In order to advise Mike Jackson, it is necessary to ascertain whether there is a contract for sales of goods between Mike Jackson and Fake Shop. A contract of sale of goods is a contract whereby the seller transfer or agrees to transfer the property in goods to the buyer for a money consideration called the price. It consists of mainly three essential elements, (i) Goods: all personal chattels other than things in action; (ii) money Transfer of ownership or title in the goods; and (iii) Price: only money consideration counts.
In this situation, Mike Jackson bought a gold watch from Fake shop for $10,000, it’s a money consideration and the watch is a property in goods transferred from seller to buyer, so it is a contract for sale of goods.
S16(2) of SOGO: where seller sells goods in the course of business, implied conditions that goods supplied shall be of merchantable quality.
S2 (5): as fit for purpose or purposes for which goods of that kind are commonly bought; of such standard of appearance and finish; as free from defects; as safe and as durable as it is reasonable to expect having regard to description applied, price and all other relevant circumstances.
Mike bought the watch just one day only, but the watch often stopped, it not durable and not reasonable expect, furthermore it has a scratch on the watch body, it’s a defects. According to S16(2) watch primary reasonableness function is time reporting, but Mike’s watch cannot achieve merchantable quality reasonability.