Exam 3: Formation of a Valid Contract

Mr.Martin,who has been declared bankrupt,decided to rent an apartment for $1,600 per month,since his house is to be sold to satisfy his creditors. -He cannot enter into such a contract,since he lacks the capacity to contract except for necessaries.

A computer software company advertised a new organizational program as one of the most "user-friendly" programs of its kind on the market.The Smallville police department used the program and,during operation,the program crashed,losing vital information related to the effectiveness of the department in carrying out its duties.Under the law of contract,what is the software company's position with respect to liability?

The world of commerce requires that the intention to create a legal relationship be proven before any contract can be found to exist between the parties.

Arnold,a professional baseball player,negotiated with the Soxville Eagles for a one-year contract.He was given one week to consider the offer and was to sign it by the opening day of the season,one week away.Arnold,in the meantime,was offered a better contract with the Baxton Bulldogs,which he accepted.On opening day,Arnold walked onto the field in the uniform of Baxton.Soxville can successfully sue Arnold for a breach of contract.

Green,a retailer,placed an advertisement in a local newspaper on May 5 that read: "Special Sale! New 16" portable TV set available for sale to the first 10 customers at my store on May 10 at a sale price of $100 each.Regular Price $199.First come,first served!" Doe was the 10th customer in the store on May 10,but Green refused to sell him a TV set for $100. -If Green had placed a notice on his shop door on May 9 that read: "Sale cancelled," his notice would revoke the offer made in the newspaper on May 5.

Jack,who is 16,makes a contract with Thomas,who is 24,to cut Thomas's lawn all summer. -If Jack breaches the contract,Thomas cannot sue him.

Parker owed Andrew a debt in the amount of $1,000.The debt was payable on June 1. -If Parker offered the $900 on the day before the due date,and Andrew accepted the money as payment in full,at Common Law,he could not later demand the remaining $100.

While suffering the effects of manic-depressive mental illness,Alec ordered 20,000 paper bags,believing that he could sell them to small supermarkets as an ecologically sound marketing device.His doctor then placed him back on his medication,and he was upset to realize what he had done.Trying to make the best of a bad job,he contacted a number of small supermarkets,but they were not interested.Recalling his business school law course,he called the paper bag supplier and cancelled the contract on the grounds that he lacked capacity when he made it.

Mabel,a young woman aged 17,went shopping.She purchased a new coat on credit at a clothing store.Later the same day,she took her expensive watch to a jewellery shop to have a new watch band installed.While in the shop,she purchased on credit an additional watch for herself,and a silver bracelet as a gift for a friend.When the merchants later requested payment,Mabel refused to pay. -The merchant was entitled to a return of the goods sold when Mabel repudiated the agreement to purchase the watch and silver bracelet.

The Queen's Wardrobe,a dressmaking boutique,agrees to make Rhonda's wedding dress for $2,000.The dress is to be ready for her wedding on June 1.On May 14,owner Jane called Rhonda to tell her that the dress would not be ready on time unless Rhonda agreed to pay an extra $500 so that Jane could hire someone to help her finish the lace embroidery.Rhonda is very upset and,feeling that she has no other choice,agrees.When she picks up the dress,she tells Jane that she does not think that it is fair that she should have to pay more than they had agreed upon and refuses to do so.

Nancy was the administrator of her deceased father's estate.Several years before he died,Wilbur,the father,had entered into a lease agreement with an oil exploration company.The company had leased the rights to explore and drill for oil on Wilbur's farm for a period of 20 years.About two years after entering into the lease,the oil company began drilling.According to the terms of the lease,the company was requested to pay Wilbur a basic monthly fee regardless of whether any drilling was underway,and regardless of the outcome of the drilling.In addition,Wilbur was to receive a substantial additional payment if any drilling proved to be profitable.For about six years before his death,Wilbur suffered from a mental illness that had impaired his ability to remember things.While he seemed generally lucid and aware of his actions in present time,he would be unable to remember events that had occurred only an hour before. The oil company was not aware of Wilbur's illness at the time it entered into the lease.It became apparent,however,once drilling was underway as Wilbur did not seem to remember that the company had paid him extra amounts as the result of successful drilling.Nancy,who believes that the oil company can afford to pay more for the lease rights,wishes to void the lease on the basis of her father's mental incapacity,and renegotiate it herself.Discuss the legal principles she will rely upon and the response of the oil company.What would be the likely outcome of Nancy's challenge?

Parker owed Andrew a debt in the amount of $1,000.The debt was payable on June 1. -In Ontario,and in Western Canada under the Mercantile Law Amendment legislation,if Andrew accepted the lesser sum as payment in full on the due date,he would not be entitled to collect the remaining $100.

Zev and John were neighbours.Before Zev left on a holiday,he asked John to "keep an eye on his house." While Zev was on holidays,John noticed that Zev's lawn was in need of cutting,and proceeded to cut the lawn.On Zev's return from his holiday,John demanded $10 for cutting the lawn. -If John was entitled to claim quantum meruit,and the regular price charged by persons who mow lawns in that area was $10,John would probably be awarded $10 by the court.

George was an independent salesman,working sales territories in which various manufacturers did not maintain sales agents.Prior to a trip to northern Manitoba,George informed a manufacturer of small electrical generators he expected to secure an order for 50 generators on this trip.From a more remote community,George was able to send a fax to the manufacturer that,when received,read "Send by air immediately the generators.Must be here by next Thursday." The fax should have read,"three generators" and the mistake was made solely by the fax office.The manufacturer sent 50 generators.Aside from the fact that one of the parties may have a remedy against the fax office,discuss the relevant principles of contract raised here,and determine whether there was no contract,a contract for three generators,or a contract for 50 generators.

Zev and John were neighbours.Before Zev left on a holiday,he asked John to "keep an eye on his house." While Zev was on holidays,John noticed that Zev's lawn was in need of cutting,and proceeded to cut the lawn.On Zev's return from his holiday,John demanded $10 for cutting the lawn. -Zev and John have a binding contract for the cutting of the lawn,because Zev's statement constituted an offer to John to cut the lawn,which John accepted.

It was almost time for the Heeleys to renew the mortgage on their home and they were considering their options.The mortgage was currently held by the Big Bank and the Heeleys were not satisfied with the service they had received from the Big Bank's mortgage staff.Recently,the local radio station had been airing commercials for the Little Bank that suggested that people switch their mortgages to Little Bank to take advantage of better rates and more personal service.As a special incentive,the commercials stated that,for a limited time,for every mortgage over $50,000 brought to Little Bank from another financial institution,Little Bank would give the customer an all-expense-paid trip to Mexico.Feeling in need of a vacation,the Heeleys decided to take advantage of this incentive and made an appointment to see the manager of Little Bank.During their meeting the manager explained that the Mexico trip would be given on mortgages transferred within the next month.The Heeleys mortgage did not expire at Big Bank for another six weeks;however,the manager said it should not be a problem awarding them the trip for having made the commitment within the advertised period to transfer their mortgage.At the end of the six weeks,the Heeleys transferred their mortgage to Little Bank and delivered the paperwork needed by the bank to set up their trip.Several days later the Heeleys received a telephone call from the head office of the Little Bank informing them that they were ineligible to receive the trip as their mortgage had not been transferred within the offer period. Discuss the legal issues that arise as a result of this case.What legal principles might the Heeleys and Little Bank apply to support their respective positions,and what would be the likely result should legal action ensue?

Robert has just mailed a letter of acceptance in response to James's letter offering to sell his hardware store to Robert,when he is knocked down by a car and killed.Jane,Robert's wife and sole heir,wants to run the business,since that is what she and Robert had intended,but James does not believe a woman could run a hardware store and tells her that the deal is off.Discuss Jane's legal position.

Zev and John were neighbours.Before Zev left on a holiday,he asked John to "keep an eye on his house." While Zev was on holidays,John noticed that Zev's lawn was in need of cutting,and proceeded to cut the lawn.On Zev's return from his holiday,John demanded $10 for cutting the lawn. -John would not be entitled to claim anything for his service because his act was gratuitous.

At a computer fair,Porter saw a demonstration by Maxwell of an excellent new accounting software package published by Slyckbyte Co. ,but he felt it was overpriced at $900."At $500" he said,"I would definitely buy it." Maxwell said that she was not authorized to give deals to anyone,not even such a good customer as Porter.Porter bought another package from a different company.Four days later,he received a package from Maxwell that contained the new software and a letter saying that Slyckbyte was happy to give him the discount he had wanted and that Maxwell looked forward to receiving his cheque within the next few days. Discuss whether Porter must pay for the software.

Alliston enters into an agreement with Berkley that,for $2,000,gives him the right to agree to purchase Berkley's screen printing business within the next 30 days for $50,000.If Alliston decides to buy,they agree that the $2,000 will be the down payment on the purchase price.This agreement is an option.