36. Basic Carpet contracts to install stain-resistant carpet
in Alice's house for $6,000. Basic Carpet then assigns the right to receive
payment from Alice to Home Finance Company. When payment comes due, Alice
refuses to pay more than $2,000, asserting that the installed carpet was not
stain-resistant. Home Finance asserts that Alice must pay $6,000, since Home
Finance was not responsible for installing the carpet. Alice decides to sue
Basic Carpet. Discuss the case.
The assignee "steps into the shoes" of the
assignor, which means that all defenses the obligor may have against the
assignor's claims may be asserted against the assignee. Hence, Alice may assert
her defenses against Home Finance. Also, Basic Carpet's claims against Alice
now belong to Home Finance Company.
37. An underground water main burst in Manhattan and flooded
the building where the Acme electric company has an electricity supply
substation. A fire resulted and disrupted electric power for four days. This
occurred during the biannual "Buyers Week" when merchandisers from
around the world were in town to visit fashion showrooms and place orders for
future seasons. Some 200 merchandisers brought suit against Acme. Some of the
businesses had no direct contractual relationship with Acme. They argued that
their lease agreements with their landlords, who were the direct contracting
entities
with Acme, obligated them to pay a share of the electricity
expenses and therefore they could sue under the contracts between the landlords
and Acme. Are they correct?
The plaintiffs cannot seek recovery as third-party
beneficiaries of the contract. Acme did not expressly undertake to supply
electricity to them. They were incidental beneficiaries of their landlords'
contracts and thus do not have a claim.
38. Dash's auto insurance policy requires that he file a
written notice of claim with the insurance company within ten days of any
damage in an auto accident or the insurance company may refuse to pay the
damage claim. Dash has several accidents and always simply orally reports the
damage to the insurance agent and the insurance company pays the claim;
however, on this occasion after his failure to file a written notice of the
claim the company refuses to pay the claim. They cite the express language of
the insurance policy. Is the insurance company correct? Discuss.
The written reporting requirement is a condition subsequent
and failure to meet it terminates the obligation of the insurance company;
however, the repeated accepting of an oral report without objection creates a
waiver of the written requirement, hence the company cannot now object and deny
payment.
