Exam 10: Failure to Create an Enforceable Contract

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 installments, one to the bank and one to him to make up for this month.

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.

Mary verbally agrees to purchase Carrie's cottage for $75,000 and gives her a deposit cheque for $7,500. Carrie later sends her a letter thanking her for the cheque and confirming all the details of the contract. Mary later refuses to go through with the deal.

Greentree Financing Ltd. enters into an agreement to lend $20,000 to Mark for the purchase of a boat. On the loan application Mark provided the following information: address, telephone, social insurance number, employer, annual earnings and banking information. Mark agreed to the collection of the information for the purpose of assessing his suitability for the loan. What steps must Greentree take to protect Mark's information?

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. B may successfully plead the Statute of Frauds as a defence.

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 is called an indemnity.

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 the Statute of Frauds as a defence.

Raimondo has been named as executor of his father's estate. Raimondo'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. This left few of his finances 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. Raimondo 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. Raimondo is allowed to do this, but must clearly state the intention in writing as outlined in the Statute of Frauds.

Martin enters into a verbal contract with Marlowe Ltd. to investigate their operations and their accounting systems, make recommendations as to how to improve them, and help implement the changes Marlowe Ltd. accepts. In the negotiations, Martin makes it clear that he cannot give Marlowe Ltd. a definite timetable and that it is clear that the whole process will take longer than a year. Part of their agreement is that either party may terminate the contract on 60 days' written notice to the other if the work is progressing unsatisfactorily. In this situation,

Sandra offered to purchase Jean's car for $3,500, and Jean accepted this offer. This contract was reduced to writing and signed by the parties, when Sandra discovered that Jean was searching for an evening gown to wear to a social affair some months in the future. Sandra offered then to make a dress for Jean, if Jean would accept $3,200 for the car. Jean agreed to the modification and in return for Sandra's cheque in the amount of $3,200 gave her the keys to her car. Sandra finished the dress in time for the social event; however Jean was not pleased with the final result, and declaring it worthless to her, returned the dress to Sandra and brought an action on the face of the written contract for the $300 balance outstanding. Discuss the legal issues raised in this fact situation, its likely resolution, and treat explicitly how Sandra may counter in procedural terms with a defence against the document for $3,500, which is clear on its face and bears her signature.

The act of putting a contract under seal was born in the King's Courts of the 13^th century. It was used as an expression of the intent to be bound by the person making the contract to which the seal was affixed. Today in some provinces formal agreements such as power of attorney and a deed of land must bear a seal to be made enforceable.

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 unenforceable.

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." The contract of guarantee is subject to the Statute of Frauds.