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Difference between revisions of "Contracts for Sale of Goods (11:III)"
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Contracts for Sale of Goods (11:III) (view source)
Revision as of 17:31, 15 June 2016
, 17:31, 15 June 2016→3. Breach of Condition
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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''. | 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''. | ||
In the case of a rightful repudiation, the buyer may refuse further payment, and in addition, seek either damages or restitution from the seller. The consequence of wrongful repudiation termination (the buyer repudiates when he or she did not have the right to do so; e.g. because the seller breached a warranty rather than a condition) is that the buyer is liable to the seller for his or her own breach of condition. So, it is important to determine whether or not repudiation is justified '''before''' taking any action, by determining the nature of the term the seller breached. | |||
===== (1) When a Breach of Condition is Treated as a Breach of Warranty ===== | |||
Section 15(4) specifies two circumstances where, unless the parties contract otherwise, any breach of condition (including the implied statutory conditions in ss 16 – 19) must be treated as a breach of warranty: (1) in a contract for sale of specific goods when property has passed to the buyer; or (2) where the buyer has accepted the goods, or part of them. | |||
===== (2) Specific Goods: Upon Passage of Property ===== | |||
When s 15(4) is combined with ss 23(1) and (2), the result is that, for a sale of specific goods in a deliverable state, the buyer loses the right to repudiate as soon as the contract is made. | |||
However, courts may avoid this harsh result by: (1) implying a term allowing the buyer to accept the goods and later reject them: see ''Polar Refrigeration Service Ltd v Moldenhauer (cob Traveller’s Hotel)'' (1967), 61 DLR (2d) 462 (Sask QB); (2) finding a total failure of consideration: see ''Rowland v. Divall'', [1923] 2 K.B. 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. | |||
===== (3) Unascertained Goods: Upon Acceptance ===== | |||
For a sale of unascertained goods, the buyer loses the right to repudiate upon acceptance of the goods (s 15(4)). | |||
Under s 38, if the buyer has not previously examined the goods, there is no acceptance unless and until the buyer has had a reasonable opportunity to examine them. However, under s 39 a purchaser has accepted the goods once (1) the seller is notified by the buyer of acceptance, (2) the goods are used in a manner inconsistent with the seller’s ownership (e.g. reselling the goods to a third party), or (3) the goods are retained without being rejected within a “reasonable time”. | |||
The court determines a reasonable time for inspection and possible rejection by looking at all the circumstances surrounding the transaction. | |||
==== b) Damages for Breach of Condition ==== | |||
As mentioned above, the innocent party has a choice in the face of a breach of condition. He or she may (1) accept the repudiation, terminate the contract, and sue for damages right away, or (2), if he or she has a legitimate interest in doing so, may affirm the contract, wait for the date of performance, and sue for damages for | |||
any defect in performance at that date. (In many cases involving one-time sales, the performance date will be contemporaneous with the date of the payment/delivery/breach, rendering this a moot point.) In deciding whether or not to affirm a contract in order to assess damages at a later date, the client should consider the implications of his or her duty to mitigate the loss. In a sale of goods, purchasing the goods from someone else can often mitigate damages; generally no special interest exists in purchasing the particular goods from a particular vendor. c)Specific Performance 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 LtdvVIP Petroleum Ltd, [1974] 1 All ER 954). Specific performance is a discretionary equitable remedy and will only be granted if damages are inadequate; for example where the goods are unique or otherwise unavailable. Section 3(1)(c) of the Small Claims Act provides that the Small Claims Division of the Provincial Court of British Columbia can grant specific performance in an agreement relating to personal property. 4.Rescission The remedy of rescission seeks to undo a contract. It is available for, among other things, misrepresentation. See section IV.I for a fuller discussion of what constitutes misrepresentation. Rescission is an equitable remedy that sets the contract aside and seeks to restore the parties to their original, pre-contractual positions. This usually means return of the goods and return of any payment made. Because it undoes the contract, no damages can be claimed beyond the restitution necessary to return the parties to their pre-contractual positions. Delay in bringing the action or acceptance of the goods may bar rescission. | |||