- 23(1) It’s the parties’ intention, if there is no other intention
- 23(2) Property passes where the specific, identified goods are in a deliverable
state, when the unconditional contract is formed; time of payment and time of
delivery doesn’t matter
o Deliverable state: when the buyer would be bound to accept the goods
o Unconditional contract: no prior conditions or conditions precedent,
nothing needs to happen before sale is complete
- 23(7) Contract for unascertained or future goods sold by description: property
passes when goods are unconditionally appropriated to the contract (no chance
for party to change their mind):
o By the seller with the assent of the buyer
o By the buyer with the assent of the seller
o Future goods by description are arguably specific goods (2009 Toyota)
o Goods may be ascertained before they’re unconditionally appropriated
Specific Goods
- Existing goods that are identified (that book) and agreed on at the time of sale
- Not: future goods, unascertained goods
- Property doesn’t pass unless the goods are specific, ascertained, deliverable
- If goods are specific and not future, property passes when the contract is formed
Kursell v. Timber Operators and Contractors (1927)
- S. 21 Property doesn’t pass to buyer until goods are ascertained
- S. 23(3) Even if goods are specific, property doesn’t pass to buyer until goods
are put in deliverable state
- Risk passes with property, so if goods are unascertained or not in deliverable
state, seller still has risk
Unascertained Goods
- Haven’t agreed on which particular item you’re selling/buying
- Goods haven’t been identified at this stage
- Contract for 10 pounds of coffee: can be any 10 lbs, not from specific day/field
- S. 21: future goods don’t pass until they are ascertained
- Effects of ascertaining goods: the ownership has transferred
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Carlos Federspiel & Co. v. Charles Twigg & Co. (1957 QBD)
- Issue: had property of tricycles passed to the buyer, or did they still belong to the
seller, to satisfy the bankrupt sellers’ debts?
- Property doesn’t pass until goods are appropriated and put in deliverable state
- Ascertained: the goods are set aside to meet contractual obligations
- Appropriation:
o Need common intention that only those goods will satisfy contract, no
others
o Parties must agree to the change of ownership (can be implied)
o Need actual or constructive delivery
o Last act of seller, who no longer possesses the goods for himself, but just
holding them for the benefit of the buyer
o Risk passes when property passes
- Once the sellers do everything they had to, set the goods aside and call the
buyer to pick them up, then appropriation has taken place, property has passed
Caradoc Nurseries v. Marsh (1959 Ont. CA)
- Sale of unascertained goods identified by description: property passes when
goods become unconditionally appropriated (can’t switch for other goods)
- No unconditional appropriation until the goods are delivered
- When goods are appropriated, property has passed, buyer can’t reject the goods
- Buyer is obliged to pay the price if the property has passed, and if they don’t,
seller can sue for the price of the goods (not just restricted to suing for damages)
Sells v. Thomson (1914 BCCA)
- T ordered 25 books, but cancelled 2nd half of order, seller sued for price of books
- When goods are unascertained (not set aside), goods are not unconditionally
appropriated if one party withdraws his assent to continue with contract
- To have appropriation, need consent of the buyer, or property doesn’t pass
- If goods are already set aside, seller can’t change mind about which goods,
property has passed, buyer has risk
Flynn v. Machin (D1) and Mahon (D2) (1974)
- Flynn (P) was injured passenger, Father Machin (D1) owned the car, Mahon (D2)
was the driver but allegedly not the owner (D2 was delivering the car to D1)
- Issue: had the property (and risk) passed to D1 at the time of the accident?
- Car constituted “future goods” b/c seller didn’t have possession when contract
was formed
- Future goods: property only passes when goods are ascertained
- Car not unconditionally appropriated b/c D2 could have substituted different car
- SGA: where goods are unascertained or future goods, or sale by description,
property passes when goods are unconditionally appropriated, and seller can no
longer substitute the goods for other goods
Risk and Frustration
- Risk: determines who bears cost if goods are lost/damaged, who can sue
- Frustration: unforeseeable circumstances arise where you can’t perform your end
of the bargain, changed the basis of the contract, so contract has come to an end
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If no frustration, risk rules apply as usual
S. 10: Goods that have perished
- Contract is avoided (effectively over) if goods were perished at the time when the
contract was made and no one knew about it
S. 11: Goods perishing before sale but after agreement to sell
- Goods perish before the sale, but after agreement to sell  contract is avoided
- Buyer still needs to fulfill contractual obligation if risk passed to them
S. 25: Risk passes with property
- Risk determines who bears the burden of an uncertainty, costs
- Risk passes to buyer when property passes, unless otherwise agreed
S. 23: Intention of the parties as to the passing of the property in the goods
- Contract for specific goods: property passes to buyer when contract is made
- (3) property doesn’t pass until seller puts it in deliverable state, notice is given
Jerome v. Clements Motor Sales (1958 Ont. CA)
- 25 Risk passes when property passes, unless otherwise agreed
o Goods remain at seller’s risk until property is transferred
- 23 Property doesn’t pass until goods are put in deliverable state, notice is given
- Deliverable state: a state where the seller can compel the buyer to accept the
goods as corresponding to the agreement (nothing left to do to get it ready)
- Can’t give notice in advance
Ocean Tankers v. V/O Sovfracht (Suez Canal)
- If you can still fulfill contractual obligations, but it’s more difficult or expensive,
you’re still obliged to fulfill the contract (it’s not frustrated)
- Parties had contracted for this, weren’t supposed to take ship into war zone,
therefore there’s no frustration (it was self-induced)
The Sellers’ Title Obligations
S. 16: Implied Undertaking as to Title
- In the case of a sale or agreement to sell (future goods not in seller’s possession)
- 16(a) implied condition that seller has the right to sell/lease the goods now, future
o If not fulfilled, you can repudiate the contract
o Most protection
o Subject to the contract (regardless of default position in SGA)
- 16(b) implied warranty that buyer will have quiet possession of the goods
o Remedy is damages, not a right to reject the goods
- 16(c) implied warranty that there’s not a 3rd party with interest in the property
(charges and encumbrances)
- SGA means, no more caveat emptor
S. 20: No waiver of warranties or provisions
- Limits the “opting out” rights of sellers
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20(3) in a consumer contract, the seller can’t require the consumer/purchaser to
release seller’s obligations as to rights to sell the goods; can’t exclude liability, so
if the goods aren’t the sellers to sell, the ordinary consumer is protected
o Can’t contract out of conditions/warranties for used goods (s. 16) or new
goods (ss. 17-19)
In consumer transaction, always an implied term that the seller has the right to
sell the goods (whether or not it’s in the contract; it’s implied by SGA)
However, it is possible to contract out of implied conditions/obligations in a
commercial context
You can contract out of s. 16; however, s. 16 promise is “subject to intentions of
parties” in the contract (doesn’t make sense that s. 16 is subject to parties’
intentions)… want to protect consumers
When there’s breach of contract, other party gets right to repudiate and damages
S. 15(4) says to treat breach of condition as warranty if goods are specific, or if
any part of the goods were accepted
Problem: if specific goods, 16(a) there’s an implied condition that seller has right
to sell… but what if seller didn’t have right? Does buyer lose right to repudiate?
The Nature of the Right to Sell Goods
Rowland v. Divall
- Restitutio in integrum: buyer can rescind IF he restores the item to the seller.
- Held: for buyer, because there was a total failure of consideration
o Buyer didn’t received the benefit that he contracted for: title to the car
- Problem: s. 15(4) buyer loses the option to treat it as a condition if:
 Buyer has accepted the goods
 Property has passed
- Court: 15(4) is subject to a contrary term in the contract, and, logically, it must be
a term in every contract that the seller has the right to sell the goods b/c that’s
fundamental to a contract
Note exception for sheriffs, who don’t need right to sell goods, b/c goods may be
proceeds of crime (so default rule doesn’t apply)
Butterworth v. Kingsway Motors (1954)
- Can’t reject goods if you’ve accepted them and too much time has passed
- Can reject goods when there’s a breach of s. 16(a)
- Note: parties couldn’t argue failure of consideration b/c they got title eventually
- Implied condition: you have the right to sell goods… so even if you own them,
you may not have that right
The Scope of S. 16(a)
Niblett v. Confectioners’ Materials Co. (1921)
- Seller owned goods but didn’t have right to sell them b/c copyright infringement
- Buyer couldn’t re-sell goods b/c of trademark rights, injunction
- S. 16 is broad – doesn’t just deal with ownership, but anything that affects the
right to sell/lease the goods
o Breach of condition of right to sell
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o Breach of implied warranty with respect to quiet possession of the goods
o Seller must disclose if there’s a charge or encumbrance on the goods;
buyer has a right to know what they’re contracting for
J Barry Windsor v. Belgo Manufacturing (1976 BCCA)
- D didn’t have the right to sell the lamps, breach of implied condition s. 16(a)
- If the buyer was legally prevented from re-selling the goods (injunction, copyright,
CSA regulations), then the seller had no right to sell the goods
Exclusion of the Implied Condition of the Right to Sell
Sloan v. Empire Motors
- Theoretically it’s possible in commercial context to contract out of s. 16, limit your
obligations… but can’t contract out of s. 16(a)
- If seller purports to sell, there’s an obligation to sell, even if it’s not expressed
- Buyers don’t purchase the possibility to own the goods; rather, they pay $ for the
possession of the goods! That’s the nature of a contract for a sale
The Warranties of Quiet Possession and Freedom from Encumbrances
Microbeads v. Vinhurst Road Markings (1975)
- Seller had right to sell the goods (no breach of 16(a) at time of sale), but once the
machine was patented, buyer lost ability to enjoy quiet possession of the goods
(breach of 16(b)) – rare b/c usually the problem is, seller had no right to sell
- 16(b) provides an ongoing implied warranty that there’s an obligation on seller
that isn’t just applicable at the time of the sale
- 16(b) and (c) will protect the buyer even if the sale was legit when it was made
The Seller’s Obligations as to Description and Quality
S. 17: Sale by Description
- 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 and be of
merchantable quality.
- It if forms part of the “description” (as per s. 17) it’s a condition
o Description: identifies subject matter of sale (class, species, kind)
o Buyer can reject when goods are not what he thought he was buying
- If it’s another kind of representation about the goods, it’s a warranty
o Description of certain attributes, quality, or degree of the goods
Classic case:
- Goods are unseen, unascertained: Goods must match identifying description
Cases that expand the classic definition:
- Sams, Hart-Parr Company v. Jones, Varley v. Whipp, Beale v. Taylor
Frey v. Sarvajc (2000 SKQB)
- S. 18 warranty re: quality, fitness won’t apply b/c transaction between individuals
- S. 17 applies to sale of goods between individuals – there’s a breach here
- No fraud to displace caveat emptor
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Description was misleading b/c seller advertised the mileage (description was
fundamental b/c buyer thought he’d be covered by factory warranty)
“Sale by description” is broad: even if you’ve seen the goods and had an
opportunity to inspect them, there might still be a description of the goods that
needs to match the actual goods (if description is fundamental)
Case distinguishes between patent and latent defects:
o Patent: buyer beware (can discover by inspection or ordinary diligence)
o Latent: seller required to reveal, not readily discoverable upon inspection
Torpey v. Red Owl Stores (US 1955)
- Not a sale by description because buyer chose the applesauce jar herself
Sams v. Ezy-Way Foodliner
- Sale by description includes any type of description, label e.g. “J’s Hot Dogs”
Hart-Parr Company v. Jones (1917 Sask. SC)
- D bought “new” engine from P in the fall. Contract said, no warranties/conditions.
- Case expands notion of sale by description: if you order new goods, and you get
that type/kind of goods but old, can still claim breach of sale by description s. 17
- Can’t contract out of liability for goods to be new b/c delivering old goods won’t
conform with the contract
- Note: Buyer never really accepted the engine, so property never passed
o The delays were due to the problems created by the seller, and because
the engine could not have been properly inspected until the spring
Varley v. Whipp (1900 QB)
- Purchase of reaper machine that turned out older than description “barely used”
- Sale by description: buyer bought goods before seeing them
- Sale by description extends to specific, unseen goods
- Property had not passed b/c buyer never accepted the goods
Beale v. Taylor
- 2 cars welded together, then wanted to repudiate under s. 17 b/c car didn’t match
the emblem on the back
- Sale by description extended to specific, ascertained goods: s. 17 applies even if
buyer saw and inspected the goods, if buyer relied on the seller’s representation
o Buyer didn’t form judgment whether it was a car of that sort, just judged
the condition of the car (assessed that it was drivable)
o P was unable to see the defect, assess if the description was wrong (like
looking at the barrel of wine, agreeing to buy it, but it contained beer)
Taylor v. Combined Buyers (1924 New Zealand)
- Most contracts are by description, but not all will fall under s. 17
- S. 17 distinction: Buyer can reject goods if there’s a breach with respect to the
type/kind/species/class of goods, but not the quality of goods
- Sale by description: how you identify the good
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S. 18: Implied conditions as to quality or fitness
- (a) Implied condition that goods will be reasonably fit for purpose: buyer must
show he made the purpose known (expressly or impliedly) and relied on seller
o Except, sale of a specified article under its patent or other trade name 
no implied condition
o Seller must be in the business of supplying those goods
o If you can show that you relied on the seller, doesn’t matter if the goods
are useful to someone else, if they weren’t useful for your purpose
- (b) Goods bought by description: implied condition of merchantable quality (for
ANY purpose)
o But, if buyer examined goods, then no implied condition wrt defects that
examination ought to have revealed
o Seller must be in the business of dealing in those goods
o As long as you can sell the product to anyone, that’s enough, the goods
don’t have to be suitable for the buyer’s purpose
- (c) Implied condition that goods durable for a reasonable period of time having
regard to normal use (and surrounding circumstances)
o Seller doesn’t have to be in the business of supplying the goods for (c)
o Doesn’t give much more protection b/c it’s implicit in ‘fitness’ and
‘merchantability’ that goods must be reasonably durable
Note:
- Where there’s only one purpose for the goods (car for driving), 18(a) and 18(b)
are the same… in other cases, such as cattle/turkey feed, 18(a) provides more
protection than 18(b), which says it’s cool if goods are fit for any purpose
- 18(a) provides higher protection for buyers than 18(b), but harder to apply
Arcos Ltd. v. E.A. Ronaasen (1933)
- No breach of s. 18(b) b/c wood was merchantable and fit for any purpose
- Breach of s. 17 classic sale by description of unascertained goods b/c goods
didn’t match the description, there was deviation from the detailed measurements
o Buyer can reject for breach of s. 17, even if the buyer can still use the
goods commercially and make the same profit
o Where there’s a breach of s. 17 description, doesn’t need to be a serious
breach: courts shouldn’t have to “read in” to the contract that there’s a
margin of error, or else the industry standard is that there’s flexibility
- Contract with specifications in description: seller can’t deviate from the specific
description (measurement), even a slight variation, unless the contract it’s ok
Ashington Piggeries v. Christopher Hill (1971 HL)
- P bought contaminated mink food from D, pigs died, P refused to pay, D sued
- Classic sale by description (buyer hadn’t seen goods) but no breach of s. 17 b/c
the food still matched the description of “herring meal” (so held for seller)
- There was breach of quality (“poisonous” described the “quality”), not breach of
condition (b/c it was still the same product that they ordered)
- Meal was supposed to be of fair, average quality; that describes quality or
attributes, not whether it’s of the same kind/class/species
- Test of description: broad, common sense approach: “buyers and sellers in the
market, asked what this was, could only have said relevant ingredient was meal”
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Merchantability: The Implied Condition of Merchantable Quality
- Only applies to sale by description (but defn of “sale by description” expanded)
- Seller must be someone who ordinarily sells that type of goods
- Merchantable quality: doesn’t mean that goods have to be perfect, just of the
quality that is suitable for sale
- If goods have only one purpose, breach in 18a means breach in 18b
- If goods have more than one purpose, could have breach in one, not the other
Bartlett v. Sidney Marcus
- Buyer sued for a serious defect in used car (clutch was totally worn down)
- 18a “reasonably fit for purpose” applies when buyer makes known to the seller
(either expressly or impliedly) the purpose for which he is buying the goods and
relies on seller’s expertise (more protection for buyers)
- 18b Not hard to satisfy condition of merchantability, b/c goods just have to be “in
usable condition” – as long as you can use them for something, 18b is satisfied
Henry Kendall v. William Lillico (Hardwick v. SAPPA) (1968 HL)
- Turkeys died after eating feed which buyer argued wasn’t “merchantable quality”
- Test for merchantability: whether the goods are commercially saleable at all
under the description (feed), not whether goods saleable for a particular purpose,
in a more narrow sense (turkey feed)
o If goods have more than one use, test for merchantability is whether
goods are suitable for any of those purposes
- Dissent: To determine merchantable quality, ask: would someone buy the goods
for that price? Consider the price to assess if goods are merchantable
Brown v. Craiks (1970 HL)
- Contract for fabric that had 2 potential uses, dresses and industrial use.
- No breach of 18a (fit for purposes) b/c buyer didn’t tell seller what they intended
to use the material for, didn’t rely on seller
- To determine if breach of 18b, “price” may be relevant (Kendall dissent)
- Price wasn’t determinative b/c it wasn’t unreasonably high for industrial use, or
unreasonably low for dress-making use (didn’t put it in a different class of goods)
- Where the goods are of different quality, and the price is clearly for the higher
price goods (quality out of line with price), court may find that goods are not of
merchantable quality b/c not saleable at that price
IBM v. Shcherban (1925 Sask. CA)
- $300 scale, 30 cent glass cover was broken – buyer entitled to reject goods
- Merchantability may be affected by what could be regarded as a minor defect,
even if it can be fixed and the goods are still useable
- Test for merchantability: would a reasonable buyer accept the goods?
- Doesn’t matter how serious the defect, or if there’s a market for it somewhere
Mash & Murrell v. Joseph Emanuel (1961)
- Potatoes loaded on ship in Cyprus, rotten by the time they got to Liverpool
- S. 18(c) Durability: Goods must continue to be merchantable for a reasonable
time period of time, even if property (and risk) has passed
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Buckley v. Lever Bros (1953 Ont. HC)
- P injured after clothespin shattered, she had only used it 2-3 times
- Goods should be durable for a reasonable period of time, but not a very big
window b/c risk has already passed, don’t want to make seller insurer
- Unclear how many times “enough use” would be
- Rationale: If goods are hardly used and break, it is evidence that goods must
have been unfit for sale (un-merchantable) and defect at the time of the sale
S. 18(b) Effect of Inspection or Opportunity to Inspect
- If the buyer or lessee has examined the goods, there is no implied condition as
regards to defects that the examination ought to have revealed
o There must have actually been an inspection or examination
o The defects must have been revealed upon examination
Thornett & Fehr v. Beers & Sons (1919)
- Defect in glue would’ve been immediately apparent had buyer opened the barrels
- S. 18b inspection: Need actual inspection, not just the opportunity to inspect the
goods (and not the outside of the containers)
- If buyer starts to examine the goods, he ought to make a reasonable examination
b/c if reasonable examination would have revealed problem, then s. 18(b)
doesn’t apply and seller is exempt from implied condition of merchantable quality
- Buyer didn’t open the barrels b/c plus the price of the glue was so low that the
buyer was willing to take the chance (so buyer pays for taking the risk)
Van Doren v. Perlman (1956 Nfld. SC)
- Even an inspection won’t disentitle a buyer from relying on 18b
o P didn’t really examine the coat thoroughly, no real inspection
o People don’t usually examine/scrutinize every article of clothing they buy
o P didn’t know about furs, she relied on D’s expertise, trusted him
o P’s alterations was just for fit, not for examining the goods
o P didn’t accept the goods, she returned the coat asap
- Inconsistent with Thornett v. Beers: those guys didn’t see the glue, and they were
stuck with it… here, lady tried on coat multiple times, and she gets to return it
S. 18(a) Implied Condition of Suitability for a Particular Purpose
Requirements to get s. 18(a) protection:
- Buyer must make known the purpose (either expressly or impliedly)
- Goods must be of description (sale by description)
- Goods have to be goods that seller deals w/ in course of business
- Buyer must rely on seller’s skill and judgment
Crowther v. Shannon Motor (1975 Sask. CA)
- Test for 18(a): Seller knew purpose of the goods (or if it’s ordinary purpose is
obvious, it’s implied), and buyer relied on seller’s judgment that fit for purpose
o Can use 18(a) b/c car only has one purpose
- Test for fit for purpose is at the time of sale, but if car fails shortly after purchase,
evidence that it was in a poor condition at the time of the sale (draw a conclusion
about condition of car at the time of sale from info that comes after the fact)
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Distinguished from Bartlett: for used goods, the test isn’t as stringently applied,
expect wear & tear
Marshall v. Ryan Motors (1922 Sask. CA)
- If you buy goods that have only one purpose, automatically triggers 18(a)
protection – the purpose of buying the car is to drive, and buyer doesn’t have to
expressly communicate that to the seller, it’s implied
Kendall v. Lillico (1968 HL)
- Turkeys died from poison feed, found to be “merchantable quality” s. 18(b)
- To trigger 18(a), buyer must indicate purpose for which the feed was purchased,
rely on seller’s skill and judgment, and express that buyer’s relying on seller
o Presumption of reliance on seller if seller knows particular purpose
- If particular price was paid, implied that goods were intended for certain purpose
- Buyers protected from latent defects that seller might not have realized
- If seller is in the business of selling x, can’t argue, don’t know enough about x
Baldry v. Marshall (1925 CA)
- If you buy something under its trade name, 18(a) doesn’t apply
- However, the mere fact that an article sold is described in the contract by its
trade name does not necessarily make the sale a sale under a trade name
o Buyer asks seller for goods to fulfill a purpose, seller gives product w/
trade name  still get s. 18(a) protection (relied on seller’s judgment)
o Buyer recommended good w/ trade name, asks seller for advice  often
by relying on seller’s skill by implication, get 18(a) protection
o Buyer tells seller, I want that brand, no opinion from you  no protection!
Allergies and the Idiosyncratic User
- Is sensitive B taking the risk by using the product, or must seller protect them?
- General: courts are more sympathetic to sellers, buyer has additional burden
Esborg v. Bailey Drug (1964)
- Buyer’s home hair dye caused allergic reaction  breach of 18(a) fit for purpose?
- 2 approaches wrt product liability and allergies:
o No breach of 18(a) warranty if ordinary person can use the goods safely
o Seller is liable if a small category of ppl would foreseeably have a reaction
- Buyer must show 3 things to claim under 18a:
o Product contains harmful synthetic ingredients (not just natural ones)
o Harmful ingredient is predicted to cause harm to a reasonably foreseeable
identifiable group of people
o Person who used the goods wasn’t at fault
Griffiths v. Peter Conway Ltd. (1939)
- Tweed coat gave buyer dermatitis, she sued seller (but lost)
- 18(a) Implied condition as to fitness for purpose only applies where buyer makes
known the purpose for which the goods are required (i.e. need for sensitive skin)
- Court was less sympathetic: Synthetic products vs. natural fibers: nothing
harmful in tweed coat, it’s benign product, plus her reaction was so unusual
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Ingham v. Emes (1955 CA)
- Ingham knew she had allergy to product, but let hairdresser use it, sued, lost
- 18(a) won’t apply if customer knew about her allergy, failed to inform/alert seller
S. 19 Sale By Sample
What is a “Sale By Sample”?
- Sale by sample if contract says, or can imply it by virtue of parties behaviour
- Implied condition that the bulk correspond with the sample in quality, that the
buyer has a reasonable opportunity of comparing the bulk with the sample, and
that the goods are free from any defect rendering them unmerchantable that
would not be apparent on reasonable examination of the sample.
- Seller selects sample to represent the bulk, implied condition that the bulk will
correspond with the sample in quality
Cudahy Packaging Co. v. Narzisenfeld (1924 US CA)
- Sale by sample: implied condition that bulk will correspond with the sample
- Held: Not a sale by sample
o The buyer could have examined all the eggs before buying
o The buyer, not seller, chose the sample to examine, so the seller could not
represent what was seen as indicative of the whole
o Seller wasn’t aware that it was a sale by sample
- Risk that buyer might select a sample that doesn’t represent the true quality of
the bulk – it would impose an obligation on the seller that they never agreed to
- Just b/c sample is inspected at seller’s request doesn’t make it sale by sample!
The Function of the Sample: Reasonable Inspection
Steels & Busks v. Bleecker Bik & Co. (1956 QB)
- The last (of several) deliveries proved “unsuitable” b/c rubber chemically treated
- First few deliveries were the “sample” with implied condition, however doesn’t
matter b/c he bad batched looked like the sample (just chemical component was
different), ordinary, reasonable inspection would not have revealed the defect
- Comparison with sample with respect to the bulk: doesn’t have to be identical in
composition, just has to correspond in an ordinary, visual inspection
Godley v. Perry
- Toy catapult snapped, injured kid’s eye. Sale by sample and by description.
- Sale by sample must correspond with bulk, but only upon reasonable
examination of the sample (if exam of sample wouldn’t show defects, seller’s ok)
- Held: toy was unmerchantable, but a “reasonable test” inspection of the sample
(using the toy properly) would not have revealed the hidden defect
Note: If sale/lease by sample and by description, the bulk of goods must correspond
with both the sample by ordinary, visual inspection (s. 19) and the comply with
description (s. 17)
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Delivery: Voluntary transfer of possession from one party to another
S. 31 Duties of seller and buyer
- 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 contractual terms
S. 32 Payment and delivery are concurrent conditions
- Unless otherwise agreed, delivery of the goods and payment of the price are
concurrent conditions (simultaneous): seller must be ready/willing to give
possession of 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 goods.
S. 33 Rules as to delivery
- Generally, place of delivery is at seller’s place of business, or if none, their home
S. 14 Stipulations as to time
- Time of delivery is “of the essence”: need strict compliance w/time of delivery
- Time of payment isn’t of the essence, unless the contract says otherwise
Time of Delivery
Bowes v. Shand
- 9/10 of the rice was loaded onto the ship too early
- Where it’s a contract between two merchants, courts will assume that provisions
wrt time of delivery is so important that even an early delivery is breach of terms
Charles Rickards v. Oppenheim
- D ordered custom Rolls from P, it took too long, so D refused to accept delivery
- Time is of the essence in business, but not necessarily in consumer transactions
- In a consumer contract, a party may specify that time is of the essence.
- If conduct leads the other party to reasonably believe that the strict legal rights
will not be insisted on, the time stipulation may be deemed as waived (buyer is
estopped from using it). However, that doesn’t mean that time is indefinite, and
the buyer is still entitled to give “reasonable notice” (make time “of the essence”
once again), so that a breach is grounds for the buyer to reject the goods
Documentary Sales
Beaver Specialty v. Donald H. Bain (1973 SCC)
- Buyers refused delivery (and won) b/c walnuts were damaged/rotten upon arrival
- 33(2): place of delivery is seller’s place of business unless otherwise agreed
- Contract said: free on board (f.o.b.) Toronto (seller’s destination)
- Therefore property passes when goods arrive at TO, so seller still has property
(and still has the risk) when the goods are transferred/shipped
o Place of delivery is no longer at seller’s place of business
S. 34: Delivery of the Proper Quantity
- Breach can be wrong quantity (excess or shortage), as well as wrong packaging
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If seller delivers less or more than what was contract for, or mixed goods:
o Buyer can reject the whole delivery
o Buyer can accept part or all of the delivery, and pay the contract price
In Re Moore & Co. and Landauer & Co. (1922 CA)
- Fruit tins arrived in cases of 24 instead of 30, but correct # of tins
- Buyer entitled to reject goods if packaged not in accordance w/contract
o Buyer might need it in specific packaging for re-sale to non-party
- Description of packaging was essential where the contract says that goods
should be in particular size or quantity
S. 35: Delivery by Installments
- Buyer doesn’t have to accept in installments unless it was agreed to
- If delivery by installments, and paid for separately, and there’s a problem with
one or more installments, or buyer refuses delivery:
o Treat the whole contract as repudiated
o Continue with the contract, and get damages
- Not every delivery in installments is an installment contract: if there’s one lump
payment and a series of deliveries, once the buyer accepts the first delivery,
can’t reject future ones unless it expressly says so in the contract
Maple Flock v. Universal Furniture Products (Wembley) (1934 CA)
- Buyer rejected 16th of 20 deliveries of rag flock, wanted to rescind whole contract
- Issue: when is contract repudiated, and when are you just entitled to damages?
- 2 part test for Installment Deliveries contract (paid for & delivered in installments):
o The ratio quantitatively which the breach bears to the contract as a whole
(overall, what percentage of the contract was breached)
o The (im)probability of a breach occurring again
Obligations of Suppliers and Manufacturers: The Privity Problem
- Contract Law: must be party to contract to have obligations imposed on you and
have a right to enforce contract
- Use tort law to show that party owed a duty, duty was breached
- Contract: easier than tort law to show promise, breach of promise, and damages
- Horizontal privity  eg. friend gave you a soda that has nail in it
- Vertical privity  eg. can sue retail seller of goods but not manufacturer
- Business Practice and Consumer Protection Act: Def’n of “supplier” does away
w/ privity expressly
- s. 51(2): 3rd party can get good title (similar to s. 30(1))
- s. 26(1): nemo dat codified
- s. 30(1): A sells to B but keeps possession, then sells to C: C gets title from B
Lyons v. Consumers Glass Co. (1981 BCSC)
- Mom bought bottle that broke and injured kid, sued shopkeeper
- Problem: kid didn’t buy the bottle, mom did, so kid can’t rely on SGA warranty
- Court rejects argument that mom acted as agent in purchasing bottle for kid
- Sometimes the party who suffers the loss isn’t the party who paid for the goods
- SGA only protects purchasers, b/c contract is between buyer and seller
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Chabot v. Ford Motor co. (1982)
- New car caught fire, buyer can rely on both SGA implied warranties (fit for
purpose) as well as manufacturer’s warranty
The Buyer’s Remedies
Statutory Remedies
- S. 54 Damages for non-delivery, s. 55 specific performance, s. 34 wrong
quantity/mixed goods, s. 35 installment deliveries
- Other consumer legislation
Common Law Remedies
- Right to damages or right to reject for breach of conditions
S. 15: Condition may be treated as warranty (Right to Reject Goods)
- (3) Word used in contract isn’t necessarily determinative
- If there’s breach of a condition, buyer has the right to reject the goods, OR the
option of waiving condition and treating as a warranty, just asking for damages
- (4) buyer loses right to reject the goods when property passes or when buyer
accepts the goods, unless contract says otherwise (explicitly or implicitly)
- Problem: sometimes, property passes immediately:
o S. 23(2) as soon as you enter into a contract for sale of specific goods,
property has passed; doesn’t matter if it hasn’t been paid for or delivered
o S. 22 Property passes when the parties intended for it
- This right to reject also applies to ascertained goods, in addition to specific goods
Loss of the Right to Reject Goods
Wojakowski v. Pembina Dodge Chrysler (1976 Manitoba QB)
- New car had defects, buyer wanted to rescind the contract, relied on 18(a)
- Buyer not limited to rely on manufacturer’s warranty even if they consented to
have the car repaired
- Buyer never unconditionally accepted goods: only conditional property passed
o Buyer accepted the goods on the condition that the D would fix up the car
- Even if buyer wasn’t entitled to reject the goods, entitled to damages equal to the
cost of the car (essentially the same result), and failing that, there was a
fundamental breach b/c complete failure of consideration, repudiate the contract
S. 39: Loss of Right to Reject Goods because of Acceptance
Buyer is deemed to accept the goods:
- If buyer intimates that he accepted the goods
- Sellers knows that buyer accepted the goods
- Goods were delivered to buyer, and buyer does any act in relation to the goods
to indicate that the seller no longer has ownership (Hardy v. Hillerns)
- A reasonable time has passed (Rafuse Motors)
Hardy v. Hillerns and Fowler
- Buyer accepted wheat, sold some to sub-purchaser, then rejected the rest
- S. 38 buyer has reasonable time to inspect/examine goods before acceptance
- S. 39 buyer loses right to reject if he accepted the goods (prevails over s. 38)
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o Acceptance: buyer acts as though seller no longer has ownership (like the
buyer re-selling the goods)
o Buyer can’t put the original seller back in original position
If there’s conflict between s. 38 and 39, 39 prevails, can only sue for damages
Issue: If the buyer had the goods back, then rescinded, would buyer have won?
Rafuse Motors Ltd. v. Mardo Construction Ltd.
- Buyer’s truck kept breaking down, seller kept saying, try it again
- Buyer is still entitled to reject goods if the delay in rejecting is due to seller’s
inducements to keep it for longer, even if buyer’s actions were inconsistent
w/seller’s ownership
o S. 38: “tried out” engine to determine if it satisfied contractual conditions
o S. 39: buyer never really accepted, he was dissatisfied from the start
- A “reasonable” time doesn’t include delays which are caused by the seller
persuading the buyer to keep the goods, give them another chance
- Reasonable time: depends on circumstances, nature of goods, actions of seller,
dealings between the parties
Barker v. Agius
- If seller delivers the whole quantity, and only part complies with contract, buyer
may accept the part which is of contract quality and reject rest, OR reject whole
- Mixed goods: Buyers don’t lose right to reject the rest of the goods when they
accept the goods that conform with the contract
- S. 34(5) protects buyers from the application of s. 39(b) - don’t have to keep all
the goods to reject the defective goods (can sell the part that you accept)
Damages
S. 54 Damages for non-delivery
- If goods aren’t delivered, you can sue for damages – estimated loss from the
breach that is directly and naturally resulting, or difference between the contract
price and the market price (Hadley)
- (3) Look at market price to determine damages (compare what you would have
paid with what you would have to pay now if you still want to get the goods)
o Timing: depends on whether the contract states a particular delivery time
o If goods will be delivered on Nov. 8, look at market price on that date
S. 55 Specific performance
- If court sees fit, can order contract to be performed
S. 56 Remedy for breach of warranty
- Damages
- (3) How to measure damages
S. 57 Interest and special damages
- Loss that isn’t directly and naturally resulting, or contemplated by parties
- Damages are payable when seller breaches obligations
- Sometimes, buyer has the right to reject the goods, but can also opt for damages
- Contract law common law rules also apply to sale of goods
o Concern of courts isn’t to punish the person who breached, but to
compensate the other party for their loss
o Put them in the situation had the contract not been breached
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The Measure of Damages
Types of damages:
- Expectation of profit
- Reliance: compensation for expenditures
- Restitution (not common)  b/c of breach other party has unduly profited 
should disgorge profits to yo
General v. Special:
- General: follow as of course, they are assumed (ie. expected)
- Special: may not be expected like loss from sub-purchasers, etc (Baxendale)
- 2 options:
1. Refund the $, put the parties in position that they never entered the contact
2. Sue for loss profits: put parties in position had the contract not been breached
Wertheim v. Chicoutimi Pulp Co. (1911 HL)
- Pulp was delivered late, in wrong quantity, and inferior quality, so buyer sued
- How to measure damages: If there’s an available market, ascertain the difference
between the contract price and market price at time of scheduled delivery
- Market value: the true value of the goods to the purchaser
- Principle: compensate for actual loss suffered due to breach, put person back in
position they should have been (not over-compensated)
Bowlay Logging v. Domtar (1978 BCSC)
- Damages: loss that would naturally and directly flow from breach
- If A is better off b/c B breached, A is not entitled to damages (not punitive)
Cullinane v. “Rema” Manufacturing Co. (1953)
- Machine didn’t satisfy warranty of producing 6 tons/hr which was the difference
between a profitable and non-profitable business
- Can’t recover for both the reduced value of the goods and lost profits, or that’s
over-compensation
- Cow analogy: can’t get damages for the amount you overpaid for the cow, plus
damages for the loss of profits, or that’s over-compensation
- Sunnyside didn’t make distinction b/c didn’t consider mitigation of damages
Hadley v. Baxendale
- Mill shaft out for repair, owners didn’t tell the repair co. that it was their only shaft
- Loss must flow naturally from breach of contract, or if there are special
circumstances, it would have to be communicated to the defendant
- Look at what the parties knew at the time the contract was formed, consider if
this type of loss was foreseeable, sufficiently likely, or too remote
Koufos v. Czarnikow (“The Heron II”) (1967 HL)
- Delivery of goods (sugar) took twice as long, price dropped, buyers lost $
- Issue: are the damages too remote? How foreseeable does the loss have to be?
- Test: whether a reasonable person, at the time the contract was made, knew or
should have known that the loss was sufficiently likely
o What is appropriate? “Reasonably Certain”
o If you have to show that loss was almost certain, too high threshold
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o In contrast, can’t say that anything remotely possible is foreseeable
Assume it was contemplated by the parties that if the delivery was late, there was
a risk that the market would change, and the delay would cause a loss
Tort: liable for any type of damage that is reasonably foreseeable
Contract: if a party wishes to protect himself against a special risk or unusual
loss, must alert the other party to it when you form the contract
Parsons v. Uttley Ingham
- Installer forgot to remove tape from pig feeder, nuts got moldy, pigs got sick, died
- If there’s only lost profits (pure economic loss), apply Heron II: damages natural
consequence of breach, reasonably certain that damages would occur (damages
can’t be too remote, damages are “real possibility” – need more than causation)
- If there’s physical damages, liable every slight possibility (not just for risks that
are reasonably contemplated)  same liability for loss as in tort law
- This case: damages were remote, not reasonably certain, but there was physical
damage, therefore test from tort (foreseeable consequences)
Severability
- Deliver in installments, paid for in one lump sum: not severable
- Separate deliveries that are paid for separately: more likely to be severable
because you could cut one off, wouldn’t affect your other obligations
Recovery of damages for loss of enjoyment
Wharton v. Tom Harris Chevrolet (2002 BCCA)
- P bought Cadillac, constant buzzing noise, dealer couldn’t find the problem
- Car was still of merchantable quality (drivable) so no breach of condition, but it
was not fit for purpose, so breach of warranty
- Not purchased under trade name: buyer relied on expertise, skill, judgment
- Exception: where one purpose of the contract is to provide you with comfort or
enjoyment, can get damages for loss of enjoyment if there’s a breach (Jarvis)
- Can recover damages that are naturally flowing from breach, or type of damage
was reasonably contemplated by parties when contract was formed (Hadley)
- In appropriate cases, you can recover for non-pecuniary losses, but it has to still
fall in the general principle rule for recovery of damages from Hadley!!!
Compound Interest
Bank of America Canada v. Mutual Trust Co. (2002 SCC)
- Court may award interest on damages, both before and after judgment is given
- Rationale: the value of money decreases with time:
o Loss of interest, inflation, loss of opportunities
- Principle: restore innocent party to position had there not been a breach
- Interest ensures fair, adequate compensation to injured party
- Shift from reluctance to award interest, towards the realistic notion that if you
don’t give interest, compensation is inadequate
- Compound interest is only awarded when the parties have contracted for details
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Damages for Non-Delivery and Late Delivery
Re Hall and Pim
- S. 57 Can claim special damages (loss of profits) if reasonably contemplated by
parties, or if reasonable person would have contemplated (Hadley 2nd branch)
- Seller ought to have known that buyer contemplated re-selling the goods
Breach of Condition or Warranty of Quality
- Parties shouldn’t profit from breaching a contract
- Buyer who loses right to reject, or chooses to accept goods anyway, can:
o Sue the seller for damages
o Set off damages against the amount they’d have to pay for the goods
Ford Motor Co. v. Haley (1967 SCC)
- Onus on seller who supplied goods to show that the goods still have some value
- If no evidence that goods have value, buyer gets full purchase price refund
Sunnyside Greenhouses v. Golden West Seeds (1972)
- Roof materials meant to last 7-10 years, but latent defect, sunlight caused panels
to become opaque, sun couldn’t get through, crops didn’t mature
- Buyer claimed general damages (s. 56) and special damages (s. 57)
- Buyer can’t recover the expense of replacing the panels, b/c would have had to
replace at future date anyway
- Buyer’s duty to mitigate: do what can reasonably be done to reduce the loss
S. 55: Specific Performance
- If goods are specific or ascertained, buyer may ask for specific performance
- Seller can’t ask for compensation of damages b/c they are just getting money
- Equitable remedy:
o Must be asked for in timely fashion
o Subject to all the regular limitations (no fraud, clean hands)
o Must establish that common law remedy for damages is insufficinet
- Specific performance usually applies if goods are ascertained, unique (land, art)
Re Wait (1926)
- Buyers wanted specific performance (deliver wheat) b/c seller went bankrupt,
damages would be useless (buyers tried to get around bankruptcy laws)
- No specific performance b/c goods were unascertained: 500 lbs of wheat hadn’t
been earmarked for buyers, they didn’t have title, property hadn’t passed
Sky Petroleum v. VIP Petroleum (1974)
- Seller wanted to terminate contract, buyer applied for injunction to get delivery
- Buyer granted injunction ‘specific performance’ of K for temporary time, even
though goods weren’t specific or ascertained, b/c fuel market was in unusual
state, remedy of damages would be insufficient (buyer would be bankrupt by
then, had no other suppliers b/c exclusive contract w/sellers)
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Statutory Remedies
S. 75 Buyer’s lien (security interest)
- Arises where seller (who’s in business of selling goods) agrees to sell
future/unascertained goods to buyer/consumer for personal use, buyer pays in
advance for all or part of the price (like a down payment)  then buyer has LIEN
against seller for the amount they paid in advance
o Lien against all goods of the same description that the seller has in their
position that hadn’t already been sold
o Lien against the seller’s usual bank account where they put their ordinary
business earnings
- Won’t apply in mercantile transactions
Business Practices and Consumer Protection Act
- Remedies for buyers who are misled, subject to prohibited practices
- S. 192: where someone’s convicted of an offence under the act (deceptive
practices), may have to pay compensation, limited by Small Claims Act
- S. 171: Recovery of damages is also allowed
S. 31: Buyer’s Obligations
- Buyer must accept goods (subject to right to reject) & pay according to contract
- S. 41: If the buyers reject the goods, seller has recourse, sue for breach
- Payment: Must be in proper form, amount, and time
o Form: Payment must principally be expressed in monetary terms
o Amount: according to contract, or determined by s. 12, 13
o Time s. 32: unless K says otherwise, delivery and payment are concurrent
Kay Corporation v. Dekeyser (1977 Ont. CA)
- Parties didn’t formally agree on timing of payment, so s. 14 default applies
- Doesn’t matter that parties had negotiated time of payment; it wasn’t finalized
Letter of credit
- Developed to address risks, uncertainties where it’s international transaction
between distant parties, so that everyone feels secure
- B’s bank agrees to back up the B’s promise to pay the S. B’s bank issues “letter
of credit” which they give to the S as an “IOU”. S ships the goods, gives the Bill
of Lading to S’s bank. S’s bank gives the Bill of Lading to B’s bank. As long as S
discharges his duties under the contract of sale, B’s bank pays the S’s bank
o Seller can ship the goods without the risk of non-payment
o Buyer doesn’t have to pay in advance, only pays when the seller delivers
the goods, fulfilled contractual obligations
- Note: Banks only care if the documents are issued and paperwork is in order, not
if the goods were satisfactory
- Similar to lawyer’s undertakings
Michael Doyle v. Bank of Montreal
- Banks aren’t required to look beyond the documents, or to inspect the goods
- When docs are accepted, the bank is bound to pay: unconditional acceptance
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Seller’s bank can claim reimbursement from the seller when:
o Documents are false, seller forged them or was negligent
o Hidden problem: docs were genuine, but not what was called for
o Discrepancy about whether the docs are irregular
Confirming bank can reject the docs for any technical problem with the docs, but
once they say that the docs are in order, they’re bound to pay the seller
United City Merchants Investments v. Royal Bank of Canada (1983 HL)
- “Issuing bank” (buyer’s bank) issued letter of credit after contacting the seller’s
“confirming bank” (D) to ensure that the D would back up the seller
- In order to get paid, seller must show a bill of lading with date of shipment
- Seller wasn’t aware of the fraud in changing the date, they presented the docs to
the Royal Bank in good faith, so doesn’t fall under fraud exception
- Fraud exception only applies where the seller/beneficiary knew about the fraud,
not when they were equally defrauded
- Doesn’t matter if the doc contain “false statement of material facts”
S. 42-51: Seller’s Rights and Remedies
Real Remedies: right dealing with the goods themselves
- Rights of unpaid sellers: Even if property (title) has passed to buyer, buyer isn’t
entitled to possession until after seller has been paid
S. 44 Unpaid seller’s lien
- Unpaid seller has right to put lien on goods
- Unpaid seller is entitled to retain possession of goods if:
o Buyer doesn’t pay at all (or doesn’t pay within specified time period)
o Buyer becomes insolvent
S. 43(1)(b) Unpaid seller’s rights
- Seller can stop goods in transit if buyer becomes insolvent
S. 51 The right of resale
- Seller has right to re-sell goods if:
o goods are perishable
o buyer becomes insolvent
o seller notifies the buyer and the buyer says nothing
- If goods re-sold at a loss, seller can claim damages from the original buyer
- Can re-sell goods even if property has passed to the buyer
- (4) If seller re-sells goods, contract treated as repudiated (Ward v. Bignall)
Snagproof v. Brody
- Seller didn’t send 2nd shipment until the 1st batch was paid for (buyer owed $)
- Any lien wrt the first shipment was lost when goods were delivered
- Can’t have a general lien over all items in contract, just over specific ones
- You lose lien in three instances:
o When you give the goods to a courier to deliver to buyer
o When the buyer has obtained possession of goods
o When you give up rights to the lien, waive the lien
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S. 45 Failure to get paid under one contract doesn’t allow you to withhold goods
on another contract if there was a waiver of the lien or right of retention
Ward v. Bignall
- Buyer changed mind about buying 2 cars. Seller sued for the full amount of both
cars minus the amount they got for one car
- Seller can re-sell goods if:
o He gives notice to buyer
o Buyer can’t pay
o Goods are perishable
- Irrelevant whether property has passed: the right to re-sell is the same either way
- S. 51(4) When seller exercises right to re-sell goods, he treats the contract as
rescinded, and causes any property that has passed to buyer to revert back to
seller, even if property has passed to the buyer. The seller can’t seek to enforce
the contract, ask buyer for full purchase price, only for damages
Personal Remedies: Price and Damages
S. 52 Action for Price
Seller can sue the buyer for the price if:
(1) property has passed, and buyer refuses to pay, or
(2) under the contract of sale, the buyer agreed to pay on a certain day, and the
buyer doesn’t pay, whether or not the goods were delivered or property had passed
Must show there was delivery with expectation of payment, goods are
received and reasonable person would know that they had to pay
S. 53: Seller’s right to Damages for non-acceptance
- Seller can sue if buyer wrongfully refuses to accept goods
- Damages: loss actually suffered
- 53(3) if there’s a market price for the goods, look at difference between the
contract price and the market price of when the goods ought to have been
accepted or when they were refused
o Seller sold goods for less than what the original buyer would have paid
- Note: can sue for the price, as well as damages (if you can show that damages
were reasonably contemplated by parties – Hadley?)
Standard Radio v. Sports Central Enterprises
- If seller is suing for damages, seller has duty to mitigate
- If seller is suing for a debt, no duty to mitigate: it’s action for a clearly identifiable
sum of $, liquidated amount that buyer owes, and it’s not subject to there being
damages, remoteness
- Buyer has obligation to pay debt if seller can show that:
o Goods were delivered
o Buyer received goods such that reasonable person would know they owed
the $
Colley v. Overseas Exporters
- Property was to pass when goods were loaded onto ship, which never happened
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Seller couldn’t sue for price of goods under s. 52(1) b/c property never passed,
even though both parties expected it would… so seller just gets damages
o f.o.b. contract: property doesn’t pass until property is put on board a ship
Stein Forbes v. County Tailoring Co.
- Buyer didn’t accept the goods, deliberately prevented property from passing
- If seller intends to retain property in goods, either deliberately (by reserving right
to deal with goods until they are paid for) or if it’s an f.o.b. contact  doesn’t
matter whose fault it is (ships broke down, buyer refused to accept goods), the
seller can’t sue for the price of goods, just damages
o Damages: Subject to questions of remoteness, mitigating damages
Charter v. Sullivan (1957 English CA)
- Buyer refused to accept car, seller found new buyer (to mitigate damages), then
sued original buyer under s. 57 special damages
- Seller argued that even though he sold the car a week later at the same price, he
could have sold 2 of them, so he lost profits
- Seller only had one car in stock, therefore failed to prove loss of profits
- Just b/c seller could have sold all the goods they could get, doesn’t mean seller
could get all the goods to sell
- Where there are more purchasers than goods, failure of one buyer to pay doesn’t
mean there’s a loss of profits, b/c seller can’t show he could have sold more
Victory Motors v. Bayda (1973 Sask. District Court)
- Distinguished from Sullivan: Seller had more cars in stock than buyers, so in fact
the seller lost profits
- Same principle applies: whether there was a real possibility of a second sale (did
the seller truly lose profit that he could otherwise have earned)
Lazenby Garages v. Wright (1976 HL)
- Buyer refused to pay for used car, seller sold it 2 months later for a higher price
- Seller argued that they could have sold 2 used cars (so sued for s. 57 lost profits)
- Distinguished b/c the other cases deal with new cars, and 2nd hand cars are
different, can’t predict how they’ll sell, b/c they are all unique and have quirks
(smell bad, dent, pulls to the right etc) so hard to prove for sure that they could
have sold a second used car
- Denning reduced their damages b/c they only had 50% chance of selling another
car, so they only get 50% of the damages
- If P had sold the car at a lower price than what original buyer was to pay, they
would have suffered damages