BUS 393 Chapter Notes - Chapter 10: Implied Warranty, Barter, Rescission

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Chapter 10 – Sales and Consumer Protection
The Sale of Goods
The Sale of Goods Act
Primary purpose: to imply terms that parties to sale of goods transactions
often leave out (eg. date for payment or time of delivery)
Governs any situation where goods are bought and sold, including
commercial transactions
Note: Properly worded exemption clauses can override provisions in the Sale
of Goods Act
Goods and Services
Only covers contracts involving goods (tangible items), not intangibles
(eg. services, stocks, bonds, etc.) – real estate is not covered
If main component is service, SOGA may not apply – but courts can
sometimes separate goods and services and treat separately
Transfer of Goods
Parties must intend for goods to transfer to the buyer (eg. not when
used to secure a loan)
Monetary Consideration
Money must also be exchanged, the Act does not apply to barter
Requirement of Writing
Direct sales of consumer goods over a certain value must be
evidenced in writing
Title and Risk
Agreement to sell – goods are not transferred immediately upon
Under the Act, whoever has title bears the risk of damage/destruction.
1. C.I.F. Contracts (Cost, Insurance, Freight) – only one party is
2. F.O.B. Contracts (Free on Board) – agreement that seller will bear risk
until a specified point in the transport process
3. C.O.D. Contracts (Cash on Delivery) – title/risk stays with seller until
delivery and payment is completed
4. Bills of Lading – seller names itself as the party entitled to receive
delivery at the destination, allows seller to maintain control during
Transfer of Title
Both remedy and risk may depend on who has title; if titled is
transferred, seller can sue for entire price, but otherwise only damages
for breach of contract
Rule 1: If there is an unconditional contract for the sale of goods in a
deliverable state, property passes to buyer immediately when contract
is made – doesn’t matter if time of payment/delivery is postponed (eg.
purchase of a used car)
Rule 2: If seller is required to do something to put goods in deliverable
state (work to be done), title transfers when task is completed and
notice is given (eg. repair work on used car)
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Rule 3: If seller is required to weigh/measure/test/etc. to ascertain
price, title transfers when act is done and buyer is notified (eg. buying
a truckload of potatoes)
Rule 4: When goods are delivered on approval or on “sale or return”
terms , property passes when (i) buyer signifies approval/acceptance
or (ii) retains goods without notice of rejection and a reasonable time
has expired (eg. test driving a car for 2 days)
Rule 5: If goods not yet manufactured or have not been
separated/identified as the particular goods for sale, title passes upon
unconditional appropriation and assent
Rights and Obligations of the Parties
Sale of Goods Act implies both conditions and warranties – distinction is
Breach of warranty does not discharge victim from contract, while breach of
condition allows victim to treat contract as ended
By accepting goods after a breach of condition, victim loses right of discharge
Seller must have the right to sell the goods, or will have the right at the time
title is transferred
Implied warranty: seller must provide quiet possession (can be
used/enjoyed in the way they were intended without any interference)
Implied warranty: goods shall be free from any charge or encumbrance not
disclosed to the buyer, free of liens
Goods must match description or pictures provided
Almost all sales of manufacture goods are by description
Fitness and Quality
Goods must be of merchantable quality – free of any defect that would
have persuaded purchaser not to buy at the agreed-upon price
When sales person is relied on for recommendation, good must be suitable
for purpose
Implied condition: bulk of goods must match sample provided and be free of
hidden defects
Other Implied Terms
If price is not stated, a reasonable price must be paid
Delivery must take place within a reasonable time, payment is due upon
With bulk goods, if too little/too much delivered, buyer can either reject
goods or keep them and pay at contracted rate
Sales Made Online
Retailers are required to take reasonable measures to draw terms to the
attention of the buyer, but if buyers fail to read even then, the buyer will
typically be bound
Remedies on Default
If buyer defaults, seller has unpaid seller’s lien against goods => right to
retain goods until appropriate payment, even though title may have
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