Professional Documents
Culture Documents
CHAPTER VIII. STANDARD FORM CONTRACTS AND EXCLUSION CLAUSES 467 103
1. INTRODUCTION 467 103
2. IMPLIED TERMS 468 104
3. JUDICIAL CONTROL OF STANDARD FORM CONTRACTS AND EXCLUSION CLAUSES 105
(A) INTRODUCTION 105
(B) INCORPORATION 484 105
(I) UNSIGNED DOCUMENT 484 105
(II) SIGNED DOCUMENTS 498 105
(C) STRICT CONSTRUCTION 509 107
(D) FUNDAMENTAL BREACH 512 108
(E) FUNDAMENTAL BREACH/UNCONSCIONABILITY POST-HUNTER 531 109
DAMAGES 113
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Terms:
Acceptance a final and unqualified expression of assent to the terms of an offer (per Treitel).
In unilateral contracts: acceptance is achieved by fully performing the required act or forbearance. There is generally no
need for the offeree to give advance notice of acceptance to offeror.
Contract a promise that is enforceable in the courtroom; Courts enforce mutual agreement freely consented to by each
party of the contract
Invitation to treat an expression of willingness to do business. The party “does not make an offer but invites the other
party to do so” (per Treitel). (Leading case Boots)
Mirror Image Rule The acceptance must precisely match the terms of the offer
Offer “an expression of willingness to contract on specified terms, made with the intention that it is to become binding
as soon as it is accepted by the person to whom it is addressed” (per Treitel). McCamus: quotation of price doesn't
constitute offer. Actions following offer can indicate acceptance (Canadian Dyers Association Ltd v Burton)
Unilateral contract "one in which one party makes an express engagement or undertakes a performance, without
receiving in return any express engagement or promise of performance from the other. Neither party is bound until the
promisee accepts the offer by performing the proposed act. It consists of a promise for an act, the acceptance consisting
of the performance of the act requested, rather than the promise to perform it.” Unilateral contracts are very rare.
McMacmus: a promise in exchange for an act; that the offeror is prepared to be bound by certain promises if the offeree
performs a stipulated act and performance will stipulate acceptance (Leading case Carlill v Carbolic Smoke Ball Co)
1. Introduction 15
Components of Contract
· Agreement: composed of offer to enter into contract and acceptance of that offer
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o Offer: expression of willingness to contract on certain terms made with intention that shall be binding as
soon as accepted by person whom is addressed
· Promises - contained in agreement are known as terms. The informing idea behind a contract is that there has been
a meeting of minds.
· Mutual Consideration - makes a promise enforceable. If someone promises to give you a $100 GC this is an
unsupported promise-> no mutual consideration, thus not enforceable.
Ex: Cause of Action: -> Breach of Contract (Entered into contract to buy a $10 textbook from 3rd year then 3rd year said
he got a better offer and wants more money) – ask for damages
- Deliberate: both parties must want to enter into a contractual relationship. “Intention to create legal relations”
- Voluntary: entered into of their own volition, willing and not forced
- Between 2 or more competent persons: Note: Oral Contract enforceable (with exceptions like Land)
Canadian Dyers Association Ltd v Burton (Invitation to Treat) **Intention & Subsequent Conduct important.
Facts: PL: Canadian Dryers (offeree) purchaser DF: Burton (offeror) vendor
● PL wrote to DF “With reference to purchasing property (25 Hanna Ave) kindly state your lowest price. Invitation to
Treat – PL inviting DF to make an offer
● DF: “Re house 25 Hanna. The lowest cash price I would care to sell is $1650…I would have sold before…but did not
for obvious reasons.” Quotation of a price and a manifestation to sell at that price through wording of “I would have
sold before.”
● PL: We would be pleased to have your Very lowest price for 25 Hanna Ave. Perhaps we could get closer together
than before. Rejection of offer, rejection of offer kills the offer & can no longer be accepted unless revived.
● DF wrote: Last price was the lowest price willing to accept, and if it were to any buyer the price would be higher.
Critical moment in case – Looks like renewal of offer, readiness to sell.
● PL sent cheque for $500. (Offered treated as accepted). Asked for draft of deed to be prepared.
● Solicitor sent draft of deed and said would be ready to close on Nov 1st.
● DF solicitor wrote that there was no contract and returned cheque for $500.
Issue: Is there offer and acceptance resulting in a contract? (Revival of counter-offer by DF?)
Results: Judge looked at Subsequent conduct of DF – Accepting $500 cheque, preparing draft deed, and expressing interest
to close on Nov 1st. The conduct of DF gives support that the DF intended to enter into a contract for sale.
● If Language ambiguous turn to conduct of DF. Correspondences viewed as an offer and subsequent acceptance by
preparing draft deed and expressing interest to close on 1st.
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Comments: Stronger view is that courts should not consider subsequent behaviour.
Encourages a rule that someone through mischief could reconstitute what happened in past to their benefit.
PL wants equitable remedy of “specific performance” - fulfillment of the property. Must prove to the court that damages
would not be adequate. If you can show that the property is unique, difficult to replicate in the market specific performance
could be awarded.
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) LTD (Offer to treat, retail display of products)
Issue Is self-serve pharmacy acceptable under the supervision of a registered pharmacist, in accordance with 18(1)a)(iii) of
the Pharmacy and Poisons Act 1933. (If the contract is made before reaching the till then we have breach of legislation)
Results: The contract is not completed at the shelf (invitation to treat) but at the cash desk where the pharmacist has final
authority. Given that the pharmacist has final say and is able to deny the “poison” to any person for any reason then yes, it
is in accordance with Pharm. & Poison Act. Appeal Dismissed.
Comments:
In Alberta we have the Human Rights Act and s4 stipulates private vendors cannot deny or discriminate with regards to
goods or services customarily available to the public.
Counter example: Women takes matched clothes and removes tags from pants. Cashier presumes clothes are set and
charges only for top but sells top/pant set. ABCA held that defendant was not guilty of theft but fraud based on Boots since
the cashier accepted the offer.
An advertisement can constitute a unilateral contract, which can be accepted by fulfilling the conditions of the contract;
no formal acceptance required. Advertisements of bilateral contracts are typically not held to be offers since further
bargaining is contemplated.
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Issues: Does the Ad constitute a unilateral contract (with who)? How does one interpret vague terms?
Results: Appeal dismissed. The contract was valid, and P is entitled to 100L.
● Vagueness to persons intended with whom to contract, only apply to those people who use smoke ball after Ad
issued.
● Vagueness as to how long immunity: Immunity is to last during use of ball – not unlimited period of time. PL caught
flu during flu season (reasonable period of time)
● Ad states that 1000L is lodged in bank for purpose of pay out. Intention is that if conditions were satisfied, since it
would be understood by the public as an offer to be acted upon. If one makes extravagant promises, there is no
reason why he should not be bound by them.
● DF claims cannot contract with world. Judge says it is an offer to become liable once conditions are met. Contract
may be with world, but DF liable only to limited portion of pop who follows conditions. Says this is not like an
invitation to treat like stating you have books to sell (where both sides can negotiate)
● Unilateral contracts - don’t have to communicate acceptance to offeror. Acceptance occurs at time performance of
the condition occurs. Do not necessarily require notice.
● Consideration – the mere inconvenience of PL using smoke ball counts as consideration
Comments: During time of “Fraudster” making extravagant claims to public so court wanted to hold them accountable.
Consider the Pepsi Co. action. PL claims that ad is an offer for a unilateral contract and relies on the Carbonic Smoke Ball
Case. The court held that a reasonable person would not have construed the ad as a reality
Goldthorpe v Logan 30
Results: Goldthorpe accepted “unilateral” contract by undergoing treatment. O’Byrne “Bilateral” Getting treatment and
“paying for services” = acceptance & consideration.
Goldthorpe was persuaded by AD, guaranteed results and DF did not make any stipulations or exemptions to exclude
anyone and as such is bound by that offer. Unlimited/absolute promises deemed as an enforceable promise.
Comments: Damages $113.25:The $100(expectation damages) + $13.25(restitution) is double compensation The $13.25
would have already been included in the $100, essentially rec’d the $13.25 twice.
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R v Ron Engineering & Construction Ltd (Contract A/Contract B)
Facts: - DF submit tender & gave $150K deposit. Tenders closed at 3:00pm. Employee who filed tender notice that tender
was $632K lower than next closest tender. DF sent Telex (after bid submitted) saying submitted tender with error of
$750,058 b/c forgot to include labour force amount. So bid should have actually been $3.5M. Due to error they want to
withdraw tender.” Contract A – acceptance occurs when submitted and closing date surpasses. No acceptance at this point
of Contract B, Contract B has to be signed and agreed to after acceptance of bid.
- In subsequent correspondence and proceedings contractor maintain that it had not withdrawn its tender, but that it was
incapable of being accepted. Law of mistake and enrolment.
Issues: Whether a binding contract had been entered into by way of unilateral contract; would the contractor be entitled to
withdraw the tender?
Results: “ Unilateral” contract formed by submitting tender – thus bid irrevocable outside T&C’s. Both parties thus obligated
to perform in contract. Wrong Contract A=bilateral.
- Deposit is clear – required to ensure performance of contract. Only recoverable under certain conditions not met & was
subject to forfeiture under another term of contract.
Comments: OLD LAW: A promise is enforceable if it is paid for… A promise not to revoke before closing=Gratuitous, owner
not giving anything return for consideration (only to consider offer). If wanted to make “firm offer” binding – then it would
mean every single offer that says “I won’t revoke” is technically binding. There would be not difference btw revocable and
irrevocable offers. NEW LAW: Invitation to tender/tenderer call=offer of Contract A. The Contract A contains rule governing
the bidding process. Typically Contract A provides for irrevocability of bids and forfeiture of deposit should selected
tendered not proceed with Contract B. Submission of tender = acceptance of Contract A and as irrevocable offer to enter
into Contract B. Contract B contains the terms of the main contract.
R v Ron Engineering & Construction (Eastern) Ltd. 561 - Law of mistake doesn’t really exist.
MJB Enterprises Ltd v Defence Construction (1951) Ltd. 36
Ratio: Court will imply terms when necessary. Privilege clauses won’t overrule implied terms. If the privilege clause is so
extensive contract A becomes void.
MJB Enterprises Ltd v Defence Construction (Implied Terms & Privilege Clause)
Facts: MJB submitted a tender in the context of a privilege clause which stated:
“the lowest or any tender shall not necessarily be accepted.” Defense awarded the tender to the lowest bid by Sorochan
BUT Sorochan’s bid was a compliant bid. MJB’s bid was the lowest compliant bid.
Issue: Can Defense rely on its privilege clause as a defence to MJB’s action?
Results: Presumed intentions that court implied “that bids submitted would comply” although yes owner does not have to
take any bid but if they are going to take a bid it must comply. **Implied terms must have a certain aspect of obviousness to
it.
Comments: Breach Contract A = expectation damages, MJB wants the profit they expected to make on the bid had the
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contract have been performed.Court – on “balance of probabilities” court sure that Owner was going award bid and choose
a tender, therefore DON’T discount for contingency b/c had they not have chosen SORO’s bid, they would have “Likely”
chosen the next best bid, MJB.
3. Communication of Offer 45
4. Acceptance 52
Facts: Evans, DF, offer to sell land for $1800. Livingstone replied “Send lowest cash price. Will give 1600 cash.”. DF replied
“Cannot reduce price” revival of offer. PL immediately after wrote accepting for $1800.
Issue: Is there a contract? Is the DF’s statement “Cannot reduce price” a revival of the first offer or an implicit rejection
Results: Binding contract for the sale of the land to which PL is entitled to specific performance.
Comments: Notwithstanding the rejection of the $1600 counteroffer, the initial offeror signals an interest in continuing the
negotiations with the offeree, it may be held that the offer’s conduct has the effect of reviving the initial offer by stating
cannot reduce price.
Last shot/performance doctrine: Every new form, with new terms, is a counteroffer (“mirror image” rule). When conduct
follows that can be considered to constitute acceptance an agreement is formed based on the terms of the last form
utilized. The terms of the party who “fires” the last document before performance prevails.
Cons:
1. Last shot ignores Mirror-image rule (forms exactly match = contract) the parties don’t have an agreement until
performance yet parties might construe that they have a binding agreement (i.e. buyer awaits his purchase
unaware the seller is not performing)
2. It is arbitrary that the terms of the last form stands
3. The virtue of certainty is “attained by ignoring reality and mechanically rendering formalistic decisions.” Among
other matters, the rule also promotes what he calls silly gamesmanship (where people just send forms back and
forth and back and forth).
Butler Machine Tool Co v Ex Cell O Corp. (1979) Court of Appeal London Wales (Battle of the forms
Facts: Seller (Butler Machine) provided quotation for machine with terms (including price variation clause & “terms prevail
over any terms and conditions in the buyer’s order”) (offer). Buyer submits order form with own terms (excluding a price
variation clause) with a tear-off form that invites sellers “to accept this offer” as per new terms and condition which cannot
be “unqualified assent” therefore counter offer. Seller's return the slip with a cover letter stating acceptance “in accordance
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with seller’s quotation”
Results: The documents must be considered as a whole “terms constructed together”. Together, it is clear the contract was
formed on the on the buyer’s terms and the cover-letter reference to “quotation” was referencing the quoted price not the
quoted terms from the seller’s quotation.
Comments: - Criticism – the judge should interpret based upon what the parties intended not what judge thinks should
have happened. Another result is determining contract is “ad idom” – not in agreement or do not have consensus – and as
result there is not contract.
Lord Denning proposes the Last Shot test is out-of-date and proposes new tests:
1. First blow: party who offers terms first prevails unless the other side draws material changes in their terms to the
attention of that first party.
2. Shots fired on both sides:
“The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious
result, all well and good. If the differences are irreconcilable, so that they are mutually contradictory, then the conflicting
terms may have to be scrapped and replaced by a reasonable implication.”
Cited in Tywood but not fully adopted by Canadian Courts.
Issue: Is the arbitration clause contained in two purchase orders issued by the DF buyer enforceable?
Decision: Arbitration clause is not enforceable as the judge does NOT rely on the last shot test. DF did not bring the new
arbitration clause to the attention of the PL and it seems neither party considered any terms other than those found on the
face of both documents.
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Comments: Themes of Denning’s third theory from Butler are expressed. Case does not follow the mirror image & last shot
fired tests. Court considers the reasonable implications of the terms.
Issue: Are the terms of the license binding which are not known at time of purchase? (i.e. when contract is formed).
Ratio: Shrinkwrap terms binding b/c unreasonable to put infinite text on box, also electronic purchases makes boxes
irrelevant.
Clickwrap licences are reasonable offer and clicking “I accept” constitutes acceptance.
Unilateral contract: acceptance is achieved by fully performing the required act or forbearance. There is generally no
need for the offeree to give notice of acceptance to offeror.
Facts: Dawson (Appellant, lapsed mineral right owner), Helicopter (Respondent, staker)
Springer and Dawson discuss developing the property over which Dawson once had a claim.
Significant document from Springer to Dawson: “[If I can secure a pilot to take us in] I hereby agree that if
you take us in to the showings and we think they warrant staking, that we will stake the claims and give you
a 10% non-assessable interest.”
Dawson: promise to try to get military leave as soon as Springer gets a pilot. (contract)
Springer: doesn’t want to take trip to scope property as he has been told it has unfavourable conditions
(Suggesting no contract btw parties).
Springer Incorp’s a company to develop claims for mineral rights in Dawson’s areas.
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Issue: Courts will endeavour to regard the contract as bilateral in order to protect the offeree pending complete
performance.
Comments: This means that Dawson & Springer were in contract whereby their primary obligations to perform were
contingent on the fulfillment of certain conditions such as securing a pilot; securing leave; etc. Because the parties are in a
contract, they have binding subsidiary obligations.
Had this been unilateral contract this argument would have failed (succeeds as bilateral)
Felthouse v Bindley
Facts: Felthouse PL (uncle, purchaser) Bindley DF (Auctioneer)
COMMUNICATION FROM UNCLE TO NEPHEW: “If I hear no more about him, I consider the horse mine at 30 pounds and 15
shillings. Offeror waiving communication of acceptance.
No reply from nephew. Ambiguous & confusing…
Nephew tells auctioneer not to sell the horse b/c it was already sold [to uncle]. The auctioneer forgot these
instructions and did sell the horse at auction to someone else.
Feb 27 Nephew writes to uncle that auctioneer sold horse admitting error.
Issues: Can an offeror waive the requirement for communication in bilateral contract? Is silent acceptable?
Results: Offeror waiver of communication – (Nephew) offeree did not communicate acceptance. Silence is not acceptance:
acceptance would have taken place on Feb 27th so technically the horse already sold in auction & uncle not entitled to
horse.
Comment: Conversion (auctioneer selling horse out of his authority) can only succeed if uncle owns the horse. Uncle
doesn’t own horse so no conversion.
Case may not be decided correctly:
Per Treitel, “the need to communicate an acceptance can be waived, and it seems that the uncle’s letter did waive it. In
view of these facts, the actual decision is hard to support.”
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now they are obligated to pay.
When services provided for your benefit & you have acquiesced in the taking service, you are required to pay for it.
Comments:
Per McCamus, conduct unaccompanied by any explicit undertaking may constitute acceptance: “The general principle is
well established and perhaps more obviously applies in circumstances were some positive action on the part of the offeree
– such as a seller sending goods in response to an order or a buyer accepting delivery of goods – where the conduct in
question plainly signals agreement to the terms of the offeror.”
Per Williston on Contracts, quoted by the SCC: “Silence may be so deceptive that it may become necessary for one who
receives beneficial services to speak in order to escape the inference of a promise to pay for them…[T]he ordinary implication
is that the services are to be paid for at their fair value, or at the offered price, if that is known to the offeree before he
accepts them.”
Could also argue unjust enrichment: If there has been enrichment and expense of one party, with no reason, even with no
contract.
o If you have “enrichment” (DF Irving gets services)
o a corresponding deprivation (PL provided services)
o absence of legal (juristic) reason supporting enrichment (no reason for enrichment they expected to get
paid part of commercial business)
Per Treitel: over a lengthy period of time, retailer has placed offer to wholesaler who has always accepted by simply
sending to goods. Wholesaler does not want to fill the order.
‘in such a situation, it may not be unreasonable to require the offeree to give notice of his rejection of the offer,
especially if the offeror, in reliance on his believe that the goods would be delivered in the usual way, had
forborne from seeking an alternative supply.”
Eliason v Henshaw 77
Eliason v Henshaw
Facts: Feb 10 Buyer (DF) contacts sellers (PL) by mail, offering to purchase flour from them. Letter stipulates that acceptance
was to be made on the ‘return wagon’ to Harper’s Ferry. Offeror master of own offer.
Feb 14 Sellers receive the letter. Feb 15: Sellers accept the offer but send acceptance to Georgetown by mail on Feb
19th instead of by return wagon to Harper’s Ferry. Wrong method of transportation and wrong location.
Feb 25: Letter from buyer to seller, acknowledging seller’s letter of Feb 15: “I didn’t hear from you so I purchased
elsewhere, and I requested answer by return wagon next day which you did not abide by”
Seller delivers flour anyway and the buyers refused delivery, alleging no contract.
Issue: We have an offer, was it accepted?
Results: No contract btw the parties. No confusion as to place of letter to return “back to Harper’s Ferry” and this was
distinctly indicated by the mode pointed out or the conveyance of the answer.
The place where answer was to be sent, constituted an essential part of the PL’s offer.
Acceptance communicated at a place diff from that pointed out by PL, and forming part of their proposal, imposes
no binding obligation (unless they want it to which they don’t).
Could the seller have accepted by dispatching arriver who arrived at Harper’s Ferry before the return wagon. If you
choose mode of transportation that is the same or better it may be fine. But if you do not follow terms of contract
to the letter you risk the judge finding that since it wasn’t followed exactly than it is not valid.
5. Communication of Acceptance 79
The offeror is master of his or her own offer. Acceptance must be compliant with any mandatory method of
acceptance specified.
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Communication of Acceptance: General rule, per Treitel: acceptance has no effect (ie: is not complete) until it is
communicated to the offeror.
1. Purpose of the communication rule (protect from mischief that law doesn’t want) To protect offeror – so that
offeror knows that she/he is in a contract
2. To protect offeree – so that offeree does not have to take the trouble of rejecting every offer she/he receives
1. Offeror waiver of the communication requirement in the context of a unilateral contract: is silence acceptance.
Carlill – per Bowen L.J.: “As notification of acceptance [in this case] is required for the benefit of the person who makes
the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so…and if
the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal
without communicating acceptance of it to himself, performance of the condition is sufficient acceptance without
notification. AKA not necessary for communication
2. Offeror waiver of the communication requirement in the context of a bilateral contract: is silence acceptance?
Assuming no prejudice to the offeree (i.e. no foisting of an obligation to reject) why shouldn’t the waiver be effective?
The postal rule only applies if it is reasonable to use the post Per Treitel: “The posting rule only applies when it is
reasonable to use the post as a means of communicating acceptance. Generally, an offer made in a letter sent by post
may be so accepted.
Per Treitel: The postal rule does not apply to acceptances made by some instantaneous mode of communication, e.g.
by telephone or by telex.
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Such acceptances are therefore governed by the general rule that they must have been communicated to the
offeror.
Postal rule does not apply in such cases b/c the acceptor will often know at once that his attempt to
communicate was unsuccessful, so that it is up to him to make a proper communication. But a person who
accepts by letter which goes astray may not know of the loss or delay until it is too late to make another
communication.
Fax messages seem to occupy an intermediate position. The sender will know at once if his message has not
been received at all and where this is the position, the message should not amount to an effective acceptance.
But if the message is received in such a form that it is wholly or partly illegible, the sender is unlikely to know
this at once and it is suggested that an acceptance sent by fax might be effective in such circumstances.
The same principles should apply to other forms of electronic communication such as email…effects of
unsuccessful attempts to communicate should depend on whether the sender of the message knows (or has
the means of knowing) at once of any failure in communication.
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time to open the email would have been.
6. Termination of Offer 95
An offer is terminated by withdrawal/revocation
Dickinson v Dodds 95
Comments: Firm offer to keep it open until Friday = gratuitous promise since there is no consideration. (revocable at any
time).
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Contrast to “option contract” where optionee pays “consideration” to keep offer open = binding contract.
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(b) Lapse 102
An offer which states that it will expire at a certain time cannot be validly accepted after that time.
An offer which does not expressly provide for how long it is open is said to lapse after a reasonable time
Comments: **Manchester – Clark case seems to be all about offeror. Suggest that SCC is sides with offeror and their
perspective so theory 1 likely better. An offer contains the implied term that it is automatically withdrawn by offeror after a
reasonable time (This test looks at the offeror)
Argument for offer open for longer period:
- Land stable, doesn’t expire (like produce) & offer should be open for longer period
- It’s winter & cannot use land till spring, also tenant in place until March
- Could be norm in community for Nov being hunting season – not expect Clark to be home
Offer open for shorter period:
- Barrick urgency to sell land “ASAP” and deal to close immediately.
- Closing Jan 1st, doesn’t leave much time to close if wouldn’t get acceptance until Dec15th-ish.
Manchester: What counts as a reasonable time can be assessed from two perspectives
1. An offer contains the implied term that it is automatically withdrawn by offeror after a reasonable time (This test
looks at the offeror)
2. When an offer is not accepted within a reasonable time, it has impliedly been rejected by offeree. (This test looks at
the offeree). An offer is terminated via rejection
1. Introduction 109
Per Treitel: “an agreement is not a binding contract if it lacks certainty, either because it is too
Although the parties may have reached agreement in the sense that the requirements of
offer and acceptance have been complied with, there may yet be no contract because the
terms of the agreement are uncertain or because the agreement is qualified by reference to
1. Courts will not make an agreement for the parties (If parties don’t have contract court won’t enforce one)
2. That is certain which is capable of being rendered certain (only infer terms based on the explicit writing in the
document in question)
2. Vagueness 112
Per Treitel, where the courts cannot determine on what terms the parties have purportedly contracted, due to
vagueness, the agreement is unenforceable.
That said “courts do not expect commercial documents to be drafted with strict precision, and will, particularly if
the parties have acted on an agreement, do their best to avoid striking it down on the ground that it is too
vague.”
Per Anson’s Law of Contract: The line between discovering the agreement of the parties and imposing an agreement on
basis of what the Court considers the parties ought to have intended can be fine. The Court must be satisfied that the
parties have in fact concluded a contract, and not merely expressed willingness to contract in the future
It may have regard to what has been said and done, the context, the importance of the unsettled matter, and
whether the parties have provided machinery for settling it.
A. Criteria/Formula
Per Treitel: An agreement may fail to specify matters such as price or quality but lay down criteria for determining
those matters. For example, in Hillas…an option to buy timber was held binding even though it did not specify the price,
since it provided for the price to be calculated by reference to an official price list.
Per Treitel: “The agreement was upheld as the standard of reasonableness could be applied to make the otherwise
vague phrase certain.”
Hillas v. Arcos (1932)(HL): content of option clause is determined with reference to other sections of the agreement or
is derived from a reasonableness standard. It is the duty of the court to construe documents fairly and broadly. This
agreement is complete and is not dependent on any future agreement for its validity. Court says that May v. Butcher
does not apply here.
Ex: O’Byrne to sell car to Yahya. Price is MKT value as set by Dean. The Dean is the “machinery” which is the
person to set the value. What if Dean says No I will not set the price for contracts btw faculty. In this case the
“machinery” has failed. If the parties intended to set “reasonable” price court can decide.
B. Machinery
Per Treitel, “Alternatively, the agreement may provide machinery for resolving matters originally left open.”
Sudbrook Trading v. Eggleton [1983] (H.L.): (not in CB.): Lease gave tenant the option to purchase the property “at such
price as may be agreed upon by two Valuers, one to be nominated by” each party. Mechanism failed because lessor
refused to appoint a valuer(!!)
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Issue is whether price mechanism is an essential term [to distinguish from May]. If it isn’t and a reasonableness standard
is consistent with the parties’ intent, the court can set the price.
The valuer’s clause amounts “to an agreement to sell at a reasonable price to be determined by the valuers;
and the stipulation that each party should nominate one of the valuers was merely ‘subsidiary and inessential.’”
Terms “to be agreed” Key issues for the cases below in this section: when can a “price to be agreed” clause be
interpreted as a clause which means that the price is to be fair and reasonable? Does the contract contain a device for
creating certainty?
Per Treitel, seems that parties did not intend to be bound until they had agreed upon price.
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uncertainty
Arbitration clause does not apply. Must have agreement first then can go to arbitration. Failure to agree is not that
same as dispute.
Lord Dunedin: Parties were not silent so SGA cannot apply.
Per Treitel, parties here did intend to be bound immediately, in spite of a provision requiring further agreement.
One of the mechanisms here had broken down [at a price agreed by the parties from time to time] but May was
distinguished because the unusual arbitration clause here referred not to this agreement [as in May] but to “the subject
matter or construction of this agreement.” It could therefore be used to fix price.
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Foley v Classique Coaches Ltd
Facts: Sale of land subject to DF entering into a supplemental agreement to purchase all gas needed for their business from
the Plaintiff. Clause 8 provided:
“If any dispute or difference shall arise on the subject matter or construction of this agreement the same shall be submitted
to arbitration ….”
Issue: Is there a contract or an agreement to agree?
Results: Both parties believed that they had a binding agreement and had acted on it for a number of years; it formed part
of a larger bargain. Court appears to be saying presence of the arbitration clause on these facts means that “it is to be
implied in this contract a term that the petrol shall be supplied at a reasonable price and shall be of reasonable quality.”
Plaintiff’s arguments
1. Arbitration clause applies. Per Scrutton L.J.: “this arbitration clause applies to any failure to agree to the price.”
Courts accepts b/c the arbitration clause applies to any dispute of “subject matter” meaning price of gas.
2. The parties intended that a reasonable price be paid for the gas. Per Scrutton L.J.: “By analogy to the case of a tied
house there is to be implied in this contract a term that the petrol shall be supplied at a reasonable price and shall
be of reasonable quality.”
Compare to Hillas court jumping through hoops to make the contract valid. Imply “reasonable” in all terms like
price, delivery etc.. Arbitration clause specifically applies to “subject matter” price of gas so court wants to apply
reasonable price.
Anytime there is an implied term (through business efficacy and those principals) it is there b/c judge says implied
term is there.
Comments: Courts will be prepared to find a way to make a contract certain, but they wont make the contract for the
parties. They agreed they had a contract, they acted on it for 3 yrs and they had a dispute mechanism process
A tide house means purchaser has to buy from one particular source so therefore must be reasonableness standard that
emerges from this agreement meaning we have a contract.
Reasonableness standard: In May & Butcher parties did not have contract therefore did not imply reasonable price
and cannot use arbitration until after contract already finalized; there is a reasonableness standard in Foley.
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Issue: (1) Is clause 7 uncertain? (2) Does the federal government have an implied obligation to negotiate in good faith under
clause 7?
Results: Interprets the section of the clause requiring the parties to agree on the rent to mean:
1. Empress could not be compelled to enter into a market rental value;
2. Here was an implied term that landlord will negotiate in good faith; and
3. An agreement on market rate would not be unreasonably withheld.
Court - Implying these terms was acceptable for reasonability and for reasons of business efficacy. In the evidence adduced,
Empress had not negotiated in good faith by adding the $15,000 "penalty".
Duty to negotiation in good faith – if there is no contract there is not duty to negotiate but if there is an existing
contract then they must negotiate in good faith.
Allowed to be unreasonable to a certain extent though.
Trial judge found Council to be in breach of contract for failing to conduct the negotiations in good faith
Issue: Is Council in breach of a process contract obliging it to negotiate in good faith? Agreements to agree not enforceable
but is this a contract or not?
Past case law:
“a promise to negotiate in good faith is illusory and therefore cannot be binding:
Legally, “neither party is under any legal duty to consider the interests of the other”
Reasonably ≠ good faith
“good faith” is illusory and therefore cannot be binding
Results: An obligation to negotiate in good faith is subjectively honest & objectively reasonable. There is no objective
criterion to measure conduct.
NOT IN Canada court talks about Good faith meaning “best efforts” as seen in Empress. The common law is
adversarial system, do not have to look out for best interests of other party, but cannot act dishonestly and
knowingly mislead as seen below in Bhasin.
Walford decision. PC raised issue whether agreement to negotiate in good faith is not synonymous to negotiate
with best efforts. (In Canada this is best efforts)
On Appeal council argued that there was no contract, an agreement to negotiate in good faith (as part of a process contract)
is not enforceable because it lacks, here, a specific procedure by which courts can reasonably determine what the parties
are required to do and whether they have done it (agreement to agree).
Comments: McCamus: No duty to negotiate in good faith at large (no existing contract) cannot be fraudulent but you can
be unreasonable if you want. However, an obligation to bargain in good faith when in existing contractual agreement.
Tendering contract Courts generally imply must act in good faith.
While Canadian case law remains mixed, the preponderance of judicial authority rejects recognition and enforcement
of a contractual duty to negotiate in good faith as a general principle.
Yet, recent Ontario case law the supports that good faith applies to negotiations
When parties agree in an existing contract to negotiation a renewal or another contract related to a first. An
express or implied duty to negotiate the new contract in good faith is contractually enforceable if the agreement
provides some objective criteria (Empress Towers and Mannpar)
o Is there really a distinction between re-negotiating and negotiating de novo?
McCamus: “the prospects for the recognition of a duty to bargain in good faith in the absence of a pre-existing
contractual relationship do not appear to be promising”
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In Light of, this might change:
Timberwest 2014 BCSC 2433: wherein the court applies Bhasin. It concludes that the renewal clause mandating good
faith in negotiationsrequires the defendant to take an “honest and reasonable” approach to renegotiating the rates. (Note the court
found that the renewal clause was sufficiently certain to be enforceable.”
Bhasin didn't specifically discuss negotiations but the court in Timberwest applies it regardless.
Bhasin v Hrynew (Duty to act Honestly & Organizing Principal of Good faith)
Facts: Can-Am Mkter of education savings plans to investors. Mr Bhasin & Co was an enrollment director. The relationship
between Bhasin and Can-Am was governed by a commercial dealership agreement.
Similar to Franchise agreement but a bit different. Bhasin owed Fiduciary duty to Can-Am & could only sell Can-Am
products. Bhasin could not merge, sell Business w/o Can-Am approval. Can-Am owned customer list.
Agreement between Bhasin and Can-Am was an expiry/termination clause which said agreement was for 3 years, &
will be automatically renewed for another 3 years subject to 6 months notice of non-renewal. No direction of how
renewal clause can be exercisable.
Agreement clause intent was to exclude any outside source for contract, whatever is written down in contract is ALL
that exists. Cannot imply terms.
Problems began when a competitor of Bhasin, Hrynew, moved his agency to Can-Am. Hrynew wanted Bhasin’s mkt
and Can-Am wanted to force merger, Bhasin had no interest in merging.
Can-Am appointed Hrynew to conduct audits of the enrollment directors in its stable in response to AB securities
legislation. Bhasin refused to give confidential info about business to Hrynew.
Most seriously, however, Can-Am lied/mislead Bhasin, including being equivocal about whether the merger with
Hrynew was a “done deal” even though in plans outlined to the Securities Commission, Can-Am committed that
Bhasin would be working for Hrynew’s agency.
Bhasin dug in his heels and refused to allow Hrynew to continue his audit. Can-Am threated to terminate agreement
and in fact did so. Bhasin lost the value of his business as well as the majority of his sales staff who went over to
work for Hrynew’s agency. Bhasin was forced into less lucrative work with a competitor of Can-Am.
Bhasin successful at trial for breach of contract & overturned at ABCA.
The ABCA found that there was no duty of good faith performance engaged by the contract because: (1) a court cannot
imply a term that conflicts with an express term; (2) establishing any such a term involved violating the parol evidence rule;
and (3) the contract was governed by an entire agreement clause.
Issue: Do people or businesses contractually owe each-other a duty to act in good faith?
Results: SCC finds No term of good faith in the contract between Can-Am and Bhasin because it falls outside of existing
situations and relationships where good faith is implied (insurance, franchise). As well, the term cannot be implied as that
would be contrary to the entire agreement clause. Cannot imply term of good faith b/c of agreement clause.
Can-Am is in breach of the new duty of honesty in contractual performance. Simply that parties must not lie or
otherwise knowingly mislead each other about matters directly linked to performance of the contract. But for this
new duty Bhasin would not have succeeded. Had Can-Am been honest in contractual performance, Bhasin would
have sought to sell or otherwise monetize his agency before Can-Am triggered its decision not to renew.
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The new duty makes things more just
Bhasin awarded value of his business at time of breach
Comments: Duty of honesty, per SCC
Is not a term - good faith would be a contractual term
Duty of honesty comes from new “organizing principal of good faith”
Operates irrespective of parties’ intention
May be subject to modification by agreement (TBA)
Hybrid btw contractual term & doctrine (ex unconscionability) therefore not excluded by operation of a “generically
worded” entire agreement clause. Like a term, however, its violation is considered a breach of contract sounding in
damages.
FIDUCIARY DUTY: engages “duties of loyalty to the other contracting party or a duty to put the interests of the other
contracting party first” (Bhasin, para 65). It is “a general duty to subordinate his or her interest to that of the other
party” (Bhasin, para 86).
GOOD FAITH AS AN ORGANIZING PRINCIPLE: is context-specific (Bhasin, para 69) but includes the concept that “parties must
perform their contractual duties honestly and reasonably, not capriciously or arbitrarily”(Bhasin, para 63). It
“exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have
appropriate regard to the legitimate contractual interests of the contracting partner” (Bhasin, para 65). It must be
“applied in a manner that is consistent with the fundamental commitments of the common law of contract which
generally places great weight on the freedom of contracting parties to pursue their individual self-interest” (Bhasin,at
para 70.)
DUTY OF HONESTY IN CONTRACTUAL PERFORMANCE: is a manifestion of the good faith principle. The duty applies to all
contracts (Bhasin, para 33) regardless of contractual intention (Bhasin, para 74) but is not a term (Bhasin, para 74 of
Bhasin). It does not mandate disclosure but does forbid lying or knowingly misleading “on matters directly linked to the
performance.” (Bhasin,at para 73).
GOOD FAITH AS A TERM: is also a manifestation of the good faith principle. No express definition is offered. Gateway v
Arton 1 is cited but with no endorsement.2
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UNCONSCIONABLITY: is based on “consideration of fairness and preventing on party from taking undue advantage of the
other” (Bhasin at para 43).3
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has been approved and executed
Notes:
Where it is clear that parties intend to be bound, courts will sometimes find a contract exists notwithstanding that
dimensions of the transaction are left to be worked out in the future.
1. As a contract
The following criteria always apply:
Protects one party b/c there is a legal obligation to do something even if there is not consideration.
3. Estoppel: In a limited range of cases, law prevents a party from breaching his or her promise, at least to the
extent required to avoid injurious reliance. Even when the promise is not supported by consideration nor given
under seal.
Per Treitel:
1. Consideration is mainly about reciprocity: "something of value in the eye of the law" must be given for a promise in
order to make it enforceable as a contract.
2. Consideration is either some detriment to the promisee (in that he may give value) or a benefit to the promisor (in
that he may receive value). Usually, this detriment and benefit are merely the same thing looked at from different points
of view.
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A – I promise to pay you $5 if you mow my lawn when I go on vacation.
Nominal consideration is good consideration (even if belief that it is inadequate). Where do you draw the
line of the adequacy of consideration? $20, $10, $2… who knows
Unilateral contract: Essence of a `unilateral' contract is that neither party is bound until the promisee accepts the offer
by performing the proposed act....It consists of a promise for an act, the acceptance consisting of the performance of
the act requested, rather than the promise to perform it.
All offers technically unilateral but true unilateral the distinction is that the offeree is not bound to do
anything BUT OFFEROR has bound themselves to do something if the party does the requested act.
Bilateral contract: Contracting parties are bound to fulfil obligations reciprocally towards the other. Contract formed by
the exchange of promises in which the promise of one party is consideration supporting the promise of the other as
contrasted with a unilateral contract which is formed by the exchange of a promise for an act.
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Governors: there was consideration because the College increased expenditures for the purposes stated on the pledge
Reliance on promise doesn’t confer a gratuitous promise into contractual promise.
In past case law that supports this claim, there was personal participation in the action of the promissee as a result
of which the expenditure
There is no evidence that without Boutillier’s donation the project would have been stopped
The acts of a promissee cannot turn a promise into something binding
Usually some specific use of money must be condition of the donation which can be consideration. Dalhousie
receiving promise and they have to be doing something in exchange for receiving promise from Boutilier. Must
purchase promise.
Held:
That this gratuitous promise did not receive any consideration, and therefore that it is not a binding agreement. When
the promise is not purchased we don’t want to always enforce to be careful not to change charitable donations to
obligations.
Comments:
Pro Donee cases acts that donee impliedly undertakes to carry out purposes of subscription cards. Enforce Payment.
Pro-donor cases court will never find consideration even where specific acts are requested… Never enforced.
Court took middle road for consideration present if express promise by Dal to do something specific.
Eastwood v Kenyon
Facts: Eastwood(PL) takes care of Sarah after her father dies. Kenyon (Sarah’s husband) promises to pay the debt for
Eastwood. In return, Eastwood promises to handle old debt from Sarah. Sutcliffe: deceased father of Sarah Blackburn:
creditor of Eastwood. Eastwood borrowed money from Blackburn and used it for Sarah's benefit.
Issue: Is consideration present? Is past consideration valid? Or is it gratuitous?
Results: Eastwood's theory: The fact that Eastwood took care of Sarah when she was an orphan and spent money to do so
IS THE CONSIDERATION for Kenyon's subsequent promise to repay Eastwood's promissory note.
The problem: The "consideration" supplied by Eastwood PREDATES the promise. How can
Eastwood's taking care of Sarah support a promise by Kenyon which is made years later?
Common law rule: past consideration is not good consideration. Past consideration is no consideration because it provides
no link between the alleged consideration and the promise made. Plaintiff’s action fails because the promise sued upon had
not been purchased by him. Kenyon’s promise to pay had not been purchased by the promisee. Present promise MUST be
purchased to saying something happened years before is not consideration. Taking care of Sarah would have to occur at
“roughly” same time as Kenyon’s promise or they cannot be connects.
Comments:
Moral consideration is not good legal consideration (Past consideration here not good)
Exceptions: Infants contracts
o Necessaries supplied by c/o to infant who upon reaching age of majority agrees to pay. This is enforceable
even though consideration is past. Thus Sarah could have been successfully sued by Eastwood.
Lampleigh v Brathwait
Facts: Assumpsit: An express or implied promise, not under seal, by which one person undertakes to do some act or pay
something to another.
1. Brathwait killed one Patrick Mahume
2. Brathwait, a felon, now wants a pardon from the king
3. Brathwait asks Lampleigh, a lawyer, to ride to Roiston and seek a pardon for Brathwait from the King
4. Lampleigh rode off to Roiston to try to secure the pardon
5. Upon Lampleigh’s return, Brathwait agreed to pay Lampleigh 100 pounds but now refuses to pay.
Issue: Is there consideration supporting Brathwait’s promise to pay? Or do we hit the wall of past consideration is no
consideration?
Treitel – An act done before expressed promise can be good consideration but you must satisfy three conditions:
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Contractual Quantum Meruit: reasonable sum to be paid
1. Act must have been done at request of promisor (Felon ask lawyer to ride to get pardon)
2. Must be understood that payment would be made (Lawyers don’t go ride to see king for free)
3. Payment, if promised in advance, would have been legally recoverable (was something that could have been
enforceable, ex: hit man contract not enforeable)
Why are some kinds of promises enforced and others are not?
NIECE can afford $1,000 for a car.
AUNT to NIECE in writing states: "I promise to give you $1,000 to buy a car.
On strength of this promise, NIECE buys a car for $2,000… Why should Aunt’s promise be enforceable?
1. Reliance of promise by niece. We don’t want promisee to go out and do something, even if intention was that it
wasn’t to be enforceable
2. Certainty – facilitates the conduct of niece
3. Formality - In writing
4. Consideration – promise binding if consideration, is there consideration when niece fulfilled request of a more
expensive car being purchased
5. Promises should be kept. ONLY PROMISES supported by consideration are enforceable contracts.
Promises enforceable if purchased by the niece. Argument is that it is gratuitous, voluntary promises not
enforceable b/c no consideration.
Doctrine of Consideration: An agreement is not enforceable absent consideration. This means that the promisee (the
person to whom the promise is made) must ‘purchase’ the promise from the promisor (the person making the promise.)
If the promise isn’t ‘purchased,’ it is gratuitous and therefore not legally enforceable.
EX: Seller promises to deliver widgets at a fixed price and on a specified date. & Buyer promises to pay that fixed price
on delivery. Note: The Seller is both a promisor and a promisee. Likewise, the Buyer is both a promisor and a promisee.
Per Treitel:
1. Consideration is mainly about reciprocity: "something of value in the eye of the law" must be given for a promise in
order to make it enforceable as a contract.
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2. Consideration is either some detriment to the promisee (in that he may give value) or a benefit to the promisor (in
that he may receive value). Usually, this detriment and benefit are merely the same thing looked at from different points
of view.
Unilateral contract: Essence of a `unilateral' contract is that neither party is bound until the promisee accepts the offer by
performing the proposed act....It consists of a promise for an act, the acceptance consisting of the performance of the act
requested, rather than the promise to perform it.
All offers technically unilateral but true unilateral the distinction is that the offeree is not bound to do
anything BUT OFFEROR has bound themselves to do something if the party does the requested act.
Bilateral contract: Contracting parties are bound to fulfil obligations reciprocally towards the other. Contract formed by
the exchange of promises in which the promise of one party is consideration supporting the promise of the other as
contrasted with a unilateral contract which is formed by the exchange of a promise for an act.
Promises under Seal: If a promise is under seal, “there is no need for there to be consideration moving from either party
towards the other”
Wood was successful at the initial trial, but this was overturned by the lower appellate court.
Issues: Is there an enforceable contract even when there is no express promise by one of the parties?
Results: Duff-Gordon claimed that there was no corresponding request to her promise – she did not request anything from
Wood, thus there was no consideration. Wood did not bind himself to anything, and therefore there was no contract.
Court says look at context of relationship to imply promise by Wood. A promise may be lacking but may have an
obligation perfectly expressed.
Cardozo J, said that it goes without saying that anyone who contracts to do this type of thing will do his or her best
efforts. Wood's promise to render accounts and to give Duff-Gordon 50% of the profits inherently implied that he
would use reasonable effort to implement the agreement.
Implied based on business efficacy. They make these arrangements in hopes that they will work.
Eastwood v Kenyon
Facts: Eastwood (PL) takes care of Sarah after her father dies. Kenyon (Sarah’s husband) promises to pay the debt for
Eastwood. In return, Eastwood promises to handle old debt from Sarah. Sutcliffe: deceased father of Sarah Blackburn:
creditor of Eastwood. Eastwood borrowed money from Blackburn and used it for Sarah's benefit.
Issue: Is consideration present? Is past consideration valid? Or is it gratuitous?
Results: Eastwood's theory: The fact that Eastwood took care of Sarah when she was an orphan and spent money to do so
IS THE CONSIDERATION for Kenyon's subsequent promise to repay Eastwood's promissory note.
The problem: The "consideration" supplied by Eastwood PREDATES the promise. How can Eastwood's taking care of
Sarah support a promise by Kenyon which is made years later?
Common law rule: past consideration is not good consideration. Past consideration is no consideration because it
provides no link between the alleged consideration and the promise made. Plaintiff’s action fails because the promise sued
upon had not been purchased by him. Kenyon’s promise to pay had not been purchased by the promisee. Present promise
MUST be purchased to saying something happened years before is not consideration. Taking care of Sarah would have to
occur at “roughly” same time as Kenyon’s promise or they cannot be connected.
Comments:
Moral consideration is not good legal consideration (Past consideration here not good)
Exceptions: Infants contracts
o Necessaries supplied by c/o to infant who upon reaching age of majority agrees to pay. This is enforceable
even though consideration is past. Thus Sarah could have been successfully sued by Eastwood.
Lampleigh v Brathwait
Facts: Assumpsit: An express or implied promise, not under seal, by which one person undertakes to do some act or pay
something to another.
1. Brathwait killed one Patrick Mahume
2. Brathwait, a felon, now wants a pardon from the king
3. Brathwait asks Lampleigh, a lawyer, to ride to Roiston and seek a pardon for Brathwait from the King
4. Lampleigh rode off to Roiston to try to secure the pardon
5. Upon Lampleigh’s return, Brathwait agreed to pay Lampleigh 100 pounds but now refuses to pay.
Issue: Is there consideration supporting Brathwait’s promise to pay? Or do we hit the wall of past consideration is no
consideration?
Treitel – An act done before expressed promise can be good consideration but you must satisfy three conditions:
Contractual Quantum Meruit: reasonable sum to be paid
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4. Act must have been done at request of promisor (Felon ask lawyer to ride to get pardon)
5. Must be understood that payment would be made (Lawyers don’t go ride to see king for free)
6. Payment, if promised in advance, would have been legally recoverable (was something that could have been
enforceable, ex: hit man contract not enforceable)
Results:
Valid Claims, forbearance to sue is good consideration if there is a valid claim and that monies paid in exchange for a
promise not to sue is valid and enforceable legal contract.
Claims known to be invalid. A promise is not binding if the sole consideration for it is a forbearance to enforce a
claim which is invalid and which is either known by the party forbearing to be invalid or not believed by him to be
valid…
Claims which are doubtful or not known to be invalid. The validity of the claim is doubtful, forbearance to enforce it can
be good consideration. It has further, been held that the same rule applies even if the claim is clearly invalid in law, so
long as it was a 'reasonable claim' (i.e. one made on reasonable grounds) which was in good faith believed by the party
forbearing to have at any rate a fair chance of success
Two further conditions must be satisfied by a party who relies on his forbearance to enforce an invalid claim as the
consideration for a promise made to him He must NOT deliberately conceal from the other party (i.e. the promisor) facts
which, if known to the latter, would enable him to defeat the claim. And he must show that he seriously intended to
pursue the claim.
o PL mislead by the tone and content of the lawyer's letter
o PL entitled to a refund on the ground of monies paid under a mistake
Class Notes:
Forbearance to sue: refraining from doing something, is good consideration
o i.e. you're injured in car accident and you're PL. You have a cause of action against the driver. Instead of going to
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trial you can settle, meaning the PL promises NOT to sue/or discontinue action and DF promises to pay money.
This is a binding contract.
Mom must show that she gave up nothing for her promise to pay
Zellers said they provided consideration because they forebore from suing
give the judge a reason to be inclined toward your client and give the court a legal reason to come to that result
We don't have a valid claim on Zeller's part.
Zeller's claim cannot succeed at law, there is no principle that allows them to succeed at law so they have an invalid
claim
Zellers must demonstrate they didn't know the claim was invalid and the claim was
1. Made on honest grounds
2. Had a chance of succeeding (reasonable claim)
3. Seriously intended to enforce claim
4. Did not conceal anything
a. PAGE 178: whatever legal opinion Zellers had about their claims general I cannot believe they thought
the claim would succeed or intended to pursuit it to court... It would be futile to pursue it
i. The business plan was to write a few letters and shake the cage and if nothing happens, let it go. Likely no
intention to bring the people to small claims court
ii. No intention to enforce claim and court couldn't believe that Zellers thought they had a true change at court
Can Fulfilment of a pre-existing duty to a third party at the request of the promisor? Such fulfilment is good
consideration. See Shadwell where the nephew’s fulfilment of a pre-existing duty to marry his finance was good
consideration for his uncle’s promise to pay an annual allowance. Court concluded that the uncle benefited from the
marriage taking place and so there was consideration.
EX: Uncle Promisor Promise to pay nephew (promisee) if, he marries fiancé (contract to marry)
Promisee (nephew) Already obligated to marry fiancé (contract)
Uncle benefited from marriage so it is good consideration.
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Criticism: No additional detriment to promisee (so how could it be consideration).
In Harris (1781), a promise for further wages in exchange for extra exertion was unenforceable, because, in the court’s words,
"If this action was to be supported, it would materially affect the navigation of this kingdom. It has long since determined that
when the freight is lost, the wages are also lost. This rule was founded on a principle of policy, for if sailors were in all events
to have their wages, and in times of danger entitled to insist on an extra charge on such a promise as this, they would in many
cases suffer a ship to sink, unless the captain would pay an extravagant demand they might think proper to make."
Arguable based on false premise. Would they all just say “ok we will all sink and die unless you pay us more”, likely not?
Very pro-public policy (captain and management perspective).
False dichotomy – we have choice btw “Fomenting mutiny” or “exploit the labour of sailors”
If someone enters into contract on basis of “duress” this is not enforceable, the captain would not have to pay additional wages
b/c there wasn’t really an agreement for that to happen.
Ratio: The sailors were not entitled to additional wages promised to them by the captain because they were already under a
contractual obligation to do “all that they could under all the emergencies of the voyage.”
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1. Gilbert’s promise to give the University a “good price” on steel in the future.
a. Court: too vague to be consideration
2. The mutual abandonment of the first contract and a new agreement being put in its place
a. Court: no, the only thing discussed was a price variation, no other changes to contract discussed. Intent to
change price not abandon contract.
3. In the increased access to credit which University receives as a result of the price hike.
a. Court, no. This must be something the University Bargained for to be good consideration.
In return is the something he's already obligated to do so there is no consideration
Williams v Roffey Bros. & Nicholls (Contractors) Ltd. (Common law is harsh in regards to variation of contracts, this case
the court helped ease the harshness)
Facts:
Shepherd’s Bush Housing Assoc. – Owner of Flats Contract 1 (BTW Bush Housing & Roffey)
Roffey (DF) General contractor to renovate 27 flats - Contract 2 (BTW Roffey & Williams)
Williams (PL) Subcontractor hired to install carpeting
Facts: DF promised PL extra payment per flat over and above what Contract 2 called for. If reno’s not done by specific date,
that damages will be owed by Roffey to Owners (Shepherds).
Sub trade Williams runs into trouble performing contractual obligations, and looks like they will going to default and
not complete on time. Then Roffey will face damages if Williams defaults.
Issues with Contract 2: (These are all self-inflicted issues PL should have to deal with)
Williams is having trouble b/c hey were underpaid (bid contract price too low)
o & Issues with payment schedule from Roffey to Williams and Williams to Contractors.
Williams mismanaged work crew
Williams made bad choices and should maybe just be their fault to cover deficiencies.
Issue: Is this promise to pay more supported by consideration?
Results:
Roffey argues:
Argue no new consideration (cites Stilks)
gratuitous promise and not binding b/c no extra consideration Unsuccessful argument.
Court:
Consideration is present. Both received benefits; Practical Benefits are good consideration in this case
DF avoided default penalties (damages clause) from Contract 1 for finishing renovations late;
Did not have to replace PL with another sub trade.
Ensure sub trade and contract 2 will seek compliance (complete on time)
PL got extra compensation to finish full flats (instead of partial completion of several flats).
DF obligated to pay the additional 10,300 euros for the 8 flats fully finished.
TEST: if practical benefits are good consideration, which exactly fits Williams V Roffey (made up for this case):
1. If A has entered into a contract with B to do work for, or to supply goods or services to B, in return for payment by B
and
2. At some stage before A has completely performed his obligations under the contract B has reason to doubt whether A
will, or will be able to, complete his side of the bargain and
3. B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on
time and
4. As a results of giving his promise B obtains in practice a benefit or obviates a disbenefit, and
5. B’s promise is not given as a result of economic duress or fraud on the part of A, then
6. the benefit to B is capable of being consideration for B’s promise so that the promise will be legally binding.
RATIO: Consideration by practical benefits is good consideration
Comments:
Williams recognizes practical benefits but Gilbert does NOT.
Where promisor has received no benefit (Stilk) then promise unenforceable; arguably Stilk would be overruled b/c a
“practical benefit” to captain would be peaceful performance of work b/c there was no suggestion of duress from the
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Seamen.
These are “Practical benefits”? Historically these practical benefits not legal consideration
Court states it has refined the Stilk test, not overruled it. This isn’t product of extortion and duress like in Stilk.
Historically, in time of Stilk only duress in terms of bodily or personal duress (death or bodily harm)
BUT today “Economic duress” exists which is extortion of additional payment is sufficient to render this
unenforceable.
For a House of Lord’s definition of “economic duress”, see Pao On:
“a coercion of the will so as to vitiate consent”…
“in a contractual situation commercial pressure is not enough”
Issue: Was the Airport’s promise to pay for the DME legally binding? Was there economic duress?
Results: Appeal dismissed. Court found that arbitrator erred in finding there was fresh consideration.
Prepare to recognize & adopt an “incremental change” in the traditional ways (vary from Stilk v Myrick) by holding
that a variation unsupported by consideration remains enforceable provided it was not procured under
economic duress.
Contractual variations not supported by new consideration are not binding. NAV already obligated under original
contract to relocate or replace equipment this had not changed, following Gilbert Steel that variations not enforceable
w/ no new consideration (a gratuitous promise).
Promise to pay for the DME could be enforced in the light of the doctrine of consideration, provided that it was not
procured by economic distress. The promise by Airport Authority was procured under economic duress and was
therefore unenforceable.
In the context of enforcing a gratuitous contractual variation, the C.A. in Nav sets out a lengthy test as to what
constitutes duress.
Court can transform gratuitous promise to an enforceable one (if court wants to) to avoid Stilk:
Promise to do more can be good consideration
Original circumstances have changed and a new benefit or detriment to make enforceable.
Judge changing rule by building on Roffey case, and concerns over Stilk.
Contractual variations are enforceable unless there is (economic) duress. WHY Change in law?
o Commercial expediency is of important value.
o Commercial efficacy should protect legit expectations of person receiving promise.
Courts should be open to avoid fictional attempt to “find” consideration.
Evolution of economic duress means we can set aside certain decisions.
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Greater Fredericton Airport Authority Inc v NAV Canada
Results: Opinion of court that Airport had no “practical alternative” but to pay money that it was not legally bound to pay.
Nav Canada threatened to withhold performance of its obligations until Airport Authority capitulated to the demand that it
pay for the costs of navigational aid. This is evidence of economic duress not conclusive proof.
**Lack of Consent** only agreed to pay under protest
DURESS & Economic Duress:
1. Contracts that are made as a result of one of the parties being threatened with physical harm or actually harmed are
obviously not enforceable. Duress is now a broader concept and includes economic duress.
2. The House of Lords in Pao On (involving a threatened breach of contract) defines duress as “coercion of will so as to
vitiate consent” but adds the proviso that “in a contractual situation commercial pressure is not enough.” The court
states that in applying this test, certain evidential matters are important, such as
“the effectiveness of the alternate remedy available,
the fact or absence of protest,
the availability of independent advice,
the benefit received, and
the speed with which the victim has sought to avoid the contract.”
3. In a commercial context, economic duress often involves one party financially pressuring the other. For example, a
company might threaten to break a contract that it knows is extremely important to the other side unless the other side
grants certain concessions or payments in return. (This was held to amount to duress in North Ocean Shipping Co.
Ltd. v. Hyundai Construction Co. Ltd., [1978] 3 All E.R. 1170 (Q.B.).) Under the traditional test, these concessions
are unenforceable if it is shown that more than ordinary commercial pressure was at play. Per Pao, there must be a
“coercion of will so as to vitiate consent.” In short, ordinary commercial pressure is acceptable but not more. A
company wouldn’t just give you more money w/o something extra in return.
4. Per McCamus, the ‘overborne will’ test set in Pao is difficult to meet. As the author notes, “if seriously applied, the
defense would rarely, if ever, be available and on the further ground that it requires a difficult, perhaps impossible,
inquiry into the psychological state of mind of the coerced party.” If you have to show test of coersion of will as to
vitiate consent is immensely difficult to show *high bar*.
5. McCamus notes that the H.L. revamped the Pao test in Universe Tankships (1983), stating that duress requires
showing:
a. pressure amounting to compulsion of will of the victim [no practical alternative] and
b. the illegitimacy of the pressure exerted.
6. Per McCamus, most Cdn. Courts seem to be following the H.L. decision in Universe Tankships. That is, at least in
the context of threatened breach of contract, there is an apparent shift away from the “overborne will theory of Pao
On” to the “no practical alternative coupled with illegitimate pressure test set forth in Universe Tankships.”
7. McCamus welcomes this, stating: As a factual matter, it should normally be a straightforward exercise to determine
whether or not the coerced party had an available alternative and practical course of act. The test of illegitimacy
speaks more directly to the problem of distinguishing legitimate commercial pressure from illegitimate coercion.
Where the threatened conduct constitutes a crime…or a tort…the illegitimacy test is easily applied. The more
difficult case…is that of threatened breach of contract, conduct that is, in the normal case at least, considered to be
lawful. Threat to breach contract isn’t “Illegal”, you are just saying I promise to perform contract or pay damages so
in abstraction not illegal.
8. McCamus concludes as follows: As the courts have observed,
a. ‘in determining the legitimacy of the pressure, one, one must consider the nature of the pressure and the
nature of the demand the pressure is applied to support’…. Accordingly, even though
b. a threat to breach a contract is normally a lawful act (bad man theory of law), it may be that the nature of the
demand being made may cross the line separating legitimate from illegitimate pressure. (You are saying you
will breach contract and pay damages)
c. The threats that have the flavour of blackmail to them are likely to be considered illegitimate. For example,
where an employer threatens to dismiss an employee and, as well, to tarnish the employee’s reputation… in
order to coerce the employee’s consent to an adjustment to his or her existing employment contract, the threat
is likely to be illegitimate. On the other hand…if the party making the threat is seeking to enforce a right to
which it believes, in good faith, it is entitled, threat is legitimate one.
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In common law we Usually follow Universe Tank ships, but concerning contractual variations we could follow this test in
Greater Fredericton Airports:
THRESHOLD REQUIREMENTS:
1. First, the promise (the contractual variation) must be extracted as a result of the exercise of ‘pressure’… (Ex:
Contractor suggested paying more to finish on time, pressure not coming from person extracting benefit)
2. Second, the exercise of that pressure must have been such that the coerced party had no practical alternative but to
agree to the coercer’s demand to vary the terms of the underlying contract. (Could the victim have gone to 3rd party
and found a replacement supplier? If yes this is a practical alternative, the plea of duress would fail)
Once these thresholds are met, the issue shifts to whether the coerced party ‘consented.’ Consider the following
THREE FACTORS to see if consent present:
(1) whether the promise was supported by consideration; (If yes this would show no duress, If no court may be more
sympathetic to plea of duress)
(2) whether the coerced party made the promise ‘under protest’ or ‘without prejudice’; and (If you complain at time you don’t
like what is going on, then court more sympathetic)
(3) if not, whether the coerced party took reasonable steps to disaffirm the promise as soon as practicable. (Expected to act
promptly pg 697: Promisor who waits several years will be guilty of acquiescence [go along with it & cannot later come
down hard on other side.])
The cases demonstrate those who voluntarily negotiate variations that could be advantageous cannot come back and
say later they are burdensome. Promptly seek legal advice.
Threshold Questions:
First: Was promise extracted by pressure. NAV we did not do anything wrong either relocate old equipment or buy new
equipment. Court Wrong implicit threat by ANV to withhold performance of contract unless airport pay for equipment.
Second: Practical Alternative: Onus on PL to have sought replacement services? Fredericton Airport cannot seek anyone else
to do work, b/c NAV has monopoly to do these services all over the country.
Three Factors:
(1) no consideration from NAV = supports duress
(2) under protest = yes, set up to pursue duress
(3) reasonable steps to disaffirm = Airport never waivered in its protest
Variation of contract procured under duress on the facts, BUT FOR this duress this PROMISE WOULD HAVE BEEN
ENFORCEABLE, even absent consideration! Probably do these steps in AB, if this case would help you would argue it.
ABCA case Globex, agree w/ NAV that consideration shouldn’t be applied in a rigid way.
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(a) Accord and Satisfaction 198
I. The hypothetical:
Debtor owes creditor $100.00: Creditor agrees to accept $80.00 in full satisfaction of the debt (i.e. agreeing to accept a
lesser sum in full satisfaction of the whole). Is this enforceable, or does this agreement fail for want of consideration? This
alone would fail, b/c paying $80 to someone is never going to satisfy $100. What is the creditor getting back? Nothing.
Mrs. Beer (respondent; judgment creditor of Dr. Foakes; says agreement is unenforceable for want of consideration; now
seeks interest even though Foakes fully performed his side of the agreement)
Facts: Beer secured judgment against Foakes in the amount of 2,090 pounds plus interest and is now known as a judgment
creditor. (She is creditor because she is owed money under the judgment)
Foakes is judgment debtor. He owes money under the judgment
Faokes asks for time to pay and they entered into a written agreement
Beer agreed not to take any further proceedings to collect on the judgment in consideration of an immediate down
payment plus a series of instalments until the amount of the debt was reached.
Foakes paid the down payment and made ALL the instalments. Mrs. Beer claims 300 pounds, which represents the
interest she was awarded under the judgment.
Pg 198: Judgement amount written in Instalment Contract, but not interest.
Legal issue: Can Beer claim interest at this point or is she bound?
Result: Court applies the rule in Pinnel’s case: “that payment of a lesser sum on the day…in satisfaction of a greater, cannot
be any satisfaction for the whole, because it appears to the judges, that by no possibility a lesser sum can be satisfaction to the
plaintiff for a greater sum.”
In this situation, Dr Foakes did not provide any consideration from him to make enforceable Mrs B’s promise to
accept less. Mrs Beer did not intend to forgive interest just a mistake on her part to include it in contract
This may be possible if under seal, or some other bargain with new consideration.
What if Dr. F saying “I will give up a defence, or appeal saying he won’t” For Mrs. Beer accepting a lesser
amount. This could be good consideration just like giving up a cause of action could be good consideration.
Or nominal consideration “a peppercorn” or anything of uncertain value.
Parl is in best position to legislate on this matter Judges don’t want to overrule Pinnel, which is a case been around
for 200 years. This Pinnel rule may not be good, but not their place to overrule it.
What could possibly be consideration (benefit) to Mrs Beer?
1. Not having to pursue Mr. F in further legal proceeding to get judgment.
2. Something is better than nothing, maybe Mr. F won’t be able to pay otherwise.
3. She got first upfront judgment payment and ALL instalments. Already obligated to pay judgment debt.
1 & 2 are Practical benefits, not legal benefits. Thus don’t count as legal consideration.
Policy reason for Pinnel pro-creditor rule benefiting one side. This is to protect creditor from ruthless debtors who
may not be cooperative or put pressure to accept lesser sum.
Pinnel a bad creditor exacts cooperation of debtor, take lesser amount and once paid debt discharged. This could
result with creditors overreaching and manipulating debtors.
Comments:
Mrs. Beer did not intend to get interest according to the post-judgement agreement. Could she go to judge for post judgement
agreement doesn’t reflect actually agreement? She has two issues:
0. Must hurdle over parole evidence rule (which is that what is written is complete)
1. Her evidence is that she's changing the agreement outside of what was written. We won't want people after the fact or
people who weren’t good a negotiating to come back after the fact.
2. If she can show that the written agreement wasn't the whole agreement but that there was an oral part of the contract
she might be able to prove that interest was to be paid. Dr. Foakes would likely disagree and say that the document
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was the whole agreement.
3. She could get a rectification: to include a provision that interest was also payable. Obviously, if both parties agree
that the contract wasn't correct then the rectification is simple. But we can anticipate that Dr. Foakes would not say
that interest was intended to be paid. So they won't get a rectification by agreement. Mrs. Beer can unilaterally get
the rectification if Dr. Foakes fraudulently or uncausionable got the contract signed.
We have a high bar for rectification and not open a door to a buyers remorse where the person seeking rectification is
seeking a rectification to an error they made.
I. An aside on rectification, per Waddams: The essence of rectification is to bring the document that was expressed or
intended to be in pursuance of a prior agreement into harmony with that prior agreement. It deals with the situation where,
contracting parties have reduced into writing the agreement reached by their negotiations, some mistake was made in the
wording of the final, written contract, altering the effect, in whole in or part, of the contract. What the court does is to alter
the document, in accordance with the evidence, and then enforce the document as changed. Rectification is not used to
vary the intentions of the parties, but to correct the situation where the parties have settled upon certain terms but have
written them down incorrectly.
Where the mistake is one-sided or unilateral, courts are reluctant to grant rectification.
Dr. Foakes would say it is silent on interest B/c under agreement he was not to pay interest.
Must prove there was oral and written parts to agreement. Not going to get recification by agreement.
Per the court in Lee v. Arthurs, quoted in Waddams, [t]he whole principle of rectifying or reforming a conveyance
rests upon the idea that the document as written is not evidential of the contact as made, and if both parties agree on the
point, the Court will proceed to reform the deed or writing in accordance with the common intent but a deed cannot be
reformed or rectified against the protest of one party thereto who says it is right already.
exceptions to this rule include fraud by the defendant, unconscionable conduct by the defendant. and per
McCamus, when the “defendant ‘knew or ought to have known of the error and the plaintiff did not.’”
II. An aside on parol evidence, Per McCamus, there are two different versions of the parole evidence rule.
1. The traditional version holds that where a written agreement appears on its face to be a complete agreement,
parole evidence [outside communication] cannot be admitted that contradicts, varies, adds to or subtracts from the
terms of the written agreement. Under this version of the rule, one must determine that the written agreement
appears to be, in some sense, incomplete before one can turn to consider evidence of prior communications
[whether written or oral].
2. The ‘modern’ version places emphasis on the need to demonstrate that the parties actually intended to reduce the
agreement into writing as a precondition to the application of the rule. In determining whether the parties actually
did intend to reduce their agreement into written form, all evidence of their prior communications relevant to this
issue…is admissible. Under this version of the rule…a party could lead evidence demonstrating that a written
agreement that appears complete on its face is actually merely a component of an agreement that is intended to by
the parties to be partly oral and partly in writing. Per McCamus, it is not clear in Canada which version courts are
relying on but there seems to be “movement in the direction of the modern rule in recent Canadian
Jurisprudence.”
Less for more scenario, practical benefits NOT good consideration in England (Selectmove)
In New Brunswick practical benefits are good consideration.
Issue: Is there consideration for the creditor’s agreement to accept less in full satisfaction?
Results:
SCC applies Sibree and concludes that giving the post-dated cheques was good consideration for the promise of
release of the debt at a lower interest rate.
Agreement owed in “cash 500” but substituting, Negotiable instrument (post-dated cheques amounting to 300) might
give satisfaction.
Substituting paper (cheque) for a sum of money may be sufficient consideration b/c cheque could be worth more or
less… it is of “uncertain value” … well that sucks. The negotiated set of cheques is good consideration and each
cheque of “uncertain value”.
Per court: “So long as the appellant continued to perform his obligations under the [new] agreement… the
respondent’s right to sue on the notes was suspended, consequently his action brought on December 7, 1960 was
premature and should have been dismissed on that ground.”
Denning:
is trading payment by cheque diff from cash? Is creditor bound? It is the same, no sensible distinction to payment of
less by cheque than by cash. If creditor not bound by payment in cash in lesser sum, they should not be bound by
cheque of lesser sum.
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Comments:
There is cooperation in that he has postdated cheques and he doesn't have to chase the debtor for money every month
- but this is a practical benefit.
If the payment is negotiated for in less amount maybe it is consideration.
If you're negotiating for the cheque and you want the cheque then maybe there is consideration but otherwise
they are the same.
The SCC's argument is that the cheque is that the cheque is of uncertain value, but would you argue it? Only if
you absolutely had to. It's probably not a winning argument but it's an SCC case and it hasn't been overruled.
Effectively repeals Foakes v Beer – less for more agreements ARE enforceable w/ no consideration
A $100
C $80 on Friday. But on Thursday I change my mind. Must be “Expressly accepted” part performance actually
receiving money, so Thursday I can say no never mind I want all my money. Not “promise to accept lesser
amount” but ACTUALLY accepting lesser amount.
o Able to revoke before agreement executed?
(a) Once money transferred “accepted” by creditor, CANNOT revoke and ask for full amount. Execution of
contract, or fully performed.
(b) pg 187 One case Note 3: Pending performance (agreement in place) cannot revoke until expiry date of
offer.
(c) Instead of paying $80 I give 8 postdated cheques for $10ea, in month 7 could I cash cheque and tell
debtor that an arrangement is off and seek full amount. “When being rendered” creditor may be able to
revoke before full performance. Promotes a deceptive way to settle debts. Creditor pretends to be
amendable to settlement, and all along intends to revoke at last minute.
Not allowed. As long as Debtor preforming the creditor CANNOT revoke. If they fail to perform, yes creditor
may revoke.
**PUT UNDER SEAL, so you don’t have to argue consideration.
Wilson J.A. in Gilbert (re: customer’s gratuitous promise to pay more for steel) requires detriment
in her definition of PE.
Robertson J. in Greater Fredericton Airport at para. 23 also recites the detriment requirement,
stating:
Regrettably, the fact that the plaintiff [Nav Canada] may have relied on the agreement [by the
Airport to pay for the equipment] to his or her detriment [emphasis added] is of no consequence
as promissory estoppel may be invoked only as sword and not as a shield. Thus, Nav Canada's
estoppel-based argument - that it relied to its own detriment on the Airport Authority's gratuitous
promise - must be rejected also.
Goff J. in Post Chaser, refused to apply PE because there was no evidence of “significant
detrimental reliance by the promisee” per McCamus. Per Goff J., the seller’s position ‘was not
prejudiced by reason of their action in reliance on the representation.’
[I]n W.J. Allan…Lord Denning MR, while stating that the principle of equitable estoppel in terms
that it must be inequitable for the representor to be allowed to go back on his representation,
nevertheless considered that it might be sufficient for that purpose that the representee had
conducted his affairs on the basis of the representation, and that is was immaterial whether he has
suffered any detriment by doing so.
The SCC in Miracle defined promissory estoppel with no express reference to a possible
detriment requirement: The principles of promissory estoppel are well settled.
The party relying on the doctrine must establish that the other party has, by words or conduct,
made a promise or assurance which was intended to affect their legal relationship and to be acted
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on. Furthermore, the representee must establish that, in reliance on the representation, he acted on
it or in some way changed his position.
Per Treitel (stating the English position): It is enough if the promisee has altered his position in
reliance on the promise so that it would be inequitable to allow the promisor to act inconsistently
with it. Thus, the requirement can be satisfied if the promisee has forborne from taking steps to
safeguard his legal position (as in Hughes…); or if he has performed or made efforts to perform
the original obligation as altered by the promise (e.g. where a seller who has been promised extra
time for delivery continues to make efforts to perform after the originally agreed deliver date has
gone by)
Per Fridman, Goff J. in the Post Chaser, also seems to take a position comparable to that
of Lord Denning. Per Goff J., in the context of the equities, states:
It is not necessary to show detriment; indeed the representee may have benefited from the
representation, and yet is may be inequitable, at least without reasonable notice, for the
representor to enforce his legal rights.
o Detriment in the context of agreements to accept a lesser amount in full satisfaction of the whole
Goff J.’s view, that some detriment or prejudice is necessary, appears more consistent with the underlying
objective of the doctrine of promissory estoppel. It may, however, have the unattractive feature that it
leaves at large the question of whether the reliance of the defendant in cases like Foakes v. Beer is
sufficiently detrimental to engage the doctrine. It is, as yet, unclear whether courts will be persuaded by
the argument that once the partial payment has been made, it would be inequitable to allow the creditor to
recover the outstanding balance.
See too Collier v. P & M J Wright (Holdings) Ltd., [2008] 1 W.L. R. 643 (C.A.) per CB
Per court: if parties who have entered into definite and distinct terms involving certain legal results – certain penalties or legal
forfeiture – afterwards by their own act or with their own consent enter into a course of negotiations which has the effect of
leading one of the parties to suppose that the strict rights arising under the contract will not be enforced (time won’t run
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against), or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not
be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between
the parties.
Time starts to run when negotiations have ended
Comments: Could you argue agreement to suspend time supported by consideration? Benefits:
LL suspect running of time, what are they getting in exchange?
o Opportunity to buy back lease, it is obviously valuable or why would they be negotiating. If court motivated
to find consideration they will find it (in NB)
Compliance w/ repairs
In these proceedings, receiver is seeking arrears of 635L for two periods: for the quarter ** ending Sept 1945 and for the
quarter ending Dec 1945. Since flats were fully let by Jan 1945 would any estoppel against the landlord have ended by
them?? A year divided into fiscal quarters looks like this: 1st quarter: Jan -mar 2nd Apr -June 3rd July-Sept and 4th: Oct-Dec.
Issue: Is the received/L stopped from seeking arrears?
Results:
Lord Denning:
LL is not estopped from seeking arrears, the contract made during the war was supposed to last until the flats were
fully let (or significantly let).
Upon Jan 1st 1945 flats fully let and as such end of agreement.
Intention of parties was for agreement to become binding for that time period.
Cannot use estoppel by representation, because the promise is going to the future
Law hasn’t been standing still, promise to do something for time frame must be honoured.
o Promissory estoppel – future promises need to be honoured and a party cannot act in contrary to it; is
binding absent consideration.
Application:
Tenant will accept reduced rent, if during the time frame flats are not full due to wartime
o Once those conditions cease the estoppel putters out by it's own words. During this time the flats were fully
let so the estoppel has fully seized.
Comments:
Denning’s agricultural practices … plants seed to use in future, started doctrine of promissory estoppel. He might
need this later, although not needed in this case. So he can refer back later. If you are in contract w/ someone and one
makes representation in future (accept lesser sun) is binding.
At this time, only real time of fighting LL would be:
o Estoppel by representation: per Treitel, if one party makes a representation as to a “present or past fact” upon
which the other party relies to his detriment, the representor cannot afterwards repudiate the representation;
Will not assist High Trees. There is no representation going to the future. LL is sating to T “I will not charge
you full rent” (representation to future) & very difficult for counsel for T to rely on representation by
estoppel.
Was there consideration? This is a contractual variation not supported by consideration by T.
Leading case in promissory estoppel is one where DF fails. LL wins.
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What was representation given to T, what is nature of the estoppel (representation)?
Rep by LL that you T will pay reduced rent, only when flats not fully let during wartime conditions. Once conditions
cease, estoppel ends by its own words.
During time LL seeks arrears the flats were FULLY LET.
PAGE 211 Questions
Had PL given notice in March 1943, that they intended to claim the full amount [going forward], could they have done
so? From when?
Denning says in last paragraph "with reasonable notice" the L could recile from representation.
Notice ---------- 6 mo ---------- repairs. Once the deadline passes there is nothing the tenant can do it to recover it.
If we allow the L to take back the representation it means that the T is kicked out
EX: Foakes and Beer. Foakes paid less amount in full satisfaction of whole. Can Foakes give notice going
forward that I want the full amount? PG 210 - Denning says looks at doctrine of promissory estopel and -
promissory estoppel change the outcome of Foakes and Beer. Denning would say that Ms. Beer is promissory
estoppel to take the promise. You cannot go back to the original obligation once Foakes has paid his lesser
amount.
Would it make a difference if the apartments had all be let during the war?
Yes, then the L would be able to recover full rent.
If you have a situation where the flats are not fully let and the war is over the estoppel by its own terms comes to an
end.
What if flats aren't fully let during war because of poor management? - In that situation then you have to pay full rent
because you're inability to do so has nothing to do with the war, it's about your competence
It becomes important to articulate what is the representation.
The PL and DF will fight over scope of representation
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John Burrow LTD v Subsurface Surveys LTD 1968 SCC
Facts: John Burrows Ltd. (plaintiff; vendor of business; brings action against defendant pursuant to an acceleration clause in
a promissory note)
Pg 216 - When D/B & C/R enter into course of negotiations, and agree a less for more, after performance creditor cannot
come back later and ask for more. Look to High Trees, and says Prom Estoppel could apply to Less for more scenarios.
In 2017, we don’t really need undue pressure because we have the Tankship test for duress instead”
Tankships: Argument that duress exists.
THRESHOLD REQUIREMENTS:
1. First, the promise (the contractual variation) must be extracted as a result of the exercise of ‘pressure’…
2. Second, the exercise of that pressure must have been such that the coerced party had no practical alternative but
to agree to the coercer’s demand to vary the terms of the underlying contract.
Once these thresholds are met, the issue shifts to whether the coerced party ‘consented.’ Consider the following
THREE FACTORS to see if consent present:
(1) whether the promise was supported by consideration; (If yes this would show no duress, If no court may be more
sympathetic to plea of duress)
(2) whether the coerced party made the promise ‘under protest’ or ‘without prejudice’; and (If you complain at time you
don’t like what is going on, then court more sympathetic)
(3) if not, whether the coerced party took reasonable steps to disaffirm the promise as soon as practicable. (Expected to
act promptly pg 697: Promisor who waits several years will be guilty of acquiescence [go along with it & cannot later
come down hard on other side.])
The cases demonstrate those who voluntarily negotiate variations that could be advantageous cannot come back
and say later they are burdensome. Promptly seek legal advice.
**If there is duress, you cannot rely on Promissory Estoppel b/c there cannot be “Accord” or agreement if duress.
Ratio:
TAKE AWAY: Promissory Estoppel is an equitable doctrine from two perspectives:
Party alleging must have acted equitably
The one who wants to rescile and only do so if it would be equitable (other party can go back to previous
position)
54
(c) The Notice 217
(d) The Reliance 223
Denning agreed, holding that once an alternative method of payment is accepted (the pounds sterling) it is deemed to
have been accepted as a term of the contract and the sellers had waived their right to be paid in shillings.
W.J. Alan could not then withdraw this waiver if it was either too late, or if it would be unconscionable in the
circumstances. On the subject of detriment, Denning held that there was no support in the case law for that requirement,
simply that the other party had relied on the decision and altered their position.
Detrimental reliance is not required for promissory estoppel to apply.
Promissory estoppel requires that the claimant party rely on the actions of the other party and alter their position
as a result. (Regular reliance). Party must act on representation.
Promissory Estoppel: Certain case require detriment and others do not. The law is divided. Show a case that promissee
relied on the promise Hughes. Detriment not necessary.
High Trees No detriment
NAV Detriment
Treitel Reliance on promise enough in England. If it would be inequitable for promisor to resile, then not justified to
55
do
Foakes Relied on promise but not detriment. Was not enough so Prom Est. not successful.
Examples of cases insisting on the traditional view that PE cannot be used as a sword: Combe, Gilbert, Greater Fredericton
Airport.
Examples of cases that say PE/waiver can be used as a sword: Robichaud
Per McCamus,
the current Anglo-Canadian position is that promissory estoppel may be deployed only defensively. …This limitation on
the role … is a source of criticism. Thus restricted, the doctrine appears to have little if any role outside the context of
gratuitous contractual variations. And indeed, in that context, the doctrine creates an artificial distinction between
concessions granted [per SKO: promise to accept late delivery] and an affirmative promise to provide greater value [per
SKO: promise to pay for the equipment in Greater Fredericton.]
2. IS PE SUSPENSORY OR PERMANENT?
The one who waives his strict rights cannot afterwards insist on them. His strict rights are at any rate suspended so long as
the waiver lasts. He may on occasion be able to revert to his strict legal rights for the future by giving reasonable notice in
that behalf….But there are cases where no withdrawal is possible. It may be too late to withdraw; or it cannot be done
without injustice to the other party. In that event he is bound by his waiver. He will not be allowed to revert to his strict
legal rights. He can only enforce them subject to the waiver he has made.
Per Treitel, the default is that PE is suspensory. The doctrine only ‘has an extinctive effect’ where ‘subsequent events,
or the passage of time, though not making performance of the original obligation impossible have made it highly
inequitable to require such performance even after reasonable notice.’
To distinguish between when reasonable notice is permitted and when it is not, ask whether the estoppel in question
concerns a CONTINUING OBLIGATION or a ONCE- AND-FOR-ALL OBLIGATION. (These categories are not water-
tight but are conceptually helpful.)
a. A representation relating to a continuing obligation can generally be withdrawn on reasonable notice with
respect to the future and subject always to the equities
Example:
to charge a lower rent (High Trees: can give reasonable notice to resile going forward but arrears are not
recoverable)
b. A representation in relation to a once-and-for-all obligation/election is typically permanent.
Examples:
to accept a smaller amount by lump sum in full satisfaction of a larger amount (per Robichaud; per discussion in
D&C Builders)
to accept a non-conforming letter of credit (W.J. Alan)
to provide an extension as to when repairs must be effected (Hughes)
Bottom line: each case is unique; the equities always prevail.
Combe v Combe
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Facts:
1. Agreement, negotiated with the assistance of lawyers, that husband would pay wife 100 pounds a year as permanent
maintenance. Husband promises to give her $$ Wife gives “Forbearance to sue” = won’t bring action later to sue for
maintenance in a greater amount of 100 pounds per year (She has common law right to sue for maintenance)
2. AUG. 26/43: The now ex-wife’s solicitor wrote to the husband for the first instalment but the ex-husband never paid
anything under the agreement.
3. The ex-wife pressed for payment privately but never instituted an action.
4. JULY 28, 1950: The ex-wife brought an action for arrears in the amount of 675 pounds. She successfully relied on
promissory estoppel but received judgment in the amount of 600 pounds due to a partially successful limitations defence.
(Some of money was statute barred). Husband appealed.
PE historically cannot be used as a sword but only as shield. PE does not found a cause of action, it just gives defence.
Legal Issues:
1. Is there consideration supporting the husband’s promise to pay 100 pounds a year as permanent maintenance?
2. Is the husband bound by his representation that he would pay 100 pounds a year as permanent maintenance via
promissory estoppel?
Results:
DENNING
The principle of promissory estoppel established in High Trees does not create new causes of action where none
existed before. It only prevents a party from insisting upon his strict legal rights, where it would be unjust to allow
him to enforce them.
Promissory estoppel: “where one party has, by his words or conduct, made to the other a promise or assurance
which was intended to affect the legal relations between them and to be acted on accordingly, then once the other
party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be
allowed to revert to the previous legal relation as if no such promise or assurance had been made by him, but he
must accept their legal relations subject to the qualification which he himself has so introduced, even though it Is
not supported in point of law by any consideration but only by his words”
Since promissory estoppel never gives a cause of action by itself: the wife can only enforce the promise if there
was consideration for it.
No consideration
o The forbearance is not consideration because it was not at the husband’s request
The wife cannot be better off than husband and it wouldn’t be fair to enforce this after many years for the whole
amount. But her being better off is legally irrelevant to her cause of action. In the facts, she was pressing for
payment privately & did not take formal step of suing later.
estoppel is a "shield", not a "sword". Estoppel is only a defence not a cause of action where one did not exist before.
You cannot use PE as sword which is what wife is doing here, as cause of action.
“equity aids the vigilant” Mrs Combe should have lost action b/c she waited too long to sue for equity to apply (not
because of limitation period)
o is equitable doctrine and must comply with maxims that go with equity. Equity aids the vigilant, not
those who slumber on their rights. Must bring action quickly.
Comments:
Can we challenge that there is no consideration. Husband agreeing to pay 100L/year to wife. What is she giving up
in return?
o Forbearance to sue? This is all by implication. She has an action against him by virtue of common law she
is entitled to sue for maintenance.
o When she agrees to 100L she assumes the risk that maybe she could get more by suing.
o he is assuming the risk that she might need less going forward or that the court might find he owes less
o Denning says that the forbearance was not at the husband's request, but we argue back it is.
Robichaud c Caisse Populaire De Pokemouche Ltée, (1990), 69 DLR (4th( 589 (NBCA), page 236
Facts: Robichaud: brings action to have his agreement with Caisse enforced and Caisse’s judgment against him removed
from registry. Caisse Populaire: resists action on the basis that the agreement is unenforceable – inter alia, promissory
estoppel is a shield, not a sword.
Robichaud owed money to Caisse Populaire
Caisse secured judgment against Robichaud for $3,787 and registers it.
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Robichaud decides to consolidate his debts with Avco
Avco negotiates with Robichaud’s creditors and commits to lend money to Robichaud to pay his judgment creditors
Subsequently, as part of an Avco debt consolidation plan, Caisse agrees to remove its judgment against Robichaud
from the registry in return for a $1,000 payment by Robichaud in full satisfaction. (Voluntarily agree to do so)
Caisse received its cheque from Avco but the Board refused to approve the compromise agreement. The cheque was
not cashed and the judgment was not removed. Promise to pay “lesser amount” what is consideration on side of
Robichaud? Nothing, even less than before.
Legal Issue: Can Robichaud rely on promissory estoppel to enforce Caisse’s promise?
Results: RICE
Case law traditionally shows that promissory estoppel can be invoked as a grounds of defence and not as grounds
for an action
Assuming Caisse Populaire brought the action (instead of Robichaud) then Robichaud could use promissory
estoppel as a defence (successfully), therefore, to refuse this appeal on the pretext that it is not invoked as
grounds of a defence is untenable and contrary to the principle of equity on which the doctrine is based
Concurring judgment dealt with Robichaud's argument for relief on the basis of promissory estoppel. After reviewing the
case law and agreeing that estoppel can only be invoked as a defence, he writes that the distinction between estoppel as a
ground for defence but not as a ground for action has been widely critiqued. Finding that in the case at bar the Caisse could
invoke promissory estoppel against Robichaud, he found it contrary to the equitable principle of estoppel that Robichaud
would not be able to utilize it in an action. Robichaud changed his position to his detriment in reliance on the promise of the
Caisse, and thus is entitled to a judgment.
Estoppel can be used as a cause of action.
If the court can find legally sufficient consideration, even one of time/effort/expense, it can enforce a promise to accept less.
Promissory Estoppel
1. Existing Legal relationship: judgment creditor (cassie) & judgement debtor (Robichaud)
2. Accord agree to take $1000 in satisfaction of whole
3. Promisor knows Promisee will act
4. Reliance on promise Robichaud arrange financial affairs with help of Amco for repayment of orderly debts.
a. But does it have to be detrimental? No just reliance sufficient; Yes it is detrimental b/c Robichaud
mortgaged house to borrow money from Avco to repay debt to Caisse which could be viewed as
“Detriment”
5. Did party act equitably? Robichaud did acted equitably took steps to pay debt but did act honestly and his conduct is
forthright.
a. Is it inequitable for Caisse to resile? Yes, kind of
**BUT Robichaud is using PE as sword to found cause of action in PE. Wants a court order saying they have to remove the
judgment. NB Court of Appeal That’s ok Robichaud CAN use as sword.
Ex: If Caisse sues Robichaud for full amount He can use PE as defence as he has satisfied all the steps b/c Caisse
promised to accept lesser amount.
Court saying in this case: Caisse has judgment against Robichaud, it doesn’t need assistance to enforce judgment
(Can seize property, garnish wages etc). He does not need help of court to realize on judgement and defence of PE
could never be raised by Robichaud b/c Caisse wouldn’t need to use courts to collect.
o Judge says Robichaud is “Stuck” b/c cannot use as defence and must use as sword.
o BUT Robichaud can resist all those seizures debtors have rights. (We use to put debtors in jail till they
paid). Robichaud could file injunction with the court to the seizure. Then Caisse would say we have
judgment in greater amount, so I can seize. Then Robichaud would then raise PE as defence at this point!!
This is a defence (PE) to a defence (Caisse defence that judgement in greater amount).
Shield v Sword:
Combe: PE estoppel as sword not ok
Robichaud: PE as sword on facts, still ok if PL is relying on estoppel as defence to defence that is acceptable.
Situation #2:
Customer agrees to pay more for car than recited in contract, then refuses to pay more.
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Vendor sues for larger amount = sword. Based on facts, is he is a position where he cannot bring any other action. If
resembles Robichaud enough than maybe allowed.
PL (PETER) (rely on no consideration) Sue for full $10K DF (Doug) say defence PE, &/or rely on Judicature
Act
Ex: Susan sent invoice to Ann b/c her 5 year old son failed to attend the Susan’s son’s B-day party. Ann had RSVP’d but
then failed to show leaving Susan out of money.
This is a b-day party, no intention to legal relations.
Is there even an offer? No capacity for minors to contract and no offer at all.
Critical Analysis of Balfour includes this fact (Stephen Hedley, “Keeping Contract in its Place – Balfour v.
Balfour and the Enforceability of Informal Agreements (1985) 5 Oxford Journal of Legal
Studies 391):
while the courts had previously refused to enforce agreements where the parties had deliberately excluded
legal sanctions (there is agreement but not enforceable), this was the first time they had denied liability
simply because the plaintiff could not prove that legal sanctions were intended.
Balfour v Balfour introduced a new obstacle for plaintiffs, which had not been there before.
Pg 250: Defence to action on alleged contract, agreements btw parties that do not result in contracts, ex: 2
parties agree to take walk together. In this case, there is legal relation they are discussing interim
support payments prior to divorce. They are tying her claim to something that is inconsequential and
social. The Court’s analogy is unfair. We have an agreement with consideration. Court assumes in
marriage relationships there is not enforceable legal relations to it.
Pg 251: Court These kind agreements if regarding as contracts lead to disastrous results (Flood gates). If
Mrs Balfour succeeds all agreements in marital relations would lead to courts deciding things in the home.
When husband makes wife promise to give $ per week (or for maintenance for children, even though no
kids here) and then she could sue him for money and he could sue her for not doing her part in home or
raising kids. There would be endless actions of spouses suing each other and justice could come to a halt.
o Respectfully tell court: This is reasonably mild situation and there is little empirical evidence to
support that claim. Sometimes matters are actionable but not worried about judicial time being
taken up.
Court explains situation in “domestic” context only with no legal relations.
Today how would you approach the issue with this precedent in court?
Equality theory: the law strives for equity and fairness whether in relation to common law rules or
legislation. Focus on equity and fairness s. 15 Charter today. Equality under the law. The common law
should also reflect Charter values. To get rid of precedent in way in this context.
Look for patterns of approaches – there will be wins and losers, these can be one sided rules, the law is
never neutral there will always be wins and losses based on it. There are a number of theoretically
questions based on equality. There are social norms and structures that serve the larger goals of
empowerment and equality, And we rework laws to serve empowerment and equality.
o Critical race theory – concerns discrimination on basis of race and looks at law on that foundation.
o Queer theory – discrimination and how law enforces based on sexual orientation.
o Feminism – discrimination against women.
Ex: Try to take a non-discriminatory perspective, find out what is wrong with legislation, and how to change it:
Feminist Critique A critical perspective, including a perspective informed by feminist analysis, can
destabilize the law and lead to reform. Look at law as contingent, and moveable, as advocate b/c you try to
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persuade. For example, see Bliss.
Bliss (S.C.C., 1979): Court concluded that a longer qualifying period for women claiming unemployment (EI)
payment due to pregnancy is unimpeachable and non-discriminatory.
Per the court, if the impugned section treats unemployed pregnant women differently from other
unemployed persons, be they male or female, it is, it seems to me, because they are pregnant and not
because they are women… Any inequality between the sexes in this area is not created by legislation, but
by nature. (Treats pregnant men and pregnant women the same… really WTF? Pregnant Men don’t exist
so they cannot be treated differently or be discriminated against) Ten years later, Bliss was reversed by the
SCC in Brooks v. Canada Safeway Ltd., [1989] 1 S.C.R. 1219 – discrimination on the basis of pregnancy
is discrimination on the basis of sex.
A. What is the feminist analysis of Balfour per Christine Boyle (unpublished manuscript)
PUBLIC/PUBLIC
Governmental
law is legitimate in this sphere
PRIVATE/PUBLIC
marketplace
law has a limited legitimacy in this sphere – the law must, for example, maintain market choice, protect
property and enforce contracts
Some law is required (contracts, criminal, basic law) that is legitimate
PRIVATE/PRIVATE
hearth & home (house, personal space)
values of altruism, morality, love, affection
law has virtually no legitimate scope in this sphere Court saying Balfour is agreement in this realm and
law doesn’t seek admittance here
State just cannot cross barriers as they see fit, b/c we live in individualistic society and privacy is
paramount.
Balfour not given support when promised to her, when court says we are not entering the private/private sphere
(we are not doing nothing) Court is enforcing status quo that Mr Balfour doesn’t have to pay (this is not neutral
they are making a decision it is not doing “nothing”) remains intact, this preserves gender relations. Isolating
women in sphere divorced from legal order denies them ability to seek legal help and continues to leave women in
isolated and discriminated position. This would not be something we would allow in 2016.
Commercial/business arrangement: Presumption that parties intend to make legal relations. Then it falls to the person
rebutting the intention of legal relations to prove there was no intention.
Formality of Seal: How formal does putting documents under seal have to be to be enforceable?
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At time of Kiska signing the guarantee, no wafer seal was attached.
Bank is now calling on the guarantee.
Legal issue: Is there consideration? If no, is the guarantee properly under seal such that it is enforceable even absent
consideration?
Holding: When Kiska signed seal he thought the brothers debt was properly under collateral, so would not be called upon
as guarantee.
MAJORITY
The guarantee was binding b/c there was consideration. B/c by brother signing the Bank would give his brother
more time to pay off the debt. This was valid consideration.
LASKIN J (dissenting)
There was no consideration so the guarantee could only be enforceable if it was under seal.
Printing of bracket word “seal” is merely an invitation to place a seal.
The document by the bank did not have sufficient formality, intention to be binding and enforceable, in this case.
Neither the words “given under seal” nor the formula of “signed, Sealed and Delivered’ suffice, even when taken
collectively.
o The words merely anticipate the formality which must be observe and are not a substitute for it
Just because the executing party (bank) intended to adopt a seal does not is not enough to bind a document under
seal when no seal is affixed
o A bank thrusting printed form in front of young man is not proper.
o There should be some semblance of formality, not anything will do just b/c the bank says so.
o The purpose of seal is to alert the guarantor of the obligation.
Example #2: What about a lifetime oral contract of employment? It is enforceable? Adams This could technically be
performed within a year (employee could die). So the contract could be performed within a year and could be enforceable.
Hanau Time is not stated therefore not determined.
Example #3: Ms. X is hired by ABC law firm as a junior lawyer under an oral contract for an indefinite period at $8,000
a month. Both parties anticipate that the contract will last at least two years. After 3 months, Ms. X is fired without cause
and without notice. Can she successfully sue? This would be enforceable b/c time indefinite.
3. A contract for the sale of any goods of the value of $50 or upwards
(2) This section applies to every contract referred to in subsection (1) notwithstanding that the goods may be intended to
be delivered at some future time, or may not, at the time of the contract, be actually made, procured or provided or fit or
ready for delivery or that some act may be requisite for the making or completing the goods or rendering the goods fit for
delivery.
(3) There is an acceptance of goods within the meaning of this section when the buyer does any act, in relation to the
goods, that recognizes a pre-existing contract of sale whether there is an acceptance in performance of the contract or not.
(note evidentiary substitutes that are not found in the original SF s. 4)
1. Contracts of Guarantee
Guarantees Acknowledgement Act R.S.A. 2000, c. G-11 as recently amended under Justice Statutes Amendment Act,
2014
Amends RSA 2000 cG-11
31(1) The Guarantees Acknowledge Act is amended by this section.
(2) The lawyer referred to in subsection (1) must not represent or be employed by a person or corporation who stands to
benefit as a result of the guarantee.
We want people who sign guarantees to know their obligations, they must appear before a lawyer (use to be
notary) Higher standard of knowledge of person talking to enter into guarantee. Sign certificate in presence of
lawyer (w/o certificate guarantee not enforceable). Person entering into it must understand what they are signing
and aware contents of guarantee. (Protect ppl who enter into guarantees)
2. In equity
Per Fridman: “it was decided quite early after the passage of the Statute, by courts of equity, that DF’s would not be
allowed to plead and rely upon the Statute if to permit them to do so would be to allow the Statute `to be used
as an engine of fraud.'”
Per Coyne J.A.: “Equitable principles which hold that the Statute of Frauds does not apply where there has been
performance or part performance of the oral contract by, or where otherwise the result would be fraud against, or injustice
to, the other party….” Can enforce these.
Per Upjohn L.J.: “acts need not be referable to no other title than the one alleged. They need only ‘prove the
existence of some contract, and are consistent with the contract alleged.’”
This broader view appears to be the one followed in Thompson (SCC 1974). SCC in Thompson says that its
decision in Brownscombe stands for the proposition that the performance has to be plainly referable to an
agreement as to the very land.
Sask C.A. in Lensen discusses the theoretical foundation of the doctrine of P/P:
1. orthodox account: “alternative evidence” – acts of P/P are seen as evidence sufficiently cogent of the contract to
permit equity to enforce it. Leads to a more narrow test of P/P
2. modern account: “raising equities” - acts of P/P raise equities in the plaintiff’s favour which render it unjust not
to enforce the contract, per Steadman. Leads to a broader test of P/P. Thompson 48 years on farm helps to support
equity.
Test in Canada is not yet clear.
Maddison v Alderson (1883) **MADDISON TEST FOR PART PERFORMANCE REQUIREMENT FOR
SPECIFIC PERFORMANCE UNDER S4 of the Statute of Fraud
“All the acts done must be referred to the actual contract, which the measure and test of their legal and equitable
character and consequence.”
BORAD TEST: All the authorities show that the acts relied upon as part performance must be unequivocally, and
in their own nature referable to some such agreement as that alleged.
NARROW TEST: It must be unequivocal. It must have relation to the one agreement relied upon and to no other
when it must be such, “as could be done with no other view or design that to perform that agreement”.
Rand J (dissenting)
Acknowledge Madison test (two tests) recites both parts but seems oblivious to the fact that there are two tests
You have to show contract and, acts must be consistent of some such agreements.
The Nephew cannot meet either test of P/P (either the loose Madison or Narrow Madison).
Acts of performance are wholly neutral and no relation to contract connected to promised property. (P/P is based
on Equity [or alternative remedies]) In this case it is not clear why he is doing this he could just be acting as
decent family member. Rand takes narrow view and P/P must be in relation to alleged property. (He cannot pass
either test)
Quantum Meruit: provide remedy in context of a contract that has failed (oral contract for land unenforceable &
insufficient acts of P/P).
“contractual Quantum Meruit” b/c Aunt and Nephew understood he was not giving acts gratuitously. Court is
saying, there is a contract btw the parties, there is implied term that he will be paid reasonable sum for services
rendered
The oral contract for reasonable some is what they imposed on fact scenario, so to do justice they “imply
contractual Quantum Meruit” on the facts… promise to pay for service b/c contract unenforceable.
The respondent is entitled to recover for his services – what the deceased would have had to pay for them on a
purely business basis to any other person
The restitution demonstrates that the estate is unjustly enriched if the estate retains the services of the nephew
but doesn't pay for them. This means that you have to show
1. An enrichment of the aunt or her estate
i. Estate enriched because of all the free labour
2. A corresponding deprivation in the nephew
i. Nephew not compensated for work
3. Absence of a juristic reason justifying the enrichment. (reason in law)
i. Since nephew did work and no reason in equity it shouldn't be compensated.
Unjust enrichment – he is entitled to recover what he put in to the contract, otherwise it would be unjust
enrichment for the aunt. There was an expectation here that some payment would be given to him. Nephew gave
benefit to estate pursuant to unenforceable contract. (O’Byrne - Not technically accurate to say there was contract,
rather give restitution of quantum meruit as opposed to some kind of contractual element).
Ratio: When part performance is done on the footing of a contractual relationship, and the party who got something out of
the performance does not complete the contract, the party who preformed is entitled to recover for that performance.
→ (ie. A provided services to B expecting to get paid, therefore B must pay for those services.)
Note: Don’t always be single-minded in actions, there can be concurrent actions. Ex: Contract for house? If you fail on
that contract element what about … payment action in restitution? You want him to get something.
Contract between Wood and Provinder's father whereby Wood promises Provender's father that he will pay Provender.
When Wood doesn't pay, Provender brings an action against Wood.
** the action of assumpsit is derived from action upon the case or action on the case. The latter thereby generated “a large
part of our law of simple contract” per T.F.T. Plucknett, Studies in Legal History (1983) at 778. ***Per Black’s, asssumpsit
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refers to “a common law form of action which lies for recovery of damages for the non-performance of a parol or simple
contract…” Assumpsit means: “He undertook. He promised.”
Issue: can Provender (who is not a party to the contract in question) sue on the contractual commitment made to his father?
Ratio: Yes. “the party to whom the benefit of a promise accrues may bring his action.”
Comments:
Tweddle (1861): No. “It would be a monstrous proposition to say that a person was a party…for the purpose of suing upon it
for his own advantage, and not a party to it for the purpose of being sued.”
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd. 289 [1915] AC 847 (HL)
Facts:
Dunlop (tyre manufacturer) (PL) Contract 1 with Dew Wholesaler (wholesaler)
Dew wholesaler Contract 2 with Selfridge (retailer, DF)
Selfridge Contract 3 With Customer
Dunlop under Contract #1 Dunlop sells to Dew. contains a resale price maintenance clause (which is now illegal but not
at the time this is price fixing). Dew can only sell below list to retailers who agree not to sell below list to their customers. To
such customers, Dew can sell at 10% below list if they obtain their customer’s promise to observe the list price.
Dew in Contract #2, Dew selling tyres to retailer Selfridge. Selfridge promised Dew that it would not sell below list or
offer to do so; and agreed to pay Dunlop £5 by way of liquidated damages in face of breach.
Selfridge In breach of Contract #2, b/c Selfridge sold below list to customer under Contract #3 (Dew doesn’t want to
Selfridge b/c it is one of their best customers and the cost and uncertainty of litigation. Dew has discharged obligation under
Contract 1. Contract 2 says everything Contract 1 requires it to say)
Dunlop is 3rd party beneficiary and not a party to contract on its face. There is a breach of contract 2 by Selfridge, Dew were
so inclined could sure. Dunlop is suing Selfridge for breach of Contract 2.
Issue: Can Dunlop sue Selfridge for breach of the Jan. 2nd contract between Selfridge and Dew (i.e. contract #2) even though
Dunlop was not a party to the contract.
Results:
VISCOUNT HALDANE LC
The Lords agree fundamentally with the decision of the Court of Appeal; there was no contract between Dunlop and Selfridge
and therefore Dunlop cannot sue.
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Appellants argue that there is consideration because the appellant's permitted and enabled Dew to give discounts
"The consideration by way of discount under contract 2 was to come wholly out of Dew's pocket and neither directly
nor indirectly out of that of [Dunlop's']. If [Dunlop] enabled Dew to sell to the [Selfridge] on the terms they did, this
was not done as any part of the terms on the contract sued on [contract 1].
o What was rec'd? Selfridge rec'd discount from Dew, not appellant so no consideration there
o Dew took the loss for providing the discount to Selfridge, still no consideration between appellant and respondent
o Did Dunlop give permission to sell? No. Dew owned the tired outright and could do whatever he wanted. There
was no residual control.
o Contract 2 confers benefit on Dunlop in way of liquidation damages clause. But the court says this doesn't give
you standing to sue on the contract.
Argument by counsel for Dunlop : Dew is an agent of Dunlop.
o An agency relationship is a relationship where the agent is empowered to effect legal relations on behalf of the
principle. Therefore when Dew as agent of Dunlop, enters into a contract with Selfridge it enters also on behalf of
Dunlop
o Therefore everything Dew is doing, it is Dunlop doing it, they are one in the same.
Court: we don't see an agency relationship
o To show an agency relationship, the contract #2 between Dew and Selfridge would need to show that Dew is
acting as an agent and as himself. There is no prof of this in the contract. The contract clearly only depicts Dew
acting as himself.
o Assuming there is an agency relationship (dissent finds agency relationship) and Dew is effecting legal
relationship to Selfridge on behalf of Dunlop we still hit a wall because of consideration
Ratio:
Only parties to a contract can sue for a breach of the contract.
The only exception to this rule is if a party named in the contract was acting as an agent AND there was consideration
flowing from the ; in this case, the unnamed party can be sued. yes
Comments:
These price fixing contracts are now illegal by statute.
At the time, the contracts were legal so we accept the contract was enforceable.
What they could have done, Dunlop could have imposed an obligation on Dew to pass on savings. So when Dew
entered into contracts "2" then that would be their consideration to enforce resale maintaince. There are ways the clause
could have been enforced but it wasn't done.
In contract 1: you could also say that Dew would undertake to sue anyone who breaches contract 2.
Maybe there is an implied term that Dew would enforce it's contract 2. Much better to have an express term.
258.
(1) Any person who has a claim against an insured for which indemnity is provided by a contract evidenced by a motor vehicle liability policy, even if such person is
not a party to the contract, may, upon recovering a judgment therefor in any province or territory of Canada against the insured, have the insurance money payable
under the contract applied in or towards satisfaction of the person’s judgment and of any other judgments or claims against the insured covered by the contract and
may, on the person’s own behalf and on behalf of all persons having such judgments or claims, maintain an action against the insurer to have the insurance money so
applied. R.S.O. 1990, c. I.8, s. 258 (1).
Denning (at CA): Mrs B can sue in her personal capacity, and as the executor. Denning did not summarize Dunlop case
correctly. Per O'Byrne, this is Denning's most shocking decision.
Legal issue: Does the privity rule prevent Mrs. B from successfully bringing this action?
Holding:
LORD REID
Start with the presumption that a 3rd party cannot enforce a contract
Widow has not capacity to sue in her personal capacity, but can sue as administratrix for specific performance
Appellant argues: widow can only sue for damages for breach of contract (contract being between himself and the
estate) and damages therefore are minimal.
o What are the damages to the estate? Very little because the estate wasn't the one getting paid. But
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technically she can only recover damages for the estate and therefore damages are nominal. This is a
repugnant result.
Respondent argues: entitled in her capacity of administratix of her decease husband's estate to enforce the
provision of the agreement for the benefit of herself in her personal capacity, and the proper way to enforce this is
specific performance
The court orders specific performance b/c the common law remedy for damages would be inadequate
Ratio
Third parties cannot sue for breach of contract when they were not a party to the contract, even if they were named as
a benefactor of the contract. 3rd party beneficiary rule is good law.
Executors of wills can sue for specific performance of promises made in contracts with the deceased.
Comments:
It's not a formal doctrine, but O'Byrne calls it the law of repugnant: If there is something repugnant, it just doesn't
matter what the common law is, the court will do what is right
Specific performance is very common in land transaction (usually based on showing the land was unique)
O'Byrne unsure why she widow suing personally because they knew she would win as an administrator… but they
were probably worried about the damages being nominal if she sued as administrator only (which counsel for the
respondent also addressed).
What if someone else had been name the administrator?
o What if the evil nephew was the administrator? This is very possible, the old man gave the nephew his
business so he obviously like him.
Then you would make an application to have nephew removed as executor because he's not doing his
job.
You could try Denning's reasoning that she can sue if she has personal interests, but…. It's not really
true.
(c) Trust
(d) Agency 302
New Zealand Shipping Co Ltd. v A.M. Satterthwaite & Co Ltd. (New Zealand)
Ajax (shipper consignor maker of drill) Contract 1 Federal Steam carrier (subsid. of NZ Shipping hires NZ
Shipping to unload the drill via Contract 2) Contract 1 Satterwaite (consignee holder of bill of lading and owner
of drill when it was dropped due to stevedores’ negligence)
(Ajax & Satterthwaite have equal rights just depends who owns it at the time is was dropped) Consignor and
Consignee have identical rights.
Federal Steam (carrier subsid. of NZ Shipping hires NZ Shipping to unload the drill via Contract 2) Contract 2
NZ Shipping Co. (stevedore parent to Fed Steam (which simply explains why Fed. Steam decided to hire NZ) under
contract #2, is obligated to unload the drill.)
Contract #1 is a bill of lading* which provides: [Limitation of liability clause – precluding one party from suing but
this was contractually agreed upon so this is ok; shelters Stevedores from liability from negligence]
“In accepting this bill of lading, the shipper, consignee and owners of the goods… agree to be bound [as follows:]…
”No servant or agent of the carrier (including an independent contractor) shall… be under any liability to the shipper,
consignee or owner of the goods… for any loss or damage… The carrier will not be accountable… beyond £100…”
NOTE: Bill of lading also incorporated the carriage of goods by Sea Act, which imposed a one year limitation period.
When parties agreed to this clause to limit liability this is not a cause that rips them off but something they
agreed to. They are paying less for drill and they should get insurance on the drill. Signal to Setterthwaite to get
insurance (b/c Federal Steam DOES NOT HAVE INSURANCE) b/c if damage or loss occurs insurance would
only pay out once and both don’t need to pay for insurance.
*Bill of Lading per Black’s: “Document evidencing receipt of goods for shipment issued by person engaged in business
of transporting… It is receipt for goods, contract for their carriage, and is documentary evidence of title to goods.”
Consignment per Black’s: “To deliver goods to a carrier to be transmitted… [Consignee is one] to whom a consignment
is made… [Consignor is]… the shipper of goods.”
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Stevedore Co is parent of carrier (subsidiary) and acts as the carriers agent on a regular basis. The focus here is the
reverse… To what extent is the Carrier acting as agent of the Stevedore?
Issue: Can Federal Steam act as agent making others party to contract? Is New Zealand 3rd party beneficiary that
cannot be successfully sued? Is there consideration flowing from Stevedore/NZ Shipping Co.
Analysis: Dunlop says Stevedores are not protected (3rd party beneficiaries not covered). There needs to be a way the
NZ Shipping Co (Stevedore) is covered by liability clause (can they rely on protection on Bill of Lading). Need an
agency relationship where Fed Steam gets benefits under contract for NZ Shipping AND Need consideration.
Wilberforce, writing for the majority, lays out a test for agency (citing Scruttons):
1. If the 3rd party beneficiary is meant to be covered by provisions/contract
a. Bill of Lading clearly says the NZ [Stevedore] should be protected they are expressly recited under the
clause as independent contracts
2. If the promissor is clearly acting as agent for the party
a. In the BOL clause, the carrier is identified as an agent for the Stevedore expressly recited
3. If the carrier has authority to act as agent
a. No doubt the carrier was authorized to act as agent because of the pre-existing corporate relationship.
b. If someone protects you in a clause of course you will accept. "it's indisputable" that this is allowed.
Federal steam is benefiting New Zealand shipping and typically you will ratify what they've done.
There is no issue is this situation the carrier is authorized to secure benefits.
4. Then consideration moves from party through agent to promisee.
a. Ajax/Satterthwaite promises not to sue…but for what
b. The entire relationship is commercial context to all parties. Cannot describe one part of relationship as
gratuitous.
c. Maj saying that the bill of lading is an offer of unilateral contract by shipper Ajax to the stevedores of
the world “whoever unloads the cargo is going to get the benefit of the exempting clause” (dissent says
no, and really we don't)… but it is from Ajax to the Stevedores of the world whoever unloads the cargo
will get the benefit of the exclusion of liability clause. The unilateral contract is accepted by discharging
the goods.
d. When NZ shipping unloads the goods it's already obligated to that under contract #2.
i. If NZ shipping is under a pre-existing legal obligation to unload the goods, how can doing that
also be consideration for the promise by Ajax??
ii. NZ Shipping has a pre-existing legal duty to federal steam
iii. Ajax is saying to NZ shipping, fulfill that contract. And the law recognizes fulfilling a
preexisting legal duty to a 3rd party at the request of a promisor is good consideration.
Satterthwaite agreed to exempt carrier and agents from liability in the BOL and commercial realities must mean that this
covers the whole carriage from loading to discharge. This is essentially a "unilateral" contract which becomes bilateral
with the specific performance of loading the goods. Consideration is loading the goods. These acts constituted
consideration for an agreement between Satterthwaite and NZ Shipping and therefore NZ Shipping would be subject to
the exemption conditions of the bill of lading. Wilberforce makes it clear that this decision is in the interest of ensuring
an efficient global market; the owners should have been insured since they knew the true value of the goods. Court
wants to do justice or serve commercial reality.
Additional points/points of confusion
Stevedore Co is parent of the Carrier and acts as Carrier’s agent on a regular basis. Our focus is the reverse: To
what extent is the Carrier agent of the Stevedore Co.?
Consignee (Satterthwaite) became holder of the BOL just before drill was dropped. Therefore, at time of loss,
property in drill had passed to consignee and therefore, consignee sues. If loss had occurred before property had
passed to consignee, the consignor (Ajax) would have sued. Consignee and Consignor have identical rights under
the Bill of Lading.
Per Treitel: “A” (the stevedores) unloads cargo belonging to “C” from “B”’s ship. In exchange, “C” promises not to
sue “A” for causing any loss. “A” provides consideration even though already obligated under a contract with “B” to
do the unloading because fulfilling the contract with “B” comes at “C”’s request.
That is, fulfillment of Contract #2 by the Stevedores comes at the request of the shipper and is therefore good
consideration for the shipper’s promise of an exemption.
The whole analysis is a stretch, but the court is driven by commercial practical reality
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(e) Employment 310
London Drugs Ltd. v Kuehne & Nagel International Ltd [1992] 3 SCR 299, page 310
Facts:
**Note that contract of storage btw LD and KN contains this limitation of liability:
LIABILITY – Sec 11(a) The responsibility of a warehouseman in the absence of written provisions is the reasonable
care and diligence required by the law. (b) The warehouseman’s liability on any one package is limited to $40….
The purpose of this clause is signal for LD to insure the transformer against damages not KN.
Trial court finds against Hank and Dennis personally for $34K.
Legal Issue: Can Dennis and Hank shelter under clause (b) (as 3rd party beneficiary of contract) as a defense to LD’s
action against them?
Holding:
Iacobucci (maj)
The employees did owe a duty of care, and that they were negligent.
Therefore the only issue is whether they are excluded from liability under the limitation clause. The main obstacle
to this finding is the doctrine of privity of contract; Hank and Dennis arguing that they should be able to rely on
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the liability clause, but technically hey are 3rd party and cannot win.
Iacobucci states that the only reason to reject the employee's claim is a strict adherence to this doctrine.
When the parties signed the contract they knew of the clause, and knew that employees of the company would be
handling the material.
To allow the employees to benefit from the limitation coincides with the agreement of the parties when they
signed the contract. Further, there are policy reasons to allow the exclusion – particularly that employees do not
expect to be found liable when there are clauses that specifically state that they are excluded. Identity of interest
btw warehouseman and warehouse employees. This a third party predicted to exist from the beginning.
He sets out a two-step test that must be satisfied in order for employees to be excluded from liability:
1. The limitation of liability clause must, either expressly or impliedly, extend its benefit to the employee(s) seeking to
rely on it; and
Clause states: Warehouseman not ‘warehouseman employees’ and throughout the contract interchange the
wording throughout the contract. Pg. 318 did not use express wording but rather implied 3rd party beneficiaries.
2. The employees seeking benefit of clause, must have been acting in the course of their employment and must have
been performing the very services provided for in the contract between their employer and the other party when the loss
occurred.
If both of these provisions are not met, then the employees are excluded from liability. They are met in this case, and
therefore the employees can benefit from the limitation clause.
Comments:
Corporations are invisible, they need people. Of course the Corp is using employees.
This is not a random 3rd party, this is a 3rd party that you can predict to exist from the beginning
The court has articulated a test just far enough to protect Denise and Hank BUT what if Denise and Hank were
going about their business at work and they were moving someone else's stuff and damaged the PL's stuff.
o If the wearhouse stores stuff from many different people then as long as Denise are operating within their
course of employment they are covered. The court makes it more specific but it could probably be expanded.
We could apply the NZ shipping case?
o K&N has negotiated a contract to protect people like Denise and Hank. We've established the agency piece.
o Must find consideration: say that LD is making an offer of unilateral contract to forklift operators of K&N
Edgeworth Construction Ltd. v. ND Lea & Associates Ltd 1993 SCC 320 (Limits of LD case for 3rd parties)
Facts: Edgeworth Construction Ltd. was engaged in the business of building roads in British Columbia. In 1977, it bid on
a contract to build a section of highway in the Revelstoke area. Its bid was successful, and Edgeworth entered into a
contract with the province for the work. Edgeworth alleges that it lost money on the project due to errors in the
specifications and construction drawings. It commenced proceedings for negligent misrepresentation against the
engineering firm which prepared those drawings.
Contract 1: Crown hired ND Engineering to prepare construction and specification drawings.
Contract 2: Edgeworth hired under tendering process to do road construction (relying on ND engineering drawings)
Clause 42: Crown is absolved from any liability for the plans
Clause 42 in Contract #2 states: any representation in the tender documents were ‘furnished merely for the general
information of bidders and [were] not in anyway warranted or guaranteed by or on behalf of the Minister…”
Issue: Can ND shelter under the clause in Contract #2 through privity of contract?
Holding: Pre-trial – clear that ND is going to be liable for neg misrepresentation
When Edgeworth performed the construction it was relying on N.D. Lea, not the provincial government.
Following the provisions in London Drugs the court finds there was no express or implied protection of the
respondent in the contract.
Unlike in London Drugs the respondent could have drawn up a contract that protected it from liability. Employees
who are not "powerless" will not benefit from an employer's exemption. Clause 42 in contract 2 only protects the
minister or Crown.
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Presumably ND could have limited their liability by disclaimer or by requiring supervision so changes could be
made when necessary.
Sheltering under LD exemption of liability clause will not always work.
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CHAPTER VI. CONTINGENT AGREEMENTS 329
1. Introduction 329
Pg 68 Dawson
Reasonable efforts to locate a pilot to bring him into the area and if acceptable Dawson would receive 10% stake. If could
not get pilot
Condition Subsequent if we say there is a contract subject to condition sub then there is a guaranteed contract but it
contemplates it’s demise if something happens (or doesn’t happen) contemplated own demise if Springer using best
efforts could not get helicopter pilot Contract gone.
III. What is a contingent agreement?
A contingent agreement is also called a conditional agreement
Per Treitel, an agreement is conditional “if its operation depends on an event which is not certain to occur.” Ex:
offer to purchase “subject to financing” or “subject to inspection”
Something that may or may not occur (not something you promise that will occur)
This does bind the parties in the interim.
(b.) ‘condition’ as a term where one party’s duty to perform is contingent on the other party performing her undertaking
‘A’ promises to work for ‘B’ at a weekly rate, payable at the end of each week.
Per Treitel: “Here, the contract is immediately binding on both parties, but B is not liable to pay until A has
performed his promise to work. Such performance is a condition of B’s liability and, as A has promised to
render it, the condition may be described as promissory.”
This part of the course concerns contingent conditions (see (a.) above). Our next chapter concerns promissory conditions
(see (b.) above).
2. Conditions precedent and conditions subsequent
Per Treitel: Contingent conditions may be precedent or subsequent. A condition is precedent if it provides that the
contract is not to be binding until the specified event occurs. It is subsequent if it provides that a previously binding
contract is to determine (end) on the occurrence of the event:
e.g. Where A contracts to pay an allowance to B until B marries. [when B married contract comes to end] See
Dawson Helicopter
Per SKO: be careful. Don’t assume that presence of an unfulfilled condition precedent means the absence of a binding
agreement. If you have agreement and there is CP there is a contract.
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Per Treitel: an agreement which is subject to a contingent condition precedent is not fully binding until the specified event
occurs; nor does either party undertake that it will occur. That said, an agreement subject to such a condition may impose
some degree of obligation on the parties or on one of them.
WHAT ARE THE POSSIBILITIES PER TREITEL?
1. Before the event occurs, each party is free to withdraw.
EXAMPLE: agreement for sale of a patent is executed but the parties also agree that it should "not be the
agreement" unless a third party approved of the invention. No agreement UNTIL approval. See Murray, cited in
Weibe.
**Put another way, we have a condition precedent going to the creation of the obligation as opposed to one the fulfilment
of which triggers the duty to perform. There is no contract btw the parties.
2. Before the event occurs, main agreement is not binding but, so long as the event can still occur, one or both of
the parties CANNOT withdraw.
EXAMPLE: A sells land from B subject to financing. A cannot withdraw before the time fixed for completion; he
was bound to wait to see whether B could arrange the loan. See Smith v. Butler, [1900] 1 Q.B. 694.
3. Before the event, the main agreement is not binding but that in the meantime, the parties must not prevent
occurrence of the event.
EXAMPLE: Soccer player is transferred. He is to be paid part of his fee immediately and the balance upon
scoring 20 goals. He is cut before he has the change to score the goals. Held: that the team was in breach as it had
not given him a reasonable opportunity to score the goals. See Bournemouth discussed in Treitel.
Before the event occurs the main agreement involved is not binding but parties cannot prevent the occurrence of
the event. There is a contract and the obligation to pay him is contingent upon scoring the goals. One party
cannot prevent the other from performing the event.
4. Before the event occurs, the main agreement is not binding but one of the parties undertakes to use reasonable
efforts to bring about the event without undertaking that those efforts will succeed.
EXAMPLE: Hargreaves Transport Ltd. v. Lynch, [1969] 1 W.L.R. 215. Land is sold subject to the condition that
the purchaser should obtain planning permission he is bound to make reasonable efforts to get the permission
but isn't liable for failing.
There is a contract btw the parties but the primary obligations under contract (buy sell develop) are suspended
pending fulfillment of the condition. Unless or until that condition is filled the primary obligation isn’t triggered.
In the meantime there is a contract and parties are bund in subsidiary way. Falls on purchaser to make reasonable
efforts to get the permission but not faulted for failing. As soon as you say someone has to ‘do something’ there
is a contract.
The principal obligation (to buy and sell) will not take effect if planning permission is not obtained. But note that there is
an implied subsidiary promissory obligation to make reasonable efforts.
**the foregoing pages must be read in light of Turney.
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VII. The “Let’s Make a Deal” summary of conditions precedent **can use on exam
DOOR #1: CONDITION PRECEDENT TO CREATION [FORMATION] OF THE CONTRACT [OBLIGATION]
Example: I’ll buy your house if I like it (not in contract)
No binding agreement results from this because the condition precedent is Illusory – it is based on ‘whim, fancy,
or dislike.’ It has no objective content and therefore cannot be enforced.
Cannot have implied subsidiary obligations b/c there is no contract.
DOOR #2: CONDITION PRECEDENT TO THE DUTY TO PERFORM THE PRIMARY CONTRACTUAL
OBLIGATIONS (in a contract)
A binding agreement (contract) results but whether the primary contractual obligations (example: to buy and sell
a house subject to selling one’s own residence per Wiebe) depends on whether the condition precedent is
fulfilled.
Such agreements can have subsidiary obligations breach of which is actionable b/c there is a contract to which we
can append.
o Wiebe has to make bf efforts to sell his house (Weibe has to do something)
o Bobsien has to wait and see if Wiebe fulfills the CP VIII. What is a True Condition Precedent?
See Turney: But here there is no right to be waived. The obligations under the contract, on both sides, depend upon a
future event, the happening of which depends entirely on the will of a third party – the Village Council. This is a true
condition precedent – an external condition upon which the existence of the obligation depends.
2. Intention, Certainty, and Consideration 332
Wiebe v Bobsien
Facts: Wiebe, PL, purchaser, paid a DEPOSIT* of $1,000 sues Bobsien, DF, vendor
Pursuant to the parties’ interim agreement dated 22 June 1984, house sale is subject to PL selling his own residence
on or before 18 August 1984.
On 22 July 1984, DF purported to “cancel” the interim agreement.
PL did not accept this cancellation and on 18 August 1984, he fulfilled the condition by selling his own home
On that day, plaintiff notified defendant that the “subject clause” was removed
Defendant refused to complete
*DEPOSIT per Alberta Conveyance Law Practice is “security for completion of the contract by the payer and will be
forfeited to the other party if the payer fails to perform his side of the contract” and, citing Howe v. Smith, “a guarantee that
the contract shall be performed… [I]f the sale goes on… it goes in part payment of the purchase money for which it is
deposited; but on default of the purchaser… he can have no right to recover the deposit.” Deposit Refundable.
**OPTION TO PURCHASE per Black’s: A bilateral contract in which one party is given the right to buy the property within
a period of time for a consideration paid to the seller. In option to purchase the consideration is paid to the vendor to keep
offer open for set period of time ($1K is purchase price for promise) don’t get money back.
Issue: Is the interim agreement a binding contract or a failed OPTION TO PURCHASE** that the def. was entitled to
cancel?
Holding:
Three types of Condition Precedents
1. DOOR #1: Circumstances where a condition precedent prevents the formation of a contract. (No contract)
a. Condition precedent is clear, precise and objective. If unable to fulfil the condition this agreement becomes
null and void.
2. DOOR #2: Circumstances where a CP suspends the performance of the contract (Contract)
a. CP is partly subjective and partly objective. Dealt with by implying a term, i.e., for the purchaser to take all
reasonable steps. If Weibe uses good faith efforts and fails, this is not actionable. The vendor has implied
subsidiary obligation to wait until the deadline passes and not free to deal with other people.
b. Pg 335 CP suspends performance to some obligations until some conditions are met (CP usually interpreted
as Door #2). Also means parties are bound pending fulfillment of CP pf purchaser to sell his own house.
3. CA DOOR #3: Circumstances where CP cannot be possible to imply a term and the agreement will fail for
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uncertainty. (Actually then turns into Door #1 preventing formation of contract)
a. Condition precedent is imprecise, or depend so entirely on the subjective state of mind of the purchaser, i.e.,
incurable uncertainty. Contract process is still at the offer stage (never accepted). Pg 338 CP to purchaser
completely dependent upon the “approval of president” not clear enough to make binding. The condition
precedent is illusory (cannot determine whether or not best efforts were used). The CP has not content.
Denning: if parties reached agreement on all essential matters there is an agreement (Door #2). Must bring to court for
approval and neither party cannot disavow prior to court approval. Meaning there is a contract btw the parties. Usually in real
estate CP are Door #2.
Summary:
1. Door #2: Real estate contract containing a CP will usually result in a binding agreement of sale and purchase. The
obligation to complete the contract is merely in suspense pending the occurrence of the event constituting the
Contract
2. Door #1: However, sometimes, such as condition may prevent the formation of contract if agreement itself and the
surrounding events indicate it was never the intention of the parties to bind themselves to a contract of sale and
purchase.
3. In this case the contract and the surrounding circumstance indicate the parties intended to reach a consensus when
they executed the interim agreement on June 22nd, 1984.
4. Completion of the sale was suspended pending disposition of the PL’s Port Moody Home on or before 18th August
1984. He had a duty to take all reasonable steps to sell his home. If he failed to do so, he would be in breach of his
agreement and liable for damages to the PL.
5. When the Port Moody home was sold August 18, 1984, the DF was then contractually bound to sell the Crescent
Beach property to the purchaser b/c the agreement was no longer in suspense. Hence, the DF had no legal right to
cancel the contract by his telegram 22, July, 1984.
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only do so in vendors name as his agent. Vendor under duty to act in good faith and to take all reasonable steps to
complete the sale. Failure to fix responsibility on a party for obtaining planning approval cannot render a contract
unenforceable.
Both parties knew about subdivision clause and both parties must do what is necessary to comply with the planning
approval. Based on legislation vendor has implied duty to comply and must act in good faith to take all reasonable
steps to complete the deal. I cannot accept proposition of failure to fix who gets planning approval makes the contract
void. This is a Door #2 (implied subsidiary obligations to do what is necessary to get approval) The contingency is no
one know if it will actually get approved. The vendor’s failure to seek approval is actionable b/c they failed to do
implied subsidiary obligation.
Remedy: We are saying the vendor is in breach of implied subsidiary obligation to make the application for subdivision.
Purchaser lost the ‘possibility’ of profit on the deal (contingency). There should be discount based on how likely it was to get
the approval. SCC remedy as follows:
1. Vendor must apply for subdivision (Likely Implied term bona fide application in good faith but better to get
expressly recited)
2. If vendor doesn’t apply, PL gets loss of profit (With no discount for the contingency) Pg 347: this quantification
was based on the approval for subdivision was certain to be obtained, this is not typical usually here would be a
negative contingency that the application may fail. O’Byrne thinks justifiable b/c they want to ensure vendors goes
through with specific performance and this ensures that they will do everything they can (added penalty to ensure best
efforts). If they fail to make application the idea is that the vendor thinks the application will likely succeed.
3. If application is successful, deal proceeds.
4. If application fails, deal ends.
Multimalls: what Eastwalsh lost was too insubstantial to justify damages (more than nominal. What success would we have
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to show to get damages? In Multimalls they had 20% chance of success which would merit 20% in damages. So at least 20%
could justify damages, but any lower we don’t know for sure.
According to Turney a true CP under the SCC test cannot be waived by either party, regardless of whether it was
intended to benefit one of them.
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2. Distinguish Turney (court do this but usually for reasons unknown)
3. Ignore Turney completely
Summary:
Condition Subsequent easy
Contract btw parties, due to fulfillment or non-fullfillment it comes to an end. (Dawson helicopter) Comes to an
end if something happens. But b/c three is a contract there ARE subsidiary obligations
Condition Precedent
Door #1 condition is illusory, or dissent in Weibe when Door #2 condition is uncertain and unclear making the
condition void, so it becomes door #1 and contract void.
Door #2 contract btw parties and there can be implied subsidiary obligations (just like Condition Subsequent)
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Chapter VII. Representations and Terms: Classifications and Consequences
I. Definition of a misrepresentation per Fridman: "a misstatement of some fact which is material to the making or
inducement of a contract."
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II. General rule per Treitel: no relief for a misrepresentation unless it is a statement of existing fact
A. Mere puffs do not count as misrepresentation: “The car was a “good little runner.”
B. Statements of opinion or belief do not count as misrepresentations: “I think this is a Rembrandt but I am not sure”
this is just giving a statement of opinion.
a. If you lie about your opinion is it still an opinion or is it something else? This is a misrepresentation of
fact (misrepresenting your opinion b/c you are lying about it). BUT Smith v. Land and House Property
Corp (CB)
Negligent misrepresentation (contract tort overlap)– When a professional vendor states it is a Rembrandt but you do NOT
take the time to get the item verified.
C. representations as to the future do not count as misrepresentations
*Edington v. Fitzmaurice (1885) 29 Ch.D. 459.
If a misrepresentation goes to the present or to the past, the classification cannot go to the future.
A induces B to lend him money, and promises that A will never borrow elsewhere. This is not a misrepresentation
b/c statement to future not covered by this representation. Could be found liable for tort of deceit though (this
could be term of contract which would be liable under breach of contract as well).
Damages: plaintiff seeks money damages for the performance which should have been rendered under the contract.
Rescission: plaintiff seeks non-enforcement of the contract (parties are restored to their pre-contractual position.)
For the purposes of this class, rely on McCamus, citing Redgrave and related case law, who states that a representation is
fraudulent if either the misrepresentor knew that the statement was false or made the statement “recklessly and without
care, whether it was true or false.”
As a general proposition, it appears to be sufficient to establish a ‘special relationship’ if the reliance of the representee on
the representor’s statement was both foreseeable by the representor and reasonable on the part of the representee. Where
the misrepresentor does not possess any particular expertise or access to superior skill and knowledge, reliance may well
be unreasonable and the special relationship will be held not to exist.
Note too that negligent misrepresentation if a recognized analogous category of proximity under Coopers. The parties are
proximate due to the defendant's invitation to rely.
X. Bars to actions for rescission based on innocent and negligent misrepresentation (non-fraudulent)
A. Laches – You must bring action promptly (act common law just sue before limitation period ends) but in equity
may have to move more quickly than that. BC v Wren Sept 1960 letter implied repudiation & only repudiation
that would justify non-payment on the mortgage. Action not commenced for a year after letter Nov 1961 … Close
call for court to call based on no Laches. Should always advance claim promptly.
B. Affirmation of contract – if innocent party continue with contract knowing they have grounds to rescind can be
bar. Argued in Kupchak that they continued to run the Motel instead of resigning but if they had done that DF
could argue that restitutio in integrim impossible on the opposite side b/c no one running Motel (not as valuable).
In reality they were trying to mitigate their losses than affirmation.
C. Restitution is impossible, impractical or unjust. *Kupchak v. Dayson Holdings Ltd. (compensation in lieu of
directly transferring back specific property)
D. Third party rights are prejudiced – Pg 373 idea is if in the period btw what has gone wrong and remedy and
3rd party acquired rights, courts are unwilling to hurt 3rd party rights this will preclude exercising rights to
rescind. Kupchak there was ½ interest affected but b/c Haro St property stays with DF and only compensation
goes to PL than this solves problem.
E. Execution of the contract in the case of land – Execution, meaning both sides fully performed, absent Fraud,
will be a bar (but a weakening bar). Kupchak not fully executed PL refuse to pay mortgage.
F. Execution of the contract for the sale of good: Leaf International – accepted goods and paid in full is bar to
rescission.
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Facts: PL (elderly lawyer, purports to sell his practice to the young lawyer). DF (young lawyer).
Lawyer business and house was part of deal
DF counter claims for rescission based on misrepresentation
DF wants deposit back
DF wants moving expenses.
Parties entered into contract for house and law practice. Young lawyer moved family to where practice is located
Young lawyer then learns that the old lawyer exaggerated the value of his business the business is worthless.
Young lawyer wants to not conclude
Old lawyer sues young lawyer
Elderly lawyer sues for specific performance of contract and when you counter claim basically you also sue
Young lawyer also asks for damages in receipt (in tort).
You can't get damages in rescission because contract believes that if it was such an important term why wasn't it
in the contract… so no damages but we'll help you escape contract.
At trial, court held for old lawyer and held there was misrepresentation but the DF should have looked at documentation
and he didn't take the opportunity to discover truth but you didn't take it so how can you say you relied on the
misrepresentation. Perhaps it was professional curtesy that the young lawyer didn't look at value.
Issue: Does the PL have an enforceable contract or is it impeachable via pre-contracted misrepresentation?
Held: Defense to action for pre-contracted misrepresentation: reasonable opportunity to discover the truth
False representation is not got rid of on the fact that the person to whom it was made was guilty of negligence
o As a matter of law, having am opportunity to discover the truth is not to raise the bar for pre-contractual
misrepresentation.
o CA says trial judge was wrong b/c there was pile of paper offered to young lawyer but the true value of practice
not present in those documents (nothing there to consult).
o Young lawyer gets rescission b/c he establishes pre-contractual misrepresentation (unambiguous, relied on,
material)
o Gets deposit and unravelling the parties.
o Hits wall for getting moving expenses b/c he needs tort and is unable to establish tort.
Can rescind for misrepresentation when: statements have been made recklessly or without care and not with the
belief that it was true
o Really trying to rip someone off. In civil scenario Dary and Peak: fraud of deceit if you make statement
recklessly or without care as to whether it is true or false.
If we're saying they've committed tort of deceit in that context you can't say if you weren’t so stupid you wouldn't have
relied on us.
o It doesn't lie in the mouth of the person who was victim.
o BUT now that we have test for fraud and even if there was opportunity to look at papers the young lawyer fails
on the tort claim in deceit . He probably did his own pleadings.
o Court: fails as to damages b/c has no pleaded knowledge that the allegations were untrue to found action for
deceit . So court: your pleadings stink.
Writ of innocent misrepresentation: not a defence (Redgrave)
Writ fraudulently misrepresentation: not a defence
Negligent misrepresentation, could be a defence
Queen v Cognos [1993] 1 SCR 87
o Special relationship between plaintiff and defendant
o To establish action of negligent misrepresentation we establish prima facie duty of care then the DF ought to
reasonably to have foreseen reliance by PL (old lawyer would have forseen that the young lawyer would have
relied on his words about the value of his business), and that the PL reliance in the circumstances is
reasonable.
Is the PL's reliance reasonable if there is an independent opportunity to discover the truth
independently??
A reasonable opportunity to discover the truth might be a fail answer to a claim in negligent
misrepresentation… O'Byrne not sure.
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It's not a DF in innocent or fraudulent misrepresentation, but maybe in tort misrepresentation
If reliance by representee is unreasonable then you don't have the tort. Whereas in the other areas
of tort we don't care about opportunity to discover truth… might impact in negligent
misrepresentation.
Slight question mark because no case law.
Young lawyer can get deposit back because that was paid pursuant to issue.
Moving expenses: no. no tort. No where to append damages to.
Issue: Was the statement "a most desirable tenant" a material fact?
You must show unambiguous, material, relied on.
PL argues: we don't have a statement of fact, we were just giving our opinion on Mr Fleck. A statement of opinion is not a
statement of fact.
Purchaser knows nothing about Mr Fleck and vendor knows everything
The vendor gives an opinion, well there is an implicit representation in that opinion
o Implicit representation that you know facts that make this opinion reasonable
Unambiguous: vendor is saying that he has factual foundation for the view the tenant pays the rent (something you
want to know as purchaser).
Material: yes would compel reasonable purchaser b/c you know if you'll have someone helping with mortgage
Reliance: arguing that it is implicit.
It is an inference of law that a material representation calculated did induce evidence to the contrary: we assume
reliance.
o If it's material we assume reliance. Others have suggested that it is an inference of fact.
o View in Canadian law: when you assess it as being material and unambiguous you can assume it can be
relied on. Alberta courts have said show me everything. Show on facts it was relied on.
Held: Statement of opinion can be statement of fact
Bank of BC v Wren Developments LTD, (1973), 38 DLR (3d) 759 (BCSC) (Duty to disclose)
Facts:
Wren took a loan from the bank and deposited shares in a number of companies by way of security. This was done via
a hypothecation agreement. Hypothecate, per Black’s means ‘to pledge property as security or collateral for a debt.’
Over time, plaintiff released some of these shares to Smith without Allan or Wren’s knowledge or consent. This
negatively affected Allan’s position under his June 2,1971 guarantee.
Allan asked about the position of the shares but did not wait for an answer — he simply signed on the assumption that
there had been no change.
Bank already has default j. against Wren on the loan and summary j. against Smith on his guarantee.
Mr Allan didn't realize that the bank was releasing shares that Wren had pledged as securities for the debt and released to
collateral to Mr Smith. It was unauthorized and shouldn't have happened.
Legal issue: Does Allan have to pay $25,000 pursuant to his written guarantee? Is there pre-contractual misrepresentation
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in the form of silence that would allow us to argue that Mr Allan is not bound by a form of guarantee.
Holding: Judgment for DF. Silence as Misrepresentation (failing to inform Allan of change in collateral)
1. Unambiguous – silence gives statement of fact that collateral unchanged. Munroe held that Allan had labored under the
mistaken belief that collateral security pledged by the company was still at the bank. He had not been informed of any sale
or exchange, his signature was required for banking transactions, and neither he nor the company had ever authorized
Smith to act as agent.
2. Material – He had been materially misled by the words, acts and conduct of the Bank. Satisfied that Allan would not
have signed the second loan guarantee if he had known all the facts, Munroe found he was induced by misrepresentation
(failure to disclose facts) to sign the second agreement. In the circumstances, he is not liable for repayment of the second
agreement.
3. Relied upon – Would not have signed the agreement had he known there was change in collateral.
In this case silence is misrepresentation and the bank did have a duty to disclose b/c of exceptions below:
No duty to disclose EXCEPT:
Creditor must disclose to the guarantor any change that guarantor would not expect to exist (not up to guarantor to ask). In
this case guarantor did ask but did not wait for answer. There was a positive obligation on part of bank to disclose.
Silence can be treated as misrepresentation:
Half truth – don’t tell the entire truth. Silence about half and that is misrepresentation b/c when you answer you
are representing that you are giving a complete answer.
Actively Concealing the truth – Sales of house vendor placed scatter rugs over termite damage. Purchaser did
not ask is there termite damages and DF did not say there wasn’t but actively concealed it.
After a Given statement Something changes – duty to disclose any changes after a statement has been given and
circumstances change.
Contractual relationship requiring good faith you have duty to disclose – contract of insurance (utmost good
faith) when enter into insurance contract the person seeking insurance has duty to disclose. Cannot wait to be
asked the magic questions.
Remedy: recession. Which is everything he needs. On these facts you don't need tort. Just need innocent
misrepresentation.
Silence amounted to the implication that there was no change.
Exception to silence being a misrepresentation: if a true representation is followed by a change of circumstances prior to
agreement which renders the statement false, the representer has a duty to draw the change to the representee’s attention
(With v O’Flanagan)
EXCEPTIONS TO THIS RULE ABOVE IN WREN
Universal Concerts Canada v Ryckman Amature Sports Society [1997] A.J. No.1228. (No general duty to disclose)
Facts: Universal Concerts (PL in an action for breach of lease contract, a concert promoter, in this case for shock
rocker Marilyn Manson (AKA Brian Hugh Warner), wants summary j [court by default wants to send to trial, but
if no triable issue then you don't have risk of trial or expense or delay.]
Rydman Amateur Sports Society (DF), lessor of Calgary arena (Max Bell). Resists application).
Def. agreed to lease arena to plaintiff to stage a Marilyn Manson concert at the Max Bell Arena and entered into a
written rental agreement.
Prior to entering the contract, the plaintiff noted the 'controversial' nature of the band's performance.
Public opposition to the concert began to mount and eventually the def. 'cancelled the concert.'
Defendant's position in cancelling the concert was, inter alia, that Manson' promoters had a duty to disclose the nature
of the act.
Court grants summary j. as there are no genuine triable issues between the parties.
Default rule: no duty to disclose at default.
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"That mere silence as to anything which the other party might by proper diligence have discovered, and which is
open to his examination, is not fraudulent, unless a special trust or confidence exists between the parties, or be
implied from the circumstances of the case"
Comments:
Memorandum of appellant really mocks DFs for delicacy.
Pulled police reports, newspapers, tipping them back and gives you momentum
Application successful
Rainbow Industrial Caterers Ltd v Cdn National Railway Co, [1991] 3 SCR 3
Facts:
The Canadian National Railway Company ("CN") called for tenders for the catering of meals nationwide for its track
crews, from March 15, 1985 to March 14, 1986. It was estimated that 1,092,500 meals would be required.
The respondents are industrial caterers which operate as a single entity. I will refer to them together as "Rainbow". They
bid $4.94 per meal. Then CN stated that the number of meals required would be only 85% of the previous
estimate. Rainbow submitted a new bid of $5.02 per meal, and this was successful. It turned out that far fewer meals were
required; there was something like a 30% reduction. The contract was not a financial success for Rainbow. They suffered
a loss of over $1,000,000 by the time they terminated the contract on September 21, 1985, on thirty days' notice as
permitted by its terms.
Issue: What damages for misrepresentation are appropriate?
Analysis:
There was a misrepresentation b/c CN underestimated the number of meals needed
As reliance Rainbow entered into the contract and rainbow was losing money on the contract
Award for entire loss, based on the assumption that but for the misrepresentation, the PL would not have entered the
contract at all
PL to prove that it had entered into the contract b/c of negligent misrepresentation and establish loss
DF to prove the contract would still have been made if a correct representation had been made, and since DF
failed to establish this the PL was entitled to recover all losses though unrelated to the misrepresentation
But for rainbow in a losing contract with CN it would have been in a profitable contract. So in that scenario you look
at loss of profit as an opportunity lost.
Kupchak v Dayson Holdings LTD, (1965) 53 WWR 65 (Explain remedy of rescission and defenses to remedy of
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rescission)
Facts:
Palm Motel Ltd (owned a motel)
Kupchack (purchaser of shares in Palm Motel Ltd from Dayson)
Dayson Holdings (vendor of shares in Palm Motel Ltd)
TJ established Kupchaks had been induced by fraud to exchange their property for the Motel. Rescission not possible
so award of $28K.
Issue: Is the plaintiff entitled to rescission?
The DF cannot restore the PL to it's pre-contractual position.
Changes to property are such that we can't restore so restitutio in integrum.
A court may decline rescission when restitutio in integrum is impossible
Analysis:
Condition of rescission: restoration of the DF to his precontract position so that no stress is placed on whether the
pursuer is so restored.
TRADITIONAL VIEW: b/c fraud, rescission, accompanied by restitutio in integrum, is proper
o But a court of equity cannot give damages, and unless it can rescind the contract, can give no relief
NOW: Courts must fix its eyes on the goal of doing "what is practically just", which depends on facts.
Respondents may not bar rescission unless it is impractical or so unjust that it ought not to be imposed upon a guilty
party
Equity has the power to remove inequities resulting from rescission and deficiencies in restitution by
compensation. Rescission is an equitable remedy and can order one to pay compensation to the other in order
to effect substantial restitution under a decree of rescission.
Character of property has been changed so much it would be unjust to deprive respondents of the property and give
it to the appellants
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Did appellants affirm the transaction by retaining the shares and remaining as directors of the company, by
continuing to manage the motel and by keeping up the payments on the first and second mortgages against the
company's property?
o Appellants could not divest themselves of shares, and the only person they could possibly appoint without
losing their right to rescind are the respondents.
o They were responsible for operating the business and could not abandon the operation without ensuring its
proper management
o Appellants were mitigating their loss
Analysis:
Anytime someone has been fraudulent they CANNOT raise an equitable defence!
"fraud unravels all". Restitutio in integrum is not a bar to rescission in case of fraud.
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Assume innocent misrepresentation: can obtain rescission after contract has been executed under innocent
misrepresentation
o Innocent misrepresentation is much less potent than a breach of condition
o Condition is a term of the most material character
o If a claim to reject for breach of condition is barred, it seems to me a fortiori that a claim to rescission on the
ground of innocent misrepresentation is also barred.
Application to Alberta:
In case, unable to claim breach of condition b/c of Sale of Good Act 1893. AB has similar SGA
o Under the act if you accept the painting in pursuance of the contract (or had goods a (long) period of time) then your
right to reject for breach of condition is downgraded to breach of warranty.
o Breach of warranty: can recover damages, do not treat contract as if it is at an end.
o Mr Leaf hung onto painting without complaint for 5 years so as per sale of goods act can only treat breach of
condition as breach of warranty
o Time starts to run within a reasonable time of getting the painting, regardless of not finding out 5 years later it was a
constable. He should have had his own appraisal done when he bought it
Comments:
o IF you lose on left hand side then you're also barred on right hand side
o Execution is a weakening bar. Less in the context of land.
o Absent fraud, your starting position is that execution is a bar and there are some cases to the contrary.
Dick Bentley Productions LTD v Harold Smith (Motors) LTD, [1965] 1 WLR 623
Facts: Mr Dick Bentley: PL, purchaser of a Bentley. Harold Smith: DF, vendor
"The car has only done 20,000 miles since it was fitted with a replacement engine and gearbox"
This statement is false (not fraudulent) just untrue
Statement made at time of contract
Dick really likes car so he doesn't want to rescind the contract
Legal Test per Denning MR: If an intelligent bystander would reasonably infer that a warranty was intended that will
suffice.
"if a representation is made in the course of dealings for a contract for the very purpose of inducing him to act on it
by entering into the contract. It is prima facie grounds for inferring that the representation was intended as a
warranty" [presumption can be rebutted]
o Statement was a promise if it was so intended
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Passes on log-book which stated year of car Stated a fact that should have been in his
to be a 1948 own knowledge
No warranty based on reasonable bystander It is a warranty based on a reasonable
test bystander test
The statement is an innocent Ended up with term aka warranty
misrepresentation ~promising "term"
~stating
TJ : "Mr Smith had jumped to a conclusion and stated it was a fact. A fact that a buyer would act on." (O’Byrne
wishes he had said PROMISE) b/c we are on right side of board.
PL could have pursued as LT side but he doesn't want rescission b/c be wants to keep the car
Representations were not dishonest, no fraud.
SOLMAN
Smith intended legally binding promise (a side promise) or warranty right in the main contract
We know the car has been paid for and Mr Bently has the vehicle but it doesn't matter b/c Mr Bently isn't on left
hand side of board.
Jury trial: jury found no fraud but breach of warranty that the company was a rubber company
Lose on LT side
Win on Right side breach of warranty
Issue: Did Johnson liable for precontractual misrepresentation? (at time of case the modern use of this term didn't exist).
At the time execution was a very strong bar for execution.
Holding: Appeal Allowed.
Argument for LEFT SIDE – UMR (relied upon? Not really) the intermediary was reputable Co and was not very
important that it was a rubber Co. PL would have to go to innocent misrep (not option b/c execution strong bar to
rescission) or fraudulent misrep (does argue this unsucessfully).
Also, restitutio in integrim impossible as well. The shares are not at the same value as they were at time of
purchase. So PL cannot restore same shares back as he purchased as another bar to rescission (especially in
context of fraud court can do what is practically just)
Also suing RIGHT SIDE “promise or term” that this was rubber Co. Would intelligent bystander would
reasonably infer that a warranty was intended as promise? In this case no.
Collateral contract option – pg 378 evident on principle and authority that there is a making of some other
contract. If you enter into A (purchase sale shares) I promise to you that this is a X (rubber company). Must show
intention to enter into a contract. Collateral contract where the sole effect is to add a term is suspect. No evidence
to support collateral contract, it was mere statement of fact (LEFT SIDE). Or in reply to question for info and
nothing more. Was rep of fact and rep upon which the main case of PL rested. Difficulty here that statement was
intended as promise. Do not want to bring term in through back door of collateral contract. No intention to do so
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here.
Moulton, Majority, says that strictly speaking the contracts in this case were not contracts of sale, as the DF was only an
agent of the rubber company and he was to undertake the necessary action to procure the shares for the PL.
Parties are not liable for damages arising from their own innocent misrepresentations.
Damages are only awarded for fraudulent or reckless misrepresentations, or misrepresentations that refer to a
material issue that fundamentally change the contract
Innocent representations are only referred to as warranties if they have clearly been intended to be warranties by
the parties.
Torts can be involved but b/c parties know each other whether a tort action is permissible is something we can address
As general proposition: it is sufficient to establish relationship by showing reliance by the representee was
foreseeable and reasonable on part of the representee.
3. Statutory Reform
FAIR TRADING ACT, PAGE 392 CASEBOOK
Unfair practices
6(1) In this section, “material fact” means any information that would reasonably be expected to affect the decision of a
consumer to enter into a consumer transaction.
(1.1) It is an offence for a supplier to engage in an unfair practice.
(2) It is an unfair practice for a supplier, in a consumer transaction or a proposed consumer transaction,
(a) to exert undue pressure or influence on the consumer to enter into the consumer transaction;
(b) to take advantage of the consumer as a result of the consumer’s inability to understand the character, nature,
language or effect of the consumer transaction or any matter related to the transaction;
(c) to use exaggeration, innuendo or ambiguity as to a material fact with respect to the consumer transaction;
(2) In an action under this section, the Court of Queen’s Bench may
(b) award damages for damage or loss suffered;
(c) award punitive or exemplary damages;
(d) make an order for
(i) specific performance of the consumer transaction,
(ii) restitution of property or funds, or
(iii) rescission of the consumer transaction;
(e) grant an order in the nature of an injunction restraining the supplier from engaging in the unfair
practice;
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(f) make any directions and grant any other relief the Court considers proper.
(3) In determining whether to grant any relief under this section and the nature and extent of the relief, the Court of
Queen’s Bench must consider whether the consumer made a reasonable effort to minimize any damage resulting from the
unfair practice and to resolve the dispute with the supplier before commencing the action in the Court.
Holding:
LEFT SIDE – There is a special relationship. DF professional accountant and knew or ought to have known that the PL
was relying on him (RELIANCE WAS REASONABLE AND FORESEEABLE). We have pre-contractual negligent misrep
which induced PL to submit his tender (formation of contract)
Tessis was liable both in contract and in tort. He held that the relationship of Tessis to Sodd as an accountant was
sufficient to create a special relationship: he had a professional responsibility and therefore a duty of care. The
valuation was thus a negligent misrepresentation intended to be acted upon, creates liability in contract & tort.
RIGHT SIDE – Is statement about the “value of inventory” a term or promise. Would innocent bystander believe that
statement was intended to be a promise? Yes b/c the way to “value the inventory”. The warranty or promise is “how you
calculate inventory” is actually in a collateral contract. The exemption clause is in the main contract for buying and selling
inventory (judicial slight of hand) the court held there is a main contract with exclusion of liability clause. The collateral
contract contains one term “this is how to value inventory” and there is no exclusion of liability clause b/c it only has the
one term. Court held that the representation as to the value of the goods was a warranty & b/c the trustee is changing the
context when he answered the question of how to value inventory and as such waiving the exclusion of liability clause.
Regarding the exemption claus, Lacourcière says that the exemption clause does not include negligent misrepresentation.
Because it is not included specifically, the clause will be interpreted contra proferentem against the person who drafted the
agreement.
Can be used to address relationship pre-emptively (compared to being rear ended by a stranger with no contractual context
for relationship.
Comments:
Left side
Defect going to contract with remedies in context of contract AND in tort.
Right side:
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This is how to value inventory. As a term?
Using the Denning Test (intelligent bystander) … yes the PL could have reasonably inferred that it was a
warranty or a promise.
This can be either a defect going to formation and/or performance.
o That statement: this is how you value inventory is also negligent.
When you see entire agreement (exclusion of liability) clause, it may not cover everything
What should BG be able to recover: Court says BG CAN recover for additional overhead for the work and recover its
costs for doing the work. Does not want to give loss of profit on this. If contract performed as agreed and BC would not
have been required to do extra work and would have avoided certain overhead. BG not entitled to profit on the cost of
clearing right of way b/c this would have put BG in better position had the contract been performed. They never bargained
for profit on this clearing work.
Contract: Loss of profit: Opportunity Cost – This means other employees cannot work on other projects that are
profitable.
o IF BG wasn’t clearing way on this project it would be making profit on another project. Could possibly get
loss of profit as opportunity cost.
o BG never bargained for profit on clearing – BG is in business to make money not donate services to BC
Gov’t.
o BG doesn’t bargain for profit for clearing on right of way b/c it wasn’t supposed to be doing this work. If
they knew they would have had to do this work they would have bargained for profit.
TORT: Loss of Profit – SCC allowed loss profit for clearing work (BUT not in contract). This was negligent
misrep that induced BG to enter into contract. Entitled to position would have been in had tort not occurred. They
would have likely included clearing in scope of work and bid more. SCC says BG would have just bid more and
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should be compensated for all reasonably foreseeable loss. BG would have increased bid to include loss of profit for
the clearing work.
La Forest and McLachlin, Majority, decide that they can sue in both causes of action, and that there are different
remedies for both actions because the law should allow wronged plaintiffs to recover in any way possible.
In the contract action, the goal is to put the plaintiff in the position that they would have been in if the contract was
performed.
In the negligence action the damages could amount to any loss that reasonably stemmed from the negligence, as the
goal is to put the plaintiff in the place they would have been in if the representation never happened.
They state that a tort action is only disallowed if it is explicitly set out that this is the case in the contract. In this case, the
contract did not limit the BC Hydro's duty. Therefore, they have the ability to sue in both, but this case needs to be sent back
to trial to determine the damages in tort.
If you contracted out of tort action you cannot pursue it, which did not happen in this case.
SCC references: Three situations that may arise when contract and tort arise at the same time:
1. Contract btw parties increases standard of care in tort
a. A contract B to deliver widgets (unqualified promise). In contract if A does not deliver than it is breach in
contract for failure to deliver for ANY reason
b. In tort we hold the person to the standard of what is reasonable. Contract action is strongest action but
always sue in court just in case.
2. Contract lowers the duty that you would owe at common law pursuant to tort b/c of (exemption clause)
exclusion of liability clause
a. Contract could limit what PL can do going forward they may nullify the court duty
b. SCC states don’t sue in court b/c little reason to sue in court b/c not going to succeed in tort, but the
exclusion clause may not stick b/c contrary to public policy or invalid.
3. Contract and tort are co-extensive
a. Common calling case – situation involving services available to public which require skill. Doctors,
Lawyers, Vets. The standard of what you have to do in contract and tort are the same. Meet standard of
reasonably competent “Lawyer, Doctor, Vet”.
Sue in both contract and tort when matter goes to trial in case contract suit fails or vice versa.
They also state that the damages for breach of contract are to put the party in the position it would have been in had the
contract been completed.
Leaf: breach of condition gives right to reject unless a reasonable amount of time has passed, in which case we say PL has
accepted the goods so breach of condition is just breach of warranty.
Provision of services over time, if there is a breach of condition then treat it as if contract is at an end but you can
get damages
Repudiation in this area of law: party not at fault is treating contract at an end
Courts call this rescind sometimes which is NOT CORREST
Rescissio : left hand side restoring parties to original state
DO not say rescission on RT hand side only REPUDIATION
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Prior to Hong Kong:
Term or warranty "does the term in question go to the root of the contract (condition), was innocent party deprived
of substantial the whole contract (condition)".
Read in light of contract and made that determination as a judge
DO not look at what happened
Look at contract at time of formation
Hong Kong Fir Shipping Co Ltd v Kawasaski Kisen Kaisha Ltd, [1962] 2 QB 26
Facts: Hong Kong Fir Co (PL, owner of vessel); Kawasaki (DF, charterers)
Per Trial Judge: There was a breach of the seaworthiness term, but in June there were no reasonable grounds for
concluding that the PL could not make the ship seaworthy by mid-Sept at worst. TJ rejected the DF"s contention that it
was entitled to repudiate.
Issue: is there a beach of term such that the charterers can "repudiate"** the contract or are they liable for wrongful
repudiation?
On the one hand, the ship was off for a total of about 5 months and had been used for about 3 months
On the other hand, there are still 17 months left on the charter
** Per McCamus, the term repudiation "is used to refer to a severe breach of contract; or, alternatively, to the election if
the party not at fault to treat the contract as discharged by the breach".
Seaworthiness Can be breached in large and small terms. Breach of same term but big difference in results.
Courts: introduced the helpful idea of an innominate term
Was breach sufficient to provide repudiation?
Must distinguish between "important" terms… means that it is so important that if not performed that the DF is
released from the contract if PL doesn't perform.
From outset we have "conditions" and "warranties"
o It is a condition of a leaf contract: painting is a constable… it is a promise. That is a "condition" of the
contract in the traditional sense
o Every breach of term goes to the root of the contract
"seaworthiness": historically in abstractions courts would look at a term and ask "is it a condition or a warranty".
You make that determination in abstraction based on what parties intended when the contract was form.
Seaworthiness in abstraction is a "condition" under the old system, it is very important but it can be breached in a
big or small way (i.e. fixable in 20 minutes or where ship sinks).
Court tries to focus to the event to which the event gave rise and asks if that was a severe or light event and then
classifies the term as "warranty-like" or "condition-like".
Court introduces: innominate term
o If court decides something is innominate term then you don't classify it as a condition or warranty and then
court looks at severity of event and looks at what happens as a result of the breach
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Warranty-like innominate term: boat needs fixing for 1 day
Condition-like innominate term: boat floating at sea for days on end
Comments:
RESPONSIBLE FOR MITIGATING DAMAGES: If you go get a new ship from the market, then you get the
difference in cost between the ship you had and the new ship you rent
Tritel: when no loss, the courts will try to protect the owner… "Contracts are meant to be performed and not avoided
according to the whims of market fluctuation".
Owners are on receiving end b/c of wrongful repudiation
Owners must mitigate, so they must find another charterer and they will likely be able to find party at lower rate
than what they charged Kawaski so Kawaski is liable for difference
Charter party sued for breach of contract by owners but does it give them right to repudiate? Charter owners said
yes…. But owners then sue charterers for breach of contract b./c they walked from a contract they weren’t entitled to
walk away from: trial and CA agree.
o In wrongful repudiation they must mitigate and get replacement charter party
In T5 Case: ABCA reviews Hong Kong Fir and says that accepted test pre-Hong Kong: Whether the term went to "the
root of the contract", otherwise it is a warranty. You can repudiate and get damages or you can just get damages as
innocent party.
TEST: Hong Kong Fir: innominate term: assuming the term is innominate then innocent party will be discharged if the
occurrence of the event deprives the party of substantially the whole benefit then the term is condition-like.
Per HongKong: it is the happening of the event and not that the even is a result of contractual obligations.
It is the event itself is relieves you because the event is so large. This also ties into idea of frustration.
CLASSIFICATION OF TERMS
1. Per the Alberta C.A. in First City Trust Co. v. Triple Five Corp. (1989), the traditionally accepted test for distinguishing
a condition from a warranty, pre- Hong Kong Fir, is as follows:
The question was said to be whether, in the later words of Lord Ellenborough in Davidson v. Gwynne in 1810, the
term and its nonperformance went to the "whole root and consideration" of the contract. This expression "the root of
the contract," was generally accepted as the basis of the distinction between conditions an other, lesser terms, in
particular warranties.
2. Breach of condition would allow the innocent party to repudiate and/or seek damages. Breach of warranty would allow
the innocent party only to seek damages.
3. Under the pre Hong Kong scheme, breach of term defined to be a condition triggers the right to repudiate, even if the
event caused by the breach is minor.
4. Hong Kong Fir seeks to mitigate the potential harshness and formulaic quality of the old scheme by introducing a third
possibility, namely the innominate term. Assuming the term involved is an innominate term, the innocent party will be
discharged from further performance under the contract if the answer to the
following test is positive: does the occurrence of the event deprive the party who has further undertakings still to perform
of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain
as the consideration for performing those undertakings.
5. Per Hong Kong Fir, "It is the happening of the event and not the fact that the event was the result of breach by one party
of his contractual obligations that relieved the other party from further performance of his obligations."
6. If the `depriving' event occurs due to breach by one party, that party is in breach of contract.
7. If the event occurs due to no one's fault, the contract may be frustrated.
Per Fridman:
o The key to both the understanding and the application of the doctrine of frustration in modern times is the idea
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of a radical change in the contractual obligation, arising from unforeseen circumstances in respect of which no
prior agreement has been reached, those circumstances having come about without default by either party.
[example: Taylor v. Caldwell (1863), 3 B. & S. 826 (Q.B.)]
8. According to Alta. C.A. in T5, Hong Kong Fir does not replace the warranty/condition distinction but is additional to it.
STEP ONE: apply the traditional condition/warranty test as articulated by Bowen L.J. in
Bentsen as ‘a starting point’:
There is no way of deciding that question except by looking at the contract in light of the surrounding circumstances, and
then making up one's mind whether the intention of the parties, as gathered from the instrument itself, will best be carried
out by treating the promise as a warranty sounding only in damages, or as a condition precedent [really just condition
"precedent not needed, not contingent agreements] by the failure to perform which the other party is relieved of his
liability [to perform]).
STEP TWO: include consideration of the commercial setting when assessing surrounding circumstances [such as, per
Reardon, the ‘genesis of the transaction, the background, the context, the market in which the parties are operating’]
STEP THREE: if intent thus far not determined, “then the basis for seeking out that intent should be, as put forward by
Hong Kong Fir, an assessment of the gravity of the event to which the breach gave rise.
Frustration
Performance becomes impossible:
RIGHT SIDE: Party claiming frustration must show the event or change of circumstances
1. Dramatic and unforeseen
2. Matter neither party had assumed the risk of occurring
3. Arose without being the fault of either party
4. Makes performance not possible or legal
EX: guy leased farm and under contract he has land but flooding makes ploughing impossible.
o Court: says that the leasee is liable b/c promise to plough is unconditional
EX: tailor decision 1863: performer leases a concert hall and before it happens it burns to the ground
o Court: frustrated b/c loss and destruction of music hall defeated purpose of hall and risk hadn't been allocated
to landlord.
EX: Leaf: court classified the mistake as "an error going to quality", so usually that's not enough to trigger law of
mistake. Air of Quality goes to the identify so most commentary says law of mistake should not apply.
Wickman 449
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Facts: agreement so wickmann sold exclusively Shuler products so Shulter wants Wickmann to take this seriously.
449: c7b "it shall be a condition of this agreement that Wickmann should send a representative … once per week… a) if
ther other has made a failure of obligations and shall remedy in 60 days.
Wickmann's staff have failed to send representatives on a few occassions (but only a few). But if it's a conditon then
Shuler can treat it as if the contract is at an end.
Analysis:
Lord Reid, Majority, states that simply calling something a "condition" does not make its breach necessarily result in a
right of rescission. In this case, it is clear that it would be almost practically impossible for Wickman to successfully
complete all of the visits – what if someone was sick, etc. There was also another clause in the contract that said Schuler
would inform the distributor of material breaches and demand a remedy, which did not occur here. The use of the word
"condition" is strong argument for that it is a condition but we must look at broader picture
o EX: what if someone died and that's why the representative didn't make the visit, that's unreasonable
o Any breach of 7 is a material breach under 11. If a sales call is missed then Wickman would have to improve
his system and remedy.
Comments:
Simply calling something a "condition" in the contract itself does not mean that its breach will lead to a right of
repudiation - you must look at the event as per Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd..
When there is a breach of one clause in a contract, the breach must be read in context with the entire contract to
decide if rescission is in order.
Jo Robertson (past NSCA), author of NAV case: said implied term cannot override an express term.
Bhasin
Facts: you know it, I know it, we all know it.
Court: Principle of good faith can be implied, regardless of entire agreement clause
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Undue Influence – both parties decided to enter into the contract. If one party limited in exercising their discretion.
Operates in two spheres:
1. Actual Pressure – one party exerted unfair influence over the other. The one who seeks release must show that
the influence existed, it was used and resulted in impugned contract.
a. Ex: Elderly person influence to sign over estate in return for care.
2. Presumed based on special relationship – sometimes there is relationship that gives rise to presumption that one
side can unfairly manipulate another, Contract btw lawyer client, and doctor-patient. Court assume undue
influence.
a. Goodman – SCC potential for domination inherent in relationship, baker-customer do not import
presumption. The more powerful party must show NO undue influence.
Holding that the employer had a legal obligation to provide reasonable notice and that this can only be displaced by an
express contrary agreement, the court imposed a reasonable term of notification on HOJ; HOJ industries.
Ratio: Terms can be implied by the court based on:
1. custom or usage;
2. if necessary for business efficacy (implied by law and necessity test);
3. legal incidents of a particular class of contract (implied by law and necessity test).
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3. Judicial Control of Standard Form Contracts and Exclusion Clauses
(a) Introduction
(b) Incorporation 484
(i) Unsigned Document 484
Thornton v Shoe Lane Parking Ltd. [1971] Court of Appeal of England and Wales, pg 484
Facts: Thornton parked his car in the Shoe Lane parking lot while he was going to the BBC. He received a ticket from an
automatic machine. On the ticket was printed the time of issue, and a statement that the ticket is issued subject to the
conditions posted in the parking lot. These conditions were posted in the office where you had to pay upon departure, and on
the wall opposite the ticket machine, however the poster was not very prominent. The conditions included exempting Shoe
Lane from any liability for injury caused to the customer while their car was in the parking building. Thornton was seriously
injured when placing goods in his trunk before leaving by another car due to the DF’s negligence. At trial the judge found that
Thornton was 50% responsible for the act, but awarded him 50% damages from Shoe Lane, which they appealed.
Exempting condition states, inter alia, that defendants shall not be responsible for any “ injury to the Customer… occurring
when the Customer’s motor vehicle is in the Parkade Building howsoever that loss, mis-delivery, damage or injury shall be
caused…”
Issue: Is the exempting condition, posted in the garage, part of the contract or did it come too late?
Does the fact that the ticket was dispensed automatically matter?
Holding: By the time Thorton gets the ticket the excepting clause comes too late, PL not bound by exemption clause.
The ticket is simply a receipt showing that the contract had been formed. Further, Shoe Lane did not do what was
reasonably sufficient to give notice of the conditions to Thornton – a driver would have to wander around the parking
lot to discover them, which is more than can be asked of a sensible patron.
There were signs by machine where ticket bought but states “car parked at owner’s risk” … this would only apply
damage of vehicle this would not affect the PL’s personal injury.
Customer bound if aware of exemptions at time of purchase or reasonable notice brought to his attention. Exemption
condition not part of contract and cannot provide defense for DF.
Relevant factors to consider in determining whether there was a duty to take reasonable steps to advise of an
exclusion or waiver include: (NOT GENERAL PROPOSITION or BROADLY) (Karoll)
1. the effect of the clause in relation to the nature of the contract;
2. the length and format of the contract; and
3. the time available for reading and understanding it.
Tilden Rent-A-Car Co v Clendenning (1987) ONCA 498 (Qualified traditional position on signing documents)
Facts: Mr Clendenning (DF) signed contract without reading it.
Tilden (PL) wants to rely on exclusions to make the DF liable for damages.
Attendant asked if Clendenning wanted extra insurance for full total coverage and he says yes. She knows Clendenning has
not read the contract. There was an exclusion clause that exempted coverage in certain conditions:
Excepting condition states:
“… customer shall be fully liable for all collision damage if vehicle is used… in violation of any of the provisions of this
rental agreement or off highways serviced by federal, provincial, or municipal governments…”
This means no insurance in parking lot at a mall (they might mean no off-roading?)
& In small font the following:
“… customer agrees vehicle will not be operated… [b]y any person who has drunk or consumed any intoxicating liquor,
whatever be the quantity.”
Small font is hard to rely on and this is a problem for enforceability
Issue: Is defendant liable for damage to vehicle by reason of contract’s exclusionary provision?
Holding: The exclusion clause conflicts with the total coverage clause. Further the clause is onerous as it is overbroad – a
driver would not be covered if they had a single glass of wine or if they were driving 1km/h over the speed limit. Tilden
argues that under L'Estrange as Clendenning signed the contract he was bound (even if he did not read it except in fraud or
misrep).
This is rejected as the clerk was aware he had not read the contract and the purpose of signing is to manifest consent
(consensus ad idem).
Tilden cannot rely on provisions of the contract which it had no reason to believe were being assented by the
other contracting party
distinction between the consumer and commercial spheres: a signature in the commercial sphere creates the
presumption of an agreement whereas in the consumer sphere is not that of consensus; generally the signing of a
contract is hurried and informal. Sufficiency of notice and proportionality trump the notion that the signature is
binding.
The party offering the clause has to draw to the attention of other side unusual or onerous terms when the party
operating the contract knows that the signature doesn’t not represent the signers consent.
Lacourcière, in the dissent, held that the contract was not difficult to read (the terms clearly printed on the reverse) and was
brought to the customer's attention clearly, fulfilling sufficiency of notice. While agreeing that the clause is strict, he held that
it was economically efficient as insurance companies set their rates based on risk and as other rental companies have a similar
approach it was not an unusual clause. Citing New Zealand Shipping Co. Ltd. v A.M. Satterthwaite & Co. Ltd., he finds that
the court should give effect to the intent of a commercial document. With this he concludes the contract was binding.
1) Start with proposition that “where a party has signed a written agreement it is immaterial to the question of his
liability under it that he has not read it and does not know its contents” (L’Estrange)
2) EXCEPTIONS:
a. Where the document is signed “in circumstances which made it not her act” (non est factum)
b. Agreement has been induced by fraud or misrepresentation
c. (1) that in the circumstances a reasonable person would have known that she did not intent to agree to the
release she signed; and (2) that in these circumstances the defendants failed to take reasonable steps to bring
the content of the release to her attention
i. Factors to determine if duty to take steps to advise of an exclusion:
1. Exclusion of liability is inconsistent with purpose of contract
2. Absence of opportunity to read and understand
3. Length/small print
Commercial context: can assume the party signing intended to be doubt/no need for presenting party to bring exclusion of
liability to the attention of the signing party nor advise him to read the document
Application:
The burden was on Karroll to show fraud or misrepresentation, or that Silver Star knew or had reason to know she
was mistaken as to terms of the document. Relied on L-Estrange case saying if you sign you are bound in ordinary
course”.
Karroll signed the release knowing it was a legal document affecting her rights.
The release was short, easy to read and headed in capital letters.
In the circumstances, a reasonable person in would not conclude that Karroll was not agreeing to terms of the release.
In any event, Silver Star took reasonable steps to discharge any obligation to bring the contents of the release to
Karroll's attention.
(c) Strict Construction 509
Exclusion clauses that are ambiguous are construed contra proferendum
It is well established when contract drafted by one party any ambiguities will be construed against the party
offering the term and in favour of the other, contra proferendum
Denning, provision that seller gave no warranty as to description of goods and did not protect of breach of
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condition.
o Warranty means “warranty” or subsidiary breach that only gives rise to damages.
o Contra Proferendum – construe against party drafting so warranty is vague and this means it will only be
construed as “warranty” in terms of exclusion clause
NOT THE LAW… historically followed in Canada, But do NOT Follow now.
House of Lords – NOT THE LAW IN ENGLAND
What is fundamental breach?
Per Lord Denning: when a party breaches its contract it a fundamental way then, by operation of law, that party cannot
rely on an exclusion clause in its favour (Karsales). Fundamental breach includes the notion that one party, through
breach, has deprived the other party of substantially the whole benefit intended under their contract (per Lord Diplock
in Photo Productions Ltd v Securicor Transport Ltd [1980] AC 827 at 849, cited by Wilson J in Hunter Engineering Co v
Syncrude Canada Ltd, [1989] 1 SCR 426, 1989 CanLII 129 (SCC) at para 137.) Rejected by House of Lords
1. The Supreme Court of Canada in Beaufort Realites v Chomedey Aluminum [1980] 2 SCR 718 rejected Lord
Denning’s operation of law approach to fundamental breach because that approach was divorced from an enquiry
regarding the parties’ actual intentions. This would infringe freedom of contract.
2. In Hunter, the SCC concurred that the reach of an exclusion clause depended on the parties’ intentions, but was
evenly divided as to when, on an exceptional basis, the court should not give effect to the exclusion clause in
question. Responses in Hunter:
Dickson CJ concluded that the notion of fundamental breach was unhelpful and should simply be replaced with an
enquiry going to whether the clause in question was unconscionable, as when there is inequality between the parties.
This reference to unconscionability, regrettably left undefined, appears to invoke the classic contract law doctrine
whereby courts set aside a contract based on procedural inequality and substantive unfairness. [Courts are to
measure the enforceability of the exclusion clause as time of formation of the contract.] For more on unconscionability,
see Downer v Pitcher 1017 NLCA 13 – TBA. Concerned with Unconscionability at time of formation, no place for
fundamental breach.
Wilson J (with L’Heureux-Dube J concurring) would preserve a role for fundamental breached as a contained trigger.
Wilson J said her enquiry as to the enforceability of the exclusion clause would take place with reference to what actually
happened, provided that a fundamental breach had occurred. Per Wilson J, there is a “virtue in a residual power residing
in the court to withhold its assistance on policy grounds in appropriate circumstances.” Note that Wilson is not rejecting
the doctrine of unconscionability as indispensable for measuring voluntariness of the agreement at time of formation.
Wilson J’s view, however, was that courts have a bounded discretion to consider more than voluntariness and, when a
fundamental breach has occurred, to consider the clause’s reasonableness in light of what has happened. [Courts are to
measure the enforceability of the exclusion clause as at time of breach, IF the breach has been fundamental. Concerned
with Fundamental breach at time of breach, yes there is a role for fundamental breach in some limited circumstances.
1. Justice Binnie in Tercon purported to “shut the coffin on jargon associated with fundamental breach” at para 82.
But did he succeed? Binnie J states that categorizing a breach as “fundamental” or (quoting from other decisions)
“immense” or “colossal” is not all that helpful. Yet in his own judgment, he finds himself having to distinguish
between types or levels of contractual breach. For example, Binnie J agreed that sometimes contractual
performance could be “so aberrant” (so breaching contract in fundamental way) that the exclusion clause’s
protection is forfeit; he acknowledged situations where one party’s conduct in breach of contract had been “so
extreme” as to “engage some overriding and paramount public interest in curbing contractual abuse.” It is
virtually impossible not to read these references as surrogates for the phrase “fundamental breach.”
How do Dickson CJ’s and Wilson J’s decisions find their way into Tercon?
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Two way to talk about fundamental breach
1. Denning sense – if there is fundamental breach party cannot rely on exclusion clause
o Tercon – do not apply Denning rule as per Karsales.
2. If one party committed fundamental breach the innocent party can treat contract as at an end and sometimes courts
talk about this as fundamental breach. This is the “Law Fundamental breach” can be a remedy to treat contract at
end (if deprived of substantially whole benefit under contract this is still fundamental breach)
Karsales (Harrow) Ltd v Wallis, [1956] Court of Appeal of England and Wales 512
Facts: Wallis - DF & Purchaser: Inspected Stinton's 2nd hand Buick, in excellent shape
Stinton – Offering Buick for sale. Arranges financing for Wallis by selling to Karesales Ltd
Karsales Ltd – PL sells to Mutual Finance (Karsales owns car and if Wallis doesn’t pay they can take the car)
Mutual Finance – later assigns its rights under hire purchase to Karsales
Car is dropped off outside Wallis’s garage late at night. It was now badly damaged. As Denning L.J. describes the situation:
“it had evidently been towed in. There was a rope attached to the front bumper. It was, as the judge found, in a ‘deplorable
state’. The new tyres had been taken off and old ones put on. The wireless set had been removed from it; the chrome strips
round the body were missing; and when the defendant’s fitter looked at the engine, the cylinder head was off all the valves
were burnt, and there were two broken pistons. The car would not go. Wallis refused delivery and the car was towed back to
Stinton's place.
Karsales sues Wallis for 10 mos. of instalments under the hire purchase.
CL 3(g) under hire-purchase agreement: "No condition or warranty that the vehicle is roadworthy or as to its age,
condition or fitness for any purpose is given by the owner or implied herein."
Issue: Can Karsales rely on cl.3 (g) of hire-purchase agreement?
Holding: On appeal, Denning LJ reversed the trial judge's decision. He said the following:
“Under a hire-purchase agreement of this kind, when the hirer has himself previously seen and examined the motor car and
made an application for hire-purchase on the basis of the inspection of it, there is an obligation on the lender to the deliver the
car in substantially the same condition as when it was seen.”
Denning LJ established a new precedent by declaring this a fundamental breach: that is, a breach that goes to the root of the
contract, where the breach is so severe that there cannot be a contract after this breach.
Misconduct or indifference to contract will not be covered under exclusion of liability
Exclusion of liability does not enable DF to turn a blind eye to his obligation
This decision set the precedent that goes against the Strict Construction rule. In Strict Construction, the rule is that the
contract is intended to do what it says it will do, and that judges can only apply what the contract says within its own terms.
Since the contract has been agreed upon by both parties, the contract is seen as representing both parties' interests. However,
Denning ruled against this rule since it would not be equitable (or fair) for both parties.
NOTE: This is a question of construction or interpretation of whether clause will cover fundamental breach, depends on what
the clause actually says. (Not a rule by Denning saying it will never be relied upon when fundamental breach occurs).
Freedom of contract – parties should be able to contract out of this if everything else is copesetic.
A few months later, the Province informed the six proponents that it now intended to design the highway itself and issued a
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request for proposals (“RFP”) for its construction. The RFP set out a specifically defined project and contemplated that
proposals would be evaluated according to specific criteria. Under its terms, only the six original proponents were eligible to
submit a proposal; those received from any other party would not be considered. Under Contract A: The RFP also included an
exclusion of liability clause which stated:
“Except as expressly permitted…no Proponent shall have any claim for any compensation of any kind whatsoever, as a
result of participating in this RFP, and by submitting a proposal each proponent shall be deemed to have agreed that it has
no claim.
Issue: Can Tercon succeed in an action based on breach of Contract “A” or is the no claims clause a complete answer?
(Tercon is seeking compensation equiv. to the profit it expected to earn had it been awarded Contract “B”).
Holding: Exclusion clause cannot be used in cases of Fraud & cannot exclude when one party intentionally causes harm.
Tercon tries to fill gap of how to treat exclusion of liability clauses.
In Contract A – there is implied term of fairness (Good faith) the province behaved egregiously. In relation to exclusion
clause – it is not within contemplation of parties that it would bar action when province did something that the clause does not
cover (accepted non-compliant bid).
Exclusion of liability no defense and at trial Tercon won.
At CA Tercon loses (freedom of contract don’t enter into contract with exclusion clause if you don’t like it)
Majority
A. Liability under Contract A
B. The no claims clause does not provide a defense.
Dissent
A. Liability under Contract A
B. Ministry misconduct was not so egregious as to generate public policy reasons depriving the Ministry of protection of
the no claims clause to which Tercon freely agreed.
Unanimous decision on how to approach exclusion clauses (with some SKO add-ons)
1. Is there a breach of contract (here, is there a breach of Contract A)?
2. If yes, is the exclusion clause at issue part of the contract? (SKO)
3. If yes, does the exclusion clause apply to the circumstances as a matter of interpretation? (depends on parties’
intentions)
4. If yes, is the exclusion clause unconscionable at the time the contract was made (versus at time of breach) IN
Dissenting:
o this might arise out of situation s of unequal bargaining power
o this might arise out of policy considerations arising from relevant legislation like the Transportation Act.
5. Assuming validity, is there any overriding public policy that would justify the court’s refusal to enforce it?
Cromwell, majority: Noted that the RFP model is a little more complicated than the simpler Ron Engineering Contract
A/Contract B model, where the terms of Contract B are fully articulated from the outset, but that this did not impact the
analysis of the case at hand, and further, it was not necessary to explore in full detail all the terms and conditions of Contract
A. The question remains whether it was a term of Contract A that the Ministry accept bids only from eligible bidders.
If the Contract A was supposed to include an exclusion of liability that they can accept ineligible bidders (non-compliant).
Only eligible bidders can be chosen. Liability doesn’t arise from Tercon’s participation it is from the province going with
an ineligible bidder. Clear language is needed to oust standards of business efficacy and fairness (especially true in public
procurement tax payers paying for this) and idea is that best bid (price) is from good and open process. This will not
result in fairest price.
Treat all bidders on equal footing and not going back on the rules **Especially in Public Procurement** this insures
transparency and fairness as per Statutory regulations.
If a clause is ambiguous (“contra proferendum”) construe against the maker. If apply this the clause would not cover
patriation against ineligible bidders (clause only apply against eligible ones).
Binnie, dissenting: accepts the finding of the CA that the terms of the RFP had been breached by the province and turns
immediately to the claim for relief from the exclusionary clause. ASK three questions:
1. Does exclusion clause apply to the circumstances? (per parties intentions expressed in contract)
2. If it applies, was it unconscionable at the time the contract was made (contract formation)? If unconscionability
applies you must show procedural inequality and substantial unfairness (must be extreme)
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3. Assuming validity is there overriding public policy why it should not apply?
o Public policy that would exclude exclusion clause: (Wilson J, from Karsales)
o Plas-tex must be more than egregious behavior. Intentionally supplied defective product with knowledge of
dangerous use and just inserted exclusion of liability clause to cover defective resin. CANNOT USE
CLAUSE ON THESE FACTS!!
o Intentionally selling toxic milk for consumption by babies cannot rely on exclusion clause
o Conduct approaching criminality or egregious fraud are examples but less may be sufficient to exclude for
public policy… must outweigh freedom of contract before finding of abuse.
Applying this test to the case, Binnie found that the exclusion clause does apply, holding that Tercon did participate in the
RFP process, whether or not the process was compromised. “Tax payers of BC not prepared to pay Brentwood for actually
building road, and Tercon, even though Tercon profit gained w/o Tercon doesn’t have to take risks associated with Contract
B”.
Tercon getting loss of profit comes from the misconduct of the Gov’t. They were willing to take on Contract B risks
and wanted the project. Binnie’s reasoning is unfair given the Gov’ts egregious behavior this is NOT Tercon’s fault
the Gov’t should be punished.
Tercon was a major contractor and while not at the same power level as government, was nonetheless able to bargain freely
so the clause was not unconscionable (They were not vulnerable). On public policy, while he agrees there is "a public interest
in a fair and transparent bidding process, it cannot be ratcheted up to defeat the enforcement of Contract A in this case".
While the Province's conduct was in breach of the RFP and the trial judge's condemnation was well founded, the misconduct
was not of sufficient character to require the clause not to be enforced.
If you have exclusion of liability clause it must apply to the specific part of the contract.
Standard form contracts are ones where the terms are not negotiated take it or leave it and not subject to bargaining. Also
called subject of cohesion.
These reduce transaction costs b/c don’t need to negotiate fresh contract every time. It is more efficient.
Usually contain exclusion of liability clause in standard form contracts. Purpose is to signal which party should get
insurance.
How do you prove clause is part of contract? Two ways to show:
1. Notice
2. Signature
Dickson in Hunter: objections to clause based on unconscionability (measured at time of formation)
Wilson in Hunter: Public policy objections to clause (measured at time of breach must be extreme) Plax-Tex
Pitcher v Downer 2017 NFCA 13 (NFLD case of unconscionability that uses AB test of unconscionability)
Facts: Collision btw two vehicles. Downer rear ended Pitcher and was clearly at fault. They agreed Downer would pay for
damages and $300 for loss of wages for time of accident. Downer Lawyer created release for waiver of liability. At time of
accident Pitcher feeling fine and signed a waiver clause for release of liability.
Pitcher signed release “forbearance to sue” and consideration would be Downer giving money for damages and $300 for
wages.
She developed soft tissue injury and she wants to sue in tort, and claims thought she was signing a release for damages of car
not personal injury. Claims she did not read who thing.
Downer – wants to rely on clause.
Issue: Is the waiver of liability clause valid in this instance? Did trial judge use right test for unconscionability?
Holding: Trial agreed clause unconscionable in circumstances.
NFLD court: No unconscionability. She was meek an unsophisticated but other than this there was no substantial unfairness
she will stuck with what she signed.
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AB CASE - Cain v Clarica Life Insurance – VERY strict test for unconscionability (not just procedural inequality and
substantial unfairness)
1. A grossly unfair and improvident transaction
2. Victims lack of independent legal advice or other suitable evidence (may not be absolutely required, just b/c you have
legal advice this shouldn’t be bar … what if it is bad legal advice?)
3. Overwhelming imbalance in bargaining power caused by victim’s ignorance of business, illiteracy, ignorance if the
language of the bargain, blindness, deafness, illness, senility, or similar disability
4. Other party’s knowingly taking advantage of this vulnerability (Would something less than actual knowledge do?
Like willful blindness or recklessly failing to make inquiries? Not sure.)
There must be a huge problem and unfairness in the signing of the clause. SCC hasn’t dealt with it directly and laid out test
but does state “overwhelming imbalance in the power relationship”.
Something substantially MORE than simple unequal bargaining power necessary for unconscionability. Judges will not
measure the fairness of the deal, that is for the parties to do (every contract has some imbalance). There is strong presumption
that individuals act rationally and in their best interest in contracting, only when substantial unfairness that it out of the
ordinary will the court intervene.
Inequality can be more than disability it could stem from extreme financial need or external pressures or special
relationships.
1. Tercon – corporations will rarely be able to fit into this unconscionability test b/c need a substantial inequality of
bargaining power etc…
Damages
1. Yacht builder (the Builder@) agrees to custom build a yacht for Yacht owner (the AOwner@) for $10,000, which the
Owner pays for in advance. Builder fails to build. This particularly annoys the Owner who has already entered into a
trucking contract to transport the boat to the coast, where he lives. Assume that the Owner will have to pay the trucking
company $500 for >cancelling= their transportation contract. Owner sues Builder for breach of contract. What can Owner
recover? (Analysis based on Fuller & Perdue terminology. Some definitions are taken from Richard Craswell, AAgainst
Fuller and Perdue@ (2000) 67 U. Chi. L. Rev. 99)
Restitution Interest: this interest Aims to restore the breaching party to the position she occupied before the contract, by
forcing her to disgorge any gains she obtained from the non-breacher.@ (Requirements: enrichment; corresponding
deprivation; absence of a juridical reason for the enrichment.)
PL, Yacht purchaser conferred value on the DF by paying money. Idea is that at this point the Yacht builder.
MUST SHOW THE FOLLOWING:
o Enrichment – situation where building been enriched by $10K
o Deprivation - $ belong to PL so deprivation & did not build the Yacht
o Absent juristic reason
Reliance Interest: this interest seeks to restore the non-breacher to the position he would have been in, absent the
contract, by compensating him for any losses he may have suffered.
Difference between them? Compensate for any losses suffered would put him into place prior to contract.
Think of it this way: restitution calls for damages equal to whatever the breacher has obtained from the non-
breacher (in our example, the purchase price of the yacht.)
Reliance gives damages equal to whatever the non-breacher gave up, whether or not the breacher received a
corresponding benefit.
Restitution calls for damages from non-breacher, reliance gives damages for anything they gave up by entering
into with 3rd party.
Expectation interest (loss of profit): Also looks to the nonbreacher’s position, but aims to restore him to the position he
would have occupied if the contract had been fully performed.
What can the Owner recover?
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Example 2: Same situation as in example 1 except that Owner had also lined up a buyer for the yacht. He could have sold
to a third party, who also lives on the coast, for $15,500. What can Owner recover?
Loss must not be too remote, or will not be recoverable. Must be reasonably foreseeable loss.
That would be compensation under expectation interest since we already have recovery under restitution and
reliance for a total recovery of $15,500. ($500 goes to the trucking company; the $10,000 is recovery of the
money he is already out leaving a balance of $5,000 under expectation.)
CANNOT RECOVER THE SAME EXPENSE TWICE… Cannot quantify that covers expectation interest twice.
Note per MacGregor on Damages: Plaintiff cannot recover, in addition to basic loss representing loss of bargain, any
expenses incurred in preparation or part performance. Watch out for double recovery. damages (yacht)
Can you recover ‘mental distress’ for breach of contract? Maybe, but you would have to show the consequence of the
breach was a reasonably foreseeable consequence of the breach, or that the breach caused the mental distress.
In Hadley – DF did not know very much about the situation, that every day shaft delayed will cost money b/c whole mill shut
down. These were special circumstances but there were not properly communicated. If PL said everyday they have shaft I am
losing money the special circumstance would be in place. Then PL can decline business or take on risk and charge more.
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