Implied Warranties

This page was last modified on January 19, 2005. There are no plans to update it further.

The Legal Guide includes scope/coverage of legislation, express warranties, implied warranties, privity & products liability, remedies and waivers. Also included are the full text of the legislation, cases (indexed by name, section of Act considered, product, judge & date), law review articles, background law reform reports, top 10 list and table of contents.

This website was created by Karl Dore, the principal architect of the Consumer Product Warranty and Liability Act. It is intended to provide information on the legislation, not to give or offer individual legal advice. For further assistance contact New Brunswick's Consumer Affairs Branch or one of the Rentalsman Offices.

This page was last modified on January 19, 2005. 

Table of Contents

Implied Warranties

Introduction. "Warranty" is the shorthand label used in the Consumer Product Warranty and Liability Act (CPWALA) to describe the supplier's contractual responsibilities (or guarantees) regarding the quality or fitness of the goods.

CPWALA text
1(1) "warranty" means a term of the contract that is a promise.

There are two kinds of warranties:

  1. So-called express warranties, which are based on what the supplier says about the goods. Express warranties are discussed in the previous part of this guide.
  2. So-called implied warranties, which don't depend simply on what the supplier says, but are based on the consumer's reasonable expectations about the goods in all the circumstances.

The supplier may be responsible under an implied warranty even if the supplier says nothing at all about the goods.

CPWALA's implied warranties cover title, quality and fitness.

Purpose and nature of implied warranties

The purpose of the implied warranties is to protect the reasonable expectations that a buyer would have about the goods considering all the circumstances of the sale.

  • The implied warranties provide protection against unexpected faults.
  • Protection is commensurate with the buyer's reasonable expectations about the goods.

Expectations vary with the circumstances. For example, what the supplier says about the quality of the goods may have an important effect on the buyer's expectations. So may their price. And so may their age. Someone buying (say) a brand new car will have a different set of expectations than someone buying a used car.

Because reasonable expectations do not depend simply on what the supplier says but on other circumstances as well, implied warranties apply even when the supplier says nothing at all.

Moreover, even when the supplier does say something, this is not the only source of reasonable expectations about the product and its quality. Express warranties do not exclude the implied warranties. The implied warranties are additional to the express warranties.

CPWALA text
7 An express warranty does not exclude or restrict an implied warranty provided by this Act.

Cases

  • McGouey v. Lawson Motors Ltd.

Title

Under the implied warranty as to title, the seller guarantees

  • the seller has the right to sell the goods, and
  • the goods are free of liens and other prior claims against title
    (except any known to the consumer before the contract is made).

For example, suppose the buyer purchases a used car from a dealer. Unknown to both parties, a previous owner of that car had used it as collateral for a loan from a bank, and the bank's security interest takes priority over both buyer and dealer. The dealer is responsible to the buyer for the defect in the title.

CPWALA text

8(1) In every contract for the sale or supply of a consumer product, other than one to which subsection (2) applies, there is an implied warranty given by the seller to the buyer

(a) that the seller has a right to sell the product, or will have a right to sell the product at the time of its delivery to the buyer;

(b) that the product is free, or will be free at the time of its delivery to the buyer, and will remain free from any interest, lien, charge or encumbrance not actually known to the buyer before the contract is made; and

(c) that the buyer will enjoy quiet possession of the product except so far as it may be disturbed by any person entitled to any interest, lien, charge or encumbrance actually known to the buyer before the contract is made.

Minor changes. This provision is modelled on section 13 of the Sale of Goods Act, and it makes only relatively minor changes in the title term (putting aside altogether the changes to remedies and waivers), such as clarification of the time at which the seller must have the right to sell (time of delivery).

Simple leases. In a case where the supplier is simply leasing the goods without any option to the lessee to purchase them, the supplier needs only to have the rights to supply the goods and to give quiet possession.

CPWALA text

8(2) Where there is a contract of lease or hire of a consumer product and there is not an option to purchase it, there is an implied warranty given by the seller to the buyer

(a) that the seller has a right to supply the product, or will have a right to supply the product at the time of its delivery to the buyer; and

(b) that the buyer will enjoy quiet possession of the product except so far as it may be disturbed by any person entitled to any interest, lien, charge or encumbrance actually known to the buyer before the contract is made.

QUALITY AND FITNESS

Safety standards

The goods must meet all applicable federal/provincial standards in relation to health, safety and quality.

CPWALA text

10(1) . . . . in every contract for the sale or supply of a consumer product there is an implied warranty given by the seller to the buyer

(b) that the product complies with all mandatory federal and provincial standards in relation to health, safety and quality.

Goods unused

In the case of used goods which are in "mint" condition, it is quite easy for a buyer to mistake them for new. To protect the buyer's reasonable expectations in this regard, CPWALA provides an implied warranty that the goods are "unused" (beyond reasonable use to test, service or deliver them), unless the buyer knows or ought to know otherwise.

CPWALA text

9(1) In every contract for the sale or supply of a consumer product there is an implied warranty given by the seller to the buyer that the product is unused, unless before the contract is made

(a) the seller discloses to the buyer that the product is not unused; or

(b) the buyer knows or ought to know that the product is not unused or is likely not to be unused.

9(2) For the purposes of this section, a product is unused notwithstanding that it has been used by the seller or any other person to test, service, prepare or deliver it, if it has not been so used to an unreasonable extent.

Satisfactory quality

As far back as 1815, long before there was any sale of goods legislation, Lord Ellenborough remarked pungently: "The purchaser cannot be supposed to buy goods to lay them on a dunghill." (Gardiner v. Gray (1815), 171 E.R. 46)

This simple notion is the root of the implied term of "merchantability" under the common law and the Sale of Goods Act, and it continues to thrive in section 10 of CPWALA.

Section 10 provides an implied warranty that:

The goods are

  • of such quality
  • in such state or condition, and
  • as fit for their normal purpose(s)

as it is reasonable to expect having regard to

  • the supplier's description of the goods, if any,
  • the price, when relevant, and
  • all other relevant circumstances.

CPWALA text

10(1) Subject to subsection (2), in every contract for the sale or supply of a consumer product there is an implied warranty given by the seller to the buyer

(a) that the product is of such quality, in such state or condition, and as fit for the purpose or purposes for which products of that kind are normally used as it is reasonable to expect having regard to the seller's description of the product, if any, the price, when relevant, and all other relevant circumstances; and

(b) that the product complies with all mandatory federal and provincial standards in relation to health, safety and quality.

10(2) There is no implied warranty under paragraph (1)(a)

(a) as regards any defect that is known to the buyer before the contract is made;

(b) as regards any defect that the seller has reason to believe exists and that he discloses to the buyer before the contract is made;

(c) if the product is a used product and the buyer examines it before the contract is made, as regards any defect that that examination ought to reveal; or

(d) if there is a sale or supply by sample, as regards any defect that a reasonable examination of the sample ought to reveal.

Cases
(in reverse chronological order)

Expectations vary with circumstances. What is reasonable to expect in the circumstances is basically a question of fact dependent on the circumstances. Expectations of quality are relative, not absolute. The buyer certainly will expect appropriate/satisfactory quality for his or her money.

For example, in Medjuck & Budovitch Ltd v. Young (1988), 86 N.B.R. (2d) 386 (Q.B.), the buyer had contracted for custom made drapes throughout her new house. When they were installed, some drapes were too long, some were too short, some had incorrect width, some were wrinkled, and some had puckered hems. Not surprisingly, the court found that the drapes were not of satisfactory quality.

Perhaps the most straightforward case to date is Beaulieu v. Leisure Time Sales Ltd. et al. (1993),138 N.B.R. (2d) 215 (N.B. Queen's Bench), where the seller of an $87,400 motor home was found to be in fundamental breach of section 10 after the seller's manager himself admitted that the motor home was a "nightmare" and a "lemon since day one."

On the other hand, in Alder v. Defazio Autobody Ltd. (1992, N.B. Queen's Bench), which involved a 12 year old Monza car "driven 166,000 kilometers on New Brunswick roads," Justice McLellan said that it was unreasonable to think of it as a "potentially valuable antique." "When a car is 12 years old," he said, "quite a bit of rust is very predictable." Similar remarks were made by Justice Dickson in Gallant v. Larry Woods Used Cars Ltd., a case concerning a car that was 8 years old and had 100,000 miles on it -- "an appreciable rusting of the frame and underparts of a vehicle of that vintage could only be well-anticipated."

In McGouey v. Lawson Motors Ltd., a seller was held to be in major breach of the warranty when it sold a 5 year old car whose unibody frame was found to be rusted out to the "point of collapse" within 7 weeks and 3,000 miles.

In Doiron v. Bayside Chrysler Dodge Ltd. (1999), 210 N.B.R.(2d) 201 (N.B. Queen's Bench) a 7 year old half-ton truck described as being in very good condition was sold for $11,300. Within days several defects surfaced: a transmission oil leak, brake problems, and battery problems, costing $582 to repair. The court held that the truck was not what the buyer was entitled to expect and the seller was in breach of the implied warranty under section 10.

Rogers v. Parish (Scarborough) Ltd. One of the clearest statements of the proper approach to a provision like section 10 is found in Rogers v. Parish (Scarborough) Ltd., [1987] 2 All E.R. 232 (Eng. C.A.). That case concerned section 14(6) of the English Sale of Goods Act, which is similar to section 10:

14(6) Goods of any kind are of merchantable quality...if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.

A brand new Land Rover car which sold for L14,000 had significant defects in the engine, gearbox and bodywork. In finding a breach of the statutory warranty, Lord Justice Mustill proceeded as follows:

...[T]he [trial] judge applied the test of whether the defects had destroyed the workable character of the car. No doubt this echoed an argument similar to the one developed before us that if a vehicle is capable of starting and being driven in safety from one point to the next on public roads and on whatever other surfaces the car is supposed to be able to negotiate, it must necessarily be merchantable. I can only say that this proposition appears to have no relation to the broad test propounded by section 14(6) even if, in certain particular circumstances, the correct inference would be that no more could be expected of the goods sold.

This being so, I think it legitimate to look at the whole issue afresh with direct reference to the words of section 14(6). Starting with the purpose for which "goods of that kind" are commonly bought, one would include in respect of any passenger vehicle not merely the buyer's purpose of driving the car from one place to another but of doing so with the appropriate degree of comfort, ease of handling and reliability and, one might add, of pride in the vehicle's outward and interior appearance. What is the appropriate degree and what relative weight is to be attached to one characteristic of the car rather than another will depend on the market at which the car is aimed.

To identify the relevant expectation one must look at the factors listed in the subsection. The first is the description applied to the goods. In the present case the vehicle was sold as new. Deficiencies which might be acceptable in a secondhand vehicle were not to be expected in one purchased as new. Next, the description "Range Rover" would conjure up a particular set of expectations, not the same as those relating to an ordinary saloon car, as to the balance between performance, handling, comfort and resilience. The factor of price was also significant. At more than L14,000 this vehicle was, if not at the top end of the scale, well above the level of the ordinary family saloon. The buyer was entitled to value for his money.

With these factors in mind, can it be said that the Range Rover as delivered was as fit for the purpose as the buyer could reasonably expect? The point does not admit of elaborate discussion. I can only say that to my mind the defects in engine, gearbox and bodywork, the existence of which is no longer in dispute, clearly demand a negative answer.

Goods must meet safety standards. The very minimum requirement is that the goods must meet all applicable federal/provincial standards in relation to health, safety and quality. See above.

Relevance of SGA's "merchantability." The requirements under section 10 bear similarities to those under the implied term as to merchantability under section 15(b) of the Sale of Goods Act. Section 10 does not speak in terms of merchantability, but it does borrow heavily from the case law on merchantability's meaning and requirements.

However, the requirements are by no means identical, so in interpreting section 10 the case law on section 15(b) must be treated with caution. Indeed, in England the Sale of Goods Act itself was amended to provide a statutory definition of merchantability with wording similar to that in section 10; yet the courts have discouraged reference to the old case law on merchantability.

The leading case is Rogers v. Parish (Scarborough) Ltd., [1987] 2 All E.R. 232 (Eng. C.A.), where Lord Justice Mustill said:

An implied term as to merchantability has been governed by statute since the Sale of Goods Act 1893. It was, however, subject to important modification by the Supply of Goods (Implied Terms) Act 1973, as regards both a change in the wording of section 14(2) itself and the addition of a new definition of merchantable quality. These were re-enacted, with a minor alteration as regards the definition, in section 14 of the Sale of Goods Act 1979, the material parts of which read:

[14(6)]. . . . Goods of any kind are of merchantable quality within the meaning of subsection (2) above if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances."

In the course of argument before us our attention was drawn to various expressions of opinion in cases decided before the enactment of the 1973 legislation as to the precise significance of the terms "merchantable quality." In my judgment this is not a practice to be encouraged. The Act of 1973 was an amending Act and it cannot be assumed that the new definition was included simply because the draftsman saw a convenient opportunity to reproduce in more felicitous and economical terms the gist of the speeches and judgments previously delivered. The language of section 14(6) is clear and free from technicality, and it should be sufficient in the great majority of cases to enable the fact-finding judge to arrive at a decision without exploring the intricacies of the prior law. . . .

. . . [I]t seems to me that the intent of section 14(6) was to make an issue of merchantable quality into very much a jury question.



Durability requirements. See below.

Defects not covered by section 10 warranty

Section 10(2) excludes coverage from these defects:

(a) any defect that is known to the buyer before the contract is made;

(b) any defect that the seller has reason to believe exists and that he discloses to the buyer before the contract is made;

(c) if the product is a used product and the buyer examines it before the contract is made, any defect that that examination ought to reveal; or

(d) if there is a sale or supply by sample, any defect that a reasonable examination of the sample ought to reveal.

Section 10(2) does not apply across the board.

  • None of it applies to the mandatory standards covered by section 10(1)(b).
  • Section 10(2)(c) applies only to used goods.
  • Section 10(2)(d) applies only to sales by sample.

Section 10(2)(a)

This exclusion from section 10 coverage applies only to a defect that is actually known to the buyer before the contract is made.

Section 10(2)(b)

Although the buyer does not have to know for certain that the defect actually exists in order for this exclusion to apply, the defect must be one that the supplier (1) suspects and (2) discloses to the buyer before the contract.

Both requirements must be met. It is not sufficient under 10(2)(b) for the supplier to give a warning about a possible defect that the supplier has no reason to believe exists.

Section 10(2)(c)

This provision applies only to used goods that the buyer inspects before purchase.

Mere opportunity to inspect does not rule out protection under 10(2)(c). It applies only when the buyer examines the (used) goods and it takes away protection only for "any defect that that examination ought to reveal."

The relevant question under 10(2)(c) is not what examination could or should be made, but what examination actually is made. What matters is what examination the buyer makes, not what examination the buyer has an opportunity to make. Section 10(2)(c) does not require the buyer to make a reasonable examination, or indeed any examination at all. Contrast 10(2)(d) below.

Case law. In Gillespie v. MacDonald Pontiac Buick GMC Ltd. (1985), 64 N.B.R. (2d) 391 (N.B. Court of Appeal), a used car buyer had been given the car to take home to test-drive and inspect before purchase. He left it in his driveway overnight, and the next morning noticed a "puddle of oil" from it in his driveway. However, he did not check it out in any way, not even by looking under the car. It turned out that the leak was caused by a defective rear main oil seal which had to be replaced. A majority of the Court of Appeal held that section 10(2)(c) applied to prevent section 10 coverage for this.

For a Case Comment on the Gillespie case by Karl Dore (published at 74 N.B.R. (2d) 78), click here.

In Doiron v. Bayside Chrysler Dodge Ltd. (1999), 210 N.B.R.(2d) 201 (N.B. Queen's Bench) the buyer of a used half-ton truck took it for a test drive before buying but did no other examinination, relying on the salesperson's assurance that it was in very good condition. The truck had defects (transmission oil leak, brakes and battery) discoverable only by dismantling parts of the truck. It was held that s. 10(2)(c) did not exclude the defects from the implied warranty under s. 10. Justice McIntyre said: "When the purchase is made through a dealer the inspection referred to in s. 10(2)(c) should not be interpreted to mean having to remove or dismantle any parts of the automobile." [See comments above.]

Section 10(2)(d)

This provision applies only to sales by sample.

Unlike 10(2)(c), 10(2)(d) requires that a buyer by sample conduct a reasonable examination of the sample because it rules out protection for "any defect that a reasonable examination of sample ought to reveal."

Contracting out

CPWALA does not permit any contracting out of section 10 in any contract between a supplier and a consumer buyer. This is clear from the general provision in section 2(3) that CPWALA applies regardless of any agreement to the contrary, and from the specific provisions in sections 24, 25 and 26.

In fact, CPWALA generally prohibits any contracting out of its protection, subject to two exceptions:

  1. in contracts between suppliers and consumer buyers, section 25 allows contracting out in some cases of the CPWALA remedies for breach of express warranties;
  2. in contracts between suppliers and business buyers, section 26 allows contracting out of any of CPWALA's warranties or remedies (subject to an important exception discussed below).

Neither exception applies to a consumer buyer's rights and remedies under section 10.

CPWALA text

2(3) This Act applies notwithstanding any agreement, notice, disclaimer, waiver, acknowledgement or other thing to the contrary.

24 Where there is a contract for the sale or supply of a consumer product, the parties cannot agree to exclude or restrict any warranty or remedy provided by this Act except as provided in sections 25 and 26.

25(1) Subject to subsection (4), where there is a contract for the sale or supply of a consumer product, the parties may agree to exclude or restrict any remedy provided by this Act for breach of an express warranty, but such agreement shall be ineffective to the extent that it is shown that it would not be fair or reasonable to allow reliance on such agreement.

25(2) Where the person alleging that an agreement referred to in subsection (1) is ineffective was himself unable to rely on a similar agreement made between him and another person in relation to the product because it was not fair or reasonable for him to rely on that agreement, then unless reliance on the agreement referred to in subsection (1) is shown to be fair and reasonable in the circumstances, that agreement is ineffective to the same extent that the similar agreement was ineffective.

25(3) In determining whether it would be fair or reasonable to allow reliance on an agreement to exclude or restrict any remedy provided by this Act for breach of an express warranty, regard shall be had to all the circumstances of the case.

25(4) Where there is a contract for the sale or supply of a consumer product by description, the parties cannot agree to exclude or restrict any remedy provided by this Act for breach of an express warranty that forms part of the description of the product.

25(5) For the purposes of subsection (4), a sale or supply of a consumer product shall not be prevented from being a sale or supply by description by reason only that the product is a specific product that is seen, examined, tested or selected by the buyer.

25(6) The right of any person claiming under section 23 is limited to the extent of any exclusion or restriction of remedy that the parties agreed to in the contract and that is effective under this section.

26 Where there is a contract for the sale or supply of a consumer product and the buyer makes or holds himself out as making the contract in the course of a business, the parties may agree to exclude or restrict any warranty or remedy provided by this Act but, except to the extent allowed by section 25, such agreement shall be ineffective with respect to any consumer loss for which the seller would be liable if no such agreement had been made.

Rationale for ban against contracting out. The reasons for banning contracting out in consumer transactions were given in the First Report of the Consumer Protection Project:

Although we believe strongly in the general principle of the law of contracts to allow freedom of contract, the special features of the consumer contract call for some controls on this freedom. This is so for a number of reasons. First, the consumer, as a general proposition, is in a much weaker bargaining position than is the seller. In many cases, he is confronted with a contract that has been drawn up by (or for) the seller and which is presented to him on a take it or leave it basis. And since it is a rare standard form contract that does not contain some kind of an exemption clause, the consumer may not fare much better if he goes elsewhere. In actual fact, in many cases the consumer will not even be aware of the limitation clause, for it may be "buried" in the fine print of a standard printed form contract. It is, after all, a rare consumer who takes the time and trouble to read a lengthy printed form contract before signing it. There are a number of factors accounting for this, including the fact that most consumers are unable to fully comprehend the legal significance of much of the terminology that is used and the fact that most consumers realize that their bargaining power is limited. Indeed, some sellers would be astounded if the consumer were to insist on reading the entire form before signing it and having those parts of it that he did not understand explained to him. In practice many standard form contracts are not expected to be read at all, much less changed.

The law, however, appears to be out of touch with reality in the consumer transaction. The consumer who signs a printed form contract containing an exemption clause is bound by the terms of that clause notwithstanding that he neither read nor was expected to read the form. And the freedom of contract principle becomes a vehicle whereby the stronger party, the seller, is enabled to impose his terms on the weaker party, the buyer. In many cases the result is that the buyer loses rights that the law meant him to have and has his reasonable expectations defeated (the implied terms, after all, are based upon reasonable expectations), by reason of a clause in a contract which he is not even aware of, or if he is, which he is not able to change. In the consumer contract, the notion that the contract and all its terms are individually bargained by persons capable of looking after their own interests to their best advantage is a myth.

If policy reasons favoured the limitation of liability, or if policy reasons were indifferent on this question, then the myth might not cause much harm in this area (although it would still cause harm in other areas producing unfair contracts). But we believe policy supports disallowing the limitation of liability. First, the implied terms are based on what the reasonable expectations of the buyer should be. Second, those reasonable expectations can be frustrated by a clause which he is not even aware of or which he is powerless to change. Third, the seller is in a much better position than the consumer to detect defective goods and either refrain from buying them or else buy them at a reduced price and, after disclosing the defects in the goods, sell them to the consumer at a reduced price. Fourth, even in respect of defects that are latent and undetectable, the seller is more likely than the consumer to appreciate the extent of that risk and to make suitable arrangements to handle it, either by arrangement for protection from his seller (and so on back to the manufacturer if he was responsible for the defect), or by insurance, or by increasing his prices to cover such costs. (144-146)

Difference between "contracting out" and "reducing expectation". Except for safety standards, CPWALA does not regulate quality standards. Rather, its purpose is to provide protection against the unexpected. CPWALA seeks only to protect the consumer's reasonable expectations about quality, as explained in the Second Report of the Consumer Protection Project.

...[O]ur recommendations for mandatory implied terms as to quality would not protect the buyer from all defects. Goods may be defective and yet still satisfy the quality requirements. This is because we have deliberately formulated a flexible proposal that is designed to reflect the reasonable expectations of the parties, which differ according to the circumstances. The seller may avoid responsibility for a particular defect in the goods by pointing out that defect before the contract is made. Nor would the buyer receive protection from defects that he is aware of from his own examination of the goods before the contract is made. The seller may also avoid what would otherwise be a responsibility, to some extent at least, by his general description of the goods. For example, if the seller describes the goods as "used" his responsibility would be less than if he had described them as "new." Or, to take another example, goods described as "seconds" would require a lower standard of quality than the same goods without this qualifying description.

Our general approach to non-safety-related defects is not that they should not exist. The fact that goods have defects, or that they are not of first class quality, is not necessarily undesirable. Such goods may be precisely what the consumer wants, if the price is right. Rather, our general approach is to give the consumer protection from unknown defects. It is only when he knows what he is getting that the consumer can make an informed decision on whether he should buy the goods at the price requested.

The consumer by no means receives perfect protection from the unknown under our proposals, however. There are practical obstacles that prevent this. We do not think it would be reasonable to require in every case that a seller actually show the consumer exactly what defects there are in the goods he is selling if he is to avoid liability. In many cases, all that can reasonably be required is that the seller indicate by way of a general description that something is wrong - e.g. "scratch and dent" sales, smoke damage sales, soiled merchandise sales. Proposals designed for the sale of goods generally must accommodate these cases. And, if mandatory, as our proposals are, even more care must be taken to ensure that they have the necessary built-in flexibility. (41-43)

"As is" Sales Under CPWALA. In sale of goods law generally, the buyer's expectations about the quality or fitness of the goods do not necessarily coincide with her or his legal rights. Indeed, quite often there is a huge difference between them. But CPWALA, through the combination of the section 10 implied warranty and the ban against contracting out, is designed to protect the consumer buyer's reasonable expectations about the goods. Section 10 imposes responsibility on the seller commensurate with the buyer's reasonable expectations about the goods.

A question often asked is, what might be the effect of a sale on "as is" terms? There is no doubt that a supplier cannot contract out of the section 10 warranty vis-a-vis a consumer buyer, whether by "as is" terms or otherwise. But can a supplier achieve the same result indirectly, by saying that "as is" nullifies any and all expectations that a buyer might otherwise have had about the quality, fitness or durability of the goods? The answer certainly is No under section 10(1)(b), and it must also be No under section 10(1)(a).

It must be taken as given that a seller cannot escape section 10 by saying "no warranties," because otherwise there would be no point at all to the ban against contracting out. From this it must also follow that neither can the seller escape section 10 by simply saying "as is." The buyer's expectations about the seller's legal responsibility could be obliterated by the seller's saying "no warranties" or "as is," (disregarding for the moment that the Act does not allow the seller to disclaim its legal responsibility). But the issue under section 10 is not the buyer's expectations about the seller's legal responsibility, but the buyer's expectations about the quality of the goods.

To say that the seller is not to be responsible should there be something wrong with the goods is not to say that something is wrong with the goods, or that one should necessarily expect something to be wrong with them. For instance, there will be high expectations about the quality of a high-priced brand-new luxury automobile sitting in the dealer's showroom, regardless of what the dealer's standard form contract may say about legal liability. Section 10 focuses on the buyer's reasonable expectations about the goods, and imposes responsibility on the seller commensurate with those expectations.

An "as is" agreement does purport to allocate to the buyer the risk of the possibility that there might be something wrong with the goods. The buyer is supposed to bear the risk of any and all defects regardless of his or her reasonable expectations about the goods. However, to allow "as is" to place all these risks on the buyer, regardless of her or his reasonable expectations about the goods, would contradict the ban against contracting out of section 10 in the same way that an agreement for "no warranties" would.

To allow "as is" agreements would also make nonsense of subsection 10(2) of CPWALA. Paragraph 10(2)(b) denies protection to the buyer "as regards any defect that the seller has reason to believe exists and that he discloses to the buyer before the contract is made." Under this provision, a seller cannot escape responsibility simply by giving the buyer a long list of possible defects. The seller must not only declare the possible defect but also must have reason to believe that it exists. In an "as is" sale the seller is attempting to deny responsibility for any and all defects, without giving any specificity, and regardless of whether he or she has any reason to believe that any defects exist. This clearly would not be effective under paragraph 10(2)(b).

It would be highly odd, then, if it were effective under subsection 10(1), because the result would be that paragraph 10(2)(b) would cease to have any legal significance. Subsection 10(1) would swallow up 10(2)(b) completely and extend it far beyond. And in doing so it would also destroy the only other possible purpose of 10(2)(b), that of clarification. In suggesting limitations on the seller that would not exist, paragraph 10(2)(b) would not clarify but mislead.

Case law on contracting out and "as is." The case law on contracting out and "as is" sales under CPWALA got off to a very shaky start. In the first case on this issue, Gillespie v. MacDonald Pontiac Buick GMC Ltd. (1984), 64 N.B.R.(2d) 243, the trial judge misconstrued section 25 of CPWALA and mistakenly concluded that it allowed sellers to contract out of the Act's implied warranties in sales to consumer buyers, and accordingly that an "as is" sale could be an effective waiver. (The actual decision was that the buyer had not in fact waived his implied warranty rights in the contract.)

For a Case Comment on Gillespie by Karl Dore, published at 64 N.B.R. (2d) 391, click here.

On appeal, the decision was affirmed on another ground: Gillespie v. MacDonald Pontiac Buick GMC Ltd. (1986), 71 N.B.R. (2d) 1. Only one appeal judge mentioned the status of "as is" sales under section 10, and then only to say that it was unnecessary to deal with that issue.

Since Gillespie, the case law has gone much better. The "contracting out" issue was ably dealt with by the Court of Appeal in a 1988 case, Sirois v. Centennial Pontiac Buick GMC Ltd. and General Motors of Canada Ltd., 89 N.B.R. (2d) 244; 51 D.L.R. (4th) 470.

"As is" came up before Justice McLellan in several cases. In Thériault v. Roy (1990), 109 N.B.R. (2d) 75, he said: "With respect to the endorsement 'as is' on the 'Purchase Order,' I am of the opinion that this is a factor to be considered. However, the court must take into account all of the relevant factors, including the nature of the product, the oral evidence and the fact that Mr. Thériault made his complaint the day after the purchase." In Wood v. Connell Motors Ltd. (1991), 113 N.B.R. (2d) 427, he found that a sale "as is" prevented any Sale of Goods Act warranty, and that CPWALA did not protect the buyer because the goods were not a consumer product. And in VanWart v. MacDonald (1994),151 N.B.R. (2d) 129, he said: "In view of the various oral representations...as to the car...I attach no significance to the words 'as is, where is'."

In Witherell v. Buchanan Estate (1995), N.B.R.(2d) 14 (N.B. Court of Appeal), an 8 year old Jeep was sold on "as is" terms after the buyer had tested it, twice, for several hours and been advised to have it inspected by his mechanic. When the motor failed 10 days and 100 kilometres later, the trial judge awarded damages of $2,000 under the implied warranty of durability under section 12 of CPWALA. The decision was reversed by the Court of Appeal on another ground, with no mention of "as is."

See also Sheppard v. Jardine Auctioneers Inc.

Fitness for normal purpose
and
Fitness for special purpose

CPWALA text

11 Where before the contract is made the buyer expressly or by implication makes known to the seller any particular purpose for which the product is to be used, there is an implied warranty given by the seller to the buyer that the product is reasonably fit for that purpose, whether or not that is a purpose for which such a product is normally used, unless the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the seller's skill or judgment.

Cases
(in reverse chronological order)

Similarities to Section 15(a) of SGA. Section 11 bears many similarities to section 15(a) of the Sale of Goods Act, especially as section 15(a) has been interpreted by the courts. In Johnson v. Maritime Water Treatment Ltd., for example, the seller was held liable under both provisions.

Section 11 requirements. Unlike section 10 of CPWALA, section 11 applies only if

  1. the seller knows or ought to know of the buyer's purpose for the goods,
  2. the buyer is relying on the seller's skill or judgment regarding the goods' fitness for that purpose, and
  3. the buyer is reasonable in so relying.

Onus of proof. The buyer bears the onus regarding 1, but the seller bears the onus regarding 2 and 3. That is, once the buyer proves that her or his purpose was made known, the section 11 warranty will apply unless the seller proves that the buyer did not rely on the seller's skill or judgment regarding the goods' fitness for that purpose, or was unreasonable in relying.

"Particular" purpose includes any known purpose. While section 10 covers the goods' fitness for normal purposes, section 11's focus is on the goods' fitness for the buyer's own "particular purpose." The buyer may intend to use the goods for their normal purpose, or for some special purpose. For section 11 protection, the buyer must make her or his purpose known. Any purpose made known, whether normal or special, may be a "particular purpose" within the meaning of section 11.

Single-purpose goods. For goods that are normally used for only one purpose, e.g. underwear, the buyer need say nothing at all if he or she intends to use the goods for that purpose. The seller automatically will be taken to know of that purpose. In effect, then, section 11 provides an implied warranty that the goods are reasonably fit for their normal purpose unless the seller shows that the buyer did not rely on the seller's skill or judgment, or was unreasonable in relying.

Multi-purpose goods. For goods that have more than one normal purpose, the seller will not automatically be taken to know of the buyer's purpose, even if the buyer intends to use the goods for one of their normal purposes.

Reliance readily inferred. The courts readily infer reliance on a retailer.

Durability requirements. See below.

Case law. A particularly instructive overview of a similarly worded provision in the English Sale of Goods Act [s. 14(3)] is found in the judgment of Lord Steyn in Slater and others v. Finning Ltd., [1996] 3 All ER 398, a House of Lords case dealing with the application of that provision [s. 14(3)] to a fact situation where new engine camshafts for a fishing boat, recommended and installed by their supplier, failed because of that boat's tendency to vibrate excessively, a fact unknown by the supplier.

Section 14(3) of the English Sale of Goods Act:
"Where ... the buyer, expressly or by implication, makes known ... to the seller ... any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller ..."

Lord Steyn:

...[S]ection 14(3)... [is]... not to be construed as a virginal text. Substantially the same statutory principles have been judicially interpreted over the last hundred years. About those principles as they appeared in section 14 of the Sale of Goods Act 1893, it was observed that the old rule of caveat emptor has become the rule of caveat venditor in order to meet the requirements of modern commerce and trade: Grant v. Australian Knitting Mills Ltd. [1936] A.C. 85, 98, as per Lord Wright; see also Hardwick Game Farm v. Suffolk Agricultural Poultry Producers Association [1969] 2 A.C. 31, 123. While the implied condition that the goods are reasonably fit is inherently a relative concept, it is well established that the liability under section 14(3) is strict in the sense that the seller's liability does not depend on whether he exercised reasonable care.

... [S]ection 14(3) provides that the implied condition is only applicable in cases where the buyer "expressly or by necessary implication, makes known ... any particular purpose for which the goods are bought." Originally, the buyer additionally had to prove reliance on the seller's skill and judgment. In 1973 the legislature reversed the burden on this issue. Under section 14(3), in a case where the buyer made known his purpose, there is prima facie an implied condition of fitness which the seller can defeat only by proof that the buyer did not rely, or that it was unreasonable for him to rely, on the skill or judgment of the seller. While section 14(3) focuses on two separate issues, i.e. the buyer making known his purpose to the seller and reliance, and provides for different burdens of proof on them, there is a close link between the two concepts. After all, if the buyer's purpose is insufficiently communicated, the buyer cannot reasonably rely on the seller's skill or judgment to ensure that the goods answer that purpose.

That brings me to the interpretation of the words in section 14(3), which are of critical importance in the present case, namely that "the buyer, expressly or by implication, makes known... to the seller ... any particular purpose for which the goods are being bought." The courts have consistently given a broad and liberal interpretation to these words, consistent with the reasonable and effective protection of the buyer. Thus the courts have refused to hold that the word "particular" purpose conveys the opposite of general: instead they have construed "particular" as signifying a specified purpose, which may be very general, e.g. a bicycle to ride on the road. Similarly, the courts have adopted a non-technical approach to the manner in which the buyer must communicate the purpose to the seller. No conceptual difficulty arises in cases of express communication, but usually there will not be an express communication. One then turns to the process of implication. In the context a practical and flexible approach has prevailed. That is best demonstrated by the observations of Lord Wright in Grant v. Australian Knitting Mills Ltd. [1936] A.C. 85. In dealing with the implication of the purpose for which the goods are bought, Lord Wright in giving the judgment of their Lordships said, at p. 99: "It will usually arise by implication from the circumstances: thus to take a case like that in question, of a purchase from a retailer, the reliance will be in general inferred from the fact that a buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment: the retailer need know nothing about the process of manufacture: it is immaterial whether he be manufacturer or not: the main inducement to deal with a good retail shop is the expectation that the tradesman will have bought the right goods of a good make: the goods sold must be, as they were in the present case, goods of a description which it is in the course of the seller's business to supply: there is no need to specify in terms the particular purpose for which the buyer requires the goods, which is none the less the particular purpose within the meaning of the section, because it is the only purpose for which any one would ordinarily want the goods. In this case the garments were naturally intended, and only intended, to be worn next the skin." It is sufficient that the seller was aware of the buyer's purpose. On the other hand, it must be borne in mind that our law generally subscribes to an objective theory of contract. What matters in this context is how a reasonable person, circumstanced as the seller was, would have understood the buyer's purpose at the time of the making of the contract: Hardwick Game Farm v. Suffolk Agricultural Poultry Producers Association [1969] 2 A.C. 31, 81.

In the present case the buyers did not expressly communicate their purpose to the sellers. The question is what could the sellers fairly have been expected to infer about the buyers' purpose from the circumstances of the case. Neutrally, it is obvious that the sellers would have inferred that the buyers' only purpose was to buy the camshafts as working component parts in the engine of their fishing vessel. It is therefore not a case where the buyer had more than one purpose. The correct approach is well settled. Professor Roy Goode, Commercial Law, 2nd ed., (1995), p. 335 explains: "The seller is entitled to assume that the goods are required for their normal purpose, or one of their normal purposes, unless otherwise indicated by the buyer. Accordingly, if the buyer requires the goods for a non-normal purpose, he must take steps to acquaint the seller of this fact before the contract is made, otherwise the seller, if unaware of the special purpose for which the goods are bought, will not be considered to undertake that they are suitable for that purpose." In other words, the implication will normally be that the goods are fit for the purpose for which the goods would ordinarily be used. For example, if a contractor in England buys pipes from a dealer for use in a pipe-laying project the seller would normally assume that the pipes need merely be suitable to withstand conditions in our moderate climate. If the contractor wishes to use the pipes in arctic conditions for a Siberian project, an implied condition that the pipes would be fit to withstand such extreme weather conditions could only be imputed to the seller if the buyer specifically made that purpose known to the seller. Applying this approach to the facts of the present case, the seller was entitled to assume that the camshafts would be used in a Caterpillar engine in an ordinary vessel. And the implied condition must be so limited in scope. The particular purpose for which the buyers ordered the new camshafts was for installation in a vessel which was in fact afflicted by an abnormal tendency to resonate excessively. It follows that...there was no breach of the implied condition.

Wall v. Dieppe Auto Ltd. (1990, N.B. Queen's Bench)

Justice Creaghan:
"The Plaintiffs purchased a used car, five years old and with mileage showing of over 87,000 kilometers. They drove the vehicle, albeit experiencing some problems, for a period of some nine months, allowing for the time it was not used, and put mileage of approximately 30,000 additional kilometers on the car. At the time of purchase they had the opportunity to examine it, test drive it and to have it gone over by an independent mechanic. They knew the problems inherent in buying a used car and they were advised by the Defendant that such problems might be expected. Hence the decision to purchase the service contract on the advice of the Defendant.

I cannot see how on the facts of this case it has been established that the Defendant breached an implied warranty on the basis that the car was sold in a condition where it was not reasonably fit for the purpose for which it was intended."

Lanteigne v. Foulem & Blanchard Ltee. (1986, N.B. Queen's Bench)

Defendant recommended and installed an exhaust system for plaintiff's used Corvette which was not the standard exhaust system for Corvette cars. It turned out that the exhaust system was unsuitable for Corvettes, and it caused damage to the engine. Defendant was held liable for the damage.

Sections 10 and 11 coverage compared. Sections 10 and 11 have some overlap regarding fitness for normal purpose. Indeed both sections may apply in the buyer's favour if the goods are unfit for their normal purpose.

However, the sections do not provide identical protection.

  • In some cases section 10 may give greater protection, e.g. the goods may be fit for use under section 11, but have cosmetic defects covered by section 10. Moreover, section 10 applies even if the buyer is relying not on the seller but on someone else, e.g. the manufacturer.
  • In other cases section 11 may give greater protection, e.g. the goods may have defects not covered by section 10, but covered by section 11 because they render the goods unfit.

Strict liability. Like section 10, the supplier's liability under section 11 is strict -- i.e. the seller is still responsible even though he or she exercised all reasonable care.

Durability

This implied term is designed to protect the buyer's reasonable expectations about durability, which, like the implied terms as to quality and fitness, will vary with the circumstances.

CPWALA text

12(1) In every contract for the sale or supply of a consumer product there is an implied warranty given by the seller to the buyer that the product and any components thereof will be durable for a reasonable period of time.

12(2) In determining a reasonable period of time for the purposes of subsection (1), regard shall be had to all relevant circumstances, including the nature of the product, whether it was new or used, its use as contemplated by the seller and buyer at the time of the contract, its actual use and whether it was properly maintained.

Cases
(in reverse chronological order)

Multi-component goods. Where the goods consist of more than one component, not only the goods as a whole but each component must have reasonable durability, reflecting the fact that some components should last longer than others. For example, a new car's transmission should last longer than its tires.

Section 12 adds to sections 10 & 11. Presumably in some cases at least, goods would need to have some capacity for durability in order to meet the section 10 and 11 warranties. However, section 12 focuses on durability in its own right as a separate, and additional, requirement. In Silliker v. New Brunswick Power Corp., (1992),130 N.B.R. (2d) 444 (N.B. Queen's Bench), a water heater supplied under a month-to-month lease developed a leak, causing considerable damage to the lessee's house. The heater had worked properly for more than 8 years. Justice Stevenson observed, "I do not think that a heater that functions properly for over eight years can be said to be unfit for the purpose for which it is normally used." Thus there was no breach of section 10. However, he did find a breach of section 12.

Onus of proof. Silliker was a small claims case, so the issues were not all fully argued, but Justice Stevenson raised some acute questions involving the onus of proof regarding durability:

What is a reasonable period of durability? Did the product fail during that period? There is evidence that the defendant purchases the heaters from manufacturers who are required to supply units that meet standards laid down by the Canadian Standards Association and the Canadian Electrical Association. What those standards are, and what aspects of the product the standards relate to, were not established. We do not know whether those standards say anything about a reasonable period of durability. Where does the burden of proof lie on such an issue? Is it enough for a plaintiff to establish the rupture and resulting damage? Does that shift the onus to the defendant to prove that the rupture occurred after a reasonable period of durability had expired? Or is the onus on the plaintiff to prove that the rupture occurred during that period?

If a product fails within a minimal time after it is supplied one might infer that there was a breach of both the fitness and durability warranties. On the other hand if the failure occurs after a very long time one might as well infer that it happened beyond a reasonable period of durability. It is the median cases that present difficulty. In those cases one party or the other must meet a burden of proof and the burden may shift.

We do not know why the water heater leaked. We do not know if it was lined with a metal that may corrode after a time as a result of action between the metal and the water in the heater. If the lining is subject to corrosion, what is the anticipated life of the tank? Are there applicable standards? If there is an anticipated life, is the defendant under a duty to institute a program whereby rental heaters will be replaced before the expiry of that normal life? The ability and resources to marshall evidence relevant to such issues lies more within the province of the supplier of the product than with the consumer. For that reason I would place the onus of proof on the defendant. Counsel for the defendant stated that there are a number of actions, both small claim proceedings and otherwise, pending in the court. It may be that in one of those cases the issues I have mentioned will be more fully explored. In the instant case, because the defendant has not met the onus of proof that I find falls upon it, the plaintiff's claim must succeed.

Leases. It is possible that the durability requirement could extend longer in a month-to-month lease situation than it does in a sale situation. For instance, in a case like Silliker, whether the heater works properly for eight years or eighty, what are the expectations for each monthly period?

Notes of some cases

Mann v. Cobra Jeans
The seam in some new jeans came apart after being worn and washed only twice. The court held that the jeans were not reasonably durable.

Parker v. New Brunswick Power Corp.
Trial decision
Appeal decision
Hot water tank, leased month-to-month, ruptured after 3 years, causing extensive damage to lessee's home. The lessor admitted a breach of section 12. Lessee awarded $15,000 at trial. An appeal was dismissed.

Witherell v. Buchanan Estate
"As is" buyer of a used Jeep whose engine failed within 10 days and 100 kilometres was awarded $2,000 at trial. Reversed on other grounds by Court of Appeal.

VanWart v. MacDonald et al.
Buyer bought 6 year old car for $2,000 from seller who advertised it as "very good condition, runs excellent," and orally represented it as "worked great," "reliable" and "used on a daily basis." Buyer soon discovered that the engine had serious problems, and was consuming about a litre of oil per day. Within 10 days buyer asked for a refund. Court allowed refund for breach of the durability term.

Ryan v. Sutherland Equipment Ltd.
Seller sold 4 year old snowmobile with about 4,500 kilometres on it, and represented as having had a "complete resale check," for $2,400, giving a 30 day, 50/50 warranty (50% off parts and labour). Snowmobile had major problems on two of buyer's three outings (engine, then clutch), all within 15 days and 700 kilometres. Court found seller in breach of durability warranty.

Alder v. Defazio Autobody Ltd.
Defendant did a paint job on plaintiff's 10 year old car and gave an express 1 year guarantee on paint and a 6 month guarantee against rust. The court held that in the circumstances the implied durability warranty was "not for any longer" than the defendant's express guarantee.

Thériault v. Roy
Buyer paid $2,100 for a 7 year old car sold "as is" after seller had said: "the engine is A-1;" "it's a good car;" "in perfect condition." The very next day the engine was found to have no oil, and within the next 3 weeks used so much oil that it was found to be finished. The court found a breach of the durability term. Per Justice McLellan: "...[T]he court must take into account all of the relevant factors, including the nature of the product, the oral evidence and the fact that Mr. Thériault made his complaint the day after the purchase."

Gallant v. Larry Woods Used Cars Ltd.
Justice Dickson: "I cannot see how in the circumstances any liability attaches, either under the statutory implied warranty or otherwise, to the defendant. The vehicle sold was at least eight years old. It was indicated by the vendor to the purchaser that it might have as much as 100,000 miles on it, a mileage which would suggest, as was testified to by a witness, that its further use-expectancy was highly unpredictable."

Grabka v. Regina Motor Products (1970) Ltd.
(1997, Saskatchewan Provincial Court, Small Claims Division)
Used car 11 years old and with over 170,000 kilometres at time of sale required transmission job within 3,800 kilometres. Seller was held not to be in breach of the durability warranty under Saskatchewan's legislation, which requires "that the product and all its components are to be durable for a reasonable period, having regard to all relevant circumstances of the sale, including: (i) the description and nature of the product; (ii) the purchase price; (iii) the express warranties of the retail seller or manufacturer; and (iv) the necessary maintenance the product normally requires and the manner in which it has been used."
Moxley Prov. Ct. J.: "Buyers acquiring high kilometrage older model vehicles for modest prices are engaged in a somewhat risky activity. It is to be expected that such vehicles will at any time require major and costly repairs. Such buyers must expect that the risk for such repairs will remain with retail sellers under those circumstances for a short period of time only. In this case, by the time he made his expenditures for his transmission, the risk had passed to Grabka."