Chapter 5 – Legislation in the Marketplace.docx

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Marketing and Consumer Studies
MCS 3040
Linda Chiasson

Chapter 5 – Legislation in the Marketplace -Statutes modify business law The Sale of Goods Act applies to all contracts where goods are sold, whether they involve consumer or business transactions Consumer protection legislation in its various forms is aimed at policing the marketplace, adjusting the balance between the bargaining position of the consumer and merchant, and establishing recourse for the worst abuses -The risks associated with sale of goods and secured transactions are not associated with government -Sales of Goods Act supplies missing terms -The primary purpose is to act in place in all common-law provinces to supply missing terms that the parties didn’t think to include in their contract of sale -Remember the SOGA applies to all transactions where goods are sold, not just retail sales, there it has important implications for all levels of business -For the Act to apply, goods must be transferred/sold -Only where the credit transaction involves a conditional sale will the Sales of Goods Act apply -In a conditional sale, the creditor is also the seller, and both possession and the title to the goods are eventually transferred to the purchaser -Goods or chattels are tangible, movable property such as cars, pens, boats, and even locomotives or other heavy equipment Where mixed goods and services are involved, if the transaction is primarily for a service such as an artist painting a portrait, the Act will not apply However where the service is incidental to obtaining the goods, as when a meal is supplied at a restaurant the Sale of Goods Act will apply to the transaction -Where the service and goods can be separated, as with a mechanic repairing a car, the Act applies to the parts supplied but not to the labour Case 5.1 Under the Sale of Goods Act “risk follows title”. Meaning that whoever has the title to the goods when they are damaged must bear the loss The parties usually override the above in agreement by including CIF, FOB, or COD CIF (cost, insurance, and freight) contracts, one party is designated responsible for arranging the insurance and the transportation of the goods thus assuming the risk In FOB (free on board) contracts, the parties specify that title and risk will transfer at a specific place, for example, FOB the seller’s loading dock COD (cash on delivery) contracts require the purchase price to be paid and title and risk transfer when the goods are delivered to the purchaser Bills of lading can also be used to control risk and title, when the goods are given to a common carrier, the seller can designate himself to receive those goods at their destination Five rules determine when title transfers: Rule Situation Result #1 Title transfers The sale of specific goods immediately upon in a deliverable state creation of the contract of (nothing further has to be sale, Purchaser bears risk done to them) even if payment or delivery may take place at some later date #2 The sale of specific goods Title transfers when work needing repairs, etc. is done and the purchaser is notified #3 The sale of specific goods Title transfer when this is needs to be weighed or done and the purchaser is measured notified #4 The sale of goods on Title transfers to approval purchaser with -Notification to seller of approval -Passage of a specified or reasonable time -Treatment of goods as the purchaser’s own #5 The sale of goods that are Title transfers when not yet selected (from goods are unconditionally many, a sample, a floor committed to contract model) or not yet made at with assent (expressed or time of contract implied) Obligations of seller under the Act: To deliver good title To deliver quiet possession To deliver goods free of liens There is an implied condition that the seller must deliver good title to the goods to the purchaser, if it turns out later that the goods were stolen before the seller obtained them whether the seller knew it or not the purchaser can get his/her money back There is an implied warranty requiring the seller to provide quiet possession, this means that the goods have to be usable as intended without interference. For example if you purchased a cell phone but it could not work on any of the available networks, that would be a breach of quiet possession There is also another implied warranty that the goods will be free of any charge or encumbrance. This refers to a lien that gives a creditor the right to seize the goods (collateral) upon default when the goods have been used as security for a loan Case 5.2 If goods are brought by description or by sample and what is delivered does not match sample or description, Sales of Goods Act implies conditions into contract that permit the purchaser to refuse delivery. Sale by description not only covers situations where goods are bought through a catalogue or ordered from an advertisement, but also includes any purchase of goods that have been mass-produced -This essentially means that the goods must be free of any defects; Goods must be of merchantable quality -Goods must be fit for the purpose purchased -Sellers often attempt to override these implied conditions of fitness and quality; a new product warranty is an attempt by the seller and manufacturer to limit the liability that would otherwise be implied by the Sales of Goods Act -Exemption clauses may limit liability The seller has the right to stoppage in transit – this means that if the goods are in the hands of a transporter and being delivered to the purchaser at the time of default, the seller can intercept those goods and recover them from the transporter, even if they do get in the hands of the purchaser, the seller has a limited right to recover them in the event of purchaser’s bankruptcy. Caveat emptor – “let the buyer beware” Consumer goods must be of minimum quality, the first type of protection provided by the consumer protection legislation relates to the quality of products and services provided The Sale of Goods Act implies certain conditions and warranties related to title, fitness, quality, and nature (description) of goods supplied. Normally the parties can override these provisions by including exemption clauses in the form of limited warranties. Case 5.3 Statutes variously called Trade Practices Act or Business Practices Act are designed to protect consumers from unacceptable practices. They prohibit misleading and deceptive practices generally, and then list a number of unacceptable practices specifically. All involve different ways that merchants may deceive the consumer, whether intentionally or by mistake. These statues also control unconscionable transactions where the consumer is taken advantage of because of factors such as undue pressure or some other vulnerability that results in the victim paying an unfair price, or some other harsh or adverse terms that are imposed in the contract Other remedies against the merchant engaging in unacceptable business practices include injunctions and damages, fines, and other penalties Consumer protection acts in place in most provinces are designed to control specific types of businesses that are prone to abuse; door-to-door sales, cooling-off periods, as well as other protections are provided. Cooling-off period is provided for door-to- door sales. Executory contracts (contracts to be performed in the future) – an agreement that has been made before any performance Case 5.4 Consumer Bureaus -Government agencies are set up to investigate abusive practices and to resolve disputes -Such organizations have the power to investigate, to search and seize records, to assist the consumer to obtain remedies, and to impose fines and other penalties in their own right Large fines can be effective, but these bodies also often have the right to take away a license and put the offender out of business -Government official has the power to treat offending conduct as an offence punishable by fine and imprisonment -Although these offences are not criminal in a technical sense (only the federal government can pass criminal law), they can have the same impact and are referred to as quasi-criminal offences or provincial offences -Because there is the potential of significant fine and imprisonment, the Charter of Rights protections relating to the legal process “presumption of innocence” and “proof beyond a reasonable doubt” generally apply Case 5.5 -In 2002, Ontario enacted a comprehensive consumer protection statute the Consumer Protection Act, which likely points the way that consumer statutes will go in other jurisdictions as well. -It not only ensures that warranties for fitness and quality set out in the Sale of Goods Act cannot be overridden in a consumer purchase agreement by a limited warranty, but also extends that protection to leases and services -There are other nongovernment, consumer-oriented organizations, both for-profit and non-profit, that can be helpful to the disadvantaged customer -Before trusting a company look into them and see how they are funded -The Better Business Bureau(BBB) is a unique organization consisting of and supported by member businesses -Reputable businesses are served by weeding out unscrupulous businesses that damage other members of the business community -Other internet services: Legal Line(Ian Levine and Antree Demakos) and the Canadian Legal Information Institute(CanLII) -The federal government also has significant consumer protection legislation enforced by government departments -The
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