How the Sale of Goods Act Applies to Condos

It can be tempting, for simplicity’s sake, to assume that the Condominium Act, 1998 (the “Act”) is the main, and sometimes only, source of law governing condominiums; however, there are many other pieces of legislation that can impact upon your community and its legal options.

One such piece of legislation is the Sale of Goods Act (the “ SGA”). The SGA is intended to cover, as the title would suggest, the sale of goods in Ontario. The SGA covers all manner of goods; indeed, the definition of “goods” in the SGA covers “ all chattels personal, other than things in action and money, and includes emblements, industrial growing crops, and things attached to or forming part of the land that are agreed to be severed before sale or under the contract of sale ”. ^[1] Litigation under the SGA has covered “goods” as far reaching as horses, ^[2] hot water heaters, ^[3] electric blankets, ^[4] and diamond rings. ^[5]

In the condominium context, it is fairly easy to see how the SGA would apply to the various goods purchased by the corporation for installation and use in the common elements. When those goods fail and/or cause damage, section 15 of the SGA sets out the various warranties that can be implied, even where no warranty is set out:

15 Subject to this Act and any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

1. Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description that it is in the course of the seller’s business to supply (whether the seller is the manufacturer or not), there is an implied condition that the goods will be reasonably fit for such purpose, but in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.

2. Where goods are bought by description from a seller who deals in goods of that description (whether the seller is the manufacturer or not), there is an implied condition that the goods will be of merchantable quality, but if the buyer has examined the goods, there is no implied condition as regards defects that such examination ought to have revealed.

3. An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.

4. An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. ^[6]

The leading decision in Ontario regarding the interpretation of section 15 of the SGA is Muskoka Fuels v Hassan Steel Fabricators Ltd. ^[7] In Muskoka Fuels, the Court held that “ while the buyer bears the onus of proving the existence of a defect on a balance of probabilities, the actual cause of the defect need not be proven ”. ^[8] Essentially, once the buyer of a product is able to prove i) the item or system failed and ii) that it did not fail as a result of any action on the part of the buyer, then the Courts will draw an inference that a defect existed at the time the product was delivered. ^[9] Muskoka Fuels dealt with a faulty fuel storage tank that leaked and caused substantial damage. The Court held that as an examination of the tank at the time of its purchase would not have revealed the defect, the implied condition of merchantability under section 15(2) of the SGA was breached. ^[10]

Muskoka Fuels made reference to an earlier Supreme Court of Canada decision, Schreiber Brothers Ltd. v Currie Products Ltd. et al. ^[11] In the Schreiber case, the defendant provided an asphalt roofing product to the plaintiff, an experienced roofing contractor. The roofing product failed and the trial judge found, as a matter of fact, that the failure could not be attributed to any faulty workmanship on the part of the plaintiff and that the failure occurred through ordinary use. Despite both sides employing experts on the matter, it could not be determined at trial what was the exact cause of the roof failure, only that there were no issues with installation and use. The Supreme Court held that the plaintiff had a burden to exclude “faulty workmanship as a probable cause” of the failure ^[12] and that once the plaintiff did so, “ it was enough here that the plaintiff show that a defect existed when the goods were delivered by Currie, without being required to prove the cause of the defect" . ^[13]

In Martin v Attard Plumbing Ltd., 2015 ONSC 5037, the Court considered the common law concept of negligence and implied warranty of fitness when an installation is made. In that case, the plastic coupling nut on the flex hose of the plaintiff’s toilet failed causing a flood. The defendant had installed the failed flex hose and the plaintiff sued in negligence and breach of implied warranty. The Court held that the common law principle of implied warranty of fitness was codified in the SGA and held that “ unless the circumstances of the contract are such as to exclude the obligation, a contractor performing work and supplying materials impliedly undertakes to use materials of good quality, to do the work with care and skill and agrees that the work and materials will be reasonably fit for the purpose for which they were required". ^[14] Relying on the Schreiber decision above, the Court held that a party alleging a breach of the SGA or the common law implied warranty of fitness “ has the onus to show that the goods were defective, and that the defect (latent or patent) existed when the other party delivered the goods. They need not, however, prove the cause of the defect that existed when the goods were delivered" . ^[15]

Furthermore, in Muskoka Fuels, the Court held that where industry knowledge of a defect can be proven, a plaintiff can successfully claim that the defendant knew, or ought to have known, of the defect in question such that they should have alerted the plaintiff to the defect and advised against the purchase and installation of a product. ^[16]

Additionally, the SGA applies whether the goods in question are common element or unit and works in conjunction with section 23(1) of the Act to permit your condominium corporation to bring an action on behalf of both the corporation and the unit owners with respect to faulty goods:

23 (1) Subject to subsection (2), in addition to any other remedies that a corporation may have, a corporation may, on its own behalf and on behalf of an owner,

(a) commence, maintain or settle an action for damages and costs in respect of any damage to common elements, the assets of the corporation or individual units; and

(b) commence, maintain or settle an action with respect to a contract involving the common elements or a unit, even though the corporation was not a party to the contract in respect of which the action is brought.

So, what does this mean for condominium boards and owners? It means that in addition to the protections afforded by the Act, there is additional recourse under the SGA in the event of product failure. This can apply when faulty plumbing is installed (for e.g., when it explodes and causes Biblical level floods and damage), when new cabinets are flawed such that they are not fit for their intended purpose (for e.g., when they don’t stay in the wall and the resulting smash can sound very much so like the sky is falling), or when patio doors are not of merchantable quality (for e.g., when they refuse to close and you can hear your mother’s voice in the back of your head, telling you to close the door because she won’t be heating the entire neighbourhood, thank you very much).

At the end of the day, there is no need to rely on the Act alone, there is a whole other world of legislation waving back at you that wants to be let in through the patio door that should have been of merchantable quality.