Case study of Gould Street Parking: Recommendations for Seeking Compensation under Frustrated Contract

Case study of Gould Street Parking: Recommendations for Seeking Compensation under Frustrated Contract

Contractual agreements guide most businesses and employments in Canada. The contracts are crucial in insuring against some risks if an individual is in breach. In that case, an individual has a legal basis for seeking damages or compensation due to the contractual agreements. However, there are instances where some of the events are unforeseen by the parties to a contract, and it changes the basis under which the parties could continue with the obligations in the pact. Such instances are based on the theory of frustrated agreements, which can be problematic, especially if a force majeure clause is absent. This was the case for the contract between Gould parking company and a hotel allowing the visitors to park their vehicles in the package. Under this contract, the Gould was to try its best to ensure that there were enough parking spaces for the Hotel's visitors and that it provided security. If there were damages, then the parking owners would be responsible. ON the other hand, the Hotel had to make reasonable efforts to ensure that many visitors used the external parking lots for their vehicles. In return, The Superior hotel would be paid 15% of the revenue from the Hotel's visitors be settled to them. However, a frustrating event occurred in 2019, which resulted in the Hotel destroying the building and selling part of its land due to financial burdens and losses. This was before the contract could end as it was to extend up to 2025. However, Gould is interested in seeking compensation which is to be computed up to the expected period of the end of the contract. However, Gould can successfully claim a prize if he proves there was a force majeure clause. The event was foreseeable by the Superior hotel party. The financial award could compensate the company in the amount spent to project interest up to 2025, which is repayable.

Problem in Law

The main issue, in this case, is that the contract has come to an end due to an event that the Hotel claims were unforeseeable. However, the amount invested in the parking to accommodate the expectations of the Hotel up to the end of the contract was substantial. Once the Hotel stopped operations and started suffering losses in 2019, the parking by Gould has experienced a lot of financial losses and a reduced number of clients, which shows the contract between the two parties had a substantial impact on the parking business's economic performance. In this case, the main issue by Gould is seeking a financial award due to breach of contract or consideration of the frustrated contract. In this case, the parking company has continued and is even willing to continue providing the Hotel with its end of the obligations up to the end of the contract year. Here, one of the issues, primarily if the event is based on a frustrating occasion, is if the severity of the condition could have continued for a long time, making it impossible for the contract to be executed. Suppose the period for financial recovery is short, and the parking could have endured the period while continuing to supply its parking services. Such an issue could be considered critical as part of the grounds for seeking damage.[1] Besides, Gould was not consulted to discuss the impact of the business destruction on the contractual agreements.

The Hotel managers destroyed the building and even sold part of the land. Therefore, the destruction of the building brings a new problem to the interpretation of the contractual agreement and the effect of making it impossible to implement. In this case, a frustrating event can be caused by a condition whereby the main object of the contract is absent. The Hotel is a significant factor in the contract's design because it was the main reason customers were attracted. By extension, the parking also benefited them by providing space for their cars. In this case, the decision of the Hotel managers not only to bring it down but even sell its property to bring in new owners of the place whose decision of what to do with the piece of land is not binding to the parking lot. In the first place, the Hotel's building has been destroyed, which makes the changes to the contract's content that cannot be implemented.[2] From the Hotel side, the managers can argue that the financial losses and decision to end the Hotel were unforeseen by the two parties and not included in the original negotiation, making it liable to pay compensation to the parking for not fulfilling its contract.

Therefore, the Canadian court has three main grounds in considering the claims by both parties before deciding whether it should give Gould a financial award. First, it has to look at the contract details between the two companies to determine if there is a force majeure clause. In Canadian law, when included in contracts, this clause helps the parties indicate what should happen and the obligation expected if a frustrating event occurs. In this case, the event was severe financial losses by the Hotel that were unforeseen. Therefore, the court has to assess whether this clause explicitly mentions the event of severe financial loss as the frustrating event that led to the frustrated contract.[3] In some instances, the presence of such a clause but not covering the specific event may make the party, in this case, the Hotel, be freed from paying damages or compensation to the parking business owners. Further, it could make the Hotel not continue its contractual obligations since the changes have already resulted in a condition change that makes the contract impossible.

However, the court has also to evaluate the ground on which the event can be determined if both parties foresaw it. One of the foundational theories in the frustrated contracts is that the vent causing the agreement to end suddenly is that it was not foreseen by both parties and could not be avoided. Secondly, the event or recovery from its impact may take a long period such that the continuation of fulfilling the contractual obligation becomes hard to implement. For instance, some the events such as the pandemic of Covid-19 or natural hazards could substantially affect the business sustainability. Most people never foresaw such a global pandemic that led to the lockdown of most businesses and borders, resulting in closure and unemployment. In the case of Gould, the court also has to consider if the event forcing the company to make losses was foreseen, especially by the party following its transactions. If the Car parking party could prove that there were chances, the Hotel expected the frustrating possibility. It acted to protect itself without minding the contractual agreement. Then this could be a legal basis for seeking the financial reward from the Hotel owners through the Canadian court.

Arguments for Gould

In the case study, the cause of the financial losses is not clear whether the impact was only on the hotel business or other enterprises were affected as well. Also, there is ambiguity as to whether there was a specific clause in the original argument, which could have given the thorough coverage of such an issue leading to the closure and destruction of the building. The absence of this clause and provision in the contract could lead to difficulty in proving the contractual expectations that could lead to seeking damages or compensation in the event of a frustrated contract. Despite these concerns, there are three main arguments that Gould's president can use to pursue his need for settlement for the Hotel failing to honor its obligations in the contract expected to end in 2025.

Frustration of Contract

In most contractual arguments, most businesses seek to prove the vent was unforeseen and unplanned and is making implementation of the obligation impossible. Therefore, all parties mainly intend to have these obligations discharged due to the contractual agreements. Also, it helps prevent one of the parties from bearing some of the risks if an unplanned event occurs, making it difficult for the contractual obligation to be completed. Furthermore, the discharge from the duty to conclude a contract under the frustration theory in Canada exonerates an individual from being charged with breach of contract. For instance, in the case of Taylor v. Caldwell, the plaintiff (Taylor) was refused by the court to receive any compensation due to losses incurred in being denied to use of a concert hall that caught fire after signing the contract. Taylor had booked the facilities to use the entrance for four concerts in this case.[4] However, the fire burned the hall to the extent that no event could occur. The fire occurred during a period before the first event and after the current signing. However, Taylor was denied any compensation for losses incurred because the fire was not the fault of any of the two parties. It discharged both parties from any further fulfillment of the contractual agreement, which included Taylor not paying for the use of the avenue Caldwell from any liability.[5] This is just one of the cases that indicate Canadian Frustration law's foundations.

Borrowing from this case as jurisprudence, the main issue is that Caldwell was not liable for any compensation due to the fire being an incident that was not foreseen by any party or caused by one of the members. Being a natural accident that was unintended, it was sonly fare no one is held responsible or pays any damages. In the same way, there is a need to prove that the Hotel and Gould both had no control over the financial outcome leading to losses suffered by the Hotel business. Gould can successfully use the grounds that the financial result and performance of the company were not only an unforeseen event but one that could be projected and traced by the company. Before the decision to close down and even sell the property, the company had evaluated that the close of the place could save the company that was on a downward trail. Selling the piece of land partly and even destroying the building is an intentional effort to protect its profit or change its interests. The destruction of the building could also be argued that it was deliberate to ensure that the main content of the contractual agreement, which is the hotel business, was no more. It contributed to the depiction of the contract as impossible at the time. However, the decision to destroy the building or business is not related to the financial losses at first but a possible change of interest in the stakeholders.[6] Their courts should allow the financial records and comparison of the market demand by comparing competitors to determine if the financial crisis at the company could be sustained for a while where the car parking company could withstand the losses for a short period as the business gained.[7] Suppose Gould can prove that there is a possibility that the losses at the Hotel business made the owners destroy the building and frame the situation as tied to the fiscal crisis at the company to avoid contractual legal issues. In that case, the courts may offer a financial reward to Gould.

Solution: Force Majeure Clause

In Canadian laws, the constitution also allows some parties to include a force majeure clause in their contracts. According to a law review for the Canadian context, Michael Theroux and April Grosse argue that the purpose of the force majeure in the Canadian laws is to allocate risk to both parties in case of a supervening event so that if the event occurs, then an individual may be protected from the liabilities of not being able to perform their obligations due to the event making it impossible.[8] The Alberta Court of Appeal indicated that a complete clause of force Majeure requires that three main questions are answered, which include the broad definition of the triggering event, the impact of the event on the person invoking the clause, and lastly, the effect on the contractual obligations on the parties.

In the case of Gould, who is the involving party, there is a need to look at the clause in the contractual agreement. There is a possibility of a gap that such a condition was not included in the original negotiation for the contract. However, it is essential, especially when claiming a financial reward from the courts. If such a clause was present, then there is a need to determine if such a frustrating event included in the specific clause is the same one that caused the hotel business to close down and if it was beyond the two parties.[9] The inclusion of the clause is critical in helping Gould secure his losses in the future, especially if the negotiation were to happen presently to avoid the current situation. This is important during the drafting stage. First, there is a need to ensure that both parties agree to and include in writing that the specific events to be covered that could affect the business are well defined, and the extent of the damage had. Secondly, the parties should also document the effects on the person invoking the law to determine grounds for liability. Lastly, the clause should also describe how the contractual agreement is affected. The detail on contractual obligations impacted by the event can help establish grounds for the persons to recover from financial losses or be protected from unforeseen circumstances.

Conclusion

In summary, despite the event being considered a frustrating contract case, the only basis for such an argument is not only the resulting event causing that situation but also the destruction of the building and selling of part of the land, which makes the implementation of the contractual agreements impossible to the car parking service. However, Gould has three main grounds to argue in her seeking a financial award for the failure of the company to honor the contract, especially when it knew that the company was failing. The determination of the building destruction and relation to the contractual obligation is critical. There is a possibility that the company destroyed the building to force the frustration contract law to be used rather than a breach of contract. Analysis of the company's decision and environmental conditions under which the company closed is essential in the case outcomes. Besides, the force majeure clause is absent. This could be a gap in the contract signed but a critical solution to the issue being sought by Gould. During the drafting negotiations, Gould could have compared and detailed what could happen because a company failed and could no longer transact.

References

Case Briefs. Taylor v. Caldwell: Case Brief for Law Students. Casebriefs.com. Retrieved 19 April 2022, from https://www.casebriefs.com/blog/law/commercial-law/commercial-law-keyed-to-lopucki/performance/taylor-v-caldwell-2/.

Roberts, T. (2003). Commercial Impossibility and Frustration of Purpose: A Critical Analysis. Canadian Journal Of Law &Amp; Jurisprudence, 16(1), 129-145. https://doi.org/10.1017/s0841820900006652

Saprai, P. (2013). The Penalties Rule and the Promise Theory of Contract. Canadian Journal Of Law &Amp; Jurisprudence, 26(2), 443-469. https://doi.org/10.1017/s0841820900006147

Supreme Court of British Columbia. (2015). Maison Development & Construction Ltd. v. Jefferson, 2015 BCSC 1329 (CanLII). CanLII. Retrieved 19 April 2022, from https://www.canlii.org/en/bc/bcsc/doc/2015/2015bcsc1329/2015bcsc1329.html?searchUrlHash=AAAAAQA9R3JvdW5kcyB0byBzZWVrIGNvbXBlbnNhdGlvbiBpbiBjYXNlIG9mIGEgZnJ1c3RyYXRlZCBjb250cmFjdAAAAAAB&resultIndex=5.

Theroux, M., & Grosse, A. (2011). Force Majeure in Canadian Law, 2011 CanLIIDocs 134. Alberta Law Review, 49(2), 397-402. Retrieved 19 April 2022, from https://www.canlii.org/en/commentary/doc/2011CanLIIDocs134?zoupio-debug#!fragment/zoupio-_Tocpdf_bk_4/(hash:(chunk:(anchorText:zoupio-_Tocpdf_bk_4),notesQuery:'',scrollChunk:!n,searchQuery:'cases%20involving%20force%20majeure%20clause%20in%20a%20frustrated%20contract',searchSortBy:RELEVANCE,tab:search)).