Ch.21 The Sale of Goods

Question 1

History of a Contract of Sale

Answer 1

Codification of the common law into a statute

Purpose was to enhance efficiency and reduce uncertainty

Question 2

Contract of sale is a type of contract

Answer 2

General contract rules apply i.e. rules of formation, discharge and impeachment

More than ordinary contract because contains promises of parties but represents evidence of a transfer of ownership to the buyer

Question 3

Two different types of contract of sale:

Answer 3

Ownership transferred immediately (sale)

Transfer of ownership takes place at a future time, or subject to fulfillment of a condition (agreement to sell)

Question 4

Application of the Act For Goods:

Answer 4

Agreement to sell must be for tangible goods i.e. moveable personal property and not intangibles

Distinct from land or anything attached to land
- Land transactions not covered by Sale of Goods Act

Distinguished from contract for work and materials
- Not covered by Sale of Goods Act if majority of contract is represented by the “work” / labour

Question 5

For money:

Answer 5

Property must be money i.e. money must change hands
- Barter or exchange of goods is not a contract of sale
- Consignment is not a contract of sale

Question 6

For Writing:

Answer 6

No special form required for contract; can be written, verbal, implied from conduct of parties

Requirement of writing if sale of goods valued above particular amount (unless partial payment made or something else given in earnest)

Question 7

Transfer of title:

Answer 7

Represents agreement to transfer property in the goods to the buyer

Title - ownership of the goods
- Normally goes with possession
- Sale of Goods Act determines when title passes

Goods not in deliverable state remain at seller’s risk until “ready for delivery”
- Examples: goods that must be produced, weighed, measured, counted, sorted or tested

Question 8

If transfer of title not dealt with in contract, Sale of Goods Act sets out fives rules

Answer 8

Deemed to apply to the sale of goods

Rules deal with the passing of property (title) and therefore who bears the risk

Specific goods - goods that are identified and agreed on at the time a contract of sale is made

Unascertained goods - goods not yet set aside and identifiable as the subject of the contract at the time the contract is formed

Question 9

Rule 1

Answer 9

If there is
- Unconditional contract
- For sale of specific goods
- In a deliverable state

Then the property in the goods passes
- the buyer
- When the contract is made

Immaterial whether the time of payment or the time of delivery (or both) be postponed

Example: “I will buy that TV as is for $1000”

Question 10

Rule 2

Answer 10

Variation of Rule 1 - where there is a contract for sale of specific goods and
- The seller is bound to do something to the goods for the purpose of putting them in a deliverable state

Then the property passes
- To the buyer
- When the thing is done and
- The buyer has notice thereof

Title does not pass until seller does whatever is necessary to put goods into deliverable state, and notifies buyer that goods are now ready for delivery

Example: “I will buy that TV for $1000 after you replace the power cable”

Question 11

Rule 3

Answer 11

Variation of Rule 1 - when there is a contract for sale of specific goods in a deliverable state, but
- The seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price

Then the property passes
- To the buyer
- When such act or thing is done and
- The buyer has been notified thereof

Seller must have the duty to weigh, measure, or otherwise deal with the goods

Example: “I will buy all the TVs on that truck once you count them”

Question 12

Rule 4

Answer 12

Deals with contracts for the sale of goods “on approval” or with return privileges
- Two-part rule - where goods are delivered to buyer on approval or “on sale or return” or other similar items

Then the property passes
- To the buyer:
-When he or she signifies his or her approval or acceptance of the transaction, or
-If buyer does not signify his or her acceptance to seller but retains goods without giving notice of rejection

Example: “I might buy that TV but let me take it home to try for a few days”

Question 13

Rule 5

Answer 13

Applies to unascertained or future goods by description (subject matter of an agreement to sell)

Then the property passes
- To the buyer
- When goods unconditionally appropriated to the contract
-By seller with buyer’s assent; or
-By buyer with seller’s assent

Example: “if you can get my size, I will buy a set of this year’s new Michelin Snow tires when they arrive”

Question 14

Contractual Duties of the Seller

Answer 14

Sales of Goods Act permits parties to insert any terms or conditions they wish into contract of sale
- Seller obliged to comply with these terms
- If not specified, Act implies certain obligations in terms of warranties and conditions of the goods:
-Condition
-Warranty

Question 15

Condition

Answer 15

essential term of a contract; if breached entitles innocent party, if he or she chooses, to treat breach as discharge

Question 16

Warranty

Answer 16

minor term in contract of sale; breach of the term would allow injured party damages, but not rescission of agreement

Question 17

Title:

Answer 17

• Implied condition that in case of a sale, seller has right to sell the goods
• Implied warranty that goods are free from any encumbrance in favour of a third party
  -Unless seller informed buyer of the encumbrance before at time of agreement being made

Buyer shall have “quiet possession” of goods i.e. no person will later challenge the buyer’s title to the goods

Question 18

Sold by description or sample:

Answer 18

Condition that goods will correspond with description/sample

“Description” refers to the identity (not quality) of goods

If sold by description as well as sample, then the goods must correspond to the description as well as sample

Question 19

Caveat emptor

Answer 19

Latin for “let the buyer beware”

Buyer subject to caveat emptor with respect to quality and fitness

Buyer has opportunity to examine goods as to quality and fitness

Act imposes some obligations on seller:
- If seller is in the business of supplying such goods, and buyer that makes the purpose of use goods known to seller, and buyer relies on skill or judgement of seller, there is implied condition - goods provided shall be reasonably fit for intended use

Question 20

Merchantable quality

Answer 20

goods of a quality standard suitable for resale

Goods sold must be of merchantable quality

Breach if reasonable buyer would not pay full price

Merchantability covers goods, packaging, labeling

Applicable only if seller normally deals in goods

Not applied to defects in the goods that would be discovered by reasonable examination

Question 21

Delivery

Answer 21

Seller has duty to deliver goods at the right time, in the right quantity and at the right place

Right time (condition of contract):
- If time for delivery not specified, goods must be delivered within reasonable time
- Buyer may reject delivery if it is late
- Delivery and payment should be concurrent, time of payment is a warranty

Question 22

Limitation of Liability

Answer 22

Seller may, be expressed term in contract, exclude all implied conditions and warranties imposed in Act
- Seller must comply exactly with contract made

Consumer protection legislation:
- In some jurisdictions, seller prevented from excluding implied conditions and warranties
- Provides “cooling off” period for certain contracts
- Impose greater responsibility on seller of goods

Question 23

Duties of buyer in accordance with Sale of Goods Act:

Answer 23

Promptly examine goods sent on approval

Compare goods to a sample

Takes delivery

Pay for the goods

Payment and delivery are concurrent conditions

Payment is a warranty unless specifically stated as a condition

Question 24

Remedies of the Buyer
Rescission:

Answer 24

For breach of condition but not warranty

IF seller’s breach goes to very root of contract, buyer can repudiate contract and reject goods
- Includes right to refuse payment
- If payment already made, right to sue for recovery

If seller fails to deliver goods:
- Buyer can purchase goods elsewhere and sue for difference between contract and price paid in market

Question 25

Damages:

Answer 25

For breach of warranties or in minor term

For deficiency in quantity of delivery

Buyer may treat a breach of condition as a breach of warranty

Question 26

Specific performance:

Answer 26

On rare occasions, if goods have unique or special attribute and cannot be readily obtained elsewhere
- Monetary damages are not adequate
- Equitable remedy at discretion of the court

Question 27

Remedies of the Seller

Answer 27

Passing of title to the buyer

Right of seller to retain goods

Question 28

Rights can be exercised against the buyer personally or against the goods

Answer 28

Depending on circumstances and nature of remedy

Seller may not repudiate contract for non-payment unless it is a term of the contract

Question 29

Lien:
(remedy of seller)

Answer 29

Seller retains possession of goods until buyer pays

Seller may claim a lien on goods if:
- Sale is a cash sale
- Period of credit has expired
- Goods sold on ”lay-away” plan
- If buyer becomes insolvent before goods are delivered

Seller must have possession to enforce a lien Buyer must not have right of credit

If seller voluntarily released goods to buyer, may lose right to lien

Question 30

Action for the price:

Answer 30

Seller has delivered goods to buyer, title has passed
- Seller may sue the buyer for price of goods

Title has not passed, seller delivered goods but delivery was refused by buyer
- Seller nay sue buyer for the price
- Seller must be prepared to deliver goods if seller recovers price

Question 31

Damages:

Answer 31

Common remedy available to seller is ordinary damages for non-acceptance
- Seller can resell goods to another
- Seller can sue buyer for any loss incurred

Damages recovered = monetary amount necessary to return seller to position prior to transaction
- Profit or loss on sale or difference between disposal price and contract price

Question 32

Retention of deposit:

Answer 32

Entitles seller to retain deposit paid as liquidated damages if buyer refuses to perform contract

Need not be in writing to render it binding on parties

Advantages to seller:
- Circumvent the requirements of writing under Sale of Goods Act if contract is unwritten and if it for more than stipulated minimum
- Represents fund that seller can access if buyer breach’s agreement
-Must be an honest estimate of the probable loss

Question 33

Stoppage in transit

Answer 33

right of the seller to stop delivery of goods by the carrier if the buyer is insolvent

Must be done before buyer has gained possession

Question 34

Recovery of goods:

Answer 34

Bankruptcy and Insolvency Act - if goods shipped to buyer, and buyer becomes bankrupt, the seller may, within 30 days:
- Submit written demand to trustee in bankruptcy for return of goods
- Goods must be unsold, still in bankrupt buyer’s possession, identifiable, and in same condition as when delivered to the buyer

Seller’s rights to goods rank above claims of other secured or unsecured creditor to the goods

Question 35

Electronic Sale of Goods

Answer 35

Electronic retailing requires new practices to:
- Minimize chance of disputes and problems
- Avoid misunderstandings as to jurisdiction of applicable law

Most internet issues can be managed via company website policies