OMVIC Sale of Goods Act and As-Is Sales — Questions and Answers
Question 1: Under the Sale of Goods Act, what implied condition protects a buyer who relies on the seller's skill and judgment when purchasing a vehicle for a specific purpose they communicated to the dealer?
- Condition of quiet possession
- Condition of merchantable quality
- Condition of fitness for purpose (Correct answer)
- Condition of clear title
Correct answer: Condition of fitness for purpose
When a buyer expressly or implicitly relies on the seller's expertise to select a suitable vehicle for a stated purpose, the Sale of Goods Act implies a condition that the vehicle will be reasonably fit for that purpose. This is the 'fitness for purpose' condition.
Question 2: Under the Sale of Goods Act, the implied condition of 'merchantable quality' means a vehicle must be:
- Sold with a minimum 90-day dealer warranty
- Reasonably fit for the ordinary purpose for which such vehicles are typically used (Correct answer)
- Priced at or below the prevailing market value
- Free of any accident history and cosmetic defects
Correct answer: Reasonably fit for the ordinary purpose for which such vehicles are typically used
Merchantable quality means the vehicle meets a basic standard of quality suitable for its ordinary use — driving on public roads. It does not imply perfection, nor does it set a price standard.
Question 3: When a registered dealer sells a vehicle 'as-is' in Ontario, what is the legal effect on implied warranties?
- The vehicle must still pass a Safety Standards Certificate inspection at the dealer's expense
- The buyer accepts the vehicle in its current condition, and the Sale of Goods Act implied conditions are excluded (Correct answer)
- The dealer's obligations under the Consumer Protection Act are automatically waived
- The dealer must offer a 30-day right of return in place of the implied conditions
Correct answer: The buyer accepts the vehicle in its current condition, and the Sale of Goods Act implied conditions are excluded
An 'as-is' sale signals that the buyer takes the vehicle in its present condition, excluding the Sale of Goods Act implied conditions of merchantability and fitness. However, this does not remove the dealer's duty to disclose known material defects under the MVDA and CPA.
Question 4: A consumer pays a $2,000 deposit on a vehicle and the dealer is subsequently unable to deliver the vehicle as agreed. What must the dealer do with the deposit?
- Apply the deposit toward a different vehicle in the dealer's inventory
- Refund the deposit in full to the consumer (Correct answer)
- Offer the consumer a store credit equal to the deposit amount
- Retain the deposit and compensate the consumer with a discounted service package
Correct answer: Refund the deposit in full to the consumer
If a dealer cannot fulfill the agreement, the consumer is entitled to a full refund of their deposit. Deposits are held in trust and must be returned when the dealer fails to perform — they are not the dealer's to keep or convert to store credit.
Question 5: A buyer signs a contract to purchase a vehicle but then refuses to complete the transaction and take delivery. What remedy is available to the dealer under the Sale of Goods Act?
- The dealer may only retain the buyer's deposit and has no further recourse
- The dealer must immediately resell the vehicle and absorb any loss in resale value with no recourse against the buyer
- The dealer can pursue the buyer for damages, including costs and losses incurred in reselling the vehicle (Correct answer)
- The dealer must refund the deposit and file a complaint with OMVIC against the buyer
Correct answer: The dealer can pursue the buyer for damages, including costs and losses incurred in reselling the vehicle
When a buyer breaches a vehicle purchase contract, the dealer can hold the buyer liable for actual damages caused by the breach — including any shortfall if the vehicle sells for less on resale plus reasonable administrative costs of the re-sale process.
Question 6: A dealer sells a used vehicle as-is without a Safety Standards Certificate. The buyer later discovers the dealer was aware of a serious undisclosed structural defect. Which legal principle most protects the buyer?
- The buyer has no recourse because they accepted the vehicle as-is
- The buyer can only claim under the Compensation Fund if the repair cost exceeds $5,000
- Under the Consumer Protection Act, the dealer's duty to disclose all material facts survives an as-is designation, and the buyer may seek rescission (Correct answer)
- Under the Sale of Goods Act, as-is clauses override all other consumer protection legislation
Correct answer: Under the Consumer Protection Act, the dealer's duty to disclose all material facts survives an as-is designation, and the buyer may seek rescission
An as-is clause limits implied Sale of Goods Act conditions but does NOT override a dealer's statutory duty under the Consumer Protection Act and MVDA to disclose known material facts. Concealing a structural defect is fraudulent misrepresentation, which can void the contract and entitle the buyer to rescission.
OMVIC Sale of Goods Act and As-Is Sales
Under the Sale of Goods Act, what implied condition protects a buyer who relies on the seller's skill and judgment when purchasing a vehicle for a specific purpose they communicated to the dealer?