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Friday, September 25, 2020

Contract to name someone as residual beneficiary upheld by BC court

The Supreme Court in BC has given us another really interesting decision. In this one, known as Munro v. James, there was a contract in which one party agreed to name the other as a beneficiary of her estate, then didn't do so.

The Plaintiffs were Fonda Munro and Bruce Boughy. They made a contract with the Defendant, Jessie James. The terms of the contract were that Munro and Boughy would live on James' farm, manage it, look after the animals, etc. and in exchange, James (who was 85 years old at the time) would give them her entire estate in her will. There were other terms as well, such as the requirement that the Plaintiffs pay the sum of $100,000 to James upon the sale of their previous home and farm, which they did. Munro and Boughy moved to the James property and took up the tasks involved in managing the farm.

Eleven years later, James changed her mind about the contract. She said she was unhappy with the Plaintiffs' management of her farm. She notified them that she was naming someone else as her beneficiary and gave them 3 months notice that she was terminating the contract. She changed her will, naming a friend, Leslie Brown, as the beneficiary. The Plaintiffs then took James to court, relying on the contract.

The court said that James had breached the contract, and that since the Plaintiffs had substantially performed their side of the contract, James must do the same. Because James had said she was not happy with the quality of the Plaintiffs' management, the court made a thorough, careful examination of that issue, and concluded that they had held up their end of the deal. 

Then the court turned its attention to what would be an appropriate outcome for the situation. In the vast majority of cases, a breach of contract will result in the damaged party getting money from the other party. Occasionally, however, a court will order what is known as specific performance. This basically means that the court will order the party who breached the contract to do the thing that he had contracted to do. In cases where someone has made a contract to name someone as a beneficiary in a will, the court usually orders specific performance. 

The court in this case ordered that the Plaintiffs would be entitled to the whole estate (after payment of bills, taxes, etc). The court also ordered that James could not place a mortgage or other encumbrance against the property without the Plaintiffs' agreement.

It's pretty unusual for anyone to make a contract to name someone as their beneficiary, but it does happen from time to time. This case shows that this type of contract is enforceable, even while the testator is still alive.

1 comment:

  1. Perhaps this is more complicated than what I read here but it just seems like 'common sense' to me.
    Irony here?
    Jesse Woodson James (September 5, 1847 – April 3, 1882) was an American outlaw, bank and train robber, guerrilla, and leader of the James–Younger Gang. Raised in the "Little Dixie" area of western Missouri, James and his family maintained strong Southern sympathies.



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