Contracts for Sale of Goods (11:III)

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on 3 July 2026.

Generally, consumers have no right to return goods or cancel a contract simply because they decide the goods are no longer wanted or needed. However, it is often only after the goods are purchased that damages or defects are discovered. In such cases, a purchaser may have a remedy if it can be shown that a term of the contract has been breached. It may also be the case that the business has a refund policy of which the consumer can take advantage.

This section outlines the protection that consumers have against the problems that may occur after a purchase has been made. To understand one’s legal rights, it is necessary to know the differences between terms, representations, and mere puffs.

A. Identifying and Classifying the Terms of a Contract

A term of the contract is a promise made by the manufacturer or seller regarding the character or quality of an article. It can be either written or oral. Written terms will generally be straightforward to identify. Whether an oral statement can be properly considered a term may be less obvious. Not everything said by the seller will be a term of the contract. To be a term, the statement must be a specific promise that makes up part of the contract.

If a statement is not a term, it may be either a representation or a puff. A representation is a material statement of fact made to induce the other party to enter the contract. A puff is vague sales talk not meant to have any legal effect. For example, a statement that “This is a wonderful car” would be a puff and not meant to be taken literally as a contractual term (see 11:IV G. False or Misleading Advertising)

Whether a statement is a term, representation, or puff affects the remedy available to the consumer: damages (see D. Remedies for Breach of Contract below), rescission (under a claim of misrepresentation; see 11:IV G. False or Misleading Advertising), or no remedy, respectively. For this Chapter, we are concerned with terms of a contract.

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 (L Schuler AG v Wickman Machine Tool Sales Ltd, [1973] UKHL 2, [1974] AC 235). The three types of terms are as follows (Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, [1962] 2 QB 26, [1962] 1 All ER 474 at para 49):

1. Condition

A condition is a term that is so essential to the agreement that its breach is considered to be a substantial failure to perform the contract. A breach of a condition is said to go to the root of the contract. In other words, the breach is such that it deprives the innocent party of “substantially the whole benefit” of the contract. If a manufacturer/supplier/seller breaches a condition, the buyer is entitled to terminate any further obligations under the contract and sue for damages.

Anticipatory breach is where one party (say, the seller) communicates their intention to breach in the future. The aggrieved party (here, the buyer), if aware of the impending breach, could accept the repudiation by the seller and terminate the contract, ending all future obligations except for the seller’s obligation to pay the damages that stem from non-performance. Or, the aggrieved party could not accept the repudiation and may wait for the future breach to actually occur before pursuing damages (e.g., if they think that there is still a chance that the contract will be performed).

2. Warranty

A warranty is a term of the contract that is not so essential. A warranty must be performed, but its breach is not considered to go to the root of the contract. This meaning of warranty should not be confused with other uses of the word such as in “one-year maintenance warranty”. When a warranty is breached, the contract is not terminated, meaning that the innocent party must continue to perform its own obligations under the contract (e.g., the buyer must still pay for the good) but can sue for damages for breach of warranty.

3. Innominate or Intermediate Terms

Innominate or intermediate terms arise out of the common law, but unlike conditions and warranties, they are not mentioned in the SGA. An innominate term is one that may be treated as either a condition or a warranty, depending on how severe the consequences of a breach turn out to be. Whether an innominate term is a condition or a warranty is for a judge to decide.

NOTE: For certain terms, the SGA specifies whether they are conditions or warranties. The SGA also implies some terms as conditions or warranties even if they are not expressly included in the contract (see C. Provisions of the Sale of Goods Act below)

B. Determining if the Sale of Goods Act Governs the Contract

The SGA applies to transactions that can be characterized as contracts for the sale of goods. Any transaction that is not for the sale of goods does not receive the benefit of the SGA. Hence, the subject matter of the transaction must be goods, and the essential elements of a contract must also be present.

1. Goods

Goods include all personal chattels, other than “things in action” (e.g. cheques, insurance policies, money). Things attached to real property, which the parties agree to sever before sale, or under the contract of sale, are included (s 1). Note that registration in the Land Title Office may be advisable to avoid possible characterization of the goods as real property or fixtures, so that the SGA may apply to the transaction.

According to ss 1 and 9, the SGA covers existing and future goods. Future goods are goods to be manufactured or acquired by the seller after the making of the contract of sale.

According to ss 1 and 6(1), general property or title in the goods must pass – not merely a special property or interest. Thus, for example, a contract of bailment is not covered.

Contracts for skill and labour alone are not contracts for the sale of goods, so the SGA does not apply to them. However, if a contract is for labour and materials, then the SGA could apply to the materials (e.g. a contract to paint a house with paint supplied by the contractor).

2. Contract of Sale

According to s 6(1), the SGA applies only where the purchaser agrees to buy goods with money as consideration. Hence gifts, barters, or exchanges are not subject to the SGA’s implied conditions and warranties. However, a court may avoid this result by finding two separate contracts rather than a barter, as long as the consideration (which is the value being exchanged in the contract, whether money or goods) has its value measured in monetary terms: see Messenger v Green, [1937] 2 DLR 26 (NSSC). Thus, if a total price is attached, there will be a sale, even if payment is in goods rather than money.

According to s 6(3) of the SGA, a contract of sale may be absolute or conditional. If the contract is subject to some condition to be fulfilled later, it is called an agreement to sell.

Under s 8 of the SGA, it provides that the contract may be either written or oral.

3. Lease Contracts

The SGA applies to lease contracts if the goods are primarily leased for personal, family, or household purposes.

C. Provisions of the Sale of Goods Act

Under ss 16 – 19 of the SGA, many terms are implied into contracts for the sale of new items. When these implied terms can and cannot be expressly waived by the seller is governed by s 20. The SGA also defines these terms as conditions or warranties, thus determining the remedies available if breached.

1. Implied Conditions and Warranties

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 2: Exemption from Implied Contractual Terms below).

a) Implied Condition of Title: s 16(a)

Under s 16(a), the SGA provides that, subject to contrary intentions, there is an implied condition that the seller has the right to sell the goods. In an agreement to sell goods at a later date, there is an implied condition that the seller will have the right to sell the goods at the date the buyer takes possession.

b) Implied Warranty of Quiet Possession: ss 16(b) and (c)

Under ss 16(b) and (c), the SGA provides implied warranties that in the future the buyer will enjoy undisturbed possession of the goods, free from any liens, charges, security interests, or other encumbrances in favour of third parties that are unknown to the buyer at the time the contract is made. For example, a contract of sale for a good may be made between a seller and buyer where a third-party lender made a loan to the seller with this good as collateral. If the secured creditor (the lender) subsequently makes claims against the buyer who was unaware of this security interest in the good at the time of sale, the buyer can sue the seller for damages resulting from breach of this implied warranty. The quantum of damages would likely be the amount of the liens outstanding so that the buyer could pay them off.

c) Implied Condition of Compliance with the Description: s 17

Under s 17, when goods are sold by description, there is an implied condition that they correspond to the description.

NOTE: Description refers to generic characteristics of a good and does not include words of praise about the good.

Most sales will be sales by description. The notable exception is where a buyer makes it clear that they are buying a particular item on the basis of its qualities known, independent of any representations by the seller. Generally, where a buyer purchases a product because of a vendor’s representations about its features (which may have been offered either gratuitously or in response to the buyer’s questions), this will be a sale by description, with the vendor’s representations forming part of the description. Catalogue purchases, online shopping, and purchases of products sealed in containers by the manufacturer are also sales by description.

If a sale is made by description and by sample, it is not enough that the bulk of the goods correspond with the sample; the delivered goods must also correspond with the description by which they were sold (s 17(2)).

NOTE: Specific goods (as opposed to unascertained goods) are goods that, at the time the contract is made, are agreed to be the only goods whose transfer will satisfy the contract. For example, in a sale of a new chair, if the parties agree that a specific chair is to be the subject matter of the contract, the sale has been of specific goods. So, if the seller attempts to deliver a different chair, which is identical in every way, except that it is not the actual chair agreed upon, the seller has breached the contract. Unascertained goods are goods that are agreed to be the subject matter of the contract at a point in time after the contract is made. For example, in the sale of a new chair, if the parties agree only on a specific type of chair, but do not specifically single out any individual chair, the sale has been of unascertained goods.

Although s 17 cannot be excluded in retail sales of new goods, it may be excluded in private or commercial sales, subject to the contra proferentum rule. The contra proferentum rule states that a contract, if ambiguous, is construed as against the party who wrote it. Where a standard form contract (a “take it or leave it” contract that is drafted entirely by one party without any negotiations with the other party) is used, it is construed as against the party who offered it (usually the seller).

A sale by description may also raise s 18(b) issues (see e) Implied Condition of Merchantable Quality: s 18(b) below).

d) Implied Condition of Fitness for Buyer’s Purpose: s 18(a)

Under s 18(a), if:

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

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

then there is an implied condition that the goods are necessarily fit for such purpose. An exception occurs where the contract is for the sale of a specified article under its patent or trade name, in which case there is no implied condition as to its fitness for any particular purpose because the buyer is no longer relying on the seller’s skill and judgement.

To establish a claim under s 18(a) of the SGA, three factors must be satisfied on a balance of probabilities (Nikka Traders, Inc v Gizella Pastry Ltd, 2012 BCSC 1412 at para 65):

1. That the buyer has made known to the seller the purpose for which it requires the goods;
2. The dissemination of that purpose shows that the buyer relies on the seller’s skill or judgment; and
3. The goods are of a description that is in the course of the seller’s business to supply.

Furthermore, the courts have held that the seller need not know the specific purpose for which the buyer wishes to use the goods; knowledge of a broad purpose is sufficient. For example, in Sugiyama v Pilsen, 2006 BCPC 265 at para 71, the court held that s 18(a) provides a warranty that a car is “a reliable vehicle for use in driving in safety on the roads” and a car being sold must be reasonably fit for such purpose. However, if the buyer wishes to use the goods for an unusual or peculiar purpose, this must be indicated to the seller.

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 Wharton v Tom Harris Chevrolet Oldsmobile Cadillac Ltd, 2002 BCCA 78 at paras 38-39.

e) Implied Condition of Merchantable Quality: s 18(b)

Under s 18(b), if:

1. Goods are bought by description, and
2. From a seller who deals in goods of that description, the seller is bound by an implied condition that the goods are of merchantable quality.

(1) The Concept of Merchantable Quality

The concept of merchantable quality is difficult to define. A commonly used test, the price abatement test, asks whether a reasonable buyer, informed of the actual quality of the goods, would buy the goods without a substantial abatement of price (BS Brown & Son v Craiks Ltd, [1970] UKHL 6, [1970] 1 All ER 823). If the informed reasonable buyer would not buy without a substantial abatement of price, unmerchantable quality is inferred, and repudiation may be available.

Any damage to goods beyond the de minimus range may be said to render the goods of unmerchantable quality (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).

(2) Sale by Description

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 d) Implied Condition of Fitness for Buyer's Purpose: s 18(a) above).

(3) Seller who Deals in Goods of that Description

In addition to requiring that the sale be by description, s 18(b) also requires that the seller must “deal in goods of that description.” In Hartmann v McKerness, 2011 BCSC 927, a seller sold a watch by description over eBay and was sued for violating the implied condition of merchantability in s 18(b). In paragraphs 43-47, the BC Supreme Court held that the seller was not one “who dealt in goods of that description” for the purpose of s 18(b), as he did not specialize in watches, but rather sold a large variety of goods.

(4) Effect of Examination by the Buyer

There is an exception where the buyer has examined the goods; then, there is no condition of merchantable quality to the extent that the examination ought to have revealed the defect. However, if the average person would not have been able to spot the defect, the condition of merchantability remains. Hence, it must be determined: 1) whether the buyer examined the goods, and 2) whether the defects ought to have been revealed by the examination.

NOTE: There is no obligation on the buyer to make a reasonable examination or even any examination.

(5) Implied Condition of Reasonable Durability

The goods must be durable for a reasonable period of time with regard to their normal use (s 18(c)).

A used vehicle that suffers a major breakdown shortly after purchase may be found not to have been reasonably fit for its purpose (s 18(a)), not of merchantable quality (s 18(b)), or not durable for a reasonable period of time (s 18(c)). See Reddy v. Insurance Corporation of British Columbia, 2025 BCSC 280 at para 42. For example, in the case of Sosa v. Reg Midgley Motors Ltd, 2019 BCCRT 487, the CRT granted the cost of repairs when a serious transmission issue arose just a few days after the sale. The decision was made because the car did not demonstrate durability for a reasonable period. Similarly, in the case of Scoretz et al v KOLENBERG MOTERS LTD, 2019 BCCRT 549, the CRT ruled in favour of compensating the Claimant for engine repair expenses, as the engine failed within two months of the purchase. However, note that it must still be demonstrated that the defect was present in the vehicle as sold; in Reddy, the court ruled against a plaintiff whose car suffered a major fire shortly after purchase as they were unable to demonstrate the fire was caused by a defect present at sale.

Where the buyer seeks recovery of the full purchase price based on the implied conditions under section 18, they should be cautioned that continued use of the goods in question seriously weakens the argument that the goods are not fit for a particular purpose or are not of merchantable quality; for example, see Camara v Tri City Mitsubishi, 2025 BCPC 50 at paras 66-74.

f) Implied Conditions in Sales by Sample: s 19

For a contract to be a sale by sample, there must be an express or implied term in the contract to that effect (s 19(1)).

Three implied conditions of a sale or lease by sample are set out in s 19(2):

1. The bulk must correspond with the sample in quality;
2. The buyer or lessee must have a reasonable opportunity of comparing the bulk with the sample; and
3. The goods must be free from any defect rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.

The last condition can only be relied upon where the defect would not have been apparent on a hypothetical reasonable examination. Contrast this with the s 18(b) condition of merchantability for sales by description, where the buyer’s actual examination is considered.

2. Exemption from Implied Contractual Terms

a) Private Seller

Based on s 20, private sellers or lessors, as opposed to retail sellers or lessors, can explicitly exempt themselves from ss 17, 18, and 19. A retail sale is defined as one in the “ordinary course of the seller or lessor’s business.” Exemption or exclusion clauses are subject to the contra proferentem rule that such a clause, if ambiguous, may be interpreted strictly against the drafter.

b) Commercial Seller

Under s 20 of the SGA, retailers of new goods cannot exempt themselves from the implied terms in ss 16 – 19, and any clause that attempts to do so is void, subject to the exceptions listed below.

A seller who is making a retail sale in the ordinary course of business can only expressly waive ss 16 – 19 if:

(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.

When a commercial seller is legally permitted to exempt themselves from the statutory implied conditions (such as when the purchaser is a commercial enterprise or intends to use the goods primarily for business) they must do so via an “express agreement” under the Sale of Goods Act. In the landmark decision Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc., 2024 SCC 20, the Supreme Court of Canada clarified how these exclusion clauses are interpreted. The Court ruled that an “express agreement” to exclude statutorily implied conditions (such as merchantability or correspondence with description) does not require specific “magic words” or explicit reference to the Sale of Goods Act. Instead, the objective intention of the parties to exclude the implied conditions must be unmistakable and is determined by examining the plain meaning of the contract’s text within the surrounding commercial context.

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.

4. Buyer’s Obligations and Seller’s Rights

A seller’s rights arise from a breach of the buyer’s