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Law 2101 - Apr. 1.docx

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Western University
Law 2101

Law 2101 Tuesday April 1 Contract Law: Sale of Goods The Sale of Goods Act • The Canadian economy was traditionally based on the sale of tangible goods (beaver pelts, timber, oil, grain) • Although our economy is moving towards intangible goods, tangible goods are still important for 3 main reasons: 1. We will always need to buy things like food and clothing 2. Many businesses still deal primarily in goods, either buying or selling things 3. Even businesses that do focus on information find it necessary to participate in the sale of goods (pens, papers, computers, etc…) • History o The Sale of Goods Act was passed by the British Parliament in 1893 o The common law jurisdictions in Canada have adopted virtually identical legislation (we have the Ontario Sale of Goods Act) • Important Points: o It is not a complete code  It depends on the general law of contract to supplement its terms o When law is codified, it is often rethought and logically put together  It is not a reformation of the rules, but has changed with the time o Respects freedom of contract  Businesses are free to make up their own regime in their own contract  If there is an absence of anything in the contract, the Sale of Goods Act will govern • Scope: o Applies to everything from the sale of a yacht to a cup of coffee o There is no monetary limit o A sale of goods is a “contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a money consideration, called the price…”  Therefore title = price o Limitations:  Only applies to a sale or agreement to sale  Only applies to a sale of goods (not services)  There must be money consideration • Sale vs. Agreement to Sell o A sale occurs if the buyer obtains ownership in the goods as soon as the contract is created o An agreement to sell occurs if the buyer does not obtain ownership of the goods until sometime after the contract is created  eg. the buyer may purchase a bicycle that has not yet been manufactured • 1. The act only applies to a sale o But does not apply if:  The goods are leased  It is a gift  They are provided as security for a loan (because ownership is not transferred for the purpose of a sale) • 2. The act only applies to a sale of goods o It does not apply to:  Land  Things that are attached to land (eg. houses, fences, things that are not moveable) o Sales vs. services  Sales are often bundled with a service – so is it a contract for a sale of goods or services?  The court has to determine the essence of the contract  eg. are you contracting for the artist’s services or the sale of the painting?  Case: Gee v. White Spot Ltd. (1987) • Mr. Gee developed botulism after eating a meal at the defendant’s restaurant. • Arguments: o Gee claimed he purchased goods, and sued for damages under the Sale of Goods Act o The restaurants argued this wasn’t a contract for a sale of goods, but for a service • The judge said that a contract does not have to exclusively deal with a contract for sale of goods. Since Gee’s primary purpose was to order a meal (a good), he was contracting for the food itself. • Note: The result may change if you go to an expensive restaurant with a renowned chef • 3. The act only applies to a sale of goods for money o The buyer doesn’t have to pay entirely with cash  The act will also accept cheques and credit cards o Because of the “money” limitation, the act does not apply for a swap of goods (eg. a yacht for another yacht, a car for a boat) o However, if the buyer pays with some money and a trade, the transaction will be considered a sale of goods Passing of Property • Property passes when the ownership or title in the goods is transferred from the seller to the buyer • Important: There is a difference between property and possession o It is possible for the seller to possess the goods while property has been transferred to the buyer • Why are we concerned with passing of property? o If the seller declares bankruptcy before delivery, the buyer will want to prove that they had ownership in the governments (otherwise they will only have a claim in the bankruptcy and won’t get back their full property) o Risk passes with property (any loss or damage that may occur to the goods) • Section 19 o Rule 1 – Where there is an unconditional contract for the sale of specific goods (eg. a specific car, a specific water bottle), the property passes when the contract is made  An unascertained good would be a 2014 red corvette that has not yet been manufactured • eg. if you order 1000 tonnes of wheat, you don’t know which 1000 tonnes you will receive  The Case of the Stolen Diamond Ring • A goes to a jewellery store and picks out a ring to buy for $2000. But because A wants to go to the gym, he persuades the jeweller to place the diamond in the safe. He promises to deliver the cheque the next day when he picks up the ring. There is a burglary that night, and the thief takes the ring. Do you have to pay the $2000? • The answer is yes because there was an unconditional sale of a specific good item (that ring and no other) that was already in a deliverable state o The property and the risk was passed to A as soon as the contract was made o It is irrelevant that the jeweller still had possession of the diamond Classification of Terms • When a contract is breached, the innocent party is given the right to damages, but there may be a more extensive charge to terminate the contract (depends on the type of contract that was breached) • Types of Terms: o Conditions: If the innocent party would be substantially deprived of the expected benefit of the contract in the event of a breach  eg. someone wanted to rent a truck, but were given a minivan (they would be able to terminate the contract). They could choose to discharge the contract and claim damages as a result of the breach, or they could choose to carry on with the contract and claim for damages for the losses it suffered from the breach of contract. o Warranty: The innocent arty would not be substantially deprived of the expected benefit of the contract in the event of a breach  eg. The
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