Chapter III
The Consumer's Rights and Remedies
for Breach by the Seller of His Responsibilities:
Remedies for Breach of the Terms of the Contract
Consumer Guarantees in the Sale or Supply of Goods
Department of Justice, New Brunswick, 1974
Reproduced with permission of the Department of Justice
First Report
- Chapter III The Consumer's Rights and Remedies for Breach by the Seller of His Responsibilities: Remedies for Breach of the Terms of the Contract
- Chapter VI General Summary of Main Recommendations
Table of Contents
- 1. Present Law 108
- 2. Problems in the Law 111
-
- (a) England 119
- (b) New Zealand 121
- (c) Australia 121
- (d) United States 122
- (e) Canada 125
- 5. Recommendations 133
CHAPTER III
THE CONSUMER'S RIGHTS AND REMEDIES FOR BREACH BY THE SELLER OF HIS RESPONSIBILITIES:
REMEDIES FOR BREACH OF THE TERMS OF THE CONTRACT
There is no problem in consumer protection that is more fundamental or more difficult than that of devising suitable remedies to enforce consumer rights. These remedies must be effective, but they must also be fair in striking a reasonable balance between the conflicting interests of the parties to the contract. We are concerned here with the remedies that the consumer buyer should have against his seller for breach of a contract for the sale of goods. <1>
1. PRESENT LAW
A seller's breach may take many different forms. He may never deliver any goods at all. Or he may deliver them late. Or he may deliver goods that do not comply with the contract requirements, for instance defective goods.
Under the existing law the first case is perhaps the easiest. The buyer can cancel the contract and either recover any payments he has made on account of the purchase price or sue for damages, which in an appropriate case will include the payments made on account of the purchase price. The damages are to be such as to place him in the same position he would have been in had the contract been performed, subject to the limitations of foreseeability <2> and the duty to mitigate. <3> Thus, for example, if a buyer agreed to buy a new car for $4,000 and the seller failed to deliver, and it would cost $4,500 to buy a similar car in the market, the buyer could get damages of $500. In addition, if the buyer had paid money to the seller on account of the purchase price he could recover this in his damages action as well. If the buyer is not content with cancellation of the contract he may seek specific [- 109 -] performance, but the courts will only order specific performance if the buyer can show that damages are not an adequate remedy (because, for example, the goods are unique) and that the goods to be delivered are specific or ascertained. <4>
The other cases, at least where the breach does not amount to total nonperformance, are more difficult. The buyer's remedies here depend initially on the nature of the broken term. The Sale of Goods Act divides terms into conditions and warranties. <5> Conditions are, loosely speaking, major terms, while warranties are minor terms. Whether a term is a condition or a warranty is supposed to depend on the intention of the parties to the contract, which in many cases, however, is not clear (not to mention non-existent). The implied terms under the Sale of Goods Act as to title, merchantability and fitness for a particular purpose are deemed to be conditions. <6>
The buyer can get damages for breach of any term. But he can reject the goods and cancel the contract only if the broken term is a condition. If it is a warranty, he cannot reject and cancel but must keep the goods and content himself with a damages claim.
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If the buyer has a right of rejection, he exercises that right by notifying the seller that he refuses to accept the goods. The buyer is not bound to return the rejected goods to the seller, but he must allow the seller to come and take them back. <7> The buyer has no lien over the rejected goods as security for the repayment of money paid on account of the purchase price or for damages. If he rejects, he must give up the goods and then pursue separately any claim he may have for money paid or for damages. <8>
The buyer may, of course, elect not to exercise his rejection rights. He may also lose his rejection rights because of subsequent events. In either case he would then be restricted to a claim for damages. The buyer will usually <9> lose his right to reject if either (1) the contract was for the sale of specific goods and the property in these goods has passed to the buyer or (2) the buyer has accepted the goods. <10>
2. PROBLEMS IN THE LAW
There are a number of problems with the present system of remedies, most of which have to do with rejection rights.
(a) The Conflicting Interests of the Parties
From the buyer's viewpoint the right to reject the goods for breach is extremely important. In many cases rejection is a much more effective remedy for him than a simple damages claim would be. This is so for a number of reasons. In the first place, the damages may not amount to enough to make it worthwhile for him to take legal action. The power to cancel the transaction puts the buyer in a better position to compel proper performance himself without the aid of legal process. Secondly, the damages may be uncertain. For example, reasonable men can easily differ over "the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty," which is the prima facie rule for recovery for breach of warranty of quality. <11> Thirdly, and in any event, the consumer buys goods for use. What he wants is the goods he contracted to receive, not something [- 112 -] else with a monetary adjustment. To get what he wants he may have to resell these goods and buy the proper ones. But consumers as a rule are not in a very good position to dispose of goods at their best price. Sellers who are dealers are in a better position to sell the goods for their best price.
If then the consumer does not have the right to reject the goods, because either he never had the right originally or he has since lost it, his position is much less strong than it would be if he had the right to reject. Even if he has the right to reject, however, the fact that he cannot hold on to the rejected goods as security for repayment of the purchase price may operate as a powerful practical deterrent to the exercise of his rejection right.
Just as the buyer has vital interests in having rejection rights, the seller has interests calling for restrictions on rejection rights. Cancellation is, after all, a drastic remedy which can cause substantial loss and inconvenience to the seller, particularly if the goods have been used. That loss and inconvenience is likely to become greater as the transaction proceeds further. Further, if it is decided that the buyer's interests should prevail and that a cancellation right should be given, in some cases at least the seller should first be given an opportunity to remedy his breach.
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The present law appears to strike an unhappy balance in resolving these various problems and conflicts, both in the cases in which cancellation rights are initially available and the cases in which cancellation rights are lost because of subsequent events.
(b) When the Buyer Has the Right to Cancel
As noted already, under the present law the buyer's rejection rights depend on whether the term that was broken was a condition or a warranty. But by focusing solely on the nature of the broken term, and ignoring the gravity of the individual breach and its consequences, anomalous results can occur. Thus the slightest breach of a condition allows rejection, while the gravest breach of a warranty does not.
Furthermore, and in any event, the consumer buyer has vital interests in rejection rights for any breach. Indeed, the smaller the breach the more likely it is that rejection will be his only practical remedy. And it is at the initial stages of the transaction that the balancing of the interests comes out most strongly in the buyer's favour, for the earlier in time that rejection takes place the less likely is the loss and inconvenience to the seller.
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On the other hand, in another respect, the present law seems to be unnecessarily harsh on the seller in that it rarely gives him an opportunity to rectify a breach of condition. But in many cases, especially the ones where the breach can be rectified quite easily, the balancing of interests would seem to favour giving the seller a reasonable opportunity to rectify. Of course, there are also cases where he should not be given such an opportunity. One such case would be that where the breach was so substantial that the confidence the buyer had in his seller has been badly shaken.
(c) When the Buyer Loses the Right to Cancel
Under the present law, even if the buyer has the right to cancel initially, he loses that right in certain circumstances. The first case in which he will lose his right to cancel is the case where the contract was for the sale of specific goods and the property in these goods has passed to the buyer. <12> It is difficult to imagine a restriction on rejection rights that is more ridiculous than this one can be. This is because by virtue of section 19 rule 1 of the Sale of Goods Act property in specific goods can pass as [- 115 -] soon as the contract is made, so that the right to reject can arise and be lost at the very same time, the moment at which the contract is made. Most courts have, through various devices, sought to avoid this result. <13> Apart altogether from this anomaly, however, it is difficult in any event to see what relevance the mere passing of property should have to rejection rights. Even under the present law the passing of property has no effect on rejection rights if the contract was originally for the sale of unascertained goods. <14> Why then should it have any effect on rejection rights in the case of a contract for the sale of specific goods?
The second case in which the buyer will lose his right to reject is the case where he has accepted the goods. Section 33 of the Sale of Goods Act provides that the buyer is deemed to have accepted the goods (1) when he intimates to the seller that he has accepted them, or (2) when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or (3) when after the lapse of a reasonable time [- 116 -] he retains the goods without intimating to the seller that he has rejected them. Section 32, however, provides that "where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract." There can be cases, namely (1) and (2) above, where there is a conflict between sections 32 and 33. It has been held that section 33 prevails. <15> Thus there can be cases where the buyer is deemed to have accepted the goods even though he does not know that the seller is in breach and has not yet had a reasonable opportunity to discover that breach. Should the buyer be deemed to have accepted the goods in these circumstances?
Take first the case where the buyer has intimated to the seller that he has accepted the goods. It can be argued that the buyer has voluntarily given up his rejection rights and there is thus no cause for concern. But whatever may be said as to sales generally, it is submitted that this is an unrealistic argument as far as consumer sales are concerned, for the consumer buyer is unlikely to appreciate fully the legal consequences of saying that he accepts the goods.
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It is one thing if he sees a defect and afterwards still says that he accepts the goods. But it is a different case entirely if he does not know of the defect and has not had a reasonable opportunity to discover it, but says he accepts the goods because they seem to be in accordance with the contract as far as he can tell.
Take next the case where the buyer has done an act which is inconsistent with the ownership of the seller. There is some difficulty in what is meant by this, especially in consumer transactions. The buyer does not do an act inconsistent with the ownership of the seller simply by starting to use the goods, although at some stage presumably use becomes relevant, e.g., where the goods have been wholly or substantially consumed. The buyer does do an act inconsistent with the ownership of the seller if he puts it beyond his power to give back the goods after rejection, at least if he was in this position at the time of rejection or any time thereafter. In England it has been held that the buyer does such an inconsistent act if at any time after delivery he has done something to render himself unable to give back the goods even though it turns out that when he does purport to reject he is back in a position to give back the goods in [- 118 -] the same condition they were in when received. <16> In Canada there is some support for saying that as long as the buyer is in a position to give back the goods at the time of rejection, and continues in that position, then he will not be deemed to have done an act inconsistent with the ownership of the seller. <17> The latter position seems preferable because it results in a much more realistic approach to the problems involved in deciding whether rejection should be available. If the buyer is able to return the goods in the same condition they were in when he received them, there seems little reason why he should not be able to reject. Any loss or inconvenience that may be caused to the seller in having to take back the goods seems clearly outweighed by the loss and inconvenience that will be caused to the consumer if he has to keep the goods.
A case that causes more difficulty from a policy viewpoint is that where the goods have received some use before rejection. Used goods, of course, have a much lower resale value than do new goods. More will be said on the resolution of these problems later. For now, however, it should be noted that under the present law the mere fact that the goods [- 119 -] have received some use does not automatically preclude rejection.
The last case in which the buyer is deemed to have accepted the goods is that where he does not exercise his rejection rights within a "reasonable time." Presumably a reasonable time would not expire before the buyer had a "reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract."
3. REFORM IN OTHER JURISDICTIONS
(a) England
Both the Final Report of the (Molony) Committee on Consumer Protection <18> and the Report of the Law Reform Committee on Innocent Misrepresentation <19> were highly critical of the provisions in the English Sale of Goods Act relating to the loss of rejection rights, which at that time were the same as ours. The latter Report states: <20>
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... in many cases the Sale of Goods Act appears to deprive the buyer of any right to reject defective goods before he has had an opportunity of examining them. This is plainly unsatisfactory. We accordingly suggest, first, that it should be made clear that acts which would amount to acceptance within the meaning of section 35 (New Brunswick's section 33) should not be held to do so until the buyer has had a reasonable opportunity of examining the goods as contemplated by section 34 (New Brunswick's section 32); secondly, that in the case of specific goods the right to reject for breach of condition should depend not on the passing of property (which is the test under section 11(1)(c)) (New Brunswick's section 12(4)) but, as it does in the case of other goods, on acceptance by the buyer. The evidence we have received indicates that this is of particular importance in connection with the practice of selling goods in sealed containers, where acceptance ought not to be a bar to rescission until the buyer has had an opportunity of examining the goods.
Some five years later, the British Parliament enacted the Misrepresentation Act, 1967 <21> which, inter alia, adopted these recommendations. The words in their section 11(1)(c) (New Brunswick's section 12(4)), "or where the contract is for specific goods the property in which has passed," were repealed, thus making the passing of property completely [- 121 -] irrelevant to rejection rights. In addition, their section 35 (New Brunswick's section 33) was made subject to their section 34 (New Brunswick's section 32), except in the case where the buyer has intimated to the seller that he accepts the goods.
(b) New Zealand
The Report of the Contracts and Commercial Law Reform Committee on Misrepresentation and Breach of Contract <22> expressed agreement with the above recommendations of the Law Reform Committee.
(c) Australia
The Report on Fair Consumer Credit Laws to the Attorney-General for the State of Victoria by a Committee of the Law Council of Australia <23> noted that in their opinion the provisions of the sale of goods legislation taking away rejection rights on the passing of property or acceptance had not worked well in practice. They accordingly recommended that "... for breach of a basic term the consumer credit buyer should as a [- 122 -] general rule have the right to reject the goods and discharge the contract within a reasonable time of their delivery."
Shortly thereafter, the State of South Australia passed legislation identical to the above amendments passed by the British Parliament. <24>
All of the above recommendations and changes go only to the question of when a rejection right should be lost. They do not touch the question of when a rejection right should be available in the first place. The changes made in the United States, and the proposals of the Ontario Law Reform Commission in their Report on Consumer Warranties and Guarantees in the Sale of Goods, are much more sweeping in their scope.
(d) United States
The distinction between conditions and warranties never really found a happy home in the American sale of goods [- 123 -] legislation. Starting with the Uniform Sales Act, <25> and carried forward to the Uniform Commercial Code, <26> their legislation has given initial rejection rights for breach of any term of the contract. It is significant that this policy decision was made for all sales, not just consumer sales. The Uniform Commercial Code, which is now the law in every state but one, <27> has however made substantial modifications to the perfect tender rule by allowing the seller an opportunity to remedy ("cure") his breach in certain situations. <28>
Rejection rights for minor breaches are lost once the goods are accepted. <29> The acceptance provisions are somewhat similar to those of New Brunswick. <30> Thus the buyer is deemed [- 124 -] to have accepted the goods (1) when he signifies to the seller that he accepts the goods, or (2) when he does not notify the seller of his rejection within a reasonable time, or (3) when he does an act inconsistent with the ownership of the seller. However, the buyer will only be deemed to have accepted the goods in (1) and (2) above if he has had a reasonable opportunity to examine the goods.
Rejection rights for major breaches are available in some cases even after the buyer has accepted the goods (called revocation of acceptance). <31> The provision is worth setting out.
§2-608. (1) The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it
(a) on the reasonable assumption that its non-conformity would be cured and it has not been seasonably cured; or
(b} without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.
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(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
(e) Canada
Following the American lead, the Ontario Law Reform Commission has also recommended that the distinction between conditions and warranties be abolished in consumer sales. <32> The Commission saw the further need for extensive revision of the entire system of consumer remedies and made the following recommendations: <33>
(a) Where the breach is remediable and the breach is not of a fundamental character, the retailer or manufacturer shall have a reasonable opportunity to make good the breach, including any breach in the implied warranties of title, freedom from encumbrances and quiet possession.
"Breach of a fundamental character" means
(i) that the product departs significantly in characteristics and quality from the contract description; or
(ii) that the product is substantially unfit for its ordinary or specified purpose; or
(iii) that the product, in its existing condition, constitutes a potential hazard to the health or property of the purchaser or any other person.
(b) Where the defect is of a fundamental character and appears within a reasonable period after delivery of the product to the purchaser, the purchaser may reject the product and shall be entitled to a refund of the purchase price, subject to a reasonable deduction for the use of the goods. The purchaser shall also be entitled to recover any other damages which he may have suffered, subject to the usual tests of foreseeability.
(c) In other cases, where the defect has not been remedied within a reasonable time, the purchaser shall have the option of rescinding the contract as under (b) or of having the defect remedied elsewhere and recovering the cost thereof from the retailer or manufacturer, together with any other reasonably foreseeable damages which he may have suffered.
4. CONCLUSIONS AND RECOMMENDATIONS
There should be no doubt that our present system of remedies is in need of major revision.
The first change that should be made is to abolish the distinction between conditions and warranties. A consumer buyer of goods should have initial rejection rights for the [- 127 -] breach of any term of the contract of sale. This has been the law in the United States for many years. And it has been recommended for Ontario by the Ontario Law Reform Commission. At the same time the seller should be given a reasonable opportunity to rectify his breach, including a breach of the title obligation, unless it is a major breach or, of course, an irremediable breach.
The question of when the buyer should lose his rejection rights is more difficult. The very least that should be done is to abolish the passing of property test and to make section 33 of the Sale of Goods Act subject to section 32, as has been done in England and South Australia. But in our opinion the changes should go further, for the present guidelines as to what constitutes acceptance, even after the above changes are made, contain a fair degree of uncertainty which, of course, operates against the consumer. There is much to be said for selecting a definite time period during which the consumer can reject for any breach discovered within that period, provided he exercises his rejection right within a reasonable time after he discovers the breach. The setting of any fixed time limit is bound to be arbitrary to some extent. But we believe it has many more advantages than disadvantages.
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We recommend that the consumer should be able to reject for any breach discovered within sixty days of delivery of the goods, provided that he exercises his rejection right within a reasonable time after discovery of the breach. After the sixty day period has expired the consumer should be entitled to reject only in the case of a major breach.
These recommendations, while giving valuable remedies to the consumer, at the same time should not be unduly harsh on the seller. In the first place, except in cases of irremediable or major breaches, it has been recommended above that the seller should be given a reasonable opportunity to rectify the breach. In the second place, therefore, the only "hard cases" should be those where the goods are rejected for minor irremediable breaches after some use by the consumer. A contrary rule, however, can produce hard cases for consumers. It is better that hard cases be suffered by the seller since he is the party in breach. <34> In the third place, as outlined below, we propose to give the seller a right to recover for [- 129 -] benefits derived by the consumer from use of the goods. The restriction of rejection rights to cases of major breach after the sixty day period has expired is in recognition of the seller's interests in not being subjected to such a drastic remedy indefinitely unless the buyer's interests clearly require it, as they do in the case of major breaches.
Rejection rights, of course, are an option given to the buyer. He does not have to exercise them. If he does exercise them he should be entitled to recover from the seller any payments he has made on the purchase price and/or other reasonably foreseeable damages.
The seller, on the other hand, should receive some protection for his restitution interests. First, of course, he should be able to get his goods back. Second, subject to what is said below, he should be entitled to recover or set off from the refund of the purchase price payments, as the case may be, the value of the net benefit derived by the buyer through use of the goods. The burden of proof as to what the value of the benefit is should be on the seller. Third, in cases where the goods have been damaged beyond the deterioration necessarily caused by their contemplated use and for reasons not attributable to the seller's breach, the [- 130 -] seller should be entitled to compensation for the difference between the value of the goods as they are and the value they would have had but for that damage.
The one exception that we would make to the seller's right to recover in restitution for the value of the net benefit received by the buyer from use of the goods is the case where the buyer exercises his rejection rights within a very short period after receiving the goods. To give the seller a right to recover in this case, although certainly desirable in theory, is in our opinion apt to cause severe practical problems through disputes as to what value should be placed on such benefits. Since the amount of money involved in this case should be small, and considering some of the reasons for granting rejection rights in the first place, it does not seem unreasonable to make this exception. Otherwise there is great danger that an unscrupulous seller who has already been paid might deduct or threaten to deduct from the refund an inflated amount which he claims represents the benefit to the buyer. Such a practice could in many cases defeat for all practical purposes the consumer's right to reject. Furthermore, this exception would reflect a principle that is not unknown in the law. Indeed in many cases the present law gives the defaulting contractor no [-131 -] rights whatever, and no doubt it is in part because of this that rejection rights are as restricted as they are. <35> Again, any fixed time limit must of necessity be somewhat arbitrary. We would recommend a ten day time period.
There remains the problem of lien rights. As noted already, under the present law a buyer who exercises his rejection rights has no right to hold on to the goods as security for repayment of money he has paid to his seller on account of the purchase price or for other damages. The absolute denial of any lien rights to the buyer seems unfair. Why, after all, should he have to give back the goods before the seller gives him back his money?
On the other hand, there are good reasons why the law should be reluctant to give him a lien in respect of all his claims, and in particular a general claim for unliquidated damages. As was stated long ago: <36>
To give a party the right to demand payment or security for the claim he may hold against another, presupposes almost necessarily, that his claim or demand is either in fact ascertained and settled, or that it may be approximated at least, by fixing a value on those things, or those services, which in every community, have some estimated or marketable worth. Else, on what basis [- 132 -] would he proceed in demanding payment or security? Or if payment or security should be offered, for what amount? By whom or how, is the amount to be ascertained? If the defendant is willing to comply, where is the data from which the computation is to be made?
It is not surprising therefore that the law rarely gives liens for unliquidated claims, although there are some cases where it does so; for example, the Liens on Goods and Chattels Act <37> provides that
A person who at the request of the owner expends money, labor or skill upon a chattel, or furnishes materials for the alteration or repair of a chattel, shall have a particular lien on the chattel for the amount of the money expended, materials furnished and his proper charges for such labor or skill.
Every lawyer will readily appreciate that there is a tremendous difference in the degree of difficulty of estimating various unliquidated claims and that, as unliquidated claims go, the above statutory lien is one of the easier ones to deal with.
In our opinion it would be unwise to give a buyer a lien for general damages. But we do recommend that the buyer should have a lien for any portion of payments made on account of the purchase price that he is entitled to recover. Similar lien rights are given by the Uniform Commercial Code. <38>
On rejection the buyer should have a duty to take reasonable care of the rejected goods and, subject to his lien rights, allow the seller to come and take back the rejected goods. However, as is the present position, the buyer should not be under any duty to return the rejected goods to the seller; it should be sufficient that he notify the seller that he rejects them.
5. RECOMMENDATIONS
We recommend that:
Rejection Rights
1. The consumer protection legislation should abolish the distinction between conditions and warranties. Instead a consumer buyer should be able to reject the goods for the breach of any term of the contract.
2. The seller should, however, be given a reasonable opportunity to rectify his breach, including a breach of the title obligation, unless it is a major or an irremediable breach.
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Loss of Rejection Rights
3. The law relating to loss of rejection rights should also be changed. The consumer should be able to reject for any breach discovered within sixty days after delivery of the goods, provided that he exercises his rejection rights within a reasonable time after discovery of the breach. After the sixty day period has expired the consumer should be entitled to reject only in the case of a major breach.
Consequences If Consumer Does Not Reject
4. If the consumer chooses not to exercise his rejection rights, or if he has lost them, he should be entitled to recover the damages he has suffered from the breach of contract, subject to the normal rules as to foreseeability and the duty to mitigate.
Consequences If Consumer Does Reject
5. If the consumer exercises his rejection rights, he should be [- 135 -] entitled to recover from the seller, subject to what is said below, any payments he has made on the purchase price and/or other damages he has suffered from the breach of contract, subject to the normal rules as to foreseeability and the duty to mitigate.
6. If the consumer exercises his rejection rights, the seller should receive some protection for his restitution interests. First, he should be able to get back his goods. Second, except in cases where the buyer exercises his rejection rights within ten days after delivery of the goods, the seller should be entitled to recover or set off from the refund of the purchase price payments, as the case may be, the value of the net benefit derived by the consumer through use of the goods. The burden of proof as to what the value of the benefit is should be on [- 136 -] the seller. Third, in cases where the goods have been damaged beyond the deterioration necessarily caused by their contemplated use and for reasons not attributable to the seller's breach, the seller should be entitled to compensation for the difference between the value of the goods as they are and the value they would have had but for that damage.
7. If the consumer exercises his rejection rights, he should have a lien on the rejected goods for any portion of payments made on account of the purchase price that he is entitled to recover.
8. If the consumer exercises his rejection rights, he should have a duty to take reasonable care of the goods after rejection and, subject to his lien rights, allow the seller to take back the goods. However, as is the present law, the consumer should not be [- 137 -] under any duty to return the rejected goods to the seller; it should be sufficient that he notify the seller that he rejects the goods.
Footnotes
<1> For excellent discussions of the many problems, see Honnold, Buyer's Right of Rejection (1949), 97 University of Pennsylvania L. Rev. 457; Treitel, Some Problems of Breach of Contract (1967), 30 Modern L. Rev. 139.
<2> Losses that were not within the "reasonable contemplation" of the parties at the time the contract was made are not recoverable: Hadley v. Baxendale (1854), 156 E.R. 145; The Heron II, Koufos v. Czarnikow Ltd., [1969] 1 A.C. 350 (H.L.).
<3> The innocent party must take reasonable steps to minimize his damages: Payzu, Limited v. Saunders, [1919] 2 K.B. 581 (Eng. C.A.).
<4> Sale of Goods Act, R.S.N.B. 1952, c. 199, s. 49.
<5> Ibid., s. 12.
<7> Ibid., s. 34.
<8> J. L. Lyons and Company, Limited v. May and Baker, Limited, [1923] 1 K.B. 685 (Eng. K.B.).
<9> But not always, for there may be a term of the contract, express or implied, to the contrary: section 12(4). Another exception is the case where the seller is in breach of section 13(a): Rowland v. Divall, [1923] 2 K.B. 500 (Eng. C.A.), and discussion supra, at pp. 67-68. It is unclear to what extent other fundamental breaches may constitute further exceptions.
<10> Section 12(4).
<11> Sale of Goods Act, s. 50(3).
<12> Ibid., s. 12(4).
<13> See, e.g., Varley v. Whipp, [1900] 1 Q.B. 513; Leaf v. International Galleries, [1950] 2 K.B. 86 (C.A.); O'Flaherty v. McKinlay, [l953] 2 D.L.R. 514 (Nfld. Sup. Ct.).
<14> If the property has passed to the buyer it revests in the seller immediately upon rejection: Hardy and Co. v. Hillerns and Fowler, [1923] 2 K.B. 490 (Eng. C.A.).
<15> Hardy and Co. v. Hillerns and Fowler, [1923] 2 K.B. 490 (Eng. C.A.).
<16> The authorities are discussed in Atiyah, The Sale of Goods (4th ed., 1971), at pp. 279-285.
<17> A.J. Frank & Sons Ltd. v. Northern Peat Co. Ltd. et al. (1963), 39 D.L.R. (2d) 721 (Ont. C.A.).
<18> (London, 1962, Cmnd. 1781), paras. 460-461.
<19> Tenth Report (London, 1962, Cmnd. 1782), paras. 14-15.
<21> 15 & 16 Eliz. II, c. 7, s. 4 (Imp.).
<22> (Wellington, New Zealand, 1967), paras. 9.1-9.2.
<23> (Melbourne, Australia, 1972), para. 5.3.1.
<24> Misrepresentation Act, 1971-1972, S.S.A. 1972, No. 46, ss. 10, 11, 12.
<25> Ss. 11, 69. The Uniform Sales Act was approved and recommended for adoption by the National Conference of Commissioners on Uniform State Laws in 1906. It was adopted by thirty-seven American jurisdictions, but has now been superseded by the Uniform Commercial Code.
<26> S. 2-601. All references are to the 1972 Official Text with Comments, published by The American Law Institute and the National Conference of Commissioners on Uniform State Laws.
<27> Louisiana is the one exception and it, of course, is a civil law jurisdiction.
<32> Report on Consumer Warranties and Guarantees in the Sale of Goods (1972), at p. 31.
<34> A possible method to avoid this dilemma might be to give the seller the opportunity to apply for a court order declaring rescission an inappropriate remedy in the circumstances of the particular case. The problem with this, however, is that it destroys the certainty and simplicity that was part of our object in giving a rejection right in the first place.
<35> See Dore, The Rights of the Defaulting Contractor in Respect of Services Rendered and Goods Supplied Before Breach (1967), 17 U.N.B.L.J. 30.
<36> Raver v. Webster (1856), 3 Iowa 502, at p. 512.