the contract of sale of goods: introductioncans.allardlss.com/application/media/cans/... · will in...

Goods vs Land

•S1: “Goods” includes

•(a) all chattels personal, other than things in action and money, and

•(b) growing crops, whether or not industrial, and things attached to or forming part of the land that are agreed to be severed before sale or under the contract of sale

•Fredkin v Gliens – if growing trees or natural grass be sold for the purpose of being cut and taken away, pursuant to the contract, they are goods under this definition (no limit of time imposed by statute within which the intended severance is to take place)

•Intention of both parties was a sale of goods, not interest in land

•Carlson v Duncan – contract for the sale of trees, granting purchaser as much time as he wanted to remove the timber; both sets of interest were passed to new parties

•No time limit; no intention to treat the timber as a chattel and land was not considered a mere warehouse for goods

•Agreement didn’t provide that timber had to be severed before sale; P has title to an interest in the timber which is part of the land

SGA Sales vs Barter

•S6(1) a contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price

•Mason & Risch v Christner – buy piano for $500+other piano = BARTER

•If the consideration for the transfer is wholly or in part, other goods, the total price not being fixed in money, the transaction is an exchange or barter

•Messenger v Greene – P agreed to sell provisions to D at regular prices, D agreed to sell and P to buy pulpwood to approximately the amount of the store bill, the accounts to be off-set = NOT A BARTER

•A purchase differs from barter only in the circumstance that in purchasing the price or equivalent given or secured is money

•In a sale there is a fixed price; in a barter there is not

•Sales includes all agreements by which property is parted with for a valuable consideration, whether there by a money payment or not, provided the bargain be made and the value measured in money terms

Sales Distinguished from Other Transactions

•SGA or Contract for Labour & Materials

•Robinson v Graves – artist painted portrait and commission is accepted by artist

•The substance of the matter was an agreement for the exercise of skill and it was only incidental that some materials would have to pass from artist to gentleman – not SGA

•Young and Marten Ltd v McManus Childs – appellant supplied and laid roofing (red tiles)

•Implied warranty: one who contracts to do work and supply materials ought to be under at least as high if not a higher degree of obligation with regard to the goods he supplies and the work that he does than a seller who may be a mere middleman or wholesaler

•Gee v White Spot – botulism poisoning; an item on a menu offered for a fixed price is an offering of a finished product and is primarily an offering of the sale of goods and not primarily an offering of sale of services


•SGA or Lease or Hire-Purchase Contract

•Lee v Butler – hire-purchase agreement entered between Hardy (dealer) and Lloyd (lease and then becomes owner at the end)

•Lloyd sold furniture to D before all installments were paid off; D acted in good faith and with no notice of P’s right, received them

•S30(3) if a person having bought goods obtains possession of the goods in good faith and without notice of any lien or other right…has the same effect as if the person making the delivery were a mercantile agent in possession of goods

•Lloyd has to finish payments, agreement of sale; mandatory

•Helby v Mathews – H owned piano, gave possession to B, who then pledged the piano with M as security for an advance; M claim they received piano from B in good faith, and that B having “bought or agreed to buy” it from him they were protected 30(3)

•No legal obligation for B to buy piano, B had option to buy or not buy piano after lease ended = lease, not governed by SGA


•Agency Contracts, Consignment Contracts, or Return

•True Consignment – contract only between buyer and consignor

•Weiner v Harris – P consigned jewellery to F with no right to buy, who sold it to D as collateral

•Parties never intended that F should be the purchaser; F had no right to buy

•F was a mercantile agent; D has perfectly good title

•Re Stephanian’s Persian Carpets – dispute between trustee in bankruptcy of SPC and Anglo with respect to 14 oriental rugs in possession of the bankrupt at the time of its assignment

•Anglo sold rugs on wholesale basis, and supplied rugs to SPC for sale by it to third parties or for purchase on its own account

•No obligation on SPC to pay Anglo for rugs until it either purchased them or sold them to third party, and SPC had right to return unsold rugs; so there was no sale of rugs

•This is a true consignment and not a “consignment intended as security” (which involves 2 contracts, one between Anglo and SPC, which makes it a sale, and Anglo wouldn’t get rugs back); so Anglo gets rugs back

The Contract of Sale of Goods: Introduction

S73 and Capacity

• Common Law Preserved – S73: except as they are inconsistent with this Act, the rules of common law (principal, agent, fraud, misrepresentation, duress, coercion, mistake) continue to apply to contracts for the sale of goods

• Capacity – s7: Capacity to buy and sell is regulated by the general law concerning capacity to contract, and to transfer and acquire property; except that where necessaries are sold and delivered to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for them

• Bawlf Grain Co v Ross – contract of a drunken man is not void but voidable only –must be actively disaffirmed within reasonable time, which D didn’t do

• Sale of grain is a commodity varying in price from day to day; P had knowledge of contract when he was sober but didn’t take action until an unreasonable time; he was speculative and only disaffirmed it after price of grain went up

Formalities and Price

• Formalities – s8: Subject to this Act a contract of sale may be made in writing, either with or without seal, or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties

• J Pereira Fernandes SA v Mehta – is email sufficient note of agreement, and was it sufficiently signed by Mehta?

• Email capable of being a sufficient note because it is in writing

• JPF argues that appearance of sender’s address constitutes a signature; but well-known that this is automatically inserted; inclusion of email address is incidental and not intended to be a signature

• Price – s12: price in a contract of sale may be (a) set by contract; (b) left to be set as agreed in the contract, or; (c) determined by the course of dealing between the parties; if not (2) the buyer must pay a reasonable price, which (3) is a question of fact dependent on the circumstances of each case

• Montana Mustard Seed v Gates – P made contract with D to buy mustard seed, but D gave him No3 grade but contract said P only has to pay for No1 seed

• Reading whole contract shows that there was contract to buy and sell D’s entire 1961 crop, but price only agreed for No1 grade; no need to establish price as the law will, and must, fix a price which is reasonable – price of No3 seed is reasonably same as No1 since demand was great

Categorisation

• S9: goods can be existing or future; specific, unascertained, or ascertained

• Specific goods are goods identified and agreed upon at the time the contract of sale is made

• Unascertained goods are goods that aren’t identified at the time of the sale; contract must contain a description and buyer must get a chance to inspect before being ascertained

• Ascertained goods – results from the process of appropriation of originally unascertained goods

• S1: future goods are goods to be manufactured or acquired by the seller after the making of the contract of sale

• S9(3) makes it clear that such a contract initially takes effect as an agreement to sell

• Perished Goods

• S10: a contract for the sale of specific goods is void if, without the knowledge of the seller, the goods have perished at the time when the contract is made

• S11: If there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is avoided

The Contract of Sale of Goods: Elements of the Contract

Types of Obligations

•S1: Warranty - agreement with reference to goods that are the subject of a contract of sale, but collateral to the main purpose of that contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated

•S15(2): Whether a stipulation in a contract of sale or lease is a condition, the breach of which may give rise to a right to treat the contract as repudiated, or is a warranty depends in each case on the construction of the contract

•Leaf v International Galleries – P bought painting from D, discovered 5y later that it wasn’t painted by Constable, can P rescind?

•Assume condition, but right to reject for breach has always been limited by the rule that once the buyer has accepted the goods, he cannot thereafter reject; buyer has accepted goods after lapse of reasonable time, as in this case (5 years)

•S15(4): (4) If a contract of sale is not severable and the buyer has accepted the goods or part of them, or if the contract is for specific goods the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

•Hong Kong Fir v Kawasaki – we can’t treat all as either conditions or warranties; use intermediate term approach – did it give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract? (look at nature of the events)

•Cehave NV v Bremer – on delivery, some of the cargo was damaged, there was an express clause: “goods were to be shipped in good condition”

•Not a condition or warranty, but intermediate stipulation which gives no right to reject unless the breach goes to the root of the contract; buyer entitled to damages but not rejection, used them all for intended purpose

•Bunge v Tradax – “giving 15 days notice” – this is a condition precedent to the ability of the other party to perform, so the term as to time for the performance for the former obligation will in general fall to be treated as a condition

Implied Terms and Exclusion/Limitation Clauses

•Implied Terms – s69: any right, duty or liability that would arise under a contract of sale by implication of law may be negativedor varied (a) by express agreement, (b) by the course of dealing between the parties, or (c) by usage, if the usage is such as to bind both parties to the contract

•Canadian Pacific Hotels v BMO – D forged cheques, no such custom for customer to examine bank statements; no implied duty to give the contract business efficacy; and a duty (absence of verification agreement) to examine bank statements with reasonable care and report discrepancies within a reasonable time is not necessary or required by the contractual relationship in this sense

•Exclusion and Limitation Clauses – equal bargaining power doesn’t always exist, especially when there are exclusion clauses in consumer sales transactions

•Clauses which deny express warranties or representations are included in contract;

•Clauses which limit or negative a buyer’s right in event of non-performance or defective performance by sellers

•Tercon v BC – BC accepted a bid from a bidder who wasn’t eligible to participate in tender and then took steps to ensure that this fact wasn’t disclosed; RFP clause said “no proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP”

•“participating in this RFP” means participating in a contest among those eligible to participate

•(1) As a matter of interpretation, whether exclusion clause even applies to the circumstances established in evidence? Look at intention of parties

•(2) Whether exclusion clause was unconscionable at the time the contract was made, as might arise from situations of unequal bargaining power between the parties

•(3) Should Court nevertheless refuse to enforce valid exclusion clause because of the existence of an overriding public policy, proof of which lies on the party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement of contracts?

Consumer Protection and the Contract of Sale

•Freedom of contract is often limited where the buyer is a consumer who doesn’t have anywhere near the economic power of access to information that the seller has

•Gaertnere v Fiesta Dance Studios – 31y nurse bought dancing lessons, but company preyed on lonely and foolish people

•Gold Key Club was a demeaning, cruel, and fraudulent device used to induce certain students to sign up for more lessons (instructor said she had great ability was prepared to propose her as a member of the Gold Key Club after filming her performance) – pressured her to sign up for $2573 more of lessons after giving her cake and congratulations

•performance wasn’t filed or sent to NY; P wasn’t supplied with competent and qualified instructors; contract rescinded

•Tilden Rent-A-Car Co v Clendenning – D rented car (done it many times) and didn’t read contract; contract said customer is fully liable if they drive off highways serviced by govt, or if consumed any intoxicating liquor

•To avoid collision with another car, he drove it to a pole, he pleaded guilty of driving while impaired although he was capable of proper control of vehicle

•Provisions are inconsistent with the overall purpose for which the contract is entered into (insurance): if driven exceeded speed limit by 1, had one beer, if driven off highway, etc.

•D said had he known of the full terms, he wouldn’t have entered into contract

•In modern commercial practice, many standard form documents are signed without being read or understood; don’t represent the true intention of signer; unaware of the stringent and onerous provisions which the standard form contains

•P took no steps to alert D to the onerous provisions; D is entitled to the benefit of the contract in the manner provided without the exclusionary provisions; D wins

•Harry v Kreutziger – bought fishing boat; Indigenous, congenital hearing defect, grade 5 education, not widely experienced in business matters; he parted with an asset worth $16000 for $4500, and now P can’t get another licence

•was assured falsely that he could get another licence easily; inequal bargaining position; rescinded & unconscionable; divergent from community standards of commercial morality

The Contract of Sale of Goods: Elements of the Contract & Consumer Protection and the Contract of Sale

The Privity Problem

•Lyons v Consumers Glass Co – P (4) bringing an action by his father, mom bought a glass baby bottle to feed infant, bottle fell and glass piece struck P’s eye; No privity of contract, action not taken by mother; questionable in any event that parent can be said to be contracting for the benefit of the child

•Chabot v Ford Motor Co of Canada – P claims damages for destruction by fire of vehicle purchased by him from South Park dealer, manufactured by Ford; No abuse of the vehicle, and no warning of fire

•Purchase agreement between P and SP dealer: there are no warranties, expressed or implied, made by seller or the manufacturer except that in the case of a new vehicle warranty delivered to purchaser; new vehicle warranty is the only warranty applicable so such new vehicles

•Court: this excludes warranties, NOT conditions

•New warranty agreement (12m or 20k km): Ford warrants that selling dealer will repair replace or adjust defective parts; all we require is that you properly operate and maintain your vehicle

•Followed by broad exclusion clauses: “the foregoing basic warranties represent the only express warranties on this vehicle”; “neither Ford nor selling dealer shall have any responsibility for loss of vehicle, special/consequential damages”

•Issue 1: Do Ford’s exclusionary clauses affect SP’s contractual liability to P?

•Purchaser should have the benefit of an express warranty from the dealer in the same terms as found in Ford’s new vehicle warranty

•There was a fundamental breach of the purchase agreement (even with exclusion clauses); the clauses could be given full business efficacy without doing violence to the parties’ intention that the vendor would assume the fundamental obligation or providing a suitable vehicle

•Implication: Exclusions clauses of the warranty were directed only towards situations where the vehicle retained its essential character and capability as a motor vehicle

•Exclusion clauses never intended to destroy the substratum of whole transaction – SP is liable for loss of vehicle ($12068)

•Issue 2: Tortious Liability of Ford – infer negligence on the part of Ford & duty of care; negligence allowed oil to leak out, causing fire – Ford liable to P in negligence

•Negligence Damages for inferior quality best left to lawsuits between vendors and purchasers (citadel of privity of contract); but Negligence Damages for accidents are recoverable from manufacturer

•P accordingly entitled to recover damages from Ford unless precluded by new vehicle warranty

•Issue 3: Do exclusionary clauses in Ford’s warranty go beyond and exclude tortious liability?

•Purchase agreement told P he was getting a warranty from Ford, an additional benefit; neither by purchase agreement or any other source was P told that his rights against Ford Canada in tort were to be taken away from him – exclusionary aspects of warranty should be viewed as applying only to limit the liability it assumed by the express warranty

•Dealer exclusion does not work retroactively – only excluded negligence from the time the contract was created, not when the vehicle was built – Ford also jointly/severally liable for $12068

•Issue 4: Does Ford owe contractual liability to P under terms of new vehicle warranty? Ford promises that SP would repair defective parts; SP has not repaired it and has opposed P’s claim for relief, so accordingly, Ford is liable, in warranty, for the cost of such service (however, little relief and $)

•Ratio: Protection of privity of contract is important (otherwise, “manufacturers would be subject to indiscriminate lawsuits by persons having no contractual relations with them, persons who could thereby escape the limitations, if any, agreed upon their contract of purchase”) – only when the danger inherent in a defectively made article causes an accident that a cause of action against manufacturer also arises

Models for Reform

• US Developments

• Henningsen v Bloomfield Motors – P’s wife was injured while driving car; new cars have implied warranty that it is reasonably suitable for use as such accompanies it into the hand of the ultimate purchaser

• An implied warranty to either automobile manufacturer or a dealer extends to the purchaser of the car, members of his family, and to other persons occupying or using it with his consent – must be considered within distributive chain

• Quebec

• General Motors Products of Canada v Kravitz – K purchased car from Plamondon, manufactured by GM; K complained of defects

• Where an obligation is identified with the thing transferred or is the accessory thereof, the successor by particular title of the first seller is not regarded as a third party, and it is considered normal that he be automatically substituted for the previous creditor of such obligation

• The warranty against latent defects is clearly an accessory of the thing sold

• Sub-purchaser may proceed directly against the first seller for both cancellation and damages

• Canada Common Law

• Fraser River Pile & Dredge Ltd v Can-Dive Services Ltd – P owned ship that sank while it was under charter by D (negligent); insurer wants to sue

• (a) Did parties to the contract intend to extend benefit to third party? Yes, express reference to “charterer(s)”

• (b) Are activities from third party the very activities contemplated as coming within the scope of the contract? Yes, the relevant activities arose in the context of the relationship of Can-Dive to FR as a charterer, the very activity anticipated in the policy pursuant to the waiver of subrogation clause

Obligations of Suppliers and Manufacturers

The Passing of Property and Risk

•Significance of Situs – location of goods may be relevant since many rights/risks depend on whether property has passed to the buyer

•Rules Governing Passing of Property

•The time at which property is transferred from seller to buyer is a function of the parties’ intention (s22), subject to the qualification that, in a contract for the sale of unascertained goods

•Liberty Wine Merchants Ltd v Isaak – P seeks injunction/damages for breach of term prohibiting retail sale of wine from RackIt

•RackIt is “brew-on premise” – transaction to transfer property interest to customer before goods become wine; so RackIt is not engaged in the sale of wine due to manner of transaction

•Goods are ascertained when employee takes kit from inventory and opens it

•Specific Goods: Kursell v Timber Operations – P bought forest which has been appropriated, annulling all private rights; vendors sue for price of forest

•Specific goods are goods identified and agreed upon – here, not every tree passed, and it depended on where it was cut and how far from the ground; timber not in deliverable state; property had not passed under s23, and timber not at risk of purchasers

•23(2)If there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, are postponed.

•23(3)If there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until that thing is done and the buyer has notice of it

•23(4) If there is a contract for the 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, the property does not pass until that act or thing is done and the buyer has notice of it.

•Risk Passes With Property

•25(1) Unless otherwise agreed, the goods remain at the seller's risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer's risk, whether delivery has been made or not.

•25(2) If delivery has been delayed through the fault of either buyer or seller, then despite subsection (1), the goods are at the risk of the party in fault as regards any loss that might not have occurred but for that fault.


•Unascertained Goods – not yet physically identified, either (a) only generically described; (b) not yet been separated from a larger bulk of which they form a part; or (c) the goods do not yet exist – until ascertained, contract only agreement to sell

•23(7) If there is a contract for the sale of unascertained or future goods by description, the property in the goods passes to the buyer when goods of that description and in a deliverable state are unconditionally appropriated to the contract

•(a) by the seller with the assent of the buyer, or; (b) by the buyer with the assent of the seller

•Carlos Federspiel v Charles Twigg – P bought bikes from D, D passed goods to Receiver, which didn’t deliver goods, company then went bankrupt; no appropriation; test for unconditional appropriation:

•1) The intention of parties ascertains to the time at which the property in the goods is to pass to the buyer unless a different intention appears; YES

•2) It is by agreement of the parties that the appropriation, involving a change of ownership, is made; NO AGREEMENT

•3) An appropriation by the seller, with the assent of the buyer, may be said always to involve an actual or constructive delivery; NO SUGGESTION OF SELLER BECOMING BAILEE FOR BUYER, no delivery here

•4) Did the risk pass on to the buyer?; NO

•5) Appropriating act is the last act to be performed by the seller (not necessarily); not done yet

•Sells v Thomson – D ordered 25 volumes of book from P (doing business in England, but licensed in BC), paid first shipment, cancelled order for second shipment, seller delivered and demands payment

•Where there is a K for sale of future unascertained goods by order, and where the buyers cancel the rest of the order upon receipt of part of the order, the cancellation amounts to a withdrawal of assent to appropriation of goods by the buyer

•Risk and Frustration – Risk deals with which party will bear burden of uncertainty (financial consequences of injury or the destruction of goods); Frustration deals with unexpected events undermining the foundation of the contract

•Jerome v Clements Motor Sales – D bought car from P, P agreed to do repairs, did most but one repair, and then fire destroyed car; goods remain in seller’s risk until transferred in deliverable state as agreed [s23(3)]

•There was no intention that the property should pass prior to the completion of the stipulated repairs and notice of the same being given to the purchaser

•At the time of the fire, such notice had not been given and the risk remained in the vendor


The Nature of the Right to Sell Goods

• S16: In a contract of sale or lease, unless the circumstances of the contract are such as to show a different intention, there is

• (a)an implied condition on the part of the seller or lessor that

• (i)in the case of a sale or lease, the seller or lessor has a right to sell or lease the goods, and

• (ii)in the case of an agreement to sell or lease, the seller or lessor will have a right to sell or lease the goods at the time when the property is to pass or the lessee is to take possession of the leased goods,

• (b) an implied warranty that the buyer or lessee is to have and enjoy quiet possession of the goods, and

• (c) an implied warranty that the goods are free from any charge or encumbrance in favour of any third party, not declared or known to the buyer or lessee before or at the time when the contract is made

• Rowland v Divall – P bought car from D, then sold it to someone else; car stolen before D possessed it

• Buyer cannot rescind as goods cannot be restored; seller had no right to sell; P entitled to recover money he paid for

• Total failure of consideration, buyer didn’t receive

• Butterworth v Kingsway Motors Ltd – Rudolph took car from Bowmaker on hire-purchase agreement

• Rudolph paid some payments but then sold it to Kennedy (wrongful sale, since car still belonged to Bowmaker); Kennedy then sold it to Hayton, which then sold it to D, which then sold it to P; P wrote letter to D saying car was not yours to sell and repudiated; P is entitled to repayment of purchase price (1275)

• P’s Letter constitutes as rescission, newly acquired title of Rudolph (after finally making all payments) passed all along the line and caused the ownership of car to vest in D

• In consequence of breach of warranty, D gets $1275 (purchase price) minus $800 (value of car) from H (475); H gets 475 from K; K gets $475 from R

The Scope of s16(a) & Exclusions

•16(a) doesn’t state that the seller has the title to the goods sold, but that the seller has the right to sell the goods which may or may not mean that the seller has title

•Niblett Ltd v Confectioners’ Materials Company Ltd – buyers seek to recover damages from the sellers on the ground that the goods delivered were not in accordance with contract; bought 3000 cases of condensed milk; 2000 delivered, and 1000 were subject to trademark infringement injunction (buyer has no right to sell)

•Implied condition that sellers shall have a right to sell the goods at the time when the property is to pass; seller didn’t have the right, so there was a breach of this condition

•J. Barry Windsor & Assoc. v Belgo Cdn Mfg Co Ltd – buyer bought 2000 lamps to resell, D’s lamps were not lawfully resaleable (prohibited by CSA); broke implied condition in 16(a) that seller has right to sell the goods; P entitlted to recover

•Exclusion of the Implied Condition of the Right to Sell

•Sloan v Empire Motors Ltd – P agreed to purchase car from D; later Vancouver Finance seized it from earlier conditional sale agreement; P suing for breach of warranty

•Condition 4 in contract says “there are no implied conditions and warranties”

•Endorsed in back is D declaring to P that title was clear of encumbrance and the full right to assign such property = clear intention

•Immediate default on D that it didn’t pass P right to possession; no sale at all of goods which seller has no right to sell; D liable to P in damages

•The Warranties of Quiet Possession and Freedom from Encumbrance

•Microbeads AC v Vinhurst Road Markings – D bought special machinery from P; 3 years later another company (Prismo), who owned a patent, came along and said machines infringed their patent

•P bought machines before invention was made public – no breach of s16(a)(i)

•Even if disturbance is by title paramount – such as by the patentee coming in and claiming an injunction to restrain the use of the machine – there is a breach of the implied warranty under s16(b)

•It may be the seller is innocent himself, but when one or other must suffer, the loss should fall on the seller; because, after all, he sold the goods and if it turns out that they infringe a patent, he should bear the loss

•Buyer not able to enjoy quiet possession which seller impliedly warranted that he shall have

•16(b): the words “shall have and enjoy” apply not only to the time of the sale but also to the future

The Seller’s Title Obligation

Sales by Description

• 17(1) In a contract for the sale or lease of goods by description, there is an implied condition that the goods must correspond with the description

• 17(2) If the sale or lease is by sample, as well as by description, it is not sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with the description

• 18(b) if goods are bought by description from a seller who deals in goods of that description, whether the seller or lessor is the manufacturer or not, there is an implied condition that the goods are of merchantable quality; but if the buyer or lessee has examined the goods there is no implied condition as regards defects that the examination ought to have revealed;

• Frey v Sarvajc – D failed to advise P that truck was previously “total loss” vehicle that had been repaired using parts from 3 different cars; P got registration, failed to notice endorsement on registration that said “previously total loss”, and didn’t arrange for any inspection

• Here, the truck was sold “as is” without express warranty of any kind; incumbent upon buyers to include express warranty (of no previous accident) in bill of sale

• Defects were patent and discoverable by inspection and ordinary vigilance; so rule of caveat emptor applies (vendor not bound to call attention to them, only latent defects)

• To advertise a truck with 58000km as though it was one entire homogeneous unit, all of whose parts had been exposed to the same use (58000km) was misleading

• S15(4) where buyer has accepted the goods, breach of condition can only be treated as a breach of warranty and not as a ground for rejecting the goods – P entitled to damages

• Hart-Parr Company v Jones – P shipped D an engine the size/shape of one ordered, freshly painted so as to look like a new engine

• What took place was not such an acceptance of the engine as prevented D from rejecting it when he did; acceptance was induced by act of P covering up defects

Sales by Description

• Varley v Whipp – P sold machine to D; P put machine on railway, D was to pay the carriage; D didn’t see machine but said he would have it; D said it’s not “practically new” as per description, and refused; property never passed (was never accepted)

• The term “sale of goods by description” must apply to all cases where the purchaser has not seen the specific goods, but is relying on description alone –17(1) implied condition that goods must correspond with description that it’s “practically new”

• Beale v Taylor – D sold car to P, P found out that car was made up of 2 cars and also unsafe to drive; this was still sale by description even though specific goods

• No one could see from ordinary sort of examination that it wasn’t of description

• Taylor v Combined Buyers – P suing on breach of implied merchantable quality –sale of a specific article is a sale by description within 18b only if article is expressly sold as being of a certain kind, class of species; but the statements made as to the quality or other unessential attributes of the articles sold are not parts of the description, but are merely representations, and inoperative unless fraudulent, or unless statements amount to an express warranty or condition –sale of a specific good imports implied condition of merchantable quality

• Arcos Ltd v EA Ronaasen & Son – buyer wanted very precise measurements of wood, but wood was left out in weather so measurements were off – if the written contract specifies conditions of weight, measurement, etc, those conditions must be complied with ; if seller wants a margin he must stipulate for it

• It fit his particular purpose, but there is no reason why he shouldn’t abandon that purpose if he pleases, and apply the goods to any purpose for which the description makes them suitable (no business/legal reason not to reject them if he wants to)

• Ashinton Piggeries v Christopher Hill – P’s minks poisoned by ingestion of herring meal due to contamination; toxic substance developed by itself; description of “herring meal” was met even though it said “best quality” (since not used for identification)

The Seller’s Obligations as to Description and Quality

1. The Standard of Merchantable Quality

• Bartlett v Sidney Marcus Ltd – P bought Jaguar from D; D told him of defects (not serious); P bought it for $550 on agreement that he do repairs himself; at garage, he found serious defects

• A buyer should realize secondhand cars have defects, and in the absence of an express warranty, he has no redress (most he can require is reasonable fit for the purpose); P drove it for more than 4 weeks, car was reasonably fit for use as a car on the road; no breach

• Kendall v Lillico – turkeys poisoned from ground nut mixtures; for some buyers, the defects might make goods useless, but for other buyers it has no effect

• Contaminated ground nut extractions are merchantable under the general description of ground nut extractions because some buyers appear to be ready to buy them under that description and to pay the ordinary market price for them (cattle purpose not affected, only poultry purpose affected); market price is the same

• BS Brown & Sons Ltd v Craiks Ltd – P wanted cloths for making dresses; D thought it was for industrial use; cloths not suitable for dresses because of irregular weaving; appellants didn’t make known to purpose; no evidence that it wasn’t of merchantable quality

• Hartmann v McKerness – P bought watch for $50000 represented as genuine, but not genuine

• D is not a “dealer of watches” (18(b))

• It is a sale by description; watch sufficiently corresponded to the description; used for purpose; of merchantable quality; law doesn’t protect people from improvident bargains

• IBM v Shcherban – D bought machine but glass dial was broken (not in deliverable condition)

• Would reasonable man after full exam accept it? Purpose was to resell, wouldn’t have accepted broken glass dial

2. Durability & 3. Effect of Inspection or Opportunity to Inspect

•2. Durability

•S18: Subject to this Act, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale or lease, except as follows:

•(a) if the buyer or lessee, expressly or by implication, makes known to the seller or lessor the particular purpose for which the goods are required, so as to show that the buyer or lessee relies on the seller's or lessor's skill or judgment, and the goods are of a description that it is in the course of the seller's or lessor's business to supply, whether the seller or lessor is the manufacturer or not, there is an implied condition that the goods are reasonably fit for that purpose; except that in the case of a contract for the sale or lease of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;

•(b) if goods are bought by description from a seller or lessor who deals in goods of that description, whether the seller or lessor is the manufacturer or not, there is an implied condition that the goods are of merchantable quality; but if the buyer or lessee has examined the goods there is no implied condition as regards defects that the examination ought to have revealed;

•(c) there is an implied condition that the goods will be durable for a reasonable period of time having regard to the use to which they would normally be put and to all the surrounding circumstances of the sale or lease

•Mash & Murrell v Joseph Emanuel – P purchased potatoes, found to be rotten before delivery to destination

•Merchantable quality: “goods in the form in which they were tendered of no use for any purpose for which such goods would normally be used and hence were not saleable under that description”

•Implied condition that they remain merchantable for a reasonable time (normal transit to the destination)

•Buckley v Lever Bros – no signs of deterioration on clothespin to shatter; vendor not an insurer; were of merchantable quality when contract entered and when property passed

•3. Effect of Inspection or Opportunity to Inspect

•Thornett & Fehr v Beers & Son – D bought vegetable glue, given chance to inspect, didn’t open barrels, but just looked at the outside (no time, low price)

•The examination agreed to on Sept 18, which they had full opportunity of making on Sept m19, would involve the opening of a sufficient number of casks to ascertain the condition of the glue

•Therefore, there is no implied condition – having found it was not a sale by sample, and that there was no implied condition that the glue was merchantable, the defence fails, and P wins


The Implied Condition of Suitability for a Particular Purpose

• Crowther v Shannon Motor Co – P bought Jaguar, took it for trial run, relied on seller’s skill and judgement that car was reasonable fit for purpose

• Engine in bad condition, car was out of use in months

• Distinguished from Sidney Marcus, in that this was not a minor repair (engine blew up after 2000 miles); buyer could reasonably expect 100000 miles out of Jaguar engine, but died at 80000

• Not reasonably fit for the purpose at the time it was sold

• Kendall v Lillico – 18a requires buyers shall have required the goods for a particular purpose, that that purpose shall have been made known to the seller, and that it shall have been made known to him in such circumstances that buyer was relying on seller’s skill or judgement to select goods fit for that purpose

• Purpose is to be stated with sufficient particularity to enable the seller to exercise his skill or judgement in making or selecting appropriate goods

• A reasonable seller in shoes of Kendall would have realized that he was inviting Grimsdale to rely on his skill and judgement, and that is what I think that in fact P was doing

• Reasonable that buyer should rely on seller to deliver ground nut meal which would be a healthy and not a harmful ingredient

• Kendall was aware that the purpose or Grimsdale was to re-sell in smaller quantities to be compounded into food for cattle and poultry

• The use of poultry compounds for rearing pheasants was a generally known use; damage was in the natural course of events and also was within the contemplation of the parties

• D liable under 18a – harm to peasants was not too remote; price can also imply a particular purpose

• Meal was not reasonably fit for the purpose for which it was supplied, even if in merchantable quality

The Implied Conditions of Suitability for a Particular Purpose

• Baldry v Marshall – P asked D if eight-cylinder Bugatti will be on market this year; D replied “we specialize in sale of cars, and are in a position to supply you with information necessary (thereby imitating that P might regard them as persons upon whose skill and judgement he could safely rely); P bought car but didn’t fulfil P’s purpose

• The mere fact that an article sold is described in the contract by its trade name does not necessarily make the sale a sale under a trade name

• 1) Where a buyer asks a seller for an article which will fulfil some particular purpose, and in answer to that request the seller sells him an article by a well-known trade name, provision doesn’t apply

• 2) Where buyer says to seller “I have been recommended such and such an article” – mentioning it by its trade name - “will it suit my particular purpose?”, naming the purpose, and thereupon the seller sells it without more, then again provision doesn’t apply

• 3) Where buyer says to seller “I have been recommended so and so” – giving its trade name – “as suitable for the particular purpose for which I want it. Please sell it to me”

• Provision applies & implied condition of the thing’s fitness for the purpose named would not arise

• Test: did the buyer specify it under its trade name in such away as to indicate that he is satisfied, rightly or wrongly, that it will answer his purpose, and that he is not relying on the skill or judgement of the seller, however great that skill or judgement may be?

• In this case, there is nothing to show that P (when describing car in contract as an ‘eight-cylinder Bugatti car’ after he had communicated to D the purpose for which he wanted it) meant to intimate that he was not relying on their skill and judgement

• The evidence seems to be all the other way; appeal dismissed; not a sale by trade name and sellers are liable


Allergies and Idiosyncratic User

•One particular aspect of fitness for purpose arises as the result of the susceptibility of some people to allergic reaction to certain substances

•Buyer can use 18(a) whether they know of this allergy or whether their allergy is common

•Esborg v Bailey Drug – P bought hair tint preparation; no ingredients list; not patch test specified; only directions stating “hypersensitive person may experience an allergic scalp irritation, if so discontinue”

•P suffered reaction, swollen, bumps, looked bad; P never previously allergic to any substances nor suffered any untoward reaction

•P needs to produce substantial evidence which will support findings that: (test limited to synthetic products)

•1) The product involved contains a harmful ingredient

•2) Such ingredient is harmful to a reasonably foreseeable and appreciable class or number of potential users of the product

•3) P has been innocently injured in the use of the product in the manner and purpose intended

•Griffiths v Peter Conway – P bought from D a tweed coat, specially made for her; shortly after she developed dermatitis (very severe and prolonged attack)

•No normal skin would have been affected by this cloth; P unfortunately had an idiosyncrasy, and that was the real reason why she contracted this disease

•Before the condition as to reasonable fitness is implied, it is necessary that the buyer should make known, expressly or by implication, first of all the particular purpose for which the goods are required

•If the person suffering from an abnormality requires an article of clothing for their use –essential for seller to know in such cases with regard to the purposes for which the article is required consists in the particular abnormality or idiosyncrasy from which the buyer suffers (so that seller can exercise skill or judgement in relation to the suitability of the goods that he is selling); s18(a) doesn’t apply

•Ingham v Emes – P had hair dyed by hairdresser using Inecto, eyes became puffy and doctor said it was Inecto that caused trouble; 7 years later she did it again and did an esay test to see if any skin trouble; sample came out fine and P got her hair dyed with Inecto, and within a few days suffered from acute dermatitis

•Assistant didn’t impliedly warrant that Inecto was safe to be used by persons allergic, but only to those who passed test and are ordinary/normal; P was not an ordinary normal person and she knew of her peculiarity and failed to disclose it to the assistant; appeal allowed

Sale by Sample

•In sales transactions that are sales by sample, the buyer can have recourse to s17,18 as well as s19 to address the problem that has arisen

•19(1) A contract of sale or lease is a contract for sale or lease by sample if there is a term in the contract, express or implied, to that effect.

•(2)In a contract for sale or lease by sample,

•(a)there is an implied condition that the bulk must correspond with the sample in quality,

•(b)there is an implied condition that the buyer or lessee must have a reasonable opportunity of comparing the bulk with the sample, and

•(c)there is an implied condition that the goods must be free from any defect rendering them unmerchantable that would not be apparent on reasonable examination of the sample

•Cudahy Packing Co v Narzisenfeld – D agreed to pay P for 400 cases of eggs sold and delivered in NY; eggs at time of sale; D asked if inspected by Mercantile Exchange, and he was informed that they had been, and he was handed a number of inspection certificates which he looked over; he selected one and asked for an order authorizing him to go to warehouse and examine eggs described in certificate he had selected

•A sale by sample is not accomplished whenever a specimen of the thing under consideration is exhibited to the buyer in the course of the negotiations

•It must have the understanding of both parties that the goods exhibited constituted the standard with which the goods not exhibited corresponded and to which deliveries would conform

•Sale of sample means seller can select a sample and offer it was a specimen of the remainder (warrants that sample corresponds to the remainder of the goods which aren’t exhibited)

•If the vendor affords the vendee opportunity of inspection, as was done here, and the vendee inspects a portion of the goods which he calls for and fails to examine the remainder which he is given the opportunity to inspect, he cannot claim in the absence of an express agreement, that what he did examine constituted a “sample” to which the remainder (which he might have examined) was warranted to conform

•Steels & Busks v Bleecker Bik & Co Ltd – buyers early deliveries suitable; final delivery unsuitable since stained by PNP

•the extent to which a sample may be held to “speak” must depend on the contract and what is contemplated by the parties in regard to it

•in this case, parties were content, in accordance with the normal practice of the trade, to rely on visual examination; PNP is not visual so cannot be a breach of the sample clause; 19(2)(a) doesn’t cover latent defects but to patent defects that are discoverable from such exam/inspection

•Godley v Perry et al – toy catapult broke and injured infant P’s left eye; arguing 19c “free from any defect in sale by sample” (between D and HK supplier); D sampled it in HK

•Ultimate supplier argued that a reasonable examination of the toy would have revealed its defects and thus the condition shouldn’t be applicable. Court rejects this – what is a reasonable examination is one that would be understood by the common-sense standards of everyday life (as in present case); no need to test it to death (no breach of (a) but breach of (c))


Delivery

•S1 "delivery" means voluntary transfer of possession from one person to another

•Frequently parties to a sales transaction do not specify the delivery obligation of the seller; SGA specifie place of delivery, time of delivery, and obligations with respect to care of the goods in transit

•Time of Delivery

•Stipulations as to time

•14(1) Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale.

•(2) Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract.

•(3) In a contract of sale, unless there is evidence to the contrary, "month" means calendar month.

•Payment and delivery are concurrent conditions

•s32 Unless otherwise agreed, delivery of the goods/payment of the price are concurrent conditions; that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods

•Bowes v Shand – two contracts for sale of rice, which differ only in respect of the price; agreed that rice would be shipped March/Apr

•This is a mercantile contract, and merchants are not in the habit of placing upon their contracts stipulations to which they do not attach some value and importance, and that alone might be a sufficient answer

•Rice should be forthcoming to them not later than a certain time, but also not be forthcoming to them at a time earlier than it suits them to be ready with funds for its payment

•Rice was on board in February (with the exception of 50m bags, which was put on board March 2), and BOL were given during February; too early to fulfil contract

•The great bulk of this rice was put on board during the Feb; nine-tenth of it bills of lading were signed in Feb

•BOL is no part of shipping, but when the question is whether there has been a shipment within a particular time or not, the fact that a bill of lading has been made out and signed is evidence

•Rice was shipped in Feb, not march, and consequently in the absence of mercantile usage D are entitled to judgement

Delivery

•Time of Delivery (Continued)

•Charles Rickards v Oppenheim – D ordered Rolls Royce, said it would take 6-7 months, but it wasn’t built til 14 months later; P kept pressing for delivery and kept getting promises;

•At end of June (11 months later), D says he won’t accept unless delivered by Jul 25

•D bought new car and asked P to return money, then waived cancellation and agreed that P should continue working and D would buy later; then delivery was refused

•Was D entitled to give such a notice, making time of the essence? Yes – adequate protection to suppliers given by requirement that notice should be reasonable

•Was notice reasonable? Yes, original contract made time of the essence; D pressed continually for delivery; P said two more weeks and day after D gave 4 weeks’ notice

•Having originally stipulated 6-7 months, having waited 11 months, and still not getting delivery, D entitled to cancel K

•Delivery of the Proper Quantity

•34(1) If the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them.

•(2) If the buyer accepts the delivered goods, the buyer must pay for them at the contract rate.

•(3) If the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may

•(a) accept the goods included in the contract and reject the rest, or (b) reject the whole.

•(4) If the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell and the buyer accepts the whole of the goods delivered, the buyer must pay for them at the contract rate.

•(5) If the seller delivers to the buyer the goods the seller contracted to sell mixed with the goods of a different description not included in the contract, the buyer may

•(a) accept the goods that are in accordance with the contract and reject the rest, or (b) reject the whole.

•(6)This section is subject to any usage of trade, special agreement or course of dealing between the parties.

Delivery

•Delivery of the Proper Quantity (Continued)

•In Re Moore & Co and Landauer & Co – seller sold to buyer 3100 cases of canned fruits (30 tins to a case); some cases only had 24 (but total quantity was correct)

•buyer allowed to reject since quantity of tins is wrong; a man who has bought 30 tins to a case may have sold under the same description, and may be placed in considerable difficulty by having goods tendered to him which don’t comply with description under which he had bought/resold

•Delivery by Installments

•35(1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery by instalments.

•(2) If there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is

•(a) a repudiation of the whole contract, or

•(b)a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated

•Maple Flock v Wembley Ltd – K for deliveries of furniture stuffing (flock) in installments paid for separately. Quality issue with the 16th delivery. Buyers want to reject and terminate the entire K

•In deciding (for 35(2)) whether the buyer has a right to repudiate the entire installment K when one or several deliveries involve non-conforming goods, the chief considerations are:

•1. The ratio must be quantitatively large which the breach bears to the contract as a whole (in this case, NO, only 11/2 tons out of a contract for 100 tons); AND

•2. The degree of probability/improbability that such a breach will be repeated or a reasonable likelihood that the breach will be repeated as inferred from the circumstances and the kind of the breach (in this case, chance of breach being repeated is practically negligible)

Delivery

The Right to Reject the Goods Tendered

•Breach of a condition or intermediate term where the consequences of breach are serious lead to the buyer’s right to reject the goods tendered

•In come cases, seller can tender alternative goods in compliance with the contact, but usually the right to reject the goods (if exercised) brings the contract (at least its primary obligations) to an end

•Loss of the Right to Reject: Specific Goods

•15(4) If a contract of sale is not severable and the buyer has accepted the goods or part of them, or if the contract is for specific goods the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

•Intention of the parties as to the passing of the property in the goods:

•23(2) If there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, are postponed

•(3) If there is a contract for the sale of specific goods, and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until that thing is done and the buyer has notice of it.

•(4) If there is a contract for the 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, the property does not pass until that act or thing is done and the buyer has notice of it


•Loss of the Right to Reject: Specific Goods

•Implication of s.15(4) + s.23(2) = the buyer never has the right to reject the goods (since property in specific goods passes immediately when K is entered into)

•Courts have been good at circumventing this situation

•Woojakowski v Pembina Dodge Chrysler – P sues for rescission of an agreement to purchase from D a 1975 Dart automobile, and for return of purchase money paid by her

•Car leaked oil, water leaked to truck, painting defects

•D breached s18(a) since didn’t fit purpose; however, D argues 15(4) that P not entitled to reject automobile or repudiate; this is a contract for specific goods (identified and agreed upon at the time P agreed to buy it)

•However, property did not pass within meaning of 15(4); P never unconditionally accepted automobile (or, accepted on basis that painting work will be done by D)

•Since it didn’t pass to P, accordingly, P entitled to reject automobile and treat contract as repudiated

•Literal application of s.23(2) would mean that purchaser of spgoods would never be able to reject the goods; Court says a literal interpretation should not be used (unjust)

•“conditional property” – until the goods are unconditionally accepted by the purchaser, only a conditional property passes

•Loss of Right to Reject: Acceptance

•Buyer's right of examining goods

•38(1) If goods are delivered to the buyer that the buyer has not previously examined, the buyer is not deemed to have accepted them unless and until the buyer has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.

•(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, the seller is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.

•S39: The buyer is deemed to have accepted the goods when

•(a) the buyer intimates to the seller that the buyer has accepted them; (b) the goods have been delivered to the buyer, and the buyer does any act in relation to them which is inconsistent with the ownership of the seller; or (c) after the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that the buyer has rejected them.


• Loss of Right to Reject: Acceptance

• Hardy & Co v Hillerns and Fowler – D bought wheat at certain price, D then sold to sub-purchasers; D dispatched some of the wheat to these sub-purchasers; In the meantime, D tested quality and found it inadequate/didn’t meet description; Tried to reject under s.18(b)

• Seller contended that under s35, buyers must be deemed to have accepted the goods and lost their right of rejection

• Was act of reselling to sub-purchasers an act inconsistent with ownership of sellers?

• When under a contract goods are delivered to buy that isn’t in accordance with contract, buyer has right to reject, and seller upon receipt of rejection is entitled to have the goods placed at his disposal to resume possession

• If buyer has done any act which prevents seller from resuming possession (as in this case), that act is necessarily inconsistent with seller’s right (not enough for buyer to give back possession at later date; he must be able to do so at time of rejection)

• Buyer lost the right to reject via accepting the goods under s39; limited to claim in damages; s38 is qualified by s39 – if the buyer is deemed to have accepted the goods under s39, he will lose the right of rejection even if he did not have a reasonable time to inspect the goods; s39 overrides s38

The Buyer’s Remedies


•Loss of Right to Reject: Acceptance

•Rafuse Motors Ltd v Mardo Construction Ltd – D wanted to buy a Fordson tractor, but P suggested 871 instead; D said he would take it if it was equal to the Fordson

•Tractor recommended broke; D refused to pay the note and rejected goods

•S40 Unless otherwise agreed, if goods are delivered to the buyer and the buyer refuses to accept them, having the right so to do, the buyer is not bound to return them to the seller, but it is sufficient if the buyer intimates to the seller that the buyer refuses to accept them

•Seller has rejected goods (told him the was “finished with it” assuming condition is broken

•Was there acceptance? No evidence that D ever intimated to P that he had accepted the unit

•Any act inconsistent with ownership of seller? “trying out engine” cannot be treated as acceptance; complaints were made when D first tried it to the final break-down

•Even before, D said he would pay no more money unless they can prove it was able to do the work I purchased it for; any delay in rejection and any acts inconsistent with P’s ownership were due to inducements of P (“all right from now on” “will repair”)

•Where the reason a buyer delays in rejecting the goods or uses the goods is b/c of inducements and assurances of the seller, the buyer’s conduct will not be deemed to be an acceptance of the goods in question for the purposes of s.39. The nature of the goods and the buyer’s purpose for the goods (which the seller should know) may allow the period of reasonable examination to be extended (s.38(1))

•NOTE: must be sure to not extend past statutory limitation period or equitable idea of laches.

•William Barker (Junior) & Co v Edward Agius Ltd – K for sale of charcoal briquettes; Buyer realizes that cargo was not the right size but had already sold half to a 3rd party; Buyers make claim to reject the cargo that was below the deck (the half not sold); Seller argues 15(4) – loss of right to reject goods; Buyer asserts that s.15(4) does not govern, s.34(5) does

•If seller delivers whole quantity, part of contract quality and partly not, the buyer is at liberty to accept the part of contract quality and reject the rest in the sense of rescinding the contract in respect of the rest – buyer allowed to reject under 34(5)

The Right to Damages and Specific Performance

• The Assessment of Damages

• Damages for non-delivery

• 54(1) If the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for nondelivery.

• (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract.

• (3) If there is an available market for the goods in question, the measure of damages is to be ascertained, unless there is evidence to the contrary, by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was set, then at the time of the refusal to deliver.

• Specific performance

• 55(1) In any action for breach of contract to deliver specific or ascertained goods, the court may, if it thinks fit, on the application of the plaintiff, order that the contract be performed specifically without giving the defendant the option of retaining the goods on payment of damages.

• (2) The order may be unconditional, or on terms and conditions as to damages, payment of the price, and otherwise, as the court thinks just, and the application by the plaintiff may be made at any time before judgment.


• The Assessment of Damages•Remedy for breach of warranty

•56(1) If there is a breach of warranty by the seller, or if the buyer elects, or is compelled, to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not merely because of the breach of warranty entitled to reject the goods, but the buyer may

•(a) set up against the seller the breach of warranty in diminution or extinction of the price, or

•(b) maintain an action against the seller for damages for the breach of warranty.

•(2)The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.

•(3) In the case of breach of warranty of quality, the loss is, unless there is evidence to the contrary, the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.

•(4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent the buyer from maintaining an action for the same breach of warranty if the buyer has suffered further damage.

•Interest and special damages

•57 This Act does not affect the right of the buyer or the seller to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover money paid if the consideration for the payment of it has failed.



•Failing the right to reject the goods or in addition to it, a buyer has the right to damages in the event of the seller’s breach

•In addition to common law remedies, buyer might ask a court for the equitable remedies of specific performance or injunction

•The Assessment of Damages

•Wertheim v Chicoutimi Pulp Company – Pulp delivered late (breach of warranty); Price had gone down – Contract value was for $70 and the value of the goods delivered was $42, but somehow the P managed to resell for $65

•When the delivery of goods purchased is delayed, the goods are presumed to have been at the time they should have been delivered worth to the purchaser what he could then sell them for, or buy others like them for, in the open market

•P can only get compensation of the lost profit up to the amount he would have gotten if delivery was on time

•The main principle upon which damages are awarded is that the buyer must be put in the same position he would be in had the breach not occurred

•Bowlay Logging Ltd v Domtar (1978) BCSC –

•D is pole manufacturer, entered into K for P to supply D with logs; D was supposed to provide trucks but didn’t provide enough so P couldn’t fulfill K (D breached); P seeking compensation for expenditures made in part performance

•Domtar claims they are not bound to compensate P since P’s operation was losing money, and if it had continues it would have lost more money

•Where it can be seen that P would have incurred a loss on the contract, the expenses he has incurred are losses flowing from entering into the contract, not losses flowing from D’s breach – true consequence is P is saved from incurring further losses; no damages awarded (just nominal)



•Cullinane v “Rema” Manufacturing – Contract for D to supply a pulverizing and drying plant with a certain production rate that wasn’t met; Could only handle 2 tons of clay per hour instead of the warranted 6 tons; P kept the machine, claiming damages for the cost of the plant and for lost profits

•P can (1) discover incapacity, claim to recover the capital cost he has incurred less anything he can obtain by disposing of the material that he got; (2) or where warranty in question relates to performance, make him claim on the basis of the profit he has lost, because the machine as delivered fell short in its performance of that which it was warranted to do

•D cannot argue that P must claim the lesser of the two, P has the right to choose; Loss of profit often harder to prove

•The Assessment of Damages – Remoteness

•Koufos v C. Czarnikow Ltd – P chartered ship to carry 3000 tons of sugar; D deviated from agreed course and took 9 days longer than they should have (breach of K); During the delay, the price of sugar per ton fell; P sues D for lost profit as a result of late delivery

•Test: (1) Damages should be such as may naturally and usually arise from the breach; or

•(2) Damages should be such as in the special circumstances of the case known to both parties may be reasonably supposed to have been in the contemplation of the parties, as the result of a breach, assuming the parties to have applied their minds to the contingency of there being such a breach

•Shipowner knew of the existence of a sugar market at Basrah, and was in reasonable contemplation

•Parties must have assumed to have contemplated that there would be a punctual delivery to the port of discharge and that port having a market in sugar there was a real danger that as a result of a delay in breach of contract and charterer would miss the market and would suffer loss accordingly

•Affirms Hadley v Baxendale; Level of probability required for a loss to be “liable to result” = Likely to occur in more than a small minority of cases

•If the loss suffered by the P was reasonably foreseeable and sufficiently likely (cannot be a very small chance of happening), the court will hold that it was within the reasonable contemplation of the parties



•Parsons Ltd v Uttley Ingham & Co – Ds sold hopper used for feeding nuts to P pig owners – when installing it, D forgot to leave a ventilator valve open. Pigs died b/c nuts were moldy. Ps had noticed moldy food but kept feeding it to the Pigs as they didn’t think it would cause harm. Ps claim for loss of pigs and profit

•Koufos says remoteness in contract depends on what the parties “reasonably contemplated at the time of the contract”

•General rule: not liable for all consequences; only liable for such damage as may fairly and reasonably be considered either arising naturally from the breach

•For physical damages in breach of K, the test is one of foreseeability: whether a reasonable man would foresee the damages (looser test, like torts)

•For lost profits and damages, the test is not unlikely (Reid) or serious possibility (Upjohn). Even though the damage was far worse than expected, it was the type/kind of damage that was foreseeable even if the extent wasn’t

•Wharton v Tom Harris Chevrolet Oldsmobile Cadillac Ltd – P purchased automobile, buzzing nose came from sound system eluded P’s attempts at repair for more than 2.5 years

•Problem caused by sound system breached the statutory warranty provided by s18(a) that automobile was reasonably fit for the purpose for which it was purchased

•A contract-breaker is not in general liable for any distress, frustration, anxiety which the breach of contract may cause to the innocent party

•NOT ABSOLUTE: where very object of a contract Is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead

•Damages recoverable for physical inconvenience and discomfort caused by the breach and the mental suffering directly related to that inconvenience and discomfort

•Reasonable fit and merchantable quality are two different things

•In this case, important object of K was tot obtain a vehicle that was luxurious and a pleasure to operate; physical inconvenience of buzzing noise and repairing it – satisfies both exceptions



•Non-Delivery & Late Delivery

•Re Hall and Pim (Junior) & Co. Arbitration – P bought 7,000 tons of wheat from D for $52, term in K allowed resale; Resold the wheat to a sub-buyer for $57; when market rose again they bought it back from sub-buyer at $59

•D late in delivering the wheat, by the time it was delivered market price fell to $54. Ps claimed damages of the $5 difference b/w the K price and price at which they re-sold and for future damages they might incur due to failure to deliver to sub-buyers

•Ds argued that they should only get the $2 difference between purchase price and market price on date of ship’s arrival

•Terms of K show that it was contemplated that the cargo might be passed on by way of sub-sale; Therefore, the seller contracted to put the buyer in a position to fulfill his sub-ks if he entered into them

•Because of Ds breach, P has been left open to claims by his sub-buyers; Damages is not merely the difference in value – it extends whenever special circumstances require it to, for such possible damages as may reasonable be supposed to have been in the contemplation of both parties at the time they made the K, as the probable result of the breach of it (2nd branch of Hadley v Baxendale)

•For special knowledge, all you need is a general reasonable understanding that the buyer will be entering into sub-contracts; do not need exact sub-contracts in place before signing main contract

•seller cannot escape liability just because there was not enough detail conveyed; As a Buyer, it is important & sufficient to make sure that the other party knows in a general way what your purpose of entering into the contract is.


• Breaches of Conditions or Warranties of Quality

• Ford Motor Company v Haley – D purchased 3 new tandem trucks from Ford for hauling gravel for a construction job

• Purchase was financed through Traders; Traders sued D for being in default; D counterclaims against P for breach of warranty (Ford had warranted that the trucks would be “satisfactory for hauling gravel”); CoA awarded damages to P for the entire purchase price paid for the trucks

• Ford argues damages should be purchase price MINUS value of the car

• D did so considerable hauling with the two trucks and made some profits ($6637); expended $2207 + $1540 on repairs; P paid $1852 + $1171 for repairs; P argues repairs necessitated because trucks were overloaded

• If trucks were overloaded, the fact remains that they were supposed to be equal or better than the other trucks D considered buying; purchase price of trucks should be damage amount

• Where there is a complete failure to perform, prima facie onus for the loss shifts to the seller, who has breached the warranty, to establish any residual value

• Failing this, the value will be considered ZERO

• Where there is a breach of s.18(a) damages are prima facie the full price or value subject to any diminution of the price by such residual value that the seller may establish. P has onus of proving that goods were in breach. Once this has been established, onus turns to the party in breach to show that the goods delivered in breach have any value


• Breaches of Conditions or Warranties of Quality

• Sunnyside Greenhouses Ltd v Golden West Seeds – D supplied rooftops to P for newly built greenhouses; D proposed a new type of roof cover called PVC, said that it would allow sunlight to pass through for 7-10 years; Latent defects of the PVC caused the panels to become opaque, killing plants

• P claimed under s.56+57 for general and special damages; P wanted cost of removing panels

• Damages for installation of panels allowed since it was an unavoidable expense in order to make the intended use of panels

• Cost of removing panels disallowed since not the direct and natural consequence of the breach (would have to be replaced in 7 years anyways)

• P not entitled to entire amount claimed for damages for lost profit - P had a duty to mitigate. Crop was getting worse each year but they did nothing

• Innocent party must take all reasonable steps to mitigate the loss consequent on the breach; ALSO, if an expense would have been incurred eventually, despite the breach, then it cannot be claimed for in full (e.g., labour cost of removing the panels)



• Specific Performance and Injunction

• Re Wait – Contract for 500 tons of wheat (half a shipment); Buyer had already paid, seller goes bankrupt; Shipment was identified but unclear which half of the shipment is buyer; Buyer is in a precarious position because now they are an unsecured creditor; buyer tried to argue for SP

• If the goods aren’t specific or haven’t been ascertained, you can’t get specific performance. In order to grant SP, need to know exactly what the goods were (need to be specific or ascertained); in this case they were neither so no SP

• Sky Petroleum Ltd v VIP Petroleum Ltd – Energy crisis caused price to go through the roof for gasoline; K for the supply of gas for 10 years, D seller tried to get out of the contract because the cost of gasoline was so high (they were losing a lot of money because K price was so low)

• Due to energy crisis, P had no prospect of finding any alternative source of supply for the filling stations which constitute its business; P seeking an injunction to protect themselves (order D to keep supplying under the K)

• P has no great prospect of finding any alternative source of supply; D indicated its willingness to continue to supply P, but only at prices that P won’t consider

• There is a serious danger that unless court interferes, P will be forced out of business – I should be disposed to grant an injunction to restore the former position under the contract until the rights and wrongs of the parties can be fully tried out

• However, SP only for specific and ascertained goods; general rule is that for sale of non-specific goods, damages are a sufficient remedy

• waiting for damages would be too late; petroleum market is in an unusual state that D is sole means of keeping Ps business alive, so the court willing to depart from the general rule (RARE)

Statutory Remedies

•In addition to the traditional remedies of damages, rejection of goods, termination of contract, specific performance or an injunction, a buyer might seek a purely statutory remedy

•Part 9 of SGA creates a buyer’s lien

•May be other statutory remedies in other statutes such as the Trade Practice Act or the Consumer Protection Act

•Buyer's lien

•75(1) If in the usual course of a seller's business the seller makes an agreement to sell goods and

•(a) the buyer pays all or part of the price,

•(b) the goods are unascertained or future goods, and

•(c) the buyer is acquiring the goods in good faith for use primarily for personal, family or household purposes,

•then the buyer has the lien described in subsection (2).

•(2) The lien under subsection (1) is for the amount the buyer has paid towards the purchase price of the goods and is against

•(a) all goods

•(i) that are in or come into the possession of the seller and are held by the seller for sale,

•(ii) that correspond with the description of or with any sample of the goods under the agreement to sell, and

•(iii) the property in which has not passed to a different buyer under a different contract of sale, and

•(b) any account in a savings institution in which the seller usually deposits the proceeds of sales.

•Termination of lien

•76(1) A buyer's lien is discharged when the seller

•(a)fulfills the contract of sale by causing property in goods to pass to the buyer in accordance with the contract of sale, or

•(b)refunds to the buyer the money that the buyer has paid towards the purchase price of the goods.

•(2)Whether a buyer's lien is to be discharged under subsection (1) (a) or under subsection (1) (b) is at the option of the seller, but a discharge of the lien under subsection (1) (b) does not affect any right of action the buyer may have for a breach of the contract of sale.

•(3)A buyer's lien ceases to bind goods that are appropriated to a sale made in good faith to a different buyer, whether or not that sale is in the usual course of the seller's business.


The Buyer’s Obligation to Accept and Pay

• A buyer may undertake any number of obligations in a contract of sale, but s31 of the SGA imposes two central, statutory duties on the buyer: (a) to accept the goods and (b) to pay for them in accordance with the terms of the contract

• Time of Payment

• Stipulations as to time

• 14(1) Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale.

• (2) Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract.

• (3) In a contract of sale, unless there is evidence to the contrary, "month" means calendar month.

• Duties of seller and buyer

• 31) It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale


• Time of Payment

• Kay Corporation et al v Dekeyser et al –

• Contract for the shipment of meat to Europe; D approached P to find them an intermediary to ship meat to Belgium; P would enter into the K with the intermediary, invoiced to P, P would pay, and D would pay P back

• Contradiction as to the arrangement for the time of payment (P thought it was payment upon presentation of documents, D thought it was 90 days credit after meat was delivered); P called for payment; D refused to pay; Meat was sold by Ps at a substantial loss

• D’s argued that there was no contract since it was missing an essential term (i.e., the time of payment)

• Court rejects this; S.14 of SGA makes it clear that parties can enter into a valid contract even though the time for payment has not been agreed upon

• If a buyer orders goods from a seller without a time being fixed for payment or arrangements being made for credit, he must be ready to pay when the seller makes delivery; P wins & holding that P properly required payment against documents


The Seller’s Rights and Remedies – Real Remedies

•The seller has two sets of remedies – one set personal, composed of an action against the buyer for the price or for damages; the other real, composed of actions the seller can take with respect to the goods

•Although there are 3 real remedies (unpaid seller’s lien, right of stopping the goods in transit, and the right of resale), the first two remedies are in practice just preliminary steps towards the right of resale

•Unpaid Seller’s Lien

•Seller must actually have the goods (or an important symbol of them) in order to have the lien

•Unpaid seller and seller

•42(1) In this Part, "seller" includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself or herself paid or is directly responsible for the price.

•(2) The seller of the goods is deemed to be an unpaid seller within the meaning of this Act

•(a) when the whole of the price has not been paid or tendered, or

•(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled because of the dishonour of the instrument or otherwise.

•Unpaid seller's rights

•43(1) Subject to this or any other Act, even if the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law

•(a) a lien on the goods or right to retain them for the price while the seller is in possession of them,

•(b) in case of the insolvency of the buyer, a right of stopping the goods in transit after the seller has parted with the possession of them, and

•(c) a right of resale as limited by this Act.

•(2) If the property in goods has not passed to the buyer, the unpaid seller has, in addition to any other remedies, a right of withholding delivery similar to and coextensive with the seller's rights of lien and stoppage in transit where the property has passed to the buyer.

Real Remedies

• Unpaid seller's lien

• 44(1) Subject to this Act, the unpaid seller of goods

the contract of sale of goods: introductioncans.allardlss.com/application/media/cans/... · will in...

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