Exam 4: Enforceability of Contractual Rights

Having made it clear that she would not buy any tractor that had been involved in a fatal accident,and having been assured that the one she chose had never been in such an accident,Farmer Brown bought a tractor from Cornfeldt's Farm Machinery for $15,000 under a conditional sales contract.Cornfeldt assigned the contract to Titewod Finance,which gave proper notice of the assignment to Farmer Brown.Shortly after,Farmer Brown found out that this tractor had rolled over on another farmer and killed him,so she immediately returned the tractor to Cornfeldt and demanded a refund because of the misrepresentation.The salesman had known of the accident when he sold the tractor to her.

John was indebted to Stan on a loan for $1,000.Stan assigned John's promise to pay to Bob. -Notice in writing of the assignment must be given to John before John is obliged to pay Bob.

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. -If Krishna had told Dominic that the paper was a guarantee for $1,500 when it was in fact for $2,000,D could still successfully plead non est factum as a defence.

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?

The Smalltown Sawmill entered into a contract with the Little Lumber Co.to supply the sawmill with logs.The sawmill produced a great deal of softwood lumber,particularly pine,for furniture making.The mill especially liked the logs supplied by Little Lumber Co.because they were from older stands of trees,which made the wood a higher quality.Little's logs were also somewhat larger,which made for less waste when cutting the larger pieces of wood required for furniture making.There was a written agreement between the parties that stipulated that the parties "for themselves,their executors and administrators and successors respectively" each covenanted to abide by and perform the terms of the agreement.The relationship continued over several years until the Little Lumber Co.assigned its rights under the agreement to another lumber company,Logs Ltd. ,which carried on the supply.The sawmill accepted shipments from Logs Ltd.for nearly a year when it decided not to accept any further shipments on the grounds that the contract it had with the Little Lumber Co.was not assignable. The Little Lumber company decided to take legal action to enforce the agreement on the sawmill.Explain the nature of the action taken and the legal principles the lumber company would rely on.What arguments would the sawmill raise in its defence? Render a decision.

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. -Verity must first try to get the money from Al before approaching Joyce.

On March 6,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.On March 29,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 Student' Union in time to perform. -The contract,by its nature,is not subject to assignment by the rock group.

Bob applied to the municipality of Smallville for a permit to build an addition onto his home.He contacted the municipal offices by telephone to inquire about the fee for the permit.The building official was unavailable,but the municipal clerk told Bob she thought the current fee was $100 per 1,000 square feet.Bob's new addition was planned to be 3,500 square feet,so he attached a cheque in the amount of $350 to his application and delivered it to the building office.When the permit was approved and returned,a note was attached to it that read that all building permits now cost a flat fee of $250.No money accompanied the note.Bob contacted the municipal offices requesting a refund of his $100.He was told by the clerk that there was no municipal by-law authorizing the repayment of excess fees paid to the municipality so she had no authority to process his refund.Bob would probably be unable to obtain the money he paid in error.

Sara purchased an old glass vase that Rina represented as an antique made by a famous Italian glassmaker in the 17th century.As proof of its authenticity,Rina 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.Sara later sold the vase to Lise,after telling Lise the story of the vase as told to her by Rina.After Lise purchased the vase,she discovered it to be a reproduction of the original,and of very little value. -Rina is liable to Sara in tort for fraudulent misrepresentation of the vase if she knew the vase was only a reproduction,and the paper a forgery.

John was indebted to Stan on a loan for $1,000.Stan assigned John's promise to pay to Bob. -Payment by John to Stan of the $1,000 before notice in writing of the assignment was given to John would require Bob to recover the payment from Stan,as he could not sue John for the money.

Sarah is suing her lawyer,Tom Takeitall,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. -Oswald bought a variety-store franchise because he thought that its position on a bus route near some high-rise apartments would make it very lucrative.He had misread the transit map,however,for the bus ran along the street parallel to the one the store was on,and the occupants of the high rises usually shopped at a store on that street.Since Oswald has made a mistake of fact,the court will grant him rescission of the franchise contract.

Johnson 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 company to terminate the contract on 30 days' written notice.Johnson finds that Brine Co.is too slow in paying its bills and too quick to question quality.On March 1,Johnson Ltd.gives Brine Co.notice in writing that the contract will end on March 31.Brine Co.insists that the 30 days' notice clause means 30 working days,not 30 calendar days,and thus Johnson must supply Brine Co.until April 1.Johnson refuses.Brine Co.loses two weeks of production when its supply of bottles runs out and sues Johnson for breach of contract. -Based on the above scenario,which is the most correct?

Harvey sold a quantity of his hand-carved bird houses to Keaton's Ltd. ,stipulating in the contract that they were not be to resold for less than a stated price,so that Keaton's would not cause him to lose business when he sold them direct at craft fairs and shows.Keaton's found it could not sell them,so the company resold them to Tom Terrific,a discounter,for the minimum price stipulated in the Harvey-Keaton's contract.Tom Terrific then sold them at an even lower price as a loss leader since they had just become very popular. Discuss whether or not Harvey,whose own sales are now slumping,can sue Tom Terrific.

In the presence of several witnesses,Quentin verbally agreed to purchase Trevor's farm for $175,000.The next day,Trevor changed his mind,and refused to sell the farm to Quentin.On the strength of the verbal agreement of purchase and sale made in the presence of witnesses,Quentin sued Trevor for breach of contract,and for a decree of specific performance to compel Trevor to sell him the farm. -The verbal agreement is valid and enforceable if the witnesses testify in court that an agreement of purchase and sale was made.

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. -Sigmund has been named as executor of his father's estate.Sigmund's father was a very wealthy man who had made a lot of money in real estate and then reinvested his money in mutual funds,and other long-term investments.The finances were in a position to be quickly liquidated.Since his father's death,bills have been piling up and creditors are starting to knock on his door.Sigmund has decided that because there is no way to utilize his father's money in the near future,he will pay the debts out of his own pocket and be reimbursed later from his father's estate.Sigmund is allowed to do this,but must clearly state the intention in writing as outlined in the Statute of Frauds.

Fraudulent misrepresentation renders a contract void ab initio.

Deirdre bought a secondhand car from Honest Harry's Autos after being assured by Harry,in response to her questions,that the car had been driven only in good weather by the little old lady from whom he had purchased it.He claimed that was why its mileage was so low,and that it had never,according to the little old lady,had so much as a scratch."That's excellent," said Deirdre."If it had been otherwise,I wouldn't have bought it." Deirdre soon began having trouble with the car pulling to one side when she applied the brakes,so she took it into the garage for a wheel alignment.The mechanic said "Why on earth would you buy this old heap? Granny Moses,that wild old lady,drove that thing like a madwoman,and it's never been the same since her last crash." A)Assuming that Honest Harry had also been fooled by Grandma Moses,what rights would he and Deirdre each have? B)Suppose Honest Harry found out after he sold the car to Deirdre that he had been cheated by Grandma Moses,but decided not to tell Deirdre.How would that affect Deirdre's rights and why?

Hughes and Martin discussed the possibility of Martin entering the employ of Hughes as the general manager of Hughes's firm.A written contract was prepared and signed by the parties on December 1,1989.The contract provided for a salary of $3,000 per month,and specified that the contract was to run for a period of two years from January 2,1990.On December 28,1989,Hughes notified Martin that he was cancelling the contract.Martin sued Hughes immediately. -The Statute of Frauds requires the contract to be in writing,and signed,to be enforceable by Martin against Hughes.

Marion buys a very expensive television set as a gift for her mother.In the store,she explains that it is a gift to reconcile her mother to the fact that she is emigrating to Australia and to give her some company once Marion leaves.Shortly after Marion leaves,the television stops functioning and,despite heroic efforts by the TV repairman,it never works again.Marion's mother cannot get a refund from the store,so she brings an action for breach of contract.

Carl agrees to buy a refrigerator from his local appliance store under an instalment 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.