Business Law In Canada PDF

Business Law in Canada Thirteenth Canadian Edition Chapter 16 Sales and Consumer Protection Copyright © 2024 Pearson Canada Inc. 16 - 1  Purpose of the Sale of Goods Act The primary pur...

Business Law in Canada Thirteenth Canadian Edition Chapter 16 Sales and Consumer Protection Copyright © 2024 Pearson Canada Inc. 16 - 1  Purpose of the Sale of Goods Act The primary purpose of Sale of Goods Act (the “Act”) is to imply terms into contacts that parties often leave out BUT it will ONLY imply missing terms into a contract – Parties are free to override provisions of the Act by clearly stating a different intention in their contract It does NOT replace the common law, but instead, ONLY supplements it It applies to both commercial and consumer transactions Copyright © 2024 Pearson Canada Inc. 16 - 2  Goods and Services The Act applies ONLY to the sale of goods (i.e. TANGIBLE ITEMS AND NOT TO INTANGIBLE ITEMS) – Where both goods and services are involved, the Act does not apply unless the sale primarily involves the delivery of goods (such as food at a restaurant) or where the labour and parts can be separated Sale of Goods Act does NOT apply to: – Real property, or – Services (except when it primarily involves the delivery of goods) Copyright © 2024 Pearson Canada Inc. 16 - 3 Transfer of Goods for Monetary Consideration The Act applies to the sale of goods for monetary consideration There must be an actual sale for the Act to apply. In other words, the title to goods (i.e. right of ownership) must actually be transferred If the transaction is NOT a sale, but involves the securing of a loan, the Act does not apply – Except where security is part of the sales transaction (i.e. a conditional sales agreement ) Also the Act does NOT apply to barter transactions Copyright © 2024 Pearson Canada Inc. 16 - 4 Title and Risk Risk follows title – SALE - title transfers immediately – AGREEMENT TO SELL - title transfers at some future time Contract can stipulate who bears the risk: – CI F (cost, insurance, freight) contracts ▪ Parties specify who bares the risk – FO B (free on board) contracts ▪ Parties specify at what point title and risk pass – CO D (cash on delivery) contracts ▪ Seller is responsible until goods are delivered to buyer Copyright © 2024 Pearson Canada Inc. 16 - 5  Transfer of Title If NOT specified by the parties the Sales of Goods Act specifies when title and risk passes The five rules are summarized in Table 16.1 Table 16.1 Rule Type of Transaction When Title and Risk Pass 1 Unconditional contract. Goods in deliverable When contract is made. state. 2 Seller to put goods into deliverable state. On notification that goods are ready. 3 Seller to ascertain price. On price notification to buyer. 4 Goods delivered on approval. When buyer signifies approval or retains goods for unreasonable time. 5 Unascertained or future goods. Upon unconditional appropriation or with assent of buyer. Copyright © 2024 Pearson Canada Inc. 16 - 6  Rights and Obligations of the Parties (1 of 2) The Sale of Goods Act implies both conditions and warranties into the contract Breach of a condition: – Victim can ignore it and accept the goods (but loses the right to discharge the contract), or consider themselves no longer bound to the contract Breach of a warranty: – Victim is not released from obligations under the contract, but can sue Copyright © 2024 Pearson Canada Inc. 16 - 7 Rights and Obligations of the Parties (2 of 2) Manufacturers and retailers often try to override the implied conditions and warranties – They do this by adding limited warranties (i.e. exemption clauses) Parties may be free to contract out of all obligations and responsibilities – Several provinces have enacted legislation prohibiting the seller from excluding or limiting those provisions relating to fitness and quality in consumer sales transactions Copyright © 2024 Pearson Canada Inc. 16 - 8  Obligations of Seller Seller must convey: – Good Title (condition) – i.e. be free of liens, and – Quiet Possession (warranty) - means that the goods must be in the condition that they can be used and enjoyed in way intended Goods must: – Match Description ▪ Goods sold on internet, by catalogue, or through other forms of distance shopping must match their picture and accompanying text – Be of Merchantable Quality and Fit for Purpose ▪ Merchantable Quality – if sold by description, goods must be free of defects that are not apparent on examination and if known, would NOT have been purchased ▪ Fit for Purpose – goods recommended by seller, must be reasonably fit for normal purpose, and for any specific purpose communicated to seller – Match Sample ▪ Goods must match examined sample, and be free of hidden defects Copyright © 2024 Pearson Canada Inc. 16 - 9 Other Implied Terms If terms are NOT stipulated in the contract the Act implies: – A reasonable price – Delivery take place at a reasonable time – Payment due upon delivery – Where bulk goods are involved, if significantly too little or too much are delivered, then the purchaser can choose to return or keep the goods Copyright © 2024 Pearson Canada Inc. 16 - 10 Sellers’ and Buyer’s Remedies Sellers’ Remedies – When buyer defaults, seller has an unpaid seller’s lein against goods and has the right to: ▪ Retain goods not yet delivered until they are paid for ▪ Retake possession of goods in transit – Where there is a breach of contract by the purchaser, the seller has the normal remedies in contract law Buyer’s Remedies – When there is a breach of contract by the seller, the buyer has the normal remedies in contract law Copyright © 2024 Pearson Canada Inc. 16 - 11  Online Sales and International Transactions Normal contract rules also apply to online transactions – Problems arise concerning where the contract is formed, and in determining the jurisdiction of the parties All jurisdictions in Canada have enacted an International Sale of Goods Act Parties are free to override the provisions in the International Sale of Goods Act by providing different terms in the contract Clicking “I Accept” accepts terms that create limits and exemptions Copyright © 2024 Pearson Canada Inc. 16 - 12  Consumer Protection Consumer transactions involve goods or services for personal consumption rather than for business use Consumer protection legislation controls: – Use and disclosure of information and advertising – The safety and quality of the goods sold – Unethical business practices Both provincial and federal legislation in place – May be found in one or more statutes The common principals below have been limited with respect to modern day consumer transactions as a result of their vulnerability: – Freedom of Contact, and – Caveat Emptor Copyright © 2024 Pearson Canada Inc. 16 - 13  Federal Legislation The Competition Bureau administers the Federal Competition Act The Competition Act has both civil and criminal aspects to it Its purpose is to maintain and encourage competition in Canada Competition Act – Controls mergers to prevent interference with competition by the creation of monopoly – Prohibits abusive trade practices such as: ▪ Misleading advertising ▪ Deceptive marketing practices ▪ Pyramid selling – Restricts agreements between merchants such as: ▪ Conspiracy to fix prices ▪ Bid rigging schemes Copyright © 2024 Pearson Canada Inc. 16 - 14  Other Federal Legislation The Competition Bureau enforces and administers several other federal statutes that have consumer protection aspects The below acts are intended to force proper disclosure to consumers: – Consumer Packaging and Labelling Act – Precious Metals Marking Act – Textile Labelling Act The below acts are intended to protect consumers from dangerous products: – Food and Drug Act – Hazardous Products Act – Canada Consumer Product Safety Act Copyright © 2024 Pearson Canada Inc. 16 - 15  Provincial Legislation When products are defective and cause injury or loss consumers have recourse in either contract or negligence Responsibility for Goods – Sale of Goods Act imposes responsibility on sellers – Effect of exemption clauses is limited by statute in some provincial jurisdictions (but NOT in Alberta) – Victims of unsafe products can sue manufacturer in: ▪ Tort (but must prove fault) ▪ Contract law – In some jurisdictions consumer protection legislation may waive the privity of contract requirement so that consumers can sue manufacturer as well as the seller of the good Copyright © 2024 Pearson Canada Inc. 16 - 16  Unacceptable Business Practices False or exaggerated claims – Legislation may make such a claim part of the contract – Government departments are given considerable power to investigate and deal with complaints including the power to impose fines or suspend licences Unconscionable transactions – Legislation has been enacted to to prevent unscrupulous mechants from taking advantage of vulnerable individuals – Legislation in some provinces is restricted to loan transactions, while in other provinces it is extended to unacceptable business practices Prepaid Cards – Legislation regulates expiry dates and fees Copyright © 2024 Pearson Canada Inc. 16 - 17  Controlled Business Practices Controlled Business Activities include: – Door-to-Door Sales ▪ Legislation imposes a cooling-off period – Referral Selling Methods of Control: – Licensing – Fines or imprisonment – Government bodies may also be able to start actions on behalf of victims Copyright © 2024 Pearson Canada Inc. 16 - 18  Loan Transactions/Debt Collection Loan Transactions – Provincial legislation usually requires: ▪ Disclosure of the true cost of borrowing in a standard format ▪ Money-lenders to be registered – The unconscionability of the loan transaction has an impact on the severity of the penalty imposed by the courts – Payday loans are regulated in most provinces Debt Collection Processes – Provincial legislation requires that debt-collection agencies be registered and licensed – Abusive debt collection practices are controlled – Credit-reporting practices are controlled Copyright © 2024 Pearson Canada Inc. 16 - 19  Consumer Service Bodies Government departments enforce consumer protection statutes – In some jurisdictions they disseminate consumer information to the public Consumer Measures Committee – Representatives of federal and provincial governments sit on this committee – Committee publishes Canadian Consumer Handbook Private agencies also provide helpful information and services: – Better Business Bureau (BB B) – Canadian Motor Vehicle Arbitration Plan There is legislation that also governs specialized industries and professionals Copyright © 2024 Pearson Canada Inc. 16 - 20 Negotiable Instruments Negotiable instruments are controlled by the Federal Bills of Exchange Act Negotiable instruments include cheques, bills of exchange, and promissory notes Essential characteristics are: – Unconditional promise to pay a specific amount on a future date or on demand – Transferability – May give greater rights to the bearer than the person to whom it was issued – holder in due course Copyright © 2024 Pearson Canada Inc. 16 - 21  Holder in Due Course Innocent holder in due course can enforce a negotiable instrument independent of problems against the drawer or maker Innocent Holder in Due Course must have: – Acquired the instrument before it was due and payable – No knowledge of any defect – Acquired instrument in good faith – Given some value in exchange for it If the instrument is not honoured when it is presented for collection the holder can turn to the endorser for payment – Holder must give timely notice of dishonour Advantages of holder in due course are reduced in consumer transactions Copyright © 2024 Pearson Canada Inc. 16 - 22 Cheque Figure 16.1 Cheque Copyright © 2024 Pearson Canada Inc. 16 - 23 Bills of Exchange Figure 16.2 Bills of Exchange Copyright © 2024 Pearson Canada Inc. 16 - 24 Promissory Note Figure 16.3 Promissory Note Copyright © 2024 Pearson Canada Inc. 16 - 25 Electronic Money Credit and debit cards are replacing negotiable instruments Unregulated virtual money is becoming more common – Bitcoin – Virtual vaults and wallets store these funds Fraud is an increasingly common problem for online transactions – Many jurisdictions have passed consumer protection legislation limiting a cardholder’s liability Copyright © 2024 Pearson Canada Inc. 16 - 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