Hogtown Hotels Inc (HHI) is about to open a new hotel in Toronto. HHI plans to o

Question

Hogtown Hotels Inc (HHI) is about to open a new hotel in Toronto. HHI plans to open on June 1, 2018. HHI has a contract with Evyl Empire Ltd (EEL) for the purchase and sale of beds and linens for the new hotel. Pursuant to this contract, EEL is supposed to deliver the beds and linens on May 23. It is important that HHI receive the beds and linens on time in order to ensure that the hotel is ready to open its doors on June 1.

On May 3, EEL contacted HHI to advise HHI that it had oversold its inventory of beds and linens. EEL told HHI that it would not have any beds or linens available for delivery until June 8. Alternatively, the representative of EEL explained that it could make beds and linens available IF HHI was willing to pay a higher price. If HHI agreed to pay the higher price (“Price 2”), then EEL said that it would be able to deliver the beds and linens on time. Because HHI plans to open on June 1 and cannot afford to wait for new beds and linens, HHI promises to pay Price 2, the higher price.

EEL delivered the new beds and linens on May 23. HHI signed for the beds and linens. However, when the bill came, HHI refused to pay the increased price. Instead, it submitted the original price it had agreed to in its contract with EEL. EEL was furious and it has demanded that HHI honour its promise to pay Price 2. EEL has threatened to sue HHI if it does not keep that promise.

HHI wonders if it is legally obligated to pay Price 2. It has asked you for legal advice about what legal obligations, if any, it has under the circumstances. Advise HHI.

REQUIRED:

WHAT IS THE APPLICATION/ANALYSIS FROM THE IRAC FORMAT FOR THE FACTS ABOVE

Explanation / Answer

Issue

HHI has a contract with Evyl Empire Ltd (EEL) for the purchase and sale of beds and linens for the new hotel. Pursuant to this contract, EEL is supposed to deliver the beds and linens on May 23. As the beds and linens were not ready with EEL, it proposed that beds and linens would be available if HHI is ready to pay ahigher.HHI promised to pay a higher price,but at the time of payment,HHI refused to pay the increased price.

Rule

HHI is liable to pay the price as signed in the contract. The rule says that once the contract is signed EEL is legally bind to deliver the beds and linens on the said date.

Analysis

HHI and EEL signed a contract at a particular price and EEL is supposed to deliver the beds and linens by May 23rd. If EEL is not able to deliver then the company can be penalised as per the contract. EEL is legally boundto deliver the beds and linens on the mentioned date.

As EEL was not able to deliver on the said date and proposed to deliver only at a higher price, for which HHI promised to pay. But HHI has not signed any contract and is not legally bind to pay the higher price.

Conclusion

HHI can sue EEL as it was not able to deliver the beds and linens on time and HHI is not liable to pay any higher price as it is not legally bound to pay the same. As the contract was signed between HHI and EEL, so EEL is supposed to deliver the beds and linens on the promised date at the same price mentioned in the contract.

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