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Lecture 9

Management and Organizational Studies 2275A/B Lecture Notes - Lecture 9: Consumer Protection, Bailment, Predatory Pricing

Management and Organizational Studies
Course Code
MOS 2275A/B
Philip King

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Business Law 2275: Lecture 9
Sale of Goods
Sale of goods in contract law, special kind of contract law
Consumer protection is contract law- modified by statute
Debtor-creditor is another kind of contract
Bankruptcy and solvency is not contract, it is a statutory regime.
The Sale of Goods Act applies to every SALE of GOODS
Not to services, intangibles, real property, gifts, leases, or licenses
Here we are talking about relationship between buyers and sellers
Statue that governs contracts for sale of goods is sale of goods act
o Antiquated, really has not ever been modernized
Originally, law was "buyer beware" the law dramatically favored
Problem with this is that its unfair to have all risk on one side,
and it didn’t promote trade and commerce because it was
frustrated for buyers
So what happened was that common law over 1800s developed a
series of rules to level the playing-field and put some risk on sellers.
These common law rules were codified- meaning put into a single
statute. 1893 was the sale of goods act
Every province in Canada has a sales of goods act, which are all
basically copies of this sales of goods act written in 1893.
o Interesting because sale of goods act applies to every sales of goods- is
very broad in its application, but does not apply to services, intangibles,
real property, gifts, leases, or liscenses
This is because either they are not a sale, like gifts, leases or
Intangibles and real property are not goods, because goods =
o Distingtion for contract which is for sale of goods and contract which is
for provision of services is difficult for the law to distinguish- many
contracts involve noth

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I take my car to get new tires: is a contract for goods (new tires), but
is also a contract for services (putting tires on)
So does the sales of good act apply to this?
First case we look at is a case called G versus white spot: Mr. G
goes into white spot restaurant. Orders a meal and they service
a meal that is contaminated with botulism. He sues under sales
of goods act. The restaurant says this is not a sales of goods act,
this is a contract for services. Court held that it was a contract
for sale of goods- although both were involved, goods and
services, it was primarily a contract for food (goods).
Another case is a woman hired an artist under contract to paint
a specific painting. She wanted him to paint her a picture of a
very specific size, and a very specific color. The artist agreed,
painted the painting, but after a while the paint started to chip,
and the color stated to yellow. She sued under sale of goods,
and artist argued not, but a provision of services. The court
held that it was not a sale of goods, it was primarily about the
artist skill and expertise, thus was primarily a contract for
services, not for goods. This is because she commissioned the
artist to paint this work specifically in accordance with her
So if contract is primarily about sale of goods, act applies.
The Sale of Goods Act
o Implies terms into sales contracts (conditions and warranties)
The act says unless you have agreed otherwise, these terms are in
your contract. This levels playing field
o Helps determine when title passes from seller to buyer
o Provides remedies for breaches
Remedies are contract law remedies
Implied conditions
Implied terms are either conditions or warranties
Conditions are serious, where innocent party has right to sue for repunity I
think or something. warranties are less important, which gives the innocent
the right only to sue for damages.

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o Seller has right to sell: amazon doesn’t have warehouses, and never
comes into contact with good. So they don’t own it, but have right to sell.
o Goods must match description: when I go online and order something
blue, then I get it and its green, then I can return it because it doesn’t
match the description. These are for benefit of buyers, and they didn’t
exist before
o Goods must match sample: primarily important for retail transactions.
o Merchantable quality: means they will be free of defect
o Reasonable suitable for intended purpose: Implied condition in every
contract for sale of goods that goods will be reasonably suitable for
intended purpose. Is there a difference in this condition being applicable
depending on what you're using goods for? If I go to surfboard shop, and
ask them to recommend a board. The clerk does and I buy it then take it
to the beach, and the surfboard sinks. Is there a breach of implied
condition? Yes. Now suppose I go to a surfboard shop and I intend to use
it as a coffee table, so I go there and say can you recommend one? The
clerk says yes, then I go home and make a coffee table but it sucks
because surf board is slanted. Is this a breach? No. now I go and tell the
clerk I'm going to buy a surfboard for a coffee table, and they say cool
take this one. Then I go home and it’s a shitty coffee table. Is this a
breach? Yes.
Because these are implied conditions, buyer can repudiate contract. Get
a refund, refuse to pay if haven't, AND sue for damages.
Implied warranties
These are security interests
o Delivery within a reasonable time
o Payment within a reasonable time
This one is only implied term that operates for seller. All others
operate for benefit of the buyer.
Risk follows title. The SHA helps determine when title passes from seller to
o Question is when does the buyer become the owner of the goods?
Reason that this is important is because risk follows title. Ie) whoever has
title to the goods suffers the loss. Practically, if you know that effective
December 1, you have the risk of loss, you are going to buy insurance.
You don’t want to buy it before December 1, because you are insuring
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