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BUS 393 (52)
Chapter 10

Chapter 10 – Sales and Consumer Protection

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Department
Business Administration
Course
BUS 393
Professor
Richard Yates
Semester
Winter

Description
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 agreement • Under the Act, whoever has title bears the risk of damage/destruction. Exceptions: 1. C.I.F. Contracts (Cost, Insurance, Freight) – only one party is responsible 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 shipment  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) • 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 important • 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 Title • 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 Description • 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 Sample • 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 delivery • 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 transferred • If goods are en route and buyer defaults, seller has right to intercept and retake possession (stoppage in transit), if goods have not reached buyer • Under Bankruptcy and Insolvency Act, supplier can recover goods after delivered if debto
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