Exam 9: The End of the Contractual Relationship

A condition precedent is a term of a contract that will bring that contract to an end when the specified condition is met.

Which of the following statements regarding novation is false?

A breach of warranty allows a victim to sue for damages, but they must go through with their obligations under the contract.

The courts prefer to grant an equitable remedy where a breach of contract has taken place.

When Mr. George sold his house, he rented an apartment and was forced to store some furniture until he bought another house. He attended the downtown office of Security Warehousing Ltd. and entered into a bailment contract that promised to safeguard the furniture. Four months later, his things were stolen from the warehouse, and when he asked for compensation for his loss, the company admitted it was in breach of contract, but said it was exempt from liability because of an exemption clause posted on the wall of the storage area where George had taken the furniture. The sign read "Not liable for loss due to fire or water." On these facts, which of the following would be his least successful argument to nullify the exemption clause?

On the February 1, Smyth contracted to buy Dupont's van. They had agreed that Smyth would pay the price of $7,000 on March 1 and take delivery and the risk on that date. Smyth then contracted to sell the van in Smithers on March 5 for $7,600. On February 22, Dupont called Smyth and said he wasn't going to sell it; he decided to keep it. On these facts, which of the following is false?

Where one party refuses to perform his contractual obligations, what is the risk that the second party runs if he continues to press the first party to perform?

Explain how the principle of remoteness affects the availability of damages in a breach of contract action.

Smedlap, a trucker, and Dewdney, a farmer, entered into a contract under which Smedlap agreed to haul all of Dewdney's 2011 pumpkin crop to market in time for the Halloween sales. However, the day before Smedlap was to pick up the pumpkins, he called Dewdney and told him that, since he had received such a good offer to buy his truck, he had sold it and therefore was not able to haul Dewdney's pumpkins. There was not enough time for Smedlap to buy another truck, but he was sure that Dewdney could make other arrangements and he hoped that he hadn't unduly inconvenienced him. Unfortunately, Dewdney was not able to make arrangements in time for the Halloween market, and instead he had to sell his crop to a pie-filling canner for much less than he could reasonably have expected at the market. Furthermore, the market owners were so disappointed by Dewdney's failure to deliver that they refused to give him their usual order for Christmas turkeys, in contrast to previous years, where this had generated his major income for the year. He was forced to find another outlet for his turkeys, and again he ended up selling to commercial processors for a substantially lower price. As a result of these two events, Dewdney was unable to keep up his mortgage payments on the farm and eventually he lost it to the bank in a foreclosure action. Dewdney is now suing Smedlap to recover these losses. Identify the correct statement with respect to the question of whether Smedlap's conduct was a breach of contract.

Courts enforce exemption clauses because it is assumed that they reflect the will of the parties to the contract.

A person who breaches a contract is responsible for all of the loss that flows from the breach, no matter how unforeseeable.

The victim of a breach cannot recover damages that he could have avoided if he had made a reasonable effort.

Which of the following is false with regard to ending a contract by agreement?

If neighbours have a contract agreeing not to erect a building that blocks the other's view, which remedy might the court impose if that agreement is breached?

In all but one of the following situations, the contract is frustrated. Identify the exception.

Discuss frustration in contract law and indicate when it is available and how and why it has been modified by statute.

The purpose of damages in contract law is to put the victim in the position he would have been in had the contract been properly performed.

The Frustrated Contracts Act today requires that when a deposit is paid, the costs incurred can be split out of the deposit.

Indicate any limitations on the availability of specific performance and injunctions.

Jones entered into a contract to purchase a 1957 Edsel automobile from Smith for $2,000. Unknown to Smith, Jones had an opportunity to resell that car for $5,000 to Brown, who wanted to use it as a prop in a movie being shot in town. Before the car was delivered and payment made, it was destroyed by fire, when one of Smith's employees carelessly spilled a can of gasoline in the garage where the car was kept. If the court found that the normal market value for such a vehicle was only $3,000, which of the following statements is correct with respect to the appropriate remedy that should be awarded by the court for such a breach of contract?