Exam 11: Failure to Create an Enforceable Contract

Jahara Ltd.enters into a contract to supply glass bottles to Brine Co.for its line of baby dill pickles.Since it is a new relationship,both parties want the option to end the contract without problems,so they include a clause that allows either one of them to terminate the contract on 30 days written notice.Jahara finds that Brine Co.is too slow in paying its bills and too quick to question quality.On March 1^st,Jahara Ltd.gives Brine Co.notice in writing that the contract will end on March 31^st.Brine Co.insists that the 30 days notice clause means 30 working days,not 30 calendar days,and thus Jahara must supply them until April 1.Jahara refuses.Brine Co.loses two weeks of production when its supply of bottles runs out and sues Jahara for breach of contract.In this situation,

For there to be punitive damages,there must have been the tort of deceit,and therefore there must have been fraudulent misrepresentation.

Rob purchased an old glass vase,which Banya represented as an antique made by a famous Italian glassmaker in the 17^th century.As proof of its authenticity,Banya produced an old paper with a rough sketch of the vase on it,along with some writing,and what appeared to be the glassmaker's name.Rob later sold the vase to Castillo,after telling Castillo the story of the vase as told to him by Banya.After Castillo had purchased the vase,he discovered it to be a reproduction of the original,and of very little value.Castillo should act promptly to void the contract on discovery of the misrepresentation,as Castillo will lose the right to do so if much time is allowed to pass.

Sunjai,who is functionally illiterate,asks her friend Hahna to read a document aloud to her.She is to sign it in order to purchase chinchillas from Patrice to start a breeding farm.Actually it is a deed transferring ownership of Sunjai's farm to Patrice and,unknown to Sunjai,Patrice and Hahna have made a secret agreement to sell the farm and share the proceeds.If Sunjai is successful in her defence of non est factum,the courts will grant rectification of the deed transferring the land,and Sunjai will be able to keep the farm.

While George was visiting his physician,he mentioned to him that he wished to sell his expensive sailboat.The physician expressed an interest in buying the boat,and offered to pay George $10,000 for it.George had intended to advertise the boat for $12,000 in the local newspaper,but agreed to sell it to the physician for $10,000.Some weeks after the boat had been sold; George wished to avoid the contract.In this case,the physician would be obliged to prove that there was no undue influence on his part

Your car dealer hands you documents for your signature,"the paperwork on the deal" you have just shaken hands on.Among the papers is an undiscussed extended warranty plan.You sign all the documents where the dealer so indicated.You first become aware of the warranty when its cost is automatically debited from your chequing account.Your successful defence to further payments will be non est factum.

If the formation of a contract is affected by mistake,which required element of a contract is not present?

Chris and Sally were successful professionals who decided that the time had come to escape city living and move to a country home.While their tastes led them to desire all the conveniences of modern living,they had further decided that they wanted a home with "character." In the course of their search,they met Johnston,a real estate agent.They told him they were looking for "an older home with character." Johnston showed them a number of country homes,all of which were older.Each was rejected in turn,for a variety of reasons.In a number of instances,the home did not appear suited to being remodeled with cathedral type ceilings,or did not lend itself to the addition of a large glass solarium,which was a feature that the couple wanted.In each case,upon finding one of these two facts to be evident,they left the properties with Johnston and returned to his car with him to view the next home on the list. At one of Johnston's listings,Chris and Sally finally found what they were after.The home clearly lent itself to the modifications they desired,and it certainly had the character they were looking for.Chris and Sally were delighted when they and Johnston noticed a decorative brass plaque six inches square beside the front door which read "Old Taylor Farmstead,1855," and underneath "Heritage Canada." Chris and Sally signed Johnston's standard offer-to-purchase form,which was later accepted,and took it to their lawyer to close the sale.While in their lawyer's office,Chris mentioned the addition of the solarium to the home,and their lawyer informed them that since the property had been designated as a heritage property by Heritage Canada,modification in any material way to the property would be impossible.Chris and Sally immediately instructed their lawyer to commence action against the owner of the property and the agent,Johnston. Discuss the legal issues raised in this case.

While George was visiting his physician,he mentioned to him that he wished to sell his expensive sailboat.The physician expressed an interest in buying the boat,and offered to pay George $10,000 for it.George had intended to advertise the boat for $12,000 in the local newspaper,but agreed to sell it to the physician for $10,000.Some weeks after the boat had been sold; George wished to avoid the contract.In this case,there is a rebuttable presumption of undue influence,because the purchaser was George's physician.

Jax,a university student commuted to and from classes by public transit.He decided that he must buy a car because the bus service was terrible.A friend was discussing this problem with Jax and said that he wanted to sell his car in order to purchase a motorcycle.Knowing the car's good condition,Jax said he would buy it.Jax's friend told him to come by to pick up the car in two days.Neither of them knew that the friend's roommate had borrowed the car that day and had destroyed it in an accident.This is not a cause of mistake of fact because the two were both clear as to what was the subject matter of the contract.

Mathieson wanted to lease a suite in the new office building owned by Logan,which is the most prestigious one in town.He knew that Logan would not rent to him because of a business deal several years ago that had gone bad,costing Logan a great deal of money.Logan swore he would never do business with Mathieson again.Mathieson paid Muir to act as an agent for his company,and Logan rented to him.Several months later,Logan found out who had really rented the suite.

Jahara Ltd.enters into a contract to supply glass bottles to Brine Co.for its line of baby dill pickles.Since it is a new relationship,both parties want the option to end the contract without problems,so they include a clause which allows either one of them to terminate the contract on 30 days written notice.Jahara finds that Brine Co.is too slow in paying its bills and too quick to question quality.On March 1^st,Jahara Ltd.gives Brine Co.notice in writing that the contract will end on March 31^st.Brine Co.insists that the 30 days notice clause means 30 working days,not 30 calendar days,and thus Jahara must supply them until April 1.Jahara refuses.Brine Co.loses two weeks of production when its supply of bottles runs out and sues Jahara for breach of contract.In this situation,

Innocent misrepresentation renders a contract voidable at the option of either party.

Rob purchased an old glass vase,which Banya represented as an antique made by a famous Italian glassmaker in the 17^th century.As proof of its authenticity,Banya produced an old paper with a rough sketch of the vase on it,along with some writing,and what appeared to be the glassmaker's name.Rob later sold the vase to Castillo,after telling Castillo the story of the vase as told to him by Banya.After Castillo had purchased the vase,he discovered it to be a reproduction of the original,and of very little value.The contract is voidable by Castillo on the basis of innocent misrepresentation.

While George was visiting his physician,he mentioned to him that he wished to sell his expensive sailboat.The physician expressed an interest in buying the boat,and offered to pay George $10,000 for it.George had intended to advertise the boat for $12,000 in the local newspaper,but agreed to sell it to the physician for $10,000.Some weeks after the boat had been sold; George wished to avoid the contract.The physician could rebut the presumption of undue influence by proving that he paid a reasonable price for the sailboat,and that George had freely offered to sell him the boat.

Sarah Burns is suing her lawyer,Tom Lachey,for the return of property worth $20,000 that she had given him.She had signed a properly sealed document making the gift to him.She says she knew what she was signing but felt overwhelmed by his manner.If Sarah Burns had not yet given him the property,she would not be obligated to do so since it was simply a gratuitous promise on her part.Since she has given it to him,she must prove duress on his part to get it back.

Undue influence is not the same legal concept as duress.Despite this,both constitute grounds for rescission by the affected party.

Wes,a neighbour of Stan,wished to borrow a sum of money from a local bank.Stan was quite wealthy,but elderly,with very poor eyesight.He frequently requested Wes to read his newspaper to him when Wes would drop by for a visit,because reading bothered his eyes.One evening,Wes placed a paper before Stan,and explained to him that he wished to borrow a sum of money,but required a letter of reference before the bank would make the loan.He requested Stan to sign the paper to satisfy this requirement.Stan trusted his friend Wes,and signed the paper at his request without reading it.Unknown to Stan,the paper was a guarantee of Wes's indebtedness,and not a letter of reference.Wes later defaulted on his debt.Wes required Stan's signature on the paper because the Statute of Frauds requires a guarantee to be in writing,and signed to be enforceable

Garth and Elizabeth are husband and wife.Garth is a real estate agent and Elizabeth an artist.Although her occupation does not expose Elizabeth to a great deal of business-related matters,the couple have entered into many real estate deals and business ventures as full partners.Garth has an opportunity to buy into a condominium complex.He asks Elizabeth to sign as his loan guarantor so that he may invest in the project.Before the project is complete,the contractor abandons the job and all partners are left to answer the debt.Garth cannot produce sufficient funds to cover his loan,and the bank turns to Elizabeth as guarantor for payment.Outraged at the course of events,Elizabeth refuses to pay,and seeks legal assistance to nullify the contract.As her lawyer,what do you tell Elizabeth?

Wes,a neighbour of Stan,wished to borrow a sum of money from a local bank.Stan was quite wealthy,but elderly,with very poor eyesight.He frequently requested Wes to read his newspaper to him when Wes would drop by for a visit,because reading bothered his eyes.One evening,Wes placed a paper before Stan,and explained to him that he wished to borrow a sum of money,but required a letter of reference before the bank would make the loan.He requested Stan to sign the paper to satisfy this requirement.Stan trusted his friend Wes,and signed the paper at his request without reading it.Unknown to Stan,the paper was a guarantee of Wes's indebtedness,and not a letter of reference.Wes later defaulted on his debt.Stan may plead non est factum as a defence to a claim by Wes's creditor on the guarantee.