FORMATION OF A VALID CONTRACT 4 1. Offer and Invitations to Treat 4 Canadian Dyers Assn v. Burton (1920, H.L.) 4 Pharmaceutical Society v. Boots Cash Chemists (1953, C.A.) 4 Carlill v. Carbolic Smoke Ball Co (1893, C.A.) 4 Goldthorpe v. Logan (1943, C.A.) 4 Tenders 5 R. v. Ron Engineering & Construction (Eastern) Ltd. (1981, SCC) 5 M.J.B. Enterprises Ltd. v. Defence Construction Ltd. (1951) 5 Double N Earthmovers Ltd. v. City of Edmonton SCC (2007, SCC) 5 2. Communication of Offer 6 Blair v. Western Mutual Benefit Assn. (1972, BC C.A.) 6 Williams v. Cowardine (1833, KB) 6 R. v. Clarke (1927, H.C.) 6 Carlill v. Carbolic Smoke Ball Co. (1893, C.A.) 6 3. Termination of Offer 7 Revocation 7 Dickinson v. Dodds (1876, C.A.) 7 Byrne v. Van Tienhoven (1880, CPD) 7 Errington v Errington and Woods (1952, C.A.) - Denning Case 7 Dawson v. Helicopter Exploration Co. (1955, SCC) 7 Rejection 7 Livingston v. Evans (1925, AB SC) 7 Lapse of Time 8 Barrick v. Clark (1951, SCC) 8 Manchester Diocesan Council of Education v. Commercial and General Investments (1969) 8 4. Acceptance 8 Livingston v. Evans (1925, AB SC) 8 Battle of Forms 8 Butler Machine Tool v. Ex-cell-o Corp. (1979, CA) - Denning Case 8 Tywood Industries Ltd. v. St. Anne-Nackawic Pulp & Paper Co. Ltd. (1979, Ont., HC) 9 Shrink Wraps 9 ProCD v. Matthew Zeidenberg and Silken Mountain Web Services Inc. (1996, U.S. C.A.) 9 Silence 9 Carlill v. Carbolic Smoke Ball Co. (1893, C.A.) 9 Dawson v. Helicopter Exploration Co. (1955, SCC) 9 Felthouse v. Bindley (1862, N.S.) 9 Saint John Tug Boat Co. v. Irving Refinery Ltd. (1964, SCR) 10 Offeror’s Control 10 Eliason v. Henshaw (1819, US) 10 5. Communication of Acceptance: Mail and Instantaneous Modes 10 Household Fire v. Grant (1879, CA) 10 Holwell Securities v. Hughes (1974) 10 Brinkibon v. Stahag Stahl (1983, HL) 11 6. Certainty of Terms no. 1 11 Vagueness 11 R. v. CAE Industries Ltd. (1986, CA) 11 Incompleteness and Agreements to Agree 11 May v. Butcher v. R. (1934, HL) 11 Hillas v. Acros (1932, HL) 12 Foley v. Classique Coaches Ltd. (1934, CA) 12 Sale of Goods Act - Ascertainment of Price 12 7. Certainty of Terms no. 2 13 Agreements to Negotiate 13 Empress v. Bank of Nova Scotia (1991, BC CA) 13 Manpar Enterprises Ltd. v. Canada (1999, BC CA) 13 Wellington City Council v. Body Corporate 51702 (2002, NZ CA) 13 Anticipation of Formalization 14

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Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991, ON CA) 14 8. Intention to Create Legal Obligation 14 Balfour v. Balfour (1919, England CA) 14 Rose and Frank v. JR Crompton Bros. (1932, CA) 14 TD Bank v. Leigh Instruments Ltd. (1990, ON CA) 14 Canadian Taxpayers Federation v. Ontario (Minister of Finance) (2004) 15 Family Law Act SBC 2011, ss. 3 and 92 15 Formality: Contracts Under Seal and the Requirement of Writing 15 Contracts Under Seal 15 Royal Bank v. Kiska (1967, CA) 15 Requirement of Writing (NOT ON EXAM) 15 ENFORCING PROMISES 16 1. Doctrine of Consideration 16 Nature of Consideration 16 Thomas v. Thomas (1842, QB) 16 Governors of Dalhousie College at Halifax v. The Estate of Arthur Boutilier (1934, SCC) 16 Wood v. Lucy, Lady Duff Gordon (1917) 17 Past Consideration 17 Eastwood v. Kenyon (1840, QB) 17 Lampleigh v. Brathwait (1615, KB) 17 Forbearance of Suit 17 D.C.B. (Plaintiff) and Harold J. Arkin and Zellers Inc. (Defendants) (1996) 17 Pre-existing Duties 18 Pao On v. Lau Yiu Long (1980, PC) 18 Stilk v. Myrick (1809) 18 Gilbert Steel v. University Construction Ltd. (1976, CA) 18 Williams v. Roffey Bros. (1990, CA) 19 Greater Fredericton Airport Authority Inc. v. Nav Canada (2008, NB, CA) 19 Promises to Accept Less 19 Foakes v. Beer (1884, HL) 19 Re Selectmove Ltd. (1995, CA) 19 Foot v. Rawlings (1963, SCC) 20 Law and Equity Act (R.S.B.C. 1996, c. 253) s. 43 20 Process Automation Inc. v. Norstream Intertec Inc. & Arroyave (2010, ON SC) 20 2. Promissory Estoppel 20 General Principles 20 Hughes v. Metropolitan Railway Company (1877, HL) 20 Central London Property v. High Trees House (1947, KB) 21 Collier v. P & M J Wright (Holdings) Limited (2007) 21 Elucidation of Principles 21 John Burrows v. Subsurface Surveys (1968, SCR) 21 D & C Builders v. Rees (1966, CA) 22 Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. (1994) 22 W.J. Alan & Co. v. EL Nasr Export and Import Co. (1972, CA) 22 The Post Chaser (1982, QB) 22 Shield or Sword 23 Combe v. Combe (1951 CA) 23 Walton Stores (Interstate) Pty. Ltd. v. Maher (1988 Aus HC) 23 M. (N.) v. A. (T.A.) (2003 BC CA) 23 3. Privity of Contract 23 Basics 24 Tweddle v. Atkinson (1861 QB) 24 Dunlop PneumaticTyre Co. v. Selfridge & Co. Ltd. 24 Beswick v. Beswick (1966;1968 CA;HL) 24 Exception 24 London Drugs Ltd. v. Kuehne & Nagel International Ltd. (1992 SCC) 24 Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd. (1993 SCC) 25

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Fraser River Pile & Dredge Ltd. v. Can-Dive Services (1999 SCC) 25 4. Conditions Precedent 25 Turney v. Zahilka (1959 SCC) 25 Beauchamp v. Beauchamp (1973 CA) 25 Barnett v. Harrison (1976) 26 Law and Equity Act, BC, s 54 26

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FORMATION OF A VALID CONTRACT

1. Offer and Invitations to Treat

• The hallmark of an offer is the readiness to sell • Invitations to treat and puffs cannot be accepted because they are mere sales talk • You can tell if something is an offer by the language and intention through the reasonably objective person in the

place of the recipient (Canadian Dyers) • Post-contractual conduct can be also be looked at (Canadian Dyers) • Unilateral contract: a promise in exchange for an act - no need for notification of acceptance - performance of

obligations and acceptance coincides (Carbolic) • Bilateral contract: a promise in exchange for a promise (performance and acceptance do not coincide) • You have to look at the nature of the offer to know if the contract is unilateral or not - whether the party who made

the offer had the intention (either implicitly or explicitly) for notification of acceptance (Carbolic)

Canadian Dyers Assn v. Burton (1920, H.L.)

Post-contractual conduct of the seller may indicate an offer valid of acceptance - ORP in shoes of the buyer regard as an offer? F: C wrote B asking his lowest price on a property - B responded that his lowest price was $1650 - buyer again

asked for lowest price - B responded that the price was the lowest he’d be willing to accept - treated as an offer and C sent B a cheque - deed sent and said he was prepared to close Dec 1 - in Nov B’s solicitor sent back the cheque and said there was no contract

I/C: Clear offer to sell? YES R: Courts look to language used in light of the circumstances and to the subsequent actions of both parties to

determine whether what was communicated was an offer - ORP - there was a “readiness to sell” (hallmark of an offer) - plain wording was an offer (“I am prepared to accept”)

Pharmaceutical Society v. Boots Cash Chemists (1953, C.A.)

Display of goods in a store is an invitation to treat - offer and invitation are malleable concepts and what constitutes an offer depends on what ORP would say in circumstances F: Boots operated a pharmacy - when the pharmacy was open, the manager, the pharmacist, and one or more of

the assistants were present in the room - the customer had to cash out with the cashier before leaving the room with any articles - the pharmacist supervised the poisons section and was permitted to refuse purchase to a customer at any time - two customers purchased medicine from the poisons section

I/C: Offer? NO R: The display of items on the shelf is not an offer to sell (rather an invitation) b/c if you were to call it such, as

soon as you put the item in your receptacle it would be considered acceptance of the offer - they would be bound to purchase that exact item - the court considers the practical implications of considering it an offer - b/c the consequences are undesirable, there is no way that the seller intended the display of the products to be an offer (freedom of contract)

Carlill v. Carbolic Smoke Ball Co (1893, C.A.)

Puffs are incapable of acceptance - in a unilateral contract communication of acceptance is not required; acceptance and performance of the condition occur simultaneously F: Carbolic put an add in the newspaper that said that a reward would be paid to anyone who contracted

influenza after having used the ball three times daily for two weeks - also noted that the money was in a particular bank - Carlill bought the ball and used it as directed for almost 2 months when she caught influenza

I/C: Offer? YES R: Carbolic put money in the bank - the ORP would have believed that it was an offer capable of acceptance -

not puff (representative of the non-offer) - unilateral contract, therefore notification of acceptance not required but merely fulfilling of obligations

Goldthorpe v. Logan (1943, C.A.)

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Implied promise - offeror bears the risk of extravagant promises - unilateral contract F: G sought help through L for facial hair removal which she saw an ad in the paper for - consulted a nurse who

was employed by L - told that her face could definitely be cleared and the results would be guaranteed and satisfactory - submitted to treatments which the results were unsatisfactory

I/C: Contract? YES R: There is an implied promise when they use the word “guarantee” - the ORP would regard this as an implied

promise that if it doesn't work they would get their money back - an advertisement constitutes an offer that can be accepted through the conduct of an individual - the offeror bears the risks of extravagant promises

Tenders

• Problems with the English model b/c it allows the owner to do with bids as he pleases because they are simply just offers

• Bids take a lot of time and money to complete and there was no vehicle to impose restrictions on the owners b/c there were not in a contractual relationship - therefore Ron v. Ron created the idea of Contract A and Contract B

• Submission of a bid is not just the acceptance of contract A, but it is simultaneously the offer for contract B (Ron v. Ron)

• Court wanted to protect the integrity of the bidding process

R. v. Ron Engineering & Construction (Eastern) Ltd. (1981, SCC)

Contract A/Contract B F: Contractor submitted bid and a deposit - after tenders closed he realized he made a mistake - wanted to

withdraw tender - contractor said that the tender was incapable of being accepted I/C: Contract? YES; tender cannot be withdrawn R: Tender may not be withdrawn if there was a contract b/wn parties - the call for tenders is an offer of a

unilateral contract for Contract A - by submitting a bid, the tenderer is accepting the offer and simultaneously putting out an offer for Contract B, which the owner can then chose to accept or deny

M.J.B. Enterprises Ltd. v. Defence Construction Ltd. (1951)

Obligation to not accept non-compliant bids - OB test for implied terms F: Call for tenders was put out and awarded to lowest bid but which did not meet specifications required by

instructions in the call for tenders - instructions also included a privilege clause saying that the lowest tender shall not necessarily be accepted

I/C: Obligation to only accept compliant bids? YES, contract A breached by accepting a non-compliant bid R: Implied obligation to only accept valid tenders - privilege clause dow not override this obligation - Canadian

Pacific Hotels established when you imply a term into a contract: you can imply a term based on looking at the presumed intentions of the parties, and by applying the officious bystander test - is it obvious according to the OB that the party intended the term? OB uses business efficacy: parties are going to be presumed to make deals that make business sense

Double N Earthmovers Ltd. v. City of Edmonton SCC (2007, SCC)

No duty to investigate compliance - duty to treat bids fairly - A is discharged when B is entered F: Call for tenders put out requiring 1980 equipment be used and providing registration number required - a

tender is accepted not realizing until later that registration number provided in tender was a lie - owner attempts to change this requirement and form amended Contract B

I/C: Breach of contract for accepting non-compliant bid? NO A: Martel (came after MJB) but told us that there is an implied obligation in contract A to treat bids fairly and

not discriminate - allowed b/c it is trivial (b/c it doesn’t cause unfairness to the other parties) - was a compliant bid (the promise to supply 1980 equipment was made)

R: (1) Owner does not have a duty to investigate or look beyond face of bid to determine whether a bid is compliant; (2) only has duty to treat all bids fairly and equally; (3) When owner accepts compliant bid and

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enters Contract B, Contract A is fully discharged and owner has no further obligations to unsuccessful bidders. (Martel case)

2. Communication of Offer

• Offers need to be communicated in a way that the reasonable person would consider to be capable of acceptance and to the person who purports to accept it (Blair Mutual)

• Can go to an individual or a class (not an objection to say that the group was too large - Carbolic) • You must intend to accept an offer (Williams v. Cowardine) - but you cannot intend to accept unless you are aware

of the offer (R. v. Clarke) • If the circumstances are such that you must of been aware of the offer, and you fulfilled the act set out in it, than it

will be presumed that you intended to accept (Williams v. Cowardine) • But if you say you have no knowledge of it or you didn’t intend to accept, it the court will not presume intention to

accept (Clarke)

Blair v. Western Mutual Benefit Assn. (1972, BC C.A.)

Must be effective comm. of an offer with the intention to deliver the offer capable of acceptance F: Stenographer transcribed minutes of meeting stating if she retired she would be entitled to 2 years salary -

never communicated directly tor her I/C: Communication of offer? NO - never communicated to the plaintiff in a way that would justify her treating it

as an offer and accepting it (defective communication) R: For an offer to be valid, it must be communicated to the persons intended to accept it and must be

communicated in circumstances that would suggest to an ORP that what is being communicated is an offer capable of acceptance

Williams v. Cowardine (1833, KB)

Must be aware of offer if you intend to accept - as long as you are aware of it and fulfill the conditions, intention will be applied and other motives do not matter F: Plaintiff responded to handbill offering reward to information that leads to the discovery of the murderer of

defendant’s brother, because she believed she did not have long to live and wished to clear her conscience I/C: Contract? YES - unilateral contract formed regardless of motive (fear of God’s punishment rather than the

reward) - contract made with anyone who fulfilled the condition of providing information R: You have to be aware of the offer if you intend to accept - as long as you are aware and fulfill the conditions

it requires, then it is presumed you intended to accept and court will not scrutinize other motives

R. v. Clarke (1927, H.C.)

To accept a contract through performance, you have to intend to accept; to do this you must have knowledge of the offer F: Two people murdered - proclamation for reward issued - Clarke provided evidence to the Crown and later

attempted to claim the reward upon suggestion of inspector - explicitly claimed that he had no intention to claim the reward

I/C: Contract? NO Clarke dud not act on the faith of the proclamation or mentally assent to the offer until after any information was given

Carlill v. Carbolic Smoke Ball Co. (1893, C.A.)

Offers can be made to individuals or a class of people (no group is too large) F: (Duplicate) R: Offers can be made to individuals or a class - it is not an objection to say the class was too large

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3. Termination of Offer Revocation

Dickinson v. Dodds (1876, C.A.)

You can revoke an offer expressly or impliedly any time prior to acceptance - must be communicated beforehand either directly or indirectly F: Defendant made offer to sell property to plaintiff however accepted offer from another buyer. Plaintiff

became aware of defendant offering to sell property to another and then proceeded to submit acceptance of offer.

I/C: Contract? NO - you cannot accept knowing that it had been sold to someone else (implied revocation) R: An offeror may revoke his offer at any time prior to acceptance - revocation must be communicated to

offeree in order to be a valid revocation - revocation need not be express, it may be implied (performing act inconsistent with the offer) - expression of revocation does not have to come directly from the offeror

Byrne v. Van Tienhoven (1880, CPD)

Revocation of an offer does not have effect until communication of the revocation is received by the offeree F: D mailed an offer to buy tin plates from P - offer was received and accepted via telegram - D mailed

revocation but was received after acceptance was sent - P sold plates to a third party on the assumption they had purchased them

I/C: Contract? YES - revocation not valid R: Revocation of an offer does not have effect until communication of the revocation is received by the offeree.

(i.e. mailbox rule does not apply to revocation)

Errington v Errington and Woods (1952, C.A.) - Denning Case

Exception to revocation: you cannot revoke on part performance without giving a reasonable amount of time to fulfill performance requirements F: Father offers to purchase house on the condition that his daughter and son-in-law pay off the mortgage- upon

which he would transfer house to them - couple made payments; father died; widow wants possession of house

I/C: Contract? YES - unilateral contract - cannot revoke on part performance R: Exception to the rule of revocation: you cannot revoke an offer if the party has started the path of

performance - must give them a reasonable amount of time to fulfill the performance requirements

Dawson v. Helicopter Exploration Co. (1955, SCC)

In cases instinct with obligation, courts will distinguish contracts as unilateral or bilateral - whichever one would make the date of acceptance earlier F: HE approached D about mining area of his staked land - wanted to take him there - D in military so needed

helicopter provided by HE - D waited for response in arranging helicopter - HE responded said they changed their mids and were not going to go - later HE contracted with another party for the development of the land

I/C: Breach of contract? YES R: In relationships instinct with obligation, courts will strive to interpret a contract as bilateral or unilateral

depending on which one would make the date of acceptance earlier to remove the possibility of revocation - interpret it as bilateral b/c there is a mutual exchange of promises

Rejection

Livingston v. Evans (1925, AB SC)

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

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F: E offered to sell land to L to which plaintiff replied with a counter-offer - L rejected counter offer and subsequently made agreement with third party for land.

I/C: Contract? YES - “cannot reduce price” is interpreted as standing by the original price and therefore open to accept it

R: Once an offer has been rejected it cannot afterwards be accepted - a counter offer is a rejection - what constitutes a counter offer or a rejection depends on the ORP - an inquiry is not a counter-offer - material changes (such as in price) are rejections

Lapse of Time

Barrick v. Clark (1951, SCC)

An offer is open for the period of time specified - if not, it is open for a reasonable amount of time F: C offered to purchase land from B; B responded but C was away when letter arrived - his wife wrote to

request offer be kept open for 10 days - upon his return 20 days later, C wrote to accept counter-offer but B had already sold land (after 13 days).

I/C: Contract? NO - “immediately upon acceptance,” “reply ASAP” implied urgency which suggests a shorter period for acceptance - just b/c he said he would keep it open does not mean he had to

R: The offer is open for the period of time specified in the offer - if not specified, it is open for a reasonable amount of time assessed by the ORP test dependant on 1) industry custom (volatility of price of goods; perishability of goods ex. land vs. stock) and 2) circumstances of the case (language; conduct of parties).

Manchester Diocesan Council of Education v. Commercial and General Investments (1969)

An offer must be accepted within a reasonable amount of time or it can be considered refused/withdrawn I/C: Is an offer refused simply by not responding to it within a reasonable amount of time? YES R: An objective assessment of the facts and the determination of whether an offeree should in fairness be

regarded as having refused the offer, is necessary in determining if an offer has been refused A: If an offer is not accepted within a reasonable time then it must be treated as withdrawn - alternatively, if the

offeree does not accept an offer within a reasonable time that it must be treated as having refused it - the time it takes for the offer to be accepted must be reasonable - if it is a reasonable amount of in light of the circumstances

4. Acceptance

Livingston v. Evans (1925, AB SC)

Duplicate case - can be used as acceptance reference F: Defendant offered to sell land to plaintiff to which plaintiff replied with a counter-offer. Defendant rejected

counter offer and subsequently made agreement with third party for land. I/C: Contract? YES - “cannot reduce price” is interpreted as standing by the original price and therefore open to

acceptance - inquiry is not a counter-offer

Battle of Forms

Butler Machine Tool v. Ex-cell-o Corp. (1979, CA) - Denning Case

Use first shot analysis to determine terms only when it yields a clear result - otherwise look at the documents holistically and the intentions of the parties F: Butler sent an offer to E to sell some machinery - with it was a price variation clause - E replied and said they

would order the machinery, but on their own standard terms which did not have a price variation clause - Butler replied on the tear-off slip from E's terms reading that they would accept the order on the terms and conditions stated therein - upon delivery B asked for more money on the basis of the clause

I/C: Is the price variation clause included? NO - variation clause not included

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A: E constituted a counter-offer when they changed the material price (b/c of no price variation clause) - historically Courts dealt with this by a last shot analysis (the person who fires the last shot and the other guy does not object, then that is the deal) or a first shot analysis, but Denning does not like this (he thinks the seller is trying to be sneaky so he applies his own rules - the escalator clause was not intended to be part of the deal because it was a material change, and if you are going to make a change of that grande scheme then you have to make the other party aware of it - there is no way that the parties both intended for it to be part of the deal

R: Denning: it may be the first shot if you cant determine btwn the first shot and last shot analysis (but this must yield a clear result) - in situations where they do not yield a clear result, you look at all of the documents holistically

Tywood Industries Ltd. v. St. Anne-Nackawic Pulp & Paper Co. Ltd. (1979, Ont., HC)

Application of Denning global approach - powerful clauses cannot be “snuck in”, need to draw attention to it F: St. Anne created an invitation to tender w/ conditions - Tywood replied with quotation w/ same Terms on

reverse - when purchase order came from St. Anne, reverse side contained 19 Terms, including an arbitration clause

I/C: Was the arbitration clause included? NO - not part of the deal A: Application of Lord Denning’s global/holistic approach - conduct of both parties indicates that neither party

considered any terms other than those found on face of documents important - what was important was the consummation of the business deal

Shrink Wraps

ProCD v. Matthew Zeidenberg and Silken Mountain Web Services Inc. (1996, U.S. C.A.)

Shrink-wrap licenses are enforceable, unless their terms are objectionable on grounds applicable to contracts in general F: ProCD is the manufacturer of a software program - use price discrimination to charge consumers less than

commercial users for profitability - company turned to contract by declaring that all software comes with restrictions stated in the enclosed license - Zeidenburg purchased a consumer package and ignored the license by reselling the product online for cheaper (as commercial)

I/C: Did Zeidenburg breach license agreement with ProCD? YES A: Has never been a shrink wraps case in Canada - one cannot agree to hidden terms however, defendant agreed

to purchasing the software and that the transaction was subject to a license (notice on box that terms inside) - Pro CD made offer when box placed on shelf, proposed contract to buyer that he would accept by using software after having read license at home - buyer accepts offer when after an opportunity to inspect, he fails to make an effective rejection (by returning) - transactions where exchange of money precedes communication of detailed terms are common – e.g. Insurance, airline tickets, radio with warranty inside

Silence

Carlill v. Carbolic Smoke Ball Co. (1893, C.A.)

Duplicate: you can accept unilateral contracts by silence through performance of conditions

Dawson v. Helicopter Exploration Co. (1955, SCC)

Duplicate: you cannot accept a bilateral contract through silence - silence is not acceptance

Felthouse v. Bindley (1862, N.S.)

Silence does not constitute acceptance in a bilateral contract F: F negotiated the purchase of a horse with nephew - different currencies created price confusion - uncle wrote

offering to split the difference and if he heard no response he would consider the horse his at the set price - nephew did not respond but at an auction sale of his stock, he told the auctioneer to reserve the horse from

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the sale - the auctioneer (B) forgot to do so and the horse was sold - the nephew thus wrote a letter to his uncle saying that the horse he had sold to him had been sold in the auction - uncle brought action against the auctioneer B

I/C: Was silence acceptance? NO - Clear that the nephew intended to sell the horse to his uncle but did not communicate acceptance therefore it could not be binding

Saint John Tug Boat Co. v. Irving Refinery Ltd. (1964, SCR)

Positive conduct indicating acceptance will show there was acceptance - acquiescence can also amount to acceptance if it is deceptive F: SJ had a deal with Irving to supply them use of tugboats - with no firm arrangements having been made, SJ

stated that they would only have two boats available unless special arrangements were made, and advised Irving to look elsewhere for help - SJ ended up having two more tugs available, and told Irving that they could use them if they paid $450/day to have them "on call" until a certain date - this date passed, and SJ continued to keep the tugs on call and Irving continued to use them for a few months - when billed for these months after the original end of the contract, Irving refused to pay

I/C: Was silence acceptance? YES - Irving’s conduct by using the tugs, and only objecting to the 10% while not objecting to anything else, indicates his acceptance

A: ORP test - Would the ORP in the shoes of the offeror believe that the offeree has accepted notwithstanding the silence - the intention of the offeror is determined by which his conduct bears when reasonably construed

Offeror’s Control

Eliason v. Henshaw (1819, US)

The offeror can stipulate the time and the manner of the acceptance F: E wanted to purchase flour from H - terms of the agreement stipulated that H write by return of wagon - but

the wagoner would not be returning - a response was written and dated a day later than the date received and sent to Georgetown on the next available wagon - E acknowledged receipt of the letter but said the response was too late and not returned by wagon

I/C: Contract? NO - E had the right to dictate terms upon which they would purchase flour and unless complied with they are not bound by them

A: E specified return acceptance via wagon to Harper’s Ferry - the place to which the answer was to be sent constituted an essential part of the offer - the time to reply should not have been delayed beyond that ordinarily employed by wagons travelling this route - more importantly, the letter should be delivered to the correct place - no answer was at any time sent to the plaintiffs at Harper’s Ferry.

5. Communication of Acceptance: Mail and Instantaneous Modes

Household Fire v. Grant (1879, CA)

Post Box acceptance rule: the offer is accepted when the acceptance is placed in the mail (posted), not when the offeror receives the acceptance F: Notice sent from H by post to purchase shares - letter never made it to G I/C: Contract? YES A: Principle that the minds of the two parties must be brought together by mutual communication. He

harmonizes this by saying that as soon as the letter of acceptance is delivered to the post office, the contract is made binding - whatever medium the parties themselves chose to communicate will be used to assess when acceptance occurs

Holwell Securities v. Hughes (1974)

Post Box Rule does not apply: (1) if requirement of “notice” of acceptance is expressly specified or (2) if its application would produce inconvenience and absurdity

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F: H granted HS a 6 month option to purchase a property, and stated that the option had to be exercised "by notice in writing” - HS’s lawyer sent a copy of the letter to H by mail, but it was never delivered - H refused to sell the property

I/C: Contract? NO A: Generally the post box rule will apply if you use the post to send your offer - however it is not going to apply

where it is stipulated in the offer that you want notification of acceptance - implicitly saying that he does not want the post box rule to apply - has a bit to do with intention - people do not intend to imply things that are absurd and inconvenient

Brinkibon v. Stahag Stahl (1983, HL)

Post box rule does not apply to instantaneous modes of comm. - cases must be resolved by (1) reference to the intentions (2) by sound business practices, and in some cases; (3) a judgement about where the risks should lie (who is it more fair to?) F: Appellants desire to sue Austrian co for breach of telex contract - must satisfy provision which says that the

buyers must show that the contract was “made within the jurisdiction” I/C: When does acceptance become effective in instantaneous comm.? As per Entores Ltd. v Miles Far East Corp.

the contract is only complete when the acceptance is received by the offeror, and the contract is made at the place where the acceptance is received

A: No universal rules for instantaneous modes of comm. - the receipt rule: the contract is made where the acceptance is received (ex. telephone effective when the offeror hears “I accept”, telex is treated as instantaneous - when acceptances i comm. (same goes for text, email, etc)

6. Certainty of Terms no. 1

Vagueness Uncertainty because it is too vague Terms which must be certain (for our purposes): Price , nature of the goods, manner of delivery

R. v. CAE Industries Ltd. (1986, CA)

Courts may ascribe meaning to words of an agreement where one or more terms are ambiguously expressed – so long as a definite meaning can be properly extracted (from the parties objective intentions) F: Gov. of Canada negotiated with CAE for taking over aircraft maintenance base – letter from gov stated loose

terms about maintaining viable airspace in Winnipeg - also said they will use their “best efforts” to ensure the higher target of man hours met

I/C: Is contract sufficiently certain to be enforceable? YES A: “A deed shall never be void where the words may be applied to any extent to make it good” - whether words

are too vague is up to whether court can find reasonable meaning - Court says “best efforts” clauses means putting in your best endeavours, leaving no stone unturned - to find reasonable meaning we look to parties objective intentions (plain words, how outward actions show intentions (both prior to and after contract formed, commercial reality) - intention to create legal relations; the more intention there is by the parties, the more the court will be motivated to uphold the contract

Incompleteness and Agreements to Agree

May v. Butcher v. R. (1934, HL)

(1) An agreement to enter into an agreement in which a critical part of the contract is left undetermined is no contract at all, (2) Price certainty is an essential requirement for binding contract (defined price is required, “an agreement to agree” is not sufficient) F: Arrangement for purchase of “tentage”- terms of arrangement left price to be subsequently agreed upon

“from time to time” as tentage became available I/C: Contract? NO - agreements to agree are not agreements at all

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A: Agreement to agree on price is no agreement at all - in the even they could not agree on price it would be sent to an arbitrator - but the arbitration clause does not cure uncertainty b/c there was no agreement and therefore it cannot be sent to the arbitrator

Hillas v. Acros (1932, HL)

When considering uncertainty, you cannot look at a passage or word in isolation, they must be read in context of whole contract, in given circumstances - “reasonable time of delivery” is implied by industry custom F: H agreed to buy “100,000 standards” of timber from A – agreement included provision stating H should have

option of entering contract with A for purchase of timber the following year with a 5% reduction price – A refused to sell to them the following year

I/C: Was there a contract to enter into another contract in the future? YES - the clause is an integral part of the contract and therefore binding

A: Argument was that the terms were uncertain b/c the standard, price, and delivery date was uncertain - but in reading the contract in its entirety the Court found that this was not the case - the prices were set out in price lists, would be in Russian standard b/c the seller was Russian, and the date of delivery could not be specified b/c it would have to be delivered in multiple shipments

Foley v. Classique Coaches Ltd. (1934, CA)

Each case must be decided on the construction of the particular document - “reasonable price” overcomes uncertainty F: Sale of land was made subject to the CC entering into a supplemental agreement to purchase all their petrol

from F “at a price to be agreed by the parties in writing from time to time” - for 3 years CC purchased petrol from F until the thought they could purchase on better terms elsewhere

I/C: Contract? YES - here court says agreement to agree is not too uncertain A: Parties actions show they believed they had a contract for 3 years - here, a “reasonable price” is implied -

“reasonable price” overcomes uncertainty

How to Reconcile the Above? • Appreciate there is conflict here. How to deal with this: • Foley is completely wrong (May & Butcher is a H.L. case and thus overrules) • Or you could say Foley is not inconsistent

• The seriousness of intent makes Foley different (performing contract for 3 years motivates court to uphold contract whereas May and Butcher didn’t have this intent and thus court didn’t feel as motivated to uphold contract)

• A better way to reconcile might be that in May v. Butcher, court didn’t want to cure the uncertainty by saying “if you can’t agree then it is a “reasonable price” but in Foley they did. Why? Maybe because tentage (old army tent) is a different subject matter then petrol

• In May & Butcher it was difficult to find a price because it was the first time tentage like this has ever been bought and sold before and therefore there is not a reasonable price

• In Foley, you can find a price for gas based on the price of oil and therefore you can come up with a reasonable price (as it is an independent metric)

• So perhaps Foley stands for the “agreement to agree” does apply if a reasonable price can be implied • What about the arbitration clause piece?

• May & Butcher probably didn’t lay down a solid foundation, it was only applicable to the wording in that particular clause

• Hunt says: Obiter statements are outside law – in Foley the arbitration clause statements are obiter

Sale of Goods Act - Ascertainment of Price

If in BC and applies only to the sale of GOODS: Agreements to agree are not void and courts can imply a reasonable price

First you have to decide if this act applies – only to the sale of GOODS (as opposed to services, land, etc.) and must be in BC

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• Only applies to situations where you are trying to ascertain the price of goods in BC • S. 12: Agreement to agree are valid - you can have an agreement to agree on price, and if you can’t agree on

price, the courts will imply a reasonable price • S. 13: You can have an agreement to have a third party arbitrator to decide the price and if he does there is a deal,

but if he cannot come to a price then there is no deal (unless of course of of the parties prevents him from making a deal, then there is still an agreement)

7. Certainty of Terms no. 2

Agreements to Negotiate

Empress v. Bank of Nova Scotia (1991, BC CA)

(1) Courts will strive to uphold agr. to negotiate if there is a strong intent to contract in the circ., (2) when there is sophisticated comm. actors, inclined to believe there is serious intent to contract, (3) agr. to agree between sophisticated comm. actors implies two obligations: (a) to negotiate in good faith and (b) agr. will not be unreasonably withheld F: Parties entered lease which stipulated Bank could renew for 2 successive 5 yr. periods provided it gave 3

months notice, and the "rental for any renewal period, which shall be the market rental prevailing at the commencement of that renewal term as mutually agreed between the Landlord and the Tenant" – Bank exercised option to renew at proposed rate but received no reply from E - E finally responded saying it would allow Bank to remain month-to-month if paid $15,000 and proposed rent thereafter

I/C: Agreement to negotiate? YES A: They specifically stipulate that they had to mutually agree and therefore the courts cannot impose a

reasonable price - there is an external market metric (such as Foley in way of gas) - but in BC it appears the Foley does not apply and May v. Butcher would - to give the term business efficacy there is an obligation to try to negotiate and in good faith, and to not withhold agreement unreasonably - not obligated to reach an agreement but to at least try - bad faith is demanding $15,000 and renting to someone else at the market rate which the bank was prepared to agree (we are not told what good faith is)

Manpar Enterprises Ltd. v. Canada (1999, BC CA)

Bare agreements to negotiate are unenforceable - there is no contractual duty to negotiate in the absence of a benchmark or standard against which to measure the duty F: ME had a permit to contract with the Crown to remove and sell sand and gravel located on the reserve - there

was a clause that said that they should have the right to renew for a further 5 years subject to satisfactory performance and renegotiation of the royalty rate and annual surface rental - both parties expected the operation to go over 10 years - despite M’s repeated attempts at renewal, neither the dept nor the band were willing to do so before the expiry of the contract

I/C: Duty to negotiate in good faith or too uncertain? NO - obligation to “negotiate in good faith” should not be implied here b/c there is no benchmark and is therefore too uncertain (what is the value?)

A: The language in the contract shows the intent of the Crown was a broad scope b/c of having to maintain a fiduciary obligation to the Indian Band - there was also no “benchmark” such as in Empress (“market rental”) where the court could imply terms into a continuing lease - unless there is a benchmark or a standard by which to measure such a duty, the negotiation concept is unworkable

Wellington City Council v. Body Corporate 51702 (2002, NZ CA)

New Zealand Case: cannot enforce agreements to negotiate in good faith b/c “good faith” is subjective and cannot be measured (lack of certainty) F: The appellant and respondent had a “process” contract which obliged the Councils officers to “negotiate in

good father and for not less than the market value” I/C: Legally enforceable contract based on the process contract? NO - agreement to negotiate in good faith are

uncertain and therefore unenforceable A: Obligation to negotiate in good faith is different from an obligation to negotiate reasonably - in trying to

reach agreement parties remain able to pursue their own interests within what is subjectively honest (rather

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than objectively reasonable) - thus there is no certain objective criterion by which court may determine whether either party is in breach of the good faith obligation (unless contract specified how negotiations are to be conducted with precision, in which case it would be enforceable)

Anticipation of Formalization

Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991, ON CA)

You can only contract now to contract later if what happens later is simply reducing to writing what you’ve agreed on now - you need to have agreed on all important points (this case does not meet the rule) F: Negotiations for the purchase of Kernels Franchise I/C: Contract? NO A: If no agreement in respect to essential terms has been reached or the terms have not been agreed to with

reasonable certainty, it can be concluded that such terms were to be agreed upon at a later date and until that time there is no enforceable agreement

R: You can have a contract to formulate a contract in an anticipation formalization scenario - if there is clear intent to be bound and be bound immediately but you agree to reduce it to writing later in the exact terms that have been discussed - then there can be a contract - you can not leave anything out to be dealt with later

8. Intention to Create Legal Obligation

• May be the first thing you want to start with on an exam • You need to be able to say by the objective reasonable person that there is intent to create legal obligations • Three presumptions: social context presumption of no intent, commercial context presumption that there is intent,

or there is no presumptions and intent is unclear

Balfour v. Balfour (1919, England CA)

[Social Context] In a social context, the presumption is that parties did not intend to create legal obligations (can be rebutted but this is your starting point) F: Plaintiff suing her husband for money due as an “allowance” – He promised to give her this allowance each

month “for her maintenance” until she returned to live with him I/C: Intention to create legal obligations? NO - the parties did not intend that they should be attended by legal

consequences A: Assessed by the ORP R: (1) Where parties did not intend there to be legal relations/legal consequences, there is no binding contract;

(2) There is a presumption that where agreement arises between spouses, there is assumed that there is no intention to create a contract - Court assumes parties when they make these promises were motivated by affection, not a serious intent to make legal consequences - this can be rebutted: if parties hate each other - can be more general: family, social exchanges (“exchange hospitality in their home”)

Rose and Frank v. JR Crompton Bros. (1932, CA)

[Commercial Context] Where the parties are commercial parties, there is a presumption that there is intention to create legal relations unless arrangement explicitly states otherwise F: R&F were the exclusive American distributor for JRC’s paper products - the parties later signed a new

document with a clause stating that the arrangement was not intended to be a formal legal agreement and would not be subject to legal jurisdiction - JRC terminated the agreement after deciding not to fill orders for some of their products - R&F sued for breach

I/C: Contract? NO - no intention to create legal obligations as expressly stated in the agreement A: “Gentlemen's” agreement - only intended to be morally binding

TD Bank v. Leigh Instruments Ltd. (1990, ON CA)

Comfort letters are generally deliberately designed with the intention not to create enforceable obligations - but this can be rebutted by looking at the entire context, the factual background, and the wider comm. reality

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F: TD is financing a subsidiary of a parent company Plessey, and L is the subsidiary - the bank opens a loan for L and they go bankrupt so the bank goes after P since L could not pay - P sent comfort letters to TD saying that their subsidiary company L “be managed in such a way to meet their debts”

I/C: Contract? NO A: P argues that the comfort letters were considered puff - P formulated the comfort letters in a way that they

were not responsible by saying “be managed” which suggests that they are passive as opposed to them taking active responsibility - they have interest in seeing them do the right thing but they are not going to ensure that they do it actively - as a matter of corporate law, subsidiaries are completely separate entities from the parent company - comfort letters have a moral purpose and rationale even if they are not binding

Canadian Taxpayers Federation v. Ontario (Minister of Finance) (2004)

Promises made by politicians (even in writing) during political campaigns are not enforceable because it is unreasonable that there would be any intent to contract F: Dalton McGuinty makes and signs a promise during election campaign not to raise taxes, he then raised taxes

after being elected I/C: Contract? NO, not binding A: Making a spectacle of it looks like pretty strong intent but no reasonable person would say that it was

intended to be binding

Family Law Act SBC 2011, ss. 3 and 92

Under the Act, spouses wishing to divide assets in debts may do so and they will be binding (must be written, signed, and witnessed) - do not have to look at intention to create legal obligations S.3: Defines spouse as any person who is married to another or has lived in a marriage like relationship for a

period of atlas 2 years - also includes former spouses S.92: Says spouses may make agreement in respect to the division of assets and debts and there is a binding

contract (must be written, signed, and witnesses)

Formality: Contracts Under Seal and the Requirement of Writing

Contracts Under Seal • Historically, promises had to be sealed for contract to be valid • Today, a seal is not necessary but is still sufficient so if there is a seal, it is binding • Note: If there is a seal, consideration is not required

Royal Bank v. Kiska (1967, CA)

The word “seal” is not sufficient to count as a seal - you need a seal in some form affixed to the document F: Bank brought action against Kiska who signed guarantee – while there was no seal was attached, the word

“seal” was printed next to the signature I/C: Contract? YES - but not b/c there was a seal, but b/c there was consideration A: No longer need to pour wax just a “gummed wafer” - need to physically affix something - by not having

strict rules there would be uproar by its means around consideration - Laskin (dissent, but this is law now): formality should be preserved as it serves a purpose - “seal”, “given under seal” “signed, sealed, delivered” are not sufficient because they are anticipatory of a formality which must be observed, not a substitute for it - the printed word “seal” is merely an invitation to place a seal at that spot - it affirms the need of formality rather than dispensing with it

Requirement of Writing (NOT ON EXAM)

Just have to know that contracts for the sale of property have to be written, signed, and have a reasonably description of the subject matter

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ENFORCING PROMISES

• A promise can be enforceable (1) as a contract, (2) as a deed, (3) by way of estoppel • Contract:

• A promise is not a binding contract unless it forms part of an agreement in accordance with the principles of offer, acceptance, certainty, and completeness

• The fact that a promise is part of an agreement, however, is not sufficient to make it a binding contract • The promise must always (1) be supported by consideration, and (2) the promisor must intend to create legal

obligations [(3) requirement occurs in some cases where it must also be in writing] • Deeds:

• A promise that is signed, sealed, and delivered is binding as a deed (which is a legal instrument distinct from a contract but with virtually the same legal effect)

• Estoppel • Promises are potentially harmful social acts in that promises often inspire their recipients to act in reliance on

the expectation that the promise will be performed • The doctrine that is concerned with remedying this kind of promissory mischief is equitable in origin and is

know as “promissory estoppel”

1. Doctrine of Consideration

• Something of value which the promisee promises in return for the promisors promise • Some right, interest, profit or benefit accruing to one party or some forbearance or loss suffered - distinguishes

contracts from gratuitous promises • Does not need to have commercial value, only value in the eyes of the law • This value stems from the fact that there have been benefits conferred on each other, mutual loss, or one benefit

and one loss • Aimed at the “in exchange for” part of our definition of contracts • Consideration will be present whenever the parties do or promise to do something at the request of the other party • The only exceptions to considerations are contracts under seal (Royal Bank v. Kiska) and promissory estoppel

Nature of Consideration

Thomas v. Thomas (1842, QB)

Consideration must flow from each party - that something has value in the eyes of the law (economic value is not relevant) F: Prior to his death, Mrs. Thomas’ husband expressed he wished his wife to have the house in which he lived -

defendant consented to carry out the intentions and entered agreement with Mrs. Thomas - agreement stated she would pay defendant £1 yearly towards ground rent – defendant now claims there was no consideration

I/C: Sufficient consideration? YES - her consideration was being able to stay in the house and his was making £1

A: Consideration exists if there is something of value in the eyes of the law (some benefit to P or some detriment to D) - here, Mrs. Thomas paid ground fee in exchange to stay in house - value does not mean economic value and it does not matter what is being exchanged (peppercorn theory), rather the mutuality of giving is what matters

Governors of Dalhousie College at Halifax v. The Estate of Arthur Boutilier (1934, SCC)

Valid consideration requires not just that both parties do something but that they agree to do those things in exchange for one another’s promises (must be mutuality) F: Boutilier promised to pay Dalhousie $5,000 in a campaign run by the university to raise funds with terms of

payment "as per letter from Mr. Boutilier” - no letter ever followed and Boutilier fell on hard economic times and could not pay - he acknowledged that he still intended to pay, and would do so when he could afford to - he died, and Dalhousie claimed against his estate for the money

I/C: Consideration? NO - unless the promisor gets some specific benefit from a gratuitous promise, then there is no consideration

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A: B did not promise to give the money for any specific reason - the promise to give him money in exchange for them building a new building etc. were made independent from each other - Dal. did not promise to do those things in response to his donation specifically - no mutuality

Wood v. Lucy, Lady Duff Gordon (1917)

Example of terms being implied using the ORP business efficacy approach F: L was a fashion designer that hired W to help her make money through exclusive rights to place her

endorsement on the designs of others and sell and market them - in return she was to have one half of all the profits from any contracts he made - L broke the contract by placing her endorsement w/o W’s knowledge and withheld the profits

I/C: Consideration? YES A: A promise my be lacking and yet it may be “instinct with obligation” - w/o an implied promise, the

transaction would not have such business efficacy as both parties must have intended - if he was under no duty, his promise to account for profits or take out copyrights would be valueless - unless W gave his best efforts, L would never make anything

Past Consideration

Eastwood v. Kenyon (1840, QB)

Generally speaking, past consideration is no consideration (b/c there is no mutuality and therefore not done in light of the other promise/no reciprocity) F: E is caring for a minor and spending his money on her - she comes of age and K comes in and marries her

and agrees to reimburse him for all the expenditures he paid for her growing up - then he decided not to pay I/C: Consideration? NO - K’s promise was a gift b/c he did not request anything in return - no consideration b/c

the benefit occurred before K was around - gratuitous promise

Lampleigh v. Brathwait (1615, KB)

Past consideration is no consideration however sometimes past consideration is consideration IF (1) the past act was done at the promisors request (explicitly or impliedly) and (2) the parties at the time understood there would be a conferrable benefit in the future (ORP) F: B killed a man and then requested L seek a pardon for this crime from the King - L rode around the country

to obtain this pardon, after which B promised to pay L £100 I/C: Consideration? YES A: It was impliedly understood that doing the act would result in payment in the future - he also requested the

action R: Past consideration is no consideration however sometimes past consideration is consideration IF (1) the past

act was done at the promisors request (explicitly or impliedly) and (2) the parties at the time understood there would be a conferrable benefit in the future - you know that there is an expectation of payment by whether or not the ORP would have expected payment in that circumstance

Forbearance of Suit

Forbearance of suit means that you could potentially sue but you wont if the other party gives you some money (a form of settlement) - can be consideration

D.C.B. (Plaintiff) and Harold J. Arkin and Zellers Inc. (Defendants) (1996)

Generally speaking, forbearance of suit constitutes consideration - BUT if the suit turns out to be bogus then this does not constitute consideration - however if the suit is invalid but the individual is (1) honest and in good faith to sue, (2) the claim is objectively reasonable, and (3) they actually intend to sue then, it does constitute consideration F: D.C.B.'s 14-year-old son shoplifted in Zellers - took $59.95 worth of goods which were recovered unharmed

- legal counsel for the store wrote the mother demanding restitution of $225 - if they did not the company

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would proceed with a civil action against her - D.C.B. paid the $225, but after obtaining legal advice, she sought the return of these funds

I/C: Consideration? NO - you have to have a valid claim against the other party in order to have forbearance to sue (parents are not legally liable for the actions of their children)

A: Since the money had already been delivered then it constitutes an executed gift (executory gift is a promise w/o consideration and you can take it back) and therefore the money stays where it is

R: Generally speaking, forbearance of suit constitutes consideration - if a person promises to call off a lawsuit for money, and the suit turns out to be bogus, then this does not constitute consideration - however if the suit is invalid but the individual is not aware of this and (1) is honest and in good faith to sue, (2) the claim is objectively reasonable, and (3) they actually intend to sue then, it does constitute consideration

*** For EXAM, look at if it has been executed first, if not look to the other factors to see if it is legitimate or not

Pre-existing Duties

Pao On v. Lau Yiu Long (1980, PC)

Promising to do something that you already have to do can constitute consideration if the preexisting duty is owed to a third party F: 3 actors: Shing (plaintiffs), majority shareholders in Fu Corp (defendant), Fu Corp itself - 3 agreements: (1)

Shing and Fu Corp (Shing exchanges building for 4.2 million shares in Fu Corp, (2) subsidiary agreement between Shing and Fu Shareholders, (3) between Shing and Fu Shareholders - scrapping agreement 2 and create new agreement Fu shareholders agree to indemnify Shing any losses they may suffer in holding 2.5 million shares - in exchange Shing promises to enter contract #1 - Fu shareholders saying #3 is not a contract b/c Fu didn’t provide consideration b/c Shing was promising to do what they were already promising in contract #1

I/C: Consideration? YES A: Agreement 1 is between Shing Corp and Fu Corp - agreement 3 is between Fu Corp and shareholders - in

these circumstances it is viewed as two different contracts - he is undertaking a new obligation by promising to do something to a different party (even though it is a different obligation, they can be sued by two different people) - this makes a material difference - it reinforces their obligation by making a new promise by giving it to a new person

Stilk v. Myrick (1809)

Promising to do something that you already have to do is not consideration at all (as long as they are to the same party) F: Prior to sea voyage, seaman arranged to be paid a set wage - during course of voyage 2 seamen deserted,

captain entered agreement with the rest of crew to divide wages of the 2 who deserted I/C: Consideration? NO - the performance of a pre-existing obligation does not qualify as consideration

because he is only promising to do what he has already promised A: No consideration for the additional pay by the crew - seaman had already undertaken to do all that they could

under all emergencies of the voyage and had sold their services until the completion of the voyage

Gilbert Steel v. University Construction Ltd. (1976, CA)

Promising to do something that you already have to do is not consideration F: GS has contract to deliver steel to UC – GS wants to raise prices – GS alleges UC orally agreed to price

increase - UC accepts deliveries of steel against invoices reflecting new price but makes unrevised payment amounts resulting in balance owing to GS

I/C: Consideration? NO - GS promised to do something they already had to do A: One of the arg. was that in making a new agreement it had rescinded the old one - this arg. failed b/c the

second agreement was oral and the first one was written, but ay be applicable in other cases - you can always create a new contract and it would not be impossible for the Court to find that the making of a new agr. rescinded the old one -

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*** The business reality is such that people want to modify deals - this rule stands in the way of that - it is often at odds with the commercial reality that people want to modify w/o having to rescind and re-write a contract - so we look at William v. Roffey Bros.

Williams v. Roffey Bros. (1990, CA)

Promising to do something that you already have to do may be consideration if (1) there is no duress whereby you are forcing someone to pay for something that they would already be getting and, (2) if there is practical benefits (commercial advantage) flowing to each both party F: R entered into a contract with W as a subcontractor, to renovate 27 flats - they agreed to pay £20,000 to do so

- in the course of performing the subcontract, W ran into financial difficulty b/c the price was too low and problems with staff - R was concerned he wouldn't complete the work on time so offered to pay W a further £10,300 at the rate of £575 for every flat that was completed - R paid £1500 under this arrangement and failed to make any further payments

I/C: Consideration? YES - practical benefits flowing form both parties: Contractor doesn’t have to pay penalty (even completion on time itself is a benefit); subcontractor gets more money - no duress here

A: Applying the test, there was mutual benefit in that the sub-contractor got more money and the contractor would not be effected by the penalty clause - even if there was no penalty clause there still may have been mutual benefit such as in the protection of his reputation

R: Court agrees that Stylk is in the general sense correct, but sometimes it has to be relaxed in commercial circumstances where (1) there is no economic duress whereby you are forcing someone else to pay for something that they would already be getting and (2) if there is practical benefits (commercial advantage) flowing to each party

Greater Fredericton Airport Authority Inc. v. Nav Canada (2008, NB, CA)

Post-contractual modification, unsupported by consideration, may be enforceable so long as it is established that the variation was not procured under duress (drops practical benefit of the Roffey) F: Nav refused to relocate ILS equip unless Airport agreed to pay for new equip - Airport maintained it was not

responsible for costs but they wanted to ensure runway operation - Airport signed a letter under protest to pay the costs - on basis of letter, Nav acquired and installed the equipment however, Airport refused to make the promised payment

I/C: Consideration? YES A: Commercial reality needs to be recognized; that is, that parties frequently vary and modify their contractual

obligations and that the law has to protect their legitimate expectations that the modifications or variations will be regarded as enforceable - if people are promising something mutually it is probably not under duress - if only one party is promising something there is more likely to be duress

Promises to Accept Less

Foakes v. Beer (1884, HL)

Payment of a lesser sum cannot be satisfaction of a larger sum - this is not consideration - cannot hold someone to this promise b/c it is a gift F: As the result of a previous judgment F owed B £2,090 + interest - the two parties entered into an agreement

that F would pay £500 immediately and £150 every 6 months (w/o the interest) until he had paid off the debt and in return B wouldn't take any action F paid off the entire amount - B now claims the interest

I/C: Consideration? NO - B’s consideration is the detriment to promise to waive the interest - but F not promised anything more than he already had to do - therefore her promise was a gift and is retractable

Re Selectmove Ltd. (1995, CA)

Foakes v. Beer is inconsistent with Williams v. Roffey - sale of goods/services vs. obligations to pay money - potential for harmonization in Canada?

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F: S required to deduct income tax from its employees but failed to do so - Co and Tax collector agreed on re-payment schedule but collector indicated he needed approval from supervisor - Crown demanded full payment - S says Crown had accepted his agreement

I/C: Consideration? NO A: Williams v. Roffey only applies to goods and services and not to obligation to pay money - Williams v. Roffey

was rejected in this case but this is not in Canada and therefore you can still argue that Williams v. Roffey may apply here - Foakes v, Beer does apply in Canada - in this case they were bound by HL in Foakes v. Beer - the two areas of law should be harmonized and we are at liberty to do so if you cannot find mutual benefit suggest Fredericton Airport case where it drops this part of the test

Foot v. Rawlings (1963, SCC)

Exception which draws a distinction between cash and cheque - by giving something new there is consideration b/c you are doing something that you did not have to do F: F owed R a sum of money - the parties made an agreement on the basis for repayment through a letter with a

list of requirements - both parties signed the letter - yet two years later R sued F for the balance of the debt I/C: Consideration? YES - as long as appellant continues to perform obligations under the agreement,

respondent’s right to sue is suspended A: According to Foakes v. Beer there would be no consideration, but by introducing cheques instead of cash

they are introducing something new and therefore is sufficient consideration

Law and Equity Act (R.S.B.C. 1996, c. 253) s. 43

Where the accepting party expressly agrees to receive less than satisfaction of the full amount, then that agreement is binding even though there is no consideration (has to be no undue pressure and expressly stated) (undoes Foakes v. Beer)

Process Automation Inc. v. Norstream Intertec Inc. & Arroyave (2010, ON SC)

Application of Ontario Law and Equity Act (same as BC) - legislation is silent on the issue of undue pressure so if any exists, common law (Foakes v. Beer) still applies F: Application of the Ontario Law and Equity Act (same as BC) A: Effect of it is to kill Foakes v. Beer - the legislation does not discuss duress or undue pressure that may occur

- it is silent on the issue - so on the Courts view, the common law still applies (Foakes v. Beer) if the agreement to accept more is brought about in a situation of undue pressure - Court defines undue pressure by looking at Lord Denning case: low standard & ordinary meaning

2. Promissory Estoppel

Lord Denning’s four part test for estoppel (High Trees): 1. There must be an existing relationship (contract between the parties) 2. Representation that you wont enforce the right (must be clear and unambiguous - does not have to be express-

can be implied) 3. Was it relied on (there must be reliance simplicitor which in a dictionary sense means you have relied upon the

promise and acted upon it - but it is unclear whether we need detrimental reliance which means that you are worse off from relying on the promise)

4. Was it unfair (all things considered) to go back on the gratuitous promise

***As a matter of precedent, detriment is not required - however need to think why it is for an exam - in terms of equity, if there is no detriment than it does not seem unfair - but is it inherently inequitable to make a serious promise and to turn around and do it anyways even if you are not worse off?

General Principles

Hughes v. Metropolitan Railway Company (1877, HL)

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Lease/leaseholder enter into negotiation - all four elements of promissory estoppel engaged F: H was the landlord of which the MRC leased property - pursuant to the lease, H served a notice demanding

that the property be repaired within 6 months - MRC replied suggesting that H by the leasehold and they were holding off on the repairs until they could negotiate - landlord did not respond to the letter but they entered into negotiations which eventually fell through - three days before the notice was to expire MRC replied saying they would undertake the repairs - H served writ of ejectment

I/C: Promissory estoppel? YES A: An example of promissory estoppel though not really (came before Denning created estoppel) - H impliedly

told the MRC they were not going to enforce the six month term by entering into negotiations - therefore bound by this and estopped from their right that they otherwise might have - existing contract, representation that it wont be enforced, the tenant relied on it, and it would be unfair now for the landlord to be resiled for this (all four elements are here)

Central London Property v. High Trees House (1947, KB)

Lord Denning: four essential requirements for estoppel F: CLP made a lease HT for tenancy of a block of flats at ground rate of £2,500 a year - with war conditions

prevailing, arrangement was made that the rent would be reduced to £1,250 a year – HT paid this reduced rent for 4 years by which time war was over - CLP seeking to recover difference in amounts

I/C: Judgement for CLP - but Denning says that had he turned around a week later and wanted to go back to the full amount he couldn't have (creates promissory estoppel through the obiter dictum of the case)

A: The promise was understood by all parties to only apply under conditions prevailing at the time and did not extend any further than that - when the flats became fully let in early 1945, the reduction ceased to apply

R: A promise intended to be binding, intended to be acted on and in fact acted on, is binding even if there is no consideration - this case may be cited for the 4 essential requirements of estoppel: (1) Must be existing relationship between parties at the time the representation is made, (2) must be clear promise or representation that promisor intends to be bound by what he is saying, (3) must be reliance by promisee upon the statement and (4) it must be inequitable to permit the promisor to go back on his promise

Collier v. P & M J Wright (Holdings) Limited (2007)

Foakes v. Beer says you can collect on a promise to accept less since payment of a lesser sum cannot be satisfaction of a larger sum - but if the elements of promissory estoppel exist then you cannot F: P&MJ made a loan to C and his two partners - it was found that the three partners were jointly liable for

repayment of the loan - two of the partners ceased to make payments (became bankrupt) - C alleged that the creditor promised that he would not pursue him for the whole debt as long as he paid his one third - C finished paying his one-third and the creditor came after him for the rest

I/C: Estoppel? YES A: While Faukes v. Beer says you can collect, if the elements of promissory estoppel exist then you can not -

resiling from a serious promise not to enforce a right is inherently inequitable

Elucidation of Principles

John Burrows v. Subsurface Surveys (1968, SCR)

Friendly indulgences cannot be classified as clear and unambiguous representation that you won’t enforce the right (what is clear and unambiguous = ORP) F: S purchased a business from B - purchase included a promissory note which included an acceleration clause permitting

the creditor to claim the entire amount due if S defaulted more than 10 days - over a period of 18 months S was consistently more than 10 days in default but B accepted late payments w/o protest - following a disagreement, the B sued for the entire amount owing

I/C: Estoppel? NO A: Estoppel only where evidence that one party lead the other to suppose the strict rights under contract would not be

enforced - not enough to show one party has taken advantage of indulgences granted to him by the other - evidence does not warrant the inference that S entered negotiation supposing that B had agreed to disregard the accelerated clause - the ORP must look at it in context (what is the relationship, motivations) to determine what is friendly indulgences and what is clear and unambiguous representation

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*** Denning invented estoppel in High Trees but it is now Canadian law b/c of this case

D & C Builders v. Rees (1966, CA)

It is only inequitable where there has been true accord (agreement) and the creditor voluntarily accepts a lesser amount in sum - a promise made under duress should not be estopped (fourth part of Hight Trees test) F: D&C completed a building job for R - R gave them partial payment and owed the rest in sum (at this point

there was no complaint of the work) - D&C wrote twice asking for the sum and received no response - R fell ill with influenza and his wife phoned D&C offering them a settlement - the company would go bankrupt if they did not accept so they did, - she demanded a receipt

I/C: Duress to accept less? YES - he is not bound b/c there was no true accord between them A: Creditor is barred from enforcing legal rights only when it is inequitable to insist on them - where there has

been true accord under which the creditor voluntarily agrees to accept a lesser sum in satisfaction and the debtor acts on that accord by paying less and the creditor accepts it, then it is inequitable for the creditor to afterwards insist on the balance

R: Generally, equity will favour estoppel where there has been true accord however, this will not apply where there is undue pressure on the promisor (duress) - a promise made under duress should not be estopped

Estoppel: Giving Notice If I tell you I’m not going to enforce my right and then I change my mind, can I go back to the original promise if I give you notice? (Can X reinstate antecedent promise by giving notice to Y?) Generally the answer is yes, as long as it meets 2 requirements (Saskatchewan River Bungalows)

Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. (1994)

You can abandon your promise if there is fair and reasonable notice of going back to the original right (1) must let the other person know that you are going to enforce your right to take the promise back, and (2) you must give notice before the other party relies on it F: (Not important) R: X may reinstate an antecedent promise by giving notice to Y as long as 2 requirements met: (1) X must give

notice to Y, and (2) X must give notice to Y before Y relies on the gratuitous promise

W.J. Alan & Co. v. EL Nasr Export and Import Co. (1972, CA)

Under stage three of the High trees test, the promise does not have to be relied on to detriment, just relied on (there are some cases that show detriment - may be able to get around it by saying a misreading of the law - 3/2 judge split) F: Buyers purchased coffee from sellers under a contract which had a price stated in Kenyan shillings – buyers

sent letter or credit in English sterling for 2 shipments to which sellers made no complaint - when English sterling devalued, sellers demanded outstanding amount of Kenyan shillings to offset devaluation

I/C: Promissory estoppel? YES - Court determines you do not have to rely on it to detriment A: The offer (letter of credit) and acceptance of that offer (making use of the credit to receive payment)

constitutes the contract of sale as varied from Kenyan to English - once the seller contends to accept the letter of credit as satisfactory, it is regarded as if it were a conforming letter of credit

The Post Chaser (1982, QB)

It is not a requirement to show detriment…but Gogh says that there was nothing inequitable by X going back on his promise b/c Y didn’t suffer any detriment (detrimental reliance is not needed under the 3rd part of the test but it is need under the 4th???) F: P agreed to sell palm oil to D who in turn contract to sell to a string of further sub-buyers - contract required

declaration of the ship be made to buyers in writing as soon as possible after vessel’s sailing - seller did not provide declaration until 1 month into ship’s sailing - buyer initially accepted documents however, when sub-buyer rejected, so did the buyer

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I/C: Decision in favour of buyer - sellers relied on buyers representation in conducting their affairs however, there is nothing which would render it inequitable for buyers to enforce their legal right thereafter to reject the documents - it is impossible to infer they suffered any prejudice

A: Lord Justice Gogh: discussion about reliance simplicitor and detrimental reliance - agrees that detrimental reliance is not required and it is reliance simplicitor (under 3 part of test) - but then goes on to the fourth element and says that it is not inequitable for them to go back on his promise b/c the guy who it is taken from has not suffered prejudice (so instead of proving it under the 3rd part you have to prove it under the 4th - at the end of the day you are proving it somewhere!)

Shield or Sword

If there is no pre-existing contractual relationship an X makes gratuitous promise to Y, Y cannot enforce that right against X by pointing to estoppel (i.e. estoppel cannot be used as a sword to create a new course of action)

Combe v. Combe (1951 CA)

Promissory estoppel cannot be used to create new actions; it can only be used as part of a cause of action, to prevent a party from insisting upon his legal rights when it would be unjust to allow him to enforce them F: Wife petitions for divorce - husband agrees to pay her £100 each year - husband never made a payment - wife

brings action for 6 years owing I/C: Can estoppel operate as a sword? NO! A: The true function of the promise/assertion may be part of the action but not a cause of action itself - the wife

can only enforce the promise if there was consideration for it but there was no consideration in this case - just a gratuitous promise, so estoppel cannot apply

Walton Stores (Interstate) Pty. Ltd. v. Maher (1988 Aus HC)

Estoppel can be used as a sword in Australia in narrow circumstances - if someone makes a gratuitous promise, someone can see that you are making this promisee, and then relies on this promise, plus the parties expect that a legal relationship will arise, then promissory estoppel can be used to compel the person to enter into a contract F: Australian case (therefore only persuasive) - W negotiated with M for the lease of land on the agreement that

M demolished one of the buildings - M not able to do so by the completion date and made oral agreement with W to extend - M not notified of any objections and began demolishing which W knew of - later returned the lease saying he was not interested

I/C: Estoppel? YES! A: To buy and sell land there has to be a written contract - but there seems to be a quasi-contractual relationship

here - attempt to use estoppel as a sword to confer an obligation onto W to enter into a contract - radical extension of the law here in Canada but not so much in Australia due to their other laws of unconscionability - Court unlikely to apply here in Canada

M. (N.) v. A. (T.A.) (2003 BC CA)

Court did not follow the Australian case and set the precedent in Canada (until decided by the SCC) that promissory estoppel can only be used as a shield F: A seeks to enforce a promise by M to pay the balance outstanding on her mortgage if she would come live

with him in Canada – A resigned from her job and moved – M did not pay mortgage but gave her promissory note – A week later he evicted A from his home

I/C: Estoppel? NO! Not a cause of action in Canada A: Arg. that the Court should follow the Australian case - not supported - gratuitous gift that can not be taken

back - no pre-existing contractual relationship

3. Privity of Contract

Generally, only those who are privy to a contract can sue on the contract - Canada is essentially one of the only jurisdictions left to have a formal prohibitions on enforcement of a contract by a third party beneficiary

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Two common notions to why we have this rule: 1. Consideration Rationale: Only X and Y can sue each other and hence exclude Z because Z has not afforded

any consideration 2. Intent Based Rationale: It’s none of Z’s business because he’s a random stranger to the contract. The reason

Z cannot sue is because he has not rights to the contract, he has no rights to the contract because X and Y never intended to include strangers

Basics

Tweddle v. Atkinson (1861 QB)

Third parties to a contract cannot sue regardless of whether the entire point of the contract is to confer a benefit to them F: J.Tweddle, father of W.Tweddle, agreed with William Guy to pay W.Tweddle after marrying his daughter -

the written agreement contained a clause which specifically granted W.Tweddle the power to sue for enforcement of the agreement - William Guy died, and the estate would not pay and W.Tweddle sued

I/C: Privity? NO! A: Stranger to the contract and therefore cannot sue - person who cannot be sued based on a contract cannot in

turn sue themselves

Dunlop PneumaticTyre Co. v. Selfridge & Co. Ltd.

Same as previous case: Third parties to a contract cannot sue regardless of whether the entire point of the contract is to confer a benefit to them F: Dunlop sold their tires to Dew who agreed not to sell them for below price - Selfridge purchased tires from

Dew and agreed not to sell them for below price set by Dunlop - S breached the contract I/C: Dunlop have privity? NO! A: Dunlop has a direct interest but they do not have a contract with S - “Our laws knows nothing of the right of a

third party to recover damages arising out of a contract” - (1) only a person who is party to a contract can sue on it; (2) for contract to be enforceable, promisee must have given consideration to promiser; (3) principle not names in the contract may sue upon it if the promisee really contracted as his agent

Beswick v. Beswick (1966;1968 CA;HL)

Administrators of estates are, for all intents and purposes, the person who is party to the contract and thus can enforce the contract for that person F: Peter Beswick contracted w/ nephew that nephew would gain Peter’s business but was to pay Peter’s widow

weekly – Ms. Beswick suing & as administratrix for non-payment I/C: Privity? YES! As administratrix but not in personal capacity A: Denning allows widow to sue on both counts but then this is overturned at HL and she is only allowed to sue

as administratrix - in this role she steps into the shoes of the dead person (in this case her husband) and therefore is capable to sue on his behalf

Exception

London Drugs Ltd. v. Kuehne & Nagel International Ltd. (1992 SCC)

If 2 part test is met, a third party can gain benefit on contract: (1) The limitation of liability clause expressly or impliedly (commercial reality/identity of interest) extends its benefit to the employee(s) seeking to rely on it; and (2) the employee(s) seeking the benefit of the limitation of liability clause have been acting in the course of their employment and must have been performing the very services provided for in the contract when the loss occurred F: Contract contained limitation of liability clause – Warehousemen attempting to move transformer caused

damage; What extent can employee benefit from employers contract? I/C: Privity? YES! Entitled to the liability limitation clause A: ORP was the contract impliedly extended? (1) There was a strong identity of interest here b/c there was little

leeway on how to do a warehouseman job and the commercial reality was that the employer knew that the

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employees would be completing the job - (2) Employees were the warehouseman doing the duties as per the very services provided for in the contract

Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd. (1993 SCC)

London Drugs test applied: failed at first step b/c there was not a close identity of interest (engineers are independent, more autonomous, therefore intent to cover was unlikely, and own safetyy measures could have been taken) F: W was engaged in building roads in BC - they bid on a contract to build a section of the highway in the

Revelstoke area - bid was successful and E entered into a contract with the prov. for the work - E alleges that it lost money on the project due to errors in the specifications and construction of drawings done by NDL (non-reliance clause btw gov’t and E)

I/C: Privity? NO! A: Engineers here have less of an identity of interest with the Prov (b/c engineers are independent contractors

and therefore more autonomous) - with less identity of interest, the parties would not have intended the benefit to extend to this third party - engineers could have protected themselves by alternate measures (creating their own limited liability clauses, insurance, etc.)

Fraser River Pile & Dredge Ltd. v. Can-Dive Services (1999 SCC)

London Drugs test does not just apply to employees; a clause can be deleted up until a right crystallizes (in cohate) but as soon as it crystallizes it cannot (this happens when there is a real practical benefit or when a cause of action is born) F: F charter a barge to Can-Dive which sank - subrogation clause allows insurance compony to step into shoes

of the insured and sue whoever caused loss - there was a waiver of this clause included in the contract for charterers (in order to invite charterers in)

I/C: Can-Dive have privity? YES! Can-Dive entitled to waive on waiver of subrogation clause A: Passes (1) of London Drugs b/c charters are specifically mentioned in the waiver clause - passes (2) b/c Can-

Dive was chartering the boat at the time of the incident - a clause can be deleted from a contract when it is in cohate - but as soon as it crystallizes then it cannot (in this case it crystallizes when the boat sank) - it crystallizes when there is a real practical benefit (according to Hunt, the moment that a cause of action is born

4. Conditions Precedent

***NOT ON THE EXAM***

A condition that must be satisfied in precedent of the contract… until that condition is satisfied, the contract is held in abeyance (and self terminates if condition is not satisfied)

What if the condition is not fulfilled but the party who the condition was to solely benefit, wants to go ahead with the contract anyway, can he waive the condition?

• Canada says it depends on whether it is a condition precedent or a true condition precedent… • If it is a true condition precedent it cannot be waived • If it is an ordinary condition of precedent it may be waived

Turney v. Zahilka (1959 SCC)

A true condition precedent cannot be waived; test to determine “true condition precedent”: (1) Must relate to a future and uncertain event, (2) condition depends entirely on the will of a third party F: T inserts condition that he will only buy Z’s land if Village Council will re-zone land – Village does not

rezone land but T wants to go ahead and still buy land – Z says they will not sell anymore b/c of the condition I/C: Right to waiver? NO! True condition precedent and therefore cannot be waived A: The rezoning of the village was a future uncertain event and entirely up to the will of a third party

Beauchamp v. Beauchamp (1973 CA)

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An ordinary condition precedent can be waived F: Agreement to purchase home conditional upon purchaser being able to obtain first mortgage for $10,000 and second mortgage for $2,500 - appellant arranged first mortgage for $12,000 - seller says condition not satisfied I/C: Right to waiver? YES! Ordinary condition precedent and therefore it does not matter if it was satisfied b/c it can be waived (though here you could argue that it was satisfied) A: Not entirely dependent on the will of a third party (ie. if you go into a bank to obtain a mortgage there are things you could do to prevent that from happening if you wanted to)(you have an option to go ahead or not but you usually pay for this in a contract (for leisure); you would be getting that in this case where you pay nothing - you would retain an interest of an option to purchase for which you have paid nothing

Barnett v. Harrison (1976)

Beauchamp was actually a true condition precedent that was satisfied F: B (purchaser) wanted to buy land from H (vendor) upon which to put a number of apartments - the purchase

was subject to zoning approval and the land being serviced - the approval was not received by closing date and the purchaser wanted to waive the condition

I/C: Right to waiver? NO! A: Talk about why Beauchamp went the way it did - Court says that it was actually a true condition precedent

and that it had been satisfied - the bottom line was that he had to get a mortgage (which was the condition precedent) and he did so - the fact that he had to get it in two instalment was immaterial

Law and Equity Act, BC, s 54

In BC none of the common law matters now b/c of this legislation - all conditions precedent can be waived by the party who’s the sole benefit is for - whether or not it is a true condition precedent is immaterial

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