Contracts for Sale of Goods (11:III): Difference between revisions

{{REVIEWED LSLAP | date= July 11, 2024}}

If a statement is a term of the contract, it can be a condition, warranty, or innominate term. A well-drafted contract will characterize particular terms as conditions or warranties, though the wording used in the contract will not always be determinative (''[https://www.bailii.org/uk/cases/UKHL/1973/2.html L Schuler AG v Wickman Machine Tool Sales Ltd]'', [1973] UKHL 2, [1974] AC 235). The three types of terms are as follows ([https://www.bailii.org/ew/cases/EWCA/Civ/1961/7.html ''Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd'', [1962<nowiki>]</nowiki> 2 QB 26, [1962<nowiki>]</nowiki> 1 All ER 474] at para 49):  

The vital part of the ''SGA'' for the consumer is ss 16 – 19, which '''may''' add statutory conditions and warranties to a contract for the sale of goods, subject to the possibility of exclusion (see [[{{PAGENAME}}#2. Exemption from Implied Contractual Terms | 2: Exemption from Implied Contractual Terms]] below).

:(a) The buyer expressly or by implication makes known to the seller the particular <u>purpose</u> for which the goods are required, so as to show that they rely on the <u>seller’s skill and judgment</u>; and  

:(b) The goods are of a description which it is in the course of the <u>seller’s business</u> to supply;  

To establish a claim under s 18(a) of the ''SGA'', three factors must be satisfied on a balance of probabilities (''[https://www.canlii.org/en/bc/bcsc/doc/2012/2012bcsc1412/2012bcsc1412.html?autocompleteStr=Nikka%20Traders%20&autocompletePos=1 Nikka Traders, Inc v Gizella Pastry Ltd]'', 2012 BCSC 1412 at para 65):

The “Patent and Trade Name Exception” is of little effect since the courts have interpreted it narrowly. The issue remains one of reliance, and the trade names exception will apply only where the buyer’s use of the patent or trade name indicates a lack of reliance upon the seller. In other words, the exception only applies where a consumer decides to purchase goods solely because of the trade name of a product. See [https://www.canlii.org/en/bc/bcca/doc/2002/2002bcca78/2002bcca78.html#par38 ''Wharton v Tom Harris Chevrolet Oldsmobile Cadillac Ltd'', 2002 BCCA 78] at paras 38-39.

===== (1) The Concept of Merchantable Quality =====

Any damage to goods beyond the ''de minimus'' range may be said to render the goods of unmerchantable quality (''[https://www.canlii.org/en/sk/skca/doc/1925/1925canlii154/1925canlii154.html?autocompleteStr=International%20Business%20Machines%20&autocompletePos=2 International Business Machines Co Ltd v Shcherban]'', 1925 CanLII 154 (SKCA).

This section also applies to the sale of '''used goods''' as well (s 18(b)). However, there is a lower standard here: the goods must be usable but not perfect. A minor defect does not necessarily render the goods unmerchantable. See ''Bartlett v Sidney Marcus Ltd'', [1965] 2 All ER 753 (Eng CA).

This section only applies to a sale by description (s 18(b)). This is usually not a problem since most sales are by description, except where the buyer is clearly buying a particular item on the basis of qualities known to them apart from any representations (see [[{{PAGENAME}}#d) Implied Condition of Fitness for Buyer’s Purpose: s 18(a) | d) Implied Condition of Fitness for Buyer's Purpose: s 18(a)]] above).

===== (4) Effect of Examination by the Buyer =====

:(a) The goods are used (except s 16, which also applies to used goods);

:(b) The purchaser, even a private individual, intends to resell the goods;

:(c) The lease is to a lessee for the purpose of subletting the goods;

:(d) The purchaser intends to use the goods primarily for business;

:(e) The purchaser is a corporation or commercial enterprise; or

:(f) The seller is a trustee in bankruptcy, a liquidator, or a sheriff.

:(a) The price is paid or tendered (s 44(1));  

:(b) Delivery is made to a carrier or other bailee (not the seller’s agent) without reserving a right of disposal (s 46(1)(a));  

:(c) The buyer or the buyer's agent lawfully obtains possession (s 46(1)(b)); or

:(d) There is a waiver (s 46(1)(c)).

:(a) If the goods are perishable, or if notice of an intention to resell is given to the buyer by the unpaid seller, and the buyer does not pay within a reasonable time. In this case, the seller may resell the goods and recover damages from the original buyer for any loss from the breach of contract (s 51(3));

:(b) If the seller has expressly reserved the right to resell in the contract (s 51(4)).   

#For the sale of '''unascertained''' or future goods by description, then title passes when the goods are unconditionally appropriated to the contract by the seller (i.e. set aside specifically for sale to the consumer) with the assent of the buyer or the seller delivers the goods to a carrier pursuant to a contract and does not reserve a right of disposal (ss 23(7) and 23(8)). See ''[https://www.canlii.org/en/bc/bcca/doc/2008/2008bcca66/2008bcca66.html?autocompleteStr=bevo%20farms&autocompletePos=3 See Bevo Farms Ltd v Veg Gro Inc]'', 2008 BCCA 66 for an example of unascertained goods (tomato seedlings) that became unconditionally appropriated when the seller contracted with the carrier for delivery, and thus title and risk had passed to the consumer when the goods were destroyed.

*• Whichever party has property of the goods is presumptively the person who is responsible for the goods if something happens to the goods. See ''Kovacs v Holtom'', [1997] AJ 775 for an example where a convertible was destroyed while being restored at the defendants’ garage shop, and the defendant was liable to the consumer for damages as title (and thus risk) did not yet pass to the consumer under rule #2 (s 23(3)); and

At common law, to be awarded damages for breach of contract, those damages must be in the reasonable contemplation of both parties at the time the contract was formed. If the damages are too remote, they may not be recoverable under contract law. Both sides must be aware of the circumstances <u>at the time of formation</u> that would lead to damages if an obligation went unperformed or underperformed. This may encompass either implied circumstances, if reasonable, or special circumstances that were communicated at the time the contract was formed (''[https://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html Hadley & Anor v Baxendale & Ors]'' (1854), 156 ER 145 (Eng Ex Div)). Damages that were substantially likely and easily foreseeable at the time the contract was formed will be deemed to have been in the reasonable contemplation of the parties. Once the '''type''' of loss is found to have been foreseeable, the extent of damages can be recoverable even if the '''degree''' of damages is so extensive as to be unforeseeable.

However, courts may avoid this harsh result by (1) implying a term allowing the buyer to accept the goods and later reject them: see ''[https://www.canlii.org/en/sk/skqb/doc/1967/1967canlii393/1967canlii393.html?autocompleteStr=Polar%20Refrigeration%20&autocompletePos=1 Polar Refrigeration Service Ltd v Moldenhauer]'' (1967), 1967 CanLII393 (SKKB) at para 22, (2) finding a total failure of consideration: see ''Rowland v Divall'' (1923), 2 KB 500, (3) finding the intent for property to not pass immediately (ss 22 and 23(1)), (4) finding that the goods are not specific, or (5) finding ss 23(3), (4) or (5) to be applicable.

If an aggrieved party does decide to affirm the contract, specific performance may be available for a contract of sale for specific goods. Specific performance is a court order compelling performance of a contract in the specific form in which it was made (''SGA'', s 55). In certain circumstances, it may be available at common law for unascertained goods (''Sky Petroleum Ltd v VIP Petroleum Ltd,'' [1974] 1 WLR 576, [1974] 1 All ER 954). Specific performance is a discretionary (for judges to award) equitable remedy and will only be granted if damages are inadequate; for example, where the goods are unique or otherwise unavailable. According to s 3(1)(c) of the ''[https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/96430_01 Small Claims Act]'', RSBC 1996, c 430, the Small Claims Division of the Provincial Court of British Columbia can grant specific performance in an agreement relating to personal property (e.g. not real property like land or real estate).