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Implied conditions in sale of goods legislation.

In each province, sale of goods legislation is the primary law governing contracts for the sale of goods (or simply, sales contracts) in which a seller transfers or agrees to transfer property in goods to a buyer for money.

Sale of goods legislation contains several important implied conditions. They are said to be implied because, unless they are specifically and expressly waived by the parties, they form part of every sales contract. In other words, you don't have to explicitly provide for these conditions in a sales contract -- whether as a seller or a buyer -- to have them apply. They apply automatically.

The implied conditions are these:

* that the seller has a right to sell the goods. In other words, the seller must be in a legal position to deliver the goods (i.e. transfer ownership of them) to the buyer.

* that the goods are of a

It is not clear, in law, what is meant by merchantable quality. However, it appears to imply that any goods sold must -- based on their description -- meet the reasonable expectations of the buyer.

Note that if the buyer inspects the goods (as opposed to just the packaging), the implied condition of merchantable quality may not apply. However, this is only the case in circumstances where the inspection would have revealed the deficiency.

* that the goods are fit for a particular purpose. This condition is in many ways like the merchantable quality condition only much narrower in scope. Essentially, if a buyer lets a seller know that he needs a particular type of good for a particular purpose and further suggests -- either by words or actions -- that he is relying (at least partly) on the seller's skill in informing him about those goods, then those goods must be able to fulfill the purpose for which they are being sold.

* that the goods comply with their description. This condition also applies where a buyer buys goods in circumstances where the goods are not necessarily available for inspection but are bought based on a description.

* that goods sold by sample will comply with their sample. This condition applies only in circumstances of a sale by sample. For example, it applies where a seller shows a buyer a swatch of cloth and, based on that sample, the buyer agrees to buy a quantity of that cloth. It is an implied condition under sale of goods legislation that the bulk will be of the same quality as the sample. In this regard, the buyer must be given a reasonable time to compare the two after delivery.

Under sale of goods legislation, a buyer may treat a breach of any of the above conditions as a breach of warranty and sue for damages rather than treat the sales contract as at an end.

Although the above conditions are implied by law, parties to a sales contract can exempt themselves from a breach of these conditions by expressly excluding them -- through the use of an exemption clause -- from the sales contract. To be effective, however, the exemption must be worded clearly and precisely. Further, it cannot be unconscionable when viewed in the context of the transaction as a whole.

With respect to the sale of goods internationally, the United Nations Convention on Contracts for the International Sale of Goods, more commonly known as the Vienna Sales Convention, governs.

Proclaimed in effect in Canada on May 1, 1992, the Convention contains effectively the same provisions as the implied conditions contained in provincial sale of goods legislation. Further, as is the case with provincial sale of goods legislation, the Convention automatically applies to any contract for an international sale of goods unless the parties to the contract expressly choose not to have the Convention -- or certain specific terms -- apply. Again, this must be done using clear and precise language.

It should be noted that it is not enough to simply select the law of another jurisdiction as the governing law for purposes of an international sales contract to exempt the parties from its provisions. Rather, the parties must expressly preclude the application of the legislation that brought the Convention into force in that jurisdiction. (In Canada, that means the International Sale of Goods Act). The parties must then select the law of the jurisdiction that will govern the sales contract and record that information in the contract.
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Author:Swais, Nishan
Date:Dec 1, 1999
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