1. CHAPTER Microsoft ® PowerPoint ® Presentation Prepared By Gail McKay, LLB, Thompson Rivers University © 2008 McGraw-Hill Ryerson Ltd., All Rights Reserved. © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9 Sale of Goods and Consumer Protection Law

2. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-1 OBJECTIVES 1.To survey the Sale of Goods Act and contracts of sale and examine options as to when title and risk will pass to the buyer 2.To distinguish between conditions and warranties in a contract of sale for goods 3.To determine rights, duties and remedies available to buyers and sellers 4.To survey the Consumer Protection Act and credit reporting and collection agencies

3. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-2 SALE OF GOODS – NATURE OF CONTRACT In a contract for the sale of goods, title passes to the buyer immediately whereas in an agreement for sale, title passes at a later time The act applies to movable property sold for money consideration, but not to services The parties should specify when title will pass since risk of loss generally follows title Unless otherwise specified, goods not in a deliverable state remain at the seller’s risk

4. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-3 SALE OF GOODS RULES 1, 2 AND 3 Rule 1 Unconditional contract for specific goods in a deliverable state: property passes to the buyer at the time the contract is made Rule 2 Contract for specific goods but the seller must do something to make goods deliverable: property passes when the thing is done and the buyer has received notice Rule 3 Contract for specific goods but the seller must ascertain price: property passes when the ascertainment is complete and the buyer has received notice

5. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-4 SALE OF GOODS RULES 4 AND 5 Rule 4 Contract for specific goods on approval: property passes when the buyer approves, accepts or adopts the goods, or when the buyer retains them beyond a specified or reasonable time Rule 5 Agreement to sell for unascertained goods or goods not yet produced: property passes when the goods ordered by description are put into a deliverable state and unconditionally appropriated to the contract, either by the seller or (with the seller’s consent) by the buyer

6. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-5

7. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-6 CONDITIONS AND WARRANTIES Implied conditions under the Sale of Goods Act include essential terms such as the seller having title to the goods, the time for delivery, goods corresponding to the description or to the sample, and goods being free of any defects Warranties are minor terms, and a breach of warranty under the Sale of Goods Act would give rise to a claim for damages, although not for rescission

8. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-7 CAVEAT EMPTOR Let the buyer beware is a concept that assumes that, in business, when a purchaser has the opportunity to examine goods, he or she has the ability to discern whether they are fit for the intended purpose The Sale of Goods Act specifies that where the seller is in the business of supplying a particular line of goods, where the buyer makes known the reason he or she wants such goods, and where the buyer relies upon the skill of the seller, there is an implied condition the goods will be fit for the buyer’s purposes

9. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-8 DELIVERY OF GOODS The time of delivery of goods is regarded as a condition and the buyer is free to reject goods that are delivered late The right quantity is also a condition, and a buyer is not obligated to accept a larger quantity than that specified in the contract The place of delivery is expected to be the buyer’s place of business or another location determined in the contract

10. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-9 EXEMPTION CLAUSES AND CONSUMERS The implied conditions of the Sale of Goods Act can be excluded when businesses elect to do so; however, when a consumer is one of the parties, the use of exemption clauses is restricted Legislation provides further protection for the consumer: verbal warranties or conditions not expressed in writing but made at the time of the sale are binding on the seller; and a cooling off period is permitted for door to door sales giving a consumer a chance to change his or her mind

11. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-10 CONTRACTUAL DUTIES OF THE BUYER There is a general obligation on a buyer to examine goods provided on approval and take delivery of goods ordered Since there are so many forms of payment arrangements available, payment is usually regarded as a warranty rather than a condition unless it is specified as a condition in the contract If there is a fundamental breach by a seller, rescission is available as a remedy to the buyer

12. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-11 OTHER REMEDIES OF THE BUYER Damages are available for a breach of warranty by the seller, but he is she is not entitled to repudiate the contract as a whole If the goods are unique and could not readily be obtained elsewhere following an award of damages, a court may issue an order for specific performance requiring the seller to perform the contract as promised

13. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-12 REMEDIES OF THE SELLER The scope of remedies available to a seller under the Sale of Goods Act is very broad If the seller is still in possession of the goods, he or she may place a lien on them, giving him or her a right to hold the goods as security until the obligation of the buyer is fulfilled If, on the other hand, the seller has delivered the goods to the buyer and the title to the goods has passed, the buyer may bring an action for the price

14. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-13 OTHER REMEDIES OF THE SELLER Ordinary damages for breach of a condition may also be sought by the seller when there has been non acceptance of the goods by the buyer The seller can resell the goods to someone else and proceed to sue the buyer for lost profits Retention of the deposit by the seller as liquidated damages is permitted when a buyer refuses to perform as promised

15. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-14 FURTHER REMEDIES OF THE SELLER Stoppage in transit may occur when a common carrier is in the process of delivering the goods to the buyer but is intercepted by a message from the seller and requested to return when the seller discovers that the buyer is not meeting his or her debts as they arise The Bankruptcy and Insolvency Act lets the seller recover delivered goods within 30 days Resale of the goods after repossession is permitted if the buyer does not make payment

16. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-15 CONSUMER PROTECTION LEGISLATION A consumer is someone making a purchase for personal use and not for resale to a customer Consumer protection legislation not only prevents sellers from using exemption clauses attempting to preclude their liability for implied conditions on the sale of goods, but requires sellers to warrant that equipment sold to consumers would function for a reasonable period of time

17. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-16 CONSUMER SAFETY Federal, provincial and territorial governments have enacted legislation to control products that might cause harm to consumers The Food and Drugs Act imposes strict liability on manufacturers for false or deceptive labelling, and the Hazardous Products Act regulates the handling of extremely dangerous products which must bear warning symbols on the packaging

18. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-17 CONSUMER INFORMATION Some consumer legislation is designed for the purpose of allowing consumers to make direct comparisons of products and prices and enable them to make their own determinations and selections The Weights and Measures Act creates a uniform system for comparison of products and the Consumer Packaging and Labelling Act attempts to prevent the public from being misled by improper product packaging

19. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-18 PRODUCT QUALITY AND PERFORMANCE Expanded buyers’ rights and sellers’ obligations have been legislated in New Brunswick and Saskatchewan for consumer goods that do not deliver a reasonable level of performance or durability Nationally, the Canadian Motor Vehicle Arbitration Plan (CAMVAP), a dispute resolution process for owners of new vehicles still under warranty, is a similar attempt to assist consumers to achieve satisfaction from manufacturers of vehicles which have turned out to be “lemons”

20. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-19 BUSINESS PRACTICES Itinerant or direct sellers may pose a special problem for consumers since the selling occurs at the prospective buyer’s residence, making it difficult for the consumer to walk away Direct sellers are consequently required to be licensed or registered, and a cooling off period of 2 to 10 days is permitted for consumers to change their minds without liability when they have entered contracts in these circumstances

21. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-20 UNFAIR BUSINESS PRACTICES Consumer protection legislation has, among other goals, the goal of promoting fair competition among merchants It also seeks to prevent false or misleading statements designed to induce consumers into sometimes unconscionable contracts It allows rescission and damages, and sometimes punitive damages as well for inequitable and unconscionable transactions

22. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-21 RESTRICTIVE TRADE PRACTICES Restrictive trade practices are those which reduce, rather than promote, competition The federal Competition Act prohibits false and misleading advertising regarding both the price of goods and the performance of products Bait and switch, referral selling and double ticketing are examples of deceptive trade practices

23. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-22 COLLECTION AGENCIES All provinces and territories now regulate collection agencies through licensing or registration requirements The agencies are not permitted, in the performance of their tasks, to threaten or harass consumer debtors or to try to collect from family members not liable for the debt Collection agencies must refrain, except for an initial verification of employment, from contacting a debtor’s employer

24. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-23 CREDIT GRANTING AND REPORTING A consumer’s credit rating will impact the willingness of lenders to offer credit If credit is extended, the consumer’s credit worthiness will also affect the interest rate he or she is charged, based on perceived risk to the lender Legislation limits access to credit information to those with consent of the debtor or another legitimate right, and provides the consumer with the right to challenge inaccurate records

25. Fundamentals of Canadian Business Law, Second Edition © 2008 McGraw-Hill Ryerson Ltd. All Rights Reserved. 9-24 SUMMARY Under the Sale of Goods Act, risk usually follows title to the goods A breach of condition permits rescission but a breach of warranty allows only damages Many practical remedies are available to buyers and sellers under the Sale of Goods Act Consumers buying for personal use and not resale are extended more legislative protection than businesses