Contracts Chart

8/2/2019 Contracts Chart

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Contract Law Professor Cotter Professor Newman

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CASE RULE TOPIC

Canadian Dyers Ass. Ltd. v.

Burton

(1920) 47 O.L.R. 259 (H.L.)

There can be no contract of sale unless there can be found an offer to sell and an acceptance of the offer.

A mere quotation of price does not constitute an offer to sell; it is no more than an invitation to treat.

The courts will look at the language used in the light of the circumstances in which it is used and into the subsequent actions of both

parties to determine whether what is said by the seller is a mere quotation of price or an offer to sell.

Offer & Invitation to

Treat

Pharmaceutical Societyv.

Boots

[1953] 1 Q.B. 401, [1953]All E.R. 482 (C.A.)

The general assumption in the case of retail self-service sales is that placing goods on shelves is an invitation to t reat.

An offer and acceptance take place at the cashier when a customer offers to buy and a cashier accepts the offer.


Treat

(retail sale)

Carlillv. Carbolic Smoke

Ball Co.

[1893] 1 Q.B. 256 (C.A.)

An ad was held to be a unilateral contract, an offer to the public at largeto everyone who does something (a guarantee in an ad was

held to be an indication of the intention to create legal obligations).

An ordinary rule of law is that acceptance of an offer requires the offeror to be not ified in order that the two minds may come

together.

However, in the case of a unilateral contract, an offer is made to the public but the contract is not concluded with everybody (all the

world). It is only formed with that limited portion of the public who come forward and perform the condition on the faith of the

advertisement(following the indicated method of acceptance).

Communication of

Offer public offer to

anyone who does

something;

Communication of

Acceptance;

Unilateral Contracts

Goldthorpe v. Logan

[1943] O.W.N 215, [1943] 2D.L.R. 519 (C.A.)

The general assumption is that advertisements published in newspapers are invitations to treat , not offers.

However, the court looked at the surrounding circumstances, the actions of both parties (direct contact, consultation, exa mination,etc.) and the language used in the ad and held that Logans electro lysis ad was an offer to the public at large.

Public offer or

invitation to treat

R. v. Ron Engineering &

Construction (Eastern) Ltd.

[1981] 1 S.C.R. 111, 13

B.L.R. 72

Analyses the tender process a 2 phase process which includes formation of two contracts (A and B). This changed the traditi onal

analysis of a call for tenders as an invitation to potential tenderers to make o ffers.

The tender call is the offer and the bid submission is the acceptance of that offer which leads to formation of contract A; the

consideration is the preparation of the bid; consequence of formation of contract A is the imposition of contractual liability on the

tenderer (not to withdraw from the bid) and the owner (to treat tenderers fairly and in good faith).

Contract B is the construction contract to be formed between the owne r and the successful tenderer.


Treat - tenders

M.J.B. Enterprises Ltd. v.Defence Construction

(1951) Ltd)

[1999] 1 S.C.R. 619

The submission of a tender in response to an invitation to tender may give rise to contractual obligations (contract A), qu ite apart from

the obligations associated with the construction contract to be entered into upon the acceptance of a tender (contract B). But it is

always possible that contract A does not arise upon the submission of a tender (if the tender is invalid). The invitation for tenders may be characterized as an offer to consider a tender, if that tender is valid.

The submission of the tender is good consideration of the owners promise, as the tender was of benefit to the owner, prepa red at a

not an insignificant cost and accompanied by the bid security.

The privilege clauseis only one term of contract A and must be read in harmony with the rest of the tender documentsit does not

override the obligation to only accept compliant bids.


Treat - tenders

Double N Earthmovers v.

Edmonton City[2007] 1 SCR

116

Utilizes the Contract A/Contract B analysis formulated in Ron Engineering for tenders.

During the bidding process, all bidders should be treated equally.

The owners can only accept compliant bids, but they need not investigate bids that appear compliant on their face.This isbecause, once a bid is accepted, the owner is entitled to enforce the terms stipulated in the tender documents. In theory,

every bidder would have to live up to the stipulations should their bid be accepted.

Offer& Invitation to

treat, Tenders


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Blair v. Western Mutual

Benefit Assn.

[1972] 4 W.W.R. 284

In general, in order to be binding an offer has to be communicated to an offeree and it has to be intended as an offer.

A bare resolution without advice, formal or otherwise, cannot be considered ipso facto to create or indicate an intention t o create a

legal obligation capable of acceptance.

Communication of

Offer,

Intention to create

legal obligations

Williams v. Carwardine

(1883) 4 B. & Ad. 621, 110

E.R. 590 (K.B.)

The court held that in the case of rewards (or an offer to anyone who can give the information requested) the defendant is entitled to

the reward regardless of her motives (fear of Gods punishment) because she knew of the reward and she performed the ac t in

question.

The case does not give offer-acceptance analysis but deals with human motives.

Communication of


anyone who does

something

R. v. Clarke

(1927) 40 C.L.R. 227 (Aust.

H.C.)

In contrast with Williams v. Carwardine, the court held that the defendant was not entitled to the reward because he did not act in

reliance on the offer but for other reasons (to clear himself from a false accusation).

Reconcile with Williams v. Carwardine by noting that in a bi-lateral contract knowledge is required (to enable meeting of the minds),

but motive is irrelevant.

Communication of


anyone who does

something

Livingstone v. Evans

[1925] 3 W.W.R. 453,

[1925] 4 D.L.R. 769 (Alta

S.C.)

An offer that has been rejected is thereby ended and it cannot be afterwards accepted without the consent of the one who ma de it.

A counter-offer is a rejection of the original offer, a mere inquiry is not.

If an offeror replies to the rejection, the reply (cannot reduce price) may amount to a renewal of the offer. The answer is dependant

upon considering all surrounding circumstances.

Acceptance counter-

offer; rejection and

counter offer

Butler Machine Toolv. Ex-

cell-o Corp.

[1979] 1 W.L.R. 401, 1 AllE.R. 965 (C.A.)

Lord Denning restated the traditional last shot formula for the resolution of the battle of the forms, identifying several possibilities for

courts:

1. Last shot: a contract is concluded upon the terms of the last document sent by one of the parties that was not objected to; 2. First

shot: a contract is concluded upon the terms of the first document; 3. All shots count and the court must discover its terms on anobjective basis: A) a contract is concluded upon terms drawn from all the documents that have passed between the parties when the

terms can be reconciled as to give a harmonious result, or B) a contract is not concluded since the differences are irreconcilable.

Acceptance counter-

offer; battle of forms

Dawson v. Helicopter

Exploration Co.

Silence is not acceptance of a unilateral revocation of a bilateral contract. A bilateral contract must have communicated revocation sincesilence will never be satisfactory.

A bilateral contract was formed with conditions precedent to performance. The Helicopter Co. was obligated to make a reasonable attemptto fulfil the conditions of the contract, as was Dawson. The Helicopter Co. did not make an effort to perform the stipulated conditions.

Judge determines that acceptance has to be unequivocal and absolute but does not need to be expressed in a specific way.Acceptance=

Communication of

Acceptance

Felthouse v. Bindley

(1962) 11 C.B. (N.S. 869,

142 E.R. 1037 (Ex. Ch.)

Silence does not amount to acceptance.

Even though the nephew (seller) might have intended to sell, he never communicated this intention to his uncle (buyer).

In general, the offeror is in control of the mode of acceptance but the courts are reluct ant to allow silence to be specified as the mode

of acceptance.

Communication of

Acceptance

Brinkinbon v. Stahag Stahl

[1983] 2 A.C. 34 [1982] 1 All

E.R. 293 (H.L.)

The mailbox rule (the contract is concluded where and when the acceptance is mailed) applies only if acceptance by mail is required or

if that has been a regular business practice of the parties or if the offer is made by mail and no acceptance requirements are specified

The receipt rule (the contract is made when and where the acceptance is received) applies to instantaneous communications s uch as

phone or telex or facsimile.

Formation:

Communication of

Acceptance

Instantaneous

communication

Rudder v. Microsoft Corp.

[1999] O.J. 3778

Terms of a contract entered into on the internet can be displayed on multiple pages. Users are expected to follow the links and

become familiar with all terms before accepting the terms of the contract.

Clicking the I agree button results in formation of a valid contract.

Formation:

Communication of

Acceptance

Household Fire v. Grant

(1879) 4 Ex. D, 216 (C.A.)

The court upheld the general mailbox rule in situations where the acceptance is lost in the postand as a consequence the offeror was

bound by the offer even though acceptance was not received. The majority held the post office to be the agent of both parties. The

dissent rejected this and applied the recipient rule.

Formation:

Communication of

Acceptance mailed

acceptance


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Holwell Securities v.

Hughes

[1974] 1 W.L.R. 155, 1 All

E.R. 161 (C.A.)

The postal rule should only apply if it does not lead to " manifest inconvenience and absurdity".

The postal rule does not apply if the express terms of the offer specify that the acceptance must reach the offeror. The re quirement

for notice was held to invoke the recipient rule.

Formation:

Communication of

Acceptance mailed

acceptance

Dickinson v. Dodds

(1876) 2 Ch. D. 463 (C.A.)

The general principle is that if a person who makes an offer dies, the offer cannot be accepted after they are dead.

The court held that an offer could be revoked by indirect communication applying the same general rule logicthat is, once the person

to whom the offer was made knows that the property has been sold to someone else, it is too late for them to accept the offer and the

contract is impossible to make. A promise to hold an offer open is not binding unless have consideration or a deed. Equity cannot be applied when a third party has

acquired rights.

Formation:

Termination of Offer -

Revocation

Byrne v. Van Tienhoven

(1880) C.P.D. 344 The mailbox rule does not apply to revo cationrevocation must be received by the offeree to be effective.

Formation:

Termination of Offer -

Revocation

Errington v. Errington and

Woods

[1952] 1 K.B. 290, [1952] 1

All E.R. 149 (C.A.)

Legal consequences of family arrangements are difficult to ascertain.

Unilateral contracts are formed when all conditions of the offer are met.

In general, unilateral contracts can be revoked anytime prior to complete fulfillment, but the court hel d that in this case a unilateral

contract could not be revoked by the promisor once the promesee entered on performance of the act (but it would cease to bind the

offeror if performance was left incomplete and unperformed).

Formation:

Termination of Offer

Unilateral contracts

Barrickv. Clark

[1951] S.C.R. 177, [1950] 4

D.L.R. 529

An offer will lapse if it is not accepted within a time limit determined by the offeror, or if a time limit is not specifie d, then it will lapse

within a reasonable time.

The court will determine what is a reasonable time using the rule of construction (objective test)it will depend upon the nature and

character of the item being sold, on the normal or usual course of business in negotiations as well as the circumstances of the offer,

including the conduct of the parties in the course of negotiation.

Formation:

Termination of Offer

Lapse of Time

R. v. CAE Industries

There need to be clarity around central points. You dont need a m eeting of the minds at a certain time. If there are terms that are very v ague, no real substance (just agreements to negotiate), unfinished agreements t hen the contract

itself can be in doubt even if there is an offer and acceptance.

Distinguish vagueness from incomplete terms etc. The court will favour finding a contract unless one party can demonstrate the parties did not mutually assent to the agreement.

Certainty of Terms-

Vagueness

May & Butcherv. R.

[1934] 2 K.B. 17 (H.L.)

To be a good contract there must be a concluded bargain which settles everything that is necessary to be settled a nd leaves nothing to

be settled by later agreement between the parties.

It has long been a well recognized principle of contract law that an agreement in which some critical part of the contract matter is left

undetermined is no contract at all.

It is perfectly possible to contract to sign a document which will contain all the relevant terms, but it is not acceptable to agree that

the parties will in the future agree upon a matter which is vital to the contract.

Certainty of Terms

Incomplete Terms

Hillas v.Arcos

(1932) 40 Lloyds Rep.

(C.A.)

Court of Appeal with great regret upheld May & Butchers general rule that if there are any essential terms of a contract of sale

undetermined, and therefore to be determined by a subsequent contract, there is no enforceable contract.

Certainty of Terms

Incomplete terms

Hillas v.Arcos

(1932) 147 L.T. 503 (H.L.)

House of Lords took a more modern approach: Business men often record the most important agreements in crude and summary

fashion; modes of expression sufficient and clear to them in the course of their business that are far from complete or precise.

It is the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects.

Certainty of Terms

Incomplete terms


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Foley v. Classique Coaches

Ltd.

[1934] 2 K.B. 1 (C.A.)

Interpreted the general principles of H.L.s decision in Hillas to mean that each case should be decided on the construction of the

particular document.

Held that an agreement to agree on price from time to time was certain enough since the parties beli eved they had a contract and had

acted for 3 years as if they did i.e. there was already partial performance: The land had been transferred and a portion of the sale of gas

agreement had been performed.

Certainty of Terms

Incomplete terms

Empress v. Bank of Nova

Scotia

[1991] 1 W.W.R. 537

The court will try, wherever possible, to give the proper legal effect to any clause that the parties understood and intend ed to have

legal effect. Agreements to agree cannot be enforced.

When the parties stated a formula (e.g. market rental) to ascertain a clause, but did not supply machinery (e.g. arbitration) for

applying the formula, the courts will supply (be) the machinery and apply the formulae so long as the formulae is not defective.

Where the formula is set out but is defective and machinery is provided for applying the formula, the machinery may be used to cure

the defect in the formula.

While there is no common law obligation to negotiate in good faith (because it is unworkable), in this case there was an implied term

requiring good faith negotiations for the renewal of the rental agreement.

Certainty of Terms

Agreements to

Negotiate

Mannpar Enterprises Ltd. v.

Canada

[1997] 33 B.C.L.R. (3d) 203

(S.C.)

The court held that the renewal clause in the rental contract was a mere agreement to agree the contract did not provide a formula

or objective measure to determine rent (such as fair market value) or a mechanism to apply the formula.

Certainty of Terms

Agreements to

Negotiate

The Govenors at Dalhousie

College at Halifax v

Boutilier

A promise cannot be enforceable if there is not sufficient consideration. In this case, directions for how the money was to be used bythe College would have been acceptable consideration

Naked promises not to be enforced - nudum pactum ConsiderationBrantford General Hospital

Foundation v. Marquis

Estate

Canadian courts appear to agree that for a pledge to be a contract there must be consideration shownEnglish law that is defined that a promise to subscribe to a charity is not enforceable in the absence of a bargainIs there consideration for a pledge of x amount of money? She is not bound by it because this was not her idea. There is no

consideration. Promise to donate is not enforceable unless there is a bargain made.

Consideration

Mountford v. ScottThe court ends up saying that the dollar is something of value given up by the promise. It is a small benefit. But it i s not up to the

courts to decide what the option was worth. It is adequate Consideration.

Consideration-

Adequacy of

Consideration

Eastwood v. Kenyon

(1840) 11 Ad. & E. 438, 113

E.R. 482 (Q.B.)

Moral obligation is nudum pactum, a voluntary promise without any co nsideration.

Past consideration is not a good consideration for a new promise made after a benefit was conferred and when the benefit was not

conferred at the request of the promisor.

Enforcement of

Promises: Past

Consideration

Lampleigh v. Brathwait,

(1615) Hobart 105, 80 E.R.

255 (K.B.)

Past consideration may be a good consideration for a subsequent promise if the benefit was conferred at the request of the promisor.Enforcement: Past

Consideration

Thomas v. Thomas

(1842) 2 Q.B. 851, 114 E.R.

330

Consideration is something which is of some value in the eyes of the law.

Consideration must move from the promise.

Consideration must be sufficient but need not be adequate.

Enforcement of

Promises: Nature of

Consideration

Callisher v. Bischoffsheim

The authorities clearly establish that if an agreement is made to compromise a disputed claim, forbearance to sue in respect of thatclaim is a good consideration; and whether proceeding to enforce the disputed claim have or have not been instituted makes no

difference

The suit was terrible but that is irrelevant as long as there was a bone fide belief that there was a reasonable chance at success in theBona Fide

Compromise of

Disputed Claims


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mind of the plaintiff.

If you could establish their was bad faith on the person, the court may deem this outside the rule and unenforceable

Pao On v. Lau Yiu Long

[1980] A.C. 614 (P.C.)

Past consideration can sometimes be good consideration if: 1. The act was done at the promisors request; 2. The parties understood

that the act was to be remunerated; and 3. Payment would have been legally enforceable had it been promised in advance.

A promise to perform, or the performance of a pre-existing contractual obligation to a third party can be valid consideration.

Duress, whatever form it takes, is a coercion of the will so as to vitiate consent; duress may render a contract voidable, but this must

be claimed promptly.

The commercial pressure alleged to constitute duress must be such that the victim entered the contract against their will, they had noalternative course open to them, and they were confronted with coercive acts by the party exerting the pressure.

Enforcement of

Promises: Pre-existing

Legal DutyDuty

Owed to a Third

Party; Economic

Duress; PastConsideration

Stilk v. Myrick

Ratio: A pre-existing legal obligation is not good consideration when there is no third party. A promise to pay more for work that was already owed under a contract is void for want of consideration Reasons of the holdings are different in the two different reporter series. 1. Strict application of consideration (as above). 2. Public

policy. The first is usually held to be more authoritative.

There is no extra work because of the two deserters, they merely do what ought to get done. No extra consideration, merely agratuitous promise.

Consideration- Pre-

existing legal duty:

Duty Owed to the

Promisor

Gilbert Steel v. University

Construction Ltd.

(1976) 12 O.R. (2nd.) 19, 67

D.L.R. (3d) 606 (C.A.)

A unilateral promise to increase price is unenforceable because there is no clear agreement to rescind the existing contrac t the new

provisions were unilaterally imported into the document and accordingly, consideration of the oral agreement was not found in a

mutual agreement to abandon the earlier written contract and assume the obligations under the new oral one.

In Stilk v. Myrick (1809), when two out of 11 sailors deserted the ship, the captain promised to pay the remaining sailors extra moneyif they sailed the ship back. However, he later refused to pay that extra money. The court held that the captain was not obliged to pay

the extra money because the obligation to sail the ship back was not a valid consideration for the subsequent agreement which varied

the original one.

Enforcement of


Legal DutyDuty

Owed to the

Promisor;

Reference to Stilk v.

Myrick (1809) 170 E.R.

1168

Williams v. Roffey Bros.

[1990] 1 All E.R. 512 (C.A.)

Pre-existing legal duty owed to the promisor may be a valid consideration for a subsequent promise if the promisor derives practical

benefit from the agreement and if the subsequent promise is not given under economic duress (note Glidewells 6 point test).

Enforcement of


Legal DutyDuty

Owed to the Promisor

Greater Fredericton Airport

Authority Inc. v. NAV

Canada

In Greater Fredricton Airport Auth. v. Nav Canada the N.B. Court of appeal took a further step change the common law to state thatthe law will recognize that a variation to an existing contract, unsupported by consideration, is enforceable if not procured (acquired)

under economic duress.*Caution: this case has not yet been accepted as law outside N.B.+ In that case, NavCan installed equipment

it was already obliged to deliver after securing a promise from the Airport Authority to pay more than was already promised.p190.

Decision by NB court of appeal. Not binding outside on NB, but may influence other courts.

Consideration- Pre-


Duty Owed to the

Promisor

Foakes v. Beer

(1884) 9 App. Cas. 605

(H.L.)

The traditional common law position is that an agreement to accept a smaller sum in satisfaction of a debt of a larger sum is not a

good consideration.

This case has been overruled in B.C. by s .43 of the Law and Equity Act.

Enforcement of


Legal DutyDuty

Owed to the Promisor

Re Selectmove Ltd. [1995] 2

All E.R. 531 (C.A.)

the promise to pay a sum which the debtor was already bound to pay was not good consideration (confirms Foakes v. Beer)-Williams v. Roffeyprinciple not applicable where the existing obligation is to pay money but rather only where the existing obligation

is to supply goods or services

Enforcement of

Promises: Duty Owed

to the Promisor

Foot v. Rawlings

A lesser sum is good consideration to pay a greater future sum. An implied promise, if acted upon is good consideration.A smaller sum paid for a greater sum is adequate consideration when there is agreement to a substantial change to form, method, time,

or place of payment.

Consideration-Pre-


Accord and

Satisfaction


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If you substitute for a sum of money a piece of paper, or a stick of sealing wax and the bargain may be carried out in its full integrity.

Royal Bank v. Kiska

Why we have seals? commerciallyuseful to have an alternative method of concluding a binding transaction.The formality of seals: Mere words of various sorts are merely anticipatory of a formality which must be observed and are no t a

substitute for it.

Cautionary reasons for seals, someone when they are being asked to put on a sticker, in theory, realize there is something importantgoing on. Then they may inquire what is going on.

Formality: Promises

Under Seal

Freidman Equity

Developments Inc. v. Final

Notes Ltd.

Even if a law seems silly it is important to consider that parties have been aware of the rule and have structured their transactionsaccordingly. Since everyone already knows the rules it may be important to just keep them. A contract under seal may be long er in

certain provinces than a simple contract.

The mere inclusion of the words signed, sealed, delivered are not sufficient, some indication of a seal are delivered. It must be aconscious delivered act.

To summarize, as a general rule, an undisclosed principal may sue or be sued on a simple contract entered into on his or her behalfby an agent. There is a well-established exception to this rule that when such a contract is executed under seal, the undisclosed

principal can neither sue nor be sued upon it. The ex ception stems from the rule that only parties to a sealed instrument may have

obligations and rights under it. Bastarache J

Formality: Promises

Under Seal

Hughes v. Metropolitan

Railway Company

The courts apply equity there was a promise and there was reliance and you cannot use it as a cause of action (you cannot use it as asword only a shield)

Three things the courts need for equity:1. There needs to be a promise 2. There needs to be reliance3. You cannot be using the Court of Equity as a cause of action

It seemed to be inequitable to include the time of negotiations in the six months for the repairs

Waivery and

Promisory Esstoppel:

The Doctrine

Central London Property v.

High Trees House

[1947] 1 K.B. 130, [1956] 1

All E.R. 256

Lord Denning relied on the doctrine of promissory estoppel and held that a promise intended to be binding, intended to be acted o n

and in fact acted on, is binding even if there is no consideration. Estoppel was used as a shield by tenants against the landlord who

wanted to enforce a higher rent.

Enforcement of

Promises: Waiver and

Promissory Estoppel

John Burrows v. Subsurface

Surveys

[1968] S.C.R. 607, 68 D.L.R.

(2nd) 354

The passive conduct of the appellant was not taken by the court as a waiver of his rights to seek enforcement of the contract, but only

as friendly indulgences.

When there is no consideration or deed, any relaxation of terms must be clear and unequivocal.

Enforcement of


Promissory Estoppel

D.C. Builders v. Rees[1966] 2 Q.B. 617

A creditor is barred from enforcing their legal rights only when it would be inequitable for the creditor to insist on them .

Where there has been a true accord, under which the creditor voluntarily agrees to accept a lesser sum in satisfaction, and the debtor

acts on that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on thebalance, but they are not bound if there was no true accord.

A promise made under duress should not be estopped.

Enforcement of

Promises: Waiver andPromissory Estoppel

Saskatchewan River

Bungalows v. Maritime Life

Assurance

waiver will be found where the evidence demonstrates that the party waiving had (1) a full knowledge of his/her rights; (2) anunequivocal and conscious intention to abandon them

waiver can be retracted if a reasonable notice is given to the party in whose favour it operatesEnforcement of

Promises:

Promissory Estoppel

and Waiver

W.J. Alan & Co. v. El Nasr

Export & Import Co. [1972]

2 Q.B. 189

Denning on waiver: if one party by its conduct leads another to believe that the strict rights arising under the contract will not beinsisted on, intending that the other should act on that belief and he does act on it, then the first party will not after wards be allowed

to insist on the strict rights when it would be inequitable for him to do so

on some occasions it is possible to revert to the strict rights if the reasonable notice is given; but not if that would be inequitableEnforcement of

Promises:

Promissory Estoppel


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waiver would operate even if there is no detriment for the parties as long as there is some alteration of the parties positions and o neparty acts in reliance on waiver

and Waiver

Socit Italo-Belge Pour Le

Commerce v. Palm and

Vegetable Oils (The Post

Chaser) [1982] 1 All E.R. 19

(Q.B.)

estoppel and waiver require reliance on representation but detriment is not needed in must be inequitable to allow the party who waives his or her rights to revert

Enforcement of

Promises:

Promissory Estoppel

and Waiver

Combe v. Combe

[1951] 2 K.B. 215, 1 All E.R.

767 (C.A.)

Lord Denning explained his own principle set out in High Trees: a) promissory estoppel cannot be used as a sword, to create new

causes of action where none existed before, b) promissory es toppel can only be used as a shield, as a part of a cause of action, to

prevent a party from insisting upon his strict legal rights when it would be unjust to allow him to enforce them.

Enforcement of


Promissory Estoppel

Walton Stores (Interstate)

Ltd. v. Maher

(1988) 62 A.L.J.R. (H.C.)

Australian court made an exception to the general rule that promissory estoppel cannot be used in the absence of a pre -existing legal

relationship.

The court held that the doctrine can be used in the absence of a pre-existing legal relation if there was a reliance on the promise that

was a reasonable expectation and if a departure from the promise is unconscionable behavior.

Enforcement of


Promissory Estoppel

N.M. v. A.T.A. (2003), 13

B.C.L.R. (4th) 73 (B.C.C.A.)

There is little evidence in Canadian authorities to indicate a move toward a more generous approach to promissory estoppel and in

Walton there was a reasonable expectation of a legal obligation.

Enforcement of

Promises: Waiver andPromissory Estoppel

Balfour v. Balfour

[1919] 2 K.B. 571

AtkinL.J.: the common law does not regulate agreements between spousesThe consideration that really obtains from them is that

natural love and affection.

There is a strong presumption that family agreements are not intended to produce legal consequences.

Enforcement of

Promises: Intention to

Create Legal

Obligation

Rose and Frank v. J.R.

Crompton Bros., [1923] 2

K.B. 261 (C.A.)

There is a strong presumption that business agreements are intended to produce legal consequences.

However, if there is a clear and definite expression of the business parties that they do not intend to be subject to legal jurisdiction,

there is no reason in public policy why effect should not be given to their intention.

Enforcement of

Promises: Intention to

Create Legal

Obligation

Dynamic Transport Ltd. v.

O.K. Detailing Ltd.

A memorandum (subject to SOF) at a minimum must identify the land and terms: if it is uncertain = unenforceable. Must contain sufficient certainty of description to enable the property to be identified once the surrounding facts are pointed to

Formaility: Statutory

rules

Provender v. Wood Says that a party to whom a benefit accrues during a contract has a right to sue. A third party beneficiary not privy to a promise can enforce legal rights for performance of the promise. Privity and third partybeneficiaries

Tweedle v. Atkinson

Natural love and affection are not sufficient consideration A person who is not a party to a contract cannot sue to enforce it. Consideration must flow from the promisee. Thomas v. Thomas

Privity and third party

beneficiaries

Dunlop Pneumatic Tyre

Co.Ltd. v. Selfridge & Co.

Ltd.

Doctrine of Privity: You are not a party to the contract, you have not given consideration, therefore, you cannot enforce the contract. Only parties who are privy to a contract can sue on it. No privity no action. Consideration must flow from the promisee to the promisor or to another at the promisor's request for the contract to be binding The form of the contract leaves the problem that there is no consideration between Dunlop and Selfridge and thus there is no ability

Privity and third party

beneficiaries


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8

to sue on the contract. They are a stranger to conside ration and therefore there isnt a contract they can enforce.

Beeswick v. Beeswick

(CA) third party cant sue (stranger to consideration is not able to sue on the contract) (HL) House of Lords make clear that had she made a suit on her own personal interest only she would not have a claim. She can not

sue as a third party on her own behalf on the contract, but she is successful as the administrator of the estate which made the

contract. The house of lords emphasizes that she can sue as administrator of her husbands estate. She can sue for a specific

performance which leads to payment to her.

Privity: Third parties

and benefits, specific

preformance

London Drugs Ltd. v.

Kuehne & Nagel

International Ltd.

The employees owed a duty of care, but the court extended exceptions to privity doctrine to apply to employees in certaincircumstances:

1. The contract must explicitly or impliedly extend the benefits to a 3rd party2. If the employees are working and doing the very acts described in the contract, then employees should benefit from the

contract

One contract between two companies. Can the employees rely upon a limitation of liability clause. Carves out a little exceptionregarding privity. An employee can use the contractual provisions as a defence to an issue, but cant sue on the contract.

Privity and third

parties: employment

Fraser River Pile & Dredge

Ltd. v. Can-Drive Services

A new exception to the privity doctrine is dependent upon the intention of the contracting parties intention is determined on thebasis of 2 factors: (LD test)

1. The parties to the contract must intend to extend the benefit to the third party seeking to rely on the contractual provision;and

2. The activities performed by the third party seeking to rely on the contractual provision must be the very activitiescontemplated as coming within the scope of the contract in general, or the provision in particular, as determined by reference

to the intentions of the parties (The third party was per forming the activities contemplated in the contract) Isnt limited to employee/employer context, can only be used as a defence, cant sue on a contract. Can rely on contract to s erve as a

defence. Requires that there is: (a) an intention to the party to benefit and (b)what the party does is what are covered in the

intentions of the contract. Grounded on London drugs case. Policy reasons to do this, which is where the courts have gone. In Canada

we have a very strict doctrine of privity with only a few exceptions carved out.

Privity and third

parties: General

Principles and

Subrogation


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TERM 2

CASE RULE TOPIC

Redgrave v. Hurd

(1881) 20 Ch.D. 1 (C.A.)

A contract can be rescinded (set aside) due to a material false representation; there is a presumption that the party who m ade the

false representation knew at the time when it was made that it was false a man is not to be allowed to get a benefit from a statement

which he now admits to be false.

Failure to exercise due diligence is not relevant if a person is induced to enter into a contr act by a false representation.

Misrepresentation

and Rescission -

material

representation,

fraudulent

misrepresentation

Smith v. Land & House

Property Corporation

(1884) 28 Ch. D. 7 (C.A.)

In the case where the facts are equally well known to both parties, what one of them says to the o ther is frequently nothing but an

expression of opinion.

However, if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best very often

involves a statement of a material fact.

Misrepresentation

and Rescission

statement of opinion

or misrepresentation

Kupchak v. Dayson Holdings

(1965) 53 W.W.R. 65, 53

D.L.R. (2d) 482 (B.C.C.A.)

General rule: there is no rescission for misrepresentation if a 3rd

party has acquired rights, or when restitutio in integrum is impossible,

or if the action to rescind is not taken within a reasonable time, or the contract is executed (except in the case of fraud), or if the injured

party affirms the contract.

The court dealt with the possibility of rescission for fraudulent misrepresentation using the 2 step test: a) is rescission practical andrestitution possible? b) was the claim to rescind submitted in timely fashion?

When rescission is impossible then the injured party may get monetary compensation (in this case fair market value for the property

plus interest).

Misrepresentation

and Rescission:

fraudulentmisrepresentation

Bank of B.C. v. Wren

Developments (1973), 38

D.L.R. (3rd) 759 (B.C.C.A.)

The court found that the banks failure to disclose material facts to the defendant (i.e. that ther e had been a change to collateral

securities held by the bank) constituted misrepresentation by words, acts and conduct which induced the defendant to sign the

guarantee which he otherwise would not have signed (unilateral mistake induced by

An obligation to disclose material facts arises when a party asks a direct question.

Failure to disclose a material fact which would have prevented a party from making a guarantee, may render that party not liable for

the terms of the guarantee

Misrepresentation

and Rescission:

omissions

Misrepresentation

and Rescission:

Enforcement of

terms

Heilbut, Symons & Co. v.

Buckleton

[1913] A.C. 30 (H.L.)

A person is not liable in damages for an innocent misrepresentation no matter in what way or under what form the attack is made,therefore if rescission is not possible there is no remedy.

An affirmation at the time of sale is a warranty, provided it appears on evidence to be so intended, else it is only an innocent

misrepresentation.

A collateral warranty must be proved strictly, not only the existence of such terms but the existence of animus contrahendimust be

clearly shown.

Misrepresentationand Rescission:

innocent

misrepresentation;

breach of warranty

Dick Bentley v. Smith

Motors

[1965] 1 W.L.R.

Lord Denning: if a representation is made in the course of dealings for a contract for the very purpose of inducing the oth er party to

act on it, and it actually induces him to act on it by entering into the contract, that is prima facie ground for inferring that the

representation was intended as a warranty.

The maker of the representation can rebut this inference if they can show that it really was an innocent misrepresentation, in that

Misrepresentation

and Rescission:

innocent

misrepresentation;

breach of warranty


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they were in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for them to be bound by it.

Leaf v. International

Galleries

[1950] 2 K.B. 86, 1 All E.R.

693 (C.A.)

Lord Denning held: rescission may be available in cases of innocent misrepresentation if no other option is available and the innocent

party behaved reasonably.

But, no rescission is available for innocent misrepresentation when the contract is executed and a reasonable time for a claim lapses.

Distinction drawn between the quality of the painting (who painted it) and the substance of the painting (picture of Salisbury

Cathedral). Only allow rescission if differs in substance.

Misrepresentation

and Rescission:

innocent

misrepresentation;

rescission and lapse

of time

Hong Kong Fir Shipping Co.

v Kawaski Kisen Kaisha LTD,

1962 CA

In addition to traditional common law categorization of terms of contract into two groups (conditions-the breach of which give rise to

repudiation; warranties-the breach of which give rise to damages only) there are intermediate terms -those which are neither conditions

nor warranties.

The test the court used to determine if the term was a condition or intermediate term is t he nature of event and its practical effect

does it deprive the party to perform of substantially the whole benefit of contract.

Classifications of

terms

Wickman Machine

ToolsSales Ltd. v Shuler AG,

1974HL

The contract should be interpreted as a whole and word condition should, on the facts of this case, be given an ordinary me aning not

as a term which will entitle the innocent party to repudiate the contract in the event of a breach.

If the parties intend to give a condition such an effect they must make that intention clear.

Classification of

Terms

Harwish v. Bank of

Montreal

[1969] S.C.R. 515

The court upheld the traditional principle that any agreement collateral or supplementary to the written agreement may be

established by parol evidence, provided it is one which could be made as an independent agreement without writing and that it is not in

any way inconsistent with or contrary to the written agreement.

Parol Evidence Rule

Bauer v. Bank of Montreal

[1980] S.C.R. 102

Confirmation of the general principle that oral evidence which contradicts the main written contract is inadmissible under the parol

evidence rule.Parol Evidence Rule

Gallen v. Butterley

(1984) 53 B.C.L.R. 38, 25

B.L.R. 314

There are many cases where evidence of an oral statement is relevant and may be admitted: the written agreement is not the whole

contract, in support of interpretation of the contract, to correct a mistake or an error in written contracts, to show misrepresentation,

etc.

It is only a presumption that a collateral agreement cannot be admitted if it is inconsistent with, or contradicts, th e written terms.

Parol Evidence Rule

Thornton v. Shoe Lane

Parking Ltd.

[1971] 2 Q.B. 163, 1 A ll E.R.

686 (C.A.)

Lord Denning on the formation of contracts in a parking lot: the ticket is no more than a voucher or receipt for the money that has

been paid on terms which have been offered and accepted before the ticket is issued The offer was accepted when the plaintiff dove

up to the entrance and by the movement of his car, turned the light from red to green, and t he ticket was thrust at him. The contract

was then concluded and it could not be altered by any words printed on the ticket itself.

The court should not bind a party by unusually wide and destructive exclusion clauses unless they are drawn to their attention in the

most explicit way.

Standard Form

Contracts: Exclusion

Clauses and unsigned

documents ticket

case

McCutcheon v. David

MacBrayene Ltd.

[1964] 1 W.L.R. 125, 1 All

Previous dealings between the parties are relevant only if they prove (1)knowledge of the terms (actual and not constructiv e), and (2)

assent to the terms in the previous dealings.

Standard Form


Clauses and unsigned


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11

E.R. 430 (H.L.) If previous dealings show that a person knew of and agreed to a term on 99 occasions, it can be imported into the 100th contract

without an express statement, but without proving knowledge there is nothing.

documents ticket

case

Tilden Ren-A-Car Co. v.

Clendenning

(1978) 18 O.R. (2d) 601

(C.A.)

In modern commercial practice, many standard form printed documents are signed without being read or understood and in many

cases the parties seeking to rely on the terms of the contract know or ought to know that the signature a party to the contract does not

represent the true intention of the signer and that the party signing is unaware of the stringent and onerous provisions which the

standard form contains.

The party seeking to rely on such stringent and onerous terms should not be able to do so i n the absence of first having taken

reasonable measures to draw such terms to the attention of the other party, and, in the absence of such reasonable measures, it is not

necessary for the party denying knowledge of such terms to prove either fraud, misrepresentation or non est factum; what is reasonable

is the question of facts in each instance.

Standard Form


Clauses and signed

documents

Karroll v Silver Star

Mountain Resorts Ltd.

To determine if the injured party had knowledge of the exclusion clause, must look at all the circumstances: hast, informal, length of

document, size of print, time to read, consistency with the contract.

Incorporation: Signed

Documents

Hunter engineering co. Inc.

V syncrude canada ltd.

Dickson J. (relying on Photo Production and inclined to lay the doctrine of fundamental breach to rest) held that if on its true

construction the contract excludes liability for the kind of breach that occurred, the party in breach will generally be saved from liability,

unless the contract or the clause is unconscionable, as might arise from situations of unequal bargaining power between the p arties.

Wilson J. held that the test for whether an exclusion clause or a contract will be enforced is one of unreasonableness as between the

parties and in light of the nature of the breach.

- There is no Doctrine of Fundamental Breach in Canada, but there is an established test to determine if an exclusion orlimitation clause applies

Fundamental Breach

Teracon Contractors Ltd. v

BC

This decision clarifies this area of the law and subsumes the doctrine of fundamental breach. The doctrine of fundamental breach has

been laid to rest. In considering an exclusionary clause, ask three questions:

1) Does the exclusionary clause actually apply?

- In Tercon the court was split of whether the words apply in the exclusionary clause

2) Was the clause at the formation of the contract, unconscionable and therefore invalid?

- Is it so unfair that it is invalid, very often they refer to the bargaining power of the parties to determine if the bargaining

power is abused

3) If applicable and valid, is there a public policy argument that will override the very strong public interest in enforcing

agreements?

- Court has discretion

- Essentially kills the idea of fundamental breach in Canada

Fundamental Breach

Fraser Jewellers Ltd. v.Dominion Electric Protection

Co.

(1997) 148 D.L.R. (4th) 496

(Ont. C.A.)

Refers to both Hunter and Photo Production cases in holding that an exclusion clause should be enforced according to its tr uemeaning provided that it is not unconscionable (Dickson J. in Hunter) or unfair or unreasonable (Wilson J. in Hunter).

If an exclusion clause is not obscure, if it is visible, clear and unambiguous, and not the result of abuse of bargaining power, there is no

basis for the court to disturb the agreement made between the parties.

Fundamental Breach:Canadian courts

follow Photo

Production

Solway v Davis Moving and

Storage, [2002] O.J. 4760 A defendant will not be permitted to rely on a liability limitation clause if it would be unconscionable in the circumstances.

Standard Form


Clauses and signed

documents

Staiman Steel v Comm and

Home Builders, Ltd.

In mutual mistake, the court must decide how a reasonable third party (objective bystander) would infer the contract based on the

words and conduct of the parties

**Only in cases where the circumstances are so ambiguous that a reasonable bystander could not infer a common intention than the

Excuses for Non-

Performance of

Contract: Mistake as


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Courts will hold that no contract was created to terms

Smith v HughesRule: Where there is mistake as to the identity of the subject matter, the contract will only be held void if the seller knew the b uyer was

mistaken, and if the seller knew that the buyer believed the seller to be contracting for the goods as he, the buyer, believed them to be.

Excuses for Non-

Performance of


to terms

R v Ron EngineeringRule: Where there is mistake in the tender that is not apparent on the FACE of the tender, the contractor is held to the tender and the

tender deposit is forfeited

Excuses for Non-

Performance of


to terms

Bell v Lever Breothers Ltd. Mistake of quality will only be capable of voiding a contract if the quality makes an essential difference to the contract.

Excuses for Non-

Performance of

Contract: Mistaken

assumptions

McRae v. Commonwealth

Disposals Commission

(1951) 84 C.L.R. 377 (Aust

H.C.)

The court held that where the non -breaching party cannot meet the burden of proof with respect to net profits he may be entitled to

recover damages measured by reference to expenditure incurred and wasted in reliance on the promise given by the Commission.

The burden was then thrown on the Commission of establishing that the expense incurred would equally have been wasted (in o rder

to reduce the amount of the reliance damages).

Excuses for Non-

Performance of

Contract: Mistaken

assumptions

Damages: Reliance

Interest

Solle v Butcher

A mistake, which renders a contract voidable (under equity):

1. If there is a common misapprehension as to facts or as to their rights2. If the misapprehension was fundamental (fundamental is defined more loosely in equity because equity makes a contract

voidable, not void)

3. The party seeking to set the contract aside was not at fault

Excuse for non-performance of a

contract: Equity

Great Peace Shipping v

Tsarvliris Salvage

There is no jurisdiction to grant rescission of a contract on the ground of common mistake where that contract is valid and enforceable

on ordinary principles of common law (overrules Sole) Not relevant in Canada only the 5 elements restated in Miller are

Excuse for non-

performance of a

contract: Equity

Miller paving Co. v B

Gottardo Construction Ltd.

Miller Paving Ltd. (p. 579) - 5 criteria to be present if common mistake is to void a K:

- There must be a common assumption as to the existence of a state of affairs

- There must be no warranty by either party that the state of affairs exists;

- The non-existence of the state of affairs must not be attributable to the fault of either party;

- The non-existence of the state of affairs must render performance of the K impossible;

- The state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must

subsist if performance of the contractual adventure is to be possible.

Excuse for non-

performance of a

contract: Equity

Showgun Finance Ltd. v

Hudson

If a rogue falsely uses someones identity, they cannot be considered an agent for the party whose identity was stolen and th e contract

is considered null and void.

Excuse for non-

performance of a

contract: Mistake

and 3rd

party interest

Saunders v Angilia Building

Society

If a person signs a document because he negligently failed to read it, they should be precluded from relying on their own negligent (in

the form of carelessness, not duty of care negligence) act for the purpose of escaping the consequences of the contract. A person

cannot take advantage of their own wrong. This was accepted in Canada in Marvco. This case overrules Carlisle.

Excuse for non-

performance of a

contract: Mistake

and 3rd party

interest

Marvco Colour Research

Ltd. v HarrisAny person who fails to exercise reasonable care in signing a document is precluded from relying o n the plea of non est factum as

Excuse for non-

performance of a


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against a person who relies upon that document in good faith. In an action between two innocent parties, the one whose carelessness

caused the loss should suffer the loss.

contract: Mistake

and 3rd party

interest

Bercovici v Palmer (SK QB)Must look at the words and conduct of the parties prior and subsequent to the agreement to det ermine what is to be included in the

contract.

Excuse for non-

performance of a

contract:

Rectification

Bercovici v Palmer (SK CA)

Excuse for non-

performance of a

contract:

Rectification

Sylvan Lake Golf & Tennis

Club v Performance

Industries

Four conditions for rectification:

a) Plaintiff must establish that the content of the written contract is inconsistent to the oral agreement closes floodgates for

unhappy contractors who simply failed to read contract

b) Evidence must be there that not only does the written document not correspond with the prior oral agreement, but that D

either knew or ought to have known of the mistake in reducing the oral terms Court is of the opinion that it is unconscientious for a

person to avail himself of the advantages obtained

c) Plaintiff must show the precise form in which the written instrument can be made to express the prior intention closes

floodgates about parties unexpressed intentions

d) All of the foregoing must be established by proofwhich this Court has variously described as convincing proof or more thansufficient evidence less stringent than proof beyond a reasonable doubt, but more stringent than on a balance of probabilities

Excuse for non-

performance of a

contract:

Rectification

Greater Fredricton Airport

Authority Inc. v NAV

Canada

Two precedents are required for a successful plea of economic duress before looking at consent both must be met before asking of

consent:

1. Whether the pressure was a demand or a threat? Must be answered yes

2. Is there any practical alternative for the coerced party? Must be answered no

If these are met, than the questio n of consent arises, factors for consent are:

a) Was the promise supported by consideration? least important, but can be used as additional evidence

b) Did the coerced party protest to the new variation?

c) If not, whether the coerced party took reasonable steps to disaffirm the promise as soon as practicable?

The Protection of

Weaker Parties:

Duress

Geffen v. Goodman Estate[1991] 2 S.C.R. 353, 81 D.L.R

(4th) 211

Wilson J. said that the plaintiff must establish the presence of a dominant relationship in order to give rise to a presump tion of undue

influence. Then the onus moves to the defendant to rebut it (to show that the plaintiff acted full, free and informed and that he hadindependent advice. The magnitude of the disadvantage or benefit is cogent evidence going to the issue of whether undue influence

was exercised).

The Protection of

Weaker Parties:Undue Influence:

Potentially dominant

relationships

Morrison v. Coast Finance

Ltd.

(1965) 54 W.W.R. 257, 55

D.L.R. (2d) 710 (B.C.C.A)

A presumption of unconscionability requires: a) proof of inequality in the position of the parties arising out of the ignorance, need or

distress of the weaker, which left them in the power o f the stronger, and b) proof of substantial unfairness of the bargain in favour of

the stronger.

The stronger party must rebut the presum ption by proving that the bargain was fair, just and reasonable.

The Protection of

Weaker Parties:

Unconscionability:

presumption of

unconsionability

Lloyds Bank v. Bundy

[1975] Q.B. 326, [1974] 3 All

The Protection of

Weaker Parties:


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14

E.R. 757 Lord Denning said that there are different categories of cases where there has been inequality of bargaining power (duress,

unconscionable transactions, undue influence, undue pressure and salvage agreements) and that the English law gives relief to one who,

without independent advice, enters into a contract upon terms which are very unfair or transfers property for a consideration which is

grossly inadequate, when his bargaining

power is grievously impairedby reason of his own needs or desires, or by his ignorance or infirmity, coupled with undue influences or

pressures, brought to bear on him by or for the benefit of other.

Unconscionability:

relief

Harry v. Kreutziger

(1978) 9 B.C.L.R. 166, 95

D.L.R. (3d) 231 (C.A.)

McIntire J referred to the test in Morrison for unconscionability: Inequality of position of the parties due to the ignorance, need or

distress of the weaker, coupled with proof of substantial unfairness in the bargain.

Lambert J. A. introduced a new test: whether the transaction seen as a whole is sufficiently divergent from community standards of

commercial morality that it should be rescinded.

The Protection of

Weaker Parties:

Unconscionability:

relief

Hart v O`Connor

- If incapacity is known, no contract is formed because objective standard finds no consensus ad idem

- But a contract by a person of unsound mind (unknown to the other party) is not voidable due to unfairness - same rules apply

as to sane persons

The Protection of

Weaker Parties:

Incapacity

KRG Insurance Brokers v

Shafron

The onus is on the party seeking t o enforce the restrictive covenant to show the reasonableness o f the terms a restrictive covenant is

prima facie unenforceable unless it can be shown to be reasonable a ambiguous restrictive covenant is prima facie unreasonable and

unenforceable only if ambiguity can be resolved is it possible to determine if covenant is possible

Courts look at in Employment ContractTest for Reasonableness:

1. Geographical Area2. Time Periodif the time restrictions take away from a persons livelihood for the rest of their life it is not enforceable

3. Activities considered in establishing reasonableness

4. If terms are ambiguous not clear as to the activity, time or activity, it is not possible to demonstrate as reasonable

Illegality: Public

Policy

Still v. Minister of National

Revenue

[1998] 1 F.C. 549 (C.A.)

The modern approach to the law of illegality rejects the understanding that simply because a contract is prohibited by stat ute it is

illegal and therefore void ab initio. Where a contract is expressly or impliedly prohibited by statute, a court may refuse to grant relief to

a party, when it would be contrary to public policy, reflected in the relief claimed, to do so.

Illegality: The

modern approach

McRea v Commonwealth

Disposal Inc.

Expectation measure is not available when it is impossible to determine what the amount would be, reliance measure allows for wasted

expenditures to be reimbursed to put the party back in the position they were in before the contract

Remedies: The

Reliance Interest

Sunshine Vacation Villas

Ltd. v. Hudson Bay Co.(1984) 58 B.C.L.R. 33, 13

D.L.R. (4th

) 93 (C.A.)

The Court of Appeal held that the defendant could not recover for loss of capital and loss of gross profit because they wer e

alternatives and it was wrong to make awards based on mixture of two approaches.

The court also held that the plaintiff could elect to claim its expenses but that, if the owner could show that the plaintiff would have

incurred a loss had it completed the contract, only nominal damages should be awarded.

Damages: Reliance

Interest

AG v Blake, [2001] 1 AC 268

In exceptional cases where the normal remedies of damages, specific performance and injunction are inadequate compensation for a

breach of contract, the court can, if justice demands it, grant the discretionary remedy of requiring the defendant to account to the

plaintiff for the benefits received from the breach of contract.

Damages: Restitution

Chaplin v. Hinks

[1911] 2 K.B. 786 (C.A.) "The fact that damages cannot be assessed with certainty does not relieve the wrong -doer of the necessity of paying damages for his

Damages:

Quantification Loss


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15

breach of contract."

The plaintiff was awarded damages for the loss of the chance of selection.

of a chance

Peevy House v Garland Coal

and Mining Co.Damages for breach of contract cannot be so excessive that they cause economic waste

Damages:

Quantification-cost

of performance or

diminution of value

Groves v. John Wunder Co.

(1939) 286 N.W. 235

(Minn.C.A.)

In a construction contract, the law attempts to give the injured party what he was promised and the cost of remedying the d efect isthe amount awarded as compensation for failure to render the promised performance--the owner is entitled to compensation for what

he has lost, that is, the work which he has been promised (cost of performance test).

Not followed in Peevyhouse v. Garland Coal Mining Co., 382 P. 2d 109 (Okla. S.C., 1962)

Damages:

Quantification-cost

of performance or

diminution of value

Jarvis v. Swans Tours

[1973] 1 Q.B. 233 (C.A.)

Lord Denning held that there are cases where one can recover damages for the mental distress, disappointment and discomfort

caused as a result of breach of a contract for a package holiday.

The court held that the right measure of damages is to compen sate the plaintiff for the loss of entertainment and enjoyment which

the plaintiff was promised and which he did not get.

Damages:

Quantification Loss

of intangible

interests

Vorvis v. ICBC

[1989] 1 S.C.R. 1085, 36

B.C.L.R (2d) 273

McIntyre:o Aggravated damages may be awarded in a case of wrongful dismissal particularly where the acts complained of were also

independently actionable.

o Punitive damages may only be awarded in respect of conduct which is of such nature as to be deserving of punishment because of its

harsh, vindictive, reprehensible and malicious nature (must be an actionable wrong).

Wilson J. relied on the remoteness test in Hadley: Th e issue in assessing damages should be whether the plaintiff should be

compensated for damage the defendant should reasonably have anticipated. Wilson J. did not agree that a separate actionable wrong

is needed for either of aggravated damages or punitive damages.

Damages:

Aggravated and

Punitive Damages

Hodgkinson v Simms,

[1994] 3 SCR 377

Undue influence focuses on the sufficiency of consent and unconscionability on the reasonableness of a given transaction

The existence of a contract does not necessarily preclude the existence of fiduciary obligations between parties

The proper approach to damages for breach of a fiduciary duty is restitutionary. The innocent party is entitled to be put i n as good a

position as he would have been in had the breach not occurred. A court exercising equitable jurisdiction may consider the principles of remoteness, causation, and intervening act where necessary to

reach a just and fair result.

Where a party can show that but for the relevant breach it would not have entered into a given contract, that party is freed from the

burden or benefit of the rest of the bargain. The wronged party is entitled to be restored to the pre-transaction status quo.

Damages must be foreseeable as to kind, but not extent

Damages: Causation

Hadley v. Baxendale

(1854) 9 Exch. 341, 156 E.R.

145

General rule is that if the loss flowing from breach is too remote then it cannot be recovered.

Recoverable losses are those arising naturally from the breach which should have been within the reasonable (objective test)

Damages:

Remoteness


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contemplation of the parties (1st

Hadleyrule).

If the contract was made under special circumstances which were communicated to the defendant, and thus known to both parties,

the damages will be the amount of injury which would ordinarily result from such a breach of the contract under the given special

circumstances (2nd

Hadleyrule).

Victoria Laundry v. Newman

[1949] 2 K.B. 528

Only damages which are reasonably foreseeable as arising from the breach are recoverable (objective test).

What is reasonable depends on the knowledge of the parties (particularly the breaching party). Everyone has imputed knowledge of ordinary circumstances, but there may have to be actual knowledge of special circumstances for

recovery to be granted on these special grounds.

It is not necessary to prove that the wrongdoer contemplated the loss. It is enough if they could foresee the loss was likely to result.

Damages:

Remoteness

Scyrup v Economy Tractor

Partsltd.If you know (foresee) there will be a loss for profit, than the extent of that loss of profit is irrelevant, you will be held liable for damages.

Damages:

Remoteness

Koufos v. Czarnikow (The

Heron II) [1969] 1 A.C. 350

The Court of Appeal criticized Victoria Laundryand held that the crucial question is whether, on the information available to the

defendant when the contract was made, they should, or the reasonable person in their position would have, realized that such loss was

sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that

loss of that kind should have been within their contemplation.

In contracts, if one party wishes to protect themselves against a risk which to the other party would appear unusual, they can direct

the other partys attention to it before the contract is made and the court need not stop to consider in what circumstances t he other

party will then be held to have accepted responsibility in that event

Damages:

Remoteness

Asamera Oil Corp v. Sea Oil

& General Corp,

[1979] 1 S.C.R. 633

If the innocent party fails to mitigate the loss they may not be entitled to the full range of remedies.

The defendant cannot be called upon to pay for avoidable losses.

Equitable Remedies:

Specific Performance,

mitigation

Semelhago v. Paramadevan

[1996] 2S.C.R. 415

Sopinka, J: Specific performance should not be granted as a matter of course absent evidence that the property is unique to the extent

that its substitute would not be readily available, but specific performance was given in this case.

Damages: Time of

Measurement

Shatilla v. Feinstein

[1923] 1 W.W.R. 1474, 16

Sask. L.R. 454

When the damages which may arise out of the breach of a contract are in their nature uncertain, the law permits the parties to agree

beforehand as to the amount to be paid in case of breach.

Whether the sum agreed upon is a penalty, must depend upon the circumstances of each case.

An agreement for payment of a fixed sum on any one of a number of breaches, some trivial and some serious, is presumed to b e void

as a penalty since the strength of a chain is its weakest link.

Damages: Liquidated

Damages and

Penalties

H.F. Clarke Ltd. v.

Thermidaire Corp.

[1976] 1 S.C.R. 319

It is always open to the parties to make t he predetermination, but it must yield to judicial appraisal of its reasonableness in the

circumstances.

The sum will be held to be a penalty if it is extravagant and unconscionable in amount in comparison with the greatest loss t hat could

conceivably be proved to have followed from the breach (Snells principles).

The formula of gross trading profit was not defined and it departs markedly from any reasonable approach to recoverable loss or

Damages: Liquidated

Damages and

Penalties


17/17


17

actual loss.

J.G. Collins Insurance

Agencies Ltd. v. Elsley

[1978] 2 S.C.R. 916

Held that the power to strike down a penalty clause is a blatant interference with freedom of contract and is designed for the sole

purpose of providing relief against oppression for the party having to pay the stipulated sum. It has no place where there is no

oppression

A penalty clause should function as a limitation on the damages recoverableif the actual loss turns out to exceed the penalty, theparty should be allowed to recover only the agreed sum.

Damages: Liquidated

Damages and

Penalties

Stockloser v. Johnson

[1954] 1 Q.B. 476, [1954] All

E.R. 630 (C.A.)

Where there is no forfeiture clause, if money is handed over in part payment of the purchase price and then the buyer makes default

as to the balanceonce the seller rescinds the contract or treats is as at an end the buyer is entitled to recover their m oney in law, but

the seller can claim damages.

Where there is a forfeiture clause or the money is expressly paid as a deposit a party may have a remedy in equity but two things are

necessary: 1. the forfeiture clause must be of a penal nature and 2. it must be unconscionable for the seller to retain the money.

Damages: Forfeiture

as Liquidated

Damages or Penalties

John E. Dodge Holdings Ltd.

v. 805062 Ontario

Ltd.(2003),

63 O.R. (3d) 304 (C.A.)

Specific performance will be granted only if the plaintiff can demonstrate that the subject property is unique: the party seeking

specific performance must show that the property has a quality that cannot be readily duplicated elsewhere.

A supervening event causing a radical change in obligation is required to invoke the doctrine of frustration.

Equitable Remedies:

Specific Performance

Contracts Chart

Documents

Transcript of Contracts Chart