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Model exam
IRAC method of exam technique
Issues – Outline the issues that you are going to discuss
Rules – Define the legal rules that are relevant to the question
Application – Apply the legal rules to the facts of the question (this is the hard
part!)
Conclusion – Usually in the form of an advice to your hypothetical client.
Always use your reading time wisely to PLAN YOUR ANSWER before writing.
This is of upmost importance as it will help you clarify your thoughts and ensure
that you avoid following exam strategies that students commonly resign
themselves to:
i) ‘the kitchen sink’ i.e spilling all of your knowledge that is vaguely
related to the topic onto the exam paper and hope for the best.
ii) ‘the garden path’ i.e going off on an irrelevant tangent
Remember that the APPLICATION IS THE MOST IMPORTANT SECTION of
your answer and should take up the bulk of your time. The actual conclusions
you reach are often superflous. Rather your marker will be most interested in
how you arrived at your conclusion.
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Each answer should include:
• An Introduction - Flag the issues that will arise in your answer.
• A Body - This should contain your answer to the issues flagged in the
introduction.
• A Conclusion - A concise answer to the question based on what you have
argued in the body of the essay. For example -‘Tim will not be able to
lawfully terminate the contract. However, he will be able to successfully
argue that he was induced into the contract as a result of unconscionable
conduct’.
When considering any possible actions in the answer, first look to see if there is
anything explicit in the contract that you can rely on (e.g. written and oral terms).
If there is nothing explicit in the contract, consider whether you can rely on any
implied or incorporated terms. If you cannot rely on these, then examine whether
you can use anything outside of the actual contract (e.g. promissory estoppel,
part performance, undue influence, misrepresentation, misleading conduct).
Use headings frequently to structure an answer.
Use the language of the question.
Be as comprehensive as possible when answering a question - canvas all
possible answers. An example of this is stating that ‘Although a Court would
likely find that termination was justified because of breach of an essential term, it
is also necessary to consider whether termination was justified because of
repudiatory conduct’. Don’t merely give an answer for whatever cause of action
will be most likely to succeed.
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SAMPLE QUESTION:
Here is a distinction-level model answer for a Contracts problem.
Contracts is a subject typically taught in the first or second year of a law
degree. This exam answer is an excellent example of the IRAC method,
an exam technique which is espoused by law lecturers around the
country. Try to answer the question yourself first before looking at the
answer. Don’t worry if you didn’t come up with the same amount of text
as is in the answer below. The student who wrote this answer had a
considerable amount of time in which to write. Good luck!
Sam, a self-taught wiz-kid, recently started a small business selling natural health
products in Canada. Having witnessed the start of the popular obsession with
organic and natural products, he decided to tap into this market. He had
convinced his father to lend him $10,000 to start up his business.
Knowing that his business idea was sure to be a success, Sam looked into
possible suppliers for his natural health products. He contacted Mike who is a
salesman for “NaturalWays”, a specialist supplier of all things natural and
organic, including food and health products. Sam asked Mike whether he would
be able to fill an order for a regular supply of PP22, a highly sought after brand of
tea. Sam emphasized to Mike that this brand of tea needed to be 100% organic
and individually packaged and suggested that $400 for 200 cartons would be
something he would accept. He also noted that shipment must be sent out every
Monday unless otherwise indicated by Sam. Mike, interested in Sam’s endeavor,
told Sam that he had to do some inventory checks and so forth and would get
back to him as soon as possible.
Three weeks passed without a word from Mike. Eager to get his business up and
running, Sam gave Mike a call to inquire into whether Mike could supply him with
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the requested goods. “Oh ya…silly me…it completely slipped my mind” said
Mike, responding to Sam’s inquiry. “Sure no problem, I can supply what you
need” said Mike. “However, we are closed on Mondays so the goods would have
to be shipped out on Tuesdays. How does $500 per 100 cartons of PP22
sound?” asked Mike. “Ummm….geee…..I don’t know. That might throw off my
entire business scheme…I guess it could work,” answered Sam. Mike then
suggested to Sam that they both agree to do this but decide on the exact terms
when Sam had worked out the precise details of his business plan, since he had
sounded a bit confused, uncertain and overwhelmed on the phone. Sam agreed.
Over the next several days, Sam’s friend Helen gave Sam some inside info about
a really cheap supplier of bulk natural health products located in Mexico. Eager
to get a good deal, he called up the supplier, Ben at HHP, and asked if him if he
could provide him with regular supplies of PP22 for 12 months. Ben accepted
without hesitation, offering a price of $200 per 100 cartons and promising that
“our PP22 products are made with 100% organic substances.” “Sweet deal” Sam
replied, “that is exactly what I need.” Both parties agreed that 100 cartoons of
PP22 would be shipped out every week on Monday for a period of 12 months.
Over the next several months, Sam had been receiving a regular supply of PP22
from Ben and was generally satisfied with everything. He had also hired a full-
time secretary and customer service employee, Tom, who was responsible for
filling customer orders. Business was thriving for Sam (although competitors
were starting to pop up in the area) and he needed to hire a full-time staff. He
was really impressed with Tom’s work and offered him the position of Vice-
President of Sam’s company for a period of 4 years with renewal possible on the
expiration of the contract. However, one of the conditions noted in the contract
was that if Tom ever left Sam’s company he would not work for any of the
company’s competitors in Canada for 10 years following his exit from Sam’s
company. Hesitant at first, Tom accepted the offer, knowing what position of
Vice-President would do for his resume!
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Over the last couple of months, Sam had been receiving complaints from his
customers as to the quality of the PP22 tea. Sam soon found out that HHP had
been shipping “copy-cat” brands of PP22 (which are not 100% organic) to Ben all
along in order to provide for its other, more prestigious and loyal customers with
the top notch stuff and at a higher profit. In addition, HHP has been sloppy on the
shipping arrangements they agreed to, shipping only 50 cartons of PP22 and
every other week on Thursdays rather than every week on Mondays.
To top off Sam’s problems, his company has started operating at a loss. He is
losing customers to competitor companies and the decreasing quality of his
products have really decreased customer purchases. Stubborn as Sam is, he is
determined to keep his business up. Sam visits his local bank to inquire into the
possibility of mortgaging his house to the bank in order to obtain money to keep
his business going. The bank manager, whom Sam knows quite well and with
whom he has been doing his day to day banking with for the past 10 years,
proposes to loan Sam the money he needs if Sam gives a guarantee of $100,000
which is more than the value of his house. Being obsessed with ensuring his
business stays afloat and not thinking of anything else, Sam accepts, saying “I
trust you” and signs the required documents without any independent advice.
Sam recently received a phone call from Mike at “NaturalWays”. Mike is looking
to conclude the terms to their agreement, as they had agreed to enter into a
contract several months ago. Sam, knowing now he cannot afford to order
regular supplies from Mike, tells Mike that he has changed his mind and no
longer wishes to retain Mike’s services. Mike is furious! “We had a deal”, he says.
Sam is also caught up in the problems associated with his supply contract with
Ben in Mexico. He thinks Ben is in breach of their agreement and wants to
terminate their contract. Further, Ben had promised him that the PP22 was made
of 100% all natural products, which in fact were not. Sam believes that this fact,
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along with Ben’s tardy shipping habits have contributed to the decrease in
customer demand.
Finally, Sam’s father’s estate is looking to collect the $10,000 Sam’s father had
loaned Sam. However Sam does not believe he owes them anything. A few
weeks after Sam’s father had lent him the money, he had promised to forgive the
debt as long as Sam stopped complaining and nagging to him about how he had
distributed his estate in his will. Sam believes he has kept up his end of the
bargain and consequently believes the debt must be forgiven. The bank manager
is also looking to recall the $100,000 loan. Sam’s newly promoted Vice-
President, Tom, is also fed up with all the drama surrounding the business. Tom
has told Sam that he has been offered a position of President at “NatureVilla”—
one of Sam’s major competitors for more money and less drama. He quits,
leaving Sam furious.
Sam asks for your advice regarding the issues noted above. Specifically, he is
looking to determine:
(1) Whether he will be required by law to re-pay, to his father’s estate, the
$10,000 his father loaned him but subsequently forgave?
(2) Whether he will be required by law to enter into a contract with Mike in
regards to supplies of PP22 for his business?
(3) Whether he can obtain any recourse against Ben for what he believes to be a
breach of their contract?
(4) The legality of the $100,000 loan from the bank to Sam?
(5) Whether Sam can enforce the employment contract against Tom?
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Issues
At issue are a number of relationships so it is best to deal with each relationship
separately. It is very important that the first thing to do in responding to an exam
question is to spot the issues and organize the information accordingly. Below is
a list of issues that should be dealt with in this fact pattern:
(1) Sam vs. his father’s estate
(i) Is there a valid contract?
• Potential issues:
o Offer & Acceptance
o Consideration
(2) Sam vs. Mike
(i) Is there a valid contract in regards to the terms of the agreement?
• Potential issues:
o Offer & Acceptance
� Intention to be legally bound
� Lapsed Offer
� Meeting of the minds on material terms
� Acceptance of counter-offer
o Enforceability of Agreement to Agree
(3) Sam vs. Ben
(i) Is there a valid contract?
• Potential issues:
o Offer & Acceptance
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� Intention to be legally bound
� Meeting of the minds on material terms
� Misrepresentation
(ii) If so, was there a breach?
(iii) If so, was the breach fundamental?
(iv) Remedies
• Termination of the contract
• Damages
(4) Sam vs. the bank manager
(i) Is there a valid contract?
• Duress
• Undue Influence
(5) Sam vs. Tom
(i) Is the employment contract valid?
• Against public policy
Rules and Application
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A. Sam vs. his father’s estate
At issue here is whether the second agreement between Sam and his father is a
valid contract. If so, Sam will not have to re-pay the $10,000 originally loaned to
him by his father. The subsequent agreement between Sam and his father was
that his father would forgive Sam’s $10,000 debt as long as Sam stopped
complaining and nagging at him about the particulars in his will. Since there are
no suspicious facts that suggest problems with the formation of the contract (i.e.
offer and acceptance, consent, intention to be legally bound) we can move on to
what seems to be the main issue in this alleged contractual relationship:
consideration. In order for a contract to be valid, there must be sufficient
consideration given for the promise.
Consideration has been defined as factors which the promisor considered when
he promised and which motivated his promising. The idea is that a promise which
lacks any adequate motive cannot have been serious and therefore should not
be taken seriously by the law. Therefore, we must determine whether Sam’s
promise not to complain or nag his father about his father’s distribution of his
estate in his will constituted sufficient consideration for the father’s promise to
forgive the debt. This is a possibility given the fact that the courts have held
valuable consideration to consist of some forbearance suffered or undertaken by
one of the parties (Hamer v. Sidway; Dahl v. Hem Pharmaceuticals Corp) in
addition to benefits and profits. For example, in Hamer v. Sidway, the promisor
promised the promisee to pay him $5000 if the promisee refrained from smoking
and drinking until his 21st birthday. As the promisee had carried out his promise,
the court found that because the promisee had a legal right to smoke and drink,
the restriction of this right in order to complete the promise constituted a
forbearance suffered and therefore was sufficient consideration in order to give
legal effect to the contract. Therefore, in Sam’s case, it could be argued that
because Sam suffered a forbearance, as he refrained from complaining to his
Make sure to bring up counter-arguments
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father about what he thought to be an injustice in his father’s estate distribution,
sufficient consideration existed so as to give legal effect to the agreement.
However, this is not likely to be the case. While a forbearance suffered may
constitute sufficient consideration, the forbearance from doing something must
be something that the promisee had a right to do in the first place (White v.
Bluett). It cannot be said that Sam had a right to complain and nag his father
about the distribution of his father’s estate. In White v. Bluett the court recognized
that a person does not have a right to complain about the distribution of another’s
person’s estate in the first place, therefore a forbearance from doing so does not
constitute sufficient consideration for the promise.
Further, it could also be argued that Sam’s complaining and nagging to his father
constituted a form of duress so as to vitiate the father’s consent in promising to
forgive Sam’s debt. In this case, the agreement would be considered void. While
this is a weaker argument than the one discussed above, it is always a good idea
to mention the possibility of such an argument, no matter how unlikely it seems.
B. Sam vs. Mike
There are two main issues here: (i) Whether there is a valid contract between
Sam and Mike with regards to the shipments of PP22? (ii) Whether the
agreement between Mike and Sam to enter into a contract but agree on the
terms of that contract at a later date is valid and can therefore be enforced by
Mike?
(i) Whether there is a valid contract btwn Sam and Mike with regards to the
shipments of PP22?
Make frequent use of case law as legal authority.
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There is clearly an offer by Sam, the offeror, to pay Mike for a given amount of
PP22. There is however an issue in regards to whether that offer by Sam lapsed,
since it took Mike three weeks before giving Sam an acceptance to his offer. An
offer lapses when the offeree has not accepted the offer within a “reasonable
amount of time” (Shatford v. BC Wine Growers Ltd). In Shatford v. BC Wine
Growers Ltd., a company made an offer to the offeree to purchase berries but the
offeree did not accept until 6 days later. The Court held that given the nature of
the product, the time of year and the necessity of prompt decision for the offeror,
6 days did not constitute a reasonable amount of time and therefore the contract
is void on the basis that the offer lapsed. However, it us unlikely that Sam’s offer
will be found to have lapsed, given that it can be distinguished on the facts from
Shatford. The PP22 was not a perishable product and furthermore, Sam did not
suggest to Mike any kind of urgency of a decision.
There also seems to be a problem in regards to Mike’s acceptance of Sam’s
offer. Mike’s response to Sam’s offer seems to take the form of an enquiry into
whether better terms might be available. If this is the case, then the power of the
original offer by Sam will have been destroyed because Mike’s response would
take the form of a counter-offer (and a rejection of Sam’s offer). This is likely to
be the case because even though Mike responded to Sam’s offer in a sense that
suggests acceptance (i.e. “sure, no problem…I can supply what you need), he
clearly inquired into whether Sam would accept different terms--$500 per 100
cartons shipped on Tuesdays rather than $400 per 200 cartons shipped on
Mondays.
Given that Mike’s response to Sam’s offer is likely to be characterized as a
counter-offer, we must assess the validity of Sam’s acceptance/response. One of
the heralding principles of contract formation is that the parties must show a
willingness to be legally bound (Klienwort Benson). This is clearly lacking in
Sam’s response to Mike’s counter-offer. It is likely that a court will characterize
Separate sub-issues with distinct headings
Clear statement of the law
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Sam’s response—“ummm…geee…I don’t know. That might throw off my entire
business…I guess it could work”—as lacking a clear intention to be legally
bound. The fact that Sam later accepted Mike’s offer to decide on the terms of
the agreement later in the future is further evidence of Sam’s unwillingness to be
bound and a lack of “meeting of the minds” of both parties.
(ii) Whether the agreement between Mike and Sam to enter into a contract but
agree on the terms of that contract at a later date is valid and can therefore be
enforced by Mike?
There is also the issue of whether the agreement between Mike and Sam to
enter into a contract but decide on its terms at a later date can be held to be
legally valid.
Agreements to agree in the common law can be enforced. However there is a
distinction to be made between agreements to enter into a contract later and
agreements to enter into a contract on terms that will be determined later. The
former can be enforced while the later cannot. Parties cannot agree at one point
in time to enter into a contract on terms to be decided later—cannot have an
enforceable agreement to negotiate (Empress Towers Ltd. V. Bank of Nova
Scotia). Given this, it is likely that the agreement between Sam and Mike to
negotiate the terms later will not be enforced. However, courts will try to give
legal effect to any clause or contract that the parties understood and intended to
have legal effect (Empress Towers Ltd. V. Bank of Nova Scotia). In Empress
Towers Ltd., even though some of the terms of the contract are left open (rental
rate) and were to be decided on at a later date, the Court enforced the contract
given that the parties clearly intended to form a contract and did not just mean to
set out the rule for the negotiation stage. This was not the case with Sam and
Mike. Given the fact that this was the first time Mike and Sam were attempting to
negotiate a contract, had no prior business history with each other and that Sam
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seemed to be confused, uncertain and overwhelmed in responding to Mike’s
offer to agree to contract but decide terms later all suggest that the parties did
not clearly intend to form a contract. It seems more likely that they intended to
continue negotiations at a later stage.
C. Sam vs. Ben
There are several general issues with respect to the contractual relationship
between Sam and Ben: (i) Was the contract validly formed? (ii) If so, did Ben
breach that contract?
(i) Was the contract validly formed?
The main problem with respect to the validly of the contract formation between
Sam and Ben is that Sam’s consent to the terms proposed by Ben may have
been vitiated thereby making the entire contract void. The facts suggest that
Ben’s misrepresentation of the PP22 product may have misled Sam into giving
his acceptance to the contract. Misrepresentation affects the intellectual
formation of a party’s decision whether to willingly be legally bound to the
agreement—consent must be reasonably informed and free. If Sam can prove
his consent was vitiated by Ben’s fraudulent misrepresentation, then not only will
the contract be voided but he will also be able to claim damages in tort due to
Ben’s wrongdoing (Hedley Byrne; Esso Petroleum Co. Ltd v. Mardon). Ben
clearly promised Sam that his “PP22 products are made with 100% organic
substances.” This was a fraudulent material statement of fact that was false, as
the facts suggest that Ben knew his products were not 100% organic.
In order for a court to void a contract based on misrepresentation, the statement
must be of a fact and not opinion and the misrepresentation must relate to a
matter that a reasonable person would consider relevant his decision to enter
Tells the marker where you are headed in your answer
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into the agreement (Sarvis v. Vermont State College). In other words, Ben’s
statement that his PP22 products are 100% organic must be not be Ben’s
opinion, but rather a fact and further, the statement must have mattered
somehow for Sam’s decision to enter into the contract. The former cannot be
reasonably disputed. Ben clearly made a statement of fact and did not use
language indicative of an opinion. Also, it is likely that a court will find Ben’s
statement to have induced Sam into agreeing to the contract. Given the nature of
Sam’s business (organic/natural health products) and the fact that he had
mentioned in his negotiations with Mike (before he was negotiating with Ben) that
the PP22 tea must be 100% organic” both prove that this fact was absolutely
necessary to his decision to enter into a contract for the purchase of PP22
products from Ben.
(ii) Did Ben breach the contract?
Even though it seems likely that the contract was not validly formed, if the facts
suggest further issues, you should always continue the analysis and note your
assumptions. In this case, while the contract between Sam and Ben is likely to be
held invalid, the facts suggest a potential issue with breach of contract.
Therefore, it is best to continue the analysis assuming that the contract has been
validly formed.
Assuming that the contract with Ben was validly formed, the issue becomes
whether Ben can be held to be in breach of that contract by virtue of his sloppy
shipping habits. Both Sam and Ben had initially agreed that 100 cartons of PP22
would be shipped out every week on Monday for 12 months. While Ben did abide
by these terms for the first couple of weeks, he eventually started shipping only
50 cartons of PP22 every other week and on Thursdays (instead of Mondays as
agreed). There is clearly a breach of contract here as Ben did not carry out his
obligation 100% as stipulated. However, this only entitles Sam to damages and
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not to a termination of the contract. In order for Sam to be able to terminate the
contract with Ben, the breach must be found to be fundamental to the contract. In
other words, the breach must be of a condition and it must be serious and goes
to the heart of the contract (Cehaave VV c. Bremer Handelgesellschaft). Can it
be said that Ben’s breach of the terms of shipping and quantity of PP22 went to
the heart of their contract and deprived Sam of the entire benefit of the contract
(Hong Long Fir v. Kawasaki Kisen Kaisha)?
It seems more likely than not that a court would find the breach not to be serious
and substantial. This is because of the fact that while Sam was not receiving the
total amount of cartons he had ordered for each shipment, he was receiving
some products. Therefore, it cannot be said that Sam was being deprived of the
entire benefit of the contract. As a result, the breach is not fundamental and Sam
will only be entitled to damages for breach of contract and not termination of the
contract.
D. Sam vs. the Bank Manager
The main issue in this situation is whether a valid contract was formed between
Sam and the bank manager. The facts suggest that there may be a deficiency in
Sam’s consent to undertake the loan in exchange for the guarantee. If the
contract is found to be invalidly formed, it will be declared void and rescission will
be the remedy (i.e. the parties will be placed in the position they were in before
the contract was formed).
(i) Is the contract valid?
Clear application of rules to the facts
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The facts suggest that the bank manager may have influenced or taken
advantage of Sam’s confusion, inexperience and obsession with his failing
business so as to get Sam to agree to give a guarantee that was worth more
than his house. There are two factors by which Sam’s consent may have been
vitiated in this situation: (a) Duress (b) Undue Influence
(a) Duress: Contracts formed under duress are voidable. Duress may take the
form of actual or threatened violence, duress of goods, or economic duress. In
determining whether there was a coercion of will, we must enquire into whether
the party alleged to have been coerced did or did not protest, whether he had an
alternative course of action open to him, whether he was independently advised
or told to seek it or whether he took steps to avoid the contract after entering into
it (Atlas Express Ltd. v. Kafko Ltd.). It must be shown that the party did not act
voluntarily in entering into the contract. This is unlikely to be found in Sam’s case.
The facts do not suggest that he was coerced, against his will, into entering into
the agreement with the bank manager. While it is true that Sam did not seek
independent advice nor told to seek it, there were no positive actions on behalf of
the bank manager that suggest he coerced Sam. He did not attempt to convince
Sam that no other options were open to him nor that his offer was a good deal.
Neither did Sam protest or question the offer.
(b) Undue Influence: The facts are much more akin to a situation of undue
influence here. Undue influence involves unequal bargaining power and abuse of
trust. In these situations, one party is in the position to dominate the will of
another and therefore the person is unable to act independently. Specifically, it
involves a relationship of trust and confidence that has been abused (Lloyds
Bank Ltd. v. Bundy). It seems that the bank manager took advantage of Sam’s
inexperience in business and banking and desperation for funding to save his
business. Consideration from the bank manager was grossly inadequate and the
bank manager used his position of power and relationship of trust to secure the
grossly unfair agreement. As the fact pattern notes, Sam had been doing his day
Concisely tells the marker the possibilities you are going to be dealing with regarding this issue
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to day banking with that particular bank manager for the past 10 years. This
suggests that a relationship of trust and confidence had developed between Sam
and the bank manager which consequently gave the bank manager much
influence over Sam. In Lloyds Bank Ltd. v. Bundy, the court held that a
relationship of trust and confidence gives rise to a presumption of undue
influence unless the creditor has taken reasonable steps to satisfy himself that
the party entered into the obligation freely and in knowledge of the facts (Lloyds
Bank Ltd. v. Bundy). Since Sam did not seek any independent advice and the
bank manager did not even suggest that Sam should seek such independent
advice, it is likely that the court will void this agreement on the basis that Sam’s
consent was vitiated by undue influence exercised by the bank manager.
E. Sam vs. Tom
The main issue with the employment contract between Sam and Tom is public
policy. The state will not enforce contracts that run against its own public policy
and community values. Issues of public policy are concerned with the content of
the contract and not the will of the parties. Therefore, if it is found that the
contract between Sam and Tom is contrary to public policy, it will be declared
illegal and thus invalid.
The main problem with Tom’s employment contract is the provision that seems to
restrain his freedom of employment. According to the employment contract, Tom
is prohibited from working for any one of Sam’s company’s competitors in
Canada for 10 years if he ever left Sam’s company. Employee restraint contracts
may be held invalid because of their unreasonable duration or because of their
unreasonable territorial ambit (Cameron v. Canadian Factors Corporation).
Whether the contract is against public policy in the sense that it unreasonably
restricts Tom’s freedom of employment will depend on whether the limitations in
terms of time and space are excessive. Reasonableness is determined by
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balancing the employer’s interest in protecting his business with the employee’s
interest in the protection of economic mobility/employment opportunity (Cameron
v. Canadian Factors Corporation). It seems likely that a court would find this
restriction contrary to public policy. The 10 year time period and territorial ambit
which it attempts to regulate is unreasonable given the size and nature of Sam’s
business. The restrictions go beyond what is necessary to protect Sam’s
company’s business interests. The restrictions could have been limited to a
particular town, municipality or even province. Further, the time period is too long
considering the state’s interest in ensuring and promoting economic mobility.
While the restraint provision seems to go against public policy, the question then
arises as to whether the entire employment contract between Sam and Tom is
invalid. If only a clause is found to be against public policy and not the entire
contract, the clause may be severable so as to allow for the validity and
enforcement of the entire contract. This would be in Sam’s interest given that the
employment contract stipulated that Tom must hold the position as Vice-
President for at least 4 years (renewable thereafter). Sam may be able to keep
Tom from working for his competitors for at least a few more years by enforcing
the employment contract (since the term has not expired). This is likely to be the
case since the common law presumes that a clause which is null and void does
not necessarily render the entire contract invalid unless it appears that the
contract is an indivisible whole. In other words, because the employment contract
between Sam and Tom is coherent and sensible with the employee restraint
provision stuck out, the rest of the contract is valid and therefore enforceable.
Conclusion Summarizes the answers of each main issue Each main issue is
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Conclusion
It is likely that Sam will be legally required to re-pay the $10,000 loan to his
father’s estate. This is because the subsequent agreement between Sam and his
father that his father would forgive the debt if Sam stopped complaining to him
about his estate distribution is void. It lacks sufficient consideration in order for
the contract to be valid.
Further, there was no initial contract validly concluded between Mike and Sam.
While it is likely that Sam’s initial offer did not lapse, Sam’s acceptance of Mike’s
counter-offer is likely to be found insufficient. His reaction to Mike’s counter-offer
did not espouse a clear and concise intention to be willingly and legally bound in
contract.
Also, Mike and Sam’s subsequent agreement to agree later is likely not to be
found valid and therefore will not be enforced. The common law does not enforce
contracts in which parties agree to enter into a contract now but decide on the
terms of that contract later. Furthermore, Mike and Sam neither clearly intended
to form a contract but merely intended to continue negotiations at a later stage.
The contract between Ben and Sam is likely to be voided given that Ben’s
statement that his PP22 products are 100% organic was a statement of fact and
not opinion and clearly induced Sam into agreeing to enter into the contract with
Ben. The statement was necessary to his decision to be legally bound. This
entitles Sam to the voiding of the contract and damages in tort for Ben’s
fraudulent misrepresentation.
However, even if a court did find the contract between Ben and Sam to be valid,
it is clear that Ben breached the terms of that contract given that he did not carry
out his obligations 100% as stipulated. This entitles Sam to damages, however,
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because the breach is not fundamental to the contract—Sam was not deprived of
the entire benefit of the contract—he is not entitled to terminate the contract.
In relation to the agreement between the bank manager and Sam, it is likely that
a court will find this agreement to be void on the basis of vitiated consent. The
facts suggest that the bank manager gave consideration that was grossly
inadequate for the promise and used his position of power and relationship of
trust to secure the agreement. He took advantage of Sam’s inexperience in
business and banking, his frustration and desperation to keep his business
going. Further, he took advantage of their long relationship in the banking domain
which clearly manifested attributed of trust and confidence which the bank
manager abused.
Finally, it is likely that Sam will be able to enforce the employment contract with
Tom but without the employee restraint provision. Prohibiting Tom from working
for any of Sam’s competitors in Canada for 10 years after he leaves Sam’s
company is unreasonable given what is necessary to protect Sam’s company’s
business interests and the state’s interest in protecting and promoting economic
mobility and freedom of employment. The prohibition is too restrictive and
consequently against public policy.
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However, given that this provision can be severed from the contract itself, the
rest of the contract will likely be enforced and held to be valid. Therefore, Sam
will be able to keep Tom from working for his competitors by requiring him to fulfil
the 4 year time period at his company as stipulated in the contract.
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