CONTRACT TERMS, PERFORMANCE AND BREACH - THE LEMON

Michael was a business professor at a local college. The catalytic converter broke on

his car, so he needed to quickly purchase a new car to get him to work since he

commuted a significant distance and public transit was not an option. He really could

not afford a new car, so he went shopping for a reliable used car. Since he commuted a

significant distance to work and tended to keep his car a long time, reliability was

important to him.

On February 1st, after work he stopped into Slick Motors and had a look at the pre-

owned vehicles on their lot. On the lot was a two-year-old Dodge Journey. As Michael

was looking it over, he was greeted by Honest Abe, the sales manager. When Michael

asked about bumper-to-bumper warranties, Abe told him that the manufacturer only

gave a 90-day warranty because it was used, but Abe would take care of him for the

first two years for anything that went wrong. After thinking it over, Michael came back

the next day and met with Roxanne at Slick Motors. Apparently, Abe was off, so

Roxanne took care of the paper work to sell Michael the vehicle. They agreed on a

price of $16,000.00. In the sales contract was the following clause:

"In the case of defects or malfunctions in the power train or engine, the manufacturer offers a ninety day risk free warranty on all parts and labour. There are no other representations, promises, or agreements other than those contained herein."

Michael signed the contract and took possession of his new pre-owned Dodge Journey.

On May 7th, it was a warm morning as a humid front was moving up from the Gulf of

Mexico. As Michael got ready for work, he thought, finally some decent weather where I

do not have to wear a heavy coat. He fired up the Dodge Journey and headed out onto

Highway 401 only to get stuck in a big back up of traffic. It was starting to get warm

sitting on the highway not moving, so Michael turned on the air conditioning. All he got

was warm air. He thought that maybe it just takes a while to kick in, but as he drove to

work it stayed hot all the way.

On May 8th, he took the car into Slick Motors and talked to Abe. Abe said he would like

to help me out, but the 90 days was up and besides the manufacturer's warranty only

covered the power train and the engine, not things like air conditioning. Abe said if it is

not in the agreement of purchase and sale, there was nothing he could do, his hands

were tied. It cost Michael $1,800.00 to have the air conditioning fixed on the Dodge

Journey at the Big Chrysler Dealership.

Michael took the bill from the dealership to Abe and demanded payment. Abe reiterated

his earlier position and then said, "Besides, you got hosed by the dealership. Some

place like Ontario Tire could have easily done that work for about $900.00."

Questions:

4. Is Abe's statement to Michael that Abe would take care of him for the

first two years for anything that went wrong enforceable under contract law? Why or why not? (Provide a complete legal explanation for your answer) (6 marks).

5. If Michael sues Abe and Slick Motors for the cost of fixing the car, could Slick Motors raise any defence to the claim that might have an impact on the amount of damages? If so, what defence and why could they raise it? (Provide a complete legal explanation for your answer) (4 marks).

6. Which of the four types of legal risk management strategies would you recommend to Slick Motors to avoid or minimize the risk from this case in the future and why that strategy as opposed to one of the others (Provide a complete explanation for your answer) (5 marks).