1

CONTRACTSSemester2PROMISES....................................................................................................................................................................4

PromissoryEstoppel[EquitableEstoppel]andWaiver......................................................................4HughesvMetropolitanRailwayCompany[1877]2AC439(HL)....................................................................4CentralLondonPropertyTrustLtd.vHighTreesHouseLtd.[1947]1KB130................................................5

A)TheNatureofRepresentation.....................................................................................................................6JohnBurrowsLtd.vSubsurfaceSurveysLtd.[1968]SCR607,68DLR(2d)354.............................................6

B)TheEquities.................................................................................................................................................7D&CBuildersLtdvRees[1966]2QB617,19653AllER837CA....................................................................7

C)TheNotice....................................................................................................................................................9SaskatchewanRiverBungalowsLtd.vMaritimeLifeAssuranceCo[1994]SCC[Waiverandreasonablenotice] 9

D)Reliance.....................................................................................................................................................10WJAlan&Co.vElNasrExport&ImportCo.[1972]2QB189,[1972]2AllER127(CA)[DetrimentalReliance] 10SocieteItalo-BelgePourLeCommerce…vPalmandVegetableOils(Malaysia)SunBhd;ThePostChaser[1982]1AllER19(QB)...............................................................................................................................................................12

E)SwordorShield..........................................................................................................................................13CombevCombe[1951]2KB215(CA)..........................................................................................................13RobichaudvCaissePopulairedePokemoucheLtee(1990)NBCA..............................................................14M(N)vA(AT)2003BCCA............................................................................................................................15

IntentiontoCreateLegalRelations.................................................................................................16A)Introduction...............................................................................................................................................16B)FamilyArrangements................................................................................................................................16

BalfourvBalfour1919Eng.CA.....................................................................................................................16C)CommercialArrangements........................................................................................................................17

Formality:PromisesunderSeal......................................................................................................17RoyalBankvKiska19672OR379(CA).........................................................................................................17

FORMATIONOFTHEAGREEMENT:CERTAINTYOFTERMS..........................................................................................181.Introduction...............................................................................................................................182.Vagueness..................................................................................................................................19

RvCAEIndustriesLtd.1986FC[ImpreciseLanguage]...................................................................................193.IncompleteTerms.......................................................................................................................20

May&ButcherLtdvR19342KB17(HL).......................................................................................................20Hillas&CovArcosLtd[1932]147LT503(HL)...............................................................................................22FoleyvClassiqueCoachesLtd[1934]2KB1(CA)..........................................................................................23

4.AgreementstoNegotiate...........................................................................................................24EmpressTowersLtdvBankofNovaScotia[1991]BCLR................................................................................24MannparEnterprisesLtdvCanada1999BCCA.............................................................................................25WellingtonCityCouncilvBodyCorporate51702(Wellington)2002NZLRCA..............................................26

5.AnticipationofFormalization(p.149).........................................................................................27BawitkoInvestmentsLtdvKernelsPopcornLtd1991ONCA........................................................................27

PROMISES..................................................................................................................................................................28Formality:TheRequirementofWriting..........................................................................................28

A)Introduction...............................................................................................................................................28B)CategoriesofContractUnderSeal.............................................................................................................28C)EffectsofNon-Compliance........................................................................................................................29D)TheRequirementofaSufficientNoteorMemoranda..............................................................................29E)ElectronicContracts...................................................................................................................................30F)PartPerformance.......................................................................................................................................31

DeglmanvGuarantyTrustCo1954SCC.......................................................................................................31UnjustEnrichment........................................................................................................................................32

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ThompsonvGuarantyTrustCo1974SCC.....................................................................................................32LensenvLensen1984Sask.CA.....................................................................................................................33

PRIVITYOFCONTRACT...............................................................................................................................................34Introduction...................................................................................................................................34TheHistoryoftheDoctrineofPrivityandThirdPartyBeneficiaries................................................34

TweddlevAtkinson(1861)EnglandQB........................................................................................................34DunlopPneumaticTyreCoLtdvSelfridge&CoLtd(1915)AC(HL).............................................................35

WaysinWhichaThirdPartyMayAcquiretheBenefit....................................................................36A)Statute........................................................................................................................................................36B)SpecificPerformance..................................................................................................................................37

BeswickvBeswick(HL)1966EnglandCA.....................................................................................................37BeswickvBeswick[1968]England(HouseofLords)....................................................................................37

C)Trust...........................................................................................................................................................38D)Agency........................................................................................................................................................39

NewZealandShippingCoLtd.vAMSatterthwaite&CoLtd.1975EnglandPC...........................................39E)Employment...............................................................................................................................................40

LondonDrugsLtd.vKuehne&NagelInternationalLtd.1992SCC[Exceptiontothethirdpartybeneficiarybar] 40EdgeworthConstructionLtd.vNDLea&AssociatesLtd1993SCC..............................................................41

F)Subrogation................................................................................................................................................42FraserRiverPile&DredgevCan-DiveServicesLtd.1999SCC.....................................................................43

PrivityandContractTheory............................................................................................................44

CONTINGENTAGREEMENTS.......................................................................................................................................44Introduction...................................................................................................................................44Intention,Certainty,andConsideration..........................................................................................45

WiebevBobsien1985BCSC........................................................................................................................46WiebevBobsien1986BCCA........................................................................................................................47

ReciprocalSubsidiaryObligations...................................................................................................47DynamicTransportvOKDetailingLtd.1978SCC.........................................................................................48

RemediesforBreachofSubsidiaryObligation...............................................................................................48EastwalshHomesLtd.vAnatalDevelopmentsLtd.(1993)ONCA...............................................................49

UnilateralWaiver...........................................................................................................................50TurneyvZhilka1959SCC..............................................................................................................................50

RepresentationsandTerms........................................................................................................................................51Introduction...................................................................................................................................51MisrepresentationandRescission..................................................................................................51

RedgravevHurd188120Ch.D.(CA)............................................................................................................51SmithvLandandHousePropertyCorp.(1884)28Ch.D7(CA)...................................................................53BankofBritishColumbiavWrenDevelopmentsLtd.(1973)BCSC..............................................................53KupchakvDaysonHoldingsLtd.(1965)BCCA..............................................................................................54

RepresentationsandTerms............................................................................................................55Heilbut,Symons,&CovBuckleton1913AC30(HL)....................................................................................55DickBentleyProductionsLtd.vHaroldSmith(Motors)Ltd.19652AllER65(CA)......................................57LeafvInternationalGalleries[1950]2KB86(CA)........................................................................................58

StatutoryReform...........................................................................................................................59FairTradingAct.............................................................................................................................................59

ConcurrentLiabilityinContractandTort........................................................................................60SoddCorpvNTessis(1977)ONCA..............................................................................................................60BGChecoInternationalLtdvBritishColumbiaHydro&PowerAuthority1993SCC...................................60

ClassificationofTerms....................................................................................................................62HongKongFirShippingCoLtdvKawasakiKisenKaishaLtd.19621AllER474(CA)...................................62WickmanMachineToolSalesLtd.vLSchulerAG[1974]2AllER39(HL)....................................................64BhasinvHrynewSCC2014............................................................................................................................65

StandardFormContractandExclusionClauses...........................................................................................................66

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ImpliedTerms................................................................................................................................66MachtingervHojIndustriesLtd[1992]SCC.................................................................................................66

GeneralPrinciplesofContractualInterpretation............................................................................67JudicialControlofStandardFormContractsandExclusionClauses................................................67

A)Introduction...............................................................................................................................................671.DevelopmentandUseoftheStandardForm...........................................................................................67Trebilcock,“TheCommonLawofRestraintofTrade”(1986)......................................................................682.TheUseofExclusionClauses....................................................................................................................68

B)Incorporation.............................................................................................................................................681.UnsignedDocument..................................................................................................................................69ThorntonvShoeLaneParkingLtd.[1971]EnglandCA.................................................................................692.SignedDocuments....................................................................................................................................70TildenRent-a-CarCovClendenning(1978)BCCA........................................................................................70KarrollvSilverStarMountainResortsLtd.(1988)BCSC..............................................................................71

3.StrictConstruction.....................................................................................................................................724.FundamentalBreach..................................................................................................................................73

Karsales(Harrow)Ltd.vWallis[1956]EnglandCA.......................................................................................735.FundamentalBreach/UnconscionabilityPost-Hunter................................................................................73

FraserJewellers(1982)Ltd.vDominionElectricProtectionCo.(1997)ONCA............................................74Plas-TexCanadaLtd.vDowChemicalofCanadaLtd.(2004)ABCA.............................................................75TerconContractorsLtdvBritishColumbia(MinistryofTransportationandHighways)2010SCC..............75

MISTAKE....................................................................................................................................................................76BothPartiesMistakenlyBelieveTheyAreinAgreement................................................................76

StailmenSteelLtd.vCommercialandHomeBuildersLtd.(1976)HC..........................................................76AgreementsMadeUnderMistakenAssumptions...........................................................................77

CommonLaw..................................................................................................................................................77BellvLeverBrothersLtd.1932HL[LeadingDecisiononMutualMistake]..................................................77McRaevCommonwealthDisposalCommission(1951)Aust.HC.................................................................78

Equity..............................................................................................................................................................79MillerPavingLtd.vBGottardoConstructionLtd.(2007)ONCA..................................................................79

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PROMISESPromissoryEstoppel[EquitableEstoppel]andWaiver

• Estoppel:root=stopping/preventingsomethingthatishappeningàdoesnotallowapersontoenforce/sueonapromisegivenwithoutconsideration–focusedonpreventingsomething[preventpeoplefromgoingbackontheirword]

• Apreventativedoctrine[notanaggressivedoctrine]àdoesnotgiveacauseofaction• Exampleofestoppelincommonlaw[estoppedfromdenyingarepresentationoffact]:

o Rentingahouse–landlordsaysgutters/drainsingoodshapeandoncerentingbecomeawaretheyarenotingoodshape;landlordsays–undertermsofleaseistenantsjobtokeepthemingoodrepair+suestenantforfailuretokeepingoodrepair

o Canuseestoppeliflandlordsues–thatlandlordcannotgobackonhisword[assuredtenantthattheywereingoodshape];theresponseisnottosuethelandlordinreturn–buttosaythatlandlordisestoppedfromsuing[itisadefensetofendoffthelandlord’sclaim]

o Defensehere=cannotgobackonhisword;legaldefense=estoppedfromstatingthattenanthastorepairguttersbecauselandlordsaidtheywouldnotneedrepair(wereingoodshape)

• Extendsfromrepresentationsoffacttopromisesoffutureaction[“youcannotdothis–youpromisednottodoso”]CourtsofEquity[CourtofChancery]

• LordofChancellorsetupthese[tribunal]courts=CourtofChancery–forpeopletobringapetitionforseekingjustice[apetitioninequity]

• Idea=ifdidnotgetremedywantedinCourtofLaw[CourtofKing/Queen’sBench]thengotoCourtofEquityforaremedy• Commonlawcourts=onlygaveajudgmentindamages;CourtsofEquity=[invented]decreeofspecificperformance• AnotherremedyavailableinCourtsofEquity=Remedyininjunction[orderpreventingsomeonefromdoingsomething]à

Ruleofinjunction=willnotgrantifitpreventsdefendantfromearningaliving• Principle:ifthereisaclashindamagesaction+aspecificperformanceactioninchancery–thenchanceryprevails

JudicatureAct(1871)• Eithercourtcanapplyremediesfromtheotherside–afusionoflaw+equity• Example:Couldsueforeitherspecificperformanceordamagesinsamecourt

HughesvMetropolitanRailwayCompany[1877]2AC439(HL)Facts:

• Therespondent(RailwayCompany/tenant)leasedpropertyfromtheappellant(Hughes/landlord)• OnOctober22,1872(pursuanttoitsrightunderthelease),thelandlordservednoticetothetenantdemandingthatit

repairthepropertywithin6months[orelseleaseterminated]• OnNovember28,thetenantrepliedsuggestingthatthelandlordbuysthetenant’sleaseholdandproposingtodefer

commencingtherepairsuntilthetenantheardfromthelandlordaboutthearrangementtheysuggested• ThepartiesthenbegannegotiatingforsaleandpurchaseoftheleaseinNovember,butnegotiationsbrokedownon

December31.Thelandlordneverrepliedtothetenant’sproposaltodefertherepairs• InApril,[3daysbeforethenoticetorepairwasduetoexpire]thetenantwrotetheplaintiffsayinginlightofthe

breakdownofthenegotiationsitwouldnowundertaketherepairs.OnApril28thelandlordservedawritofejectmentonthetenant.ThetenantcompletedtherepairsinJune.Thelandlordsuedtoenforcethewrit.

Issues:• Cantheappellantsuetoenforceejectment?

Decision:• No–appealdismissedwithcosts

Ratio:• Ifpartiesenterintodefiniteanddistincttermsinvolvinglegalresults(penalties/legalforfeiture),thenwillinglyenterinto

negotiationsleadingonepartytobelievetherightsarisingunderthecontractwillnotbeenforced/willbesuspended/heldinabeyance(impliedrepresentation),thenthepartywhoisabletoenforcetherightsisnotabletoenforcethemifitwouldbeinequitablehavingregardtothedealingsthathavetakenplace

Analysis:(LordCairnsLC)• TheeffectoftheletterofNovember28wastoproposetothelandlordtosuspendtheoperationofthatnoticeinorderto

enteruponanegotiationforthepurchaseandsaleofthelease.ThisnegotiationwasentereduponandcametoanendonDecember31

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• InanyCourtdealingupontheprinciplesofEquity,thetimebetweentheOctobernoticeandtheNovemberlettershouldbetakenaswaivedaspartofthe6-monthsrequirement–thetimebetweenNovemberandDecembershouldalsobewaived

• OnDecember31,the6-monthsshouldbetakenasstartingtorun• Therepairsweremadewithinthesix-monthperiodstartingonDecember31,andsincethenegotiationswerebrokenoff

onDec31,therepairswereexecutedwithinareasonabletime• Byenteringintonegotiations,bothpartiesmadeitinequitablethattherepairsshouldbecarriedoutstrictlywithinthe6-

monthdeadlinebeginninginOctoberClassNotes:

• Extendsdoctrineofcommonlawestoppeltoapplytoimpliedrepresentationsoffutureconduct[limitsthefutureactionofthelandlord]

• Landlordissuing+tenantisholdingupthe“shieldofestoppel”[adefenseagainstlandlord’saction]• Threefactors=fundamentalbuildingblocks:

1) Partiesareinanexistingcontractualrelationship2) Enteredintoacourseofnegotiationsleadingtenanttosupposelandlordwouldnotinsistonitsstrictrightof

termination3) Landlordwillnotbeabletoenforceitsstrictrightswhereitwouldbeinequitable[havingindicatingtothetenant

thatitwouldnot]CentralLondonPropertyTrustLtd.vHighTreesHouseLtd.[1947]1KB130Facts:

• OnSeptember24,1937byaleasemadeundersealtheplaintiffs(CentralLondon)grantedtothedefendants(HighTrees)asubsidiaryoftheplaintiffcompany(atenancyofablockofflatsfora99-yeartermatagroundrentof2500pounds/year)

• Warconditions=theblockofflatswasnotfullyoccupiedduetoabsenceofpeopleinLondon• January31940–[newarrangement]plaintiffswrotethedefendantsthatthegroundrentshouldbereduced1250ayear–

thedefendantspaidthereducedpricefrom1940tobeginningof1945bywhichtimealltheflatswerefullylet• InSeptember1945,thereceiveroftheplaintiffcompanyinaletterdeterminedtherentshouldactuallybe2500/year–he

claimedtherentmustbepaidinfullandthatthedefendantsowedarrears• Thedefendantspleaded1)theletterofJan31940referredtotheentiretermofthelease;2)theplaintiffcompanywere

estoppedallegingtherentexceeded1250;and3)byfailingtodemandrentinexcessof1250beforetheSeptemberletterwassenttheplaintiffswaivedtheirrightsofanyexcessrentthathadaccrueduptothatpoint

Issues:• Whethertheplaintiffsareentitledtothehigherrentandwhethertheycanrecoverthedifferencefortherequiredprevious

yearsaftertheflatsbecamefullylet?Decision:

• Yes–judgmentgivenfortheplaintiffcompanyfortheamountclaimedRatio:

• Apromiseintendedtobebinding,intendedtobeactedon,andinfactactedon,isbindingsofarasitstermsproperlyapply.Ifapromiseismadeandonlyintendedtoapplyundercertainconditions,oncethoseconditionsnolongerexist,thepromiseisnolongerbinding

Analysis:(DenningJ)• PreviouslyàOldcommonlaw–aleaseundersealcannotbevariedbyanagreementbyparol(whetherinwritingornot)

butonlybyadeed–therefore,theplaintiffswouldhavebeenentitledtorecoverthegroundrent• NowàEquityhassteppedin–iftherehasbeenavariationofadeedbyasimplecontractthecourtsmaygiveeffecttoit–

however,thisdoctrinecannotbeappliedherebecausethevariationmightbesaidtohavebeenmadewithoutconsideration

• Estoppelàtherepresentationmadeinrelationtothereductionofrentwasnotoneofanexistingfactbutwasarepresentationastothefuture–thattherentwouldnotbeenforcedatthefullrateàthiswouldnotgiverisetoanestoppelbecausearepresentationastothefuturemustbeembodiedasacontractornothing

• InJordanvMoney(1864)10ER686itwassaidthatarepresentationastothefuturemustbeembodiedasacontractorbenothingàhere,thepromisormadeitclearshedidnotintendtobelegallybound

• Insubsequentcases,thecourtshaveheldapromisetobebinding(evenifundertheoldcommonlawitwouldbehardtofindconsiderationforit)–thecourtshavenotgranteddamages,howevertheyhaverefusedtoallowthepartymakingthepromisetoactinconsistentlywithitàinthissensesuchapromisegivesrisetoestoppel

• Thecourtsnowallowthatapromiseshouldbeenforceableinlaw(byequity)eventhoughnoconsiderationforithasbeengivenbythepromisee.Here,thepromisewasthatthegroundrentshouldbereducedto1250ayearasatemporary

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expedientwhiletheblockofflatswasnotfullylet–thereforethereductionappliedthroughouttheyearsuntilearly1945whenitwasapparentthattheflatswerefullylet

• Theconditionsthatprevailedatthetimewhenthereductioninrentwasmade,hadcompletedsubsidedbytheearlymonthsof1945–thepromisewasunderstoodbyallpartiesonlytoapplyundertheconditionsprevailingatthetimewhenitwasmade[thattheflatswereonlypartiallylet]

• Ifthecasehadbeenoneofestoppel–theestoppelmayhaveceasedwhentheconditionscametoanendorperhapsonlyuponnotice

ClassNotes:• Landlordcouldwinonanumberofgrounds–• 1)[Mostnarrowratio]Landlordspromisewasneverenforceable[neverbinding]=noconsideration[noenforceable

promisepreventinglandlordfromseekingfullrent]• 2)Landlordcouldalsowinbecausehecouldnotgobackonhispromisewhilewartimeconditionsprevailed–buttenants

werecomingbackbymid1944• 3)[LordDenning’sjudgment]Assumeslandlordcouldnotgobackonhispromise–butcouldbeendedwhenwartime

conditionscametoanendoronlyuponnotice• Effectofnoticeàpurposeofthistypeofestoppel[preventgoingbackonpromisethatonehasreliedon]–landlordcould

havesaidthatin6monthshewouldbeseekingfullrentagain–landlordsayseveniftenanthasactedonthispromise,landlordalsohasrights=purposeofestoppelisstillfulfilled[tenantwasnotambushed+hasbeengivingtime]

• Covershistracksbyhisjudgmentinthelastparagraphà‘ifthecasehadbeenoneofestoppeltheestoppelmayhaveceasedwhentheconditionscametoanendorperhapsonlyuponnotice’

• Here,Denningwantedestoppeltogofurtherthanmerelypreventingsomeonefromgoingbackontheirpromise[widerdoctrineofestoppel]

• 1940agreement[half-rent]ànoconsiderationhere,thenin1943iflandlordgivesnoticethenhecangobackontheagreement–iftherewasconsiderationhecouldnothavegonebackbynotice–however,usingpromissoryestoppelhecouldgoback[estoppelprotectsreliance]–promiseisnotbindingonthelandlord;thetenant’srelianceisprotected

Questions–P.2111) WouldtheplaintiffshaverecoveredfullrenthadsuedinMarch1943?

a. No–intheabsenceofnoticecouldnothaverecoveredthefullrentb. LordDenningseemstointerpretthepromisetohavelasteduntilwartimeconditionsended=stronghintDenning

wouldhavedismissedthelandlordsactionc. Obstacletoovercomeàlandlordspromise–notbindingbecauseofnoconsideration=DenningsaysFoakesv

Beerwaswrong–saysthefusionoflaw+equitywasnotconsideredinFoakesvBeer=heiswrong–theydidconsiderallmeritsanddidsaylawmaybeimprovedifcasewasdecidedwithoutconsiderationbuttheywereboundbyprecedentàDenningtriestoreversethisrule[heisatrialcourtjudge=cannotreverseHouseofLordsdecision]–doesnotchangedecision+makesitclearwithlastjudgment

2) HadtheplaintiffsgivennoticeinMarch1943thattheyintendedtoclaimfullamount,couldtheyhavedoneso?Fromwhen?

a. Likelyyes–providedtheyhadgivenreasonablenoticeandsoughtfullrentonlyafterexpirationoftheperiodofreasonableperiodofnotice–cannotenforceifitwouldbeinequitabletodoso

3) Woulditmakeanydifferenceiftheapartmentshadallbeenfullyletduringthewar?a. Dependsonthecircumstancesofthepromise–whattheconditionswereàwhetherwartimeconditionsmeant

fullyrentedatfullrent,etc.orwhetherconcessioncontinuesuntilreasonablenotice[promisewasopentointerpretations]

4) Howdidthedefendants“acton”thepromiseinHighTrees?a. Thetenantsreliedonthepromisethattheywouldonlyhavetopaythereducedrateofrent

A)TheNatureofRepresentationJohnBurrowsLtd.vSubsurfaceSurveysLtd.[1968]SCR607,68DLR(2d)354[FirsttimeHighTreescometotheattentionoftheSCC(inabigway)]Facts:

• SubsurfaceSurveys(defendant)purchasedabusinessbelongingtotheplaintiffforapriceinexcessof$127000.Partofthepurchasepricewassecuredbyapromissorynoteintheamountof$42000[givenfromthedefendanttotheplaintiffinMarch1963]

• Thenoteprovidedforpaymentsinmonthlyinstalmentsandcontainedanaccelerationclauseallowingthecreditortoclaimtheentireamountdueiftherewasadefaultofmorethan10daysonanymonthlypayment

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o (W/othisclause,iftherewasadefaultinpaymentthentheseller/creditorcouldonlysueforthepaymentthatwasbreached[notfortheentirepaymentowed])

• Overan18-monthperiod,Dwasconsistentlymorethan10daysindefaultw/itsmonthlypayments,althoughnodefaulthadextendedbeyond35days–thecreditoracceptedthelatepaymentsoneachoccasionanddidnotinvoketheaccelerationclause[byhispreviousconduct]

• FollowingadisagreementbetweenthepresidentofDandP,PsuedforthewholeamountowingwhenthedefendantwaslatewiththepaymentdueinNovember1964.TheDthentenderedthatinstalment,butPrejectedit

Issues:• Doesthedefenseofequitableestoppelorestoppelbyrepresentationapplyhere?

Decision:• No–appealallowed[findingforP/creditor]

Ratio:[Whatisnecessarytooccurtoestopapersonfrominsistingontheirstrictlegalrights]

• Cannotinvokeanequitabledefenseunlessa)thereissomeevidencethatoneofthepartiesenteredintoacourseofnegotiationwhichhadtheeffectofleadingtheothertobelievethestrictrightsunderthecontractwouldnotbeenforced[usingMetropolitanRailway]whichimpliesthatb)theotherpartymusthavereasontobelievethatthefirstpartyintendedbyhisconducttoaltertheirlegalrelationships

Analysis:(RitchieJ)• Thistypeofequitableestoppel(asexpressedbyLordCairnsinHughesvMetropolitan)cannotbeinvokedunlessthereis

someevidencethatoneofthepartiesenteredintoacourseofnegotiationwhichhadtheeffectofleadingtheothertosupposethatthestrictrightsunderthecontractwouldnotbeenforced

• Theremustbeevidencefromwhichitcanbeinferredthatthefirstpartyintendedthatthelegalrelationscreatedbythecontractwouldbealteredasaresultofthenegotiations

• Itisnotenoughtoshowthatonepartyhastakenadvantageofindulgencesgrantedtohimbytheotheràthisisnotthetypeofconductthatwouldleadtoanestoppel

• Here,theevidencedoesnotwarranttheinterferencethattheappellantenteredintoanynegotiationswiththerespondentswhichhadtheeffectofleadingthemtosupposethattheappellanthadagreedtodisregardorholdinsuspenseorabeyancethatpartofthecontract

• ThebehaviorofthePismoreconsistentwithhishavinggrantedfriendlyindulgencestoanoldassociatewhileretaininghisrighttoinsistontheletterofobligation

ClassNotes:• Inordertobeestopped–needapromise/clearrepresentationthatwillnotinsistonstrictlegalrightsàhere,usesthe

wordingofMetropolitanRailway• Whatharmwouldithavedonetosaythecreditorwasestoppedfromthelastpayment[whenpreviouspaymentshadbeen

acceptedlate]?–ifwouldhavegivennotice[“ifyou’relateagain,Iwillinvoketheaccelerationclause”]thenitwouldnothavebeenthatradicalandlikelywouldhavebeenabletodoso

• [Oftenexpressclausesincludedincontracts–ex.“willnotbeboundbyindulgencesifacceptlatepayment,canstillenforcetimelypaymentsinothermonths”]

B)TheEquitiesD&CBuildersLtdvRees[1966]2QB617,19653AllER837CAFacts:

• DandCbuilders(plaintiffs)andMr.Rees(defendant)hasashopwherehesellsbuilders’materials• In1964DemployedPtodoworkathispremises.PdidtheworkandrenderedaccountsinMayandJunewhichcameto

74613s1dpoundsandDpaid250pounds.InJulytherewasanowingtoPof48213s1d,Ddidnotpay• PwrotetotheplaintiffonAugust31,hedidnotreply;PwroteagainonOctober19thattheoutstandingamountof480

waswelloverdueandDdidnotreply• D’swifecontactedPandsaidherhusbandwilloffer300insettlement.Psaidtheywouldacceptthe300andgiveayearfor

Dtocomeupwiththebalance.D’swifesaidno,300isalltheywouldofferandaskediftheywantedthemoneybycashorcheque–[cashonMonday,chequeonSaturday]

• WhenPwenttocollectthemoneyonSaturday,thewifeinsistedthatonthereceiptafter“receivedsumof300fromMr.Rees”that“incompletionoftheaccount”wasadded[akainfullsatisfaction]

• PwereworriedaboutthemoneysotheysaidtoDthattheyweretreatingthe300aspaymentontheaccountandbroughtanactionforthebalanceofthemoney

• Dsetupadefenseofbadworkmanshipandalsothattherewasabindingsettlement–trialjudgefoundsettlementissueinfavorofplaintiffs

8

• D’sappealdefense=therewasanaccordandsatisfaction–anaccordwhentheplaintiffsagreedtoaccept300insettlementoftheaccount,andsatisfactionwhentheyacceptedthechequefor300anditwasdulyhonored

Issues:• CanPinsistonthebalancefromDorwoulditbeinequitabletodoso?

Decision:• Yes–thereisnoreasoninlaworequitywhythecreditorshouldnotenforcethefullamountduetohim–appealdismissed

Ratio:• Noconsideration.But,whentherehasbeen‘trueaccord’underwhichthecreditorvoluntarilyagreestoacceptalesser

suminsatisfaction,andthedebtoractsonthataccordbypayingthelessersumandthecreditoracceptsit,thenitisinequitableforthecreditorafterwardstoinsistonthebalance.HOWEVER,heisnotboundunlesstheretrulyhasbeenanaccordbetweenthem

Analysis:(LordDenning)• Inlaw,thecreditorisnotboundbythesettlement–hecansuethedebtorforthebalance[noconsiderationforthe

agreement]–however,equityhasstretchedtohelpthedebtoro [DenningsaidinHighTreesthattheprincipleofpromissoryestoppeloverridesFoakesvBeer]

• Whenacreditorandadebtorenteronacourseofnegotiation,whichleadsthedebtortosupposethat,onpaymentofthelessersum,thecreditorwillnotenforcepaymentofthebalance,andonthefaiththereofthedebtorpaysthelessersumandthecreditoracceptsitassatisfaction,thenthecreditorwillnotbeallowedtoenforcepaymentofthebalanceifitwouldbeinequitabletodoso

• Thecreditorisonlybarredfromhislegalrightsifitwouldbeinequitableforhimtoinsistonthem• Whentherehasbeen‘trueaccord’underwhichthecreditorvoluntarilyagreestoacceptalessersuminsatisfaction,and

thedebtoractsonthataccordbypayingthelessersumandthecreditoracceptsit,thenitisinequitableforthecreditorafterwardstoinsistonthebalance

• HOWEVER,heisnotboundunlesstheretrulyhasbeenanaccordbetweenthem• Here,itseemsasthoughtherewasnotrueaccord–thedebtor’swifeheldthecreditortoransomassheknewthecreditor

wasinneedofmoneytomeethisowncommitments–whenshesaid“wewillpayyounothingunlessyouaccept300insettlement”shewasputtingunduepressureonthecreditor–thecreditorcompliedwiththedemand[thewifeisguiltyofinequitableconduct]

• Inacaseofintimidationthereisgenerallyfoundtobenotrueaccord,thereforecannotusethedefenseofaccordandsatisfaction

• Estoppelisanequitableprinciple–andtouseestoppelmustnotbeusinginequitableconduct• Noequity–nopersoncaninsistonasettlementprocuredbyintimidation

ClassNotes:• Obstacle1inCanadaàJudicatureAct–partperformancewillbeenforcedwhenexpresslyacceptedinfullsatisfactionor

whenrenderedpursuanttoanagreemento Representingbuilders–thebuyers[givepayment‘infullsatisfaction’]–whatareargumentso 1)Bringupanelementofduressàhowever,theJudicatureActdoesnotmakementiontoduresso 2)Focuson‘expresslyaccepted’=wasthereanexpressacceptancehereo 3)Accord+satisfaction–theaccord=anagreementtotakelessthanthefullamountofthedebt,thesatisfaction

=theextraconsiderationyoumustprovide§ Cantheagreementbetweenwifebeatrueaccord–atrue‘meetingoftheminds’

• Obstacle2inCanadaàFootvRawlings–felttheagreementtotakelessshouldbebinding–paymentbyanegotiableinstrumentwaspaymentinadifferentkind

o SCCprecedent=paymentbychequecanbepaymentinadifferentkind,thereforebindingbecausethereisconsiderationforit

o Argument–wasthispaymentbychequebargainedforàinFootvRawlingsthecreditorproposedthepaymentbycheque

§ InFoot,itwasclearthepaymentbyanegotiableinstrumentwasattherequestofthecreditorandtothecreditor’sadvantage

o Here,wasitbargainedfororabenefittothebuildingcompany?=looksasthoughitwasmerelyincidental[therewasnoadvantagetothebuildersherebyacceptingpaymentbycheque]

• Ifsuingforspecificperformance=anequitableremedyw/alloftherestrictionstheCourtofEquityhasplacedonit–petitioningthecourthere[canrefuseifcomewithinequitableconduct]

• 1)JudicatureAct,2)Consideration[paymentbycash],3)Possibilitythecreditormaybeestopped• Hadthedebtorbeenfreefrominequitableconduct,thecreditorwouldhavebeenbound[Denningsuggestsw/othis,the

creditorwouldhavebeenboundbytherepresentationthathewouldacceptthelesseramount]

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o Argumentàthereisnoconsiderationhere(FoakesvBeerisstillacommonlawprinciple–wasnotoverruledbyHighTrees)

o ReSelectmove–statesthatFoakesvBeerremainsafundamentalprinciple[estoppeldidnoteradicatethefundamentalrequirementofconsideration]

o LordDenning’sjudgments/commentsofestoppelaredicta–alsonotsharedbyotherjudges

C)TheNoticeSaskatchewanRiverBungalowsLtd.vMaritimeLifeAssuranceCo[1994]SCC[Waiverandreasonablenotice]Facts:

• OnJuly26,1978MaritimeLifeAssuranceCompany(appellant)issuedaninsurancepolicyonthelifeofMichaelFikowskiSrtoSaskatchewanRiverBungalows(respondent)andin1984,ownershipofthepolicywastransferredtotheConnieFikowski(respondent),atwhichtimeshebecamethebeneficiary

• SRBretainedtheresponsibilityofpayingtheannualpremiumsunderthepolicy• In1979thepolicylapsedafterSRBfailedtomakethepaymentwithinthegraceperiod,thepolicywasthenreinstated

accordingtotheprovision.• In1981,SRBfailedagaintomakepaymentwithinthegraceperiod–onthisoccasion,Maritimeacceptedlatepaymentand

didnotrequireevidenceofinsurabilityoranapplicationforreinstatement• OnJuly24,1984SRBmailedachequefor$1316topaytheannualpremiumdueonJuly26,1984.• OnAugust13,SRBreceivedapremiumduenoticerequestingpaymentof$1361.SRBsentachequeforthedifference($45)

–however,thefirstchequewasneverreceivedbyMaritime,nordeductedfromSRB’sbank• MaritimesentalatepaymentoffertoSRBsayingitmustbepostmarkedorifnotmailed,receivedattheHeadOfficeat

HalifaxonorbeforeSeptember8–SRBdidnotrespondtothelatepaymentoffer• OnNov28,MaritimesentalettertoConnie[atSRB]sayingtheJulypaymenthadremainedunpaidandthatthepolicyis

outofforceandrequiringanimmediatepaymentof$1361(waiver)• OnFeb2,MaritimesentalettertoSRBstatingthatthepolicyisretractedbutcouldapplyforreinstatement[however,the

reinstatementinvolvesprovinggoodhealthoftheinsured(whoisdying)]o Here,gavethereasonablenotice=retractionofwaiver

• SRBcloseditshotelbusinessforthewinterandpickedupcorporatemailonaninfrequentbasisthereforewerenotawareofthelatepaymentoffer,theNovemberletter,orthelapsenoticeuntilApril

• ItwasnotuntilJuly1985[3monthsaftergotMaritime’sletters]thatSRBsentareplacementchequetoMaritime,andachequeforthe1985premium–MaritimerejectedSRB’sclaimforbenefitsunderthepolicyonthegroundthatitwasnolongerinforce

• OnAugust10,1985MichaelFikowskidied–Maritime’spositionwasthatthepolicyhadlapsedandthatthedeathoccurredduringatimewhenthepolicywasnolongerineffectthereforetherespondentshadnorighttobenefitsunderit

• TherespondentspositionisthatMaritime[throughconduct]waiveditsrighttocompeltimelypaymentunderthepolicy+thatnoneofMaritime’sactweresufficienttoretractitswaiveroftimeandthatthepolicywasstillinforceatthetimeofthedeath

Issues:• DidMaritimewaiveitsrighttoforcetimelypaymentthereforemakingthepolicystillinforceduringthedeath?

Decision:• Mdidwaiveitsrighthoweverthewaiverwasnotineffectatthetimeofthedeath.Thepolicywasnotinforceatthetime

ofthedeath–therespondentsarenotentitledtoanyofthebenefitsunderthepolicyRatio:

• Waiverwillbefoundonlywheretheevidencedemonstratesthatthepartywaivinghad1)afullknowledgeofrights;and2)anunequivocalandconsciousintentiontoabandonthem

• Waivercanberetractedifreasonablenoticeisgiventothepartyinwhosefavoritoperates–[anoticerequirementshouldnotbeimposedwhererelianceisnotanissue]

Analysis:(MajorJ)• Recentcaseshavenotedthatwaiver+promissoryestoppelarecloselyrelated–[principle:bothpartiesshouldnotbe

allowedtogobackonachoicewhenitwouldbeunfairtotheotherpartytodoso]• Waiveroccurswhereonepartytoacontractortoproceedingstakesstepswhichamounttoforegoingrelianceonsome

knownrightordefectintheperformanceoftheotherparty(waiverofalimitationperiod)• Waiverwillbefoundonlywheretheevidencedemonstratesthatthepartywaivinghad1)afullknowledgeofrights;and2)

anunequivocalandconsciousintentiontoabandonthem• Thisstringenttestisrequiredbecausethereisnoconsiderationfromthepartyinwhosefavorthewaiveroperates

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• ItisobviousthatMaritimehadfullknowledgeofitsrightsunderR’spolicy;anditseemsclearthattheNovemberletteraloneconstitutedawaiverofMaritime’srighttoreceivetimelypayment

o InthisletterMaritimewaswillingtocontinuecoverageunderthepolicyuponpaymentoftheJuly1984premiumwithnomentionofevidenceofinsurabilityorofreinstatement

• Waivercanberetractedifreasonablenoticeisgiventothepartyinwhosefavoritoperates–[anoticerequirementshouldnotbeimposedwhererelianceisnotanissue]

o RwerenotawareoftheNovemberwaiveruntiltheyreceiveditinApril,thereforetheywerenotreliantonit–Maritimewasnotactuallyrequiredtogiveanynoticeofitsintentiontolapsethepolicy

• HOWEVER,OnceopeningmailinApril,RbecameclearofMaritime’sintention–aninformalcommunicationofaparty’sintentiontoinsistonstrictcompliancewiththetermsofacontractissufficientnotice+Rdidnottenderareplacementchequeuntil3monthslateràtherefore,evenifreasonablenoticerequirementwasimposeditwouldhavebeenadequatelymetbytherespondent’sfailuretoactbetweenAprilandJuly

• Maritime’swaiverwasnolongerineffectwhenSRBsoughttomakepaymentinJuly1985–Maritimehadnoobligationtoacceptthereplacementchequeandthepolicylapsed

ClassNotes:• 1)Howcanyouactonarepresentationifdonotreceiveit?–Here,itwasneveractedupon

o Notjustenoughyourepresentyouareactingonstrictlegalrights–mustbeactedupon• 2)Evenifithadbeenactedupon–itwasrevokedbyreasonablenoticeinFebruary[howestoppelcanberetracted]• WhengetinApril–donothinguntilJulyeither[hadtheyactedonitinApril,mayhavehadabetterlegalposition]

D)RelianceWJAlan&Co.vElNasrExport&ImportCo.[1972]2QB189,[1972]2AllER127(CA)[DetrimentalReliance]Facts:

• Thebuyers[EgyptiancompanytradinginTanzania]purchased500tonsofcoffeefromthesellers[Kenyancoffeeproducers]undertwoseparatecontractsof250tonseachatapriceof262[Kenyanshillings]

• Paymentwastobebyconfirmed,irrevocableletterofcreditandthecontractwasspecificallytobegovernedbyEnglishlaw• Thebuyersopenedaconfirmedletterofcreditinsterlingthroughabank–thesellersraisednocomplaintwhentheletter

ofcreditwasconfirmedinsterling• Thefirst250tonswereshippedunderthefirstcontractand29tonsinpartialfulfillmentofthesecondoneàthebankwas

invoicedinsterlingandthepaymentwasacceptedinsterling• Thesellersshippedtheremaining221tonsandpreparedaninvoiceforthisshippinginsterling–butbeforedocuments

werepresentedforpayment,itwasannouncedthatsterlingwouldbedevaluedbutunknowniftherewouldbeanequaldevaluationinKenyancurrency–thesellersstillsenttheinvoicetothebuyers’bankandwerepaidinsterling

• SubsequentlyitwasknownthatKenyancurrencywouldnotbedevaluedandthesellerspreparedaninvoiceforanextra165,530Kenyashillingstooffsetdevaluation,howeverthebuyerscontendedthatnomorewasowed+thesellersbroughtanactionfortheinvoiceamount

Issues:• DothebuyersowethesellersfortheKenyanshillingstooffsetdevaluationofthesterlingpayment?

Decision:• Appealallowed–thebuyersdonotowethesellerstooffsetdevaluation

Ratio:• Oncethecreditisestablishedandaccepteditisunalterableexceptwiththeconsentofallthepartiesconcerned• Detrimentalrelianceisnotrequiredforpromissoryestoppeltoapply–promissoryestoppelrequiresthattheclaimant

partyrelyontheactionsoftheotherpartyandaltertheirpositionasaresultAnalysis:(MegawLJ)

• ThenecessaryconsequenceoftheofferandacceptanceofasterlingcreditisthattheoriginaltermofthecontractofsalewasvariedfromKenyancurrencytosterling

• Bythesellersacceptingtheofferofsterling–notonlydidthebankbecomeirrevocablyboundbythetermsoftheoffer–butsodidthebuyers

• Ifthebuyerscouldnotunilaterallyreverttotheoriginalcurrencyofaccount,oncetheyhadofferedavariation,whichhadbeenacceptedbyconduct,neithercouldthesellersrevert

• Oncethecreditisestablishedandaccepteditisunalterableexceptwiththeconsentofallthepartiesconcerned• Whentheletterofcreditwasacceptedasatransactioninsterlingasthecurrencyofaccount,thepriceunderthesale

contractcouldnotremainasKenyancurrency• Theacceptancebythesellersofthesterlingcreditwasaonce-for-allacceptance–itwasnotaconcessionforaspecified

periodoftimeoronewhichthesellerscouldoperateaslongastheychose

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• Majority–findspromiseisbindingbecauseofconsideration[easiertorelyonconsiderationthanestoppel]–majoritydescribesthiscaseasavariationofcontract/performance[actualperformance=Kenyanshillings;variedperformance=Britishpounds]–thepartieshave,bycontract,variedtheperformance[canbedescribedasvariedperformance]

LordDenningMR• A‘conforming’letterofcreditisonethatisinaccordancewiththestipulationsinthecontractofsale–here,theletterof

creditdoesnotconform• Theprincipleofwaiver:ifonepartybyhisconduct,leadsanothertobelievethatthestrictrightsarisingunderthecontract

willnotbeinsistedon,intendingthattheothershouldactonthatbehalfandhedoesactonit,thenthefirstpartywillnotafterwardsbeallowedtoinsistonthestrictlegalrightswhenitwouldbeinequitableofhimtodoso

• Theonewhowaiveshisstrictrightscannotafterwardsinsistonthem–rightsaresuspendedaslongasthewaiverlasts[unlessmaybebygivingreasonablenoticeorbyconduct]–withdrawalmaybeimpossibleinsomecases[iftherewouldbeinjusticetotheotherparty]–therefore,heisboundbythewaiver

• LordDenning=KenyansellerswaivedrightitsrighttobepaidinKenyanshillings• Nocourseofnegotiationinthiscase=andLordDenningstillassumestherecanbeestoppel

StephensonLJ• AgreedwithMegawthatthecontracthadbeenvaried• Here,thebuyersdidacttotheirdetrimentonthesellers’waiver–[thecontractwasvariedforgoodconsideration]

ClassNotes:• Confirmedirrevocableletterofcredit=Buyerprovidesletterofcredittosellers’bankfortheentirepurchaseprice–notto

theseller–totheseller’sbankà[Knowwhatitisdesignedfor+howitistowork]Theconditionsaresetoutintheletterofcredititself

• Billoflading=provesthecoffeehasbeenplacedonthecarrieronthisdate[entitlesthebuyerstotheamountofmoney–bankgivestothemfromsellersaccount]soiftheshippingdocumentsarecorrect–bankmustgivethemthemoneyandnobankcanturndownthedocumentsiftheyconformtotheletterofcredit

• Undertherequirementsofthecontract–thepricestipulatedwasinKenyans• Technicallyabreachofcontract=buyersopeneditinpoundsSterling[sellerdidnotcare–becauseatthetimethese

currenciestradedatpar]• Problem=Britishcurrencydevaluedby18%-butthesellersdidnotcare,becauseeverytimeinthepasttheBritish

currencydevaluedsodidtheKenyanshilling[therefore,stillacceptBritishpoundsundertheletterofcredit]• Forthefirsttimeever–theKenyanshillingisnotdevalued[sellersendedupgetting18%lessfortheircoffee]–sellerssue

forthedifference[becausecontractsaiditwassupposedtobepaidinKenyanshillings]–losethisaction• Agreedvariationofthecontract–offeredbythebuyerswhentheyopenedthecreditinBritishpounds,couldhavebeen

rejectedbythesellersbutitwasnot–itwasaffirmativelyacceptedwhentheygavetheshippingdocumentsinexchangeforBritishpounds

• Simpleexplanationforthecase–Hawk,horse,ropeàdifferentmethod/kindofpayment[owemoneyinKenyanshillings,givesUKpoundsinstead–ifthisisaccepted,thenacceptsomethingdifferent–thistypeofpaymentcouldbeworthmoreorworthless]onceaccepted=goodconsideration

• LordDenningreasontheylose=1)theyareestoppedfromgoingbackontheirrepresentationthattheywillnotinsistontheirstrictlegalrightstobepaidinKenyanshillings–hereifthesellersareestopped,thentheyarepermanentlyestopped[onlybecausethisisaonceandforalltransaction]

• Thisisanestoppelwhicheffectivelyextinguishestheirrights–becauseitisimpossibletogoback[unlikeHighTrees,whenthelandlordcangobackonpromisingtotakelesserrent]–here,alreadyhappened

• Demonstratestoushowsometypesofestoppelcanbepermanent[permanentlybarthepartywhomakestherepresentationfromgoingbackontheirstrictlegalrights]

• Example:Ifagreetobuyyourcarw/deliverydateofFeb.1butsellersaysneedituntilFeb.10andbuyersaysitisokay,thenatthattimerejectsthecarandsaysare10dayslateàthebuyerisestoppedandbecauseFeb.1ispassedthencannotgoback

Notep.221• “Waiver”oftenhasdifferentmeanings• Shouldnotmatterwhetheritisavariationofcontractorawaiver[HighTreesisaclassiccaseofwaiver;thiscaseseemsto

bemorelikethatofavariationofcontract]–terminologyshouldnotmatter–needtoseewhetherthechangewassupportedbyconsiderationorbyestoppelandotherwiseitisgratuitousandnotbinding

• Binding=eithermusthaveconsiderationforthechange,orthereisestoppelpreventingfromgoingback• Ifestoppel–therecanbeanagreementthattherewasnotanagreement

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SocieteItalo-BelgePourLeCommerce…vPalmandVegetableOils(Malaysia)SunBhd;ThePostChaser[1982]1AllER19(QB)Facts:

• Theplaintiffsagreedtosellpalmoil(purchasedfromKievit)tothedefendants,whocontractedtosellittosub-buyers[Conti]andthentofurthersub-buyers

• [Inordertoallowthetransactiontooccur–theshipperhastomakeadeclarationoftheshipment(tothebuyers)assoonaspossibleaftertheshipment=buyershaveamorepreciseideaofwhentheywillreceivetheshipment]

• Thetermsofthecontractwerethat‘declarationofshiptobemadetobuyersinwritingassoonaspossibleaftervessel’ssailing’–(breachofcontract1)thesellersdidnotgivethisdeclarationoftheshipmentdateuntilmorethanamonthaftertheshipsailed[allsub-buyerscanatthispointterminatethecontractbecauseofthebreach],butonreceiptofthedeclarationthebuyersandContimadenoprotestaboutitslateness,[althoughlatertheothersub-buyersdid=documentsarelate=nogood]

• OnJan20thebuyerssentamessagerequestingthesellerstohandoverthedocumentscoveringtheconsignmenttoConti–whenthesub-buyersrejectedthedocumentstwodayslaterthebuyersalsorejectedthemandthesellerswereforcedtoselltheoilelsewhereataloss

• ThesellersclaimdamagesIssues:

• Whetherthebuyer’swaivedtheirrighttorejectthesellers’tenderofdocuments?• Whethertherewasanysufficientreliancebythesellersonthisrepresentationforthepurposesofwaiver?• Whetherornotbyrequestingthedocuments,theplaintiffs+otherhadwaivedthesellersbreach[whethertheir

representationestoppedthemfrominsistingontheirstrictlegalrights]Decision:

• No–thecourtfoundthatthedelayinmakingthedeclarationofshipgavethebuyerstherighttorejectthesellers’tenderofdocuments–findingforthebuyers

Ratio:• Astherewasnorelianceinterestthecompleteelementsofestoppelareabsent• Therepresentorwillnotbeallowedtoenforcehisrights‘whereitwouldbeinequitablehavingregardtothedealingswhich

havethustakenplacebetweentheparties’Analysis:(RobertGoffJ)

• Bothcounselwereinagreementthattheapplicableprincipleswerethoseofequitableestoppel• Discussedwhetherthebuyers’messageonthe20thconstitutedanunequivocalrepresentationthattheydidnotintendto

enforcetheirstrictlegalrightstorejectthesellers’tenderofdocuments• Therewassufficientunequivocalrepresentationforthepurposesofwaiver–wasaccompaniedwiththebuyers’request

todebitthesellersinrespectofthedifferencebetweentheirpurchasepriceandtheirsalepricetoConti–thisreinforcedtheimpressionthatthiswasnotintendedtobeaprovisionpresentationinthehopethatConticouldpersuadetheothersub-buyerstoacceptthedocumentsbutwasarepresentationbythebuyersthattheywerepreparedtoacceptthedocuments,thereforewaivinganydefectinpriordeclarationofshipment

Whethertherewasanysufficientreliance(actingupon)bythesellersonthisrepresentationforthepurposesofwaiver?• Thereisnofindingofanyreliancebythesellersonthebuyers’representation,asidefromthefactthatthedocuments

coveringtheparcelonthePostChaserwereaccordinglypresentedbyKievittoConti• Here,allthathappenedwasthatthesellers[throughKievit]presentedthedocumentsonthesamedayasthebuyersmade

theirrepresentationandwithintwodaysthedocumentswererejected–althoughthesellersdidactivelyrelyonthebuyers’representation,andconductedtheiraffairswithrelianceonit,thereisnothingthatwouldrenderitinequitableforthebuyersthereaftertoenforcetheirlegalrighttorejectthedocuments

• Anecessaryelementfortheapplicationofthedoctrineofestoppelislacking–cannotseethatthesellerssufferedanyprejudicebyreasonoftheirrelianceontherepresentation

ClassNotes:• Whetherplaintiff’sestoppelwaivedà1)Wasthisrepresentationbythedefendant’sactedonbytheshippingcompany?2)

Didtheymakearepresentation?• D’sdonotsaytheywillforgivethebreachofcontract–justaskforthedocuments[MetropolitanRailway=wasthis

negotiationthatinsistedthatplaintiff’swouldnotusestrictlegalrights]andiftherewasarepresentation,didtheseller’sactonit?

• Buyer’smustactontherepresentation=somecasessayitmustbeactedontotheirdetriment[thisisnotthecase–ex.HighTrees(wasnotadetriment)–themainthingistheyactedonit]

o Whattypeofconductisneeded(bythepersonwhoreceivesthisrepresentation)forthisdoctrine(estoppel)=equitabledoctrine

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o Havetheyactedonitinsuchawayastorenderitinequitable/unfairtogobackontherepresentation?• Thesellersclearlyreliedontherepresentationthatwhentheyrequestedthedocumentsthesellersreliedonthem–

however,doesthisrenderitinequitabletorelyontheirstrictlegalrights?• Arepresentationhasbeenmade(buyerssaidsendusshippingdocuments),and(ithasbeenreliedupon),howeverhereis

noestoppel=notimetoactontherepresentationbeforeitwasrevoked• 2dayslater–tolddocumentsarerejected[wouldhavebroughtevidenceofconductinthose2daystoshowtheyactedon

therepresentation–happenedsoquickly]• Courtssayforestoppelthetypeofrepresentationthatisnecessary=thereneedstobeanunequivocalrepresentation

E)SwordorShieldCombevCombe[1951]2KB215(CA)Facts:

• Thepartiesweremarriedin1915butseparatedin1939.OnFebruary1,1943thewife’spetition,adecreeofnisiofdivorcewaspronounced[therewasnothingthatdealtwithmaintenanceinthedivorcedecree]

• OnFebruary9,1943thewife’ssolicitorwrotetothehusband’ssolicitor‘withregardtopermanentmaintenance,weunderstandthatyourclientispreparedtomakeheranallowanceof100lperyear,freeofincometax’

• OnFeb.19,thehusband’ssolicitorrepliedthatthehusbandhad‘agreedtoallowyourclient100lperannum,freeoftax’• OnAug11,thedecreewasmadeabsolute–thewife’ssolicitorwroteaskingforthefirstinstallmentof25,thensetdates

forthefutureinstalmentstobepaid–thehusbandrepliedsayinghecouldnotbeexpectedtopayinadvance–andhenevermadeanypayment

• OnJuly28,1950thewifebroughtanactionclaimingfromherhusband675beinginarrearsofpaymentattherateof100peryearfor6¾years[wifemakesmorethanhusband+hadmadenoapplicationtotheDivorceCourtformaintenance]

• ByrneJheldtherewasnoconsiderationforthehusband’spromisetopayhiswife,butneverthelessheldthepromisetobeenforceablebasedontheHighTreesprinciplebecauseitwasanunequivocalacceptanceofliability,intendedtobebinding,intendedtobeactedon,andinfact,actedon

Issues:• Isthehusbandliabletopaythewife,inabsenceofanyconsideration,basedontheHighTreesprinciple?• Wastheresufficientconsiderationtosupportthepromise?

Decision:• No–thereisnosufficientconsiderationanditisalsonotrightforthewife[whoisbetteroff]totakenoactionfor7years

thencomedownonhimforthewholeamountRatio:

• Thisprinciplecanneverstandaloneasacauseofaction–therefore,itcanneverdoawaywiththenecessityofconsiderationwhenthatisanessentialpartofthecauseofaction

Analysis:(DenningLJ)• ItisimportantnottostretchtheprinciplefromHighTreestoofar–theprincipledoesnotcreatenewcausesofaction

wherenoneexistedbefore–itonlypreventsapartyfrominsistinguponhisstrictlegalrights,whenitwouldbeunjusttoallowhimtoenforcethem,havingregardtothedealingswhichhavetakenplacebetweentheparties

• [Beforesomeonecansueonapromise–theremustbeconsiderationforthatpromise]• Thedefendantisnotsuedonapromise,assurance,orassertionasacauseofactioninitself–hewassuedforsomeother

cause,forexample–apensionorabreachofcontract,andthepromise,assurance,orassertionwasonlyasupplementaryrole

• Theprinciple=whereonepartyhas,byhiswordsorconduct,madetotheotherapromiseorassurancewhichwasintendedtoaffectthelegalrelationsbetweenthemandtobeactedonaccordingly,then,oncetheotherpartyhastakenhimathiswordandactedonit,theonewhogavethepromiseorassurancecannotafterwardsbeallowedtoreverttothepreviouslegalrelationsasifnosuchpromiseorassurancehadbeenmadebyhim,buthemustaccepttheirlegalrelationssubjecttothequalificationwhichhehimselfhassointroduced,evenitisnotsupportedinpointbylawbyanyconsiderationbutonlybyhisword

• Thewifecanonlyenforcethepromiseiftherewasconsiderationforit–foundtheretobenoconsiderationas–thewifemayhavesufferedsomedetrimentbecause[sinceshedidnotapplytothecourtfor7years]shemightnotnowbegivenleavetoapply,howeverassumingshehassufferedsomedetrimentbyherforbearancetoapplytothecourt,thiswasnotatthehusband’srequest,thereforeitisnoconsideration

Notes:• Whycanshenotgetthe75poundsforthe¾year?–StatuteoftheLimitationAct[usedtobewithin6yearsfromthedate

ofbreach]=nowitis2yearsfromthedateareasonablepersonwouldhaveknownaboutthebreach

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• Argument–itisamerearrangement;thereisnoconsiderationonthepartofthewife[canonlyinforcethepromiseifweregivenforconsideration][however,considerationwasnotseriouslyarguedinthiscase]

• Weknowtheagreementwasintendedtobebinding,andthehusbandknewshewastoactuponit,andshedidtoherdetriment[theseareestoppel-likeelements]

• DenningistakingarestrictiveviewoftheargumenthetookinHighTrees–promissoryestoppelalonecannotbeusedasacauseofaction[preventssomeonefromenforcingtheirrightagainstthem]

• Canapromisebeenforcedjustbecausetheothersidereliesonit[possiblytotheirdetriment]?o Denning–saysatcommonlawthisisnotareasontoenforceapromise

RobichaudvCaissePopulairedePokemoucheLtee(1990)NBCAFacts:

• TheCaisse[localcreditunion]obtainedajudgementagainsttheplaintifffor$3787.TheRoyalBankalsohadobtainedajudgmentagainsttheplaintiffforapproximately$10,000

• AspartofadebtconsolidationnegotiatedbyarepresentativeofAvcofinancialservices,bothagreedtoremovetheirjudgmentsinexchangeforthepaymentof$1000toeachcreditor–achequeintheamountof$1000wassenttoCaisse

• Subsequently,theboardofdirectorsofCaisserefusedtoratifytheagreement[whichwasreachedthroughalocalmanager]andthechequewasnotcashed–theplaintiffsuedtocompeltheCaissetoacceptthemoneyasagreedandremovethejudgment

• [ClassicFoakesvBeercase]Issues:

• Wasthereabindingagreementtoacceptthe$1000insatisfactionforreleasingthejudgment?Decision:

• Yes[AngersJA]–theconsiderationwastheimmediatereceiptofpaymentandthesavingoftime,effort,andexpense–theimplicitintheagreementtosettlefor1000istheprovisothatifthelesseramountisnotpaid,theoriginaldebtcomesintoforce

Analysis:(RiceJA–concurringjudgmentbasedonpromissoryestoppel)• Theappellantbaseshisargumentontheprincipleofpromissoryestoppel–however,estoppelcanonlybeinvokedasa

groundsofdefenseandnotasagroundsforaction–arightofactioncannotbefoundedontheprincipleofestoppel• Thisprincipleisinvokedasaruleofevidenceonlyagainstanapplicantbecause,itwouldbeunjusttoallowhimtoretracta

promiseasaresultofwhichthedefendanthadmadecommitmentstohisdetrimentNotes:

• InNB–CommonlawisappliedintortisFrench• Commercialadvantagetothecreditorsinpromisingtotakelessthanthefullamountowed

o NBdoesnothavetheequivalentinourJudicatureAct–theother2judgesdonotagreewiththispoint• Rice–sameinjuriousrelianceargument[seeninCombe]–ifthecreditunionhadtosueRobichaudforthedebt,theymight

havebeenestoppedfromdoingso[Rcouldatleastraisethepromissoryestoppelshield]–however,theyneverhavetosue[theyalreadyhaveajudgmentagainstR–allhavetodoisexecutethejudgmentagainsthim]

• IfcreditunionhadtosueR–wouldhavetheproblemofwhetherFoakesvBeergotoverruled/replacedbythedoctrineofestoppel[answerisalmostcertainlynot]

• 1stjudge=apromiseshouldbebinding[abirdinthehandisworth2inthebush]• 2ndjudge=thereisapermanentestoppel• 3rd=agreew/resultreachedbytheCourt[donotknowwhy]• [Likelyawrongapplicationofthelaw]

ExceptiontotheDoctrineofConsideration–ACompositionAgreement

• “Itisanunexplainedexceptiontothedoctrineofconsiderationmadeoutofcommercialnecessity”• Happenswhenallcreditorsagreetotakea%ofthedebtinsatisfactionofthewhole• Theseagreementsmakesensetohaveanagreementwhere‘creditors’agreetoeachtakeless[alltreatedequally,donot

havetomakeajudgementagainstthem]• Example–

o Acompanyhasalotofdebtfromdifferentcreditors(5)againstthem[eachofthecreditorsagreetotake$0.70onthe$1.00]

o Theyeachgetachequefortheagreedamount–1decidestosuefortheentireamounto Commonlawoffered2reasonswhythe‘renegadecreditor’cannotsueforentireamount:

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o 1)Everycreditorgaveitsresponse/promisetotake$0.70–andifonecreditordefaults,theyshouldbeabletobesuedbytheothercreditors[hardtoseehowyouwoulddefinethisinanaction–howtheactualdebtorwouldraisethisdefense]

o 2)Itwouldbeafraudontheothercreditorstoallowtherenegadecreditortosueonthefullamount[wouldnotbesensibletoallowtherenegadecreditortosuethedebtorforfull]

M(N)vA(AT)2003BCCAFacts:

• ThisappealisfromanorderdismissingMs.A’sclaimtoenforceapromisebyMr.MtopaythebalanceoutstandingonthemortgageonherhomeinEngland,ifshewouldcometolivewithhiminCanadawithaviewtomarriage

• Inrelianceonthatpromise,Ms.AresignedherpermanentjobwiththeBankofAmericaandmovedtoVancouverinJuly1993

• Mr.Mdidnotpayoffhermortgage;hedidhowever,loanher$100000onapromissorynotedatedApril6,1994–Ms.Aappliedthosefundstohermortgage–aboutaweeklater,Mr.MevictedMs.Afromhishomeandshehasnotbeenabletofindpermanentemploymentsince

• Ms.Asues.Mr.Nonhispromise• Thetrialjudge–thedefendanthasnotestablishedtheprimaryrequirementfortheapplicationofthedoctrineof

promissoryestoppel–thedefendantfailedtoestablishtheexistenceofalegalrelationshipbetweenthepartiesatthetimethepromisewasmade

Issues:• WhetherthetrialjudgeerredinrefusingtoenforcethepromiseonwhichMs.Areliedtoherdetriment[Candetrimental

reliancebeusedtoenforceapromise]Decision:

• No–thepromiseisnotbinding–appealdismissedRatio:

• Estoppel(detrimentalreliancetheory)hasnotyetbeenrecognizedasacauseofaction–andthereisnoreasonheretoextendthedoctrine

Analysis:(HuddartJA)• Ms.A’scounselisaskingtheCourttoextendtheapplicationofpromissoryestoppeltorightawrongthatisotherwisebeing

doneMs.A–asshesufferedfromherrelianceonMr.M’spromisegreatlytoherdetriment• RespondentsaystheCourtshouldnotmakesucharevolutionarychangetothelawincircumstanceswheretheunfulfilled

promisewasmadeattheoutsetofaromanticrelationshipthatbyitsnatureinvolvesrisk-takingandhemighthavesaidmanypromises;Parliamenthaveprovidedstatutoryremediesforlossessufferedonthebreakdownofromanticormarriage-likerelationships,amongwhichtheyhavenotchosentoincludetheenforcementofunfulfilledpromises

• Respondentalsosaid–thecommonlawfortheenforcementofapromiseiswhetherbothpartiesintendedtoaffecttheirlegalrelations–andpointsoutthatthereisnoevidencethateitherpartythoughtalegalrelationshiphadbeencreatedbythepromise,theirlegalrelationshadbeenaffected,orthatthepromisewaslegallybinding

• Waltons=afailuretofulfilavoluntarypromisedoesnotamounttounconscionableconduct–somethingmoreisrequired• CombevCombe=foranestoppel[unconscionableconduct]theremustbeanassumptionorexpectationastoalegal

relationshipbetweenthepromisorandpromiseeinducedbythepromisor• CounselcouldnotpointtoanyevidencesupportingafindingthatMr.Mintendedhisvoluntarypromisetopaythebalance

outstandingonMs.A’smortgagetohaveabindingeffect–nordidtheysuggestMs.Awasoftheviewhispromisewasbinding–shebelievedhewouldfollowthroughonhispromiseandtooktheriskofhisnotdoingso

• Therewasalackofanyreferenceastowhenthepromisewastoorcouldbefulfilled,whichsuggestedthatthepromisewasmadeinthecontextofarelationshipbothofthemthoughtwouldbepermanent,andresultinmarriage,notthatitwouldbefulfilledtocompensateMs.Aforthedetrimentshewouldsufferfromleavingherjobandhome

• Therewasalsoalackofmutuality–Ms.AcouldbeundernoenforceableobligationtostaywithMr.Mifhefulfilledthepromise

• ConclusionàThereisverylittlesignoftheadoptionofthistypeofaction(detrimentalreliance)toenforceapromiseNotes:

• Possibilityofconsiderationà“ifyouagreetocomelivewithme,Iwillpayoffyourmortgage”o Issueswiththisargument–maynothavebeenthereasonshewasmotivatedtocometoCanadaandlivew/Mr.

M;WouldshehavebeeninbreachofcontracthadshemovedtoCanada,gottenhermortgagepaidoff,andmovedback?WhetherMr.Mwouldhavehadaninterestinthehome–itwasnotdealtwithasacontract

• Theseissuesarelikelywhyshetakesthe‘promissoryestoppel’action

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• SomeCanadiancourtshavesuggestedpromissoryestoppelmaybeextendedtobeusedasacauseofaction–onlyindicta[noteverinabindingdecision]butinotherplaces(NZ)–detrimentalrelianceasacauseofactionismorehighlyreceived

PromissoryEstoppelConclusion

• CannotstrictlysueuponapromisebasedonPE–canuseitresistapersonwhowantstoenforceexistinglegalrightsagainstyou(usingitasadefense)

IntentiontoCreateLegalRelationsA)Introduction

• Contractualobligationshavetraditionallybeenregardedasvoluntaryobligations–liabilityincontractsisthoughttobevoluntarilycreatedbythepartiesthemselves

• Traditionalview=partiestoacontractmusthaveintendedtocreatelegalrelations• Betterview=itformsafourth,discretecriterionofenforceability,alongsideoffer,acceptance,andconsideration[thisis

satisfiedoncetheotherthreecriteriaaremetexceptwheresocialordomesticarrangementsareinvolved]o Shoulditbeenforcedwherethereisnointentiontocreatelegalrelations?o [Main]Areasconcerned–domestic/familyrelationships,socialrelationshipso Otherareas–wherepartiessaytheydonotintendittobealegalrelationship

• Insocial/domesticrelationships,theoppositepresumptionsapply–closelyassociatedpartieswillbepresumednottointendlegalrelations,intheabsenceofclearevidencetothecontrary

B)FamilyArrangements

• Itisafactualpresumptionthatthesetypesofpromisesarenotlegallybinding[however,thereisnorule]–therefore,thepresumptioncanberebuttedbyevidencethatonthefactsofthecaseitwasintendedtobelegallybinding

BalfourvBalfour1919Eng.CAFacts:

• Theplaintiffsuedherhusbandformoneywhichsheclaimedtobedueinrespectofanagreedallowanceof30pounds/month

Issues:• Whethertherewasacontractenteredbythehusbandwithhiswife?

Decision:• Theparolevidencedoesnotestablishacontract–thejudgmentoftheCourtbelowwaswrongandtheappealshouldbe

allowedRatio:

• Arrangementsbetweenhusbandandwifegenerallydonotconstituteacontract,astheconsiderationisusuallynaturalloveandaffectionandtheydonotintendtheyshouldbeboundbylegalconsequences

Analysis:[AtkinLJ]• Thehusband’sdefenceisthathedidnotenterintoacontractwithhiswife• Itisnecessarytorememberthatthereareagreementsbetweenpartieswhichdonotresultincontractswithinthemeaning

ofthatterminourlaw• Oneofthemostusualformsofagreementswhichdonotconstituteacontractseemtobethearrangementswhichare

madebetweenhusbandandwifeo Theseagreementsarenotconsistentw/legalobligations–theyareintendedtobeflexiblebytheparties,and

thereforearenotintendedtocreatelegalconsequences• Evenifthereareagreementssupportedbyconsideration,thesearenotcontractsasthepartiesdidnotintendthatthey

shouldbeboundbylegalconsequences• Thepromiseherewasnotintendedbyeitherpartytobeattendedbylegalconsequences–theonuswasupontheplaintiff,

andtheplaintiffhadnotestablishedanycontractNotes:

• Attitudeof1919àspousalarrangementsareofnobusinessinthecourts• Significanceofcontractlawtowomenin1919àaffectingbusinessrelationshipsbutnotfamilyrelationships[therefore,

notveryusefultowomenatthistime]• WifewastostayinEnglandbecauseofherhealth–andreliedonthemoneypromisedbythehusband[nowneedstorely

onotherstokeepherselffinanciallystable]• Pre-nuptialarrangementsalwayshavetobeexpresslystatedthattheyarelegallybinding

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• Duringseparation–thereisapresumptionthatagreementsarelegallybindingNote#4(p.252):

• Familycirclearrangemento HarveySr.promisestopayHarveyJr.$10000/yearwhileheisinlawschool–thensubsequentlyreducesamounto Isthisfirstpromiselegallybinding?o Thisarrangementiscaughtby1)absenceofconsideration[itisnotinexchangeforattendinglawschool]and2)it

isafamilycirclearrangement• WoulditmakeanydifferenceifHarveyofferedHarveyJr.ahousetocomehomeandgiveupjobinTorontoandattendlaw

schoolinWinnipeg?• Jones–motherinLondonofferedtoprovidefreeaccommodationtodaughterinTrinidadtomovetoLondontogotolaw

school;then,issubsequentlykickedoutofhouseo Daughtergivesupalotforveryspecificpromise–factuallyrebutpresumptionoffamilyarrangementduetothe

circumstanceso However,shehadbeentherefor7-yearandnotprogressedinlawschool[mustbeatime-limitofsomesortonthe

promise]C)CommercialArrangements

• Presumedtobelegallybinding,unlessthereiscompellingevidencetothecontrary• RoseandFrank(p.253)–cannotenforcethecontractifpartiesexplicitlysaythattheagreementsarenotlegalrelations• P.255–banklendingmoneytoaclientonbasisofparentcompanynotguaranteeingtheloan[butsendinga‘letterof

comfort’]–banklends45milliontotheinstruments,whobecomeinsolvent[thensueparentcompanyonbasisofthe‘comfortletter’]

• Legalstatusofthecomfortletter–policythatallsubsidiariesbemanagedinawaytomeetitscommitmentso Courtsaysthecomfortletterisempty+providestemporarycomforttothebank[butitismeaninglesscomfort]

• Courtnottemptedtogiveastrongerinterpretationtothisletterànottheintentionoftheparties,thebankknewthattheparentcompanywouldnotguaranteethatthedebtwouldbepaid–parentcompanysendstheletternotobligatedthemtoacceptit,butintendingthatthebankwouldtaketherisk[banktakestherisk–wantsthebusinessoftheelectriccompany]

Formality:PromisesunderSeal

• Intheearlydaysofcommonlaw[beforeconsideration]theonlywaytorenderapromiseenforceablewastomakeitunderseal[Neededawaytomakeapromiseenforceable+manypeoplewereilliterate]Therefore,anythingstatedina‘deed’islegallyenforceable

• Adeed:isadocumentthatissigned,sealed,anddelivered• PuttinganX–w/redwaxandstamp(signantrings)init[meanstherearelegallyformal/importantobligations]=a

‘cautionarydevise’–becausealloftheformalitysignifythisisimportant+aregoingtobeboundbyit• Thesealisnolongeranecessaryconditionofenforceability–butitremainssufficient+Canadiancommonlawcontinuesto

enforcethesepromisesevenintheabsenceofconsideration• Adeedpoll:cutdeedinhalfinapattern–onehalfgiventooneside,andothertotheother[andintheeventofalawsuit

iftheymatcheditwasadeed/bindingcontract]• Adeedwasasubstituteforconsiderationfor2reasons:1)Deedexistedbeforeconsiderationexisted(andwasenforceable

asadeed);and2)Whenconsiderationbecamealegalrequirement–thesealreplacestheneedforconsideration• Thepresenceofasealprovidesclearevidencethatthepromisorintendedtocreatealegalobligation;andtheactofsealing

apromiseservestoencouragethepromisortocarefullycontemplatethelegalconsequencesofhisactions• Itisaquestionoffactwhetheradocumentiseffectivelysealed• RelaxationofthesealàIfpartymakesindication/intentionthatthepartyissupposedtobesealed–thatwilldo

[sometimes,partieswoulddrawasealandwriteseal,orS,LS]o Generaltest–ifCourtsareconvincedthepersonsigningthecontractintendedtosealit

• Thisrelaxationmovedthesealfroma‘cautionarydevise’toatrapfortheunwary(doesnotsignifysomethingofgreatlegalmagnitude)

RoyalBankvKiska19672OR379(CA)Facts:

• 2brothersinvolvedinseparatesmallbusiness(hairdressingbrotheroperatedsalonunderloanfrombank)

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• Bankcallsinthe2brothersformoresecurity–otherbrothersignsaguaranteesayinghewouldguaranteethebrother’sdebt[bankthendoesnottakeanystepstocollectagainstthehairdressingbrother,butdoesnotsayitwillnot]–thencallstheminagainsayingtheotherbrotherhadtopaythedebt,becausehesignedforthedebtundertheseal

• Theplaintiffbroughtanactiononaguaranteewhichhadbeensignedbythedefendant–atthetimeofthesignature,nowafersealwasattachedtotheguaranteebuttheword‘seal’wasprintedonthedocument,nexttothespaceinwhichthedefendantwrotehissignature

Issues:• Whethertheguaranteewasbinding,andiftherehadbeennoconsiderationwhethertheword‘seal’wouldhavesufficedto

maketheagreementbindingDecision(majority):

• Themajorityofthecourtfoundthattheguaranteewasbindingbecauseitwassupportedbyconsideration• Appealallowed–therewasconsideration

Dissent:(LaskinJA)• Believedtheretobenoconsiderationandthereforetheguaranteeshouldonlybeenforcedifitconstitutedasealed

instrument• Theformalcontractundersealisnotasformaltodayasitwas–andtherehasbeenarecognizedrelaxationoftheancient

commonlawrequirementofawaxedimpression[neitherwax,noranimpressionisobligatoryanylonger]• Agummedwaferisenoughwhenitisaffixedbyoracknowledgedbythepartyexecutingthedocumentonwhichitis

placed• Wouldalsoholdthatanyrepresentationofasealmadebyasignatorywilldo• Thequestionishowshouldthecommonlawbedevelopedandrelaxtheformalityandstillaffirmthatagratuitouspromise

isnottobeenforcedmerelybecauseitisinwriting• Neitherthewords‘givenunderseal’nor‘signed,sealed,anddelivered’willsufficeevenwhentakencollectively,tomake

asignatorychargeableunderasealedinstrumentwhenithasnotinfactbeenexecutedunderseal• Formalityservesapurposeandshouldbepreserved–especiallysincetheoperativeactwastheaffixingoradoptionofa

seal[andthatatestimoniumorattestationclausewasnotrequired]• Doesnotmatterthattheintentionoftheexecutingpartywantedtoadoptasealashisowninordertofreehimfrom

liability–andthatthiswillbindalthoughthereisactuallynosealaffixed• Donotbelievethattheword‘seal’preservesasufficientamountofformality–asthisismerelyaninvitationtoplaceaseal

inthatspot[itaffirmstheneedofformalityinsteadofdispensingit]Notes:

• Laskin–therelaxedsealrequirementshadbecomeatrapfortheunwary• Haditbeenproperlysealedhewouldhavebeenundoubtedlyresponsibleforthebrother’sdebt• Likelyacautiontootherinstitutionsthatthereshouldbemoretoasealthansigningaprinteddocumentlikeanyother

document• ThereissomedivisionofauthorityinCanada• InAB–wehaveanadditionalrequirementforacontractofguarantee[Guarantee’sAcknowledgmentAct]–here,ifwantto

gettheguaranteesignedwouldhavetosendguarantortoalawyerwhoexplainsthelegalconsequencesoftheguaranteeandmakessuretheguarantorunderstandstheguarantee

Note#2(p.260):JusticeBastarache[dicta]

• Tointendaseal,theremustbeevidenceofaconsciousanddeliberateact

FORMATIONOFTHEAGREEMENT:CERTAINTYOFTERMS1.Introduction

• Oneoftherequirementsofacontract’sformationisthatitstermsdefinetheparties’obligationswithcertainty• Determinewhetherthepartiesaretrulyinagreement–whethertheyshareanunambiguousunderstandingoftheir

respectiverightsandobligationsàwhetherthepartieshaveachieved‘consensusadidem’[ifno,thenpartieshavemadeanagreement–notenteredacontract]

• Ifitisnotpossibletoidentifythetermsuponwhichthepartieshaveagreed,therecanbenocontract• Inordertograntaremedy,itmustbepossibletodefinepreciselywhatitisthatthepartyinbreachwasobligedtodo

underthecontract• Theintentionofpartiestoanagreementisrelevanttothequestionofwhetherthetermsusedaresufficientlycertainto

supportacontractintworespects:

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o 1)Ifthereisadegreeofuncertaintyinthetermsofanagreement,thecourtwillnotattempttoresolvethatuncertaintyinaidoftheconclusionthattheagreementisacontractunlessitisclearthatthepartiesintendedtocontract

o 2)Theexerciseofdeterminingwhetherthetermsoftheagreementdefinetheparties’obligationsw/sufficientcertaintydependsuponascertainingtheparties’intentionastothemeaningofthelanguageused

• Issueisnotwhateachpartyactuallyintended[subjective]butratherwhattheymustreasonablybeviewedashavingintendedgiventhelanguageusedandthecircumstancesandaimofthetransaction[objective]

• 1)Imprecise/absencelanguage

o Ex.Plumbercase• 2)Leavinganimportantmattertobelateragreed

o Ex.“Quantitiestobeagreed”–commonsourceofuncertaintyàleaveanimportantterm/elementofthecontracttobedeterminedinthefuture

• 3)Apparentlyreachanagreementbutunderstandingtheagreementwillbeformalizedlaterinaformaldocumentàpartiesreachanagreement(w/elements),thensaytheywillformalizetheagreementinthefuture

o Ex.Realestatepurchase–agreew/theagent[inaninterimagreement]tobuythehouse+vendorsignstheagreement[thisdoesnotconveythehouse]–beforeitisfinalized/formalized,therearemoreagreements/nuancesthatneedtobemade/dealtwithbeforesigntransferofland[deedofconveyance]

• 4)Incompleteterms(skeletonagreement)–butagreetonegotiatethedetailslatero Isthereabreachifonesidefailstonegotiate?

2.VaguenessRvCAEIndustriesLtd.1986FC[ImpreciseLanguage]Facts:

• Negotiationstookplacebetweenthegov’tofCanadaandtherespondentaboutthepossibilityoftherespondenttakingoverandrunninganaircraftmaintenancebasenolongerrequiredbyAirCanada

• InMarch1969,aletterwassentfromministers+thentherespondentarrangedforthepurchaseofthebasebyasubsidiarycompany

• In1971,theworkloadatthemaintenancebasediminishedandtherespondentsuedforbreachofcontractIssues:

• Wasacontractintended?• Isthecontractvague+uncertainorincomplete?

Decision:• Appealdismissed

Ratio:• Inbusinessrelationships,thecourtswillmakeeveryefforttoapplydefinitemeaningtovaguetermsinacontractsoasnot

torenderitunenforceable;thisisespeciallytrueifitisobviousthatthepartiesintendedtoenterintoabindingrelationship,oriftherewaspartperformance

Analysis:(StoneJ)Wasacontractintended?

• Thecircumstancesinwhichtheletterwaswrittendistinguishesthiscasefromotherswhereithasbeenfoundthatnointentiontocontractwaspresent–itisclearfromtheevidencethatthepartiestreatedthedocumentasabindingcontracttotheextentthatitwaspartlyperformed

• Onusofproofhereisonthepersonwhoassertsnolegaleffectisintended+theonusisaheavyone–therewasanintentiononthepartofbothpartiestoenterintoabindinglegalcontract

Isthecontractvague+uncertainorincomplete?• Thecontractdoesnotleaveanythingunsettledthatwasnecessarytobesettledbetweentheparties–itisanentire

contractcapableofstandingonitsownfeet• Butthelanguageused,thepartiesintendedthatatleast40000directlabormanhoursof‘set-aside’workwouldbe

provided=issueofwhetherthisincludedover-headcostsornot[agreew/trialjudgethatitincludedcosts]• ‘Bestefforts’àthegov’tpromisedtoemploytosecureadditionalwork–[needtodiscoverwhatthepartiesintendedbyit]

–trialjudgesaiditmeanttoleavenostoneunturnedo Mustlookatitinthelightofthecontractitself,thepartiestoit,anditsoverallpurposeasreflectedinthe

languageitcontains–thiscreatedabroadobligationtosecurefortherespondentaircraftrepairandoverhaulworkuptothelimititlaysdown

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o Agreew/trialjudgethatthisfeatureofthecontractobligedthegov’ttoemployitsbesteffortstosecureadditionalworkfromotherdepartmentsandcrowncorporations

ClassNotes:• AirCanadabase–importantelementofthecity’seconomy–governmenttriestofindabuyerforthemaintenancebase

[CAEIndustriesagreetotakeontheformerAirCanadabase]–negotiationshadgonehighup[ministersinOttawahadtosign]

• Agreedforthisbasetoviableneed700000hoursofworktocompletebase–governmentsaystheywouldusebesteffortstocoverthework[guaranteeonly40-50000directlaborhours]

o [Courtsaysthereisnotenoughcontenttomakethisenforceable]• Governmentsaystheyneverintendedlettertobelegallybinding–apoliticaldocument,notalegaldocument[commercial

arrangement–presumptionthatitislegallybinding,thereforetheonusisonthegovernmenttoshowthatitisnotacontract]–Courtsaysthereisnoevidencethatthisagreementwasintendedtobeamerepoliticalarrangement+notacontractàCAEalsoperformedalloftheobligations

• 40-50000hoursofworko Ordinarylanguagewouldsaytheydidcommittothesehourso Gov’targument–commitmentwastoouncertaintobeenforcedo Problem–howmuchtheyaregoingtopay–anelementofthecontractisprice[theagreementissilentonthis

point–thereisnoindication–didnottalkaboutpriceatall]o Presumptionisitwillbea‘reasonableprice’ofthe‘going-rate’–however,thegovernmentandtheCAEhavea

differentversionofwhatthegoingrateshouldbe§ Government=workdoneatstandardlaborrates§ CAE=notjustlaborcost[alsolabor,space,heating,billing,etc.–ALSOoverheadcosts]

• Courtagreesw/CAE’sversionàbecausethisiswhatitcosts–wouldnotbeeconomicallyefficientiftheoverheadcostswerenotalsoaccountedfor–Gov’tinterpretationofthecostisnotareasonableone

• Presumptionforcostisthestandardfactoryratewhichincludestheoverheadcosts[notjustthestandardlaborrate]• Gov’tsaysforthebalanceofthehours–wouldusetheirbesteffortstosecurethiswork[thensaytheytriedtosecureit,

butcouldnot]o “Bestefforts”doesnotguaranteethework–butitdoesguaranteethatnostoneisleftunturnedintryingo Likelyleft‘afewstonesunturned’–thisiswherethedamageswouldplayarole

• Potentialsourcesofastronglegalargumentofuncertaintyo Inasetasidework–howmuchisgoingtobepaidforito Togetthatwork–gov’tmustleavenostoneunturned

• Courtgoesasfarastheycantokeepanagreement[lackingallnecessarydetails]enforceable• Lackingnecessarydetails=thoseimportantdetailsthatthepartieshavenotagreedupon

3.IncompleteTerms

• Ineachofthesefollowingcases,thepartiesleftanaspectoftheiragreementunspecifiedMay&ButcherLtdvR19342KB17(HL)Facts:

• EndofWWI–UKgov’thadtentsleftover[wantedtodisposeofallsurplustents–May&Butcheragreedtobuytotalstockofoldtents]

• Pricestobepaid=“shallbeagreeduponfromtimetotimebycommissionerandpurchasers”o [Thereisanagreementforpricehere]

• Thereisafallingout–whenMay&Butcherseektoenforcethecontract,thegovernmentsaystherewasnoagreementIssues:

• WhetherornotthetermsofthecontractweresufficientlydefinedtoconstitutealegalbindingcontractbetweenpartiesDecision:

• Theagreementisnotabindingagreement–thedepositwasforthepurposeofsecuringthecarryingoutofthetermsofthebargainwhenithadbeenmadecomplete[suchcompletionnevertookplace]

Ratio:• Basicprinciple–priceisacentralelement,andmustbe1)fixed/determinablebythecontractor2)ascertainablebya

mechanismthatthepartieshaveagreedandthatisboundtowork• Atermyettobeagreedcanmeanthereisnocontractifitisanessentialterm;itissimplyanagreementtoagree+itisnot

enforceable

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• PrincipleofuncertaintyemergingfromMayandButcheràparties,property,price–mustbefixedbytheconductORascertainablebyamechanismthatisboundtowork

• TheCourtcannotreadtermsintoanincompletecontractAnalysis:(LordBuckmaster)

• Therewasneveraconcludedcontractbetweentheparties–anagreementbetween2partiestoenterintoanagreementinwhichsomecriticalpartofthecontractmatterisleftundeterminedisnocontractatall

• Arguedthattheasthefixingofapricehasbrokendown,areasonablepricemustbeassumed–thatdependsinpartonthetermsoftheSaleofGoodsAct

• Samethingbetweenallowingpricetobefixedbyathirdpartyandallowingthepricetobefixedbythepartiesinthefutureo Iftheagreementistosellgoodsonthetermsthatpriceistobefixedbyathirdparty,andthethirdpartydoesnot

makesuchasavaluationthentheagreementisvoid• “Disputesarisingoutofthisagreementtoarbitration”àUntilthepriceisfixed,thereisnoagreement–therefore,an

arbitratorcannotbeusedtomakeacontract,onlytomediateanexistingagreement• Onlyonewaythispricecanbefixed–bythesubsequentagreement[nocontractifdonotagree]–bothsideshave

reservedavetorightClassNotes:

• M+Barguethatalldisputesarisesoutoftheagreementweretobesubmittedtoarbitrationo Courtdoesnotbuythisargument–thearbitrationclausewasonlytoapplytoagreements[anduntilthereisan

agreementonthepriceofthetents,thereisnobindinglegalagreement]• Disputehere–partieshavesaidhowtheyaregoingtodeterminetheprice(saytheyaregoingtoagreeontheprice–have

notsaidgoingtopayhighpriceorlowprice)andifdonotagree,thereisnopriceo Bysaying‘wemustagree’theneachpartyhasaveto[onlyhavetopaythepricetheyagreeon]

• P.119–M+Bargument–knowdidnotagreetoprice,shouldhavetopayreasonableprice• DependsonSaleofGoodsActS.8à1)maybelefttobefixedinamannerherebyagreed;or2)ordeterminedbythe

courseofdealingsbythepartieso Here,priceisnotlefttobeagreedbysomeoneelseo Onlymechanismshere–isthepartiesownagreement

• S.9àpricefixingmechanism[3rdparty]o Contractinitiallyvalid,butif3rdpartyrefusestofixprice–contractisvoid

• Courtsays–herethecaseisanalogoustothe3rdpartyrefusingtofixpriceo Whenthepartiesfailedtoagreeintheprice,thecontractbecamevoid

• Basicprinciple–priceisacentralelement,andmustbe1)fixed/determinablebythecontractor2)lefttoamechanismthatthepartieshaveagreed

• Here,theflawintheargumentisthatthepartiesagreedtodeterminethepricethereforenooneelsecoulddeterminethepriceforthem

o Therefore,thearbitrationclausecouldonlycomeintoeffectoncethepricewasdeterminedbytheparty[notbyanyotherway]

• COULDHAVEputanarbitrationclausein–butmadeitclearitrelatedtothefixingofthepriceà“ifpartiesfailedtoagree,thepricecanbefixedbyarbitration”

o Ifpricecanbedeterminedbyarbitrationorbymarketprice–thereisamechanism+thissavestheagreementfromuncertainty[PROVIDEDTHATITWORKS]

• Here–uniqueproduct[surplustentsinvarioustypes]àmoredifficulttodeterminethemarketvalue• Ifsetupamechanism+itfails=removedtherightofthecourttofixtheprice• PrincipleofuncertaintyemergingfromMayandButcheràparties,property,price–mustbefixedbytheconductOR

ascertainablebyamechanismthatisboundtowork• Certumestquodcertumredidpotestà“Somethingisuncertainwhichcanbereducedtocertainty–canbefixedbythe

mechanismestablishedbytheparties”Example:

• Agreetobuycaratapricefixedbythedean[3rdperson]o Ifdeandoesnotwanttofixtheprice–thismechanismfailso ALSOremovedtherightofthecourttofixtheprice

Example:• Agreetobuycaratmarketvalue

o Marketvalueisa3rdpersonmechanismo Partiesmightdisagreeastowhatfairmarketvalueis–Courtwillrequirethebestevidenceofthemarketvalue+

decidewhatthepriceis

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Example:• Ordersetsoftapsfromaplumber

o Contractorbyremainingsilentaboutthepricehasagreedtopaythereasonablemarketpriceofthetapso Byremainingsilent,doesnotremovethecourtfromhavingtherighttodeterminethereasonableprice

Difference:• CAE–weresilenttotheprice,howevertheyclearlyintendedtheyweretobepaidfortheservice[therefore,thecourt

coulddeterminetheprice]• May&Butcher–oncepartystateditistheirrighttodeterminetheirownprice,theyhavenotauthorizedanyoneelseto

decidethepriceforthemHillas&CovArcosLtd[1932]147LT503(HL)Facts:

• Hillas[anEnglishtimberfirm]broughtanactionagainstArcos[thebusinessrepresentativesoftheRussiangov’tforbreachofacontracttosupply100000standardsofRussiantimberduring1931

• UndertheagreementHagreedtobuyastipulatedamountoftimber‘offairspecification’onveryfavorabletermsfromAduringthe1930season

• Clause9[OptionClause]à“Buyersshallalsohavetheoptionofenteringintoacontractwiththesellersforthepurchaseof100000standardsfordeliveryduring1931.Suchcontracttostipulatethat,whatevertheconditionsare,buyersshallobtaingoodsonconditionsandatpriceswhichshowtothemareductionof5%onthefobvalueoftheofficialpricelistatanytimerulingduring1931.SuchoptiontobedeclaredbeforetheJan11931”

o HaveoptiontobuymoretimberfromAat5%lowerthanfobvalueo [Isthispricefixingformulaworkable?àIntheory,yes–BUTonlyaslongascanidentifytheofficialpricelist,

otherwisethereisamechanismbutdonotknowwheretosubtractthe5%from]• AftertheagreementwithH,Aenteredintoacontractw/CentralSoftwoodforsaleofitsentirelimberproductionfor

shipmenttotheBritishIslesforthe1931seasonIssues:

• Wastheoptionprovisionabindingagreement?Decision:

• Appealallowed–abindingcontractexistedtosellthe100000standardsRatio:

• Acontracttonegotiateisenforceable• Thecourtsshouldintervenetodeterminethetermsofanagreementthroughcontextandintentionalityoftheparties

Analysis:(LordWright)• Itisclearthatbothpartiesintendedtomakeacontractandthoughttheyhaddoneso• Thecontracthereisclearlyaninstallmentcontractovertheseason1930sincethewholequantitycouldnotbedeliveredin

oneshipment–itisobviousthatthepartieseithercannotordonotdesiretofixprecisedatesforthepluralityofshipmentswhichiscontemplated–therefore,theyleaveaportionoftheseshipmentsovertheperiodtobedeterminedascircumstancesrequire

o First,byreadinessofthegoodsandsecond,bytheactionsoftheappellantswhoonreceivingthedeclarationswillbeentitledtoareasonabletimeoneachoccasioninwhichtogivethenecessaryshoppinginstructionsinaccordancewithwhichtherespondentswillhavetoprovidetonnagebecauseitisacost,insurance,andfreightcontract

• Pricehasbeenspecificallyfixedbytheclauseswhichhavereferencetotherespondent’snewrevisedschedulesupplementedbyafurtherprovisionincl.8thattheappellantsweretohavetheadvantageofanybeneficialtermsgrantedtoanyotherbuyerswhichdirectlyorineffectreducedthepricepaidorconsiderationgivenforthegoods

• Cl.9=abindingofferwhichtheappellantsareentitledbyacceptingbeforeJan1toturnintoacontractifotherobjectiondoesnotprevail

• Thecontractisclearandcompleteastothepricebasedonthestipulations–itwascontendednoofficialpricelistwouldbeissueduntil1931–butitispracticeoftherespondentstoissuesuchalist

• TheofficialpricelistisnotamerecontingencybutapracticalcertaintythatthemechanismwouldworkClassNotes:

• Thereisanofficialpricelist–noneedtodeterminewhatwouldhappeniftherewasnot;Aslongasthereisanofficialprice,themechanismisvalid+willworkaslongasthereis;Certaintyofpriceistheeasyissuehere

• Politicalbackgroundmakesitdifficult:o BoycottonRussiantimberfromBritishbuyers[1930]–Hillasbreaksthisboycottin1930(HrecognizesRussiaisin

adifficultposition+needsmoneyfortheirtimber)

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o Hisinapowerfulbargainingposition–nooneelseisbuyingtimbero OPTIONcontract–“tobuystandardsin1931”[future=issue,howmuchtopay?]

• NEED=thepricelist+whatthepartiesmeanbythepricelist• PROBLEMà1931–timberboycottisover[CentralSoftwoodmadeadealtobuyallofthetimber]–if1931agreementis

valid,causesAtobeinbreachoftheagreementbetweenH• Whatispricelist?

o Hposition–5%offthewholesaleprice[thepricewhichAsoldtimbertotheconsortium]o Aposition–eachyearcirculateretailpricelistinUK[pay5%offretailprice]

• Courtsaysitistheretailpricethattheymeantbythe“officialpricelist”--StillputsHinapreferentialposition[stillget5%offwhatanyoneelseinUKwouldget]

• Partiessetupmechanism–therewasapracticalcertaintythismechanismwouldwork+itdidworkbecausetheycouldidentifythe1931officialpricelist

• FOBvalueà“freeonboard”=obligationoftheselleristogetthetimbertotheportandonboard–costoftherestisbuyer

• CIFcontract[internationaltrade]=contractpriceincludescarriageinsurance+freighto FreeofchargetothebuyeruntilgoodarriveintheUK/getstoharbor[includespriceoftransportingthegoods+

gettingtoUKportofentry]• 3rdP=Property–whatdidthebuyershavetherighttobuyunderthe1931agreement?

o 100000standardso Howdoweknowwhatthepartiesmeanby100000standards?o Courtssay–itispartofalargeragreement[the1930agreement–whichappliestostandardsofRussiansoftwood

timber]o Itisonlyclearwhenlookattherestoftheagreementàlookatthecontext+intentionalityoftheparties

• Qualityofthegoods?o ‘Offairspecification’–thisisaparty-agreedmeansofmeasuringanyperformancethatisrenderedo Thequalityofthepropertyisnotdefinedbytheagreement–butitispossiblyascertainable[mustbesoftwoodsof

fairspecification]–thistermisimpliedintotheoption• Aarguesthat‘fairspecification’doesnotmeanthis

o In1930=notrouble;1931=theconsortiumhadnodifficultyfornegotiatingfairspecificationoftheentirecropinafewdays

o Canlookathowitwasappliedin1930+howthenewconsortiumdeterminedittodeterminewhat‘fairspecification’means

• Partiespastconducttellsushowthesetermswereapplied–canapplyinthesameway• Courtdecisionbasedon:

o Aalreadyreceivedconsiderationin1930–Hdealtw/themwhennooneelsewouldo Optionclausewaspartofabiggerdealo Ifoptionclausewasvoid–Awouldhavegottenalltheywanted,butw/onlyaportionoftheprice/deal[Hwould

haveonlygottenaportionofwhattheywereentitledto]• “Buyersshallalsohavetheoptionofenteringintoacontractwiththesellersforthepurchaseof100000standards…”

o IssueàisitancontracttoenterintoacontractORanagreementtoagreeinthefuture?o Donotwanttowriteacontractinawaythatlookslikeanagreementtoagreeinthefuture–thisisoftennota

bindingcontracto Courtsaysàrealquestioniswhetherthereisabindingcontracttodayornot?

• Wouldhavebeenbetter‘buyershavetheoptiontobuythe100000standardsonthefollowingterms…”o Wanttomakeitclearthebuyershaveenteredintoabindingcontractfor1931+thetermshavebeenagreedto

FoleyvClassiqueCoachesLtd[1934]2KB1(CA)Facts:

• Thedefendants[operatorsofafleetofmotorcoaches]agreedtopurchaseapieceoflandfromtheplaintiffs,whooperatedaservicestationonadjacentpremises

• Thesalewasmadesubjecttothedefendantsenteringintoasupplementalagreementtopurchaseallthepetrolrequiredfortheirbusinessfromtheplaintiffs‘atapricetobeagreedbythepartiesinwritingandfromtimetotime’

• Therewasalsoanarbitrationclauseà“ifanydisputeshallariseonthisagreementthesameshallbesubmittedtoarbitrationintheusualwayinaccordancew/ArbitrationAct”

• Landwasconveyedtothedefendants+for3yearsthedefendantsobtainedalltheirpetrolfromtheplaintiffsuntiltheythoughttheycouldpurchasetheirsuppliesonbettertermselsewhere

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• Dtriedtorepudiatethesupplementalagreement+Psoughtadeclarationthattheagreementwasbindingandaninjunctiontopreventthedefendantsfrompurchasingtheirpetrolelsewhere

• TrialfoundinfavorofplaintiffsIssues:

• Doesthefactthatnopricewasquotedmeanthatthecontractwasvoidforuncertainty?Decision:

• No–AppealfailsRatio:

• PastperformancemayindicatethatacontractisbindingAnalysis:(ScruttonLJ)

• Hillas=HouseofLordssaidtheyhadnotlaiddownuniversalprinciplesofconstructioninMay+thateachcasemustbedecidedontheconstructionoftheparticulardocument

• Hillas=thepartiesbelievedtheyhadacontract• Itclearthepartiesbelievedtheyhadacontract+actedfor3yearsasiftheyhadàthereistobeimpliedinthiscontracta

termthatthepetrolshouldbesuppliedatareasonablepriceandshouldbeofreasonablequality• Agreew/trialthereisaneffectiveandenforceablecontract,althoughnodefinitepricehadbeenagreedwithregardtothe

petrolClassNotes:

• Argument–allwewillpayisthepriceweagreeupon?o Diminishthisargumentàifdonotagree,musthaveamechanismfordeterminingtheprice

• MayandButcherestablishesifagreetoagreeuponpriceinfuture–courtcannotsaymustpayareasonableprice,becauseeachpartyhasreservedavetoàonlywaytocuretheproblemistohaveamechanismtodeterminethatprice

• Herethemechanismàthearbitrationclauseo WhydoesnotarbitrationclauseworkhereandnotinMayandButcher?o InMayandButcher–dealingwithFIRSTpurchaseoftentsundertheagreement,heretheagreementhadbeen

goingonfor3yearsalongw/thepurchaseofland[partofabiggeragreement]• Here–wehaveamechanism+thismechanismunderthesecircumstancesallowarbitrationtofixtheprice• ClauseissimilarlywordedtoMayandButcherBUTpartofabiggerdeal=forsellinglandgetsanagreementtobuytheir

gas[partoftheconsiderationfortheirsaleofland]–ifotherpartybacksouttheyaregettingwhattheywanted,butdonothavetopaytheentirepricetheyagreed[buyingthegasfromthem]

• Thiscasedealsw/amechanismsetupinthecontracttodeterminetheprice–however,notclearthearbitrationclauseappliestoprice,howeverCourtinterpretsitthatitdoesapply

4.AgreementstoNegotiate• Adistinctionmaybedrawnbetween1)anagreementtoperformatransactiononunspecifiedtermsorontermstobe

agreedandanagreementtonegotiateinanendeavortoarriveattermspursuanttowhichatransactionwillbeperformedo In1)thesubjectoftheagreementisthetransactionitself,andin2)thesubjectistheprocessbywhichitishoped

atransactionwillbeconcluded• Theviewthatanexpressorimplicitagreementtonegotiatemayinitselfconstituteacontracthasfoundfewadherents

amongthejudiciary–1)itisimpossibletodeterminethecontentofadutytonegotiate;and2)thereisnobasisuponwhichtodeterminedamagesforbreachofsuchduty

EmpressTowersLtdvBankofNovaScotia[1991]BCLRFacts:

• Thelandlord,EmpressTowers,broughtapetitionunders.18oftheCommercialTenancyActagainstthetenant,theBankofNovaScotia,seekingtoobtainawritofpossessionunders.21oftheAct

• Thefirstleasewasmadein1972,anditexpiredin1984.• Anewleasewasmadew/arenewalclause[renewal–rentalshallbethemarketrentalprevailingatthecommencementof

therenewaltermasmutuallyagreedbetweenlandlordandtenant]o [Isthisvoidforuncertaintyorlegallyenforceable?]o Itisvoidforuncertaintyàbothsideshaveaveto[ifstoppedafterrenewaltermanddidnotincludeasmutually

agreedbetween…thiswouldenableapricefixingmechanismàthephraseattheendaddsavetoonbothparties]

• The1984leasewasduetoexpireonAugust31,1989–OnMay25thebankexerciseditsoptiontorenewtheleastforafurthertermof5yearsandthebankproposedarentalrateof$5400amonth

• NowrittenresponsewasreceivedfromEmpress

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• Finally,onAugust31Empresssaiditwouldallowthebanktoremainonamonth-to-monthbasisif$15000waspaidandthenarentof$5400thereafter

o Landlordbringsanactiontothebank–orderfortenanttogiveuppossessionofpremiseso Defencebankraises=inorderfortherenewalclausetoworkitrequiresnegotiation[theyatleasthavetodiscuss

therenewalrate–therefore,thelandlordfailedtonegotiateingoodfaith]Issues:

• Whethertherenewalclausewasvoideitherforuncertaintyorasanagreementtoagree?Decision:

• No–appealdismissedRatio:

• Thecourtswilltrywhereverpossibletogiveproperlegaleffecttoanyclausethatthepartiesunderstoodandintendedwastohavelegaleffect

• ThereisarequirementtonegotiateingoodfaithwhenreachinganagreementAnalysis:(LambertJA)

• England–BrownvGouldo 1)Whererentis“tobeagreed”=suchaclausecannotbeenforcedo 2)Whererentistobeestablishedbyastatedformulabutnomachineryisprovidedforapplyingtheformulato

producetherentalrate–oftenthecourtswillsupplythemachineryo 3)Wheretheformulaissetoutbutisdefectiveandthemachineryisprovidedforapplyingtheformulatoproduce

therentalrate=machinerymaybeusedtocurethedefectintheformula• Thecourtswilltrywhereverpossibletogiveproperlegaleffecttoanyclausethatthepartiesunderstoodandintendedwas

tohavelegaleffect• Theeffectofthemutualagreementisthatthelandlordcannotbecompelledtoenterintoarenewaltendencyatarent

whichithasnotacceptedasthemarketrental• BUTitalsocarrieswithit1)animpliedtermthatthelandlordwillnegotiateingoodfaithwiththetenantwiththeobjective

ofreachinganagreementonthemarketrentalrate,and2)thatagreementonamarketrentalwillnotbeunreasonablywithheld

Notes:• Goodfaithàhowdowemeasureonthesefactswhetherthenegotiationsareingoodfaithornot?• Whatdoesthecourtsaytohowwecanmeasuregoodfaithinthiscaseifnecessary?àbycomparisonofrentalpricesto

othertenantscandeterminewhetherthelandlordisnegotiatingingoodfaith–adutytonegotiateingoodfaithwithnothingmoreisempty

o Negotiatingingoodfaithwithsomesortofcriteriatoguidingnegotiationscanallowustomeasurethegoodfaith• Donothavetoassessdamagesinthiscase–landlordisnotsuingfordamages,theyaresuingforpossession• EasyCase:

o 1)Caseoftotalfailureofgoodfaithonthepartofthelandlord–recognizingabilityofnegotiationsofgoodfaith[negotiationsaretobeguidedbycriteria–notgoodfaithintheabstract]

o 2)Nooneissuinganyonefordamages–merelysuingforpossession• Ex.1)Tenantwantstosub-leasetosomeoneelse

o Tenantmaysub-leasew/consentoflandlord,thatshallnotbereasonablywithheld[needstoberefusedforacertainreason–donotwantpremisesusedforX]–courtisgivencriteriatojudgethisupon[merelysays‘reasonably’howeveritisaworkablestandard]

• Ex.2)Tenantmaysubleasewithconsentofthelandlord,whichmaybeunreasonablywithheldo AKA–theyhaveaveto[canrefusetoacceptthetenantonanygrounds]o Thisisnotunusualinan‘in-demand’location/building

MannparEnterprisesLtdvCanada1999BCCAFacts:

• MheldapermitundercontractwiththeCrown[actingthroughtheDepartmentofIndianandNorthernAffairs],toremove+sellsandandgravellocatedonanIndianreserve–permithada5-yearinitialterm[Clause7=permiteehastherighttorenewthepermitforafurther5-yearperiodsubjectto…]

• Crownwillonlydowhatbandcounseltellsitdo–Crownhasafiduciarydutytoactinbestinterestsoftheland[cannotactonown]

• Bothsidesanticipatedleasewouldlast10years–itlegallylasted5years[renewalperiodrequiredre-negotiationoftheannualsurfacerentalrate+royalty]

• Manpargivesnoticetheyintendtorenewpermitforfurtherperiodof5years+wanttonegotiatetheroyalandrentalrate

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Issues:• Wasclause7uncertainasfoundbythetrialjudge?ShouldtherehavebeenanimpliedtermrequiringtheCrownto

negotiateforarenewalornegotiateingoodfaithforarenewal?Decision:

• No–noenforceableagreementaroseoutofthelanguageoftherenewalclause–appealdismissedRatio:

• Inordertoimplyadutytonegotiateingoodfaith,theremustbeanobjectivebenchmarkmentionedintheagreementinordertomeasurethegoodfaithby

Analysis:(HallJA)• Inthecases[ex.EmpressTowers]thecourtswereimplyingtermsintotheleasesthatwerecontinuingleases–here,the

partiesonlyanticipatedthatthearrangementsmaylast10years• InEmpress,therewasabenchmark[marketvalue]+withoutabenchmarkorstandardbywhichtomeasuresuchaduty,

thenegotiationconceptisunworkable• Theimplicationofatermcanonlybemadeifitisthecasethatbothpartieswouldbelikelytoagreethatsuchaterm

shouldbeimplied=officiousby-standertest• Acourtwillnotimplyatermintoacontractmerelybecausetheythinksuchatermwouldbereasonableorwouldlikelybe

moresatisfactory• Thelanguagechosenintheagreement+intherenewalclausereflectsastateddesireonthepartoftheCrownaffordingit

considerablelatitudeindecidingwhetherornottoagreetoanyextensionofthe5-yearpermitoriginallygrantedandindecidingonwhattermsmightbeacceptableifitweretoagreetoanysuchrenewal

ClassNotes:• Band=donotwanttotalkaboutituntil1st5-yearperiodisover• Band,thereforetheCrowndonotdiscuss–failuretodiscussinbadfaith• DiffersfromEmpressTowers:–therewasameasurement(guidingcriteria)tothegoodfaithnegotiation[weregoingto

negotiateinrelationtothemarketvaluerates]–here,noguidingcriteria[whocanmeasurethegoodfaith/whethertheywereactinginbadfaith?]Secondreasoncourtswereunwillingtosaytherewasadutytonegotiateingoodfaithàtherewasnorighttorenew[theleasewasoverafter5years–therewasapossibilityofrenewalifnegotiated,however,stillendedafter5years]–afreestandingrighttonegotiationofgoodfaithbutnotanchoredinacontinuinglease[norighttorenew]andnomeasurementofcriteria

WellingtonCityCouncilvBodyCorporate51702(Wellington)2002NZLRCAFacts:

• TheCouncilwroteAlirae–“Councilofficerswillnegotiate,ingoodfaith,salesofCouncil’sleaseholdintereststoexistinglesseesatnotlessthanthecurrentmarketvalueofthoseinterests”

• AliraethenarguedthattheCouncilofferedtonegotiateingoodfaith,andAacceptedthisofferbyitsconductinenteringnegotiationsonthatbasis

• TheWCityCouncilappealsfromajudgmentholdingitliabletopayAliraedamagesforbreachofcontract• Thiscontract=a‘process’contract+itobligedtheCouncil’sofficerstonegotiateingoodfaithw/Alirae[lessee]forthesale

ofthepremises• TrialjudgefoundthatiftheCouncilhadnegotiatedingoodfaith,acontractorsale+purchaseprobablywouldhave

resulted–therefore,AliraelostprofititwouldhaveachievedfromdevelopingthepremisesinthemannerithadinmindIssues:

• Wasthe‘process’contractenforceableinlaworwasitmerelyanagreementtoagree?Decision:

• Thecontracthadnotlaidoutanyspecificobligationsoftheparties,norwasthereanyconsiderationforthenegotiations.–Appealallowed+contractdeemedunenforceable

Ratio:• IfacontractspecifiesthewayinwhichthenegotiationsaretobeconductedwithenoughprecisionfortheCourttobeable

todeterminewhatthepartiesareobligedtodo,itwillbeenforceableAnalysis:(TippingJ)

• Contractstonegotiateshouldnotbeheldinallcircumstancestobeunenforceable–enforceabilitywilldependontheirtermsandonthespecificityofthoseterms

• Whetherthetermsofaprocesscontractaresufficientlyspecifictobeenforceableisanissueseparatefromwhetherthesubstantiveagreementissufficientlycertaintobeenforceable–ifitis,thentheprocesscontractwillhavebornefruitandnoissueofbreachcanarise

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• Ifthesubstantiveagreementisnotsufficientlycertaintobeenforceable,thenegotiationswillhavefailedtobringaboutanenforceablecontract

• Fortheretobeanenforceablecontract,thepartiesmusthavereachedaconsensusonallessentialterms;oratleastuponobjectivemeansofsufficientcertaintybywhichthosetermsmaybedetermined

• Thoseobjectivemeansmaybeexpresslyagreedormaybeimplicitinwhathasbeenpreviouslyagreed• Therearesomecaseswhenprocesscontractsareenforceable–ex.tendercases

ClassNotes:• Willnegotiateingoodfaithforthesaleofthepremises–trialjudgesaidthatthecitycouncilfailedtoconductthe

negotiationsingoodfaith[hadnottalkedaboutthesaleinanymeaningfulway]• Courtofappealrefusalstoagreewiththeargumentthattheyhadfailedtonegotiateingoodfaithàanyagreementjustto

negotiateisunenforceable[donotknowwhattheyaregoingtonegotiate]+merelyaddingthattheywouldnegotiateingoodfaithdoesnotmakeanydifference[theperceptionofgoodfaithisabstract–donotknowthecontenttomeasurethegoodfaithby]

• ReasonHouseofLordsrejectedastand-alonedutyofgoodfaith–repugnanttotheadversarialpositionoftheparties[ifhaveanabstractdutyofgoodfaith,theproblemisyoucannotmeasureitinadversarialnegotiations]

• Problemintrialjudge=ifhadnegotiatedingoodfaith,wouldhaveagreedonthesaleoftheproperty[wedoknowthis+cannotjudgethissortofnegotiation]

• Goodfaithnegotiationw/oanycriteriatoguideitisanemptypromise–wecannotgiveitcontent• Occasionallygoodfaithnegotiationsareenforceable[EmpressTowers]=showstheyaretobeguidedbyobjectivecriteria

[i.e.marketrates]BUTalsowerenotfacedw/theissueoftheneedtoassessdamages[thismakestheissuemoredifficult]

5.AnticipationofFormalization(p.149)BawitkoInvestmentsLtdvKernelsPopcornLtd1991ONCAFacts:

• Thisisanappealfromajudgmentdeclaringtheappellant[Kernels]inbreachofanoralcontracttogranttherespondentafranchisetooperatearetailstoreatashoppingcenterinHamilton[JacksonSquare]

• AprovidedRwithw/aKernels‘informationpackage’–thisincludedacopyofthe‘draft’or‘standard’formoffranchiseagreement[50pageslong]

• After,theymetandthetrialjudgefoundthatAorallycontractedtograntRafranchiseagreementforJacksonSquare=duringthismeetingafewportionsofthestandarddocumentwereamended

• Racknowledgedthatthepartiesagreedtoembodytheirmutualobligationsinaformalwrittendocument• Passander[thesolerepresentativeofBawitko]approachedAw/aviewtoacquiringfranchiserightsforaKernelsstorein

JacksonSquareIssues:

• Cantheoralcontractconstituteacompleteandlegallyenforceablecontractorwhethertheoralcontractwasnotinitselfacomplete+legallyenforceablecontractbutwassubjecttoawritten,formaldocumentbeingsettledandapprovedbytheparties?

Decision:• Thenatureofthefranchisor-franchiseerelationshipmandatestherebeexpressagreementonthedetailedprovisionsset

uptoregulatethebusinessrelationshipoftheparties• Essentialtermsremainedopenfornegotiation=acontracthasnotbeenestablished

Ratio:• Theeffectofastipulationthatanagreementistobeembodiedinawrittenformaldocumentdependsonitpurpose–must

lookattheparties’intentionsAnalysis:

• Partiesmaycontracttomakeacontract–theymaybindthemselvestoexecuteatafuturedateaformalwrittenagreementcontainingspecifictermsandconditions.Whentheyagreeonalloftheessentialprovisionstobeincorporatedinaformaldocument,theywillhavefulfilledalltherequisitesfortheformationofacontract–thefactthataformalwrittendocumentistobepreparedafterwardandsigneddoesnotalterthebindingvalidityoftheoriginalcontract

• HOWEVER,iftheoriginalcontractisincompletebecauseessentialprovisionshavenotbeensettled,oritistoogeneraltobevalid,ortheunderstandingbythepartiesisthattheirlegalobligationsaretobedeferreduntilaformalcontracthasbeensigned=notacontract

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• Thetrialjudgedidnotspecifyallessentialtermsthatweretobeincorporatedintotheintendedwrittenfranchisedocument–healsodidnotfindthatithadbeenagreedatthatmeetingthatthewrittenfranchiseagreementwastobeintheformofthedocumenttogoverntheJacksonSquarefranchise

• Pmadeitclearthatthefocusofthemeetingwasonthebusinessaspectsofthedeal,namelytheprovisionsrelatingtothepersonalguarantees–theremainingprovisionswerenotthesubjectofnegotiationordiscussion

ClassNotes:• InformationpackageincludedstandardfranchiseagreementbyKernelsPopcorn• 4Keytermsà1includesthepersonalguarantee–companycanbesuedpersonally• Franchiseagreementwasneversigned• Question–dowehaveacontractbasedontheoralagreementoristherenocontractuntiltheformaldocumentissigned?

[ifallessentialtermsareagreed(eveniforally)thencanbeaformalcontractw/osigning]o Hadthepartiesagreedtoalloftheessentialterms?o CourtàNo,inarelationshipasimportantasafranchiseagreementneedittobesigned–hasmanyimportant

terms+cannottakethemtobeagreedifthedocumenthadnotbeensigned[ifindisputeonthefranchiseterms–thedocumentwouldnothavebeensigned]

• Ifallthekeytermsofthecontractareagreed+stilldonothavetheformalcontractsigned,therecanstillbeacontract[ex.RonEngineering–allowedforacontractw/osigning–becausethetenderdocumenthadalltheterms–andthepartiesbidbasedonthoseterms,thereforewhenthetenderwasacceptanceaformalcontractwasmade(interimagreementbetweenthepartieswasbinding)]–unlessitisexplicitlystated–mayagreetoallterms,butsaythereistobenocontractuntilformallysigned

• Example:Realestateagreement[interimagreement]o ABlaw–makesureinterimagreementisfullylegallybinding,andthesubsequentdeedofconveyanceisjustan

aspectoftheagreemento Unless“subjectto[formal]contract”=meansnotbounduntilformaldeedofconveyance[UK]

• Cannotbecertaintherewasacontractenteredintobecausetheydidnotsign[therefore,agreeingtokeyterms+conditions]=evenifhadagreedtoallkeyterms,needtobeawareofcaseswherepartiesstatetheyarenottobebounduntilaformalcontractissigned[AKA“agreementissubjecttocontract”]

PROMISES

Formality:TheRequirementofWriting

A)Introduction• TheStatuteofFrauds[passedin1677byEnglishParliament]isonesourceofformalcontractualrequirement–itwarrants

specialattentionbecauseitappliestoimportantkindsofcontracts(ex.contractsforaninterestinland)+becauseeitheritorlegislationderivingfromitareinforceinmostCanadianprovinces

• Mainpurpose=preventfraudulentlitigantsfromenforcingpromisethathadneverbeenmadeo Atthetime–jurieswoulddecidecasesbasedontheirownopinions[regardlessofthefactsgiven]o Partieswerealsonotallowedtotestify[couldpaywitnesstotestifyonone’sbehalf]o Defendantcouldnotsayanythingtoexoneratehim/herself

• S.4=certainkindsofcontractshadtobeevidencedinwritingtobeenforceable• S.17=imposedawritingrequirementoncontractsforthesaleofgoods,wares,andmerchandizeforapriceof10pounds

ormoreo ThisisreflectedintheSaleofGoodsActs.6inAB[forgoodsover$50]o Contractforsaleofgoodsof$50ormoreisnotenforceablebyactionunlessbuyeracceptsthegoodsinwholeor

inpart,givesdeposit…orunlesssomedocumentinwritingormemorandumo Acceptingthegoods=performinganyactinrelationofthegoodsthatrecognizesapre-existingcontractofsale

[ex.signingacreditcardbillislikelysufficient]• InAB–theprovincehasnotre-enactedthestatute;however,thewritingrequirementins.4forcontractsofguaranteehas

beensupplementedbytheGuaranteesAcknowledgmentActwhichrequiresadditionalformalitiesforguaranteesgivenbyindividuals[notaryexplainstheguaranteetotheguarantor+aresufficienthe/sheunderstandsit]

B)CategoriesofContractUnderSeal• Section4oftheStatuteofFraudscover5categoriesofcontracts–however,thebulkoflitigationconcerningtheStatute

involvescontractsforthesaleordispositionofland

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• Noactionbroughtuponthese–unlesstheagreementorsomememorandumornoteisinwritingandsignedbythepartytobechargedorhis/heragent[i.e.thedefendant]

1) ContractstoChargeanExecutororAdministratoronaSpecialPromisetoAnswerDamagesOutofHisOwnEstateo Thiswaslikelypopularbecausetheadministratorofanestateusedtotaketheresidualpropertyintheestate,and

sincetheestatewasnotliableforthedeceased’sdebtsorwrongs,therewasapressurefeltbytheadministratortocompensatecreditors/victimsoutofhisownfunds

o Cannotsueexecutorifpromisetomakedamagesclaimoutofownproperty[unlessinwriting]o [ThinkofThomasvThomas]–executorisunderpressuretorecognizepromisesoftheestateo [SubjecttowritingrequirementinAB]o *Notimportanttoday–now,estateisliabletopaydebts

2) ContractsMadeUponConsiderationofMarriageo Thiscoverscontractswhereinapartypromisestosettlepropertyuponanotherinconsiderationofmarriage

[majortransfersofpropertyoccurred]o [Ex.ShadwellvShadwell]–promisemadeincontemplationofmarriageo [SubjecttowritinginAB]

3) ContractstoAnswerforDebt,Default,orMiscarriageofAnotherPersono Referstoguarantees,notindemnitieso I=anundertakingtobeliableregardlessofwhetheranotherpersonbeindefault[akaprimaryliability]o G=anundertakingwhichisconditionalonthedefaultornon-performanceofsomeoneelse[akasecondary

liability]o Ex.“IfBdoesnotpay,Iwillpay”–someoneguaranteesanotherperson’sdebtso InAB,thishasbeensupplementedbytheGuaranteesAcknowledgmentActo [Ex.RoyalBankvKiska]

4) ContractsNottobePerformedWithinOneYearfromtheDateoftheMakingo Enactedbecauseofthefrailtiesofmemoryo Criticized=bothtoonarrowandtoobroadàtoonarrowsincelimitationoncontractactionsistypically2years;

toobroadsinceanactionmaybebroughtonacontractnottobeperformedwithinayearevenveryshortlyafterformation

o Interpretedasanagreementthatmustexpresslylastmorethan1yearhastobeinwriting–ifitmaynotlastmorethan1year,doesnothavetobeinwriting

o Ex.Ifsignacontractfora‘lifetime’wouldnotbecaughtintheStatuteofFraudbecauseitisnotexpressedthatitwilllastafullyear–itmightnotlasttheentireyear[personcoulddiew/inayear,etc.],HOWEVERa13-monthcontractwouldbecaughtwithintheStatute

o [SubjecttowritinginAB]5) ContractsfortheSaleoranInterestinLand

o Appliestoanycontractorsaleoflands,oraninterestinorconcerningthemo ThisissubjecttoawritingrequirementinallprovincesbutMB+PEI

C)EffectsofNon-Compliance

• Non-compliancew/theStatuteonlyrendersacontractunenforceable–itpreventsaplaintifffrombringingalegalaction,butdoesnotrenderitvoidorinvalid

• Ex.Ifhavea3-yearoralleaseinthehouselivingin;andthelandlordsuesforpossession–canraisetheenforceableagreementasadefencebecausetenantisnotbringinganactiononthelease[couldnotsueforspecificperformance(wouldbebringinganactiononthelease)]

• Unenforceablebutvalidcontractmayhavelegalsignificance:o 1)Apartytoanon-conformingcontractmaynotbringanactiononit,howevermayrelyonitindefenceofaclaimo 2)Thevalidityofanunenforceablecontractmeansthatevidencesufficientforacourtofcommonlaworequityto

allowenforcementmayariseafterformationofthecontractàatcommonlaw,thisevidenceneedonlybeasufficientnote/memoranda;inequitythisevidencemustsatisfythedoctrineofpartperformance

o 3)Anon-conformingcontractcanbeconsiderationforanewcontractorforanegotiableinstrumentD)TheRequirementofaSufficientNoteorMemorandaFormoftheNote/Memoranda

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• Eithertheagreementitselfmustbeinwritingortherebeanoteoramemorandumevidencingtheagreement[signedbywhoeverisbeingsued]

• Noparticularformofmemorandumorwritingisrequired+itdoesnotneedtohavebeenwrittenwiththeintentofsatisfyingtheStatute

ContentsoftheNote/Memorandum

• Thenote/memorandummustcontainalltheessentialterms• InMcKenzievWalsh,theessentialterms=price,property,parties• Othertermsmayalsoberegardedasmaterial[dependingoncircumstances]

DynamicTransportLtd.vOKDetailingSCC1978

• Requires–anoteormemoofthekeytermsofthecontractshowingtheparties,property,orpriceo Thesecanappearinseparatedocumentsaslongasthereissomethinglinkingthesedocumentstogether

• InPlantvBourneSCC–thedefendantagreedtobuyapropertydescribedinamemosignedbyhimas’Iagreetobuy24-acresofland,freehold,atvillageofTinparishofD’–itwasheldthattherewasanagreement+theagreementreferstothe24-acresoffreehold=knowparties,property,andpricewasstipulatedsomewhere[oncehavenoteofmemorandumw/keytermsthencanbringinoralevidenceofwhatthe24-acresmeant]

• InMcMurrayvSpicer–heldthattheparolevidencewasadmissibletoidentifytheproperty• TurneyvZilkaSCC–vendorthoughtheowned65-acresofland,buyeragreedtobuyallofthelandbutnotthebuildings–

therewasnot65acres,only62.7acres=memonotsufficientcertaintyofdescriptiontoenablethepropertytobeidentifiedoncethesurroundingfactsarepointedto[eventhoughreferredtoproperty,itdidnotrefertoitinsufficientdetail]

• Summary–donotrequireentirecontracttobeinwritingàonlythekeyterms,mustbesigned,andcanjoinseveraldocumentstogethertocreatetherequireddocument

TheRequisiteSignature

• Asignatureisintendedtoauthenticatetheentiredocumentas‘emanatingfromtheindividualsosigning’• Mereinitialinghasbeenheldtobesufficient,thesignaturemaybeprinted,anditisnotnecessaryitbeattheendofthe

documentaslongasitpurportstogovernallofit• Doesnotrequiresignaturesofbothparties;onlythe‘partytobecharged’[thedefendant/thepersonbeingsued]–itis

thereforepossibleforaplaintiffwhohasnotsignedtoenforceacontractagainstadefendantwhohasJoinderofDocuments

• Incircumstanceswhereallthematerialtermsdonotappearinonedocument,itmaybepossibleto‘join’thetwodocumentstogether,evenifoneisnotsigned,forthepurposeofproducingasufficientmemorandum=mustbesomeconnectionforsuchajoindertobepermissible

E)ElectronicContractsWrittenMemorandainElectronicFormatCommonLaw

• Statutedoesnotspecifyanyparticularformforthewrittenmemo• Ithasbeenheldthatamemoranduminanemailcansatisfythiswritingrequirement

WrittenMemorandainElectronicFormUnderElectronicCommerceLegislation

• EachofthecommonlawprovinceshavenowpassedelectroniccommercelegislationbasedontheUniformElectronicCommerceAct

• Mainfunctionisaccessibilityforlaterreferenceàtheprovincialelectroniccommercestatutesprovidethatalegalwritingrequirementwillbesatisfiedelectronicallyiftheelectronicrecordenduresandremainsaccessible[donotdeleteit]

• S.5oftheAct=alegalrequirementthatinformationoradocumentbeinwritingissatisfiedbyinformationoradocumentthatisinelectronicformifitisaccessiblesoastobeusableforsubsequentreference

• *Mostprovinces’Actexcludesagreementsthatcreateortransferinterestsinland[includingAB]• AB=ElectronicTransactionsAct

SignaturesinElectronicForm

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• Thereisnodifficultyinprinciplew/asignatureinelectronicform–aslongastherelevantmarkwasinsertedw/theevidentintentionofauthenticatingtheentireelectronicwriting,itwillcountasasignature

• Ithasbeenheldthatanemailw/sender’snametypedatbottomis‘signed’forthepurposesoftheStatuteF)PartPerformance

• MostCourtsthatdecidedlitigationinland-salecontractswerecourtsofEquity–moreconcernedw/justice+fairnessthanw/observingtheStatute[i.e.StatuteofFrauds]

• Early–inlandsalecontracts,theCourtsofEquitydevelopedanexceptiontotherulethatnoactionshallbebroughtunlessthereiswriting

• EXCEPTION=sufficientactsofpartperformancetoshowuswhatthetermsofthecontractwere• Problemw/StatuteofFrauds=preventedcertaintransactionsthatthepartiesclearlyintendedtoenforce

DeglmanvGuarantyTrustCo1954SCCFacts:

• Rwasthenephewofthedeceased–helivedw/hisauntfor6months;boththathouse(No.550)+thehouseontheadjoininglot(No.548)wereownedbytheaunt–duringthistimetheauntisclaimedtohaveagreedthatifthenephewbegoodtoher+doherservicesasshemightrequestduringherlifetime,shewouldleavehimthepremisesatNo.548inherwill

• Thenephewdidchoresduringthe6monthshelivedinNo.550• TheperformanceconsistedoftakinghisauntontripstoMontrealandelsewhere,doingoddjobsinthehouses,and

errands/minorservicesforher• Shedidnotleavehimthehouseinherwill–heismakingaclaimforrestitution[onthecontractthatifhedoesthe

services,shewillleavethehouse]• Estatedefence=cannotbringanactionifthiscontractwasnotmadeinwriting• SpenceJheldattrialthatthesecircumstancesweresufficientfordisregardingtheprohibitionofthestatute

Issues:• Whatnatureofpartperformancewillallowthecourttoorderspecificperformanceofacontractrelatingtolands

unenforceableatlawbyreasonofs.4oftheStatuteofFrauds?Decision:

• PartperformancenotenoughtonullifytheeffectsoftheStatute–respondententitledtorecover$3000outoftheestateRatio:

• Whenpartperformanceisdoneonthefootingofacontractualrelationship,andthepartywhogotsomethingoutoftheperformancedoesnotcompletethecontract,thepartywhoperformedisentitledtorecoverforthatperformance?

• Ifrelyonpart-performancetoexcuseanon-productionofanoteormemorandumundertheStatuteofFrauds,thenshouldfirstprovetheactsreliedupon,anditisonlyaftersuchactsunequivocallyandreferableintheirownnaturetosomedealing/agreementwiththelandthatevidenceoftheoralagreementbecomesadmissibleforthepurposeofexplainingthoseacts

Analysis:(RandJ-Minority)• Inrelationtospecificperformance,strictpleadingwouldrequireademonstratedconnectionbetweentheactsof

performanceandadealingwiththelandbeforeevidenceofthetermsofanyagreementisadmissible• Therespondentisentitledtorecoverforhisservicesandoutlayswhatthedeceasedwouldhavepaidforthemonapurely

businessbasistoanyotherpersoninthatposition(CartwrightJ-Majority)

• FromMcNeilvCorbett–ifrelyonpart-performancetoexcuseanon-productionofanoteormemorandumundertheStatuteofFrauds,thenshouldfirstprovetheactsreliedupon,anditisonlyaftersuchactsunequivocallyreferableintheirownnaturetosomedealingwiththelandthatevidenceoftheoralagreementbecomesadmissibleforthepurposeofexplainingthoseacts

• Here,thereisnothinginthenatureoftheactsprovedwhichbearsanynecessaryrelationtotheinterestinlandsaidtohavebeenthesubjectoftheagreementinquestion

• Heisentitledtorecoverthevalueofhisservices–thisisarightbasedonanobligationimposedbylaw[notbasedonthecontract]

ClassNotes:• Nephewsayshefitsw/intheexception–hisactsofpartperformanceweresufficienttoestablishacontractbetweenthe

auntandhimselfàCourtsaidthatthiswasnothingmorethanwhatwouldberequiredofadutifulnephew• Whatdoesthetestofpartperformancerequire?[p.273]

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o MaddisonvAlderson[leadingcase]–spent20yearsasahousekeeper[unpaid]onthestrengthofthepromisethattheownerwouldleaveherhishouseonhisdeath–madeherawillwhichhegaveheralifeinterest,butitwasnotproperlyexecuted

o HouseofLords=iftherewasacontracttoleavethehouse,itwouldhavebeeninadequatepartperformanceàthiswasinsufficienttocountaspartperformance

o TEST=allactsdonemustbereferredtotheactualcontract,whichisthetestoftheirlegal…• P.274=allauthoritiesshowmustbeunequivocalandintheirownnaturedemonstratetheexistenceofthetypeof

contractshealleged[atthistimemanyhousekeepersworkedforroom+board]–Harshtest• LowerCourts–foundtheactsarepartperformanceweresufficient,• SCC–saidhedoesnotsatisfythetestbecausehisactswerenotunequivocallyandinownnaturereferabletothetypeof

agreementhealleges(becausetherewereotherexplanationsforthem)• Compensationforthenephew=quantummeruitàcontractexisted,butitwasunenforceablebecausetherewasnonote

ofmemorandum–thistellsusthenephew’sserviceswerenottobegratuitous[hethoughthewasgettingthehouse];therefore,ifleavehimuncompensated=unjustenrichment,thereforeestatemustpayfortheservicesofthenephews

• Underthesecircumstances,Courtswillawardnephewthereasonablevalueofhisservices[$3000]• Exampleofunjustenrichmentoftheestate,whichispreventedbytheactionofrestitution–itrestorestothenephewthe

valueofhisservices[thisisnotacontractremedy]• Cannotimplyacontractwhentheexpresscontracthasbeenrenderedunenforceable–(p.276)butthelawimposesupon

theaunt+thereforeherestate,topayfortheservices[anobligationoflaw–unlessthereispaymentfortheservices,anunjustenrichmenthasoccurred]

• Parliamentsaid[bytheStatuteofFrauds]anexpresscontractforthesaleofinterestoflandisunenforceableunlessinwriting–cannotusesamesetoffacttocreateanimpliedcontract

• HOWEVER,hereunjustenrichmentisnotbasedonanimpliedcontract,itisbasedoncertainsituations–thelawimposedanobligationontheaunt[notacontract,noranagreement]therefore,thecourtcansaytherewasanunenforceablecontractbutthereisaremedy[notbecausethepartiesagreedonaremedy]butbecausethelawsaystheaunt’sestatemustpayfortheservicestheygotfornothing,whentheywereintendedtobecompensated

• Deglman–recognizedthisareaoflawhadnothingtodow/contractsUnjustEnrichmentExample[UsedtobeCalledImpliedContracts/Quasi-Contracts]:Havecottageinsummer,neighborsaway,+noticefirestarted–spenddayprotectingthecottagefromfireàisheentitledtobecompensatedforservices?

• Thereisnocontractbetweentheneighbors• Incommonlawcases=courtsfrequentlyallowedthe‘neighbor’tobecompensatedà"savingthehousewasan

undoubtedbenefittotheneighbor”• Personputtingoutfire=the‘agentofnecessity’

MathesonvSmiley• Servicesrenderedundernecessity–attemptedsuicide;roommatescallambulance+surgeonoperatesfor4hours–tries

tosuetheestateo Nocontract–nooffer+acceptanceo HOWEVER–whenservicesarerenderedoutofnecessity(cannothavedoctorssayingtheywillnotstartwithout

proofofpayment)–obligatedtopayo SurgeoncanrecoverfeesoutofSmiley’sestate–becausetheserviceswererenderedoutofnecessity

Unjustenrichmentoccursinagroupofwell-recognizedcases:• ApaysBmoneybymistake–AneverintendedtogiveBthemoney,diditonlybecausemadeamistakeàlawhas

recognizedinthiscase,themoneyshouldbepaidback[theonlyreasonfortheenrichmentofB,wasbecauseofthemistakeofA]

• Benefitstransferredunderacontractthatfails[contractnevermaterializes]• Benefitsthatariseoutofnecessity–Ex.EastwoodvKenyan–minorsareobligedtopayfornecessitiestheyreceive[nota

contractualobligation,morerestitution]ThompsonvGuarantyTrustCo1974SCCFacts:

• Theappellanthadsuedforspecificperformanceofanagreementallegedtohavebeenenteredintobetweenhimandthedeceased

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• Thedeceasedagreedthatinconsiderationoftherespondentremainingwiththedeceasedandworkingandoperatinghisfarmlandsuntildeathofthedeceased,hewoulddeviseandbequeathtohimhisentireestate

• Alivedw/Dick[deceased]for48yearsandworkedforhimasafarmlaborer• Hecouldnotaffordtopayhimwages,butpromisedifhestayed+workthepropertywouldbehis• WhenDickdiedhisestatewasworth$200000+nowillhadbeenfound• NotarybringsinapowerofattorneytogiveGuscompletecontrolofDick’sestate–however,oncetheownerdies[Dick]

thenthepowerofattorneyalsodies[whatmattersafterdeath=mustbestatedbywill],thereforewasnouseingivingGustheland

Issues:• Whetherthelackingofasufficientmemorandumbasedons.4oftheStatuteisvitiatedbythepartperformanceonthe

partoftheappellantDecision:

• Theappellanthasprovedactsareunequivocallyreferabletotheverylandsandthereforehehasadducedtheevidenceofpartperformancewhichtakesthecaseoutofs.4oftheStatute

Ratio:• Unequivocalperformanceinaccordancewiththeintentofanoralcontractsatisfiesthepartperformanceandtakesthe

actionoutoftherealmofs.4oftheStatuteofFraudsAnalysis:(SpenceJ)

• ThetrialjudgebelievedthatGus’sworkwasdirectedtothecontract+constitutenotonlypartperformance,asequityrequires,butcompleteperformance

• CourtofAppeal=didnotmeettestinDeglmanvGuarantyTrustCo.• PresentcasediffersfromDeglman–nephewneverlivedinthehousepromisedtohim,theactsofassistanceweremore

referabletothenaturaldesireofadutifulnephewtoassistanagedauntthanacontracttoleavehimpropertyinawill;nephewalsohadhisownlifeawayfromtheaunt

• From1924tothedeathofDick,theappellantwasamanagerandoperatorofthewholefarmindustryownedbythedeceased

• SamecircumstanceasinBrownscombe–appellanthadrebuiltandrenovatedthehouse• Here,Dickrenovatedthehousecompletely[wouldnotdothisjustbecause]• àlookingatactsthatGushaddonerelatedtotheproperty+saidthatGusrenovatedthehouse

Notes:• Dependingonwhoisnextofkin/whowouldgetthelandifGusgottheland–ifnotimmediatenextofkin,theywillbe

morelenientonthetestforpartperformanceLensenvLensen1984Sask.CAAnalysis:(TallisJA)

• Thereare2theoreticalbasesforthedoctrineofpartperformance:1) ‘Alternativeevidence’=actsofpartperformanceareviewedasbeingsufficientlycogenttoallowacourtofequityto

enforcethecontracteventhoughitcouldnotbeenforcedatcommonlawbecauseoftheStatute–itisnecessarythattheactsofpartperformancebeadducedasapre-conditiontotheintroductionofparolevidencetoprovethecontract=issueissufficiencyofacts

2) Emphasizestheactsofpartperformance[notsomuchfortheirevidentiaryvalue]butasraisingequitiesintheplaintiff’sfavorwhichrenderitunjustnottoenforcethecontract

• TheEnglishauthoritiestaketheviewthattheactsdonotneedtounequivocallyrefertothecontractinquestionbutmustprovetheexistenceofsomecontractandbeconsistentwiththeonealleged

• Mustfirstlooktotheallegedactsofpartperformanceandseewhethertheyprovethattheremusthavebeenacontractanditisonlyiftheydosoprovethatyoucanbringintheoralcontract[SteadmanvSteadman]

• TheSCChasindicatedthattheactsoftheallegedpartperformancemustbereferabletoandmustbeindicativeofsomecontractdealingwiththeland

• TheSCCdoesnotapplysuchastringenttestthattheactsmustofnecessitybereferabletoeithertheinterestinthelandorthecontractwhichisbeingpropounded–iftheactsrelieduponare‘unequivocallyreferableintheirownnaturetosomedealingw/thelandtherequisitetestismet

Notes:• WakehamvMackenzie,1968–p.283àtheseEnglishauthoritiestaketheviewthattheactsdonotneedtounequivocally

refertothecontractinquestionbutmustprovetheexistenceofsomecontractandbeconsistentwiththeoneallegedo WewerestillapplyingtheoldEnglishtest–butmorelooselythantheywouldhave

• ThelawremainsinCanadaasstatedinThomasvGuarantyTrustCo

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• P.284–Note2o SomeCourtshaveadoptedtheliberalreformationofthedoctrineofpartperformanceintheEnglishcourts[Currie

vThomas(BCCAdecision)refertopart-performancewithoutevenreferringtotheSCCdecisions–onlyrefertoEnglishdecisions]

• Thedoctrineofpartperformancewascreatedbecausetheserealestateissueswhenthecourtsofequity[whattheyappearedtohaveinmindwasthealternativeevidencerule]

PRIVITYOFCONTRACTIntroduction

• ThedoctrineofprivityappliesinCanadatopreventtwotypesofpersonsfromenforcingacontract:o 1)Apersonisacompletestrangertothecontracthasnolegalrighttoenforcethepromiseofanypartytothat

contracto 2)Thethirdpartybeneficiary–thepersonidentifiedandintendedbythepromisorandpromiseetoreceiveallor

partofthebenefitoftheagreeduponperformanceo [Thisthirdpartybarhasbeeneliminatedinalmostallcommonlawjurisdictions]

• Privityofcontract:IfA+Benterintoacontract,onlytheyhavecontractualdutiesandareentitledtothebenefitsofthecontract

TheHistoryoftheDoctrineofPrivityandThirdPartyBeneficiaries

• Thereareauthoritiesstatingthatinthenineteenthcenturythirdpartybeneficiarieswereallowedtosueonthecontract–howeverthereisconfusion/uncertaintyastowhenthebanbegan

• Thereisdebateoverwhetherornottheprivityruleisjustanotherwayofsayingthat‘considerationmustmovefromthepromisee’

TweddlevAtkinson(1861)EnglandQBFacts:

• ThedeclarationstatedthattheplaintiffwasthesonofJohnTweddle(deceased)andbeforethemakingoftheagreement,theplaintiffmarriedthedaughterofWilliamGuy(deceased)

• Beforethemarriagetheparentsofbothpartiesorallypromisedtogivetheplaintiffamarriageportion,andafterthemarriagetheparentsenteredintoawrittenagreement

• Writtenagreement:o BetweenWilliamGuyandJohnTweddle–mutuallyagreedthatWilliamGuywillpaythesumof200poundsto

WilliamTweddle[hissoninlaw]andWilliam’sfather(John)willpaythesumof100pounds,eachandseverallythesaidsumsonorbeforethe21stdayofAugust.AnditisagreedbyWilliamGuyandJohnTweddlethatWilliamTweddlehasfullpowertosuethesaidpartiesinanyCourtoflaworequityfortheaforesaidsumsherebypromisedandspecified

o [Dealisbetweenfatherofbride+fatherofthegroom]o Bothfather’sdie–fatherofbridehasneverpaidthepromised200poundtoson-in-law–hesuesthefather-in-

law’sestate• Itisalsoallegedthatboththeplaintiff+hiswiferatifiedandassentedtotheagreementbutneitherWilliamGuy,norhis

executorhaspaidthepromisedsumof200poundsIssues:

• Canthethird-partytoacontractsueuponitwhenthecontractisforthebenefitofthethird-party?Decision:

• No–athirdpartycannotsue–judgmentforthedefendantRatio:

• Noactioncanbemaintaineduponapromise,unlesstheconsiderationmovesfromthepartytowhomitismade–however,thereisanexception:whentheconsiderationmovesfromafather,andthecontractisforthebenefitofhisson,thenaturallove+affectiongivesthesontherighttosueasiftheconsiderationhadproceededfromhimself[butthisexceptiondoesnotapplytotheactionofassumpsit]

Analysis:[WightmanJ]

• Someoftheolddecisionsappeartosupportthepropositionthatastrangertotheconsiderationofacontractmaymaintainanactionuponit,ifhestandsinsuchanearrelationshiptothepartyfromwhomtheconsiderationproceeds,thathemaybeconsideredapartytoconsideration

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• However,itisnowestablishedthatnostrangertotheconsiderationcantakeadvantageofacontract,althoughmadeforhisbenefit

[CromptonJ]• Theplaintiffcannotsucceedunlessthiscaseisanexceptiontothemodernandwell-establisheddoctrineoftheactionof

assumpsit• Itisnowsettledthatnaturalloveandaffectionisnotconsiderationforapromiseuponwhichanactionmaybemaintained

–itisalsosettledthatthepromiseecannotbringanactionunlesstheconsiderationforthepromisemovedfromhim• Theconsiderationmustmovefromthepartyentitledtosueuponthecontract• Here,itwasarguedthefatherwasagentforthesoninmakingthecontractbutthatwouldalsomakethesonliableuponit• Bythereasonoftheprinciplesthatnowgoverntheactionofassumpsit,thepresentactionisnotmaintainable

[BlackburnJ]• Noactioncanbemaintaineduponapromise,unlesstheconsiderationmovesfromthepartytowhomitismade–

however,thereisanexception:whentheconsiderationmovesfromafather,andthecontractisforthebenefitofhisson,thenaturallove+affectiongivesthesontherighttosueasiftheconsiderationhadproceededfromhimself

• HOWEVER–thiscasecannotbesupportedonthatground–thecasesshowthatnaturalloveandaffectionarenotasufficientconsiderationwhereanactionofassumpsitistobefound

ClassNotes:• Didthefather-in-lawintendtobeboundbyhispromise?àYes,hemadeitclear–bothparentsagreedtheson-in-lawhas

fullpowertosuethetwopartiesofthecontract–couldnothavemadeitmorecleartheyintendedthistobealegallybindingcontract

• Courtdoesnotfindthistobebinding:o 1)Thisisacontractbetweenthetwofathers–thesoninlawwasnotapartytothecontract

§ Itwouldbemonstrousforthesontobeabletotakebenefitforthebenefit,buthavenoobligationsunderit[couldnotbeliable]

o 2)Considerationmustflowfromthepromiseetothepromisor[orsomeoneelsedecidedbythepromisor]§ Thisisjustagratuitouspromise

• Therewasconsiderationforthepromise–however,thisconsiderationwasprovidedforbythefatherofthegroomandNOTbythesoninlaw[thebeneficiary]

• Firsttwojudges–astrangertothecontractusedtobeabletosueonthecontract[WarnevMason]o Inthepast,thecommonlawallowedindividualstosueasstrangersonthecontracthoweverthiswasbeforethe

lawofcontracts/doctrineofconsiderationwasfullydeveloped• Whocouldsue?–ifthefatherofthebridedoesnotpay,thentheestateofthefatherofthegroomcansue[thereisa

breachofcontract]• Themeasureofdamages=puttheotherpartyinthepositionhewouldhavebeeninhadthecontractbeenperformed–

fatherhasnotsufferedanyloss–wouldnotbearemedytomakehimgetthe100pounds[hewasneverintendedtogetanymoneyoutofthedeal]

• Whensuffernofinancialloss–thecourtwillordernominaldamages–recognizeabreach,howeverithascausednoloss• [Notspecificperformanceàneedtobeinacourtofequityandonlyincertaintypesofcases/categoriesofcontract]

DunlopPneumaticTyreCoLtdvSelfridge&CoLtd(1915)AC(HL)Facts:

• Theappellants(Dunlop/tiremanufacturers)soldtheirtirestoDewandCompany,whowerewholesalemerchants,onthetermsthatDewwouldnotsellthetiresatbelowDunlop’slistprices,excepttocustomerslegitimatelyengagedinthemotortrade

• Tothosecustomers,Dewwereentitledtosellat10%belowthelistpriceiftheyobtainedanundertakingthatcustomers,inturnwouldobservetheappellants’listprice[notsellthosetiresbelowthelistprice]

• Therespondents(Selfridge/alargedepartmentstore)agreedtosellDunloptirestotwocustomersatpricesbelowthosespecifiedbytheappellants

• OnJan.2theyobtainedthetiresfromDewandsignedanagreementunderwhichtheypromisednottosellorofferthembelowlistpriceandagreedtopay5poundstotheappellantsbywayofliquidateddamagesforeverytiresoldorofferedinbreachoftheagreement

• Therespondentsdeliveredonetiretoacustomerandchargedhimlessthanlistprice–theylaterinformedthesecondcustomerthathewouldberequiredtopaythefulllistprice

• TheappellantscommencedanactionforinjunctionanddamagesinrespectofbreachoftheJan.2agreementsIssues:

• Dothesetermsgivetheappellantsanyenforceablerightsagainsttherespondents?

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Decision:• No–appealdismissed

Ratio:• Onlypartiestoacontractcansue–exceptwhenanagentisactingforaprincipaltothecontract–however,muststillbe

considerationflowingfromtheagentandtheremustbeanintentiontocreatethisagencyrelationshipAnalysis:[ViscountHaldane]

• Certainprinciplesarefundamentalfoundationalprinciplesofthecommonlaw–o 1)Beingthatonlyapersonwhoisapartytoacontractcansueonit[thiscontractwasbetweenDewandSelfridge]o 2)Beingthatifapersonwithwhoacontractnotundersealhasbeenmadeistobeabletoenforceitthen

considerationmusthavebeengivenbyhimtothepromisorortosomeotherpersonatthepromisor’srequest[considerationfrompromiseetopromisor]

o 3)Aprinciplenotnamedinthecontractmaysueuponitifthepromiseereallycontractedashisagent[butmusthavegivenconsideration,actingashisagentingivingit]

• Dewsoldtherespondentsgoodswhichtheyhadatitletoobtainfromtheappellantsindependentlyofthiscontract–theconsiderationbywayofthediscountwastocomeoutofDew’spocketandnotoutofthatoftheappellant’s

• EveniftheappellantswereprincipalsofDew,theonlyconsiderationisonegivenbyDew,notastheiragents,butasprincipalsactingontheirownaccount

• Cannotbeaprincipalandanagentinthesamecontract–cannotcontractforhimselfandforanother[LordDunedin]

• Anactorforbearanceofoneparty,orthepromisethereof,isthepriceforwhichthepromiseoftheotherisbought,andthepromisethusgivenforvalueisenforceable

• TheagreementwasmadebetweenDewandSelfridge–however,DewwasanagentofDunlop[andDunlopwasanundisclosedprincipal]–inordertoenforceit,theremustbeconsiderationmovingfromDunloptoSelfridge

• ThetireswerepropertyofDew[notDunlop]–soDunlopdidnotdoanythingforDewandhedidnotforbearinanythingbecausehehadnoactionagainstDew–becauseDewhadfulfilledhiscontractwithDunlopinobtainingacontractfromSelfridgeinthetermsprescribed

ClassNotes:• Onlypersonstoapartycansueonit;DunlopalsohasnotprovidedanyconsiderationforSelfridge’spromisenottosell

belowlistprice• DunlopargumentagainstprivityàDewwasactingastheiragent/Dunlopareprincipals

o Ex.Buycoffeeforself+B[Bgivesmoneytobuythecoffee]àpartiestothecontractareboththecoffeesellerandself;andcoffeesellerandB–selfhasprovidedconsideration

§ Intention–didbuyerintendtobuycoffeeforselforforBatB’srequest[ifthelatter,thenselleristheagentandBistheundisclosedprincipalofthecontract]

o IfBuyerbuyscoffeethatismuchmoreexpensivethanBaskedfor[notwithinthescopeofbuyer’sauthority]–agentperformedanunauthorizedactandbreachedtheagreement;however,BcanratifythepurchaseandonlythenisBinacontractualrelationshipw/seller

• Toestablishagency–mustdeterminewhoprovidedtheconsideration• DunlopsayscontractwasforDunlop’sbenefit–courtsaysno,thiscontractwasbetweenDewandSelfridgeforDew+

Dunlopprovidednoconsiderationo TherewasnointentiontosetDewupasanagentforDunlop–nothingthatshowsDunlopintendedDewtobeits

agento ANDnoconsideration–onlyconsiderationisfromDewactingonitsown

• Cannotallegeanagencyw/ointentiontomaketheagencyrelationship• Doesthepartyneedtoknowtheotherpartyofwhichheisdealing?

o Noàexample:realestate–oftenbuypropertythroughanagent[foranundisclosedprincipal]WaysinWhichaThirdPartyMayAcquiretheBenefit

• Theprivityrulemaybeinapplicablebecausethereissomesortofexistingrelationship–eitheratrustoragencyrelationshipmightexist

A)Statute• Specificexceptionstothedoctrineofprivitywereincludedintheinsurancelegislationofmostcommonlawjurisdictionsat

anearlydateo Privityisinconvenientinlifeinsuranceandcarinsurance

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o Lifeinsurance–ifXdies,thenmoneygoestonamedbeneficiaryortoX’sestate§ AKA–beneficiaryisathirdparty,onlythedeceasedcansueonthepolicy§ Therefore,InsuranceActswerecreatedàallowingbeneficiariestoenforceforthebeneficiary’sown

benefit§ Bofthelifeinsurancepolicycanenforcethepolicy–recognitionofexception

o Carinsurance–contractbetweendriverandinsurancecompany;accidentbetweenthetwodrivers§ Autoinsurance–allowspartytotheaccidenttoenforcethecontractagainsttheinsurancecompany

o Tookstatutorychangestoallowbeneficiariestosueiftheinsurancecompanieswouldnotpay• Example–TheInsuranceAct–s.195[LifeInsurance]ands.258[AutomobileInsurance]–p.293• InAus.AndNZlegislationnowprovidesthatathirdpartyintendedtobenefitfromtheagreementmayenforcethe

agreementdirectly• PassedinEnglandin1999• LawReformAct[Canada]–p.294

B)SpecificPerformance

BeswickvBeswick(HL)1966EnglandCAFacts:

• PeterBeswickwasacoalmerchant–hisnephewJohnBeswickhelpedinthebusiness• InMarch1962,Peterhadhislegamputatedandwasnotingoodhealth–Johnwasanxioustogetaholdofthebusiness

beforetheoldmandied–asolicitordrewupanagreementforthem:“BusinesstobetransferredtoJohn,Peterwouldbeemployedasaconsultantfortherestofhislifeat6.10aweekandafterhisdeathJohnwastopayPeter’swidow5/weekoutofthebusiness”

• JohnpaidPeteruntilhedied–afterthedeath,Johnpaidthewidowonceandthennotagain• WidowbroughtanactionagainstJohnforthepromisedmoney–sheclaimed175inarrearsandspecificperformanceand

theappointmentofareceiver[heractionintrialwasdismissed]Issues:

• Canthewidowsueasexecutrixofherhusband’sestateorinherpersonalcapacity[asathirdperson]forspecificperformance?

Decision:• Yes–appealallowedandwidowentitledtoarrearsof175and5/week

Ratio:• Whereacontractismadeforthebenefitofathirdperson,whohaslegitimateinteresttoenforceit,itcanbeenforcedby

thethirdpersoninthenameofthecontractingpartyorjointlywithhimAnalysis:(LordDenningMR)

• Therulethatnothirdpersoncansueonacontracttowhichheisnotapartyisonlyaruleofprocedure• Whereacontractismadeforthebenefitofathirdperson,whohaslegitimateinteresttoenforceit,itcanbeenforcedby

thethirdpersoninthenameofthecontractingpartyorjointlywithhim• Itisdifferentwhenathirdpersonhasnolegitimateinterestandtheagreementwasnotinthepublicinterest–ex.Dunlop

[seekingtoenforcepricestopublicdisadvantage]orwhenseekingtorelyonanexemptionclausetoexempthimselffromliability[cannotsetupanexemptionclauseinacontracttowhichhewasnotaparty]

• Thewidowissuingasexecutrixofherhusband’sestate[andthereforeasacontractingparty]andalsoinherpersonalcapacity[asathirdperson]–sheisentitledtoanorderforspecificperformanceoftheagreementbutorderingthedefendanttopay175and5/week

[DanckwertsandSalmonLJJ]• Agreedw/Denningbutdidnotgoasfar• ArrivedatsameresultonthegroundthatasadministratrixofPeter’sestate,thewidowcouldsueasapartytothecontract

betweenPeterandthenephew+obtaintheremedyofspecificperformanceClassNotes:

• Bysuingastheestate=damagesarenominal–nodamagestotheestate[thedamagesweretothewidow]• HouseofLordcircumventsthisissueinordertodojusticeinthiscase

BeswickvBeswick[1968]England(HouseofLords)Facts:

• Thewidowisboththeadministratrixoftheestateandsuesinboththatcapacityandinherpersonalcapacity[asathirdparty]

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Issues:• Canwidowsueforspecificperformance?

Decision:• Yes–appealdismissed–widowentitledtospecificperformance

Ratio:• Thewidow[inherpersonalcapacity+thereforeasthirdpartytothecontract]hasnorighttosue–butshehasarightas

administratrixofherhusband’sestatetorequiretheappellanttoperformhisobligationundertheagreementAnalysis:[LordReid]

• Thecommonlyacceptedview–athirdpartycannotenforcethecontract–isright• Thewidow[inherpersonalcapacity]hasnorighttosue–butshehasarightasadminofherhusband’sestatetorequire

theappellanttoperformhisobligationundertheagreement• Appellantargument=widow’sonlyrightistosuehimfordamagesforbreachofhiscontractandthesewouldbeonly

nominaldamagesasthebreachcausednolosstotheestateofthehusband–however,thiswouldbegrosslyunjust• Thewidow’sargumentisthatsheisentitledinhercapacityofadmin.toenforcetheprovisionoftheagreementforthe

benefitofherselfinherpersonalcapacity–andtodosomustorderspecificperformance–thiswouldproduceajustresultandtherefore,specificperformanceshouldbeordered

[LordPearce]• Here–thecourtrightlydecidedtheremedyofspecificperformanceisappropriate• However,ifdamagesweretobeawarded–theydidnothavetobenominal• Thiscasehasallthefeatureswhichledtheequitycourtstoapplytheirremedyofspecificperformance–contractwasfor

thesaleofabusiness;thedefendantcouldclearlyhaveobtainedspecificperformanceifBeswickoradmin.haddefaulted,andmutualityisagroundinfavorofspecificperformance

• Theestate[notthewidowpersonally]canenforcetheconditionofthepaymenttothewidowClassNotes:

• Outsideofrealestatecases–thisisthefirstcasewherespecificperformancewasissued• Here–specificperformanceisthemoreconvenientremedyàpaymentisweekly,wouldhavetosueeachweekandwas

theobviousintentionofthehusband• HLgotaroundprivity–allowspecificperformancebecausemoreconvenientandgivesbettereffecttotheintentionofthe

estate• WhatifPeterhaddiedwithawill?

o Ifappointedasexecutoreithernephewornephew’sdado Executorcansayitisnotintheestatesinteresttobringthisactiono Atthispoint,theCourtwouldhavehadtoconfrontthedoctrineofprivity+howitfitsw/thiscase

• Thefacthediedw/oawillgavetheCourtanescaperoute–thewidowcansueasadministrixoftheestateforspecificperformance

• Wasrecommendedthereshouldbeareversaltothedoctrine–thisshouldbereformedbyParliamentC)Trust

• Thetrustwasdesignedtoevadeprivity• Atrustcanbecreatedindifferentways:• Apersonwhoestablishesthetrust(calledasettlor)maygratuitouslyorforconsideration,transferpropertyorrightstoa

trusteetobeheldormanagedforthesolebenefitofathirdparty(calledthecestuiquetrustorbeneficiary)o Whentransferassetstheyareoutofthesettlor’scontrol–decisionsmadebythetrustee[knownasafiduciary=

actinthebestinterestofthetrust]o Trueownersofthetrustarethebeneficiaries–equityrecognizedthatthebeneficiariescouldsuethetrustee

(becausetheyaretheequitableownersofthetrust,thereforetheycandetermineitsterms)o Itisanequitableexceptiontothedoctrineofprivity

• Whenestablishatrustitisirrevocable–moneyisputoutofthesettlor’shand[nowbelongstothetrust]• ORapersonmaydeclarehim/herselftoholdpropertyorrightastrusteeforthebenefitofaspecifiedbeneficiary–oncea

trustiscreated,thebeneficiaryisentitledtoenforcethetrustobligationdirectly• Expresswordsof‘trust’arenotrequiredinordertocreateatrustobligation–itisenoughifthereissomekindofevidence

toestablishan‘intention’tocreateatrust• Apromisetobenefitathirdpersonisevidenceofthiskindandinanumberofcasesatrusthasbeenimpliedtogiveeffect

tosuchapromise

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D)Agency• Ifthe‘promisee’isactuallycontractingasagentonbehalfofthethirdparty,thedoctrineofprivitysimplyhasno

application• Thepromisorandthethirdpartyarecontractingparties–theyareinadirectcontractualrelationship

NewZealandShippingCoLtd.vAMSatterthwaite&CoLtd.1975EnglandPCFacts:

• AnexpensivedrillingmachinewasreceivedonboardtheshipEurymedonatLiverpoolfortransportationtoWellingtonpursuanttothetermsofabillofladingno.1262onJune5,1964

• Theshipperwasthemaker/manufacturerofthedrill[AjaxMachine/’theconsignor’]whichenterintoacontractw/thecarrier[thiscontract=thebillofladingàacontracttocarrythegoodsandadocumentoftitle]

o Thiscontractcontainslimitationsofliability–1)limitationofdamagesto100poundsand2)anyactionmustbebroughtwithin1year

• ThebillofladingwasissuedbyagentsfortheFederalSteamNavigation[thecarrier]o ThecarriershipsthegoodsfromLiverpooltoWellington–butdoesnotunloadthem(employsthestevedoresto

unloadthem)• ConsignorssaythatNZcannotshelterthemselvesunderthelimitationclausesinthecontractbecausetheyarenotincluded

inthatcontract(thecontractwasnotwithNZ)• TheconsigneewasAMSatterthwaite[consignee]àthecustomer

o BillofLadingAct=onceBofLisinthehandsoftheconsignee,thentheconsigneehasalloftherightsoftheoriginalshipper(assignsalloftherightsoftheshippertothecustomer)

• Forseveralyears,theNZShippingCo[thestevedore]hadcarriedoutallstevedoringworkinWellingtoninrespectoftheshipsownedbythecarrier

• NZalsoactedastheagentforFederalSteamNavigationandassuchagent,thestevedorereceivedthebilloflading–clause1ofthebillwasinthesametermsasbillsofladingusuallyissuedbytheStevedoreanditsassociatedcompaniesinrespectofordinarycargocarriedbytheirshipsfromtheUKtoNZ

• Theconsignee[AM]becametheholderofthebillofladingandownerofthedrillpriorto1964–onAugust1964,thedrillwasdamagedasaresultofthestevedore[NZ]negligenceduringunloading

• OnthefirstpageoftheBillofLadingào “Inacceptingthisbilloflading,theshipper,consignee,andownersofthegoodsagreetobeboundbyallofits

conditions…”o ALSO–“noservantoragentofthecarrier(includinganyindependentcontractoremployed)shallinany

circumstancesbeunderanyliabilitytotheshipper,consignee,orownerofthegoods…”o Carrierisdeemedtobeactingasagentortrusteeforallthosewhomaybeservants

• Clause11limitedliabilityto$100.TheapplicationofthebillofladingtotheCarriageofGoodsbySeaActmeantthatthecarrierandtheshipweredischargedfromallliabilityinrespectofdamagetothedrillunlesssuitwasbroughtagainstthemwithin1yearofdelivery–noactionwascommenceduntilApril1967whentheconsignee[AM]suedthestevedore[NZ]innegligenceclaiming$880–costofrepairingthedamageddrill

Issues:• Whetherthestevedorecantakethebenefitoftheprovisionsinacontracttowhichtheyarenotaparty(contractis

betweenshipperandcarrier)• Doesthecontractsatisfythepropositionstoallowittoapplytothethirdpartyasanagent?

Decision:• Yes–theappealifallowedandrespondentmustpaycostsoftheappeal

Analysis:(LordWilberforce)• Scruttonsleftopenacasewhereoneofthepartiescontractsasagentsforthethirdperson–speltout4

propositions/prerequisitesforthevalidityofsuchanagencycontract:o 1)Thebillofladingmakesitclearthatthestevedoreisintendedtobeprotectedbytheprovisionsinitwhichlimit

liabilityo 2)Thebillofladingmakesitclearthatthecarrier,inadditiontocontractingfortheseprovisionsonhisownbehalf,

isalsocontractingasagentforthestevedorethattheseprovisionsshouldapplytothestevedoreo 3)Thecarrierhasauthorityfromthestevedoretodothatorperhapslaterratificationbythestevedorewould

sufficeo 4)Anydifficultiesabouttheconsiderationmovingfromthestevedorewereovercome

• Clause1ofthebillàdischargesthecarrierfromallliabilityforloss/damageunlesssuitisbroughtwithinoneyearafterdelivery–also,thecarrierasanagentforindependentcontractorsstipulatesthesameexceptions

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• Thecarrierwasindisputablyauthorizedbytheappellanttocontractasitsagentforthepurposeofclause1• Issuehereis#4àconsideration• Thisbecameafullcontractwhentheappellantperformeditsservicesbydischargingthegoods[unilateralcontract]–the

performanceoftheseservicesforthebenefitoftheshipperwastheconsiderationfortheagreementbytheshipperthattheappellantshouldhavethebenefitoftheexemptionsandlimitationscontainedinthebilloflading

ClassNotes:• Traditionalrule–cannottakeadvantageofthecontracttowhichyouarenotapartyifhavenotprovidedanyconsideration• HOWEVER,ifcouldprovethatthecarrierswereinthecontractasanagentforthestevedoresthenthestevedorescould

takeadvantageoftheprovisionsofthecontract• Becauseoftheprovisions–theyhavedeclaredanagencyrelationshipàhowever,therestillneedstobeconsideration• Usedunilateralcontractanalysistodeterminetheconsideration–theysaidtheconsiderationisthestevedoresperforming

theactofunloadingfromtheship–inexchangeforunloadingthegoodstheygettotakeadvantageofthelimitationclause• ISSUE=pre-existingduty?àShadwellvShadwellorPaoOn• Ifitwasbilateralthenthestevedorewouldbeunderadutytounload–anenforceabledutyàsayitisunilateral–a

promiseinexchangeforanact• Courtsaysbylookingatthecontractitiscleartheprovisionswouldapplytothestevedores–woulddefeatthe

arrangementsthepartiessetoutifallowedprivitytogetinthewayoftheprotectionofthestevedores• Contractalsostipulatesthatiftheywantmorethan100poundsofprotectionhavetoletcarrierknow–inthatcase,

carrierswouldinsurethegoods–[premiumswouldlikelybelessiftheinsurancepaidforbyshippers–whoshipgoodslessfrequentlythanthecarriersdo]

• Therealpartiestothiscaseweretheinsurancecompaniesforeachparty• Createscommercialcertaintyiftheclausethateveryoneagreedtoisappliedàifallowdoctrineofprivitytogetintheway,

thentheclauseisirrelevant• CanadiancourtsadoptedthisanalysisàITOvMaidaElectronics1986SCC[note2p.309]

o Thisnewanalysisavoidsthedoctrineofprivitytoallow3rdpartytotakeadvantageofaprovisionsinacontractthattheywerenotapartyto

E)Employment

• Adleràpassengerinjuredoncruise–sueemployees(captain+boatman)àcruiselinedidnotinjurethepassenger–anegligentemployeedid

o P+OLinessaidthattheywouldstandbehindtheemployeesandpayifsheclaimsdamageso Contractbetweenpassenger+P+Odidnotincludeemployees

• P.309Note2àGreenwichShoppingPlazaSCC1980[AdlerappliedinCanada]o Lawsuitinitiatedbyownerofshoppingcenter+leaseportionofittoCanadianTire–contractsayingiftherewasa

firecausedbyCTthatGwouldnotsuethem(Ggetsfireinsurance)o AfirewascausedbyCT’semployees(negligently)–GcannotsueCTsosuetheemployeeso SCCsaysbecauseofAdlerthattheemployeesareliable–clearlynegligent

• DifferencebetweenNZShippingàtheclauseexpresslyextendedtothestevedoresLondonDrugsLtd.vKuehne&NagelInternationalLtd.1992SCC[Exceptiontothethirdpartybeneficiarybar]Facts:

• OnAug.311981LondonDrugs[appellant]delivereda7500lbtransformertoKuehne[R]forstoragepursuanttothetermsandconditionsofastandardformcontractofstorage

• Transformerhadbeenpurchasedfromitsmanufacturer[FederalPioneer]andwastobeinstalledinthenewwarehousefacilitybeingbuiltbytheappellant

• Thecontractofstorageincludedalimitationofliabilityclauseàstatingthatthewarehouseman’sliabilityonanyonepackageislimitedto$40unlesstheholderhasdeclaredinwritingavaluationinexcessof$40andpaidtheadditionalchargespecified

• LondonDrugswasawareofthisclause+chosenottoobtainadditionalinsurance• 2employeesofKuehneweretoloadthetransformer[knewtheyshouldloadbyliftingitfromaboveusingbracketsasit

saysthatdirectlyonit]however,attemptedtodosobyusing2forklifts–thetransformertoppledoverw/damagescosting$33955

• LondonDrugsknowtheycannotsueK+Nthereforedecidetosuethe2employees• BCSCsaidthe2employeeswerepersonallyresponsibleforthedamages,limitingKuehne’sliabilitytothe$40

Issues:• Thedutyofcareowedbyemployeestotheiremployer’scustomers

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• Theextenttowhichemployeescanclaimthebenefitoftheiremployer’scontractuallimitationofliabilityclauseandthereforelimittheirliabilityto$40

Decision:• Yes–appealdismissed• Theemployeesareentitledtobenefitdirectlyfromthelimitationofliabilityclausebecausetheyarethirdparty

beneficiariesw/respecttotheclauseandbecausetheyweredealinginthecourseoftheiremployment+performingtheservicescontractedforwhenthedamagesoccurred

Ratio:• Thisrelaxationtothedoctrineofprivityallowsemployeestousetheiremployer’slimitationasshieldsinactionsbrought

againstthem,whenthedamagewascausedinthecourseofemployment,andwhiletheywerecarryingouttheveryservicesforwhichtheplaintiff(customer)hadcontractedwiththeiremployer

Analysis:[IacobucciJ]• Agreesw/therespondentsthatisthetimeforarelaxationofthedoctrineofprivityasappliedtoemployer’scontractual

limitationofliabilityclauses• Thisshouldberelaxedforthirdpartybeneficiariesofacontract–especiallyhere,whenusedasadefencetoanaction• Notsuggestingthatemployeesareapartytotheiremployer’scontractssothattheycanbringanactiononthecontractor

besuedforbreachofcontract• HOWEVER,whenanemployerandcustomerenterintoacontractandincludeaclauselimitingliabilityfordamagesarising

fromconducttobeperformedbyemployer’semployeesthereisnovalidreasontodenythebenefitoftheclausetoemployeeswhoperformthecontractualobligations

• Thenatureandscopeofthelimitationofliabilityclauseinsuchacasecoincidesessentiallywiththenatureandscopeofthecontractualobligationsperformedbythethirdpartybeneficiaries(employees)

• Employeesmayobtainbenefitsfromalimitationofliabilityclauseifthefollowingrequirementsaresatisfied:o 1)Thelimitationofliabilityclausemust,eitherexpresslyorimpliedly,extenditsbenefittotheemployees(or

employee)seekingtorelyonit,and§ [AKAtheemployerschoosewhethertoallowemployeesintotheclause]

o 2)Theemployees(oremployee)seekingthebenefitofthelimitationofliabilityclausemusthavebeenactinginthecourseoftheiremploymentandmusthavebeenperformingtheveryservicesprovidedforinthecontractbetweentheiremployerandtheplaintiff(customer)whenthelossoccurred

• Theemployeeswereinthecourseoftheiremploymentduties,performingtheservicesofthecontract,andtheclausedoesnotincludelanguagethatrestrictsthebenefitsolelytotheemployer[notexpresslystated–however,impliedàlanguagewasnotchosentomeantheemployeeswerenottobenefitfromtheclause–wasnoclearindicationtothecontrary]

ClassNotes:• Exclusionappliesexpresslytoemployees–here,thecontractmadementiontowarehousemen[theemployeeswere

warehousemen]• DifferencefromGreenwichShoppingPlaza–heretookabroadinterpretationofwarehousementosayitincludesK+Nand

allemployeesEdgeworthConstructionLtd.vNDLea&AssociatesLtd1993SCCFacts:

• Theappellant(Edgeworth)isengagedinthebusinessofbuildingroadsinBC–1977itsuccessfullybidonacontracttobuildasectionofhighwayintheRevelstokeareaandenteredintoacontractw/BCforthework

• Edgeworthlostmoneyontheprojectduetoerrorsinthespecificationsandconstructiondrawings+commencedproceedingsfornegligentmisrepresentationagainsttheengineeringfirmwhopreparedthedrawings(NDLea)aswellastheindividualengineerswhoaffixedtheirsealstothedrawings

Issues:• DoesthecontractbetweenEdgeworthandBCnegateorsubsumethedutyofcarewhichwouldotherwisehavearisenon

thefactspleaded?Decision:

• No–thecontractdoesnotassisttheengineeringfirminpreventingthemfromliability–appealallowedAnalysis:[McLachlinJ]

• Therepresentationsofthedesignbecametherepresentationsoftheprovince–butthisdoesnotestablishthatwhentherepresentationsbecamethoseoftheprovincetheyceasedtoberepresentationsoftheengineers–thecontractorwasrelyingontheaccuracyoftheengineer’sdesignjustasmuchafteritenteredintothecontractasbefore

• TheclauseprotectsBCfromanyliabilityfortheplans–however,itdoesnotpurporttoprotecttheengineersagainstliabilityfortheirrepresentations

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• NotsimilartoLondondrugsbecauseithereitwasnotestablishedintheclausethatitprovidesprotection+alsotheemployeesinLDwerevulnerable/notabletoprotectthemselves

• SeemsasthoughtheclausewasintendedfortheprotectionofBCalone–cannotinfertheywantedtoincludetheengineers

• Engineeringfirmcouldhavetakenmeasurestoprotectitselffromliability• Thecircumstancesofthecasecombinedw/thewordingoftheclausenegateanyinferencethatthecontractorshouldbe

takenashavingexcludeditsrighttosuetheengineersfordesigndeficienciesbyitscontractwiththeprovinceClassNotes:

• Aclauseinthetendercontractthatsaystheprovincecannotbeheldresponsibleforanydefectivedesignorcostincurredbydefectivedesignprovidedinthetender.Edgeworthsuesthedesignerofthehighway(N.D.)

• Thisisnotalawsuitonthemerits(attheendofthecaseanyonewillbeheldliable)-itisastrikeoutapplication-EdgeworthsuestheengineeringcompanyandN.Dsaystheyarebringinganapplicationtostrikeoutthestatementofclaim-allegethatthestatementofclaimifallthefactsareadmittedtobetrue,doesnotdiscloseagoodcauseofaction

• TheSCCfindsthatitispossiblethattheycanbeheldliable• McLachlin-Inprinciplecouldtheengineersbeheldliable?Basicrequirementsofnegligentmisrepresentation-engineers

undertooktoprovideinformationtobeused-knewthepurpose(contractorscomeupwiththebidpriceusingit)-Edgeworthreliedontheinformationfortheirbid-ifthatinformationwasnegligentlypreparedandEdgeworthsufferedlossasaresultoftheinformationtheyshouldbeheldliable

• Findsthattheengineersfulfilltherequirementsandcantheoreticallybeheldliable,unlesstheyarecoveredbyadisclaimerinthecontract-coveredbytheclauseinthecontractbetweentheprovinceandEdgeworth

• Thisdisclaimeronlyabsolvestheministryofliabilityformisinformation-itdoesnotincludetheengineers-thecourtsaysthatthereisnohintoftheengineersbeingincluded

• Isthereanythingtheengineerscouldhavedonetoprotectthemselves?Theycouldhaveputadisclaimerontheirplanstosaythattheengineerspreparedtheseplansfortheirclient(theprovince)andnooneelsemayrelyonthemwithoutthepresswrittenconsentoftheengineer-therepresentationwasmadetotheprovincenotEdgeworth-suchadisclaimerwouldforceEdgeworthtodotheirownchecksontheplansbeforeusingthem

• EdgeworthsuedbothN.D.Leaandthe2employeeswhodesignedtheplans-McLachlinsaidtheindividualengineersonlyowedadutyofcaretotheiremployerandnottoEdgeworth(disposedoftheactionagainsttheemployees)

• Lafaresaidtheessenceofliabilityfornegligentmisrepresentationisreliance(theygaveadviceanditwasreliedupontothedetrimentofEdgeworth)-butEdgeworthwasnotrelyingonthe2specificengineers,butratherwererelyingonN.D.-unreasonableforthemtorelyonthetwoemployeeswhomadethedesign

• Thecircumstancesforwhichapersoncanbeheldliableforwordsthatcausefinanciallossaremuchlessrestrictivethanforcaseswherenegligentactscausephysicaldamage

Negligentmisrepresentationisanunusualtypeoftort–itinvolvesgivinginformation/advicetosomeone–givingadvicetoclients,etc.–italwaysinvolvesacommunicationbetweenthepersonwhomakestherepresentationandthepersonwhoreceivesit

o Therefore,havetheabilitytogiveinformation/adviceoncertainconditions–couldbe“youcannotrelyonitinanywayandIwillnotbeliableifyoufollowthislossandincurloss”–generallycannotsaythisornoonewouldhireyou;couldsaythatotherpeoplecannotrelyonthisinformation[disclaimresponsibility]

• Ex.Engineerhiredbymunicipalitytodesignwastemanagementsite–engineermustdoagoodjobfortheclientbutcanaddastatementthat“thedesignissolelyforbenefitofclient+maynotberelieduponbyanyoneelseunlessobtaintheirconsent”

• Alsosuedthe2employeeswhodesignedtheplans+fixedtheirstampstoit:o 1)Courtsaidtheindividualengineersowedadutyofcaretotheiremployertocarefullyemploythedesignbutnot

tothestrangerswhomightuseito 2)Thereasonapersoncansuefornegligentlegaladviceisreliance–buttherelianceisnotonthe2individual

engineersbutonND

F)Subrogation• Subrogationisatermdenotingalegalrightreservedbymostinsurancecarriers.Itistherightforaninsurertolegally

pursueathirdpartythatcausedaninsurancelosstotheinsured.Thisisdoneasameansofrecoveringtheamountoftheclaimpaidbytheinsurancecarriertotheinsuredfortheloss.

• Therightofsubrogation:RelationshipbetweeninsurancecompanyandinsuredàInexchangeforinsurancecompaniescoveringtheloss,thepersonmustallowtheinsurancecompanytherighttotakeactionagainsttheotherpartyintheinsured’sname[theinsurancecompanyhasbeengiventherighttostandintheinsured’sshoes]

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o Usually(incaraccidents)theotherpartyisinsuredaswell–theinsurancecompanyfortheotherpartywillalsostandintheinsured’sshoes

• Ex.CanruinrelationshipsàGreenwich+CanadianTireo Tenantsaidlandlordcouldnotsue–Ifgetawaiverofsubrogationrights[willnotallowtheinsurertotakean

actionagainstyou]–thismeansthetenantswouldnothavetogetinsurance–becausethereisablanketpolicycoveringthem

FraserRiverPile&DredgevCan-DiveServicesLtd.1999SCCFacts:

• Abargebelongingtotheappellant(FraserRiver)sankandatthetimeitwasunderchartertoCan-Dive• Insurancecompaniesgenerallyhavetherighttostepintotheshoeoftheinsuredandtosuetowrong-doer• ThecontractofinsurancebetweenFRandtheinsurercontainedaclauseunderwhichtheinsurerwaiveditsrightto

subrogation(waiverofsubrogation)o “Theinsurerwaiveditsrighttosubrogationagainst‘anycharterer’andextendedcoveragetoaffiliatedcompanies

andcharterers”o [DoesthismeansCan-Divedoesnothavetoinsurethebarge–cannotbeliable?]

• AfterbargesankinsurancecompanygoestoFraserRiverw/themoneyandaskedtocancelthewaiverofsubrogationandagreeintheirnametocommenceanactionagainstCan-Dive

Issues:• Doesthisclauseextendtothethird-partybeneficiary?CouldCan-Divetakeadvantageofaclauseinacontracttowhichit

wasnotaparty?Decision:

• Yes–appealdismissedAnalysis:[IacobucciJ]

• LondonDrugsfactors:o 1)Didthepartiestothecontractintendtoextendthebenefitinquestiontothethirdpartyseekingtorelyonthe

contractualprovision?o 2)Aretheactivitiesperformedbythethirdpartyseekingtorelyonthecontractualprovisiontheveryactivities

contemplatedascomingwithinthescopeofthecontractingeneral,ortheprovisioninparticular,againasdeterminedbyreferencetotheintentionsoftheparties

• Duetothewordingoftheclause+‘charterers’thereisnoquestionthatthepartiesintendedtoextendthebenefitinquestiontoaclassofthird-partybeneficiarieswhosemembershipincludesCan-Dive

• Thewordinghereexplicitlyincludesthemwiththeexpressreference–whereasinLondonDrugsitwouldanimplicitassumption

• HeretherelevantactivitiesaroseinthecontextoftherelationshipofCan-DivetoFraserRiverasacharterer,theveryactivityanticipatedinthepolicypursuanttothewaiverofsubrogationclause–secondrequirementhasbeenmet

• Whensophisticatedcommercialpartiesenterintoacontractofinsurancewhichexpresslyextendsthebenefitofawaiverofsubrogationclausetoanascertainableclassofthird-partybeneficiaryanyconditionspurportingtolimittheextentofthebenefitorthetermsunderwhichthebenefitistobeavailablemustbeclearlyexpressed

ClassNotes:• Can-Divewascoveredbythecontract:• 1)Inthiscontract,thepartiesclearlyintendeditshouldcovercharters–thiswasexplicitlymentioned• 2)Can-Divewasperformingactivitiesthatwerecontemplatedunderthecontract• Thecasesaysthatitisanalogoustotheearlier3rdpartybeneficiariesbecausethecharterswereperformingtheactivities

contemplatedandthereforecoveredbyit• WhatwasFraserRiver’sbestargumentagainstCan-Dive?

o Justbecauseacontractismadeforthebenefitofanotherpersondoesnotmeanthepartiestothecontractcannotchangetheirmindsàareabletochangetheirmindstothecontract

o Can-Diveisnotapartytothecontract–nothingisstoppingthepartiesfromchangingtheirmindsandcancellingthearrangementsthatbenefitedCan-Dive

o ArguethatiffindCan-Divecanusethebenefitsasa3rdpartythenreducestheautonomyoftheparties• Courtsaidno–theycouldhavedoneitbeforetheaccident,butbythetimetheydidittheaccidentalreadyoccurredàby

thetimetheycancelledthewaiver,Can-Dive’srightshadcrystallized(theveryactcontemplatedbythewaiverofsubrogationhadhappened=toolatetocancel)–cannotretroactivelyremovethewaiver

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• Ineachcase,thecourtsaremakingsmallexceptionstothedoctrineofprivity–buthowfarcancourtsgoinreformingprivityontheirown?

• IfAandBcontractsforbenefitofC,canAandBchangetheirminds=CanadasaysNOoncetherightshavecrystalized,butyesupuntilthattime

• DotheyhavetoinformCifareawareCisstillrelyingonit?• Thiscaseleavesopenthesepolicydetails–somearedealtwithbylegislationhoweverlegislationdealswithitindifferent

wayswithavarietyofsolutions

PrivityandContractTheory• Ithasbeenarguedthatthethirdpartybarisinconsistentwitheverytheoryorapproachthathasbeenofferedtojustify

eithertheexistingortheidealstateofcontractlaw

CONTINGENTAGREEMENTS

Introduction• Thecharacterizationofanagreementasacontractentailsadefinedsetoflegaloutcomes–thepartiesareboundto

performtheobligationsimposedbyitstermsorbeliableforfailuretodoso• Ifrefusetoproceedinthemanneragreedcanconstituteabreachsupportinganawardofdamages(putinnocentpartyin

positionthepersonwouldhaveoccupiedifthepromisewouldhavebeenperformed)orspecificperformance• “Condition”isunderstoodtorefertoacontractualtermofsuchimportancethatitsbreachbyonepartyentitlestheother

tobothclaimdamagesandtoterminatethecontract• Itisthefailureofapromisedperformanceorstateofaffairstomaterializethatconstitutesadischargingbreachbythe

promisor–therefore,theconditionispromissory• Acontingentconditiondescribesaneventorstateofaffairsthatneitherpartytoacontracthaspromisedwillcomeabout,

buttheoccurrenceofisaprerequisiteoftheirobligationtoperformtheircontractualobligationso Sinceitdoesnotembodyanobligationundertakenbyeitherpartyitcannotbebreachedo Unlessotherwisestated–thefailureoftheconditionsimplybringsthecontracttoanendo Ex.“Iagreetobuyyourhousefor$50,000subjecttoobtainingamortgagebyMar21”

• 2sortsofterms–1)promisesor2)conditions• Exampleconditionsforbuyingahouseà1)finance;2)buildingreport• Doesthismeanbothpartiesareboundby1)thecontractonthatdayor2)istherenocontractuntiltheconditionsare

satisfied?o ContractToday:

§ Cannotselltoanyoneelse/takeadvantageofrisingmarket§ Tiedpropertyupuntilconditionsaresatisfied

o NoContract:§ Thepersonnevertriestoobtainamortgage–here,wouldbenoissuebecausenocontract

• Oldlawterminologyà“Thereisnocontractuntiltheconditionissatisfy”=thecontractissubjecttoaconditionprecedent–existenceofcontractdependsonfulfillmentofcondition

o Butifotherpersondoesnotmakereasonableeffortstofulfillthecondition,aretheyfreefromliability?• Theotherapproach–thereisacontractbutthepartyhasawayoutifconditionsiffulfilled–conditionsubsequent

o Ex.DawsonvHelicopterExploration–classifiedDawson’sgettingleaveasaCS[contractisnotfullybindingbutthepartiesarebound+Dawson’sdutyistotakereasonableeffortstoobtainleave–iffails,thecontractisoff]

§ IfDawsonneverasksforleave,Dawsonisinbreachofthecontract• Example-Mortgagesubjecttoobtainingmortgagefrombank

o CP=IfmortgageisnotthereonMar.21thecontractisoffo CS=Ifpersontakesreasonablestepstoobtainmortgageandbanksturnshimdowncontractisoff;otherwiseitis

stillon• Issuewhenaconditionissosubjective(onepartyisbound,andtheotherhasa“free-wayout”)• Example-Subjecttoobtainingsatisfactorybuildingreport

o Issue–ifleftsubjectivethecourtswillhavehardtimedeterminingthereisagoodcontract• Example-“Subjecttomyinspection+approval”

o Courttendstosaythattheconditionissosubjectivethatitisnotreallyacontract,becauseonepartyinrealityhasnomeasurableobligations

• Example–p.337“subjecttoapprovalofcompany’spresident”o Courtsaysthereisnocontenttocorporationspromisethatitwillbuythisland

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• P.338–SmallmanvSmallman

o Agreementreachedwassubjecttotheapprovalinduecourseofthecourto Thisdoesnotmeanthereisnoagreementatall–buttheoperationofitissuspendeduntilthecourtapprovesand

ifcourtapprovesitisbindingonthepartieso Contractualduties–someonehastogotocourtandseekapprovalo Bothpartiesclearlyexpectedtheretobeacontracto TechnicallyaCS–goodcontract(fullyonandenforceable),unlessoncegotocourtandfailTHENitis

unenforceable• Mustdetermine1)Isthereacontractonthatday+2)whatisthenatureofthecondition–cantherebeobjectivecontent

giventothecondition?• Aconditionprecedentisacontingentcondition:

o I)Itisatermofanexistingcontractasopposedtoatermofanoffertocontract,o II)Whichdescribesaneventorstateofaffairstheoccurrenceofwhichhasnotbeenpromisedbyeitherparty,ando III)Whosefulfillmentisaprerequisiteoftheobligationofbothtocompletethecontract

• Aconditionsubsequentisaprovisionandthefulfillmentofitshalldischargeeitheroneofthepartiesfromfurtherliabilitiesunderthecontract

o Lesscommon+lesslikelytoraiseconceptualissue• P.336PlantationsCase[noobligationsuntilconditionsarefulfilled]

o Buyerwantstobuylandbutthereareleases;Buyerwantstobuysubjecttorenewaloftheleaseso Purchaseisconditionuponvendorobtainingrenewaloftheleaseandifvendorunabletheagreementshall

becomenullandvoido Vendorwasunabletoobtainrenewalo Isthereagoodcontractonthedaytheysignedthedeal?àPCfoundthatgiventhenatureoftheconditionthere

wasnocontractbecausecontractwasconditionalupontheconditionbeingsatisfied(aconditionprecedent)o Thewayitwasworded–astheentirepurchasebeingconditional

• CarlislevTheCarbolicSmokeBallo Condition–advertisementdidnotaskpeopletocatchtheflu,thereforeitwasaconditiontocatchthefluandthe

considerationwastousethesmokeball3xdayfor2weeksàcontractwasinsuspensewhileusingthesmokeball+wasnotinfullforceuntilshecaughttheflu

o Canrevokeanofferunilaterallybutcannotrevokeacontractunilaterally• DawsonvHelicopterExplorationCompany

o P.65àtermsofcontract–ifyouinformmeifandwhenyouobtainapilotIwilltakestepstotaketimeoffwork–willshowwhereclaimsifgetpilot,butworriedaboutnotbeingabletogetleave[notsayinghewillobtainleavebuttakestepstoobtainleave]

o P.66àunqualifiedpromissoryacceptance–takeintoshowingssubjecttoperformancetohisbeingabletoobtainthenecessaryleave

§ Thismeansthereisacontract(anunqualifiedpromissoryacceptance)subjecttoperformancetohisbeingabletoobtainthenecessaryleave(thecondition)àthisconditiondoesnotapplytothewholecontractbutonethatgoestoDawson’sperformance

§ AKAhemustperformthecontractsubjecttoonecondition[totakestepstoobtainleave]–performanceissubjecttoacondition

o P.67àconditionnotfulfilled[hasnotobtainedleave]butheisstillunderacontractualdutyo Thereisstillacontractbeforeheobtainsleave–hestillhascontractualdutiestofulfillo BUTDawsondoesnothavetoperformthemajorpartofthecontractinoneevent[wherehisperformanceis

excused]o Thisconditionhereisoneofaconditionsubsequent–thereisacontractbutintheeventthatacertaincondition

happens,Dawsonisnotunderadutytoperformo Also,aconditionontheperformanceofthehelicoptercompanyaswell[ifcannotfindapilot]

• Sometimesitisnotthecontractthatisconditional,buttheobligationtoperformcertaindutiesduringthecontract

Intention,Certainty,andConsideration

• Thequestionofwhetheracontractiscreatedbylanguagerequiringthesatisfactionofacontingencyisdeterminedinpartybytheintentionoftheparties

• Therequirementofconsiderationandcertaintyoftermsmayalsoaffectcontractformation

46

• Thedifferencebetweenanoptionandaconditionaloffertocontractliesinthepresenceorabsenceofconsideration–anoptionentailsapresentcontractualobligationonthepartofBobtorefrainfromtakingactionthatwillprecludetheeventualformationofthecontemplatedprimarycontract

WiebevBobsien1985BCSCFacts:

• BobsienisacontractorandownsthepropertyonCrescentBeachRoad• WiebehadtitletoahouseinPortMoody+madetheoffertopurchasetheCrescentproperty• Theybothsignedaninterimagreement(June221984)àdepositprice,purchaseprice,completiondate,salesubjecttoW

sellingPortMoodyresidence(onorbyAug18),sellerretainedrighttosellthepropertytoanotherpurchaserifonecouldbefound/getsbetteroffer+inthiseventWhad72hourstoremovetheconditionprecedent(akatowaiveit)

• IfWdidnotsellhisresidencebyAug.18hewasentitledtoterminatetheagreementandreceivebackthedeposit• July22Bdecidedhenolongerwantedtogothroughwiththesaleandinformedtheplaintiffofthisbytelegram;Wdidnot

acceptthiscancellationandgoesaheadtosellthePortMoodyresidenceandonAug18hewassuccessfulinobtainingabuyer(CPissatisfied;Wgavetheadditionaldeposit)

• AtthecompletionBrefusedtoclosetheoffer/saidtherewasnocontract• Sellerissayingitismerelyanoffer+hehasawayoutuntilWsoldhisPortMoodyhome

Issues:• IstheinterimagreementaformofoptionthatcouldbecancelledbythedefendantpriortoAug18orisitabinding

agreementforthesaleandpurchaseoftheCrescentBeachproperty?Decision:

• TheagreementwasbindingbutinsuspenseuntilthePortMoodyhomewassold,andwhenitwassoldthedefendantwasthencontractuallyboundtosellthepropertytothepurchaserbecausetheagreementwasnolongerinsuspense–thedefendanthadnorighttocancelthecontract

Ratio:• ThereisageneralrulethatinarealestatetransactionaCPwhichmustbeperformedbythepurchaserwillnotusually

preventtheformationofacontractbutwillsuspendthecovenantofthevendortocompleteuntiltheCPismetbythepurchaser

Analysis:(BouckJ)• Aconditionprecedenteither1)preventsthecreationofacontract,orit2)merelysuspendsperformanceofsomeorallof

theobligationsetoutinthecontractuntiltheconditionismet• 3)TherearealsoCPthatgiveproblemsbecausetheyaresosubjectivetheycannotgiveanycontenttothem(alsoallows

buyertosayatanytimehedoesnotwanttogoaheadwithit–givesapartyafreewayout)1.CircumstanceswhereaCPpreventstheformationofacontract

• Atransactionmayhavetheappearanceofanoptionhoweveritisnotatrueoptionifgivenneitherundersealnorforconsideration

• ACPmaybeofanaturethatcreatesnobindingagreementoritmayjustactasaningredientwhichsuspendsperformanceofanotherwisecompletecontract

• CPthatimplyaconditionofwhim,fancy,likeordislikeconstituteanillusorycontractthatwasnoagreementatall2.CircumstanceswhereaCPsuspendstheperformanceofthecontract

• ThelawseemstoleaninfavortheconceptthatwherethereisaCPacontractisformedonsigningbytheparties• Aconditionmeansthereisstillabindingagreement,howevertheoperationofitissuspendeduntiltheconditionisfulfilled

–iftheconditionisnotfulfilleditisnotbinding,butifitisitremainsbindingSummary:

• 1)ArealestatecontractcontainingaCPwillusuallyresultinabindingagreementofsale+purchaseandtheobligationtocompletethecontractismerelyinsuspensependingtheoccurrenceoftheeventconstitutingtheCP

• 2)Sometimes,aCPmaypreventformationofacontractiftheagreementitself+surroundingeventsindicateitwasnevertheintentionofthepartiestobindthemselvestoacontractofsale+purchase

• 3)Here,thecontract+surroundingeventsindicatethepartiesintendedtoreachaconsensuswhentheyexecutedtheinterimagreementonJune22

• 4)Completionofthesalewassuspendedpendingdispositionoftheplaintiff’sPortMoodyhomeonorbeforeAugust18,1984–hehadadutytotakeallreasonablestepstosellthehouse+ifhefailedtodosohewouldbeinbreach+liabletodamages

• 5)WhenthePortMoodyresidencewassold,thedefendantwasthencontractuallyboundtosellthepropertytothepurchaserbecausetheagreementwasnolongerinsuspense–thedefendanthadnorighttocancelthecontract

ClassNotes:

47

• Thiscaseisnotfreefromdoubt–notcertainhowaggressivelyhehastosellthehousewhetherhecanturndownoffers?àisitasubjectiveorobjectivecondition?

• Thecontractisnotconditional;itisW’sdutytoperformthatisconditional• Towhatextentaretherebindingobligationstoday,beforetheconditionsarefulfilled?• IfdecidetherearenoobligationsuntilWsoldhisPortMoodyhousethenwouldhavetosaythereisnocontract,and

thereforeBcouldrevokehisoffero Theydefinitelydidnotintendthistobethecase–likelytheybothknewtheyhadenforceableobligationsbefore

WsoldhisPortMoodyhouse• Dotheywantanimmediatelybindingcontractw/certainwaysoutORnobindingobligations?

o Mustlookattheparties’actionsWiebevBobsien1986BCCADissent:(LambertJA)

• EachCPcasemustbeconsideredonitsownfacts• 1)SomeCParesoimpreciseordependentirelyonthesubjectivestateofmindthatthecontractprocessmuststillbe

regardedasattheofferstageo Ex.Subjecttoapprovalofthecorporatepurchaser

• 2)WheretheCPisclear,precise,andobjectiveacontractiscompleted+neitherpartycanwithdraw,buttheperformanceofitisheldinsuspenseuntilthepartiesknowwhethertheCPisfulfilled

o Ex.SubjecttoJohnSmithbeingelectedasMayorintheelectiononOctober15• 3)Conditionsthatarepartlysubjective+partlyobjective

o Ex.Subjecttoplanningdepartmentapprovaloftheattachedplanofsubdivisiono Thishasbeendealtw/byimplyingatermthatthepurchaserwilltakeallreasonablestepstocausetheplantobe

presentedtotheplanningdepartment+takeallreasonablestepstohaveitapproved§ ThelawinrelationtoimplyingtermsintoacontractisnodifferentforCP’s

• However–therewillbetimesinthis3rdcategorywhereitwillbeimpossibletoimplyamissingtermandtheagreementwillfailforuncertainty–there,thecourtcannotwriteacontractfortheparties

• Believesinthiscase–theCPwasuncertainandcouldhavebeenturnedcertainbythepurchasersellinghishouse,butuntilthentheinterimagreementremainedastandingofferrevocableatthewillofthevendoronreasonablenoticetothepurchaser

• Here,thestandingofferwaswithdrawninampletimethereforenocontractofpurchaseandsaleeverarose• Candealw/thisproblembystatingtheprice+essentialtermsuponwhichthepurchasermustsellhishouse–thenthe

courtcanimplythetermthatthepurchasermustmakeallreasonableeffortstosellatthatpriceandonthosetermsNotes:

• Needtohaveafloorpricingincondition–orelseunsuretodeterminehowtomeasuredamagesby• Here,whathasbeenlostisthechancetosellthehouse

p.826–ChaplinvHicks[LossofanOpportunity]• Argument–impliedtermthatbeingselectedshewouldhaveareasonableamountoftimetopresentherselfforthe

interview,andindoingsowasachanceshewouldgetoneofthecontracts• Suesforherchancetogetapriceinthebeautyactresscompetition• Howtovalueanopportunityshewasentitledtogetbutlossthechancetodoso–awardeddamagesof100pounds[valued

herchanceofthepriceat100pounds]• Shehadbeendeprivedofsomethingofvalue

**Hadthissametypeofproblemw/potentialoflossinWiebevBobsienReciprocalSubsidiaryObligations

• ContractualobligationsthatfalltobeperformedonlyuponsatisfactionofaCPmaybedescribedastheparties’primaryobligations–theyaretheobligationsthatrelatetotheultimateobjectiveofthecontract

• Inrealestatetheprimaryobligationsarethosethatgiveeffecttothesale–essentially,paymentofthepurchasepriceontheonehand,anddeliveryoftitleandpossessionontheother

• However,thatacontractexistsbeforetheprimaryobligationsbecomeoperativemeansthatthepartiesaresubjecttootherobligationsinthemeantime–subsidiaryobligations

• Thesecanbetheobligationtorefrainfromwithdrawingfromthecontract,butusuallytherewillbeanimpliedsubsidiaryobligationtotakestepstobringaboutthestateofaffairsconstitutingfulfillmentofthecondition

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DynamicTransportvOKDetailingLtd.1978SCCFacts:

• ThisisanactionforspecificperformancebroughtbyDynamic(purchaser)toenforceacontractw/OK(vendor)forthesaleofland

• Thesalepricewas$53,000andthelandisworth$200,000bythetimeitwenttocourt• Saleofthelandwassubjecttosubdivisionapproval• OKsaysthecontractisunenforceableon2grounds–1)thedescriptionofthelandissovague+uncertainthat

identificationisimpossible;and2)thecontractissilentastowhichpartywillobtainthesubdivisionapprovalrequiredunderthetermsofthePlanningAct

Issues:• Isthecontractunenforceableduetouncertaintyofthedescriptionofthelandorduetothecontractbeingsilentonwhich

partywillobtainthesubdivisionapproval?Whohastoapplyforsubdivisionapproval?[quicklyansweritistheseller]• Howdowevaluethechancethatiftheotherpartyhaddonewhattheyaresupposedtodo,thebuyerwouldhavegotten

whattheywanted?Decision:

• TheappellantisentitledtoadeclarationthatthecontractbetweenthepartiesisbindinginaccordancewithitstermsincludingtheimpliedtermthatOKwillseeksubdivisionapproval

• ThereisnodoubtthepersonwhohastobringanapplicationforsubdivisionistheownerRatio:

• Thecourtwillreadilyimplyapromiseonthepartofeachpartytodoallthatisnecessarytosecureperformanceofthecontract

Analysis:(DicksonJ)• ThestatutoryprerequisitebecameanimpliedtermofthecontractandtheobtainingofthesubdivisionapprovalwasaCP• Thepartiescreatedabindingagreement–theobligationsweremerelyinsuspensependingtheoccurrenceoftheevent

constitutingtheCP• Inaformofcontractwherethelandissold‘subjecttoplanningpermission’–apromisetoobtainthepermissioncouldnot

beimpliedhowever,courtshaveimpliedapromiseforthepurchasertousehisbestendeavorstoobtainthepermission• Thiscaseisaspecificinstanceofthegeneralprinciplethat“thecourtwillreadilyimplyapromiseonthepartofeachparty

todoallthatisnecessarytosecureperformanceofthecontract”• Inthepurchase+salesituation,the‘personwhoproposestocarryoutasubdivisionofland’istheintendingvendor–itis

hewhomustdividehisparceloflandforthepurposeofsale• Thepurchasercouldonlydosointhevendor’snameandashisagent• Thevendorisunderdutytoactingoodfaithandtotakeallreasonablestepstocompletethesale

Notes:• Rangeofdamagesdependsonlikelihoodontheotherpartyperformingtheirsideofthebargainandtheagreement

actuallybecomingfulfilledRemediesforBreachofSubsidiaryObligation

• Theprincipalremedyforabreachofcontractisanawardofdamagesdesignedtoputthevictimofbreachinthepositionheorshewouldhavebeeninifthecontracthadbeenperformed,sofarascanbedonethroughanawardofmoney

o Extentofdamagesiswhetherthepersonwouldhavesucceededinproperlyperformingtheirendoftheagreement

• Courtalwayscanawardspecificperformance–thisisgenerallynottobeawardedwheredamageswilladequatelycompensatetheplaintiffforhisorherlossandwillrarelybeapracticaloption

• InDynamic,specificperformancewasawardedforbreachoftherespondent’sobligationtomakebesteffortstoobtainsubdivisionapproval+iftherespondentfailedtheappellantwasentitledtodamagesbasedonthelossoftheappellant’sbargain(differencebetweencontractprice($53,000)andthemarketpriceofthelandthatwassubjecttothecontractofsale($200,000))[p.347]

o Unusualremedyàspecificperformanceasorderedherewouldrequirealotofjudicialsupervisiono Wealsodonotknowwhetherthiswouldoccuriftherespondentwouldhavesucceededinapplyingforsubdivision

approval,theywouldhavebeenrefusedànotsurethiscaliberofdamagesherewouldbeappropriatetheno Proper/betterapproachàIfvendormadeproperapplicationwhatwouldhavebeenchancesofsuccess

• Whatthevictimofthebreachhaslostisthechancetorealizethebenefitthatwouldhavefollowedfromfulfillmentofthecondition

• Aplaintiffwhorequestsspecificperformancemayendupneitherperformancenordamages–facestheriskthatgenuineeffortsmadebytheotherpartytoobtainfulfillmentofaconditionasorderedbythecourtwillfail

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EastwalshHomesLtd.vAnatalDevelopmentsLtd.(1993)ONCAFacts:

• Theappellant,AnatalDevelopmentsLtd.,enteredintoanagreementtoselltotherespondent,EastwalshHomesLtd.(‘Eastwalsh’),abuilderofhomes,147buildinglotsoutlinedinaproposedplanofsubdivision

• Itwasanexpressedconditionoftheagreementthat“Anatalwoulduseitsbesteffortstohavetheplanofsubdivisionregisteredpriortothedatefixedforclosingofthesale”–andthatbyfailingsuchregistrationtheagreementwouldbeterminated

• Theplanwasnotregisteredwithintherequisitetimeperiodandthesalefellthrough[Anatalmadethepropersubdivisionregistrationbutitwasnotapprovedbythedate]

• EbroughtthisactionagainstAclaimingspecificperformance,oralternativelydamagesforbreachoftheagreement(sayingAdidnottryhardenough)

• Trialjudge–Adidnotusebesteffortsandifwouldhavethentherewouldhavebeena50%chancethattheplanofsubdivisioncouldhavebeenregisteredwithinthecontractualtime-periodandthetransactioncouldhaveclosed+awardedE50%oftheincreasedmarketvalueofthelotsoverthesameprice(halfoftheexpectedamount),amountingtodamagesof$2020780[thelosstoEinbeingdeprivedoftheopportunitytopurchase147lots]

• Trial–didnotawardEspecificperformanceandheldEwasentitledtodamagesonlyforthebreachandrejectedtheirclaimforlossofprofitsholdingthatEcouldhavereasonablymitigateditslossesbybuyingsimilarlotsavailablebuttooknostepstodoso

Issues:• ShouldEbeawardeddamagesforthebreachofcontractandpotentiallossofopportunity?

Decision:• Chancelosttooinsubstantialtojustifyanythingmorethannominaldamages• Appealallowed

Ratio:• Inassessingdamages,thecourtmustdiscountthevalueofthechancebytheimprobabilityofitsoccurrence

Analysis:(GriffithsJA)• Trialwasrightinprincipal(valuationofthelossofthechance)butwronginresult• Thegeneralruleisthattheburdenisontheplaintifftoestablishonthebalanceofprobabilitiesthat,asareasonableand

probableconsequenceofthebreachofcontract,theplaintiffsufferedthedamagesclaimed–ifunabletoestablishaloss,orifthelossprovenistrivial,theplaintiffmayrecoveronlynominaldamages

• Thesecondfundamentalprincipleisthatwhereitisclearthatthebreachofcontractcausedlosstotheplaintiff,butitisverydifficulttoquantifythatlossthedifficultyinassessingdamagesisnotbasisforrefusaltomakeanawardintheplaintiff’sfavor

o Ifplaintiffcanonlyprovethe‘chance’ofreceivingabenefithadthecontractbeenperformed,ratherthanrefusingtoawarddamages,thecourtshaveattemptedtoestimatethevalueofthelostchanceandawardeddamagesonaproportionatebasis

o Proofoflossofamerechanceisnotenough–theplaintiffmustprovethatthechanceconstitutes‘somereasonableprobabilityofrealizinganadvantageofsomerealsubstantialmonetaryvalue

• Thisiswhatthetrialjudgedidhere–foundthathadAnotbreachedthecontracttherewasa50%chancethattheplanofsubdivisionwouldhavebeenregisteredandtransactionofsalecouldhaveclosed

• BUT,donotagreew/trialjudgeinresultànotwithstandingthebreach(evenifAworkedashardaspossible)thetransactionwouldnothavebeencompletedwithinthecontractperiod[mustshowtherewasareasonableprobabilityofreceivingtheadvantageyoucontractedfor];Therefore,theyneverreallylostthechance

• EdidnotsatisfytheburdenherebyprovingthatifAdischargeditsbesteffortstherewasareasonableprobabilityofregistrationoftheplanbeingachievedwithinthetime-frameofthecontract–thechanceElosswastooinsubstantialtojustifyanythingmorethannominaldamages

ClassNotes:• Whatdatedidtheysaydamagescouldbecalculatedfrom?

o Dateofrepudiation(dateofthebreach)untilthedateofmitigation(keeptoreasonableminimum)o Youareentitledtodamagessufferedfrombreachofcontractbutmusttakereasonablestepstomitigate(keepto

areasonableminimum)thoselosses• Here,therewerelotsofopportunitiestobuysimilarland–oncetheyknewthecontracthadbeenrepudiated(Asaidthey

werenotgoingtoperformit)theyshouldhaveboughtotherlandfortheirproject• Damagesfromthebreachuntilthetimethattheyshouldhavebeenabletomitigatethelosses

50

UnilateralWaiver• Ex.“SubjecttoobtainingmortgagebyMay,1”–donotobtainmortgagebutgoingtogow/itanyway(willpayinallcash)

àcantheCPbewaivedbyeitherparty?[thisprotectionishereforthebuyer–easyCPcase]• Thebiggerissue–withthesubdivisionapprovalcasesàlessclearthisCPishereforthebuyer’sbenefit

o Buyer–‘IwaivetheCPofrequiringsubdivisionapproval’àisthisallowed?• Aconditioncharacterizedasatrueconditionprecedentcannotbewaivedbyeitherpartyregardlessofwhetheritwas

intendedtobenefitoneofthemTurneyvZhilka1959SCCFacts:

• Adefencepleadedwasthatthepurchaserfailedtocomplywiththefollowingcondition:“ProvidingthepropertycanbeannexedtotheVillageofStreetsvilleandaplanisapprovedbytheVillageCouncilforsubdivision”

• Thedateforcompletionofthissaleisfixedwithreferencetotheperformanceofthiscondition–60daysafterplansareapproved

• Aftertroublearoseoverquantityanddescriptionoftheland,thepurchaserpurportedtowaivethisconditiononthegroundthatitwassolelyforhisbenefitandwasseverableandsuedforspecificperformancewithoutreferencetotheconditionandthetimeforperformancefixedbythecondition

• ThetrialjudgefoundthattheconditionwasoneintroducedforthesolebenefitofthepurchaserandhecouldwaiveitIssues:

• Canthepurchaserwaivethecondition?Decision:

• No–buyercannotwaivetheCPRatio:

• AtrueconditionprecedentcannotbeunilaterallywaivedAnalysis:(JudsonJ)

• Herethereisnorighttobewaived–theobligationsunderthecontractonbothsidesdependuponafutureuncertainevent–thehappeningonwhichdependsonthewillofathirdparty

• Thisisatrueconditionprecedent–anexternalconditionuponwhichtheexistenceoftheobligationdependsanduntiltheeventoccursthereisnorighttoperformanceoneitherside[thepartieshavenotpromiseditwilloccur]

• Untilitisfulfilled–thereisnocontractNotes:

• Thisseemstobeanillogicalconclusion–othercaseshaveallowedtheretobedutiesbeforetheconditionprecedentisfulfilledandacontractisformallycreated

• Caseinlastparagraph(1976)àsalesubjecttoplanningapprovalandifagreementnotsatisfiedtheagreementshallbenull+void

o Purchasersayshewantstowaivetheconditionandtakethelandanywayo SCCisforcedtore-evaluatetheruleinTurneyo UpholdtherulinginTurney–whenpartieshavedraftedacontractsubjecttoaCPandifthepartieshavesaidif

thisconditionisnotfulfilleditisnull+void,thenthecourtcannotrewritethecontractandthepurchasercannotwaivetheCP

o DOnotwantpurchasertohavetheabilitytowaivetheCPifthevalueofthelandisgoingup,butthentositbackanddonothingifthelandvalueisgoingdown

o Evenifforthepurchaser’ssolebenefit–doesnotmatter;itwouldinvolvethecourtrewritingthecontractthatsaysitisnullandvoid

• Thisruleisrestrictedtocasesofwaivero Therearestillsubsidiaryobligationsforothercontracts

Note:• GoodadvisorswillneverendupdraftingacontractthatsaysitissubjecttoaCPandifthatisnotfulfilledthecontractis

nullandvoid• DonotputinaCPinawell-draftedcontract–insteadputinaCS• “Ifafterreasonableeffortshavebeenmade,thelandisstillnotsub-divided,thepurchasermaybutneednotdeclarethey

arewillingtoproceedwiththeagreementӈsayingthereisacontract,howeverthereisawaytogetout

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RepresentationsandTerms

Introduction• Statementsmadeduringthecourseofnegotiationsleadinguptoacontractmayormaynotbecometermsofthecontract

–fallinto3broadcategories:o 1)Therearestatementsmadew/ocontractualintent–‘merepuffs’or‘salestalk’withnoliabilityattachedto

them–thesedonotamounttoastatementfact[noliability]o 2)Pre-contractualstatementsmaybecategorizedasmererepresentationswhicharenottermsofthecontract

butwhichcanleadtolimitedlegalconsequenceso 3)Astatementmaybeconstruedasatermofthecontract,leadingtomoreseriouslegalliabilitiesintheevent

thatitisbroken[apromiseandarewillinglytoincurcontractualliabilityifwrong]§ Ifwriteintoacontract–thereisapresumptionthatitisaterm

• Oncetherearestatementsoffacts–thenliabilitiescanbeattached–astatementthatinducestheothersidetoenterintothecontract[butitisnotpartofthecontract]

• Onceonehasdecidedwhichstatementscanbeclassifiedascontractualterms,themoreimportanttermsarecalled‘conditions’andthelessimportanttermsareknownas‘warranties’

o Warrantiescanalsobeusedtorefertoalltermsofacontracto Ifpromiseorwarrantsomething=likelyatermofthecontracto Ifpromisesomethingàthencanbesuedonthosetermsofthecontract

• Athird,hybridtermhasbecomerecognized‘anintermediateterm’• Tellingdifferencebetweenrepresentation+term–ifinacontractthenalmostcertainlyaterm

MisrepresentationandRescission• Misrepresentation:amis-statementoffactthatinducesthecontractbutisnotpartofthecontract

o 1)Howfarmustitinducethecontract?–whatiftheplaintiffnegligentlyfailedtocheckthestatementmadebythevendor?

• Thismis-statementoffactcanbemadew/differentintentions–ao 1)Innocent:Anhonestmistakeàaninnocentstatementoffactthatinducesthecontractandisnotfraudulent

§ Limitedremedy–rescissionw/ashorttimelimito 2)Fraudulent:Astatementmadewith1)knowingly,or2)withoutbeliefinitstruth,or3)recklessly,careless,

whetheritistrueorfalsesomethingthatisintendedtodeceive§ Remedy–damagesplusrescission

• CategoriesofMisrepresentations(Torts)• 3)Negligentmisrepresentations:fulfillstherequirementoftortiousmisrepresentationsinacontractualsetting

o Remedy:damages• Rescissionisanexpressionwhichisusedinavarietyofways:• 1)Todenotethesettingasideofacontractbecauseofsomedefectaffectingitsformation,suchasmisrepresentation,

duress,orundueinfluence• 2)Describethedischargeofanexistingcontractbysubsequentagreementoftheparties• 3)Itisincorrectlyusedtorefertothesituationinwhichaninnocentpartyisdischargedfromhavingtocarryouthisorher

obligationsunderthecontractbecauseoftheotherparty’sseriousbreachofcontractorfailuretoperform• Theactionfordamagesisanactiontoenforcetheagreementandthushasasitsobjectthesubstitutionofmoneydamages

fortheperformancewhichshouldhavebeenrenderedunderthebindingagreementbetweentheparties• Asuitforrescissionistodeterminethatthecontractisonethatoughtnottobeenforced–anymoneyawardmadeupon

rescissionshouldhaveasitsobjecttherestorationofpartiestotheirpre-contractualpositions• Aremedybutw/ashortfuseonwhenonecanexercisetheremedy[innocent]

RedgravevHurd188120Ch.D.(CA)Facts:

• Theplaintiff(solicitor)advertisedhewouldtakeasapartneranefficientlawyerandadvocateabout40,whowouldnotobjecttopurchaseadvertiser’ssuburbanresidence

• Thedefendantenteredintonegotiationsw/theplaintiffwithaviewtopurchasingthehomeandashareinthepractice–askedforanideaofyearlyincomeandwasadvisedbytheplaintiffthatitamountedto300-400ayear[hetooktheassuranceofthesellingsolicitorwithoutchecking]

52

• Thedefendantagreedtopurchasethehouseandashareinthebusinessfor1600–thepartiesenteredintoawrittenagreementwhichreferredonlytothesaleofthehouseandtheDgavea100deposit

• Onlearningthepracticewas‘utterlyworthless’thedefendantrefusedtocompletethesale• Theplaintiffbroughtsuitforspecificperformance[alsothatDcouldhavecheckedhowmuchitwasworthactually]–the

defendantalleginghehadbeeninducedtoenterintoanagreementbyamisrepresentation,counterclaimedforrescission,returnofthedeposit,anddamagesindeceitforthelossandtroubleofthemoveandgivinguphisoldpractice

Issues:• Didthetrialjudgeerrinallowingdamagesfortheplaintiffanddismissingthecounterclaimforrescission?

Decision:• Yes–appealallowed• OrderallowedforrescindingthecontractandthedeposittobereturnedtoD• Defendantfailsforcounterclaimfordamages–failedtoshowthatfraudulentmisrepresentationonthepartoftheseller• Plaintiffcannothavespecificperformancebecausehismis-statementinducedthecontractanditiseasytorescindthe

contractRatio:

• Ifitisamaterialrepresentationcalculatedtoinducehimtoenterintothecontract,itisaninferenceoflawthathewasinducedbytherepresentationtoenterintoitandinordertotakeawayhistitletoberelievedfromthecontractonthegroundthattherepresentationwasuntrueitmustbeshownthatheeitherhadknowledgeofthefactscontrarytotherepresentationorthatheshowedclearlybyhisconductthathedidnotrelyontherepresentation

Analysis:(JesselMR)• Thecounterclaimfordamagesfailsbecausehehasnotpleadedknowledgeonthepartoftheplaintiffthattheallegations

madewereuntrue• Thetrialjudgesaidtheplaintiffhadbooksthedefendantcouldhavelookedatifheintendedtorelyuponthe

representationofbusiness[courtsaidthiswasirrelevant]• Selleronlygotwhathewantedbecausehereliedonsomethingthatisfalse(regardlessofwhetherheknewitwasfalseor

not)àa“moraldelinquency”• Apersoncannotgetabenefitofanythingobtainedthroughastatementthatisfalse–sellerisgettingmorethanheshould

becausebuyerwouldhavepaidlessknowingthetruth• However,therewerenobooksthatshowedthebusinessdone–itisamistaketobelievetherewereanybooksthe

defendantcouldhavelookedintotheascertainthecorrectnessofthestatementsmadebytheplaintiff• Andthesellermakesamaterialrepresentationaboutthesebooks• Ifitisamaterialrepresentationcalculatedtoinducehimtoenterintothecontract,itisaninferenceoflawthathewas

inducedbytherepresentationtoenterintoitandinordertotakeawayhistitletoberelievedfromthecontractonthegroundthattherepresentationwasuntrueitmustbeshownthatheeitherhadknowledgeofthefactscontrarytotherepresentationorthatheshowedclearlybyhisconductthathedidnotrelyontherepresentation

• ThestatementbeingamaterialstatementandbeinguntrueissufficientgroundforrescindingthecontractClassNotes:

• Defenceofplaintiffàdidnotcheckintothepapersanddetermineforhimselfhowmuchthebusinesswasactuallyworth• Ifmakeamaterialrepresentation,thenthebuyerdoesnothavetocheckitoutforhimself–itisaninferenceoflawthathe

reliedonit• HOWEVERàthisstatementismisleading–Courtmustalwaysdecidethepurchaserreliedonthemis-statementoffact–it

isactuallyafactualquestionwhetherthepurchaserreliedonit• Lawisnolongerasstrictasitisstatedhere• Toexaminetherightsofthebuyer–startwiththeprincipleof‘buyerbeware’/caveatemptoràentireriskofthe

transactionreliesonthebuyerexcepttotheextentthatthebuyerhasbeenmisleadbyafactualmis-statementofthesellerorifthereisatermofthecontractthatstatestheseller’sobligations/governingthematter

o Thesellerisundernoobligationtodisclose/canbesilent–butoncedostarttodisclosemustbeaccurateinwhatyousay

• Fraudulentmisrepresentationà(p.362)recklesslyandwithoutcarewhetheritwastrueorfalseandnotwiththebeliefthatitwastrue[evenifthebuyerhadpleadfraudulentmisrepresentationitisahighbartoovercome]

• Uberrimaefidei:Discloseanyfactthatisrelevanttotheriskundertakenbytheinsurancecompany,evenifnotasked[relevanttoinsurancecontractsonly]

Note3(p.365)• CanadianCourtshaverejectedthisapproach• Approachistoconsiderallrelevantfactstoconsiderwhetherastatementwasreliedon–thereisalogicalinference(not

aninferenceoflaw)thattherepresentationwasreliedon[withoutotherfacts]

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• NOWneedàmis-statementoffact,buyerreliedonit,andprovideevidenceofthereliance[buyerneedstoshowthis]Example:

• Buyerdoesnotrelyonthemis-representationofthefact–canhaveamaterialmisrepresentationbutitdoesnotinducethecontract

• 1)Ifinwritingandthebuyerdoesnotreadit(neverawareofit);2)ifthebuyerknowsbutmakesitclearitdoesnotaffectthebuyer’sjudgment;3)buyerbeforethecontractbecomesawarestatementisnottruebutdecidetogoaheadanyway

SmithvLandandHousePropertyCorp.(1884)28Ch.D7(CA)Facts:

• TheplaintiffofferedforsaleahotelstatingitwascurrentlyleasedtoFrederickFleck‘adesirabletenant’• ThedefendantsagreedtobuythehotelandshortlyafterFleckwentintobankruptcy[inrealityheonlypaidtherentunder

pressureandbitbybit]• Thedefendantsrefusedtocompletethetransactionanddefendedtheplaintiff’ssuitforspecificperformanceonthebasis

thatthemis-descriptionofFleck’svirtuesamountedtoamisrepresentation• Plaintiff’ssaiddescriptionofFleckwasamereexpressionofopinionandnotastatementoffact

Issues:• CanthedefendantdefendthesuitonthebasisthatthedescriptionofFleckamountedtoamisrepresentation?

Decision:• Yes–thestatementsofopinioncouldberegardedasfactinthissituation

Ratio:• Ifthefactsarenotequallyknowntobothsidesthenastatementofopinionbytheonewhoknowsthefactsbestinvolves

veryoftenastatementofmaterialfact,forheimpliedlystatesthatheknowsfactswhichjustifyhisopinionAnalysis:(BowenLJ)

• Ifthefactsarenotequallyknowntobothsidesthenastatementofopinionbytheonewhoknowsthefactsbestinvolvesveryoftenastatementofmaterialfact,forheimpliedlystatesthatheknowsfactswhichjustifyhisopinion

• Alandlordknowsherelationbetweenhimandhistenant–otherseitherdonotknowthematallordonotknowthemequallywellandifthelandlordsaysthatheconsidersthattherelationshipsbetweenhimselfandhistenantaresatisfactorythenthatopinionshouldberenderedasreasonable

• Heisassertingthatthenothinghasoccurredintherelationshipbetweenlandlord/tenantwhichcanbeconsideredtomakethetenantanunsatisfactoryone–thisisnottrue[hewasbeingforcedtopayhisrentslowlyunderpressure]

• [Beingwronginopiniondoesnotnecessarilyamounttoliability–unlessknowfactscontrarytotheassertionofopinionàdoesthesellerknowofanyfactsthatwouldunderminetheopinion?]

Notes:• Astatementofopiniondoesnotamounttoamis-representationàitisnotastatementoffact• CourtàStatementofopinionimpliesyouknowofnofactsthatwouldunderminethatopinion• Cannotattacktheopinion–butcannotattackthattheopinionmustbebasedonsomeevidence[heretheyknewthe

tenantdidnotpayrentontime+neverinfullquantities]BankofBritishColumbiavWrenDevelopmentsLtd.(1973)BCSCFacts:

• Theplaintiffclaimsthesumof$25,000againstthedefendantuponcertainwrittenguaranteesexecutedanddeliveredbysaiddefendanttotheplaintiffassecurityforaloanof$30,000madebytheplaintifftothedefendant

• Ascollateralsecurityfortheloan,thedefendantdepositedwiththeplaintiff1050sharesofDynastyExplorationsand33,400sharesofSpartanandreceivedinexchangeshares

• Askcorporateofficers(Smith+Allan)tosignguaranteesforthecompany’sdebt–meaningifWrencannotpaythedebtoff,theywillbepersonallyliable

• Smithenteredintoanewloanw/thebank–togetanewloan,banksaidneededbothSmith+Allan’sguarantee–Allansaystellmeaboutthecollateralsecurity/hastherebeenanychangetothecollateralsecurityyouhold?àBankresponded–didnotknowparticularsbutwouldmakeinvestigationtolookandreportlater;Allansigned

• BankdoesnothaveasmuchsecurityfortheloanasAllanthought• Issueàthebanktellerdidnotlie;hedidnotknowtheparticulars• Theplaintiffhasnotproveditdidsellthesecuritiesandapplytheproceedsinreductionoftheloan

Issues:• Isthedefendant,Allanliabletotheplaintiffuponthesecondpersonalguarantee?

Decision:

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• No–hewasinducedbymisrepresentationoftheplaintiffinfailingtodisclosematerialfactstohim• Actiondismissedwithcosts

Analysis:(MunroeJ)• Findthatthedefendant,Allan,wasmisledbythewords,acts,andconductoftheplaintiffintobelievingtherehadbeenno

changeinthecollateralsecuritiesheldbytheplaintiff–otherwisehewouldnothavesignedit• TherewasaunilateralmistakeonthepartofAllanwhichwasinducedbythemisrepresentationoftheplaintiffinfailingto

disclosematerialfactstohimClassNotes:

• Ifthereisliabilityonpartofthebank–ifthestatementasmadewastrue,theliabilitycanonlyattachtothestatementthathewouldfindoutandletyouknow[itmayhavebeenhereifherealizedtherewaslesssecurityhecouldhavedonesomethingtopreservehisownposition]

• Wasthereanactivemis-statementoffact?àNotatthetimeitwasmade• IssueherewasthattherewasachangeinsecurityandAllaninquiredandthiswasnottoldtoAllan[employeefailedto

comethroughwiththesecondpartofthestatement‘I’llfindoutandreportback’]• Luckycaseàcouldhavelikelygoneeitherway

KupchakvDaysonHoldingsLtd.(1965)BCCAFacts:

• Theappellants(K)purchasedthesharesofamotelcompany,PalmsMotelLtd,fromtherespondents(D)inreturnfortwopropertiesconveyedtotherespondentsandmortgagesgiventotherespondentsbytheappellantsonthelandandchattelsownedbythemotelcompany

• ThetransactionwascompletedonMarch30th1960andtheappellantsthereupontookpossessionofthehotelpremisesandbegantooperatethebusiness

• 2monthslater–learningthatrepresentationsmadebytherespondents’agentastothepastearningsofthehotelwerefalse,theappellantsstoppedmakingpaymentsontheirmortgagesandconsultedtheirsolicitors

• A’ssolicitorsnotifiedRofanintentiontocontinuewithholdingpaymentsuntilaproposedlawsuithadbeendetermined• RsoldanundividedhalfinterestinoneofthepropertiesconveyedtothembyA,toredowntheexistingbuildingand

erectedanapartmentbuilding• Theamountofanexistingmortgageontheotherpropertywasincreasedandtheinterestratewasraised• AyearafterthesaleofthehalfinterestRlaunchedanunsuccessfulforeclosureactionagainstAandAcommencedan

actionforrescission• TrialjudgedeniedrescissionbutawardedAdamagesbecausewereinducedbyfraudbyR(awarded$28,000)• DidnotawardrescissionbecausetheywereabletorestoretoRthesharesinthemotel,Rcouldnotrestoretheirproperty

astheyhadconveyedanundividedone-halfinterestinitandbecausebuildingstorndown+anewapartmenthouseerected

Issues:• WereAinducedbyfraudandshouldtheybeawardedrescissionordamages?

Decision:• WouldorderrescissionandorderRtocompensateAfortheirequityintheHaroSt.propertybaseduponitsvalueonMarch

31tobeascertainedbyaninquirywithinterestat5%perannumfromthatdateRatio:

• Equityasanincidentofitspeculiarremedyofrescissionorunderitspowertoawardcompensationmayadjusttherightsofthepartiesbyorderingeitheronetopaycompensationtotheothertomakegoodsomedeficiencyinperfectrestitution

Analysis:(DaveyJA)• Findtheretobeenoughevidencetosupportingthefindingoffraud• AcanrestorethesharesinthePalmsMoteltoRandsincetheyhavecontinuedtooperatethebusinessthereisnochange

inthecharacterofthecompanyoritsshares• However,RcanreturntheNorthVanpropertybutnottheHaroSt.propertybecauseoftheirowndealingssotheycanonly

returntheremainingundividedone-halfinterestinitandthatinaformsocompletelychangedthatitsidentitymayhavebeensaidtobedestroyed

• TheR’sacquiredtheirpropertybyfraudandoughtnottobarrescissionofthetransactionunlessitbeimpracticalorsounjusttotherespondentsthatitoughtnottobeimposeduponaguiltyparty

• Indeterminingwhetherrescissionispractical,equity’spowertoremoveinequitiesresultingfromrescissionanddeficienciesinrestitutionbycompensation,account,orindemnitymustbekeptinmind

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• Thepropertyhasbeensogreatlychangedbyindustry,planning,andexpenditureofalargesumofmoneythatitwouldunjusttodepriveRofthepropertyandgivetoA–andAdoesnotwantthis,theywantthesumof$80,000putuponthepropertyintheexchange

• Rescissionisanequitableremedy+equityhasthesamepowertoorderonetopaycompensationtotheotherinordertoeffectsubstantialrestitutionunderadecreeforrescissionasitdoestoorderonepartytopaymoneyonaccountorbywayofindemnity

• Equityhasapowertodowhatispracticallyjustandtheapplicationofremedyisdiscretionaryandshouldbemoldedinaccordancewiththeexigenciesoftheparticularcase

• Rescissionisjustasmuchanequitableremedyasaccountandindemnity,andinapplyingthatremedy,equitymayorderthepaymentofcompensationtoadjusttherightsoftheparties’consequentuponrescission,justasitmayorderthepaymentofmoneyuponaccountorbywayofindemnity

• SinceitisimpracticalandunjusttorequireRuponrescissiontorestoretheHaroSt.propertytheyhadacquiredfromtheappellantsbyfraud,RoughttocompensateAforthepropertyRareallowedtokeep

• Iftheentireinteresthadbeensoldatfairpricetheamountofcompensationwouldbethepurchaseprice–buthere,itshouldbethevalueofthepropertyonMarch31

• Thequestionmustalsobeaskedwhetherthepersononwhomthefraudwaspracticedhavingnoticeofthefraud,electednottoavoidthecontract,electedtoavoidit,ormadenoelection?

• AslongashemakesnoelectionheretainstherighttodetermineiteitherwayClassNotes:

• TheygottheHaroSt.propertybyfraudsothisshouldnotbarrescission–thisshouldgoonforever–eveniffraudàfraudunravelsall

• Allowrescissionevenafter2yearshaselapsedfromthedateofthecontract–butwhendatepassesfromdateofcontractandpartiestakingactiononit,otherdefensesareraised[didnottakeanystepstostopoperatingthePalmsMotel–affirmedthecontractknowingofthefalserepresentation]

o Needevidencethatonceknewofthefalserepresentations,theychosetocontinueonwiththecontractàp.374• Defenceoflaches–AKAdelayàequitablelimitationperiod–basicABruleistocommenceanactionwithin2yearsofthe

fraudulentmisrepresentationBUTrescissionisanequitableremedy,andasanequitableremedythecourtsaysthatmaynotgettheremedyifdelayundulyinseekingacourtofequity’sassistance,regardlessofthelimitationperiod[thetimelimit=actingpromptlyinseekingtheequitableremedy]

• Wouldrescissionbeavailableinthecaseofaninnocentmisrepresentation?ànoitwouldhavebeentoolongNote6–p.376

• NesbittàInrealestatetransactions,performanceor‘execution’ofthecontractconstitutesabartorescission.Here,buyerbuyingahouse.Propertyheldundersellerunderalong-termlease(buyingaleaseholdinterest);buyerandrealestateagentlookathouseandagentsaysit’slitbyelectricity.Buyeragreestobuyhouse,takespossessionofthehousethenrealizesthereisnoelectricity

o Twodayslatergobacktosellerandsaynotgoingaheadwiththis–SCCsaysthattherepresentationbytherealestateagentwasinnocent

o Couldthebuyersrescind?–Courtsaysno–because(kindof)twocontractssoalloftherightsbecomemergedintothefinaldocument–thefinaldocumentsignedtendstobeacompletecontractoftheentirecontract

o SCCholdsthattheonlytimeyoucanuserescissionisupto30days(?)beforethesigningofthefinaldocument(thedeedofconveyance)–thisisonlyforinnocentmisrepresentationàunravelsforfraud

RepresentationsandTermsHeilbut,Symons,&CovBuckleton1913AC30(HL)Facts:

• Theappellants(rubbermerchants)underwrotealargenumberofsharesinacompanycalledFisiolaRubberandProduceEstates(acompanyregisteredandpromotedbyotherpersonsatthattime)

• Thiscompanyinstructedamanager(Mr.Johnston)oftheirLiverpoolbusinesstoobtainapplicationsforsharesinLiverpool• Johnston(hadseenadraftprospectusbuthadnocopyofit)mentionedthecompanytoseveralpeopleinLiverpool,

includingMr.Wright(abrokerfortherespondent)• RespondentphonedJohnstonfromWright’soffice–askedabouttherubbercompanyandwhetherhehadanyprospectus

–Johnstonsaidno–Rasked‘ifitwasalright?’andJsaid‘wearebringingitout’• Asaresultofthisconversation,alargenumberofshareswereallottedtotherespondent• Atthistimerubberboomwasatitsheightandthesharesofthecompanywereatapremium–thenfoundouttherewasa

largedeficiencyinrubbertrees(whichsaidintheprospectuswereontheFisiolaestate)andthesharesfellinvalue

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• RbroughtanactionagainstAforfraudulentrepresentationandalternativelyfordamagesforbreachofwarrantythatthecompanywasarubbercompanywhosemainobjectivewastoproducerubber

• Attrial–juryfoundnofraudulentmisrepresentationbutfoundthecompanycouldnotbeproperlydescribedasarubbercompanyandthatA/Jhadwarranteditwasarubbercompany

Issues:• Wastherefraudulentmisrepresentationonthepartoftheappellants?• WasthereacontractcollateraltothemainonewhereApromisedtoRthatitwasarubbercompanyinconsiderationforR

takingshares?Decision:

• No-thereisnothingwhichcanbetakenasevidenceofanintentiononthepartythatthereshouldbeacontractualliabilityinrespectoftheaccuracyofthestatement–itisarepresentationastoaspecificthingandnothingmore

Ratio:• Apersonisnotliableindamagesforaninnocentmisrepresentation,nomatterinwhatwayorunderwhatformtheattack

ismade• Anaffirmationatthetimeofthesaleisawarranty,provideditappearonevidencetobesointended

Analysis:(LordMoulton)• ItisnotcontestedthatinthephoneconversationJohnston’sreplywasarepresentationthatthecompanywasa‘rubber

company’• Mustshowawarranty–acontractcollateraltothemaincontracttotakeshares,wherebythedefendantsinconsideration

oftheplaintifftakingsharespromisedthecompanyitselfwasarubbercompany• Collateralcontractsmustbeprovedstrictly• Here–thewholecasefortheexistenceofthecollateralcontractrestsonthemerefactthatthestatementwasmadeasto

thecharacterofthecompany–ifthisistakenassufficient,thenwouldhavetodothisforanystatementregardingthesubjectmatterofacontractmadebyacontractingpartypriortoitsexecution

• Thiswouldnegativetheestablishedrulethataninnocentrepresentationgivesnorighttodamages–andsaythatanyrepresentationpriortoacontractrelatingtoitssubjectmatterissufficienttoestablishtheexistenceofacollateralcontract

• Inordertoestablishacauseofactionsoundingindamagesformisrepresentationthestatementmustbefraudulentormustbemaderecklessly,notcaringwhetheritbetrueornot

• HoltCJ–‘anaffirmationatthetimeofthesaleisawarranty,provideditappearonevidencetobesointended’Notes:

• Problem–ifonlyaninnocentmisrepresentationàtheremedyisrescission–butthecompanyislikelybebankrupt–companiescannotbeputbackintheirpre-contractualposition

• Thiswasmorethanamererepresentation,itwasatermofthecontract• Here–allegingabreachofwarrantyàbuyerallegedthesellerswarranteditwasarubbercompany–itwasatermofthe

contractthatwewerebuyingsharesinarubbercompanyo Cannotfindanyevidenceinthecontractofthepurchaseforsalethatthecompanywarrantedthecompanywasa

rubbercompany• Argument–itwasacollateralwarranty–asubsidiarycontract–allegingthecompanyisarubbercompanywasusedas

considerationforbuyingsharesinthecompanyo Effectofcollateralcontractistoincreasetheconsiderationprovidedinthemaincontract–sopossibilityof

enteringinthesecontracts,butthesetypesofcontractsmustbeprovedstrictly[“IfIbuythesesharesinthecompany,willyouwarrantitisarubbercompany?”]

o Courtregardsthistypeofcontractwithsomesuspicion–wonderwhyitwasnotaddedintothemaincontract• Testissameformaincontractasforthecollateralcontract• Test=wasitintendedtobeatermofthecontract(p.370)àHoltCJ=‘anaffirmationatthetimeofthesaleisawarranty,

provideditappearonevidencetobesointended’o Evidencethatitisintendedtobeapromise=“Ipromisethisistrueandyoucansuemeifitisnot”

• Statementoffactcannotgiverisetodamagesunlessmadefraudulently• Decisivetest–notenoughthatitisastatementoffactleadingtothecontractorastatementoffactofwhichthevendoris

ignorant–itismorethanthat[morethanastatementoffact–mustbestatedinawaythatthepromisorassumescontractualliabilityifwrong]

• Here–statementofbringingoutarubbercompanydidnotamounttoawarrantybecauseawarrantyisapromisethatsomethingistrue

• Differencebetweenatermandamisrepresentation–isthatinawarranty(term)itispromisedthatitistrue

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• Here,thestatementofitbeingarubbercompanywasnotwrittenintothecontract(ifitwasthenitisassumedtobeaterm)–thenifnotwrittenintothecontract,needtodeterminewhetherthestatementwasmadeandintendedtobeatermofthecontractassumingcontractualliability

• Toclaimdamages–musteithershowthereisatermofthecontractorafraudulentmisrepresentation• P.379-338àfraudulentmisrepresentation=acarelessstatementisnotfraudulent;toestablishacauseofactionfor

damagesinmisrepresentationthestatementmustbefraudulentormaderecklesslynotcaringwhethertrueornot(thesearenotextremelycarelessstatements)[thiswasapprovedbytheSCC2yearsago]

SummaryMisrepresentations:

• Innocent=remedyàrescission• Negligent[tortofnegligentmisrepresentation]=remedyàdamages

o [SoddCorp.vNTessis]• Fraudulent=remedyàrescission+damages

o [Knowingitisfalseorwhatitequivalentthereto,mustbemaderecklessly,notcaringwhetheritbetrue–Heilbutp.380]–notnegligentorcarelessstatements

Terms:• Warranties(lessimportanttermsofcontract)àDamages• Innominate(Intermediatetypeofterm)àDamages+(sometimes)Rescission[dependingonseverityof

consequences]• Conditions(moreimportantterms)àDamages+Rescission

o Atermforwhichtheremedyisalwaysdamagesplusanentitlementtorescission,forbreachofacondition

Testforterms:somethingisatermifitistointended[Heilbut]–ORagreementrecordedinawrittendocument,thenchancesaretheseareterms[alltermsdonothavetobewritteninthedocument]DickBentleyProductionsLtd.vHaroldSmith(Motors)Ltd.19652AllER65(CA)Facts:

• DickBentleybringsanactionagainstHaroldSmithfordamagesforbreachofwarrantyonthesaleofacar• BentleyhadbeendealingwithSmithforacoupleofyearsandtoldSmithhewasonthelook-outforawellvettedBentley

car• In1960,Smithfoundoneandboughtitfor1500fromafirminLeicester–hewroteBentleysaying‘IpurchasedaParkWard

poweroperatedhoodconvertible–it’soneofthenicestcarswe’vehadinforquitealongtime’• [SaiditwasownedbyaGermanbaron=merepuffery]• SmithtoldBentleyearlierhewasinapositiontofindouthistoryofcars–andforacarofthisqualitythemakerskeepa

completebiographyofit• Bentleywenttoseethecar–Smithtoldhimithadbeenfittedw/areplacementengine+gearboxandhaddone20,000

milesonlysinceithadbeenfitted(thisshowedonthespeedometeraswell)• Smithsaidthepricewas1850andhewouldguaranteethecarfor12monthsincludingparts+labor• Bboughtthecarfor1850• ThecarwasadisappointmenttoB–hebroughtitinfromtimetotimeandeventuallybroughtanactionforbreachof

warranty• Trial=foundtherewasawarranty,itwasbroken,andgave400indamages

Issues:• Whethertherepresentationthatthecarhadonlydone20,000mileswasaninnocentoneorwhetheritwasawarranty

Decision:• Therepresentationwasawarranty–thisisamplefoundationforinferenceofawarranty

Ratio:• Ifarepresentationismadeinthecourseofdealingsforacontractforthepurposeofinducingtheotherpartytoactonit

anditactuallyinduceshimtoactonitbyenteringintothecontract,thatisprimafaciegroundforinferringthattherepresentationwasintendedasawarranty–andabreachofitwillleadtoacauseofactionfordamages

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Analysis:(LordDenningMR)• ‘Anaffirmationatthetimeofthesaleisawarranty,provideditappearonevidencetobesointended’• Butintended–dependsontheconductoftheparties–onwords/behavior,ratherthanthoughts–ifareasonable

bystandercouldinferthatawarrantywasintended,thatwillsuffice• Ifarepresentationismadeinthecourseofdealingsforacontractforthepurposeofinducingtheotherpartytoactonit

anditactuallyinduceshimtoactonitbyenteringintothecontract,thatisprimafaciegroundforinferringthattherepresentationwasintendedasawarranty–itisnotnecessarytospeakofitasbeingcollateral

• But,themakercanrebutthispresumptionifhecanshowthatitreallywasaninnocentmisrepresentation–hewasinnocentinfaultinmakingitandthatitwouldnotbereasonableinthecircumstancesforhimtobeboundbyit

• Here,Smithwasinthepositiontoknow,oratleastfindout,thehistoryofthecar–hecouldgetitbywritingthemakersbuthedidnotdoso–hedidlater,andwhenthehistorywasexaminedhisstatementturnedouttobequitewrong

[SalmonLJ]• IfwhatSmithsaidwasintendedandunderstoodasalegallybindingpromisethenitwasawarrantyandmaybepartofthe

contractofsaleorcollateraltoit–here,thereisnodoubtwhatwassaidbySmithwasunderstoodandintendedtobealegallybindingpromise

Notes:• Wasthisaterm?–wasitintendedtobeamerestatementoffactorwasitintendedtobeaterm?

o Thelegalmechanism/testweusetojudgetheseller’sintention=officiousbystandertesto Factorsthatthebystanderwouldsaythiswasawarranty–whenaspecialistdealermakesthistypeofstatement;

heisabletocheckveryeasilyandthebuyerisnotabletocheck–apersoninthispositionismorelikelytobepromisingthatthisstatementistrue

• OscarChesscaseàsellerofcarsaysitisa1948model+buyerbuyscaronthatbasis,thenfindsoutthecaris9yearsolder[statementoffact=becausethesellerhadboughtthecarfromsomeoneandtheregistrationstipulatedthecarwasa1948model]

LeafvInternationalGalleries[1950]2KB86(CA)Facts:

• ThebuyerboughtfromthesellersanoilpaintingofSalisburyCathedral–onthebackwasalabelindicatingthatithadbeenexhibitedasaConstable,andduringnegotiationsforthepurchasethesellersrepresenteditwasapaintingbyConstable–thisrepresentationwasincorporatedasoneofthetermsofthecontract

• 5yearslaterthebuyerwantedtosellthepaintingandhetookittoChristie’stobeputintoanactionwherehewasadviseditwasnotaConstable–hetookitbacktothesellerswhotookitbacktemporarilyforinvestigationandstilladheredtotheviewitwasaConstable

• Thebuyerbroughtaclaimforrescissionofthecontract–thatthepicturehadbeenrepresentedtobeaConstableandthathepaid85inrelianceonthatrepresentation

• ItwasdeterminedthispaintingwasnotaConstableandwasworthverylittleIssues:

• Canthebuyersrescindthecontractontheaccountthatthepaintingisafake?Decision:

• No–toomuchtimehaselapsed-thebuyerhadtheopportunitytoexaminethepaintingandhedidnot• Appealdismissed

Ratio:• Oncethebuyerhasacceptedthegoodsinperformanceofthecontracthecannotrejectthemafter–theonlythinghecan

claimisdamagesAnalysis:[DenningLJ]

• Thiswasacontractforthesaleofgoods–therewasamistakeaboutthequalityofthesubject-matterbecausebothpartiesbelievedthepicturetobeaConstableandthatmistakewasinonesenseessentialorfundamental

• Suchamistakedoesnotavoidthecontract–therewasnomistakeaboutthesubject-matterofthesale–thepartiesagreedonthespecifictermsofthesamesubjectmatterandthatissufficienttomakeacontract

• Thetermofwhopaintedthepaintingwaseitheraconditionorawarrantyàifacondition=buyercouldrejectthepictureforbreachoftheconditionatanytimebeforeheacceptedorwasdeemedtohaveacceptedit;ifawarranty=couldnotrejectitbutwasconfinedtoaclaimfordamages

• S.11ofSaleofGoodsAct=oncethebuyerhasacceptedthegoodsinperformanceofthecontracthecannotrejectthemafter

• S.35=thebuyerisdeemedtohaveacceptedthegoodswhenafteralapseofareasonabletimeheretainsthegoodswithoutintimatingtothesellerthathehasrejectedthem

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• Thebuyerhadthepaintingfor5years–thisisfartoolateforhimtorejectthispictureforbreachofanycondition–hisremedyafterthistimeisonlyfordamages,andhedidnotbringthisclaimtothecourt

[SirRaymondEvershedMR]• QuestionswhetherthecourtshouldholdtothedoctrineinSeddonvNorthEast-ernSaltCo.thatanexecutedcontract

cannotberescindedincasesofinnocentrepresentation.AstherulehasstoodforalongtimeandhasnotbeenchangedbyParliament,hefeelsthecourtshouldnotoverturnitinthiscase.

• Thebuyerstillhasthearticleheintendedtobuy(apictureofthecathedral),ithasjustchangedinquality.Further,withthegreatvolatilityofitemsintheartmarket,findingavalueforrestitutionwouldbeverydifficult

Notes:• Here,theremedythebuyerisseekingisrescission• Aremedyofrescissioncanbeperformedwhenitisamisrepresentation

o Innocent=outofthequestion[5yearsafterthesellingdate]o Fraudulent=sellersboughtitasaConstableandsolditasone–notfraudulent

• SaleofGoodsAct–givesapossibleargumentforrescissionIFitisacondition• S.11=ifacondition,theninpropertimecouldhaverejectedthepicture,buttherighttorejectthebreachofconditionhas

alwaysbeenlimitedbytherulethatoncethebuyeraccepted,orisdeemedtohaveaccepted,thegoodsinperformanceofthecontracthecannotrejectthemafterbutisrelegatedtoaclaimfordamages

• Isthegalleryowner‘undertaking’thatthispaintingwastheConstable?–no,thegalleryownerwasnotinthepositiontomakethesestatements

• Couldthisbecomeatermofthecontract?àunlikelytobeapromise–theartgalleryownerislikelynotsayingheguaranteesittobeaConstable

• Assumethatthebuyerclaimingrescission,thebestpossiblepositionforthebuyer–here,assumeitisabreachofconditiono Howlongisrescissionavailable–eveninitsmostpowerfulform[breachofcondition]

• SaleofGoodsAct[existsintheexactformtodayinAB]o Oncethebuyeracceptsthegoods,thebuyercannotrejectthembutisrelegatedtohisclaimfordamages[before

acceptcanrejectthegoods]o Whatdoesacceptancemean?àwhenafteralapseofreasonabletime,heretainsthegoodswithoutintimatingto

thesellerthathehasrejectedthemo Thismeansitislongerthanjustthedaythepaintingwasreceivedo BUT,5yearsismuchtoolongafterthisamountstipulatedbytheAct

• Rescissionisatimelimitedremedyàitisaflexiblelimit;butafter5yearsthetimelimitisdefinitelyover• Foramereinnocentrepresentation[leastpowerfulremedy],thetimelimitforrescissionisevenshorterthanatimelimit

forabreachofacondition.Ifremedyforbreachofconditionisgone,thenitisdefinitelygoneforinnocentrepresentation• SaleofGoodsAct–describestermsaseitherconditionsorwarranties

o Impliedconditionthatthesellerhasthetitletosellthegoodso Impliedwarrantythatbuyerwillhavethesecurityoftheinterest(?)o Itisanimpliedtermunlessexcluded,thatthegoodsarereasonablyfitfortheirintendedpurposeandfittobesold

ofmerchantablequality• Wayofdealingwithdisappointedbuyer/seller–donotcarewhattheysaidbutinsteadlookfortheremedy[justbecause

thereisamistakeitdoesnottakethemtoaseparateareaoflaw]

StatutoryReformFairTradingAct

• Appliestoconsumerpurchasers(apersonbuyinggoodsforself;notforresale)• Theconsumermustbebuyinggoodsfromasupplier(apersonwhosebusinessitistosellthosegoods;notaprivateseller)• FairTradingActappliesbetweenconsumersandsuppliers• Listsunfairpractices:

o S.6(2)(c)–touseexaggeration,innuendo,orambiguityastoamaterialfactwithrespecttotheconsumertransaction

o S.6(4)(b)–asupplier’smisleadingstatementofopinioniftheconsumerislikelytorelyonthatopiniontotheconsumer’sdisadvantage

o S.6(4)(f)–asupplier’srepresentationthatgoodshaveorhavenotbeenusedtoanextentthatisdifferentfromthefact

o S.7(1)–aconsumermaycancelatnocostorpenaltytotheconsumeraconsumertransactionasaresultofanunfairtradingpractice

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o S.7.1(1)–thereisatimelimit–aconsumermustgivenoticewithinoneyearofasupplierhavingbeenfoundtohaveengagedinanunfairpracticerelatedtoaconsumertransaction

ConcurrentLiabilityinContractandTort

SoddCorpvNTessis(1977)ONCAFacts:

• Trialgrantedtheplaintiffjudgmentagainstthedefendantin$4500onthebasisofanegligentmisrepresentationonthesalebytenderofcertainstock-in-tradecontainedinawarehouse

• Thedefendant–acharteredaccountantandlicensedtrusteeinbankruptcyadvertisedforsalebytenderthestockofafurniturebusinesscarriedonbythebankruptunderthenameandstyleofRitewayFurniture

• Theplaintiffsubmittedatenderafteritsprincipalofficermadeacursoryexaminationofthestockinthewarehouse–theofficertestifiedthatthedefendantrepresentedtohimthatthemethodofcalculatingtheretailvalueofthegoodsinthewarehouse($33,500)wasbydoublingthewholesalecostandthatherelieduponthatrepresentationindecidingtosubmittheplaintiff’stender

• Thetrialjudgefoundthesegoodswereovervaluedbyapproximately100%incomparisonwiththeinvoicesandpricecataloguesfoundinthestore–shefoundthedefendantnegligentinmisrepresentingthequantityandvalueoftheitemsincludedintheassetsofthebankruptadvertisedforsale,andthatthedefendantwasnotentitledtorelyonanexemptionclauseintheadvertisement[…nowarrantyorconditionisexpressedorcanbeimpliedastodesignationclassification,qualityorconditionorinanymannerwhatsoever]

• Trial–ifDdidnotwantpurchaserstorelyonhisrepresentations,thenheshouldnothavemadethem–hemadenegligentrepresentationswhichheshouldhaveknownwouldanddidinducetheplaintifftopreparehistenderinacertainmannerandasaresultofthattenderbeingacceptedtheplaintiffsuffereddamage–reliedonHedleyprinciple

• Hedley=therecouldbeliabilityintortforanegligentmisrepresentationcausingpecuniarylosswhereaspecialrelationshipexistedbetweentheparties

Issues:• Wasthetrialjudgecorrectinfindingthattheplaintiffwasnotnegligentinrelyingonalicensedtrusteewhohadcausedan

inventoryofthestocktobetaken,whentheplaintiff’sopportunityforinspectionwaslimitedDecisions:

• Yes-AppealdismissedAnalysis:[LacouriereJA]

• Hedley–areasonablemanknowinghewasbeingtrustedorthathisskillandjudgmentwerebeingreliedonwouldhave3coursesopentohimà1)hecouldkeepsilentordeclinetogiveinformationoradvicesought;2)hecouldgiveananswerwithclearqualificationthatheacceptednoresponsibilityfor;or3)hecouldsimplyanswerwithoutanysuchqualification

• Here–thedefendantasaprofessionalaccountantandtrusteeinbankruptcywasinaspecialrelationshipcreatingadutyofcaretotheplaintiffandwasnegligentinhisrepresentationconcerningtheretailvalueofthestock-in-trade

• Thiscasedidinvolveapre-contractualnegligentmisrepresentationwhichinducedtheplaintifftosubmititstenderandthedefendant’sliabilityfollows

• Thedefendant’sstipulationamountedtoabindingpromisedeprivinghimofthetermsoftheexemption• Itisclearfromthecasesthatthedefendant’srepresentation,whethercharacterizedasanegligentmisstatementorasa

collateralwarrantyfallsoutsidetheexemptionclauseNotes:

• Tortlawupto1962–aboutphysicalactsthatcausedphysicaldamages• Advance–extendtortlawintwowaysà1)fromnegligentactstonegligentwords;2)toallowforrecoveryinthecaseof

negligentmisrepresentationforfinancialoreconomicloss• Introductionofthetortofnegligencemisrepresentation

BGChecoInternationalLtdvBritishColumbiaHydro&PowerAuthority1993SCCFacts:

• Theappellant(BCHydro)isaBCCrowncorporation• Respondent(BGCheco)isalargecorporationinthebusinessofconstructingelectricaltransmissionlinesanddistribution

systems• InNov1982,Hydrocalledfortenderstoerecttransmissiontowersandtostringtransmissionlines–inDec.1982priorto

submittingitstender,Checo’srepresentativeinspectedtheareabyhelicopter–henotedthattherightofwayhadbeenpartiallyclearedandalsonotedevidenceofongoingclearingactivitysotherepresentativeassumedtherightofwaywouldbefurtheredclearedpriortothecommencementofCheco’swork

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• OnFeb15thepartiesenteredintoawrittencontract–Checocontractedtoconstruct130towersandinstallinsulators,hardware,andconductorsover42kmofrightofwayinBC

• Nofurtherclearingevertookplace–the‘dirty’conditionoftherightofwaycausedChecoanumberofdifficultiesincompletingthisworkandChecosuedHydroseekingdamagesfornegligentmisrepresentationorinthealternative,breachofcontract

• DocumentsweretenderedinevidencethatdemonstratedHydrowasawareoftheproblemswiththeclearingandoftheimpactthattheseproblemswouldhaveonthesuccessfultenderer+asaresultChecoamendeditsstatementofclaimtoincludeastatementoffraud

• TrialfoundHydroactedfraudulentlyinitsdealingswithChecoandawardedCheco2milbeing‘thetotallosssufferedasaresultofbeingfraudulentlyinducedtoenterintothiscontract’

• CArejectedthefindingoffraudbutfoundtherehadbeenanegligentmisrepresentationwhichinducedChecotoenterintothecontract–awarded1mil

Issues:• WasthereanegligentmisrepresentationonthepartofHydroinducingChecotoenterintothecontract?• CanChecosueincontractand/ortort?Andwhatarethedamages?

Decision:• TheclauserequiredHtocleartherightofwayandthiswasnotnegatedbythemoregeneralclausesrelatingtoerrorsand

misunderstandings–therefore,Hbreachedthecontract• Itwasopentotheplaintifftoclaimfornegligentmisrepresentationintortaswellasbreachofcontract–appealdismissed

Ratio:• Theactionsincontract+tortmayconcurrentlybepursuedunlessthepartiesbyavalidcontractualprovisionindicatethat

theyintendedotherwise–thisexcludescaseswherethecontractuallimitationisinvalidasbyfraud,mistake,orunconscionabilityandacontractuallimitationmaynotapplywherethetortisindependentofthecontractinthesenseoffallingoutsidethescopeofthecontract

Analysis:(LaForestandMcLachlinJJ)• Thereshouldbeamovementawayfromtheseparationofcontractandtortandallowapersonwhohassufferedawrong

fullaccesstoallrelevantlegalremedies• Thetenderdocumentssaidtheclearingoftherightofwaywouldbedonebyothersandformednopartoftheworktobe

performedbyCheco–alsostatedthatitwasC’sresponsibilitytoobtainclarificationbeforesubmittingthetender• HargueditwasC’sresponsibilitytofindoutwhat‘cleared’meantiftherewasanyambiguitytoit• Itisacardinalruleofcontractsthatthevariouspartsofthecontractaretobeinterpretedinthecontextoftheintentions

ofthepartiesasevidentfromthecontractasawhole–onlyifaninterpretationcannotbefoundwillthecourtruleoneclauseortheotherineffective

• GiventhespecificnatureofH’sobligationtocleartherightofway,thesiteinspectionandcontingenciesreferredtocanreasonablybereadasrelatingtomattersotherthanclearing,whichwasaclearlyassignedobligationandthereforenotacontingency

• TheclausesplacingtheobligationonHtocleartherightofwaycanbereconciledwiththeclausesplacingonChecotheconsequencesoferrorsandmisunderstandingsinthetenderdocumentsandtheobligationtosatisfyitselfastothesite,thework,andcontingencies

• Ifdamagesareassessedonbreachofcontract,thenthecaseshouldbereturnedtotrialTheClaiminTort

• Therighttosueintortisnottakenawaybythecontractinsuchacase[wherethereisanexpressterminthecontractdealingwiththematteroftort],althoughthecontract,bylimitingthescopeofthetortdutyorwaivingtherighttosueintort,maylimitornegatetortliability

• Whereagivenwrongprimafaciesupportsanactionincontractandintort,thepartymaysueineitherorboth,exceptwherethecontractindicatesthatthepartiesintendedtolimitornegativetherighttosueintort–mustlookonhowsomethingisdealtwithinthecontract

• Thereare3situationswherecontractandtortareappliedtothesamewrong:o 1)Wherethecontractstipulatesamorestringentobligationthanthegenerallawoftortwouldimpose–the

partiesherearehardlylikelytosueintort,sincetheycouldnotrecoverintortforthehighercontractualduty–thevastmajorityofcommercialtransactionsfallintothiscase

o 2)Wherethecontractstipulatesalowerdutythanthatwhichwouldbepresumedbythelawoftortinsimilarcircumstances–thisoccurswhenthepartiesbytheircontractindicatetheirintentionthattheusualliabilityimposedbythelawoftortisnottobindthem–themostcommonmeansbywhichsuchanintentionisindicatedintheinclusionofaclauseofexemptionorexclusionofliabilityinthecontact–herethereisusuallylittlepoint

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suingintortsincethedutyintortandconsequentlyanytortliabilityislimitedbythespecificlimitationtowhichthepartieshaveagreed

o 3)Wherethedutyincontractandthecommonlawdutyintortareco-extensive–here,theplaintiffmayseektosueconcurrentlyoralternativelyintorttosecuresomeadvantagepeculiartothelawoftort–suchasamoregenerouslimitationperiod

• Thecaseherefallsintothe3rdcategoryàthecontractdidnotnegateH’scommonlawdutynottonegligentlymisrepresentthatitwouldhavetherightofwayclearedbyothers–hadChecoknownthetruth,itwouldhavebidforahigheramount–thatdutyisnotexcludedbythecontract,whichconfirmedH’sobligationtocleartherightofway,thereforeCmaysueintort

• Theactionsincontract+tortmayconcurrentlybepursuedunlessthepartiesbyavalidcontractualprovisionindicatethattheyintendedotherwise–thisexcludescaseswherethecontractuallimitationisinvalidasbyfraud,mistake,orunconscionabilityandacontractuallimitationmaynotapplywherethetortisindependentofthecontractinthesenseoffallingoutsidethescopeofthecontract

• Usingtheexpress-implieddistinctionfordeterminingwhetherthereisarighttosueintortposesanumberofproblems• Whilethetortdutymaybelimitedbythecontractualtermssoastobenobroaderthanthecontractduty,thereisno

reasontosupposethatmerelybystipulatingadutyinthecontract,thepartiesintendedtonegateallpossibilityofsuingintort

ClassNotes:• Thereisonegeneraltermthatappliestoeverything+thenmorespecificterms[Hydrosaidthat‘everythinghadbeen

cleared’–specificterm]• Time-limitbaronaclaimincontract,thereforeclaimintortfornegligentmisrepresentation–failtotakereasonablecarein

makingthestatementaboutthelandclearing–madestatementwithoutcheckingthatthepersonwhowassupposedtocleartheland+ifwouldhavechecked,thenwouldnothavemadethestatement[actualevidenceshowstheydidknowthesiteclearingpersondidnotclearitwell–suingthem]

Howfarcantortbeusedinacontractsetting?• (DiamondsSCCcase–1976)àCannotsueinthetortofnegligencewheretherelationshipbetweenthepartiesisgoverned

bycontract–thecontractsetoutallrulesofthetransaction+cannotallowtorttointerfere• SoddCorporation1977–priortothisCanadiancourtshadahardtimedetermininghowtortfitinwiththecontractual

relationship• 1985–CentralTrust(SCC)àDiamondswaswrong–ifelementsofthetortisfulfilledthenwealwayshaveatortaction

againstthetortfeasor–thisshouldonlyceasetoapplyifhaveclearlycontractedoutofrighttodoso• BGCheco(1993)àIacobuccihadadissentingjudgement–didnotwantthemtousetortlawincontracts[Checocouldnot

sueinnegligentmisrepresentation–here,thepartieshavedealtw/siteconditionsbycontract+shouldnotallowanactionintortwherethecontractaddressestheproblemofsiteconditions]

• P.405–Thetheoryofconcurrency–acontractmadeprecludesapartyfromsuingintortwherethereisanexpresstermofthecontractdealingwiththatmatter

• Majorityàthatisnottherule–theonlythingthatcouldpreventanactionintortiswherethecontractsayswearenotliableforantortiousconduct/misrepresentationwehavemade[haverighttosueintortunlesslimited/excludedbythetermsofthecontract]

• Thereisaclaiminnegligentmisrepresentationaslongascanprovealloftheelementsofthemisrepresentation–1)representationmademustbeonewhereitisreasonableforapartytorely(reasonablereliance);and2)statementhastoactuallybenegligent(withoutreasonablecare);and3)causetheallegeddamage

o Ifthoseelementsareproved–haveaclaimintort,unlesscontractsaysnotliableClassificationofTerms

HongKongFirShippingCoLtdvKawasakiKisenKaishaLtd.19621AllER474(CA)Facts:

• Byatime-charter,itwasmutuallyagreedbetweentheownersofthevesselHongKongFirandthecharterersthattheownerswouldletandthatthecharterershirethevesselfor24monthsfromthedateofdeliverytotheCharterersinLiverpool‘shebeingineverywayfittedforordinarycargoservice’andthat‘theownerswouldmaintainherinathoroughlyefficientstateinhullandmachineryduringservice’–the2relevantterms

• [Shiphadbadcrew+interriblecondition]• Hirewaspayableat47sperton

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• WhenthevesselwasdeliveredtothecharterersatLiverpool,herengine-roomwasundermannedandthestaffincompetent,althoughtheownersknewthatthevessel’smachinerywasveryoldandthereforerequiredanampleandefficientengineroomtomaintainit

• Heldupfor4weeksanditwasfoundtheenginewouldtakeafurther15weeksforrepairbeforeitwasseaworthy[andgotnewcrewwhocouldruntheship]

• Itbecameseaworthybutinmid-Junetherehadbeenasteepfallinfreightratesfrom47sto24spertonandbymid-Augustto13sperton

• Thechartererswrotetheownersrepudiatingthecharter[incompetentcrewandterribleconditionship]andsayingnolongerboundbyit;andinanactionbytheownersforwrongfulrepudiation

o PriortothiscaseàChartererscorrect(forrighttorescindcontract)iftermbrokenwasaconditionofthecontract–ifitwasamerewarranty,thencanonlygetdamages(ifany)

o Ifwrong,liableforstoppingperformingtheirendofthecontract• Thetrialjudgefoundtheownerswereinbreachofcontractindeliveringavesselthatwasunseaworthywithregardtoher

engineroomstaffandalsoforfailingtonegligentlymaintainthevesselinanefficientstate• Trialrejectedthatthecontractwasfrustratedorentitledtorepudiateforbreachofcontract

Issues:• Arethecharterersabletomakeaclaimforrepudiationofthecontract?

Decision:• No–thelearnedjudgetookintoaccountandgavedueweighttoalltherelevantconsiderationsandarrivedattheright

answerfortherightreasonsRatio:

• Thecorrecttesttodetermineifabreachshouldleadtorepudiationistolookattheeventswhichhaveoccurredasaresultofthebreachandtodecideiftheseeventsdeprivedthepartyattemptingtorepudiateofthebenefitsthatitexpectedtoreceivefromthecontract.Thebreachmustleadtothepartybeingunabletoobtainallorasubstantialproportionofthebenefitsthattheyintendedtoreceivebyenteringintothecontract.

Analysis:[DiplockJ]• Todeterminewhetherapartywillberelievedofitsundertakingtodothatwhichhehasagreedbuthasnotyetdoneà

mustaskwhethertheoccurrenceoftheeventdeprivesthepartywhohasfurtherundertakingsstilltoperformofsubstantiallythewholebenefitwhichitwastheintentionofthepartiesasexpressedinthecontractthatheshouldobtainastheconsiderationforperformingthoseundertakings?

• Wheretheeventoccursasaresultofthedefaultofoneparty,thepartyindefaultcannotrelyonitasrelievinghimselfoftheperformanceofanyfurtherundertakingsonhispartandtheinnocentparty,althoughentitledto,neednottreattheeventasrelievinghimoftheperformanceofhisownundertakings–amanshouldnotbeabletotakeadvantageofhisownwrong

• Wheretheeventoccursasaresultofneitherparty,eachisrelievedofthefurtherperformanceofhisownundertakingsandtheirrightsinrespectofundertakingspreviouslyperformedarenowregulatedbytheLawReformAct

• Thequestionwhetheraneventwhichistheresultoftheotherparty’sbreachofcontracthasthisconsequencecannotbeansweredbytreatingallcontractualundertakingsasfallingintooneoftwoseparatecategories–1)“conditions”thebreachofwhichgivesrisetoaneventwhichrelievesthepartynotindefaultoffurtherperformanceofhisobligations,and2)“warranties”thebreachofwhichdoesnotgiverisetosuchanevent

• Condition=contractualundertakingsofwhichitcanbepredicatedthateverybreachofsuchanundertakingmustgiverisetoaneventwhichwilldeprivethepartynotindefaultofsubstantiallythewholebenefitwhichitwasintendedthatheshouldobtainfromthecontract

• Warranties=undertakingsofwhichitcanbepredicatedthatnobreachcangiverisetoaneventwhichwilldeprivethepartynotindefaultofsubstantiallythewholebenefitwhichitwasintendedthatheshouldobtainfromthecontract

• Mustlookattheeventswhichhadoccurredasaresultofthebreachatthetimeatwhichthechartererspurportedtorescindthecharter-partyandtodecidewhethertheoccurrenceofthoseeventswhichhaddeprivedthecharterersofsubstantiallythewholebenefitwhichitwastheintentionofthepartiesasexpressedinthecharterpartythatthecharterersshouldobtainfromthefurtherperformanceoftheirowncontractualundertakings

• Inthiscase,asthecharterersstillgettohavetheboatfor20moremonths,theexpectedbenefitscanstillbereceived.Therefore,thisbreachshouldnotleadtorepudiation,butonlytodamages

• Here–thebreachwasserious,butdidnotdeprivethepartiesofthewholebenefitofthecontract[still20moremonthsofsailingtobedone]andnowtheshipisinoperatingcondition

• Cannotsaydefinitelywhetherconditionorwarranties–someintermediatetermClassNotes:

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• Differencebetweenatermthatisaconditionvs.atermthatisawarrantyàintention–whetherthepartiesintendedthatabreachofatermwouldgivetheothersidetherighttocallthecontractoff–mustreadthecontractasawholetodeterminewhichtermsthepartieshavesingledout

• Unsettledontheverbalruleofaconditionàoneruleisthetermmustgototherootofthecontract• HongKongFir–changesthetraditionalapproach–nottryingtoclassifytheterm,butareworriedabouttheconsequences

ofthebreachandtheseverityoftheconsequences–ruleàisthebreachsoseriousastosubstantiallydeprivethechartererofthewholebenefitofthecontract

• EitherprovebreachisaconditiontermORthenewrule• Nowsayingclassificationofconditionswhichanybreachjustifiesinrescissionofcontract;warranties=norescission;orif

neither[intermediateterm]àabilitytorescinddependsonseriousnessofbreacho Inanyofthesehavetherightofdamages–limitedbytermsofthecontract[cansayunderwhichcircumstancesa

partycanrescindacontract/dischargedfromperformance]o Becausetheultimatetestisintention–sopartiescansaywhatcanexcusethemfromperformanceofthecontracto Testforcondition/testforseriousnessofbreach=stricttest

WickmanMachineToolSalesLtd.vLSchulerAG[1974]2AllER39(HL)Facts:

• Schuler(manufacturingfirm)enteredintoawrittenagreementwithWickman(Englishcompany)whichgrantedtoWthesolerighttosellSproductsincludingpanelpresses,inaterritorywhichincludedtheUK

• InordertoensurethataggressivesaleseffortswereundertakenbyW,therewasanagreementstipulatingtheW’sobligations

• Wfailedtocomplystrictlywithitsobligationsunder7(b–p.449)[ShallbeconditionoftheagreementthatWickmansendrepresentativestostoresonceaweekandthesamerepresentativeshallvisitunlessthereareunavoidablereasons]

• Wrepsvisitedthenamedfirmsinmostweekshoweveronafewoccasionstheyfailedtodoso–Srepudiatedtheagreement,claimingthatthesedefaultsamountedtoabreachof‘condition’andthereforeconferredanabsoluterighttoterminatetheagreement[theword‘condition’wasusedthereforeanybreachjustifiesrescissionregardlessofhowtrivialtheconsequences]

• [Bestcounterargument=justbecauseitsayscondition,doesnotmeanthey’reusingthelegaldefinitionofcondition–needtodeterminewhetherconditionisusedasatechnicaltermofartorasthecommonmeaning;howstrictlydidtheyintendtousetheterm]

• Trial=agreementhadbeenlawfullyterminated• Appeal=[Denning]theuseoftheterm‘condition’intheagreementmightdrawuponanyoneofthe3meanings:

o 1)TheProperMeaning=somethingdemandedorrequiredaprerequisitetothegrantingorperformanceofsomethingelse,andwhichiscarriedoverintothelawinthisway‘inalegalinstrument–acontract,aprovisiononwhichitslegalforceismadetodepend’

§ Mustbeaprerequisitetotheveryexistenceoftheagreement–here,wasnot§ Wasitaprerequisitetotherighttorecoverontheagreement?–here,no

o 2)TheCommonMeaning=aprovision,astipulationo 3)TheTermofArt=aconditioninthissenseisastipulationinacontractwhichcarrieswithittheconsequence

thatifthepromisorbreaksaconditioninanyrespect,howeverslight,itgivestheotherpartyarighttobequitofhisfutureobligationsandsuefordamagesunlesshebyhisconductwaivestheconditioninwhichcaseheisboundtoperformhisfutureobligationsbutcansueforthedamageshehassuffered

• OnlymaterialbreacheswouldconferarighttodetermineinaccordancewithclauseIssues:

• Wasclause7aconditionofthecontractandthereforethebreachofitgivingrighttoterminationofthecontract?Decisions:

• No–appealdismissedAnalysis:(LordReid)

• Clause11=theagreementshouldcontinueinforceuntilthe31st–thatappearstoimplythecorollarythattheagreementshallnotbedeterminedbeforethatdateinanyotherwaythanasprovidedincl11

• Ifthetermsofcl.11arewideenoughtoapplytobreachesofcl.7thencl.7mustbereadsubjecttotheprovisionsofcl.11• Cl.11isintendedtoapplytoallmaterialbreachesoftheagreementwhicharecapableofbeingremedied[believeremedy

=curesothatmattersareputrightforthefuture]• Canthebreachofs.7beremediedwithinthemeaningofthisagreement?à• Mustdiscovertheintentionthatisdisclosedbythecontractasawhole–sosimplycallingita‘condition’doesnotmeanit

isaconditionn

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• Useof‘condition’isindicativeofaconditionbutitisnotconclusive• Thecontractissoobscure–Swerenotentitledtorescindthecontractastheypurportedtodo

Dissent:(LordWilberforce)• Dissentingonthemeaningofcondition–theuseofthewordindicatedthatthetermwasonethebreachofwhichentitled

theaggrievedpartytotreatthecontractasatanend[termofart]Notes:

• Usingtheword‘condition’inthecontract–fromthestanceofthereasonablepersoncouldhavemorethanonemeaning–likelytheywouldinterpretitasatermofthecontract–butitisambiguousastoitsmeaning

• Butthepartiesherehadanotherclause–cl.11–setoutthecircumstancesastohowthecontractcancometoanend[iftherehasbeenamaterialbreachandhavegiven60-days-noticeinwritingandtheotherpartyfailedtoremedythebreach]

BhasinvHrynewSCC20141.WhatwastheprimaryreasonfortherefusaloftheAlbertaCourtofAppealtoimplyatermofgoodfaithintoBhasin'scontract?

• Onlycoverscertaincategoriesofrelationships• The‘entireagreementclause’=noagreementsexpress,implied,orstatutoryotherthanthoseexpresslysetoutinthe

contract• Thisclausemakesitalmostimpossibletoarguetherewasarelevantrepresentationortermunlessyoucanalsofinditin

theagreement

• Thisclausedidnotworktoexcludethedutyofgoodfaith–foundbytheSCC:o Goodfaithisadifferenttypeofimpliedterm–thisisimpliedbylaw(cannotexcludethat)o [Mosttermsareimpliedbyfact–thisissoobviousthatmostpartieswouldhaveincludedit]o Thedutyofgoodfaithisliketodoctrineofunconscionability–cannotexcludethis/baritbyageneralclauseo Canuseageneralclausetobaratermimpliedbyfact

2.IsitpossibletojustifyadecisioninfavorofBhasinbyapplyingfraudulentmisrepresentationtothecase?WhydoestheCourtconsiderthatthedutyofgoodfaithhasanadvantageovercivilfraud?Dothesereasonssoundcorrectinlightofyourknowledgeoftherequirementsoffraudulentmisrepresentation?

• Bhasin’ssourceofdiscontentàBhasinaskedwhetherCan-AMwouldmergeindustrywHrynew’sandtheyequivocateandgaveananswerimplyingtheywouldnot

o Soundssimilartoafraudulentrepresentation–oncetheyembarkedonsayingsomething,theyhadtobefullandfrank–itwasintheirplanstomergetheindustries

• CourtsaidFMwasnotagoodwaytodealwiththistypeofproblemàtoestablishanactioninFMmustproveanintentiontodeceive

o Butthisisactuallynotarequirement–donotneedtointenttomakethestatementfraudulentlyo DarianPeak–testforFM–requirementsareafalserepresentation,somelevelofknowledgeoffalsehood,causes

plaintifftoactincertainway,resultinginlosso Noreferencetointention

• TherelikelywasanargumentforFMhere–butthecourtsaysitisnotasolution(becauseof‘intention’)3.TheCourtalsostatesthatthedutyofhonestperformanceismoreadvantageousthanpromissoryestoppel.Whydoesitreachthisconclusion?CanyoumakeanargumentthatCan-AmwasestoppedfromdenyingtherepresentationthatitwasnotplanningtomergethebusinessesofBhasinandHrynew?

• TherepresentationCan-Ammade–thattherewasnoplantomergethebusinesses;andBhasinreliedonthisbycontinuingtooperatehisbusiness

• Thereislikelyanargumenttheyareestoppedfromdenyingthetruthofthatrepresentation• Courtsaysthereisaproblemw/PEbecauseitcannotbesuedasacauseofaction• DamagesBhasingotwas$87,000–amountthathisbusinesswasworth(althoughCan-Amhadtoapproveanypurchaseof

thebusinesses)• IfCan-Amhadbeenestoppedfromgoingbackontheirrepresentation–hewouldhavehadthesametimetoadjustandto

capturewhateverhecouldfromhisagency(essentiallytheamountofdamagesthetrialcourtappliedinthiscase)• Although,thesedamagesthatwereawardedarehardtojustify–giventhevetoCan-Amhad

CategoriesofContractwhereGoodfaithimposed:• Franchises,fiduciaryrelationships,andemploymentrelationshipsduringdismissal• Bhasinwasnotanemployment–butwassimilartoanemploymentrelationshipandafranchise[closeenoughto2,sono

harminapplyingsameprinciples]• SCCsaidthesecategoriesarenotexclusive,butasevidenceofawiderprincipleofgoodfaith

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• Theory–notcreatingamassiveexpansionofgoodfaith,butasmallandincrementaltweakbutapplyingittoacategorythatissimilartoexistingcategories

• Mustshowananalogytoanexistingheadofgoodfaith• SCCnotoverridingCan-Am’sabilitytoterminatethecontract;butwhatthebreachliesinisthefailuretodealhonestly+in

goodfaithwithBhasinCanyoucontractoutofGF?

• No–itisadutyimposedbylaw• However,canlimitthedutyàputtingaclauseintothecontract[candefinehowgoodfaithwillbeinterpreting–ex.by

sayingthatthepartiesgoingintothedealknowingthatthelandlordcanbecapriciousandthedecisioncanbemotivatedbyunreasonablefactors]

o Verynarrowdoctrine–w/somepossibilityofextension

StandardFormContractandExclusionClausesImpliedTermsMachtingervHojIndustriesLtd[1992]SCCFacts:

• AppellantsbroughtanactionforwrongfuldismissalIssues:

• Courtaskedtodecideonwhatgroundsanemployeeisentitledtoreasonablenoticeoftermination• Intheabsenceinacontractofemploymentofalegallyenforceabletermprovidingfornoticeontermination,onwhatbasis

isacourttoimplyanoticeperiodandtowhatextentisintentiontobetakenintoaccountinfixinganimpliedtermofreasonablenoticeinanemploymentcontract?

Decision:• Entitledtoareasonablenoticeoftermination

Analysis:[McLachlinJ]• Theintentionofthecontractingpartiesisrelevanttothedeterminationofsomeimpliedterms,butnotall–intentionis

relevanttotermsimpliedasamatteroffact[whatwouldthepartieshavestipulatedhadtheirattentionbeendrawnatthetimeofcontractingtothematteratissue?]

• Intentionisnotrelevanttotermsimpliedasamatteroflaw• Candistinguishbetweendifferenttypesofimpliedterms–

o 1)termsimpliedinfact;o 2)termsimpliedinlaw;ando 3)termsimpliedasamatterofcustomorusage

• Requirementsforreasonablenoticeinemploymentcontractsfallintothecategoryoftermsimpliedbylaw–theydonotdependoncustomofusage,althoughitcanbeanelementindeterminingthenatureandscopeofthelegaldutyimposed;donotfallintocategoryoftermsimpliedbyfacteither(wherethelawsuppliesatermwhichthepartiesoverlookedbutobviouslyassumed]

• Termsimpliedincontractsofemploymentimposingreasonablenoticerequirementsdependonanumberoffactors–w/referencetoeachparticularcase,thecharacteroftheemployment,lengthofservice,ageandavailabilityofsimilaremployment,havingregardtoexperience,trainingandqualifications–itdoesdependoncontractualintention

• 1)Termsimpliedasamatterofcustomorusageàtheremustbeevidencetosupportaninferencethatthepartiestothecontractwouldhaveunderstoodsuchacustomorusagetobeapplicable–termsareimpliedinthismanneronthebasisofapresumedintention

• 2)Termsimpliedasnecessarytogivebusinessefficacytoacontract–termswhichthepartiestohaveagivencontractwouldobviouslyhaveassumed–alsoimpliedonthebasisofpresumedintention+correspondtotermsimpliedbyfact

• 3)Termsimpliedaslegalincidentsofaparticularclassorkindofcontract,thenatureandcontentofwhichhavebeenlargelydeterminedbyimplication–correspondw/termsimpliedbylaw–testforimplicationofatermimpliedbylawisnecessity

• Thetestofnecessityisnotwhetherthetermis‘necessary’fortheveryexistenceofthecontract–[butperhapsmorenecessaryinapracticalsensetothefairfunctioningoftheagreement]

• Wherethelawhasformanyyearsimposedalegaldutyoncontractingparties,asithasinimplyingthetermthatemployersmustgiveemployeesreasonablenoticeoftermination,thatdutyhasclearlybeenfoundtobe‘necessary’

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• Whatisatissuehereisnottheintentionoftheparties,butthelegalobligationsoftheemployer,impliedinlawasanecessaryincidentofthisclassofcontract–thisdutycanbedisplacedonlybyanexpresscontraryagreementandsincethereisnocontraryagreementhere,theActhavingrenderedwhatcontraryagreementtherewasnullandvoid,thereasonabletermofnoticeimpliedbylawisnotdisplacedandwillbeimposedbythecourt

Notes:• Canwefindaremedybysayingthecourtscanimplyaterm?• McLachlinàThereare2typesofterms–impliedinfact+thoseimpliedinlaw

o Fact–basedonpresumedintentionoftheparties[ex.officiousbystandertest]o Law–3categorieswhereitisimportanttorecognizethese–andimpliedbythemotiveofgoodfaithdealings

[insured/insuree,employee/employer,landlord/tenant]• Here–Courtaskedtodecideonwhatgroundsanemployeeisentitledtoreasonablenoticeoftermination?

o Asamatteroflaw–anemployeeisentitledtoreasonablenotice–dependentonlengthofserviceandtypeofjob[thisisimpliedbylaw–andnotbecausethepartiessointended]

• Termsimpliedbylawarewell-recognized+areimpliedasanincidenttothatrelationship• Para44àevenwithaprincipleoflaw,itisrecognizeditcanbedisplacedbyanagreementexpressedtothecontrary[this

canbechangedbyparties–mustbeexpressedthatitisnotareasonableperiodofnotice,butsomeotherperiodofnotice]o Those3categoriesareexplainedbythegoodfaithterm–arenottryingtoextenditintothesesituationsasafree

standingprincipleGeneralPrinciplesofContractualInterpretation

• Ininterpretingcontracts,thecourtsgiveexpressiontotheintentionoftheparties,howeverthatintentionmustbefoundinthewordsthepartieshaveused–inconstruingthosewordsthecourtsshouldpreferthe‘natural’or‘ordinary’meaningtheywouldhaveforalayperson,buttheremaybecircumstancestojustifyconstructionofthewordsaccordingtoaspecialmeaningdevelopedbyusageorcustom

• Extrinsicevidencecannotbeusedtoexplaintheplainmeaningofwords,butcanbeemployedtoshowthatwordshaveacquiredaspecialmeaningasaresultofsomecustomortoresolveanambiguity[itisunnecessarytoconsiderextrinsicevidenceatallwhenthedocumentisclear+unambiguous]

• Negotiationspriortothefinalcontractaregenerallyinadmissible–Englishcourtshaveheldthatsubsequentconductisalsonotadmissibleasanaidtocontractinterpretation;themodernCanadianpositionismoreflexibleandisinfavorofadmittingsuchevidence–thoughweighingitcarefully,wherethereareatleast2reasonableinterpretationsofthecontractinquestion

• Subjectiveintentionsorpurposesisinadmissible–butrealizecontractsarenotmadeinavacuum,andarewillingtoconsiderevidenceastothebackgroundcircumstancessurroundingthemakingofthecontract

• Ifadditionsaremadetoacontract[eitherwenttypedbyhand,orbyhandwhentyped]anyconflictbetweenthebasicdocumentandtheadditionalprovisionswillberesolvedinfavorofthelatterontheassumptiontheymorereliablyexpressintentionoftheparties

• Contraproferentemprinciple–ifthecontracthasbeendraftedbyoneparty,anyambiguitiesarelikelytobeconstruedagainstthatpartyandinfavoroftheother

• Awordorphraseofdebatableimportmayachieveclearmeaningwhentheentiredocumentisread,givingeffecttoallitslanguagewherethatispossibleorwhenthe‘surroundingcircumstances’areexamined

JudicialControlofStandardFormContractsandExclusionClausesA)Introduction

• Shouldbecarefultoseparateproblemsthatresultfromthestandardformcontractandthosethatarisefromtheexclusionclause

1.DevelopmentandUseoftheStandardForm

• 3differenttypesofcontractsandcontextsinwhichstandardformsareused:• 1)‘TicketCases’illustrateoneoftheearliestusesofastandardizedwrittenform.Inthesecasesthecontractisformed

quickly,casually,andwithoutdiscussionofthetermsandaticketishandedoverwhichpurportstosetoutthetermsinverybriefcompass,orsometimestoincorporatetermswhicharenotprintedontheticket,butwhichtheticketattemptstoincorporatebyreference[usuallybetweenentrepreneursandtheircustomers]

• 2)Contractualdealingsbybusinesses–somanytransactionsthatcannotaffordtonegotiatetermswitheachcustomer,howevercontractsocomplexthatthecustomercouldnotexpecttonegotiatetermswithoutalawyer–sofinancial

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institutionsadoptastandardformoffinancingandlendingagreements;realpropertyorautorentalbusinessusestandardformleaseagreements–andinsurancebusiness

• 3)Transactions(oftenofsale)inwhichthevendormayuseastandardformbutislargelyconcernedtointroduceintothecontractadisclaimerclauseintendedtolimitoreliminateliabilitytothepurchasertowhichthevendormightotherwisebeexposed

• Standardformisconvenient/valuableforpartieswhoareinapositiontobargainfortermsreasonablyfairtoboth–butitsmostobjectionablecharacteristicliesinitspropensityforoppressivenesswhenusedbyapartyinadominantpositionwhoisabletodictatetermstotheothercontractingparty

• Importanceincommercialarena[FederalCommerce&NavigationCo]à1)enablethosemakinguseofthemarkettocompareoneofferwithanothertoseewhichisthebetter;and2)theybecomecriticallyinterpretedbythecourtssothatthewayinwhichtheywillapplywillbeunderstoodinthesamesensebybothparties

• Thereisaneedtodistinguishstandardformagreementsmadebycommercialequalsfromthosecharacterizedbyamarkeddisparityintherespectivebargainingpoweroftheparties[SchroederMusicPublishingCovMacualay]àwhenlookingatthelatter,thetermsofthesecontractshavenotbeenthesubjectofnegotiationorapprovedbyanyorganizationrepresentingtheinterestsoftheweakerparty–theyhavebeendictatedbythepartywhosebargainingpowerallowshimtosaythatifyouwantthesegoods/services,thesearetheonlytermsinwhichtheyareobtainable

Trebilcock,“TheCommonLawofRestraintofTrade”(1986)

• ThisextractusestheSchroedercaseasanillustrationandprovidesimportanteconomicinsightsonthegeneralnotionofinequalityofbargainingpowerandontheuseofthestandardformcontract

• Ifanagreementhadtobenegotiatedanddraftedfromscratcheachtimeastandardtransactionwasenteredinto,thecostsforallpartieswouldescalatedramatically

• Thefactincasessuchas(hotelregistrationforms,dry-cleaningagreements,insurancecompanies,restaurantsmenus/prices,etc.)productsareofferedonatakeitorleaveitbasisisnotevidenceofmarketpowerbutofrecognitionthatneitherproducernorconsumerinterestsareservedbyincurringthecostsinvolvedinnegotiatingseparatelyeverytime

• Therealmeasureofmarketpoweriswhethertheconsumer,ifhedecidesto‘leaveit’hasacompetitiverangeofalternativesavailabletohim

• 1)Evenifoneassumesabuseofmarketpowerthroughmonopolizationorcartelization,amonopolistwillmonopolizetheprice,thetermsoftrade,butnotthenon-priceterms

• 2)Evenifmarketconcentrationexists,therewillstillbetheintractableproblemofdeterminingwhetherandtowhatextendithasproducedanti-competitiveeffects

• 3)ThecorporatestructureofthedefendantsinMacaulaymadeitimplausiblethattheyhadamonopolypowerorwereplayingadominantfir,roleintheindustry

• theplaintiffshavingsomeknowledgeofthetermsavailablefromotherpublishersbecauseofpriordealingswiththem,heandhiscollaboratorinitiatedthecontactwiththedefendantsandindealingwiththem,theyapparentlybeganwithclearviewsonthetermsdesired

2.TheUseofExclusionClauses

• Wherethelimitingorexemptingclausesareareasonabledevicefordefiningthebargainreachedbyfreelyconsentingpartiesinasituationofrelativelyequivalentbargainingpower,norealproblemexists

• But,aproblemdoesarisewhenanexemptionisinsertedinastandardformcontractbyadominantparty,orwhenanexclusionclauseappearstorelieveacontractingpartyoftheveryresponsibilitywhichthecontractseemedintendedtoimpose

• Thereare3distinctquestionsthatmayberaisedintheprocessofdecidinghowtodealwithaparticularlimitingclausethatisreliedonbyonecontractingpartyandischallengedbytheother–

o 1)Hastheclausebeeneffectivelyincludedasatermofthecontract?[mayinvolveaninquiryintothenoticeoftheclausegiventothepartywhochallengesit]

o 2)Whatdoestheclausemean?[mayincludeastrictreadingoftheclausetonarrowitseffect]o 3)Istheresomereasonwhywewillsimplyrefusetoapplytheclausetoaparticularsetoffacts?[woulditproduce

aresultthatisjusttoounjust,toounfair,toooppressive,ortoounconscionable?]

B)Incorporation

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1.UnsignedDocumentThorntonvShoeLaneParkingLtd.[1971]EnglandCAFacts:

• Attrialthedefendants(ShoeLane)wereheldliableforthepersonalinjuriessufferedbytheplaintiffastheresultofanaccidentwhichoccurredinamulti-storycarparkofwhichthedefendantsweretheoccupiers

• Plaintiff,parkedincarpark–therewasanoticeontheoutsidewhichincluded‘allcarsparkedatowners’risk’–hedroveintothegarageandtookaticketoutofthemachineandthecarwastakenupbymechanicalmeanstothefloorabove–theplaintifflefthiscarthereand3hourslatercameback

• Hiscarwasbroughtdownandwhenhewenttoputhisbelongingsintothebootofthecartherewasanaccidentandtheplaintiffwasseverelyinjured–foundittobehalfhisfault,andhalfthedefendantsfault

• Defendant’sdonotcontesttheyarepartiallyresponsiblefortheinjury,butsaytheyareprotectedbyvirtueoftheexemptionconditions–theyrelyontheticketissuedtotheplaintiffbythemachinesayingitwasacontractualdocumentwhichincorporatedaconditionwhichexemptsthemfromliability

• Belowthetime,therewassomesmallprintinthecornerstating‘thisticketisissuedsubjecttotheconditionsofissueasdisplayedonthepremises’

• Ifplaintiffhadreadthis+lookedforwheretheconditionsweredisplayed,hewouldhavehadtodrovehiscarintothegarageandwalkedaroundandthenfoundtheconditionsonapillaroppositetheticketmachine

• Broughtanactioninnegligence-50%contributorynegligence• Defendant’ssaidwerenotliablebecauseTcontractedoutofwhatotherwisewouldhavebeenhisrighttosuefornegligent

conduct• Oneconditionà“thedefendantsarenotresponsible…forinjurytotheCustomeroranyotherpersonoccurringwhenthe

Customer’smotorvehicleisintheParkingBuildinghowsoeverthatloss,mis-delivery,damage,orinjuryshallbecaused”Issues:

• Isthedefendantexemptfromliabilitybyvirtueofitsexemptioncondition?Decision:

• No–appealdismissedRatio:

• Whenaticketisissuedbyanautomaticmachine–thecustomerpaysmoneyandgetsaticket,hecannotrefuseitandhecannotgethismoneyback–thecontractwasconcludedwhenheputhismoneyintothemachine

• Ifwanttheexemptingconditionstowork,theymustexplicitlybebroughttotheattentionofthecustomerbeforethecontractisconcluded

Analysis:[LordDenning]• Ticketcases[forrailways,steamships,cloakrooms]whereaclerkissuesticketstoacustomerwhotookthem–theticketas

regardedasanofferbythecompany,andifthecustomertookitwithoutobjection,itwasregardedasacceptance• Thisisdistinguishablewhenaticketisissuedbyanautomaticmachine–thecustomerpaysmoneyandgetsaticket,he

cannotrefuseitandhecannotgethismoneyback–thecontractwasconcludedwhenheputhismoneyintothemachine–cansayofferiswhentheproprietorofthemachineisreadytoreceivethemoney,andacceptanceisputtingthemoneyintothemachine–thetermsoftheofferarecontainedinthenoticeplacedonornearthemachinestatingwhatisofferedforthemoney+thecustomerisboundbythosetermssolongastheyhavebeensufficientlybroughttohisnoticebeforehand+heisnotboundbyconditionsontheticketiftheydifferfromthenoticebecausetheticketcomestoolate

• Here–offerwascontainedinthenoticeattheentrance‘atowner’srisk’i.e.riskoftheownersofarasdamagetothecarwasconcerned,theofferwasacceptedwhentheplaintiffdroveuptotheentranceandtheticketwasprintedoutathim–thecontractwasthenconcludedandcouldnotbealteredbyanywordsprintedontheticketitself+couldnotbealteredtoexemptthecompanyfromliabilityforpersonalinjuryduetonegligence

• Iftheautomaticmachinewasabookingclerksothatoldfashionticketcasesapply[ParkervSouthEasternRy]–thenforcustomertobeboundbythetermsonthetickethavetoaskif1)theyknewtherewaswritingontheticketandthatthewritingcontainedconditionsor2)theyknewtherewaswritingontheticketandhadreceivedreasonablenoticethatthewritingcontainedconditions

• Wouldbemoreappropriatetosaycondition(singular)–becausetheonlyrelevantconditionistheexemptingcondition• Thecustomerisboundbytheexemptingclauseifheknowsthattheticketisissuedorsubjecttoit;orifthecompanydid

whatwasreasonablysufficienttogivehimnoticeofit• Inordertogivesufficientnotice,theexemptingclausewouldneedtobeinredinkwithanarrowpointingtoitor

somethingequivalent• Burdenisondefendantstoprovethatthecustomerkneworbelievedtoknowtherewaswritingontheticket–theydid

notdoso

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ClassNotes:• Didsigndocument?Ifnot,mustexplainhowenteredintothecontract.• Istheclausepartofthecontractinthefirstplace?

o Whatistheofferandwhereistheacceptance?o WhenTfirstenteredtheparkinglot–sign‘allcarsparkedatowners’risk–thistermlikelypartofthecontract;

however,thisclauseonlyappliestodamagetothecarandnotdamagetothepersonsothisdoesnotexemptthecarparkfromliability

o CarparksaysarenotliablebecausetheconditionswereprintedonthepillarandtheticketthatwasgivensaysthatTwassubjecttoallconditions[andbythistimethereisacontractbetweentheparties]

o Whichconditionsarethepartiesboundby?àThetermsthatwerepresentatthetimeàthetermsthatTwasawareofatthetimethecontractwasmadeorthoseofwhichhehadreasonablenoticeof

o Theexemptingtermswerenotreasonablyavailabletotheparkeratthetimeheenteredtheparkinglot–arenotexemptfromthetermsintheliabilityclause

• Isthereawrittencontractorisitpartlyoralandpartyinwriting?• Doestheclausecovertheeventsthatoccur?

o Needtointerpretthewordsofthecontractinlightofwhathappened–dothewordsofthecontractcovertheeventsthathappened

o Somecourtstakethecontraproferentemapproach• ParkervSouthEasternRyCo.

o Knewticketwouldbesubjecttoconditions+bytakingtheticket,agreeingtotheconditions• Casewheretheexemptingconditionsarebroughttotheattentiontotheothercontractingpartytoolate• OlleyvMarlboroughCourt

o Hotelroom–givecreditcard=contractismadeo Gettohotelroomlaterafterwardsandseetheexemptionsonthebackofthedoorofhotelroom[aftercontractis

made]o Courtheldthatthecontractwasmadeatfrontdesk+atthispointtherewasnoreferencetocontractingoutof

commonlawduties–bythetermtheconditionsinhotelroomweremade,contracthadalreadybeenenteredintoforquiteawhile

o Canonlycontractoutofcommonlawdutiesifbringthemtoattentionduringthetimethecontractisbeingformed

• Ifitisalittlebitlate–okay–ifclearthatitispartofthetransaction,thenwilllikelybindthepersonbythemA

2.SignedDocuments• Thetraditionalviewwasthatoneparty’ssignaturetoadocumentcontainingtermsestablishedthatparty’sassenttothose

terms,inabsenceoffraudormisrepresentation.Tildenhasqualifiedthisposition.TildenRent-a-CarCovClendenning(1978)BCCAFacts:

• CattendedtheofficeofTforthepurposeofrentingacar–heprovidedtheinformationaskedofhimandsaidyeswhenaskedifhedesiredadditionalcoverage–acontractwassubmittedforhissignaturewhichhesignedintheclerk’spresence

• Heplacedhiscopyofthecontractinthegloveboxanddidnotreadit• Onthebackofthecontractinfainttypetobehardlylegibleareaseriesofconditions–onestatingthevehiclewillnotbe

operatedbyanypersonwhohasconsumedanyintoxicatingliquorregardlessofthequantity• ThevehiclewasdamagedbyC,intryingtoavoidacollisionwithanothervehiclehehitapole

Issues:• Isthedefendantliableforthedamagecausedtocarwhilebeingdrivenbyhimbyreasonoftheexclusionaryprovisions

whichappearinthecontract?Decision:

• ItwasnotopentoTtorelyontheclauses–havingpaidthepremiumhewasnotliableforanydamagetothevehiclebeingdrivenbyhim

• AppealdismissedRatio:

• Whenyousignadocument,itisexpectedthatyouhavereadthetermsofit.However,onlyreasonableexpectationswillbeprotected.Thepartyofferingtheclausemustdrawittotheattentionoftheotherpartyifthereareoneroustermsthattheofferingpartyknowstheothersideisunawareof.

Analysis:[DubinJA]

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• Thecompanyinstructionsforwhatistobesaidtocustomersabouttheconditionsisthatunlessinquiriesweremade,nothingwastobesaidwithrespecttotheexclusionaryconditions–ifinquired,employersweretosaythatbypaymentof2.00perdaycustomershadcompletecoverageunlesswereintoxicatedorunlesscommittedanoffenceundertheCriminalCode

• Onewhosignsawrittendocumentcannotcomplainiftheotherpartyreliesonthesignatureasamanifestationofassenttothecontents–butonlyareasonableexpectationwillbeprotected

• Theclausesreliedonhereareinconsistentwiththeoverallpurposeforwhichthecontractisenteredintobythehirer–undersuchcircumstancessomethingmoreshouldbedonebythepartysubmittingthecontractforsignaturethanmerelyhandingitovertobesigned

• Manystandardformprintdocumentsaresignedwithoutbeingread/understood–thepartiesknow/oughttoknowthatthecontractdoesnotrepresentthetrueintentionofthesignerandthatthepartysigningisunawareofthestringentandonerousprovisionswhichthestandardformcontains

• Inthesetypesofcases,thepartyseekingtorelyonthetermsshouldnotbeabletounlesstheyhavefirsttakenreasonablemeasurestodrawsuchtermstotheattentionoftheotherpartyandinabsenceofthesereasonablemeasuresitisnotnecessaryforthepartydenyingknowledgeofthetermstoprovefraud,misrepresentation,ornonestfactum

• Here–nostepsweretakentobringattentiontotheprovisionsandCwasunawareoftheexemptingprovisions,thereforeitwasnotopentoTildentorelyonthoseclauses

Dissent:[LacourciereJA]• Cviolatedtwoconditionsofthecontract–hedroveintoapoleafterdrinkinganamountofalcohol• Itisnotforthecourttobrandtheclauseasbeingunfair,unreasonable,oroppressive–thetermsofthecontractarenot

unusualorunreasonableandarebindingonC• Wouldallowtheappealandsubstituteajudgmentforamountofagreeddamages+costs

Notes:• ThepartiesweregovernedbythelawrulefromL’EstrangevFGraucobLtd.[1934]KBàwhenadocumentcontaining

contractualtermsissigned,thenintheabsenceoffraudormisrepresentationthepartysigningitisboundanditwhollyimmaterialwhetherhehasreadthedocumentornot

• Arewesuretheclauseinquestionappliestowhathappened?• Signcarrentalcontract+areboundbyallofitsterms–regardlessofwhethertheyarereadornot• Whenlookatcontractcanseethereisaninconsistency–frontside‘inconsiderationfor$2/daythecustomer’sliabilityis

limitedtoNIL’[initialthisside]butontheback–othercircumstanceswhereliabilitywillbetotal• Here–specialcircumstancesàtherewasahastyandinformalwayinwhichthecontractwassigned(itwasapparentthe

customerhadnotreadthecontract-speedisimportanttothetransaction);therewasnorealopportunityforhimtoreadit(lengthandsmalllprint);theclauseisstringentandunusual(inconsistentwiththetermsoftherestofthecontract);

• Clausesowide–[usingthevehicleinviolationofanylaw]–notevenrelevanttotherestoftheagreement;couldhavewrittenthisclausetobemorereasonable[otherwiseessentiallyaskingforpeopletochallengeit]

• Ifareunreasonableintheclauseyoudraft[i.e.trytoover-grasptopreventanyliability],thenareaskingforacourttointerferewithit–needtodeterminewhatriskwouldbereasonabletoallocatetotheotherparty

KarrollvSilverStarMountainResortsLtd.(1988)BCSCFacts:

• Plaintiffbrokealegwhileparticipatinginaskiingcompetition–resultedfromacollisionbetweenplaintiffandanotherskier• Priortotherace,theplaintiffsignedadocumentreleasingSilverStarfromliabilityforanyinjuriessustainedintherace• Theplaintiffcontendssheisnotboundbythedocumentarguingshewasnotgivenadequatenoticeofitscontentor

sufficientopportunitytoreadandunderstandit• AtthetopoftheformitsaysRELEASEANDINDEMNITY–PLEASEREADCAREFULLY• Shedoesnotrecallwhethershewasgiventimetoreaditbutsaidshecouldhavereaditin1-2minutes

Issues:• Whetherornotthewrittendocumentwasonethatsuccessfullyexcludedtheriskfortheskiresort?Wastheplaintiffbound

bythetermsoftherelease?Decision:

• Yes–theplaintiffwasboundbythetermsofthedocument• Plaintiffisprecludedfromrecoveringfromthedefendants

Ratio:• Thereisnogeneralrequirementthatapartyofferingadocumentmusttakereasonablestepstobringtheoneroustermsto

theattentionofthesigningpartyortoensurehereads/understandsthem.Itisonlywherethecircumstancesaresuchthat

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areasonablepersonshouldhaveknownthatthepartysigningwasnotconsentingtothetermsinquestionthatanobligationarisesorelseitwouldbeamisrepresentationbyomission.

Analysis:[McLachlin]• Thereislimitedapplicationoftherulethatapartyprofferingforsignatureofanexclusionofliabilitymusttakereasonable

stepstobringittotheotherparty’sattention–thisisnotageneralprincipleofcontractlawbutisonlyapplicableinspecialcircumstances

• Thereare2exceptionstothegeneralrulethatitisimmaterialwhetherthepartyhasreadthetermsofthecontractaftertheyhavesignedit:[L’Estrange]

o 1)Incircumstanceswhichmadeitnotheract(nonestfactum)o 2)Wheretheagreementhasbeeninducedbyfraudormisrepresentationo 3)(approvedinTilden)Wherethepartyseekingtoenforcethedocumentkneworhadreasontoknowofother’s

mistakeastoitsterms,thosetermsshouldnotbeenforced;andinthesecircumstancesthedefendantsfailedtotakereasonablestepstobringthecontenttoattention

• Intheusualcommercialsituation,noneedforpartypresentingthedocumenttobringtermstoother’sattention–itissafetoassumethesigningpartyintendstobeboundbyitsterms

• Manyfactorsmayberelevanttodeterminewhetherthedutytotakereasonablestepstoadviseofanexclusionclause/waiverarisesà

o Effectofexclusionclauseinrelationtothenatureofthecontract(ifrunscontrarytonormalexpectations,fairtoassumepartydoesnotintenttobeboundbythem);thelength/formatofthecontract+timeavailabletoreadandunderstandit

• Ms.KarrollknewshewassigningalegaldocumentaffectingherrightssosheisboundbytheL’Estrangeruleunlessshecanbringherselfwithinanexceptionoftherule

o Therewasnoactivemisrepresentationandthisisnotacaseofnonestfactumo WasthisacasewhereareasonablepersonshouldhaveknownKdidnotintendtoagreewithwhatshesigned?o 1)thereleasewasconsistentw/thepurposesofthecontract–toallowhertoengageindangerousactivityand

theexclusionoflegalliabilityo 2)itwasshort,easytoread,andheadedincapitalletters[nofineprint]o 3)signingthesereleaseswascommonfeaturesofthisskirace+Khadsignedsuchreleasesonpreviousoccasions

–thiswasnotanunusualterm;itwasastandardaspecthere• ItwasnotrequiredofStobringthesetermstoherattention;andeveniftheywererequired,theydidtakestepsto

dischargethemselvesofanyobligationtobringcontentstoherattention(capitallettersattop)ClassNotes:

• Doestheclauseapply??• WhatisthesizeoftheexceptionthatTildenintroducedintothisareaofthelaw?• Whyistheparticipantboundbytheclausethatshesigned?• Thereisnoinconsistency,thereisnoclausesayingyouarecoveredfullyinthisevent–attentionisdrawntoit,andhave

thechancetoreadit,andisononepage• ClearcasethatlooksatTilden,andsaysitonlyappliesincertaincircumstances• P.505–differencesbetweenthiscase+Tilden

o Noneofthe4specialcircumstancesinTildenwereapplicablehere• *AffirmsTildenruleofreasonablenotice

Part2àNOW,assumingclauseispartofthecontract–andbecauseitisamatterofcontractualinterpretationitwillbevalidifitcoverstheeventthathappened3.StrictConstruction

• Court’sinterpretcontractsintheirnaturalandordinarymeaning–notanarrowinterpretation• P.473• Similarprinciplesofstrictconstruction+contraproferentumapplytotheinterpretationofexclusionclausesgenerally

[contractwillbeconstruedagainstthepartywhodraftedit]–thiswillapplywhenonepartyhasdraftedastandardformcontractandgiventoapartyona‘takeitorleaveit’basis,ANDthetermsinthecontractareambiguousthenitwillbestrictlyconstruedagainstthepersonwhodraftedit[classically,appliestoinsurancecontracts]

• Asageneralproposition,veryclearwordsmustbeemployedinorderforonepartytoprotectitselffromliabilityfornegligence–sowhereadefendantispotentiallysubjecttotwoliabilities,onestrictandtheotherfornegligence,generalwordsofexclusionwillnotbeconstruedasprotectingthedefendantfromitsliabilityfornegligence;butwherea

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defendant’spotentialliabilityrestsonlyinnegligence,thegeneralwordsofexclusionarecapableofcoveringnegligencesinceotherwisetheclausewouldlacksubject-matter

• SCCcase[InternationalTerminalOperators]–relaxedtherestrictiveapproach(commercialcontext)àalthoughageneralexemptionfromallliabilityusuallydoesnotexcludeitselffromnegligence,butincasessuchashere,whentheexemptionclauserelatesonlytoasmallpartofthefull,agreedperformance,suchageneralruleisnotnecessarilyapplicable

4.FundamentalBreach

Karsales(Harrow)Ltd.vWallis[1956]EnglandCAFacts:

• Winspectedasecond-handBuickmotorcarwhichSwasofferingtosellfor600–hefoundthecarinexcellentconditionandagreedtobuyitifScouldarrangefinancingthroughahire-purchasecompany

• KboughtthecarfromSandsoldittoMutualFinancewhichletthecarouttoWonhire-purchaseterms• WhenthisagreementwasconcludeditwasstillinS’spossessionandWhadnotseenitsincetheinitialinspection• ThecarhadbeenleftoutsideW’sgarage–ithadbeenbadlydamagedandhadevidentlybeentowedin;thenewtireshad

beenremovedandoldonesputon,thewirelesssetwasremoved,chromestripsmissing,thecylinderheadwasoff,allvalveswereburnt,andtherewere2brokenpistons

• WsaidhewouldnotacceptthecarinthisconditionandwastowedawaytoS’sandneverrepaired• KsueWfor10monthsofinstallmentpaymentsundertheagreement• DefendantsaysthattherewasadutyonMutualFinancetoseethatthecardeliveredcorrespondedtotheoneWallissaw,

andthatbecauseoftheconditionofthecarondeliverytherewasafundamentalbreachbyMF,andthatKcannotrecovertheinstalments

• Kreliesonaclauseoftheagreementthattheyarenotresponsiblefortheconditionofthecarondeliveryà‘noconditionorwarrantythatthevehicleisroadworthyorastoitsage,condition,orfitnessforanypurposeisgivenbytheownerorimpliedherein’

Issues:• Cantheplaintiffrecoverthe10monthsofinstallmentpaymentsbasedontheexclusionclauseintheagreement?

Decision:• No-thebreachwenttotherootofthecontractanddisentitledthelenderfromrelyingontheexemptingclause• Appealallowed

Ratio:• Apartycannotuseexemptingclausesifhehasbreachedafundamentalterm/onethatgoestotherootofthecontract

Analysis:(DenningLJ)• Whenthehirerhasseenthecarandexamineditandmadeanapplicationforhire-purchaseonthebasisofhisinspectionof

it,thereisanobligationonthelendertodeliverthecarinsubstantiallythesameconditionasitwasseen• Itisanimpliedtermintheagreementthatpendingdeliverythecarwillbekeptinsuitableorderandrepairforthe

purposesofthebailment• Itisnowsettledthatexemptingclausesonlyavailapartywhenheiscarryingouthiscontractinitsessentialrespects–heis

notallowedtousesuchclausesasacoverformisconductorindifferenceortoenablehimtoturnablindeyetohisobligations–theydonotavailhimwhenheisguiltyofabreachthatgoestotherootofthecontract–mustlookatallexpress/impliedtermsofthecontractandifheisinbreachofonethatgoestotheroot,hecannotusetheexemptingclauses[i.e.whenhehasbrokenafundamentalterm]

• Here,thebreachwenttotherootofthecontractanddisentitledthelenderfromrelyingontheexemptingclauseClassNotes:

• Doctrineoffundamentalbreach–avarietyofstrictinterpretation;thisclausewouldapplytominorbreaches,thenthesellerwouldnotbeliableforit;however,therewasafundamentalobligationinthecontract–todeliveracarinsubstantiallythesameconditionithadbeenwhenseenbythebuyer(thiswasthecoreobligation)àcannotcontractoutofthisfundamentalobligation

• Thiswaschangedà“anabuseofthenaturalroleofjudges”[cannotchangewhatthepartieshavesaidintheircontracts–norulethatonecannotruleoutofliabilityforafundamentalbreach;mustgiveordinaryandnaturalmeaningtothetermsofthecontract]

• Contractswhereabusesoccurred(standardformcontracts)weredealtwithbylegislativeprovisions(ex.FairTradeAct)5.FundamentalBreach/UnconscionabilityPost-Hunter

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FraserJewellers(1982)Ltd.vDominionElectricProtectionCo.(1997)ONCAFacts:

• Theplaintiffoperatedajewelrystoreandenteredintoacontractwiththedefendant,operatingunderthenameofADTandADTwastofurnishaburglaralarmsystemandforanannualfeeprovidetheplaintiffwithamonitoringservicewhereADTwastonotifythepoliceifthealarmsystemwasactivated

• Intheagreementtherewasanexclusionclauseà“ADTisnottoguarantee/warrantythatthesystemwillavertorpreventoccurrencesoftheconsequenceswhichthesystemorservicewasdesignedtodetect/avert;andiffoundliableforloss,damage,injuryitsliabilityshallbelimitedtoasumequalto100%oftheannualservicechargeor$10,000,whicheverisless”[FundamentallysayingthisisnotariskthatADTassumes–notaninsurer;butalsodoesnotleavethecustomerwithoutaremedyeither]

• Plaintiffwasnotawareofthisexclusionaryprovisionanditwasnotpointedouttohimbythedefendant• 2yearsafterhavingthesysteminstalled,robbersescapedtheplaintiff’spremiseswith$50,000worthofjewelry;the

defendantfailedtorespondtheplaintiff’salarmsignalforabout10minutesandbythetimeADTcalledthepolice,therobbersweregone

• PlaintiffsuedtorecoveritslossfromADTIssue:

• Isthedefendantentitledtolimititsliabilitytotheamountoftheannualmonitoringcharge($890)asinaccordancewiththeexclusionclause?

Decision:• Yes–appealallowed

Ratio:• Inthiscommercialsettingintheabsenceoffraudorotherimproperconductinducingtheplaintifftoenterthecontract,the

onusmustrestupontheplaintifftoreviewthedocument+satisfyitselfofitsadvantages/disadvantagesbeforesigningit• Regardlessofwhetherabreachisfundamentalornot,anexclusionaryclauseofthiskindshouldbeenforcedaccordingto

itstruemeaning–reliefshouldonlybegrantediftheclauseisseentobeunconscionable,unfair,orunreasonableAnalysis:(RobinsJA)

• TrialjudgeheldthatADTwasnotentitledtorelyontheclause/fullyliablefortheloss–usingHunterEngineeringàtheretheCourtfoundthatwhileexclusionaryprovisionswereenforceableaccordingtotheirtruemeaning,acourtwasempoweredinlimitedcircumstancestograntreliefagainstprovisionsofthisnature

o Foundtheclausetobeunfair/unreasonable/unconscionable–agreementwasnotread,wasnotbroughttohisattention,wasonastandardprintform/notnegotiated,wasunusualinnature,andtherewasinequalityofbargainingpower

• Thereisnoreasonnottoreadthecontractasitwaswritten• Thedefendant’snegligenceinfailingtorespondappropriatelytothealarmcannotbeequatedtoafundamentalbreachof

theagreement• However,regardlessofwhetherabreachisfundamentalornot,anexclusionaryclauseofthiskindshouldbeenforced

accordingtoitstruemeaning–reliefshouldonlybegrantediftheclauseisseentobeunconscionableorunfairorunreasonable

• Thisisnotacasewheretheclausewassoobscuredtomakeitprobableitwouldnotbeseen–itwasprintedonessentiallyonesheetofpaperandthelimitationprovisionwashighlightedinboldblockletters

• Therewasnospecialrelationshipherewhichwouldimposeonthedefendantresponsibilitytobringtheclausetospecialattentionoftheplaintiff;theplaintiffhadallthetimehewantedtoreaditandquestionADTonitsterms

• Merelyhavinginequalityofbargainingpoweralsodoesnotentitleapartytorepudiateanagreement–theissueiswhetherthereisanabuseofthatpower–heretherewasnoabuseofpower

• Clausesounusualincharacterorunfairastoconstituteanunacceptablecommercialpractice?àtherationale(ADTisnotaninsurerandthatinsuranceshouldbeobtainedandscopeofliabilityisunrelatedtothevalueofthecustomer’sproperty)underlyingtheexemptionisapparentandmakescommercialsense

• ADThasnocontroloverthevalueofitscustomer’sinventoryandcanhardlybeexpectedtoinsureajeweleragainstnegligentactsonpartofitsemployeesuptothevalueoftheentirejewelrystockwhateverthevaluemaybe

• Thealarmserviceswereprovidedontheunderstandingthatthechargeswerebaseduponthe‘valueoftheservicesandthescopeoftheliabilityandnotuponthevalueofthecustomer’sproperty

ClassNotes:• Thisexclusionclausewasfairlydrafted+notunreasonable• Syncrudeà[shouldhaveputexclusionclauseintenderingcontract]–donotgenerallyassumearisk(i.e.1billion,here)for

morethanthereward(approx.$300,000)thatwouldobtainiftheagreementworksout

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• Here,lessofanexclusionclauseandbetterdescribedasalimitationclauseàlimitationclausestendtoattractlessjudicialattentionthanexclusionclauses

• Nowcourtstendtonotinterfereinconsumercontracts–butdoonoccasion(ex.Plas-Tex)Plas-TexCanadaLtd.vDowChemicalofCanadaLtd.(2004)ABCAFacts:

• Plaintiffs(P)wereaffiliatedcompaniesprovidingpipelinesystemstocarrynaturalgastoruralco-ops–theysharedcommonownership,management,andgoals

• Defendant(D)solddefectiveresintotwooftheplaintiffs–Ddidnothaveacontractualrelationshipwiththeotherplaintiffs

• OneofthecontractscontainedclauseslimitingD’sliabilitybystatingthatPacceptedallliabilityforlossordamageresultingfromuseoftheresin

• Dknewtheresinwasdefectiveandthatsomeplaintiffswoulduseittomanufacturepipeinstalledbyotherplaintiffstocarrynaturalgas–thepipewasdangerousandallowedgastoescape–Pwasforcedtoundertakemajorremedialoperationsandtheuseofthepipewaseventuallyprohibited

• P’sreputationwasdamagedwhichcausedittolosesomeofitscustomersandbepetitionedintobankruptcyIssues:

• CanDrelyonthelimitationofliabilityclausetopreventitfrombeingliabletoPforlossanddamageasaresultoftheknowinglydefectiveresinitsoldtothem?

Decision:• No,therecanbenodoubtthisconductwasunconscionable–Dispreventedfromrelyingonthelimitationofliability

clausesincontractwiththeplaintiffs• Appealdismissed

Ratio:• Apartytoacontractwillnotbeallowedtoengageinunconscionableconductmerelybecauseitknowsthatnoliabilitycan

beimposedonitbecauseofanexclusionaryclauseAnalysis:(PicardJA)

• Trial–foundtherehadbeenafundamentalbreachbecausetheplaintiffdidnotgetwhatitcontractedforandbecausetheresinwascompletelyunsuitableforuseasnaturalgaspipeline;andDknewoftheproblemswiththeresinbeforeitenteredintothecontractwithP;alsofoundtheretobeunequalbargainingpower(Dknewoftheformulationoftheproductandknewthereweresignificantproblemswithit)

• Whetherabreachisafundamentalonethatdeprivesthebreachingpartyofthebenefitofanylimitationofliabilityclauseisaquestionofconstruction–ABcourtshaveheldthatcontractsshouldgenerallybeenforcedregardlessofstringencyoftheirtermslimitingliabilitybecausepartiesrequirecertaintythattheprovisionswillbelegallyenforceable,HOWEVERthereisanexceptionàthecourtwillintervenewhenthepartydesiringtoenforcealimitingliabilityclausehasengagedinunconscionableconduct[thisisnotaquestionoffact,butoneofconstruction]

• Unconscionabilitymightarisefromunequalbargainingpower–Hunter• Ifadefendanta)knewofapossibleriskassociatedwithitsproducts;b)failedtodiscloseimportantassumptionswithinits

knowledgetherebypreventingtheotherpartyfromproperlymeasuringtheconsequencesandriskstheywereundertaking,c)deliberatelywithheldinformationandinducedtheclaimanttoentertheagreementonthebasisthattheotherpartyhad‘scientificallydonetheirhomework’thiswouldprohibitthedefendantfromrelyingonthelimitedliabilityclauses

• Ratherthandiscloseitsknowledgeofitsdefectiveresin,Dchosetoprotectitselfbyinsertinglimitingliabilityclausesinitscontract

TerconContractorsLtdvBritishColumbia(MinistryofTransportationandHighways)2010SCCFacts:

• BCacceptedabidfromabidderwhowasnoteligibletoparticipateinthetender,thentookstepstoensurethatthisfactwasnotdisclosed

• 2-stageprocess–1)selectedaseligiblebidder(mustshowresources,capacity–onlyselecteligible/qualifiedbidders)–6companieswerechosenaseligible

• BCawardedittoabidderwhowasnotoneofthe6eligiblebidders• TerconsaidBCbreacheditscontractbyawardingbidtoineligiblebidder[agreedthatTerconwasthecompanythatwould

haveotherwisebeenawardedthecontract]Issues:

• WhetherBCsucceededinexcludingitsliabilityfordamagesflowingfromthisconductthroughanexclusionclauseitinsertedintothecontract?

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Decision:• No–appealallowed

Analysis:(CromwellJ)• TheRequestsforProposal(RFP)includesanexclusionclauseà‘noproponentshallhaveanyclaimforcompensationofany

kindwhatsoeverasaresultofparticipatinginthisRFP’• Trial=thisclauseisambiguousandapplyingcontraproferentemsheresolvedtheambiguityinT’sfavorandsaidwerenot

barredbyclausetoclaimdamages;shealsofoundBC’sbreachwasfundamentalandthatitwasnotfair/reasonabletoenforcetheexclusionclauseinlightofthenatureoftheProvince’sbreach

• Itisnecessarytoexaminetheexclusioninlightofitspurposesandcommercialcontextaswellasofitsoverallterms• HavingregardtoboththetextoftheclauseinitsbroadercontextandtothepurposesandcommercialcontextoftheRFP,

thisclaimdoesnotfallwithinthetermsoftheexclusionclause• Inthetext,itaddressesclaimsthatresultfrom‘participatinginthisRFP’–centraltothiswasparticipatinginacontest

amongthoseeligibletoparticipate• Acceptingabidfromanineligiblebidderattackstheunderlyingpremiseoftheprocessandliabilityforsuchanattackisnot

excludedbyaclauselimitingcompensationresultingfromparticipationinthisRFP• Alsobelievesitisambiguous

Dissent[BinnieJ]:• AcceptthattherespondentbreachedthetermsofitsownRFPwhenitcontractedwithBrentwood–however,alsoagree

withCAthattheexclusionofcompensationclauseisclearandunambiguousandthatnolegalgroundallowsthecourttooverridethefreedomofthepartiestocontractwithrespecttoaparticularterm

• Theexclusionappliestomustlookatunconscionabilityàdonothaveunconscionabilitysincebothpartiesaretwopowerfulcompaniesandequallymatched

• Arethereanypublicpolicyreasonsforthecourtstooverridetheclause?àno,conductisnotasbadaswasinPlas-TexCanada

ClassNotes:• Examplesofunconscionabilityàknowinglyputtingouttoxicbabyformula;Plas-Texcase• Minority--Itispossibletoattackanexclusionclauseonthegroundsofonlyunconscionability–however,thisisextremely

strict• Courtsallagree–whendealingwithexclusionclause,needtointerpretit

MISTAKE• Thelawofmistakeisconcernedwiththecircumstancesunderwhichapartytoacontractmayavoidliabilitybecauseheor

shehasenteredthecontractonthebasisofamistake• Ex.LeafvInternationalGalleries(p.485)TheCourtreferstomistakehere–“mistakeaboutthesubjectmatter,andthat

mistakewasfundamental;suchamistakehoweverdoesnotavoidthecontractsonoremedy.”Thereisonlyaremedyifthereisaspecificrepresentationortermabouttheauthorofthepainting.

• Thelawofcontractgenerallyadoptsanunsympathetic–bettertoadviseapartytosueonthisbasisonlyasalastresort• Anargumentbasedonmistakealoneisanargumentoflastresort

BothPartiesMistakenlyBelieveTheyAreinAgreement

StailmenSteelLtd.vCommercialandHomeBuildersLtd.(1976)HC[MistakeatTimeofFormation]Facts:

• Pmadeasuccessfulbidforsteel–heunderstoodthelottoincludebothbuildingsteelandusedsteel[“allsteelintheyard”],whilethedefendantsgaveevidencethelotincludedusedsteelonly

• ThedefendantsrefusedtodeliveranyofthesteelbecausePwouldnotsignawaivertotheeffectthatthelotdidnotcontainthebuildingsteel

• DsaidthattherewasnoconsensusadidemandthereforenocontractforanysteelIssues:

• Cantherebeanactionforbreachofcontractorwastherenocontractatallbecausethepartieswerenotinagreementregardingtermsofit?Whatwasthescopeoftheoffer?

Decision:• Yes–therewasacontractbasedonreasonableinterpretationofthetermsforsaleoftheusedsteelandthereforeDis

liableforbreachofcontractforrefusingtogivetheplaintiffthesteelRatio:

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• Itisonlyacasewherethecircumstancesaresoambiguous(evidenceissoconflicting)thatareasonablebystanderwouldnotinferacommonintentionthattheCourtwillholdthatnocontractwascreated

• Whenthereisamutualmistake,thecourtmustdecidewhetherreasonablethirdpartieswouldinfertheretobeacontractfromthewordsandconductofthepartieswhoenteredintoit

Analysis:(SoutheyJ)• Thecircumstancesweresuchthatareasonablemanwouldinferthattheauctioneerwasmanifestinganintentiontooffer

forsalethebulklotwithoutthebuildingsteel;andbymakingthehighestbidtheplaintiffconductedhimselfsothatareasonablemanwouldbelievehewasassentingtopurchasethelottherefore,acontractforthesaleofthelotcameintoexistenceandwasneverrepudiated

• DhadtherighttoinsistthatPtakedeliveryandpayforthebulklotexcludingthebuildingsteel,butDneverhadtherighttorequirePtogiveupitsclaimthatthecontractincludedthebuildingsteelaswellastheremainderofthebulklot

• IfPthoughtthebulklothewaspurchasingincludedthebuildingsteelandDthoughtthatthelottheyweresellingdidnot,thenthisisoneofmutualmistake–andthen,thecourtmustdecidewhatreasonablethirdpartieswouldinferthetobethecontractfromthewordsandconductofthepartieswhoenteredintoit

• Itisonlyacasewherethecircumstancesaresoambiguous(evidenceissoconflicting)thatareasonablebystanderwouldnotinferacommonintentionthattheCourtwillholdthatnocontractwascreated

• Here,areasonablemanwouldinfertheexistenceofacontracttobuyandsellthebulklotwithoutthebuildingsteelandthereforetherewasacontracttothateffectbindingonbothparties–andbyrefusingtodeliveranysteelfromthebulklot,DclearlybreacheditscontractforthesaleofsuchbulktoP

ClassNotes:• Whetheracontracthasbeenenteredintointhefirstplace.Mistakeatthetimeofformation.• Onecannotacceptanofferheknowstobemistaken• Whenthereisadisputebetweendifferentassumptionsastothemeaningsofterms,mustlookathowareasonableperson

wouldinterprettheoffer.Wouldtheytakeitliterally(tomeaneverypieceofsteelintheyard)orinadifferentway?• Adisputebetweenthemeaningofoffer+acceptancedoesnotmeanthereisnocontract.Thereisstillacontractforthe

usedsteel,andsothedefendantscannotaddanewtermstatingthatPneededtosignawaiverinordertoobtainthesteel.• RathelsvWitchelhouse–twoshipscalledthe“Pierless”andbuyermeantOctoberoneandsellermeanttheDecemberone.

Courtapplyingreasonableinterpretationofcontract,itisimpossibletotellwhichmeaningwasintended,thereforethereisnocontract.

AgreementsMadeUnderMistakenAssumptions

CommonLaw• Whenbothpartiesmakethesamefalseassumptionconcerningamattermaterialtothedecisiontoenterintothecontract

=a‘commonmistake’BellvLeverBrothersLtd.1932HL[LeadingDecisiononMutualMistake]Facts:

• TheLeverBrothersboughtoutBellfromthecontract,butafterfindingoutthatBellviolatedthecontract(speculatingincompanyinbusinessontheside,hadLknowncouldhavefiredw/opayment),Lwanteditsmoneyback

• TheagreementsaidtobevoidistheagreementthatBwouldretirefromtheBoardandindoingsoLwouldpayhimascompensation

• Enteredcontractonthemistakenassumptionthatneitheremployeehadengagedinconductthatwouldhaveallowedthemtobefired

Issues:• Werethecompensationagreementsandmoneypaidunderamistakeoffactandthereforevoid?

Decision:• No–theidentityofthesubject-matterwasnotdestroyedbymutualmistake• Appealallowed

Ratio:• Thereismistakewhichmakesacontractvoidwhenthecontractcontainsanerroneousassumptionbybothparties,and

thatassumptionisafundamentalreasonformakingthecontract.• Forthedoctrineofmutualmistaketoapplyitmustbeshownthatthesubjectmatterofthecontracthasbecome

somethingessentiallydifferentfromwhatitwasbelievedtobe• Amistakewillnotaffectassentunlessitisthemistakeofbothparties,andisastotheexistenceofsomequalitywhich

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makesthethingwithoutthequalityessentiallydifferentfromthethingasitwasbelievedtobeAnalysis:(LordAtkin)

• Ifmistakeoperatesatallitoperatessoastonegativeorinsomecasesnullifyconsent–thepartiesmaybemistakenintheidentityofcontractingpartiesorintheexistenceofthesubject-matterofthecontractatthedateofthecontract,orinthequalityofthesubject-matterofthecontract

• Ex.amistakenbeliefbyAthatheiscontractingwithB,whenheisactuallycontractingwithCwillnegativeconsentwhereitisclearthattheintentionofAwasonlytocontractwithB

• Ifpartiescontractunderamutualmistakeandmisapprehensionastotheirrelativeandrespectiverightstheresultisthattheagreementisliabletobesetasideashavingproceededuponacommonmistake

• Butmistakeastothequalityofathingraisesmoredifficultquestionsàinsuchacase,amistakewillnotaffectassentunlessitisthemistakeofbothparties,andisastotheexistenceofsomequalitywhichmakesthethingwithoutthequalityessentiallydifferentfromthethingasitwasbelievedtobe

• Whenthereisamutualmistake,themistakemustbefundamentalandacontractisvoidwhenthereis1)amistakeastosubjectmattereitherbeforeoratthetimeofcontractingifthesubjectmatterofthecontractisdestroyedordoesn’texistor2)amistakeastoquality–onlyifthesubjectmatterisessentiallydifferentfromwhattheythoughttheywerecontractingfor

ClassNotes:• Theemployeesnevermisrepresentedandsaidnobreachesoccurred.Therewerealsonotermsintheseparation

agreementthatsaidnobreacheshadbeencommitted.Thispointstocaveatemptor(“buyerbeware”)atfirstsight.• Commonmistake,sharedbybothparties.Terminatedacontractthatwasalreadybroken.• TEST:Wasthecontracttobeterminateddifferentinkindfromthecontractthatalreadyexisted[fromthecontractthat

bothpartiesthoughttoexist].Andthisdifferenceinkindtestisextremelydifficulttofulfill/stricttest.• Here,theCourtisfirm(p.570)thatitwouldbewrongtodecideanagreementtoterminateadefinite,specificcontractas

voidisdifferentthananagreementtoterminateacontractthatisalreadyvoid• [Similartopersonalinjuryclaim–buyoutclaimforXamountregardlessofhowgood/badtheclaimis]• Boughtoutthiscontractgood,bad,orindifferent• P.570–Examplesofwhatsoundlikeseriouscommonmistakes:

o AbuysB’shorse+thinkshorseissound+payspriceofsoundhorse;ifBhasmadenorepresentationtothesoundnessandhasnotcontractedaccordingtosoundness,Aisbound.[Iftherehasbeennorepresentationornotermofthecontractrelatingtothe‘mistake’thentherecanbenoremedy]

• Ex.CoopervFibbs–personagreedtobuysomethinghealreadyowned.Thatisafundamentalmistake.Personbuyspropertyunknowinglythathealreadyownedtheproperty.

McRaevCommonwealthDisposalCommission(1951)Aust.HCFacts:

• CommissionenteredintoacontracttoselltheplaintiffoneoiltankerincludingcontentswreckedonJourmandReefapproximately100milesnorthofSamaraifor285

• Theplaintiffwentonanexpeditionatconsiderableexpensebutfoundnotanker–sueforbreachofcontract• TheCommissionwasnevercertainabouttheactualexistenceofthetanker–saytherewasamutualmistake,therefore

renderingthecontractvoidIssues:

• Wasthereacontract,andifsoabreachofit?Decision:

• TherewasacontractandtheCommissioncontractedthatatankerexistedinthepositionspecified,theysaidnothingaboutthequalitybutdidwarranttherewasatleastatankerthereandsincetherewasnotankertherewasabreachofcontractentitlingtheplaintiffstodamages.

Ratio:• Apartycannotrelyonamutualmistakewherethemistakeconsistsofabeliefwhichisontheonehandentertainedbyhim

withoutanyreasonableground,andontheotherhanddeliberatelyinducedbyhiminthemindoftheotherparty.• Justbecausethereisnosubjectmatterofthecontractdoesnotmeanthereisnocontract,iftherewasrepresentationof

thesubjectmatter.Analysis:(DixonandFullegarJJ)

• Apartycannotrelyonamutualmistakewherethemistakeconsistsofabeliefwhichisontheonehandentertainedbyhimwithoutanyreasonableground,andontheotherhanddeliberatelyinducedbyhiminthemindoftheotherparty–eveniftheCommissionwascreditedwitharealbeliefintheexistenceofthetanker,theywereguiltyofthegrossestnegligence–theyhadnoreasonablegroundsforsuchabelief

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• Theymusthaveknownthatanytendererwouldrelyimplicitlyontheirassertionoftheexistenceofatankerandmusthaveknowntheplaintiffswouldrelyontheirassertionoftheexistenceofthetankerinthelatitudeandlongitudegiven

• Theytooknostepstoverifywhattheywereassertingsoany‘mistake’thatexistedwasinducedbytheirownculpableconduct

• TheonlymistakemadeherewasthattheplaintiffsbelievedwhattheCommissiontoldthem• Here,itcannotbeseenthatthepartiesproceededonthebasisofacommonassumptionoffactsoastojustifythe

conclusionthatthecorrectnessoftheassumptionwasintendedbybothpartiestobeaconditionprecedenttothecreationofcontractualobligations

• TheCommissionmadeanassumption,buttheplaintiffsdidnotmakeanassumptioninthesamesense• TheproperconstructionofthecontractisthatitincludedapromisebytheCommissionthattherewasatankerinthe

positionspecified• Ifthiscaseistobetreatedasoneraisingaquestionof‘mistake’thentheCommissioncannotrelyonanymistaketoavoid

thecontractbecauseanymistakewasinducedbytheseriousfaultoftheirownservants,whoassertedtheexistenceofatankerrecklesslyandwithoutanyreasonableground

• Courtiereisdistinguishedbecausetherebothpartiessharedthesameassumptionthatthecornexisted,whereasheretheCommissionpromisedthetankerexistedandthereforeassumedtheriskthatitdidnot

Equity

• InSollevButcher,itwassuggestedthatthecasesofmistakenassumptionsshouldbesubjectedtoatwo-stageanalysis–1)itshouldbeaskedwhetheramistakehadoccurredwhichrenderedthecontractvoidatcommonlaw;2)ifthecontractisvalidatcommonlaw,thennecessarytoaskwhetheritwasvoidableongroundsofequitablemistake

MillerPavingLtd.vBGottardoConstructionLtd.(2007)ONCAFacts:

• MillercontractedtoprovidematerialstoGwhichthenusedthematerialsforahighwayextensionithadcontractedtobuildfortheownerofthehighway

• M+GsignedanAgreementinwhichMacknowledgedithadbeenpaidinfullforallofthematerialsithadsupplied–afterthis,MsentaninvoicetoGafterdiscoveringdeliveriesforwhichithadnotbilledG

• Gusedtheagreementtoresisttheclaim,althoughithaditselfbeenpaidbytheownerformostofthesematerialsIssues:

• ShouldthetrialjudgehaveappliedthedoctrineofmutualmistaketosetasidetheAgreement?CanthecourtapplyitsequitablejurisdictiontosetasidetheAgreement?

Decision:• No–theAgreementprecludesMfromresortingtothedoctrineofmutualmistake,andevenifitcoulddoso,neitherthe

commonlawdoctrinenortheequitabledoctrinewouldresultinthecontractbeingsetasideRatio:

• Thedoctrineofcommonmistakewillvoidacontractbasedonacommonandmistakenassumptionofmaterialfact.If,however,thecontractprovidesthatonepartybearstheriskoftheparticularmistake,thatpartycannotrelyonthedoctrinetohavethecontractsetaside

Analysis:(GoudgeJA)• M+GreachedanAgreementonthetermsoftheirmemorandumofrelease,howevertheysharedanerrorwithrespectto

animportantcontextualcircumstances–thatallmaterialsuppliedbyMhadbeenpaidforbyG–atthistime,eachthoughtthatthiswasso

• Bell=testfordeterminingwhetheracontractisvoidformistakeatcommonlaw• Solle=LordDenningcreatedtheequitablejurisdictiontosetasideasvoidable,contractsthatmightbefoundenforceable

atcommonlaw;courtscanrelieveforcommonmistakewhenitwouldbeunconscientiousinallthecircumstancestoallowacontractingpartytoavailitselfofthelegaladvantageithadobtainedandwherethiscouldbedonewithoutinjusticetothirdparties

o Acontractisliableinequitytobesetasideifthepartieswereunderacommonmisapprehensioneitherastofactsorastotheirrelative+respectiverights,providedthatthemisapprehensionwasfundamentalandthatthepartyseekingtosetitasidewasnothimselfatfault

• GreatPeace=HLindecidingwhethertoapplythedoctrineofmutualmistake,inbothlawandequity,thecourtshouldlooktothecontractitselftoseeifthepartieshaveprovidedforwhobearstheriskoftherelevantmistake,becauseiftheyhave,thatwillgovern.NoroomforequitablemistakeinUK.

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• TheAgreementhereclearlyprovidesthatitisthesupplierthatacknowledgesandagreesthatpaymentinfullhasbeenreceivedforthematerialssuppliedandtotheninvoiceforthatamount–thiscontractclearlyallocatestoMtheriskthatpaymentinfullhasnotbeenreceived,thereforetheAgreementrequiresMtobeartheconsequencewhenthatrisktranspiresratherthanallowingittoinvokethedoctrineofcommonmistake

• BUT,evenifMcanresorttodoctrine–cannotsucceed:• 1)Mustshowthatasaresultofthecommonmistake,thesubjectmatterofthecontracthasbecomesomething

essentiallydifferentfromwhatitwasbelievedtobe(Bell)–here,thesubjectmatterwasthereleaseofallfurtherclaimsandnothingaboutthemistakenassumptionchangesthat

• 2)Toengagetheequitabledoctrineofcommonmistake–Mmustshowitwasnotatfault–butitwasfoundthatthemistakewasduetounexplainederrorsinM’sownproceduresandwasnotinanywaytheresponsibilityofG–thisdoctrinecannotbeused

ClassNotes:• IntheorythereisadoctrineofequitablemistakeinCanada,applyingwhereitwouldbeunconscientioustoallowoneparty

toobtainanadvantagethroughtheotherparty’smistake.Butitdoesnotapplyinthiscase.