BLAW 310 Business Law For Terms And Goods

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06-01-2020

Questions:

1.You are a collector of Martin guitars. You found one for sale that you thought was manufactured in 1954. You asked the seller, who had inherited it from his father, when it was manufactured. He replied that he did not know. The serial number was not legible so you could not check it out that way. You bought the guitar anyway, thinking it was a 1954 model. You subsequently found out it was manufactured in 1956, making it worth much less than you paid for it. Discuss any contractual remedies for mistake AND misrepresentation you might have against the seller.

2 John saw an ad on Craig’s List for a used sit upon tractor mower. He contacted Cheryl who was selling it. He tried it out and was happy with it. He gave her the $400 she was asking for it. Cheryl typed out a Bill of Sale and signed it. Three days later the police arrived at John’s door. They told him the mower had been stolen, and he would have to return it to the rightful owner. Discuss John’s legal situation concerning ownership.

3. Janine sold her women’s clothing store to Yvonne. As part of the purchase agreement, Janine agreed that she “would not engage directly or indirectly in any retail business of any sort within a one-mile radius of the store for a period of five years”. Six months later Janine wants to open up a men’s clothing store and asks you about the validity of the clause she signed. Advise her.

4. On January 15, Jimmy signed a contract to sell his Picasso drawing to Marion for $115,000. The parties were to meet at Jimmy’s residence at 4 p.m. on February 1 and Marion was to give Jimmy a bank draft for the full purchase price, and in return Marion would get the drawing. Marion has heard a rumour that Jimmy has already delivered the drawing to another buyer, who offered and paid an extra $10,000 for the drawing. Marion has not seen or heard from Jimmy since they signed the original agreement. Marion still wants the drawing or damages if she does not get it. Assume it is now the morning of February 1. What should Marion do and why?

5. Sherwin went to Collegiate Sports Ltd. with his dad. His dad told the sales clerk that he wanted some shoes for Sherwin suitable for playing squash. The sales clerk however unknowingly sold them a pair of running shoes suitable only for jogging. His dad paid by cash. That evening, wearing the new shoes while playing squash, Sherwin broke his ankle. In the ensuing lawsuit, the statement of claim referred to the provisions of the Sale of Goods Act. Which ONE of the following is true if it were proven that the shoes were inappropriate and the cause of the injury?
a.Sherwin could win for breach of contract because he made known the purpose for which he wanted the shoes to a shoe dealer.
b.Sherwin's father would be the proper plaintiff in this action and could win for breach of contract because he made known the purpose for which he wanted the goods and the goods were not fit for the purpose.
c.This is a "buyer beware" situation and there would be no remedy for anyone.
d.This is not a sale of goods situation because Sherwin’s father paid by cash.

6. John saw a lawnmower he liked at Bad Billy’s House of Mowers Ltd. He paid for it with a credit card and the clerk gave him the sales slip. As he was wheeling it out the door the clerk came running after him and stated she had forgotten to give him the “Terms of Sale Document”. John took the paper and stuffed it in his pocket. The next day he was using the lawnmower when it exploded. Part of the lawnmower broke off in the explosion and crashed through his front house window necessitating $1000 in repairs. When John went back to the store looking for damages, Bad Billy pointed to a clause in the Terms of Sale Document which stated:
“Notwithstanding any other terms of this sale, the maximum amount the seller is responsible for by way of direct or incidental damage caused by malfunction of the equipment is $10.”
Bad Billy gave him a new lawnmower and $10 and said “Y’all have a nice day now, ya hear?” John is not pleased and wants to sue. What is the best argument John can make that he is not bound by this clause?

7. Patrick Sarsfield wanted to buy Edward Carson’s hockey stick manufacturing business. They had a number of meetings personally and with their accountants. They agreed on a purchase price of $225,000 for the plant, equipment and inventory, with a closing date of December 1 (assume today’s date is October 1); however, they could not agree on the price for the company’s specialized computer program and equipment, a very important part of the business. Sarsfield’s accountants thought the program and equipment was only worth about $50,00 while Carson’s accountants valued it at around $350,000. In order to move things along, Sarsfield and Carson agreed in writing to the sale and purchase of the business. The agreement stated that all the assets of the business would be transferred on December 1, and Sarsfield would pay $225,000. The parties would then sit down on December 1 and agree to a price for the computer program and equipment. After the agreement was signed, Carson decided he had made a bad deal and wanted to get out of the agreement. On these facts, what argument can be made to allow him to do this and why?

8. You were interested in buying a rare Fender Telecaster 1954 electric guitar. They generally sell for about $5,000. You heard about a musician who had one for sale and who was in desperate need of rent money. You offered her $2500 cash for the guitar and she accepted the offer. You were to meet in a week to exchange the cash for the guitar. Two days before you were to meet her, you got a letter from a law school legal advice centre stating they were acting for the musician and there was no contract as the purchase price was for far less than the guitar was worth. Does the letter set out the law correctly? Explain with reasons.

9. You went looking for a used car at “Jimmy the Joker’s” used car lot. The sign on a car you liked stated it was for sale for $3500. You offered $3000 cash for delivery right away and Jimmy replied "Well that looks like a deal to me." When you went into the office to sign the papers, however Jimmy changed his mind and refused to sell it to you, saying "Hey I was only joking when I said yes, I had no intention to sell it to you, that’s why they call me Jimmy the Joker!" What is the likelihood of success if Jimmy pleads that he had no intention? Explain?

Answer:

Question 1

Issue: Whether a pre-contractual statement is a term or a mere representation.

Rule: Where one party relies on the statement made by the knowledgeable party, the statement is interpreted as a term. Where the statement is the other party uses its own judgement in deciding whether to enter into the contract or not. The statements are interpreted as mere representations as the other party do not rely on them in changing the position.

Application: The seller clearly stated that he had no knowledge on when the guitar was manufactured. In this case, it was up to me to examine whether I should buy it or not. The fact that I decided to buy it without knowing the model was an independent decision that was not induced by the seller’s statement.

Conclusion: There is no remedy as the misrepresentation did not cause reliance. The seller already stated that he had no knowledge regarding the model, but I decided to buy it anyway.

Question 2

Issue: Right to sell.

Rule: There is always an implied condition in all contracts of sale that every seller of goods can only sell goods that he/she owns. The seller must have the right to transfer title of the goods before they pass to the buyer. Where the goods were stolen, the seller would be in breach of these terms and the goods would be returned back to the true owner as the true owner still retained the title. The person who stole the goods must then return all the money to the buyer and cannot charge for any benefit the buyer had earned before the goods were recovered.

Application: Cheryl had no right to sell the tractor, and therefore the ownership did not pass to John. Also, Cheryl cannot charge any amount on the days the tractor was used.

Conclusion: Ownership of the car did not pass to John since Cheryl had no right of ownership, and no right to sell. John should get back all the money.

Question 3

Issue: Enforceability of non-compete agreement.

Rule: In an agreement for the sale of the business, a non-compete agreement is valid unless the seller provides grounds for its exemption. These grounds are a long duration and different geographical location. In most cases, the courts find it reasonable for a non-compete to extend to five years especially the one that involve a sale of business.

Application: A duration of five years limitation on Janine would seem reasonable to court for a limitation. Also, the one-mile radius is reasonable for a limitation.

Conclusion: The limitation is valid and Janine cannot put up a similar business for up to 5 years within a one-mile radius.

Question 4

Issue: Breach of a sale agreement.

Rule: Where a contract is breached, the innocent party can elect an action suing the other party for breach and claim for the damages. In section 49 of the sale of goods act. The acts state that

“49 (1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery.”(1)

Subsection (2) provides that the damages to be recovered by the buyer are those resuling directly from the breach (1). Under subsection (3), the buyer can get the goods from the market and then sue for the difference in price (1).

Application: Under section 49, Marion should sue for the breach of contract and claim the loss that directly arises from the breach. She can also get the drawing from the market and sue for price difference.

Conclusion: Marion should sue for breach of contract.

Question 5:

The answer is B

Question 6:

There is a standing rule that the exclusion clause must be incorporated in the contract. Limitation or exclusion clauses cannot be added to the contract when it has been executed.

Question 7:

There was no binding agreement since the parties agreed on some but not all matters. The only reequipment was that both parties should negotiate good faith over the remaining mattes of the program. In addition, there was no obligation that the future negotiations were to end into a legally binding agreement.

Question 8:

The contract was unenforceable on the basis of unconscionability. The principles of unconscionability bar one party into a contract from attaining its benefit if one of the parties was weak, and there was a proof of inequality in the bargaining power.

Question 9:

In law, there is always an intention to create a legal relationship in business contexts unless there come grounds for rebutting this presumption. The main grounds for the exemption of this presumption is that the parties already had a written agreement not to enforce the agreement. The second grounds of rebutting the presumption is when the facts of the case demonstrate that both parties contemplated that the negotiations were not going to result to a binding agreement. However, for this case, Jimmy has no likelihood of rebutting assumption because the two requirements are not available.

Bibliography

Sale of Goods Act, R.S.O. 1990, c. S.1. 1989.

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