Exam 8: Consideration and Privity

Under the Electronic Home Business Administration Act,any citizen that pays a $50 fee is entitled to receive a licence to operate a certain type of business from home.Donna,who wished to operate such a business,sought information over the telephone from Duncan,a government official who was responsible for issuing licences under the legislation.Duncan agreed to provide a licence to Donna,but only if she promised to pay an additional fee of $25 to him directly.Although Duncan was not actually entitled to demand that extra sum,he honestly believed that he was acting within his rights.Because she was anxious to receive the licence,Donna promised to pay $75.However,she now regrets her decision to do so.How much must she pay Duncan in order to receive a licence? Explain your answer.

Jan's aunt writes a letter to Jan,offering to give her a new car.Jan takes the car,but after two months her aunt asks for the car back.Jan refuses and her aunt sues her,claiming there was no contract and therefore it was still her property.Which of the following statements is true?

The Canadian government announced its plan to create and circulate a new $100 bill.Because Marta knew that Bernie was an avid collector of currency,she promised to give him the first new $100 bill that she received from her work at a flea market.The agreement was placed in writing and Bernie applied his seal to the document.Shortly after the government released the new $100 bills,Marta received one from a customer at the flea market.She is required to deliver it to Bernie.

A statutory assignment involves three parties: the assignor,the assignee,and the debtor.

ABC Construction agreed to build a pool for Miranda in exchange for $100 000.The pool was to be built during the month of May,but payment was not due until the end of August.The pool was completed on schedule.However,because it was experiencing financial difficulties,ABC orally assigned its contractual rights against Miranda to Mirth Enterprises in early June.In July,Miranda discovered that the pool leaked.Because ABC denied responsibility,Miranda had the problem fixed by another company at a cost of $20 000.The evidence now indicates that the problem was in fact caused by ABC's breach of contract.ABC failed to use appropriate materials when it constructed the pool.Which of the following statements is TRUE?

Dawn Sumi hosts a national call-in radio program.On a number of occasions,when the on-air discussion concerned computers and electronic devices,she spoke very favourably about the merchandise manufactured by Rabby Electronics Inc.As a result of those compliments,Rabby's business increased dramatically.Rabby was both delighted and surprised: delighted because it was making larger profits and surprised because it had never asked Sumi for the endorsements.As a gesture of thanks,the president of Rabby wrote to Sumi and promised to pay him $25 000 within six weeks.In reliance upon that promise,Sumi immediately entered into a contract with a builder to add a sun deck to her home at a cost of $25 000.Sumi never would have entered into that contract if she had not received Rabby's promise.A week later,however,the president of Rabby changed his mind and told Sumi that she would not be receiving the money after all.Is Rabby entitled to do so? Did a contract exist between the parties? If no contract existed between the parties,is Rabby nevertheless obliged to fulfill its promise? Explain your answer.

Zeta Corp was contractually obliged to pay $25 000 cash to Omega Inc on June 15.On June 1st,Omega agreed to discharge the entire debt if Zeta immediately gave a cheque worth $15 000.Zeta did so.Nevertheless,on June 15th,Omega demanded payment of another $10 000.It is entitled to receive that amount.

A gratuitous promise is generally not enforceable.

The contractual rule that requires an exchange of value

The decision in London Drugs Ltd v Kuehne & Nagel International Ltd is primarily authority for which of the following propositions?

"A trust provides am exception to the privity of contract doctrine.The contract is enforced by the person to whom the contractual promise was intended to benefit." Explain the meaning of that statement and indicate whether or not it is true.

Sebastien Johan is a music critic known for his ill-tempered manners.In a recent newspaper article,he harshly criticized a classical recording that was released shortly after the death of Glenn Klavier,its featured performer.Johan's review attacked Klavier's music,which was not unusual.However,the review also attacked Klavier personally.It unfairly and inaccurately suggested that Klavier had intentionally stolen all of his ideas from another pianist.Klavier's widow sued Johan under the tort of defamation on the basis that the review tended to make people think less of her late husband.She threatened to sue for $500 000 unless she immediately received payment of $100 000.Although Johan normally would have simply ignored the matter,he recently had experienced a number of financial setbacks.He therefore realized that while he would prefer to pay nothing,he could afford $100 000,but would be ruined if he was ever required to pay $500 000.He therefore promised to pay $100 000 within one year to Klavier's widow in exchange for her promise to drop the lawsuit.Six months later,however,Klavier's widow was reliably informed that her lawsuit certainly would have failed if it had been brought before a judge.The law of defamation states that a person cannot be held liable for making derogatory comments about a dead person.Johan therefore now refuses to fulfill his promise to pay $100 000.Is he entitled to do so? Explain your answer.

Identify and explain two situations in which legislation allows a stranger to sue on a contract that was made for its benefit.

Hofflehass Architectural Ltd was hoping to persuade the Town of Buchanan to create a new beachfront resort.Buchanan said that it was not yet willing to commit itself to such a project.However,it also said that it would likely agree to any proposal that met certain specifications.On that basis,Hofflehass spent $150 000 in creating a proposal that met all of the town's specifications.It presented the proposal and further explained that it would charge $2 million to actually undertake the construction project.The town's officials,however,said that they were no longer interested in a beachfront resort.Although Hofflehass cannot force Buchanan to pay it $2 million to create the proposed resort,it can use the doctrine of promissory estoppel to recover its expenses of $150 000.

Sid and Nancy entered into a contract.Part of that contract was subsequently assigned to Johnny.Which of the following statements may be TRUE?

Which of the following propositions is TRUE in the context of the doctrine of promissory estoppel?

Rande promised to provide a series of lectures on tort law to a group of professional athletes in exchange for payment of $10 000.Shortly before the lectures were scheduled to take place,Rande promised to provide a publishing company with a recorded set of lectures on tort law in exchange for $15 000.The publishing company agreed that Rande's planned lecture for the group of professional athletes would be the subject of the recording.Which of the following statements is TRUE?

Which of the following statements is TRUE?