Does Ontario Have a Lemon Law For Defective Vehicles?
When a Consumer Buys a Defective Automobiles From a Business the Consumer May Have Protection Whereas the Consumer Protection Act, 2002 Contains Statutory Warranty Provisions Requiring That the Automobile Be Fit For the Intended Use.
Understanding the Consumer Protection Act, 2002 Mandates That May Act As a Lemon Law For Vehicle Sales
An unfortunately all too common consumer protection issues case, often proceeding in the Small Claims Court, involves the purchase of a used vehicle from a dealer, rather than private sale which is exempt from consumer protection laws, where the vehicle is subsequently discovered as having significant mechanical defects that render the vehicle unfit for the intended purpose - the intended purpose being as a personal use automobile.
The Consumer Protection Act, 2002, S.O. 2002, Chapter 30, Schedule A, statutorily prescribes various conditions and warranties within the Sales of Goods Act, R.S.O. 1990, c. S.1, as applicable to business-to-consumer dealings. Specifically, the Consumer Protection Act, 2002, and the Sales of Goods Act, state:
9 (2) The implied conditions and warranties applying to the sale of goods by virtue of the Sale of Goods Act are deemed to apply with necessary modifications to goods that are leased or traded or otherwise supplied under a consumer agreement.
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.
In the situation where a dealer sells an automobile that, at the time of delivery, is unfit for the intended use of the automobile, unless the As-Is box upon the standard Bill of Sale document from the Used Car Dealers Association (UCDA) is checked and initialed by the buyer, the seller may be liable for any losses suffered by the buyer. These losses may include repair costs, towing costs, rental vehicle costs, and even awards for disappointment whereas the purchase of a vehicle is reasonably expected to include emotional benefits such as the pleasure and freedom to travel, among other things.
It is noteworthy that proving that the dealer knew of the defect at the time of sale is unnecessary; however, proving that the vehicle was defective at the time of delivery is required. Proof that the vehicle was defective before the sale or after the sale is insufficient – it must be proven that the vehicle was defective at the exact moment of sale. Of course, it is sometimes obvious that by proving the vehicle was defective before the sale as well as proving that the vehicle was defective after the sale inherently proves that the vehicle was defective at the time of sale. This requirement was stated in Elbassiouni v. World Fine Cars Limited, 2016 CanLII 75052, wherein it was said:
… from the moment the … vehicle was sold by the Defendant to the Plaintiff it was not operating properly and was not of merchantable quality and not reasonably fit for purpose that it was sold for: that purpose being as a roadworthy vehicle to be used as a means of transportation. It had all the defects the Plaintiff testified about and since it was not sold “as is”, the Defendant breached its contract with the Plaintiff and is liable for all the reasonably foreseeable damages arising from the breach of contract.
Claiming General Damages
Although it went unaddressed within the Elbassiouni case, general damages may be available per the principles explained within Fidler v. Sun Life Assurance Company of Canada,  2 S.C.R. 3 whereas it could be argued that a breach of contract involving the failure to deliver an automobile in "merchantable quality" also involves the failure to deliver the incidental emotional benefits of freedom to travel and pleasure, among other things, and such is therefore a failure to deliver all that was bargained for within the sale. This requires a genuine argument that the parties to the contract reasonably contemplated that emotional benefits were bargained for, explicitly or impliedly, at the time of the sale. Specifically, in Fidler, the Supreme Court said:
48 While the mental distress as a consequence of breach must reasonably be contemplated by the parties to attract damages, we see no basis for requiring it to be the dominant aspect or the “very essence” of the bargain. As the House of Lords noted in Farley, the law of contract protects all significant parts of the bargain, not merely those that are “dominant” or “essential”. Lord Steyn rejected this kind of distinction as “a matter of form and not substance” (para. 24). Lord Hutton added:
I can see no reason in principle why, if a plaintiff who has suffered no financial loss can recover damages in some cases if there has been a breach of the principal obligation of the contract, he should be denied damages for breach of an obligation which, whilst not the principal obligation of the contract, is nevertheless one which he has made clear to the other party is of importance to him. [para. 51]
Principle suggests that as long as the promise in relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable. This is to state neither more nor less than the rule in Hadley v. Baxendale.
49 We conclude that the “peace of mind” class of cases should not be viewed as an exception to the general rule of the non-availability of damages for mental distress in contract law, but rather as an application of the reasonable contemplation or foreseeability principle that applies generally to determine the availability of damages for breach of contract.
As explained in detail above, consumers are well protected by the statutes and common law in that an implied warranty of "merchantable quality" exists for goods, such as used vehicles, and that dealers who fail to deliver such, knowingly or otherwise, will likely be found liable for pecuniary and non-pecuniary losses incurred by the consumer.