Question 1
Explain when risk transfers to the buyer in a sale
of goods transaction and explain the exceptions to the rule. Explain when title
transfers to the buyer in a sale if goods transaction.
Answer:
When the title (the
property interest in the goods) does not transfer immediately upon the sale
agreement’s being concluded, it is called an agreement to sell. The Sale of Goods Actalso applies to this
future transfer of goods. Under the Sale of
Goods Act, whoever has the title bears the risk of damage or destruction to
the goods– unless the parties have agreed otherwise.
1. C.I.F
contracts (cost, insurance, and freight). In this type of contract it doesn’t
matter when title transfers, because one of the parties has been designated as
being responsible for paying the costs involved in the shipping of those goods
as well as arranging insurance, in the process assuming the risk if anything
goes wrong.
2. F.O.B
contracts (free on board). With F.O.B contracts, the parties have agreed that
the seller will bear the risk until a specified point in the transport process.
For example, if the goods are to be delivered F.O.B the loading dock at the seller’s
place of business, the buyer assumes the risk at that point.
3. C.O.D
contracts (cash on delivery). This type of contract entitles the seller to
maintain the proprietary rights or title as well as control over the possession
of those goods until they are delivered to the buyer’s premises and paid for.
The risk stays with the seller until delivery at the specified location is
complete.
4. Bills
of lading. Bills of landing are also often used by the seller to maintain
control over the goods during shipment. A bill of lading is a document given by
the transporter or carrier of the goods to the shipper as a form of receipt.
The seller can maintain control (and the risk) with respect to those goods by
naming itself as the party entitled to receive delivery of the goods at their
destination.
Who has title
not only can determine who bears the risk but also may affect what remedies are
available in the event of a breach. If title is transferred, the seller can use
for the entire price; otherwise, only damages for breach of contract are
available. The rules for determining who has title as found in the Sale of Goods Act are set out below.
Rule
1:where there is an unconditional contract
for the sale of specific goods in a deliverable state, the property in the
goods passes to the buyer when the contract is made and it is immaterial
whether the time of payment or the time of delivery or both are postponed.
Rule
2: where there is a contract for the sale
of specific goods and the seller is bound to do something to the goods for the
purpose of putting them into a deliverable state, the property does not pass
until such thing is done and the buyer has notice thereof.
Rule 3:
where there is a contract for the sale of specific goods in a deliverable state
but the seller is bound to weigh, measure, test, or do some other act or thing
with reference to the goods for the purpose of ascertaining the price, the
property does not pass until the act or thing is done and the buyer has notice
thereof.
Rule
4: when goods are delivered to the buyer
on approval or on “sale or return” or other similar terms, the property in them
passes to the buyer.
1) When
the buyer signifies approval or acceptance to the seller or does any other act
adopting the transaction;
2) If the buyer does not signify approval or
acceptance to the seller but retains the goods without giving notice of
rejection, then if a time has been fixed for the return of the goods, on the
expiration of that time, and, if no time has been fixed, on the expiration of a
reasonable time, and what is a reasonable time is a question of fact.
Rule
5:1) Where there is a contract for the
sale of unascertained or future goods by description and goods of that
description and in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer, or by the buyer
with the assent of the seller, the property in the goods thereupon passes to
the buyer, and such assent may be express or implied and may be given either before
or after the appropriation is made.
2)
Where in pursuance of the contract the seller delivers the goods to the buyer
or to a carrier or other bailee (whether named by the buyer or not) for the
purpose of transmission to the buyer and does not reserve the right of
disposal, the seller shall be deemed to have unconditionally appropriated the
goods to the contract.
Question
2
The Sale of
Goods Act imposes terms relating to goods matching samples or descriptions
and meeting standards of fitness, quality, and title. Explain the nature of
these implied terms and their effect on the parties. Determine which conditions
are and which are warranties and explain the effect of this distinction.
Explain the effect of exemption clauses in the purchase agreement which states
“that there are no implied terms, and that the only terms are those contained
in the agreement.”
Answer:
Samples:
The Sale of Goods Act uses a similar
approach for the purchase of goods after examining a sample. There is an
implied condition that the bulk of the goods must match the sample provided and
be free of any hidden defects. It is in these areas related to fitness and
quality that manufactures and retailers usually try to override the provision
of the Act. They do this in
“warranties” that include exemption clauses attempting to limit their
liability. If such clauses are carefully worded, they can override these
provisions unless prohibited by statute.
Descriptions:
Goods sold on the internet, by catalogue, by mail order, or other forms of
distance shopping, usually with a picture and accompanying text, are being sold
by description. Section 14 of the Ontario Sale
of Goods Act provides that when goods are sold by description there will be
an implied condition that the goods delivered must match that description. In
fact, today the sale of any manufactured good is a sale by description, one
item being indistinguishable from another of the same model.
Quality:
The Sale of Goods Actrequires, as a
condition, that when goods are sold by description they must be of merchantable
quality. This means that the goods must be free of any defect that would have
persuaded the purchaser not to buy them at the agreed-upon price if the
purchaser had known of the defect at the outset. If a sample has been
inspected, the defect must not have been readily apparent upon examination.
Fitness:Sometimes
a purchaser with a particular need will rely on a seller’s recommendation as to
what product to use. In these circumstances there is an implied condition that
the goods will be reasonable fit for that purpose. The requirement of fitness
applies not only when the goods are being used for some unique purchase, but
also when they are being used normally.
Title:
According to the SGA, the seller
implies that it has the right to sell the goods; this is a condition. Since
this is a major term of the contract, its breach will allow the buyer to
terminate the contract. The seller also implies that the buyer will enjoy quiet
possession of the goods; that third parties will not interfere with the buyer’s
right to use the goods as intended; and that there are no encumbrances on the
goods. These are warranties whose breach only sounds in damages. The buyer will
not be able to terminate the contract but only receive financial compensation
for its losses.
Conditions
and Warranties:A warranty governs a minor or
non-essential term of the contract while a condition is an essential term of
the contract. Breach of a term which is a warranty does not give the aggrieved
party the right to terminate the contract. For a breach of warranty, a party
who has suffered a loss only claim damages. Because a condition goes to the
root of the contract – it is the reason why the parties contracted – its breach
gives the aggrieved party the right to terminate the contract and claim damages
for any loss suffered.
Other
Implied Terms: There are several other terms that
are implied by the Sale of Goods Actunless
otherwise specified by the parties. Where no price is stated, a reasonable
price must be paid for goods. Delivery must take place within a reasonable
time, and payment is due upon delivery. The time of payment will be treated as
a warranty, unless the parties state time is of the essence. Whether the time
of delivery will be treated as a condition or a warranty will be implied form
the conduct of the parties. When the bulk goods, such as grains, lumber, and
ore are involved, if significantly too little or too much is delivered the
buyer is free to either reject the goods or keep them and pay for them at the
contracted rate. The provisions affecting delivery, place, time, and quantity
of the goods are usually made conditions by the parties.
Question 3
Describe, in detail and
naming the statutes, the methods outlined in federal and provincial consumer
protection statute to control businesses with a tendency to abusive practice.
Discuss the effectiveness of these tactics.
Answer:
TheCompetition Actis meant to ensure
competition in the marketplace. A competitive market prevents unfair pricing and,
thus protects consumers. The Competition
Act regulates mergers, and the competition tribunal will intervene when a
merger unreasonably limits competition. The Act
also prohibits certain anti-competitive practices which unduly restrict
competition. These practices include predatory pricing, discriminatory
allowances, refusal to deal, exclusive dealing, tied selling, market
restriction, bid rigging, misleading advertising, double-ticketing,
bait-and-switch advertising, and pyramid selling.
There are several
statutes, both federal and provincial, designed to protect the consumer from
dangerous products. The federal Food and
Drugs Act is intended primarily to control the sale of food, drugs, and
cosmetics unfit for consumption or use. The legislation also prohibits
misleading or deceptive claims associated with the sale, labelling, and
advertising of these products.
Another federal act,
the Hazardous Products Act, similarly controls the manufacture, import, and
sale of products that are inherently dangerous. Some particularly dangerous
products are prohibited from sale in Canada, while the sale of other potentially
dangerous products is allowed provided that they comply with the enacted
regulations. The act also contains important inspection, analysis, and
enforcement provisions.
The goal of
other legislation, such as the Weights
and Measures Act, the Consumer
Packaging Actand the Textile
Labelling Act, is to provide accurate information to consumers to enable
them to make enlightened decisions.
Question 4
Discuss the remedies available to the buyer and the
remedies available to the seller when there is a default in a contract to which
the Sale of Goods Actapplies.
Answer:
The SGA only provides remedies for the
seller. In some case, the seller will be limited to monetary damages; however,
in certain cases, it will be able to retake possession of the goods and resell
them to limit the losses suffered.
A lien is the
seller’s right to refuse to deliver goods to the buyer until the purchase price
has been paid. The goods, therefore, secure payment. However, once the seller
has given up possession of the goods, it cannot retake possession to assert a
right of lien.
However, if the
buyer has become insolvent and the carrier is still in possession of the goods,
the seller can order the carrier not to deliver the goods to the buyer by
exercising its right of stoppage in transit. Moreover, if the buyer has become
bankrupt within 30 days of the delivery of the goods, the seller can under certain
conditions obtainpossession of the goods for the trustee in bankruptcy.
A seller can
also exercise a right of resale. If a seller does so, he or she can no longer
recover the full sale price from a buyer who refused to take possession, or who
took possession but did not pay for the goods. The seller will only be able to
claim the difference between the price of the goods when they were sold at the
original sale price. To this, the seller will be able to add any costs
associated with taking back possession of the goods and reselling them.
Once title in
the goods has passed to the buyer, the unpaid seller can sue for the price of
the goods if the buyer defaults on payment or if the buyer refuses to take
possession of the goods.
The SGA does not provide any remedied to the
buyer. However, the buyer of defective goods will have recourse to the remedies
provided by the implied terms (conditions and warranties) in the SGA. These remedies are generally those
already available in contract law. For a breach of a condition, the buyer has
the option of treating the contract as terminated and to have returned any
money paid to the seller. For a breach of a warranty, the buyer must perform
the contract and may only seek damages for its losses. In the case of an unique
object which cannot be easily replaced, the buyer can ask for specific
performance.
Question
5
Discuss the differences and similarities of the PPSAand the Bank Actregarding secured transactions, including types of
property, methods of securing the transaction, enforceability, and priority.
Answer
The Personal Property Security Act (PPSA) is now used in all jurisdictions
in Canada. It creates a unified approach toward the use of personal property as
security. The PPSA is more
complicated than legislation used previously, because it uses one set of rules
and a common approach to cover both tangible and intangible forms of personal
property and the various way that security can be taken. A secured transaction
is still created by contract in the traditional forms of conditional sales,
chattel mortgages, and assignments of account receivable, but other forms, such
as leases, can also be used, depending on the property used as security. The PPSA allows other, less common, forms of
personal property, such as licences, share, bonds, and even intellectual
property, to be used as security and to be treated in a uniform way. The PPSA provides for some or all of the
assets of a particular debtor to be used as security. It also provides rules to
determine the ranking of various claims when several secured creditors have
claims against those assets.The method of creating a secured relationship under
the PPSA is unique. There are three
stages. First, the parties must enter into the contractual agreement. Second,
the secured interest must attach to the collateral that has been identified to
provide the security. Third, the secured interest must be perfected. If more
than one security interest is perfected by registering different financing
statements against the same collateral, the priority of those secured parties
is generally determined by the date registration takes place.
The Bank Act is federal statute predates the
passage of the PPSAs. It allows banks
flexibility in what they can takes as security. Under the Bank Act, growing crops, inventories, and goods in the process of
manufacture can be taken as security by the banks, despite the fact that the
nature of the goods changes in the process. For this type of security, it must
be possible to sell the collateral during the course of business without
affecting the nature of the security. The Bank
Act is still an important federal statute, but under the provincial PPSAs, other lenders now have similar
flexibility. There is therefore now more potential conflict between the Bank Act and the provincial legislation.
Business people must now learn two sets of rules. For example, under the Bank Act, security must be registered
with the Bank of Canada, creating duplication and confusion. This confusion is
compounded because the Bank Act
enables the banks to continue to use the usual types of secured transactions
available to other lenders, such as chattel mortgages, real property mortgages,
assignment of debts guarantees, and so on.
Question 6
Describe bankruptcy and describe insolvency,
including the roles of different parties, the steps in the process, the sale
and distribution of the assets, and any wrongdoing of the debtor.
Answer:
Insolvency
simply means that a person in unable to pay his debts as they become due.
Bankruptcy is the process by which a debtor’s assets are transferred to a
Trustee in Bankruptcy, who then deals with them for the benefit of the
creditors. An insolvent debtor will be forces into bankruptcy by one of its
creditors if it can show to the court that the debtor has committed an act of
bankruptcy. It will then obtain a bankruptcy order against the debtor. Or an
insolvent debtor may voluntarily place itself into bankruptcy by making an
assignment.
Process: (1) In
an involuntary bankruptcy, a creditor petitions the court to force the debtor
into bankruptcy. In granting the petition, the court makes a bankruptcy order. (2)
To obtain a bankruptcy order, the creditor must specify in the petition that
the debtor owes more that $1000 in debt and has committed an act of bankruptcy
during the previous six months. (3) Petitioning a debtor into bankruptcy is an
involved process, normally requiring the assistance of a lawyer. Caution should
be exercised before using this approach. (4) In a voluntary assignment in
bankruptcy, the debtor must make an “assignment for the general benefit of his
creditors,” using the prescribed form. The debtor must also prepare a
“statement of affaires,” summarizing his property and listing all of his
creditors, showing the amounts and nature of their claims (whether they are
secured, preferred, or unsecured). (5) Not all of the debtor’s property is
transferred to the Trustee in Bankruptcy. The exempt property is protected. (6)
The Trustee in Bankruptcy holds the debtor’s property in trust for the
creditors.
Settlements
involve the transfer of assets for nominal or no consideration. A settlement is
void if it took place within one year of bankruptcy. This period can be
extended to up to five years, if it can be proven that, at the time of the
settlement, the bankrupt knew that he was insolvent. A payment made in
preference to one creditor over the other is also void. Fraudulent transfers
and preference often take place in bankruptcy situation. In a fraudulent
preference, consideration justified the payment of the insolvent party to the
creditor; however the intention is to give that creditor a financial advantage.
In such a case, the trustee in bankruptcy can seize the property. A fraudulent
preference occurs when (1) a payment or transfer of property to a creditor is
made (2) within three months prior to the bankruptcy (3) by an insolvent debtor
(4) in order to give that creditor a financial advantage over the other
creditors (5) where the creditor was aware of the impending bankruptcy. The
Trustee can force the return of those funds so that they can be fairly
distributed to all of the creditors. Bankrupt has many duties, if she fails to
fulfill them or commits another bankruptcy offence, she can be fined and/or
imprisoned.
Question
7
Discuss agency from the point of view of actual,
implied and apparent authority, estoppels, fiduciary duty, breach of duty,
ratification, and vicarious liability.
Answer
The principal
empowers the agent to do certain things only in the principal’s name.The thingsthat
the agent is actually required to do are
called the agent’s actual authority. The principal can create an agency agreement
with actual authority either expressly, by word- orally or written- or by his
contract; in the case of conduct, the actual authority will be implied.
When a principal
does something by conduct or words to lead a third party to believe that an
agent has authority, the principal is bound by the agent’s actions,regardless
of whether there is or is not actual authority. Even when the principal has
specifically prohibited the agent from doing what he did, the principal will be
bound because of the agent’s apparent authority. This is an application of the
principle of estoppels.
Estoppel is an
equitable remedy that stops a party from trying to establish a position or deny
something that, if allowed would create an injustice. In holding out, the
principal has used words or behaved in a manner that represented the other
person as the principal’s agent. If that is not the fact, the principal is
estopped from denying the facts and the principal will be bound by the agent’s
actions.
Fiduciary Duty,
a person owing that duty must submerge personal interests in favour of the
interests of the principal he or she represents. The principal and agent are in
a fiduciary relationship; that is, the agent has rights and powers that it must
exercise for the benefit of the principal. Agent must act in the best interests
of their principal, in utmost good faith.
Breach of duty:
an agent cannot act for both a principal and a third party at the same time. It
would be very difficult for an agent to extract the best possible price from a
third party in behalf of a principal when the third party is also paying the
agent. Another problem sometimes arises where an agent who is hired to purchase
goods or property sells to the principal property actually owned by the agent
as if it came from some third party. This is a violation of the agent’s
fiduciary duty; even if that property fully satisfies the principal’s
requirements, there must be fully disclosure. It also follows that the agent
must not operate his own business in competition with the principal, especially
if a service is being offered. Nor can the agent also represent another
principal selling a similar product without full disclosure. Finally, the agent
must not collect any profits or commissions that are hidden form the principal,
but must pay over all the benefit resulting from the performance of the agency
agreement.
A way of
creating the agency relationship is by ratification.A person may make a contract with a third party in the name of
the principal without having the authority to do so. The principal will not be
bound by the contract.The power of the principal to ratify must meet the
following qualification:
a) The
third party has the right to set a reasonable time limit within which the
ratification must take place.
b) The
agent must have been acting for the specific principal who is now trying to
ratify.
c) The
principal has to be fully capable of entering into the contract at the time the
agent was claiming to act on his or her behalf.
d) The
parties must still be able to perform the object of the contract at the time of
the ratification.
An employer is
vicariously liable for the acts an employee commits during the course of
employment. When an agent is also an employee of the principal, the principal
is vicariously liable for any tortuous acts committed by the agent in the
course of that employment. The difficulty arises when the agent is not an
employee but acts independently. The principle of vicarious liability is
restricted to those situations in which a master-servant relationship can be
demonstrated. The courts have been expanding the definition of employment. Even
if the relationship involves a person who is essentially an independent agent,
the agent may be functioning as an employee or servant n a given situation;
thus, the courts may impose vicarious liability on the principal by simply
asserting that the agent is also an employee.There are some situations in which
vicarious liability will apply even if the agent is acting independently. The
courts appear willing to hold the principal responsible for theft or fraudulent
misrepresentation by an agent, even when no employment exists.
Question
8
Explain how the court will determine whether a
person is an employee, an independent contractor, or an agent.
Answer:
Independent
contractors work for themselves and act independently, providing a specific
service for the person they contract with, whereas an employee is said to be in
a master-servant relationship acting under the direction of the master. Agency
is a third party type of business relationship, where one person acts as a
go-between in relationship between others.
The traditional
method of determining whether an employment relationship exists is to assess
the degree of control exercised but the person paying for the service.A person
who is told not only what to do but also how to do it is classed as an
employee. But if the person doing the work is free to decide how the job should
be done, the position is more likely that of an independent contractor. Whether
the person is paid a wage or salary or is paid by the job is also taken into
consideration in determining employment. Courts will also look at who owns the
tools used and who profits or runs the risk of loss from the work performed.
The courts have
supplemented the control test with the organization test. Even if there is
little direct control, where the individual is an integral part of the
organization, working only for that company and subject to group control, that
person is likely an employee. On the other hand, if that person is free to
offer services to others and bears the risks of profit or loss if work is not
completed in a timely manner, he may be an independent contractor. At least for
the purposes of established vicarious liability, a person can be an independent
contractor for most purpose but an employee or a servant in some specific
instances. Agents can be independent contractors or employees.
The principle of
vicarious liability holds one person responsible for acts committed by another.
In the case of the employment relationship, the employer is responsible for
acts committed by its employee during the course of employment. The principle
of vicarious liability has been extended to apply to the payer of an
independent contractor when the independent contractor cam ne characterized as
an employee. It is important that vicarious liability does not apply to the
independent contractual relationship but to the employer-employee aspect of the
relationship.
Question
9
Discuss how a court will determine whether there has
been a wrongful dismissal and the remedies that the court can award for
wrongful dismissal.
Answer
If an employer
dismisses an employee without reasonable notice, without salary in lieu or
without just cause, the employer has wrongfully dismissed the employee and will
have to pay damages. When an employer demotes the employee or otherwise
unilaterally changes the nature of the job, this may constitute constructive
dismissal, and the employee can sue for wrongful dismissal. From a contractual
perspective, one party cannot simply impose a change in the terms of a contract
without fist securing the consent or agreement of the other party. In essence,
the employer is simply refusing to perform the original contract when it
demotes an employee.
In
a wrongful dismissal action, the damages awarded are usually based on what the
employee would have received had proper notice been given. An employer must
have the clearest evidence of the misconduct or incompetence and with the
latter must demonstrate that the employee has been given a reasonable
opportunity to improve. Damages are the appropriate remedy for wrongful
dismissal. The employee will be able to recover the following amounts: (1)
wages for the period of time that employee would have worked if the employer
had given a reasonable notice; (2) lost fringe benefits; (3) pain and
suffering; (4) reasonable expenses incurred in looking for work. An employee
who has been wrongfully dismissed has an obligation to mitigate the loss and
must seek other employment. Reinstatement is more common when collective
agreements are involved, where the decision is made by an arbitrator rather
than a judge.
Question 10
Explain the objectives and purpose of workers’
compensation legislation, how it is determined who is covered, and the effect
if a person is or is not covered.
Answer
Objective and Purpose:
The worker’s compensation legislation which is enacted by the government provides
a compulsory insurance program covering accidents that take place on the job. It
sets the rate to be paid for different types of injuries and establishes a
board that hears and adjudicates the claims of injured employees. The system is
essentially a no-fault insurance scheme, in which benefits are paid to injured
workers, or to their families in the event of death, and careless conduct on
the part of the worker will not disqualify an injured employee from receiving
compensation.
Some employees, such as
casual workers, farmers, and small business employees, are often excluded. A
significant aspect of workers’ compensation legislation in most jurisdictions
is that the worker gives up the right to any other compensation. The worker can
no longer sue the employer (or the party who caused the injury, if he also
contributed to the plan), being limited to the benefits bestowed by the
workers’ compensation system. When the injury is caused by someone other than
the employer or another employee, the plans usually give the injured worker the
choice of receiving workers’ compensation benefits or pursuing a civil action.
Compensation is also limited to injury or disease that arises in the course of
the employment. This can sometimes be a problem where it is difficult to
establish that a disease was caused by the work of the employee. Compensation
is typically paid to the employee, but where an employee dies as a result of
injuries sustained on the job, payments are to be made to her dependants.
Question 11
Explain the differences among mediation,
conciliation, and arbitration and how these are used in labour disputes.
Answer
Mediation, also
called conciliation, has been provided for in the various Canadian
jurisdictions. When negotiations begin to break down, either party has the
right to apply to the appropriate government agency for the appointment of a
conciliator or mediator. This person then meets with the two parties and
assists them in their negotiations. The hope is that communications between the
two parties will be greatly facilitated by this third-person go-between. The
parties are prohibited from taking more drastic forms of action, such as strike
or lockout, as long as a conciliator/mediator is involved in the negotiations.
In some
jurisdictions, conciliation is a pre-requisite to strike or lockout. Although
conciliators have no authority to bind the parties, they do have the power to
make recommendations that will be embarrassing to an unreasonable party. In
many jurisdictions, a conciliator can be imposed on the parties by the Labour
Relations Board, even when neither party has requested one.
