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CONTRACTS - Performance - Conditions precedent - Time for performance - Time of the essence - Frustration - What constitutes - General principles - Foreseeability - Sources of supply

Wednesday, October 11, 2017 @ 8:36 AM  

Appeal by the plaintiff, Seaboard Specialty Grains and Foods, from summary judgment dismissing its claim against the defendants, Palimar Farms and Marc Agra. The plaintiff marketed specialty crops and other agricultural products. The defendants ran farming operations. In 2014, the plaintiff contracted with the defendants for the supply of lentils. The 2014 growing season was wet, negatively impacting the quality and quantity of lentil production. The defendants advised the plaintiff of their concerns regarding quality. The plaintiff advised that it would accept a particular grade of lentils at a lesser price. Meanwhile, the price of lentils rose sharply. The defendants treated their contracts with the plaintiff as having been terminated and sold their production to a different company at a higher price. Consequently, the plaintiff had to purchase replacement product on the open market at a price above the contractual price. The plaintiff sued, seeking compensation. The chambers judge concluded the parties' contract did not permit the plaintiff to demand delivery of lower grade lentils at a lower price. Production of the higher grade of lentils was a condition precedent that was not fulfilled. In addition, the contract was frustrated. The defendants thus had no obligation to sell their production to the plaintiff.

HELD: Appeal dismissed. The chambers judge did not err in determining that the term regarding the grade of product constituted a true condition precedent, and that non-compliance with such term could be waived by the plaintiff. No error arose from application of the doctrine of frustration to find that production and acceptance of a different grade of lentils was radically different from what was agreed upon in the original contract. The contractual term specifying the required grade of lentils was not a provision empowering the plaintiff to require delivery of lentils of any quality. The fact that the defendants were able to sell their production to a third party at a higher price was not relevant to the application of the doctrine of frustration to the parties' contract.

PS International Canada Corp. (c.o.b. Seaboard Specialty Grains and Foods) v. Palimar Farms Inc., [2017] S.J. No. 412, Saskatchewan Court of Appeal,
R.G. Richards C.J.S., J.G. Lane and R.K. Ottenbreit JJ.A., September 18, 2017. Digest No. TLD-October92017006