Chapter 13 Notes

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Chapter 13: Special Contracts: Sale of Goods
The Canadian economy was traditionally based on tangible goods; however, recently the
situation has started to change. We are beginning to depend on more intangible things, like
information and services.
Nevertheless, the sales of goods remain vitally important:
i.As individual consumers, we will always need to buy things like food and clothing.
ii. Many businesses in this country continue to deal primarily in goods, either buying or selling
iii.Eve those businesses that do focus on info occasionally find it necessary to participate in the
sale of goods.
B/c sales of goods contracts are so significant; they are governed by a special statute, the Sale of
Goods Act. Interestingly, that statute was initially introduced as a codification.
Business people did not want to spend time or money in court. They want clear &
comprehensive laws that allow them to quickly deal w/ potential problems & get on with the
job of making money.
Thus, the British Parliament transferred, or codified, the judge-made rules into Sales of
Goods Act in 1893. Since then, all common law jurisdictions in CA have adopted virtually
identical legislation.
Judges wanted to provide default rules that would apply if the parties did not deal with
particular issues themselves, where goods can be bought and sold quickly b/c the parties do not
have to negotiate and agree on a long list of terms. The act does much of the work for them.
B/c the Act provides default rules, a contract may include terms that the parties did not even
If you are buying or selling goods you should know the rights & obligations that the statutes
implies and if you are unwilling to accept those rights & obligations, you should walk away from
the deal or persuade the other party to adopt different terms.
The Sale of Goods Act only applies to a sale of goods.
oSale of Goods: is a contract whereby the seller transfers or agrees to transfer the property in goods to a
buyer for a money consideration called the price.
Note for points:
i. The Act applies only to a sale.
oThe terms cover two situations: sales and agreement to sell.
oSale: occurs if the buyer obtains ownership in the goods as soon as the contract is created.
oAgreement to Sell: occurs if the buyer does not obtain ownership of the goods until some
time after the contract is created. E.g. a buyer agrees to purchase a car that has not yet been
oA sale of goods does not occur if the buyer is not intended to eventually obtain ownership.
E.g. if goods are leased, gifts, or it goods are provided as security for a loans.
ii. The Act applies only to a sale of goods.
oGoods are tangible things that can be moved. It doesn't include land or things that have
already been attached to land, e.g. houses and fences not moveable.
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Chapter 13: Special Contracts: Sale of Goods
oAct does not apply to goods that are not tangible = i.e. trademarks, shares, debts etc.
oDoes not apply to services.
iii. The Act applies only to a sale of goods for money.
oDoes not apply if the parties simply trade goods; say a car for a boat.
oBuyer does not have to pay entirely with cash; money cash and other forms of payment
(cheques & credit).
oMay pay with money and goods. E.g. purchasing a new bicycle by paying $200 & trading in
your old bike.
iv.The Act is sometimes enforceable only if the contract is evidenced in writing.
oThe requirement is limited in several ways:
a.Applies only in some jurisdictions and only if the price is over a specific amount.
b.A lack of writing doesnt mean that a contract is invalid, but rather that a court
will not enforce it.
c.The rule does not apply if the buyer 1) accepts part of the goods, 2) pays part of the
price, 3) provides somethingin earnest.
oProperty Passes: when the ownership or title in goods is transferred from the seller to the buyer.
However, there is a difference b/t property and possession. E.g. the seller may still posses the
goods, in the sense of having physical control over them, even though the buyer has become the
The passing of property is important:
May affect the remedies that are available if a contract is breached.
If one party becomes bankrupt. E.g. suppose you pay the seller for goods that the seller
promises to deliver in a week. If the seller declares bankrupt before sending it, you will want
to prove that you already acquired ownership in the goods. Or you will have to share it
with other creditors.
Important b/c the Act states that risk passes with property unless the parties otherwise
oRisk: is any loss or damage that may occur to the goods.
The party who bears the risk suffers the loss if, e.g., goods are destroyed in a fire or stolen by a
The Act provides rules for determining when property & risk pass under 5 situations: E.g. Bus.
Decisions pg. 285 287.
1: Where 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 & it is
immaterial whether the time of payment or the time of delivery or both is postponed.
2:Where there is a contract for the sale of specific goods & 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 such thing is done & the buy has notice thereof.
Rule Where there is a contract for the sale of specific goods in a deliverable state but the seller
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