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?

Sales of Goods Act

The good news is you would not be without legal remedy. If the amount you claim from the other party is under $35,000, 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:

Price of Goods

If the parties did not set a price in a contract, the Small Claims Court judge would determine a reasonable price that the buyer must pay for the goods. The concept of “reasonableness” is difficult to apply. Price determinations will vary depending on the case’s specific circumstances. The Small Claims Court will look to evidence such as industry practices or the history of similar transactions.

Quality of Goods

The Act prescribes that in every sale, there is an implied condition about the quality. 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, the buyer purchased a window, but it does not fit the opening in the wall. Of course, this window is not reasonably fit for its purpose.

Time and Place of Delivery

Time is of the essence in every business. Therefore, prompt delivery is key. If there is no contract outlining the delivery time, the Act specifies that the seller must deliver the goods within a reasonable time. As before, the reasonableness depends on circumstances. Evidence regarding industry practices or similar transactions is likely to be important, too. The Act addresses two more points:

First, if a contract does not set the 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 hands them to a transportation company. This means that if the seller dropped the items off with, for example, UPS, the buyer can’t claim against the seller because the UPS failed to deliver them.

acceptance of goods by the buyer

Whether or not the buyer has actually accepted the goods may 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.

Small Claims Court and Sales of Goods Act

As you can see, the Act can help settle many sale-related disputes even in the absence of a contract. For example, if a party alleges that the goods did not come on time to the right place, the Small Claims Court would determine whether the seller delivered goods within a reasonable time to the place of business. Likewise, if there is a price dispute, the Court will see which price would be reasonable, and so on.

So, if for any reason you had 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.