Difference between revisions of "Contracts for Sale of Goods (11:III)"
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=== 3. Buyer’s Lien === | === 3. Buyer’s Lien === | ||
Amendments to the ''SGA'' in 1994 created the buyer’s lien, which gives priority to a consumer who has paid some or all of the purchase price of the goods, but has not taken possession, before the seller goes into receivership or bankruptcy. | Amendments to the ''SGA'' in 1994 created the buyer’s lien, which gives priority to a consumer who has paid some or all of the purchase price of the goods, but has not taken possession, before the seller goes into receivership or bankruptcy. | ||
next 11- | === 4. Buyer’s Obligations and Seller’s Rights === | ||
A seller’s rights arise from a breach of the buyer’s obligations. The buyer has two main obligations: (1) to pay the price, and (2) to take delivery. A breach of either of these obligations does not necessarily give rise to all of the seller’s possible remedies as outlined below. One must consider the severity and consequences of a breach to determine the seller’s remedy. The seller has two classes of rights under the ''SGA'': (1) personal rights against the buyer for price or for damages, and (2) ''in rem'' rights to the goods. | |||
==== a) Seller’s Personal Rights ==== | |||
===== (1) Action for the Price: s 52 ===== | |||
This action arises when the property in the goods has passed to the buyer, and the buyer neglects or refuses to pay; or where the price is payable on a certain day and the buyer neglects or refuses to pay. This remedy involves the seller seeking the price of the goods. | |||
===== (2) Damages for Non-Acceptance: s 53 ===== | |||
This is an alternate remedy to action for the price. The prima facie rule for damages is set out in s 53(3). The seller is entitled to be paid an amount equal to the difference between the negotiated price and the market price for the goods. However, this rule may be displaced where there is either no available market, or the goods are unique, in which case the damages will be assessed based on the estimated loss incurred by the seller stemming from the breach (s 53(2)). | |||
==== b) Seller’s In Rem Rights ==== | |||
===== (1) Unpaid Seller’s Lien: ss 43 - 45 ===== | |||
To get an unpaid seller’s possessory lien (the right to retain the goods until the whole of the price has been paid), the seller must be an “unpaid seller” as set out in s 42. An unpaid seller may retain the goods beyond the specified delivery date. Where goods are to be delivered in installments under a single contract, the seller may exercise a lien over any part of the goods if any part of the price is outstanding (s 45). If the goods are sold on credit, the seller is not entitled to a lien, except under ss 44(1)(b) and (c) where the term of credit has expired, or where the buyer is insolvent. | |||
The right of lien may be lost if: | |||
*a) the price is paid or tendered (s 44(1)); | |||
*b) delivery is made to a carrier or bailee (not the seller’s agent) without reserving a right of disposal (s 46(1)(a)); | |||
*c) the buyer or his or her agent lawfully obtains possession (s 46(1)(b)); or | |||
*d) there is a waiver (s 46(1)(c)). | |||
===== (2) The Right of Stoppage in Transit: ss 47 - 49 ===== | |||
This right can be exercised in accordance with s 47 when the seller is unpaid, the buyer is insolvent, and the goods are in the hands of a carrier. | |||
===== (3) The Right of Resale: ss 43(1) and 51 ===== | |||
The seller has the right to resell: | |||
*a) where the goods are perishable and notice is given to the buyer, the seller may resell and recover damages (s 51(3)); | |||
*b) where the seller has expressly reserved the right to resell in the contract (s 51(4)); | |||
Note that if the buyer defaults, and the contract provides that the seller may resell the goods in that situation, the seller may still claim damages, (s51(4)). | |||
=== 5. Other Sale of Goods Act Provisions === | |||
==== a) Stipulations as to Time ==== | |||
Section 14 states that, unless there is a different intention, stipulations as to time of payment do not go to the essence of a contract of sale (i.e. they are not conditions). | |||
==== b) Stipulations as to Quantity ==== | |||
Under s 34, if the seller delivers a quantity of goods either greater or lesser than that contracted for, the buyer may either reject the entire shipment, or accept the quantity delivered and pay accordingly, or, if the quantity is greater than ordered, reject the balance over that ordered. There is likely an exception when the difference in quantity is so slight as to be de minimis. | |||
==== c) Stipulations as to Price ==== | |||
Under s. 12, where a contract is silent as to price, the court will infer a reasonable price, but where the price would be too vague for the court to infer, there may be no consensus upon an essential term, and therefore no contract. | |||
==== d) Installments ==== | |||
Under s. 35(1), a buyer need not accept delivery by installments unless that is agreed to. Where a contract is for separately paid installments, circumstances and construction of the contract determine whether a breach allows for repudiation of the entire contract, or only a right to sue for damages regarding the defective installment. | |||
== D. Remedies for Breach of Contract == | |||
Sections 52 – 57 of the ''SGA'' cover actions for breach of contract. Common law and equitable remedies may exist as well. | |||
=== 1. Damages Generally === | |||
Generally, the object of damages is to put the injured party in the same position he or she would have been in had the other party performed their contract obligations (“expectation damages”). | |||
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 at the time of formation that would lead to damages if an obligation went un- or underperformed. This may encompass either implied circumstances, if reasonable, or special circumstances that were communicated at the time the contract was formed (''Hadley v. Baxendale'' (1854), 9 Exch. 341). 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. | |||
Parties have a common law '''duty to mitigate''' their damages from the date of the contractual breach. In a contract for the sale of goods, this means buying the goods elsewhere and suing the party who breached the contract for the additional amount paid for the goods over the contract price. In a contract for services, such as roof repair, this means hiring another party to do the repairs and suing the original party for the difference in price paid, if any. There is some jurisprudence that suggests when it is not feasible for a party to mitigate, they are excused from doing so. See ''Southcott Estates Inc v Toronto Catholic District School Board'', 2012 SCC 51. | |||
=== 2. Breach of Warranty === | |||
For a breach of a term of the contract that is a warranty, the only available remedy will be damages. The innocent party must continue with the contract while seeking damages. | |||
In a contract for the sale of goods governed by the ''SGA'', the standard measure of damages is “the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach” (s. 56(2)). Where the warranty pertained to quality of the goods, the loss will be calculated as the difference between the cost of obtaining the goods in the market and the contract price of the goods (s.56(3)). Thus a buyer who has negotiated a good deal can recover the difference between his or her expected savings and the market price. Section 57 states that s. 56 does not affect recovery of special damages or interest, if otherwise available by law. The common law governs the recovery of special damages. For special damages to be recoverable both parties must have been made aware of their possible incursion at the time of formation of the contract. | |||
=== 3. Breach of Condition === | |||
For a breach of condition, the aggrieved party can affirm the contract and, in the future, seek damages, or terminate the contract, discharging future obligations but still allowing recovery for damages. The offending party has “repudiated” the contract by acting in a way that expresses the intention to no longer be bound by the contract, and the party aggrieved can accept or reject that repudiation. | |||
==== a) Repudiation ==== | |||
The buyer’s primary right for a breach of a condition is to repudiate the contract and reject the goods. This can normally be exercised regardless of the actual quantum of loss or benefit to the parties. However, the right to repudiate may be lost under the ''SGA''. | |||
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