Copyright © 2004 by Nelson, a division of Thomson Canada Limited CANADIAN BUSINESS AND THE LAW Second Edition by Dorothy Duplessis Steven Enman Shannon O’Byrne Sally Gunz Presentation prepared by Allan Elliott, Southern Alberta Institute of Technology

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CHAPTER TWENTY-THREE SALES AND MARKETING: THE CONTRACT, PRODUCT, AND PROMOTION OBJECTIVES:  The scope of marketing law  The rights and obligations in a contract of sale  The legal obligations associated with the product component of marketing  The legal obligations associated with the promotion component of marketing

Copyright © 2004 by Nelson, a division of Thomson Canada Limited MARKETING PRACTICES: PRODUCT AND PROMOTION OBJECTIVES OF MARKETING LAW  to protect consumers from physical harm  to foster fair competition  to protect consumers from unfair selling practices MARKETING LAW ▪ all areas of law that influence and direct the creation, distribution, promotion, and pricing of goods, services, or ideas

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CONTRACT OF SALE TERMS RELATING TO THE CONTRACT caveat emptor – let the buyer beware or the buyer take care sale of goods legislation provides a measure of protection for the purchaser of goods

Copyright © 2004 by Nelson, a division of Thomson Canada Limited LEGISLATION SALE OF GOODS ACT  establishes minimum standards for many goods and services where it is considered to be in the public interest to reduce the risk of harm  implies terms into a contract for the sale of goods  classifies them and provides remedies to the purchaser on how the breach is classified

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CLASSIFICATION OF TERMS TERMS ARE EITHER  conditions – an essential or important term under sale of goods legislation OR  warranties – a term that is not classified as a condition under sale of goods legislation

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CONDITIONS AND WARRANTIES SOME CONDITIONS AND WARRANTIES IMPLIED INTO ALL SALES TRANSACTIONS CONDITIONS:  the condition that the seller has the right to sell the goods  the condition that the goods are equivalent to their description  the condition that the goods will be reasonably fit for the intended purpose

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CONDITIONS AND WARRANTIES IMPLIED WARRANTIES:  that the buyer will have and enjoy quiet possession of the goods (third parties will not claim rights against them)  that the goods are free from liens and encumbrances in favour of third parties that were not declared or known to the buyer at the time the contract was made

Copyright © 2004 by Nelson, a division of Thomson Canada Limited SALE OF GOODS ACT REMEDIES  breach of implied condition – may give the innocent party the right not only to sue for damages, but also to reject the goods and treat the contract as ended  breach of implied warranty – legislation permits the buyer to maintain an action for damages or ask the court to reduce the purchase price but the buyer must continue with the contract

Copyright © 2004 by Nelson, a division of Thomson Canada Limited SALE OF GOODS TRANSFER OF TITLE  Sale of Goods Act sets out a series of rules that determine when title changes in the absence of terms in a contract  specific goods – goods that are identified and agreed on at the time a contract of sale is made  unascertained goods – goods not yet set aside and identifiable as the subject of the contract at the time the contract was formed

Copyright © 2004 by Nelson, a division of Thomson Canada Limited SALE OF GOODS REMEDIES  damages for nonacceptance – damages to which a seller is entitled if a buyer refuses to accept goods prior to title shifting  action for the price – the obligation of buyers of goods, once title to goods has passed, to pay the seller the full price of the goods  bill of lading – a shipping document that serves as a contract between the seller and the carrier Continued...

Copyright © 2004 by Nelson, a division of Thomson Canada Limited SALE OF GOODS REMEDIES  stoppage in transitu - the right of a seller to demand that goods be returned by a shipper at the seller’s expense even after title has transferred, provided the purchaser is insolvent

Copyright © 2004 by Nelson, a division of Thomson Canada Limited CONTRACTUAL SHIPPING TERMS  c.i.f. - cost, insurance, and freight  seller is responsible for arranging the insurance and shipping  f.o.b. - free on board  the buyer specified the type of transportation to be used, and the seller arranges and delivers the goods to that shipper  c.o.d. - cash on delivery  the purchaser is obliged to pay for the goods on delivery

Copyright © 2004 by Nelson, a division of Thomson Canada Limited SALE OF GOODS ACT LIMITATIONS  generally only applies to goods, not land or services  requires privity of contract  permits contracting out of the implied terms  does not address pre-contractual representations made by the vendor

Copyright © 2004 by Nelson, a division of Thomson Canada Limited THE PRODUCT BASIC PRINCIPLES  anything a business sells  goods, services, or ideas DESIGN AND MANUFACTURE governments impose minimum standards for many goods and services through legislation governments also impose standards for product design and patent protection

Copyright © 2004 by Nelson, a division of Thomson Canada Limited PRODUCT PACKAGING AND LABELLING LABELLING OF PREPACKAGED GOODS  minimum labelling requirements set out in Consumer Packaging and Labelling Act (CPLA)  product warnings  Hazardous Products Act provides at least 23 categories of “restricted” products that must be labelled in a specific manner or meet certain standards to be legally sold in Canada

Copyright © 2004 by Nelson, a division of Thomson Canada Limited PROMOTION INDUSTRY STANDARDS AND LEGISLATION  Advertising Standards Canada (ASC) provides a detailed code of industry guidelines  ASC provides the mechanism for public complaints concerning violations of the code, as well as business-to-business complaints

Copyright © 2004 by Nelson, a division of Thomson Canada Limited PROMOTION FALSE OR MISLEADING ADVERTISING  promotional statements that either are false or have the ability to mislead a consumer as to their truth  Competition Act defines false or misleading advertising

Copyright © 2004 by Nelson, a division of Thomson Canada Limited COMPETITION ACT UNDER THE COMPETITION ACT  prohibited offences – offences under the competition act that are criminal in nature  reviewable matters – offences under the Competition Act that are assessed according to a civil burden of proof and resolved by voluntary agreement or by order of the competition tribunal

Copyright © 2004 by Nelson, a division of Thomson Canada Limited COMPETITION ACT INVESTIGATION OF COMPLAINT  consumers might complain either to the Competition Bureau or to ASC or CBCS, the industry associations  civil track – the process by which the Competition Bureau may order a promoter to desist from engaging in false or misleading advertising

Copyright © 2004 by Nelson, a division of Thomson Canada Limited COMPETITION ACT DEFENCES  the best defence is that the elements of the offence have not been proven  due diligence – a defence based on having a reasonable belief in the truth of the statements made or adopting reasonable steps to avoid the utterance of false or misleading statements

Copyright © 2004 by Nelson, a division of Thomson Canada Limited COMPETITION ACT PERFORMANCE CLAIMS  statements about the performance of a product or a service may fall within the general provisions of misleading advertising  it is reviewable conduct under the Competition Act to make a representation about a quality of a product that is not based on an “adequate and proper test”

Copyright © 2004 by Nelson, a division of Thomson Canada Limited TESTS AND TESTIMONIALS TESTS  Competition Act requires that the tests be carried out prior to the promotion TESTIMONIALS  testimonials will be acceptable provided they are accurately stated and reasonably current, and provided the persons in the testimonials have actually used or evaluated the product

Copyright © 2004 by Nelson, a division of Thomson Canada Limited WARRANTY AND SERVICES PROMISES PROMISES  must meet the same standard for truthfulness as set out in false and misleading advertising provisions  provincial statutes also bind the advertiser to the promises made in the promotion

Copyright © 2004 by Nelson, a division of Thomson Canada Limited PROMOTION THROUGH SELLING PRACTICES BAIT AND SWITCH  advertising a product at a very low price to attract customers, then encouraging them to accept another product that is usually more expensive UNFAIR PRACTICES  illegal business practices that exploit the unequal bargaining position of consumers

Copyright © 2004 by Nelson, a division of Thomson Canada Limited PROMOTION THROUGH SELLING PRACTICES CONTESTS  highly regulated form of promotion  may be indictable offences under the criminal code or may be reviewable under the Competition Act  Criminal Code prohibits competitions that require participants to buy goods or services in order to participate  Competition Act provisions focus on disclosure