Sale of Goods: Going to Small Claims Court with No Contract

For many businesses, the purchase and sale of goods has become routine. When 99 out of 100 sales go well, the parties might not even draft a contract. But what do you do on that last sale, when things go sour and you have no contract? How can you go to court?

The good news is you would not be without legal remedy. If the amount you claim from the other party is under $25,000, you can go to Small Claims Court. And, rather than relying on a contract for the specific items in question, you would look to the Ontario statute that regulates sales: the Sale of Goods Act. The Act covers all major conditions of a sale, providing guidelines for the Small Claims and other courts to use when they resolve sale-related disputes. Here are some highlights:

  1. Price of goods.  If a price isn’t determined by a contract, the Small Claims Court judge will determine a reasonable price that the buyer must pay for the goods. The concept of “reasonableness” is difficult to apply, and price determinations will vary based on the specific circumstances of the case. In making determinations, the Small Claims Court will look to evidence such as industry practices or the history of similar transactions.
  2. Quality of goods. The Act prescribes that in every sale, there is an implied condition that the goods should be reasonably fit for their intended purpose. Again, the Small Claims Court would look to the specifics of the case. For example, if the buyer purchased a window to fit a 3’ by 4’ opening, and got a 5’ by 10’ window instead, the windows would not, of course, be reasonably fit for their purpose.
  3. Time and place of delivery. Time is of the essence in every business, and prompt delivery is key. If there is no contract outlining the time of delivery, the Act specifies that the seller must deliver the goods within a reasonable time. As before, reasonableness is based on circumstances, and evidence regarding industry practices or similar transactions is likely to be important. The Act addresses a further two considerations. First, if a contract does not set exact place of delivery, the place of delivery is the seller’s place of business, and second, the Act prescribes that a seller has delivered the goods to the buyer when it handed them over to a transportation company.  This means that if the seller dropped the items off with, for example, UPS, the buyer can’t make a claim against the seller because the goods were never delivered.
  4. Acceptation of goods by buyer. Whether or not the buyer has actually accepted the goods can become important in a dispute. The Act sets out three conditions under which the buyer is deemed to have accepted the goods. The goods are accepted if:
      • A buyer notified a seller that he or she had accepted the goods.
      • A buyer started using the goods for their primary purpose.
      • The buyer did not notify the seller of non-acceptance within a reasonable time, and simply kept the goods.

As you can see, the Act can help settle a number of sale-related disputes even in the absence of a contract. For example, if a party alleges that the goods were not delivered on time to the right place, in the absence of a contract, the Small Claims Court would determine whether the goods were delivered within a reasonable time to the place of business. If there is a dispute about price, the Court will see which price would be reasonable, and so on. So, if for any reason you have not signed a contract when you bought or sold certain products, don’t despair. You or your lawyer or paralegal can look to the Sale of Goods Act to determine how the buyer and seller should have behaved, and try to gain insights into possible outcomes of the matter and the evidence that should be produced.

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