Exam 10: Failure to Create an Enforceable Contract

Joyce's son, Al, borrowed money from Verity Finance. He 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. If Verity, without Joyce's knowledge, extends the time Al has to make the payments but increases the interest rate by ½%, because he explains about his job loss, they could no longer enforce Joyce's promise, regardless of whether or not it was in writing and signed by her.

Painter and Hawe discussed the possibility of Hawe entering the employ of Painter as the general manager of Painter's firm. A written contract was prepared and signed by the parties on December 1^st, 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^nd, 1990. On December 28^th, 1989, Painter notified Hawe that he was cancelling the contract. Hawe sued Painter immediately. The Statute of Frauds requires the contract to be in writing, and signed, to be enforceable by Hawe against Painter.

Painter and Hawe discussed the possibility of Hawe entering the employ of Painter as the general manager of Painter's firm. A written contract was prepared and signed by the parties on December 1^st, 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^nd, 1990. On December 28^th, 1989, Painter notified Hawe that he was cancelling the contract. Hawe sued Painter immediately. When Painter cancelled the contract, Hawe was released from his obligation to perform.

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. Lev insists that they have only reached 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.

Pashi promises, in an unsigned note, to give Neve, her daughter-in-law-to-be, the family jewellery and some share certificates worth $100,000 on the day she marries Pashi's son. If she does not do so, Neve can enforce the agreement since it is evidenced in writing and she, by marrying, gave Pashi consideration for her promise.

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

Joyce's son, Al, borrowed money from Verity Finance. He 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.

X wished to purchase a motor vehicle from Y on credit, but X was unemployed, and Y was hesitant to sell to him for that reason. Z, who was quite wealthy, said to Y: "Sell X the automobile on credit, and if X does not pay you, I will." If Z made the guarantee in writing, and signed the document, the guarantee would not be enforceable until X defaulted on a demand for payment by.

In the presence of several witnesses, A verbally agreed to purchase B's farm for $175,000. The next day, B changed his mind, and refused to sell the farm to A. On the strength of the verbal agreement of purchase and sale made in the presence of witnesses, A sued B for breach of contract and for a decree of specific performance to compel B 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.

The effect of the Statute of Frauds (or any other statutory provision in provinces that have repealed it) is that none of the following may be brought in a court of law unless they are in writing and signed by the party to be charged:

In the presence of several witnesses, A verbally agreed to purchase B's farm for $175,000. The next day, B changed his mind, and refused to sell the farm to A. On the strength of the verbal agreement of purchase and sale made in the presence of witnesses, A sued B for breach of contract and for a decree of specific performance to compel B to sell him the farm. Assuming the verbal agreement is unenforceable, the contract would still exist.

Painter and Hawe discussed the possibility of Hawe entering the employ of Painter as the general manager of Painter's firm. A written contract was prepared and signed by the parties on December 1^st, 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^nd, 1990. On December 28^th, 1989, Painter notified Hawe that he was cancelling the contract. Hawe sued Painter immediately. The Statute of Frauds would render the contract illegal if it was not in writing and signed.

In the presence of several witnesses, A verbally agreed to purchase B's farm for $175,000. The next day, B changed his mind, and refused to sell the farm to A. On the strength of the verbal agreement of purchase and sale made in the presence of witnesses, A sued B for breach of contract and for a decree of specific performance to compel B to sell him the farm. If A had given B $10 in cash as a deposit the agreement would be enforceable.

In the presence of several witnesses, A verbally agreed to purchase B's farm for $25,000. The next day, B changed his mind and refused to sell the farm toA. On the strength of the verbal agreement of purchase and sale in the presence of witnesses, A sued B for breach of contract and for a decree of specific performance to compel B to sell him the farm.

Karen, a marketing consultant, entered into an agreement with Better Life Consumer Products Co. whereby she agreed to assist in test marketing their products for a year. The verbal agreement was made on June 12^th, and Karen was to begin work for the firm on November 1^st of that year. The contract was to terminate on November 1^st of the following year. Better Life offered to prepare a formal agreement for her signature which would be available for signature on her first day of work. However, the August prior to her starting work, Better Life was forced to drop plans to test market their intended products as a result of a patent infringement suit. They notified Karen that there was no need for her services Discuss Karen's rights (if any) and Better Life's position at law.

In the presence of several witnesses, A verbally agreed to purchase B's farm for $175,000. The next day, B changed his mind, and refused to sell the farm to A. On the strength of the verbal agreement of purchase and sale made in the presence of witnesses, A sued B for breach of contract and for a decree of specific performance to compel B to sell him the farm. The verbal agreement is void.

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

Mr. Guimond was teaching his son, Jacques, to drive in the family car when Jacques failed to apply his brakes soon enough and hit the car in front, causing considerable damage. Mr. Bouchard, the driver of the other car, should get Mr. Guimond's promise to pay for his repairs in writing or it will be unenforceable.

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 gallery can successfully answer all of Ravi's case by raising the parol evidence rule.

The Consumer Protection Act says that the parties to a contract must each have a copy of the contract or it will not be enforceable. Tim and Tess go to the Rapacious Furniture Co. to buy a couch. They have saved $500 from their salaries as employees in a sheltered workshop for the developmentally handicapped and do not intend to spend more than that, but the salesman takes advantage of their slower thought processes to fast-talk them into a couch which costs $1,200, the balance of which they must pay for in installments of $50 per month, a sum which is really beyond their means. Having read a book on contract law, the salesman makes sure that all the formalities are followed when Tim and Tess sign the contract, and he makes sure he gives the couple one copy of the contract and keeps one for Rapacious' files. Tim and Tess realize later that day that they cannot afford the couch and they ask Rapacious to tear up the contract. They are upset to find out that the furniture salesman will not do so. Can you advise them of any way out?