Exam 13: Performance of Contractual Obligations

In the contract between Bayson's Department Store and Clem's Manufacturing,there is a clause that allows either party to end the contract on 60-days notice and the payment of liquidated damages,which are set at a reasonable amount.This clause is

The case of Turney et al.v.Zhilka accurately describes the state of the law in Canada with respect to the effect of conditions precedent.

Shamira offered to purchase Brendan's automobile for $3,050 cash,with Brendan to deliver the vehicle the next Wednesday,at which time Shamira would pay the $3,050.On the Wednesday,when Brendan did not deliver,Shamira went to Brendan's home,and found him in his garden.Shamira offered Brendan the money,but Brendan refused,saying that he had changed his mind,and did not wish to sell his automobile.If Shamira had in her possession three $1,000 bills,and one $100 bill,her tender would be invalid,even though she had cash in excess of the amount requested.

Sangster and Williams enter into a verbal contract with each other.They later decide to put it in writing.This is a substituted agreement.

Joe sold a barn full of hay to Sheila but,before Sheila could transfer it to her own barn,a hurricane blew the roof off Joe's barn,and that part of the hay that did not blow away was ruined by the torrential rains.The contract is frustrated.

Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi's gravel pit to a building site some five kilometres distant,at $60 per load.Before Kirk was to begin performance,his truck was destroyed in a serious traffic accident.Because Kirk is bound in contract,Yemmi can require Kirk to purchase a new truck to perform the agreement.

Gavin is in the business of local transport of goods,as well as running a rural bus service.He contracts for a delivery van from his local truck dealer,but before the dealer places the order with the manufacturer,Gavin amends the order to request the minibus model of the delivery van.Gavin and the dealer have created a new contract that replaces the prior one.

Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi's gravel pit to a building site some five kilometres distant,at $60 per load.Before Kirk was to begin performance,his truck was destroyed in a serious traffic accident.If Kirk deliberately destroyed his truck,Yemmi can insist that he perform the agreement or compensate Yemmi for any loss that might result from Kirk's nonperformance.

In the contract between Canada Oil Company and the Government of Iran for the supply of Iranian crude oil,there is a clause that allows either party a period of one year to bring forward to court any claim arising from events subject to the contract.Any claim raised after one year from the events which give rise to it is agreed to be unenforceable.Had the parties not provided for this themselves,the common law would have provided a somewhat similar measure,represented by the doctrine of

Julian decides that he would like the house being built for him,under contract with Porter Developers,to have a blue tile roof instead of a red tile roof.The two kinds of tile are equally available and are the same price,and no roofing of the house has yet been done.Porter alleges that this is a material alteration of the terms of the contract,since the roof is one-tenth of the value of the house,and that,therefore,it cannot be done without their agreement to the change,which they will only give for a further payment of $5,000.They are right.

When does a waiver have to be in writing and under seal?

In 1969,XYZ Co.Ltd.,a manufacturer of small appliances,entered into a 20-year contract with ABC Smelters Inc.who agreed to process molten aluminum for XYZ's manufacturing needs.The parties undertook lengthy negotiations to determine the terms of the complex agreement which governed their relationship.In particular,the pricing clause was quite complicated based upon various factors.The price to be paid by XYZ was to vary in accordance with two of those factors.After a base price was agreed upon,20 percent of that price would vary with changes in the Wholesale Price Index for Industrial Commodities (WPI).This portion was referred to as the "production charge." An additional 20 percent of the price would vary with changes in the hourly wage rates of ABC Smelter employees.A major component of the production charge for the smelting of aluminum was the cost of electricity. The parties performed under the contract for several years applying the pricing formula appropriately to the basic price.However,in 1973,the Arab oil producing nations imposed an oil embargo that severely affected most of the world's economies causing rapid inflation,particularly in sectors which were substitutes for oil based energy.The cost of electricity rose at a rate greatly in excess of the rate of increase in WPI,of which electricity was only one of many factors.At this point,ABC Smelters realized that continuing with the contract as it stood to the end of its term would result in a loss of over $60 million to the company and would likely result in its bankruptcy.ABC then ceased performing under the contract and instituted legal action to attempt to relieve its onerous obligations under the agreement. a.Discuss the nature of the action and the arguments which may be used by ABC. b.Whether ABC is successful or not,what further steps may the parties take to revive their contractual relationship? F.Supp.53,this situation examines the doctrines of frustration and the principles of substituted agreement.a.The legal action brought by ABC is based in frustration in order to bring the contract to an end and relieve the parties from further performance.The external event of an oil embargo causing huge increases in the cost of electricity was neither foreseeable nor caused by any fault of the parties.Its effect was to change the circumstances and conditions under which the agreement was to be performed such that performance becomes virtually impossible for ABC without risking the company's demise.Furthermore,given the long-term nature of the contract,it was an event for which the parties would likely have provided for discharge of the agreement had it been foreseeable and the changes in conditions apparent.The defendants may raise an argument that ABC is attempting to have the contract declared frustrated simply because performance became more expensive than contemplated at the outset.However,the courts,recognizing the difficulty in predicting future conditions in long-term contracts,especially those of an unexpected nature,would likely treat the contract as frustrated.This is particularly true in light of the great care and thorough negotiations which the parties undertook at the outset.Thus,the frustrated contract is brought to an end and the parties would be relieved of further performance. b.The parties may agree to substitute their original contract with a new agreement with material alterations to the terms.The new substitute agreement will discharge the existing agreement if it has not already been discharged as frustrated by the courts.The alteration in the pricing terms of the agreement would be sufficiently material to effectively discharge the original agreement.

Shamira offered to purchase Brendan's automobile for $3,050 cash,with Brendan to deliver the vehicle the next Wednesday,at which time Shamira would pay the $3,050.On the Wednesday,when Brendan did not deliver,Shamira went to Brendan's home,and found him in his garden.Shamira offered Brendan the money,but Brendan refused,saying that he had changed his mind,and did not wish to sell his automobile.Brendan would be entitled to reject the tender of payment if it consisted of $3,100 in cash,instead of the required $3,050 in cash.

Damian and Raja agree in writing that Raja will buy Damian's cottage.On the date set for closing the sale,it is up to Raja to come to Damian to make payment of the purchase price,unless the contract says otherwise.

In the contract between Gamil's Building Materials store and Hightrees Logging and Lumber Company for the supply of lumber,there is a clause that allows either party to end the contract on 10-days notice should actions of logging protesters on Hightrees property bring logging operations to a temporary halt.This clause is

Under the Frustrated Contracts Act; can Delores keep a $20 000 deposit?

Ms.Sherbourne bought a candy bar costing 80 cents.She paid for it by presenting the storekeeper with a $5 bill.While this is not a legal tender,it is so customary to give change that the storekeeper would have to warn customers if he was only prepared to accept exact tender of the price of the goods.

King,a library sciences student,was hired at $400 a week to catalogue the library of the very wealthy Earle family.He estimated that the work would be completed in early August,giving him a month of vacation,which he felt he badly needed.For the first three days on the job,King was kept busy running errands for Mr.Earle,who had a sprained ankle,and keeping him from getting bored.On the fourth day,Mrs.Earle was using the library for her bridge club and a meeting of her church Flower Committee,and on Friday she kept King busy running errands for the dinner party she was giving that night.After two weeks of this,King quit and took a labouring job for $275 a week.

How can contracts be discharged?

In the contract of sale of Jones' house to Greenwood,no particular method of payment was specified.Greenwood's lawyer has heard rumours that Jones got a much better offer after he signed the deal with Greenwood,and,from the attitude displayed by Jones recently,Greenwood's lawyer thinks Jones may be hoping the deal will fall through.Greenwood