Difference between revisions of "Conditional Sales Contracts and Security Agreements (11:VI)"

Under Part V of the ''Bills of Exchange Act'' [''BEA''], a bill of exchange or promissory note given for a consumer purchase must be clearly marked “Consumer Purchase” (s 190(1)), and where it is marked, the rights of an assignee of the bill or note are subject to any defence the purchaser would have against the vendor (s 191). Where it is not marked, it is void except in the hands of a holder in due course without notice (s 190(2)). The purpose of Part V is to codify the rule in ''[https://www.canlii.org/en/on/onca/doc/1962/1962canlii124/1962canlii124.html?resultIndex=1 Federal Discount Corp v St Pierre]'', (1962), 32 DLR (2d) 86.  

Part V does not cover private sales (where the seller is not engaged in the business of selling the goods in question), or sales to small businesses or corporations of items to be used in their business. Nor does it cover a purchaser’s loan, i.e. a loan from a lender to a person to enable that person to buy goods and/or services from a seller (subject to s 189(3) below).  

Section 189(1) defines a consumer bill and s 189(2) defines a consumer note. Under s 189(3), a consumer bill or note is conclusively presumed if:  

#the consideration for its issue was the lending of money, etc. by a person other than a seller, to enable the purchaser to make a consumer purchase; and  

#the seller and the person who lent the money, etc. were, at the time the bill or note was issued, not dealing with each other at arm’s length within the meaning of the ''Income Tax Act''.  

If an instrument meets the definition of a consumer note, any defence that consumer would have for an action against them by the seller would also be available as against subsequent note holders.  

 

Therefore, if the consumer does not get what they have paid for, that person may not be required to pay the loan back when pressed for payment by the assignee. Also, if the seller does not fulfil obligations under a warranty, the consumer will be able to resist payment.  (See ''Canadian Imperial Bank of Commerce v Geldart'', [1985] BCJ No 1973 and ''Canadian Imperial Bank of Commerce v Kabatoff'', [1986] BCJ No 942)