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CONTRACT LAW 2020 –

Table of Contents

Chapter 3: Certainty of Terms ............................................................................................................ 3 GOOD FAITH ........................................................................................................................................................ 3

Bhasin v Hrynew (2014) ................................................................................................................................... 3 Styles v Alberta ................................................................................................................................................. 4 085664 BC Ltd v TimberWest Forest Corp ...................................................................................................... 4

ANTICIPATION OF FORMALIZATION ................................................................................................................... 4 Bawitko Investments Ltd v Kernels Popcorn Ltd (1991) ............................................................................... 4

Chapter 4: The Enforcement of Promises .......................................................................................... 5 EXCHANGE AND BARGAINS .............................................................................................................................. 5

Governors of Dalhousie College v the Estate of Arthur Boutilier (1934) .................................................... 5 Brantford General Hospital Foundation v Marquis Estate (2003) ............................................................... 6 Wood v Lucy, Lady Duff-Gordon (1917) ....................................................................................................... 6

PAST CONSIDERATION ........................................................................................................................................ 6 Lampleigh v Brathwait (1615) ........................................................................................................................ 6

BONA FIDE COMPROMISES OF DISPUTE CLAIMS .............................................................................................. 7 B(DC) v Zellers Inc (1996) ................................................................................................................................ 7

PRE EXISTING LEGAL DUTIES ................................................................................................................................ 7 Stilk v Myrick (1809) .......................................................................................................................................... 8 Gilbert Steel Ltd v University Const. Ltd. (1976) ............................................................................................ 8

ACCORDANDSATISFACTION .................................................................................................................................... 9 FoakesvBeer(1884) ............................................................................................................................................. 9 RobichaudvCaissePopulaire .............................................................................................................................. 10 FootvRawlings(1963) ........................................................................................................................................ 10 JudicatureAct .................................................................................................................................................... 10

DUTY OWED TO THE PROMISOR – JUDICIAL REFORM .................................................................................... 11 NAV Canada v Greater Fredericton Airport Authority Inc (2008) ........................................................... 11 Rosas v Toca (2016) ....................................................................................................................................... 11

LAW OF DURESS ................................................................................................................................................. 12 UNDUE INFLUENCE ............................................................................................................................................ 12

Bank of Montreal v Duguid (2000) ............................................................................................................... 13 UNCONSCIONABILITY .................................................................................................................................... 13 Heller v Uber ................................................................................................................................................... 13

PROMISSORY ESTOPPEL .................................................................................................................................... 14 Hughes v Metropolitan Railway Company (1877) .................................................................................... 14 Central London Property Trust Ltd v High Trees House (1947) .................................................................. 15 John Burrows Ltd v Subsurface Surveys Ltd (1968) ..................................................................................... 15 D&CBuildersLtdvRees(1966) ............................................................................................................................ 16 WJ Alan & Co v Nasar Export and Import Co (1972) ................................................................................ 16 Combe v Combe (1951) .............................................................................................................................. 17 Robichaud v Caisse Populaire (1990) ......................................................................................................... 17

INTENTION TO CREATE LEGAL RELATIONS ....................................................................................................... 17 Balfour v Balfour (1919) ................................................................................................................................. 17

PROMISES UNDER SEAL ..................................................................................................................................... 18 Royal Bank v Kiska (1967) .............................................................................................................................. 18

THE REQUIREMENT OF WRITING ........................................................................................................................ 18 PART PERFORMANCE ........................................................................................................................................ 20

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Deglman v Guaranty Trust Co (1954) .......................................................................................................... 20 Thompson v Guaranty Trust Co (1974) ........................................................................................................ 21

Chapter 5: Privity of Contract ........................................................................................................... 21 Provender v Wood (1630) ............................................................................................................................. 22 Tweedle v Atkinson (1861) ............................................................................................................................ 22 Dunlop Pneumatic Tyre Co v Selfridge Co (1915) ..................................................................................... 22

Ways in which a third party may acquire a benefit ..................................................................................... 22 Beswick v Beswick (1968) .............................................................................................................................. 23 New Zealand Shipping v Satterthwaite & Co (1975) ................................................................................. 23 London Drugs v Kuehne & Nagel International ( ) .................................................................................... 24 Fraser River v Can-Dive Ltd (1999) ............................................................................................................... 24

Chapter 6: Contingent Agreements ................................................................................................ 25 CONTINGENT AND PROMISSORY CONDITIONS ............................................................................................. 25 DEGREES OF OBLIGATION ................................................................................................................................ 25 Conditions precedent to obligation vs. conditions precedent to performance ...................................... 26 True Condition Precedent ............................................................................................................................... 26

Wiebe v Bobsien ............................................................................................................................................ 26 RECIPROCAL SUBSIDIARY OBLIGATIONS ......................................................................................................... 27

Dynamic Transport v OK Detailing (1978) ................................................................................................... 27 REMEDIES FOR BREACH OF SUBSIDIARY OBLIGATIONS .................................................................................. 28

Eastwalsh Homes v Anatal Developments ................................................................................................. 28 UNILATERAL WAIVER ......................................................................................................................................... 28

Turney v Zhilka ................................................................................................................................................ 29

Chapter 7: Representations and Terms ........................................................................................... 29 LIABILITY IN TORT ................................................................................................................................................ 30

Redgrave v Hurd (1881) ................................................................................................................................ 30 REASONABLE OPPORTUNITY TO DISCOVER THE TRUTH & DUTY TO DISCLOSE ............................................. 31

Smith v Land and House Property Corp (1884) .......................................................................................... 31 Bank of BC v Wren Developments (1973) ................................................................................................... 31 Universal Concerts Canada v Ryckman Amateur Sports Society (1997) ............................................... 32

INDEMNIFICATION ............................................................................................................................................. 32 Kupchak v Dayson Holdings (1965) ............................................................................................................. 32

REPRESENTATION AND TERMS .......................................................................................................................... 33 Helibut, Symons & Co v Buckleton (1913) ................................................................................................... 33 Dick Bentley Productions Ltd v Harold Smith (1965) .................................................................................. 34

CONCURRENT LIABILITY .................................................................................................................................... 34 BG Checo v BC Hydro (1993) ....................................................................................................................... 35

PAROL EVIDENCE RULE ..................................................................................................................................... 36 CLASSIFICATION OF TERMS ............................................................................................................................... 36

Hong Kong Fir v Kawasaki ............................................................................................................................ 36 PRINCIPLE OF GOOD FAITH IN CONTRACTUAL PERFORMANCE .................................................................. 37

Machtinger v Hoj Industries Ltd (1992) ........................................................................................................ 37 Bhasin v Hrynew (2014) ................................................................................................................................. 38

Chapter 8: Standard Form Contracts and Exclusion Clauses ....................................................... 39 INCORPORATION: UNSIGNED DOCUMENTS ................................................................................................... 40

Thornton v Shoe Lane Parking (1970) .......................................................................................................... 40 INCORPORATION BY SIGNATURE ..................................................................................................................... 40

Karroll v Silver Start Mountain Resorts (1998) ............................................................................................... 40 CONTRACTUAL INTERPRETATION ..................................................................................................................... 41

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Chapter 3: Certainty of Terms

GOOD FAITH Whatisuncleariswhetheranagreementtonegotiateingoodfaithissufficientlycertaintoberecognizedasacontractitselforasapartofabroadcontract

• TheCanadiancases,includingEmpressTowers,suggestthatanagreementtonegotiateingoodfaithiscontractuallyenforceableifitreferstoanobjectivestandardguidingtheconductofnegotiations.

• Forexample,inEmpresstheagreementtonegotiatewasoverthemarketrentalrate.ThisallowedtheCourttodeterminewhetherthelandlordnegotiatedingoodfaithbycomparingtherentdemandedwiththeprevailingrateforcomparableproperties.

• So,anagreementtonegotiateingoodfaithisnotacontractfortworeasons:(1) Itisimpossibletodefinethemeaningoftheobligationinawaythatallowsustoknowwhatsortofbehaviordoesor

doesnotamounttogoodfaithinanegotiation.(2) Negotiatingpartiesareandshouldbeunfetteredintakingthepositionthatsuitstheirsubjectiveinterest,however

unfairandunreasonablethatpositionmaybetothecounterpart.

ButthenthereisBhasinvHrynew:• TheconclusionthatcanbedrawnfromtheCourt'sdecisionisthatwhilethepreciseactionsandconstraintsrequiredby

goodfaithmayvaryaccordingtothecontextoftheobligation,themeaningofthestandardinanygivencontextisascertainable

• Accordingly,ifitisnotinherentlyuncertain,anagreementtonegotiateingoodfaithmeetsthecertaintyrequirementforcontractformationandisacontract

• Bhasinbolster’sMannpar’sanalysisofEmpressinpartbecauseitconcludesthatthegoodfaithstandardiscapableofdefinition(goodfaithincludestheideaof“bestefforts”,perEmpress)

GoodFaithasReasonableness

• Largelyconcernsgoodfaithasanimpliedterm• Somecontractscontainagoodfaithtermbyoperationoflaw(e.g.insurancecontracts)• Somecontractscontainagoodfaithtermimpliedinfact.Thetermisimpliedbasedonthepresumedintentionofthe

partiesandmustbe“insomesense,obviousfromthecircumstances”(McCamus)–MJBshowshowtermsareimpliedinfactbasedonbusinessefficacy

• ThecauseofactionisbreachofcontractGoodFaithasHonesty

• SCCrecognizesanewdutyofhonestywhichinformsallcontracts• Thisdutyisa“simplerequirementnottolieormisleadtheotherpartyaboutone’scontractualperformance”• Breachofthisdutyisindependentlyactionable(unliketheprincipleofgoodfaith)• Entireagreementclausescannottotallyexcludetheduty,thoughpartiesmaybeentitledtorelaxtheduty

o Entireagreementclause:Thecontractaswritten.Nothingelseinnegotiationsisincluded.Ifnotincontract,doesn’texist

Bhasin v Hrynew (2014) Facts:Defendant(Can-Am)wasasupplierofeducationalsavingsplansthatitmarketedthroughenrolmentdirectors.Theplaintiff(Bhasin)wasanenrolmentdirector.ThedefendantHrynewattemptedtomerge/takeoverBhasin'sbusiness.Can-AmappointedHrynewtoapositionwhereheauditedBhasin'sbusinessrecords,didnottellBhasinthathewouldbecomeanemployeeofHrynew,didnotconfirmthemergerwhenasked.Can-AmthenexerciseditsrighttonotrenewBhasin'senrolmentdirectoragreementIssues:Arepartiestoacontractsubjecttoadutyofgoodfaith?Wasthereanimplieddutyofgoodfaithinthemannerinwhichthecontractwasperformed?Holding:HeldforBhasin.SCCheldthatyoucan’timplyagoodfaithtermbecauseoftheclause,butthedefendanthadbreachedanewdutycalledthedutyofhonestyReasons:

• Contractsgenerallydonotincludeatermimpliedinthelawrequiringthepartiestoactingoodfaithinthemannerofperformance

• Twoprincipleswereadvanced,describedas“incrementalsteps”inthefurtherdevelopmentofthecommonlaw

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(1) Goodfaithcontractualperformanceisan“organizingprinciple”ofthecommonlawofcontractswhichunderpinsandinformsthevariousrulesinwhichthecommonlaw,andvarioussituationsandtypesofrelationshipsrecognizeobligationsofgoodfaithcontractualperformance

(2) Asamanifestationofthisorganizingprincipleofgoodfaith,thereisacommonlawdutywhichappliestoallcontractstoacthonestlyintheperformanceofcontractualobligations

• Thearticulationofanorganizingprincipleofgoodfaithandtherecognitionofspecificgoodfaithdoctrineswill“bringthelawclosertowhatreasonablecommercialpartieswouldexpectittobe”whichis“abasiclevelofhonestyandgoodfaithincontractualdealings”

• Thismeansthereisnogeneraldutyofgoodfaithincontractualperformance,butthereisanorganizingprincipleofgoodfaiththatunderliesspecificcontractrulesanddoctrines–thisisanewcommonlawdutyofactinghonestly

Ratio:• Theorganizationprinciplestatesthatpartiesmustperformtheircontractualdutieshonestlyandreasonablyandnot

capriciouslyorarbitrarily• Incarryingouttheirownperformanceofthecontract,acontractingpartyshouldhaveappropriateregardtothelegitimate

contractualinterestsofthepartner• Thegoodfaithprincipleisastandardwhichunderpins,organizesandunitesthoseaspectsofcontractlawthatrequire

honest,candid,forthrightorreasonablecontractperformance–itisNOTACAUSEOFACTION• Partiesmustnotlieorotherwiseknowinglymisleadeachotheraboutmattersdirectlylinkedtotheperformanceofthe

contract

Styles v Alberta • TheprinciplesinBhasindonotenableeitherpartytoinsistoncovenantsandprovisosthatarenotsetoutinwritinginthe

agreement,notdotheyallowpartiestoignoretheplainwordingoftheagreementorinsertprovisionsinconsistentwiththeactualtermsofthecontract

• Thegoodfaithprinciplecannotdirectlyinsertcontentinacontractbecauseitisnotafreestandingrule–itisratherasourceofrules,doctrinesandotheraspectsofcontractlaw

• Thiscaseshowsthataconservativeapproachshouldbetaken,contractlawdidn’tdrasticallychangeinBhasin

085664 BC Ltd v TimberWest Forest Corp ArecentexampleoftheprinciplesfromBhasinFacts:ThepartieshadanagreementfortheplaintifftologonTimberWest'sproperties.Itwasafive-yearcontractwithonlythefirst-yearrateset.Thesubsequentyearsweretobe"negotiatedingoodfaith."TimberWestendedtheagreementandtheplaintiffsuedHolding:HeldfortheplaintiffReasons:

• Thesubstantivecontracthadanexpressgoodfaithtermeventhoughtherewasnodefinitionorstandardtomeasureitagainst

• InvokedtheBhasinprinciplesofadutyofhonestperformance,whichrequireshonestyintheperformanceofcontractualobligations

• TimberWestwasthereforerequiredtoacthonestlyinnegotiationsofratessincethatwaspartofthesubstantivecontract• Theydidnotbecausetheydidn’tdiscloseastrategytoterminatethecontracttoreducecosts,whicheliminatedthevery

purposeoftheagreementRatio:Difficulttopredictwhatwillhappeninthefuturewiththegoodfaithprinciple–pendingdecisionsattheSCC

ANTICIPATION OF FORMALIZATION

Bawitko Investments Ltd v Kernels Popcorn Ltd (1991) Facts:ThepartiesagreedorallytoamendKernels'standardfranchiseagreementtochangeprovisionstoBawitko'sadvantage.Onedaybeforethedeadline,BawitkosoughtrelevantdocumentsfromKernel'ssolicitorintheformofferedtothesecondfranchise,butnotintheformthepartieshadagreeduponatthepreviousmeeting.BawitkosoughtdamagesforbreachIssue:Isanoralcontractincontemplationofaformalcontractenforceable?Holding:AppealallowedReasons:

• Thecourtheldtherewasnooralcontract.Ontheevidence,itcouldnotbesaidthepartieshadagreedinAprilastothefinalformofthefranchiseagreement;termsotherthanthosespecificallyagreedtohadyettobesettledandthustherewasnomeetingoftheminds.Theunsettleddetailsofthecomplexagreementwerenotmereformalities

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Ratio:Anoralagreementincontemplationofaformalwrittenagreement,whenlackingessentialterms,isnotenforceableduetolackofcertainty;itisacontracttoformacontractNote:Thephrase"subjecttocontract"orwordingtosimilareffectisoftenviewedasanindicationthatthepartiesdidnotintendtobebounduntilaformaldocumentisexecuted

Chapter 4: The Enforcement of Promises Promisescanbeenforced:(a)asacontract(b)asaseal(c)bywayofestoppelPromisesenforcedascontracts• Needoffer,acceptance,principlesofcertaintyandcompletenessBUTanagreementisnotsufficienttomakeitbindingasa

contract• Need(1)thepromisemustbesupportedbyconsideration(2)thepromisormustintendtocreatelegalrelations(3)certain

classesofagreementsmustbeevidencedinwriting• Consideration:mayconsisteitherofsomeright,interest,profit,orbenefitaccruingtotheoneparty,orsomeforbearance,

detriment,loss,orresponsibility,given,suffered,orundertakenbytheothero Contractsarebargainswhereanactorreciprocalpromiseisgivenbythepromiseeinreturnfor("inconsiderationof")

thepromiseo Forconsideration,anactorundertakingmusthavebeengiveninexchangeforthepromiseo Mainlyaboutreciprocity:“somethingofvalueintheeyeofthelaw”mustbegivenforapromiseinordertomakeit

enforceableasacontracto Doctrineofconsideration:anagreementisnotenforceableabsentconsideration.Ifthepromiseisn’t‘purchased’,itis

gratuitousandnotlegallyenforceableo Nominalconsiderationisgoodconsideration:courtdoesn’twanttojudgetheadequacy,commonlawsaysitisstill

bindingPromisesenforcedasseals• Apromisethatis"signed,sealedanddelivered"isbindingasadeed,alegalinstrumentdistinctfromacontractbutwith

virtuallythesamelegaleffect• Enforceableevenifnoconsiderationfromtheotherside–goalofhavingagratuitouspromisebeenforceable

Promisesenforcedbywayofestoppel• Thelawcanpreventapartyfrombreachinghisorherpromise,atleasttotheextentrequiredtoavoidinjuriousreliance,even

wherethepromiseisneithersupportedbyconsiderationnorgivenunderseal• Promissoryestoppel

EXCHANGE AND BARGAINS

Governors of Dalhousie College v the Estate of Arthur Boutilier (1934) Facts:BoutilierpromisedtopayDalhousie$5000inacampaignrunbytheuniversitytoraisefundsto"improvetheefficiencyoftheteaching,toconstructnewbuildingsandtootherwisekeeppacewiththegrowingneedofitsconstituency"withtermsofpayment"asperletterfromMr.Boutilier".NolettereverfollowedandBoutilierfellonhardeconomictimesandcouldnotpay.Heacknowledgedthathestillintendedtopay,andwoulddosowhenhecouldaffordto.Hedied,andDalhousieclaimedagainsthisestateforthemoney.DalhousiewassuccessfulattrialthatwasoverturnedonappealIssue:Isagratuitoussubscriptionpromisesufficienttofindabindingcontract?WhatdidDalhousiegivebackinexchangeforBoutilier’spledge?Analysis:

• Courtheldthatthisgratuitouspromisedidnotreceiveanyconsiderationandisthusnotabindingagreement.Boutilierdidn'tpromisetopaythemoneyforanyspecificreasonandwasnotgettingaspecificbenefitoutofit.Unlessthepromisorgetssomespecificbenefitfromagratuitouspromise,thenthereisnoconsideration

• CrocketJ.alsofindsthatestoppeldoesnotapplyherebecauseitcanonlyapplywhenarepresentationhasbeenmadeinfact(whenthepromisorhaspartiallyperformedhispromise)

Holding:Appealdismissed.Estatenotrequiredtopay

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Ratio:• Forestoppeltoapply,thepromiseemustrelyonactualactionsofthepromisor,notmerelyastatementthattheywilldo

something• Thirdpartyconsiderationisnoconsiderationbecause:

o Considerationmustflowfromthepromiseeo Subscriptionofothersisnotconsiderationinlaw

• Courtswillneverfindconsiderationinthepromiseofthedonortodothethingsrecited,evenwhentheyarespecific• Incommonlaw,reliancecan’ttransformagratuitouspromiseintosomethingthatiscontractual

Brantford General Hospital Foundation v Marquis Estate (2003) Facts:HelmiMarquissignedapledgein1998todonateonemilliondollarstoahospital.Shepassedawaybeforecompletingalltheinstalmentsandherestaterefusedtopaythebalanceowingtothepledge.ThehospitalarguedthathavingthehospitalwingnamedafterherandherlatehusbandwasconsiderationforthebargainIssue:Wastheregoodconsiderationforthepromisetopay?(Herethepaymentshadalreadybegun)Analysis:

• ThecourtheldthatMarquisneversoughtthenamingoftheunitaconditionformakingthepledge,andthatthehospitalsuggestedthismechanism,soitisnotfoundtobeconsideration.UnderCanadianlaw(asopposedtoAmerican),apromisetosubscribetoacharityisnotenforceableintheabsenceofabargain.

Holding:AppealdismissedRatio:Apromisetodonatetoacharityisunenforceablewithoutconsideration,evenifpaymentshavealreadytakenplace

Wood v Lucy, Lady Duff-Gordon (1917) Facts:Theplaintiffwassupposedtohavetheexclusiverighttoplacethedefendant'sendorsementsonthedesignsofotherstomarketthem,andinreturnshewouldhavehalfofalltheprofitsandrevenuesderivedfromanycontracthemightmake.Thiswassupposedtolastforatleastoneyear.Theplaintiffsaysthatthedefendantbreachedthecontractbyplacingherendorsementonitemswithouthisknowledge,andwithholdingtheprofits.ThedefendantsaystheagreementofemploymentlacktheessentialelementsofacontractIssue:Wasthereconsideration,eventhoughinthecontracttheplaintiffdidn'texplicitlystatethathewouldusereasonableeffortstogetendorsements?Analysis:

• Usesamoremoderninterpretationofcontractlawwhereprecisewordingisn'talwaysnecessary.Apromisemaybelacking,butinitsentiretybesufficient

• Thecourtfoundconsiderationintheplaintiff'sefforts,becausewithouthiseffortsshewouldn'tgetanything(withoutanimpliedpromise,thetransactioncannothavebusinessefficacy)

Holding:Heldfortheplaintiff.Thepromisehasvalueinitsintent,becausetheplaintiffhassomedutiesRatio:Imperfectcontractsmaybeenforcedifconsiderationispresentandhasbeenperformed,eventhoughconsiderationmaynotbeexplicitlystatedwithinthetermsofthecontract

PAST CONSIDERATION

Lampleigh v Brathwait (1615) Facts:BrathwaitkilledamanandthenrequestedLampleighseekapardonforthiscrimefromtheKing.Lampleighrodearoundthecountrytoobtainthispardon,afterwhichBrathwaitpromisedtopayLampleigh£100Issue:Canapromisetopayafterarequesthasbeenfulfilledbebinding?Reasons:Thecourtheldthatwhileamerevoluntarypromiseisnotsufficientconsideration,therewasapriorrequestandthenthepromisetopay.Thisisthennotanudumpactum,butrathercoupledwiththepriorrequestandthereforeabindingcontractHolding:Heldfortheplaintiff.BindingcontractfoundRatio:Apromisemadeafterperformancecanbeenforced,onlyifitwasunderstoodbythepartiesthattheyhavesomekindofrewardaftertheperformance

• Pastconsiderationisnoconsideration• Theactmusthavebeendoneattherequestofthepromisor• Contractualquantummeruit:“asmuchasdeserved”–foundedontheimpliedpromiseonthepartofthedefendanttopay

theplaintiffasmuchashereasonablydeservedtohaveforhislabour

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BONA FIDE COMPROMISES OF DISPUTE CLAIMS Validclaims:PromisetoreleaseavalidclaimisgoodconsiderationClaimsknowntobeinvalid:ThereisnoconsiderationifthesoleconsiderationprovidedbyAishisforbearancetoenforceaclaimwhichisclearlyinvalidandwhichheeitherknowstobeinvalid,ordoesnotbelievetobevalidDoubtfulclaims:Whereaclaimisdoubtfulinlaw,apromisetoabandonitinvolvesthepossibilityofdetrimenttothepotentialclaimantandofbenefittotheotherparty.SuchapromiseisgoodconsiderationforacounterpromisegivenbythelatterpartypromisingtoabandontheclaimClaimswronglybelievedtobevalid:ApromisetoAtoabandonaclaimisgoodconsiderationforacounterpromiseeventhoughA’sclaimisclearlybadinlaw.Ifthiswerenottherule,innocasesofadoubtfulclaimcouldacompromisebeenforced.Aalsosuffersdetrimentbecausehegivesupwhathebelievestobearightofaction(althoughingeneralconsiderationmustbesomethingofvalue,notsomethingbelievedtobeofvalue)Forbearancetosueingredients(Treitel)A’spromisetoabandonaclaimwhichisclearlybadisgoodconsiderationofallofthefollowingconditionsareinplace:

1) Mustbeareasonableclaim2) Amusthonestlybelievethattheclaimhadafairchanceofsuccess3) MustnotconcealfromBanyfactsknown,whichwouldenablehimtoresisttheclaim4) Mustshowthatheseriouslyintendedtoenforcetheclaim

B(DC) v Zellers Inc (1996) Facts:Plaintiffsuingdefendantsformoneyshepaidtothemascompensationfordamagesthedefendant(Zellers)sustainedresultingfromtheftscommittedbyhersonIssue:Eventhoughshehandedoverthemoney,cansherecoveritonthegroundthatZellerneverhadavalidclaimagainstherpersonally?Reasons:

• Thereisnogeneralrulethatparentsareliableforthetortsoftheirchildrenbyvirtueoftheirstatusasparents-onlywouldbeliableiftheythemselveswereinsomewaynegligent

• Althoughforbearancetosueisgoodconsiderationandmoneypaidforexchangeofapromisenottosueisavalidandenforceablelegalcontract,thecourtheldthatthiswasaclaimthatwasknowntobeinvalid-Zeller'scouldnothavehonestlythoughtthatthiswasavalidclaim

Holding:AppealallowedRatio:Apromiseisnotbindingifthesoleconsiderationforitisaforbearancetoenforceaclaimwhichisinvalidandwhichiseitherknownbythepartyforbearingtobeinvalid.Forclaimsthataredoubtfulornotknowntobeinvalid,forbearancetoenforceitcanbegoodconsideration

PRE EXISTING LEGAL DUTIES General:apromisetodowhatoneisalreadyboundtodoisindistinguishablefromapromisetodowhathasalreadybeendone–AgivesupnothingforB’spromise

1) Preexistingpublicduty:(WardvByham)a. E.g.nephewispromisedbyhisuncletogivehimmoneyifhestopssellingillegaldrugs.Hedoessobuttheuncle

refusestopay.Isthispromiseenforceable?i. Nephewwasalreadyunderapublicdutytonotselldrugs-apromisenottodosomethingthatyoualreadyhad

adutynottodoisnotconsiderationii. Nodetrimenttothepromisee-theydon'texperiencedetrimentbyobeyingthecriminalcode,nobenefittothe

promisorthanwhattheyalreadyhave-needtogivesomethingextrab. E.g.WardvByham,casewheremotherhasapreexistinglegaldutytosupportthechild,noobligationsonthefather,

buthepromisedtopaymoneytoheraccompaniedbysomerequests.Hedoesn'tpay-isthereconsideration?i. Fatherispromisingmoney,butthemotherispromisingtolookafterthechildinexchange,butshealreadyhas

thisobligationpursuanttolegislation

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ii. Courtfoundthatthemotherhadtodomorethanthestatuterequiredhertodo,whichwouldconstituteconsiderationforthefather'spromise

iii. Courtfindsconsiderationherebecausethemotherwasrequiredtoprovethatthechildwaslookedafter,happy,andgiventhechoiceofwhetherornottolivewithhermother

2) Preexistingdutyowedtoathirdparty:(Shadwell)

a. Promiseehastopurchasethepromisor'spromise-considerationhastoflowfromthepromiseei. Butconsiderationdoesn'thavetoflowtothepromisor(Shadwell)ii. E.g.payingmoneytoathirdpartyattherequestofthepromisorisgoodconsideration

b. Example2:pre-existinglegalrelationshipi. Nephewisengagedtohisfiancé(pre-existingobligationtomarry),hisunclepromisestopay$150/yearuponthe

nephew'smarriage-uncledidn'tpay,isthereconsideration?ii. Whatdidthenephewdotopurchasehisuncle'spromise?Heonlyfulfilledapre-existingcontractualobligation

tomarryiii. Courtsaidthattheuncle'spromiseislegallyenforceableeventhoughthenephewwasunderanobligationto

marryiv. Controversialbutstillgoodlaw-nodetrimentv. Ratio:Fulfilmentofadutyowedtoathirdpartyattherequestofthepromisorisgoodconsiderationforthe

promise

3) Dutyowedtothepromisor:a. Wherethepromisesoughttobeenforcedismadeinreturnfororinanticipationofsomeperformancebythe

promiseethatthelatterisalreadycontractuallyboundtoprovidetothepromisor.Twocategories:i. (1)Casesinvolvingapromisetovaryanexistingcontractbyaddingtothedutiesowedbythepromisortothe

promiseeii. (2)Casesinvolvingapromisetovaryanexistingcontractbysubtractingfromthedutiesowedbythepromisee

tothepromisorb. Traditionalviewthatpromisesinbothcategoriesareunenforceableforlackofconsideration,butsomelegislatures

havemodifiedthisforthesecondcategoryPromisestoPayorProvideMore

Stilk v Myrick (1809) Facts:Actionforasailor’swages-thecaptainpromisedthecrewextrawagesafterthejourneyhadbeganIssue:Isthereconsiderationsupportingthecaptain’spromisetopaymore?Holding:No,therewasnoconsiderationfortheextrapaypromisedtothesailor,theyhadsoldtheirservicesalreadyuntilthejourneywascompleted.PlaintiffcannotrecoverRatio:Theremustbeadditionalconsiderationwherethepromisefromonepartyistodowhattheyarealreadyobligatedtodoundercontract

• Doingsomethingextraiskeyinthecontextoffulfillingapre-existinglegaldutytothepromisor,otherwisenotenforceable• Contractualvariationsrequirefreshconsideration(accordingtotraditionallaw)

Gilbert Steel Ltd v University Const. Ltd. (1976) Facts:Theplaintiffenteredintoawrittencontractwiththedefendantforthesupplyofsteelatafixedpricefor3buildingprojects.Priortothecommencementofconstructionofthe1stofthetwobuildingfortheUniversityProject,theplaintiffannouncedapriceincrease.Later,thepartiesenteredintoanewcontractforthesupplyofsteelforthe1stbuildingattheincreasedprice.Whilethe1stbuildingwasstillunderconstruction,theplaintiffannounceda2ndpriceincrease.OnMarch1,1970,thepartiesenteredintoanoralagreementforthesupplyofsteelforthe1stbuildingreflectingthe2ndpriceincrease.FurthertotheiroralagreementonMarch1,awrittencontractwassenttothedefendant,butwasneverexecuted.Thedefendantcontinuedtoacceptdeliveriesofthesteel,butfailedtomakefullpaymentsagainstinvoicesreflectingthe2ndpriceincrease.TheplaintiffsuedforbreachofcontractforthebalanceowingIssue:Isthereconsiderationsupportingthedefendant’spromisetopaymore?Reasons:

• Noconsiderationonthepartoftheplaintiffforthedefendanttopaytheincreasedpricesincetheplaintiffwasalreadybound

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• Noconsiderationintheargumentthatitwasanewcontractsinceitwasonlythepricethatwaschanged,orinthepromiseofa"goodprice"sincetheplaintiffnevermadeanycommitmentinthisregard.Noconsiderationintheincreasedcreditaffordedbytheplaintifftothedefendant

• Plaintiffcannotfoundaclaiminestoppel(shield,notasword).Thefactthatthedefendantdidn'trejecttheinvoicesreflectingthehigherpricedidn'tmeanheagreedtothem

Holding:Appealdismissed,heldfordefendantRatio:

• Inordertoarguethattherewasanimpliedrescissionyoumustprovethatbothpartiesagreedtorescindthecontractintotalratherthanmerelychangingoneaspectofit

• EstoppelcannotbeusedasaswordNote:Whatcouldtheyhavedone?

1) Negotiatedaclauseaccordingtoaformula–e.g.sayingthatthepriceofsteelisgoingtobemeasuredaccordingtoaformuladesignedtoreflectthemarketprice

2) Maketheinitialcontracta“costplus”contract–notriskingtheincreaseinprice,insteadisnegotiatedtomarket(stillleavessomeuncertaintytothemarket)

PromisestoAcceptLess

ACCORDANDSATISFACTION• Incasesinvolvingpromisestoacceptlessthecourtsgenerallyadheretothetraditionalpositionthatnoconsiderationis

provided,thantheyhaveincasesinvolvingpromisestopaymore• Sometimesapromisetoextinguishanobligationinexchangeforpartialperformanceofthesamewillbeenforcedonthe

theorythatthepartiesintendedtorescindtheoriginalcontractandcreateanewoneo Traditionallytherescissionargumentisonlyavailablewheretheobligationsofbothpartiesareatleastpartially

unperformed(executory,astheconsiderationisthemutualreleaseoftheoldobligationso Ifonepartyhasfullyperformed(executed)theagreement,an"accordandsatisfaction"isnormallyrequiredat

commonlawtoreleasetheotherpartywhollyorpartiallyfromobligations• Accordandsatisfaction:thepurchaseofareleasefromanobligationwhetherarisingundercontractortortbymeansofany

valuableconsideration,notbeingtheactualperformanceoftheobligationitselfo Theaccordistheagreementbywhichtheobligationisdischargedo Thesatisfactionistheconsiderationwhichmakestheagreementoperative

Overview

1) Atcommonlaw,a“lessformore”agreementisnotbindingunless”:a. Theagreementisundersealb. Thereisaccordandsatisfaction

2) Caseswherenoconsiderationisfound:a. Foakes(applyingtheruleinPinnel’scase)

3) Caseswhereconsiderationisfound:a. Debtoragreestodosomethingextra(suchaspayingearly)b. Foote(chequesareconsideration)c. Robichaud(practicalbenefitsaregoodconsiderationintheformofsaving“time,effortandexpense”innothaving

topursuethedebtor)4) DoesthereasoningofNAV/Tocaspossiblyapplysuchthatconsiderationisnotneeded?

a. IftheJudicatureActapplies,a“lessformore”agreementisenforceablei. Onlypointofcontentionisifs.13appliestotheexecutoryagreement

b. Ifpromissoryestoppelapplies,the“lessformore”agreementisenforceable

FoakesvBeer(1884)Facts:FoakesowedmoneytoBeer.TheyenteredintoanagreementnotundersealthatFoakeswouldpay£500immediatelyand£150every6monthsuntilhehadpaidoffthedebtandinreturnBeerwouldn'ttakeanyaction.Foakespaidofftheentireprincipal.Beersoughtleavetoproceedonthejudgment,claimingshewasentitledtointerestbecausethedebtwasnotpaidoffimmediately.FoakesclaimedtherewasacontractwithnomentionofinterestthatBeerclaimedwasinvalidbecauseshedidnotreceiveanyconsiderationIssue:IspartialpaymentofadebtsufficientconsiderationfortheoriginalcontractbetweenFoakesandBeer?

10

Reasons:• Becausethecontractwasnotundersealthedefendantwasnotboundunlesstherewasconsideration.Thejudge

acknowledgesthedoctrinehasbeencriticizedsoadoptsithesitantlyHolding:Appealdismissed.InterestmustbepaidRatio:Thepaymentofasmallersumofmoneyforalargersumisnotconsiderationbecauseinpayinglessisnotwholesatisfaction(CourtappliestheruleinPinnel’scase)

RobichaudvCaissePopulaireFacts:Caisseobtainedajudgmentagainsttheplaintiff,asdidtheRoyalBank.Aspartofdebtconsolidationbothagreedtoremovefromtheregistrytheirjudgmentsagainsttheplaintiffinexchangeforthepaymentof$1000toeachcreditor.SubsequentlytheboardofdirectorsofCaisserefusedtoratifytheagreement.TheplaintiffsuedtheCaissetoacceptthepaymentasagreedandtoremovethejudgment-considerationwastheimmediatereceiptofpaymentandthesavingoftime,effortandexpenseIssue:IsCaisseboundbyitsagreementwithRobichaud?Ratio:

• Estoppelcanbeusedasacauseofaction• Ifthecourtcanfindlegallysufficientconsideration,evenoneoftime/effort/expense,itcanenforceapromisetopayless• Practicalbenefitsareacceptedasgoodconsideration

FootvRawlings(1963)Facts:FootowedRawlingsmoneyforseveraldebts.Rawlingsofferedanewagreementwherebytheappellantwouldpaylessmoneymonthlyaslongashegavepost-datedchequeseverysixmonthsforthefollowingsixmonths.Ifheperformedthis,thentherespondentwouldnotsue.Bothpartiessignedthisagreement.Footfollowedthisagreement,howeveraftercashingtheNovember1960chequeanactionwasbroughtforthebalanceIssue:Isthereconsiderationforthecreditor’sagreementtoacceptlessinfullsatisfaction?Reasons:

• Therespondentrelinquishedhisrighttosuewhenheenteredintothesubstituteagreement.Theconsiderationintheagreementwastheappellant'sagreementtoprovidethepostdatedchequesinadvancepurelyforthebenefitoftherespondentsothathecouldenjoythemoneybeforehisdeath

Holding:Appealisallowed;thenewagreementmaycontinueandtherespondentcannotsueunlesstheappellantfailstokeepupthepaymentsRatio:

• Acceptingtermsthatbenefitthecreditorforconveniencecanamounttoconsideration• Anegotiableinstrumentsuchasacheque,oranobjectoravaluelessthanthedebt,canbeconsiderationevenifthe

amountislessthanthecashdebt• Notaverycompellingargumentoverall–courtbendingoverbackwardstoachievethedesiredresult

LegalResponsetoFoakesvBeer

JudicatureActPartPerformance13(1)Partperformanceofanobligationeitherbeforeorafterabreachthereofshallbeheldtoextinguishtheobligation

(a) Whenexpresslyacceptedbyacreditorinsatisfaction,or(b) Whenrenderedpursuanttoanagreementforthatpurposethoughwithoutanynewconsideration

AnagreementtoacceptalessersuminsatisfactionofthewholeisenforceableundertheJudicatureAct

• Don’tneedconsiderationifitfallsunders.13• ThisprovisionappearstooverruletheruleinFoakesvBeer• Onlypointofcontentionisifs.13appliestotheexecutoryagreement–unclearaboutthis

11

DUTY OWED TO THE PROMISOR – JUDICIAL REFORM

NAV Canada v Greater Fredericton Airport Authority Inc (2008) Facts:Airportistheassigneeofthefedgov't.NAVCanadaresponsibleforairnavigationservices.AirportrequestedthatNAVrelocatealandingsystem,NAVsuggestedanalternativethatwouldincludepurchasingnewequipment.NAVwasresponsibleforthecostbutinsistedthattheairportpay.Airportagreedtopay,nowairportrefusestopayIssue:Wastheairport’spromisetopayfortheDMElegallybinding?Reasons:

• TheCourtofAppealcharacterizedGFAA's"underprotest"letterpromisingtopayfortheDMEasavariationtotheexistingcontract,howeverfoundthatthearbitratorhaderredinfindingthatthevariationwassupportedbyfreshconsideration(andconstitutedthereforeabindingagreement)

• TheCourtacceptedthatapost-contractualmodification,unsupportedbyconsideration,maybeenforceableaslongasitisestablishedthatthevariationwasnotprocuredbyeconomicduress

Holding:Appealdismissed.Thepromisemadebytheairportwasmadeunderduress,andthereforeunenforceableRatio:Acontractualvariationisenforceableunsupportedbyconsiderationandabsentduress

• GivesrisetotwolinesofauthorityinCanada:o OnethatfollowstheGilbertSteelanalysiso OnethatfollowstheNAVCanadaanalysis

Rosas v Toca (2016) Facts:Ms.Rosaslent$600,000toherfriendMs.Toca.Ms.Tocausedtheloantopurchaseahouse.Thefriendsagreedthattheloanwouldberepaidwithoutinterestinoneyear.Intheensuingyears,Ms.Tocarepeatedlyrequestedpermissiontodelaytheloanrepayment,sayingshewouldrepaytheloan"nextyear","inayear",or"afterayear."Ms.RosasaccommodatedMs.Toca'srequests.InJuly2014,Ms.RosascommencedanactionagainstMs.Tocaseekingrepaymentoftheloan.TheactionwascommencedmorethansevenyearsafterMs.RosasoriginallyadvancedtheloantoMs.Toca.Issue:Hasthecontractbetweenthepartiesbeenvariedinabindingwayordoesthelimitationdefenceprovideafullanswertotheplaintiff’sclaim?Reasons:

• JusticeBaumanwaspersuadedthatcontractingparties'legitimateexpectationsandintentionstomodifyanongoingcontractoughttobeprotected.JusticeBaumanproposedtomodifytheStilkrulesuchthatwherepartiesagreetovarythetermsofanagreement,thevariationisenforceablewithoutconsideration,absentduress,unconscionabilityorotherpublicpolicyconcerns,whichwouldrenderanotherwisevalidtermunenforceable.Alackoffreshconsiderationwouldnolongerbedeterminative,althoughitmaybea"valuablesignalthatthepartiesintendtobebound".

Holding:AppealallowedRatio:Whenpartiestoacontractagreetovaryitsterms,thevariationisenforceablewithoutconsideration,absentduress,unconscionabilityorotherpublicpolicyconcerns

• Anagreementtomovetheduedateofaloanisenforceableandmovestheperiodoflimitation(stillneedtoshowthereisn’tduress)

CONTRACTUALVARIATIONREVIEW

• Acontractualvariationmustbesupportedbyfreshconsideration(Stilk,GilbertSteel,Foakes,Foot)• Thiscanbeseentoworkaninjusticewherethedoctrineofconsiderationisarguablyappliedinanundulytechnicalway• Response:

o Avoidanunpalatableoutcomebycontroversiallyfindingconsideration(Foot)o Acceptpracticalbenefits(savingtime,effortandmoney)asconsiderationforthedefendant’spromisetoaccepta

lesseramount(Robichaud)o Legislativeresponseinthecontextofsettingadebtforalesseramountincertainjurisdictionssuchthatthe

creditorisboundbyanagreementtoacceptalesseramountevenabsentconsideration(JudicatureAct)o Contractualvariationsdonotrequirefreshconsiderationprovidedthevariationisnotsecuredbyduress(NAV)or

moreexpansively,absentduress,unconscionabilityorotherpublicpolicyconcerns(Rosas)

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LAW OF DURESS NotesonDuress:

1) Thelawwillnotenforcecontractsmadeasaresultofonepartybeingthreatenedwithphysicalharmoractualharm(coercion,notvoluntary)

a. Duressincludeseconomicduress2) Economicduressoftentakestheformofonepartyplacingfinancialorcommercialpressureontheother

a. E.g.acompanymightthreatentobreakacontractthatitknowsisimportanttotheothersideunlesstheothersidegivescertainfinancialconcessionsinreturn

b. Theseconcessionswillbeunenforceableifitisshownthatthecoercionwentbeyondordinarycommercialpressuretoaforceoracoercionofwillsoastovitiateconsent(PaoOn)

c. Ordinarycommercialpressureisacceptable,butgoingbeyondthisisnot3) ThePaoOntestwasrevampedinUniverseTankships-duressnowrequiresshowing:

a. Pressureamountingtocompulsionofwillofthevictim(nopracticalalternative)andb. Theillegitimacyofthepressureexerted

4) Indeterminingthelegitimacyofthepressure,needtoconsiderthenatureofthepressureandthenatureofthedemandthepressureisappliedtosupport

a. Ifthereisa‘flavourofblackmail’,thenlikelytobeillegitimateb. Ifthepartymakingthethreatisseekingtoenforcearighttowhichitbelievesthatitisentitledtoingoodfaith,

thenthethreatislegitimate5) PrinciplesfromKolmarGroup:

a. Threateningabreachofcontracttoobtainfurtherconcessions,withoutanyjustification,isillegitimateb. Itisrelevanttoconsiderwhethertheclaimanthada“realchoice”or“realisticalternative”,andcouldhaveresisted

thepressurebypursuingpracticalandeffectivelegalredress.Ifnoreasonablealternative,thissupportstheconclusionthatthevictimofduresswasinfluencedbythethreat

c. Thepresenceofabsenceofprotestmayberelevantwhenconsideringwhetherthethreathadsomecoerciveeffect.Buteventhetotalabsenceofprotestdoesnotmeanvoluntarinesswaspresent

6) Indiciaofduress(EllisvFriedland):a. Whetherthepartyprotestedatthetimetheagreementwasenteredintob. Whetherthepartyhadarealisticalternativetoenteringintotheagreementc. Whetherthepartyhadtheopportunitytospeakwithindependentlegalcounseld. Whether,afterenteringtheagreement,thepartytookstepstoavoiditwithinareasonableperiodoftimee. Ifapartycanshowthata-dwasmet,whetherthepressureexertedwaslegitimate

7) Pressurethatisillegitimateforthepurposesofthelawofduressmighttakemanyforms:a. Pressurearisingfromnormaleconomicfactors(e.g.supplyanddemand)isnotsufficientb. Bargaininghardtoadvanceowninterestsisnotillegitimatec. Determiningillegitimacymustbeassessedonthefacts

UNDUE INFLUENCE Canbeestablishedtwoways:(BMOvDuguid)

1) Proveactualundueinfluence–showthatthishasoccurredonthefactsa. Claimantmustproveaffirmativelythatthewrongdoerexertedundueinfluenceonthecomplainanttoenterinto

theparticularimpugnedtransaction2) Presumedundueinfluence–complainantonlyhastoshowthattherewasarelationshipoftrustandconfidencebetween

thecomplainantandthewrongdoerofsuchanaturethatitisfairtopresumethatthewrongdoerabusedthatrelationshipinprocuringthecomplainanttoenterintotheimpugnedtransaction.Oneaconfidentialrelationshiphasbeenproved,theburdenshiftstothewrongdoertoprovethatthecomplainantenteredintothetransactionfreely,fore.g.byshowingthatthecomplainanthadindependentadvice.Suchaconfidentialrelationshipcanbeestablishedtwoways:

a. Class2A:Certainrelationshipsbringapresumptionofundueinfluence(e.g.solicitor-client)asamatteroflawb. Class2B:Ifthecomplainantprovesthedefactoexistenceoftherelationshipunderwhichthecomplainant

generallyreposedtrustandconfidence,theremaybeapresumptionofundueinfluence.Thecomplainantwillsucceedinsettingasidethetransactionmerelybyproofthatthecomplainantreposedtrustandconfidenceinthewrongdoer

i. Thespecificrelationshipofhusbandandwife,withoutmore,doesnotgiverisetothispresumptionofundueinfluence

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Bank of Montreal v Duguid (2000) Facts:BankrequiredMs.Duguidtoco-signforherhusband.Loanwentintodefault;Mr.Duguiddeclaredbankruptcy,nowthebankissuingMr.Duguid.SherefusestopaybecauseofMr.Duguid'sundueinfluenceIssue:Inwhatcircumstancescanapartysetasideatransactiononthegroundofundueinfluenceasagainstathirdpartytotheallegedwrongdoing?Reasons:Whereaclaimantreliesonapresumptionofundueinfluence,thecourtmustlooktothenatureoftherelationshipanddeterminewhetherthepotentialfordominationexistsasamatteroffact,orwhetheritmaybepresumed

• Setsoutthecategoriesforactualandpresumedundueinfluence• Thepresumptioncanberebutted:

o Byevidencethatthesuretyobtained,orwasadvisedtoobtain,independentlegaladviceo Byevidencethatshowsthecontractwastheactofafreeandindependentmindeventhoughnoexternaladvice

wasgiven• Husband/wiferelationshipmaygiverisetoapresumptionofundueinfluenceiftheclaimantcanprovetherelationshipof

trustandconfidenceexistedHolding:NoundueinfluencefoundRatio:Husband/wiferelationshipdoesnotautomaticallyindicatearelationshipoftrustandconfidence.Setsoutthecategoriesforactualandpresumedundueinfluence

UNCONSCIONABILITY UnconscionabilitytestfromTitus,appliedinHellerrequires:

1) Agrosslyunfairandimprovidenttransaction2) Avictim’slackofindependentlegaladviceorothersuitableadvice3) Anoverwhelmingimbalanceinbargainingpowercausedbythevictim’signoranceofbusiness,illiteracy,ignoranceofthe

languageofthebargain,blindness,deafness,illness,senility,orsimilardisability,and4) Theotherparty’sknowinglytakingadvantageofthisvulnerability

ContrastingapproachusedbytheBCCourtofAppealfromMorrisonvCoastFinanceLtd,appliedinDouezbythedissentingjudges:

1) Inequalityofbargainingpower2) Unfairness

Note:UnderRosas,contractualvariationsareenforceableevenwithoutconsiderationaslongasnoduress,etc.–thesedefencesarerarelymadeout,generallymeantforanextremesituation

Heller v Uber Facts:Appellantisalicenseddriver,bringingaproposedclassaction,wantsadeclarationthatuberdriversareemployeesandthattheemploymentstandardlegislationhasbeenviolatedbyUber.Alsowantsprovisionsintheserviceagreementtobeunenforceable(disputesmustbearbitratedintheNetherlands)Issue:Isunconscionabilitypresent?Analysis:InHellerthetestfromTitusisapplied:

• Istheclauseimprovidentorunfair?Ubersaysifthedriverstheywinthey'llgetthemoneyback–veryunrealistic• Clearlackofindependentlegaladvice• Imbalanceinbargainingpower-notalotofanalysisinthiscaseonthispoint,seemsthatUberhasfundamentally

acknowledgedthispoint• Takingadvantageofthevulnerability-courtsaysthatUberchosetheclausetofavouritselfandtakeadvantageofdrivers

vulnerabletothemarketstrengthHolding:HeldfortherespondentRatio:Four-steptestused.Criticismsofthefour-steptest-aretheseadjectivesreallyhelpingus?(NewfoundlandCourtofAppeal).Adjectivesmeanttosignalextremescenarios,butmaybethey'retooextreme

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PROMISSORY ESTOPPEL

• Overallidea:considerationcanbequiteharsh,wheneverwehavesomesortofchangeinacontractualrelationshipandinsistingonconsiderationitcanleadtoaninjusticesoweneedtohavetheequitableresponseofpromissoryestoppel(CentralLondonvHighTrees)

o Ideathatpromissoryestoppelisgenerallyregardedassuspendingrights• SometimesPEispermanent:twocategories

o Ifthepartiesareinarelationshipwithongoingobligations–givingreasonablenoticetoterminateisacceptableo Ifpartiesareina‘onceandforallobligation’–lawisuncertainbutsomeindicia–itmaybetoolatetowithdraw,

perhapscan’twithdrawwithoutinjusticetotheotherparty.Inthiscasetheestoppelispermanent• ThelawrespectingpromissoryestoppelhasundergoneasignificantdevelopmentsincetheHighTreesprinciplewas

enunciatedbyLordDenningin1946–stillsomeuncertainties• NoSCCdecisioncontainsasustained,comprehensiveexaminationofpromissoryestoppel(MacDougall)

OVERVIEW

• Needtohaveconsiderationsupportingthevariation;otherwisethevariationisn'tenforceable(Foakes,etc.)• Canbeinequitable-inresponsesomecourtsmakeupconsideration(FootvRawlings-courtsfoundchequestobe

consideration,ofuncertainvalue)o CourtslikeRobichaudacceptpracticalbenefits

• Legislativeresponse-JudicatureAct-promisetoacceptalesseramountisenforceable,evenwithoutconsideration• Don'tevenneedconsiderationnecessarilyaslongasthereisnoduress,unconscionability,etc.-RosasvToca

INGREDIENTS(MacDougall,Fridman,McCamus,Treital)

1) Thereisalegalrelationshipbetweenthepartiesa. Partiesmustbecontractuallyboundtooneanother

2) Thereisaclearpromise,assurance,orrepresentationofintentionbytherepresentora. Thepartyrelyingonthedoctrinemustestablishthattheotherpartyhas,bywordsorconduct,madeapromiseor

assurancewhichwasintendedtoaffecttheirlegalrelationshipandtobeactedon3) Therepresenteeactson/reliesonthepromise,assuranceorrepresentationofintentionbytherepresentor

a. Pointofcontroversywhetherthereliancemustbedetrimental–MacDougallsaysthebulkofauthoritystatesthatdetrimentalrelianceisrequired(RyanvMoore)

b. ExamplesofcasesthatdonotrequiredetrimentincludeWJAllan,andMaraclec. Detriment:goestotheideathatthepromiseewillsufferorbeworseoffsomehowifthepromisorisallowedto

resilefromthepromiseorassurance–couldbebecausetheyhavealreadyincurredcostsofsometime4) Promissoryestoppelisanequitabledoctrinesuchthat:a)therepresenteemusthaveactedequitablyinordertoraise

thedefenceofPEandb)itmustbeinequitabletoallowtherepresentortoresilea. Fora:D&CBuildersb. Forb:MacDougall–thecircumstancesmaymakeitunfairtofindPE

5) Promissoryestoppelcannotbeusedtofoundacauseofactiona. Aminorityofcasesgotheotherway

Noteforexam:whenaskedtoadviseunder…

• Commonlaw:determineconsideration• Equity:assesspromissoryestoppel• Statute:JudicatureAct

Hughes v Metropolitan Railway Company (1877) Facts:Thelandlordgavehistenant6monthstorepairthepropertyelseriskforfeiture.Withinthe6months,negotiationforthesaleoftheleasewasopenedbetweenlandlordandtenant.Thenegotiationfailedafter6monthsandthetenantfailedtorepair.Thelandlordsoughttoenforceforfeiture.Issue:Whendoestimerunagainstthetenant?Reasons:

15

• Withaviewtoequity,thecourtheldthatallthetimethathadelapsedbetweenthegivingofthenoticeandthelettergivenlaterwaswaivedaspartofthesixmonthsduringwhichtherepairsweretobeexecuted.Thismeansthattheclockbegantorunwhenthenegotiationwasconcluded

• Ifpartieswhohaveenteredintodefiniteanddistincttermsinvolvingcertainlegalresultsafterwardsbytheirownactorwiththeirownconsententeruponacourseofnegotiationwhichhastheeffectofleadingoneofthepartiestosupposethatstrictrightsarisingunderthecontractwillnotbeenforced,orwillbekeptinsuspenseorheldinabeyance,thepersonwhootherwisemighthaveenforcedthoserightswillnotbeallowedtoenforcethemwhereitwouldbeinequitablehavingregardtothedealingswhichhavetakenplacebetweentheparties

Holding:AppealdismissedRatio:Firstcaseofpromissoryestoppel-anexampleofpromissoryestoppeliswhereApromisesBthathewouldnotenforcehislegalrightsandBactedandreliedonitwithoutgivinganyconsideration,equitywouldnotallowAtorenegeonhispromisetoB

• Timedoesnotalwaysrunstrictly–equityinvolved,prevailsoverastrictinterpretation

Central London Property Trust Ltd v High Trees House (1947) Facts:CentralTrust(landlord)hasa99yearleasewithHighTreesHouse(tenant).Lofferstoreducetherent.OneofL'screditorsputLintoreceivership(jobistolookattheassetsandliabilitiesofthecompany).Tpaidareducedrentforyears,whichthereceiverdiscovered,anddemandedfullrentfromTgoingforwardplusarrearsof8000poundsIssue:Thedefendantsarguedthattheagreementtopaytherentatareducedrateappliedtothewholetermofthelease.TheyarguedthattheplaintiffswereestoppedfromclaimingthattherentshouldbehigherReasons:

• Thecourtreviewedthepastcaselaw,especiallyHughes,wheretheHouseofLordshadheldthatpartiesshouldbepreventedfromgoingbackonapromisetowaivecertainrights

• DenningJstatedthatthecasesshowedthatapromisewhichthepromisorknewwasgoingtobeactedonbythepersontowhomitwasmadewasenforceabledespitealackofconsideration.Thetimehadcomeforthistoberecognizedasgivingrisetoanestoppel

• Here,theplaintiffshadmadeabindingpromise.However,theevidenceshowedthisonlyappliedduringthewar.Therefore,afterthewarthedefendantswereliableforthefullrent

Ratio:LackofconsiderationcanstillamounttoestoppelNote:Estoppelbyrepresentation–ifonepartymakesarepresentationastoapresentorpastfactwhichtheotherpartyreliesontohisdetriment,therepresentorcannotafterwardsrepudiatetherepresentationTHENATUREOFTHEREPRESENTATION

John Burrows Ltd v Subsurface Surveys Ltd (1968) Facts:Subsurfacebuyspartofabusinessfromtheplaintiff.Includedinthepurchasepricewasapromissorynotewherethedefendantpaid42,000upfrontthenagreedtomakemonthlyinstallments.Theinstallmentswerelate,theplaintiffcouldacceleratethepaymentsandclaimtheentireamountdue,butthePdoesnothing.AfteradisagreementbetweenthePandtheD,thePsuesfortheentireamountIssue:Doesthedefenceofpromissoryestoppelapply?Byacceptinglatepaymentsmonthaftermonth,istheplaintiffsayingthattheaccelerationclausewillnotbeinvokedandthereforepromissoryestoppelapplies?Reasons:

• CourtcitesHughes-thistypeofequitabledefencecannotbeinvokedunlessthereissomeevidencethatoneofthepartiesenteredintoacourseofnegotiationwhichhadtheeffectofleadingtheothertosupposethatthestrictrightsunderthecontractwouldn'tbeenforced.Thisimpliesthattheremustbeevidencefromwhichitcanbeinferredthatthefirstpartyintendedthatthelegalrelationscreatedbythecontractwouldbealteredasaresultofthenegotiations

• Itisnotenoughtoshowthatonepartyhastakenadvantageofindulgencesgrantedtohimbytheother-ifthiswasthecaseitwouldmeantheholdersofpromissorynoteswouldberequiredtoinsistoneveryletterbeingfollowedincasethisendedupaffectingtheenforcementofthecontract

• Estoppeldoesnotapplyinthiscase.ForestoppeltoapplytheconductofBurrowsmustamounttoapromiseorassuranceintendedtoalterthelegalrelationsbetweenthetwo,andthatitisimpossibletoinferthisfromthefactsofthecase.Hewassimplyactingasafriend,andnotenteringintoanynegotiationswithWhitcombovernewtermsofpayment.

Ratio:• Inorderforapromisetobecapableofbeingrelieduponandhaveestoppelavailableasadefence,itmustbeapromiseor

assuranceintendedtoalterthelegalrelationsbetweenthetwoparties• Afriendlygestureisnotabindingagreement,andifitisrelieduponestoppelwillnotbeavailableasadefence

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THEEQUITIES

D&CBuildersLtdvRees(1966)Facts:Theplaintiffswereasmallcompanywhodidworkforthedefendants.Thedefendantmadeapaymentontheaccountaftertheworkwascompleted,butafterthisfailedtopaytheremainderofthebalance.Thedefendantsfinallyofferedsomepayment,butrefusedtopaythefullbalance,citingpoorwork.Theystatedtheywouldneverhaveenoughtopaythebalance.TheplaintiffsfinallyacceptedthemoneytopreventthemfromfallingintobankruptcyIssue:Canapartyacceptalesseramountforsatisfactionofadebtandthendemandpaymentinfull?Reasons:

• Atcommonlaw,substitutecontractsarenotenforceableunlessthereisconsiderationprovided.Butsubstituteagreementsthatsatisfythenecessaryaccordcanbevalidinequity,eveniftheydon'thaveconsideration,ifitwouldbeinequitabletoallowthecreditortosueforthemoneyfromtheoriginalcontract.Tosatisfythisrequirementanagreementmusthavebeenmade,thedebtormusthavereliedonit,anditmustbeunfairtoallowthecreditortoclaimmoremoney

• Inthiscasethereisnoconsideration-DenningstatesthatthepressureplacedonD&Cforcedthemtoacceptanagreementthatwasunsatisfactory.Thereforethereisnoreasonwhythecreditorshouldnotenforcethefullamountofthedebt

• Thecreditorisbarredfromhislegalrightsonlywhenitwouldbeinequitableforhimtoinsistonthem-whentherehasbeenatrueaccord,itisinequitable

• NopersoncaninsistonsettlementprocuredbyintimidationHolding:JudgmentforD&C,noreasoninlaworequitywhythecreditorshouldnotenforcethefullamountRatio:

• Substituteagreementsrequireconsiderationtobebindingatcommonlaw• Substituteagreementsmaybeacceptableinequityeveniftheydon'thaveconsideration,ifitwouldbeinequitabletoforce

thedebtortopayanymore,therewasanagreementbetweenthetwopartiesthatthenewsumwouldsettlethedebtandthisagreementwasrelieduponbythedebtor

• Apersonisnotheldtoarepresentationifitwasmadeundercompulsion–‘cleanhands’canaffecttheavailabilityofpromissoryestoppel

THERELIANCE

WJ Alan & Co v Nasar Export and Import Co (1972) Facts:ThiscaseconcernsthesaleofcoffeebeansbetweenaKenyancoffeebusinessandaTanzanianbasedbuyer(ElNasr).Thecontractsweremadepayableoncredit,theagreementofwhichwassetupusingamountsinsterling.Thisisthekeydiscrepancybetweenthecontractforsaleandthecreditagreement.ThefirstshipmentwasacceptedbyElNasr,whopaidforthisinstallmentinpoundssterling.Whenpaymentbecamedueonthesecondinstallment,thevalueofsterlinghaddecreased.ToavoidalossWJAlandemandedpaymentinKenyanShillings,meaningthatthesterlingbalanceneededincreasing/thebalanceowedIssue:Couldthebuyersrelyonpromissoryestoppel,basedontheoriginalacceptanceofthefirstpaymentinsterlingandthelackofredressabouttheinclusionofsterlingduringtheaddressingofotherissues?Reasons:

• Therehadbeenavariationintheformofpaymentintherevisedagreement-WJAlanhadwaivedtheirrighttobepaidinshillings.Thiswasheldnottobeasaleofgoodsdeliverableininstallmentswherethetermscouldvary,sothesellerscouldn'tunilaterallychangetheircurrencyofexchange

• Couldbeconsiderationbecausethepartiesagreedtovarytheircontractinawaythatcouldbenefiteitherparty(usuallygeneratesitsownconsideration)

• Denningheldthatonceanalternativemethodofpaymentisaccepted,itisdeemedtohavebeenacceptedasatermofthecontract.Nosupportinthecaselawfortherequirementofdetriment,simplythattheotherpartyhadreliedonthedecisionandalteredtheirposition

Holding:AppealallowedRatio:

• Arequirementofpromissoryestoppelisthatthepromisee'sconducthasbeeninfluencedbythepromiseorrepresentation• Torelyonpromissoryestoppel,detrimentalrelianceisnotakeyrequirement.Youmustonlyestablishthatthepromisor

haschangedtheirpositionNote:waivervs.promissoryestoppel

• Waiveristhevoluntaryrelinquishmentofsomeknownright• Estoppelistheinhibitiontoassertingit• Thereisfunctionallynodifferencebetweenthetwo-thedifferenceisvirtuallynonexistent

17

SWORDORSHIELD

Combe v Combe (1951) Facts:Duringthedivorceprocess,ahusbandpromisedtopayhiswifeatax-freesumof£100eachyeartorepresentapermanentmaintenancepayment.Thewifewasawarethatthehusbandwasnotinagoodfinancialstateandmadenoclaimtothispayment.Severalyearslater,shebroughtanactiontoclaimthearrearsthatwereowedundertheiragreement.Issue:ThiscasewasbroughtonlyfouryearsafterthelandmarkdecisiongiveninCentralLondonPropertyTrustLDvHighTreesHouseLD,whichheldthatapartycouldnotrevertonanearlierpromisemade.ThecourtinthisinstancewasrequiredtoconsiderwhetherthehusbandcouldwithdrawfromhisearlierpromisetopaythewifethesumofmoneyReasons:

• Thecourtheldthatthewifecouldonlyenforceheragreementforthepaymentthatwaspromisedbythehusbandifshehadgivenconsideration.Thecourtfoundthatthewifegavenoconsiderationasshehadnotagreedtoapplyforthemaintenancethatwaspromisedbythehusband.Thehusbanddidnotrequestthewifetorefrainfromtakingthemaintenancepaymentandthereforethewifecouldnotclaimforthemoney

Ratio:Promissoryestoppelisashieldandnotasword–cannotbeusedtofoundacauseofaction,onlyasadefenceNote:Canadianauthorityisoftheviewthatestoppelisincapableofcreatingnewrights,asopposedtolimitingtheenforcementofexistingrights

Robichaud v Caisse Populaire (1990) Facts:Caisseobtainedajudgmentagainsttheplaintiff,asdidtheRoyalBank.Aspartofdebtconsolidationbothagreedtoremovefromtheregistrytheirjudgmentsagainsttheplaintiffinexchangeforthepaymentof$1000toeachcreditor.SubsequentlytheboardofdirectorsofCaisserefusedtoratifytheagreement.TheplaintiffsuedCaissetoacceptthepaymentasagreedandtoremovethejudgmentIssue:CanRobichaudrelyonpromissoryestoppeltoenforceCaisse’spromise?Reasons:

• Ingredientsofpromissoryestoppelfulfilled• ProblemisthatRobichaudissuingCaisseasaplaintiff,onthebank’spromisetoacceptalesseramount–notusing

promissoryestoppeldefensivelyRatio:

• CourtrelaxestheruleinCombe(didn’twantthebanktogetawaywiththeirconductbasedonthesword/shielddistinction)

• Aplaintiffcanrelyonpromissoryestoppelifitisadefencetoadefence(e.g.youareestoppedfromraisingthedefence)

INTENTION TO CREATE LEGAL RELATIONS

Balfour v Balfour (1919) Facts:Husbandagreestopayhiswife30poundsamonthwhilesheisaway.Shedoesnotwanttocomeback,andsuedhimtoenforcepaymentsIssue:CanMrs.BenforceMr.B’spromise?Reasons:

• Therecanbemutualagreementsthatarenotcontracts,e.g.arrangementsbetweenhusbandandwife.Thesearenotcontractsbecausethepartiesdidn’textendthattheyshouldbeattendedbylegalconsequences

• Theconsiderationthatobtainstheseagreementsisloveandaffection,whichthecourtsdon’tcareabout• Thecommonlawdoesnotregulatetheformofagreementbetweenspouses,andtheevidencedoesnotproveacontract

Holding:HeldforMr.BRatio:

• Inacommercialsetting:intentiontocreatelegalrelationsispresumed.Thepersondisputingtheintentionmustrebutthispresumption

• Familyarrangements:nointentiontocreatelegalrelationsispresumed.Thepersondisputingtheintentionmustshowthattherewasintentiontocreaterelations

• Thiswasthefirsttimethecourtsaidthattheplaintiffmayhavetoshowanintentiontocreatelegalrelations• Theintentiontocreatelegalrelationsrulehereisanartificialbarriererectedbythecourttostoptheclaimthatitwas

discriminatory–probablyshouldn’tbefollowed

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Note:CanarguethatBalfourshouldn’tbefollowedinAlberta,asthiscasecouldpresentaprecedentthathurtsyourclientEqualitytheory:Includestheideathatthelawshouldstriveforfairnessinrelationtocommonlawrules

• FlowsfromtheCharter–judgemadelawshouldreflectChartervalues• Lookforpatternsofinclusion,exclusion,andvulnerability

Feministcritique:Blissheldthatinequalitybetweenthesexesinthisareisnotcreatedbylegislation,butbynature(inresponsetothelawtreatingtheunemployedwomendifferentlyfromotherunemployedpersons)–thiswasreversedinBrooks

• E.g.TenderYearsDoctrine:asadefault,youngchildrenwouldbeplacedinthecustodyoftheirmother• Balfour:theruleinthiscasetypicallyleaveswomeninadisadvantagedpositionbecausetheyhavetoshowintentionto

createlegalrelations.EssentiallymeanswomenareleftwithoutlegalrecourseLiberaltheory:

• Publicsphere:o Governmentalo Lawislegitimateinthissphere

• Private/Public:o Marketplaceo Wewantlawinthemarketplacetomaintainmarketchoice,protectpropertyandenforcecontracts

• Private/Private:o Lawhasvirtuallynolegitimatescopeo Hearth/homeo Valuesofaltruism,love,affection–lawhasnobusinessbeinghere(alludedtoinBalfour)o Whenthelawsaysitdoesn’twanttogointotheprivatesphere,thisisn’tremainingneutral,butratherpreserving

thestatusquo

PROMISES UNDER SEAL

• Thesealisnolongeranecessaryconditionofenforceabilityforapromise;however,itisasufficientcondition• Thesealprovidesclearevidencethatthepromisorintendedtocreatealegalobligation.Theactofsealingitservedto

encouragethepromisortocarefullycontemplatethelegalconsequencesoftheiractions

Royal Bank v Kiska (1967) Facts:Kiska’sbrothertookoutaloan.Kiskasignedastheguarantee.Theplaintiffbroughtanactionontheguarantee.Therewasnowafersealattachedbutthewordsealwasprintedonthedocumentnexttowherethesignaturewas.Issue:Istheguaranteeundersealsuchthatitisenforceableevenabsentconsideration?Reasons:

• Awaximpressionisnolongerrequired,agummedwaferwillsuffice• Thewords“sealhere”arenotenoughtomakeaformalseal–thereshouldbesomesemblanceofformalitybecause

commonlawrequiresanoperativeactsuchasaffixingofwaxoradoptionofaseal• Theword‘seal’afterthesignatureismerelyaninvitationtoplaceasealthere• TheconsiderationforKiska’sguaranteewasthattheBankgavehisbrotherextratimetopaythedebt

Dissent:Laskinsaysthereisnoconsiderationsupportingtheguaranteebecausetherewasnopromise(expressorimplied)toforbearordoanything

THE REQUIREMENT OF WRITING

• TheStatuteofFraudsappliestocertainkindsofcontractsandlegislation,derivingitsforcefrommostCanadianprovinces• Itspurposewastopreventlitigantsfromtryingtoenforcepromisesthatwerenevermade• Sec.4includesthekindsofcontractsthatmustbeinwritingtobeenforceable• Sec.17statesthatcontractsforgoodsofsalegreaterthan$10mustbeinwriting

o AnequivalentprovisionisfoundintheSaleofGoodsAct2000(>$50)o InAlberta,s.4hasbeenreplacedbytheGuaranteesAcknowledgementAct

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Whycertainkindsofcontractshavetobereducedorevidenceinwriting:

• StatuteofFrauds,SalesofGoodsAct,GuaranteeAcknowledgementActRationalesforthewritingrequirement:

• Shutsthedooronconfusion,memoryloss,strategicmemoryloss• StatuteofFrauds:topreventfraudinlitigation

o Defendantswouldbethevictimsofshamlitigationthroughperjuredevidencebyassertingacontractagainstthedefendant

Whatkindsofcontractsmustbereducedtowritingorevidencedinwriting:

1) Contractsforthesaleoflandoranyinterestconcerningthem(Deglman,Thompson)2) Contractsnottobeperformedwithinayear(Adams,Hanau)

a. Ideathatpeople'smemoriesfade,butthisrationaledoesn'treallyholdup3) Acontractforthesaleofgoodsofthevalueof$50orupwards(SaleofGoodsAct)

a. Notenforceableunlessthebuyeracceptspartofthegoodssoldandactuallyreceivesthatpart,orgivessomethinginearnesttobindthecontractorinpartpayment(overandaboveconsiderationofthecontract)

b. Needsomenoteormemoinwritingandsignedbythepartyc. Thereisacceptanceofgoodsinthemeaningofthissectionwherethebuyerdoesanyactinrelationtothegoods

thatrecognizesapre-existingcontract4) Contractsofguarantee(GuaranteesAcknowledgementAct)

a. Guaranteedoesn’thaveanyeffectunlessthepersonenteringintotheobligationappearsbeforealawyer,acknowledgestothelawyerthatthepersonexecutedtheguarantee,andinthepresenceofthelawyersignsthecertificate

b. ThismeansitisnotenoughinAlbertathataguaranteeisevidencedinwriting–needtohavethecertificate,appearbeforealawyer,andsignthecertificate

Rules:

• StatuteofFraudsistechnical-courtstrytoavoidapplicationofit.ThesetworulesaretohelpavoidapplicationoftheStatute

• RuleinAdams:contractonlyhastobeinwritingifitsperformanceofnecessitymustlastlongerthanoneyear• RuleinHanau:ifthereisnomentionoftimeandtimeisuncertainorindefinite,theagreementisnotwithinthestatute

MemorandumorNoteRequirement

• Thereisliberalinterpretationofthisrequirement• Mustadducetheexistenceofthecontractandnotfailforuncertainty(McKenzie)

o Party,propertyandpriceareusuallyvital,butotheressentialtermsmightexist(Tweddell)• Documentdoesn'thavetobeintendedasamemoofthecontract• Itissufficientifthememocomesintoexistenceanytimebeforetheactioniscommenced-doesn'thavetobe

contemporaneouswiththedeal• Itcanbeconstitutedbyseveralpiecesofpaper• Itmustbesignedbythepartyagainstwhomthecontractisbeingalleged:(butinclusionmustbeintendedaspartofthe

signature,pg.269note2)• Mereinitiallingisinsufficient• Hand-printednameissufficient• Printednameofthecontractingpartyontopofastandardformissufficient• E-contracts:(ElectronicTransactionsAct)

o Contractscanbeconcludedonline,butsomerestrictionsexist§ Exchangeofemailsusuallyleadstotheformationofaformalcontract§ Signedinwritingrequirementcanbedemonstratedelectronically§ Alwaysuptothediscretionofthejudge

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Non-Compliance• Atcommonlaw:

o Failuredoesn’tmakethecontractvoid,onlyunenforceableo StatuteofFraudsdoesn’tdealwiththevalidityofthetransaction,onlytheevidencetoproveanagreement

§ Notsayingthereisnocontract,butthatthereisaproceduralproblemwithenforcement(contractstillmayexist)

§ Thecontractcanbeusedbywayofdefence(Wauchope)andalsobeusedasconsiderationforanewcontract

§ Goesagaintothecourt’sdesiretousetheStatuteaslittleaspossible• Equity

o DefendantswouldnotbeallowedtopleadandrelyontheStatuteiftopermitthemtodosowouldbetoallowtheStatutetobeusedasanengineoffraud

o EquitableprincipleswhichholdthattheStatuteofFraudsdoesnotapplywheretherehasbeenperformanceorpartperformanceoftheoralcontractby,orwhereotherwisetheresultwouldbefraudagainstorinjusticetotheotherparty

PART PERFORMANCE

• HasbeenusedbythecourtstocircumventthestrictapplicationoftheStatuteofFrauds• Courtsofequitywouldenforcesomecontractsforsaleintheinterestofland,absentasufficientnoteormemorandum,as

longascertaincircumstancescouldbeproved• Equity’sabilitytodispensewiththewritingrequirementbecameknownasthedoctrineofpartperformance

o Plaintifftryingtoenforceacontractnotreducedtowritingo Sufficientactsofpartperformanceinrelationtothelandwillessentiallyreplacetherequirementtobeevidencein

writingOVERVIEWMaddisonvAlderson-seemstoincludetwoviews

1) Oneview:theactsreliedonmustbereferredtotheactualcontract(narrowview)(Deglman)a. Partperformancemustbereferabletotheoralagreementthatisreliedonb. E.g.actscouldalsobereferabletoalongtermlease,socan'tpassthisarticulationofthetest

2) Secondview:theactsreliedonmustbeunequivocally,andintheirownnature,referabletosomesuchagreementasthatalleged(broadview)

a. Toombsb. Broaderisbetterforenforcement-ifyouwantthecontractenforcedneedtopushforthisc. 'Some'suchcontract-doesn'tmatteriffeesimple,ora99yearlease

SCCFOLLOWSTHEBROADERVIEWNote:

• Paymentofmoneyisequivocalanddoesnotcountasasufficientactofpartperformance• IfyouallegethatcontractiscaughtbytheStatuteofFraudsbutcan’tshowsufficientactsofpartperformance,stillmay

receiveaquantummeruit(Deglman)

Deglman v Guaranty Trust Co (1954) Facts:Auntpromisednephewshewouldleavehimherhouseifhewouldrunerrands,etc.,fromtimetotime.Agreementwasneverrecordedinwriting.Actsofallegedpartperformanceincludeddrivingauntaround,oddjobsaroundthehouse.Thenephewonlylivedatoneofherpropertiesforabout6monthsIssue:Arethesesufficientactsofpartperformance?Reasons:

• MajorityfollowsthebroadertestfromMadison–actsofpartperformancemustbereferabletosomesuchagreementasthatalleged

• Afterthishasbeenproved,thenevidenceoftheoralagreementbecomesadmissibleforthepurposeofexplainingthoseacts–thisiswhyapaymentofmoneyalonecanneverbeasufficientactofpartperformance

• Thereisnothinghereinthenatureoftheactsprovedthatbearsanynecessaryrelationtotheinterestinland

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• Thequantummeruitisaresponsetothefactthatthereisanunenforceablecontract.Thenephewunderstoodthathewasnotrenderingservicesgratuitously–couldgivehimaquantummeruit

• Cartwrightsaidwecan’timplyacontractualpromisetopayareasonablefeebecausewehavealreadysaidthecontractisunenforceable.WeCANimplyarestitutionaryquantummeruit

• Restitutionaryquantummeruit:ideathatonepersonhasbeenunjustlyenrichedattheexpenseofanother.Requires:o Anenrichmento Correspondingdeprivationo Absenceofajuridicalreasonjustifyingtheenrichment

Ratio:BroadviewfromMadisonisacceptedascorrect

Thompson v Guaranty Trust Co (1974) Facts:GbeganworkingasahiredhandonD’sfarm,continuedthisfor48years.GallegesthatthiswordwasdoneinconsiderationforD’spromisetodeviseandbequeathhislandandpersonaltytoG.DwouldoftenbeinjuredorillandGwouldnursehimbacktohealth.Gtookasomewhatmarginalfarmingoperationandmadeitsuccessful.OnD’sdeath,nowillwasfound.GsuedforspecificperformanceIssue:WasG’sworkoverthistimesufficienttocountaspartperformancesothathisagreementwithDcanbeenforced?Reasons:

• UsedthebroadtestfromMadison• Practicallyeverypartofpartperformanceastowhichevidencewasgivenwereactswhichwereunequivocallyreferableto

acontractinreferencetotheverylandsinquestionHolding:HeldforGRatio:

• Exampleofacasethatshowsanextremecaseofactsofpartperformance,versusDeglmanwheretheevidenceisequivocal

Chapter 5: Privity of Contract Definition:acontractcannot,asageneralrule,conferrightsorimposeobligationsarisingunderitonanypersonsexceptthepartiestoit.ThismeansthatsomeonewhostandstobenefitfromacontractbetweentwopartiescannotsueonthecontractTwoexamples:

1. YouarebothinacontracttobuyA’shouse.Abreaches.a. Ifthepersonwhobreachisn’tinvolved,theyareanofficiousintermeddler

2. AandBareinacontractwhereApromisestoconveyahousetoCandBpaysforthatpromise.a. Contractcontemplatesathirdparty(C)-Chasnoobligationsofthecontract,buttheyaretheintended

beneficiaryofthecontractb. HistoricallyCcouldsue(Provender)butthiswasreversedinTweedle

Overview:

• Historicallythirdpartiescouldsueonacontract,itwastheCLthatledtothecurrentissue• Nowonlyapartycansueorbesued,soasdefaultrulethirdpartiescannotsueorbesued• MaincaseisDunlop–firmlineagainstallowingathirdpartytosue/besued,insistedonagencyandconsideration• NZShipping:testforagency• LondonDrugs–changedtheCL,theLDtestpuntstheconsiderationrequirement

o Havetoshowtheclauseexpresslyorimpliedlyextendedbenefittoemployeesandtheemployeeswereworkingontherelevantactivity

• CanDive–appliedincontextofasubroclaim.Needtoask:o Didtheyintendtoextendthebenefit?o Isthethirdpartybeneficiaryperformingtheactscontemplated?o Outcomeconsistentwithsoundpolicyconsiderations?

• Beswick–sometimesseekingananswerofspecificperformancecanbeananswertotheprivityproblem,cangetspecificperformancewhentheCLremedywouldsomehowbedeficient

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Provender v Wood (1630) Facts:Bride'sfatherandgroom'sfathercontractedthattheywouldeachgivethegroomanannualstipenduponthemarriage.Groomsueshisfatherinlaw,courtallowedhimtodothis.Ratio:Thepersonwhoaccruesthebenefitofapromisemaybringanaction(thirdpartiescanbringactions)

Tweedle v Atkinson (1861) Facts:JohnTweddle,fatherofWilliamTweddle,agreedwithWilliamGuytopayWilliamTweddle£100aftermarryinghisdaughter.ThewrittenagreementcontainedaclausewhichspecificallygrantedWilliamTweddlethepowertosueforenforcementoftheagreement.WilliamGuydied,andtheestatewouldnotpayandWilliamTweddlesuedRatio:

• Thirdpartybeneficiariescannotsueorbesuedoncontracts• Naturalloveandaffectionisnotsufficientconsiderationintheeyesofthelaw

Dunlop Pneumatic Tyre Co v Selfridge Co (1915) Facts:Dunlop,atiremanufacturingcompany,madeacontractwithDew,atradepurchaser,fortiresatadiscountedpriceonconditionthattheywouldnotresellthetiresatlessthanthelistedpriceandthatanyresellerwhowantedtobuythemfromDewhadtoagreenottosellatthelowerpriceeither.DewsoldthetirestoSelfridgeatthelistedpriceandmadeSelfridgeagreenottosellatalowerpriceeitherandthattheywouldpay£5indamagesiftheyviolatedthisagreement.Selfridgeproceededtosellthetiresbelowthepricehepromisedtosellthemfor.DunlopbroughtactionandwassuccessfulattrialbutthiswasoverturnedbytheCourtofAppealIssue:IsitlawfulforDunloptosueSelfridgeeventhoughnocontractualrelationshipexistsbetweenthem?Reasons:

• TherewasnocontractbetweenDunlopandSelfridgeandthereforeDunlopcannotsue• Thereareafewfundamentalprinciplesoflawunderpinningthisdecision:

o a)thedoctrineofprivity,whichstatesthatonlyapartytoacontractcansueinbreachofthecontract;o b)thedoctrineofconsiderationwouldrequirethepromisee(Dunlop)togiveconsiderationtoSelfridgeforthe

contracttobecompleted,andthisdidnotoccurasDunlopdidnotgiveanythingtoSelfridgehere(SelfridgemadeapromisetoDunloptoonlysellatacertainpricebutitwasgratuitousbecauseDunlopgavenoconsiderationinreturn);

o c)theonlywaythataprincipalnotnamedinacontractcanbesuedisifheactedasanagentonbehalfofoneofthepartiesprivytothecontract.DewwasnotactingasanagentforDunlop,thereforethisdoesnotapplyinthiscase

• IfDewwereDunlop'sagent,thentheeffectofthetwodealswouldreallybeonedeal.Inanagencyagreement,theAgentdisappearsandthecontractisbetweentheprincipal(Dunlop)andthethirdparty(Selfridges)Theprincipalgivestiresandthethirdpartygivesmoney.Thisdidnothappenhere.ThecourtheldthatthetiresbelongedtoDew,notDunlop.Theyhadalreadysoldthem

Holding:AppealdismissedRatio:

• Onlypartiestoacontractcansueforabreachofthecontract• Theonlyexceptiontothisruleisifapartynamedinthecontractwasactingasanagentofanunnamedparty;inthiscase,

theunnamedpartycanbesued

Ways in which a third party may acquire a benefit Privityisobviatedwhen:

1) Theplaintiffcanproceedwithanactionintorta. Don’talwaysneedacontracttosuesomeonesuccessfully

2) Theplaintiffcanestablishacollateralcontracta. Collateralcontract:theconsiderationisthemakingofanothercontract–collateraltothecontract,buthasitsown

independentexistenceb. E.g.theplaintiffsueshairdryermanufacturerpursuanttoacollateralcontractcontainingthewarranty(the

considerationforthecollateralcontractisintheplaintiffenteringthemaincontracttopurchasethehairdryerfromtheretailer)

3) Statutelawcreatesanexceptiontotheoperationofprivity

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a. E.g.InsuranceAct–iftheinsurerdoesn’tpayout,thebeneficiarymightnothaveacauseofactionatcommonlawsotheActgivesone

4) Theplaintiffbringsanactionforspecificperformancea. Beswick

5) Trustlawappliesa. Onceatrustisestablished,thebeneficiaryisentitledtoenforcethetrustobligationdirectly

6) Thereisanagencyrelationship a. E.g.principalauthorizesanagenttoenterintocontractsontheprincipal’sbehalfwiththirdparties–suggeststhe

agentisnolongerathirdparty,butpartytothecontractb. DunlopandNewZealandShipping

7) Acommonlawexceptionappliesa. ThelimitationofliabilityclausefallswithinLondonDrugs(asopposedtoEdgeworth)b. ThewaiverofrightsclausefallswithinFraserRiver

Beswick v Beswick (1968) Facts:PeterBeswickwasacoalmerchant.Heagreedtosellhisbusinesstohisnephew,therespondent,ifhepaidhimacertainsumofmoneyforaslongashelived,andthentopayhiswife(theappellant)£5perweekfortherestofherlifeafterhedied.Hedied,andthenephewonlypaidhisauntoncebeforestatingthatnocontractexistedbetweenthem.Shewasalsotheadministratrixofherhusband'swillIssue:IsMrs.Babletosuehernephewinherownpersonalcapacity,asanexecutrixoftheestate,orboth?Reasons:

• TheHouseofLordsdecidedthattheaunthadnorighttosuehernephewinherowncapacity,asshewasnotapartytothecontract.ThisoverturnsDenning'sfindingsinthelowercourtallowingthirdpartiestosueforbenefitsthatwereguaranteedtothemunderacontract.However,inhercapacityastheadministratrixsheisabletosuehimforthespecificperformanceofhispromisethatwasmadeinthecontract.

Holding:Appealdismissed.HeldforMrs.BRatio:

• Thirdpartiescannotsueforbreachofcontractwhentheywerenotapartytothecontract,eveniftheywerenamedasabeneficiaryofthecontract

• Thiscaseexemplifiesthecourtsusingequitableprinciplestoremedyatechnicalsituation-usingspecificperformanceasaremedy,eventhoughMrs.Bwasathirdpartybeneficiary

New Zealand Shipping v Satterthwaite & Co (1975) Facts:AjaxMachineComanufacturedandconsignedadrilltoSatterthwaite.AbillofladingwasissuedbyagentsfortheFederalSteamNavigationCo,whichcontainedaclausestating:(1)noliabilityforthecarrierorservants/agentstotheconsignee;(2)allclaimsmustbewithinoneyear;(3)notaccountablefordamagesinexcessof$100.ThestevedoreswereNewZealandShipping(ofwhichtheFederalSteamNavigationCowasasubsidiaryof)andtheydamagedadrillduetonegligence.Satterthwaitebroughtanaction3yearsafterthedamage,NZclaimedtheywerenotliableastheywerecoveredbytheclauseinthebillofladingIssue:Doesthelimitedliabilityclauseinthebillofladingapplytothestevedores?Reasons:

• Wilberforce,forthemajority,laysoutatestforagency:o Ifthepartyismeanttobecoveredbyprovisions;o Ifthepromissorisclearlyactingasagentfortheparty;ando Ifthepromissorhastheauthoritytodothis;o Thenconsiderationmovesfrompartythroughagenttopromisee.Applyingtothiscaseitisclearthatthe

subsidiaryrelationshipbetweenthepartiesfulfillseachrequirement• Satterthwaiteagreedtoexemptcarrierandagentsfromliabilityinthebilloflading,andcommercialrealitiesmustmean

thatthiscoversthewholecarriage.Thisisessentiallya"unilateral"contractwhichbecomesbilateralwiththespecificperformanceofloadingthegoods

• TheseactsconstitutedconsiderationforanagreementbetweenSatterthwaiteandNZ,andthereforeNZwouldbesubjecttotheexemptionconditionsofthebilloflading

• ThisdecisionisintheinterestofensuringanefficientglobalmarketHolding:Appealallowed,liabilityclauseapplies

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Ratio:• Testforagency.Showshowacourtcanusealternativeroutestoensuresmoothfunctioning-e.g.hereaunilateralcontract

wasshowntoexist• Fulfilmentofapre-existinglegaldutytothepromisorisnotgoodconsiderationforafreshpromise(GilbertSteel),but

fulfillingapre-existinglegaldutytoathirdpartyISgoodconsiderationbecauseitscomingattherequestofthepromisor,Ajax

London Drugs v Kuehne & Nagel International ( ) Facts:LDistheappellant,hadacontractwithK&Ntostoreatransformer.Includedinthiscontractisalimitationofliabilityclause,whichlimitedthewarehouseemployee’sliabilityto$40dollars.LDatthetimeofthecontractwasassumedtohaveknownthatK&N’semployeeswouldberesponsibleforthemovingofthetransformer.Therespondentsattemptedtomovethetransformernegligently,whichresultedindamagetoit.Issue:CantheemployeesshelterunderthelimitationofliabilityclauseasadefencetoLD’saction?Reasons:

• EventhoughtheemployeesarenotpartiestothecontractbetweenK&NandLD,theSCCcontendsthatitistimeforajudicialreconsiderationoftheruleregardingprivityasappliedtoemployer’scontractuallimitationliabilityclauses

• Thecourtrecognizesthatarightforthirdpartybeneficiarytorelyonalimitationofliabilityclauseshouldhavelittleimpactontherightsofcontractingpartiestovarytheircontracts,incomparisonwiththerecognitionofathirdpartyrighttosueoncontract

• Whenapersoncontractswithanemployeeforcertainservices,therecanbelittledoubtgenerallythatemployeeswillhavetheprimeresponsibilitiesrelatedtotheperformanceoftheobligationswhichariseundercontract

• TheCourtisnotsuggestingthatemployeesareapartytotheiremployer’scontractsinthetraditionalsensesothattheycanbringanactiononthecontractorbesuedforbreachofcontract

o Thereissimplynovalidreasonfordenyingthebenefitoftheclausetoemployeeswhoperformthecontractualobligations(policyreasonforextendingtheprocedurehere–privityshouldn’tstandinthewayofcommercialrealityandjustice)

Holding:TheLLCappliestothetwoindividualsonanimpliedbasisRatio:Theemployeescanobtainthebenefitiftheycanshow:

1) Thelimitationofliabilityclausemusteitherexpresslyorimpliedlyextenditsbenefitstotheemployeesseekingtorelyonit2) Theemployeesseekingthebenefitofthelimitationofliabilityclausemusthavebeenactinginthecourseoftheir

employmentandmusthavebeenperformingtheveryservicesprovidedforinthecontractbetweentheiremployerandthenplaintiffwhenthelossoccurred

PRIVITYANDSUBROGATIONRightofsubrogation:insurancecompaniesgenerallyhavetherighttostepintotheshoesofthepartywhomtheycompensate(theinsured)andsueanypartywhomthecompensatedpartycouldhavesued(forcausingtheloss)

Fraser River v Can-Dive Ltd (1999) Facts:FRandCDhadachartercontractforaboat.FRistheplaintiffandownsthebarge,CDisthedefendantwhowasallegedlynegligentandsunkthebarge.FRhasaninsurancecontractforthebarge.Underthiscontracttheinsurancecompanywouldordinarilyhavethesubrorighttosueastheinsurancecompany,butinthisinsurancecontractthesubrorightwaswaived.CDisnowsubjecttoasubrogatedactiondespitethewaiverofsubrointhecontract.CDisathirdpartybeneficiary,notpartytotheinsurancecontractIssue:Canthethirdpartybeneficiary(CD)relyonthewaiverofsubroclauseasadefencetotheactionagainstitinnegligence?Reasons:

• Determinationmadebasedontwofactors:(1)didthepartiestothecontractintendtoextendthebenefitinquestiontothethirdpartyseekingtorelyonthecontractualprovision?(2)Aretheactivitiesperformedbythethirdpartyseekingtorelyonthecontractualprovisiontheveryactivitiescontemplatedascomingwithinthescopeofthecontractingeneral?

• Oncetherightsaredevelopedintoanactualright,theycannotberevokedunilaterally.Oncethethirdparty’sactscrystallizeunderthecontract,thecontractinrelationtothisrightcannotbeburied

• Courtfindspolicyreasonsforrelaxingthedoctrineofprivityinthesecircumstances

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• Whensophisticatedcommercialpartiesenterintoacontractofinsurancewhichexpresslyextendsthebenefitofthewaiverofsubroclausetoanascertainableclassofthirdpartybeneficiary,anyconditionspurportingtolimittheextentofthebenefittobeavailablemustbeclearlyexpressed

Ratio:CourtsindirectlysaythereisathirdoutcometotackontoLondonDrugs–hastobeapolicyfoundationwhenyouapplythetest–whatarethemainpolicyreasonsinfavourofpermittingthewaivertoberelieduponasadefence?

Chapter 6: Contingent Agreements

• Theneedtocreateapresentlybindingcontractonestablishedtermssubjecttoaprovisothatwillreleaseoneorbothofthepartiesfromtheobligationtoactuallyperformunderthosetermsifthecontingencydoesnotmaterializemaybemetbymakingthecontractconditional

o Typicallyreferredtoasaconditionprecedent• RecallthecaseofDawsonvSpringer.ThecontractwassubjecttoSpringergettingahelicopterandtakingDawsoninit.The

impliedsubsidiaryobligationistomakegoodfaithefforts.Ifthisconditionisfulfilled,thentheprincipleobligationofgiving10%ofthestakeisfulfilled.Butiftheconditionisnotfulfilled,theremaystillbeabreachofcontractaswasthecaseinthiscase.

Acontingentconditiondescribesaneventorstateofaffairsthatneitherpartytoacontracthaspromisedwillcomeabout,buttheoccurrenceofwhichisaprerequisiteoftheirobligationtoperformtheircontractualobligations-aconditionprecedentiscontingent(ifitsoperationdependsonaneventwhichisnotcertaintooccur)

• Conditionsubsequent–thepartiesintroduceaprovisionthatthefulfillmentofaconditionortheoccurrenceofaneventshalldischargeeitheroneofthemorbothfromfurtherliabilitiesunderthecontract

CONTINGENT AND PROMISSORY CONDITIONS

1) Conditionasanevent(contingentcondition)versusconditionasaterm(promissorycondition)a. Event:conditionasaneventthatneitherpartyundertakestobringabout.Theobligationsofbothpartiesare

contingentonthehappeningofthespecifiedeventwhichmaythereforebedescribedasacontingentconditionb. Term:whereoneparty’sdutytoperformiscontingentontheotherpartyperformingtheirundertaking.The

contractisimmediatelybindingonbothparties

2) Conditionsprecedentandconditionssubsequenta. Precedent:aconditionprecedentprovidesthatthecontractisnottobebindinguntilafterthespecifiedevent

occurs.Itcanrelatetoasituationwherethereisnocontractatalluntiltheconditionisfulfilledorasituationwherethereisacontract

b. Subsequent:aconditionissubsequentifitprovidesthatapreviouslybindingcontractistodeterminetheoccurrenceoftheevent

Note:DON’TASSUMEthatthepresenceofanunfulfilledconditionprecedentmeanstheabsenceofabindingagreement

DEGREES OF OBLIGATION Anagreementthatissubjecttoacontingentconditionprecedentisnotfullybindinguntilthespecifiedeventoccurs;nordoeseitherpartyundertakethatitwilloccur.AnagreementsubjecttosuchaconditionmayimposesomedegreeofobligationonthepartiesorononeofthemFourPossibilities:

1) Beforetheeventoccurs,eachpartyisfreetowithdrawa. Wehaveaconditionprecedentgoingtothecreationoftheobligationasopposedtoonethefulfillmentofwhich

triggersthedutytoperformb. Eitherpartycouldwalkawaybeforethispointanditwouldn’tbeabreachc. Nocontractunlessanduntiltheconditionisfulfilled

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d. Murray:agreementforsaleofapatentisexecuted,butthepartiesagreethatitshould“notbeintheagreement”unlessathirdpartyapprovedoftheinvention.NoagreementUNTILapproval

2) Beforetheeventoccurs,themainagreementisnotbindingbut,solongastheeventcanstilloccur,oneorbothofthe

partiesCANNOTwithdrawa. Thereisacontract–waitingfortheeventtooccur–can’twithdrawb. Needtohaveacontractinplacetopreventwithdrawalc. Primaryobligationtobuyandsellissuspended,subjecttoaneventoccurring–impliedsubsidiaryobligationson

thevendortowaitandsee,andonthepurchasertomakegoodfaitheffortsd. SmithvButler:AsellslandtoBsubjecttofinancing.Acannotwithdrawbeforethetimefixedforcompletion;he

wasboundtowaittoseewhetherBcouldarrangetheloan

3) Beforetheevent,themainagreementisnotbindingbutinthemeantime,thepartiesmustnotpreventoccurrenceoftheevent

a. Inacontract–partofyourcompensationisgoingtobetiedtoperformanceb. Needtoavoidbreachingtheimpliedsubsidiaryobligationofgivingtheindividualthetimetoachievethe

performancec. Bournemouth:Footballplayeristransferred.Heistobepaidpartofhisfeeimmediatelyandthebalanceupon

scoring20goals.Heiscutbeforehehasthechancetoscorethegoals.Heldthattheteamwasinbreachbecauseitdidn’tgivehimreasonableopportunitytosodo

4) Beforetheeventoccurs,themainagreementisnotbindingbutoneofthepartiesundertakestousereasonableefforts

tobeingabouttheeventwithoutundertakingthatthoseeffortswillsucceeda. Theprincipalobligationtobuyandsellwillnottakeeffectifplanningpermissionisnotobtainedb. Butthereisanimpliedsubsidiarypromissoryobligationtomakereasonableeffortsc. HargreavesTransportLtdvLynch:landissoldsubjecttotheconditionthatthepurchasershouldobtainplanning

permission–heisboundtomakereasonableeffortstogetthepermission,butisn’tliableforfailing

Conditions precedent to obligation vs. conditions precedent to performance

• Aconditionprecedentmayrelatetothebindingeffectofanagreementortothedutytoperformanexistingcontract• Theexistenceofsuchaconditiondependsupontheintentofthepartiesasgatheredfromthewordstheyhaveemployed,

anditwillbeinterpretedaccordingtothegeneralrulesofconstruction(Wiebe)DOOR#1:CONDITIONPRECEDENTTOCREATIONOFTHECONTRACT

• Nobindingagreementresultsbecausetheconditionprecedentisillusory• Itisbasedon‘whim,fancy,ordislike’.Ithasnoobjectivecontentandthereforecannotbeenforced• E.g.I’llbuyyourhouseifIlikeit

DOOR#2:CONDITIONPRECEDENTTOTHEDUTYTOPERFORMTHEPRIMARYCONTRACTUALOBLIGATIONS

• Abindingagreementresults,butwhethertheprimarycontractualobligationsdependsonwhethertheconditionprecedentisfulfilled

• Suchagreementscanhavesubsidiaryobligations(expressorimplied),breachofwhichisactionable

True Condition Precedent

• Anexternalconditionuponwhichtheexistenceoftheobligationdepends.Untiltheeventoccurs,thereisnorighttoperformanceoneitherside(Turney)

Wiebe v Bobsien Facts:Weibepaidadepositof$1000toBobsien,thevendor.Thehousesaleissubjecttotheplaintiffsellinghisownresidenceonorbefore18August1984.Beforethatdate,thedefendantpurportstocanceltheinterimagreement.Plaintiffdidn'tacceptthiscancellationandfulfilledtheconditionbysellinghisownhome.Onthatday,theplaintiffnotifiedthedefendantthatthe"subjectclause"wasremoved.ThedefendantrefusedtocompleteIssue:Istheinterimagreementabindingcontractorafailedoptiontopurchasethatthedefendantwasentitledtocancel?

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Reasons:• Aconditionprecedenthastheeffectof(1)preventingthecreationofacontractor(2)merelysuspendingperformanceof

someoralloftheobligationssetoutinthecontractuntiltheconditionismeto Thisdependsontheintentionoftheparties

• Inthiscaseitisadoor#2conditionprecedent,thetimesetasideforperformingtheconditionprecedentissuchthatoneorbothsideshavetowait–mostofthetimewehaveadoor#2precedent–herethevendorhasanobligationtowaitandseeifthepurchasercanfulfillthecondition(can’twithdrawduringthistime)

• Conditionsrelatingtotheapprovalofthepremisesandofchattelsimplyaconditionofwhim,fancyordislike(ifthepurchaserlikesthemthentheycompletethepurchase)–thisconstitutesanillusorycontractthatwasnoagreementatall(Murray)

o Whileapurchasermustusehisbesteffortsindoingthingssuchasobtainingfinancing,etc.thereisnowaythelawcantestwhetherheusedhisbesteffortsindecidingifhelikesaparticularpropertyornot,sothereisnocontractintheseinstances

• Thelawseemstoleaninfavouroftheconceptthatthereisaconditionprecedentsuchasasubjecttoclause,acontractisformedonsigningoftheparties.Itismerelyinsuspensependingthecompletionofthecondition

Ratio:• Thegeneralruleislaiddownthatinarealestatetransactionaconditionprecedentwhichmustbeperformedbythe

purchaserwillnotusuallypreventtheformationofacontract,butwillsimplysuspendthecovenantofthevendortocompleteuntiltheconditionprecedentismetbythepurchaser

• Incomeinstancesaconditionmaypreventtheformationofacontractiftheagreementitselfandsurroundingeventsindicateitwasnevertheintentionofthepartiestobindthemselvestoacontract

• Ifyourconditionprecedentisuncertainsuchthatitcan'tbeapplied,thenthoughyoudidn'tintendtobeinadoor#1scenario,thisistheresult

Note:TheMurraydecisioniscitedinthisdecision.Thiswasanexampleofadecisionwheretherewasadoor#1conditionprecedent,meaningtherewasnocontractatall.Thisisthebestexampleofthistypeofaconditionprecedent

RECIPROCAL SUBSIDIARY OBLIGATIONS

• Contractualobligationsthatfalltobeperformedonlyuponsatisfactionofaconditionprecedentmaybedescribedastheparties’primaryobligations.Theyrelatetotheultimateobjectiveofthecontract

• However,theconclusionthatacontractexistsbeforetheprimaryobligationsbecomeoperativesuggeststhataresubjecttootherobligationsinthemeantime

o Therearesubsidiaryobligationso Theyaredefinedasthesimpleobligationtorefrainfromwithdrawingfromthecontract.Arefusaltoproceed

manifestedbeforethetimestipulatedforsatisfactionoftheconditionprecedenthasarrivedwillaccordinglyconstituteabreachofcontract

• InWiebe,thepurchaserhadanimpliedsubsidiaryobligationtomakereasonableeffortstobringaboutthesaleofthehousebyaspecifieddate

• Insomecasesthecourtswillimplyatermthatrequiresoneofthepartiestorefrainfromconductthatwillmakefulfillmentoftheconditionlesslikely

Dynamic Transport v OK Detailing (1978) Facts:DynamicTransporthasacontractwithOKDetailing,subjecttotheconditionthatthelandcanbesubdivided(meansthepurchaserisinterestedinbuyingtheland,butonlyifitcanbebrokendownintolargerpieces).Thevendoristryingtogetoutofthedeal,saysthereisonlyanattempttocontract.PurchaserbroughtanactionforspecificperformanceReasons:

• TheSCCheldthatthepartieshaveabindingagreementsubjecttothedivision-therewasanimpliedpromisebythevendortogetapprovalforthesubdivision–vendorisinbreachoftheimpliedsubsidiaryobligation

• Thiscaseisaspecificinstanceofthegeneralprinciplethatthecourtwillreadilyimplyapromiseonthepartofeachpartytodoallthatisnecessarytosecureperformanceofthecontract

• Thiscaseisanapplication,ideathatthereisanimpliedsubsidiaryobligationonthevendor–iftheydon’tdothistheyareinbreach

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• Remedy/damages:courtrequiresthevendortomakeabonafideapplication–incentivizesthembyholdingthatiftheydon’tmaketheapplication,theappellantisentitledtodamagesforthelossofthebargain(fullexpectationdamageswouldbegrantedeventhoughthisisn’twhatwouldnecessarilyhappen)

Ratio:• Theexistenceofaconditionprecedentdoesnotprecludethepossibilityofsomeprovisionsofacontractbeingoperative

beforetheconditionisfulfilled• Theremedyisthatthevendorwillmakebonafideefforts,andiftheydon’tthenthepurchaserisentitledtodamages• Courtsareofteninclinedtotheviewthatoneofthepartieshasanimpliedsubsidiaryobligationtotakestepstobring

aboutthestateofaffairsconstitutingthefulfillmentofthecondition

REMEDIES FOR BREACH OF SUBSIDIARY OBLIGATIONS

• CourtsthatawarddamagesforbreachofasubsidiaryobligationofthekindaddressedinDynamicTransportLtd.generallyrecognizethatthereisnoguaranteethattherequisiteapprovalorstateofaffairswouldhavebeenachievedifpropereffortsweremade;whatthevictimofbreachhaslostisthechancetorealizethebenefitthatwouldhavefollowedfromthefulfillmentofthecondition

• Notethataplaintiffwhorequestsspecificperformancemayendupwithneitherperformancenordamagesifapprovalisnotgranted

• Evenifthecourthastomakesomethingup,theywillgenerallytrytoassessdamages.Itisnoargumentthatitistoohardtoassessmonetaryvalue.Wedonotknowwhatthebasementofchanceis,butthereisanOntarioCourtofAppealdecisionthatgaveanawardbasedonanassessed20%chanceofsuccess(seebelow)

Eastwalsh Homes v Anatal Developments Facts:Contractbetweenthepartiesissubjecttosubdivision.Contractualtermrequiredthevendortouseits"bestefforts"tohavetheplanofsubdivisionregisteredpriortoclosingdate.ThevendorbreachedthistermIssue:Howshouldtheplaintiff’slossbemeasured?Reasons:

• PlaintiffhastoprovethattheD'sbreachcausethelossonaBofP,inthiscasealossofchance.Alsohastoprovethatthelossofchanceconstitutessomereasonableprobabilityofrealizinganadvantageofsomereal,substantialmonetaryvalue

• TJ'sawardisreversedonthisbasis-Eastwalshdidn'tlosea50%chanceofclosingthesale• Anatalcouldnothavesucceededinregisteringaplanofsubdivisionwithinthetimeframeofthecontract.Nothingmore

thannominaldamagesiswarranted-lossistoounsubstantialRatio:

• Generalrulethattheburdenisontheplaintifftoestablishonabalanceofprobabilitiesthat,asareasonableandprobableconsequenceofthebreachofcontract,theplaintiffsufferedthedamagesclaimed

o Iftheplaintiffisnotabletoestablishaloss,theplaintiffmayonlyrecovernominaldamages• Secondprinciple:whereitisclearthatthebreachofcontractcausedlosstotheplaintiffbutitisverydifficulttoquantify

theloss,thedifficultyinassessingdamagesisnotabasisforrefusaltomakeanawardintheplaintiff’sfavour• SCChassaidthatproofofthelossofamerechanceisnotenough;theplaintiffmustprovethatthechanceconstitutes

somereasonableprobabilityofrealizinganadvantageofsomerealsubstantialmonetaryvalueo InOntario,20%hasshowntobesubstantialinMulti-Malls–itisunclearwhetheranythinglessthanthatwouldbe

considered‘substantial’

UNILATERAL WAIVER

• Partiestoacontractthatincludesaconditionprecedentasoneofitstermscanagreetovaryorwaivesatisfactionofthecondition

• Inmanycaseoneofthepartieswishestowaivetheconditionsothecontractcanbegiveneffectwhiletheotherpartydoesnot

• Partiesshouldincludeinthecontractexplicitprovisionsthateitherallowedorprohibitthewaiverofconditionsprecedent,however,oftencontractsaresilentonthematter

• Forexample,thehomebuyermaywishtoproceedwithpurchaseofthehouse,eventhoughheorsheisnotabletoobtainfinancingbythedatespecifiedintheconditionprecedent.Ifheorshepurportstowaivefulfilmentofthecondition,isthesellerobligedtocompletethetransaction?

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o Commonsensewouldsuggestthat,sincetheconditionwasincludedtoensurethatthepurchaserwouldhavefundsavailabletomakethepurchaseandwasthusintendedforthepurchaser’sbenefit,heorsheshouldbepermittedtowaiveit

o Waiverwould,ofcourse,putthepurchaserinthepositionofbeingsubjecttoanunconditionalcontractualobligationtopaythepurchasepriceontheagreeddate,regardlessofwhetherheorshehassucceededinarrangingthenecessaryfundsfromanexternalsource

Turney v Zhilka Facts:Partiesenteredintoacontingentagreementforthepurchaseandsaleofland.Conditionsareasstated(annexationcondition).Purchasermadesomeeffortstosecurefulfillmentofthecondition,butthenpurportedtosimplywaivethefulfillmentofthecondition(sayingthisconditionhastobefulfilledorthepurchaserwaivesit,sayingthattheydon'tcareanymorejustwanttheland).VendorsclaimthattheyarenotboundbytheagreementbecausetheconditionwasnotfulfilledIssue:Didthepurchaserhavetherighttounilaterallywaivetheconditionprecedent?Reasons:

• SCCdoubtsthatthebenefitwassolelyforthebenefitofthepurchaser(SOBdisagreeswiththis)• Purchaserhasnorighttowaivetheannexationcondition,whichwasatrueconditionprecedent(thistermisnewly

introducedhere)• Theobligations,onbothsides,dependuponafutureuncertainevent,thehappeningofwhichdependsentirelyonthewill

ofathirdparty–theVillageCouncil.Thisisatrueconditionprecedent--anexternalconditionuponwhichtheexistenceoftheobligationdepends.Untiltheeventoccurs,therewasnorighttoperformanceoneitherside.Thepartiesdidnotpromisethatitwouldoccur

• Thepurchasernowseekstomakethevendorliableonhispromisetoconveyinspiteofnon-performanceoftheconditionandthistosuithisownconvenienceonly

• Waiverhasoftenbeenreferredtoasatroublesomeanduncertainterminthelawbutitdoesatleastpresupposetheexistenceofarighttoberelinquished.

Ratio:Thisdecisioniswrong,buttheratioisright.Aconditioncanbewaivedifatermisforthesolebenefitofoneparty,theconditionisnotatrueconditionprecedentandtheconditionisseverable Note:HowtogetaroundTurney

• CourtsapplyDynamicinthatatrueconditionprecedentcanhaveimpliedsubsidiaryobligations.Turneyhasbeenotherwisedistinguished,orjustoutrightignored

• YoucangetawayfromTurneybydraftingyourcontractarounditbyinsertingawaiverclause.Haveaclausesayingthattheconditionprecedentcanbewaived,thereforeitisnotatrueconditionprecedent

• Anotherpossibilityistoframetheconditionsothattheappropriatepartycandeclarethecontractnullandvoid.Thepurchasermayatanytime,uptoandincludingthe__dayof__,199__,waivetheprotectionoftheaboveclauseinwholeorinpartbygivingnoticetothateffecttothevendorinwritingat__(address)

• Thisagreementmaybedeclarednullandvoidattheoptionofthepurchaser(vendor)ifthepurchaser(vendor)isunabletoobtainbythe__of__,19__,financinguponthefollowingtermsandthedepositshallbereturnedtothepurchaserwithoutdeduction

Chapter 7: Representations and Terms Amisrepresentationisamisstatementofsomefact,whichismaterialtothemaking,orinducementofacontract(Fridman)Misrepresentationversusaterm:statingsomethingasafactversuspromisingsomethingGeneralrule:noreliefforamisrepresentationunlessitisastatementofexistingfact

• Merepuffsdonotcountasmisrepresentations• Statementsofopinionorbeliefdonotcountasmisrepresentations(butseeSmithvLand;HousePropertyCorp)

o Providedthepersonmakingthestatementhasnoknowledgeofthemattero Iftheylieabouttheirownopinion/knowthetruthandmisrepresentthisthenitwouldcountasmisrepresentation

offact.Ifnegligentlydonethenactionable• Representationsastothefuturedonotcountasmisrepresentations(EdingtonvFitzmaurice)

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o Misrepresentationgoingtothefutureisnotactionable,onlywouldbeifrecitedasaterminthecontracto Differentthanifyoulieaboutyourfutureintent,whichisamisrepresentationoffact

Ingredientsofanactionablemisrepresentation–themisrepresentationofanexistingfactmustbe:

1) Unambiguous2) Material

a. Test:i. Itmustbeonewhichwouldaffectthejudgmentofareasonablepersonindecidingwhetheroronwhat

termstoenterintothecontractwithoutmakingsuchinquiriesashewouldotherwisemake(Treitel)ii. Thematerialityrequirementmeansthatthemisrepresentationmustrelatetothematterthatwouldbe

consideredbyareasonablepersontoberelevanttothedecisiontoentertheagreementinquestion(McCamus)

iii. Meansthatthemisrepresentationmustrelatetothematterthatwouldbeconsideredbyareasonablepersontoberelevantinthedecisiontoentertheagreementinquestion(RedgravevHurd)

b. Materialitygoestothereasonableperson–woulditaffectthem?Specificsoftherepresentee3) Reliedonbytherepresentee

a. Howisreliancedifferentfromthematerialitycriterion?(seeRedgravevHurd)Meaningsofrescission–theremedyformisrepresentation

• Anactiontosetthecontractasideduetosomedefectaffectingtheformationofthecontract(thisisthefocusinthischapter)

• Voluntarysettingasideofthecontractbybothparties• Incorrectly,referstoasituationwhereonepartyisdischargedfromhavingtocarryouthisorherobligationunderthe

contractbecausetheotherpartyhascommittedaseriousbreachDifferencebetweenaclaimfordamagesandanactiontorescindacontract

• Damages:plaintiffseeksmoneydamagesfortheperformancewhichshouldhavebeenrenderedunderthecontract• Rescission:plaintiffseeksnon-enforcementofthecontract(partiesrestoredtotheirpre-contractualposition)

LIABILITY IN TORT Fraudulentmisrepresentation:Arepresentationisfraudulentifeitherthemisrepresentorknewthatthestatementwasfalse,ormadethestatement“recklesslyandwithoutcare,whetheritwastrueorfalse”

• UseRedgraveNegligentmisstatement(i.e.:negligence):aprimafaciedutyofcareexistswhenthereisproximityandreasonableforeseeability(Deloitte&TouchevLivent)

1) Proximityisestablishedifthereisacloseanddirectrelationshipbetweentheparties2) Reasonableforeseeabilityisestablishedif(a)thedefendantshouldhavereasonablyforeseenthattheplaintiffwouldrely

onhisorherrepresentationand;(b)suchreliancewould,intheparticularcircumstancesofthecase,bereasonable

Redgrave v Hurd (1881) Facts:Redgraveadvertisedtosellhisbusinesspremisesandashareinhisbusiness,representingthatitbroughtinbetween£300and£400ayearwhenittrulygrossedlessthan£200ayear.Thedefendantpurchasedthepropertyandapartnershipinthelawpracticeonthepremisesonthebasisofthisrepresentation.However,whenhediscoveredthatthelawpracticewas"utterlyworthless"herefusedtocompletehispaymentsIssue:Canadefendantrescindacontractbecauseofamisrepresentation?Reasons:

• Theplaintiffarguesthatthedefendantcannotrescindthecontractbecausehesimplyshouldhaveusedduediligenceandsoughtmoreinformationbeforepurchasingthepremises.Thejudgerejectsthisandsaysthattheonlylimitationonsuingforamisrepresentationisthelimitationperiod,whichstartswhenthefraudreasonablyshouldhavebeendiscovered

• Ifitisshownthatarepresentationwasmadeinanattempttoinduceapartytoenterintoacontract,andthecontractwasinfactformed,thenthereisapresumptionthattherepresentationwasreliedupon.Thiscanonlyberefutedbyprovingthatthepartyhearingtherepresentationhaddefiniteknowledgetothecontrary,orbyexplicitevidencethattheydidnotrelyontherepresentation

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• Whereyouhaveneitherevidencethatheknewthefactsshowingthatthestatementwasuntrue,orthathedidanythingtoshowthathedidnotrelyuponthestatement,theinferenceremainsthatherelieduponthestatementasbeingamaterialstatement(condition)inthecontract.Therefore,itsbeinguntrueissufficientgroundfortherescissionofthecontract.Thiscomesfromthecourtsofequity;commonlawtakesadifferentapproach

• Courtmakesamistakehere-saysthatifyoushowrepresentationismaterial,itwillbeaninferenceoflawthattherewasreliance-NOTaccurate.Actuallyneedtoshowonthefactsthattherewasreliance

Ratio:• Arepresentationisfraudulentifeitherthemisrepresentorknewthatthestatementwasfalseormadethestatement

recklesslyandwithoutcare,whetheritwastrueorfalse.Youcanshowtortinthiscasesoyoumaybeabletogetdamagesaswellasrecession

• Reasonableopportunitytodiscoverthetruthisnotabartoinnocentmisrepresentationorfraudulentmisrepresentation• Misrepresentation=damages• Tortiousmisrepresentation=damagesandrescission

REASONABLE OPPORTUNITY TO DISCOVER THE TRUTH & DUTY TO DISCLOSE

• RepresenteedoesnothaveanyobligationofduediligenceasperRedgrave–itisnotaresponsetotheplaintiffthatsayingifyouhadusedduediligence,youcoulddeterminethatthemisrepresentationwasfalse

• Iftheplaintiffisdupedbyaliar,thefraudstercannotuseasadefencethatifyouhadnotbeensostupidyoucouldfindouttheywerelying

• Thereasonablenessofyourrelianceisirrelevantforrescission,butisrelevantforrecoveryofdamagesintort

Smith v Land and House Property Corp (1884) Facts:LandandHousecontractedwithSmithtobuythetitleoftheMarineHotelatWalton-on-the-Naze.SmithhadadvertisedthatitwaslettoFleck,"amostdesirabletenant".LandandHouseagreedtobuythehotelhoweverFleck,whohadbeenoverduewithrent,wentbankruptjustbeforetransferoftitle.LandandHouserefusedtocompletethetransaction,defendingSmith'sspecificperformanceonthebasisthatthedescriptionofFleck'svirtueswasgroundsformisrepresentation.Issue:Wasthestatementamereopinionorarepresentationoffact?Reasons:

• Bowenheldthatwhenfactsareequallyknowntobothsides,thenstatementsaregenerallyopinions,howeverwhenfactsarenotequallyknown,thenastatementofopinionbyonewhoknowsthefactsbestisoftenastatementofmaterialfactastheyareimplyingthathisopinionhasjustification

• Inthiscase,withFleckbeingbehindinhisrent,thestatementofhimbeinga"desirabletenant"wasnotatruestatementandthusLandandHousewereentitledtonotcompletethetransactionduetomisrepresentation

Ratio:• Astatementofopinion,fromaknowledgeablepartytoonewhoisnot,isarepresentation.Iffalse,itisactionable • Innocentmisrepresentationallowsrescission

Bank of BC v Wren Developments (1973) Facts:SmithandAllanweredirectorsofWren.Theywantedaloan,sotheyputupsharesinanothercompanythatWrenownedascollateralwiththeBank.SmithhadthebankcashinshareswithoutAllanknowing,whothoughtthattheshareswerestillinplace.Allanwenttothebanktoaskaboutthemandtheysaidtheywould"getbacktoyoulateronthedetails".ThebankclaimedthebalanceowinginplaceofthecollateralfromAllanIssue:Wasthereamisrepresentationoffact?Reasons:

• MunroeheldthatAllanhadlabouredunderthemistakenbeliefthatcollateralsecuritypledgedbythecompanywasstillatthebank.Hehadnotbeeninformedofanysaleorexchange,hissignaturewasrequiredforbankingtransactions,andneitherhenorthecompanyhadeverauthorizedSmithtoactasagent

• Hehadbeenmateriallymisledbythewords,actsandconductoftheBank.SatisfiedthatAllanwouldnothavesignedthesecondloanguaranteeifhehadknownallthefacts,Munroefoundhewasinducedbymisrepresentation(failuretodisclosefacts)tosignthesecondagreement.Inthecircumstances,heisnotliableforrepaymentofthesecondagreement

Ratio:• Failuresoromissionscanqualifyasamisrepresentationespeciallyifthereisanactiveconcealmentofthetruth

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• Negligentmisrepresentationpermitsrescission • Silencecanbeamisrepresentation

DEFAULTRULE:silenceisNOTamisrepresentation,generallynodutytodiscloseBUTtherearemanyexceptionstothisstatement,sohardtorelyonitbroadly

• Exceptions:o Representoroffersahalftruth-partialdisclosure,misrepresentationbecauseyouthinkyou'regettingafull

answer,representingthatyourdisclosureiscompleteo Representorconcealsthetruth–actionableo Circumstancesaffectthetruthofamisrepresentation-notcorrectingthefirststatementisamisrepresentation

becausecircumstanceshavechangedo Contractualrelationshiprequiresdisclosure-E.g.Wren,relationshipslikeinsurancecontractswherethereisa

positiveobligationtomakedisclosureofmaterialfacts

Universal Concerts Canada v Ryckman Amateur Sports Society (1997) Facts:Universalistheplaintiffinanactionforbreachofaleasecontract.Theyareaconcertpromoter,inthiscaseforshockrockerMarilynManson.ThedefendantisthelessorofaCalgaryarea.TherewasargumentthattheMarilynMansonactwascontroversial,sothattherewasamisrepresentationbyomission,anddefendant’ssoughtarescissionofcontractIssue:Wasthereadutytodisclosethecontroversysurroundingtheact?Reasons:

• TheresponseisthatthatthedefendantpreviouslyallowedhardrockactstobebookedintotheMaxBellwithoutcomment.Further,therewasabrieforaldescriptionoftheact,andtherewasnocriteriaputinplaceastothetypesofRockactsthatcouldplayintheMaxBell

• Secondly,thePlaintiffgavetheDefendantawarningandofferedtoprovidetheDefendantwithfurtherinformationaboutMarilynMansonbytheDefendantdeclinedthePlaintiff’sinvitation

Ratio:Thereisarequirementtodiscloseifonlyahalf-truthhasbeenprovided,thereisanactiveconcealmentofthetruth,ortherearechangingcircumstances

INDEMNIFICATION

• Essentiallyreimbursement;canberaisedinrescission.Youmustberequiredtodosomething(e.g.rentmoneyoradutytorepair)asstatedinthecontracttobeabletoseekindemnification

• Intort,thequestionishadtheplaintiffknownthetruth,wouldtheyhaveenteredintothecontract?Ifno,butforthetort,couldhavebeenengagedinprofitableendeavorsatanotherlocation(opportunitycostissue)

Kupchak v Dayson Holdings (1965) Facts:TheKupchaksboughtthesharesofamotelcompanyfromDaysonHoldingsgivinginexchangetwopropertiesonHaroStreetandNorthVancouverandamortgagefor$64,500forthemotel.InJuly1960,thelawyerfortheKupchaksstoppedmakingpaymentsonthemortgageastheyhaddiscoveredthatpastearningsofthehotelwerefalse.OnSeptember16theirsolicitorwrotetoDayson.DaysonsubsequentlysoldhalfoftheirinterestintheHaroStreetPropertytoMarksEstatesLtd.andtheexistingbuildingwastorndownandanapartmentcomplexerected.OnNovember21,1961theKupchakscommencedtheiractionagainstDaysonforrescission;inthemeantimetheyhadcontinuedtoliveinandoperatethemotelIssue:Cantheplaintiffsclaimrescission?Isrescissionbarredbylaches?(lapseoftime)Reasons:

• Dealingsinpropertyobtainedbyfraudcannotbeusedtobarrestitution-theremustbeflexibleremediestoattempttorestorepartiestotheiroriginalpositions.Daveyholdsthataremedyofrescission(accompaniedbyrestitution)isequitableanditsapplicationisdiscretionarywhilenotingthatwhenapplieditmustbemouldedtotheexigenciesofthecase

• Incasesofinnocentmisrepresentationcourtswillnotbeasinterventionistasthepartiesarenotatfault,howeverinfraudulentmisrepresentationthecourtswillexercisetheirjurisdictiontoorderrescissiontothefullestunlessthatorderwouldbeimpracticalorunjust.Inthecaseatbar,toreturnthepropertyatHaroStreetwouldbeunjustduetothefundamentallyalterednature

• Eventhoughequityisnotsupposedtogivedamages,itcanordercompensationtomakegoodsomedeficiencyinperfectrestitution

• Onlaches,thefactsshowthatthedefendantwasawareofanactionasearlyasSeptemberof1960andtherewasnoprejudiceagainstthemasaresultoftheactionnotbeingcommenceduntilNovember1961

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Ratio:• Situationswherethemisrepresenteeisnotentitledtoclaimrescission:

o (1)Whenthirdpartyrightsinterveneo (2)Whenthereiselectionoraffirmationo (3)Whenthereislachesordelayo (4)Whenrescissionwouldcauseradicalinjusticetomisrepresentoro (5)Whenthereisinnocentmisrepresentationandthecontracthasbeenexecuted

• Monetarycompensationmaybegrantedunderrecessionwhereitisimpossibleorinequitabletorestoretheoriginalproperty

• Notethatallegationsoffraudareseriousandpotentiallyverydamagingtothoseaccusedofdeception.Whereapartymakessuchallegationsunsuccessfullyattrialandwithaccesstoinformationsufficienttoconcludethattheotherpartywasmerelynegligentandneitherdishonestnorfraudulent,costsonasolicitor-and-clientscaleareappropriate

• Thecourthasthejurisdictiontobepracticallyjustalthoughitcannotawarddamagesincontract

REPRESENTATION AND TERMS

Helibut, Symons & Co v Buckleton (1913) Facts:AnagentofBuckletonpurchasedsharesfromanagentofHeilbut,Symons&Co.ontwooccasionsbasedonwhattherespondent'sclaimwasarepresentationthatthecompanywasa"rubbercompany".ThecompanyturnedouttobesourandBuckletonlostmoneyonthetransactionandbroughtanactionforbreachofwarranty.Issue:Didtheactionsoftheappellantconstitutearepresentation?Reasons:

• Moulton,writingforthemajority,saysthatstrictlyspeakingthecontractsinthiscasewerenotcontractsofsale,asthedefendantwasonlyanagentoftherubbercompanyandhewastoundertakethenecessaryactiontoprocurethesharesfortheplaintiff

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• Thecourtholdsthatinordertoestablishacauseofactionindamagesformisrepresentationthestatementmusthavebeenfraudulent,oritmusthavebeenmaderecklessly.Heclearlystatesthatitisaprincipleoflawthatapersonisnotliablefordamagesresultingfromaninnocentmisrepresentation

• Thiscasewasaninnocentmisrepresentation;thereforetheappealmustbeallowedasnodamagescanstemfromaninnocentmisrepresentation.AsperDenning,theremustbeintentionforittobeatermofthecontract

Ratio:• Damagesareonlyawardedforfraudulentorrecklessmisrepresentations,ormisrepresentationsthatrefertoamaterial

issuethatfundamentallychangethecontract• Innocentrepresentationsareonlyreferredtoaswarrantiesiftheyhaveclearlybeenintendedtobewarrantiesbythe

parties(testisintention)

Dick Bentley Productions Ltd v Harold Smith (1965) Facts:BentleypurchasedacarfromSmith,relyingontherepresentationthatithadonlytraveled20,000milesafterithadbeenrepaired.Subsequenttothepurchaseitbecameclearthattheenginehadbeendrivenmuchfurtherandrepairswererequired.BentleybroughtanactionforbreachofwarrantyIssue:Wasthestatementaboutthecar'smileageaninnocentrepresentationorawarranty?Reasons:

• Thereisaprimafacieassumptionthatarepresentationmadeinthecourseofdealingsforacontractfortheverypurposeofinducingapartyintothecontractisawarranty.Itwasintendedtobeactedupon,anditwasinfactactedupon

• Theappellantwasacarsalesmanandthereforethatheshouldhavetakenthediligencetodiscoverhowfarithadtraveledoratleastheshouldnothavemadeafalserepresentationifhedidnotknowtheexactdistance

• Denningagreeswiththetrialjudgethattherepresentationwasnotfraudulent;however,itwasstatedasafactandwasawarrantyinthecontractforthesaleofthecar.Therefore,breachingitgivesrisetoacauseofactionfordamages

Ratio:• Arepresentationmadeinthecourseofdealingsforacontractfortheverypurposeofinducinganotherpartytoenterinto

thecontractispresumedprimafacietobeawarrantyofthatcontractandtherefore,abreachofitwillleadtoacauseofactionfordamages–canrebutifrepresentationwasmadeinnocently

o Butnotethatinthiscase,thesellershouldhaveknownaboutthemileageandthusinnocentrepresentationwasnotanapplicabledefence

• Itisanobjectivetestthatisusedtodetermineifarepresentationwasawarranty–ifanintelligentbystanderwouldreasonablyinferawarrantywasintended,thenitisawarranty

CONCURRENT LIABILITY

• Generalprinciplefavoursthepossibilityofconcurrentliabilityintortandcontractincontractualcontextso Butcannotrecoverdamagestwice

• Theplaintiffhastherighttoassertthecauseofactionthatappearstobemostadvantageoustotheminrespectofanyparticularlegalconsequence

• Thisliabilitycanarisewherearelationshipofsufficientproximitytocreateadutyofcareintortisestablishedbythecontractandwheretheresultingtortdutyisco-extensivewithanobligationalsoimposedbythecontractitself

• Aconcurrentliabilityintortwillnotbeadmittedifitseffectwouldbetopermittheplaintifftoescapeacontractualexclusionorlimitationofliabilityfortheactoromissionthatwouldconstitutethetort

o Subjecttothisqualification,whereconcurrentliabilityintortandcontractexists,theplaintiffhastherighttoassertthecauseofactionthatappearstobemostadvantageoustohiminrespectofanyparticularlegalconsequence

• Importanttortinthiscontextisnegligentmisstatemento Toestablish,theplaintiffneedstoshowthattherewasadutyofcarebetweenherandthedefendanto Dutyofcareissometimescalleda‘specialrelationship’–primafaciedutyofcarewhichexistswithproximityand

reasonableforeseeability§ Proximityisestablishedwhenthereisacloseanddirectrelationshipbetweentheparties§ Reasonableforeseeabilityisestablishedifthedefendantshouldhavereasonablyforeseentheplaintiff

wouldrelyontherepresentation,andtherepresentationwasreasonable

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BG Checo v BC Hydro (1993) Facts:BGChecosuccessfullybidtoerecttransmissiontowersonBCHydro'sproperty.ThecontractsaidthatBCHydrowouldcleartheirlandbeforethetowerswereerected,buttheydidnot.Asaresult,BGCheco'sworkwasmoredifficultandexpensive.Theysuedinbreachofcontractandnegligentmisrepresentation.ThelowercourtsallowedBGChecotoclaiminbothcontractandtort,whichBCHydroappealed.Issue:CanBGsueinbothcontractandtort?Reasons:

• LaForestandMcLachlin,writingforthemajority,decidethattheycansueinbothcausesofaction,andthattherearedifferentremediesforbothactionsbecausethelawshouldallowwrongedplaintiffstorecoverinanywaypossible

o Inthecontractaction,thegoalistoputtheplaintiffinthepositionthattheywouldhavebeeninifthecontractwasperformed

o Inthenegligenceactionthedamagescouldamounttoanylossthatreasonablystemmedfromthenegligence,asthegoalistoputtheplaintiffintheplacetheywouldhavebeeniniftherepresentationneverhappened

o Atortactionisonlydisallowedifitisexplicitlysetoutthatthisisthecaseinthecontract.Inthiscase,thecontractdidnotlimittheBCHydro'sduty.Therefore,theyhavetheabilitytosueinboth,butthiscaseneedstobesentbacktotrialtodeterminethedamagesintort

o Thedamagesforbreachofcontractaretoputthepartyinthepositionitwouldhavebeeninhadthecontractbeencompleted

• Claimintort:generalruleisthatwhereagivenwrongprimafaciesupportsawrongincontractandintort,thepartymaysueineitherorboth,exceptwherethecontractindicatesthatthepartiesintendedtolimitorprohibittherighttosueintort

o Ideathatifthetortdutyisnegatedbythecontract,you'vegivenuptortactiono Ifthecontractdoesn'timpactonthetortdutyyoucansueonboth

• 3kindsofcontract:o (1)Stipulatesamorestringentobligationthanthegenerallawofcontractwouldimpose

§ E.g.contractrequiresmorethanreasonablecare,whereyouhavetodeliverbyacertaindate§ Prudentheretosueincontractandtort-goodtohaveabackupactionincasethecontractactionfails

o (2)Contractstipulatesalowerdutythanwouldbepresumedincontractduetoanexemptionorliabilityclause§ Limitstheliabilityofthedefendantinsomeway§ E.g.amovingcompanywherethecustomerbearsallriskoflossordamagetothegoods,includingby

negligence§ Shouldprobablysueinbothcontractandtorttobesafehereaswell

o (3)Dutyincontractandtortiscoextensive§ Includes'commoncallingcases'-aservicegenerallyavailabletothepublicwhereskillisnecessary,e.g.a

lawyer§ Thereisacontract,buttheobligationisdefinedbyimpliedterms(bythecourt)§ E.g.alawyerisobligatedbycontracttogivehisclientcompetentlegaladvice.Breachingthiswouldbring

anactionintortandcontractRatio:

• Aplaintiffisalwaysallowedtosueinbothtortandcontract,iftheybothapply,solongastherelevantdutynecessaryforthetortactionisnotexplicitlynegatedinthecontract

• Thegoalofdamagesforbreachofcontractistoputthepartyinthepositionitwouldhavebeeninhadthecontractbeencompleted

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PAROL EVIDENCE RULE

• Sattva:theparolevidenceruleprecludesevidenceoutsidethewordsofthewrittencontractthatwouldaddto,subtractfrom,orcontradictacontractthathasbeenwhollyreducedtowriting

• Purposeoftheruleistoachievefinalityandcertaintyincontractualobligations,andtohamperaparty’sabilitytousefabricatedorunreliableevidencetoattackawrittencontract

• Exceptions:o (1)Doesnotapplytoprecludeevidenceofsurroundingcircumstanceswheninterpretingthewordsofawritten

contract§ Evidenceofsurroundingcircumstancesisnotusedforadding/subtracting,butratherasanobjective

interpretiveaidtodeterminethemeaningofthewordspartiesused§ Whilethefactualmatrixcan’tbeusedtocraftanewagreement,aTJmustconsiderittoensurethe

writtenwordsofthecontractarenotlookedatinisolationordivorcedfromthebackgroundcontext§ GoalistodeepentheTJ’sunderstandingofthemutualandobjectiveintentionsofthepartiesas

expressedinthewordsofthecontracto (2)Doesnotapplywhenthecontractisintendedtobepartlyoralandpartlywritten

CLASSIFICATION OF TERMS

• Warrantyandcondition-whetheratermisclassifiedisaconditionorawarrantyhasanimpactonwhetherthepartyhasanopportunitytofulfillitscontractualobligationsinlightofthebreachoftheotherparty

o Breachofcondition-givestherighttorejectandtreatthecontractasended(Leaf)§ Ifthereareongoingobligationsunderbreachofcondition,thepartycanelecttotreatthecontractas

endedasuefordamages,sotheobligationsaresetaside§ Innocentpartycanalsoinsistonperformancebytheotherside,notwithstandingtheseverityofthe

breachandsuefordamageso Breachofwarranty-onlygivestheremedyofdamages

Hong Kong Fir v Kawasaki Facts:ContractbetweenHongKongandKawasaki.Defendantsprovidedforacharter,thattheownerswouldmaintaintheshipinagoodstate.InFebtheshipisdeliveredatLiverpoolwithanundermannedandincompetentstaff.Duringthevoyagetheshipwasoffhirefor5weeksduetotheneedforrepairtoenginesduetostaffincompetence.June6thechartererspurporttorepudiateforbreachofcondition.Issue:isthereabreachoftermssuchthatthechartererscantreatthecontractasrepudiated,orarethecharterersthemselvesReasons:

• Whatkindofbreachamountstorepudiation:5relevantfactorsastowhethertherehasbeenafundamentalbreach(abreachgoingtotherootofthecontract)

o (1)Theratiooftheparty’sobligationsnotperformedtotheobligationasawholeo (2)Theseriousnessofthebreachtotheinnocentpartyo (3)Thelikelihoodofrepetitionofsuchbreacho (4)Theseriousnessoftheconsequencesofthebreacho (5)Therelationshipofthepartoftheobligationperformedtothewholeobligation

• BeforeHongKong,thetestfordistinguishingawarrantyfromaconditionwaswhetherthetermanditsnon-performancewenttothewholerootandconsiderationofthecontract

o Breachofconditionwouldallowtheinnocentpartytorepudiateand/orseekdamages.Breachofwarrantywouldallowtheinnocentpartyonlytoseekdamages

o Underthisscheme,breachoftermdefinedtobeaconditiontriggerstherighttorepudiate,eveniftheeventcausedbythebreachisminor

• Changedhere:seekstomitigatepotentialharshnessandformulaicqualityoftheoldschemebyintroducingathirdpossibility–theinnominateterm(anintermediatetermthatcan’tbedefinedaseitheraconditionorawarranty

o Assumingtheterminvolvedisaninnominateterm,theinnocentpartywillbedischargedfromfurtherperformanceunderthecontractiftheanswertothefollowingtestispositive:

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§ Test:Doestheoccurrenceoftheeventdeprivethepartywhohasfurtherundertakingsstilltoperformofsubstantiallythewholebenefitwhichitwastheintentionofthepartiesexpressedinthecontractthatheshouldobtain,asconsiderationforperformingthoseundertakings?

§ Itisthehappeningoftheevent,andnotthefactthattheeventwastheresultofbreachbyonepartyofhiscontractualobligationsthatrelievedtheotherpartyfromfurtherperformanceofhisobligations

o Ifthe‘depriving’eventoccursduetobreachbyoneparty,thatpartyisinbreachofcontracto Iftheeventoccursduetonoone’sfault,thecontractmaybefrustrated:

§ Contractissimplysetaside• HowtoapproachtheissueofclassificationinAlberta:

o (1)Applythetraditionalcondition/warrantytestfromBentsen:§ Lookatthecontractinlightofthesurroundingcircumstances§ Decidewhethertheintentionoftheparties,asgatheredfromtheinstrumentitself,willbestbecarried

outbytreatingthepromiseasawarrantysoundingonlyindamages,orasaconditiono (2)Includeconsiderationofthecommercialsettingwhenassessingsurroundingcircumstances

§ Genesisofthetransaction,thebackground,thecontext,themarketsinwhichthepartiesareoperatingo (3)Iftheintentisstillnotdetermined,thenthebasisforseekingoutthatintentshouldbeanassessmentofthe

gravityoftheeventtowhichthebreachgaverise• CourtMUSTinterpretwordsintheirfactualmatrixorsurroundingcircumstances

o Surroundingcircumstances:consistsofobjectiveevidenceofthebackgroundfactsatthetimeoftheexecutionofthecontract,knowledgethatwasorreasonablyoughttohavebeenwithintheknowledgeofbothpartiesatorbeforethedateofcontracting

o Examples:thegenesis,aimorpurposeofthecontract,thenatureoftherelationshipcreatedbythecontract,andthenatureorcustomofthemarketorindustryinwhichthecontractwascreated

o Canincludeabsolutelyanythingwhichwouldhaveeffectedthewayinwhichthelanguageofthedocumentwouldhavebeenunderstoodbyareasonableman

• Keepinmindwhenimplyingtheintentteststhat:o Evenwhereabreachofatermhasproducedaminorevent,itcanbetreatedasabreachofacondition

§ Partiesmaythinksomematter,seeminglyofverylittleimportance,tobeessential.Iftheysufficientlyexpressanintentiontomaketheliteralfulfillmentofsuchathingacondition,itisone

o Commonsensehasaroletoplay§ Usingthewordconditioninthecontractmaybeenoughtoestablishthisintention,butnotconclusively§ Thefactthataparticularconstructionleadstoaveryunreasonableresultmustbearelevant

consideration§ Themoreunreasonabletheresult,themoreunlikelyitisthatthepartiesintendedit,adiftheydon’t

intenditthemorenecessarythattheyshallmakethatintentionabundantlyclear

PRINCIPLE OF GOOD FAITH IN CONTRACTUAL PERFORMANCE

Machtinger v Hoj Industries Ltd (1992) Facts:Issue:Whatshouldthenoticeperiodbeinordertoterminateemploymentifnoticerequiredinemploymentcontractviolateslegislatedstandards?Reasons:

• Intentionisrelevanttotermsimpliedasamatteroffact,wherethequestioniswhatthepartieswouldhavestipulatedhadtheirattentionbeendrawnatthetimeofthecontractingtothematteratissue

• IntentionisNOTrelevanttotermsimpliedasamatteroflaw• 3types:

o Termsimpliedinfacto Termsimpliedinlaw

§ Thetestisnecessity-shouldbereadintothecontractasthenatureofthecontractimplicitlyrequires,nomore,noless

§ Notwhetherthetermis"necessary"fortheexistenceofthecontract,butrathernecessaryinapracticalsensetothefairfunctioningoftheagreement,giventherelationshipbetweentheparties

o Termsimpliedasamatterofcustomorusage

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o Requirementsforreasonablenoticeinemploymentcontractsfallintothecategoryortermsimpliedbylaw-don'tdependoncustomorusage,althoughthiscanbeanelementindeterminingthenatureandscopeofthelegaldutyimposed

• Alsodon'tfallintoacategoryoftermsimpliedasamatteroffact,wherethelawsuppliesatermwhichthepartiesoverlookedbutobviouslyassumed

o Basesuponwhichatermmaybeimpliedintoacontract:• Termsimpliedasamatterofcustomorusage

§ Theremustbeevidencetosupportaninferencethatthepartiestothecontractwouldhaveunderstoodsuchacustomorusagetobeapplicable

§ Termsareimpliedinthismanneronthebasisofapresumedintention• Termsimpliedasnecessarytogivebusinessefficacytoacontract

§ Thesearetermswhichthepartiestoagivencontractwouldobviouslyhavepresumed§ Alsoimpliedonthebasisofpresumedintention§ CorrespondtoTreitel'scategoryoftermsimpliedinfact

• Termsimpliedaslegalincidentsofaparticularclassorkindofcontract,thenatureandcontentsofwhichhavetobelargelydeterminedbyapplication

§ CorrespondtoTreitel'scategoryoftermsimpliedinlaw

Bhasin v Hrynew (2014) Facts:PlaintiffBwaspartytoanenrollmentdirector’sagreement,Can-Amwasalsoaparty.TheEDAcontainedanon-renewableclauseexercisableon6monthsnoticebyeithersideandanentireagreementclause(norepresentations,warranties,terms,conditionsorcollateralagreements..).

• TJheldthatCan-AmmisledandwasdishonestwithBhasinonanumberoffronts.Saidthecontractbetweenthepartiescontainedanimpliedtermofgoodfaith,andthattheentireagreementclausewasnotabarriertoimplyingatermofgoodfaithbecauseitwouldbeunjustandinequitabletoallowCan-Amtorelyonit

• Basedonthegoodfaithterm,Can-Am’snon-renewalwouldhavetobeexercisedfairly• Entireagreementclauseseekstodefinethescopeoftheparties’contractinordertoprecludeallegationsofterms

ABCourtofAppeal• ReversedtheTJ’sdecisionentirely• Therewasnodutyortermofgoodfaithperformanceengagedbythecontractbecause:

o Acourtcannotimplyatermthatconflictswithanexpressterm;ando Thecontractcontainedanentireagreementclause

SCCongoodfaithprinciple:• Theprincipleisthatpartiesmustgenerallyperformtheircontracts“honestlyandreasonably,notcapriciouslyand

arbitrarily”• Meansthatpartieshaveanappropriateregardtothelegitimatecontractualinterestsoftheircontractingpartner• ThegoodfaithprincipledoesNOTfoundacauseofaction.ItisaSTANDARDthatorganizes,unites,andunderpinscontract

law• Thegoodfaithprinciplehastwofunctions:

o (1)Itisthesourceofandjustificationforcertainaspectsofcontractlawalreadyinplaceo (2)Itisthefoundationforthecourtstodevisenewcontractrulesorelements,thoughthismustbearestrained,

incrementalandprecedent-respectingmanner• Theapplicationoftheorganizingprincipleofgoodfaithtoparticularsituationsshouldbedevelopedwhereexistinglawis

foundtobewantingandwherethedevelopmentmayoccurincrementallyinawaythatisconsistentwiththestructureoftheCLofcontractandgivesdueweighttotheimportanceofprivateorderingandcertaintyincommercialaffairs

Thegoodfaithprincipleasreasonablenessandhonesty• Reasonableness:

o Thehigherstandardo Largelyconcernsgoodfaithasacontractualtermimpliedinlawandimpliedinfact

§ Impliedinlaw:incertaintypesofcontractsgoodfaithisimpliedasalegalincident(employment,landlord/tenant,franchise)

§ Impliedinfact:goodfaithisimpliedasatermbasedontheofficiousbystanderandbusinessefficacytests• SCCgivestheexampleofthetenderingcontract,wheregoodfaithis“generally”implied• Thisisalimitedavenue.Courtscanonlyimplyagiventermbasedonthepartiescontractual

interpretationandonlyifitisnecessaryorisinsomesense,obviousfromthecircumstancesoftheparticulartransaction(McCamus)

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o Threeothertypesofsituationswherethegoodfaithtermexists:(listisnotclosedandisalwayscontextspecific.Thecauseofactionisabreachofcontract)

§ (1)Wherethepartiesmustcooperateinordertoachievetheobjectsofthecontract§ (2)Whereonepartyexercisesadiscretionarypowerunderthecontract§ (2)whereonepartyseekstoevadecontractualduties

• ExampleofacontractwithadiscretionclausefromBhasino Mitsui&CovRoyalBank:Theleaseofahelicopterincludedanoptiontobuyatthe“reasonablefairmarket

valueofhelicoptersasestablishedbythelessorӤ Herethereasonablenessrequirementaroseasanimpliedtermthatwasnecessarytogivebusinessefficacyto

theagreement• Honesty

o ThisisthefoundationfortheSCC’snewdutyofhonestyincontractualperformanceo Thisduty,whichappliestoallcontracts,isasimplerequirementnottolieormisleadtheotherpartyaboutone’s

contractualperformanceo Thisdutyisindependentlyactionablebutisnotatermoratorto Operatesirrespectiveoftheparties’intentionso Thisdutycannotbebroadlydisclaimedandwouldnotbecapturedbythestandardentireagreementclause

Summary

• ThegoodfaithprinciplefoesNOTchangecontractlawfundamentals–ratherisexplainsthosefundamentalsandmoorsthem

• Thegoodfaithprincipleisnotafree-standingruleorotherwiseindependentlyactionable• Manifestationsofitarelimited• Inrelationtoitsreasonablenessarm,theprincipleunderpinscommonlawruleswhich,intypesofrelationshipandtypesof

situations,recognizeobligationsofgoodfaithcontractualperformanceo E.g.certainkindsofcontracts:employment,insurance,landlord/lessee,franchiseandgenerallyinthetendering

contexto Wherepartiesmustcooperate,whereonepartyhasadiscretionarypower,andwhereonepartyseekstoevade

contractualduties• Inrelationtoitshonestyarm,theprincipleisresponsibleforgeneratingthedutyofhonestyincontractualperformance

ApplicationofthelawtothefactsofBhasin

• SCCrejectsanalysisbyTJwheresheimpliedatermofgoodfaith,becauseitfallsoutsidetheexistingrelationships(e.g.insuranceandfranchise)andtypesofsituations

• Alsorejectsimplyingatermofgoodfaithduetotheoperationoftheentireagreementclause

Chapter 8: Standard Form Contracts and Exclusion Clauses StandardFormContracts

• Reducetransactioncosts• Theyarenotobjectionableperse• E.g.carrentalcompanies-ideathattheycanchargeasmalleramountofmoneyperpersonbecausethecontractsarenot

individualizedExemptingClauses

• Oftenfoundinstandardformcontracts• Purposetolimittheserviceprovidersliabilityforthecontractgoingawry

o E.g.LondonDrugs-warehousemanlimitingliabilityfordamagetopropertyto$40-cansignalwhoisliable• Theseclausescanbeareasonabledevicefordefiningthebargainreachedbyfreelyconsentingpartiesinacasewhere

thereisreasonablebargainingpower• Problem:whenanexemptionisinsertedinastandardformcontractbyadominantparty,orwhenanexclusionclause

appearstorelieveacontractingpartyoftheresponsibilitythatthecontractseemedtointendtoimpose• Needtodetermineiftheexemptingclauseispartofthecontract

o Canhaveanexemptingclauseifitformspartofthecontract-mayprovideadefenceo Ifsomemalfunctionwheretheclauseisn'tpartofthecontract,thenthedefencewouldprevail

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• Twomainwaysofincorporatinganexemptionclause:o (1)Bynotice

§ Thorntono (2)Bysignature

• Threequestions:o Incorporation:didthepurportedexclusionclauseentertheagreement?o Interpretation:doesthecontentofanagreed-uponexclusionclauseapplyto,orcover,thecomplained-ofloss?o Justification:cananotherwisevalidlimitingclauseneverthelessberenderedunenforceablebecauseits

applicationwouldbetoounfairorcontrarytopublicpolicy?

INCORPORATION: UNSIGNED DOCUMENTS

Thornton v Shoe Lane Parking (1970) Facts:Tparkedhiscarintheparkinglot,wasseriouslyinjuredwhenplacinggoodsinhistrunkIssue:Istheexemptingcondition,postedinthegarageandontheticket,partofthecontract?Doesthefactthattheticketwasdispensedautomaticallymatter?Reasons:

• LordDenningstatesthatthiscasediffersfromtheprecedingcasesbecausetheticketisissuedautomaticallyandnotfromaclerk.Therefore,thereisnochancetolookattheconditions,rejectthem,andgetyourmoneyback.EffectivelytheofferismadebyShoeLaneinhavingthemachinepostedwiththeprices,andthisofferisacceptedwhenthedriverplacesmoneyinthemachine

• Thiscontractcannotbesubjecttoconditionsthatarepresentedafterthistime.Thewritingontheticketstatingthatitwassubjecttotheconditionswasnotvisibleuntilafterthecontracthadbeenformed,thereforethecontractisnottrulysubjecttotheconditions.Theticketissimplyareceiptshowingthatthecontracthadbeenformed

o ShoeLanedidnotdowhatwasreasonablysufficienttogivenoticeoftheconditionstoThornton–adriverwouldhavetowalkaroundtheparkinglottodiscoverthem,whichismorethancanbeaskedofasensiblepatron

• MegawJagrees,butfocusesexclusivelyonthefactthatthedefendantdidnotgivereasonablenoticeratherthantheformationofthecontractpriortotheconditionsbeingdelivered

• WillmerJstatesthatincasesinvolvinganautomaticticketmachinethereissomethingdistinctlyirrevocableabouttheoffermadebythecompanyowningtheparkinglot

Ratio:• Incaseswithautomaticticketdispensers,thecontractisformedwhentheplaintiffinsertsmoneyintothemachineand

receivestheticket;conditionsthatarenotseenuntilafterthistimearenotbindingasthecontracthasalreadybeenagreeduponwithouttheconditions

• Thiscaseshowstheimportanceofwhethertheexemptingclausewaspartofthecontractornot

INCORPORATION BY SIGNATURE

Karroll v Silver Start Mountain Resorts (1998) Facts:Ksignedupforaskirace,signedaliabilityinsurancewaiverwheresheagreedtoassumeallpersonalliabilityrisks.Shewashurtandcontendedshewasnotboundbecauseshewasn'tgivenadequatenoticeofitscontentsIssue:Istheindemnityagreementbinding?Reasons:

• McLachlinheldthatitwasnotageneralprincipleofcontractlawthatapartyprofferingforsignatureanexclusionofliabilitymusttakereasonablestepstobringittotheotherparty'sattention.TheburdenwasonKarrolltoshowfraudormisrepresentation,orthatSilverStarkneworhadreasontoknowshewasmistakenastotermsofthedocument

• Essentiallyhavetwolinesofauthorityhere-needtoreconcileo CourtholdsthatTildoncan'tbetakenasageneralrule,butonlyarulethatappliesinspecialcircumstances.

§ Wedothisbylimitingtherulethatthepartyofferingtheexclusionclausemusttakereasonablestepstobringtotheotherparty'sattention

o Pg.515-whereapartyhasreasontobelievethatthesigningpartyismistakenastoaterm,thenthesigningpartycannotbetakenashavingreasonablyconsentedtothatterm,withtheresultthatthesignatureisnotaconsensualact

§ Toallowsomeonetosignadocumentwheretheyknowthecontentsarenotunderstoodisnotfarfrommisrepresentation

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o Usuallyinacommercialsituationitissafetoassumethatthepartysigningintendstobeboundo Ifthecircumstancesareoneswheretheplaintiffisbeingrushed,ortheclauseexcludingliabilityisinconsistent

withtheoverallpurposeofthecontractthenwehavedifferentcircumstances§ Inthesespecialcircumstancesthereisadutyonthepartiestotakereasonablemeasurestobringthe

exclusionclausetotheattentionoftheotherside• Courtdiscussesexceptionstorulethatonceyouhavesignedyouarebound:

o Fraudo Misrepresentationo Nonesfactumo Whentheotherpartykneworhadreasontoknowoftheotherparty'smistakeastoterms,veryclosetoanact

ofmisrepresentation(Karroll)• Factorsofifthedutytoadviseoftheexclusionclausearises:

o Doestheclauseruncontrarytotheparty'snormalexpectation?o Whatisthelengthofthecontract?o Whatistheformatofthecontract?o Whatisthetimeavailableforreadingorunderstandingit?o Anyotherrelevantconsiderations(casebycasebasis)

• Karrollsignedthereleaseknowingitwasalegaldocumentaffectingherrights.Thereleasewasshort,easytoreadandheadedincapitalletters.Inthecircumstances,areasonablepersoninwouldnotconcludethatKarrollwasnotagreeingtotermsoftherelease.Inanyevent,SilverStartookreasonablestepstodischargeanyobligationtobringthecontentsofthereleasetoKarroll'sattention

Ratio:• Itisnotageneralprincipleofcontractlawthatapartymustdrawattentiontoanexclusionofliabilityclause• Tofinditifthereisadutytodrawattention,mustlookat:

o Theeffectoftheclauseinrelationtothenatureofthecontracto Thelengthandformatofthecontracto Thetimeavailableforreadingandunderstandingthecontract

• Absentextremecircumstances,peopleshouldtakecareofthemselves

CONTRACTUAL INTERPRETATION

• Thegoalofcontractualinterpretationistounderstandthemutualandobjectiveintentionsofthepartiesexpressedinthewordsofthecontract(Sattva)

• Thisinvolvestheplainmeaningruleandthecontract’sfactualmatrix• Whenpartiesfailtoaddressanimportantaspectoftheircontractualrelationship,thecourtmaybeabletofillintheblanks

throughimpliedterms-butcan'tcountonthissincethetestinMatchtingercan'tbereliedonwithcertaintyPlainMeaning

• Needtoreadthecontractasawhole,givingwordstheirordinaryandpracticalmeaningwiththesurroundingcircumstancesknowntothepartiesatthetimeofformationofthecontract

• Considerationofsurroundingcircumstancesrecognizesthatascertainingcontractualintentioncanbedifficultwhenlookingatwordsontheirown,becausewordsalonedonothaveanimmutableorabsolutemeaning

FactualMatrix

• Consideringthesurroundingcircumstancesdoesnotoffendtheparolevidencerule• Thefactualmatrixmustbeconsideredevenabsentambiguity• Surroundingcircumstancesincludesobjectiveevidenceofthebackgroundfactsatthetimeoftheexecutionofthecontract

o Knowledgethatwasorreasonablyoughttohavebeenwithintheknowledgeofbothpartiesatorbeforethedateofcontracting(Sattva)

• Examplesofrelevantbackgroundfactsinclude:o Thegenesis,aimorpurposeofthecontracto Thenatureoftherelationshipcreatedbythecontracto Thenatureorcustomofthemarketorindustryinwhichthecontractwasexecutedo Surroundingcircumstancescanincludeabsolutelyanythingwhichwouldhaveaffectedthewayinwhichthe

languageofthedocumentwouldhavebeenunderstoodbyareasonableperson