Sale of Goods Act

Legislation category:
Code of Ethics, Consumer Protection Act, Motor Vehicle Dealers Act, Sale of Goods Act
Current to
August 31, 2023

This Act incorporates specific conditions into most contracts between buyers and sellers for the sale of goods in Ontario, including that the goods are fit for a specific purpose and of merchantable quality.

The Sale of Goods Act (SGA) provides a general set of regulations. These regulations must be followed when selling goods in Ontario.

The act grants implied conditions and warranties to car-buyers by stipulating that vehicles sold are of merchantable quality and fit for purpose and that buyers receive quiet possession, free of encumbrances.

Merchantable quality

A vehicle is not of merchantable quality unless it provides transportation. There cannot be any hidden defects and the vehicle must provide reliable transportation for a reasonable period of time. This does not need to be written into the sales agreement; the SGA implies this as a condition within the contract.

Fit for purpose

Vehicles must be fit for the purpose for which they are intended. If a farmer is buying a used truck and tells the salesperson that he will sometimes be using the truck for hauling in his gravel pit operation, then the truck must not only be strong enough for normal farm work but also strong enough for the heavier gravel. The SGA implies this as a condition within the contract.

Quiet possession

Purchasers are entitled to quiet possession of their vehicles, secure that a bailiff will not seize the vehicle because of an undisclosed lien or that the police will not seize the vehicle because it turned out to be stolen.

A dealer should ensure any liens are removed so the car-buyer is free to enjoy quiet possession and use of the vehicle. Under the SGA, if a lien is not discharged, it must be disclosed to the customer.

This does not need to be written into the sales agreement. Under the SGA, it is an implied condition that the seller has the right to sell the vehicle (even if the dealer acted in good faith and did not know the vehicle was stolen).

The buyer is entitled to demand and receive all money back from the dealer. The SGA does not cover leases or services (e.g., repairs); however, the Consumer Protection Act (CPA) extends the implied conditions and warranties in the SGA to cover consumer leases.

As is sales

In the past, as is has meant different things to different people. To some buyers, it meant the car had no warranty. To others, it meant the car was not road worthy, while others simply thought it meant the seller didn’t know the condition, so stating it was as is meant the buyer took their chances.

Under the Motor Vehicle Dealers Act (MVDA) there is no longer any ambiguity about the meaning and use of as is. Using the term as is does not give a dealer protection from its obligations under the SGA and its additional obligations under the CPA if the buyer is a consumer.

Even if a vehicle is sold without a safety standards certificate, or as is is written on the contract, a court may hold that the vehicle should be capable of providing transportation. Therefore, a bill of sale for vehicles sold as is should always include additional disclosures concerning the condition of the vehicle, its intended purpose and this required statement which must be initialed by the purchaser:

“The motor vehicle sold under this contract is being sold “as is” and is not represented as being in road worthy condition, mechanically sound or maintained at any guaranteed level of quality. The vehicle may not be fit for use as a means of transportation and may require substantial repairs at the buyer’s expense. It may not be possible to register the vehicle to be driven in its current condition.”

A buyer who reads and initials this statement may find it more difficult later on to argue that the implied conditions and warranties of the SGA should apply to this purchase.

Dealers should not allow a vehicle sold as is to be driven off the lot by the car-buyer. If a safety standards certificate has been issued, a vehicle cannot be sold as is, per the MVDA.