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Sale Summary – Fall 2000, Prof. Jobin
INTRODUCTION
A. Evolution of Modern Sales
à The Anglo-Canadian Position
à Sales law is mainly a product of the late 18th & early 19th C developments, prompted primarily by the industrial revolution.
à The Act was "to reproduce as exactly as possible" the existing law of sales, which led to the enactment of the UK Sale of Goods Act, 1893.
à The British Act was copied throughout the common-law Commonwealth, including all common- law provinces in Canada, with Ontario adopting in 1920 although some significant changes came about slowly
à American Sales Law
à The differences between the US and UK acts are mainly the Wide definition of warranty (US), the Unitary classification of terms (US), the Different regime of buyer remedies and the Treatment of documents of title
à All the states eventually adopted the Uniform Commercial Code. The UCC has a much wider scope – the provisions are broader which allows the law to change and not be stuck on details.
à Note on Codification and Sources of Sales Law
à Con codification:
à Incompatible with "free" spirit of common law
à Freezes growth and responsiveness to changing conditions - particularly important for commercial law
à It deals only with sales of goods but not with similar products
à Pro codification:
à Certainty & predictability are as important as flexibility (the c/l was a mess for a non-lawyer)
à busy practitioners shouldn't need to plough through pages of frequently conflicting decisions to ascertain the law
à The Act provides for default terms so you don’t have to spell out everything in the K.
à In a federal system and on an international level, meaningful uniformity can only be achieved by uniform legislation
à Interpretation
à For what is not touched by the Act, the rules of c/l K apply
à Bank of England v. Vagliano Bros, [1891] AC 107
à Lord Herschell expressed the opinion that case law prior to codification is irrelevant.
à The proper course is to determine the statute's "natural meaning" without regard to prior law, then assuming that the statute probably intended to leave existing law unaltered, to see if the words of the enactment bear an interpretation in conformity with this view.
à So look at words (regular meaning), then at the case law when ambiguities
à The ratio in Vagliano is more often breached than followed: see Ashington Piggeries, Harwick Game Farm, Cehave NV.
à SGA provisions are presumptive and can be eliminated or modified by express agreement or by usage (s. 53) - therefore the course of dealing and usage of trade are important sources in determining the agreement between the two parties.
B. Civil Code and Statutes
à Sale is a mix between nominate and innominate K
1. Sources of law for K of sale
à CCQ:
à In book of obligations, in the section on nominate K
à General rules for all K obligations – ex. Promise to sell, offer and acceptance 1398 ff.
à 1794: K of sale for residential premises – incorporates by reference the regime of warranty from K of enterprise
à integrative interpretation of CCQ – be consistent with other nominate K
2. Relationship between statutes and code
à Common law: statutes have precedence over cases
à Civil law: preliminary provision
à In harmony with the QC Charter, general principles of law
à Lays down the jus commune
à Code is the foundation – have other laws that complement or make exceptions
à If there is a clear conflict, the Code loses – ex. consensual K are formed by mere consent and have no form requirements but for K of sale, consumer law states that it must be written and there are formal requirements
Part 1: Consumer Ks
A. General Remarks
à 1960-70 era of consumerism
à Concern with hidden costs, etc.
à Problems with itinerant merchants i.e. door to door salesman, cheap products, misrepresentations, etc.
à Demand made by interest groups - Association of Consumers, Ralph Nader.
à First Consumer Protection Act in Ont. in 1966.
à In 1974, Business Practices Act.
à In QC, 1971 QCPA, amended several times and so comprehensive it is considered a model for the rest of Canada. It falls short of being a code. France actually has a code.
à 1980s there was a stabilization and standardization – consensus on part of businesses (live by the rules) and consumers (we are protected)
à In the 1990s, the crisis in public budgets has caused harm to the QCPA, less money for the enforcement mechanisms. Went from 14-2, now back to 5 inspectors.
à 2 big battles successful – breast implants and cigarettes
1. Problems of market economy
à concentration of industry and distribution chains
à pervasive effects on consumers include loss of bargaining power, K of adhesion and standard form K reduce ability to shop around and compare, tricky advertising, concealing of part of costs of bargaining, repossession by force, conditions for warranty, increased interest rates for low income classes, disparity of resources between consumers and merchants
CCQ:
à 1377: general rules of the chapter apply to all K, regardless of nature
à 1384: definition of consumer K
à 1432: in case of doubt, interpretation in favour of person who Ked the obligation (debtor), but if the purchaser is a consumer, then it is interpreted in favour of the consumer (broadly)
QCPA:
à 2: Act applies to all K between consumer and merchant in the course of business for goods or services
à 5: Act does not apply to K of insurance, for gas and electricity, for telecommunications
à 6: Act does not apply to securities or immovables
à 17: K interpreted in favour of consumer
à 261: Can’t derogate from the Act
à 262: unless otherwise provided for by the Act, consumer can’t renounce her rights
OCPA:
à 1: definitions
à 33: Act applies despite agreement or waiver to the contrary
à 34: (1) definition of consumer sale – K for sale of goods made in the ordinary course of business to a purchaser for the purchaser’s consumption or use (2) implied conditions or warranties from SGA
2. The Development of Canadian Consumer Law
à what binds consumer problems together is the perception that they affect the individual as a purchaser of goods and services for his personal use or consumption
à characteristics of consumer problems:
à disparity of bargaining power
à disparity of knowledge concerning the goods and services
à disparity of resources between the 2 sides – ability to obtain redress, ability of supplier to absorb cost of defective product
à Issues of protection of consent and fair price – lesion, form and disclosure
à Minimum standards of quality and safety
à Efficiency in vindication of rights – law might held some classes of persons
à Class action – ex. Dow Corning (breast implants)
à Small claims court – mainly used by professionals suing for fees
à Mediation – growing slowly
à Direct recourses to manufacturer
à Punitive damages – exceptional in civil law
à Ex. rent to own Ks.
à K of instalment has restrictions that protect the consumer
à We are now seeing K to rent and then K to buy. The rent is high. There was a case where a TV worth $400 went for a total of $1100 over 2 years. In case of default, lessee returns the goods.
à Jobin: disguised instalment sale and should be null as fraud because it does not comply with the form. Need to give the law some teeth – punitive damages.
à Reprehensible conduct and undue advantage – false and tricky advertising
à Equity
à Clause of forfeiture of term – need prior notice and court can decide whether it’s an appropriate remedy
3. Sources of consumer K law
à Statutes:
à QCPA 261-2, OCPA 33, consumers cannot waive their rights at time of formation. Some waivers are admitted when a breach has materialized and the consumer knows that she has a right to vindicate.
à All of the CPA can be considered public order (protection), therefore mandatory
à Garcia Transport (SCC)
à QC case having to do with public order of protection (as distinguished from public order of direction). Some forms of renunciation are possible.
à General law – civil law:
à CCQ 1432 (interpretation of K), 1435-7 (abusive clauses).
à General law – common law
à Ex. unconscionability
B. Formation
1. Lesion and Unconscionability
à Different in QC and ON.
à In ON, the doctrine of unconscionability has a broad field – Hunter Engineering (SCC, 1989).
à characteristics of unconscionability:
à Unequal bargaining power
à Stronger party takes advantage of the relationship to impose unfair terms
à Not restricted to consumers
à There is also the Interest Relief Act
à In QC, 1405, lesion may be a ground of relief only in cases provided by law. Consumer Ks are one such section (QCPA 8).
à 1406: legal definition of lesion except where there is a derogation (objective and subjective)
à QCPA uses a different concept of lesion
à In US, UCC allows unconscionability as grounds of relief.
à Public policy considerations:
à The objective is to ensure protection of consent of weaker property.
à Desire to promote equity by providing remedies for unfair prices
à Balanced against sanctity of K. This is the test.
How should we interpret QCPA 8?
Gareau Auto v. CIBC [1989] R.J.Q. (QC. C.A.) – leading case
Facts:
à C purchased a boat from G for $11,144.00, payable in instalments. Respondent Bank financed the payments for C.
à After having used the boat only one time, C regretted his purchase.
à Having defaulted on the first three payments, the Bank takes action to reclaim the selling price of the boat. C contests this and asks that the K be annulled.
à C claims that he is unable to meet his payments, asks that he be reimbursed for the amount of money already paid out and in exchange, he will return the boat to G.
Sup Ct. Holding:
à Judge allowed K to be annulled under ss. 8 & 9 QCPA. concluding that the K was exorbitant and excessive based on the fact that it offered no utility to C & was beyond his financial means. Judge rejected the action of the bank, ordered the return of the payments to date and that C return the boat to G.
CA Claim:
à Appellant now claims the K should not be annulled based on the fact that there is no lesion. Appellant wants banks’ claim against C to be upheld. C & the bank both claim that the K is lesionary.
Issue:
à Is the K lesionary? Can C have the K annulled under ss. 8 & 9 QCPA?
Holding:
à Yes. K is lesionary and subsequently annulled.
à Boat is considered to be of no use to C and offers no utility. Boat is returned to G.
à Analysis of the limited use of lesion as demonstrated in 1012 CCLC: ss. 8 & 9 QCPA and 1040 CCLC are derogations from this article that stipulates that lesion cannot be the sole cause of annulment for adults. Furthermore, according to s. 41 IA, a liberal interpretation should be given to ss. 8 & 9 QCPA as they intend to remedy abusive Ks and protect consumers.
à S. 8 QCPA: Objective and subjective criteria either of which, if met, is sufficient to prove lesion. Objective standard assesses whether or not there is a disproportion in the prestations and “si cette disproportion est considérable au point de léser gravement le consommateur.” If the court finds this to be the case, the result is an irrebutable presumption of exploitation. Subjective standard is in regard to the state of the consumer. The court will assess whether or not the obligation is “excessive, abusive or exorbitant.”
à S. 9 CPA: the subjective standard of s. 8 QCPA (an obligation which is excessive in that it puts the person’s patrimony in peril) is assessed by the 3 criteria illustrated in s. 9 QCPA.
(1) Condition of the parties: Obliges the merchant to investigate the financial situation (direct economic consideration) of consumer at the time of K
(2) The circumstances in which the K was concluded: The merchant is obliged to inform himself on the circumstances surrounding negotiation and conclusion of the K, and not the Kant’s personal life,[UNLESS, the consumer is acting manifestly abnormal] and
(3) The advantages that result from the K for the consumer: Is the object necessary? Useless? K stands a better chance of being annulled if object has no use for the consumer.
à NB: Judge is applying a subjective form of lesion to the facts of this case. There is nothing objectively wrong with the K but subjectively speaking, the court found it to be harsh and onerous.
à NB: not many cases where the K has been struck down by QCPA 8.
à Result: merchant must investigate into consumer’s situation.
à Jobin: judgment goes too far. If the merchant does not investigate, they take the risk. A merchant may refuse K except if there is discrimination. Could argue that it would be discrimination based on socio-economic situation.
à Alleatory K may not be challenged on the basis of lesion – ex. gambling
à We are not looking for bad faith on the part of the merchant, so a K can be annulled even if the seller was in good faith.
2. Form of the K
à A large number of Ks must be in writing, in duplicate, signed, etc.
à QCPA 23 ff and OCPA 19ff
à This requirement is derogation from consensualism, to ensure the well-informed consent of the consumer. Here you do not have to prove an error or fault, only the absence of the form.
à The remedy is nullity - QCPA 271, OCPA 19
à We have a grandfather clause, QCPA 271(3), the merchant can avoid nullity if he proves the consumer suffered no prejudice. In particular, QCPA 26 provides that the K will be in French unless expressly agreed to by both parties.