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We are not lawyers at EJ WIPS Designs, but here is a bit of an overview of the ins and outs of buying and selling things particularly online when it is descriptions and pictures that really sell a product. Any comments are appreciated.
E-business encompasses e-commerce, which is the buying and selling of goods online. To put it simply, the buying and selling of goods is the main source of revenue for many companies both online and offline. The law in Alberta, which governs the buying and selling of goods, is called the Sale of Goods Act (Sale of Goods Act, 2000). Maneuvering through the Sale of Goods Act can be difficult.
There are some basic principles that every buyer and seller must know about the Sale of Goods Act when doing business online: implied warranties, sale by description and sale by sample, merchantability and fitness of goods, exclusion clauses, and when title passes from seller to buyer. Knowing these sections will help to make business transactions uncomplicated and predictable.
In Alberta, the Sale of Goods Act (2000) lays out implied warranties, which do not need to be included in contracts, such as the seller having title to the goods at the time of a sale Section 14a; the buyer being entitled to quite possession of goods Section 14b; and that there are no third party interests in the property Section 14c. For businesses buying and selling goods online, whether in a Business to Consumer (B2C), or Business to Business (B2B), relationship, understanding and being aware of the rules in the Sale of Goods Act will ensure that few problems arise, and it will explain how to deal with these problems if they arise.
Within the Sale of Goods Act (2000), Section 15 mentions that goods purchased based on a description must correspond to the description given by the seller. In order to prevent a potential dispute, a seller should give the least amount of description as possible when it comes to selling a product online. For example, if a business were to sell t-shirts the least amount of description would be to describe the item as Item #1. Of course, a buyer would not be inclined to purchase something over the internet--especially if they are buying in bulk-based on such a vague description. Businesses must keep in mind that words of praise and quality that are used to describe an item do not factor into the description. A seller may choose to describe a t-shirt as fashionable, 100% cotton, red, and durable in order to provide a bit more description, however, only red and 100% cotton would be part of the sale by description because they are laudatory. The concept of excluding laudatory language (a description containing excess praise) from the description of goods is summed up in the case John Macdonald & Co. v. Princess Manufacturing (1925). In a B2B relationship a buyer may purchase an item based on a sample as well as a description. If the seller sends the buyer a sample that does not match the description given but the buyer accepts the shipment of the product based on the sample, then the buyer may be entitled to either reject the goods or sue for damages based on the fact that the goods do not correspond with the sample. For example, if a seller describes and item as a red 100% cotton t-shirt and sends a buyer a red 90% cotton t-shirt, and the buyer agrees to purchase 10,000 of the item based on the acceptance of the sample, then upon discovery notices the t-shirts are 90% cotton, the buyer may sue for a breach of contract. This legal action would be possible because Section 15 in the Sale of Goods Act (2000) states that “if the sale is by sample as well as by description it is not sufficient that the bulk of the goods will correspond with the sample if the goods do not also correspond with the description.”
The other important sections in the Sale of Goods Act (2000) are Section 16, for buyers, and Section 54, for sellers, which speak to merchantability and fitness and exemption clauses. Merchantability and fitness implies that the goods are usable for the purpose that the buyer intends to use them for. If a buyer “expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill," then "there is an implied condition that the goods are reasonably fit for that purpose” (Sale of Goods Act, 2000, Section 16(2)). It is in the best interest of the buyer to look for as much description as possible, to inform the seller of the purpose that the goods will be used for in order to avoid dispute, and to settle a dispute quickly in the case that one does arise. Section 54 in the Sale of Goods Act (2000) deals with exemption clauses. Exemption clauses can be helpful for sellers to deter buyers from rejecting the goods or seeking damages, and exemption clauses serve as a type of “buyer beware” clause that relieves sellers of liability arising from the unfit or unmerchantable goods they sell. Since exemption clauses are to the disservice of the buyer, courts will usually be very strict and sometimes imaginative when interpreting exemption clauses. For example, the case Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) (2010) included the exemption clause that “no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this RFP, and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim” (para. 60). It was held by the judge that “Tercon’s claim is not barred by the exclusion clause because the clause only applies to claims arising ‘as a result of participating in [the] RFP’, not to claims resulting from the participation of other, ineligible parties” (Tercon Contractors Ltd. v. British Columbia, 2010, para. 63). This imaginative interpretation of a seemingly air-tight exemption clause is a reminder to sellers that the law does not look favourably on exempting oneself from liability.
One of the other important sections in the Sale of Goods Act is Part 2, which speaks to the transfer of title between buyer and seller. This section is extremely important for buyers and sellers in B2C and B2B relationships because, generally, risk follows title, and it is essential to insure your goods as soon as they become your property. The Sale of Goods Act states that “no property in the goods is transferred to the buyer until the goods are ascertained” (s18). There are many different conditions for the ascertainment of goods which section 20 covers. The chart below summarizes the relevant and important information.
Sale of Goods Act: Passing of Property
| Contract Type | When Property Passes | Example |
| Unascertained Goods | Property cannot pass until the goods have been identified (ascertained). | A contract to purchase ten boxes of t-shirts from a shipment with a thousand boxes of t-shirts in it. Title cannot pass until the specific boxes to be transferred are identified. |
| Unconditional contract for specific goods | When contract is made. | A contract to purchase a specific bicycle in a store. The buyer can take bicycle immediately or pick it up later. When the buyer collects the bicycle is immaterial to passing of title since buyer owned at the time of contract. |
| Contract to sell specific goods where seller must in some way prepare the goods before they can be transferred to the buyer | When the goods being purchased are ready for the buyer and the buyer has been informed of the fact. | A contract to purchase a dress but the store must fix the hem first. |
| Contract to sell tangible, ready to transfer, goods where the goods need to be measured in some way to determine price | When the goods have been measured, weighed or otherwise tested as needed, the price has been determined and the buyer is informed of that price. | A contract to purchase a ten specially selected planks of high grade lumber by the linear foot. The transfer of title cannot take place until the exact number of linear feet has been determined and the price calculated. |
| A contract which allows the buyer to test or review the goods purchased after they are delivered and return the goods if they are unsatisfactory | Either when the buyer informs the seller that they have approved and accepted the goods, or the buyer indicates acceptance by their actions (e.g. begins to use the goods) OR, when a specified review period has ended without the buyer rejecting the goods. | A contract involving a "book of the month" being sent to the buyer, which the buyer may either keep if they like it or return within 30 days if they are uninterested. If the buyer begins reading the book, cause wear to it, or if the buyer simply does not return the book within the 30 day period they have ratified the agreement and the book is theirs. |
| A contract to purchase goods that are not yet in existence but that can be clearly described and identified | When the goods are ready and both parties agree, then ownership (title) of the goods passes to the buyer. | A contract to purchase the crops off of a specific plot of land. (this would also in some ways overlap with the third type, as the crops would need to be measured as well). |
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