Question

Val’s Foods signs a contract to buy 1,500 pounds of basil from Sun Farms, a small organic herb grower, as long as an independent organization inspects the crop and certifies that it contains no pesticide or herbicide residue. Val’s has a contract with several restaurant chains to supply pesto and intends to use Sun Farms’ basil in the pesto to fulfill these contracts. While Sun Farms is preparing to harvest the basil, an unexpected hailstorm destroys half the crop. Sun Farms attempts to purchase additional basil from other farms, but it is late in the season and the price is twice the normal market price. Sun Farms is too small to absorb this cost and immediately notifies Val’s that it will not fulfill the contract. Using the information presented in the chapter, answer the following questions.

1. Suppose that the basil does not pass the chemical-residue inspection. Which concept discussed in the chapter might allow Val’s to refuse to perform the contract in this situation?

2. Under which legal theory or theories might Sun Farms claim that its obligation under the contract has been discharged by operation of law? Discuss fully.

3. Suppose that Sun Farms contacts every basil grower in the country and buys the last remaining chemical-free basil anywhere. Nevertheless, Sun Farms is able to ship only 1,475 pounds to Val’s. Would this fulfill Sun Farms’ obligations to Val’s? Why or why not?

4. Now suppose that Sun Farms sells its operations to Happy Valley Farms. As a part of the sale, all three parties agree that Happy Valley will provide the basil as stated under the original contract. What is this type of agreement called?

Answer 1

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1:

In this situation, failure of condition is the appropriate concept that might allow Val’s to refuse to perform the contact. Actually, “a condition is a qualification in a contract based on a possible future event, the occurrence or non-occurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract” (Roger L. & Jentz 322). The assigned condition should have been satisfied in order to avoid discharging of the parties’ obligations. Val’s signed a contract to buy basil from Sun Farms on condition that the crop contained no pesticide or herbicide residue. The basil did not pass the chemical-residue inspection.

2:

Under the legal theories of commercial impracticality and impossibility of performance Sun Farms might claim that its obligation under contract has been discharged by operation of law. Impossibility of performance can be applied in situation when the parties failed to foresee the events that rendered performance impossible. The unforeseen events may be commercially infeasible. Performance is impossible in the following situations: “when one of the parties becomes incapacitated prior to performance, when a specific subject matter is destroyed, and when change in the law renders performance illegal” (Roger L. & Jentz 330). Commercial impracticality can be applied in the situation when performance appears to be extremely difficult or rather costly.

3:

Yes, this would fulfil Sun Farm’s obligations to Val’s. Under substantial performance doctrine, performance may not differ from the performance signed in the contract. Substantial performance ensures that the other party has to perform its obligations in a proper way.  

4:

This type of agreement is called delegation of duties. In this situation, Sun Farms transfers Happy Valley Farms all the duties arising under the signed (original) contract. Sun Farms acts as a delegator, while Happy Valley Farms acts as a delegatee. According to experts, this type of agreement does not relieve Sun Farms (the delegator) of the obligations to perform in the event that Happy Valley Farms (the delegatee) fails to perform as stated under the original contract.