Exam 4: Enforceability of Contractual Rights

Brenda discovered that her younger sister,Allison,desperate to break her addiction to cocaine and unable to get into a Canadian addiction program for many months,has made a contract with a doctor from the United States.The doctor will Allison treat at his centre immediately,in return for which Allison has signed over to him the inheritance from her grandmother to which she will have access when she turns 22 next year.Since the cost of the treatment is only a fraction of the value of Allison's inheritance,Brenda promises to pay for the treatment if Allison can reimburse her next year.However,the doctor refuses to release Allison from their contract,and she does not know what to do.

Joyce's son,Al,borrowed money from Verity Finance.Al lost his job last month and has not made the latest payment on the debt.When Verity's collections department telephones,Joyce answers the phone.She agrees to make the payments if Al does not because she is worried about his state of mind due to his job loss. -Joyce's promise does not have to be in writing to be enforceable.

Acme 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.Acme pays $75 now for the assignment of right to collect $100 in the future.For good reason,Acme should be examining the business practices of the merchants from whom it accepts assignments as much as it examines the creditworthiness of the accounts that it purchases.

Cal has just co-signed a car loan for his friend,Peter.This action made Cal the guarantor of the loan.In the event that Peter defaults on payment Cal has been made liable for payment.After a few months without incident,Cal receives a notice from the bank that Peter missed a payment,and that Cal is to pay.After writing a cheque,Cal confronts Peter who said he could not afford it this month because he bought a new stereo.Cal is annoyed with Peter's irresponsible actions and informs Peter that next month he will have to pay two instalments,one to the bank and one to him to make up for this month.

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

Acme Engineering needed cash and assigned a block of its accounts receivable to Wellington Finance Company.A week later,it assigned another block to Bagot Finance Company.By an oversight,the second block contained an account,a receivable from Smith,that Acme had already assigned to Wellington.The notice of assignment from Bagot arrived at the Smith offices before that of Wellington.Smith should pay against the demand of Bagot Co.

Joyce's son,Al,borrowed money from Verity Finance.Al lost his job last month and has not made the latest payment on the debt.When Verity's collections department telephones,Joyce answers the phone.She agrees to make the payments if Al does not because she is worried about his state of mind due to his job loss. -A verbal contract concerning the sale of land to Jack by Jill will not be enforceable by either one of them unless it can be shown that the one who wishes to enforce it dealt with the land as if there was such a contract and no other interpretation could be put on his or her actions;that the non-enforcement would perpetrate a fraud and a hardship on the one who wishes to enforce it;and there is clear verbal evidence,such as witnesses to the transaction,to establish that there was such a valid verbal contract between them.

Ray wished to purchase a motor vehicle from Rita on credit,but Ray was unemployed,and Rita was hesitant to sell to him for that reason.Ziggy,who was quite wealthy,said to Rita: "Sell Ray the automobile on credit,and if Ray does not pay you,I will." -Ziggy's promise would be unenforceable,unless it was made in writing and signed by Ziggy.

The Carpenters bought a house from the Taylors for $250,000,paying a $25,000 deposit with the balance of $225,000 to be paid on the closing date.To save money on lawyers,they used a standard contract purchased from a stationery store.Thinking that the appliances,curtains,and carpets that the Taylors were to sell them for $5,000 could not be included in a contract for the sale of real estate,the Carpenters simply agreed to that verbally,and paid the extra $5,000 on the date of closing.They were horrified to arrive at their new house to find no carpets,drapes,or appliances.The lawyer they consulted said,"You have nothing here that says they are selling you those things." A)What rule of law would the lawyer tell them about that could cause them difficulty in suing the Taylors for the missing furnishings,and how would it apply in this case? B)What solution could the lawyer suggest,once she knew all the facts,and how would it apply in this case? C)If the verbal agreement about the furnishings had been made sometime after the contract of purchase and sale,would the same problem exist? Why or why not?

Van Overschelde Manufacturing (VOM)is a successful multi-million-dollar electronics component manufacturer.The company president,Elias Van Overschelde,personally collects rare Canadian native art.One of the members of the maintenance crew at VOM,Usama,had recently purchased at a garage sale an article that Usama thought might be a piece of Canadian native art.Having purchased the piece for $2 Usama wondered what it was worth and showed the art to the Elias.Elias immediately recognized the piece as an extremely rare example of early 1700s Iroquois art worth nearly $250,000.Elias,knowing that Usama had paid only $2,immediately offered Usama $1,000 for it.Usama,who couldn't believe his luck,immediately accepted.Prior to formalizing and executing the agreement,what prudent step should Elias take to ensure the deal cannot later be overturned by the courts?

A student from another class says that assignments were originally Common Law concepts but are now a statutory process.He is correct.

Ravi,an art collector,had been made a standing offer by a gallery to purchase one of his paintings for $150,000.At shows and luncheons of the art community he had previously rejected the entreaties,knowing the painting to be worth at least twice as much.On the latest occasion of a luncheon at which Ravi was deliver an art commentary to the guests,the gallery made its offer once more.To himself,Ravi considered the offer and concluded he could use the charitable tax relief that such a sale at a loss would generate.In the course of his speech,he acknowledged and accepted the offer.Two days later,Ravi's lawyer advised him that the purchasing gallery was NOT a charitable foundation,and no tax deduction for such a "donation" could be expected.Ravi then refused to sell the painting to the gallery.On the strength of the verbal agreement of purchase and sale made in the presence of witnesses,the gallery sued Ravi for breach of contract,and for a decree of specific performance to compel Ravi to sell it the painting. -Ravi may successfully plead that his words were agreement in principle only.

Ravi,an art collector,had been made a standing offer by a gallery to purchase one of his paintings for $150,000.At shows and luncheons of the art community he had previously rejected the entreaties,knowing the painting to be worth at least twice as much.On the latest occasion of a luncheon at which Ravi was deliver an art commentary to the guests,the gallery made its offer once more.To himself,Ravi considered the offer and concluded he could use the charitable tax relief that such a sale at a loss would generate.In the course of his speech,he acknowledged and accepted the offer.Two days later,Ravi's lawyer advised him that the purchasing gallery was NOT a charitable foundation,and no tax deduction for such a "donation" could be expected.Ravi then refused to sell the painting to the gallery.On the strength of the verbal agreement of purchase and sale made in the presence of witnesses,the gallery sued Ravi for breach of contract,and for a decree of specific performance to compel Ravi to sell it the painting. -The verbal agreement is unenforceable.

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.

Pulpco contracts for logs from A1 Timber Co. ,which later made a statutory assignment of its rights and obligations to Forest Green Co.(FGC).The quality of FGC logs was less than the fine product usually delivered by A1 Timber,and for which the company was known,and Pulpco brought suit against A1 Timber on the grounds that the contract was not assignable.The court would find that the contract was assignable.

George was approached by a travelling salesperson,who convinced him to purchase an automatic weaving machine at a price of $900.To encourage the sale,the salesperson had verbally agreed to purchase,for a very modest price,any goods George wove that were up to a marketable standard.It was suitable for a home business,and George undertook a series of payments under a written agreement.The machine did a poor job,producing nothing marketable.The salesperson had disappeared in the meantime,having assigned the agreement to a finance company.The finance company was now looking to George for payment.George refused to pay.Explain the rights and liabilities of the parties.

Box Co.assigns a conditional contract with Yee to Zip Finance on November 10.Zip Finance notifies Yee of the assignment on November 17.Yee had mailed his cheque to Box Co.on November 12,although it wasn't due until November 15. -If Zip Finance gave Yee notice on November 13 that the November 15 payment was to be made to it,but Yee had already mailed the cheque on the 12 to Box Co. ,then Yee must put a stop payment on the cheque to Box Co.and send a new one to Zip Finance for the November 15 payment.

Ray wished to purchase a motor vehicle from Rita on credit,but Ray was unemployed,and Rita was hesitant to sell to him for that reason.Ziggy,who was quite wealthy,said to Rita: "Sell Ray the automobile on credit,and if Ray does not pay you,I will." -Ziggy has made an offer to guarantee the payment of the debt of Ray.

Joe,a university student,commuted to and from classes by public transit.He decided that he had to buy a car because the bus service was terrible.Ryan was discussing this problem with Joe and said that he wanted to sell his car in order to purchase a motorcycle.Knowing the car's good condition,Joe said he would buy it.Ryan told him to come by to pick up the car in two days.Neither of them know that Ryan 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 the subject matter of the contract.

John was indebted to Stan on a loan for $1,000.Stan assigned John's promise to pay to Bob. -Lev and Drew have been negotiating verbally and in writing concerning the purchase by Lev of a number of items manufactured by Drew's company.All of the material terms of the contract have been agreed.Lev insists that they have reached only the stage of having an agreement in principle but Drew says they have a binding contract.If one of the terms they agreed upon verbally was that they would execute a written contract,the court will hold that a contract does exist.