Povitz-Commercial Law-Edwards-2015IntroductionA. The Course on Sale Sale: transfer of ownership from a seller to a buyer in exchange for money. 1708 CCQ & 2(1) Sale of Good

Act Ontario (SGA) Objectives of sale: Stability through (1) good title & (2) quality of transferred goods

B. Sources and Historical Development of the Law of Sale in QC and CML Canada Sources

o CVL: Modern CCQ 1994…codified jurisprudence. Most relevant articles are Book 5, Title 2 1708-1735 CCQ. Articles outside of the chapter will be used to interpret using integration approach.

Nominate contracts (18 types including K of sale): special rules in CCQ to govern their existence and derogate from generals rules of K v Innominate contracts which don’t have legislative framework and are governed by parties and basic rules of contract.

Ex) 1396 CCQ which says promise to enter into K is not a K and 1710 CCQ state that a promise to sell accompanied by possession is equivalent to selling.

o CML: Old system. Original SGA adopted from UK 1893, Key interpretation cases are from the 1920s. Updates though jurisprudence

o International: United Nations Convention on the International Sale of Goods (CISG) integrates CML and CVL

Historical Development o The law of sale exists as a continuation of the Exchange (CVL) and Barter (CML) systems

As such, the effects of a contract of sale apply to contracts of exchange as well 1798 CCQo “Sale’s carousel of progress”: notion that each civilization added refinements to the law of sale

Egypt: Objects of K were animals and slaves. Standards were often specified (Code of Hammurabi (2023-2080)

Rome: Original source of CVL + influence of CML. Legal system was elevated to new level because (1) greater levels of wealth required law to deal with complex transactions; (2) compared to Egypt it had more order, stability, and longevity over 1000+ year rule (3) they created and maintained actual system through precedents by judicial note taking + Juris Consults writing doctrine.

Classical period (450 BC) came creation of Aedalicane Edict in 199BCfirst consumer protection law dealing with animals and slaves. Game citizens recourse against defective property

The decline of Roman power and the end of authority in Gaul (France) was in 476 C.E. Germanics: had a respectful approach to other legal systems and decided to govern the law

according to nationality so that Romans governed by Roman law, and Franks by Frankish law, with different courts for each. Would break down when there was conflict between groups. Result was a merger of Franc and Roman Law. At the same time, there was a decline in the economy and education. Went from literate society with codified rules to illiterate judges applying oral law. Local communication with little communication between localities. Result was various different systems of customary law.

Justinian Digests the most influential instrument of private civil law proclaimed in 538 CE First Reception: When explorers and settlers came from Europe to Canada, they

brought their own customs. Merchants were not happy with unpredictable oral law and wanted more certainty, stability and clarity. 1100 Pope found Digest of Justinian that dealt with law of purchase and sale. From a different time but stable enough for merchants to rely on. A jurist in Bologna (Irinius) taught jurists from all over Europe who wanted to learn the law. They would go back to their respective countries and spread the Roman law of the Justinian Diget.

o Issues as it didn’t correspond to modern life

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Second Reception: Involved taking what was known and modernizing it for transactions. Involved giving more weight to some excerpts over others. Adopted by majority of EU

UK resistance: Although they did take part in the first reception of Roman Law, they were succeeding beyond everyone else at the time and did not want to follow suit. Developed their own modernization and created English Common Law

This represented the first division between the CVL and CML as jurists at the time would refer to similar sources but concluded different interpretations.

Issue was that law on sale of was not coherent. Solution 1893 Mackenzie Chalmers was given mandate to codify existing law to make it coherentSale of Goods Act

Law of Sale in CVL (Quebec) : By the Colonial Era, European countries had refined their laws and took them with them to their colonies. France exported Justinian French Law to New France (Quebec), French Africa, Belgium and Louisiana. In Quebec:o 1642: Various customs in Quebec until 1642, switch to follow Custom of Paris exclusively. o 1763: English conquest, territory transferred to English jurisdiction. Royal Proclamation Act abrogated

French law.o 1774: Quebec Act restored French law in respect of property and civil rights. From this point on, the law

no longer evolves from precedents of the Cour du Paris. Rather, Quebec legal rules will develop independently.

o 1804: Code Napoleon, French civil code, is adopted in France. o 1865: First Quebec civil code (CCLC): felt that Quebec needed their own civil code too many

differences from Franceo 1994: Recodification (CCQ) modernized old laws and removed contradictions, incorporating the law of

statute as well as case law into codal provisions. Law of Sale in CML : Modernization of the law of sale by Chalmers, but mandate was to codify the law as it

existed (not to resolve issues very much).o 1893: SGA was adopted throughout the British Empire. It was progressively adopted by every CML

province and territory. Ontario was the last province to adopt it in 1919.o 1906: The US felt like it needed something similar to UK. American Uniform Sales Act improved upon

existing merchant law, and proposed that all states adopt it. First US attempt to codify the law of sale. Samuel Williston wrote a 4-volume treatise on the law of sale and was involved in the early US law of sale. The problem with this piece of legislation was that it was largely based on the UK SGA but that legislation was simply codified existing law – which was already confusing.

o 1952: Publication of the Uniform Commercial Code (UCC), driven by Karl Llewellyn. Adopted by all states except for Louisiana.

International Law of Sale: Convention on the International Sale of Goods (CISG) o Ernst Rabel – an Austrian German jurist noticed a problem with the law of sale being limited to the

domestic forum…what law ought to be applied to international transactions? He sought to develop a neutral set of rules so that it would not be the law of any particular country that applied. Worked with various leading scholars from USA and France, but lost his ability to work and access the library during WWII since he was a jew.

o 1966: Dutch gov took this project on and came up with proposed convention. However, because USA was not interested, the Dutch effort was unsuccessful.

o 1980: Convention adopted in Vienna at an International Assembly. The USA was finally content with the amount of US CML content within it. Promoter was American John Honnold

Almost universal adoption, including Canada in 1991. CISG division is roughly 65% CVL and 35% CML Since 1991, when a seller and a buyer are located in two different countries, both of which

have adopted the convention, the Convention applies automatically as of right, unless explicitly written to be excluded. Despite its great success, lawyers are always most comfortable with their own system of law and although it has been marvelously successful as an international instrument adopted in all countries to favor and promote trade in the market place, it has not been extremely practically successful other than in Europe.

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CISG has been successful in promoting trade and serving as a model for law reform. When countries reform their law of sale, they tend to look to the CSIG as a point of reference, which is already partially integrated into their law and is widely accepted around the world.

When QC reformed their CCQ in 1994, introduced various provisions, which came from the CISG (arts. 1456, 1736, 1738, 1739, 1740).

C. Good Faithi) CVL Perspective Good faith requirement in law of sale: Requires : (1) Honesty & (2) Disclosure – obligation to disclose

material info, especially in cases of unequal access to information BMO v Bail. Seller must only disclose information if he knows that it will impact buyer’s decision. Seller need not inform a negligent buyer Jobin 160.o *1375 CCQ: The parties shall conduct themselves in good faith both at the time the obligation arises

AND at the time it is performed or extinguished.o 6 CCQ: must exercise civil rights in good faitho 7 CCQ: No right may be exercised with the intent of injuring another or in an excessive and

unreasonable manner, and therefore contrary to the requirements of good faith.ii) CML Perspective Traditional view: If enquiry is made, must respond honestly but no positive obligation to disclose. Modern view: Bhasin v. Hrynew SCC 2014: Good faith contractual performance is a general organizing

principle of Canadian common law, parties to a contract are under a duty to act honestly in the performance of their contractual obligations. Can’t lie or knowingly mislead about matters related to performance of K . Does not create a duty to disclose.

o Parties cannot contract out of the duty of honesty, but they can modify its scope by determining the standards if such standards respect the duty's minimum core requirements

iii) International Contentious point as CML voices concerns of clarity & predictability v CVL voices adopted everywhere and

reduces ambiguity by creating minimum standard for all jurisdictionso Result: good faith is not incorporated as a legal obligation, but as a principle of interpretation.

However, jurisprudence shows it has evolved into a general rule under the CISG -Vienna & Germany

o 7(1) CISG: interpretation requirement to observe good faitho 7(2) CISG: matters not expressly settled must be in conformity with general principles

Vienna, Austria, Arbitration Decision (June 1994): Under the CISG, parties are under the obligation to exercise their rights in good faith 7(1)(2). Good faith as estoppel: If a party behaves in a way that would lead an objective reasonable person to infer that this party will not exercise a right, and the other party relies upon this inference to his detriment, then the first is estopped from claiming the enforcement of the right.

Germany Supreme Court (October 2001): Under the CISG, parties are under the obligation to exercise their rights in good faith 7(1)(2). Good faith in pre-formation: A party seeking to incorporate standard conditions into a K (external doc) must show good faith efforts to communicate these terms to the other party. Where these efforts have not been made, these terms are not part of the K.

o In CVL 1435 a k of sale can have external provisions except (1) adhesion & (2) consumer contracts. In CML incorporation be reference is valid. Hyperlinks would be enough to make buyer aware Dell

D. Custom Custom: tradition within a geographic area//Usage: tradition within an economic sector. C & U often spoken

about together. Practice: tradition between two parties. Custom can refer to two things:o (1) Custom as an implied obligation: contract binds parties not only with respect to what is

expressed, but also to what is incident in conformity with the contract’s nature and usage 1434 CCQ. Similar in 29(4) SGA, 9(1) CSIG;

Customs have legal effect, can be incorporated by reference even if not explicitly agreed ono (2) Custom as a tool for interpretation: Has a “gap-filling function” such that it can help interpret

an ambiguous clause or how the agreement should be interpreted. 1426 CCQ, 8(3) CSIG, SGA not explicit but contains references to usage 15(3).

Customs binding if: (1) Regularly observed & (2) widely known by people in specific sector Edwards

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International context: Harder because parties can be in different areas. 9(2) CSIG: even if usage is not expressly stated in contract, such usage is implied so long as: (1) It is not derogated from by contract; and (2) The parties knew or ought to have know of such usage; and (3) Such usage is widely known to and observed by parties to contracts of the type involved

I. FormationA. Form of the Contract Contract of sale: A sale is a contract by which the seller (1) transfers ownership of property to the buyer (2)

for a monetary price, which the latter obliges himself to pay 1708 CCQ 4 Characteristics of a contract of sale: (1) Consensual (2) Bilateral (3) Onerous (4) Instantaneous

i) Consensual Interpreted through offer and acceptance created by exchange of consents between persons having capacity

to contrac t . However, law will impose some formal requirements on certain types of contracts. CVL

o 1385 CCQ: based on simple exchange of consents (no form is required for ordinary contracts). BUTo Formal Requirements for:

Sale of residential immovables 1785 CCQ: The executed contract of sale must be preceded by an earlier executor contract whereby the parties promise to buy and sell, respectively. If not done either party may apply to nullify 1786 CCQ. Will not necessarily prevent the formation of the contract; the buyer must petition the court and show that he suffered serious prejudice 1793 CCQ. Requirements allows the buyer to determine the value of his rights (by evaluating the property, checking titles, etc)

Requires Publication:: The acquisition, creation, recognition, modification, transmission or extinction of immovable real right requires publication 2938 CCQ

Consumer contracts 1384 CCQ: A consumer contract is legislated by QCCPA. One of the parties, being a natural person, the consumer, acquires, leases, borrows or obtains in any other manner, for personal, family or domestic purposes, property or services from the other party, who offers such property and services as part of an enterprise which he carries on.

23 QCCPA provides that certain consumer contracts can only be validly formed if there is an exchange of written documents (imposed on merchants so that buyers are informed of their rights). It also imposes other formalities. These contracts include: Contracts of sale/lease of goods; Contracts of credit; Contract which include a conventional option to purchase the good leased; Contracts of lease with guaranteed residual value; Contracts of service involving sequential performance; Physical fitness studios; Contacts entered into by consumers for the lease of goods with a merchant with whom he has entered into a principle contract

CML o 4 SGA: contract of sale may be made in writing, either with or without seal, or by word of mouth or

partly in writing and partly by word of mouth, or may be implied from the conduct of the parties, but nothing in this section affects the law relating to corporations

o 22 ONCPA: Consumer contracts must be in writing International

o 11 CSIG: A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses

ii) Bilateral 1380 CCQ: A contract is synallagmatic, or bilateral, when the parties obligate themselves reciprocally , each

to the other, so that the obligation of one party is correlative to the obligation of the other.o Buyer must pay for property//Seller must give property

iii) Onerous 1381 CCQ: A contract is onerous when each party obtains an advantage in return for his obligation.

o Seller gets payment of purchase price by Buyer//Buyer gets goods purchased from Selleriv) Contract of Instantaneous Performance

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1383 CCQ: …[Where] the performance of the obligations of the parties [is] at one single time, the contract is a contract of instantaneous performance. This is why resolve K (retroactive impact-put back in shoes pre K) rather than resiliate (prospective effects)

v) Registration Requirements The law requires that registration be done before certain contracts are opposable (CVL) or can be “set-up”

(CML) against third parties CVL

o There is no general condition for registration of movable rights – don’t need to register for it to be opposable. There are a few exceptions: installment sales, cars, recreational vehicles 1745 CCQ

o See 2938, 2939, 2941 and 2946 CCQ for registration requirements for immovables CML

o Regardless of the nature of the agreement, if there is a security interest (i.e. somebody invoking a right with respect to that property), then there is a requirement that it be registered – registration requirement 23 PPSA, 9 UCC

vi) Contracts of Sale v Gifts A pure gift is a transfer of ownership through gratuitous title 1806 CCQ, whereas a contract of sale is a

transfer of property by onerous title 1708 CCQ. Must ask if party received some benefit.o The obligation of a donor is not the same as the obligation of a seller. Donor not obliged to warrant

title or quality. Just liable for latent defects he was aware of and failed to disclose 1828 CCQ o If it’s a mixed contract of gift + benefit. Rules will only apply to the benefit 1810 CCQ

vii) Contracts of Sale v Enterprise/Service 2098 CCQ: Contract of enterprise/sale is a contract by which one agrees to provide services to another for a

price which the other binds himself to payo The difference between a contract of sale and the contract of enterprise or services is that the object

of the latter contract does not exist at the time it is entered into . Ex) Watch v Houseo Big differences between the two occur with regards to warranty. See 1794, 2118-2119 CCQ for

example re: architects and buildings How to qualify the contract: Must assess whether the contract for work or service is merely accessory to the

value of the property supplied? So, is work mostly for services or mostly for material (mostly” to mean over 50%). 2103(3) CCQ and 3 CISG

o If more than 50% of the value of the contract is for materials, it will be a contract of saleo If more than 50% of the value of the contract is for services, it will be a contract of enterprise.o Jobin: Inns c. Gabriel Lucas ltee and the CISG, there is an a priori contract of enterprise

See Old Farmer on p.20 for codal articles on giftsB. Offer and Acceptancei) Overview CVL

o Offer: An offer to contract is a proposal which contains all the essential elements of the proposed contract and in which the offeror signifies his willingness to be bound if it is accepted 1388 CCQ

2 Essential elements: (1) Object & (2) Price w/o not validly formed [but doesn’t prevent formation if parties desire, just acts as hook for nullity] Jobin 7

There must be a serious intent to enter into contractual relations if offer is accepted. Term & Revocation: If a term is attached the offer cannot be revoked until that term

lapses. If no term is attached then it may be revoked at any point before acceptance is received 1390 CCQ. Where there exists a term in an offer but the offeror has revoked the offer before the offeree has seen it, it lapses 1391 CCQ

Lapses if: (1) no acceptance is received by the offeror before the expiry of the specified term or, where no term is specified, before the expiry of a reasonable time; (2) lapses with respect to the offeree if he has rejected it. 1392 CCQ

May constitute promise to sell under 1396 CCQ [see p.8]o Acceptance: Acceptance which does not correspond substantially to the offer or which received by

the offeror after the offer has lapsed does not constitute acceptance. It may constitute a new offer 1393 CCQ. Silence does not imply acceptance (unless usage or prior biz relationship 1394 CCQ)

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CML o The CVL rules are generally the contractual rules in CML

International o Offer: (1) Be serious (intention to be bound) (2) Indicate the goods involved (3) Implicitly or

explicitly make provisions for determining the quantity of goods (4) Implicitly or explicitly make provisions for determining the price AND needs to address one or more persons 14(1)(2) CSIG

o Acceptance: 18(1) CSIG: Statement or conduct can be considered acceptance (silence or inactivity is not

acceptance). If reply contains additions, limitations, modifications it is a counter offer 18(2) CSIG: Acceptance is effective at the moment it reaches the offeror. Accordingly, if

there is a term attached, the acceptance will not be effective if it fails to reach the offeror within that time. Furthermore, if no term is attached, acceptance must reach the offeror in a “reasonable time” (looking at the circumstances)

18(3) CSIG: performance may constitute acceptance, if practice or usage amongst the parties allows.

Not acceptance but counter offer when: (1) Addition (2) Limitations (3) Other modifications 19(1) CSIG. If there are non-material changes [material: price, payment, quality, quantity, delivery, party liability, settlement dispute 19(3) CSIG ] it will be considered acceptance unless the offeror objects to the modifications without undue delay 19(2) CSIG

ii) Determination of Price CVL

o Price is an essential element of the contract [need it for sale] 1708 CCQo The price need not be determinate, but it must be determinable

Determinable: there must be a mechanism in place which will allow it to be determined at any point 1373(2) CCQ. Need objective factors with sufficient precisions. Cannot be left to will of parties. Jobin 233 ex) $5/kg or 10% of market price, third party determination.

When the price is not determined or determinable, the contract is not valid because an essential element is missing Beaudouin v. Rodrigue QCSC 1952

SGA and CSIG offer an alternative to voiding the contract if the price is not determined or determinable

CML o The price must be ascertained or ascertainable by (1) parties can fix price (2) parties agreed on way

to determine price (3) price can be determine by past dealings 9(1) SGAo Where the contract and dealings of the parties and their custom is silent in regards to price, the

contract is maintained and a “reasonable price” is determined 9(2) SGAo If a third party is to fix the price but is unable to, the agreement is void. However, if the goods or part

of them have been delivered, buyer will pay “reasonable” price for them. 10(1) SGA International

o Offer should indicate intention to be bound and be sufficiently definite. It is definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and price.14 CSIG

o Prima facie considers a concluded contract as valid despite the absence of a determinate or determinable price. Unless there is indication to the contrary, the parties are considered to have impliedly made reference to the price generally charged at the time of the conclusion of the contract. 55 CSIG

55 beats out 14 regarding price but should only be used as last resort.o Austria, Supreme Court - November 1994: Where parties to a K of sale establish a range for the

price of sale and act in acceptance of the K then it is held to be sufficiently definite and the court is empowered to fix the price within this range under 14 CSIG .

iii) Incorporation by Reference & Battle of the Forms Incorporation by reference

CVL

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o External clauses referred to in contracts are binding on the parties. Two Exceptions: (1) Consumer contracts & (2) Contracts of adhesion. Under exceptions, contract will be null if external clause wasn’t expressly brought to parties attention. Hyperlinks would be enough to make buyer aware Dell

CML o Incorporation by reference is valid Dell

International o See jurispru.No particular rule on incorporation of standard terms, only jurisprudence. Based on

principles of efficiency and good faith found in 7(1)(2) & [interpreted according to his intent where the other party knew or could not have been unaware what that intent was 8(1)] [if 8(1) not applicable, interpretation based on reasonable person of same kind as other party 8(2)] CSIG Germany, Supreme Court (October 2001): set out requirements under the convention for

the validity of a clause: (1) Found in the offer and acceptance; or (2) Transmitted to the co-contracting parties; or (3) Made available in another manner

Battle of the forms: Sophisticated commercial parties generally want to have the contract subject to their own standard terms and conditions. General rule in Canada (CML and CVL) as per Stmicroelectronics, Inc. v. Matrox Graphics (2008) QCCA: Where there is a battle of forms and both parties have tacitly accepted the others T&Cs, both parties are bound by the integration of each other’s terms. It is not an all-or-nothing equation; rather the court creates a master contract of terms and conditions that are not contradictive. When there is too much contradiction, apply framework from international and apply SGA. CVL

o Baseline: Acceptance that does not correspond substantially to the offer does not constitute acceptance. May constitute counter offer 1393 CCQ BUT… Silence does not imply acceptance of an offer, unless the contrary results from will of parties, or special circumstances, such as usage or a prior business relationship. 1394 CCQ

Achilles (U.S.A.) v. Plastics Dura (2006) QCCA: [arbitration clause] Silence does not usually result in acceptance of an offer, however, the repetitive nature of the circumstances (10,000 sales) shifted the burden to the person receiving the documents – if they were not in agreement, they had to come forward before the issue actually arose.

CML o Stmicroelectronics or international using SGAo If UCC applies s.2-207 UCC (1) Acceptance operates as an acceptance even though it states terms

additional to or different from those offered or agreed upon [they will be added to k] unless the additional terms (1) the offer expressly limits acceptance to the terms of the offer; (2) they materially alter it; or (3) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

International o See 18,19 CISG Acceptance if doesn’t materially change K. See Offer and Acceptanceo Germany, Supreme Court, (January 2002): Where the parties each propose T&Cs that contradict

with one another, if their conduct evidences that they nonetheless considered a K to be formed then these terms are excluded in their entirety and the K is formed on the basis of CISG provisions .

C. Lesion and Unconscionabilityi) CVL: Lesion

Exploitation of one of the parties by the other, the effect of which is the creation of a serious disproportion between the prestations [one obligation is excessive relative to the more minor obligation of the other] of the parties 1406 CCQ

o Can only be invoked for : (1) Minors and persons of limited capacity 1405 CCQ & (2) expressly provided by law CPA, right of redemption 1756 CCQ through unfair loans 2332 CCQ, see p.34

QCCPA: s.8 defines lesion as a disproportion that borders on exploitation because it is either excessively harsh or unconscionable. S.9 lays out factors: (1) Circumstances of the contract (broad discretion) (2) Benefits to the consumer (3) Conditions of the party [health, education, ability to pay]. We are looking at more than objective prestations.

o Richard v. Time Inc., 2012 SCC: Assessing the authenticity of a commercial representation [misleading ad] under 218 CPA will be based on the literal meaning of the words (1) Describing

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the general impression [initial contact] that the representation is likely to convey to a credulous and inexperienced consume r [not reasonable person] (2) Determining whether that general impression is true to reality. Applies to CML

ii) CML: Unconsiconability The doctrine of Unconscionability applies if: (1) There is an inequality of bargaining power between the

two parties. Conditions to consider: Education, intellect. Age, State of necessity, Language, Lack of independent advice & (2) outcome is grossly unfair seen through excessive price, unfair clause or disproportion in their respective obligations Edwards

o While the doctrine of unconscionability applies to all contracts (Hunter), in reality it mostly applies to consumer contracts since the relationship between consumer and merchant often consists of the requisite inequality

ONCPA: s.15(2) gives factors that should be taken into account in determining unconsciability [price>price of similar services, consumer can’t protect interests because of disability, illiteracy etc, no reasonable probably of full payment by consumer, one sided for non-consumer, consumer subject to pressure. s.18 remedies including rescission and damages after notice within 1 year.

C. Promise of Salei) Introduction

PoS: 2 transactions: (1) Parties agree to enter into second contract (contract of sale) provided that certain conditions are satisfied & (2) parties enter in an actual K of sale. [usually comes up in real-estate]

Three types of Ks: o (1) If offer to purchase is acceptedyou have a contract of saleo (2) If offer to promise to purchase is acceptedyou have a promise to purchase and to sell.

It is reciprocal (sufficient consideration/cause-parties are bound to enter KoS o (3) If unilateral promise of sale is entered into, you have an option – the offeree has the right

(option), but not the obligation, to purchase, and when the right is exercised, it becomes a bilateral promise of sale like #2

1396 CCQ: (1) An offer to contract made to a determinate person constitutes a promise to enter into the proposed contract from the moment that [A] the offeree clearly indicates to the offeror that he intends to consider the offer and [B] reply to it within a reasonable time or within the time stated therein. (2) A mere promise is not equivalent to the proposed contract; however, where the beneficiary of the promise accepts the promise or takes up his option, both he and the promisor are bound to enter into the contract, unless the beneficiary decides to enter into the contract immediately.

Much more developed in the CVL than CMLii) Conditions of Validity

CVL o Deemed a promise of sale if: (1) He intends to consider the offer; & (2) He intends to reply in the

time period stated or in a reasonable period of time 1396(1) CCQ Jobin: PoS also requires agreement on price.

o No consideration. Requires cause 1410 CCQ [the reason each of party entered K] + 1385 CCQ [cause is general requirement of K]. Cause does not require benefit or value. The seller is giving the buyer the right to buy with the hope that the deal will go through…that is enough. For buyer, Getting an option or increasing chance of subsequent K is enough

CML o Unilateral promises to purchase must come with nominal form of consideration

iii) What Are the Effects of a Promise of Sale CVL

o A promise to purchase is not equivalent to the subsequent sale. There is no transfer of ownership 1396(2) CCQ. It can’t be registered. It is a personal right, not real right [so only damages].

Exceptions: (1) If the intentions of the parties is to transfer ownership of the object immediately and is clearly expressed in the promise 1396(2) CCQ & (2) When the promise to contract is accompanied by immediate delivery and actual possession of the property 1710 CCQ

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o 1711 CCQ Money paid on the PoS is presumed to be a deposit against price. If deal doesn’t happen seller can’t keep $ (even if buyer in default).

o 1712 CCQ Failure by the promisor S/B to execute entitles beneficiary to obtain a judgment in lieuo Jobin 34: Contrary to an offer, a promise does not expire at the death of the promisor; it transfers

to beneficiaries of the estate. CML

o SGA 2(4): An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.

iv) Remedies for Breach of Promise of Sale [vendor to purchaser] When a promise of sale is breached, it gives rise to a personal contractual right. There are 2 main remedies:

(1) Damages and (2) Specific performance CVL

o Creditor can: [(1) force SP 1601 CCQ; (2) resolution of K or reduction in their obligation (3) take any other measure provided by law [seize property before judgment 953 CCQ, court can force title to be passed 1712 CCQ + Houlachi c. Bray QCCA] 1590 CCQ

CML o Damage is default. Specific performance is much more difficult to get. Object must be (1) unique

& (2) compensation through damages is not sufficient or adequate v) Contract Made in Violation of a Promise to Contract [either party can promise]

CVL o If seller sold object to 3rd party, promising buyer can only get damages from promising seller and

3rd party purchaser in bad faith 1397 CCQ. Recourse against promisor would be an action for breach of contract 1458 CCQ. If 3rd party in bad faith they can also be sued for damages/fault 1457 CCQ

o Damages: 2 types of damages: (1) *Loss sustained; (2) Profits deprived 1611 CCQ. Alternatively promising buyer can get an injunction prohibiting sale 752 CCP

Loss sustained for buyer: difference between the price in the promise to purchase and what he eventually had to pay (FMV)

Loss sustained for seller: difference between the price in the promise to purchase and what he subsequently sold it for.

CML o Damage is default. Specific performance is much more difficult to get. Object must be (1) unique

& (2) compensation through damages is not sufficient or adequate vi) CVL “De Rigeur” and CML “Time is of the Essence”

All promises to purchase will say that the deed of sale must be signed by a certain date. What happens if the promise to purchase is not concluded on that date?

o If the date intended by the parties is not intended to be absolute : Quebec courts have generally said that the promise to purchase survives and continues to live until either party sends notice to the other that unless the issue is resolved in a reasonable time, then the deal is off.

o If the date decided by the parties is intended to be absolute or “ De rigeur ” : Failing conclusion at that date, the deal is null and void.

II. Transfer and Ownership of RiskA. Transfer of Ownership

Both CVL and CML distinguish between 2 types of property: (1) Certain and determinate (CVL) OR ascertained or specific (CML) (2) Determined as to kind only (CVL) OR unascertained (CML)

The CSIG does not deal with the question of when transfer of ownership occurs. It deals only with the consequences (transfer of risk).

CVL o Property is certain and determinate : the acquirer is vested with ownership at the time the

contract has been entered into [applies w/o delivery or price determination… “selling you all my inventory at cost”] 1453(1) CCQ. Immovables always certain and determinate but require registration 1455 CCQ

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o Property is determined only as to kind : Property that has not been specified/individualized [it is part of greater lot]. Before right transfers there is (1) a requirement of isolating, labeling or earmarking the specific goods that the buyer intends to buy by separating them from the general goods [making them certain and determinate] & (2) notifying buyer [parties can waive]. 1453(2) CCQ.

o If seller defaults buyer can get resolution w court 1604 CCQ moveable w/o court 1736 CCQ, damages 1458 CCQ, specific performance 1590 CCQ

o Double sale : Immovables: Priority to the party who registers their right first 1455, 2946 CCQ. Moveables: the acquirer who is first given possession in good faith (even if title is later in time) is vested with the real right 1454 CCQ

CML o Ascertained/specific goods , ownership transfers when the parties intend it to transfer 18(1) SGA

Intend: First look to terms of K, conducts of parties, circumstances 18(2) SGA Second 19 SGA: Sets out guidelines regarding different transactions p.54

19(1) SGA, in combination with 12(3) SGA causes a significant problem for buyers’ recourses. In CML, there is a distinction between a condition and a warranty (in CVL, there are simply obligations). A condition is considered a type of obligation on which the foundation of the contract is established and if the condition isn’t met, there is a right to treat contract as resolved and reject the goods. On the other hand, a warranty only gives rise to a claim in damages. 12(3) SGA transforms conditions into warranties once ownership has passed. Any breach is considered to be a breach of warranty and is therefore not grounds for rejecting the goods. Result is restrictive treatment by CML when transfer of ownership occurs. 12(3) SGA only used where the product being bought is entirely seen and examinable.

If seller defaults on k to deliver specific/ascertained goods, specific performance and potential damages 50 SGA In Re Wait: Specific performance can only be claimed once transfer of ownership has occurred. ToO only possible once ascertained

o Unascertained . 3 conditions must be met for the transfer of unascertained property to pass: (1) Property must be in a deliverable state; (2) Property must have been unconditionally appropriated to the contract (ascertained)-Carlos [17 SGA] (3) There must be assent (express or implied) (notification/acceptance-ex: accepted on truck) 19 rule 5 SGA is used most often Edward

Exception: Ascertainment by exhaustion: If you have a sale of a specified quantity of unascertained property and the buyer has pre-paid, and what remains of the bulk is equal or less than what has been ordered, the property is considered individualized by default and is transferred to the buyer. Must be clear that what is left clearly belongs to the buyer. UK has codified this doctrine in their SGA.

In re: Wait 1926 UKCA: Under the SGA, the moment where ownership is transferred is determined by the intention of the parties. Transfer never occurs until the goods are ascertained. Unless the parties express a clear intention otherwise, then in a sale of unascertained goods ownership is not transferred until the goods become both ascertained and unconditionally appropriated to the K (measured and set aside), unless the parties intended otherwise [ss.17, 18, 19-rule 5].

In re Goldcorp New Zealand (1995): There can be no intention to transfer property, until the very goods sold are ascertained

Carlos Federspiel & Co. v. Chas. Twigg & Co (1957): Criteria for unconditional appropriation: Seller must be unable to use the goods to perform another k, or be unable to use different goods to perform this k; actual or constructive (seller as bailee) delivery, transfer of risk, seller must be done making his moves. [Higher bar than CVL]

B. Transfer of Riski) Moment of the Transfer of Risk

The moment of the transfer of risk is similar in both CVL and CMLo Res perit domino: as a general rule, transfer of risk takes place at same time as transfer of

ownership. Owner of property assumes the risks of loss 950 CCQ. Same + if fault in the mix, risk lies with person at fault 21 SGA

o Exceptions

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Frustration [pre delivery]: If the loss or damage of goods occurs before delivery, or if the buyer is prevented from receiving delivery for some reason, then both parties are discharged. If buyer has already paid, he is entitled to a refund

Despite transfer of ownership, risk remains with debtor [seller] of obligation until delivery has been effected 1456(2) CCQ 69 CSIG In CML, the goods are at the buyer’s risk whether delivery has been made or not [unless fault in the mix-risk lies with person at fault] 21 SGA

If good perishes before delivery, the sale is resolved, buyer doesn’t have to pay. But parties can contract out of this in CVL.

Installment sales: Installment buyer accepts the risk once he gets possession, but before he gets ownership, except in consumer sales or otherwise stipulated. 1746 CCQ+133 QCCPA

International : General rule when there is a agent/shipper involved: Risk is transferred to the buyer upon handing over the goods to the agent, unless the goods are not yet appropriated to the contract (67 CSIG)

o Specific circumstances depending on contract see p.60 66-69 CSIGii) Impossibility of Performance

CVL : Debtor is released where he cannot perform because of superior force. 1693(1) CCQ. Superior force: an external, unforeseeable and irresistible event 1470(2) CCQ. BoP is on the debtor. If proven, he will be released from his obligation unless he consented to assume the risk of SP 1693(1) CCQ

o A debtor released by impossibility of performance can’t exact performance of the correlative obligation of the creditor [both released]; if performance already rendered, restitution owed.Where the debtor has performed part of his obligation, the creditor remains bound to perform his own obligation to the extent of his enrichment. 1694(2) CCQ

o Partial loss: Even if property has suffered deterioration (partial loss only-under 10% loss), debtor has obligation to perform 1562 CCQ. +10% loss seller gets released 1693 CCQ

CML : Frustration means impossibility of performance. If it applies agreement is voided both parties discharged 8 SGA

International o 66 CISG: loss or damage of the goods after the transfer of risk does not excuse the reciprocal

obligation of the buyer to pay the price, unless it was due to an act or omission of the sellero Note : CISG sets different rules for when transfer of risk occurs for various contracts

1. Seller delivers goods himselfrisk is transferred either: (a) upon delivery (69(1) CISG) or (b) when delivery ought to have occurred (69(2) CISG)

2. Seller delivers goods through an agent (most common in an international context)risk is transferred to the buyer upon seller handing over goods to the agent, unless the goods are not yet appropriated to the K (67 CISG)

3. Goods are already in transit when contract is formedrisk passes upon formation of the K, unless goods are already damaged at that time and seller knows or ought to know of the damage (68 CISG)

C. Sale of Property Belonging to Anotheri) CVL

What can original owner do?o Where a vendor sells an object that he does not own or is not authorized by the owner to sell, this

contract may be declared null 1713 CCQ. The true owner of an object has the right to revendicate that object from a purchaser under invalid title 1714 CCQ.

A vendor may conclude a contract of sale for an object that he will subsequently purchase from a third party, if the transfer is deferred. If the defective vendor becomes the rightful owner after the transfer of ownership [to vendor] would have taken place, but before any action implying nullification is taken, then the recourse disappears and the ownership is merely transferred 1713 CCQ.

o Exceptions: 1714(1) CCQ The true owner may apply for the annulment of the sale and revendicate the property from buyer unless : (1) sale was made under judicial authority, or (2) buyer can set up positive prescription. 3 years for moveables presumed gf, burden shifted 2919

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CCQ. 10 years for immoveables presumed not gf burden on possessor + judicial application required 2918 CCQ. Neither applies to thieves but applies buyer from t in GF. See double sale p.9

o If moveable sold in the ordinary course of business of an enterprise or bought from a professional seller, the owner must reimburse the good faith buyer for the price he has paid 1714(2) CCQ. Presumption of GF 2805 CCQ true owner would have prove bad faith

Entreprises Maurice Canada v. Cossette [1980] (QCSC): failure to check registry will constitute bad faith

A right registered in a register in regard to property is presumed known to any person acquiring or publishing a right in the same property. 2943 CCQ

Masella v. Nettoyeur Eden [1993] (QCCA): Restricts bad faith to actual knowledge that the seller was not the true owner or gross negligence.

What can 3rd party buyer do? A nnul the sale if owner is able to revendicate 1715(1)(2) CCQ so buyer gets payment returned;

arguably they are obligated to return object unless it is seized. Damages in eco under 1457 CCQ and k 1458 CCQ

ii) CML No nullity in CML. Just the possibility of revendication under the exceptions What can original owner do?

o Unauthorized seller will never confer any rights regarding ownership of property to the buyer 22 SGA. Exceptions:

Estoppel: where true owner put himself in a position such that either through deliberate acts or negligence, the court should not grant him his normal rights

Factors act (acting): Unauthorized seller has acted in such a way as to give buyer the reasonable impression that he was authorized to sell. 22(a) SGA

Sellers in possession: Where a person having sold goods keeps possession and then subsequently sells those same goods to a second buyer, the sale will be valid if: (1) the second buyer was in good faith & (2) delivery or transfer of the goods took place. 25(1) SGA narrowly applied-imposes a penalty on first buyer for not taking possession right away. Equivalent to double sale p. 9

Pacific Motor Auction v Motor Credits (1965) Australia: Under Australian SGA, when a vendor sells goods but keeps continuous possession of them and subsequently sells them a second time to another person who takes possession of them in good faith, the second sale is valid and purchaser becomes owner

Buyers in possession: Applies where A sells (or promises to sell) to B under arrangement whereby B (in good faith) gets possession but pays over a period time and there is a suspension in transfer of ownership, but then B sells the goods to C (C in good faith). Burden of seller to get paid 25(2) SGA

25(3) SGA say registry rules have primacy Newtons: Dealership (plaintiff) sold car to Andrews under agreement that

ownership would only transfer when his cheque cleared. Cheque bounced, but in the meantime Andrew sold the car to Biss, who sold it to Williams (defendant). Dealership was never paid so revendicates the car. But Williams paid for it, and wants to keep it. Court concludes that dealership may not revendicate. Andrew had valid possession (even if he did not pay), so sale to Williams is valid.

III. Seller’s ObligationA. Warranty of Ownershipi) CVL

Seller bound to deliver property and to warrant ownership and quality. These warranties exist by operation of law, whether or not they are stipulated in the k of sale 1716 CCQ [can be excluded by parties].

o Seller must declare rights : The seller is bound to warrant the buyer that the property is free of all rights except those he has declared at the time of the sale 1723(1) CCQ

Two conditions added: (1) If the problem is known to the buyer, it need not be disclosed & (2) If the restriction is registered, it need not be disclosed unless the presumption of

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knowledge is rebutted [can be rebutted if notary was consulted] Chartré v. Exploitation agricole et forestière des Laurentides [2002] (QCCA).

Registration is presumed to be known but this can be rebutted by buyer 2943 CCQo Hypothecs : The only way the seller can get around the obligation to disclose existence of a

hypothec on property is if the buyer assumes the debt that the security guarantees 1723(2) CCQ o Encroachment : The seller warrants buyer against any encroachment on his part unless he has

declared it at the time of the sale 1724(1) CCQ. The seller also warrants against any encroachment commenced with his knowledge by a 3rd person before sale [seller must be aware at time of sale. 1724(2) CCQ

o Public Law Violation: (1) property sold must be an immovable; (2) there must be a public law restriction (ie. zoning); (3) there must be a violation existing at the time of the sale, and (4) it must not be part of the ordinary law of ownership (ie. it must be with respect to separate rules such as zoning, agricultural rules, environmental rules etc.) 1725(1) CCQ.

Chartré: if the case does not fall under 1725 general regime under 1723(1) can still apply Ex) Seller sells a property. He is operating a business but the property is zoned

as residential, not commercial. Here, there is a restricting (zoning law) and a violation, so the provision would apply.

Defences for Public law : 3 possible defences if conditions from 1725(1) are met: (1) Seller has given notice of the restriction to the buyer at the time of the sale; (2) prudent and diligent buyer [status of seller, status of the buyer, age of the property, nature of the defect, price, nature of the property and conduct of the parties] could have discovered the restriction by reason of the nature, location and use of the premises; (3) Restriction has been registered [this can’t be rebuted by buyer like 2943] 1725(2) CCQ

Larin v. Curadeau, QCCA 1997: A buyer cannot avail himself of the warranty against violations of public law restrictions if the violation is apparent, as opposed to latent. The violation is apparent if there are enough indicia to cause the ordinarily prudent and diligent buyer to doubt the legality of the situation. Buyer can’t be naïve or negligent [storage business deal]

Changing the warranty: o Parties may, in their contract, add to obligations of legal warranty, diminish its effects or exclude

it altogether but in no case may seller exempt himself from his personal fault. 1732 CCQo Seller may not exclude or limit his liability unless he has disclosed the defects of which he was

aware or could not have been unaware and which affect the right of ownership or the quality of the property. An exception may be made to this rule where a buyer buys property at his own risk from a seller who is not a professional seller 1733 CCQ [applies to warranty of ownership and warranty of quality]. Court overrides in Trilogy of Stolen Cars

Buyer can still claim fraud under 1401, 1407 CCQ Infringement

o Buyer who discovers a risk of infringement of his right of ownership [by 3rd party] shall, within a reasonable time [6 months in Bergeron ] after discovering it, give notice to the seller, in writing [or verbal], of the right or claim of the third person, specifying its nature. 1738(1) CCQ

Seller may not invoke tardy notice from the buyer if he was aware of the right or claim or could not have been unaware of it [negligence standard]. 1738(2) CCQ

Enforcement/Remedies governed by 1590 CCQ: SP, resolution/resiliation of K, reduction of obs, any other measure

CPA: Similar to 1723 but buyer doesn’t have to respect reasonable delay + seller can’t limit their liabilityii) CML

Unless parties’ intentions indicate otherwise, a k of sale imposes three obligations: (a) title obligation : implied condition that, in case of a sale, seller has the right to sell the goods, (b) quiet enjoyment of the goods: implied warranty that the buyer will not be disturbed in its use by third parties who might make claims on the goods; and (c) goods are free of any charge or encumbrance of a third party not disclosed to the buyer: an implied warranty 13 SGA [applies to all property]

o Rowland v. Divall [1923] (UK CA): Can’t sell something unless you have title to it…13(a) SGAii) International

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Seller must deliver goods that are free from claim from another party 41 CSIG similar to 1723 CCQ and 17(c) SGA

42(1) CSIG: General rule that IP must be respected. It is the law of the place of the buyer that must be respected; but there are two scenarios which would reduce this protection: (a) where the buyer knew or should have known that the goods would be in violation of trademark, and (b) where the breach of IP results from the buyer’s requirements or specifications.

43 CISG: In the event that there is a violation under the warranty of ownership, the buyer must give a notice specifying the nature of the right or claim of the third party. Exact same as 1739 CCQ

B. Warranty of Qualityi) CVLConditions defects and exclusions: Seller is bound to warrant ownership and quality of the property, regardless of whether it is mentioned in the contract 1716 CCQ. Parties must expressly indicate changes but seller can’t get out of personal fault 1732 CCQ or bodily/moral injury 1474(2) CCQ. Seller also can’t get out of his liability unless he has disclosed the defects of which he was aware or could not have been unaware 1733(1) CCQ [presumption of knowledge for: (1) manufacturer-ABB rebut if superior force or development of risk; ( 2) professional non- specialized seller rebut using negligence test; (3) specialized seller rebut if reasonable precaution, could not have known or suspected Samson.] Exception may be made where a buyer buys property at his own risk from a seller who is not a professional seller 1733(2) CCQ. Warranty of quality doesn’t apply to judicial sales 1731 CCQ.

There are 6 conditions necessary for the warranty of quality to apply :1. Defect must be latent , not apparent: defect will be considered apparent when it can be perceived by a

prudent and diligent buyer without expert assistance, or when seller has fully disclosed it to the buyer. [1726(2)].

1726 only covers latent defects that impair use of the product. ABB v. Domtar Inc. (SCC) 2007: Any fact or set of facts that impair the

expected normal use of the buyer will be considered a “defect” for the purposes of the warranty of quality. So the warranty is not really against the existence of a latent defect so much as it warrants reasonable, normal use.

Cook v. Warren [1992] (QCCS): Court held that the presence of the bats impaired the normal use of the house (therefore it was a defect) and that the defect was hidden [d]. All you need is that the presence of the bats made the house “impropre a l’usage” that they wanted to use it for, not that they had caused serious damage. Buyer due diligence met with reasonable inspection by inspector who was also not a fault.

o Conditions for latent defect under 1726 CCQ : a. Defect must exist at time of the sale; need not be full-blown, but must exist “en germe.”b. Defect must be unknown to the buyer; refers to positive knowledge.c. Defect must be serious; buyer would not have bought it at all, or would have insisted on

reduction in price.d. Defect must be hidden; hidden means not apparent, could not be perceived by a prudent and

diligent buyer without expert assistance.i. Conditions for apparent - Placement Jacpar v. Benzakour [1989] (QCCA):

1. Status of seller : the more a seller is a professional, the likely that defect is considered hidden.

2. Status of buyer : the more the buyer is a professional, the more likely a defect was apparent.o Blanchard v.Guertin [2004] (QCCA): [wood house]. Even though they

are not professional buyers, the law will adapt the intensity of the obligation of inspection to the specific knowledge and experience of the parties.

3. Nature of property : if commercial real estate, for instance, a more thorough inspection will be expected than personal use property.

4. Age of property : the older the property, more likely that a defect will be considered apparent.

5. Price : the more expensive the property, the more intense the inspection should be.

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6. Type of defect : what would be apparent to the diligent buyer7. Behaviour of the parties : General rule: seller only has to notify buyer of

latent defects. If apparent, it is not necessary. But the courts have occasionally modified the general rule. If the circumstances where misleading or fraudulent statements were made, a defect normally considered apparent may be deemed hidden.

2. Defect must be serious : defect will be serious when it is the case that if buyer had known about the defect, he wouldn’t have bought the property or wouldn’t have paid such a high price [art. 1726(1)].

3. Defect must have existed prior to the sale [1726(1)].4. Defect must have been unknown to the buyer/not apparent [1726(2)]. Defect must have been known

(or presumed to be known) to the seller in order to obtain damages [1728] ABB: Where a seller is aware, or ought to have been aware of the existence of defects at

the time of sale he cannot employ an exculpatory clause to limit liability. Where he was not aware or has rebutted the presumption he may deploy the exculpatory clause. Additionally, he will not be liable for damages.

5. Buyer who ascertains defectiveness must give written notice within a reasonable time . When defect is gradual, time begins to run when buyer could have suspected seriousness/extent of defect [1739(1)], but late notice is okay if seller knows or could have known of the defect at time of sale [1739(2)].

St-Maurice compagnie d’assurance v. General Motors of Canada Jobin: 6 months to 1 year. Factors: use, nature of the property. Extended for expert.

Suspended if can’t reach seller. Delay begins to run on discovery of defect. Professional seller: defect presumed to have existed at the time of a sale by a professional seller if the

property malfunctions or deteriorates prematurely in comparison with identical items; such a presumption is not made, however, where the defect is due to improper use of the property by the buyer. 1729 CCQ

Liability: manufacturer, distributor, supplier including wholesaler and importer are also bound to warrant the buyer in the same manner as the seller. 1730 CCQ

o Hay v Jacques (1999) QCCA: The sub-buyer can take recourse when the person who sold it to him cannot be found, has gone insolvent, or cannot be held to the obligation of guarantee.

Enforcement/Remedies governed by 1590 CCQ: SP, resolution/resiliation of K, reduction of obs, any other measure

ii) CML Warranty of quality is composed of 3 distinct obligations or [implied] conditions:

o (1) Description: k for the sale of goods, implied condition that goods will correspond to the description given 14 SGA [written or oral, professional sellers and private sellers, gf and bf]

Violations of conditions give rise not only to damages, but also give buyer the right to repudiate the contract and reject the goods.

o (2) Merchantability: to be “merchantable” means to be acceptable in the marketplace-can it be sold in its current condition/does it have necessary components that allow it to be used [ex: rust, instructions, lack of durability]. BUT if the buyer has examined the goods, there is no implied condition as regards defects that such examination ought to have revealed. 15(2) SGA. [Professional seller, does not cover apparent defects]

Hardwick Game Farm v. SAPPA 1969 HOL: The lowest quality that is sold meets the condition of merchantable quality (i.e. it’s the lowest common denominator that is accepted under that name). It’s not because a particular buyer won’t buy. Any one adequate purpose is sufficient to make goods commercially saleable as described.

o (3) Fitness for use: Where the buyer expressly or by implication makes known the particular purpose for which he is buying the goods, there is an implied condition that the goods will be reasonably fit for such a purpose 15(1)(SGA. 3 conditions in this provision: (1) Buyer must make intention known (explicitly or implicitly); (2) Buyer must thereby show reliance on the seller’s skill, judgment or expertise; and (3) The seller is a professional seller. Widely interpreted. Extends to normal use. Reliance is presumed

Hardwick: A buyer is only obliged to inform the seller if his purpose is unusual, for the seller is presumed to know the normal range of purposes of the goods he sells. It is possible to rebut the assumption of reliance, however it is difficult to do so. None of the following serve to displace the inference of reliance: membership of buyer and seller in

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the same trade association, a wide purpose of the goods, or the fact that the seller has not seen the goods he is selling.

Ashington Piggeries Ltd v. Christopher Hill 1972 HOL: Where a good is purchased for a stated purpose, such that the buyer makes clear his reliance upon the expertise of the seller to ensure its adequacy for this purpose, if this purpose is general, the seller warrants that the goods be useful for every foreseeable particular application of this larger purpose

Varying Contract: Parties can vary contract by agreement, use, or dealings 53 SGAo Murray v. Sperry Road: (1) A disclaimer will not protect a vendor against breach of a

fundamental term of a contract. Fundamental term: something which underlies the whole k. “Exempting clauses, no matter how widely they are expressed, only avail the party when he is carrying out his contract in its essential respects.” (2) A person may be liable for breach of a warranty notwithstanding that he has no contractual relationship with the person to whom the warranty is given [manufacturer towards retailer].

iii) QC and ON Consumer Law [professional seller to consumer]QCCPA

37 QCCPA Goods forming the object of a contract must be fit for the purposes for which goods of that kind are ordinarily used.

38 QCCPA Goods forming the object of a contract must be durable in normal use for a reasonable length time, having regard to their price, the terms of the contract and the conditions of their use

44 QCCPA In a conventional warranty, exclusions are prohibited unless they are clearly indicated in separate and successive clause

53 QCCPA A consumer who has entered into a contract with a merchant is entitled to exercise directly against the merchant or the manufacturer a recourse based on a latent defect in the goods forming the object of the contract, unless the consumer could have discovered the defect by an ordinary examination.

ONCPA 7(1) ONCPA: Entire Act is of public order, can’t be waived by parties 9(1) ONCPA: The supplier is deemed to warrant that the services supplied under a consumer agreement are

of a reasonably acceptable quality. 9(2) ONCPA: The implied conditions and warranties applying to the sale of goods by virtue of the   SGA are

deemed to apply with necessary modifications to goods that are leased or traded or otherwise supplied under a consumer agreement.

9(3) ONCPA: Any term or acknowledgement, whether part of the consumer agreement or not, that purports to negate or vary any implied condition or warranty under the   SGA or any deemed condition or warranty under this Act is void.

9(4) ONCPA: If a term or acknowledgement referenced in subsection (3) is a term of the agreement, it is severable from the agreement and shall not be evidence of circumstances showing an intent that the deemed or implied warranty or condition does not apply.

iv) International 35 CSIG: Goods must conform to the k. Conform: provision has list of conditions and if it doesn’t meet

conditions, will not conform [fit for purpose of description, fit for use [implied general], packaged in usual manner]. Seller not liable if the buyer knew or could not have been unaware of such lack of conformity

36 CSIG: seller liable for conformity even if it becomes apparent post delivery. Liable for their guarantee. 38 CSIG: Buyer must examine the goods within as short a period as is practicable in the circumstances.

Either at seller or at destinationo Germany, Supreme Court, (June 2004): 2 weeks was considered normal.

39(1) CSIG: Buyer needs to send notice in writing on discovery on non-conformity within reasonable time 40 CSIG: Seller can’t benefit from notice requirements if the lack of conformity relates to facts of which he

knew or could not have been unaware and which he did not disclose to the buyero Germany, Supreme Court, (June 2004): [paprika radiation] Seller couldn’t avail of delay because

he knew 4 types of buyer recourses under the CSIG :

o (1) Specific performance 28 CSIG but only if it constitutes a fundamental breach 25 CSIG. Availability of recourse is dependent upon the rules of the jurisdiction in which suit is brought 46(2) CSIG

o (2) Damages : Buyer will always be entitled to damages for breach 45(2) CSIG

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o (3) Reduction in sale price: Price will be reduced in proportion to the value of goods actually delivered 50 CSIG

o (4) Recision of the contract: Only available in cases of fundamental breach. Seller can avoid by offering specific performance or repairing the item. If buyer refuses, he may not obtain recision of the contract.

37 CSIG If seller has delivered goods before date for delivery, he may, up to that date, deliver any missing part/fix/replace issues or make up any deficiency in the quantity of the goods delivered, provided that the exercise of this right does not cause the buyer unreasonable inconvenience or unreasonable expense. However, the buyer retains any right to claim damages as provided for in this Convention.

48 CSIG The seller may, even after delivery, remedy at his own expense any failure to perform his obligations, if he can do so without unreasonable delay and without causing the buyer unreasonable inconvenience or uncertainty of reimbursement by the seller of expenses advanced by the buyer. However, the buyer retains any right to claim damages as provided for in this Convention.

IV. Manufacturer and Product Liability Apart from guaranteeing the quality of goods, the warranty of quality also protects against safety defects

that cause damage to the buyer, his property, or a third party. A. CVL

i) Contractual liability Reform of CCQ saw increased importance to consumer safety: physical integrity of the person 3 CCQ;

exclusion of bodily/moral harm 1474(2) CCQ, can’t invoke untimely notice 2930 CCQ Warranty of Quality extends to safety defects p.13 Rights of the direct buyer : Products fulfilled their normal use, but they were unreasonably dangerous.

That danger was held to constitute a latent defect [riffle] Rosso K binds parties to what is expressed in it but also as to what is incident to it according to its nature

and in conformity with usage, equity or law 1434 CCQ. Where he fails to honor k he is responsible for any bodily, moral or material injury he causes 1458 CCQ. 53 QCCPA applies p.15

Rights of the sub-acquirer : Buyer has rights against the chain. Sticky recourseo The rights of the parties to a contract pass to their successors by particular title if they are

accessory to property which passes to them or are directly related to it. 1442 CCQo The manufacturer, any person who distributes the property under his name or as his own, and any

supplier of the property, in particular the wholesaler and the importer, are also bound to warrant the buyer in the same manner as the seller. 1730 CCQ essentially same as QCCPA 54

Jobin: rights of the parties to a contract are transmitted to those having cause to a particular title as accessories of the property or when they have a close link with the thing. When the vice is dangerous, person can choose between k and eco recourses against manufaturer

GM v. Kravitz [1979] (SCC): [purchaser of car to skip over the insolvent dealer to get $] Kravitz decision allowed direct contractual recourse against the manufacturer on the basis of hidden defects. Was codified in 1730 CCQ

Hay v Jacques (1999) QCCA: The sub-buyer can take recourse when the person who sold it to him cannot be found, has gone insolvent, or cannot be held to the obligation of guarantee.

ii) Extra Contractual liability [for 3rd parties not direct buyer] Liability towards 3rd parties: The manufacturer of movable property is liable to reparation for injury to a

third person by reason of a safety defect; the same rule applies to anyone who distributes the thing or any supplier (wholesaler or retailer) 1468 CCQ

Safety defect: A thing has a safety defect where having regard to all circumstances it does not afford the safety a person is normally entitled to expect particularly by reason of a defect in design or manufacture, poor preservation or presentation, or the lack of sufficient indications as to the risks and dangers it involves or as to the means to avoid them 1469 CCQ

Defenses: Manufacturer, distributor or supplier is not liable if he proves that victim knew of the defect, could have known of the defect (responsibility to examine), or could have foreseen the injury 1473(1) CCQ. Development of risk defense: Manufacturer, distributor or supplier also not liable if he proves that

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according to the state of knowledge at the time of the sale or manufacture of the good, he could not have known of the existence of the defect 1473(2) CCQ.

Bodily injury or gross fault: A person may not exclude or limit his liability for material injury caused to another through an intentional or gross fault 1474(1) CCQ. He may not in any way exclude or limit his liability for bodily or moral injury caused to another. 1474(2) CCQ

iii) Duty to warn aka No explanation or instructions Here, the issue is not that the product is dangerous, but that there was insufficient explanation or instruction

as to how to use the good properly. Jobin:

o Contract : obli to inform is not specifically codified in the contractual sphere – falls under 1434 [k binds party to custom and usage], 1458 [duty to honor k undertakings], 1726 [warranty of quality].

o ECO : obligation clearly set out in art. 1469 – a safety defect “is on which results from the lack of sufficient indications as to the risks and dangers involved”

o Consumer protection : obligation to warn under 53(2) QCCPA - where there are insufficient directions regarding the risk of danger, it is equivalent to a latent defect.

Edwards golden rule: The greater the danger, the more significant your duty to inform or warn. If danger is minimal, a general instruction is probably okay. But if danger is great, it needs to be indicated clearly.

iv) Right to damages re product liability [options] Contractually: Breach of warranty of quality requires restoring price and reparation for injury 1728 CCQ

+ breach of k general 1458 CCQ. K remedies: SP, resolution/resiliation/any measures provided by law 1590 CCQ.

QCCPA: unconditional right to damages under 53 QCCPA Eco: reparation for injury under 1468 CCQ

B. CMLi) Contractual liability Contract between seller and immediate buyer: products liability claim can be based in contract. Contract between seller and sub-acquirer: there is no “direct recourse” in the CML.

o SGA provides no recourse to subsequent purchaser against manufacturero However, Murray and theory of collateral warranty: Court held that representations in a

brochure were sufficient to create a warranty and direct contact between the end user and manufacturer. The breach of that warranty gave rise to damages.

ii) Extra-contractual liability CML is based primarily on being able to sue the manufacturer under tort law. Tort is there to compensate you for physical damage to your person or property. Exception: CML will permit a claim in tort for economic loss resulting from a dangerous defect.

o Winnipeg Condominium v. Bird Construction 1995 SCC: Adopting Laskin’s dissent in Rivtow: If a defect in construction is due to the contractor’s negligence, and poses a foreseeable danger to the health and safety of the building’s occupants, the contractor is responsible for the cost of reasonable repairs and putting the building back into a non-dangerous state. A contractor, or sub-contractor of a building owes a duty of care in tort to subsequent purchasers of that building, such that they may be liable for all defects that pose a substantial danger, bodily or material, to the health and safety of the occupants. This extends to liability for economic loss of the cost of repairing the defect in advance of any harm. Court argues that the fear of indeterminate contractual liability is misplaced: instead, the court stresses that there must be a tort independent from the contractual duty under the K. Tort only applies to the useful life of the building (they don’t last forever)

V. Buyer’s ObligationA. CVL

The buyer is bound to take delivery of the property sold, and to pay the price thereof at the time and place of delivery. He is also bound to pay any expenses related to the act of sale 1734 CCQ. The buyer owes interest on the sale price from the time of delivery of the property or the expiry of the period agreed by the parties. 1735 CCQ

Remedies for seller :

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o (1) Withhold delivery [only applies to moveables?] 1591 + 1592 CCQ. Seller can stop delivery in transit 1740(2) CCQ

o (2) Action for payment of price [moveable and immoveables] This recourse occurs often when the buyer has resold the good, the seller cannot retake the good, only has recourse against the buyer for damages for the purchase price 1590 CCQ;

o (3) Resolution of K Moveable property

Before delivery : if buyer fails to pay and does not take delivery, the contract can be resolved (no longer remains in force/like never happened) 1740 CCQ. Condition: Buyer must be in default: obligation no longer useful because time expired, has failed to do or not do, SP impossible through his own fault, made clear to creditor he won’t perform, refusing to perform successive obligation 1597 CCQ

After delivery : seller has the right to revendicate the goods, even after delivery + resolution of the contract. 6 requirements 1741(1) CCQ:

o (1) request for revendication and resolution made within 30 days of delivery

o (2) Property in same condition as it was sold…if you sold bricks to a buyer, but they were made into a wall, this article doesn’t apply

o (3) Has to be a cash sale – cannot have a termo (4) Property cannot be in hands of 3rd party who has paid purchase priceo (5) Purchaser has to be already in default or has to be put in default.

under 1597 CCQo (6) No hypothecary creditor has obtained surrender of the property:

2763, 2768 CCQ. There would have to be a judgment in this case confirming surrender of the property

1741(2) CCQ gives the seller the right to revendicate the good no matter where it isthis is a great remedy for the seller but a bad remedy for buyers and third parties. As long as conditions are met, seizure of the property by a third party doesn’t stop the seller from seizing the goods back.

If conditions aren’t met : 1604 CCQ: legal proceedings to get resolution – have to go before the court BUT 1605 CCQ: says a contract may be resolved or resiliated without judicial proceedings in certain instances. Jobin argues that it can apply to contracts of sale when, for example, it is sold to a subsequent buyer and the subsequent buyer is in bad faith. Edwards: 1605 prob doesn’t apply

Immoveable property [public policy because of $, protection towards buyer] Seller has the right to resolve [like it never happened] if following requirements are:

(1) 1742(1) CCQ: all contracts of sale require express resolutary clauses (2) 1742(2) CCQ: The resolution must be exercised within 5 years of sale (after

5 years, you can still get an action in payment – if the seller took a hypothec on the good he sold, he would also have a hypothecary recourse)

(3) 1743(1) CCQ requirement of prior notice: give 60 days to buyer. Requirement must be registered

o Similar to rules for hypothec: indicate what recourse wanted (2757 ff. (especially 2758, 2761).

o 1743(2) – A seller who takes back property by exercising a resolutory clause takes it back free of any charges which the buyer may have placed on it after the seller registered his rights.

(4) 2778 CCQ – when the buyer already paid more than half the price of the good – the seller must obtain the authorization of the court to obtain resolution. There is large discretionary power to the court (there is no specific criteria to follow)

o What can the buyer do? All parties affected by restrictions have to be notified – so that any interested parties the

right to stop the resolution by paying the creditor the amount owing to him or by

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remedying the omission or breach set forth in the prior notice and any subsequent omission or breach, and, in either case, by paying the costs incurred 2761(1) CCQ. Must be done before property is taken or sold 2761(2) CCQ

They only have to pay the installments – don’t have to pay the full amount. Future terms and acceleration clause don’t apply. Stops resolution for the moment 2761(1) CCQ

If there an automatic resolutory clause, it does not apply 2761(1) CCQ A creditor not entitled to demand any indemnity from the debtor except the interest and

the costs incurred + extra judicial professional fees 2762 CCQ Right of the subsequent buyer and hypothecary creditor to force the buyer to sell the

property, or sell under judicial authority. From the proceeds of this sale, the seller gets fully paid, and this goes to subsequent creditors in rank 2779 CCQ [creditor gets proceeds from sale].

o Effects of resolution 2 types of resolution: (1) voluntary (2) judicial 2781 CCQ. All resolutions have to be

registered to be opposable against third parties 2938 CCQ. All real rights that have been registered completely disappear. Seller gets the good back in its original state 2783 CCQ. Retroactive effect to the date of registration of sale not the date of sale itself 1743 CCQ

Buyer’s obligations in installment sales o An installment sale is a sale with a term by which the seller reserves ownership of the property

until full payment of the sale price. 1745(1) CCQo A reservation of ownership with respect to road vehicles and other movable property determined

by regulation (art. 15.01 of the Regulation on the RDPRM). Including: Road vehicles – includes motorcycles; Caravans (included in regulation); Fifth wheel (included in regulation) – semi car; Mobile home (included in regulation); Boat ((included in regulation); Personal watercraft (included in regulation); Seadoo; Motor marine; Personal aircraft AND goods for an enterprise MUST BE REGISTERED to be opposable. Reservation may be set up against third persons from the date of the sale provided the reservation of ownership is published within 15 days. Transfer must also be published 1745(2) CCQ

If not published: The seller or transferee may take the property back only if it is in the hands of the original buyer; 1749(2) CCQ

If published late: The seller or transferee may likewise take the property back only if it is in the hands of the original buyer 1749(2) CCQ

o An installment sale transfers to the buyer the risks of loss of the property, except in the case of a consumer contract or where the parties have stipulated otherwise 1746 CCQ

o The balance owing by the buyer becomes exigible where the property is sold under judicial authority or where the buyer assigns his right to 3 rd person w/o seller consent 1747 CCQ

o Where the buyer fails to pay the sale price in accordance with the terms and conditions of the contract, the seller may exact immediate payment of the installments due or take back the sold property; if the contract contains a clause of forfeiture of benefit of the term, the seller may instead exact payment of the balance of the sale price 1748 CCQ

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