Question

Because of the Covid-19 lockdown, Skully McBones, owner of Broken Bones Skateboard Shoppe, had no customers for a period of six months. At the end of the first month, he told his landlord, Betty Stern, that he would have to declare bankruptcy because he could not afford to pay the rent. Betty said she would reduce the rent from $1000 to $250 to help him out. Skully paid her $250 and, with a bank loan, managed to do so every month. In the seventh month, when the lockdown stopped and the economy reopened, Skully went to Betty’s office and gave her a cheque for $1000. Betty said, “Where is the $4500 for the other six months?” Skully replied, “I thought you had forgiven me that rent because of the lockdown.” Betty said, “Of course not. I only delayed payment until the lockdown ended. You still owe me the money.” Skully refused to pay the $4500.

What is the law, issue, analysis and remedy for this case? Canadian Business Law question

Answer 1

The landlord called Betty Stern and her tenant Skully are contracting parties.

The issue between Betty Stern and Skully is that does the tenant owe the landlord $4500?

Considering their agreement, Skully has not breached the contract and does not owe Stern $4500.

The parties contracting in this case is between Betty Stern the landlord and the tenant called Skully. From the case, Skully is a tenant who has been paying Stern, the landlord $1000 each month as rent. Due to Covid-19 lockdown Skullly informed the landlord that his business has been significantly affected and he wants to declare bankruptcy because he is not able to comfortably pay the rent as before since there are no customers. In response, Stern informs Skully that he will reduce his rent from $1000 to $250 making new terms and agreement. Stern created another contract in which Skully was obligated as a tenant to pay her the rent of $250 until the Covid-19 lockdown stops while the economy re-opens. Considering their agreement, Skully does not owe Stern $4500 because the landlord did not inform him that she was delaying payment until the end of Covid-19 lockdown.

Stern, breaches the agreement and due to her action, Skully can sue claiming a breach of contract. Based on their agreement, the tenant was obligated to pay the landlord $250 as rent. On the other side, the landlord was required to allow the tenant proceed with his business while paying the amount agreed upon until when the lockdown has ended so that each party can resume to its initial duties.

Specific performance is one of the remedies that Skully can raise under this circumstance. Skully can assert that his landlord is breaching her duties by forcing him to pay the rent despite that she personally made the offer to allow Skully stay in the room and refrain from declaring bankruptcy if he accepts to pay $250 as rent instead of $1000. The tenant can justify that he performed his contractual duty but Stern has refused to honor her duties. Skully therefore, can ask the court to enforce the contract and seek compensation for the breach.