J. Q.B.G. A.D.1994 No. 2946 J.C. R. IN THE QUEEN'S BENCH JUDICIAL CENTRE OF REGINA BETWEEN: S.S. JOHNSON SEEDS LTD. DEFENDANT D.G. Schirr Devon Page for the plaintiff C.M. Richmond for the defendant JUDGMENT HUNTER J. May 6, 1997 The plaintiff, S.S. Johnson Seeds Ltd. ("JohnsonSeeds"), claims damages from the defendant, Barry Farr("Farr"), for an alleged breach of contract. Johnson Seeds is Manitoba corporation, and operates out of Arborg, Manitoba, and currently has approximately 20 employees. Part of its business is the buying and selling ofspecialty crops such as canary seed, peas, lentils, canola,and flax. Johnson Seeds purchases specialty crops from producers and contracts with purchasers, including other traders or packagers, for the resale of these specialty crops. To secure the product for resale, Johnson Seeds will enter into contracts with growers prior to the seeding and harvesting of the same. Johnson Seeds attempts to have matching contracts for the quantum of specialty crops required with various producers with options for differing times of delivery to match the demand of the purchaser and to meet the delivery date requirements in the sales contracts. Always some flexibility is needed as the purchaser may alter the delivery times. As well, the crops must be cleaned to meet the delivery standard required and Johnson Seeds must organize the operation of the processing plant to meet the needs of the purchasers. Johnson Seeds has limited storage capacity so it is not possible for Johnson to take delivery from the growers as soon as the crops are harvested. When Johnson Seeds wants to take future delivery of the product then it usually must pay higher price to the producer because the farmer is then required to carry the cost of storing the product until Johnson Seeds takes delivery of the same. Farr is farmer in the Lewvan, Saskatchewan, area. He farms with his two sons, Jason and Jeff, and together they also operate chemical/fertilizer business and custom spraying business. Each year they farm approximately 10,800 acres. As part of their farming operation they grow specialty crops (which Farr refers to as their cash crops) which are important to the financial planning and management of their large farm operation. Because large purchases of chemical, fertilizer and fuel are made at the end of calendar year, they require approximately $500,000.00 in January and February of each year to meet their cash commitments. As well, land taxes are due in December of each year. From 1990 to October 1996, Murray Calcutt ("Calcutt"), was employed by Johnson Seeds as buyer. It was his job to find producers and enter into contracts to purchase their specialty crops to match the sales contracts entered into by Brian Johnson on behalf of Johnson Seeds. Part of his duties include attending farm shows where he will have the opportunity to meet growers and establish contacts within the grower community. Johnson Seeds annually has on average between 200 to 250 production contracts with growers. Brian Johnson has been involved in the business since 1975, and he is the managing director of marketing for Johnson Seeds. In 1993, Brian Johnson was president of the company. Johnson Seeds conducts its business throughout Canada and the world. Brian Johnson arranges the seller contracts. He stays in very close contact with Calcutt to advise on the price and quantity of seller contracts entered into so that Calcutt could arrange producer contracts at suitable prices and quantity. Before Calcutt could enter into production contracts he would require input from Brian Johnson on the call price and call date so that Brian Johnson could match it to the sales he had arranged. Brian Johnson did authorize Calcutt to enter into contracts for increased prices for delivery of product further out in recognition of the fact that the grower would have to bear the carrying charges for keeping the product for period of time after harvest. In January 1993, Calcutt attended the Crop Production Show in Saskatoon. Farr stopped by the booth of Johnson Seeds with another grower who did negotiate contract with Johnson Seeds at 10ï¿½ per pound for the canary seed he expected to plant and harvest in 1993. Farr had never entered into these producer contracts but during his attendance at the show he decided to return to the Johnson Seeds booth and see if he might negotiate contract. Calcutt says that he was then entering into contracts to purchase canary seed at 1/2ï¿½ per pound but that Farr wanted 10ï¿½ per pound. Farr says that Calcutt was purchasing some contracts at 10ï¿½ but that by the time Farr returned to the booth, Calcutt had no 10ï¿½ contracts left. Farr says that he told Calcutt that he would need payment by January 2, 1994, and that Calcutt said they could not agree to that. Accordingly, no contract was concluded. In February 1993, while Farr and his sons were at Trade Show in Winnipeg they received the message that Calcutt wanted to talk to him. On the speaker telephone in the truck there were various telephone calls between Calcutt and Farr. Calcutt could offer only 1/2ï¿½ for the canary seed but he was prepared to increase the price to 10ï¿½ on specific calls. There were numerous telephone calls and Calcutt says that Farr finally agreed to this because he could cover his 10ï¿½ price on the back-side of the contract. When Calcutt talks of the back-side of the contract he means the canary seed produced in excess of the amount that the producer has committed to sell under the producer contract to Johnson Seeds. Farr says the agreement proposed was that Calcutt would use later call and he could get Farr his money in January 1994 and he would pay 10ï¿½ pound. The call would be stated in three phases with three prices. Farr said he was only interested in the 10ï¿½ January price. Calcutt says that Farr was adamant about the 10ï¿½ per pound price. Calcutt added clause to the standard form contract setting out three specific call times with three different call prices as follows: Pricing Sept Oct call .09 1/2ï¿½ Nov Dec call .9 3/4ï¿½ Jan Feb March. Call .10ï¿½ However, despite this written portion of the contract, Calcutt admitted in cross-examination that 10ï¿½ was the price Farr wanted to receive and that Calcutt had agreed that is the price Farr would receive not any of the other quoted prices. Brian Johnson testified that Calcutt had been pushing him to increase the number of "farther out" contracts (i.e. delay shipments of the product to Johnson Seeds). Brian Johnson authorized the farther out contract with Farr as it fit both with the plant capacity for processing the seed and it fit with the 1994 sales contracts Johnson Seeds had entered into. In the discussions that Brian Johnson had with Calcutt about the contract he was never advised of any specific delivery dates or dates for payment on the Farr contract. His only specific recollection is that the Farr contract was one of the contracts Johnson Seeds wanted farther out. Calcutt was to send contract out to Farr and he would have look at it. Farr had never entered into these forward contracts before so the use of the word "call" was unfamiliar to him. Calcutt then wrote up the contract and mailed it to Farr at Lewvan. He never received any signed copy of the contract back from Farr. This contract covered the first 500 pounds of canary seed produced per acre on 1,000 acres of the Farr land. Most of the Johnson Seeds contracts with producer are for 50 to 250 acres, so the Farr contract for 1,000 acres was significant. No contract arrived but Farr did not notice this oversight until near the end of May, 1993, when they were finished seeding the crops. Farr telephoned Calcutt and Calcutt, after checking with his superiors, advised that the contract was still available and he faxed copy of the contract to Farr. Farr understood Calcutt to say that the money would be to Farr by January 2, 1994, and that the price would be 10ï¿½ per pound for the canary seed. Farr signed the contract and faxed signed copy to Calcutt. Calcutt says Johnson Seeds later received the original signed contract in the mail from Farr and that Calcutt then signed the same (P-3). Calcutt says he then sent copy of the contract which he had signed back to Farr through the office mail. The copy with the original signatures of both Farr and Calcutt were retained in the Johnson Seeds file. This is standard form contract used by Johnson Seeds since 1983. The paragraphs which are relevant are as follows: THIS AGREEMENT MADE IN DUPLICATE THIS "5" DAY OF "Feb", 19"93" between S.S. Johnson Seeds Ltd., hereinafter referred to as the Contractor, and "Barry Farr" of "Lewvan, Sk." hereinafter referred to as the Producer. WHEREAS the Contractor and the Producer have agreed to enter into contract for the purposes hereinafter set forth, subject to the terms, conditions and provisions hereinafter written: THEREFORE NOW in consideration of the mutual undertakings and obligations given and received by each of the parties hereto to the other, THIS AGREEMENT WITNESSETH AS FOLLOWS: 1. The Producer shall plant, tend, harvest and deliver to the Contractor and the Contractor shall accept from the Producer prior to the end of the 19"93" crop year all the Canaryseed produced on the land described as follows: 2. The Producer shall complete and return to the Contractor Seeding Report by June 30, 19"93". 3. The Producer shall deliver the entire crop to the Contractor. Gross weights of crop delivered will be determined immediately. The producer shall be responsible for rights, title, risk of loss and interest of the grain until such time as the grain has been delivered and grade established. The Contractor assumes responsibility for the grain upon completion of delivery and grade establishment. 4. After delivery, the Contractor will pay to the Producer for all of the pure, mature dry sound Canaryseed maximum "10%" moisture, on the basis of net cleaned weights at the rate of ".09 1/2" cents/pound for the first "500" pounds of production per acre against this contract. The impurities and hulled seed count shall be established by the Contractor in accordance with procedure and standards used by the Canadian Grain Commission and included as foreign material. Shrinkage of "1%" applies to unload weights. The Producer undertakes and agrees to pay for the said seed in one of the following ways: The Contractor may charge directly to the Producer any excess cleaning charges arising from delivery of Canaryseed containing in excess of 20% foreign material or other seeds which require special cleaning. The Contractor shall have the option for first refusal on the balance of production from the acreage assigned to this contract at fair market value at time of delivery. The Contractor's refusal will be confirmed in writing on or before July 31, 19"94" and upon receipt shall release the Producer from his obligation to deliver balance of production under this Contract. Pricing Sept Oct call .09 1/2ï¿½ Nov Dec call .9 3/4ï¿½ Jan Feb March. Call .10ï¿½ Nothing further occurred until November 3, 1993, when Calcutt telephoned Farr to inquire whether they produced any overage on the contract because the price was going up. At that time Farr did not know his exact production as the canary seed was being held in crib annex at Sedley, Saskatchewan. Farr telephoned Calcutt to advise of the production. There was no overage above the contracted amount. Farr told Calcutt to get things arranged to pick up the canary seed because Farr needed the money by January 2, 1994. Calcutt indicated he understood Farr's request. In December 1993 when Farr confirmed the production with Calcutt he says that Calcutt said money could be advanced to Farr. Calcutt's evidence contradicts Farr. He says he next heard from Farr in November 1993 and he says that Farr called him to check on the prices on the back side of the contract. Calcutt produced his personal notebook he kept and the words in the notation were: November 3, 1993 "Farr 11 1/4ï¿½ 11,000 bu over contract. Wants to hold now for better price." November 9, 1993 "Farr overage on contract. 15ï¿½ 2-4000 bushels" There is no reference in the notebook to the words back side of the contract. Calcutt interprets his notations to mean that Farr had 11,000 bushels excess production over the contract amount and that he wanted to hold for better price than the current market price of 11 1/4ï¿½. Calcutt telephoned Farr on November 9, 1993, and offered him 15ï¿½ per pound on the 2,000 to 4,000 bushels that Farr had in excess of the contract amount of production. In addition pink telephone message taken by someone in Johnson Seeds office noted telephone call from Barry Farr and said "back side of contract .15ï¿½ 2-4000bu". The telephone records of Johnson Seeds show two brief telephone calls to the Farr number on November 3, 1993, for one and two minutes respectively. The telephone records for November 9, 1993, were not filed at trial. Calcutt says Farr agreed to the 15ï¿½ offer and he thinks he would have told Farr that Johnson Seeds would pick up the canary seed on the back side of the contract the same time it took the call on the contract canary seed. Calcutt says he told Farr that Johnson Seeds was going to take the late call on the canary seed anyway and it would not take the early call. During cross-examination, Calcutt admitted that it was understood during the conversation of November 3, 1993, that Johnson Seeds would not call the contract until Farr could get 10ï¿½ per pound, despite the written form of the contract. Calcutt made no entries in his notebook from December 24, 1993, to January 2, 1994. There were no other entries in the notebook of conversations held with Farr. As well, Calcutt was unable to locate his notebook that covered the periods January 1993 through to early September 1993. By the end of December, 1993, there had been no further contact by anyone at Johnson Seeds and no arrangements were made to take delivery of the canary seed. Farr was getting very anxious. He says he attempted to call the Arborg office few times before the new year but he could not get any answer. Farr was getting very anxious because they had already drawn down $300,000.00 on their $20,000.00 line of credit in anticipation of the fact that they would be receiving the $50,000.00 from Johnson Seeds on January 2, 1994, for the canary seed and they were expecting to be paid $175,000.00 for the lentils from Sedley Seeds. The person they needed from Sedley Seeds was away and they could not get any answer from Johnson Seeds. At this time Farr and his sons were looking at the contracts in an effort to find different telephone number for Johnson Seeds. At this time Farr noticed that they did not have any contract on their file that Johnson Seeds had signed. When they examined the clauses in the contract they noted clause 14 which states: 14. This agreement is not valid unless it has been signed by an officer of the Contractor on the line below, marked "S.S. Johnson Seeds Ltd.". Farr thought perhaps that because he did not have copy of contract signed by Johnson Seeds in his file that it was not valid contract. Farr telephoned to Sedley and Lajord to inquire as to the price of canary seed. Pioneer Grain at Lajord would purchase the canary seed for 22ï¿½ per pound. Farr decided to sell the canary seed to Pioneer Grain and he arranged to have all the canary seed hauled to Lajord and sold on January 4, 1994. Farr sold 423,750.39 lbs of canary seed and he received $93,225.09. At the price he had contracted with Johnson Seeds, had he delivered under this contract at 10ï¿½ per pound he would have received $42,375.04. After Farr sold the canary seed, he saw his lawyer the following day and letter was written on his behalf in which he purported to revoke his offer to sell the canary seed to Johnson Seeds. On or about May 26, 1993 Barry Farr submitted an offer to you for the sale of Canary Seed. To date Barry Farr has not received any response from you nor has he received copy of the contract executed by officers of S.S. Johnson Seeds Ltd. This letter is to advise you that Mr. Farr is hereby revoking his offer for sale of Canary seed to you. Please return all documents executed by Mr. Farr to our office. Calcutt responded by letter of January 7, 1994 as follows: We reply to your letter of January 5, 1994 relating to Barry Farr. Contrary to your statements about Mr. Farr not receiving an executed copy of the agreement he has received copy. The writer spoke to Mr. Farr on number of occasions after he acknowledged receipt and at his request delivery and payment was deferred until January 1994. If Mr. Farr is now seeking to break his contract we would regret this very much and cannot agree to him so doing as more than Mr. Farr's contract is involved. We are reluctant to become involved in substantial court expense but if we have to we will do so. We enclose copy of the executed agreement. Please advise of Mr. Farr's position since if we have to retain our counsel in Regina we may as well do so without delay. Farr, through his counsel, responded by letter dated January 21, 1994, the material portions of which read as follows: am advised by Mr. Farr that contrary to your statements, Mr. Farr has never received an executed copy of the agreement, and, in fact, advised us that the only executed agreement that he has seen is the one that you were kind enough to provide to our office. On what evidence are you relying to claim that Mr. Farr received an executed copy of the agreement. Furthermore, there is no indication as to when this contract was signed by you, and, in fact, may very well have been executed following receipt of my correspondence of January 5, 1994. Furthermore, you purport to be signing the contract on behalf of S.S. Johnson Seeds Ltd., and yet, no corporate seal has been affixed to the agreement. Given the information provided to me by Mr. Farr, it is obvious Mr. Farr is not now seeking to break his contract but rather, has revoked his offer to sell the Canary Seed to you. Under the circumstances, Mr. Farr will not be disposing of his Canary Seed through S.S. Johnson Seeds Ltd. Govern yourself accordingly. There were no further communications between Farr and Calcutt (nor anyone else from Johnson Seeds) until March 31, 1994, when Calcutt telephoned Farr to exercise the call provision in the contract. When Calcutt telephoned Farr to ask if he fulfilled the contract, Farr said he had not as he thought there was clause saying he would be paid by January 2, 1994. Calcutt says this is the first time he heard of this. Calcutt exercised the call on this date because he said he still believed Johnson Seeds had contract with Farr. Calcutt says this is when he first heard from Farr that he had sold the canary seed elsewhere. Calcutt advised that canary seed prices escalated dramatically starting in the fall of 1993 and continuing in 1994 and the highest recorded price for canary seed during that time was 42ï¿½ per pound. Calcutt explains the dramatic increase occurred for three reasons, namely, there was not as much carry-over from the previous year as was expected, the number of acres seeded to canary seed was not that large and there were no bumper crops anywhere in the world where canary seed is grown. As frequently occurs, there is too much that is left unsaid and undone between the parties until there is problem in the arrangement. There were no on-going conversations between the parties and follow up letters to confirm each person's understanding of the arrangement. Nor did anyone bother about compliance with the strict terms of the written contract. For instance, there was term of this contract that harvest report is to be completed by the producer within two weeks of harvest and forwarded with sample to the contractor. What really matters to each party is that the primary terms are honoured, i.e. sell an amount of product at defined price at the correct time. Each person now puts their own slant on the course of dealings as they saw it. find that all discussions prior to May 1993 were pre-contractual negotiations. Farr knew that he wanted 10ï¿½ per pound and that he wanted to be paid no later than January 2, 1994. Johnson Seeds knew that it was prepared to pay 10ï¿½ only if delivery occurred after January 1, 1994. Johnson Seeds promised not to take delivery until it could pay 10ï¿½ per pound. The formal written contract did not expressly set forth these conditions. The formal written contract wassigned by both parties in May, 1993, and both parties knew atthe time they executed the contract that these terms wereabsent. Farr and Johnson Seeds both considered that they hada binding and legally enforceable contract in May and inNovember, 1993. Johnson Seeds retained fully executed copy of the contract on their file in Arborg, Manitoba. Johnson Seeds believes that fully executed copy of the contract was mailed to Farr in the ordinary course of its business. Farr never received fully executed copy of the contract. When Johnson Seeds did not contact Farr in December to arrange to take delivery of the canary seed and when Farr could not get any answer to his telephone calls to the Johnson Seeds office in late December 1993 and early January 1994, he looked at the copy of the contract in his file and he saw that it might be possible to argue that the contract with Johnson Seeds was not valid. When Farr telephoned and found out that he could sell the canary seed for more than double the contract price he realized that he could receive in excess of $90,000.00 which would help his immediate cash-flow problem. Given the cash crunch he was feeling (especially since his sons had gone off skiing and left Farr to worry about the line-of-credit problem), Farr took calculated risk and sold the canary seed. If Farr was wrong and if he did have valid contract with Johnson Seeds then he may have thought that he might have to pay Johnson Seeds 10ï¿½ per pound for the canary seed he produced. In any event, that would have been at some time in the future and the cash flow problem was immediate. There is no doubt that if Johnson Seeds had delivered cheque to Farr on January 2, 1994, for $42,375.04 (even without taking delivery of the canary seed), there would have been no concern about whether fully executed copy of the contract had been delivered to Farr by mail or otherwise. Johnson Seeds knew in early January 1994 that their contract with Farr was in trouble. They knew that they would not be taking delivery of Farr's canary seed. They did not testify that on receipt of Exhibit D-1 (the second letter from Farr's counsel) that they went into the market place to purchase the canary seed they needed to cover the sales contracts they had to match the Farr contract canary seed production. However, cannot imagine that Johnson Seeds would naively sit around and wait until March 31, 1994, to call the Farr contract and hope that canary seed that he could not deliver would suddenly become available to it. By March 1994 the price of canary seed had escalated to 38.4ï¿½ per pound. Since the fall of 1993 the price of canary seed had been rising steadily. In my view, Johnson Seeds waited until the last possible day under the written contract terms to telephone and "call" the Farr contract in an effort to position itself to claim increased damages in any lawsuit against Farr for breach of contract. There was concluded contract between Farr and Johnson Seeds. The issue is whether communication by deliveryof the fully executed contract was necessary to complete thecontract so that it could be legally binding and enforceable. In the instant case, the parties communicated inperson, by telephone, by fax and by mail. While it may havebeen in the reasonable contemplation of Farr that he wouldreceive back a fully executed copy of the contract, there isno doubt that in the telephone conversations he had withCalcutt in November and December, 1993, he verbally confirmedthat in his view a contract did exist. This as well was confirmed by Calcutt. What is confusing about these telephone conversations is that Calcutt's records of these telephone calls all refer to discussions about overage on the contract when in fact, the production was less that contracted for. Consequently, the telephone records only suggest that Calcutt and Farr were talking about completely different matters in each of those conversations. This certainly casts some doubt on Calcutt's testimony about these discussions because his notes make no sense in relation to the indisputable facts. Therefore, would accept Farr's evidence that he verbally reaffirmed to Calcutt that it was very important that payment be received in early January 1994. However, this was not written into the contract and Farr was not sufficiently careful to ensure that this term was there in print at the time he executed the contract. Farr cannot now insist that this was an essential and fundamental term of the contract which would entitle him to rescind the contract. am aware that this was Farr's first experience in negotiating these forward sale contracts but he must be more careful before he signs any contract in writing which does not express the essential and important terms that he believes are the essence of the contract. If this term was so important, then it was incumbent on him to insist that it be expressly stated in the contract before he executes the same. have read the decision in Balfour Grain Ltd. v. Goertz (1989), 1989 CanLII 4629 (SK QB), 78 Sask. R. 283 (Sask. Q.B.) wherein Lawton J. held that it was essential to the contract that there would be delivery of the fully executed contract to the defendant. This was factual determination. In the instant case, delivery of the fully executed contract to Farr was not an express term of the contract. In addition to the fax, Farr had used the mail to communicate the offer to Johnson Seeds and it should therefore have been in the reasonable contemplation of Farr that he would received the fully executed copy back in the mail from Johnson Seeds. There is no reason to disbelieve Calcutt that he used the mail in the ordinary course to forward the fully executed copy of the contract to Farr. The post office was legitimate agent of Johnson Seeds for the purpose of communicating the acceptance of the offer and to this extent the postal acceptance rule is satisfied. Further, Farr had verbally confirmed on at leasttwo occasions that he did have a contract with Johnson Seedsand at all times Calcutt confirmed that such a contract didexist. The only issue about which they disagree is whether payment on or before January 2, 1994, was an essential term of the contract. For all these reason, I find that there was a validcontract between Johnson Seeds and Farr. The parties agreed that if found valid contract that the measure of damages is $50,850.05 if the appropriate time for assessing damages is January, 1994. If damages should be assessed at March 1994 the parties agreed that the quantum of damages was $120,345.11. I find that Johnson Seeds knew in January 1994 thatFarr was in breach of the contract and this is when damagesshould be assessed. Accordingly, Johnson Seeds shall havejudgment against Farr for $50,850.05 and pre-judgment interestcalculated in accordance with The Pre-Judgment Interest Act,S.S. 1984-85-86, c. P-22.2 together with costs of the action.
The plaintiff, a specialty seed marketing company, claimed damages from the defendant for an alleged breach of contract. Johnson Seeds entered contracts with growers prior to the seeding and harvesting to secure product for resale. After extended negotiations the defendant eventually signed and mailed the standard form contract but never received an executed copy. The price of the canary seed escalated substantially during 1993. The defendant thought that as he did not have a copy of the contract signed by the plaintiff it was not a valid contract and sold the seed to a third party for more than double the contract price. HELD: Johnson Seeds was awarded judgment for $50,850.05 and pre-judgment interest together with costs of the action. 1)There was a valid contract between the parties. Damages were assessed as of January 1994 when Johnson Seeds knew that the defendant was in breach of the contract. 2)The issue was whether communication by delivery of the fully executed contract was necessary to complete the contract. The parties communicated by fax, mail and telephone. There was no doubt that the defendant verbally confirmed that a contract did exist. Discussions prior to May 1993 were pre-contractual negotiations. 3)Johnson Seed knew that it was prepared to pay 10 cents only if delivery occurred after January 1/94. The formal contract did not expressly set forth these conditions. Both parties knew these terms were absent when they executed the contract but both considered that they had a legally binding contract in 1993.  4)Farr took a calculated risk and sold the seed which alleviated his immediate cash-flow problem. Johnson Seeds waited until the last possible day under the written contract terms to call the contract in an effort to position itself to claim increased damages for breach of contract.