Question

CONTEMPORARY CANADIAN BUSINESS LAW: Chapter 12, Page 223, Case 3

Sly operated a used-car business. He sold Fox an automobile that he indicated was in good condition and suitable for use by Fox as a taxi. In the course of this discussion, Sly stated that, in his opinion, the vehicle was “hardly broken in,” as the odometer registered only 26,000 kilometres. Sly suggested that Fox test drive the car to satisfy himself as to its condition. Fox did so and, on his return from a short drive, agreed to purchase the automobile for $12,000. Fox signed a purchase agreement whereby he would pay for the car by monthly installments over a three-year period. On the completion of the transaction, Sly immediately sold the purchase agreement to the Neighbourhood Finance Company for $10,000. Fox was duly notified in writing of the assignment. A week later, the automobile broke down. When the vehicle was examined by a mechanic, Fox was informed that most of the running gear and the engine were virtually worn out. Unknown to both Sly and Fox, the previous owner had driven the automobile 226,000 kilometres and the odometer, which registered only six digits (including tenths of kilometres), was now counting the third time over. When Fox discovered the condition of the automobile, he refused to make payments to the finance company. Discuss the rights of the parties in this transaction.

Answer 1

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Relationship - buyer and seller

Where:

Assignor - Sly,

Assignee – Finance company,

Debtor   - Fox.

In my view, all parties are responsible for the harm and amount of damages that they have caused to each other. Sly would be responsible because he owned the company and he must be mindful of the car that he is selling to his customers. At the same time, Sly never pressured Fox to buy that vehicle, which means that Fox wisely made the decision to purchase that vehicle after that short test drive, he also made a mistake because he could not completely be held responsible for the harm caused by the failure of the car.

The parties were unaware of the error because they both made mistaken assumptions as to the subject matter of the deal and both found the car to be sold and bought in good condition. This includes MUTUAL MISTAKE, such as error about the subject matter's nature or error as to its origin. Although Sly would be more liable to Fox and also by PRIVITY i.e. more than the amount Fox charged.

Furthermore, Fox can not refuse to pay Finance Company because it is bound by a STATOURY ASSIGNMENT of rights that an assignee may impose if the assignment (CAR) fulfills those conditions where Fox considers the assignment to be debtor. Or they can all set it off as Sly has to give Fox money back and contact the previous owner about half details or whatever he can do best. Whereas Fox is expected to return the car to Sly and make due payment to the Finance company.