1. Leonard purchased an unconstructed condominium in a large development. The contract stated that delivery of the completed condo was to be on a date set by the developer before February 1, 2010. Construction proceeded on schedule except on April 25, 2009, the whole development burned to the ground. After spending some time looking for the cause of the fire, the developer started the process of rebuilding in October 2009. It looks like the condo will be delivered about a year later than originally anticipated. Is Leonard bound by the contract under these circumstances? Does it matter if the fire was caused by the developer's negligence?26
2. John chartered a large ship from Rent-a-Boat Ltd. The duration of the charter was 24 months, and it was a term of the contract that Rent-a-Boat would provide a seaworthy ship and supply John with competent engine-room staff. Immediately, there were problems. For example, due to the ship's engine being old and its engine-room staff being inexperienced, the ship was in repair for the first 20 weeks of the charter. In week 18, John advised Rent-a-Boat that its breaches of contract
permitted him to end the contract and sue for damages. Is John correct? What remedy is John entitled to and why?
3. Susan, a law professor, was in Israel when her cellphone was stolen from her home in Toronto. Upon her return, Rogers, the cellphone service provider, advised that $12 000 in calls had been made from that phone and she was responsible for payment. Susan replied that she would not pay, since those calls were unauthorized and had been made from her phone after it had been stolen. In response, Rogers, among other actions, cut off her young son's cellphone service. The son's phone had been acquired by Susan for safety reasons since he would be taking the subway, alone, to school for the first time starting in September. Susan was responsible for bills associated with her son's cellphone, but the cellphone was held under a separate contract.
A judge ultimately determined that Rogers was in breach of contract when it cut off her son's phone service, since it had no legal reason to do so. Among other heads of damage, the judge awarded Susan $612 in damages for “lost wages” because she had to drive her son to school while his cellphone was blocked. Do you think Susan's mitigation was reasonable? What else could she have done? Do you think that Rogers should appeal this decision? Why or why not?27
4. Atlantic Fertilizer (AF) operates a fertilizer plant in New Brunswick. AF made a major sale to the government of Togo in Africa and engaged Pearl Shipping (PS) to transport the fertilizer to Togo for a fee of $60 000. The contract between AF and PS specified that AF would deliver the cargo to PS for loading on its ship between 25 and 31 March and that AF would pay
$1000 (in addition to the shipping charges) for each day after 31 March that the cargo was delayed. AF had difficulty in filling the large order in its plant and notified PS that delivery would be sometime after 31 March.28
PS is contemplating AF's message and deciding how it should react. Options under consideration are to wait for AF to deliver and add the $1000 daily charge to the bill, give AF a firm date by which it must deliver, or terminate the contract with AF and seek another cargo for its ship. Which options are legally available to PS? Which should PS choose?
5. ABC Ltd. was in a contract to supply 1000 widgets at $1 each to XYZ Ltd. by a specified date. Due to a mechanical failure at its factory, ABC Ltd. cannot fill the order on time and has advised XYZ Ltd. to expect delivery to be two months late. XYZ Ltd. planned to use the widgets as components in a machine that it had already contracted to sell for an
anticipated profit of $30 000. It cannot wait the two months without jeopardizing that sale. What is XYZ Ltd. obligated to do now? What if the only other source for replacement widgets is from a manufacturer that is proposing to sell them at an exorbitant sum? What other costs can XYZ Ltd. seek to recover?
6. XYZ Ltd. entered into a contract with ABC Ltd. for the supply of resin which XYZ Ltd. needed in order to produce pipe necessary for a large pipeline. ABC Ltd. made the business decision to supply defective resin to XYZ Ltd. and drafted the contract between the parties to protect itself from liability in relation to that defect as follows:
XYZ Ltd. assumes all responsibility and liability for loss or damage arising from the use of the resin supplied under this contract herein and acknowledges that ABC Ltd.'s liability is limited to the selling price of the resin.
Another clause stated:
XYZ Ltd. to notify ABC Ltd. of any objection to the resin supplied within 30 days. Failure to provide such notice constitutes unqualified acceptance and waiver of all claims.
ABC Ltd. knew that the resin was dangerous and would allow natural gas to escape. In fact, this is exactly what happened.
There was an explosion in the pipeline for which XYZ Ltd. supplied pipe and which XYZ Ltd. fixed at great cost. When it asked ABC Ltd. for help, ABC Ltd. refused to take any responsibility, pointing to the exclusion clauses. Due to negative publicity surrounding the gas pipe leaks, XYZ Ltd. lost both its reputation and financial viability. Assuming that the supply of defective was a breach of contract, do you think ABC Ltd. will be able to rely on the exclusion clauses above? On what basis?29
7. Imperial Brass Ltd. wanted to computerize all of its systems. Jacob Electric Systems Ltd. presented Imperial with a proposal that met Imperial's needs. In August, Imperial accepted the proposal, along with Jacob's “tentative” schedule for implementation, which led Imperial to expect a total computerized operation by mid-January, with the possibility of a 30-day extension. In October, it became clear that there were problems with the software being developed, and Imperial asked for corrections to be made. At the end of October, the hardware and two software programs were delivered to Imperial, and Imperial's employees attempted to begin to use the programs. Very little training was provided, however, and there were major problems with the computer screens freezing and data being lost. More programs were delivered in January, along with some operating instructions, but Imperial's employees were still unable to make any use of the programs they had. The programmer whom Jacob assigned to Imperial's contract, Mr. Sharma, continued to work on the remaining programs. In May, however, Jacob informed Imperial that Sharma would be leaving the company, and Imperial informed Jacob that if that were to happen, given the problems and delays the company had already experienced, Imperial would be forced to end the contract with Jacob's company.30 Is the breach by Jacob's company serious enough to permit the innocent party, Imperial, to treat the contract as at an end?
8. Canadian Pacific Airlines (CP) agreed to safely transport the Newells' two pet dogs on a flight from Toronto to Mexico City. The Newells were concerned about the safety and welfare of their dogs, but CP's employees reassured them that the dogs would be safe in the cargo compartment of the aircraft and reported to them before they boarded that their dogs had been safely placed in the cargo area. When the flight arrived in Mexico City, one dog was dead and the other was comatose.
The Newells sued CP for general damages to compensate them for “anguish, loss of enjoyment of life and sadness” that they allege resulted from the breach of contract.31 Are the Newells entitled to anything other than compensation for their direct financial loss (i.e., the monetary value of the dogs)? If so, what would be an adequate amount to compensate for the mental distress suffered by the Newells?
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Footnotes
1. Edwin Peel, Treitel: The Law of Contract, 12th ed (London: Sweet & Maxwell, 2007) at 924.
2. NAV Canada v Greater Fredericton Airport Authority Inc, 2008 NBCA 28.
3. If they choose this route, the Owens still have a duty to mitigate, as discussed later in this chapter.
4. GHL Fridman, The Law of Contract in Canada, 5th ed (Toronto: Thomson Carswell, 2006) at 685.
5. Ibid at 686. Note that in certain jurisdictions, there is also legislation related to assignments. These are discussed by Fridman, ibid at 688 and following.
6. Ibid at 643 and following.
7. Howell v Coupland (1876), 1 QBD 258 (CA).
8. For a discussion of statute law applying to frustration, see Fridman, supra note 4 at 672 and following.
9. There are a number of ways in which someone who is not a party to a contract (called a third party) may acquire an enforceable benefit, but this chapter discusses only one of them, in the employment context.
11. The Consumer Protection Act, SS 1996, c C-30.1, s 55. See too Consumer Product Warranty and Liability Act, SNB 1978, c C-18.1, s 23.
12. This analysis is based on John McCamus, The Law of Contracts (Toronto: Irwin Law, 2005) at 635 and cases cited therein.
13. Wickman Machine Tool Sales Ltd v Schuler, [1974] AC 235 (HL).
16. Whiten v Pilot Insurance Co, 2002 SCC 18 at para 36. For further discussion of the Whiten case, see Chapter 28.
17. It is beyond the scope of this book to discuss whether the test for remoteness is stricter in contract than it is in tort.
P. 218
18. (1854), 9 Exch 341.
19. Liquidated damages clauses are discussed in Chapter 7.
20. For a discussion and excerpts of relevant case law concerning equitable remedies and defences thereto, see Stephanie Ben-Ishai and David R Percy, eds, Contracts: Cases and Commentaries, 8th ed (Toronto: Carswell, 2009) at 902 and following.
21. See Castle v Wilkinson (1870), 5 LR Ch App 534.
22. See Chapter 8.
23. Contractual quantum meruit has already been discussed in Chapter 7.
24. GHL Fridman, “Quantum Meruit” (1999) 37 Alta L Rev 38.
10. Those who are not party to a contract containing exclusion clauses should not automatically assume that they can rely on those clauses notwithstanding the outcome in London Drugs. In Haldane Products Inc v United Parcel Service (1999), 103 OTC 306 (Sup Ct Just), for example, the plaintiff contracted with UPS to deliver industrial sewing needles to British Columbia. The contract contained a limitation of liability clause but there was no stipulation that anyone other than UPS employees would discharge UPS contractual obligations. UPS' subcontractor—who was transporting a UPS trailer containing the package—failed to deliver due to a fire in the trailer. The subcontractor was found liable for over $40 000 because the court refused to allow it to shelter under the exclusion clause in the UPS–Haldane contract.
14. For discussion in this text regarding the difference between Contract A and Contract B, see discussion of R v Ron Engineering & Construction Ltd, [1981] 1 SCR 111 in Chapter 6.
15. (1978), 83 DLR (3d) 400 (Ont CA).
25. For a discussion of quantum, see Shannon Kathleen O'Byrne, “Damages for Mental Distress and Other Intangible Loss in a Breach of Contract Action” (2005) 28:2 Dal LJ 311.
26. Based, in part, on Fishman v Wilderness Ridge at Stewart Creek Inc, 2010 ABCA 345.
27. Based, in part, on Drummond v Rogers Wireless, [2007] OJ No 1407; and John Jaffey, “Law prof wins punitive damages against Rogers in small claims”, The Lawyers Weekly (27 April 2007) 7.
28. Based, in part, on Armada Lines Ltd v Chaleur Fertilizers Ltd (1994), 170 NR 372 (FCA), rev'd [1997] 2 SCR 617.
29. Based, in part, on Plas Tex Canada Ltd v Dow Chemical of Canada Ltd, 2004 ABCA 309.
30. Based, in part, on Imperial Brass Ltd v Jacob Electric Systems Ltd (1989), 72 OR (2d) 17 (HCtJ).
31. Based, in part, on Newell et al v Canadian Pacific Airlines Ltd (1977), 14 OR (2d) 752 (Co Ct J).
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