Canadian Model Exam - Lawskool models/Model Exam.pdf(1) Whether he will be required by law to...

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Model exam

IRAC method of exam technique

Issues – Outline the issues that you are going to discuss

Rules – Define the legal rules that are relevant to the question

Application – Apply the legal rules to the facts of the question (this is the hard

part!)

Conclusion – Usually in the form of an advice to your hypothetical client.

Always use your reading time wisely to PLAN YOUR ANSWER before writing.

This is of upmost importance as it will help you clarify your thoughts and ensure

that you avoid following exam strategies that students commonly resign

themselves to:

i) ‘the kitchen sink’ i.e spilling all of your knowledge that is vaguely

related to the topic onto the exam paper and hope for the best.

ii) ‘the garden path’ i.e going off on an irrelevant tangent

Remember that the APPLICATION IS THE MOST IMPORTANT SECTION of

your answer and should take up the bulk of your time. The actual conclusions

you reach are often superflous. Rather your marker will be most interested in

how you arrived at your conclusion.

CONTRACT LAW MODEL EXAM

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Each answer should include:

• An Introduction - Flag the issues that will arise in your answer.

• A Body - This should contain your answer to the issues flagged in the

introduction.

• A Conclusion - A concise answer to the question based on what you have

argued in the body of the essay. For example -‘Tim will not be able to

lawfully terminate the contract. However, he will be able to successfully

argue that he was induced into the contract as a result of unconscionable

conduct’.

When considering any possible actions in the answer, first look to see if there is

anything explicit in the contract that you can rely on (e.g. written and oral terms).

If there is nothing explicit in the contract, consider whether you can rely on any

implied or incorporated terms. If you cannot rely on these, then examine whether

you can use anything outside of the actual contract (e.g. promissory estoppel,

part performance, undue influence, misrepresentation, misleading conduct).

Use headings frequently to structure an answer.

Use the language of the question.

Be as comprehensive as possible when answering a question - canvas all

possible answers. An example of this is stating that ‘Although a Court would

likely find that termination was justified because of breach of an essential term, it

is also necessary to consider whether termination was justified because of

repudiatory conduct’. Don’t merely give an answer for whatever cause of action

will be most likely to succeed.


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SAMPLE QUESTION:

Here is a distinction-level model answer for a Contracts problem.

Contracts is a subject typically taught in the first or second year of a law

degree. This exam answer is an excellent example of the IRAC method,

an exam technique which is espoused by law lecturers around the

country. Try to answer the question yourself first before looking at the

answer. Don’t worry if you didn’t come up with the same amount of text

as is in the answer below. The student who wrote this answer had a

considerable amount of time in which to write. Good luck!

Sam, a self-taught wiz-kid, recently started a small business selling natural health

products in Canada. Having witnessed the start of the popular obsession with

organic and natural products, he decided to tap into this market. He had

convinced his father to lend him $10,000 to start up his business.

Knowing that his business idea was sure to be a success, Sam looked into

possible suppliers for his natural health products. He contacted Mike who is a

salesman for “NaturalWays”, a specialist supplier of all things natural and

organic, including food and health products. Sam asked Mike whether he would

be able to fill an order for a regular supply of PP22, a highly sought after brand of

tea. Sam emphasized to Mike that this brand of tea needed to be 100% organic

and individually packaged and suggested that $400 for 200 cartons would be

something he would accept. He also noted that shipment must be sent out every

Monday unless otherwise indicated by Sam. Mike, interested in Sam’s endeavor,

told Sam that he had to do some inventory checks and so forth and would get

back to him as soon as possible.

Three weeks passed without a word from Mike. Eager to get his business up and

running, Sam gave Mike a call to inquire into whether Mike could supply him with


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the requested goods. “Oh ya…silly me…it completely slipped my mind” said

Mike, responding to Sam’s inquiry. “Sure no problem, I can supply what you

need” said Mike. “However, we are closed on Mondays so the goods would have

to be shipped out on Tuesdays. How does $500 per 100 cartons of PP22

sound?” asked Mike. “Ummm….geee…..I don’t know. That might throw off my

entire business scheme…I guess it could work,” answered Sam. Mike then

suggested to Sam that they both agree to do this but decide on the exact terms

when Sam had worked out the precise details of his business plan, since he had

sounded a bit confused, uncertain and overwhelmed on the phone. Sam agreed.

Over the next several days, Sam’s friend Helen gave Sam some inside info about

a really cheap supplier of bulk natural health products located in Mexico. Eager

to get a good deal, he called up the supplier, Ben at HHP, and asked if him if he

could provide him with regular supplies of PP22 for 12 months. Ben accepted

without hesitation, offering a price of $200 per 100 cartons and promising that

“our PP22 products are made with 100% organic substances.” “Sweet deal” Sam

replied, “that is exactly what I need.” Both parties agreed that 100 cartoons of

PP22 would be shipped out every week on Monday for a period of 12 months.

Over the next several months, Sam had been receiving a regular supply of PP22

from Ben and was generally satisfied with everything. He had also hired a full-

time secretary and customer service employee, Tom, who was responsible for

filling customer orders. Business was thriving for Sam (although competitors

were starting to pop up in the area) and he needed to hire a full-time staff. He

was really impressed with Tom’s work and offered him the position of Vice-

President of Sam’s company for a period of 4 years with renewal possible on the

expiration of the contract. However, one of the conditions noted in the contract

was that if Tom ever left Sam’s company he would not work for any of the

company’s competitors in Canada for 10 years following his exit from Sam’s

company. Hesitant at first, Tom accepted the offer, knowing what position of

Vice-President would do for his resume!


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Over the last couple of months, Sam had been receiving complaints from his

customers as to the quality of the PP22 tea. Sam soon found out that HHP had

been shipping “copy-cat” brands of PP22 (which are not 100% organic) to Ben all

along in order to provide for its other, more prestigious and loyal customers with

the top notch stuff and at a higher profit. In addition, HHP has been sloppy on the

shipping arrangements they agreed to, shipping only 50 cartons of PP22 and

every other week on Thursdays rather than every week on Mondays.

To top off Sam’s problems, his company has started operating at a loss. He is

losing customers to competitor companies and the decreasing quality of his

products have really decreased customer purchases. Stubborn as Sam is, he is

determined to keep his business up. Sam visits his local bank to inquire into the

possibility of mortgaging his house to the bank in order to obtain money to keep

his business going. The bank manager, whom Sam knows quite well and with

whom he has been doing his day to day banking with for the past 10 years,

proposes to loan Sam the money he needs if Sam gives a guarantee of $100,000

which is more than the value of his house. Being obsessed with ensuring his

business stays afloat and not thinking of anything else, Sam accepts, saying “I

trust you” and signs the required documents without any independent advice.

Sam recently received a phone call from Mike at “NaturalWays”. Mike is looking

to conclude the terms to their agreement, as they had agreed to enter into a

contract several months ago. Sam, knowing now he cannot afford to order

regular supplies from Mike, tells Mike that he has changed his mind and no

longer wishes to retain Mike’s services. Mike is furious! “We had a deal”, he says.

Sam is also caught up in the problems associated with his supply contract with

Ben in Mexico. He thinks Ben is in breach of their agreement and wants to

terminate their contract. Further, Ben had promised him that the PP22 was made

of 100% all natural products, which in fact were not. Sam believes that this fact,


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along with Ben’s tardy shipping habits have contributed to the decrease in

customer demand.

Finally, Sam’s father’s estate is looking to collect the $10,000 Sam’s father had

loaned Sam. However Sam does not believe he owes them anything. A few

weeks after Sam’s father had lent him the money, he had promised to forgive the

debt as long as Sam stopped complaining and nagging to him about how he had

distributed his estate in his will. Sam believes he has kept up his end of the

bargain and consequently believes the debt must be forgiven. The bank manager

is also looking to recall the $100,000 loan. Sam’s newly promoted Vice-

President, Tom, is also fed up with all the drama surrounding the business. Tom

has told Sam that he has been offered a position of President at “NatureVilla”—

one of Sam’s major competitors for more money and less drama. He quits,

leaving Sam furious.

Sam asks for your advice regarding the issues noted above. Specifically, he is

looking to determine:

(1) Whether he will be required by law to re-pay, to his father’s estate, the

$10,000 his father loaned him but subsequently forgave?

(2) Whether he will be required by law to enter into a contract with Mike in

regards to supplies of PP22 for his business?

(3) Whether he can obtain any recourse against Ben for what he believes to be a

breach of their contract?

(4) The legality of the $100,000 loan from the bank to Sam?

(5) Whether Sam can enforce the employment contract against Tom?


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Issues

At issue are a number of relationships so it is best to deal with each relationship

separately. It is very important that the first thing to do in responding to an exam

question is to spot the issues and organize the information accordingly. Below is

a list of issues that should be dealt with in this fact pattern:

(1) Sam vs. his father’s estate

(i) Is there a valid contract?

• Potential issues:

o Offer & Acceptance

o Consideration

(2) Sam vs. Mike

(i) Is there a valid contract in regards to the terms of the agreement?



� Intention to be legally bound

� Lapsed Offer

� Meeting of the minds on material terms

� Acceptance of counter-offer

o Enforceability of Agreement to Agree

(3) Sam vs. Ben





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� Intention to be legally bound

� Meeting of the minds on material terms

� Misrepresentation

(ii) If so, was there a breach?

(iii) If so, was the breach fundamental?

(iv) Remedies

• Termination of the contract

• Damages

(4) Sam vs. the bank manager


• Duress

• Undue Influence

(5) Sam vs. Tom

(i) Is the employment contract valid?

• Against public policy

Rules and Application


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A. Sam vs. his father’s estate

At issue here is whether the second agreement between Sam and his father is a

valid contract. If so, Sam will not have to re-pay the $10,000 originally loaned to

him by his father. The subsequent agreement between Sam and his father was

that his father would forgive Sam’s $10,000 debt as long as Sam stopped

complaining and nagging at him about the particulars in his will. Since there are

no suspicious facts that suggest problems with the formation of the contract (i.e.

offer and acceptance, consent, intention to be legally bound) we can move on to

what seems to be the main issue in this alleged contractual relationship:

consideration. In order for a contract to be valid, there must be sufficient

consideration given for the promise.

Consideration has been defined as factors which the promisor considered when

he promised and which motivated his promising. The idea is that a promise which

lacks any adequate motive cannot have been serious and therefore should not

be taken seriously by the law. Therefore, we must determine whether Sam’s

promise not to complain or nag his father about his father’s distribution of his

estate in his will constituted sufficient consideration for the father’s promise to

forgive the debt. This is a possibility given the fact that the courts have held

valuable consideration to consist of some forbearance suffered or undertaken by

one of the parties (Hamer v. Sidway; Dahl v. Hem Pharmaceuticals Corp) in

addition to benefits and profits. For example, in Hamer v. Sidway, the promisor

promised the promisee to pay him $5000 if the promisee refrained from smoking

and drinking until his 21st birthday. As the promisee had carried out his promise,

the court found that because the promisee had a legal right to smoke and drink,

the restriction of this right in order to complete the promise constituted a

forbearance suffered and therefore was sufficient consideration in order to give

legal effect to the contract. Therefore, in Sam’s case, it could be argued that

because Sam suffered a forbearance, as he refrained from complaining to his

Make sure to bring up counter-arguments


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father about what he thought to be an injustice in his father’s estate distribution,

sufficient consideration existed so as to give legal effect to the agreement.

However, this is not likely to be the case. While a forbearance suffered may

constitute sufficient consideration, the forbearance from doing something must

be something that the promisee had a right to do in the first place (White v.

Bluett). It cannot be said that Sam had a right to complain and nag his father

about the distribution of his father’s estate. In White v. Bluett the court recognized

that a person does not have a right to complain about the distribution of another’s

person’s estate in the first place, therefore a forbearance from doing so does not

constitute sufficient consideration for the promise.

Further, it could also be argued that Sam’s complaining and nagging to his father

constituted a form of duress so as to vitiate the father’s consent in promising to

forgive Sam’s debt. In this case, the agreement would be considered void. While

this is a weaker argument than the one discussed above, it is always a good idea

to mention the possibility of such an argument, no matter how unlikely it seems.

B. Sam vs. Mike

There are two main issues here: (i) Whether there is a valid contract between

Sam and Mike with regards to the shipments of PP22? (ii) Whether the

agreement between Mike and Sam to enter into a contract but agree on the

terms of that contract at a later date is valid and can therefore be enforced by

Mike?

(i) Whether there is a valid contract btwn Sam and Mike with regards to the

shipments of PP22?

Make frequent use of case law as legal authority.


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There is clearly an offer by Sam, the offeror, to pay Mike for a given amount of

PP22. There is however an issue in regards to whether that offer by Sam lapsed,

since it took Mike three weeks before giving Sam an acceptance to his offer. An

offer lapses when the offeree has not accepted the offer within a “reasonable

amount of time” (Shatford v. BC Wine Growers Ltd). In Shatford v. BC Wine

Growers Ltd., a company made an offer to the offeree to purchase berries but the

offeree did not accept until 6 days later. The Court held that given the nature of

the product, the time of year and the necessity of prompt decision for the offeror,

6 days did not constitute a reasonable amount of time and therefore the contract

is void on the basis that the offer lapsed. However, it us unlikely that Sam’s offer

will be found to have lapsed, given that it can be distinguished on the facts from

Shatford. The PP22 was not a perishable product and furthermore, Sam did not

suggest to Mike any kind of urgency of a decision.

There also seems to be a problem in regards to Mike’s acceptance of Sam’s

offer. Mike’s response to Sam’s offer seems to take the form of an enquiry into

whether better terms might be available. If this is the case, then the power of the

original offer by Sam will have been destroyed because Mike’s response would

take the form of a counter-offer (and a rejection of Sam’s offer). This is likely to

be the case because even though Mike responded to Sam’s offer in a sense that

suggests acceptance (i.e. “sure, no problem…I can supply what you need), he

clearly inquired into whether Sam would accept different terms--$500 per 100

cartons shipped on Tuesdays rather than $400 per 200 cartons shipped on

Mondays.

Given that Mike’s response to Sam’s offer is likely to be characterized as a

counter-offer, we must assess the validity of Sam’s acceptance/response. One of

the heralding principles of contract formation is that the parties must show a

willingness to be legally bound (Klienwort Benson). This is clearly lacking in

Sam’s response to Mike’s counter-offer. It is likely that a court will characterize

Separate sub-issues with distinct headings

Clear statement of the law


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Sam’s response—“ummm…geee…I don’t know. That might throw off my entire

business…I guess it could work”—as lacking a clear intention to be legally

bound. The fact that Sam later accepted Mike’s offer to decide on the terms of

the agreement later in the future is further evidence of Sam’s unwillingness to be

bound and a lack of “meeting of the minds” of both parties.

(ii) Whether the agreement between Mike and Sam to enter into a contract but

agree on the terms of that contract at a later date is valid and can therefore be

enforced by Mike?

There is also the issue of whether the agreement between Mike and Sam to

enter into a contract but decide on its terms at a later date can be held to be

legally valid.

Agreements to agree in the common law can be enforced. However there is a

distinction to be made between agreements to enter into a contract later and

agreements to enter into a contract on terms that will be determined later. The

former can be enforced while the later cannot. Parties cannot agree at one point

in time to enter into a contract on terms to be decided later—cannot have an

enforceable agreement to negotiate (Empress Towers Ltd. V. Bank of Nova

Scotia). Given this, it is likely that the agreement between Sam and Mike to

negotiate the terms later will not be enforced. However, courts will try to give

legal effect to any clause or contract that the parties understood and intended to

have legal effect (Empress Towers Ltd. V. Bank of Nova Scotia). In Empress

Towers Ltd., even though some of the terms of the contract are left open (rental

rate) and were to be decided on at a later date, the Court enforced the contract

given that the parties clearly intended to form a contract and did not just mean to

set out the rule for the negotiation stage. This was not the case with Sam and

Mike. Given the fact that this was the first time Mike and Sam were attempting to

negotiate a contract, had no prior business history with each other and that Sam


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seemed to be confused, uncertain and overwhelmed in responding to Mike’s

offer to agree to contract but decide terms later all suggest that the parties did

not clearly intend to form a contract. It seems more likely that they intended to

continue negotiations at a later stage.

C. Sam vs. Ben

There are several general issues with respect to the contractual relationship

between Sam and Ben: (i) Was the contract validly formed? (ii) If so, did Ben

breach that contract?

(i) Was the contract validly formed?

The main problem with respect to the validly of the contract formation between

Sam and Ben is that Sam’s consent to the terms proposed by Ben may have

been vitiated thereby making the entire contract void. The facts suggest that

Ben’s misrepresentation of the PP22 product may have misled Sam into giving

his acceptance to the contract. Misrepresentation affects the intellectual

formation of a party’s decision whether to willingly be legally bound to the

agreement—consent must be reasonably informed and free. If Sam can prove

his consent was vitiated by Ben’s fraudulent misrepresentation, then not only will

the contract be voided but he will also be able to claim damages in tort due to

Ben’s wrongdoing (Hedley Byrne; Esso Petroleum Co. Ltd v. Mardon). Ben

clearly promised Sam that his “PP22 products are made with 100% organic

substances.” This was a fraudulent material statement of fact that was false, as

the facts suggest that Ben knew his products were not 100% organic.

In order for a court to void a contract based on misrepresentation, the statement

must be of a fact and not opinion and the misrepresentation must relate to a

matter that a reasonable person would consider relevant his decision to enter

Tells the marker where you are headed in your answer


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into the agreement (Sarvis v. Vermont State College). In other words, Ben’s

statement that his PP22 products are 100% organic must be not be Ben’s

opinion, but rather a fact and further, the statement must have mattered

somehow for Sam’s decision to enter into the contract. The former cannot be

reasonably disputed. Ben clearly made a statement of fact and did not use

language indicative of an opinion. Also, it is likely that a court will find Ben’s

statement to have induced Sam into agreeing to the contract. Given the nature of

Sam’s business (organic/natural health products) and the fact that he had

mentioned in his negotiations with Mike (before he was negotiating with Ben) that

the PP22 tea must be 100% organic” both prove that this fact was absolutely

necessary to his decision to enter into a contract for the purchase of PP22

products from Ben.

(ii) Did Ben breach the contract?

Even though it seems likely that the contract was not validly formed, if the facts

suggest further issues, you should always continue the analysis and note your

assumptions. In this case, while the contract between Sam and Ben is likely to be

held invalid, the facts suggest a potential issue with breach of contract.

Therefore, it is best to continue the analysis assuming that the contract has been

validly formed.

Assuming that the contract with Ben was validly formed, the issue becomes

whether Ben can be held to be in breach of that contract by virtue of his sloppy

shipping habits. Both Sam and Ben had initially agreed that 100 cartons of PP22

would be shipped out every week on Monday for 12 months. While Ben did abide

by these terms for the first couple of weeks, he eventually started shipping only

50 cartons of PP22 every other week and on Thursdays (instead of Mondays as

agreed). There is clearly a breach of contract here as Ben did not carry out his

obligation 100% as stipulated. However, this only entitles Sam to damages and


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not to a termination of the contract. In order for Sam to be able to terminate the

contract with Ben, the breach must be found to be fundamental to the contract. In

other words, the breach must be of a condition and it must be serious and goes

to the heart of the contract (Cehaave VV c. Bremer Handelgesellschaft). Can it

be said that Ben’s breach of the terms of shipping and quantity of PP22 went to

the heart of their contract and deprived Sam of the entire benefit of the contract

(Hong Long Fir v. Kawasaki Kisen Kaisha)?

It seems more likely than not that a court would find the breach not to be serious

and substantial. This is because of the fact that while Sam was not receiving the

total amount of cartons he had ordered for each shipment, he was receiving

some products. Therefore, it cannot be said that Sam was being deprived of the

entire benefit of the contract. As a result, the breach is not fundamental and Sam

will only be entitled to damages for breach of contract and not termination of the

contract.

D. Sam vs. the Bank Manager

The main issue in this situation is whether a valid contract was formed between

Sam and the bank manager. The facts suggest that there may be a deficiency in

Sam’s consent to undertake the loan in exchange for the guarantee. If the

contract is found to be invalidly formed, it will be declared void and rescission will

be the remedy (i.e. the parties will be placed in the position they were in before

the contract was formed).

(i) Is the contract valid?

Clear application of rules to the facts


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The facts suggest that the bank manager may have influenced or taken

advantage of Sam’s confusion, inexperience and obsession with his failing

business so as to get Sam to agree to give a guarantee that was worth more

than his house. There are two factors by which Sam’s consent may have been

vitiated in this situation: (a) Duress (b) Undue Influence

(a) Duress: Contracts formed under duress are voidable. Duress may take the

form of actual or threatened violence, duress of goods, or economic duress. In

determining whether there was a coercion of will, we must enquire into whether

the party alleged to have been coerced did or did not protest, whether he had an

alternative course of action open to him, whether he was independently advised

or told to seek it or whether he took steps to avoid the contract after entering into

it (Atlas Express Ltd. v. Kafko Ltd.). It must be shown that the party did not act

voluntarily in entering into the contract. This is unlikely to be found in Sam’s case.

The facts do not suggest that he was coerced, against his will, into entering into

the agreement with the bank manager. While it is true that Sam did not seek

independent advice nor told to seek it, there were no positive actions on behalf of

the bank manager that suggest he coerced Sam. He did not attempt to convince

Sam that no other options were open to him nor that his offer was a good deal.

Neither did Sam protest or question the offer.

(b) Undue Influence: The facts are much more akin to a situation of undue

influence here. Undue influence involves unequal bargaining power and abuse of

trust. In these situations, one party is in the position to dominate the will of

another and therefore the person is unable to act independently. Specifically, it

involves a relationship of trust and confidence that has been abused (Lloyds

Bank Ltd. v. Bundy). It seems that the bank manager took advantage of Sam’s

inexperience in business and banking and desperation for funding to save his

business. Consideration from the bank manager was grossly inadequate and the

bank manager used his position of power and relationship of trust to secure the

grossly unfair agreement. As the fact pattern notes, Sam had been doing his day

Concisely tells the marker the possibilities you are going to be dealing with regarding this issue


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to day banking with that particular bank manager for the past 10 years. This

suggests that a relationship of trust and confidence had developed between Sam

and the bank manager which consequently gave the bank manager much

influence over Sam. In Lloyds Bank Ltd. v. Bundy, the court held that a

relationship of trust and confidence gives rise to a presumption of undue

influence unless the creditor has taken reasonable steps to satisfy himself that

the party entered into the obligation freely and in knowledge of the facts (Lloyds

Bank Ltd. v. Bundy). Since Sam did not seek any independent advice and the

bank manager did not even suggest that Sam should seek such independent

advice, it is likely that the court will void this agreement on the basis that Sam’s

consent was vitiated by undue influence exercised by the bank manager.

E. Sam vs. Tom

The main issue with the employment contract between Sam and Tom is public

policy. The state will not enforce contracts that run against its own public policy

and community values. Issues of public policy are concerned with the content of

the contract and not the will of the parties. Therefore, if it is found that the

contract between Sam and Tom is contrary to public policy, it will be declared

illegal and thus invalid.

The main problem with Tom’s employment contract is the provision that seems to

restrain his freedom of employment. According to the employment contract, Tom

is prohibited from working for any one of Sam’s company’s competitors in

Canada for 10 years if he ever left Sam’s company. Employee restraint contracts

may be held invalid because of their unreasonable duration or because of their

unreasonable territorial ambit (Cameron v. Canadian Factors Corporation).

Whether the contract is against public policy in the sense that it unreasonably

restricts Tom’s freedom of employment will depend on whether the limitations in

terms of time and space are excessive. Reasonableness is determined by


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balancing the employer’s interest in protecting his business with the employee’s

interest in the protection of economic mobility/employment opportunity (Cameron

v. Canadian Factors Corporation). It seems likely that a court would find this

restriction contrary to public policy. The 10 year time period and territorial ambit

which it attempts to regulate is unreasonable given the size and nature of Sam’s

business. The restrictions go beyond what is necessary to protect Sam’s

company’s business interests. The restrictions could have been limited to a

particular town, municipality or even province. Further, the time period is too long

considering the state’s interest in ensuring and promoting economic mobility.

While the restraint provision seems to go against public policy, the question then

arises as to whether the entire employment contract between Sam and Tom is

invalid. If only a clause is found to be against public policy and not the entire

contract, the clause may be severable so as to allow for the validity and

enforcement of the entire contract. This would be in Sam’s interest given that the

employment contract stipulated that Tom must hold the position as Vice-

President for at least 4 years (renewable thereafter). Sam may be able to keep

Tom from working for his competitors for at least a few more years by enforcing

the employment contract (since the term has not expired). This is likely to be the

case since the common law presumes that a clause which is null and void does

not necessarily render the entire contract invalid unless it appears that the

contract is an indivisible whole. In other words, because the employment contract

between Sam and Tom is coherent and sensible with the employee restraint

provision stuck out, the rest of the contract is valid and therefore enforceable.

Conclusion Summarizes the answers of each main issue Each main issue is


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Conclusion

It is likely that Sam will be legally required to re-pay the $10,000 loan to his

father’s estate. This is because the subsequent agreement between Sam and his

father that his father would forgive the debt if Sam stopped complaining to him

about his estate distribution is void. It lacks sufficient consideration in order for

the contract to be valid.

Further, there was no initial contract validly concluded between Mike and Sam.

While it is likely that Sam’s initial offer did not lapse, Sam’s acceptance of Mike’s

counter-offer is likely to be found insufficient. His reaction to Mike’s counter-offer

did not espouse a clear and concise intention to be willingly and legally bound in

contract.

Also, Mike and Sam’s subsequent agreement to agree later is likely not to be

found valid and therefore will not be enforced. The common law does not enforce

contracts in which parties agree to enter into a contract now but decide on the

terms of that contract later. Furthermore, Mike and Sam neither clearly intended

to form a contract but merely intended to continue negotiations at a later stage.

The contract between Ben and Sam is likely to be voided given that Ben’s

statement that his PP22 products are 100% organic was a statement of fact and

not opinion and clearly induced Sam into agreeing to enter into the contract with

Ben. The statement was necessary to his decision to be legally bound. This

entitles Sam to the voiding of the contract and damages in tort for Ben’s

fraudulent misrepresentation.

However, even if a court did find the contract between Ben and Sam to be valid,

it is clear that Ben breached the terms of that contract given that he did not carry

out his obligations 100% as stipulated. This entitles Sam to damages, however,


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because the breach is not fundamental to the contract—Sam was not deprived of

the entire benefit of the contract—he is not entitled to terminate the contract.

In relation to the agreement between the bank manager and Sam, it is likely that

a court will find this agreement to be void on the basis of vitiated consent. The

facts suggest that the bank manager gave consideration that was grossly

inadequate for the promise and used his position of power and relationship of

trust to secure the agreement. He took advantage of Sam’s inexperience in

business and banking, his frustration and desperation to keep his business

going. Further, he took advantage of their long relationship in the banking domain

which clearly manifested attributed of trust and confidence which the bank

manager abused.

Finally, it is likely that Sam will be able to enforce the employment contract with

Tom but without the employee restraint provision. Prohibiting Tom from working

for any of Sam’s competitors in Canada for 10 years after he leaves Sam’s

company is unreasonable given what is necessary to protect Sam’s company’s

business interests and the state’s interest in protecting and promoting economic

mobility and freedom of employment. The prohibition is too restrictive and

consequently against public policy.


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However, given that this provision can be severed from the contract itself, the

rest of the contract will likely be enforced and held to be valid. Therefore, Sam

will be able to keep Tom from working for his competitors by requiring him to fulfil

the 4 year time period at his company as stipulated in the contract.

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