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Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods

Professor Jacob S. Ziegel, University of Toronto
July 1981

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Article 38

(1) The buyer must examime the goods, or cause them to be examined, within as short a period as is practicable in the circumstances.

(2) If the contract involves carriage of the goods, examination may be deferred until after the goods have arrived at their destination.

(3) If the goods are redirected in transit or redispatched by the buyer without a reasonable opportunity for examination by him and at the time of the conclusion of the contract the seller knew or ought to have known of the possibility of such redirection or redispatch, examination may be deferred until after the goods have arrived at the new destination.

COMMENT

1. Article 38 addresses itself to two questions: (a) the place of examination of the goods after delivery; and (b) the period of time within which the examination must take place. On the first point, art. 38 is approximately the same as, or possible slightly more favourable than, Canadian law, but seemingly not as favourable to the buyer as UCC 2-513. Article 38 is more stringent than either the provincial Acts or the Code with respect to the time of examination. It is also much more severe than the Canadian common law with respect to the consequences of the buyer failing to satisfy the joint requirements of arts. 38 and 39. Under the convention the buyer loses all his remedies whereas under the OSGA he loses merely his right to reject the goods. Art. 38 and its related provisions therefore depart from the common law in some basic respects. For the moment I will confine my attention to the first two of the above mentioned features of art. 38.

(a) Place of examination. OSGA 33 does not specify the place of examination but the common law rule was that prima facie it is the place where the goods are delivered to the buyer. See Perkins v. Bell (1893) 1 Q.B. 193. It is generally assumed the rule was carried over into the SGA. The rule is manifestly impractical in shipment contracts and the courts have readily found an implied agreement to change the place of examination to the place of destination. However, a major stumbling block was created by the decision in Hardy & Co. v. Hillerns & Fowler (1923) 2 K.B. 490 (C.A.). This held that trans-shipment of the goods by the buyer after arrival at their destination was an act "inconsistent with" the seller's ownership of the goods within the meaning of OSGA 34. As a result it was held that he had lost the right to reject the goods even though the reasonable period for examination permitted by SGA 33(1) had not expired. The decision in Hardy v. Hillerns & Fowler has now been reversed in the U.K. by an amendment to the U.K. Act but still represents good law in Canada. However, Canadian courts seem to be quite willing to circumvent it in practice. See e.g., A.J. Frank & Son Ltd. v. Northern Peat Co. (1963) 39 D.L.R. (2d) 721 (Ont. C.A.).

The "dominion" rule does not appear in CISG, and art. 38(3) expressly provides for the case where the seller ought to have appreciated that the goods might be redispatched by the buyer before he has had a reasonable opportunity to examine them. However, unless subs. 3 is read very broadly, it does not seem to go far enough. It is not clear for example whether it includes the position of a retailer who receives packaged durables (e.g., a T.V. set), stores them and then, in due course, delivers them in their original cartons to the ultimate consumers. [The reasoning in the [Secretariat] Commentary, pp. 99-100, suggests that this situation was intended to be included although it is not discussed specifically.]

(b) Time of examination. Art. 38(1) requires the buyer to examine the goods---"within as short a period as is practicable in the circumstances". (emphasis added). By way of contrast, OSGA 33(1) entitles the buyer to a "reasonable opportunity" to examine the goods. Again, OSGA 34 speaks of the lapse of a "reasonable time". The Uniform Commercial Code contains similar provisions. See e.g., UCC 2-602, 2-606(1)(b). The [Secretariat] Commentary suggests that art. 38(1) must not be read too literally and that "in the circumstances" coupled with the provisions in subs. 2 and 3, was meant to qualify "within as short a period as is practicable"quite extensively.

2. From the foregoing comments it will be seen that art. 38 contains some important ambiguities and, if read literally, may be too severe in its demands on the buyer. An attempt was made by Canada at Vienna to amend the article to solve both these difficulties but was not successful.

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Pace Law School Institute of International Commercial Law - Last updated April 23, 1999
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