Exam 12: The Extent of Contractual Rights

Chris was indebted to Kirk for a loan of $1,000. Kirk assigned Chris' promise to pay to Bryce. If Bryce fails to give Chris notice of the assignment, Chris may lawfully make payment to Kirk.

On March 6^th, the Limestone Student Society entered into a contract with the "Stumbling Stones", a rock group, to give a performance at the Limestone University Students' Union on March 31^st. On March 29^th, the "Stumbling Stones" fell ill with the flu and were unable to travel to Limestone City. Another rock group was contacted by the Stumbling Stones to appear in their place and arrived at the Students' Union in time to perform. The contract, by its nature, is not subject to vicarious performance.

Dev contracts to build a computerized printing press for Tyrone. He subcontracts some of the work on the computerized components to another company, Charlie Co., which wired a vital component negligently. The repairs are very costly for Tyrone. He can sue Dev for the losses caused by Charlie Co.

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the

Chris was indebted to Kirk for a loan of $1,000. Kirk assigned Chris' promise to pay to Bryce. Notice in writing of the assignment must be given to Chris before Chris is obliged to pay Bryce.

Kathy sells her business to Lucy for $40,000 including the stock, the goodwill, and the remainder of the lease. The landlord agrees that Kathy may end her involvement with the leased premises and that Lucy may take over the remainder of the lease on the same terms, and a new lease reflecting this is drawn up and signed by the landlord and Lucy. This new lease is an example of

Carl agrees to buy a refrigerator from his local appliance store under an installment plan, with eight monthly payments of $100. The store immediately, and properly, assigns the deal to a finance company for $750 in cash. After the refrigerator is delivered it utterly fails to operate, and Carl refuses to make his payments to the finance company. The finance company demands continued payments and indicates that any issue of faulty goods must be taken up with the store as a separate matter. In this regard, it is in Carl's best interest to continue to make his payments lest he be successfully sued for being in breach of the agreement himself.

Luxury Homes Ltd. contracts with Eliza to build her house. The electrical work is completed by Firefly Electric Ltd. under a contract it entered into with Luxury Homes Ltd. The electrician was Wilbur, an employee of Firefly. Eliza moves into the house and three months later it burns to the ground as a result of faulty wiring. Who can Eliza sue for breach of contract?

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa. It designs the project and assigns the construction to Dynamic Construction Ltd. The contract has no provisions regarding assignment. Can Precision make the assignment to Dynamic?

The Smalltown Sawmill entered into a contract with the Little Lumber Co. to supply the sawmill with logs. The sawmill produced a great deal of softwood lumber, particularly pine, for furniture making. The mill especially liked the logs supplied by Little Lumber Co. because they were from older stands of trees, which made the wood a higher quality. Little's logs were also somewhat larger, which made for less waste when cutting the larger pieces of wood required for furniture making. There was a written agreement between the parties which stipulated that the parties "for themselves, their executors and administrators and successors respectively" each covenanted to abide by and perform the terms of the agreement. The relationship continued over several years until the Little Lumber Co. assigned its rights under the agreement to another lumber company, Logs Ltd., which carried on the supply. The sawmill accepted shipments from Logs Ltd. for nearly a year when it decided not to accept any further shipments on the grounds that the contract it had with the Little Lumber Co. was not assignable. The Little Lumber company decided to take legal action to enforce the agreement on the sawmill. Explain the nature of the action taken and the legal principles the lumber company would rely on. What arguments would the sawmill raise in its defence? Render a decision.

An expert landscape architect, known for special skill in designing Japanese gardens, is engaged under contract by a municipality for the creation of a public park with a Japanese theme. The architect becomes unable to fulfill the obligation, but to the satisfaction of the municipality can name a replacement architect who will agree to execute the same work on the same terms. The legal mechanism required to affect this will be an equitable assignment.

The Block furniture store granted credit to many customers for the purchase of furniture and appliances. It had separate categories for furniture credit and appliance credit. It statutorily assigned its furniture credit to Prestige Financing Inc. and its appliance credit to Gold Stream Financing Ltd. Karim purchased a bed for $700 and a stove for $700 from The Block and received financing for both purchases on the same contract. When The Block's contracts were assigned, Karim's was assigned to both assignees. On Monday he received a notice of assignment from Prestige Financing Inc. and on Tuesday from Gold Stream Financing Ltd. To whom should Karim make his next payment?

Mr. Black enters into a contract with Build-It Construction Ltd. for the construction of a house. The house is not built in accordance with the contract. Mr. Black sues Build-It Construction Ltd. seeking $200,000 in damages. He is successful, but discovers that Build-It Construction Ltd. has insufficient assets to satisfy the judgment as it regularly transfers its assets to its parent company Build-It Holding Company Inc. Can Mr. Black collect the $200,000 from Build-It Holding Company Inc.

Chris was indebted to Kirk for a loan of $1,000. Kirk assigned Chris' promise to pay to Bryce. Payment by Chris to Kirk of the $1,000 before notice in writing of the assignment was given to Chris would require Bryce to recover the payment from Kirk, as he could not sue Chris for the money.

James owed Christie $2,500. She asked him to make the payments to her friend, Amira, and they drew up and signed a contract to that effect. After he had made a couple of payments, Christie died, and James told Amira he would not give her any more money. $2,300 is still outstanding. a. Explain why Amira cannot simply sue James for breach of contract to get the balance of the money. b. Identify the equitable remedy available to Amira and describe how it would operate to help her here. c. What should Christie have done to make sure that Amira could enforce the contract if Christie was not there to do so?

Carten Printing receives an unexpectedly large order for shipping envelopes from one of its regular clients, a major Canadian CD-ROM retailer. In order to meet the order delivery date, Carten farms out part of the printing to another firm, Serger Printing. Serger, in an attempt to raise its own profit margin on the deal, uses lower grade adhesive and cuts corners on printing quality. The faulty shipping envelopes show up as returns made to the retailer from dissatisfied customers. The retailer takes action against Carten for damages. What is the most likely outcome?

The Four Guys Garage advertised automobile repairs by "Licensed Mechanics." Terry, a car owner, took his automobile to the Four Guys Garage for repairs. The garage owner, Todd, examined the car, and indicated that extensive repairs were required. Terry left his car with Todd, and the repairs were carried out by another licensed mechanic, Rod, an employee. Terry paid $150 for the repairs, but on his way home discovered that the repairs had been done negligently, and had ruined the engine. Terry may only sue Rod, the mechanic that negligently performed the service.

Kevin was injured when a bottle of pop, purchased by Katie and given to him, exploded in his hand. Kevin cannot sue the manufacturer and receive damages for his injuries because he lacks privity of contract.

Boyz Finance Company approaches merchants and gives immediate cash to them in return for the right to collect the series of monthly payments made on account by the merchant's customers. Boyz pays $75 now for the assignment of right to collect $100 in the future. For good reason, Boyz should be examining the business practices of the merchants from whom it accepts assignments as much as it examines the credit-worthiness of the accounts that it purchases.

A business may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment. What is this method of raising capital called?