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Midterm Answer Key

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Administrative Studies
ADMS 2610
Richard Gasparini

ADMS2610BSummer2009 Mid-termAnswerKey-30Marks Question 1: Both the issues of equitable-estoppel and adequacy of consideration are raised in this case. The grocery chain will raise an argument that the wholesaler is estopped from now charging the terms of the contract negotiated between the parties. The wholesaler had openly negotiated these terms with Cheap And Save upon which the latter relied in entering into the agreement in calculating the timing and quantity of its purchases. The grocery chain will argue that it relied on the wholesaler's promise of discount to its detriment and would have acted otherwise had it been aware from the outset that the policy gave discounts only for greater quantities Question 2: Students should discuss the intention to create a legal relationship and the elements of offer and acceptance in the contractual sense. They should point out that the intention is a presumption at law, but that the parties' actions toward one another will define the nature of the legal relationship to which they intend to be bound. The discussion should include the importance of the negotiation process and the fact that the conclusion of that process should produce a meeting of the minds of the parties with respect to the terms and conditions that the negotiations produced. The aspects of offer and acceptance are equally important in the formation of an enforceable contract. When assessing the validity of a contract, there must always be an examination of whether the offer was effectively made and accepted thus creating a valid basis for performance of the agreement. Students should point out circumstances in which either the offer was made improperly (i.e. not communicated to the offeree) or was revoked before acceptance was properly made. Similarly, the numerous rules about acceptance should be discussed together with the consequences to the contract's enforceability of inadequate acceptance. Question 3: Michelet can only be found liable after the determination of three factors. The first is whether Rose Asphalt's damages were actually caused by a breach of the contract, the second that the damage was reasonably foreseeable as liable to result from the breach, and finally that Michelet is not protected by an exemption clause. Students may attempt to argue that various aspects of the tendering process make it difficult to suggest that Michelet caused the damages suffered by Rose Asphalt. The line of reasoning tends to be centred around the uncertainty whether Rose Asphalt would have got the contract in the first place. Students suggest that for further reasons such as reliability, the Ministry of Transport might not have awarded them the contract in any event. While this is possible, it is an evidentiary question, and to approach the case answer in this manner is to assume away the question. Students should proceed on the assumption that the damage suffered by Rose Asphalt is very real. Given that, there is no doubt that the failure of timely delivery as per the contract by Michelet caused the loss suffered by Rose Asphalt. The second question is whether the damages were reasonably foreseeable by Michelet as liable to result from the breach. Again, there are evidentiary matters in play; however, the driver was informed that the contents of the envelope was a tender, and that the engineer was prepared to drive the item to the Ministry if necessary. Students will often conclude that since the actual quantum of damages could not be ascertained until after the fact, that somehow these damages weren't unforeseeable. This approach is incorrect. The important factor is that Michelet should be able to foresee the nature of the damages that may be potentially suffered, that is to say, lost profits on a contract. Only if the quantum of damages was so extraordinary, as to warrant perhaps special warnings to Michelet regarding the consequences of breach, would questions of quantum relate to foreseeability. The final aspect before visiting liability on Michelet is whether the exemption clause included on the bill of lading is sufficient to relieve them of responsibility for the consequences of breach. Again, students are called upon to recognize the distinction between what is required at law as opposed to what was done in reality. Exemption clauses usually fail as a result of their bar to liability even in cases of fundamental breach. In strict contractual terms, Michelet has not committed a fundamental breach, in the sense that they bound themse
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