Val's Food signs a contract to buy 1,500 pounds of basil from Sun Farms, a small organic herb grower, as long as independent organization inspects and certifies that the crop 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. When Sun Farm 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 coast and immediately notifies Val's that will not fulfill the contract.
1. Suppose that Sun Farms supplies the basil that survived the storm but the basil does not pass the chemical-residue inspection. Which concept 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?
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?
1. The concept that might allow Val's to refuse to perform the contract in this situation is the condition precedent. A condition precedent is a condition that must be satisfied before a party is obligated to perform a contractual obligation. In this case, the contract between Val's Food and Sun Farms specifies that an independent organization must inspect and certify the crop contains no pesticide or herbicide residue. If the basil does not pass the chemical-residue inspection, it can be considered a breach of the condition precedent, allowing Val's Food to refuse to perform the contract.
2. Sun Farms may claim that its obligation under the contract has been discharged by operation of law through the doctrine of frustration of purpose or the doctrine of impossibility.
- Frustration of purpose occurs when an unforeseen event or circumstance occurs that makes the performance of the contract radically different from what was originally contemplated by the parties. In this case, the unexpected hailstorm that destroyed half of Sun Farms' basil crop could be argued as frustrating the purpose of the contract, as Val's Food intended to use the basil for pesto to fulfill their contracts with restaurant chains.
- Impossibility occurs when performance of a contract becomes objectively impossible due to an unforeseen event or circumstance. The hailstorm could also be argued as rendering the performance of the contract impossible for Sun Farms, as they were unable to harvest the expected amount of basil.
3. No, Sun Farms' obligations to Val's would not be fulfilled if they are only able to ship 1,475 pounds instead of the agreed-upon 1,500 pounds. This is because the contract requires the specific quantity of 1,500 pounds of basil. If Sun Farms fails to deliver the full quantity, it would be considered a breach of the contract. Val's would then have the right to seek remedies for the breach, such as damages or specific performance, depending on the terms of the contract.
4. The type of agreement in which Sun Farms sells its operations to Happy Valley Farms and Happy Valley agrees to provide the basil as stated under the original contract is called an assignment. An assignment is the transfer of rights and obligations under a contract from one party to another. In this case, Sun Farms is transferring its rights and obligations as the supplier of basil to Happy Valley Farms. Val's Food would then expect Happy Valley Farms to fulfill the obligations stated in the original contract.