Exam 12: The Extent of Contractual Rights

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 it 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?

Businesses 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?

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.

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.

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?

Hammond sells her house to Mendoza for $165,000 subject to a mortgage from Imperial Bank for $90,000.Hammond's mortgage had been arranged at a time when interest rates were low,and prevailing interest rates are now much higher.Mendoza would very much like to assume Hammond's obligation to pay under the existing mortgage,rather than arrange a more costly replacement from his own banker.Imperial Bank is indifferent as to who is repaying the debt as Mendoza is just as acceptable a credit risk as was Hammond.Mendoza pays Hammond the $75,000 difference and takes over both the house and her mortgage.This arrangement is an example of

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 negligently made,and had ruined the engine.Terry may only sue Rod,the mechanic that negligently performed the service.

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?

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.

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.

If the restrictive covenant said that the land was never to be sold to a woman of Scottish descent,Martin could ignore it and sell to whomever he pleased,on the grounds that the clause breached public policy.

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 negligently made,and had ruined the engine.The Four Guys Garage is liable to Terry under the vicarious performance rule for Rod's negligence.

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 U 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 privity of contract rule would entitle the Limestone Students' Society to reject the substitute rock group,and prevent them from performing.

Sylvia obtained a full release from the payment of her car loan when she gave the car to her friend,Victoria,who agreed to make all the remaining payments.The arrangement was acceptable to the bank that had made the loan.The bank cancelled the loan and replaced it with one in Victoria's name.This is

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.

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.

If Alan is a beneficiary of his father's life insurance with Avuncular Life,he has the statutory right to enforce payment if his father dies and Avuncular refuses to pay on the grounds that Alan lacks privity of contract with it.

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

Creighton owned a commercial property on the main street of a large city,which he leased for 15 years to a franchise of a nationwide department store.The lease contained a covenant prohibiting the department store tenant from establishing another one of its stores within a 15-kilometre radius of its current location.The main reason for the restrictive covenant was to protect the landlord's rental revenues.The rent for the property was set at a $24,000 minimum per year plus 3% of gross sales receipts.In reality,another franchisee of the department store had been operating a store within six blocks of Creighton's property for the last 10 years.Creighton was well aware of this fact,but had never taken any steps to enforce the covenant in his lease. In December,Creighton sold his property to Murdock and assigned the lease in its entirety.Creighton and Murdock arranged the deal such that Murdock made a lump sum down payment and Creighton held a mortgage that Murdock would pay,in part,with the monthly rental revenues from the property.The assignment was executed under seal and immediately written notice was sent to both the store manager at the leased property and to the national office of the department store chain.The notice informed the tenant that the assignment had occurred and that all future rental payments were to be directed to Murdock.The tenant properly forwarded its monthly payments to Murdock for several months. In March,Murdock telephoned the tenant to inform it that he had reassigned the right to receive the rental income to Creighton and that future payments should again be made directly to Creighton.The purpose of the reassignment was to reduce the length of time it took each month to get the payments processed from the tenant to Murdock and on to Creighton.In return,Creighton reduced the rate on Murdock's mortgage by one-quarter percent.Murdock pointed out,however,that he retained his capacity as landlord,having assigned only the rental income back to Creighton. One week later,Creighton brought an action against the tenant for damages for breach of the lease's covenant prohibiting the existence of the second store within 15 kilometres.Creighton sought damages in the amount equal to lost rental revenue for the previous 10 years. What legal issues are raised in this case? What arguments will be used by both Creighton and the tenant and what will be the likely outcome?

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 U 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 assignment.