When goods arrive defective or fail to match what was ordered, Canadian business owners have a statutory right to reject them and recover their money. This right flows from provincial sale of goods legislation, which implies certain conditions into every commercial sale even when the written contract is silent. The key to exercising this right successfully is understanding what the law requires of both the seller and the buyer, acting within the permitted timeframe, and communicating rejection clearly before the goods are deemed accepted.
Every province and territory in Canada has enacted sale of goods legislation modelled on the same English statute. In Alberta, the governing law is the Sale of Goods Act, RSA 2000, c S-2. British Columbia, Ontario, and the other provinces have substantially similar statutes, meaning the core rules about fitness, quality, and rejection apply coast to coast with only minor procedural variation. These statutes imply conditions into contracts for the sale of goods that cannot be easily contracted out of in consumer transactions, though commercial parties sometimes limit them. The most important implied conditions are that goods must correspond with their description, that they must be of merchantable quality when sold by a business that deals in goods of that kind, and that they must be reasonably fit for any particular purpose the buyer made known to the seller at the time of purchase.
Merchantable quality is the condition most often at stake when equipment arrives defective. Goods are merchantable if a reasonable buyer, fully aware of their condition, would still purchase them at the contract price. A piece of machinery that leaks fluid, fails to operate correctly, or breaks down repeatedly does not meet this standard. When a seller is in the business of selling goods of that type, the implied condition of merchantable quality attaches automatically unless the buyer examined the goods before purchase and that examination ought to have revealed the defect, or unless the seller specifically disclaimed the condition and the buyer agreed to accept the goods as-is. For business-to-business sales of equipment, most buyers rely on the seller's description rather than a hands-on inspection, so the implied condition typically applies.
The right to reject arises when goods fail to conform to the contract, whether by breaching an express term or an implied condition. A buyer who rejects is entitled to treat the contract as repudiated and recover any amounts already paid. However, this right is not unlimited in time. Under the Sale of Goods Act, a buyer is deemed to have accepted goods when they intimate acceptance to the seller, when they do any act inconsistent with the seller's ownership, or when they retain the goods beyond a reasonable time without notifying the seller of rejection. Once acceptance occurs, the buyer loses the right to reject and is left with a claim for damages instead. Damages can be adequate in many situations, but a buyer stuck with unusable equipment usually prefers a refund.
Determining what constitutes a reasonable time depends on the circumstances. For complex machinery or equipment that requires installation and testing, reasonable time extends until the buyer has had a genuine opportunity to examine the goods and discover latent defects. Attempting repairs or requesting warranty service does not necessarily amount to acceptance, but the buyer must not treat the goods as their own in a way that is inconsistent with eventual return. Continuing to use defective equipment for revenue-generating work after discovering defects, for example, risks being characterized as an act of acceptance. The safer course is to stop using the goods as soon as a significant defect becomes apparent and to communicate rejection promptly.
Communication of rejection should be clear, in writing, and specific. The buyer should identify the goods, describe the defects, state that the goods are rejected, and demand a refund of all amounts paid. Keeping a contemporaneous record of defects through photographs, videos, or technician reports strengthens the buyer's position if the seller disputes the rejection later. Under the statute, a buyer who rightfully rejects is not bound to return the goods to the seller; the buyer's obligation is to hold them and notify the seller where they can be collected. The seller bears the risk and expense of retrieval unless the contract provides otherwise.
A common friction point arises when the seller insists the buyer pay return shipping before any refund issues. If the goods were defective at delivery, the seller's breach is what triggers the return, and requiring the buyer to fund that return out of pocket effectively shifts the cost of the seller's non-performance onto the buyer. Unless the contract contains an express term allocating return shipping to the buyer, the default position under sale of goods principles is that the seller must bear the cost of collecting non-conforming goods. Buyers should resist demands for upfront shipping payment and instead propose that the seller arrange pickup or that the shipping cost be deducted from the refund.
Cross-border sales within Canada can create questions about which province's law applies. Alberta's Sale of Goods Act applies when the contract is made in Alberta or when the parties agree that Alberta law governs. When a buyer in one province purchases from a seller in another, the applicable law is usually determined by where the contract was formed, where the goods were to be delivered, or what the parties chose in their agreement. In practice, the substantive rules are similar enough across provinces that the outcome rarely turns on which statute applies, but buyers should note which province's legislation is in play and confirm that their rejection complies with any procedural nuances.
Finally, business owners should document every step of the rejection process. Save emails, record phone calls where legally permitted, photograph the defects, and keep copies of invoices and shipping records. If the dispute escalates to a demand letter, small claims court, or civil litigation, contemporaneous documentation will be far more persuasive than after-the-fact recollections. Rejection of defective goods is a right the law protects, but exercising it effectively requires prompt action, clear communication, and careful record-keeping.