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Chapter 23

Chapter 23

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Department
Marketing and Consumer Studies
Course
MCS 3040
Professor
Joseph Radocchia
Semester
Winter

Description
Chapter 23: Sales and Marketing: The Contract, Product and Promotion What is Marketing Law? • Marketing is regulated by all three levels of government: ◦ federal ◦ provincial ◦ municipal • The main objectives of these laws are: ◦ to protect consumers from physical harm ◦ to foster fair competition ◦ to protect consumers from unfair selling practices • These objectives give rise to laws regulating a multitude of issues, including implied conditions and warranties for the sale of goods and services, product safety standards, disclosure on packaging, standards for honest promotion, anti-competitive practices and distribution of products • Marketing Law: All areas of law that influence and direct the creation, promotion, pricing, and distribution of goods, services or ideas Contract of Sale Terms Relating to the Product • Caveat Emptor: “Let the buyer beware” or “let the buyer take care” • The common law requires prospective purchasers to take care of themselves, to be aware of what they are purchasing and to make appropriate investigations before buying • If the purchaser wants the product to exhibit certain characteristics, the common law requires that expectation to be contained in the contract • Otherwise, the purchaser can be left without a remedy if the product should prove to be deficient Sales of Goods Legislation in Canada • The law governing the sale of goods is specialized branch of contract law ◦ Mean that it is governed by legislation and where the legislation is not relevant, by the common law rules of contract • Sales of goods legislation applies only to the sale of goods • Under the legislation, “goods” means what it meant at common law: personal property in its tangible, portable form as well as items attached to land that can severed • Sales of goods legislation implies terms into a contract for the sale of goods, classifies them and provides remedies to the purchaser based on how the breached term has been classified ◦ Unless the parties expressly agree to the contrary or are otherwise able to exclude the operation of the Sale of Goods Act, a number of terms are automatically implied into their contract ◦ To implying terms, the legislation classifies them as either conditions or warranties • Conditions are terms that are important or essential to the purpose of the contract • As warranties are classically understood as being minor or collateral terms Conditions • That the seller has the right to sell the goods • That the goods will be reasonably fit for the intended purpose where the buyer, expressly or by implication, makes it known what the intended purpose of the goods will be, in such a way as to show that he is relying on the skill and judgement of the seller. Note that a buyer does not have to make his intended purpose known when goods are used for their ordinary purpose • That the goods will be of merchantable quality, where the goods are bought by description. Merchantable quality means that the goods are of reasonable quality considering the price paid. The essence of a sale by description is the reliance by the buyer on some description by the seller and there may be reliance even where the buyer has seen or inspected the goods • That, where the goods are sold by sample, the goods will correspond to the sample and that the buyer will have a reasonable opportunity to compare the goods with the sample • That, where goods are sold by description, the goods will correspond with the description Warranties • That the buyer will have and enjoy quiet possession of the goods, which generally means that third parties will not claim rights against them • That the goods are free from liens and encumbrances in favour of third parties that were not declared or known to the buyer at the time the contract was made • READ EXAMPLES ON PG 588 Remedies • Give the innocent party the right not only to claim damages but also to reject the goods and treat the contract as ended ◦ This is known as the right of repudiation ▪ Means that the balance of the contract and further obligations under it can be dismissed, if the non-defaulting party so chooses • For example look at pg 589 • When a warranty is breached, the sales of goods legislation permits the buyer to maintain an action for damages or ask the court to reduce the purchase price due to the breach • The buyer cannot return the goods and is obligated to continue with the contract in question and comply with any outstanding terms • If the buyer refuses to perform after breach of warranty, the buyer will also be in breach of contractor • Read case on pg 589 for example Limitation of Sales of Goods Legislation • While sales of goods legislation provides helpful inroads on the doctrine of caveat emptor it has limitations, for example: ◦ Generally applies only to sales of goods, not land or services ◦ Requires that there be privity of contract between the customer and the “offending” party; breach of warranties by the manufacturer, for example, are not covered ◦ Permits contracting out of the implied terms (the buyer and seller can agree that the terms will not apply) ◦ Does not address ore-contractual representation made by the vendor • All provinces have recognized the need to address these limitations as they affect consumers ◦ This recognition arises from the assumption that consumers are at a disadvantage compared to businesses and therefore require legislative protection ◦ The concept of protecting the consumer implicitly assumes that the commercial purchaser is better able to take care of itself and does not require any kind of special safeguards Consumer Protection Legislation • Ontario has enacted a comprehensive act that consolidates several existing pieces of legislation and addresses consumer rights, unfair trade practices (such as false, misleading, and unconscionable representation), particular consumer agreements (including direct sales and online agreements), credit agreements, and leases, along with remedies and enforcement • The model of legislation has a broader scope in that it applies to all forms of transactions for consumer products, not just sales • Protected transactions include contracts of lease, conditional sales, and contracts for services or for labour and materials, if supplied along with a consumer product • It also no longer possible to exclude the operation of the implied terms • The legislation also eliminates the artificial distinction between warranties and conditions by implying warranties into protected transactions and providing specific remedies in the event of a breach of an implied warranty • With the implied warranties under the legislation are similar to those provided for under sale of goods statutes, greater protection is afforded to consumers by virtue of: ◦ Stronger warranties with respect to quality and fitness for purpose ◦ A warranty of durability to ensure that the goods are merchantable and fit for reasonable amount of time (what is reasonable depends, on the nature of the goods, the intended purpose and the price paid) ◦ A warranty of reasonably acceptable quality of services ◦ A provision that makes all representations designed to induce a consumer into a transaction, whether written, oral, or otherwise, into express warranties given by the seller to the buyer Transfer of Title • Ownership entails control of the property but also involves the risk of loss from damage or destruction • Transfer of title or ownership of goods from the seller to the buyer is fundamental to the sales transaction and has an impact on a number of business concerns, especially the transfer of risk • At the heart of the transfer of title issue is the notion that possession and ownership of goods can be held by different parties • The best way for parties to ensure clairty is to write the contract in a way that specifies when and how ownership moves from the seller to the buyer • The parties then know when responsibility shifts and how insurance coverage should be structured • If they fail, there are statutory provisions that resolve the issue • Read box in pg 592 • In the board terms, the act address two contrasting sets of circumstances: ◦ In most contracts for sale, goods are already in existence and can be clearly identified when the contract is formed • Specific Goods: Goods that are identified and agreed on at the time a contract of sale is made ◦ Sometimes goods either are yet to be set aside and identified as being the sibject of the contract or have not yet been produced • Unascertained Goods: Goods not yet aside and identifiable as the subject of the contract at the time the contract is formed Rule 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, and it is immaterial whether the time of payment or the time of delivery or both postponed • Read example on pg 592 Rule 2 • Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until the thing is done and the buyer has received notice • Read example Rule 3 • Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining their price, the property does not pass until such act or thing is done and the buyer has received notice • read example Rule 4 • Where goods are delivered to the buyer on approval or on “sale or return” or other similar terms, the property passes to the buyer ◦ a. When she signifies her approval or acceptance to the seller or does any other act adopting the transactions ◦ b. If she does not signify her approval or acceptance to the seller but retains the goods without giving notice of rejection, when a time that has been fixed for the return of the goods expires, and if no time has been fixed, on the expiration of a reasonable time • Read example Rule 5 • Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property passes to the buyer, and such assent may be express or implied and may be given either before or after the appropriation is made • Read Example • It is always preferable to avoid potential misunderstandings by drafting contracts that set out clearly when title and the corresponding risk shift from the seller to the buyer • The rules determining when title to goods shifts also affect the damages the seller is entitled to in the event of breach by the buyer ◦ Example: If the buyer commits breach by canceling an order, t
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