Exam 11: The Extent of Contractual Rights

Red Stripe Beer Ltd., located in Kingston, Jamaica enters into a sales contract to sell beer to the Manitoba Liquor Board. The contract the beer will be sold for a price of $4 per 12-bottle case plus transportation and delivery costs. The Manitoba Liquor Board receives 200 cases and an invoice for $800. It writes a cheque for JMD$800 (approximately CDN$400). Red Stripe replied saying the $4 price is in Canadian currency, not Jamaican currency. What is the effect of the flaw on the agreement?

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. It will be up to Sarah Burns to prove on the balance of probabilities that she was unduly influenced by Tom Lachey.

A met B while shopping, and in the course of conversation, mentioned that he had a motorcycle for sale. B was familiar with A's motorcycle, and offered to purchase it for $500. A accepted the offer, and A and B walked to A's home to get the motorcycle. When they reached A's house, they were told by A's father that the motorcycle had been stolen earlier in the day, and was subsequently found by the police in a badly damaged and burned condition in a local stone quarry. B may avoid the contract on the basis that the parties had made a mistake as to the existence of the subject matter.

A met B while shopping, and in the course of conversation, mentioned that he had a motorcycle for sale. B was familiar with A's motorcycle, and offered to purchase it for $500. A accepted the offer, and A and B walked to A's home to get the motorcycle. When they reached A's house, they were told by A's father that the motorcycle had been stolen earlier in the day, and was subsequently found by the police in a badly damaged and burned condition in a local stone quarry. B is bound in contract, and must purchase the motorcycle even though it is badly damaged.

Fraudulent misrepresentation renders a contract void ab initio.

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,

Bev and Renee moved to a large farm they recently purchased. The couple wish to subdivide some of the land and sell a lot. They contracted a local surveyor who completed the survey of the perspective lot to be severed. After the deal had been completed and the lot sold, the couple was confronted by the new lot owner, and a neighbour of the farmer. They produced an older deed showing the newly severed lot belonged to the neighbour's farm and did not belong to Bev and Renee. With the threat of legal action looming, the couple confronted the surveyor who told them they cannot sue him because he is an unlicensed professional, and is free from any responsibility for the services he renders.

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

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.

ABC Construction Co. was building a large condominium complex in two phases. Phase 1 was to commence immediately and construction of Phase 2 would get under way once a minimum of 50% of the Phase 1 units had been presold. ABC had asked for bids for certain aspects of the construction project. Company X had bid on the stucco work and Company Y on the drywall. Both bids were accepted by ABC and the respective contracts awarded. Moreover, ABC used the bids to prepare its budgeting for the project and to acquire its financing. Shortly after commencement of Phase 1, Company X ran into financial difficulties and was forced to withdraw from the project. ABC then approached Company Y with a request for a bid on the work which Company X could no longer complete. ABC emphasized the urgency to move on with Phase 1, which was falling behind schedule, and requested Company Y's bid as quickly as possible. Company Y believed from the conversations it had with various representatives of ABC that it was to quote only on Phase 1. ABC accepted Company Y's bid as it was very close to the prior bid of Company X. Sometime later it became apparent that ABC expected Company Y to do all of the stucco work on both phases of the project for the bid price. The president of Company Y contacted the president of Company X to inquire what X had understood the bid terms to be. X's president replied that he had been unclear at the time just what he was bidding on but that he had submitted a bid for one phase only. In fact, he mentioned to Y's president that if ABC had taken even a brief look at his bid, it would have realized that the bid would have been substantially below cost if it were for both phases. After this conversation, Company Y undertook the further work on Phase 2 but insisted on additional payment. ABC contended that the bid was to be for both phases, and brought legal action for breach of contract against Company Y. Company Y countered with a claim for the money owing for Phase 2. Discuss the legal issues which arise as a result of these facts and the principles of law each party will rely on.

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

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 is married to Tom Lachey, she cannot sue him for undue influence.

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, there is a rebuttable presumption of undue influence, because the purchaser was George's physician.

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. Banya is liable to Rob in tort for fraudulent misrepresentation of the vase if he knew the vase was only a reproduction, and the paper a forgery.

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

A tort that arises when a party suffers damage by acting upon a false representation made by a party, with the intention of deceiving the other is called

Fronia, a neighbour of David, wished to borrow a sum of money from a local bank. David was quite wealthy but elderly, with very poor eye sight. He frequently requested Fronia to read his newspaper to him when Fronia would drop by for a visit because reading was exceedingly difficult for him. One evening, Fronia placed a paper before David 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 David to sign to the paper to satisfy this requirement. David trusted his friend Fronia, and signed the paper at his request without reading it. Unknown to David, the paper was a guarantee of Fronia's indebtedness, and not a letter of reference, and Fronia later defaulted on her debt.

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,

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. Since Sunjai did what was reasonable to deal with her own inability to read, she could raise the defence of non est factum to an action by Patrice to get possession of the farm.