Legal Risk Mgmt Canada
Legal Risk Management Canada
Assignment 2, Case 1
In case 1, Smith had made an offer to sell the property to Jones, giving him until nine o’clock on Friday morning to consider the offer and indicate his acceptance or lack thereof. However, on Thursday, Smith entered into a contract with Brown and sold him the said property before the period given to Jones to consider the offer had lapsed. Jones then decided to accept the offer upon hearing that Smith had already sold the property to Brown and decided to sue when Smith informed him that the said property had already been sold. In this case, Jones is entitled to win his action against Smith for the breach of contract. The question, in this case, is whether the contract between Smith and Jones is a valid and enforceable one. This can only be determined by evaluating the basic elements of a contract, which include an offer, acceptance, consideration, and contractual intention.
In the context of contract law, an offer is an explicit promise to be bound, with the understanding that the terms, as stipulated in the offer, are accepted. The contracting process starts with one party making an offer to another, with the offer becoming legally binding if and when the other party consents to the terms through acceptance. Conversely, acceptance occurs when the offeree agree to the offer through an explicit statement of the act (Goldman and William 156). It is imperative to note that acceptance must be explicit and communicated directly to the promisor or offerer. A person will not be deemed under the law to have accepted an offer simply because she or he has not explicitly rejected it. Consideration is merely something of value, in this case, the property and the money to be exchanged while contractual intention refers to the behavior of the parties that suggests an intention to be bound.
The essence of Smith’s offer, similar to other offers, lies in the fact that it presented an opportunity to the offeree (Jones) that he accepts of rejects it. Jones is entitled to win his action against Smith for the breach of contract because an offer was formed once he accepted the offer, with the contract creating legally enforceable rights and obligations. An important point to note here is that a contract can only be created if the offer is accepted before the withdrawal or lapse of the offer (Frey and Phyllis 67). A lapse can only occur in three ways. First, if there is a specified time by the offeror within which the offer is to be accepted by the offeree, failure to which the offer is extinguished. Second, when the time within which the offer is to be accepted has not been specified, and the offeree has failed to accept it before the lapse of a “reasonable” duration. In this case, what constitutes a “reasonable” duration is contingent upon the circumstances surrounding the offer.
The third is if parties lose their contractual capacity, through insanity, death, or other reasons recognized under law, before the acceptance of the offer. The offer may also be extinguished if it is revoked or withdrawn by the offerer, and revocation is deemed effective only if the offeree receives notice of the same. In the case under investigation, Jones accepted Smith’s offer before the lapse of the set time. On his part, Smith decided to sell the property to Brown on Thursday, even though he had given Jones up to nine o’clock on Friday to consider the offer and indicate his acceptance or lack thereof. From the foregoing, it is evident that a lapse did not occur because Jones accepted the offer on Thursday, even though he had up to Friday to communicate his acceptance or rejection of the offer. Also, Smith did not extinguish the offer by way of revocation or withdrawal, and did not care to inform Jones that he had indeed sold the property to Brown.
Two rules apply concerning the acceptance of offers and the formation of a contract. These are that a contract will be formed upon acceptance, and acceptance occurs when the offeror has been notified of the acceptance. Some questions are of critical importance in determining Jones’ entitlement to win his action against Smith for the breach of contract. The first is whether there was acceptance while the second is whether the acceptance occurred before the lapse of the offer. The third question is whether Smith was notified of the acceptance while the fourth is whether Smith, in contracting with Brown, took reasonable care to avoid causing harm to Jones by formally withdrawing or revoking the offer. The answers to the above questions are that there was indeed acceptance of the offer since there was no lapse and that the acceptance was indeed communicated to the offeror. The acceptance of Smith’s offer by Jones created a contract that gave rise to legally enforceable rights and obligations.
The law of negligence demands that the defendant (Smith) takes reasonable care to avoid occasioning harm to the plaintiff (Jones) when such harm can be reasonably foreseen. The decision by Smith to enter into contract selling the property to Brown constituted a foreseeable harm to Jones. Smith should have taken reasonable care to withdraw the offer or revoke it before it lapsed. Instead, he entered into another contract with Brown with the first offer to Jones still pending. In view of the foregoing, it is reasonable to conclude that Jones entitled to win his action against Smith for breach of contract, and depending on the jurisdiction of the court, seek remedies such as the award of damages, rescission of the contract between Smith and Brown, or specific performance. It is important to note that in a court of limited jurisdiction, the likely remedy would be an award damages since rescission, and specific performance fall under equitable remedies, which are often not within the jurisdiction of lower courts.
Assignment 2, Case 2
The facts of the case is that the Sweets refused to settle the outstanding contract fees despite Repair Guys (RG) having performed the contract as agreed, and that RG only accepted part payment, which was considerably less than the amount owed under the contract, because they were experiencing financial difficulties, which the Sweets were aware of. Without a doubt, RG is entitled to recover the rest of the contract amount, notwithstanding the fact that they had agreed that the amount already received would be regarded as full payment. If one party owes another a sum of money and agrees to settle part of this sum, the rule of common law is that partial payment does not constitute good consideration for the promise to give up or forego the balance. Therefore, if the Sweets owed RG $2,000, for instance, and RG accepted $1,000 in satisfaction after the due date, nothing can stop RG from claiming the balance later because there was no consideration from Mrs. Sweet to enforce the promise of RG to accept the partial payment, and because The Sweets were already bound to settle the full amount. In essence, the case between RG and The Sweets is one concerning economic duress.
Duress is defined as the economic or physical force that is used in overriding the freedom of one party to choose whether to contract. As this case illustrates, in the business world, it is not uncommon for a party to be pressurized into an agreement. For instance, in D & C Builders v Rees, a firm in dire financial straights was coerced into accepting part payment in full settlement of the debt owned (Kelly, Ruby, Hammer and John 156s). The case gave rise to the doctrine of economic duress. Today, the challenge in cases of economic duress is differentiating between acceptable commercial pressure and unacceptable economic duress, with the latter capable of rendering a contract voidable. Canadian courts, in keeping with the English traditions, have often adopted the “overborne will” theory that demands that the will or volition of the entity claiming duress be suspended before any claims of duress can be entertained, with the courts often supplementing the overborne will doctrine with a reference to inequality of bargaining power.
This response argues that such as approach is fundamentally flawed and, therefore, should not be followed. This is because the theory of “overborne will” focuses on an inappropriate aspect of the dealing between the weaker and the stronger party. In typical cases of duress, the weak party is never rendered an automaton but proceeds willfully and, therefore, claims of duress will never succeed in such situations when the overborne will theory is to be applied in a strict sense. Contract law should reject the overborne will theory in the same manner it has been rejected under criminal law. It should be apparent that a victim of duress always submits consciously and intentionally (Chen-Wishart 322). If one is given a choice between surrendering $20,000 or being maimed, for instance, his decision to surrender the money would be real indeed, he is aware of what he agrees to, has the intention to agree, and wants to agree. The objection is not that he did not consent, but that he was coerced to consent through illegitimate pressure. Therefore, the protest arises from the nature and tolerability of the choices that the victim is given.
In the case of Repair Guys (RG) versus The Smiths, RG is entitled to recover the rest of the contract amount, even though they agreed that the amount already received would be regarded as payment in full for the principal reason that an alternative to the overborne will theory exists. This alternative approach, which will be termed as a “principled” approach, focuses on the legitimacy of The Smiths’ decision not to settle the full amount within the required time, as well as on the legality of their proposal for part payment, and not on the victim’s (RG) will. This approach addresses the underlying reasons for instituting an economic duress by the victim in the first place. The “principled” approach has already superseded the overborne will theory approach in a number of Commonwealth and English cases and can accommodate extant Canadian cases relating to economic duress in a principled manner.
In D & C Builders v Rees, it was held that the doctrine of partial payment of a debt could not satisfy the whole debt. It was established that by failing to settle the full payment on time, and by offering to pay only part of the agreed sum in full knowledge that D & C Builders were in dire financial difficulties, Mrs. Rees effectively held D & C Builders to ransom (Virgo 213). In this regard, it was held that any alteration of the original agreement between Mrs. Rees and the builders was voidable at the debtor’s instance for duress. The D & C Builders v Rees case is identical to the one between RG and The Sweets. By failing to pay the account, in spite of months of attempts by RG to collect, and by offering to pay an amount, which was considerably less than that owed under the contract, in cash, subject to RG’s agreement that it would be accepted as payment in full, The Sweets effectively held RG to ransom. In point of law, the payment of a lesser sum, be it by cheque of by cash, cannot serve as a discharge of the greater sum. Therefore, any change in the initial agreement between RG and Mr. and Mrs. Sweets is voidable for duress.
Chen-Wishart, Mindy. Contract Law. Oxford, UK: Oxford University Press, 2015. Print.
Frey, Martin A, and Phyllis H. Frey. Essentials of Contract Law. Albany, NY: West/Thomson Learning, 2001. Print.
Goldman, Arnold J, and William D. Sigismond. Business Law: Principles and Practices. Boston, MA: Houghton Mifflin Co, 2013. Print.
Kelly, David, Ruby Hammer, and John Hendy. Business Law. New York, NY: Routledge, 2014. Print.
Virgo, Graham. The Principles of the Law of Restitution. Oxford, UK : Oxford University Press, 2015. Print.