Interests Protected & Consequences of Contract - UVic … - LAW 108A Outline... · Web...

LAW 108A | private law: contractsfinal outline | 2012-2013

John Bullock

TABLE OF CONTENTS

Interests Protected & Consequences of Contract..........................................................9Remedies................................................................................................................................................................................. 9Damages...................................................................................................................................................................................9

Kinds of Promises Legally Enforced.............................................................................10Offer & Acceptance...........................................................................................................................................................10Formalisation & Certainty.............................................................................................................................................11

BC Sale of Goods Act – Ascertainment of Price...................................................................................................................................................12

Correspondence.................................................................................................................................................................13BC Electronic Transactions Act.................................................................................................................................................................................13

Consideration......................................................................................................................................................................14Two Basic Legal Rules/Ways to Enter into Contract.......................................................................................................................................14What is Consideration?.................................................................................................................................................................................................14Going Transaction Adjustments (GTAs):...............................................................................................................................................................15Debt Settlements & BC Law and Equity Act.........................................................................................................................................................16Charitable Pledges..........................................................................................................................................................................................................16Cases to Refer to:.............................................................................................................................................................................................................16

Intention............................................................................................................................................................................... 16Non-Bargain Promises....................................................................................................................................................17Past Consideration............................................................................................................................................................18Reliance & Estoppel.........................................................................................................................................................18Unilateral Contracts.........................................................................................................................................................18

Government Programmes...........................................................................................................................................................................................19Early Cancellation of Unilateral Contracts............................................................................................................................................................19

Contracts & Third Parties............................................................................................20Third-Party Beneficiaries..............................................................................................................................................20

Application of Exclusion Clauses to Third Parties (Eurymedon)................................................................................................................20Subrogation Rights.........................................................................................................................................................................................................20Limitation of Liability Clause.....................................................................................................................................................................................20

Mistaken Identity – Void & Voidable Contracts...................................................................................................21Non Est Factum – Waldron Only................................................................................................................................21

Contract Interpretation..............................................................................................22The Parol Evidence Rule................................................................................................................................................22Clauses Excluding Liability...........................................................................................................................................23Misrepresentations & The Relationship between Contract & Tort.............................................................23

The Residual Power of the Court in Contract Enforcement.........................................24Unconscionability, Undue Influence & Duress.....................................................................................................24

Trebilcock Excerpt..........................................................................................................................................................................................................24Leff Excerpt........................................................................................................................................................................................................................24Unconscionability............................................................................................................................................................................................................25Undue Influence...............................................................................................................................................................................................................25Spousal Guarantors........................................................................................................................................................................................................26Duress..................................................................................................................................................................................................................................26

Penalties & Forfeitures...................................................................................................................................................27Illegality.................................................................................................................................................................................28

Common Law Illegality.................................................................................................................................................................................................28Statutory Illegality – Waldron Only.........................................................................................................................................................................29

Private Law: Contracts

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Mitigation Consequences of Illegality – Waldron Only...................................................................................................................................29

Mistakes About….......................................................................................................30Mistakes About Contractual Terms...........................................................................................................................30Mistakes in Assumptions...............................................................................................................................................31

Equitable Mistake............................................................................................................................................................................................................31Contract ‘A’ Situation.....................................................................................................................................................................................................32Rectification.......................................................................................................................................................................................................................32

Mistake as to Future - Frustration.............................................................................................................................32

Remedies for Breach of Contract................................................................................33The Interests Protected..................................................................................................................................................33

Restitution..........................................................................................................................................................................................................................33Reliance...............................................................................................................................................................................................................................33Expectation – Normal Award for Breach of Contract.......................................................................................................................................33

Special Problems in Measurement............................................................................................................................34Measuring Damages.......................................................................................................................................................................................................34Lost Volume.......................................................................................................................................................................................................................34Loss of Profit......................................................................................................................................................................................................................34

Intangible Injuries & Punitive Damages..................................................................................................................34Remoteness.........................................................................................................................................................................35Mitigation............................................................................................................................................................................. 36

Cases..........................................................................................................................38Damages....................................................................................................................................................................38

Wertheim v. Chicoutimi Pulp Company (1911 UK)...................................................................................................... 38Precedent for expectancy....................................................................................................................................................................................................... 38

Hawkins v. McGee (1929 USA)............................................................................................................................................... 38Surgery leads to a “hairy hand” and awarded expectation damages................................................................................................................. 38

Specific Performance............................................................................................................................................38Falcke v. Gray (1859 UK)......................................................................................................................................................... 38

One of the leading cases on specific performance....................................................................................................................................................... 38

Warner Bros. Pictures Incorporated v. Nelson (1937 UK)........................................................................................38Injunction case, Bette Davis was in 52-week exclusive contract, breached it.................................................................................................38

Offer & Acceptance................................................................................................................................................39Denton v. Great Northern Railway Company (1865 UK)...........................................................................................39

Said there was a train, there wasn’t, but kept saying there was........................................................................................................................... 39

Johnston Brothers v. Rogers Brothers (1899 ONCA).................................................................................................... 39Bakers want to buy flour; was initial correspondence an offer?........................................................................................................................... 39

Lefkowitz v. Great Minneapolis Surplus Store (1957 USA).......................................................................................39An advertisement can be an offer, normally “invitation to treat”........................................................................................................................ 39

Scammell and Nephew, Limited v. Ouston (1941 UK).................................................................................................40Trading a van, rare case where court cannot find some way to make contract work................................................................................40

Durham Tees Valley Airport Ltd. v. BMI Baby (2010 UK)..........................................................................................40BMI backed out but courts couldn’t determine contract, but knew what it wasn’t......................................................................................40

Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd. (1953 UK)...................40Determining where the sale of goods occured.............................................................................................................................................................. 40

Manchester Diocesan Council for Education v. Commerical & General Investments Ltd. (1969 UK).....41Particular acceptance can be waived, if method is not only way to accept.....................................................................................................41

Larkin v. Gardiner (1895 ONSC)........................................................................................................................................... 41Acceptance must be communicated - agreement to buy was signed but no contract.................................................................................41

Dickinson v. Dodds (1876 UK)................................................................................................................................................ 41Revocation may be effective when offeree learns about it indirectly.................................................................................................................. 41


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Eliason v. Henshaw (1819 USA)............................................................................................................................................ 42Acceptance needs to correspond to offer, wanted to buy some flour.................................................................................................................. 42

Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corporation (England) Ltd. (1979 UK).........................................42Battle of the forms, wanted to sell “on our terms only”............................................................................................................................................ 42

M.J.B. Enterprises v. Defence Construction (1951) (1999 SCC)...............................................................................42Non-compliant bidder was chosen, sued for profits they would have made.................................................................................................... 42

Formalisation & Certainty..................................................................................................................................43May and Butcher, Limited v. The King (1929 UK)......................................................................................................... 43

Wanted some surplus “tentage” as it became available........................................................................................................................................... 43

W.N. Hillas and Co., Limited v. Arcos, Limited (1932 UK)..........................................................................................43Contrast to May and Butcher, commercial setting requires flexibility of terms.............................................................................................43

Foley v. Classique Coaches, Limited (1934 UK).............................................................................................................. 43Partial execution of Contract works towards enforceability, even with no set price...................................................................................43

Walford v. Miles (1992 Australia)........................................................................................................................................ 44Australian case showing that an agreement to negotiate is not a contract.................................................................................................... 44

Empress Towers v. Bank of Nova Scotia (1990 BCCA)................................................................................................44Court goes far to determine a difficult to enforce contract, rental property................................................................................................... 44

Correspondence.....................................................................................................................................................44Henthorn v. Fraser (1892 UK)............................................................................................................................................... 44

Postal acceptance rule adopted, acceptance sent before revocation received...............................................................................................44

Byrne & Co. v. Leon Van Tienhoven & Co. (1880 UK)................................................................................................... 45For business efficacy, postal acceptance rule doesn’t apply for revokation..................................................................................................... 45

Holwell Securities Ltd. v. Hughes (1974 UK)................................................................................................................... 45Another exception to postal acception rule, vendor asked for notice in writing...........................................................................................45

Eastern Power Ltd. v. Azienda Comunale Energia & Ambiente (1999 ONCA)..................................................45Postal acceptance rule does not apply to other forms of communication........................................................................................................ 45

Consideration..........................................................................................................................................................45White (Executor) v. William Bluett (1853 UK)............................................................................................................... 45

Dad would forgive son’s debt if he would stop complaining................................................................................................................................... 45

Hamer v. Sidway (1891 USA)................................................................................................................................................. 46Uncle Promised Nephew money if he would stop drinking, smoking, west-coasting...................................................................................46

Eleanor Thomas v. Benjamin Thomas (1842 UK)......................................................................................................... 46Husband wanted to leave his house to his widow, died, rent for £1 a year......................................................................................................46

The Great Northern Railway Company v. Witham (1873 UK).................................................................................46Building a railway and need to secure source of supplies, supplier wants to stop........................................................................................46

Tobias v. Dick and T. Eaton Co. (1937 MBCA)................................................................................................................ 47Grain grinding machine inventor grants exclusive right to market product..................................................................................................47

Wood v. Lucy, Lady Duff-Gordon (1917 USA)................................................................................................................. 47Lady grants exclusive selling rights to put her name on fashions, then backs out........................................................................................47

Harris v. Watson (1791 UK).................................................................................................................................................... 48Sailor did extra work because ship was in danger, with promise of extra pay...............................................................................................48

Stilk v. Myrick (1809 UK)......................................................................................................................................................... 48Two seamen jumped ship, captain promised to divide their wages amongst the rest................................................................................48

Gilbert Steel Ltd. v. University Construction Ltd. (1976 ONCA)...............................................................................48Price for supply of steel went up after 2 of 3 agreed upon buildings were done............................................................................................48

Williams v. Roffey Bros. Ltd. (1991 UK)............................................................................................................................. 48Subcontracted carpentry, ran out of funds, asked for more money.................................................................................................................... 48

Greater Fredericton Airport Authority v. NAV Canada (2008 NBCA)..................................................................49Parties to an agreement, had terms governing capital expenditures, landing system...............................................................................49

River Wind Ventures Ltd. v. British Columbia (2011 BCSC)......................................................................................49Adjustments/modifications to on-going contracts should be enforceable....................................................................................................... 49

Foakes v. Beer (1884 UK)......................................................................................................................................................... 49Partial payment of a debt, paid in installments........................................................................................................................................................... 49


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Fairgrief v. Ellis (1935 BCSC)................................................................................................................................................. 50Retired guy asks friends to do housekeeping and he would leave house to them..........................................................................................50

Dalhousie College v. Boutilier Estate (1934 SCC).......................................................................................................... 50Made pledge on a form to college to maintain and improve teaching, binding?...........................................................................................50

Intention...................................................................................................................................................................50Jones v. Padavatton (1969 UK).............................................................................................................................................. 50

Mother breached a contract to support daughter if she moved and studied..................................................................................................50

Rose and Frank Company v. J.R. Crompton & Brothers, Limited (1923 UK)......................................................51Agreement was specifically stated not to be formal or legal.................................................................................................................................. 51

Past Consideration................................................................................................................................................51Mills v. Wyman (1825 USA)..................................................................................................................................................... 51

Son was travelling world, got sick, man took care of him – then he died anyway........................................................................................51

Lampleigh v. Brathwait (1615 UK)..................................................................................................................................... 51Exception to past consideration rule – killed a guy, pardoned, promised to pay..........................................................................................51

Roscorla v. Thomas (1842 UK).............................................................................................................................................. 51Bought a horse, subsequently told it was sound and viceless................................................................................................................................. 51

Webb v. McGallan (1935 USA)............................................................................................................................................... 52Implied request and motive as consideration – not followed in Canada........................................................................................................... 52

Reliance & Estoppel..............................................................................................................................................52Hughes v. Metropolitan Railway Co. (1877 UK)............................................................................................................. 52

First known instance of Promissory Estoppel, entitled to compel to repair building..................................................................................52

Central London Property Trust Ltd. v. High Trees House Ltd. (1947 UK)...........................................................52Basis of promissory estoppel, had a lease on a block of flats in London before war....................................................................................52

Combe v. Combe (1951 UK)..................................................................................................................................................... 53Husband promised wife £100/yr, didn’t pay, wife sued ~6 years later.............................................................................................................. 53

Robertson v. Minister of Pensions (1949 UK).................................................................................................................. 53Government said no medical evidence required for pension, estopped from reneging...............................................................................53

John Burrows Ltd. v. Subsurface Surveys Ltd. (1968 SCC).........................................................................................54Business was sold, payment was to be over time, form of promissory note.....................................................................................................54

Owen Sound Public Library Board v. Mial Developments Ltd. (1979 ONCA)....................................................54Construction contract, needed certificate for payment, wanted further seal.................................................................................................54

D. & C. Builders, Ltd. v. Rees (1965 UK).............................................................................................................................. 55Defendant refused to pay for services, plaintiff accepted less just to survive..................................................................................................55

N.M. v. A.T.A. (2003 BCCA)....................................................................................................................................................... 55Came to Vancouver for marriage, broke up, sued for reliance.............................................................................................................................. 55

Unilateral Contracts..............................................................................................................................................55Williams v. Carwardine (1833 UK)...................................................................................................................................... 56

Going against strict consensus ad idem approach, witness to a murder sought reward...........................................................................56

Carlill v. Carbolic Smoke Ball Company (1893 UK)...................................................................................................... 56Performance of a condition is sufficient, notification unnecessary..................................................................................................................... 56

Dale v. Manitoba (1995 MBCA)............................................................................................................................................. 56Province offers program to help university students, tries to cancel it part way..........................................................................................56

Grant v. Province of NEw Brunswick (1973 NBCA)...................................................................................................... 57New Brunswick potato subsidy program, province then refused to pay........................................................................................................... 57

Errington v. Errington (1952 UK)........................................................................................................................................ 57Father bought house for kids, estate tried to take it back – finding second contract..................................................................................57

Dawson v. Helicopter Exploration Co. Ltd. (1955 SCC)...............................................................................................57Construing offer as bilateral contract to avoid flagpole problem........................................................................................................................ 57

Third-Party Beneficiaries...................................................................................................................................58Tweddle v. Atkinson (1861 UK)............................................................................................................................................. 58

Fathers made mutual promises for wedding, son and daughter gave no consideration...........................................................................58

Beswick v. Beswick (1966 UK)............................................................................................................................................... 58


4

Nephew buys business and promises to pay amount to uncle’s widow, then doesn’t..................................................................................58

Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915 UK)........................................................................59Discount on tire orders had a price maintenance clause for a minimum price..............................................................................................59

The Eurymedon – New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd (1975 UK)..................59Extension of liability protection to 3rd parties when allowed by contractual term....................................................................................59

London Drugs Ltd. v. Kuehne & Nagel International Ltd. (1992 SCC)..................................................................60Extension of contractual limitation to employees read in as implied term...................................................................................................... 60

Fraser River Pile and Dredge Ltd. v. Can-Dive Services Ltd. (1999 SCC).............................................................60Broader exception than London Drugs – Marine Insurer, no subrogation clause........................................................................................60

Mistaken Identity – Void & Voidable Contracts..........................................................................................61Phillips v. Brooks (1910 UK)................................................................................................................................................... 61

Misrepresentation of identity alone not enough to void contract........................................................................................................................ 61

Ingram v. Little (1961 UK)...................................................................................................................................................... 61When fraudulent identity relied upon to induce contract, it may be void........................................................................................................ 61

Lewis v. Averay (1972 UK)....................................................................................................................................................... 62Law finally settled - for in person deals, rebuttable presumption of contract................................................................................................62

Shogun Finance v. Hudson (2003 UK)................................................................................................................................ 62For non face-to-face deals presumption is intent was not contract with fraudster.....................................................................................62

Non Est Factum.......................................................................................................................................................62Saunders v. Anglia Building Society (Gallie v. Lee) (1971 UK)................................................................................62

Elderly woman transfers home to nephew’s friend thinking nephew – transfer good................................................................................62

Marvco Color Research Ltd. v. Harris et al. (1982 SCC)..............................................................................................62Family tricked by daughter’s boyfriend – innocent plaintiff is protected......................................................................................................... 63

The Parol Evidence Rule.....................................................................................................................................63Prenn v. Simmonds (1971 UK)............................................................................................................................................... 63

Evidence from negotiations not admissible to interpret terms of the contract..............................................................................................63

Hawrish v. Bank of Montreal (1969 SCC).......................................................................................................................... 63Oral evidence of collateral contract not admissible if contradicts written...................................................................................................... 63

Tilden Rent-A-Car Co. v. Clendenning (1978 ONCA).................................................................................................... 64Even in signed contracts attention must be drawn to extraordinary terms.................................................................................................... 64

Gallen v. Allstate Grain Co. Ltd. (1984 BCCA).................................................................................................................. 64Exceptions to the parol evidence rule – the court stretching to protect reliance..........................................................................................64

Clauses Excluding Liability.................................................................................................................................65Photo Production Ltd. v. Securicor (1980 UK)................................................................................................................ 65

Nightwatchman burns factory – liability limitation applied because they had agreed.............................................................................65

Hunter Engineering Co. Inc. et al. v. Syncrude et al. (1989 SCC).............................................................................65No fundamental breach – limitation applies even if the merchandise is CRAP..............................................................................................65

Delaney v. Cascase River Holidays Ltd. (1983 BCCA)................................................................................................... 66White water river rafting, doesn’t read waiver, no consideration anyway...................................................................................................... 66

Tercon Contractors Ltd. v. British Columbia (Ministry of Transportation and Highways) (2010 SCC) 66Decided the modern rule – BC accepted ineligible bid during RFP process.....................................................................................................66

Misrepresentations & the Relationship Between Contract & Tort......................................................66Heilbut, Symons & Co. v. Buckleton (1913 UK)............................................................................................................... 66

“We’re bringing it out” – not held as a guarantee or an innocent misrepresentation................................................................................66

Bentley (Dick) Productions Ltd. v. Smith (Harold) (Motors) Ltd. (1965 UK)....................................................67Denning decides a warranty exists when a statement was made to induce a contract..............................................................................67

Redgrave v. Hurd (1881 UK).................................................................................................................................................. 68Man buys law practice misrepresented as being worth something - rescission.............................................................................................68

Leaf v. International Galleries (1950 UK)......................................................................................................................... 68Barred due to passage of time-however painter’s identity was warranty/condition..................................................................................68

Murray v. Sperry Rand Corporation (1979 ONHC)....................................................................................................... 69Rep by manufacturer creates warranty though plaintiff didn’t contract with them...................................................................................69


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Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1964 UK)...................................................................................69idea of negligent misstatement of C, inducing A into contract with B, making C liable.............................................................................69

Esso Petroleum Co. Ltd. v. Mardon (1976 UK)................................................................................................................ 69Estimate not a guarantee of profits, reliance damages because estimate was careless............................................................................69

Unconscionability, Undue Influence & Duress............................................................................................70Marshall v. Canada Permanent Trust Co. (1968 ABSC)..............................................................................................70

Agreement unconscionable due to vulnerability whether or not it was apparent........................................................................................70

Mundinger v. Mundinger (1968 ONCA)............................................................................................................................. 70Contract between husband and wife void due to unfairness and wife’s incapacity......................................................................................70

Lloyds Bank Limited v. Bundy (1975 UK)......................................................................................................................... 71Poor Mr. Bundy mortgages farm for son – voidable due to unequal bargaining power............................................................................71

Royal Bank of Scotland p.l.c. v. Etridge (No. 2) (2002 UK)........................................................................................71A wife providing a surety for husband’s debts and the rule of constructive notice.......................................................................................71

Pridmore v. Calvert (1975 BCSC).......................................................................................................................................... 71Release signed after accident voided due to gross unfairness and unequal footing....................................................................................71

Penalties & Forfeitures........................................................................................................................................72H.F. Clarke Ltd. v. Thermidaire Corp. Ltd.......................................................................................................................... 72

Excessive penalty reduced in contract for sole distribution.................................................................................................................................... 72

Stockloser v. Johnson (1954 UK)........................................................................................................................................... 72Seemingly unfair clause allowing seizure of all goods on non-payment upheld............................................................................................72

Common Law Illegality........................................................................................................................................72Holman v. Johnson (1775 UK)................................................................................................................................................ 72

You can’t rely on a contract if you know the other party is using goods for crime.......................................................................................72

Shafron v. KRG Insurance Brokers (Western) Inc. (2009 SCC)................................................................................73Ambiguous restrictive covenant applying to metro Vancouver not upheld..................................................................................................... 73

Brissette Estate v. Westbury Life Insurance Co. (1992 SCC).....................................................................................73Husband kills wife and tries to claim her life insurance policy – srsly?............................................................................................................. 73

Oldfied v. Transamerica Life Insurance Co. of canada (2002 SCC)........................................................................74However, if you die committing a crime your beneficiaries can collect............................................................................................................. 74

Mistake About Contractual Terms...................................................................................................................74Hobbs v. Esquimalt & Nanaimo Railway Company (1899 SCC)..............................................................................74

Interprets the meaning of land based on what a reasonable person would think........................................................................................74

Raffles v. Wichelhaus (1864 UK)........................................................................................................................................... 74No contracts exist where two parties didn’t agree what ship contract referred to......................................................................................75

Staiman Steel Ltd. v. Commercial & Home Buildings Ltd. (1976 ONHC).............................................................75“All the steel in the yard” taken to mean what the seller would have intended.............................................................................................75

Smith v. Hughes (1871 UK)..................................................................................................................................................... 75Mistake re: quality or characteristic – caveat emptor.............................................................................................................................................. 75

Mistake in Assumptions......................................................................................................................................76Bell v. Lever Brothers Ltd. (1932 UK)................................................................................................................................. 76

Deal to end employment not void just because they could have terminated with cause...........................................................................76

Solle v. Butcher (1950 UK)...................................................................................................................................................... 77Mistake about maximum rent that could be charged only made contract voidable...................................................................................77

Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd. (2002 UK)...............................................77Mistake about proximity of ship not sufficiently fundamental for rescission..................................................................................................77

Miller Paving Limited v. B. Gottardo Construction Ltd. (2007 ONCA).................................................................78Great Peace not adopted in Canada – common mistake remains a possible remedy..................................................................................78

Sherwood v. Walker (1887 USA)........................................................................................................................................... 78Recovery where mistaken assumption goes to the essential nature of subject matter...............................................................................78

McRae v. Commonwealth Disposals Comm. (1951 Australia).................................................................................78Reliance interest only for a contract to salvage a non-existent ship................................................................................................................... 78

R. v. Ron Engineering & Construction Eastern Ltd. (1981 SCC)..............................................................................79


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Mistake bidding on a contract............................................................................................................................................................................................. 79

Frustration...............................................................................................................................................................80Paradine v. Jane (1647 UK)..................................................................................................................................................... 80

Have to keep paying lease even though invaders pushed defendant off farm................................................................................................. 80

Taylor v. Caldwell (1863 UK)................................................................................................................................................. 80Since hall destroyed by events beyond either’s control contract is dissolved..................................................................................................80

Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975 ONCA)...............................................................80Doctrine of impossibility to sale of land – ends when land can’t be developed..............................................................................................80

The Sea Angel – Edwinton Commercial Corp. v. Tsavliris Russ Ltd. (2007 UK)...............................................81Ship ends up trapped in harbour – foreseeable risk so no impossibility............................................................................................................ 81

The Interests Protected.......................................................................................................................................81Wertheim v. Chicoutimi Pulp Company (1911 UK)...................................................................................................... 81

Just sets out precedent for expectation damages........................................................................................................................................................ 81

Bollenbeck v. Continental Casualty Company (1965 US)...........................................................................................81Restitution damages when plaintiff kept paying insurance premiums after expiry....................................................................................81

Anglia Television v. Reed (1972 UK)................................................................................................................................... 82Reliance damages allowed when too difficult to calculate expectation............................................................................................................ 82

Hawkins v. McGee (1929 USA)............................................................................................................................................... 82Hairy hands, wonder why?.................................................................................................................................................................................................... 82

Special Problems in Measurement..................................................................................................................83Carson v. Willitts (1930 ONCA)............................................................................................................................................. 83

Can be different ways to calculate expected position – court chooses easy one............................................................................................83

Groves v. John Wunder Co. (1939 USA).............................................................................................................................. 83How to calculate cost of levelling land – increase in value or cost of performance?...................................................................................83

Thompson (w.L.) Ltd. v. Robinson (Gunmakers) Ltd. (UK 1955)............................................................................84Car was sold, but delivery refused, car wouldn’t sell so defendants had to pay.............................................................................................84

Charter v. Sullivan (1957 UK)................................................................................................................................................ 84Reneged on deal to buy car, sold easily though............................................................................................................................................................ 84

Injuries & Punitive Damages.............................................................................................................................85Addis v. Gramophone Company Limited (1909 UK)..................................................................................................... 85

Given six months notice, but essentially fired immediately..................................................................................................................................... 85

Jarvis v. Swan Tours Ltd. (1973 UK).................................................................................................................................... 85Wanted an awesome vacation based on claims in brochure, ended up shitty................................................................................................85

Fidler v. Sun Life Assurance Co. of Canada (2006 SCC)...............................................................................................85Company doesn’t want to acknowledge liability for disability benefits............................................................................................................. 85

Whiten v. Pilot Insurance Co. (2002 SCC)......................................................................................................................... 86House burned down and insurance company refused to pay the rest of policy..............................................................................................86

Remoteness..............................................................................................................................................................86Hadley v. Baxendale (1854 UK)............................................................................................................................................. 86

Delivery of steam engine part was delayed due to neglect...................................................................................................................................... 86

Horne v. The Midland Railway Company (1873 UK)................................................................................................... 87Shoe manufacturer’s shipment was delayed, had to sell at a loss........................................................................................................................ 87

Victoria Laundry Ltd. v. Newman Industries Ltd. (1949 UK)...................................................................................87Late delivery of a boiler, couldn’t take a profitable contract................................................................................................................................. 87

Munroe Equipment Sales Ltd. v. Canadian Forest Products Ltd. (1961 MBCA)...............................................87Rented a tractor and it broke down, couldn’t remove wood.................................................................................................................................. 87

Scyrup v. Economy Tractor Parts Ltd. (1963 MBCA)................................................................................................... 88Received a faulty bulldozer part, caused a breach with other contract............................................................................................................ 88

The Heron II - Koufos v. C. Czarnikow, Ltd. (1969 UK)................................................................................................89Chartered a ship, was supposed to deliver sugar immediately on delivery...................................................................................................... 89

The Achilleas - Transfield Shipping Inc. v. Mercator Shipping Inc. (2009 UK).................................................89Rented a vessel, it was returned late, had to change price for next renter....................................................................................................... 89


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Mitigation.................................................................................................................................................................90Payzu Limited v. Saunders (1919 UK)................................................................................................................................ 90

Silk dealer, small discount on credit sales....................................................................................................................................................................... 90

White & Carter (Councils), Ltd. v. McGregor (1962 UK).............................................................................................90garbage bin advertisements, cancelled, didn’t want to pay.................................................................................................................................... 90

Finelli et al. v. Dee et al. (1968 ONCA)................................................................................................................................ 91Paving a driveway even though the contract had been repudiated.................................................................................................................... 91

Wroth v. Tyler (1974 UK)......................................................................................................................................................... 91Purchase a house but the seller’s wife registered a binding title, measure damages..................................................................................91


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INTERESTS PROTECTED & CONSEQUENCES OF CONTRACT

REMEDIES

Remedies reveal the interests that the law is designed to protect:

a) Equitable remedies - normally the remedy for breach of contract is expectation damages, but in some cases courts will move toward a more equitable remedy…i) Injunction

(1) Negative order, can’t do something. (a) In cases of nuisance.(b) Courts will enforce a negative covenant so long as an injunction does not

amount to specific performance or effectively require the plaintiff to remain idle or starve – Warner Brothers v. Nelson

ii) Specific performance – Falcke v. Gray(1) Requires defendant to perform a specific act, usually what is stated in the contract.

(a) Contract was for a specific car you get that car.(b) Restitution of specific property.

b) Substitutionary remediesi) Plaintiff suffered harm, so should receive a sum of money to make it right.

(1) Compensatory damages(2) Restitution for unjust enrichment(3) Punitive damages(4) Attorney’s fees

c) Constitutional remediesi) Can have government actions overturned if against the provisions of law. (Released

from jail, etc.)

DAMAGES

1) 4 General Types of Damages:a) Restitution (deals with unjust enrichment) – most important

i) Recovery of benefits that the defendant has received instead of plaintiff. ii) Contract breaker must return the value he has received from the other party.

b) Reliancei) Recovery of a loss or inconvenience suffered on basis of reliance.ii) Costs that have been incurred as a result of relying on the fulfilment of the contract.

c) Expectation – Hawkins v. McGeei) Not only a loss as a result of a promise, but litigant wants fulfilment of promise.ii) Best way to protect expectations is through specific performance.iii) If there’s no reliance or unjust restitution, expectation gives the promisee the value of

where he would have been had the promise been fulfilled.d) Punitive

i) Very rare in contract law, but not so in tort law.ii) Not based on protection of victim, but in the punishment of wrongdoing.


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KINDS OF PROMISES LEGALLY ENFORCED

OFFER & ACCEPTANCE

1) What is a contract?a) Not a thing, but a legal relationship:

i) Created by communication between peopleii) Written document is simply evidence of a contract

b) A form of private ordering:i) Most important source of rights is a contract.ii) Multifaceted regulation of the rights and interactions that surround us everyday.

c) The basis of reasonable expectations about what we feel we are obliged to, or entitled to.d) An enforceable agreement.

i) The courts will enforce through the provision of some kind of legal remedy.e) Legal relations governing simultaneous and future exchange.f) A way to expand our options in the world:

i) By planning for the future instead of being limited by immediate exchange.ii) The ability to trade in the future through promises has social value.

g) An element of exchange:i) Socially valuable and therefore subject to legal enforcement.ii) Private individuals as free to enter into exchanges; freedom of contract.iii) Exchange is inherently good; maximises human welfare.

2) Contract law: a) Facilitates freedom of contractb) Provides a policy framework:

i) In determining whether a contract exists, courts need to establish:(1) That there was a reasonable reliance,(2) There were expectations arising out of the transaction/interaction,

(a) There must be an entitlement to assert these expectations, or it would be unfair surprise to enforce these expectations.(i) These considerations exist on a spectrum; must figure out where to draw

the line so as to determine a legal relationship.3) Bargain Theory of Contract:

a) Builds on a core paradigm: you know there is a legally enforceable agreement that gives rise to enforceable reasonable expectations when there has been an offer, an acceptance, and a bargain or consideration.i) So long as an agreement has the three requirements, it is reasonable and there is no

element of unfair surprise.ii) Typically based on objective assessment of what a reasonable person would interpret

from the interaction.4) How to turn an offer into a contract?

a) Offer becomes a contract only when it is accepted on its terms. Acceptance must mirror the offer.

b) Acceptance has to come while the offer is open.i) At least three ways in which offer can be terminated:

(1) Offer itself may stipulate a period in which offer is open,


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(2) Offer can be withdrawn,(3) Acceptance must be communicated; silence is not acceptance even when the offeror

says silence is acceptance.5) Tendering:

a) Contract A and B – A begins in the Request for Proposals which sets out terms and conditions for the bidding process (begins legal relationship), serves as both an invitation to treat and an offer (to enter into Contract B).

6) Examples:a) Offer provided in a railway timetable, accepted by customer arriving at station to purchase

ticket (only accepted here because railway could have re-printed/put a sign/etc) – Dentonb) No contract exists until the offer and the acceptance match – Johnston Brothersc) Advertisements more commonly understood as invitation to treat – Lefkowitz

i) Invitation to treat is not an offer, rather an invitation to make an offerd) Offer is only made when goods are brought to counter to purchase, not when picked up

Pharmaceutical Societye) Acceptance must be communicated. – Larkinf) An exclusive offer to leave offer open is not legally binding. – Dickinsong) Offer can be revoked, indirect communication of revocation is effective even if promise is

stated to be irrevocable – Dickinsonh) Acceptance must be sent using method specified in offer, acceptance does not trigger legal

consequences if it violates a term of the offer, even if this term does not seem immediately significant – Eliason

i) Last Shot Rule - Contract is established as soon as the last of the forms is sent and received without objection being taken to it – Butler Machine Tool Co.

j) Request for Proposals is an offer of Contract A and invitation to treat for Contract B; tender is acceptance of contract A and offer of contract B; selection of bid is acceptance of contract B. – MJB Enterprises

FORMALISATION & CERTAINTY

1) Agreements are not enforceable if the terms are too uncertain:a) Obligations are assumed, not imposedb) Avoid unfair surprisec) “The courts will not make a contract for the parties”

2) Courts will strive to enforce agreements that are intended to be bindinga) Business reality is that expression and foresight are imperfectb) Reliance and business efficacyc) “As long as an agreement is not being constructed by the court, to the surprise of the parties

… the courts should try to retain and give effect to the agreement…” (Lambert in Griffen v. Martens (1988), 27 BCLR 92d 152 (CA)

3) Summary:a) Courts will not create a contract for the parties; needs to be relative agreement between

parties so that there is no unfair surpriseb) Courts will consider:

i) Did the parties think they had a binding agreement or were they really negotiating?ii) Have the parties acted on the agreement and treated it as binding (mutual expectation)?


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iii) Have the parties relied on the agreement to their detriment or received benefits under it (reliance and unjust enrichment)?

iv) Is there evidence, based on past conduct, or practices in the industry to show how the agreement is intended to be interpreted?

4) Three ways in which agreements may create uncertainty & examples:a) Incompleteness – ie, open terms, gaps

i) If price has not been explicitly stated, no price agreed upon, and no method for determining price in future contract is not valid – May and Butcher, Limited

ii) If price is missing but is generally well-understood, more familiar business setting, contract will be held (retreats and narrows from May and Butcher) – W.N. Hillas and Co., Limited

iii) Failure to act in good with will often motivate a court to find a contract (e.g. adhering to terms of contract for three years then deciding there isn’t one) - Foley

b) Agreements to negotiate or agree – parties are aware something is missing, but still believe they have an agreement and agree to fill in the blanks as they goi) Agreeing to negotiate and no longer negotiate with a third party not binding – Walfordii) If specified that parties had to mutually agree on price, cannot be sure of terms without

that agreement – Empress Towersc) Ambiguity and vagueness – parties agree on terms/forms of words but they are misleading

or vaguei) Item for sale must be reasonably specific – Lefkowitzii) If agreement is too uncertain, non-binding – Scammelliii) If court cannot determine what contract means specifically, but knows exactly what it

doesn’t mean, can enforce minimum level of performance - Durham Tees Valley Airport

BC SALE OF GOODS ACT – ASCERTAINMENT OF PRICE

12 (1) the price in a contract of sale may bea) set by the contractb) left to be agreed in the contract, orc) determined by the course of dealing between the parties

(2) if the price is not determined in accordance with subsection (1), the buyer must pay a reasonable price.

(3) what is a reasonable price is a question of fact dependent on the circumstances of each case

Note: Act was in effect at time of May v. Butcher. Why did it not apply?

Facts do not align with 12(1)(b),(c) of 12(2): parties set no mechanism to agree on price.o Price was not determined in dealing between parties.o Parties had explicitly excluded implication that it is a reasonable price by stating that it

will be a price they agree on. the way∴ the parties set the agreement precluded application of BC Sale of Goods Act.


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CORRESPONDENCE

Postal Acceptance Rulea) Most important technological development to raise this issueb) Principle:

i) Do not have contract until offer and acceptance, and acceptance is not binding until communicated, but when parties are not face-to-face what counts as communication?(1) Moment of posting letter of acceptance = contract.

c) Reasons for this exception:i) Business efficacy; if no rule, would expose offeree to high risk:

(1) How long would they have to wait to know if they had a contract?ii) Not fair to offerors:

(1) Only applies in cases where post was the way the parties agreed they were going to communicate; therefore consistent with reasonable expectations.

(2) If offeror does not like the risk, they can simply choose to avoid this risk when drafting the contract.

iii) Postal acceptance therefore only applies where post is authorised way to communicate and nothing in offer that indicates the actual acceptance is required.

Note: Most standard form contracts/offers today explicitly exclude postal acceptance ruled) Rule does not apply in case of faxes:

i) Due to instantaneous communication. PAR is to protect offeree (reasonable expectations) but not necessary because offeror receives acceptance right away.

e) Other forms of electronic communication:i) Email now one of most common ways of entering into contracts; automated contracts

also common.ii) How do we apply traditional principles of offer and acceptance in this new context?

(1) Most jurisdictions have created a specific act of parliament to regulate electronic communication.

Examples:a) Acceptance valid when posted, revocation of offer must be communicated and only

communicated once actually received – Henthornb) Even if acceptance is sent after revocation, so long as acceptance is received before

revocation is there is a contract – Byrnec) Postal acceptance rule does not apply if its application “would produce manifest

inconvenience and absurdity” (also post was not specified) – Holwell Securitiesd) Postal acceptance rule does not apply for forms of instantaneous communication – Eastern

Power Ltd.

BC ELECTRONIC TRANSACTIONS ACT

Digitised information assimilated to talking, etc. – held to be communication. Contract may be formed by interaction between electronic agent and individual or solely

between electronic agents.o Contracts can be made with no human interaction.


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Electronic signature is anything that shows record of interaction, but signature not necessary for

contract – simply proof of interaction. s. 15: Contracts can be created through computers, unless parties express otherwise. s. 18: Postal acceptance rule does not apply to email.

o Question as to when it is said to be received.o Does not have to be read, but the moment it reaches inbox or moment it is capable of

being retrieved (on the server) it is considered received (same with fax).

CONSIDERATION

General Framework:a) Balance between reasonable expectations on the one hand and unfair surprise on the other.b) In addressing a contractual question, one needs to consider these factors before legal rules.c) Then proceed to questions of carefulness/deliberateness:

i) Did they carefully define what they thought they were agreeing to? (Uncertainty)ii) Was there reasonable reliance on the contract/agreement and/or were they using it to

plan their future endeavours, would society endorse this sort of planning?iii) Was there unjust enrichment as a result of making a promise? (Morality)

TWO BASIC LEGAL RULES/WAYS TO ENTER INTO CONTRACT

a) Put arrangement in writing and under seal:i) A promise that is written down and formalised with a seal is binding (a deed).ii) Principle was developed in 14c. as a way of signifying that something important was

happening.iii) Judicial decisions have expanded the form of the seal (no longer needs to be dripped

wax) but still very rare instruments.b) The Doctrine of Consideration:

i) Mere offer and acceptance does not make a contract.ii) Must be part of a trade:

(1) Needs to be something of value that is exchanged between the parties.(2) Must be more than just a promise in order to be enforceable.

iii) At broadest extremes:(1) Pure gifts:

(a) Not enforceable,(b) “Naked promise” – does not have consideration.

(2) Paradigm of contract/economic exchange:(a) Economic relationship geared at the trading of resources,(b) Includes offer, acceptance, and consideration.

iv) Principle of Consideration at its highest form:(1) Enforces contract law when the agreement tends to look more like a commercial

exchange.

WHAT IS CONSIDERATION?

a) What is traded in exchange for the promise can be:


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i) Actual – executed contract, nothing left to be traded; orii) Promised – executory contract, trade of mutual promises, trade remains to be done.

b) Can be right, interest, profit, or benefit to promisor given in exchange for promise ORi) Forbearance, detriment, loss, responsibility to promisee.ii) Therefore, do not need to benefit from a promise in order for the promise to be binding.

c) Courts will not second guess the value of the consideration: (West Lake v. Adams)i) Will give no consideration to adequacy of the consideration.ii) Based in values of a liberal, capitalist society where people are free to enter into any

kind of contracts they want;(1) Not up to a third party tribunal to tell you what contracts you can and cannot enter

into (up to a point).(2) Not unjust enrichment because entry into agreement is voluntary.

(a) E.g. I’ll give you a pink hat for your Lamborghini.d) Principle of Consideration critiqued as both:

i) Under-inclusive – excludes voluntary arrangements lacking consideration that do not take place under duress; and

ii) Over-inclusive – includes agreements with consideration made under economic duress.

GOING TRANSACTION ADJUSTMENTS (GTAS):

a) Main problem that is perceived with modification of contracts part way through is duress.i) Main reason not to enforce adjustment.

b) In absence of duress, there are also very good policy reasons to enforce GTAs, especially in business context.i) Showing flexibility in business relationship today often benefits parties later, and GTAs

assumed to be enforceable.c) Problem is that the main tool law uses to determine if contract is enforceable

(consideration) often assumes that GTAs are unenforceable – will not be binding in the absence of fresh consideration.

d) Judges, however, recognise that consideration is not entirely satisfying, so there are a variety of exceptions/modifications to the rule:i) Variation in the new consideration (Gilbert Steel) – if there is some new benefit given

for promise to pay more, may be consideration.ii) Possible to construct interaction of parties not as variation of existing contract, but

rather as rescission of old contract and replacement with new contract.iii) Practical benefit with reliance (Williams v. Roffey) – where we can find there is a

promise to pay more, and a practical benefit and the other party relies upon it, enough to enforce.

iv) Estoppel:(1) If you enter into legal relationship with someone based on a statement of fact, you

are estopped from going back on statement of fact.(2) Promissory estoppel – developed to apply this reasoning to promises.

(a) If you make a promise to someone, and they rely on that promise, you are estopped from going back on that promise (not a statement of law, or would replace doctrine of consideration with one of reliance)

(3) Examples: Hughes v. Metropolitan Railway, Central London Property v. High Treesv) Compromise:

(1) Agreement to settle legal dispute.


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(2) Sometimes contract variations enforced on the basis that what they really are is compromise.(a) Settlement is binding because each party gives up right to go to court.

DEBT SETTLEMENTS & BC LAW AND EQUITY ACT

a) Payment of a lesser sum in satisfaction of a debt is not binding because there is no consideration. – Foakes v. Beeri) No detriment to debtor, no benefit to lender.ii) Relies on Pinnel’s Case – lesser sum cannot be satisfaction for entire sum.

b) If something else (new) is offered, then acceptance of lesser sum would be binding.i) New form of payment, do a little dance, offer a pink hat, etc. (contrary to common sense)

c) BC Law and Equity Act, s. 43i) “Part performance of an obligation, either before or after a breach of it, when expressly

accepted by creditor…though without any new consideration, shall be held to extinguish obligation.”

CHARITABLE PLEDGES

a) Doctrine of Consideration has prevented courts from enforcing charitable promises.i) Not a contract; rather, a gift.ii) Mere pledge not a contract - neither is a small gift in exchange for a pledge (not

bargained for, simply a gift of appreciation).b) Problem from the perspective of charities is that it prevents them from relying on pledges,

but it’s still the rule.c) Possible exception: If it is specifically negotiated (donation in exchange for completion of

specific project or action) then it is more like a contract because there is a benefit to donor (consideration) and it is bargained for (not a gift).

CASES TO REFER TO:

a) Informal relations:i) White (Executor) v. William Bluett, Hamar v. Sidway, Eleanor Thomas v. Benjamin Thomas

b) Problems of Mutuality:i) The GNR Co. v. Witham, Tobias v. Dick and T. Eaton Co., Wood v. Lucy Lady Duff-Gordon

c) Going Transaction Adjustments (GTAs):i) Harris v. Watson, Stilk v. Myrick, Gilbert Steel Ltd. v. University Construction Ltd., Williams

v. Roffey Bros. Ltd., Greater Fredericton Airport Authority v. NAV Canadad) Debt Settlements:

i) Foakes v. Beer, Fairgrief v. Ellise) Charitable Pledges:

i) Dalhousie College v. Boutilier Estate

INTENTION

1) Though consideration is primary test for enforcement of promises, test of intention to create legal relations also exists.


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a) Must be a bargain/exchange andb) Interaction of parties must be such that court thinks parties appreciated that they were

entering into legal relationship.c) Test is not of subjective intent, but objective.

i) It this the type of social situation where it is generally understood that promise is made seriously and could have legal consequences?

d) Presumptions:i) Promises/agreements made in business/commercial situation are binding; can be

rebutted, even in sophisticated commercial agreement. – Rose v. J.R. Cromptonii) In family situations, promises and arrangements are not intended to be legally binding. –

Jones v. Padavatton

NON-BARGAIN PROMISES

Excerpt from Fuller1) Evidentiary Function

a) Most obvious function of a legal formality is that of providing “evidence of the existence and purport of the contract, in case of controversy”.

b) Can provide evidentiary security with:i) Requiring a writing, or attestation, or the certification of a notary.ii) Also, to some extent, by such a devise as the Roman stipulation, which compelled an oral

spelling out of the promise in a manner sufficiently ceremonious to impress its terms on participants and possible bystanders.

2) Cautionary Functiona) Formality may also perform a cautionary or deterrent function by acting as a check against

inconsiderate action.b) The seal in its original form fulfilled this purpose remarkably well.

3) Channelling Functiona) That a legal formality may perform a function not yet described, can be shown by the seal.b) The seal not only insures a satisfactory memorial of the promise and induces deliberation in

the making of it – also serves to mark of signalise the enforceable promise.Excerpt from Brudner

1) The fact that promises under seal are bounding without consideration has led many to surmise that consideration must be a functional substitute for a seal.a) … taken to its extreme, this reasoning issues in a proposal to redefine consideration to mean

any good reason for enforcing a promise, of which the existence of a bargain is only one.i) Flaw in this reasoning is the assumption that consideration and the seal are

interchangeable means by which to test the legal seriousness of a promise.ii) Those who start from this premise forget that the enforcement of promises in an action

for debt long predates the write of assumpsit from which the modern action for breach of contract derives; and they forget, too, that promises under seal are enforceable only upon delivery to the donee.

iii) Promises under seal are enforced not as executory promises but as executed gifts.iv) Delivery of a sealed deed acts as a symbolic delivery of the object.

b) Not in place of consideration, but transforms a promise into an executed transfer.


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PAST CONSIDERATION

1) Rule is that contracts exist when promise is made in exchange for some consideration.a) Promise made for something that happened in the past is not a contract – nothing was given

in exchange for the promise/not induced by an exchange – Mills v. Wymanb) Claims or promises made after the exchange are not part of exchange. Lord Denman:

“Promise must be co-extensive with the consideration” – Roscorla v. Thomasc) If a promise is made in exchange for something already done, but it was for something that

would normally expect consideration, then it will be a contract. – Lampleigh v. Brathwaitd) If there was an implied request, with consideration given after, it will be a contract – Webb v.

McGallan

RELIANCE & ESTOPPEL

1) At common law, when a statement of fact is relied upon, the party making the statement can’t deny the truth of that statement – Central London Property v. High Treesa) However, estoppel functions as a shield, not a sword.

i) It does not provide a cause of action, only prevents the party that made the relied upon statement from insisting on exercise of strict legal rights when it would be unjust to do so – Combe v Combe

ii) Thus, it does not contradict the principle that a consideration is needed for a cause of action.

b) Where a defendant has made a factual admission to the plaintiff which the plaintiff relied on instead of trying to gather evidence on that point, the defendant can be estopped from disputing that earlier admission at trial – Robertson v. Minister of Pensions

2) In order to establish that a statement gives rise to estoppel, the party asserting it must show plaintiff’s conduct amounted to an assurance that was intended to affect the legal relationship between the parties - John Burrows v. Subsurface Surveysa) Merely being permissive in allowing a party not to live up to the strict letter of the contract

does create estoppel – John Burrows v. Subsurface Surveysb) Were that the case it would create a disincentive for parties to be generous. However,

estoppel can rise by implication. c) Where a party ought to have known that their action would lead the other to believe there

was a suspension of a contractual term, they can be estopped from insisting on performance of the terms in the contract – Owen Sound Public Library v. Mial Developmentsi) For estoppel to apply it is also necessary that the circumstances of the agreement

suggest the parties intended a legal relationship. d) Even promises without consideration that were relied on heavily that were made as part of a

romantic relationship have not had estoppel applied – NM v ATA3) Estoppel cannot apply if the statement relied on was procured through duress – D&C Builders v.

Reesa) Policy from D&C is that promissory estoppel ends the problem in Folkes v. Beer. If we agree

to settle debt for less and I rely on that, you are estopped from suing me.

UNILATERAL CONTRACTS


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1)The promisor makes a promise that doesn’t ask for a promise in return, but rather promises

something for fulfilment of the promise. a) Notification is not required or can come prior to performance – Carlill v. Carbolic Smoke Ball

Companyb) Classic situation is rewards, but useful modern applications are consumer protection and

government programs.c) The contract binds the promisor to compensate anyone who fulfils the requirements of the

promise, even if they performed the actions for purposes other than gaining the reward – Williams v. Carwardine

2) Distinguishing between a unilateral contract and mere “puff”a) The party claiming based on the promise must show that the alleged promisor intended the

statement to be a binding contract Carlill v. Carbolic Smoke Ball Company

GOVERNMENT PROGRAMMES

1) Government programs, particularly for subsidies can be considered unilateral contracts, with a promise of benefits who those who perform by meeting the program requirements – thus giving legal claim to subsidy - Dale v. Manitoba

2) The person alleging the benefit though must show the program was meant to function as a unilateral contract – Grant v. Province of New Brunswick

3) People claiming benefits should also be able to rely on statements made by the providers of programs (as authorised agents) whether such statements are authorised or not, so long as the understanding of the statement and assumption the statement was authorised was reasonable – Dale v. Manitobaa) Policy reasons for this – the public participates in programs through agents so reliance is

reasonable, it is up to the government to control their agents.

EARLY CANCELLATION OF UNILATERAL CONTRACTS

1) In strict interpretation of unilateral contract theory, you can revoke an offer right before the action is complete, even if there has been a great deal of reliance already. Two responses to this:a) This can be countered by the argument that the contract was actually bilateral.

i) Courts generally will find bilateral contracts when at all possible - Dawson v. Helicopter Exploration

ii) They are also motivated by fairness concerns of reliability, and the business efficacy of supporting arrangements by not allowing parties to back out after reliance – Dawson v. Helicopter

iii) But courts are not always going to read in bilateral because it deprives unilateral contracts of their utility in the real world – there are lots of reasons why you would want to be able to revoke a unilateral offer.

b) Other technique in Errington v. Erringtoni) The court (i.e. Denning) finds an implied promise not to revoke the offer while the

requested performance is underway, as to do otherwise would be to betray the party’s reliance

c) Revoking a unilateral offer can be difficulti) Expires in reasonable time, when it is set to inspire, or when notice is given


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ii) Probably just taking down the notice is not revocation; you would probably have to put down another notice.

CONTRACTS & THIRD PARTIES

THIRD-PARTY BENEFICIARIES

1) Generally, Rule of Privity is that third party beneficiaries don’t get benefits, unless for some reason they are parties to the contract.

a. Considered wrong that could be party for suing but not for being sued under, and also it deprives parties of right to modify the contract - Tweddle v. Atkinson

b. However in case of insurance contract providing coverage for third parties, SCC and UKPC have found unjust enrichment for not providing benefits - Vandepitte v Preferred Accident

i. Legislatures of England and Canada immediately stepped in to make 3rd party coverage enforceable

2) Denning tried to put forward that if you’re entitled to something under a contract you can either join with one of the parties or sue in their name.

a. But the House of Lords said no, she can sue as executor, but upheld privity - Beswick v Beswick

b. It is not effective to argue that the plaintiff is in contract with the defendant through a third party that the plaintiff and defendant are both in contract with.

i. Needs to be consideration coming from one party to the other directly – Dunlop Pneumatic Tyre v. Selfridge

ii. A party likely can’t be a principle and an agent for another within one contract – Dunlop

APPLICATION OF EXCLUSION CLAUSES TO THIRD PARTIES (EURYMEDON)

1) 4 criteria for applying the protection to stevedore (3rd party)a) Bill of lading made it clear it applied to the stevedoreb) Bill of lading made it clear that the carrier was contracting as agent for stevedore as wellc) If the stevedore had actually agreed to the carrier being an agentd) If there was consideration flowing from stevedore to the shipper.

i) Agreeing to do an act which the promisor was obligated to do for a third party (other party in contract) is probably consideration – Eurymedon

SUBROGATION RIGHTS

1) No subrogation clause says that the parties will not sue each other if one needs to collect insurance

2) No subrogation clause not taken to apply to employees of a contracting company - Greenwood Plaza

LIMITATION OF LIABILITY CLAUSE

1) Kuehne v. London Drugs gives opposite result from Greenwood Plaza


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2)Two requirements to new exception:

a) Contractual limitation of liability between employer and another party that suggests employees are to be included

b) Employees must have been acting in the course of carrying out the services contracted for.3) This rule expanded to cover third parties contracted to so long as the parties intended to extend

the benefit to third parties and the actions of the third party are those considered by the contract.

MISTAKEN IDENTITY – VOID & VOIDABLE CONTRACTS

1) Nemo Dat rule – can’t sell something you don’t own, however just because a person has defrauded and not paid you doesn’t mean that property hasn’t passed.

a. You can sue for breach of contract, but this means you have contract – therefore, the cheque bouncer still owns the car.

b. But what if the contact was only available to the specific person?i. Then you argue, no it’s not that the contract was breached – it’s that there was

no contract because the offer was only available to one person (not the person that took the car).

2) Simply claiming to be another person when purchasing something doesn’t void the contract - Philips v. Brooks

3) Where the seller didn’t want to sell but changed mind after researching fake identity, contract void – Ingram v. Little

a. Dissent – finding identity was irrelevant, she should have been trying to verify creditworthiness

4) In face to face contracts, the plaintiff must prove they didn’t mean to contract with the person before them - Lewis v Avery

a. The seller who was ripped off by fraudster is less innocent than the person who bought from fraudster, as he could have verified identity.

b. When not face to face though, law confused.c. Presumed the finance company meant to contract with person named rather than

fraudster when they were not present, though purpose of finance company is to deal with specific individuals based on credit – Shogun Finance v. Hudson

NON EST FACTUM – WALDRON ONLY

1) General Principles: - Saunders v. Angliaa) Extremely rare for a court to negate a contract for non est factumb) A person of full age and understanding, who can read and write, is bound by their signature

on a legal documentc) Plea of non est factum is available to a person who, whether temporarily or permanently, is

not capable of reading and sufficiently understanding the document signed.d) Mistaken party must prove that they took all reasonable precautions in the circumstances.

i) Generally insufficient to say they relied on a trusted friend/advisor.2) Available where: - Saunders v Anglia


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a) Party took all available precautions to determine the true meaning of the doc (not negligent/careless): Negligence on the part of the signor is relevant only to bills of exchange - Marvco Color

b) The document as signed is fundamentally different in character (document for different purpose) and effect than what the individual thought they were signing

c) There is fraudulent misrepresentation of a third party that you trustd) Difference in character or class is sufficient, yet Diff only in contents is not sufficient

3) Not available where:a) Signature on the document was brought about by negligence of the signer in failing to take

precautions which they ought to have taken, or - Saunders v. Anglia; Marvco v. Harrisb) The actual document was not fundamentally different from the document as the signer belie

ved it to be.

CONTRACT INTERPRETATION

THE PAROL EVIDENCE RULE

1) We have a written contract, we will not admitted verbal evidence of what the parties agreed to be admitted (Prenn v. Simmonds), only evidence of the genesis and objectively the aim of the transaction.

2) You can only admitted parol evidence establishing a separate agreement if it has no overlap with the concerns of the terms in the first deal - Hawrish v. Bank of Montreala) Court may be willing to be very narrow in interpretation of contractual terms to prevent

overlap where reliance - Gallen v Allstate Grain Co.b) Courts will be suspicious of claims when there was a contract offering something in

exchange for making a second contracti) Would normally be done all in one - Heilbut, Symonds v. Buckletown

c) A collateral agreement putting a lien on chattel for payment in the creation of the chattel does not vary the initial agreement and therefore is admissible as parol evidence - Bryers v. McMillan

3) Situations in which oral evidence may be admitted even if it varies a contract - Gallen v. Allstate Grain Coa) To show the contract was invalid due to fraud, misrepresentation, mistake, incapacity, lack

of consideration, lack of intention to contractb) To dispel ambiguities, establish term implied by custom, or demonstrate factual matrix of

the agreementc) Support claim for rectificationd) Establish condition precedent to the agreemente) Establish a collateral agreementf) Support an allegation that the document itself was not intended to constitute the whole

agreementg) Support a claim for an equitable remedyh) Support of a claim in tort that the oral statement was breach of duty of care

4) Rule in L’Estrange v Graucaub, if you have a signed written contract, we will assume your are bound by its termsa) Based on reasonable reliance of the other parties


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5)If you reasonably believe what you are purchasing is a certain way, and in actuality it is completely

different in an extraordinary way, then you are not bound unless this term is brought to your attention – Tilden Rent-A-Car Co. v. Clendenninga) It’s not reasonable for them to assume you would agree to some crazy ass term.

CLAUSES EXCLUDING LIABILITY

Exclusion Clauses: exclude or limit liability in consumer and commercial transactions, for tort or breach of contract (e.g. no liability for negligence, no warranties, etc.)a) Limitation of Liability Clauses: these are clauses that limit liability to a stated amount –

common in transportation contractsb) Contra Proferentum – courts read exclusion clauses narrowly – Terconc) Notice requirements – unsigned, the party with the contract must prove that the signor was

aware of the terms reasonablyi) Signed – the signor is bound by the terms unless the Tilden exception applies:

(1) There is no intent that the contract be read or opportunity for the signee to do so(2) The clause is inconsistent with the reasonable expectations about what you’re

contracting for Policy considerations:

a) Exclusion clauses strike many people as unfair:i) You shouldn’t be able to exclude liability for negligence.

(1) But in commercial situations they play a valuable role: signalling who has to buy the insurance

(2) Also, it can help lower the price, e.g. if you’re shipping a used book to your friend in Toronto, you want them to do it as cheaply as possible, so no one worries about insurance.

ii) However, they can cause unfair surprise, contrary to the reasonable expectations of the parties

The Fundamental Breach Experiment – Not law in Canadaa) There are a long series of cases that are no longer the law, that developed fundamental

breach - the idea that the breach was so bad that the exclusion doesn’t cover it.b) Examples:

i) Whether an exclusion clause applies to a particular act is a matter of interpreting whether the parties wanted exclusion to apply - Photo Production v. Securicor

ii) Refuting fundamental breach - courts should not intervene to say a clause doesn’t apply, let the parties allocate risks - Photo Production

iii) SCC rejects fundamental breach – hold parties to their terms unless unconscionable - Hunter Engineering v. Syncrude (Dickson Majority)(1) Wilson dissent – Unconscionability about bargaining powers – we should have other

tools for fairnessiv) Court willing to stretch facts to uphold exclusion clause if signed – willing to say a

reasonable person would have expected that kind of exclusion, and that renewing the initial consideration is consideration - Delaney v Cascade River Holdings Ltd

v) However when the exclusion is protecting the government, courts really willing to stretch to uphold it - Tercon Contractors Ltd v. British Columbia(1) The question is whether the parties intended at time of contract formation that the

exclusion clause would apply to situations of breach of contract


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MISREPRESENTATIONS & THE RELATIONSHIP BETWEEN CONTRACT & TORT

Collateral warranties are rare (Heilbut Symonds v Buckleton) and need good evidence of clear terms and intention

Innocent Misrepresentation: An important statement of fact about a central component, induced the contract, and the

reliance was reasonable. Who would be in a better position to know than the owner is? - Redgrave v Heard

No damages, but rescission. However, no rescission after too long decided on a case-by-case basis – question of

reliance, disturbing expectations. 5 years in Leaf v. International Galleries

Intervention of 3rd party rights is also a bar to rescission. Third bar to rescission is the inability for parties to get back what they gave up initially –

substantial difference needed though. Warranties can be in collateral agreements and unilateral contracts - Murray v Sperry Rand If sales material from a manufacturer advertising gives specific assurances, the purchaser

can have warranty with manufacturer even if the contract of sale was with a vendor If a third party makes a statement that induces to contract that is wrong it may be negligent

but only if the third party owes a duty of care – tort of Negligent Misrepresentation - Hedley Byrne v. Heller

A carelessly made estimate that is not a guarantee does not allow for a remedy of expectation damages in contracts, though likely in torts - Esso Petroleum v. Mardon

However there can be an implied guarantee that an assessment was made with due diligence and that can allow for reliance damages – Esso In tort where a person with special knowledge or skill makes a recommendation to

another with the intention of inducing him to enter into a contract is required to use reasonable care to make sure information is correct, or he is liable in tort for damages under negligent misrepresentation.

THE RESIDUAL POWER OF THE COURT IN CONTRACT ENFORCEMENT

UNCONSCIONABILITY, UNDUE INFLUENCE & DURESS

TREBILCOCK EXCERPT

1) Should market price be standard indicia of unfairness in contract? for situations where item has historical, sentimental, locational value?

2) Cases where are information processing disabilities between parties appropriate for Unconscionability, autonomous consent requires information.

3) Standard form contracts a margin of sophisticated, aggressive consumers discipline entire market; but where inframarginal consumers exploited, should see if contract significantly inferior to that realized by marginal consumers.

LEFF EXCERPT


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Dealing with 2-302 of the Uniform Commercial Code, using unconscionability as reason for unenforcement – but no clear meaning for unconscionable

American Home Improvements v MacIver suggests means “too expensive” William v. Walker-Thomas Furniture Co: bad to sell expensive items to someone knowing they are

poor, to encourage someone to live beyond means Unconscionability not transparent, doesn’t speak to reasoning behind decisions. Leaf divides unfairness into two kinds. Procedural unfairness and substantive unfairness

a) Procedural unfairness deals with defects or problems in formation of the contract. b) Substantive unfairness deals with unfairness in actual operation or substance of contract.

Example:c) You will sell me big screen TV for $2 at gun point. Court will not allow contract to stand.

Since physical duress earliest ground for court to say contract won’t stand. Physical duress goes toward procedural unfairness because physical threat overrode ability to freely consent to deal. But it is also substantively unfair because paid $2 for something that costs $2,000 in the local store.i) For courts to intervene need both procedural unfairness and substantive unfairness.ii) So if voluntary sell TV for $2 can’t get it back on basis of unconscionability if did it

wholly of own volition.

UNCONSCIONABILITY

Unconscionability is gross inequality of bargaining power (need, distress, ignorance or other factor) + significantly unfair bargain For courts to intervene need both: - Marshall v. Canada Permanent Trust Co.

Procedural unfairness and Substantive unfairness.

Deals with defects or problems in formation of the contract. Need gross inequality in bargaining power. For e.g. one party is astute businessman and other party is mentally incapacitated.

Must fail ‘smell test,’ fall outside normal bounds of commercial morality, commercial norms. Need grossly unfair bargain.

Not necessary that party knows about or consciously takes advantage of vulnerability - Marshall v. Canada Permanent Trust Co

UNDUE INFLUENCE

1) Undue influence vitiates consent by making it such that one party did not genuinely consent to the transaction agreed upon based on undue pressure or influence by the other party (or 3rd party).

2) There are two categories of Undue Influence:a) Actual undue influence:

i) The person who had a relationship with the dominant party was pressured to accept the bargain (such that the person’s will was overborne)

ii) Overlap with economic duress.b) Relationship of trust and confidence between the parties and transaction that requires

explanation.


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i) Burden of proof shift: party in the stronger position must prove that the bargain was fair and reasonable under the circumstances.

ii) Relationship component sub-divided into two categories: - Allcard v. Skinner(1) Categories where the relationship is presumed.

(a) Parent/child, solicitor/client, doctor/patient, religious leader/disciple(2) Categories where the relationship of confidence is proven.

(a) Burden of proof on claimant to prove this component.

SPOUSAL GUARANTORS

When a spouse who owns a business needs to borrow money, the lender will typically ask for security. As business assets are generally insufficient given a corporation’s limited liability for debts, the lender will request a personal guarantee, which requires an assert (typically the matrimonial home.) The lender will require the other spouse’s signature (as joint tenants) to secure this assert.

In such situations, there are potentially difficulties w/ the quality of consent of the non- commercial spouse to the guarantee (potentially undue influence or misrepresentation). This situation raises two competing issues: Fairness to spouse who may not have understood the nature of the transaction Concern about commercial impact if lender absorbs burden of spousal relationship (unlikely

to loan if only personal assert is matrimonial home) Principles: Etridge

The lender placed on notice of the possibility of undue influence whenever the lender is dealing with non-commercial guarantors

If the lender is aware of undue influence, the lender cannot benefit from the guarantee unless reasonable grounds to rely on the guarantee’s consent as genuine if the lender is unaware and has reasonable grounds to rely on the guarantor’s consent as genuine, the transaction cannot be set aside (despite undue influence of third party)if the lender is aware, the transaction can be set aside

Application: Etridge Anytime someone guarantees a loan for non-commercial reasons (i.e. not a partner in the

business but family or marital relationship or other reasons of personal affection), the lender must take steps to ensure that they have reasonable grounds to rely on the guarantor’s consent as genuine

Reasonable grounds = a reasonable belief that the guarantor is working with a solicitor and receiving independent advice

Solicitor provides certificate indicating that such independent legal advice was provided. Requirements for certificate to be issued:

Solicitor that the wife has chosen herself Solicitor explained the risk of the transaction (i.e. potential loss of the house) Solicitor must have information from the bank about the situation of the borrower

(i.e. credit position; previous borrowing history; company’s situation) Sufficient information for the lawyer to suggest whether the transaction makes

financial sense Senior bank official may be relied upon to provide the advice unless there are facts known to

the bank that increase the risk of undue influence (i.e. wife does not have a commercial background; wife does speak primary language of business well)


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DURESS

Vitiates consent by eliminating all alternatives to agreement (i.e. with a gun to your head you cannot give free consent as all other answers but “yes” are eliminated).

No choice: In bargaining situations one party always has more leverage than the other and courts will not interfere with it in normal contracts. So it has to be a situation where other party has no alternative but to accept.

A contract made under duress is prima facie not enforceable. Duress occurs when one party feels it has no option not to sign. Economic Duress occurs when one party has to choose between agreeing or great financial

hardship - D&C Builders Ltd v Rees The line between economic duress and simple aggressive negotiation can be hard to

determine.

PENALTIES & FORFEITURES

While it’s common for contracts to provide for what happens if contract is broken (liquidated damages), the equitable court will not enforce a penal provision (Dunlop Tyre). Definition of:

Penal - “The essence of a penalty is a payment of money stipulated as in terrorem of the offending party”.

Liquidated Damages – “The essence of liquidated damages is a genuine covenanted pre-estimate of damage”. – Dunlop Tyre

Policy consideration: “The fact that the appellant subscribed to it, and may have been foolish to do so, does not mean that it should be left to rue its unwisdom” – HF Clarke

Penalties: - Consider H.F. Clarke v. Thermidaire Corp. Matter of construction (terms and inherent circumstances of each particular contract

provision, judged as at the time of contract formation not at the time of breach. Some considered factors:

Sum is extravagant and unconscionable compared to the greatest loss that could be conceivably foreseen as arising from the breach.

Breach consists only in paying a sum of money, and the liquidated damages are greater than the sum that was owed under the contract.

Single lump sum made payable on the occurrence of one or more of several different events, where the several events are not all sever (no specificity = too general to be a genuine pre-estimate = penalty).

Forfeitures: - Consider Stockloser v. Johnson Courts will generally enforce forfeiture clauses.

However, equity will intervene when two requirements are met: Deposit or forfeiture must be grossly disproportionate (“penal in nature”) Unconscionable for receiver to retain (i.e. sharp practise, unjust enrichment)

When there is no forfeiture clause. If money is handed over in part payment of the purchase price, and then the buyer makes default as to the balance, then so long as the seller keeps the contract open and available for performance, the buyer cannot recover the money; but once the seller rescinds the contract or treats it as at an end owing to the buyer’s default, then the buyer is entitled to recover his money by action at law subject to a cross-claim by the seller for damages: …


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But when there is a forfeiture clause or the money is expressly paid as a deposit (which is equivalent to a forfeiture clause), then the buyer who is in default cannot recover the money at law at all. He may, however, have a remedy in equity, for, despite the express stipulation in the contract, equity can relieve the buyer from forfeiture of the money and order the seller to repay it on such terms as the court thinks fit. Equity will step in when: The forfeiture clause is of a penal nature, in this sense, that the sum forfeited must be

out of all proportion to the damage, and, To determine if penal in nature not 50% but will look at custom. For example in real

estate 10% deposit is normal. If no industry custom they will look at what damages would be (for example market fluctuation) and decide if unfair.

It must be unconscionable for the seller to retain the money. Not unconscionable in the same way as test for setting contract aside but in a

colloquial sense for unfairness. Typically refers to sharp practice for e.g. rescinding contract because party is one day late on making final instalment payment

ILLEGALITY

The original position is that if an act is illegal or immoral courts will simply not get involved (Holman v. Johnson) – even if further illegality done with product form another contract original parties can’t be charged.

Two categories of illegality: Common law illegality: (against public policy)

Burrough J, in 1824: “Public policy … is a very unruly horse and when once you get astride it you never know where it will carry you”

Lord Denning, in 1971: “I disagree. With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice.”

Statutory illegality: Entails an action in violation of a statute.

COMMON LAW ILLEGALITY

Refers to the areas that have been defined by the courts as illegal for the contravention of public policy, e.g.: Contracts in restraint of trade.

Consider Shafron v. KRG Insurance Brokers Presumption is restraint of trade not allowed Exception where restraint of trade is reasonable Reasonableness measured by considering:

Extent of activity sought to be restricted, and Temporal Geographic/spatial scope of restriction - Shafron

Where restriction is too uncertain/ambiguous courts may completely eliminate the restriction.

Courts have made a difference between how they look at restraints in trade in seller/ purchaser of business relationship and employer/employee relationships. Since there is greater freedom to contract between buyer/seller than between employer/employee


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courts will take harder closer look at employer/employee contracts than vendor/purchaser of business

When buying selling business both people operating on equal footing, typically both have legal advice.

However in employer/employee relationship there is more dependence and power imbalance since employer is in a better position to dictate terms of contract than employee than purchaser Note: where significant time that has expired after sale of business and there have

been a number of employment contracts renewals court will consider the relationship to be employer/employee - Shafron

Note: Waldron thinks if it was a vendor purchaser agreement court may have looked a

little harder to see if there was any external evidence to suggest what was meant by the area.

Issue here is not that area is too large but that it was not clear what the area was. Prima facie unreasonable to restraint someone trade when you can’t tell them where. So court said contract was illegal and didn’t enforce it and Shafron could compete wherever he wanted.

Contracts containing benefits as a result of crime. The rule is that it is against public policy to let someone get an advantage out of their

own crime. Therefore a person can’t insure against own criminal act. The courts will not allow the benefit to even pass ‘through the criminal’s hands’ - Brissette Estate v. Westbury

Where innocent beneficiary is directly named in insurance policy, not disentitled to insurance proceeds even when insured dies committing criminal act: Oldfield v Transamerica Life Insurance Co of Canada SCC

Courts have noted that distinction between innocent beneficiary and those claiming through estate may be arbitrary, need reform in future

Note: Suicide has always been a problem for insurance industry. Suicide is an act against public policy. Generally attempted suicide is illegal. Generally speaking insurance statute only allow insurance company to not pay for suicide for a limited period of time after policy is taken out

Normal rule is that third parties cannot sue for contracts for which they have given no consideration. However insurance beneficiaries are a statutory exception to the privity of contract.

STATUTORY ILLEGALITY – WALDRON ONLY

The K in violation of a provision can be expressly declared void in a clause in the contract - Doherty

Court focus on Purpose of the Act and regulations - Kingshot v. Bruskill Policy: Protecting Public

Consider the sophistication of purchaser/plaintiff - Kingshot Disingenuous attempt (trying to rely on own wrong to escape contractual obligations) can be

considered by court to allow contravention of statute - Doherty

MITIGATION CONSEQUENCES OF ILLEGALITY – WALDRON ONLY


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“Blue pencil” test: can you remove the illegality from the contract? If so, the rest of contract can be enforced without the illegal provision.

Modern Approach: focus on public policy Courts pair flexible approach of notional severance with blue pencil test - New Solutions

Financial Corp Court tends to apply notional severance where striking out the whole thing would

unjustly enrich one party Shafron – BCCA said we can apply idea of notional severance only to cases of non-

competition (no disparity in bargaining power). I.e. in this case can substitute “Metro Vancouver” for the names of the municipalities. Court says you can only use notional severance test where there would be a bright line

test (where the court otherwise could not balance factors surrounding contract) Notional severance not allowed in restraint of trade cases for public policy reasons - Shafron Where government document is misleading (not really plaintiff’s fault) there is no public

policy reason to deny a benefit (not deliberately illegal) - Still v. MNR Consider in this case the fact plaintiff mitigated the policy concerns by paying EI premiums

MISTAKES ABOUT…

1) Residual category, cases don’t fit under the normal heads of breach of contract.2) Original categories:

a) Shared/Common: mistakes that both parties held – usually voided (i.e. both vendor and purchaser believe a painting is an original)

b) Mutual Mistake: both mistake but not the same one – sometimes makes contract ineffective (no contract), but otherwise simply no remedy or equitable remedy of setting contract aside.

c) Unilateral: one party makes mistake – depends on knowledge of party who was not mistaken.

3) Current categories:a) Mistake of terms, assumptions, as to future (frustration).

MISTAKES ABOUT CONTRACTUAL TERMS

1) Court uses interpretive tools to determine what a reasonable person would think that the term meant

a. Where one party has an unusual meaning/understanding/usage of a word which they did not communicate to the other party then the word will be interpreted in the normal way that a reasonable party would - Hobbs

b. However, if meaning is ambiguous such that a reasonable bystander would be unable to infer common intention, courts will hold that there was no consensus ad idem and therefore no binding contract - Raffles v. Wichelhaus

i. Intention is of no avail, unless stated at the time of the contract.2) Court doesn’t look at quality of bargain - Hobbs v. E&N Railway3) If one party had made a mistake as to terms of the agreement and the other party is aware that

they are contracting on different terms and remains silent then the contract is unenforceable unless it is only a mistake in assumption - Smith v. Hughes

a. Note where a sample is provided caveat emptor applies and the terms of the contract are assumed to mean just like the sample


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Contract Formation1) The idea that K formation is objective was arguably not cemented until Smith v. Hughes2) If there is a fundamental ambiguity in a K, due to common mistake, court may void the contract -

Raffles v. Wicklehaus3) If there is disagreement as to meaning of a description used in K formation, it may be found

void due to fundamental ambiguity, or court may find determinable meaning, and enforce the contract - Staiman Steel Ltd

a. ie attempt to find what reasonable 3rd parties would infer to be the contract

MISTAKES IN ASSUMPTIONS

1) Not a term of the contract but is an underlying motivation for making the contract.2) Three types of these mistakes: - Bell v Lever Bros

a) Identity of contracting partiesb) Existence of subject matterc) Quality of subject matter (Raises difficult questions – won’t affect assent unless):

i) It’s a mistake of both parties, and ii) Mistake is as to the existence of some quality, which makes the thing without the quality

essentially different from the thing as it was believed to be.3) Failure by one party to disclose material facts does not presumptively void contract -

Bell v. Lever Bros4) Common Law: Courts will only give relief in mistake in assumptions in very narrow

circumstances -- mistake in the actual subject matter of the agreements (ie. item no longer exists, or have no right to sell it (mistake in title), or mistake in identity) - Bell v. Lever Bros

EQUITABLE MISTAKE

1) A mistake renders contract void at common law, but voidable at equity. Contract is voidable (Note: third party rights still protected) where it is unconscientious for other party to avail self of legal advantage obtained, i.e.a) Where one party induced other, or knew of the other’s mistake but didn’t disabuse them of

it, or where fundamental common misapprehension and b) Party seeking to set aside is not at fault - Solle v. Butcher

2) Equitable jurisdiction from Solle overruled in Great Peace Shipping v. Tsavliris Salvage however the equitable doctrine still exists in Canadian law - Miller Pavinga) Great Peace not adopted in Canada because:

i) Loss of the flexibility needed to correct unjust results in widely diverse circumstances that would come from eliminating the doctrine of common mistake would be step back

3) Great Peace requirements to void contract:a) Common assumption as to the existence of a state of affairsb) Must be no warranty by either party that the state of affairs existsc) Non-existence of state of affairs must not be attributable to the fault of either partyd) Non-existence of state of affairs must render performance of contract impossiblee) State of affairs may be the existence, or a vital attribute, of the consideration to be provided

or circumstances which must subsist if performance of contract is to be possiblef) Solle: less stringent than Bell/Great Peace, Denning requires a sufficiently serious mistake,

not the specific categories as in Bell


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g) Where K allocates risk the court will apply the K rather than hold a mistake in assumption - Miller Paving

CONTRACT ‘A’ SITUATION

1) Courts prefer to enforce contract if possible – R. v. Ron Engineeringa) Mistakes in bid prices are considered a potential mistake in contract B not contract Ab) More generally If there is a blatant mistake in a tender submission, and its clear other party

would be contracting on mistaken assumptions, the better view is that can’t take advantage of mistake by “snapping up” the offer. Nonetheless Courts are divided in situation and its unclear how any particular court will decide

RECTIFICATION

1) Rarely used as remedy – determined on balance of probabilities- Requirements: pre-existing oral agreement where plaintiff proves a specific error in

transcription. To get rectification one must show parties in agreement on terms, and error is separate from intended purposes - Bercovici v. Palmer

- Court may consider: - Bercovicio prior negotiations (Rectification is clear exception to parole evidence - Sylvan o post contractual conduct o Broad range of evidence can be considered - Prenn v Simmonds

- Preconditions met if the following requirements found - Sylvan Lake Golf & Tennis Clubo Proof of existence and content of prior agreement. o When only one party is mistaken you have to show the other is acting in a dishonest

way (equivalent to fraud but not deceit just “dishonest way”) o Must be able to show the precise form the agreement should have takeno At time of execution of written document, defendant knew or ought to have known

of the error and the plaintiff did not

MISTAKE AS TO FUTURE - FRUSTRATION

Frustration of contract takes place where there is a: - Capital Quality Homes / The Sea Angel1) Supervening event (in the future)2) Without fault of either party3) For which no sufficient provision is made by contract4) Which significantly changes the nature of the commercial setting of contractual bargain to

something that the parties could have not have reasonably contemplated at the time of execution (not just something that makes performance more expensive or onerous)

5) Such that it would be unjust to hold parties to strict bargain they have madea) Impossibility of performance depends on what Court determines contract is for

(assumptions) - Triantis Excerptb) Frustrated Contracts Act gives courts the power to have money paid returned subjects to

benefits received (ie partial performance of contract)i) Adjusts economic position of the partiesii) Must be nothing in contract about what happened, neither party at fault, and

condition must make contract basically impossible to perform


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c) Rule of absolute promises – when a person enters a contract they can’t escape liability from that contract simply because events turned out differently than expected rendering it impossible to perform contract – Paradine v Jane

d) Absolute promises rule relaxed: Court may imply a term in contract about continued existence of subject matter - Taylor v Caldwelli) Must not be provision for the secession of the subject matter in contract (if there

was, court would defer to contract)

REMEDIES FOR BREACH OF CONTRACT

THE INTERESTS PROTECTED

Must pay damages even if you cannot complete contract though no fault of your own (unless under duress)

RESTITUTION

Requires there to have been a benefit transferred by one party to the other which it is now unreasonable or there is no juridical reason for the party now to keep the benefit - Bollenback Plaintiff awarded damages equal to the benefit unjustly acquired by defendant Policy Goal: Prevent unjust enrichment of defendant: corrective justice Court determines what the services rendered would have merited in payment Courts might imply a promise (quasicontract approach), for policy reasons Restitution of benefits conferred vs. disgorgement of profits Plaintiff may not have measurable financial loss, and thus will be due no compensation, even

when K-breaker has profited from the breach. In situations of happy breach (when expectation damages are negative) court will not award restitutionary damages - Bowlay Logging

In extreme cases, courts have discretionary power to award restitution damages for profits.

RELIANCE

Usually awarded in tort. Compensate to position would’ve been without contract Used when expectation damages too speculative - Anglia What you have lost because this thing happened, not what you would’ve got Can claim only under certain circumstances, ie answers: “what have I lost in reliance on this

contract?” Can’t claim reliance damages if they exceed expectation damages - Anglia v. Reed Must compensate for losses “in contemplation of both parties before contract was signed”

Combined Contract and Tort: Esso Petroleum – used when unable to establish expectation damages

EXPECTATION – NORMAL AWARD FOR BREACH OF CONTRACT

They answer the question “What position would the parties have been in had contract been properly carried out?”


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“Should be placed in the same position as he would have been in if the contract had been performed” – Wertheim v Chicoutimi Pulp Company

Policy: To incentivize fulfilling contracts To lessen risk to be transferred to another party Avoids double compensation / unjust enrichment - Bollenback To determine expectation damages, subtract the value of the current situation from the value

that would have accrued had K been performed - Hawkins v McGee

SPECIAL PROBLEMS IN MEASUREMENT

MEASURING DAMAGES

Expectation damages do not take Pain and Suffering into account (Reliance damages do) – Hawkins v McGee

value of a ‘chance’ is what you are willing to pay for it (not the potential wealth it could bring): value of a lottery ticket is market price, not the ‘chance of winning lottery’ - Carson

Even if expectation damages (forcing completion of contract) unjustly enriches plaintiff (gets $60,000 to restore land back to inherent value of $12,000), does not allow defendant to escape paying - Groves

Inherent value of what you are contracting for does not change the requirement to pay expectation damages because maybe the purpose of contract is not monetary (Waldron wants ugly fountain) - Groves

LOST VOLUME

Can claim expectation damages (lost profits) if supply > demand (could not resell) - Robinson Cannot claim expectation damages (lost profits) if demand > supply (because you could resell it,

so the limiting factor is how many cars you get from manufacturer, not how many buyers there are) - Charter

If demand > supply, can still claim damages for difference of contract price and market price - Charter

LOSS OF PROFIT

Where lost profits are reasonably foreseeable from breach of contract they may be awarded as damages and is based on knowledge possessed by defendant before breach of contract. Does not have to be a certainty just has to be a serious possibility. - Victoria Laundry

Allocation of risk of loss of ordinary profits must be implicit in the contract

INTANGIBLE INJURIES & PUNITIVE DAMAGES

Aggravated damages: non-economic, intangible suffering (compensate with expectation damages) – Fidler If damage for Mental Distress is foreseeable you can recover damages

Mental Distress: to recover damages for mental distress you must find that… - Fidler The object of the contract was to secure psychological benefit,


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It brought you mental distress, and it was in the contemplation of the parties There must have been sufficient distress to warrant damages: doesn’t have to be clinically

proven, just “serious and severe” Punitive damages: punishment for breaking contract RARE

Awarded in cases where there was a duty to act in good faith. You must have bad faith to get punitive damages - Whiten

Damages have to be proportional to the judgment and it must also be rational. 3 objectives of punitive damages:

Punishment Deterrence Denunciation

Must consider if punished by other means (criminal prosecution) Entertainment and Enjoyment: If purpose of contract is non-financial (i.e. purpose is enjoyment)

you can compensate for loss of purpose - Jarvis

REMOTENESS

General rule: - Hadley / Victoria Laundry Did damages arise naturally from the breach? Was it in reasonable contemplation of the parties as the probable result of the breach?

(Forseeability plus probability) Were any special circumstances communicated?

Damages flowing from breach Doesn’t have to be a certainty, not even balance of probabilities just has to be probable.

Reasonable Contemplation Reasonable man standard: would he “have realised that such loss was sufficiently likely to

result from the breach to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation” – The Heron II

Can claim expenditures incurred before a contract, if they were such that the breaching party could’ve reasonably have foreseen them - Anglia v. Reed

Damages should be based on the reasonable expectations of both parties (at the time of contract) as to the probable result of a breach of the contract – Hadley Naturally resulting consequences Special circumstances that were in reasonable contemplation of both parties

Common Carrier: a common carrier at this time had no way of covering excessive risk, thus reasonably foreseeable that parties should insure items - Hadley

Contract breaker doesn’t have to have considered potential losses, contract only requires that a reasonable man in his position would have perceived it as a possibility if he considered potential losses stemming from breach of contract

Loss due to fall in market price was not too remote to be recoverable as damages - The Heron II

Also consider: Sophistication of Parties The more sophisticated/knowledgeable the parties, the more likely the damages in question

will be foreseeable Special Circumstances

Mere communication of circumstances is not sufficient. Must communicate special circumstances more than just saying X must be done on time - Victoria Laundry


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Cannot claim damages for special circumstances if you are placing unreasonable value on an inherently unreliable object/contract: i.e. remove 2 years’ wood with second hand tractor in ad hoc contract - Munroe

Change in market price is reasonably foreseeable: “it is possible to think that it may happen” - The Heron II

Construe contract in its commercial setting: only make both parties liable for what they both believed they were contracting for - Transfield Shipping

MITIGATION

Payzu Ltd v. Saunders - “In assessing damages for breach of the performance, a jury will of course take into account whatever the plaintiff has done, or has had the means of doing and, as a prudent man, ought in reason to have done, whereby his loss has been or would have been, diminished” Test- “what a prudent person ought reasonably to do in order to mitigate his loss arising

from a breach of contract” - Payzu Ltd v. Saunders Acceptance of new offer doesn’t preclude action for damages – Payzu Refused to accept cash, could have and not doing so resulted in a large loss which

prudent/reasonable people would have avoided. Banks L.J. thinks ‘what reasonable person should have done to mitigate’ is a question of fact

in each particular scenario. Scrutton L.J.- personal cases might be ok to not accept offer because grossly injured by

them…but in commercial contracts generally not. White & Carter v. McGregor

Repudiation rule - if one party repudiates (refuses or will refuse to carry out contract) other party has an option Accept repudiation and sue for damages for breach of contract (regardless of time for

performance having arrived or not) Disregard/refuse to accept it and then contract remains in full effect

Thinks impossible to say pursuer should be denied right to claim contract price because benefit to them as against claiming damages and reletting their advertising space might be small in comparison with the respondent

Finelli et al. v. Dee et al Attracted by dissent of White & Carter – rescission is not something that calls for acceptance

when there is no question of rescission but merely excuses the innocent party from performance and leaves him free to sue for damages.

Distinguishes because McGregor case could carry out contract notwithstanding repudiationHad to enter defendants land and thus had to give notice of entering land/to do work/for a certain day…didn’t so not entitled to recover

Asamera Oil Corp. Ltd. V. Sea Oil & General Corp. Where circumstances reveal a substantial and legitimate interest in seeking performance as

opposed to damages, then a plaintiff will be able to justify his inaction and on failing in his plea for specific performance might then recover losses which in other circumstances might be classified as avoidable and thus unrecoverable, but such is not the case here.

Wroth v. Tyler General rule that damages for breach of contract = different between contract price and

market price of the land at date of breach.


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These facts would allow general rule to defeat purpose of general principle Hadley v. Baxendale second rule applied.

Rise in housing prices within contemplation- need only shown under what head/type of damage.


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CASES

DAMAGES

WERTHEIM V. CHICOUTIMI PULP COMPANY (1911 UK)

PRECEDENT FOR EXPECTANCY

Rule: Lord Atkinson: “Party complaining should, so far as it can be done by money, be placed in the

same position as he would have been in if the contract had been performed”.

HAWKINS V. MCGEE (1929 USA)

SURGERY LEADS TO A “HAIRY HAND” AND AWARDED EXPECTATION DAMAGES

Facts: There is a contract, but what is it? Physician to perform action with due care. Trial judge said pain and suffering, and any damages if hand was worse. Appeal court said no damages for pain and suffering, implied in any surgery. Promised was a 100% good hand. Expectation damages are going to be somehow calculated

by figuring out the difference between a perfect hand and the one he had after the surgery. Decision:

Paid for damages between what was expected, a 100% good hand, and what was received, a hairy palm. Pain and suffering were expected and implicit in the contract, so damages were not paid for that.

SPECIFIC PERFORMANCE

FALCKE V. GRAY (1859 UK)

ONE OF THE LEADING CASES ON SPECIFIC PERFORMANCE

Facts: Item in question is not easily available in marketplace and market value cannot be

determined – cannot be replaced with simple monetary compensation). Rule:

Chattels can do specific performance, so long as they are of unusual distinction and curiosity.

WARNER BROS. PICTURES INCORPORATED V. NELSON (1937 UK)

INJUNCTION CASE, BETTE DAVIS WAS IN 52-WEEK EXCLUSIVE CONTRACT, BREACHED IT

Facts: Bette Davis said she would work for 52 weeks, renewable at Warner Bros.’ discretion. Had a negative stipulation, said she couldn’t render services for others. Contract would extend for length of time for which she did not perform her services for WB. Impractical to force her to work, relationship had been strained and good faith broken.


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Second clause of contract said she couldn’t engage in “any other occupation without the written consent of the product” – too broad, court couldn’t enforce.

Rule: Cannot force someone to do something, but can prevent from doing something else.

OFFER & ACCEPTANCE

DENTON V. GREAT NORTHERN RAILWAY COMPANY (1865 UK)

SAID THERE WAS A TRAIN, THERE WASN’T, BUT KEPT SAYING THERE WAS

Facts: Railway timetable is an offer (normally). Said contract materialised when person shows up ready to buy ticket. Not late, no train at all, only for this case because railway continued to publish incorrect

schedule. Rule:

Offer and acceptance sometimes manipulated, this case could be different today. Quasi-punitive ruling, GNR should not have continued printing false schedule.

Court won’t agree that price is offer, rather more like an invitation to treat.

JOHNSTON BROTHERS V. ROGERS BROTHERS (1899 ONCA)

BAKERS WANT TO BUY FLOUR; WAS INITIAL CORRESPONDENCE AN OFFER?

Facts: Bakers seek to recover for a breach of a contract for the sale and delivery of a quantity of

flour. Alleged contract: Defendant to plaintiff “we quote you… Hungarian $5.40”

Rule: Mere quotation is not an offer to sell, merely an indication of price

LEFKOWITZ V. GREAT MINNEAPOLIS SURPLUS STORE (1957 USA)

AN ADVERTISEMENT CAN BE AN OFFER, NORMALLY “INVITATION TO TREAT”

Facts: Dft made 2 advertisements, first said 3 fur coats worth up to $100, first come first served, $1

Wouldn’t serve first person, said was only for women. Ad said if you do this, you will get this.

Specified who can accept the offer and quantities were specified. Held:

Couldn’t recover because “worth to $100” was too vague. Rule:

No problem of limited supply when advertisement contains certain quantities of goods, at certain prices, with certain terms.


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SCAMMELL AND NEPHEW, LIMITED V. OUSTON (1941 UK)

TRADING A VAN, RARE CASE WHERE COURT CANNOT FIND SOME WAY TO MAKE CONTRACT WORK

Facts: Claimants wished to trade in their old van for a new one. Agreed on price for trade in, but only that they would pay for remainder of the new van ‘on

hire-purchase terms’ for two years. Defendants then pulled out of agreement. Held to be too vague to enforce, no objective standard by which the court could know what

price was intended or what a reasonable price would be. Rule:

Lord Atkinson: “Party complaining should, so far as it can be done by money, be placed in the same position as he would have been in if the contract had been performed”.

DURHAM TEES VALLEY AIRPORT LTD. V. BMI BABY (2010 UK)

BMI BACKED OUT BUT COURTS COULDN’T DETERMINE CONTRACT, BUT KNEW WHAT IT WASN’T

Facts: Durham Airport did a lot of work to bring BMI in. After 2 years, BMI backed out of agreement and was sued. Court couldn’t tell what the contract specifically meant, but knew what it didn’t mean.

Not flying any aircraft was clearly not the contract. Couldn’t award damages because would need to specify exactly what was required to

determine losses. Shows how far a court may go when they see compelling reasons to enforce a contract even

if it may be difficult to do so. Rule:

Courts will not create a contract for the parties; needs to be relative agreement between parties so that there is no unfair surprise.

Will consider whether parties thought there was a binding agreement, is there evidence based on past conduct to illustrate how the agreement is supposed to be interpreted?

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V. BOOTS CASH CHEMISTS (SOUTHERN) LTD. (1953 UK)

DETERMINING WHERE THE SALE OF GOODS OCCURED

Facts: PS challenged the legality of how Boots supplied certain regulated drugs in its self-service

stores. Under the legislation, Boots was required to supply such commodities only under

supervision of a registered pharmacist. Products were displayed, people could take them off shelf, but pharmacist was authorised to

prevent their sale at the cashier – when does sale occur? If it was at moment taken off shelf they would be bound to purchase as soon as in basket.

Rule: Need to be able to bend concepts of offer and acceptance like this.


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MANCHESTER DIOCESAN COUNCIL FOR EDUCATION V. COMMERICAL & GENERAL INVESTMENTS LTD. (1969 UK)

PARTICULAR ACCEPTANCE CAN BE WAIVED, IF METHOD IS NOT ONLY WAY TO ACCEPT

Facts: MD called for tenders relating to property. C&G submitted a tender (offer to buy). The

tender stated that acceptance was to be notified to the person whose tender was accepted by letter sent ‘by post addressed to the address given in his tender’. MD decided to accept C&G tender and sent their acceptance to the CG's solicitor, which was not the address given in the offer. C&G knew of this acceptance. Was there a contract? In particular, was a mandatory form stipulated for acceptance and, if so, was it complied with?

Held: The method of acceptance prescribed in the tender was not mandatory - here the offeror was

made aware of the acceptance by an equally effective method and thus the acceptance was effective.

Rule: Particular acceptance can be waived. Where offeror has prescribed particular method, but not in terms insisting it is the only

mode of acceptance that shall be binding, any mode of acceptance that is no less advantageous to the offeror will be binding

LARKIN V. GARDINER (1895 ONSC)

ACCEPTANCE MUST BE COMMUNICATED - AGREEMENT TO BUY WAS SIGNED BUT NO CONTRACT

Facts: Larkin had placed property in hands of her agent for sale, agent received offer from D and

got D to sign it, next morning took it to P’s house where she signed it. Before Gardiner received agreement, he notified agent he was withdrawing offer. Held: Larkin had not accepted Gardiner’s offer by time he withdrew it.

Rule: Agreement must be communicated to be effective (doesn’t always apply). Signing it and giving to your agent is not enough, neither is signing and putting in your desk.

DICKINSON V. DODDS (1876 UK)

REVOCATION MAY BE EFFECTIVE WHEN OFFEREE LEARNS ABOUT IT INDIRECTLY

Facts: Dodds have given a firm offer to sell Dickinson a residential property at particular price,

open until the 12th at 9am. (Firm offers not binding, Dodds can withdraw whenever he wants)

On the 11th Dickinson’s agent advised him that he understood Dodds was negotiating to sell property to third party and property had in fact been sold.

Still sent agent to give him acceptance on 12th, was denied. General rule:

Must communicate withdrawal of offer. Exception: revocation can be communicated through actions (if buyer hears about it).


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ELIASON V. HENSHAW (1819 USA)

ACCEPTANCE NEEDS TO CORRESPOND TO OFFER, WANTED TO BUY SOME FLOUR

Facts: Needs to be a mirror image for agreement to be valid.

Acceptance that is not compliant with the offer or that introduces significant new elements usually considered a counter-offer.

Ruled there was no contract, offeror has the ability to set the terms of how they want acceptance returned; when these terms are not complied with there is no binding agreement.

Rule: Acceptance does not trigger legal consequences if it violates a term of the offer, even if this

term of the offer does not seem immediately significant.

BUTLER MACHINE TOOL CO. LTD. V. EX-CELL-O CORPORATION (ENGLAND) LTD. (1979 UK)

BATTLE OF THE FORMS, WANTED TO SELL “ON OUR TERMS ONLY”

Facts: First letter from seller to buyer, saying terms and conditions “shall prevail over any terms

and conditions in the Buyer’s order” – included price variation clause. Second form, buyer placed order, order stated to be subject to T&C that were materially

different, no price variation clause – also had to tear off acknowledgement slip. Third letter, accompanying slip, said order was being entered in accordance with terms of

first form, higher price due to price variation clause. Rule:

Counteroffer killed the seller’s earlier offer of sale, and seller’s return of tear-off slip constituted acceptance of buyer’s counteroffer.

M.J.B. ENTERPRISES V. DEFENCE CONSTRUCTION (1951) (1999 SCC)

NON-COMPLIANT BIDDER WAS CHOSEN, SUED FOR PROFITS THEY WOULD HAVE MADE

Facts: Crown picked a non-compliant bidder. P sued for profits the P would have made if D had followed rules and only chosen compliant

bids. P argues they were second lowest, should recover full profits it would have made if bid

was awarded. D had privilege clause saying had right not to pick lowest bidder

Court says this is OK. Rule:

It is implied that offeror has obligation to accept only compliant bids. Where they do not comply with terms of tender (contract A) it is a breach of tender and bidding parties can claim expectancy damages (based on profits they would have realised).


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FORMALISATION & CERTAINTY

MAY AND BUTCHER, LIMITED V. THE KING (1929 UK)

WANTED SOME SURPLUS “TENTAGE” AS IT BECAME AVAILABLE

Facts: Agreement said that prices to be paid, dates on which payment due, quantities available and

dates for delivery to be determined later. Held:

No contract, mainly because price was not stipulated. Rule:

An agreement must contain the essential elements of the contract (price, in this case).

W.N. HILLAS AND CO., LIMITED V. ARCOS, LIMITED (1932 UK)

CONTRAST TO MAY AND BUTCHER, COMMERCIAL SETTING REQUIRES FLEXIBILITY OF TERMS

Facts: Agreement left a number of details such as dates and quantities of shipments to be

determined, and prices to be determined by a forthcoming price list. For one year arrangement worked quite well, second year Arcos tried to get out of contract

Decision: In contrast to May and Butcher, enforceable because a necessity of business that they make

contracts with a degree of flexibility. Undesirable to fix dates for shipments.

Agreement already worked for a year, already overcame vague terms

FOLEY V. CLASSIQUE COACHES, LIMITED (1934 UK)

PARTIAL EXECUTION OF CONTRACT WORKS TOWARDS ENFORCEABILITY, EVEN WITH NO SET PRICE

Facts: Agreement that P would sell land to D on condition that D would purchase all the fuel they

require for their business from P, “at a price to be agreed by the parties in writing and from time to time”.

D abided by agreement for 3 years until deciding to acquire fuel from another supplier. Held:

Contract is enforceable. Rule:

Didn’t fail for incompleteness simply because price was not set. D wanted to escape contractual obligations while at the same time enjoy the benefits of that

agreement, won’t succeed.


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WALFORD V. MILES (1992 AUSTRALIA)

AUSTRALIAN CASE SHOWING THAT AN AGREEMENT TO NEGOTIATE IS NOT A CONTRACT

Facts: Mr and Mrs Miles agreed to negotiate with Walford for the sale of a photographic processing

business. They also agreed to terminate negotiations for the sale of the business to any other purchaser (which they did), provided Walford confirmed they were financially able to proceed with a purchase (which they did). However, the Miles’ subsequently decided not to proceed with the negotiations for the sale and eventually sold to a third party. Walford sued for breach of contract. Walford succeeded at trial. Mr and Mrs Miles succeeded in an appeal.

Decision: On further appeal - Lord Ackner: ‘There is clearly no reason in the English contract law why

A, for good consideration, should not achieve an enforceable agreement whereby B, agrees for a specified period of time, not to negotiate with anyone except A in relation to the sale of his property.’ Lord Ackner noted the commercial benefits of such an arrangement and stressed that such an agreement is 'a negative agreement' which does not lock B into negotiations with A.

EMPRESS TOWERS V. BANK OF NOVA SCOTIA (1990 BCCA)

COURT GOES FAR TO DETERMINE A DIFFICULT TO ENFORCE CONTRACT, RENTAL PROPERTY

Facts: Long-term lease arrangement between bank and landlord set to expire but has renewal

clause in it at a price to be agreed. Contract seems to set a formula for setting price: “market rental prevailing at

commencement of renewal term.” Problem: parties had to mutually agree on the market rental price according to contract. Why try so hard to enforce?

Bad faith: landlord waiting until last day to respond to bank, acting out of personal animosity.

Rule: Court implies obligation of good faith and argues that plaintiff’s failure to act in good faith

constitutes a breach of contract. Otherwise landlord could be liable for loss of business to bank as result of breach of contract.

CORRESPONDENCE

HENTHORN V. FRASER (1892 UK)

POSTAL ACCEPTANCE RULE ADOPTED, ACCEPTANCE SENT BEFORE REVOCATION RECEIVED

Facts: Fraser offers to sell land to Henthorn, sent acceptance before receiving revocation.

Rule: Acceptance valid when posted. Revocation of offer must be communicated and only communicated when received.


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BYRNE & CO. V. LEON VAN TIENHOVEN & CO. (1880 UK)

FOR BUSINESS EFFICACY, POSTAL ACCEPTANCE RULE DOESN’T APPLY FOR REVOKATION

Facts: Offer to sell tin is posted, then revoked, acceptance is then telegraphed, then posted, then

revocation is received. Held that there was a contract.

Rule: Postal acceptance rule doesn’t apply for revocation.

HOLWELL SECURITIES LTD. V. HUGHES (1974 UK)

ANOTHER EXCEPTION TO POSTAL ACCEPTION RULE, VENDOR ASKED FOR NOTICE IN WRITING

Facts: Vendor asked for notice in writing, so court held that solicitor telling him about it not enough

Rule: Exceptions to postal acceptance rule:

When the express terms of the offer specify that the acceptance must reach the offeror. When its application would product manifest inconvenience and absurdity – that having

regard to all circumstances, negotiating parties cannot have intended that there should be a binding agreement until party accepting offer had in fact communicated.

EASTERN POWER LTD. V. AZIENDA COMUNALE ENERGIA & AMBIENTE (1999 ONCA)

POSTAL ACCEPTANCE RULE DOES NOT APPLY TO OTHER FORMS OF COMMUNICATION

Facts: Key issue was where offer accepted (contract formed) Italy or Ontario. It was faxed by an offeree located in Ontario to offeror in Italy.

Held: Offer was accepted in Italy where fax was received.

Rule: When not using letter or telegram, acceptance occurs where the acceptance was heard.

Instantaneous communications we don’t need PAR, so acceptance occurs where it is heard/received.

CONSIDERATION

WHITE (EXECUTOR) V. WILLIAM BLUETT (1853 UK)

DAD WOULD FORGIVE SON’S DEBT IF HE WOULD STOP COMPLAINING

Facts: D, son, was unhappy with the way his father is doling out benefits to his children. Father agreed that he would forgive the debt his son had to him (promissory note) if he

should forever cease to make complaints. Decision:


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Lawyer for the son would say this is clearly a promise in exchange for another promise, therefore consideration.

Judge says there is no consideration because there is no right to complain, because the father can distribute his property however he wants.

Rule: A forbearance of something you do not have the right to do is not good consideration.

HAMER V. SIDWAY (1891 USA)

UNCLE PROMISED NEPHEW MONEY IF HE WOULD STOP DRINKING, SMOKING, WEST-COASTING

Facts: Uncle promised nephew that if he refrained from drinking, using tobacco, swearing and

playing cards until age 21 he would give him $5000. Now dealing with third party (who nephew sold debt to, Hamer vs. executor of estate,

Sidway) Decision:

Estate says contract without consideration, therefore invalid. Uncle got no consideration.

Judge: “it is sufficient that he restricted his lawful freedom of action within prescribed limits upon the faith of his uncle’s agreement”. Doesn’t matter that there was no benefit to the uncle.

Rule: Restriction of freedom of action is sufficient consideration in return for a promise, even if the

promisor does not benefit.

ELEANOR THOMAS V. BENJAMIN THOMAS (1842 UK)

HUSBAND WANTED TO LEAVE HIS HOUSE TO HIS WIDOW, DIED, RENT FOR £1 A YEAR

Facts: Husband died, wanted to leave his house to his widow (P). Executors try to put wish into effect, make contract with widow so that she pays £1/year as

ground rent. After death of co-executor, D evicts P. P sues based on agreement. Rule:

Motive is not the same as consideration. Not a bargain or exchange. Court enforces the promise to wife to be able to stay in the house.

Clearly a gift but someone knew about the law of contract and therefore decided to introduce rent into contract to serve as consideration.

THE GREAT NORTHERN RAILWAY COMPANY V. WITHAM (1873 UK)

BUILDING A RAILWAY AND NEED TO SECURE SOURCE OF SUPPLIES, SUPPLIER WANTS TO STOP

Facts: D sent in a tender to P, undertaking to supply the P for a set period of time, with set prices

for different articles that may be ordered. P accepted tender, ordered iron and it was delivered several times, but eventually D refused

to supply any more.


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D argues that contract is “void for want of mutuality”, because P did not bind themselves to take any iron from D, his promise to supply them with iron was a promise without consideration.

Decision: Umbrella contract (under which individual orders can be made) and each individual order.

Umbrella is not enforceable, because there is no consideration, there is no promise by ∴P to make orders, or a certain amount of orders, so no consideration.

Individual orders are promises to pay a set amount of money in return for the promise of the goods ordered consideration.∴

If GNR had promised to buy solely from offeror that could be argued as consideration. Witham has to supply order already submitted, but can back out of further agreements due

to lack of mutuality.

TOBIAS V. DICK AND T. EATON CO. (1937 MBCA)

GRAIN GRINDING MACHINE INVENTOR GRANTS EXCLUSIVE RIGHT TO MARKET PRODUCT

Facts: P had agreement with D, that he would have exclusive rights to sell D’s machines in the

prairies. Tobias bought machines from D, but could not sell them, so stopped ordering machines. Only then did D ask T Eaton Co. to sell machines. No consideration on behalf of Tobias. Exclusive selling rights, but no obligation to sell a certain amount. Gives the right to buy, but no obligation. No benefit to Dick.

Rule: No mutuality.

WOOD V. LUCY, LADY DUFF-GORDON (1917 USA)

LADY GRANTS EXCLUSIVE SELLING RIGHTS TO PUT HER NAME ON FASHIONS, THEN BACKS OUT

Facts: P was to have exclusive right, subject to D’s approval, to place D’s endorsement on designs of

others. Also exclusive right to place her designs on sale, license others to market them. In return she got 50% of all profits. D placed her endorsement on products without P’s knowledge and kept profits to herself. Is there consideration given even though there was no explicit guarantee on behalf of the P

to generate revenues? Decision:

Judge says there was an implied promise that the P will use reasonable efforts to gain profits, and he lived up to this promise.

Unless he gave effort, she would not get anything, so without the implied promise of his effort there would be no point to the contract.

Rule: Implied promises can be used as evidence of obligation and consideration, thus making them

enforceable. Why different from Tobias? Tobias wasn’t trying/succeeding, wasn’t commission based.


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HARRIS V. WATSON (1791 UK)

SAILOR DID EXTRA WORK BECAUSE SHIP WAS IN DANGER, WITH PROMISE OF EXTRA PAY

Facts: Policy based explanation for why sailors shouldn’t be allowed extra wages for times of

danger because it would lead to extortion, cause ships to sink unless given extra money Contrast with Stilk, which explains with doctrine of consideration.

STILK V. MYRICK (1809 UK)

TWO SEAMEN JUMPED SHIP, CAPTAIN PROMISED TO DIVIDE THEIR WAGES AMONGST THE REST

Facts: Two sailors deserted a ship and the captain told the rest of the crew they could share the

wages of the two equally if he could not replace them. Rule:

Agreement to pay extra wages was void for want of consideration. Promise to perform pre-existing duty is not good consideration. Agreed to do what they were already contracted to do.

GILBERT STEEL LTD. V. UNIVERSITY CONSTRUCTION LTD. (1976 ONCA)

PRICE FOR SUPPLY OF STEEL WENT UP AFTER 2 OF 3 AGREED UPON BUILDINGS WERE DONE

Facts: P was supplier of steel for three projects of the D. First 2 were fine, then P announced need to increase the prices, so agree to new contract. P then alleges that they approached D about further increase to which D orally agreed.

Decision: Yes, had agreed to new contract, but no new consideration so unenforceable.

Rule: Implied rescission can be denied. Increased credit not good consideration. Vague promises (“good price”) not good consideration.

WILLIAMS V. ROFFEY BROS. LTD. (1991 UK)

SUBCONTRACTED CARPENTRY, RAN OUT OF FUNDS, ASKED FOR MORE MONEY

Facts: P a carpenter employed by D (contractor) to work on refurbishing flats, total contract

£20,000 P having financial difficulty (contract price too low) and inadequate supervision of workers D became worried because penalty clause on main construction agreement if work not

completed, so D agreed to pay P extra money (£10,300) D didn’t pay all of this—argued variation of contract had been made without consideration

Rule:


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One’s promise to voluntarily (promisor speaks first and no duress or fraud) pay another party more to perform a pre-existing duty in order to obtain a benefit or avoid a dis-benefit or liability is good consideration and the agreement will thus be held to be enforceable.

GREATER FREDERICTON AIRPORT AUTHORITY V. NAV CANADA (2008 NBCA)

PARTIES TO AN AGREEMENT, HAD TERMS GOVERNING CAPITAL EXPENDITURES, LANDING SYSTEM

Facts: NAV Canada and GFAA were parties to agreement governing responsibility for some capital

expenditures. As part of runway extension project, GFAA requested that NAV relocate an instrument to the

runway being extended. NAV decided that rather than relocating they would replace it with something new. GFAA thought NAV should have to pay for it, NAV said they wouldn’t provide for the

purchase unless GFAA agreed on the acquisition cost, which they did “under protest”. Was there sufficient consideration to find that a contract was created, or the existing

contract modified? Rule:

Post-contractual modification, unsupported by consideration, may be enforceable as long as it is established that the variation was not procured by economic duress.

To establish economic duress, two conditions must be met: The promise must be made under pressure (demand/threat), The pressured party must have no option but agreeing.

Business efficacy often requires adjustments to on-going contracts and law must then protect the legitimate expectations of the parties that the modifications will be considered legally enforceable.

RIVER WIND VENTURES LTD. V. BRITISH COLUMBIA (2011 BCSC)

ADJUSTMENTS/MODIFICATIONS TO ON-GOING CONTRACTS SHOULD BE ENFORCEABLE

Rule: Adjustments/modifications to on-going contracts should be enforceable when:

They really were intended to be binding; and There is some evidence of reliance.

FOAKES V. BEER (1884 UK)

PARTIAL PAYMENT OF A DEBT, PAID IN INSTALLMENTS

Facts: Foakes owed Beer a large sum of money, had agreement for him to pay it down in a down

payment and instalments Beer commenced this action to recover the interest

Rule: Promise by a debtor to make partial payment of a debt in return for a creditors promise to

accept the partial payment as fully discharging the debt does not give rise to an enforceable agreement.


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Not good consideration because debtor only promising partial performance of debt, not binding even if accepted. Stupid rule, but pay up regardless.

FAIRGRIEF V. ELLIS (1935 BCSC)

RETIRED GUY ASKS FRIENDS TO DO HOUSEKEEPING AND HE WOULD LEAVE HOUSE TO THEM

Facts: Defendant asks 2 female friends (plaintiffs) to keep his home in return for him leaving it to

them when he dies. Agreement was carried out until the defendant’s wife returned home and insisted that the

plaintiffs leave. Defendant made new agreement with the plaintiffs that if they gave up their rights under

first agreement he would pay them $1000. Plaintiffs seek to recover the $1000.

Rule: Good consideration even if original agreement was unenforceable as a contract.

DALHOUSIE COLLEGE V. BOUTILIER ESTATE (1934 SCC)

MADE PLEDGE ON A FORM TO COLLEGE TO MAINTAIN AND IMPROVE TEACHING, BINDING?

Facts: D had made pledge on a form which said funds were promised, “for the purpose of enabling

Dalhousie College to maintain and improve the efficiency of its teaching, to construct new buildings and … in consideration of subscription of others, I promise…”

Rule: Attempt to turn charitable gift into a contract fails because of no consideration.

INTENTION

JONES V. PADAVATTON (1969 UK)

MOTHER BREACHED A CONTRACT TO SUPPORT DAUGHTER IF SHE MOVED AND STUDIED

Facts: Mother (Jones) who lived in Trinidad, urges daughter to move to London to pursue legal

studies. Daughter didn’t want to leave Washington, where she had very good job. Daughter induced by mothers promise of monthly allowance in return for studying in

London. Mother later purchased housed in order in to give daughter home, she is to rent out rooms

use proceeds in lieu of monthly allowance. After 5 years (study only supposed to take 3) mother arrived in London, sought possession

of house termination of agreement. Decision:

One of those family arrangements, which depend on good faith of promises made, not intended to be legally binding.

Minority said it should have been binding, but there was an implied term that was expired.


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ROSE AND FRANK COMPANY V. J.R. CROMPTON & BROTHERS, LIMITED (1923 UK)

AGREEMENT WAS SPECIFICALLY STATED NOT TO BE FORMAL OR LEGAL

Facts: Parties wrote up agreement, which was specifically stated not to be formal/legal.

Rule: Not binding, because the clause establishes that there is a clear intention that the agreement

is based on faith and does not have legal consequences.

PAST CONSIDERATION

MILLS V. WYMAN (1825 USA)

SON WAS TRAVELLING WORLD, GOT SICK, MAN TOOK CARE OF HIM – THEN HE DIED ANYWAY

Facts: Wyman’s son was travelling the world and got sick. Mills took care of him and gave him

food, shelter, medical care and support while sick. Kid died anyway.

Father promised to pay Wyman out of gratitude for the assistance, and then he too died before he could make the payment.

Decision: Court said there is no contract, promise made out of gratitude not consideration.

LAMPLEIGH V. BRATHWAIT (1615 UK)

EXCEPTION TO PAST CONSIDERATION RULE – KILLED A GUY, PARDONED, PROMISED TO PAY

Facts: D killed someone, requested that P try and obtain a pardon for him from the king. P did work to do so, got the pardon.

D then promised to pay him £100. Rule:

Past consideration is good consideration where the act is performed as a result of the request of a party who later promises to pay.

ROSCORLA V. THOMAS (1842 UK)

BOUGHT A HORSE, SUBSEQUENTLY TOLD IT WAS SOUND AND VICELESS

Facts: P bought a horse from D, no promise as to quality of horse made at time of bargain. Later, D made a promise about the horse saying it was: “sound and free from vice”.

Rule: Past consideration is not good consideration for a subsequent gratuitous promise on top of a

prior contract.

WEBB V. MCGALLAN (1935 USA)


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IMPLIED REQUEST AND MOTIVE AS CONSIDERATION – NOT FOLLOWED IN CANADA

Facts: In act of courage, W fell to floor with pine block in order to avoid it falling and hitting M. W severely injured, M promised to pay allowance to W for rest of W’s life. After M died, estate refused to make payments. Judges held promise enforceable b/c where there is an implied request (D obviously wanted

him to save his life, would have asked him to do so) it will be held to be good consideration (an American exception to PC rule).

Rule: Other way of framing is to say M had moral obligation to compensate Webb.

RELIANCE & ESTOPPEL

HUGHES V. METROPOLITAN RAILWAY CO. (1877 UK)

FIRST KNOWN INSTANCE OF PROMISSORY ESTOPPEL, ENTITLED TO COMPEL TO REPAIR BUILDING

Facts: Terms of the lease gave landlord the right to demand repairs on 6 months’ notice to tenant. Gave notice in October; during November and December the parties negotiated about the

possibility of the tenant buying the landlord’s interest; negotiations broke off. 6 months comes from original notice, landlord tries to terminate lease and eject tenant.

Rule: Denning – “Some promises we will enforce even without consideration.” Where parties enter into negotiations that have the effect of leading one of the parties to

suppose that the strict rights arising under the contract will not be enforced, the party who might have enforced those rights cannot if doing so would be inequitable.

There does not have to be an explicit promise, implicit is enough. Application:

Tenant was upset because they assumed that the requirement to repair was postponed by negotiation. Not said, but implied.

Court dismissed because the course of negotiation of the parties had led the tenant to believe the time limit would not be strictly enforced.

Tenant suffered detrimental reliance.

CENTRAL LONDON PROPERTY TRUST LTD. V. HIGH TREES HOUSE LTD. (1947 UK)

BASIS OF PROMISSORY ESTOPPEL, HAD A LEASE ON A BLOCK OF FLATS IN LONDON BEFORE WAR

Facts: Defendant had lease on a block of flats in London, war breaks out, the plaintiff landlord

agrees to a reduction in the rent as not many flats were let at the time. Defendant pays lesser rent throughout the war, and continued even when the flats had been

fully let at the beginning of 1945. Plaintiff sues for full rent from only last two quarters and in future – Denning worried about

cases where they would sue for entire amount.


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Rule: Promissory Estoppel: A promise that is:

Intended to be binding, Intended to be acted upon, Indeed acted upon, Should be considered a binding promise.

Application: Originally tried to argue Foakes, saying that agreeing to accept reduced rent did not preclude

it from reasserting entitlement to full rent. Denning says no, this is not the way to do it.

Creates new doctrine of PE instead. Hughes shows that equity wouldn't allow one to go back on the proposition. PE wouldn't allow whole amount since beginning to come back, only since the flats were

fully let (part of agreement, so 2 quarters back is okay). Allows promise to be enforced even though there was no consideration for it. Different from waiver because there is no detrimental reliance, just general.

COMBE V. COMBE (1951 UK)

HUSBAND PROMISED WIFE £100/YR, DIDN’T PAY, WIFE SUED ~6 YEARS LATER

Facts: Divorced couple, husband had promised to pay former wife £100/year, but doesn't. At trial the judge found that even though there was no consideration for the promise, it was

rendered binding by the doctrine of PE from High Trees. Rule:

The doctrine of PE can be use only as a shield, not a sword. Point of PE is to prevent parties from insisting on strict legal rights in situations where it

would be unjust to allow actions to enforce them. Applications:

If the courts didn't put this restriction in place, the whole doctrine of consideration could/would be overthrown.

Note: Most often used as shield by defendants, but can still be used by plaintiff so long as it's still a

shield. Cannot give up your right to claim maintenance from a spouse, so doesn't count as

consideration. Also, she waited 6 years, why wait that long? Unfair surprise at that point.

ROBERTSON V. MINISTER OF PENSIONS (1949 UK)

GOVERNMENT SAID NO MEDICAL EVIDENCE REQUIRED FOR PENSION, ESTOPPED FROM RENEGING

Facts: Plaintiff relied on assurance from defendant that he did not need to get medical evidence to

prove his illness in order to collect pension. Defendant then says that he cannot get pension because no medical evidence.

Held: Defendant is estopped from relying on lack of medical evidence because it would be

inconsistent with promise they made.


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Plaintiff relied on this to his detriment.

JOHN BURROWS LTD. V. SUBSURFACE SURVEYS LTD. (1968 SCC)

BUSINESS WAS SOLD, PAYMENT WAS TO BE OVER TIME, FORM OF PROMISSORY NOTE

Facts: Plaintiff sold their business to defendant, part of purchase price was in the form of a

promissory note, to be paid for in monthly payments, with a clause that allowed the plaintiff to claim entire amount of any monthly payments was more than 10 days in default.

Principals of two companies were friends, and late payments were frequently accepted. After a falling out, the plaintiff reacted to a similarly late payment by suing defendant for

entire outstanding amount of the promissory note. Defendant tried to rely upon doctrine of PE, asking court to find that seller's acceptance of

series of late payments without protest constituted undertaking to accept late pay in the future.

Rule: PE cannot be invoked unless there is some evidence that once of the parties entered into a

course of negotiation, which had the effect of leading the other to suppose strict rights under contract would not be enforced.

No such negotiations in this case (from Hughes). Friendly indulgences in this case did not amount to plaintiff surrendering right to timely

performance. Seems like this leaves open the argument that in certain circumstances granting of friendly

indulgences should reasonably give rise to an inference that the letter of the agreement can be insisted upon only on reasonable notice.

Note: If you were to pay late 30 times and it was okay, they would need to send letter if you are

now to be expected to pay on time or be charged.

OWEN SOUND PUBLIC LIBRARY BOARD V. MIAL DEVELOPMENTS LTD. (1979 ONCA)

CONSTRUCTION CONTRACT, NEEDED CERTIFICATE FOR PAYMENT, WANTED FURTHER SEAL

Facts: Library entered into construction contract with defendant for renovations to the library. Contract said the library board would pay any amounts due within 5 days of presentation of

architect's certificate, and if they didn't pay within 7 the defendant could terminate the contract.

Certificate came, library requested a further corporate seal of subcontract, Mial said they would though not necessary under the contract.

No seal, so library didn't pay and Mial terminated the contract, library sued. Rule:

If they hadn't paid and Mial sued them, estoppel would have been a good defence to that. Too sword-like in this case as Mial hasn't really done anything wrong. Note: Shield is too sword-like in cases where, as in this one, estoppel can't be terminated with

notice, so no way to find the estoppel self-limiting.


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D. & C. BUILDERS, LTD. V. REES (1965 UK)

DEFENDANT REFUSED TO PAY FOR SERVICES, PLAINTIFF ACCEPTED LESS JUST TO SURVIVE

Facts: Defendant refused to pay contracts who had supplied services to him. Defendant offered to

pay less than two-thirds of the outstanding amount in "settlement". The plaintiff (small building company) was in dire need of money, and the defendant knew

this, so plaintiff accepted the money to save the company. Plaintiff brought action for the balance of the amount owed. Defendant used doctrine of PE

as shield to try and protect themselves from being forced to pay original contract amount. Denning said defendant's wife held plaintiffs randoms, put under pressure so decided case in

terms of coercion can't be used in accordance with PE. (more precise to use duress or UI) Obiter:

Clearly indicated he believed PE would apply in these circumstances (Foakes) partial payment.

Would use doctrine of PE to overrule Foakes. Also, said that acting on the promise doesn't have to lead to detrimental reliance. Sufficient that promisee has been led to act differently form what he otherwise would have

done. Thus according to Denning you don't need to show that debtor who made partial payment

has prejudiced themselves by doing so, or that tenant in High Trees prejudiced.

N.M. V. A.T.A. (2003 BCCA)

CAME TO VANCOUVER FOR MARRIAGE, BROKE UP, SUED FOR RELIANCE

Facts: ATA wants to enforce promise made by NM to pay balance outstanding on her mortgage in

England in return for her coming to live with him in Canada with view to marriage. Relied on promise, quit English job, moved to Vancouver, relationship fell apart but not

before he loaned her $100,000 on promissory note which she applied to mortgage. He evicted her from her home, but now sues for return of money under note, she

counterclaims with promissory estoppel. Rule:

Estoppel denied because no expectation or intent for legal relationship in original promise that could be used in later claim.

Again, PE denied as sword. Note:

Also issue of timing: estoppel, if accepted was based on behaviour that arose before the actual creation of the legal document (promissory note).

UNILATERAL CONTRACTS

WILLIAMS V. CARWARDINE (1833 UK)

GOING AGAINST STRICT CONSENSUS AD IDEM APPROACH, WITNESS TO A MURDER SOUGHT REWARD

Facts:


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Plaintiff witnessed a murder and said nothing. Sometime later a reward for information leading to conviction was published. The murderer beat the plaintiff. The plaintiff, believing she was near death, and in order to ease her conscience provided

information that led to the conviction. Plaintiff survived, sought reward. Motive does not matter, so long as objectively offer and performance are there.

Rule: You are entitled to recover a reward so long as you satisfy the terms of the reward,

regardless of whether or not you are acting specifically on the offer > motive irrelevant. Note:

It is likely the plaintiff knew of the reward as a result of all the posters. Might just be that the court is being generous in an attempt to encourage people to come

forward with information.

CARLILL V. CARBOLIC SMOKE BALL COMPANY (1893 UK)

PERFORMANCE OF A CONDITION IS SUFFICIENT, NOTIFICATION UNNECESSARY

Facts: £100 reward for any person who gets sick after having used the product 3 times a day for 2

weeks according to printed directions. (£1000 delisted to show sincerity). Woman does all as required, gets sick, tries to collect. Defendant argues:

Only payable if she did it at the company premises (no). Not a real promise, too vague to be enforceable (rejected). Argued it was a contract to the entire world, therefore not enforceable (no, limited to

people who can actually get their hands on a smoke ball and do all as required, then catch flu).

Acceptance ought to have been notified to the defendant (court says offer said performance of conditions is acceptance).

Rule: Court says the form of acceptance is stipulated by the terms of the offer, and it is clear that in

this case performance is acceptance. Acceptance need not precede performance. Note:

If our job is to try and represent the client, say theta their acceptance occurred as soon as you have tried it, contacted the flu? Court says yep.

DALE V. MANITOBA (1995 MBCA)

PROVINCE OFFERS PROGRAM TO HELP UNIVERSITY STUDENTS, TRIES TO CANCEL IT PART WAY

Facts: Province offered funding programme to university students and wanted to reduce it later. In return for the funding, province got indirect flow of benefits. Consideration found on the benefits/detriments approach.

Rule: Offeror will not revoke once performance has begun.


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GRANT V. PROVINCE OF NEW BRUNSWICK (1973 NBCA)

NEW BRUNSWICK POTATO SUBSIDY PROGRAM, PROVINCE THEN REFUSED TO PAY

Facts: Province makes offer to buy up surplus potatoes to stabilise prices via a program. Plaintiff’s potatoes are destroyed as per program, but province refuses to provide money. Province claimed it wasn’t a contract, just a subsidy. If province indicated a limit on quantity, value or that committee approval was a condition

for payment it could have been an invitation to treat. Rule:

Must interpret alleged offers with an objective test: What a reasonable person in the position would have thought the communication meant.

ERRINGTON V. ERRINGTON (1952 UK)

FATHER BOUGHT HOUSE FOR KIDS, ESTATE TRIED TO TAKE IT BACK – FINDING SECOND CONTRACT

Facts: Father had purchased house for son and daughter in law to live in, placing title in his own

name and borrowing most of the money from the building society. Told them if they made all the scheduled payments on the mortgage he would transfer

ownership to them when it was paid. Father also ended up paying rates on house (only out of affection - irrelevant). Father died and the estate claimed property.

Application: Lord Denning implies term against revocation on part performance due to:

Long period of performance, Detrimental reliance by couple, and Estate unjustly enriched if it received house where most of mortgage not paid by the

father. Deal doesn’t make commercial sense without term: not reasonable to think anyone would

have started to pay if they thought offer could be revoked. Also, since this was a case of the estate clearly acting against the father’s actual intention.

Two Contract Approach: Unilateral contract 1 is express; if you make all the payments, I will transfer the property. Contract 2 (the way that Denning gets around the flagpole problems, implied/collateral

understanding): If you start making the payments, I promise to keep the offer open as long as you keep doing so.

DAWSON V. HELICOPTER EXPLORATION CO. LTD. (1955 SCC)

CONSTRUING OFFER AS BILATERAL CONTRACT TO AVOID FLAGPOLE PROBLEM

Facts: Defendant offered arrangement to plaintiff under which he would accompany defendant's

representatives to area to guide them to properties in question in return for 10% interest in whatever claims defendant might stake in area.

Defendant offer indicated trip would be made only if suitable pilot could be retained, and proposed a time frame.


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Plaintiff said time frame didn't work, invited defendant to inform him when pilot was obtained so he could make arrangements to come to BC.

Defendant investigated properties without plaintiff's assistance > plaintiff claims damages. Defendant argued that contract was unilateral in nature and could only be accepted by

plaintiff's act of accompanying defendant on trip to area, no such trip, therefore offer not accepted.

SCC Solution: Offer properly construed was a bilateral contract that imposed obligation on defendant to

participate in carrying out arrangements for planned trip. So make Dawson's promise to come up a promise exchanged for their promise to cut him in

for 10%. Not his fault they failed to get a pilot for him like they were supposed to.

THIRD-PARTY BENEFICIARIES

TWEDDLE V. ATKINSON (1861 UK)

FATHERS MADE MUTUAL PROMISES FOR WEDDING, SON AND DAUGHTER GAVE NO CONSIDERATION

Facts: Father of bride exchanged promises with father of groom that each would pay monies to the

groom before a certain date (A promise to pay him $100 in consideration of your promise to pay him $100) - clearly good consideration.

Agreement was written down, stipulated that husband had full power to sue with party with respect to enforcement of promises.

But claim eventually brought against father in law was unsuccessful. Rule:

Third party beneficiary cannot sue for damages or completion of a contract: Twofold explanation: the husband gave no consideration and he is not a "party" to the

contract (only a person who is party to contact can sue on it).

BESWICK V. BESWICK (1966 UK)

NEPHEW BUYS BUSINESS AND PROMISES TO PAY AMOUNT TO UNCLE’S WIDOW, THEN DOESN’T

Facts: Uncle sold business to nephew, who promised that in return, after his uncle's death he would

pay uncle's widow £5/week. Once uncle died the nephew refused to pay.

Held: Widow cannot sue on her own since she was not a party to the contract and gave no

consideration. However, as executrix of her deceased husband’s estate she can enforce the contract.

Since contract was to benefit third party widow, husband’s estate did not lose anything when payments were not provided. As a result, expectation damages would not be sufficient so court requires specific performance to be just.


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DUNLOP PNEUMATIC TYRE CO. LTD. V. SELFRIDGE & CO. LTD. (1915 UK)

DISCOUNT ON TIRE ORDERS HAD A PRICE MAINTENANCE CLAUSE FOR A MINIMUM PRICE

Facts: Dunlop, tire manufacturer wish to regulate prices on tires sold by retailers. But Dunlop did not deal directly with retailers, sold to wholesale merchant (Dew) who sold

to Selfridge (retailer). In their contract with Dew, Dunlop has incentive for Dew, in its contract with retailers, that if

retailers agreed to sell at list price Dew could sell tires to them 10% below list price. If breached Dunlop could get £5/sale from retailer, Selfridge agreed, but still sold tires below list price.

Now Dunlop is trying to claim £10 for 2 tires sold below list price. Held:

Claim defeated by 3PB rule, undertaking to sell at list price given by Selfridge in its contract with Dew, Dunlop is merely third party beneficiary to that promise.

Rule: Reaffirmed Tweddle (two separate justifications for Doctrine of Privity) Only a person who is party to a contract can sue on it If a person is to be able to enforce a contract, he must have given consideration to the

promisor. Note:

Failed attempt to use agency to get around rule here, Dew was clearly independent, clearly owned the tires.

THE EURYMEDON – NEW ZEALAND SHIPPING CO. LTD. V. A.M. SATTERTHWAITE & CO. LTD (1975 UK)

EXTENSION OF LIABILITY PROTECTION TO 3RD PARTIES WHEN ALLOWED BY CONTRACTUAL TERM

Facts: Bill of lading case, stevedore damages drill during unloading, consignee brings action,

stevedores try and rely on provisions in bill of lading even though "not a party". Rule:

Privity of contract is extended when the contract makes explicit mention that the employer or contractor misacting as agent for its employees.

Agency argument used successfully. Application:

Clause 1 of the bill of lading said: Carrier was acting as an agent on behalf of its servants or any independent contracts

whom it might hire (i.e. placing party stevedores in direct contractual relations with consignee).

Lord Reid treat on agency, suggests agency argument can succeed if: Bill of lading makes it clear stevedores are intended to be protected. Bill of lading makes it clear that the carrier is contracting on behalf of stevedores Carrier has the authority of stevedores. There is consideration for the agreement.

This was only questioning this case. Argued that unloading the ship was consideration.


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Note: This case is why everyone throws in language of agent or trustee to try to get around TPB

rule.

LONDON DRUGS LTD. V. KUEHNE & NAGEL INTERNATIONAL LTD. (1992 SCC)

EXTENSION OF CONTRACTUAL LIMITATION TO EMPLOYEES READ IN AS IMPLIED TERM

Background: (from Greenwood (1980 SCC) unjust application of the TPB rule) Lease in mall entered into, landlord says I will get fire insurance, will not sue you the tenant

if there is fire. Fire happens because of employees, insurance company in landlord's shoes goes after

employees who as third parties, aren't party to contract between landlord and tenant, can't rely on that clause of contract, and they are picked clean.

Facts of London Drugs: LD stored transformer in warehouse, agreed in contract that warehouseman's liability

limited to $40 in the event of damage (LD also declined option to buy insurance to cover damage of transformer).

Transformer damaged, LD brought action against the warehousemen who claim they were protected by clause in contract.

Iacobucci says that warehousemen can benefit from limitation of liability clause. Creates a new exception to DOP (on top of statuary, agency, trust). Two Part Test for new exception to TPB rule:

The limitation of liability clause must, either expressly or impliedly, extended its benefit to employees seeking to rely on it AND

The employee must have been performing the very services provided for in the contract between employer and plaintiff (customer). Basically, must have been doing what the parties expected them to be doing.

Application: Iacobucci says this is only an incremental change to DOP, its still about intention of

contracting parties, they decide. Applying first clause to this case: court implies that the term warehouseman, which is used

in contact, means the employees and clause should extend to them.

FRASER RIVER PILE AND DREDGE LTD. V. CAN-DIVE SERVICES LTD. (1999 SCC)

BROADER EXCEPTION THAN LONDON DRUGS – MARINE INSURER, NO SUBROGATION CLAUSE

Facts: Marine insurer, has a contract with FR. Both contracts have a no subrogation clause. Third

party wrecks the equipment. Under new regime, third party can take advantage of that exclusion clause. What happens if

the main parties to the contract decide to vary it. SCC takes another step, says no you can't do that. Once rights have crystallized, then the third party takes the benefit of that contract and can no longer be varied without the permission of the beneficiary. Both this and LD are using as a shield. To some extent as a sword with FR case, because

they're using the insurance of other without consideration. A charterer party case, marine insurance contract says that if boat sinks you won't sue me,

the owner of the boat, nor will you sue any charterers.


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Owner has insurance, he is not liable. Insurance company says I know contract says I can't sue you or charter, but lets amend that

so I can sue charterer - waive your subrogation rights. Problem is that charterer is explicitly mentioned in contract as being covered by limited

liability clause (so meets part 1 of LD test) but not an employee (doesn't meet part 2). Iaccobucci says LD is not just about employer/employee relationship, but much broader.

New Test: Parties to the initial agreement intended to extend the benefit in question to the third party,

intention may be explicit as it is here, or implicit as it was in LD. The very activities of the third party come within the scope of the initial contract or

provision, were hey doing what they were expected to do?

MISTAKEN IDENTITY – VOID & VOIDABLE CONTRACTS

PHILLIPS V. BROOKS (1910 UK)

MISREPRESENTATION OF IDENTITY ALONE NOT ENOUGH TO VOID CONTRACT

Facts: Man entered jewelry store, looked at a few things, wrote false cheque but took ring at the

time (left jewels, then pawned. Held:

Intending to contract with the person in the store at the time, contract was voidable but not void, pawnbroker kept the ring.

Application: Plaintiff was willing to let him take items anyway, simply saw person as customer, didn't

care about identity.

INGRAM V. LITTLE (1961 UK)

WHEN FRAUDULENT IDENTITY RELIED UPON TO INDUCE CONTRACT, IT MAY BE VOID

Facts: Ingram sisters had car for sale; stranger came to buy, offered cheque, Ingrams said cash only. Said he was Hutchinson, a reputable businessman, and gave address. Checked address in

director, and agreed to take cheque. Fraudster, disappeared, cheque bounced, sold car to defendant Little. Court found Ingrams made offer to Hutchinson, not to man in front of them.

Held: Question of facts; whether good contract was formed despite fraudulent misrepresentation

about identity - mere presence of individual is not conclusive.

LEWIS V. AVERAY (1972 UK)

LAW FINALLY SETTLED - FOR IN PERSON DEALS, REBUTTABLE PRESUMPTION OF CONTRACT

Facts: Lewis selling car, rogue pretended to be Richard Greene, actor playing Robin Hood on TV.


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Only accepted cheque instead of cash on evidence of Greene identity; cheque bounced and Rogue sold car to Averay (innocent third party).

Followed dissent in Ingram in finding presumption; plaintiff bears burden of proof to bring evidence that you did not intend to contract with person in front of you.

What evidence would displace the presumption? Cases not conclusive. Policy:

Who is the more innocent party? Loss should fall on he who had a chance to avoid it - in these cases, the innocent purchaser

knew nothing of the first transaction, whereas the seller gave the rogue the opportunity to commit fraud.

SHOGUN FINANCE V. HUDSON (2003 UK)

FOR NON FACE-TO-FACE DEALS PRESUMPTION IS INTENT WAS NOT CONTRACT WITH FRAUDSTER

Facts: Does credit check on Patel, agrees to sell car to rogue. Dealer met with rogue, but finance company did not. House of Lords split 3-2, with 3 judges falling Ingram v. Little saying there was never a

contract to sell the car. Finance company had a contract to sell to "actual person" not rogue, so got money back.

NON EST FACTUM

SAUNDERS V. ANGLIA BUILDING SOCIETY (GALLIE V. LEE) (1971 UK)

ELDERLY WOMAN TRANSFERS HOME TO NEPHEW’S FRIEND THINKING NEPHEW – TRANSFER GOOD

Facts: 78 year-old woman to transfer ownership of house to nephew so he could raise money on

security. Nephew, avoiding alimony issues, wanted house transferred to friend, Lee, who would pay

nephew money over time for using house to raise security. Got aunt to sign transfer to Lee by telling her it was document dealing with transfer to

nephew. Lee raised security with building society, then didn’t pay nephew. Building society trying to foreclose house to get their money back. Aunt wants to have

contract voided. Held:

Court did not allow it.

MARVCO COLOR RESEARCH LTD. V. HARRIS ET AL. (1982 SCC)

FAMILY TRICKED BY DAUGHTER’S BOYFRIEND – INNOCENT PLAINTIFF IS PROTECTED

Facts: The Harrises, a married couple, signed a substantial second mortgage on their house as

guarantee for debts of Johnson, their daughter’s boyfriend at the time.


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Johnson told them they were signing something to correct a date on a previous mortgage; during foreclosure Harris couple tried to claim non est factum.

Held: Court did not allow it. Yes the document was procured by fraud by Johnson, but no evidence that Marvco had

anything to do with the fraud – independent third party. Since Johnson is unable to pay Marvco, they will only be able to saddle Marvco with the

money if they are able to say it is non est factum.

THE PAROL EVIDENCE RULE

PRENN V. SIMMONDS (1971 UK)

EVIDENCE FROM NEGOTIATIONS NOT ADMISSIBLE TO INTERPRET TERMS OF THE CONTRACT

Facts: Prenn bought holding company (and all the subsidiaries) to obtain services of Simmonds. In order to retain Simmonds he agreed to sell Simmonds a 4% interest in the company at a

discount, if aggregate profits of RTT exceed £300,000. Prenn said aggregate profits of RTT referred to profits from the RTT holding company only

(i.e. only those profits that was transferred from subsidiaries to the main holding company) whereas Simmonds argued it refers to sum of profit of all subsidiaries.

Simmonds argues want to rectify contract to include his interpretation and wants to present parol evidence.

Held: Negotiations not admissible since the process of negotiation is meant to change parties’

position and includes a lot of back and forth that may not reflect actual consensus in documents.

Court interprets contractual intent by looking at words and context, but not purely subjective meanings (as expressed through negotiations).

Looked at factual matrix i.e. a fairly broad range of circumstances: commercial practice in the company, linguistic analysis and held that contract refers to aggregate profit of subsidiaries.

HAWRISH V. BANK OF MONTREAL (1969 SCC)

ORAL EVIDENCE OF COLLATERAL CONTRACT NOT ADMISSIBLE IF CONTRADICTS WRITTEN

Facts: Hawrish guaranteed loan taken out by another company. Bank made oral promise that was

not included in contract. Bank of Montreal goes after his assets. Decision:

SCC dismisses Hawrish's appeal and holds for Bank of Montreal. Upholds strict interpretation of parol evidence rule. Collateral contract (the oral agreement of the manager's promise) contradicts the original

contract.

TILDEN RENT-A-CAR CO. V. CLENDENNING (1978 ONCA)

EVEN IN SIGNED CONTRACTS ATTENTION MUST BE DRAWN TO EXTRAORDINARY TERMS


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Facts: Defendant crashed rented vehicle while slightly inebriated. Tilden relying on unknown

clause not allowing any alcohol consumption. Decision:

Action dismissed, verdict for Clendenning. Court seems to see the clause as fairly unreasonable. Employees instructed not to mention the clause in question

No consensus ad idem (meeting of the minds) If he had known, he might have reconsidered the contract

Clarification was not what the document reflected. The rule in L'Estrange v. Graucob (party signing a contract is bound by terms even if he

didn't bother to read it ) overruled. Presumes no misrepresentation.

Application: Contractual stipulations that one party intends to rely on must be brought to the attention of

the other party.

GALLEN V. ALLSTATE GRAIN CO. LTD. (1984 BCCA)

EXCEPTIONS TO THE PAROL EVIDENCE RULE – THE COURT STRETCHING TO PROTECT RELIANCE

Facts: Plaintiff, farmer, sues seed distributor on oral representation explicitly contradicted by

written contract (clause excluding all liability for losses). Weeds cause farmer loss, brings action for breach of contract and negligent

misrepresentation. Parol is rule of evidence but also substantive rule of law - as a rule of evidence, the parol

evidence rule is useless because there are so many exceptions to rule that you can always get it into court

If written and oral contradict, strong presumption for written. Saying here, oral doesn't contradict, it's supplementary to it. Collateral contract, parallel to, the written contract, that adds some supplementary

terms. Decision:

Verdict for the plaintiff on breach of contract. Parol evidence rule exceptions:

Oral representations (warranty or collateral contract) given before the signing of the contract.

Case lists eight principles of the rule (pp 515-517). Test of whether the parties intend to have contract force:

How important is this to the formation of the contract? When you look at the parties' words and actions, can you say they intended one of them

to bear the risk instead of the other?

CLAUSES EXCLUDING LIABILITY

PHOTO PRODUCTION LTD. V. SECURICOR (1980 UK)


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NIGHTWATCHMAN BURNS FACTORY – LIABILITY LIMITATION APPLIED BECAUSE THEY HAD AGREED

Facts: Securicor contracted to provide security services for photo production’s factory with night

patrolman services. Contract included contractual liability limitations. Securicor employee visited factory lit a fire which burned down the building. Limitation clause said Securicor not responsible for injurious act.

Default by employee unless could have been avoided by due diligence. Securicor argued that they had no reason to believe employee would light a fire and could

not foresee loss suffered through fire, theft, or burglary. Said they were only liable where solely attributable to negligence of company’s employees

acting within course of employment. Held:

Securicor not liable. Contract exempts Securicor from negligence and other deliberate acts. Court held the transfer of risk was reasonable in this situation because:

Modest price for service: lower price is a representation of the risk the security company is going to take. The risk of employee is doing something small is not to be borne by security company.

Insurance: if you are charging more then you would also include higher costs. Make more commercial sense for factory owner to insure because it is a single facility that is well known to them versus a large number of unknown buildings that security company would have to insure.

HUNTER ENGINEERING CO. INC. ET AL. V. SYNCRUDE ET AL. (1989 SCC)

NO FUNDAMENTAL BREACH – LIMITATION APPLIES EVEN IF THE MERCHANDISE IS CRAP

Facts: Syncrude buying gearboxes from plaintiff for use in oil processing plant. Warranty limited liability to 24 months from shipment, gearboxes poorly designed and

developed cracks. Syncrude sues after lapse of warranty.

Held: Dickson CJC would like to replace doctrine of fundamental breach with strict adherence to

terms of the contract (rules of construction). Only exception unconscionability.

Read the exclusion clause within the principles of contractual interpretation and see if it applies to the situation at hand, and if it does use it (except unconscionability).

Wilson J asks: Does the clause apply as a matter of construction? Is it unfair or unreasonable (rather than only unconscionable) to enforce that clause in

light of what has happened? Also warns against any automatic application.

DELANEY V. CASCASE RIVER HOLIDAYS LTD. (1983 BCCA)


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WHITE WATER RIVER RAFTING, DOESN’T READ WAIVER, NO CONSIDERATION ANYWAY

Facts: Delaney visited BC on a business trip. Met a friend form school, was invited on a river rafting trip. Signature was given by all paying passengers. All passengers had received brochures from Cascade which had liability statement. No proof Delaney received one, but he did sign the waiver. Life jackets were insufficient. No negligence was proved.

Rule: In the absence of some evidence of unconscionability, fraud, misrepresentation or case of

non est factum the traditional rule that signature is a manifestation of assent continues to prevail.

TERCON CONTRACTORS LTD. V. BRITISH COLUMBIA (MINISTRY OF TRANSPORTATION AND HIGHWAYS) (2010 SCC)

DECIDED THE MODERN RULE – BC ACCEPTED INELIGIBLE BID DURING RFP PROCESS

Facts: BC put out a call (request for expressions of interest – RFEI). Six teams responded. Request for proposals followed, stating that only the participants to the RFEI could submit

bids. Tercon responded, Brentwood responded but had partnered with EAC for part of the work. BC accepted the bid from Brentwood/EAC. Tercon sued BC for damages on the basis that by accepting an ineligible big, BC was in

breach of contract, cause Tercon to lose the project. Rule:

Process of adjudicating clauses excluding liability broken into three steps: Whether, as a matter of interpretation, exclusion clause applies to circumstances in the

evidence, depending on intention of parties, objectively assessed. Was exclusion clause unconscionable at time contract was made? Is there an overriding public policy, proof of which lies on part seeking to avoid

enforcement of clause that outweighs interest in freedom of contract.

MISREPRESENTATIONS & THE RELATIONSHIP BETWEEN CONTRACT & TORT

HEILBUT, SYMONS & CO. V. BUCKLETON (1913 UK)

“WE’RE BRINGING IT OUT” – NOT HELD AS A GUARANTEE OR AN INNOCENT MISREPRESENTATION

Facts: Defendant was a rubber merchant who had underwritten shares in third company (Filisola)

for the purpose of selling to the public. Public can buy shares in a new company, owns a rubber plantation.


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The plaintiff talks to the defendant and asks about the company, says I hear you're bringing out a rubber company, is it good… yes, we're bringing it out. Plaintiff says, that's good enough for me, defendant has a good reputation. So lousy, plantation isn't good enough, isn't really a rubber company.

Plaintiff purchased a large number of shares from defendant, having been assured that Filisola was a "rubber company" Statement note made fraudulently. Availability of innocent misrepresentation was barred by elevation of the main contract. Held company was in fact not a rubber company.

Issue: Was statement that shares on offer were shares in a rubber company a mere innocent

misrepresentation inducing the contract (therefore no relief available) OR could it be construed as a collateral warranty that created a binding contractual obligation guaranteeing that Filisola was rubber company.

Held: Lack of intention

Application: Judge explains how one would make the claim that representation was actually a warranty

(collateral contract). Says this is conceivable, but there must be animus contrahendi (a contractual intention) on

both sides: Pro defendant > plaintiff must think representation was binding, but might not be able

to prove that defendant had contractual intention.

BENTLEY (DICK) PRODUCTIONS LTD. V. SMITH (HAROLD) (MOTORS) LTD. (1965 UK)

DENNING DECIDES A WARRANTY EXISTS WHEN A STATEMENT WAS MADE TO INDUCE A CONTRACT

Facts: Case of car dealer selling a used car, says that the car has only gone 20k miles since being

fitted with replacement engine - misrepresentation. Denning gets rid of Heilbut intention rule, gets rid of need to find unilateral collateral

contract (says representation simply a term of main contract), makes test essentially the one that applies for misrepresentation.

Test for warranty is objective bystander test: Statement of fact made Of a material term Intended to induce party to entering into main contract Did in fact induce party

If a representation is made for very purpose of inducing the other party to act on it and party acts on it by entering into that contract, the representation was intended as a warranty. It is not necessary to speak of it as being collateral.

Note: Denning distinguished a previous case of his own.

Previous case was non-commercial seller, reselling a used car he had bought. Had simply passed on information he had got (that car was a '48 model). Seller was completely innocent and not in a position to verify information.


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VS Dealer in Bentley, who was in position to know or find out about history. So seems that this lesser test should apply in cases where the representer has expertise or

access to information not possessed by represented - leading to contract entered into because of reliance on that representation.

Cases are being argued today, people who try to wrap themselves in Denning from Bentley, opposition says even Denning concedes he is bound by Heilbut, therefore there still must be real contractual intention.

REDGRAVE V. HURD (1881 UK)

MAN BUYS LAW PRACTICE MISREPRESENTED AS BEING WORTH SOMETHING - RESCISSION

Facts: Plaintiff solicitor selling home and law practice as a package. After entering into agreement to purchase house, defendant discovered law practice was

utterly worthless, and refused to complete purchase. Plaintiff brought an action for specific performance. Defendant denied liability because he was induced into making agreement by false

representation about law practice. Decision:

Contract rescinded. A material inducement to contract being false is grounds to rescind the contract. No deliberate misleading, thus it was an innocent misrepresentation. Could rules that performance would be inequitable.

Rule: If statement was a material statement and was intended to be relied upon and was relied

upon, its being untrue is sufficient ground for rescinding the contract. Material must relate to a matter that would be considered by a reasonable person to be

relevant to the decision to enter the agreement in question. Facts:

Present case, statements made by solicitor that income yielded annually was a certain amount - obviously material.

Another case where misrepresented income yield be less than 1% - not material.

LEAF V. INTERNATIONAL GALLERIES (1950 UK)

BARRED DUE TO PASSAGE OF TIME-HOWEVER PAINTER’S IDENTITY WAS WARRANTY/CONDITION

Facts: Plaintiff bought painting he thought was by a specific artist. Five years later, that belief is found to be mistaken. Sues for rescission.

Held: Denning: In favour of deft, authorship not a condition to contract. Term (of the painting's author) either condition or warranty: If it is a condition/provision, then contract breached. If it was a warranty, could claim damages but no rescission.

MURRAY V. SPERRY RAND CORPORATION (1979 ONHC)


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REP BY MANUFACTURER CREATES WARRANTY THOUGH PLAINTIFF DIDN’T CONTRACT WITH THEM

Facts: Farm machine bought by plaintiff does not perform as it was advertised by a representative

(Church). Sues the manufacturer as well.

Decision: In favour of the plaintiff. Misrepresentations induced contract - constituted warranty. Not a product liability case (negligence cause of action) Liability of Church on collateral contract.

HEDLEY BYRNE & CO. LTD. V. HELLER & PARTNERS LTD. (1964 UK)

IDEA OF NEGLIGENT MISSTATEMENT OF C, INDUCING A INTO CONTRACT WITH B, MAKING C LIABLE

Facts: Plaintiff lent money to a third party in reliance on a credit report provided by the defendant

bank. Action for negligent misrepresentation, no contract.

Decision: In favour of the defendant.

Defendant providing a service, relationship equivalent to a contract. Court speaks of special relationship that gives rise to liability outside of contractual

parties. Case established the tort of negligent misrepresentation.

Filled in the gap between tort and contracts.

ESSO PETROLEUM CO. LTD. V. MARDON (1976 UK)

ESTIMATE NOT A GUARANTEE OF PROFITS, RELIANCE DAMAGES BECAUSE ESTIMATE WAS CARELESS

Facts: Esso builds petrol station. Report on expected business inaccurate, as the station had to be

built without access to main road. Mardon enters a tenancy contract with Esso. Big time losses. Sues for damages.

Decision: In favour of plaintiff. Mardon induced into contract on negligent misrepresentation (reliance) Esso liable in both contract and tort. Collateral contract inferred from estimate, but remedy only in tort. Both negligence and contract damages are the same: reliance losses. Collateral contract was not for particular throughput. Contract promise was that the fore case was properly made.

UNCONSCIONABILITY, UNDUE INFLUENCE & DURESS

MARSHALL V. CANADA PERMANENT TRUST CO. (1968 ABSC)


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AGREEMENT UNCONSCIONABLE DUE TO VULNERABILITY WHETHER OR NOT IT WAS APPARENT

Facts: Plaintiff offered to purchase land form senior in retirement home who had suffered brain

damage and minor stroke that impaired his ability to think and rationalize, although mental capacity not physically evident by plaintiff.

Defendant seeks rescission of agreement and wins. Rule:

Agreement was unconscionable regardless of whether one seeking to enforce contract was aware of other party's vulnerability at the time.

Note: It is not material whether the stronger party is aware of the weaker party's incapacity to

protect his own interest. (use for weaker party) McCamus says rule not entirely correct - unconscionability

doctrine only applies where the stronger party knows or ought to have known that the other party was weaker

(use this for stronger party) whether a person would known of another's inequality of bargaining power determined from reasonable person point of view.

MUNDINGER V. MUNDINGER (1968 ONCA)

CONTRACT BETWEEN HUSBAND AND WIFE VOID DUE TO UNFAIRNESS AND WIFE’S INCAPACITY

Facts: Wife seeks declaration that agreement entered into with husband is null and void as it was

entered into under duress. Decision:

Appeal allowed. Judgment in favour of wife. Agreement was entered into during the wife's stay in hospital caused by mental breakdown

after husband's infidelity. Applying the test from Marshall:

First, clear inequality of bargaining power. Second, agreement must be found as grossly improvident.

Sufficiently beyond norms of commercial morality. Equitable rule:

If party is not capable of protecting their own interests, the court of equity will do it. Not against folly or carelessness, but against being taken advantage of because of

their position. Modern rule:

Now courts have a variety of powers to interfere with separation agreements within families: Availability of independent advice negates unequal bargaining power. Never see unconscionability between companies.

LLOYDS BANK LIMITED V. BUNDY (1975 UK)

POOR MR. BUNDY MORTGAGES FARM FOR SON – VOIDABLE DUE TO UNEQUAL BARGAINING POWER

Facts:


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Defendant, a farmer, mortgaged his house for his son's troubled business. Bank attempts for possession. Old man did not know what he was doing when taking not he debt and putting up his assets

as security. Decision:

Lord Denning held that the contract was voidable due to the unequal bargaining position in which the defendant had found himself.

Reasoning: All impairments of autonomy could be collected under a single principle of "inequality of

bargaining power".

ROYAL BANK OF SCOTLAND P.L.C. V. ETRIDGE (NO. 2) (2002 UK)

A WIFE PROVIDING A SURETY FOR HUSBAND’S DEBTS AND THE RULE OF CONSTRUCTIVE NOTICE

Facts: Re wives charging homes to bank as security for husbands' debts (note that it applies to co-

habitees generally and even broader). Several wives guaranteed husbands' debts. Claim undue influence.

Reasoning: Burden to prove undue influence lies on party asserting wrong.

Actual or presumed undue influence can be argued to vitiate consent to a contract. Equity identified two forms of unacceptable conduct to ground the notion of undue

influence: Principle of duress. Unfair advantage of one party over the other.

Manifest disadvantage established by proof of ascendancy by one party over the other.

Court drags in doctrine of constructive notice as the Bank did not know where it ought to have known. Should be alert as to the circumstances surrounding loan to husband where it ought to

have known. Broad interpretation of this concept that Canadian courts have not followed.

Common entities must ensure the securing party is aware of the nature of the contract through independent legal advice (ILA).

PRIDMORE V. CALVERT (1975 BCSC)

RELEASE SIGNED AFTER ACCIDENT VOIDED DUE TO GROSS UNFAIRNESS AND UNEQUAL FOOTING

Facts: Plaintiff injured in motor accident by defendant's negligence. Defendant relied on a release signed by the plaintiff after the accident.

Decision: Satisfied by evidence that plaintiff was on unequal footing when negotiating agreement and

agreement was grossly unfair.

PENALTIES & FORFEITURES


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H.F. CLARKE LTD. V. THERMIDAIRE CORP. LTD.

EXCESSIVE PENALTY REDUCED IN CONTRACT FOR SOLE DISTRIBUTION

Facts: Clarke agrees to be sole distributor of Thermidaire's product. Contract contains a clause in which a breach would warrant damages of the liquidated sale

of the competitor's products. Decision:

Reduces damages in breach clause to a reasonable level. Reasoning:

Clause creates an excessive penalty, and regardless of its presence in the contract, it should not be enforced. Decided on the basis that the gross damages owed was in excess of the profits that

Clarke would have made. Forfeitures and/or deposit clauses

Deposit is a security for performance (contract in itself) Different from a penalty clause

Money belongs to the seller in part payment of price No fraud, extortion, or in terrorum

Equity intervenes in such cases when: Penal in nature: sum is not proportional to possible loss Unconscionable for the seller to keep it

Something about the transaction makes it unfair for the vendor to keep the money forfeited.

STOCKLOSER V. JOHNSON (1954 UK)

SEEMINGLY UNFAIR CLAUSE ALLOWING SEIZURE OF ALL GOODS ON NON-PAYMENT UPHELD

Facts: Contract stipulated that should the purchaser default on payments, the seller could retake

possession of goods and keep payments made thus far. Reasoning:

Forfeiture clause is not penal and a clear part of the contract and neither are the circumstances unconscionable.

COMMON LAW ILLEGALITY

HOLMAN V. JOHNSON (1775 UK)

YOU CAN’T RELY ON A CONTRACT IF YOU KNOW THE OTHER PARTY IS USING GOODS FOR CRIME

Facts: Plaintiff sold tea to defendant knowing defendant was going to smuggle it to England. Defendant didn't pay, plaintiff sues.

Issue: Can plaintiff rely on the contract even though he knew the defendant was going to use the

goods for an illegal purpose?


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Decision: Claim dismissed on grounds of illegality. The party to the illegality cannot sue on a contract - as long as you don't have to rely on the

illegality yourself you can sue on the contract. Reasoning:

The contract is enforceable because it finished upon delivery of the tea and plaintiff cannot be held responsible for actions of defendant afterwards.

SHAFRON V. KRG INSURANCE BROKERS (WESTERN) INC. (2009 SCC)

AMBIGUOUS RESTRICTIVE COVENANT APPLYING TO METRO VANCOUVER NOT UPHELD

Facts: Shafron joined KRG through a sale of his agency. Shafron was subject to a restrictive covenant that prevented him from competing with KRG

within the "Metropolitan City of Vancouver" for 3 years following the termination of his employment.

Shafron left KRG to join a broker in Richmond. KRG sued to enforce the covenant prohibiting competition.

Decision: In favour of Shafron, defeat for employers.

Reasoning: Restrictive covenants are a restraint of trade: limited people's ability to carry on a living or

compete in commerce, that courts have always been very cautious to apply. In order for an employer to be permitted to hold a former employee to a restrictive

covenant, the clause must be reasonable and unambiguous. Application:

Clause was unreasonable because it was ambiguous. In particular, the clause must be reasonable in respect to three primary factors:

Geographical scope Time limit In the activities it seeks to restrict

BRISSETTE ESTATE V. WESTBURY LIFE INSURANCE CO. (1992 SCC)

HUSBAND KILLS WIFE AND TRIES TO CLAIM HER LIFE INSURANCE POLICY – SRSLY?

Facts: Husband kills wife. Wife's estate claims life insurance benefits.

Decision: Claim denied. General rule:

Parties cannot benefit from their own crime. Application for a constructive trust would be the logical equitable remedy. Husband would hold the funds in trust of the beneficiaries of the estate so he wouldn't

benefit. By principles of public policy the contract cannot be enforced.

Also, minor children not beneficiaries under the policy.


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OLDFIED V. TRANSAMERICA LIFE INSURANCE CO. OF CANADA (2002 SCC)

HOWEVER, IF YOU DIE COMMITTING A CRIME YOUR BENEFICIARIES CAN COLLECT

Facts: Plaintiff died while cocaine trafficking. Claim by separated spouse and child, against the proceeds of plaintiff's life insurance policy. The insurer refused to pay, saying claim was barred by the public policy principle that a

person should not be allowed to insure against his own criminal act. Decision:

In favour of the claimant. It is not against public policy to permit an innocent beneficiary to obtain the proceeds of a

life insurance policy where the insured accidentally dies during the course of a criminal act. The public policy rule at issue is that a criminal should not be permitted to profit from

crime. To deny recovery would penalize the innocent beneficiaries for the insured's anti-social

behaviour. Differentiated from Brissette.

MISTAKE ABOUT CONTRACTUAL TERMS

HOBBS V. ESQUIMALT & NANAIMO RAILWAY COMPANY (1899 SCC)

INTERPRETS THE MEANING OF LAND BASED ON WHAT A REASONABLE PERSON WOULD THINK

Facts: Contract for sale of land. Prior to payment of last instalment, railway (defendant) wants to keep mineral rights and

claims "land" exclusive of mineral rights. Hobbs (plaintiff) sues for specific performance of sale including mineral rights.

Issue: What does "land" mean - surface or minerals as well. The railway argued Raffles: no contract because there was a true ambiguity with parties no

ad idem, it was important and there's no reason to prefer one party's understanding over the others.

Decision: Performance granted. Contract was for land, and a reasonable person would have thought rights were included. Look at how reasonable person would construe the argument. Private meaning has no relevance to the court.

RAFFLES V. WICHELHAUS (1864 UK)

NO CONTRACTS EXIST WHERE TWO PARTIES DIDN’T AGREE WHAT SHIP CONTRACT REFERRED TO

Facts: Plaintiff agreed to sell defendant cotton from India. Defendant thought it was arriving by another ship with same name, leaving at a different

time.


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Refuses to pay, probably motivated by price fluctuations. Decision:

No contract exists between parties. Not enforceable. Majority:

No misrepresentation or fraud, so the contract should be enforced. Judicial means of settling the ambiguity.

WWARPD - objective analysis Customs of the trade External evidence.

STAIMAN STEEL LTD. V. COMMERCIAL & HOME BUILDINGS LTD. (1976 ONHC)

“ALL THE STEEL IN THE YARD” TAKEN TO MEAN WHAT THE SELLER WOULD HAVE INTENDED

Facts: Plaintiff buying scrap at auction, thought defendant had included all items. Defendant is selling used steel. Auctioneer says they're offering "all the steel in the yard". Plaintiff comes to collect the steel, wants included the brand new steel that was sitting in the

corner of the yard that had already been sold. Everyone knows that all the steel in the yard.. doesn't mean ALL the steel in the yard. Just

meant the ones that had been offered in different lots were now brought together into one lot.

Decision: Damages for plaintiff, but only gets steel defendant intended to sell.

Reasoning: Reliance of plaintiff on certain statements was unreasonable.

Never the intention of the defendant to include that much in offer. Defence argues no consensus ad idem, thus no contract of sale of any sale.

Court infers a mutual mistake, which means a binding contract was still agreed to. Defendant breached contract by failing to deliver any goods, damages for the plaintiff

awarded Defendant said if Staiman refused to acknowledge he hadn't bought it all, none would be

given. Basic rule of contract law that it is not a party's actual intention that determines contract

relationship, but rather the intention manifested by the words and actions of the parties Differentiates from Raffles, contract enforceable.

SMITH V. HUGHES (1871 UK)

MISTAKE RE: QUALITY OR CHARACTERISTIC – CAVEAT EMPTOR

Facts: Plaintiff sold oats to the defendant. Defendant thought he was buying 'old' oats as sampled by the plaintiff. Contract dispute over the delivered product. Bridge between mistake as to terms and mistake as to assumptions Same mistake can sometimes be characterised as both, depending on the facts.

Reasoning: Applies the caveat emptor rule as there was no warranty in contract.


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Defendant cannot rely on the plaintiff to take into account his mistaken belief unless mislead by a misrepresentation.

Judge put two questions to jury. Was the word 'old' used? Was it a term of the contract? If the word 'old' not used, did the plaintiff (vendor) believe the defendant wanted old

oats? Appeal in regards to the merit of this question.

Coburn J said sale by sample doesn't obligate any kind of warranty, no reliance can be inferred. Thus 2nd question was wrong.

Blackburn and Hannon JJ: 2nd question could have been interpreted in two ways: Mistake in assumptions: did the farmer form the opinion that the purchaser misjudged

the sample as being old oats? Mistake in contractual terms: did the farmer form the judgment that the purchaser

believed that the term of the contract was old oats?

MISTAKE IN ASSUMPTIONS

BELL V. LEVER BROTHERS LTD. (1932 UK)

DEAL TO END EMPLOYMENT NOT VOID JUST BECAUSE THEY COULD HAVE TERMINATED WITH CAUSE

Facts: Bell worked for Lever Bros. After employment contract had elapsed it was discovered that Bell had been doing some

private dealings. Lever brought a claim for rescission to get money back from the 'golden parachute' they had

given Bell when he retired. Decision:

No mistake and the contract could not be rescinded nor was it void. Reasoning by Atkin:

Holds that common mistake does not lead to a void contract unless the mistake is fundamental to the identity of the contract (renders the performance completely different from that contract for). EG. Contract for something that is destroyed or Contract by vendor without title

Here, an agreement to buy out a contract of employment Contract not as valuable as parties thought it was Mistake as to quality not sufficiently serious.

Effectively, the mistake must nullify or negate consent of the parties in order for the agreement to be void (high standard). Mistake as to assumptions is a mistake as to the current state of affairs when you enter

into contract. In order for the contract to be void by common mistake the mistake must involved the

actual subject matter of the agreement and must be of such a "fundamental character as to constitute an underlying assumption without which the parties would not have entered into the agreements."

Significance:


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Criticized in Solle v. Butcher where Denning reduced the standard by enumerating an equable remedy for a shared common mistake, which rendered the agreement voidable.

Subsequently in Great Peace Shipping Ltd. the CA purported to overturn Solle and set the standard for common mistake in line with the original Bell v Lever Brothers standard.

SOLLE V. BUTCHER (1950 UK)

MISTAKE ABOUT MAXIMUM RENT THAT COULD BE CHARGED ONLY MADE CONTRACT VOIDABLE

Facts: Plaintiff rented from defendant for years at a rent higher than that permissible by rent

control legislation. Claims the sums overpaid.

Decision: Judgment in favour of landlord. Parties were under a mistake as to how the Rent Acts applied.

Terms of the subject matter not in dispute. Thus tenancy is not a nullity.

Two types of mistakes: Ones that render the contract void. Ones that render the contract voidable.

Equity has a much more generous view of mistake in assumption. Differentiates from Bell v. Lever Bros as it only dealt with CL.

GREAT PEACE SHIPPING LTD. V. TSAVLIRIS SALVAGE (INTERNATIONAL) LTD. (2002 UK)

MISTAKE ABOUT PROXIMITY OF SHIP NOT SUFFICIENTLY FUNDAMENTAL FOR RESCISSION

Facts: Defendant sought claimant for a rescue. After finding out the plaintiff's boat was far from the target, he cancelled the contract and

sought another party. Decision:

Defendant liable for cancellation fee. No rescission granted. Reasoning:

Defence claims contract concluded on assumption of close proximity, thus entitled to rescission of contract. The mistake was no sufficiently fundamental to void the contract.

Court rebuts Denning in Solle as overly broad: equity never gave right of rescission on grounds of common mistake. Common law doctrine of mistake by Bell v Lever:

Test of common mistake to the subject matter of a contract Doctrine of frustration: the fact that the ship was far makes the contract less useful,

but not impossible to perform the contractual venture. Eliminates equitable doctrine of common mistake.

MILLER PAVING LIMITED V. B. GOTTARDO CONSTRUCTION LTD. (2007 ONCA)


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GREAT PEACE NOT ADOPTED IN CANADA – COMMON MISTAKE REMAINS A POSSIBLE REMEDY

Facts: Miller signs contract with defendant that they have paid all bills. Then discovers new bills and tries to get contract rescinded under doctrine of common

mistake. Decision:

Claim dismissed. Great Peace not adopted in Canada, equitable doctrine of common mistake still a possible

remedy. Does not invoke doctrine of common mistake as the contract stipulates who bears risk of

mistake, claimant.

SHERWOOD V. WALKER (1887 USA)

RECOVERY WHERE MISTAKEN ASSUMPTION GOES TO THE ESSENTIAL NATURE OF SUBJECT MATTER

Facts: Farmer/breeder (defendant) agrees to sell cow (Rose the 2nd of Abalone) and says "she is

probably barren". Sold to banker for $80 (the value of the cow as beef, if cow was a breeder would be worth 10x as much).

When banker goes to collect the cow, breeder refuses since cow is now pregnant. Decision:

Contract void for mistake. Contract is void since the thing they contract for (a barren beef cow) didn't exist. Instead there was a "breeder" cow, this was a mistake as to the nature of the cow, not the

quality. So can rescind if mistaken assumption goes to the essential nature of the subject matter.

ie, the thing contracted for, as opposed to just being a mistake concerning the quality of the thing.

Dissent says it was for a specific cow, so mistake in this case went to quality not nature. Both parties knew that this specific cow was the subject of the contract, so mere mistake

in quality.

MCRAE V. COMMONWEALTH DISPOSALS COMM. (1951 AUSTRALIA)

RELIANCE INTEREST ONLY FOR A CONTRACT TO SALVAGE A NON-EXISTENT SHIP

Facts: Plaintiff bought right to sunken oil tanker from defendant, incurred substantial expenses

(boat and crew), goes to location and there's no ship. Issue:

How to calculate damages when calculating potential profit is impossible. Rule:

Plaintiff has burden to prove venture would have been profitable. If not possible, because of defendant's breach, burden shifts to defendant to show there

would have been a loss. If neither proved, plaintiff can claim reliance interest (get out of pocket expenses, put in

position would have been before the contract).


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Note: Also remember that in this case it was defendant's breach that made calculating impossible. Outlines a certain situation where reliance is necessary, in absence of expectancy. Expectancy is rule. Wetheim, Bowlay, McRae all consistent with it. Anglia can be read in a

way to be consistent.

R. V. RON ENGINEERING & CONSTRUCTION EASTERN LTD. (1981 SCC)

MISTAKE BIDDING ON A CONTRACT

Facts: Made a mistake of about $700,000 in the bid. Forgot to include own labour costs. SCC says they can't create a framework where it's too easy for bidders to cancel their bid

when they've made a mistake, or when they're pretending they've made a mistake. Court reasserts two contract approach in bidding.

Contract A arises the moment the bid is submitted to the owner. The contract is defined by the terms of the tender documents (the invitation for bids). Typically, the most important terms of contract A, is once you've submitted a bid you

may not withdraw it. Non-withdrawal, fair consideration (mistake does not alter the fact that you cannot

withdraw it). Unless, on its face, it's obvious there’s been a mistake.

RFP requires deposit of $150,000 which would be lost if the tendered offer was withdrawn. Ron was the low bidder. Then discovered that they had made a mistake in calculating their total bid price. The change was refused, the contract was given to another company, and the owner kept

Ron's bid deposit. Ron sued to get their deposit back. Counter-claim for costs incurred as a result of having to go with a different bidder.

Decision: Dismissed counter-claim, but owner can keep the deposit.

Reasoning: Held that the extender process involved two contracts, A and B, where the second was the

construction contract being bid on and the first was a separate contract created to govern the tender process.

Contract A was binding, per the terms of that contract as set out in the tender documents. Defendant argues that the mistake voids tender contract with binding deposit.

Not a mistake in the terms of A, but a mistake in B. Law of mistake irrelevant, forfeiture provisions govern.

Snapping up cases: taking advantage of a mistake by other party. If there is a blatant mistake, and it's clear the other party is contracting on mistaken

terms, you can't hold them to it.

FRUSTRATION

PARADINE V. JANE (1647 UK)

HAVE TO KEEP PAYING LEASE EVEN THOUGH INVADERS PUSHED DEFENDANT OFF FARM


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Facts: Long-term lease to farm. War happened, couldn't farm. Does he have to keep paying? Yes. Attempt to enforce a lease. Defendant was pushed off by invaders.

Decision: In favour of plaintiff, made him pay rent.

TAYLOR V. CALDWELL (1863 UK)

SINCE HALL DESTROYED BY EVENTS BEYOND EITHER’S CONTROL CONTRACT IS DISSOLVED

Facts: Plaintiff booked defendant's premises. Hall burns down, claims damages.

Decision: For defendant. Fire without fault on either party. No contract provision as to how to deal with possibility of such a disaster. Doctrine of impossibility invoked

Does not relieve the party unable to perform from liability. This contract not to be construed absolutely as it was dependant on the Church being

there. Some contracts clearly end as the subject matter of the contract perishes.

Contracts have in them an underlying assumption of the continuation of a certain state of affairs.

CAPITAL QUALITY HOMES LTD. V. COLWYN CONSTRUCTION LTD. (1975 ONCA)

DOCTRINE OF IMPOSSIBILITY TO SALE OF LAND – ENDS WHEN LAND CAN’T BE DEVELOPED

Facts: Plaintiff buying lands from defendant for residential development. Before closing, laws change restricting land use. Claim for deposit.

Decision: Appeal dismissed. Plaintiff gets the deposit. Legal effect of frustration of contract does not depend on intention.

But on how reasonable people would have prepared for such an outcome. All the factors for impossibility of performance established.

While the land would still be conveyed, the enterprise for which the contract was made is impossible to perform. The contractual enterprise became impossible.

Doctrine expanded to sale of land. Remedy according to Frustrated Contracts Act. Para 7.. treated that it's straight frustration, impossible to satisfy.


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THE SEA ANGEL – EDWINTON COMMERCIAL CORP. V. TSAVLIRIS RUSS LTD. (2007 UK)

SHIP ENDS UP TRAPPED IN HARBOUR – FORESEEABLE RISK SO NO IMPOSSIBILITY

Facts: Edwinton owns Sea Angel, splits in two near Karachi Port Trust. Salvage by defendant. KPT retains boat as they claim the salvage was done negligently. Edwinton sues Tsavliris. Defendant claims frustration due to KPT's seizure.

Decision: Doctrine of frustration inapplicable.

Plaintiff asserts that detention by unreasonable port authorities is a risk of the industry and thus foreseeable. Foreseen events exclude doctrine of frustration.

Court wants a multidimensional approach to determining applicability of doctrine.

THE INTERESTS PROTECTED

WERTHEIM V. CHICOUTIMI PULP COMPANY (1911 UK)

JUST SETS OUT PRECEDENT FOR EXPECTATION DAMAGES

Rule: Places plaintiff, by money, in position have been in had the contract been performed. Lord Atkinson "party complaining should, so far as it can be done by money, be placed in the

same position as he would have been in if the contract had been performed"

BOLLENBECK V. CONTINENTAL CASUALTY COMPANY (1965 US)

RESTITUTION DAMAGES WHEN PLAINTIFF KEPT PAYING INSURANCE PREMIUMS AFTER EXPIRY

Facts: Plaintiff made insurance claim in 1964 against policy with defendant. Policy taken out in 1954. Company wrongly said plan lapsed due to non-payment in 1959. Plaintiff sues for return of all premiums.

Finding: Plaintiff entitled to recover premiums paid after wrongful termination in 1959.

Rule: Party seeking restitution after rescission must deduct benefits, if any, received under the

contract. Canadian courts might take expectancy route

Payment for claim, difference in switching insurance companies/policy price. Only "contract of utmost good faith" might change minds.

ANGLIA TELEVISION V. REED (1972 UK)

RELIANCE DAMAGES ALLOWED WHEN TOO DIFFICULT TO CALCULATE EXPECTATION


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Facts: Plaintiff wanted to make a film, incurred pre-contractual expenses (eg. director, venue, etc.) Contract made with defendant for him to be leading man, breaches 6 days before. Plaintiff sued for damages, but not expectancy (lost profits) because didn't know what they

would have been, so sue reliance, including for pre-contractual expenditure. Defendant says can only sue for post-contractual expenditure.

Rule: Pre-contractual expenditures are recoverable provided that they were in contemplation of

the parties as likely to be wasted if the contract was broken. If a breach of contract and if the plaintiff cannot prove their lost profits, and if the defendant

can't prove prospective loss, then reliance becomes the measure used. This isn't really said explicitly, because doesn't clearly show shifting of burden from

plaintiff to defendant, more like "Anglia can be read this way…" Application:

Reed would have known when he entered the contract that much expenditure had already been incurred, and if he broke the contract this is wasted.

Anglia can't show, neither can Reed, so reliance. Notes:

Anglia can be read in two ways: Reliance only when, or is a valid alternative all the time. Seems more like elect between, people will argue "Lord Denning says reliance is an

alternative" Also, the ability to claim pre-contract expenditures is made shady in this case by plaintiff

hiring defendant close to deadline.

HAWKINS V. MCGEE (1929 USA)

HAIRY HANDS, WONDER WHY?

Facts: Defendant, doctor, said: "I guarantee 100% good hand", induced patient into elective

surgery, failed to deliver. If it were torts, it would be how much money for the pain and suffering of the surgery, and

the value of the hand he had before and the worsened condition after. Court of appeal treats as a contract, says instruction to jury shouldn't have been how much

money to put in position if he hadn't had the operation, should be the difference between now and if the surgery had been successful.

Expectancy: Put plaintiff so far as money can do it, in position he would've been in if contract was

performed properly. Application:

True measure of the plaintiff's damages was the difference in value to him of a perfect/good hand, as had been promised, and the value of his hand in its present condition.

In this case contract was for a perfect hand – forward-looking nature of contracts. Torts is backwards looking (essentially reliance), trial judge had torts in his head, wrong

in assessing damages for pain and suffering, because that was part of the price plaintiff was willing to pay for good hand.


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SPECIAL PROBLEMS IN MEASUREMENT

CARSON V. WILLITTS (1930 ONCA)

CAN BE DIFFERENT WAYS TO CALCULATE EXPECTED POSITION – COURT CHOOSES EASY ONE

Facts: Defendant contracted to drill three holes. Drilled one then quit.

Rule: Difficulty of estimating loss is no reason for refusing to award any damages. Look at the heading, problems in measuring damages (cost of substitute performance, or

economic value) different ways to do it. Remember, two ways of expectancy here. Put me in the position I would have been in if drilled holes, found oil (hard to calculate). Give me three holes.

Problem: Royalties:

If you make defendant pay for two more holes then plaintiff gets 100% royalty and all holes

This puts him in better position than before the breach, better than expectancy. (100% + 3 holes vs. 50% + 3 holes).

GROVES V. JOHN WUNDER CO. (1939 USA)

HOW TO CALCULATE COST OF LEVELLING LAND – INCREASE IN VALUE OR COST OF PERFORMANCE?

Facts: Plaintiff leases land to defendant, contract stipulates at end defendant is to level property to

uniform grade. Defendant deliberately failed to do so. Two types of expectancy interest at play: The difference between the market value of the plaintiff's land in condition it was when the

contract was made (broken?) and what it would have been if the contract had been performed -> diminution of value -> $12k (plus interest, made $15k)

The cost of levelling the land, making the land as it was promised in the contract -> cost of performance -> $60k

Rule: Cost of performance -> "hypothetical peak of accomplishment (not value) which would have

been reached had the work been done as demanded by the contract". Application:

Defendant breach was wilful, decision of trial court (diminution) rewards bad faith and deliberate breaches. Defendant paid lump sum, and agreed to level the ground. This is his price for the contract, but by not levelling the ground, he has unilaterally

reduced the price he is paying (unjust enrichment?) Argument that it is unconscionable enrichment for plaintiff to get so much money because

his land is worth so little is wrong.


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No unconscionable enrichment when the result is simply to give one party to a contract only what the other has promised (particularly, as here where the delinquent has already been paid in full for the promise)

Shouldn't matter if plaintiff uses money to level ground or not either Absent economic waste, cost of performance applies. Diminution of value provides incentive to breach contract.

$60k to level vs. $12k for lawsuit, why not breach?

THOMPSON (W.L.) LTD. V. ROBINSON (GUNMAKERS) LTD. (UK 1955)

CAR WAS SOLD, BUT DELIVERY REFUSED, CAR WOULDN’T SELL SO DEFENDANTS HAD TO PAY

Facts: Defendants contracted to buy a car, then breached the contract by refusing delivery. Plaintiffs returned the car to their suppliers and claimed they had lost the profit they would

have made. They relied on s 48 of the Sale of Goods Act.

Ratio: Expectancy applies. When a buyer refused delivery of a contract good thereby depriving the seller of profit, the

buyer is liable for that lost profit. However, the buyer will only be liable for the losses he causes; if the good can be sold

elsewhere for the same profit, the buyer is not liable. The plaintiff must show that he tried to dispose of the good and mitigate his losses. If car had sold only nominal damages for storing car, interest on money.

Decision: Car didn't sell (supply>demand), defendants paid for car.

CHARTER V. SULLIVAN (1957 UK)

RENEGED ON DEAL TO BUY CAR, SOLD EASILY THOUGH

Facts: Same as Thompson v. Sullivan except that there was in fact a readily available market for the

car and it was in fact resold. Every car he gets of the type can be sold, so no lost volume (demand exceeds supply)

Appeal allowed, favour of the defendant, damages reduced to a nominal claim. Note:

Not positive, but even if your car sells to someone else, this isn't enough, unless they can sell every car they get their hands on.

Should apply to any context.

INJURIES & PUNITIVE DAMAGES

ADDIS V. GRAMOPHONE COMPANY LIMITED (1909 UK)

GIVEN SIX MONTHS NOTICE, BUT ESSENTIALLY FIRED IMMEDIATELY

Facts:


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Plaintiff employed by defendant as manager, could be dismissed by six months notice Was given to him, stripped of power, successor took job.

At trial awarded money for the "harsh and humiliating way in which he was dismissed". New employee made it impossible for him to do his job, essentially firing him without notice. Pay was largely in the form of commissions.

Held: Received compensation for what he would have made. Jury also gave extra, way beyond what else he would have got. Figured the jury must have compensated him for something else or punishing the company

for misbehaviour. SCC says damages can't do that. pg 80. Damages in the nature of compensation and not punishment, looking at behaviour or motive

is irrelevant. Psychological harm that is usually suffered is not as a result of breach of contract, as a result

of losing your job. Sucks to be fired, even legally. Rule:

Law of contracts does not award damages intangible injuries at all How some people read this case, reading it broadly

JARVIS V. SWAN TOURS LTD. (1973 UK)

WANTED AN AWESOME VACATION BASED ON CLAIMS IN BROCHURE, ENDED UP SHITTY

Facts: Solicitor had high hopes for 2 week Swiss vacation, fuelled by claims made in defendant's

brochure. In reality, an awful holiday, advertised claims were bogus.

Rule: When the points of the contract is to provide a pleasurable experience, or at least piece of

mind, and it fails to do so damages for mental aggravation can be awarded.

FIDLER V. SUN LIFE ASSURANCE CO. OF CANADA (2006 SCC)

COMPANY DOESN’T WANT TO ACKNOWLEDGE LIABILITY FOR DISABILITY BENEFITS

Facts: Contract for disability benefits. Company unreasonably refuses to acknowledge liability. Disability contract is not strictly a psychological benefit contract.

Promise to pay money. Disability contract may not be like a holiday, promise of a monetary benefit.

Foreseeable that an unreasonable refusal to pay benefit will result in psychological harm compensation.

Defendant insurance company denied plaintiff long-term disability benefits for five years. Awarded $20k for mental distress, SCC denied claim for punitive damages.

Held: Claims for mental distress do not require "independent actionable wrong", require plaintiff

to demonstrate that object of contract was to secure psychological benefit that brings mental distress upon breach, tha the mental distress was within the reasonable contemplation of


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the parties at creation and that degree of mental suffering was enough to warrant compensation.

Policy Considerations: Stiff upper lip expectation in commercial life, contracts normally concern commercial

matters, players in commercial game expected to meet breaches with mental fortitude; mental distress not foreseeable in general commercial contracts.

Court should ask 'what did the contract promise' and provide compensation for those promises.

Rule: No longer requires an independently actionable wrong, simply foreseeability

WHITEN V. PILOT INSURANCE CO. (2002 SCC)

HOUSE BURNED DOWN AND INSURANCE COMPANY REFUSED TO PAY THE REST OF POLICY

Facts: Plaintiff's house burnt down; defendant insurance company made single payment on policy

but refused to pay more, instead alleging arson in the case and taking appellant through eight week trial.

No evidence of arson at all; suggestion that defendant attempting to use plaintiff's poor financial shape to force acceptance of reduced claim.

At trial level, jury awarded a million dollars in punitive damages. No specific class of cases required for punitive damages.

Policy: Overcompensation of plaintiff a reward for performing useful service - only person in

position to invest legal costs in proceedings to prove defendant behaved abominably.

REMOTENESS

HADLEY V. BAXENDALE (1854 UK)

DELIVERY OF STEAM ENGINE PART WAS DELAYED DUE TO NEGLECT

Facts: Plaintiffs operated a mill, and a component of their steam engine broke causing them to shut

down the mill. Plaintiffs then contracted with defendants, common carriers, to take the component to W.

Joyce & Co. to have a new part created. When delivery was delayed due to defendants’ neglect, causing plaintiff’s mill to remain

closed longer than expected, plaintiffs sued to recover damage. Rule:

The damages to which a non-breaching party is entitled are those arising naturally from the breach itself or those that are in the reasonable contemplation of the parties at the time of contracting.

HORNE V. THE MIDLAND RAILWAY COMPANY (1873 UK)

SHOE MANUFACTURER’S SHIPMENT WAS DELAYED, HAD TO SELL AT A LOSS


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Facts: Exchequer, plaintiff shoe manufacturers had lucrative contract with French army requiring

shoe delivery by set date. Took shoes to defendant's station in time to be delivered, gave notice to stationmaster of

special circumstances. Shoes delayed, plaintiff obliged to sell at a loss.

Findings: Court held that no loss of profit damages would be awarded. No clear precedent: all previous HvB rule cases decided because special circumstances not

communicated. Policy:

Railway system economic backbone, couldn't protect selves against unusual losses; no desire that prices for freight rise in response.

VICTORIA LAUNDRY LTD. V. NEWMAN INDUSTRIES LTD. (1949 UK)

LATE DELIVERY OF A BOILER, COULDN’T TAKE A PROFITABLE CONTRACT

Facts: Late delivery of boiler from defendant to plaintiff, 20 weeks. Caused plaintiff to turn down a very profitable government contract. Plaintiff wanted to recover loss of profits, which they could have made had the boiler been

delivered in time. Held:

Plaintiff was able to recover regular profits, not extraordinary profits. Ratio:

In cases of breached contract the party is only able to recover the part of the loss reasonably foreseeable at time of contract.

It’s enough if party was likely to see the loss. For the plaintiffs to recover profit, the defendants would have had to know at the time of

contract the prospects and terms of such contracts.

MUNROE EQUIPMENT SALES LTD. V. CANADIAN FOREST PRODUCTS LTD. (1961 MBCA)

RENTED A TRACTOR AND IT BROKE DOWN, COULDN’T REMOVE WOOD

Facts: Defendant rented a second-hand tractor from plaintiffs for clearing roads so wood could be

brought to market, this much made clear by defendants. Tractor broke down within 2 days and was unreliable until abandoned. Defendant allowed damages based on lost profits as a result of being unable to remove 3,500

cords of wood in trial court. Used Hadley to show loss was “natural and probable consequence” plaintiff ought to have

foreseen. This is appeal. Application:

Special circumstances not communicated Miller C.J.M.: there were many special circumstances that weren’t communicated

No indications as to how much wood would be removed


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No indication that D was going to try and remove all the wood that season as a result of labour troubledidn’t let P know

Miller thought it was ridiculous that a 2nd hand tractor would be used for such a burdensome chorethis is clearly a special circumstance If the P’s had known they would have contracted itself out of liability

Miller has a problem with liability acting as insuranceunreasonable to think that lessor of 2nd hand tractor was insuring the removal of all of this wood

Also, Miller notes D’s made contract very late, it’s relevantbut this is not mentioned in Hadley or Victoria Laundry.

Rule: If we make the leasing company liable for damages we are essentially making them the

guarantor of the work, imposing a significant amount of liability where the special circumstances surrounding the amount of liability required were not stated in the contract. There must be proportionality between information given to other party and risk they are asked to undertake.

Failure to remove the timber is not a naturally flowing consequence of the breach and the lessor could not be considered to guarantee the removal of the timber, but only the clearing of the road.

SCYRUP V. ECONOMY TRACTOR PARTS LTD. (1963 MBCA)

RECEIVED A FAULTY BULLDOZER PART, CAUSED A BREACH WITH OTHER CONTRACT

Facts: Plaintiff entered into contract with defendant to provide a bulldozer part in anticipation of

an agreement with a third party (Supercrete). The defendant was informed of the second agreement. The part provided by defendant was faulty and caused breach between the plaintiff and

Supercrete. Plaintiff sues, claiming lost profits as well as value of lost part as damages. Trial judge held that Defendant was liable for both damages, and defendant appeals. Issue is: how much knowledge needs to be communicated with respect to the special

circumstances that increase a party’s profits from a contract? Held:

Appeal dismissed, if second contract had been honoured only damages relating to the part itself would be awarded.

Rule: The test in Hadley v. Baxendale is further watered down to knowledge of the existence of

special circumstances is enough to satisfy the test. Similar to Hadley, since the imputed knowledge was present (since defendant knew

consequences of plaintiff’s need for the part), but special circumstances were also communicated.

THE HERON II - KOUFOS V. C. CZARNIKOW, LTD. (1969 UK)

CHARTERED A SHIP, WAS SUPPOSED TO DELIVER SUGAR IMMEDIATELY ON DELIVERY

Facts: Plaintiff charters the defendant’s ship, the Heron II, to deliver sugar.


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Plaintiff had agreement to sell sugar immediately on delivery. Defendant was aware of sugar market in delivery location but not aware of agreement. Ship made voluntary detours and the market value of sugar decreased by the time the ship

arrived late to the port. Plaintiff is suing for lost profit from decrease in price between the time the ship should have

arrived and the time it actually did. Trial judge awards lost profit. Held:

Appeal dismissed. Defendant found to be liable for loss of profits. Rule:

There is a wide gap between what is probable and improbable, but foreseeable can cover both, thus foreseeability cannot be a test.

Application: A new standard to determine damages somewhere between Hadley v. Baxendale and Victoria

Laundry v. Newman is to be used; “not unlikely” is the standard, what would happen in majority of cases. Now there are three standards: Hadley v. Baxendale: Probable result, arising in the natural order of things. Victoria Laundry v. Newman: Forseeeable, “in the cards”. Koufos v. Czarnikow: Not unlikely, define probable as the “majority case”

THE ACHILLEAS - TRANSFIELD SHIPPING INC. V. MERCATOR SHIPPING INC. (2009 UK)

RENTED A VESSEL, IT WAS RETURNED LATE, HAD TO CHANGE PRICE FOR NEXT RENTER

Facts: Plaintiff ship owners leased to charterer defendants at a set daily hire rate. Contract gave latest date for redelivery. Market rates made unexpected change; owners made contract for charter at much higher

daily rate with fixed time for pickup of ship. Defendants ran over date of contract, delivered late. Plaintiffs required to renegotiate new contract at lower rate. Plaintiffs claim for difference in contract higher prices over whole length of new contract;

defendant says only liable for difference between market rate, charter rate for nine days delay

Court held in favour of defendant’s interpretation of damages, dicta in shipping cases supports this reading.

Rule: Extent of liability founded on interpretation of contract as whole, including commercial

context, means test does not impose greater liability than party could have reasonably been thought to undertake

Three-three split on case; commercial conditions side versus side saying that Hadley rule immediately applicable as volatile market not foreseeable when contract created.

MITIGATION

PAYZU LIMITED V. SAUNDERS (1919 UK)

SILK DEALER, SMALL DISCOUNT ON CREDIT SALES


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Facts: Defendant silk dealer contracted with plaintiff for material at a certain price. Contract included credit provision that allowed later payment and 2.5% discount on price. Mix-up led defendant to believe that plaintiffs could not pay, refused to make further

deliveries unless paid in case for each order. Could have paid in cash, and saved loss in market price difference, but refused to do so.

Ruling: Mitigation required: cannot recover for all losses, only those that could not be avoided –

given damages only for loss of 2.5% discount. Rule:

Plaintiff cannot recover for losses that could have been reasonably avoided. Question of what reasonable person would do in mitigation.

Not a question of law, but a question of fact on the circumstances of each case.

WHITE & CARTER (COUNCILS), LTD. V. MCGREGOR (1962 UK)

GARBAGE BIN ADVERTISEMENTS, CANCELLED, DIDN’T WANT TO PAY

Facts: Plaintiff supplied litter bins, made money by attaching ads. Defendant contracted to display advertisement. Three years later, sales manage made further contract but defendant immediately

repudiated. Plaintiff refused to accept, attached ads and displayed for three years. Sued for full payment.

Held: Majority decision gave full payment – highly criticized and not frequently followed. Dissent – goes against mitigation rules, created more losses, essentially forces inverted

specific performance on repudiating party. Only allowed to accept repudiation and claim damages. Obiter support in Finelli v. Dee).

Rule: When one party breaches, choice between accepting repudiation and claiming damages, or

completing contract and claiming full price. Not recommended to try to complete and claim full price, not followed in Canada.

FINELLI ET AL. V. DEE ET AL. (1968 ONCA)

PAVING A DRIVEWAY EVEN THOUGH THE CONTRACT HAD BEEN REPUDIATED

Facts: The customer had repudiated the agreement prior to the selection of a date for the work to

be done. The paving company affirmed the agreement, in effect, by paving the drive way while the

defendant was away from home and then sued for the price. Did paver have duty to mitigate?

Held: Laskin says he prefers dissent from White & Carter, finds in favour of the defendant. Laskin JA said that he was “attracted by the arguments of the dissent” by Lord Keith


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Nonetheless, he distinguishes this case from White & Carter b/c the contractor should have given notice of his intention to do the work before he did it. Performance of this contract required the defendant’s permission for the plaintiff to enter on the defendant’s land.

WROTH V. TYLER (1974 UK)

PURCHASE A HOUSE BUT THE SELLER’S WIFE REGISTERED A BINDING TITLE, MEASURE DAMAGES

Facts: Plaintiff agrees to purchase defendant’s house. Then the defendant’s wife registered a title that was binding on subsequent purchasers. Plaintiff sued for specific performance and damages. Value of house rose dramatically between time of agreement and trial. What is the proper time to measure damages when a breach of contract occurs?

Held: If damages are awarded in substitution for specific performance, the court should award

such damages as will put the plaintiff in to as good a position as if the contract had been performed; even if to do so means awarding damages assessed by reference to a period subsequent to the date of breach.

Contemplation of parties in Hadley only applies to type or head of damages contemplated by parties – it does not affect the quantum of damages under a specific type or head of damages (if parties contemplated the type of damage, it does not matter if they did not think the amount of damages would be so high – the breaching party is still liable).

Rule: The damages should constitute a true substitute for specific performance – giving as nearly

as may be what specific performance would have given. Generally, normal time to measure damages is when the contract is breached (difference

between contract price - value if would have been performed – and market price at date of breach – normally fixed date for completion) This case opened up normal rule – can get date of hearing when getting damages when

specific performance is claimed in this case.


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Interests Protected & Consequences of Contract - UVic … - LAW 108A Outline... · Web...

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