CONTRACTS CAN 2019-2020 copy
Transcript of CONTRACTS CAN 2019-2020 copy
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TableofContents
Chapter1:Introduction...............................................................................................3INTROTODAMAGES.......................................................................................................................4
Chapter2:OfferandAcceptance.................................................................................5INTRO..............................................................................................................................................5
CanadianDyersAssociationLrdvBurton(1920)........................................................................5HarveyvFacey[1893]................................................................................................................6
RULESGOVERNINGOFFERANDACCEPTANCE...............................................................................7PharmaceuticalSocietyofGreatBritainvBootsCashChemists................................................7UnilateralandBilateralContracts..............................................................................................7
ACCEPTANCEOFCONTRACTS:INTRODUCTION...........................................................................11LivingstonevEvans...................................................................................................................11
BATTLEOFTHEFORMS.................................................................................................................12ButlerMachineToolCovEx-Cell-OCorp(1979).......................................................................13TywoodIndustriesLtdvStAnne-NackawicPulpandPaperCoLtd..........................................13ProCDvMatthewZeidenbergandSilkenMountainWebServicesInc.....................................14
ACCEPTANCEINUNILATERALANDBILATERALCONTRACTS.........................................................14DawsonvHelicopterExplorationCo(1995).............................................................................15
RULESOFCOMMUNICATION.......................................................................................................16FelthousevBindley(1892)........................................................................................................16SaintJohnTugBoatCovIrvingRefineryLtd............................................................................17EliasonvHenshaw(1819)........................................................................................................17
MAILEDACCEPTANCES.................................................................................................................18HouseholdFireandCarriageAccidentInsuranceCo.vGrant(1879).......................................18HowellSecuritiesLtdvHughes.................................................................................................19
INSTANTANEOUSMETHODSOFCOMMUNICATION....................................................................19BrinkibonLtdvStahagStahlundStahlwarenhandelsgesellschaftmbH..................................19RuddervMicrosoftCorp...........................................................................................................20
TERMINATIONOFANOFFER........................................................................................................21TERMINATIONBYREVOCATION...................................................................................................21
DicksonvDodds[1876]............................................................................................................21ByrnevVanTienhoven[1880]..................................................................................................21ErringtonvErringtonandWoods[1952]..................................................................................22
TERMINATIONBYLAPSE...............................................................................................................22BarrickvClark[1951]...............................................................................................................22
ChapterThree:CertaintyofTerms.............................................................................23VAGUENESS..................................................................................................................................23
RvCaeIndustriesLtd(1986)....................................................................................................24INCOMPLETETERMS.....................................................................................................................24
May&ButcherLtdvR(1934)..................................................................................................26Hillas&CovArcosLtd(1932)...................................................................................................26FoleyvClassiqueCoachesLtd(1934).......................................................................................27
AGREEMENTSTONEGOTIATE......................................................................................................27EmpressTowersLtdvBankofNovaScotia(1991)...................................................................28MannparEnterprisesLtdvCanada(1999)...............................................................................29
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CONTRACTS
CHAPTER1:INTRODUCTION
• Contract:anagreementgivingrisetoobligationswhichareenforcedorrecognizedbylaw
TheComponentsofaContract
• Anagreement:anagreementiscomposedofanoffertoenterintoacontractandanacceptanceoftheoffer
o Anoffer:anexpressionofwillingnesstocontractoncertainterms,madewiththeintentionthatitshallbecomebindingassoonasitisacceptedbythepersontowhomitisaddressed
o Anacceptance:afinalandunqualifiedexpressionofassenttothetermsofanoffer
§ Thepromisescontainedintheagreementareknownasterms.Theinformingideabehindacontractisthattherehasbeenameetingoftheminds–thatthepartieshaveagreedonwhattheiressentialobligationsaretoeachother
• Mustbecomplete:thismeanstheagreementmustbecomplete,whichmeansitiscertain
o Example:knowwhothepartiesare,whatthematterisabout,whatthepotentialpurchasepriceis,etc.Thiscomesdowntoreasonableness
• Deliberate:theagreementmustbedeliberate,meaningthatbothpartieswanttoenterintoacontractualrelationship.Thismatterisformallyknownasanintentiontocreatelegalrelations.
o Intentiontocreatelegalrelationsmeansthatthepartiesmadetheagreementincontemplationofithavinglegalconsequences
• Voluntary:theagreementmustbefreelychosenandnotinvolvecoercionorotherformsofseriousunfairness
• Betweentwoormorecompetentpersons:thosewhoenterintoacontractareknownaspartiestothecontract.Theremustbeatleasttwopartiestoanycontract,whomusthavelegalcapacity
o Asageneralrule,onlypartiestoacontractcansueandbesuedonit• Supportedbymutualconsideration:acontractinvolvesabargainorexchangebetween
theparties.Thismeansthateachpartymustgivesomethingofvalueintheeyeofthelawinexchangeforreceivingsomethingofvaluefromtheotherparty
o Thisbilateralelementmeansthereismutualconsideration• Notnecessarilyinwriting:asageneralrule,evenoralcontractsareenforceable,though
itispreferablefornegotiatorstogetthecontractinwritingo InmostCanadianjurisdictionstherearecertainkindsofcontacts(likethose
involvinganinterestinland)thatmustbeevidencedinwritingtobeenforceable
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Notes:• Balanceofprobabilities:theplaintiffhastoshowonaBofPthatthereisacontract
betweenthepartiesinordertosueo Thisburdenofprooffallsontheplaintiffo BofPis50%certaintyplusabit
ClassicalTheoryofContract
• Theideathatthereisastablebodyofdoctrinecontaininggeneralprinciplesrelevanttoallcontracts.Conceptsinclude:
o Thatthelawcouldbereducedtoastatementofruleso Thatthelawwasconcernedwiththeobjectivemanifestationofagreementand
nottheparties’privatethoughtso Thatfreedomexistedforpeopletocontractastheychooseo Thatcontractualliabilitywasstrictonceabargainthatthelawrecognizedasa
contractwasstruck• Inreality,thefreemarketoverlapsandexistsintensionwithpublicregulation,markets
arenotlefttooperateuntouchedbydemocraticprocesses,andproblemsofracismandsexismincontracts,ortherefusaltoformcontracts,exists
o Thedoctrineofunconscionabilityofferssomeprotectionfromunfairbargainsbyinsistinguponindividualresponsibilitytoavoidtakingadvantageofinequality
o ThedoctrineofgoodfaithwasshowninthedecisioninBhasinvHrynewandrecognizedadutyofgoodfaithandhonestperformance
FreedomofContract:
• Thisisfocusedonthevoluntarychoicesofindividuals.Theroleofthelawofcontractswasconceivedprincipallyasafacilitationofvoluntarychoicesbygivingthemlegaleffect
• However,thelawhasalwaysplacedsomeexpresslimitsonthepursuitofself-interesto Example:thelawprotectingthosewhoarepresumedtotransactata
disadvantage,likeyouthorthosewithamentaldisability• Anotherlimitationonthisisafiduciary,apersonwhooccupiesapositionoftrustand
confidenceo Becausefiduciarieshaveexpresslyorimpliedlyundertakentodoso,theyare
requiredtorelinquishtheirselfinterestandactsolelyonbehalfofanothero Afiduciarydutyplacesthestrictestlimitationsonthepursuitofself-interesto Example:therelationshipbetweenatrusteeandabeneficiary
INTROTODAMAGES
• Contractualmeasureofdamages:o Theplaintiffisentitledtobeputinthepositiontheywouldhavebeeninhad
thecontractbeenperformed• Dutytomitigate:
o Thelawimposesadutyontheplaintifftomitigateloss
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o Aplaintiffcanonlyrecoverforunavoidablelosses–aplaintiffwillnotbeabletorecovertotheextentthattheyhavefailedtoactreasonablytolimitorreducetheirlosscausedbythedefendant’sbreach
• Typesofdamages:o Expectation:thismeasureaimstoputtheinnocentpartyinthepositionthey
wouldhavebeeninhadthecontractbeenfulfilledo Reliance:thismeasureaimstoputtheinnocentpartyinthepositiontheywould
havebeeninhadtheynotenteredthecontract§ Topermitrecoveryoflossesincurredduetorelianceonthecontract
o Restitution:thismeasureaimstogivebackwhattheinnocentpartytransferredtothecontractbreaker
§ Tohaveaclaimhereyouneedtoshowthreethings:anenrichment,acorrespondingdeprivation,andtheabsenceofajuristic/legalreasonjustifyingtheenrichment
Chapter2:OfferandAcceptance
INTRO
• Therulesofofferandacceptancearetoolsofanalysistoassistindefiningthe“momentofresponsibility”,ratherthanaprioristatementthatcanbeblindlyappliedinavarietyofcircumstances
• Currentcommonlawrulesonofferandacceptancearenottheonlyoptions,manyotherreasonablealternatives
• Invitationtotreat:anexpressionofwillingnesstodobusiness.Thepartydoesnotmaketheofferbutinvitestheotherpartytodoso
• Offer:anexpressionofwillingnesstocontractonspecifiedterms,madewiththeintentionthatitistobecomebindingassoonasitisacceptedbythepersontowhomitisaddressed
• Offeror:thepersonmakingtheoffer• Offeree:thepersontowhomtheofferisaddressed
CanadianDyersAssociationLtdvBurton(1920)• Facts:InMayof1918,CanadianDyersAssociation(CDA)wrotetoBurtonandaskedfor
aquoteofthelowestpriceforthepropertyon25HannaAvenue.BurtonrepliedonJune6thstatingapriceof$1650wasthelowesthewouldsellat.OnOctober16ththefollowingyeartheCDAwroteBurtonagainaskingfortheprice.October21stBurtonrespondedsayingpreviouspriceremainedthelowestoffer.CDAinterpretedthisasanofferandacceptedbysendingachequefor$500onOctober23rd.Onthe27thBurton’ssolicitorsentadraftdeed,suggestingaclosingdateofthe1st.Onthe5thofNovemberBurton’ssolicitorwrotetotheCDAstatingtherewasnocontractandreturnedthe$500
• Issue:Didthewordsandactionsofthedefendantconstituteanoffer?• Reasons:
o Merelyquotingthepricedoesnotmanifestanintentiontosello Middletonheldthattheletterwhichwasmorethanamerequotationofprice,
butratherastatementofthepriceatwhichBurtonwaswillingtosello Thisconstitutesanofferasitindicatesareadinesstosell
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o Burton’sconductafterOct.23rdsuggestedacontracthadbeenmade–hedidn’tsendoutaletterdenyingthesalebutratherwroteupadraftdeed,didatitlesearchandsuggestedaclosingdate
§ Needtobecautiouswhenconsideringconductfollowinganoffer,becausetheperson’sconductcan’t‘travelbackintime’andaffectthecontract
§ Policyrationaletolookatsubsequentconduct:couldleadtotheissueofbuyersremorsewhereadishonestpersoncouldaltertheirsubsequentconductinordertoescapetheoffer
§ Forthisreasonsubsequentconductisgenerallyirrelevant,butsomeexceptionsmade
• Holding:Heldfortheplaintiff.Burton’swordsandactionsconstitutedanoffer• Ratio:CreatedtheDyerstestforassessingcontractualintention
o Anapparentintentiontobeboundmaysufficetocreateacontract.Theallegedofferormaybeboundifhiswordsorconductaresuchtoinduceareasonablepersontobelievethatheintendedtobebound,eventhoughinfacthehasnosuchintention
o Subsequentconductisgenerallyirrelevantbecauseofpolicyrationale–couldleadtoissuesofbuyer’sremorsewhereadishonestpersoncouldaltertheirconducttoescapetheoffer
o DifferencebetweenDyerstestforanofferversusinvitationtotreat:comesdowntointention,andwhetheraproposalistobeconstruedasaninvitationtodealorasanoffer.Thisdependsonthelanguageusedandthecircumstancesoftheparticularcase
HarveyvFacey[1893]• Facts:Would-bepurchasers(theplaintiffs)sentatelegramaskingthewould-bevendors
(thedefendant)thesetwoquestions:“willyousellusBHB(thenameoftheproperty)?Telegraphyourlowestcashprice”.Thedefendantsrespondedbysaying,“LowestcashpriceforBHPis900pounds”.
• Issue:Wasthereanoffer?• Reasons:
o Faceyhadnotdirectlyansweredthefirstquestionastowhethertheywouldsellandthelowestpricestatedwasmerelyrespondingtoarequestforinformationnotanoffer
o TherewasthusnoevidenceofanintentionthatthetelegramsentbyFaceywastobeanoffer.
• Holding:ThePrivyCouncilheldthattherewasnocontractconcludedbetweentheparties
o BUTJusticeRussellcriticizedthiscase,saidthattheJCPCconstruedthetelegramsinsuchanarrowgrammaticalsensethatwassocontrarytotheirobviousmeaningandtheobviousintentionofthepartiesastoshockone’sintelligenceandone’ssenseoffairness
• Ratio:o Aquotationofpricedoesnotevidenceanindicationtosello Thiscasedefineswhenthereisanofferversusanintentiontotreat
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RULESGOVERNINGOFFERANDACCEPTANCE
A. Retailsales:TheDisplayofGoods(Boots)B. Advertisementsofrewards/advertisementsofunilateralcontracts(Carlill)C. Advertisementsofbilateralcontracts(Goldthorpe)D. Tenders(oldlawpreRonEngineering,newlawinRonEngineering)
PharmaceuticalSocietyofGreatBritainvBootsCashChemists• Facts:Defendantsoperatedaself-servicepharmacythatsolddrugsthathadsubstances
inthemthatwereinthePoisonsList.Whenthepharmacywasopenthepharmacistandotherworkerswereinthebuilding,andthepharmacistwasstationednearthepoisonssection.Asignwasclearlydisplayedshowinghisregistration,andineverycasewhereadrugwassoldthepharmacistsupervisedthetransaction
• Issue:DidthesaleofthesubstancesonthePoisonsListbyBootstranspirebyorunderthesupervisionofaregisteredpharmacistasrequiredbythePharmacyandPoisonsAct,1933?
o Thisdependsentirelyonwherethecontractwasformed• Reasons:
o Plaintiffsallegedthepurchasewascompleteonceacustomerputsanarticleintotheirbag,andthereforethecontractwascompleteatthistime,disallowingthepharmacistfrompreventingthedrugfrombeingsoldtocustomersasoccasionallyrequiredundertheAct
o Courtruledthatthecontractisnotcompleteduntilthecustomerhasindicatedtotheshopkeeperwhattheyneedandtheshopkeeperacceptstheoffer
o Ifthiswasnotthecase,thencustomerscouldbeboundtothecontractoftheobjectonceitisintheirbasket,andthencouldbeunabletosubstituteitforanotherobject
o Ifadisplayofgoodsinawindowwereanoffer,theshopkeepercouldbeforcedtocontractwithvirtuallyanyone
• Holding:Infavourofthedefendant• Ratio:establishesthegeneralrulethatadisplayofprice-markedgoodsinastore
window/onastoreshelfisnotanoffertosellatthatprice,butaninvitationtotreat
UnilateralandBilateralContracts1) Unilateralcontract:whereapartymakesanexpressengagementorundertakesa
performance,withoutreceivinginreturnanyexpressengagementorpromiseofperformancefromtheother.
a. Theessenceofthiscontractisthatneitherpartyisbounduntilthepromiseeacceptstheofferbyperformingtheproposedact
b. Consistsofapromiseforanact,theacceptanceconsistingoftheperformanceoftheactrequestedratherthanthepromisetoperformit
2) Bilateralcontract:acontractinwhichthecontractingpartiesareboundtofulfillobligationsreciprocallytowardseachother
a. Thecontractisformedbyexchangeofpromisesinwhichthepromiseofonepartyisconsiderationsupportingthepromiseoftheother,ascontrastedwithaunilateralcontractwhichisformedbytheexchangeofperformanceforanact
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• Inaunilateralcontractonlyoneparty(thepromisor)isboundtoperformbecauseonlyonepartyhasmadeapromise.Inabilateralcontractbothpartiesareboundtoperformasbothhavemadepromises
CarlillvCarbolicSmokeBallCo• Facts:thedefendantsweretheproprietorsofamedicalpreparationcalled"TheCarbolic
SmokeBall",andplacedanadvertisementinanewspaperstatingthattheywouldgivea$100rewardtoanyonewhocontractedacoldafterhavingusedthesmokeballthreetimesadayforaperiodoftwoweeks.Theplaintiffboughtthesmokeballanduseditasdirectedforthreeweeks,andthencaughtacold.Sheheldthatshewasentitledtothe$100
• Issue:IsthereacontractbetweenthepartiessuchthatMrs.Carlillisentitledtobepaid100pounds?
o Wastheadmerely“puff”?• Reasons:
o Theadwasnotaunilateraloffertoalltheworld,ratheranofferrestrictedtothosewhoacteduponthetermscontainedinthead
o Satisfyingtheconditionsforusingthesmokeballconstitutedacceptanceoftheoffer
o Useofthesmokeballandpaymentwerebothformsofconsideration(detrimentandinconveniencesustainedattherequestoftheofferor),andpeoplebuyingthesmokeballsbyrelyingontheadwasaclearbenefittothecompany
o Company’sclaimthatthemoneywasalreadyinthebankshowedtheseriousintentiontobelegallybound
o Thecompanywaiveditsrightstobenotifiedofacceptanceastheyreallyjustwanttohearfromyouonceyou’vegottensickafterusing(completingthenecessarycondition)
• Holding:Infavouroftheplaintiff• Ratio:Advertisementsofrewardsforreturnedpropertyare“invariably”treatedas
offers.Soareadvertisementsofunilateralcontractsgenerallyo Anadvertisementcanconstituteaunilateralcontract,whichcanbeaccepted
byfulfillingtheconditionsofthecontract;noformalacceptancerequiredNote:HarrierFighterJetadasanexampleofaunilateralcontract,butof“puff”
GoldthorpevLogan• Facts:Plaintiffhadhairsonherfaceandwantedthemremoved.Sawanadvertisement
bythedefendantLogan,wenttothebusinessandconsultedthedefendantFitzpatrick.Shewastoldthatherfacecouldbedefinitely"cleared"andthehairremovedpermanently,andthattheresultwasguaranteed.Sheunderwenttreatmentsbutthehairscontinuedtogrowasbefore.Sheclaimedthatthetreatmentsbyoronbehalfofthedefendantswereunskilfullyornegligentlyadministeredorshouldnothavebeenadministeredatall,andthatasaresultshesuffereddamages.Husbandalsoclaimsdamagesfromthedefendantbasedonsufferinglossandexpense.
• Issue:IsthereacontractbetweenGoldthorpeandLogan?Hasitbeenbreached?• Reasons:
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o Throughtheadvertisement,thedefendantsclearlycommunicatedwhattheresultswouldbeandwerecarelessintheirpromise–suggestednoexceptionsfortheirguarantees
§ Theadshouldbereadinplainmeaning.o Thedefendantpanderedtotheweaknessofadistressedclient;thestrong
cannotbeallowedtopreyontheweaknessofthegullibleormisguided(allusiontoinequalityofbargainingpowers)
o Itwasdeterminedthatanofferwasmadetothepublic,theplaintiffacceptedtheoffer(communicatedbyconduct),andconsiderationwasgivenintheformofdetrimentorinconveniencesustainedbytheplaintiffbyundergoingtheprocedure
o Thiswasanadforabilateralcontract,notaunilateralcontract• Holding:Judgeruledinfavouroftheplaintiff.Orderedtopaythesumofthe
treatments,aswellas$100inexpectationdamages.ActionagainstFitzpatrickandactiononbehalfofherhusbandbothdismissedwithoutcosts.
• Ratio:Advertisementsofbilateralcontractsaretypicallynotheldtobeofferssincefurtherbargainingiscontemplated
o Ifyoumakeanunqualifiedpromise,youareboundbyit(theyareenforceableevenifyoutryyourbesttodeliver)
Noteonassessingdamages:
• ThecourtshouldnothaveawardedexpectationdamagesandrestitutiondamagesinthewaythatitdidinGoldthorpe
• Whatwehavehereisdoublerecoverysinceshewasawarded$100inexpectationdamagesand$13inrestitution
• ThismeansGoldthorpeisrecoveringthe$13twice–thecourtshouldhaveeitherawarded$100astheexpectationdamagesandnothingelse,orrefundedthefeeunderrestitution($13)anddeductedthatsameamountfromtheexpectationdamages($87)
• Thisisbecausetogetthevalueofahairlessface($100),Goldthorpewouldhavehadtospend$13
RvRonEngineering&Construction(Eastern)Ltd• Facts:RonEngineeringsubmittedatenderfor$2,748,000inresponsetotheowner’s
call.Ronalsogaveadepositintheamountof$150,000.Upontheowneropeningthetenders,anemployeeofREdiscoveredthatitstenderwas$632,000lowerthatthenextlowesttenderbecausetheyhadaccidentlyomitted$750,000fromthetotalsum.REimmediatelyinformedthegov’toftheerrorandinitiallyaskedtowithdrawitstender.Gov’trefused.Nowandontheassumptionthatthebidwasanoffer,REissayingthatitstenderisincapableofbeingaccepted
• Issue:Isthereacontract?CanREgetitsmoneyback?• Reasons:
o Undertheoldlaw:§ Invitationtotenderwastheinvitationtotreat§ Submissionofthebidswastheoffer§ Choosingthebestbidwastheacceptance
o Underthenewlawcreatedhere
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§ OfferofContractAistheinvitationtotender.ThecontentofContractAcontainstherulesgoverningthebiddingprocess.Thiscontracttypicallyprovidesfortheirrevocabilityofthebidsandforfeitureofdeposit
§ SubmissionofthetenderistheacceptanceofContractAandanirrevocableoffertoenterintoContractB.ContractBcontainsthetermsofthemainagreement
o ThecontractoracceptedcontractAwhenhesubmittedhisbidinaccordancewiththeterms,anditstatesthathehasanobligationtoenterintoContractB(constructioncontract).AcceptingContractAbindsthecontractortoenterintoContractB.ThedepositwastoensurethattheperformanceofthecontractorofitsobligationsunderContractA,whichitfailedtoliveupto
• Holding:Appealallowed,ownertokeepthedeposit • Ratio:Bidsatoncebecomeirrevocableiffiledinconformitywiththetermsand
conditionsunderwhichthecallfortenderswasmade,ifsuchtermssoprovide o Inmanycasesthesubmissionofanofferinresponsetoacallfortenders
constitutesacontractseparatefromtheeventualcontractfortheconstruction Note:MistakeinRelationtotheLawofTender
• Thisisanextremelynarrowdefence–usedinRonEngineeringtoarguethattherewasnoContractAbecauseofthemistakeintender
• Ideaisthatwedon’twantpeopletobackoutofadealafterithasbeenmadebyeasilysayingthattheyhavemadeamistakesoitisn’tavaliddeal
• BUTifyouknowsomeonehasclearlymadeamistake,youcan’tsnapuptheofferyouknowisn’treallythere
• SCCsaysthatweassessthesituationwhenthetenderhasbeensubmitted.Thetenderhastoshowitselfasdeficientatthatverymoment
• Theerrorhastobesoclearthatapersonknowsimmediatelybylookingatitthatitiswrongforittofallunderthecategoryofmistake
MJBEnterprisesLtdvDefenceConstruction(1951)• Facts:MJBsubmittedatenderinthecontextofaprivilegeclausethatstated:“the
lowestoranytendershallnotnecessarilybeaccepted.”DefenceawardedthetendertothelowestbidbySorochanbutSorochan’sbidwasanon-conformingbid.MJB’sbidwasthelowestconformingbid.
• Issue:CandefencerelyonitsprivilegeclauseasdefencetoMJB’saction?• Reasons:
o TheformationofContractA,includingifitisformedatall,dependsontheintentionoftheparties.Therearespecificparametersthatshowintention(alwaysneedstobeacasebycaseanalysis)
o ItisanimpliedtermintendersthatonlycomplyingbidswillbeacceptedandthatSorochan’sbiddidn’tcomplywiththeterms,soitcan’tbeaccepted
o InacceptingthedisqualifiedbidtheownerisinabreachofContractA(outlinedin(RonEngineering)
o Althoughtheprivilegeclausedoesnotoverrulethisobligationtoonlyacceptcompliantbids,itdoesallowtheownertonotsimplyacceptthelowestbidderbecauseofthistheownerwasundernoobligationtocontractwiththeplaintiff
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• Holding:Appealallowed.ThecontractwithSorochanisnotbinding,buttherespondentdoesnothavetocontractwithMJB • Onabalanceofprobabilitiestherecordsupportstheappellant'scontentionthatas
amatteroffactitwouldhavebeenawardedtheContractBifSorochanwasdisqualified,sotheappellantisawardeddamages
• Ratio:o Aprivilegeclauseisonlycompatiblewithacceptingcompliantbidso Withaprivilegeclauseyoudonothavetoacceptthelowestbid,butyoucannot
acceptadeficientbido ThiscaseisimportantbecauseitconfirmsandclarifiesContractAandContract
B(ContractAisbilateral,notunilateral)
ACCEPTANCEOFCONTRACTS:INTRODUCTION
• Acceptanceisafinalandunqualifiedexpressionofassenttothetermsoftheoffer• Importantprinciplesregardingacceptance:
1) Ifpurportedacceptancevariedinanyrespectwiththetermsoftheoffer,thisisacounteroffer
2) AcounterofferkillstheoriginalofferperHydevWrench3) Anofferorcanrevivetherejectedoffer,includingbyimplication,suchthat
itcanbeaccepted(LivingstonevEvans)4) Asimplerejectforinformationisnotarejection(LivingstonevEvans)
LivingstonevEvans• Facts:ThedefendantEvansofferedtoselllandtotheplaintifffor$1800.Theplaintiff,
Livingstone,responded:“Sendlowestcashprice.Willgive$1600.”Thedefendantresponded:“Cannotreduceprice.”Thentheplaintiffpurportedtoaccept
• Issue:Isthisacceptanceeffective?Isthisarequestforinformationorarejection?• Reasons:
o UnderHydevWrenchacounterofferconstitutesarejection–thisisveryfirmlyestablished
o Becauseofthislongstandingprecedent,Livingstone’sfirsttelegramisacounter-offerandaninquirywouldhaveputanendtoEvan’sliabilityunder
o However,Evans’secondtelegramconstitutesarenewaloftheoriginalofferandLivingstone’sacceptancemakesitabindingcontract
• Holding:Thejudgeheldthattherewasabindingcontractforthesaleoflandandtheplaintiffisentitledtospecificperformance
• Ratio:o Themakingofacounterofferisarejectionoftheoriginaloffero Anoffercanberenewedafteracounterofferthroughambiguouslanguage
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BATTLEOFTHEFORMS• Agreementsarecommonlyenteredintobecausebetweenpartiesviastandardform
contracts.Eachpartymayhaveadocumentthatpurportstosetoutthetermsofthecontract
• Battleoftheformsdetermineswhosetermstriumph(PerDenningLJinButlerMachineToolCoLtd)TRADITIONALAPPROACH FIRSTBLOW SHOTSFIREDONBOTHSIDES
• Applythe‘mirrorimage’principleofacceptance:eachsuccessiveformisacounterofferanditispossiblethatnoconsensusiseverreachedifonlyformshavebeenexchanged
• Applythelastshotrule:ifthelastformutilizedisfollowedbyconductbytheothersidewhichamountstoacceptance,thereisacontractthetermsofwhicharecontainedonthelastform
• Thepartywho‘fires’thelastdocumentprevails
• Partyprevailswhoofferstermsfirstunlesstheothersidedrawsmaterialchangesintheirtermstotheattentionofthatfirstparty
• Thetermsandconditionsofbothpartiesaretobeconstruedtogether
• Ifthedifferencesareirreconcilablesothattheyaremutuallycontradictory,thentheconflictingtermsmayhavetobescrappedandreplacedbyareasonableimplication
• Theagreementwouldbeconstitutedbythetermsthatarecommontotheirrespectiveforms,togetherwithimpliedreasonableterms
• Virtueofthemirrorimage/lastshotrule:certainty
o Undermirrorimage,acontractonlycomesintoexistencewhentheformsexactlymatch;alternativelyandbasedonthelastshotrule,thetermsarethosecontainedinthelastdocumentprecedingperformancebytheotherside
• Problemswiththetraditionalapproach:o Whereonlyformsareexchangedtheconclusionwillbethatnocontracthas
beenformed,eventhoughthepartiesmayregardthemselvesashavingbeenboundatthetime
o Whentherehasbeendelivery,thelastshotrulecanproducearbitraryresultso Overall,thevirtueofcertaintyisattainedbyignoringrealityandmechanically
renderingformalisticdecisions
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ButlerMachineToolCovEx-Cell-OCorp(1979)• Facts:OnMay23,1969,inresponsetoaninquirybythebuyers,thesellersquoteda
priceforamachinetoolfor73pounds.Onthebackoftheirofferwasanumberoftermsandconditions,whichstipulatedthattheywereto"prevailoveranytermsandconditionsinthebuyer'sorder".Oneoftheconditionspurportedtoallowthesellertochargethebuyersthepriceforthemachineprevailingatthetimeofdelivery.Thebuyersrepliedbyplacinganorderforthepurchaseofthemachine.Theirdocumentstipulatedthattheorderwassubjecttotermsandconditionsthatdifferedfromthoseputforwardbythesellersanddidn’tmakeanyprovisionfortheincreaseinprice.Thesellerscompletedandreturnedtheformwiththeseconditions,statingthattheorderwasbeingenteredinaccordancewiththeseller'squotationfromMay23rd.Whenthesellerscametodeliverthemachinetheyclaimedtobeentitledtoadditionalmoneyunderthepriceformulaoftheiroffer.Thebuyerssaidthattheirownorderprevailedandtherewasafixedcontract
o BasicallyButler(sellerandplaintiff)saysit’sowedmoremoneyviaapriceescalationclause.Ex-CellOCorp(purchaseranddefendant)saysthatnofurthermoneyisowedbecausethepriceescalationclauseisnotpartoftheircontractofpurchaseandsale
• Issue:Whosetermstriumph?• Reasons:
o Denningsaysthatfactsarecritical–wecan’tlookatthelawinabstraction,needtolookatthelawincombinationwiththeparticularfacts
o Thelastshotmethodisusedhere.May23rdisseenasanoffer,May27ndisarejectionoftheofferandacounterofferbythebuyer.June5thcouldbeacceptanceoftheMay23rdcounteroffer,buttheyincludedacoverlettersayingtheyareenteringthebuyer’sorderinaccordancewiththeseller’squotationofMay23rd
o June5thisthedecisivedocumentasthecoverletterdoesn’tchangeanything,itagreestogothroughwiththearrangementbasedonthepurchaser’sterms
• Holding:Thecourtallowedthebuyer’sappeal.Itfoundthatthebuyer’sorderwasnotanacceptanceoftheinitialofferfromthesellerbutacounter-offer,whichthesellershadacceptedbyreturningthesignaturesectionofthebuyer’sletter.Onthisbasis,thecourtfoundthatthecontractwascompletedwithoutthepricevariationclauseandthereforethesellercouldnotincreasethecostofthetool.
• Ratio:BattleoftheformstestsbyDenning
TywoodIndustriesLtdvStAnne-NackawicPulpandPaperCoLtd• Facts:Theplaintiff(Tywood,theseller)broughtanactionforthepriceofgoodssold,
andthedefendant(St.Anne,purchaser)arguedthattheagreementofsalecontainedaclauseforsubmissiontoarbitration.Thedefendant'sinvitationtotenderdidnotcontainanarbitrationclause,andarevisedproposalwassubmittedtotheplaintiff.Whentwopurchaseordersfromthedefendantweresubmitted,anarbitrationclausewaspresent
• Issue:Underwhosetermswasthecontractformed?• Reasons:
o Judgefoundthatneitherpartyconsideredanytermsotherthanthosefoundonthefaceofthedocument(specificationsandprice)tobeimportant
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o Undertheclassicalmodel,St.Anne'scontractwouldhold.Similarlyundereitherafirstshotoralastshotmodel,St.Annewouldprevail.Grange,however,takesaninterventionisttack.Hewantstopreventinefficiencybyworkingoutwhathethinksisareasonableagreementbetweentheparties.
o Tywoodimposednon-arbitrableconditionswhentheyquotedinitialpriceandneveracknowledgedSt.Anne'sterms.Thedefendanttriedtosmuggleinarbitrationtermsanddidnotcomplainwhenthepurchaseorderswerenotreturned.
o Theconductofthepartiesindicatesbothpartieswereinterestedonlyinthespecificationsandthepriceandthatconsummationofthebusinessdealwasparamountfortheparties
• Holding:Applicationforstaydismissed,Tywood’stermsprevail• Ratio:
o Ifthereisadiscrepancy,looktotheessenceofthecontracto Onecannotsneaktermsintocontractswithoutpropernotificationo Looktoactualconductofbusiness(dopeoplereallyreadtheterms?)o Representsamoveawayfromclassicalcontractingmodeltoreasonable
contracting
ProCDvMatthewZeidenbergandSilkenMountainWebServicesInc• Facts:DefendantboughtaCD-ROMdatabasewithalicenserestriction,limitingthe
consumer-purchasertonon-commercialuse.Theexistenceofalicenserestrictionwasdeclaredbyshrinkwrappackagingbutthetermswereinsidethepackagingandnotontheoutside.DefendantignoredthelicenseandresoldtheinformationontheCDdatabase.
• Issue:IsZeidenbergboundbythetermsofthelicensewhenthetermswerenotknownatthetimeofcontract?
• Reasons:o TheUCC(uniformcommercialcode)permitspartiestostructuretheirrelations
sothatthebuyerhasachancetomakefinaldecisionafteradetailedreview.Thecustomerinspectedthepackage,triedoutthesoftware,learnedofthelicenseanddidnotrejectthegoods,whichthecustomercouldifthelicensewasunsatisfactory
o Abuyeraccepts,under2-206whenafteranopportunitytoinspectthegoods,hefailstomakeaneffectiverejection.Thus,thebuyerhadacceptedandwasboundtoabidebythelicenseashehadtheopportunitytorejectthelicense
• Holding:HeldforProCD.Thebuyermustcomplywiththelicenseterms• Ratio:Ifabuyerispresentedwithadditionaltermsandofferedtheopportunitytoreject
andreturnthegoodsandsubsequentlydoesnotrejectthegoods,thenthebuyerwillhaveacceptedthoseterms
ACCEPTANCEINUNILATERALANDBILATERALCONTRACTS
• Acceptanceisa“finalandunqualifiedexpressionofassenttothetermsofanoffer”• Unilateralcontext:acceptanceisachievedbyfullyperformingtheactorforbearance.
Thereisgenerallynoneedfortheoffereetogiveadvancenoticeoftheacceptancetoofferor
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o Whereasinabilateralcontractacceptancemustbecommunicated• Courtswillendeavortoregardthecontractasbilateralinordertoprotecttheofferee
pendingcompleteperformance(DawsonvHelicopterExplorationCo)
DawsonvHelicopterExplorationCo(1995)• Facts:In1931Dawsonhaddiscoveredandstakedamineraldepositinaremotearea.In
1951Dawsoncommunicatedseveraltimeswiththerespondentconcerningtheexploitationofhisproperty.Therespondentexpressedinterestinmakingarrangementsthenextsummertofinancethestakingoftheclaims,towhichDawsonexpressedinterest.TherespondentwantedDawsontotakehimtothepropertyandgetapilottodoso,andDawsonagainagreedandofferedtoobtainatemporaryreleasefromhisarmypositiontodoso.MonthlatertherespondentrepliedandsaidthattheunfavorableconditionsmeantDawsonshouldn'tbothmakingthetripandtomakeotherarrangements.LateranexplorationpartyoftherespondentinvestigatingtheareaandlocatedshowingsreportedbyDawsonin1931,andhemadearrangementstoenterintothedevelopmentoftheclaims.Dawsondidnotfindoutuntil1953
• Issue:Wasthereabreachofcontract?Thishingesonifthecontractwasunilateralorbilateral
• Reasons:o Springersaidhewasn’tinbreachofcontractbecausetherewasnocontractas
theMarch5thdocumentwasanofferofaunilateralcontractthatcouldonlybeacceptedbyDawsondoingthethingrequested
o Courtssaythisisn’tanofferofaunilateralcontractbecauseitdoesn’tsimplycontemplateanactdonebyDawsonandisn’tarewardsituation–bothsideshadtoundertakethingsandSpringerwassupposedtoparticipateinhisownproposal(expressobligations)
o ItwasnecessarilyimpliedthatSpringerwouldparticipate.Theofferwasunconditionalbutcontemplatedaperformancesubjecttoacondition.Whethertheprimaryobligationcomestofruitiondependsoncontingencies
o Springerwasalsoinanticipatorybreacho Demonstratestheexistenceofprimarilyandsubsidiaryobligations
• Holding:Heldfortheappellant• Ratio:Reliesonbusinessefficacytosupportthepropositionthatwheneverpossible,
courtsinterpretanofferascontemplatingabilateralratherthanunilateralagreement.Thisisdonebecauseinabilateralcontractbothpartiesareprotectedfromaperiodpriortothebeginningofperformanceoneitherside
Note:Thiscaseisalsoanexampleofaconditionalcontract
• Thisiswheretheprimaryobligations(e.g.forSpringertogive10%interestandforDawsontobringhimtothesite)aresubjecttoconditions,andthoseconditionshavetobefulfilledbeforetheprimaryobligationsaretriggered
• Therewillbeimpliedsubsidiarycontractsinthiscase–e.g.goodfaithefforts• Nostandardforwhatconstituteseffortforagoodfaithcontract,needtoapplythe
factstodeterminewhatisreasonable(casebycasebasis)• Conditionsubsequent:Aruleinacontractthatallowsinteresttobedefeatedifa
specificeventoccursordoesn’toccur
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RULESOFCOMMUNICATION(FelthousevBindley)
1) Communicationofacceptance:a. Acceptancehasnoeffect(isnotcomplete)untilitiscommunicatedtothe
offeror2) Purposeofthecommunicationrule:
a. Toprotectofferor–totheofferorknowthattheyareinacontractb. Toprotectofferee–sotheoffereedoesnothavetotakethetroubleof
rejectingeveryoffertheyreceive3) Exceptionstothegeneralrule:
a. Silenceisacceptableasameansofacceptanceinaunilateralcontractbecauseperformanceoftheconditionissufficientacceptancewithoutnotification
i. E.g.CarlillvCarbolicSmokeBallb. Iftheofferorwaivedthecommunicationrequirementinabilateralcontract,
assumingnoprejudicetotheofferee,thewaiveriseffectivei. E.g.FelthousevBindley–questionsaboutwhetherthiscaseiscorrectly
decided(Treiteldoesn’tthinkitis)c. Ifthereisconductbytheoffereethatevidencesacceptance,thismayconstitute
acceptance–seenwheretheconductinquestionplainlysignalsagreementtothetermsoftheofferor
i. E.g.Battleoftheformscaselawd. Theofferee’ssilencecanreasonablyindicateacceptancetotheofferor.
Acquiescencebytheoffereeinreceiptoftheservicespermitstheinferenceofanacceptance
i. E.g.SaintJohnTug
FelthousevBindley(1892)• Facts:Plaintiffhaddiscussedbuyingahorsefromhisnephew,butduetoa
misunderstandingtheunclethoughthehadboughtthehorsefor30pounds,andthenephewthoughtthepricewas30guineas(oneguineaworthabitmorethenonepound).TheunclewrotethenephewonJanuary2ndofferingtosplitthedifferenceandstatingthatifhedidn'thearanythingbackhewouldconsiderthehorsehisat30pounds.Thenephewdidnotreply.OnFebruary25thanauctionsalewasheldandBindley,theauctioneer,wasinstructedtoreservethehorseinquestionfromthesalebutforgottodothis,soitwassoldfor33pounds.Theunclebroughtanactionagainsttheauctioneerfortheconversionofthehorse.Attrial,thedefendantobjectedthatthepropertyinthehorsewasnotvestedintheplaintiffatthetimeofsalebythedefendant
• Issue:Didthenephewaccepthisuncle’soffer,orwasthehorsestillhisatthetimeoftheauction?
• Reasons:o WillesJsaysthattherewasnothingthathadbeendoneatthetimeofthe
actiontoimplythatthepropertyhadchangedhandstotheuncle,andthenephewhadnotgivenacceptance
o Becauseofnoacceptanceorimpliedacceptance,throughactions,thepropertyremainedthatofthenephewatthetimeoftheauctionandtheunclehasnocaseagainsttheauctioneerforconversion
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o Ifthenephewwantedtoenterintothecontractheshouldhavegivenclearindicationofhisacceptance,whichhefailedtodo
• Holding:Appealallowed.Heldinfavouroftherespondent• Ratio:Onecannotimposeanobligationonanothertorejectone'soffer
SaintJohnTugBoatCovIrvingRefineryLtd• Facts:SaintJohnTugBoathadadealwithIrvingtosupplythemtheuseoftheir
tugboatsforassistingincomingoiltankerstotheirshipyard.However,withnofirmarrangementshavingbeenmade,SaintJohntoldIrvingthattheycouldusetheirtwotugboatsiftheypaid$450/daytohavethem"oncall"untilacertaindate.Thisdatepassed,andSaintJohncontinuedtokeepthetugsoncallandIrvingcontinuedtousethemforafewmonths.Whenbilledforthesemonthsaftertheoriginalendofthecontract,Irvingrefusedtopay.SaintJohnsuedforpayment
• Issue:Didthedefendant’scourseofconductduringthemonthsinquestionconstituteacceptanceoftheofferstogiverisetoabindingcontractforthe“standby”servicesofthetug?
• Reasons:o Aftertheoriginaldeadlinepassed,SaintJohnwereessentiallyservingIrvinga
newoffereverytimetheysentthemaninvoiceandkeptthetugsoncall,andthatIrvingcontinuedtoimplyacceptancebytheircontinuationofusingtheservice
o Irvingmusthaveknownthatthetugwasstillstandingby,andthatSaintJohnexpectedtobepaidfortheirservices
• Holding:Heldfortheappellant• Ratio:
o Silencecanconstituteacceptancewhencombinedwithconducto Ifapartyallowsanotherpartytoworkforthemundersuchcircumstances
thatnoreasonablepersonwouldsupposetheworkwasbeingdonefornothing,thenthefirstpartywillbeliabletopayforit
o Thedoingoftheworkistheoffer,thepermissiontodoitortheacquiescenceofitsbeingdoneistheacceptance
EliasonvHenshaw(1819)• Facts:OnFebruary10th,1813,aletterfromEliasontoHenshawwassent,offeringto
purchaseflourfromthematGeorgetownatapriceof9dollarsand50centsabarrelsenttoHarper'sFerry.Theyaskedforananswerbythereturnofthewagon.TheletterwasdeliveredonFebruary14th,butthewagonersaidhewouldnotbereturningtoHarper'sFerry,sotheydespatchedananswerbymailthatleftonthe19thtoGeorgetown.InthisletterHenshawacceptstheofferattheearliestopportunity.Onthe25thofFebruaryEliasonwritesanotherletterstatingthatsincetheydidnothearearlierandhadexpectedaletterthenextday,theynolongerrequiretheflour.Henshawsuedfornon-performance
• Issue:Wasavalidcontractformed(offeracceptedattherightplaceandtime)?• Reasons:
1. Thecontractwasnoacceptedwithinthepropertime(notsentbackbythewagon)2. Thecontractwasnotacceptedintherightplace(acceptanceshouldhavebeensent
backtoHarper'sFerry,nottoGeorgetown)
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3. Thecontractwasnotacceptedintherightmanner(shouldhavebeensentbywagon,buttheysentbymail)
• Holding:judgeholdsthatitwasperfectlyreasonableforEliasontodictatethetermsofthecontractassuch,findsthatnocontractwascreatedsothereisnobreachofcontract
• Ratio:Offereemustfollowthetermsoftheofferor(time/place/mannerofacceptance)foranacceptancetobevalidandbinding
Note:Commonlawruleversusconsumerprotectionlegislation• Weatherby(1832):Jamwassentundercircumstancesshowingthattheofferoraccepted
tobepaid.Ifyoueatthejamyouhavetopayforit(tookthebenefitoftheservice),sounderthisruletheofferorcanrecoverthepriceofthejam.Thisisthecommonlawruleo Underconsumerprotectionlegislation-saysthatyouaren'tliabletopayforgoods
andservicesinthesecircumstances.Goestotheideathatyou'redeliveredsomethingthatyou'llhaveadealunlessyouletthemknowtothecontrary• Essentiallyreversesthecommonlawrule
MAILEDACCEPTANCES
HouseholdFireandCarriageAccidentInsuranceCo.vGrant(1879)• Facts:GranthadnegotiatedtopurchasesharesinHouseholdFire.Hisapplicationwas
accepted,andhisnamewasaddedtothelistofregisteredshareholders.However,theletterinformingtheappellantofthisneverreachedhimandthusGrantneverpaidfortheshares.Hisearningsfromdividendswerecreditedtohisaccount.EventuallyHouseholdFirewentintoliquidationandtheliquidatorappliedformoneyfromtheappellant.Herefusedtopayonthegroundsthathewasnotashareholder–hehadneverreceivedthenotificationinthemailandwasnotaware
• Issue:Whendoacceptancesbecomebindingwhentheyaresentbymail?• Reasons:
o Acontractbecomesbindingwhentheofferissentthroughthepost,thepostofficeisseenastheagent
o BUTanofferorcanalwaysmakeacontractwhereactualcommunicationtothemselvesisnecessaryforthecontracttobeformed
o Iftheruleweren’tthisway,itwouldopenthedoorstofraudanddelaycommercialtransactions.Theacceptorwouldneverbesafeinactingontheacceptanceuntilhehadreceivednoticethattheletterofacceptancehadreacheditsfulldestination
• Holding:Heldfortheappellant• Ratio:Thepostalrule–contractbecomesbindingwhentheletterofacceptanceis
posted(thisdoesNOTapplytorejections)Note:Deviationstothepostalrule
• Criticismofthepostalrule–seenasarbitrary,favourstheofferee• Thepostalruleonlyappliesifitisreasonabletousethepost• Itcanbeexcludedbythetermsoftheoffer(HowellSecuritiesvHughes)• Theruledoesnotapplyifitwouldproduceaninconvenienceandabsurdity(Howell
SecuritiesvHughes)
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Note:Deviationstoacceptances• Iftheofferorhasspecifiedthemannerofacceptance,theycanwaiveitthemselves
(can’twaivetherightsofothers,butcanwaiveyourownrights)• Iftheofferwasacceptedbymeansseenasanimprovementtothemethodof
acceptance,thisstilldoesn’tmatter.Offerorcanchoosetowaivethis,butsafestthingistoacceptexactlyastold
HowellSecuritiesLtdvHughes• Facts:HughesgrantedHolwellasix-monthoptiontopurchaseaproperty,andstated
thattheoptionhadtobeexercised"bynoticeinwriting".Beforethesixmonthswereup,Holwell'slawyerwrotetoHughes'lawyerstatingthathisclientwasexercisinghisoption.Theletteralsoincludedachequeforthedeposit,whichwasnotaccepted.Holwell'slawyersentacopyofthelettertoHughesbymail,butitwasneverdelivered.HughesrefusedtosellthepropertyandHolwellsuedforbreach
• Issue:Doesthepostalrulealwaysapply?• Reasons:
o Thepostalruledoesnotalwaysapplywhentheexpresstermsoftheofferspecifythattheacceptancemustreachtheofferor
o Italsogenerallydoesn’toperateifitsapplicationwouldproducemanifestinconvenienceandabsurdity
o Thefactthatthewords“noticeinwriting”wereincludedmeantthatHughesrequiredactualnoticeinwriting
o Stillneedthegeneralelementsofacontract(communication)• Holding:Heldfortherespondent• Ratio:Thepostalruledoesnotapplywhenthetermsofacontractpointtothe
necessityofactualcommunication,evenifthepostisthedesiredmediumofcommunication
o Thiscasedemonstratesawaytogetaroundthepostalruleo Rememberthattheonusfallsontheofferortomakesurethepostalrule
doesn’tapply,otherwiseitappliesbydefault
INSTANTANEOUSMETHODSOFCOMMUNICATION
BrinkibonLtdvStahagStahlundStahlwarenhandelsgesellschaftmbH• Facts:BrinkibonwasaLondoncompanythatboughtsteelfromStahag,asellerbasedin
Austria.BrinkibonsenttheiracceptancetoaStahagofferbyTelextoVienna.BrinkibonlaterwantedtoissueawritagainstStahagandappliedtoserveanoutofjurisdictionparty.TheywouldonlybeabletodosoifthecontracthadbeenformedinEngland.
• Issue:Inwhatjurisdictionwasthecontractformed?• Reasons:
o ThiscasefollowsthesimilarcaseofEntoresLtd.vMilesFarEastCorp.whichfoundthatincasesofinstantaneouscommunication,thecontractisonlycompletewhentheacceptanceisreceivedbytheofferor,andthecontractismadeattheplacewheretheacceptanceisreceived
o InthiscasetheacceptancewasdeliveredtotheofferorinVienna,thusAustriahasjurisdictionovertheissue
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o Nouniversalruleofacceptancecancoverallcasesofinstantaneouscommunication–theymustberesolvedwithreferencestotheintentionsoftheparties,andthespecificcircumstancesofthecase
• Holding:Appealdismissed• Ratio:Instantaneouscommunicationrule–formationgenerallyoccursintheplace
whereacceptanceisreceived(notnecessarilyauniversalrule)
RuddervMicrosoftCorp• Facts:Plaintiffsbroughtaclassactionforbreachofcontract,fiduciaryduty,
misappropriationandpunitivedamages,allegingthatMicrosofthaschargedmembersofMSNandtakenpaymentfromtheircreditcardsinbreachofcontractandthatMicrosofthasfailedtoprovidereasonableoraccurateinformationregardingaccounts.TheMemberAgreementcontainstheprovisionthatitisgovernedunderthelawsofWashington,andthatthisisthevenueforanydisputearisingfromMSN-thedefendantMicrosoftreliesonthisclausetosupportitsassertionthattheintendedclassproceedingshouldbepermanentlystayed
• Issue:Istheforumselectionclausepartofthecontractandthereforeenforceable?• Reasons:
o Forumselectionclausesshouldbetreatedthesamewayasarbitrationagreements(deferencetoarbitrationagreements-greatercommercialcertainty)
o Plaintiff'ssubmissionthattheforminwhichtheMemberAgreementisprovidedobscurestheforumselectionclause,buttheCourtholdsthatthereisnofineprintaswouldbedefinedinawrittendocument
• Holding:Heldfortherespondent.• Ratio:
o Click-wrapagreementsarevalid.Tonotgivethemeffectwouldleadtocommercialuncertaintyandunderminetheintegrityofanyagreemententeredintothroughthismedium
o Theonusisontheplaintifftoshowstrongcausetooverrideatermofexclusivejurisdiction.Inabsenceofastrongcause,anexclusivejurisdictiontermwillbeenforcedforthebenefitofcommercialcertainty
Note:InstantaneousMethodsofCommunication• Thepostalruledoesnotapplytoacceptancesmadebysomeinstantaneousmodesof
communication(e.g.telephoneortelex).Theseacceptancesaregovernedbythegeneralrulethattheymusthavebeencommunicatedtotheofferor
• Thereasonwhythepostalruledoesn’tapplyisthattheacceptorwilloftenknowatoncethathisattempttocommunicatewasunsuccessful,sothatisuptohimtomakeapropercommunication,butapersonwhoacceptsbyletterwhichgoesastraymightnotknowofthelossuntilitstoolatetomakeanothercommunication
• Forsomethinglikeemail,theeffectsofunsuccessfulattemptstocommunicateshoulddependonwhetherthesenderofthemessageknows(orhasthemeansofknowing)atonceofanyfailureincommunication
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TERMINATIONOFANOFFER1) Anofferisterminatedbywithdrawal/revocation2) Anoffercanberevokedatanytimebeforeitisaccepted(Byrne)3) Asageneralrule,revocationhastobecommunicatedtotheofferee
TERMINATIONBYREVOCATION
DicksonvDodds[1876]• Facts:Doddsmakesawrittenoffertosellproperty,sayshewillkeepitopenuntilFriday.
DickinsonhearsfromhisfriendthatDoddshasbeenofferingtosellthepropertytoothers,soDickinsondelivershisacceptancetoDodd'srelativethatday,whoforgetstogiveittoDodds.OnFridaytheplaintiff'sagentfoundDoddsandgavehimaduplicateoftheacceptance,butDoddshadalreadysoldtheproperty
• Issue:IsDoddsinbreachofcontract?• Reasons:
o Allwehaveisafirmoffer,noconsiderationtoholdtheofferopen(foranopenpromisetobeenforceableweneedanoptioncontract)
o Cannotacceptanofferyouknowisn’topenanymore.TheCourtsaysthatyoudon’thavetoheardirectlyfromtheofferor,itisenoughthatwithdrawaloftheofferhasbeenbroughtup
o ALTHOUGH,Treiteliscriticalbecauseitcreatesuncertainty.Ifyouhearfromtheofferorthattheofferisrevoked,thenthatmakessense.Butwhatthecourtisimplyinghereisessentiallyjustsometalkthatapersoncouldhearissufficient.Treitelsaysthattheruleisthatyouhavetohearfromareliablethirdpartysource
• Ratio:o Revocationfromareliablethirdpartysourceiseffective.Butrevocationhas
tobecommunicatedo Anoffertosellpropertymaybewithdrawnbeforeacceptancewithoutany
formalnoticetowhomtheofferismade
ByrnevVanTienhoven[1880]• Facts:OnOctober1stthedefendantsmailedanoffertosell1000boxesoftinplatesto
theplaintiffsatafixedprice.TheofferwasreceivedonOctober11thandtheplaintiffsimmediatelyacceptedbytelegramonthe11thandbyletteronthe15th.OnOctober8ththedefendantmailedarevocationoftheoffer,whichwasreceivedonOctober20th.Theplaintiffshadalreadyresoldthetinplatesontheassumptionthattheyhadpurchasedthem.Theybroughtanactionforbreachofcontractandforfailuretodeliver
• Issues:o Whetherawithdrawalofanofferhasanyeffectuntilitiscommunicatedtothe
persontowhomtheofferissento Whetherpostingaletterofwithdrawalisacommunicationtowhomtheletter
issent• Reasons:
o ThewithdrawalbythedefendantsonOctober8thoftheirofferonthe1stisinoperativeandacompletebindingcontractwasenteredintoonthe11th,whentheplaintiffsacceptedtheofferofthe1st
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o Ifthedefendant'sopinionwascorrect,thennopersonwhohadeverreceivedanofferbypostandhadaccepteditwouldknowtheirpositionuntiltheywaitedforsometimetomakesurethataletterwithdrawingtheofferhadn'tbeensent(commercialinconvenience)
• Holding:Heldfortheplaintiff• Ratio:Anofferisonlyrevokedbycommunicationwiththeofferee,andthepostalrule
doesnotapplyinrevocation;whilesimplypostingalettercountsasavalidacceptance,itdoesnotcountasvalidrevocation
ErringtonvErringtonandWoods[1952]• Facts:Thefatherboughtahouseforhissonanddaughterinlawunderhisnameand
paidpartofitincash,butfortheresttookoutaloanthathadtoberepaidwithinterest.Hetoldthedaughterinlawthatifshecontinuedtopaythemortgagepayments,onceitwasfullypaidoffthehousewouldbelongtoherandtheson.Althoughshehadcontinuedtorepaytheloanstohim,hediedbeforeitwaspaidoff
• Issue:Cantheofferbeterminatedeventhoughperformancehasalreadybegun?• Reasons:
o Thefather’spromisewasaunilateralcontract(hemadeacollateralundertaking)
o Thepromisecouldnotberevokedoncethecoupleenteredonperformanceoftheact,althoughitwouldceasetobindhimiftheyleftitincompleteandunperformed
o Thefatherexpresslypromisedthatthepropertywouldbelongtothemwhenthemortgagewaspaid,andimpliedlypromisedthataslongastheypaidtheinstallmentstheywouldbeallowedtoremaininpossession(theyactedonthispromisesonoonecandisregardthemfromit)
• Holding:Appealdismissed,noorderforpossessionmade• Ratio:Onceperformancehasbegun,theoffercannotbeterminated.Theamountof
performancecompletedisirrelevantaslongasithasbeenstarted
TERMINATIONBYLAPSE
BarrickvClark[1951]• Facts:Facts:BarrickownedfarmlandthatClarkwantedtobuy.Theyenteredinto
negotiations,whichresultedinClarkmakinganofferof$14,500.Barrickwrotebackstatingthatthepricewas$15,000andifthepricewassatisfactorythedealcouldbeclosedimmediately.AtthistimeClarkwasawayonahuntingtrip.HiswifereceivedtheletterandrespondedaskingBarricktoholdtheofferopenuntilherhusbandreturnedinaroundtendays.Barrickdidnotreply.Thirteendayslater,Barricksoldthepropertytosomeoneelsefor$15,000.Clarkdidnotreturnuntiltwentydaysafterhiswifereceivedtheoffer.ClarksoughtspecificperformanceoftheallegedcontractbetweenhimandBarrick
• Issue:Whatisthereasonabletimeanoffermustbeleftopenforbeforeitlapses?• Reasons:
o Thereasonabletimethatthisspecificoffermustbeleftopenforislongerthanforgoodsthatfluctuateinprice(stocks)orforperishablegoods.Thefieldscouldnotbeuseduntilspringanyways
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o AlthoughhisactionsandinsistenceonreplyingtoBarrick'slettersbywire,Clarkindicatedthathedidnothaveaspringdateinmindbutwantedtogetthesaledone,orgotopursueotheroptions.BarrickalsodidnotrespondtoClark'sletter,sohewasnotboundtoanyparticularperiodofoffer
o Leavingtheofferopenfor13dayswasreasonable,asClarkhadindicatedthathewantedtoacceptandclosethesaleassoonaspossible.Whatthewifesaidwasirrelevant,asitisuptotheofferor
o Kellock,inaconcurringjudgment,discussedhowmuchoftheCourtofAppeal'sreasoningwasbasedoffclaimsthatBarrickmadeconcerninghisintenttosellassoonaspossibleoutsidehiscommunicationwithClark.TheofferbyBarrickwasclearthatitshouldbedealtwithswiftly,sothetimeframewasvalid.Healsostatedthatsincethepurchase-pricewasagreedtobepaidonJanuary1st,onlygiving2weeksinterveningbetweenthereceiptofacceptanceandthisdatewasentirelyunreasonable
• Holding:Appealallowed• Ratio:
o Thereasonabletimetoacceptanoffercanbedeterminedfromtheconductandlanguageofthetwoparties,thenatureofthegoodsandsubjectmatter,themeanstocommunicatetheoffer,andotherreasonableindications
o Lapseofanoffercanoccurafterareasonableamountoftimehaspassed,undertherightconditions,withoutnoticetotheofferor
ChapterThree:CertaintyofTerms
• Generalstatementoflaw:Anagreementisnotabindingcontractifitlackscertainty,eitherbecauseitistoovagueorbecauseitisobviouslyincomplete
• Althoughpartiesmayhavereachedagreementinthesensethattheyrequirementsofanofferandacceptancehavebeencompliedwith,theremightnotbeacontractyetbecausethetermsoftheagreementareuncertainorbecausetheagreementisqualifiedbyreferencetotheneedforafutureagreementbetweenthem
• Twocompetingpropositions:1. Courtswillnotmakeanagreementfortheparties2. Thatiscertainwhichiscapableofbeingrenderedcertain
• Mainquestion:ifthepartieshaveconsensusadidem–trytofigureoutifthepartiesaretrulyinagreement(shareaunambiguousunderstandingoftheirrespectiverightsandobligations)
VAGUENESS
• Generalstatementoflaw:Wherethecourtscannotdetermineonwhattermsthepartieshavepurportedlycontractedduetovagueness,theagreementisunenforceable.Thatsaid,courtsdonotexpectcommercialdocumentstobedraftedwithprecisionandwill(particularlyifthepartieshaveactedonanagreement)dotheirbesttoavoidstrikingitdownonthegroundsthatitistoovague
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• RvCAEIndustriesLtd:Ifpartieshaveexpressedthemselvesinlanguagesufficientlyclearsoastohavecreatedrightsandobligations,thecourtwillenforcethecontractespeciallywhereithasbeenpartlyperformed
• Hillas&CovArcosLtd:Vaguewordsorphrasescanbeinterpretedinlightofwhatisreasonable
RvCaeIndustriesLtd(1986)• Facts:CAEIndustrieswishedtotakeoverandrunanaircraftmaintenancebaseno
longerrequiredbyAirCanadaandtheGov’tofCanada.Anagreementwasmadewhichcontainedmanyvaguestatements,butessentiallystatesthatalthoughthebaseusuallygenerated700thousandmanhoursperannum,theGovernmentcouldnotcommittoguaranteeingmorethan40-50thousand–althoughtheycouldusetheir“bestefforts”toincreasethisnumber.Thecontractwasformed,butthehoursfellbelow40thousandandCAEsuedforbreach.TheyweresuccessfulattrialCrownappealed.
• Issue:Wasacontractintended?Ifso,wasitbreached?• Reasons:
o Stone,writingforthemajority,determinedthatthepartiesdefinitelyintendedtoenterintoacontract–particularlybecausetheyactedasiftheydiduntiltherespondentbroughtthisaction(partperformanceasperFoley)
o TheonusisontheCrowntoprovethatthepartiesdidnotintendtoenterintoacontractandtheyfailedtoprovethis.Stonethenscrutinizedallofthe"uncertain"clausescitedbytheCrownanddeterminedthatnoneofthemaresovagueastorendernomeaningtothecontract
o Hestatedthatinbusinessrelationshipsthecourtsmustmakeeveryefforttointerpretvaguetermsanddeterminetheirintendedmeaningatthetimethecontractwasformed.HedeterminedthattheCrownguaranteedacertainamountofwork,andthiswasnotprovided;therefore,theCrownbreachedthecontract.
• Holding:Appealdismissed• Ratio:Inbusinessrelationships,thecourtswillmakeeveryefforttoapplydefinite
meaningtovaguetermsinacontractsoasnottorenderitunenforceable;thisisespeciallytrueifitisobviousthatthepartiesintendedtoenterintoabindingrelationship,oriftherewaspartperformance
Note:lettersofcomfortareoftenusedincommercialloantransactions-theselettersstatethattheparentcompanyisawareoftheloanprovidedandgivesassurancesofthecontinuingfinancialinvolvement.Oftenraisequestionsofwhetherthewriterintendstocreateacontract,butinaSCCcaseitwasconcludedthatthelackofpreciselanguageindicatedthattherewasnocontractualeffect
INCOMPLETETERMS
• Partiestoanagreementmaybereluctanttocommitthemselvestoarigidlong-termagreement(particularlywhenpricesaffectingperformancearelikelytofluctuate).Theyattempttointroduceanelementofflexibilityintotheagreement
• ThelinebetweendiscoveringanagreementofthepartiesandimposinganagreementonthebasisofwhattheCourtconsidersoughttohaveintendedcanbefine–court
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mustbesatisfiedthatthepartieshaveactuallyconcludedacontract,notjustexpressedwillingnesstocontractinthefuture
o Mayhaveregardtowhathasbeensaidanddone,thecontextinwhichitwassaidanddone,therelativeimportantoftheunsettledmatter,andwhetherthepartieshaveprovidedmachineryforsettlingit
1. Criteriaormachineryspecifiedintheagreement
a. Criteriaspecifiedintheagreement:i. Anagreementmayfailtospecifymatterssuchaspriceorquality,but
laydowncriteriafordeterminingthosemattersii. Example:inHillasanoptiontobuytimberwasbindingeventhoughit
didn’tspecifytheprice,sinceitprovidedforthepricetobecalculatedbyreferencetotheofficialpricelist
b. Machineryspecifiedintheagreement:i. Theagreementmayprovidemachineryforresolvingmattersoriginally
leftopenii. SudbrookTradingvEggleton:Leasegavetenanttheoptiontopurchase
theproperty“atsuchapriceasmaybeagreeduponbytwovaluers,onenominatedbyeachparty”.Themechanismfailedbecausethelessorrefusedtoappointavaluer
iii. Issue:whetherthepricemechanismisanessentialterm(todistinguishfromMay)Ifitisn’tanareasonablenessstandardisconsistentwiththeparties’intent,thecourtcansettheprice
iv. Thevaluer’sclauseamountstoanagreementtosellatareasonablepricetobedeterminedbythevaluers.Thestipulationthateachpartyshouldnominateoneofthevaluerswasmerelysubsidiaryandinessential
v. Theagreementofafairanreasonablepriceismoreimportantthanthemachinerytogetthere
2. Terms“tobeagreed”a. MayvButcher:agreementstoagreearenotenforceableb. FoleyvClassiqueCoach:Oneofthemechanismsherehadbrokendownbut
Maywasdistinguishedi. Indefaultofanagreement,areasonablepricemustbepaidii. Thecourtappearstobesayingthatthepresenceofanarbitration
clauseonthesefactsmeansthatitistobeimpliedinthiscontractatermthatthepetrolshallbesuppliedatareasonablepriceandshallbeofreasonablequality
3. Agreementstonegotiatea. EmpressTowersb. MannparEnterprises:whererenewalclauseistoobroadlyworded,itfails
becausethereisnoobjectivemeasure.Allwehaveisanagreementtoagreewhichisvoid
c. MannparinterpretsEmpresstosaythatthereisadutytonegotiateingoodfaithif:
i. Thereisacontractbetweenthepartiesii. Adutytonegotiateingoodfaithisconsistentwiththeparties’intent
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iii. Thereisanobjectivebenchmarkagainstwhichthecourtcanassesswhetherthepartyinquestionisinbreachornot
May&ButcherLtdvR(1934)• Facts:ArrangementwithasupplierandtheDisposalsBoardforthepurchaseofsurplus
"tentage".Thetermsofthearrangementdidnotspecifythepricestobepaid,thedatesonwhichpaymentistobemade,thequantitiestobesold,orwhendeliverywouldtakeplace
• Issue:Wasacontractformeddespitethelackofincompleteterms?• Reasons:
o Itwasimpossibletoagreetotheprices,sowecan'tholdtheCrownliableforacontractatareasonablepriceorforthearbitrationclauseinthecontractthatwasintendedtogarnerareasonableprice
o Therewasneveraconcludedcontractbytheparties-ifacriticalpartofthematterisleftundeterminedthereisnocontractatall
o Thereisnothinginthearbitrationclausethatenablesacontracttobemadeo Partiesnotentitledtoanofferforfurtherparcelsbecausetheagreementisnot
binding,andthepaymentofthedepositwasnotfortheappellantstohavetherighttothis
• Holding:Appealdismissed• Ratio:Anagreementtoagreeisnotacontract.Acourtcannotreadtermsintoan
impliedcontracto Anagreementbetweentwopartiestoenterintoanagreementinwhichsome
criticalpartofthecontractmatterisleftundeterminedisnocontractatall
Hillas&CovArcosLtd(1932)• Facts:Hillas,anEnglishtimberfirm,broughtanactionagainstAcros,thebusiness
representativesfortheRussiangovernment,forbreachofcontracttosupply100000standardsofRussiantimberduring1931.Underanagreementin1930onwhichtheactionwasbased,Hillashadagreedtobuy22000standardsoftimberandthepricetobepaidwasdeterminedinaccordancewiththeseller'snew"revisedschedule",includingastipulationforreductionofthepriceintheeventthatthesellerspriceswerereducedduring1930.Clause9heldthatthebuyersshallobtainthegoodsonconditionsandatpriceswhichgivethemareductionof5%againstcompetingbuyers.Afterthisagreementwasconcluded,AcrosenteredintoacontractwithCentralSoftwoodBuyingCorporationLimitedforthesaleofitsentiretimberproductionforthe1931season.AcrosclaimedtheagreementhadbeencancelledwithHillaspurportedtoexercisetheoptiongrantedbyclause9
• Issue:Wastheoptionprovisionabindingagreementforthepurchaseoftimber?• Reasons:
o Itisthedutyofthecourtstoconstrueacontractfairlyandbroadly,butthisdoesn'tmeanthecourtshouldmakeacontractforthepartiesorgooutsidewordsused
o Thepartiesheredon'tfixprecisedatesfortheshipments,butthecourtholdsthatthisisokaybecauseifdifferencesemergeduringconsultation,thestandardofwhatisreasonablecanbeappliedbythelawasalastresort
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o Thisisnotacontracttoenterintoacontract-inlawthisdoesn'texist,thereiseitheranenforceablecontractornocontract.Clause9simplymeansthattheappellantshadtheoptionofacceptinganofferinthoseterms
o Theonlythingthathadtobenegotiatedwastheprice,butthiswasbecausepriceschangeyearly.Inhisjudgment,Wrightsaysthat"wordsaretobeinterpretedsothatsubjectmatterispreservednotdestroyed",alegalrealistpositionfocusingontheintentionoftheparties.
• Holding:Appealallowed.Abindingcontractexists• Ratio:
o Acontracttonegotiateisenforceableo Thecourtsshouldintervenetodeterminethetermsofanagreementthrough
contextandintentionalityofthepartieso ThisdepartsfromthepreviousdecisioninMaywherethecourtheldthat
missingtermsresultinacontractnotbeingcreated
FoleyvClassiqueCoachesLtd(1934)• Facts:Thedefendantsoperatedafleetofmotorvehicles.Theyagreedtopurchasea
pieceoflandfromtheplaintiffs,whooperatedaservicestationonadjacentpremises.Thesalewasmadesubjecttothedefendantsenteringasupplementalagreementtobuyallofthepetrolrequiredfortheirbusinessfromtheplaintiffatapricetobeagreedbythepartiesinwritingandfromtimetotime.Thisagreementincludedanarbitrationclause.Later,theplaintiffsthoughttheycouldpurchasetheirsuppliesforacheaperpriceelsewheresotheyattemptedtodisputetheagreement.Theplaintiffssoughtadeclarationthattheagreementwasbinding
• Issue:Wasthisagreementbindingdespitelackinganagreeduponprice?• Reasons:
o Significantdifferenceinthetwocasesprior.InMayitwasdeterminedthatanagreementbetweentwopartiestoenterintoanagreementinwhichsomecriticalpartofthecontractmatterisleftundeterminedisnocontractatall,butinHillasitwasheldthattherewasacontractdespitemissingterms
o Inthiscasethepartiesbelievedthattherewasacontractbecausetheyactedonitforthreeyears.Theyalsohadanarbitrationclausethatrelatedtothesupplyofpetrol
o Thereisanimpliedterminthecontractthatpetrolshouldbesuppliedatareasonableprice
• Holding:Appealfails.Therewasaneffectiveandenforceablecontractdespitenodefinitepriceagreedupon
• Ratio:Pastperformancewillindicatethatacontractisbinding(relianceinterest)
AGREEMENTSTONEGOTIATE
• Conceptualandpolicyreasonsforconcludingthatpartiestoanagreementwhohaveonlyagreedtoagreearen'tinacontract:
o Ifthereisnobasistodeterminethepriceforgoodstobepaidinthefuture,thejudicialdeterminationofapriceatwhichtheintendedbuyerisobligedto
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purchasemaywellimposeonthatpartyariskthattheydidnotandwouldnothavevoluntarilyassumed
• However,abindingpromisetonegotiateisoftenofrealpracticalvaluebecauseitsfulfilmentoffersagreaterlikelihoodthatpartiescompleteatransaction
• Adistinctionmaybedrawnbetweenanagreementtoperformatransactiononunspecifiedtermsorontermstobeagreed,andanagreementtonegotiateinanendeavourtoarriveaytermspursuanttowhichtransactionwillbeperformed
o Inthefirstcasethesubjectoftheagreementisthetransactionitselfo Inthesecond,thesubjectoftheagreementistheprocessbywhichitishopeda
transactionwillbeconcluded• Primaryobjectionsagainsttheviewthatanexpressorimplicitagreementtonegotiate
mayinitselfconstituteacontract:o Itisimpossibletodeterminethecontentofadutytonegotiateo Thereisnobasisuponwhichtodeterminedamagesforbreachofsuchaduty
EmpressTowersLtdvBankofNovaScotia(1991)• Facts:ETandBNShadatwelve-yearleaseagreementwhichwasabouttoexpire.The
agreementstatedthatthepriceofrentforarenewedcontractwouldbetheprevailingmarketrate,conditionalonthe“mutualagreement”oflandlordandtenant,andthatintheabsenceofagreement,thecontractcouldbeterminatedbyeitherparty.AnemployeeofEThadbeenrobbedinabranchofBNSof$30,000andET’sinsurancehadpaidonly$15,000.ThisrobberywasnofaultofBNS.Duringnegotiations,ETdemanded$15,000cashandtherighttocancelBNSleasewith90daysnotice(whichisunreasonable).BNSrefused.ETbroughtapetitionforwritofpossessionagainstBNSforitsofficespace.Thiswasallattheendofthelease,withlittleresponsefromETtoBNS’sreasonablerentoffers
• Issues:o Wastherenewalclausevalidorvoidforuncertainty?o Diditcontainanimplicitobligationtobargainingoodfaith?
• Reasons:o Lambert,writingforthemajority,heldthereweretwocoursesofaction:
§ FollowMayvButcher-iftherearethingstobeagreeduponthenthenthereisnocontract;or
§ FollowHillas-thecourtsshouldstrivetofindmeaningifthereisanagreementbetweenparties
o Heheldthattherewere3approachesfordeterminingrent:§ Renttobeagreed(cannotbeenforced)§ Renttobeestablishedbyaformula,butnomachinerytodoso(courts
willgenerallysupplymachinery)§ Aformulaisgivenbutitisdefective(courtswillcurethedefect)
o Heinterpretsthesectionoftheclauserequiringthepartiestoagreeontherenttomean:
§ Empresscouldnotbecompelledtoenterintoamarketrentalvalue;§ Therewasanimpliedtermthatthelandlordnegotiatedingoodfaith;
and§ Anagreementonthemarketratewouldnotbeunreasonablywithheld
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o Implyingthesetermswasacceptableforreasonabilityandforreasonsofbusinessefficacy.Intheevidenceadduce,Empresshadnonegotiatedingoodfaithbyaddingthe$15000"penalty"
• Holding:Theclausewasvalid.Itdidcontainanimplicitobligationtobargainingoodfaith
• Ratio:Thecourtswilltry,wheneverpossible,togivetheproperlegaleffecttoanyclausethatthepartiesunderstoodandintendedwastohavelegaleffect.”o Thiscaseisspecialbecauseitdoesnotimplyathirdpartytodeterminemarketrate
upondisagreementoftheparties,explicitlycallsongoodfaithofparties.Notthesameassayingthatiftheyareundecided,tothecourtstodecide.Here,ifthecourtweretointervene,wouldgoagainstthewillofthepartiesexpressedintheK,whichexcludedinterventionofthecourts.Troublesomebecauseusuallywhenacontractdoesnothavesetprice,itisnotenforceable
MannparEnterprisesLtdvCanada(1999)• Facts:MannparenteredanagreementwiththeCrowntoextractsandandgravelfrom
anaboriginalreserve.Thecontractwastolastfiveyearswithanoptiontorenewforanotherfiveyearssubjecttosatisfactoryperformanceamongstotherthings.Evidenceindicatesthatbothpartiesexpectedtheprojecttolasttenyears.TheCrownfailedtorenewthecontract,andMannpartookthepositionthattheywererepudiatingtheirobligationtorenew.Mannparlaunchedanactionseekingdamages
• Issue:DidtheCrownhaveanobligationtonegotiateingoodfaith?• Reasons:
o ThelanguageintherenewalclauseallowedtheCrownconsiderableflexibility.Therewasnothingintheclausetosuggestanenforceableagreement,rather,itconveyedonlyanoptiontorenegotiateiftheCrownwantedto.Giventheirdutytotheaboriginalband,itwouldhavebeenrecklessnottopreservesuchflexibility
o ThecourtdistinguishedthiscasefromEmpressTowersvBankofNovaSoctiabecause,here,therewasnomarketvaluethatcouldbeassigned.Withoutsuchanobjectivebenchmark,thecontractisunworkable.Furthermore,therewasnoarbitrationclauseinthecontract,suggestingthattheCrownintentionallyleftitoutbecausetheydidnotwanttobeboundfortenyears
o Theimplicationofatermcanonlybemadeifitisthecasethatbothpartieswouldbelikelytoagreethatsuchatermshouldbeimplied(e.g.tosatisfytheofficiousbystandertest,inordertogivebusinessefficacytoacontract).Acourtwillnotimplyatermjustbecausethecourtmaythinkthatsuchatermwouldbereasonableorlikelytobemoresatisfactory
• Holding:CourtruledagainstMannpar.Nodutytonegotiateingoodfaith
• Ratio:o Arightofrenewaldoesnotalwaysimplyadutytonegotiateingoodfaitho Thiscaseistheauthorityforthegeneralprinciplethatthereisnocontractduty
tonegotiateingoodfaith-theconceptofadutytonegotiateisunworkableintheabsenceofanobjectivebenchmarkorstandardagainstwhichtomeasuretheduty