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Contracts-2015 F - Summary Contracts&Jud Decision Making
Contracts&Jud Decision Making (Dalhousie University)
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CONTRACTS CANS
PART ONE – MAKING A SIMPLE CONTRACT
CHAPTER ONE – MUTUAL ASSENT: HOW A BARGAIN IS MADE
Secion One – Essenial Elements of an Ofer
The Invitaion to Dinner Case (Ficional)
Need Intent to Be Bound For a Contract to Be Binding
Facts: Mr. Patrick is having dinner with Professor Thomas, whom he hopes will give him a job. He knows
that the Professor is a fan of bridge, and that you need three people to play bridge. He invites Mr. David
to come to dinner, and to stay to play bridge aterwards, and Mr. David agrees. Just before dinner, Mr.
David gets a call to go play poker with his friends and decides not to go to Mr. Patrick’s – however, he
tells his wife that he is sill going to Mr. Patrick’s. The bridge game fell through, the professor let, and
Mr. Patrick did not get the job.
Proceeding: Mr. Patrick sued Mr. David for breach of contract, asking for $25,000 in lost wages from the
job that he did not get and $10,000 for the mental distress.
Issue: Was there an intenion for the invitaion to create a legally binding contract?
Analysis: Here it is obvious that an ofer was made, and that it was accepted. There is even
consideraion as Mr. David was to receive his favorite dinner. However, it is also clear that when the ofer
was made there was no intenion of it creaing a legally binding contract. This idea only arose ater Mr.
David did not show up. Although Mr. David might have had a moral obligaion to atend the dinner, he
had no legal obligaion to do so.
Outcome: The case is dismissed; no legally binding contract was formed.
Notes/Raio: In order for a contract to be formed both paries must intend to be legally bound by the
terms at the ime when the negoiaion is made.
Weeks v. Tybald (1605, UK)
Pay for My Dumped Son; Contracts Need Intent; Ofers Need Oferees
Facts: The plainif and the daughter of the defendant were in talks of marriage. The father of the
plainif and the defendant also talked about marriage, and the defendant said he would give 100
pounds to anyone who married his daughter as a dowry. The two did not end up geing married.
Proceeding: The plainif sued staing that a contract for the 100 pounds had been made.
Issue: Can an ofer be made with no speciic oferee in mind? Was there intent to be bound?
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Analysis: The courts state that a legally binding contract was not formed for two reasons: (1) there was
no clear oferee, and (2) the paries did not intend to be legally bound at the ime of the discussion.
Outcome: The case is dismissed; no legally binding contract was formed.
Notes/Raio: An ofer must be made with serious intenion, and must be intended to create legal
consequences. An ofer must be made to a speciic oferee.
Randall v. Morgan (1805, UK)
Confusing Leter from Father in Law; Ofers Cannot be Qualiied, Must be Unequivocal
Facts: The defendant entered into an agreement with his wife’s father staing that £2000 would be paid
to the defendant from the father in law’s estate when he died. In the document, the father in law says
that if his daughter gets married then he may bind himself to pay the principal when he dies. The man
dies, and the defendant is an executor of his will. He takes the money.
Proceeding: Other paries in the estate do not think that the defendant should have the money, and they
sue him.
Issue: Did the father in law’s leter amount to an ofer, or was it too uncertain?
Analysis: The judge states that the ofer was uncertain, and the right to determine what would happen
was sill on the table. Therefore the ofer was qualiied, and was not a true ofer at all.
Outcome: The defendant must give the money back; there was no legally binding contract formed.
Notes/Raio: There is no legally binding ofer when a declaraion is qualiied. Where the oferor retains
the power to change his mind, a true ofer is not made. An ofer must involve an absolute, unequivocal
commitment given at the ime the ofer is made.
Balfour v. Balfour (1919, UK)
Sick Wife Wants Monthly Payments; Husband-Wife Agreements Generally Are Not Contracts
Facts: Mr. Balfour and his wife went to England for vacaion, and his wife became ill and needed medical
atenion. They struck a deal, and the wife was to remain behind in England when the husband returned
to Ceylon. They had this understanding when they were in a good relaionship; however things turned
sour later on down the road. At the ime of their departure, Mr. Balfour said that he would give his wife
£30 a month.
Proceeding: The wife is suing the husband claiming that he owes her £30 a month indeinitely.
Issue: Was Mr. Balfour’s ofer intended to be legally binding? Does the fact that they were husband and
wife mater?
Analysis: The law of contracts is not made for personal family relaionships. In the irst trial, the
judgment was given to the wife, however upon appeal the judgment was given to the husband, as there
was no intent to be legally bound when the agreement was agreed upon. The judges say that if they
were to allow all wives to come to court when agreements had been broken with their husbands then
the courts would be overrun with frivolous cases. One of the judges also says that there was no bargain
made on the part of the wife, and therefore no contract could have resulted.
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Outcome: Mr. Balfour’s appeal is allowed, he does not owe his wife the monthly payments as no legally
binding contract was made.
Notes/Raio: Arrangements made between husbands and wives are not ordinarily contracts because the
paries did not intend to be legally bound by the agreements.
Grant v. Province of New Brunswick (1973, NB AC)
Condiional Ofer for Disposing of Potatoes; Meeing Condiions = Acceptance
Facts: The province passed an act staing that you would receive compensaion from the province for
your potatoes if you destroyed them in a paricular manner. You had to apply and be accepted by the
government. Grant illed out the forms, and saisied himself and the members of the commitee that
everything needed had been done. Everything appeared to be all right. However, Grant was refused
compensaion because he was told that he was not the owner of the potatoes,
Proceeding: Defendant is appealing the earlier decision staing that they had to pay the plainif for their
destroyed potatoes.
Issue: Did the Province make an open ofer to all potato farmers, or was it an invitaion to treat, meaning
that the ofer was made by the farmer?
Analysis: The government argues that they made an invitaion to treat, and it was Grant who made the
ofer. The court goes back to the invitaion, and says that it has every condiion necessary for an ofer.
They introduce us to the concept of condiional ofer, and Grant met the condiions in the ofer. They
decide that there was an ofer to purchase made by the province to certain people, not an ofer to sell by
the plainif. To come to this decision, the court used the objecive test. They decided that this is what a
reasonable person would decide in the case – a contract had been formed.
Outcome: The appeal is dismissed; a binding contract was made on the basis of the Province’s ofer.
Notes/Raio: Condiional ofers lay out speciic condiions that must be met by potenial acceptors of the
ofer. If the condiions are met, then the party accepts the ofer through their performance and a
contract is formed. If they are not met, then no contract is formed.
Rose & Frank Co. v. J.R. Crompton & Bros. Ltd. (1923, UK CA)
In Business Relaionships, Assume Contract is Intended; You Can Contract out of a Contract
Facts: Plainifs were the defendants’ American distributor for their new paper product. In their legal
agreement there was a clause included staing that the contract would not be legally binding. The
defendants cancelled the agreement because they were unhappy with the Americans’ proceedings.
Proceeding: The defendants are appealing the decision of the trial court staing that a contract did exist,
and atemping to negate the damages.
Issue: Can a clause be put in a contract saying that it is not legally binding, or is there a contract anyway?
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Analysis: Although in business relaions it is generally assumed that a contract has been intended, here
there is a speciic clause staing the intenion of the paries not to be bound in a legal contract. It is the
intenions of the paries that maters, and here they are clearly stated.
Outcome: The appeal is allowed; no legally binding contract was formed.
Notes/Raio: If you can impliedly assume that people in business relaionships intend to be bound, then
if they expressly state that they do not wish to be bound you must respect their actual intenions.
Jones v. Padavaton (1969, UK CA)
Mother Gives Daughter Money for School and a House; Family Relaionship ∴ No Contract
Facts: The plainif is the defendant’s mother. The mother tells her daughter that she will pay for her to
go to law school if she comes back from the US to go to law school in England. She comes back, and the
mother ends up buying a house for her to live in, along with other tenants. There is no express
agreement made – the daughter furnishes the house, but the mother never receives the money that the
other tenants pay for rent. The mother tried to sell the house and the daughter claimed that she was
enitled to some of the money based on the work she had put into it.
Proceeding: The mother sued the daughter irst for possession of the house, but then the daughter
counter-claimed for the money that she had spent on the house. The trial judge found for the daughter.
Issue: Has a legally binding contract been formed? Did the paries intend to be bound?
Analysis: This agreement is of a family nature, and thus there is no basis for the daughter to say that her
mother has given away her legal right in the house. Further, employing the objecive test, there was the
discrepancy in the amount of money given which was never addressed (US vs. Trinidad Dollars) – if it had
been a true contract, this would have been an issue. Further again, the condiions are so vague that this
could not be considered a contract even if it was intended to be one. If they really wanted a contract to
be formed, the contract would have been made much more speciic. This is perhaps the most important
point.
Outcome: The mother’s appeal is granted; no binding contract was formed.
Notes/Raio: “Family relaionships” in contract extend farther than husband-wife – at least to motherdaughter. If one of the paries in a family relaionship claims that a binding contract was formed, then
the onus is on them to prove that the paries intended to enter into a legally binding contract regardless
of their family relaionship.
Gould v. Gould (1970, UK CA)
Broke Husband Can’t Pay Ex-Wife; Vague Terms Mean No Intent ∴ No Contract
Facts: A husband and wife split up, and the husband agreed to pay the wife £12 a week. They got back
together, and then broke up again; they made a verbal agreement that the husband would pay £15 a
week for “as long as he could manage”. He paid for a while, but eventually he stopped paying and said
that he could no longer aford to.
Proceeding: The wife sued for the money that she claimed she was owed. She was successful at trial.
Issue: Was there a legally binding contract? Does Mr. Gould’s condiion make a diference?
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Analysis: In the dissent, Lord Denning difereniates this case from Balfour v. Balfour because the
husband and wife have already split up here at the ime the agreement was made. Therefore they
should be seen as two separate paries not in a family relaionship. Davies agrees that the probability
that a contract was formed here is higher than in Balfour; however he states that the terms were too
vague to be considered a contract. If they had really intended to enter into a contract, the terms would
have been clariied. Furthermore, there was no consideraion on the part of the wife.
Outcome: The appeal is allowed and the husband does not have to pay his wife as no contract was
formed.
Notes/Raio: The terms of a contract must be clear enough to indicate that the paries intended to enter
into a legal relaionship.
Edwards v. Skyways Ltd. (1964, UK QB)
Pilot Wants Pension He Paid Into; Agreement Made Ex Graia By Employer, Sill Have To Pay
Facts: Pilots were laid of from their jobs before they earned their pension. There was an agreement
between the union and the company that they would receive pension that they had paid into. However,
the company failed to come through on this bargain and refused to pay the pension. The company was
supposed to make a payment equivalent to the defendant’s pension payment ex graia (i.e. without legal
obligaion).
Proceeding: The plainif is one of the pilots who is suing for the pension that he paid into.
Issue: Was the promise binding, or does the fact that it was made ex graia free the company from all
liability?
Analysis: This is a clear case of where the objecive test could be applied – however, there are limitaions
on the objecive test here – this is a complex negoiaion between 12 corporate and trade union
representaives, so extensive background knowledge would be needed. The court says that ex graia
means that the company had no legal sipulaion to pay the laid of workers before they made the
promise, but does not mean that this promise is not binding. In making the promise it is clear that both
paries intended to be bound.
Outcome: The pilot is successful and receives his money because the promise amounted to a contract.
Notes/Raio: The courts give consideraion to the fact that the negoiaing paries are not equal in this
case – the principle of equity. In commercial contracts the court does not ordinarily inquire whether
paries intended to be bound. The onus is on the party who claims that no legal consequences were
intended – the company (same reasoning as in Jones v. Padavatan).
McGugan v. Smith (1892, SCC)
Super Granddaughter Gets No Love; Quantum Meruit Employed So She Gets What She Deserves
Facts: This is a family relaionship between a grandfather and his granddaughter. He said that he would
provide for her as amply as he did for his daughters as long as she lived with him unil he died, or she got
married. She lived with him unil she got married, then he dies shortly ater and let signiicantly less
money to her in his will than he did to his daughters.
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Proceeding: The granddaughter sues and claims that a contract had been formed.
Issue: This was a family relaionship, but the granddaughter performed acts far outside of a typical family
relaionship expecing reimbursement. Does this mater?
Analysis: The family relaionship does not mater here because she did things that were far beyond her
duies to her grandfather. Her acions were beyond any reasonable expectaions for this type of
relaionship. The services of the plainif are so extreme that she is enitled to recover quantum meruit.
Outcome: The appeal is allowed; the daughter gets her original legacy plus $1000.
Notes/Raio: Quantum meruit is a term in equity. It means “pay the person equivalent to what they
have worked for”, and is employed to avoid unjust enrichment. Here, if the grandfather had goten away
with this, then his estate would have gained money that it did not deserve, which is not fair.
Matheson v. Smiley (1932, Man. CA)
Estate Doesn’t Want to Pay for Surgeon Because No Contract; Quasi Ex Contractu Obligaion Applies
Facts: A man shoots himself, and the neighbours summon a doctor. The doctor summons a specialist
surgeon who does everything possible to save the man’s life, but he died. The surgeon presented his bill
to the estate, but the estate says that is will not pay it.
Proceeding: The case was found for the plainif in the lower court. This is the defendant’s appeal.
Issue: Can you enter into a contract with someone who was in such a state, and has no control of his
thoughts? There is no consensus ad idem (meeing of minds).
Analysis: The court inds that there was no contract here, and also that there was no implied contract.
However, “whenever necessiies are supplied to a person who by reason of disability cannot himself
contract, the law imposed an obligaion on the part of such a person to pay for such necessiies out of
their own property”. This is called an obligaion quasi ex contractu, (“arising almost like a contract”).
Outcome: The appeal is dismissed and the estate must pay the surgeon’s fees.
Notes/Raio: Quasi ex contractu obligaions arise in speciic circumstances, including: paying for the
necessiies of life, paying for burial of a dead body, situaions involving people who are insane or are not
in control of their mind, and intervenions in medical emergencies.
Deglman v. Guaranty Trust Co. and Constanineau (1954, SCC)
Aunt’s Estate Won’t Give Nephew House; He Gets Wages Quantum Meruit Despite No Contract
Facts: The aunt tells her nephew (the plainif) that if he performs some paricular duies, then she will
leave him a home in her will. He does these duies, but when she dies she does not leave him the house
in her will.
Proceeding: The nephew was successful in the lower courts; the aunt’s estate appealed.
Issue: Can resituion be provided quantum meruit when no legal contact is in place?
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Analysis: It is clear that there is no legally binding contract because there is no agreement in wriing and
the Statue of Frauds requires contracts dealing with the sale of property to be in wriing. The court
states that they cannot order reimbursement on the basis of speciic performance because there is no
contract. However, it is clear that the acts were no performed gratuitously and the nephew expected to
be paid for them. Thus, he should be reimbursed on the basis of quantum meruit because the Statute of
Frauds does not say anything about resituion to prevent unjust enrichment. Although he cannot be
awarded the house because of the Statutes of Frauds, he in enitled to the wages that he should have
been paid for his performance.
Outcome: The appeal is partly allowed, and the reimbursement of the nephew is changed to $3,000,
which is the esimated cost of his work.
Notes/Raio: When no legally binding contract applies, plainifs can sill recover for earnings that they
are enitled to in order to prevent unjust enrichment.
B.C. Atorney General v. Parklane Private Hospital Ltd. (1974, SCC)
Confusing Hospital Rates; No Contract with City but Quantum Meruit Prevails
Facts: Prior March 1968 the hospital had an agreement with the city at the rate of $5.05 per paient per
day. The hospital made a fresh ofer to the city @ rate of $9.50 per diem and asked the city to remove
its paients if not agreeable. The city did nothing, kept paying the old rate of $8.05. City resoluion
airmed its unwillingness to pay the hospital’s new rate. The hospital warned that their coninued
acceptance of paients did not imply an agreement with the city’s posiion. The city made no acion and
coninued to refer paients to the hospital. In June 1971, the hospital served the city further noice of an
increase to a rate of $11.50, and threatened that if the city disagreed then all the social welfare paients
would be removed by the end of June, failing which the courts will be asked to enforce a payment at the
reasonable rate of $11.50 per paient per day. The City coninued to be silent, and coninued to send
paients.
Proceeding: Originally the City was successful, however the hospital was awarded the appeal. This is the
City’s appeal to the SCC.
Issue: Did the city imply acceptance of the ofers given by the hospital by coninuing to send them
paients?
Analysis: The courts imply that there was no contract because the paries had never reached a clear
agreement on the level of payment; however Vancouver has beneited from the services of the hospital
and to allow them to escape on the basis that there was no contract would amount to unjust enrichment
– thus the hospital had a right to reimbursement in quantum meruit.
Outcome: The appeal is dismissed, and the City must pay “reasonable rates” to the hospital.
Notes/Raio: Someimes silence can consitute acceptance, but it depends on the facts of the case.
Re Jacques (1968, NS Co. Ct.)
Singy Old Woman; Obligaions Arise Quasi Ex Contractu
Facts: Two people (Ms. Kidston & Ms. Morine) are claiming on the estate of a singy old woman for
services that the performed without receiving compensaion. A third party (Lindsay) told both of the
women that they would be paid for their work. The woman also promised Ms. Kidston that if she stayed
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with her, then she would be paid for her services. The services were given in an atempt to help the old
woman, and were done so beyond any reasonable expectaions, to say the least.
Proceeding: This is the original trial.
Issue: Can plainifs recover when they are taken advantage of, even when a contract is not present?
Analysis: For Morine, there was only evidence of direct representaion by the 3 rd party who had no
binding authority. Although the taxi service was obviously iniiated by the deceased, there was no intent
to pay – and thus no contract. Therefore, her remedies come completely from quantum meruit. For
Kidston, in addiion to the third party representaion, the deceased directly made a promise to her. She
fulilled her duies in this promise and stayed beyond the expectaions. The deceased had the opion to
terminate the contract, but did not, and hence her claim is founded upon a contractual liability against
the deceased’s estate.
Overall, the acts went far beyond expectaions for a reasonable neighbour or member of the community,
and the women should be reimbursed to prevent unjust enrichment of the defendant. This obligaion
arose quasi ex contractu.
Outcome: Judgment for the plainifs.
Notes/Raio: It is an axiom of the law that no person will be permited to take advantage of his own
fraud, and accordingly a promise of remuneraion is implied where one person induces another to
perform a service without intending to pay for it, and the obligaion so created may be enforced in the
same way as if it were an obligaion arising out of an express contract [quasi ex contractu].
The “Moorcock” (1889, UK CA)
Ship Runs Aground At Dock; Safety of Riverbed Implied In Contract
Facts: The plainifs made a deal to unload their cargo at the defendant’s dock. When the ied went
down, the boat sustained damage when it hit the hard botom of the river beneath the mud. The
defendants did not expressly state that the ground would be safe during unloading.
Proceeding: The defendants were held liable at trial; this is their appeal.
Issue: Was the term that the riverbed would be safe implied in the contract?
Analysis: The courts state that is goes without saying in the circumstances that the only way that the
cargo would be unloaded was during low ide, and thus it was assumed that the ground would be safe.
Both paries must have known that if the ground was not safe, then the unloading could not proceed.
Thus the term of the safety of the ground was implied in the contract, as it could not have been formed
without the agreement.
Outcome: The appeal is dismissed; the defendants are sill liable.
Notes/Raio: In cases of implied terms, the courts almost always raise an implicaion from the presumed
assumpion that the paries that are subject to the transacion are seeking eicacy (or a “fair deal”).
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Wood v. Lady Duf-Gordon (1917, NY CA)
“Martha Stewart” Deals Outside her Agent; His Best Eforts to Sell Were Implied
Facts: Defendant was a celebrity who atached her name to products to help them sell in return for
payment. She employed the plainif to help her do her business, and gave him exclusive right to license
out her name and he was going to give her 50% of the proits he earned. Right ater the contract was
signed, she went out on her own and did her own dealings and did not pay Mr. Wood.
Proceeding: The lower court gave the decision to the defendant saying that there was no enforceable
contract. This is his appeal.
Issue: Is there an enforceable contract even when there is no express promise by one of the paries?
Analysis: The defendant claimed that there was no corresponding request to her promise – she did not
request anything from the plainif, there was no consideraion. The plainif did not bind himself to
anything, and therefore there was no contract. However, the court said that it goes without saying that
anyone who contracts to do this type of thing will do his or her best. The plainif’s promise to render
accounts and to give the defendant one-half of the proits inherently implied that he would use
reasonable efort to implement the agreement.
Outcome: The appeal is allowed and the plainif is successful.
Notes/Raio: For a term to be implied in a contract it has to be very obvious. A promise may be lacking,
and yet there might be “insinct with an obligaion” imperfectly expressed.
Oicious Bystander Test
Is a Term Implied in the Contract?



The oicious bystander measures the threshold required for the court to imply a term to
a contract.
The oicious bystander is not necessarily a reasonable person invoked in the object test
of intenion.
In this test an arbitrator or invesigator tries to ascertain what would have been the reply
of the contracing paries if a nosy-bystander had then asked them “Do you intend to
include the term ‘x’ in the contract?” If the paries under the circumstances prevailing at
that ime would have answered “Yes, deinitely!” then the term can be implied into the
contract.
Secion Two – Invitaions for Ofer
There are a few things that always consitute invitaions to treat, and are not ofers. Some of
them are:





Quotaion of lowest price
Display of goods in a self-service store
Adverisements
Tender/bids (toughest ones)
Aucions (we don’t really deal with this one)
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Why is this disincion important? It is important because if you accept an invitaion to treat then there is
no contract – you are in fact making an ofer which must be accepted by the other party.
Harvey v. Facey (1893)
Quotaions of Lowest Price = Invitaion to Treat, Not an Ofer
Facts: The plainif sent a telegram to the defendant staing, “Will you sell us BHP? Telegraph lowest cash
price”. The defendants replied “Lowest cash price for BHP £900”. The plainif wired their acceptance,
however the defendant would not sell BHP.
Proceeding: The plainif sued claiming that they had accepted an ofer and a contract had been formed.
Issue: Do quotaions of a lowest price consitute an ofer?
Analysis: The courts said that the defendant only quoted the lowest price, which does not amount to an
airmaive answer to the 1st quesion. Quotaion of lowest price does not amount to an uncondiional
ofer to sell.
Outcome: The case is dismissed; no contract was formed.
Notes/Raio: Quotaions of lowest price are invitaions to treat, not ofers.
Harty v. Gooderham (1871)
Language in Price Quote Can Imply Ofer
Facts: The defendants told the plainifs that “£xx is our lowest price, we shall be happy to have an order
from you, to which we will give prompt atenion.” The plainifs accept the ofer; however the
defendants refuse to sell the good to them.
Proceeding: The plainif sues claiming that a contract had been formed.
Issue: Does the speciic language mater when giving a price quote – can it consitute an ofer?
Analysis: The court holds that a contract was indeed made here. In doing this they look at the speciic
language used. “We shall be happy” and “order from you” imply that they are speciically ofering it to
the plainif.
Outcome: The plainif is successful; a legally binding contract was formed.
Notes/Raio: The circumstances and the nature of the transacion are important in determining whether
a contract was formed – speciically the language used.
Canadian Dyers Associaion Ltd. v. Burton (1920, Ont. SC)
Def. Keeps Cheque & Makes Deed; Wording and Acions Can Lead to a Quote of Price Being an Ofer
Facts: The defendants own a property that the plainif wishes to buy. The defendants quoted a price to
the plainif, who responded that he would like to hear the very lowest ofer. To this the defendant
replied “the last price I gave you is the lowest price I am prepared to accept. In fact, I feel that under the
present condiions that is excepionally low and if it were to any other party, I would ask for more”. The
plainif then sent a deposit cheque for £500 to indicate acceptance, and asked for a deed. The
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defendants sent a drat deed to the plainif, but then cancelled it and returned the cheque claiming that
no contract had been made.
Proceeding: This is the iniial trial. The plainif is suing claiming that a contract was made.
Issue: Was this simply an invitaion to treat, or truly an ofer made by the defendants?
Analysis: The court said that the defendant’s reply was more than a quotaion of price already named –
emphasis should be placed on “if it were any other party I would require more”. Surely, this is an ofer.
Also, the defendant’s acions were inconsistent with no contract having been formed – he kept the
money, and made a drat deed. Here, both the language and the conduct of the party help to show that
a contract was formed.
Outcome: The judgment is decided for the plainif; a contract had been formed.
Notes/Raio: A mere quotaion of price is not an ofer, however if either the language used or the
defendant’s conduct (or both) are consistent with the view that a true ofer has been made then it will
be considered an ofer.
Pharmaceuical Society of Great Britain v. Boots Cash Chemists (1952, UK QB)
Self Serve Store = Invitaion to Treat, Not Ofer
Facts: The defendant was a self-serve drug store with a pharmacy department. Patrons would pick up
priced drugs and bring them to the counter to purchase. Dispensing of drugs pursuant to statute has to
be under the supervision of a registered pharmacist. The pharmacist’s oice is located near the cashier;
he was in a posiion to prevent the customer from removing the drugs.
Proceeding: This is the original trial; the plainif claims that the defendant is making sales against the
rules of the statute, and that the sales are made when the patrons pick up the drugs from the shelves.
Issue: At what point does the sale take place in a self-service store: when the customer picks up the
good, or at the ime and place of payment? Who makes or accepts the ofer as between customer and
the shop owner/cashier?
Analysis: The court holds that in cases like this it is the purchaser who is making the inal ofer on the
product, and the cashier accepts their ofer to make the sale. “It is a well-established principle that the
mere exposure of goods for sale by a shopkeeper indicates to the public that he is willing to treat but
does not amount to an ofer to sell. The principle is not reversed merely because there is a self-service
scheme.” Also look at public policy implicaions – if sale was made when patrons picked up products
from the shelves in stores then the stores could not work.
Outcome: The judgment is for the defendants; the contract is not made unil the cashier accepts the
ofer.
Notes/Raio: Self-serve stores are not ofering their goods for sale; they are giving an invitaion to treat.
Fisher v. Bell (1961 UK QB)
Illegal Knife in Window with Price tag; Invitaion to Treat, Not Ofer
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Facts: Defendant displayed a lick knife with a price (icket) in his shop window. The police charged the
defendant with the ofence of contravening the Restricion of Ofensive Weapons Act as a person
ofering for sale the lick knife, which was a prohibited weapon.
Proceeding: In the iniial trial the defendant was successful; this is the appeal by the Crown.
Issue: Does the exhibiion of a good with a price icket in a window consitute an ofer for sale?
Analysis: The display of the good is an invitaion to treat, not an ofer. The ofer is made by the
purchaser when they bring the good to the cashier. Thus, although the knife was an illegal weapon, the
store owner was not violaing the statute because it only says that it is illegal to ofer to sell prohibited
items.
Outcome: The appeal is dismissed; no ofence was commited.
Notes/Raio: Displaying priced goods in a window is the same as in a self-serve store; it is an invitaion to
treat. This is a case where the legislature should intervene; clearly the intent of the ofence was there.
R. v. Dawood (1976, Alberta AC)
Blouse Swap! Contracts Induced by Fraud are Not Binding
Facts: Defendant, in a self-serve store, removed the price tag and swapped clothing onto a hanger with
lower price tag. She proceeded to the cashier, paid the lower price, and let. She was charged and
convicted for thet/larceny.
Proceeding: The defendant appealed the convicion – admited that she obtained by false pretence, not
thet or larceny.
Issue: Was thet commited? Was an enforceable contract made? Was it voided by fraud?
Analysis: It is obvious that there was consent here on the part of the cashier, and therefore it was not
thet – which needs to have taking of a good without consent. If property passes with the consent of the
owner (represented by the cashier), then it does not amount to thet or larceny. A contract of sale has
been consummated (hence the property passed to the defendant). The defendant made the ofer to
buy, the cashier accepted the ofer, and hence a contract was formed, even if it is viiated by fraud. The
contract was voidable, and can be voided on the basis of fraud. She knew the price to be false, and knew
that the cashier had the authority to accept the ofer, thus the contract was induced by fraud and is
voidable.
Outcome: The convicion is overturned. She did not commit thet; however the sale contract is voided
because it was induced by fraud.
Notes/Raio: Contracts induced by fraud will not be legally enforceable.
Aucions
Sale is Complete When Aucioneer Drops Hammer
- The Aucioneer’s call = invitaion to treat
- Bidder’s response = ofer
- Fall of the hammer = acceptance (so aucioneer makes acceptance)
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Georgian Co. v. Bloom (1921, Georgia AC)
Falsely Adverised Cheap Scarves; Newspaper Ads Are Invitaions to Treat
Facts: The plainif inserted an adverisement for the defendant; however they listed the price as $5
instead of $15 for the furs/scarves for sale. The defendant sold at the adverised price and lost money.
Proceeding: The defendant refused to setle the plainif’s bill and counterclaimed for his loss.
Issue: Did the adverisement bind the defendant to sell at $5, or was it an invitaion to treat, allowing
him to negoiate price with customers?
Analysis: Despite the mistake, they were not bound to sell at the misleading price. This was an invitaion
to treat, and they could have refused the ofers of the people willing to buy the scarves for $5.
Outcome: The plainif is not liable for the defendant’s losses.
Notes/Raio: A general adverisement in a newspaper for the sale of an indeinite quanity of goods is a
mere invitaion to enter into a bargain, rather than an ofer.
Carlill v. Carbolic Smoke Ball Co. (1893, UK CA)
Smoke Ball Doesn’t Cure Flu; Unilateral Contract Deined – Performance = Acceptance
Facts: The adveriser promised to pay £100 to any person that contracted inluenza ater using the
smoke ball as directed. Adveriser deposited £1000 in a named bank as evidence of good faith. Mrs.
Carlill purchases and uses the smoke ball as adverised, and sill catches the lu.
Proceeding: The plainif was successful at trial; the defendant appealed staing that no contract was
formed.
Issue: Was the advert an ofer capable of acceptance? Did the adveriser raise expectaions as to create
legal consequences?
Analysis: This was a special type of ofer, and this is a unilateral contract – a contract where performance
can consitute acceptance of an ofer and there does not need to be an exchange. As long as you comply
with the terms of the ofer, then you accept and a contract is formed. Further, the defendant acted as
though they intended to be bound – they deposited money in a bank and said that if the product did not
work, you would receive a sum of money. Here the Carbolic Company is the oferor and any member of
the public and be the acceptor as long as they follow the performance as instructed. The consideraion
is the inconvenience sustained by one party at the request of the other.
Outcome: The appeal is dismissed; a binding contract was formed and the defendant must pay the £100.
Notes/Raio: In unilateral contracts, as long as you comply with the speciic provisions then you accept
the ofer made to the general public and a contract is formed.
Goldthorpe v. Logan (1943, Ont. CA)
Hairy Woman Distressed When Removal Fails; Guarantee in Ofer is a Term of the Ofer
Facts: The defendant put out an adverisement for their hair removal staing that it was safe and that the
results were guaranteed. The plainif goes in for assistance and is further guaranteed of the results by a
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nurse. The plainif underwent the procedure, but the result was not realized and she became
distressed.
Proceeding: The defendant was successful at trial; this is the plainif’s appeal claiming that a contract
had been formed.
Issue: Was there a contract between the paries? Did the defendant’s adverisement consitute an ofer?
If so, what is the efect in law?
Analysis: The defendants were careless in their promise – they did not suggest that “results may vary” –
they suggested no excepions for their guarantees. The court states that the defendant pandered to the
weakness of a distressed client; the strong cannot be allowed to prey on the weakness of the weak, the
gullible, or the misguided. There is an allusion to inequality in bargaining powers. This was an ofer
made to the public, which the plainif accepted by submiing to the procedure. However, the
defendant did not live up to the terms of their ofer and thus breached the contract. Perhaps they made
the ofer negligently, however either way they breached their contractual obligaions.
Outcome: The appeal is allowed; a binding contract was formed.
Notes/Raio: An adverisement will be construed as an ofer where in its plain meaning it could be
understood by the public as guaranteeing saisfactory result in return for submiing to a paricular
procedure.
R. v. Ron Engineering & Construcion (Eastern) Ltd. (1981, SCC)
Contractor Enters Bid without Labour Cost; Deposit Forfeited; Tenders Have Two Contracts (A&B)
Facts: The plainif contractor submited a tender for construcion to the owner defendant. Aterwards,
plainif realized that his tender was too low as he forgot to include labour costs. Te tender did not allow
bids to be removed ater the deadline for 60 days. The contractor claimed that he was not revoking his
bid, but only that the owner could not accept it as it was. The owner disagreed and provided the
contractor with the construcion agreement at his quoted price, which he would not sign.
Proceeding: The owner insisted that the contractor had forfeited his deposit because he did not accept
the construcion contract within the 7 day limitaion period. The owner was successful at trial, and then
overturned on appeal, and this is his appeal to the SCC.
Issue: Could the contractor revoke its ofer? Could the owner insist that the contractor is contractually
bound to enter into Contract B (construcion contract) failing which contractor forfeits its deposit?
Analysis: Generally, calls for tenders are invitaions to treat. However, in cases like this where speciic
language and condiions are used then it becomes a unilateral ofer. “Contract A” was accepted by the
contractor when he submited his bid in accordance with the terms, and it states that he has an
obligaion to enter into “Contract B” – the construcion contract. Acceping Contract A binds the
contractor to enter into Contract B. The deposit was to ensure the performance of the contractor of its
obligaions under Contract A, which it failed to live up to.
Outcome: The appeal is allowed, and the owner is allowed to keep the deposit.
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Notes/Raio: Bids at once become irrevocable if iled in conformity with the terms and condiions under
which the call for tenders was made, if such terms so provide. The principal term of contract A is the
irrevocability of the bid and the corollary term is the obligaion of both paries to enter into contract B
upon the acceptance of the ofer.
M.J.B. Enterprises Ltd. V. Defence Construcion Ltd. (1999, SCC)
Qualiied Bid Cannot Be Accepted; Privilege Clause Allows Owner to Contract as Desired
Facts: The defendant owner tendered for construcion bids according to 11 speciic documents. There
was an indicated privilege clause which stated “the lowest or any other tender shall not necessarily be
accepted.” One of the four bidders (Sorochan) submited a bid suggesing an alternaive cost (in efect
qualifying their bid). The owner accepted this. The plainif contractor had the next lowest bid.
Proceeding: The defendant sues staing that Sorochan’s bid was not in accordance with the terms and
condiions as it was qualiied, and therefore their bid should be accepted as it was the next lowest and
the custom in tenders is to accept the lowest bid.
Issue: Is it implied that only complying bids will be accepted? Does the owner have to accept the lowest
bid, even when there is a privilege clause?
Analysis: The court holds that it is an implied term in tenders that only complying bids will be accepted,
and that Sorochan’s bid did not comply with the terms – therefore, it cannot be accepted. In acceping
the qualiied bid the owner is in a breach of Contract A with the other bidders Although the privilege
clause does not overrule this obligaion to only accept compliant bids, it does allow the owner to not
simply accept the lowest bidder. Therefore, the owner was under no obligaion to contract with the
plainif.
Outcome: The contract with Sorochan is not binding. However, the plainif does not get the contract
because of the terms in the privilege clause. They get the damages that were setled on out of court,
but not the contract to do the building.
Notes/Raio: Contract A is not always a unilateral contract – it is not always formed upon the submission
of a tender – it depends on the terms and condiions of the ofer for tender. In the absence of a privilege
clause, you are most likely to be bound to accept the lowest ofer.
Harvela Investments Ltd. V. Royal Trust Co. of Canada Ltd. (1986, UK House of Lords)
Fixed Bid Sale; Qualiied Ofer Cannot be Accepted
Facts: The defendant owner issues an ofer for tender to the plainif Harvela and Sir Leonard
Outerbridge. Harvela ofered $2,175,000; Sir Leonard ofered $2,100,000 or “$101,000 in excess of any
other bid you receive”, whichever was higher. The defendant accepted Sir Leonard’s ofer at $2,276,000,
which was $101,000 higher than Harvela’s bid.
Proceeding: The plainif is suing claiming that Sir Leonard was not allowed to make such a qualifying
ofer. Harvela was successful at trial, but overturned on appeal. This is the inal appeal.
Issue: In a ixed bidding sale, can a bidder adjust his bid or must it be deinite at the ime of the bid?
Whose bid is the vendor bound to accept?
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Analysis: The ofer only invited ixed bids – the vendor chooses between a ixed bidding sale and an
aucion sale. In a ixed bidding sale the bidders submit their bid in accordance with the maximum
amount of money that they wish to pay. Using the reasonable man test, the judge states that the ofer
simply asked the two bidders to submit their highest bids, which was not hard to understand. Harvela’s
bid was higher than Sir Leonard’s. In a ixed bid sale, the owner is calling for a unilateral contract.
Outcome: The appeal is allowed, and the vendors were bound to accept Harvela’s ofer.
Notes/Raio: The vendor decides whether they want to sell in an aucion or with ixed bids. In an
aucion the bidders can haggle with their bids, however in a ixed bid sale the bidders must simply
submit the highest amount that they are willing to pay and hope that it is the highest of all the paries.
In ixed bid sales, the owner makes the ofer and invites a unilateral contract.
Secion Three – Certainty: “Court Cannot Make a Contract”
Hillas & Co. v. Arcos Ltd. (1932, UK House of Lords)
Timber Sale with Condiion for Next Year; Confusing Contracts to Enter Into Contracts?
Facts: The plainifs were merchants purchasing imber from the defendants. They reached an
agreement to purchase 22,000 standards of imber, under the speciic condiion that the plainifs should
also have the opion of entering into a contract with the defendants to purchase 100,000 standards the
following year with a 5% reducion on price. The defendants refused to sell them the 100,000 standards.
Proceeding: The plainifs were successful at trial; the defendants won the appeal. This is the inal
appeal.
Issue: Was the term negoiaing the future sale a condiion of the contract? Can you make a contract to
enter into another contract? Was this one?
Analysis: The court inds that there was a binding contract for the subsequent sale of 100,000 standards.
They say that this term indicated more than an agreement to make an agreement, and was an ofer that
merely had to be accepted by the plainif. The only thing that had to be negoiated was the price, but
this was because prices change yearly. In his judgment, Lord Wright talks more about agreements to
enter into agreements, and says that they are in strict terms enforceable contracts, however his
reasoning is very unclear.
Outcome: The appeal is allowed – they hold that there was a binding contract to sell the 100,000
standards.
Notes/Raio: Contracts to enter into contracts might be binding? Part performance of a contract gives
rise to diferent judicial treatment because it shows that paries intended to be bound by the contract.
Courts favor a contract when there has been reasonable reliance by the paries on its existence.
Foley v. Classique Coaches, Ltd. (1934, UK CA)
Gas Staion Agreement; Lack of Deinite Price Make Contract Too Vague? Not here! Part Performance!
Facts: The plainif owns a gas staion. He sells a piece of land atached to the illing staion to the
defendant to use for their business on the condiion that the defendants purchase all of their gas from
the plainifs as long as they can supply it. They did not indicate price in the contract, however there was
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a clause staing that any arguments should be setled by arbitraion. Ater three years, a lawyer for the
defendant claims that because there was no stated price, the contract is not valid. The defendants then
begin to purchase gas from other venders.
Proceeding: The plainifs were successful at trial; it was found that the contract was binding. This is the
appeal by the defendants.
Issue: Did the fact that no price was quoted mean that the contract was not binding – was it too vague?
Analysis: The judge states that there was a binding contract. The two paries acted for three years as if
there was a contract, so the defendants cannot simply decide not to adhere to it all of a sudden.
Further, if there was an issue with the price it should have been setled by arbitraion as was laid out in
the contract – the defendants breached the contract by going to other vendors. The judge also states
two important things: (1) an agreement to make an agreement does not consitute a contract, and (2)
the wrongful repudiaion of a contract by one party relieves the other party from the performance of
any condiions of the contract.
Outcome: The appeal is dismissed. The plainifs are successful; there was a binding contract.
Notes/Raio: An agreement to make an agreement does not consitute a contract. The wrongful
repudiaion of a contract by one party frees the other party from the terms of the contract. Part
performance will indicate that a contract is binding.
Courtney & Fairbairin Ltd. V. Tolaini Bros (Hotels) Ltd. (1975, UK CA)
Plainif Can’t Find Acceptable Contractor to Build Hotel; Contracts to negoiate are not contracts!
Facts: Plainif ofered to help the defendant ind a contractor to help him build the hotel that he desired.
They entered into a contract staing that if the defendant’s quality supervisor approved the price that
the plainif was able to ind, then the plainif would receive 5% as payment. The plainif found a
potenial builder, however the defendant’s quality supervisor would not accept his terms. The
defendant found another contractor without the help of the plainif and used him to build his project.
Proceeding: The plainif sued claiming breach of contract and that the defendant was bound to use the
company that he had found. The plainif was successful at trial; this Is the appeal.
Issue: Was the contract to enter into a contract valid?
Analysis: Lord Denning says that it is clear that no binding contract was present here. He discusses the
terms of the contract that clearly state that the quality surveyor must negoiate the price with the
plainif’s contractor before a contract is reached. Without an agreed price, it is unconceivable that a
construcion contract can be established. With the absence of such an important condiion there can be
no binding contract. He also states that in general an agreement to enter into an agreement is not a
binding contract, as it is too vague to enforce – damages would be impossible to calculate. Lord Diplock
further states that Lord Wright’s statement in Hillas & Co. v. Arcos Lt. was bad law.
Outcome: The appeal is allowed; no binding contract was formed for the use of the plainif’s contractor
unil the quality surveyor had negoiated the price with him.
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Notes/Raio: Contracts to negoiate are not contracts!
De Laval Co. v. Bloomield (1938, Ont. CA)
Milk Machine Installed; Terms of Pay Uncertain – Contract Sill Binding
Facts: There was a contract for sale of a milking machine at a price of $400. It was said that $200 was
due on November 1st, and that the rest of the balance was to be arranged at a later ime. The machine
was installed; however the defendant refused to pay on November 1 st and wanted to return the machine
because it was not saisfactory.
Proceeding: This is an appeal. The plainif was successful at trial.
Issue: Is the contract void for lack of certainty?
Analysis: The court examines many previous cases and determines that the omission of the paricular
form of payment, and/or the ime that payment is due does not necessarily invalidate a contract of sale.
Here it is only the mode of payment that the defendant claims renders the contract uncertain – the price
was already set.
Outcome: The plainif is successful, the contract is binding.
Notes/Raio: Contracts with uncertain terms concerning the mode of payment or price are not
necessarily invalid.
Friesen et al v. Braun et al (1950, Man. KB)
Land Sale States Price To Be Setled Upon Sale, Not Done – Contract Void
Facts: The plainifs agree to sell land to the defendants, who are currently leasing the land from the
plainifs. In the contract for sale it is stated that the terms of the sale will be discussed “upon the
paries at the date of acceptance”. The defendants accepted the contract, but no discussion of price was
made at the ime. The defendants refused to pay for the property.
Proceeding: This is the original trial. The plainifs seek speciic performance or damages.
Issue: Did the lack of seing the price at the ime of sale void the contract?
Analysis: The judge states that although this seems very unjust, the decision must be for the defendant.
It is clearly stated in the contract that the price would be discussed at the ime the contract was made,
and this was not done. This was a condiion of the contract that was not saisied, and therefore the
contract is void.
Outcome: Judgment for the defendant.
Notes/Raio: If a contract states that price will be setled upon the sale, and this is not done, the contract
is void.
Nicolene, Ltd. v. Simmonds (1953, UK CA)
Sale of Reinforcing Bars; Meaningless Terms Have No Efect on Validity of Contract
Facts: The plainif makes a contract with the defendant to purchase three thousand tons of reinforcing
bars on very speciic terms. The defendant accepts the terms, and states, “the usual condiions of
acceptance apply”. The defendant also makes promises about the amounts that will be delivered by
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speciic dates. The defendant fails to deliver the goods on ime, and the plainif sufers losses as they
had agreed to sell the goods to another party. The defendants claim in defence that these condiions
were not part of a “normal acceptance”.
Proceeding: The plainif was successful at trial; this is the appeal by the defendant.
Issue: Does this clause make the contract uncertain and render it void?
Analysis: Lord Denning clearly states that there are two types of uncertain clauses in contracts. There
are those that indicate that a clause has yet to be agreed, and there are those that simply have no true
meaning at all. The former can mean that there is no contract at all because the paries have not agreed
on all the essenial terms. The later have no efect on the overall validity of the contract, but are
themselves unenforceable and stricken from the contract. The clause in this case is of the later
disincion, and thus the contract as a whole remains binding.
Outcome: The appeal is dismissed; the contract is binding.
Notes/Raio: Meaningless clauses in contracts have no efect on the validity of the overall contract as
long as there is nothing let to negoiate in the contract.
Calvan Consolidated Oil & Gas v. Manning (1959, SCC)
P’s Develop Land Instead of Sell; Second Contract Formed; Future Consideraions Not Certain
Facts: Calvan had the authority to deal with a permit in which the defendant had a 20% interest.
However, it was also envisaged that the plainif could wish to develop the land itself instead of selling it.
In the original contract it was casually stated that if this were the case, an arbitrator would be appointed
– but a formal agreement would come soon ater. A few days later a clause was added to the contract
that formally stated this. The defendants do not wish to use an arbitrator to setle a price, and claim
that the contract is not binding. The plainif sued.
Proceeding: The defendants were successful at trial, but overturned on appeal. This is the SCC appeal.
Issue: Was the arbitraion clause an enforceable condiion of the contract?
Analysis: The defence claims that the contract is not enforceable on two grounds: (1) the terms of the
agreement had not been setled, and (2) the reference to a later contract indicated that the irst was not
meant to be binding. The judge says on the irst point that it was not necessary to lay out speciic terms
for the eventual sale in the original contract because it was not known if it would deinitely happen. To
hold that it was necessary would mean that paries would have to account for all possible future
negoiaions at the beginning of a relaionship that is ridiculous from a policy perspecive. On the
second issue, he states that the paries were bound by the original agreement, and that it was not a
qualiied ofer. There was a formal contract formed, and another formal contract was to follow.
Outcome: The appeal is dismissed; the plainifs are successful and the second contract was binding.
Notes/Raio: Statements about possible future negoiaions do not have to be certain in the original
contract. If a contract can operate independently of a second contract discussed, it will be binding.
Knowlton Realty v. Wylder (1971, BCSC)
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Realtor Wants his Fees; Contract Dependent on Future Contract That Didn’t Happen – Not Binding
Facts: The plainif is a real estate agent working to help a building developer (Wyder – the defendant)
sell loors of his planned building to Zurich Insurance Company. There are a series of leters passed
between the two companies; the last stated that the terms of the contract were “subject to the
execuion of the lease”. Troubles in development occurred, and the building was never constructed,
therefore the lease documents were never completed. The plainif claims realtor’s fees, however the
defendant claims that the event on which the commission was payable (the lease) never occurred.
Proceeding: This is the original trial.
Issue: Was the term staing that the terms of the contract relied on the signing of the lease a condiion in
the contract, or merely a statement of desires and the transacion had already been completed?
Analysis: The judge relies on the precedence from Rossdale v. Denny: “Where you have a proposal or
agreement made in wriing expressed to be subject to a formal contract being prepared, it means what it
says; it is subject to and is dependent upon a formal contract being prepared.” As the formal contract
(lease) was never prepared in this case, the proposal never turned into a binding contract. Therefore the
sale never truly took place, and the realtor cannot recover his fees.
Outcome: The acion is dismissed; a contract was not formed.
Notes/Raio: When a contract states that its terms are subject to the signing of another formal contract,
the original contract does not come into efect unil the second formal contract has been formed. This is
the opposite of what happened in Calvan, where the two contracts could operate in isolaion of each
other – here the irst is reliant on the second.
Subrook Trading Estate v. Eggleton (1983, House of Lords)
Lessor Doesn’t Want to Appoint Valuer; Paries Intended Fair Price – So One Must be Established
Facts: Lessees were given opion to purchase the land they were leasing if they gave the lessor noice in
wriing. The price was not to be less than £12,000, and is to be agreed upon by two valuers: one to be
appointed or nominated by the lessor and the other by the lessee, and in default of such agreement by
an umpire appointed by the valuers. The lessees exercised their opion but the lessor refused to appoint
a valuer.
Proceeding: The lower courts found for the plainif lessee; this is the appeal.
Issue: Were the paries agreeing to sell at a fair valuaion, i.e. at a reasonable price? Was their mode of
ascertaining the price of the essence of the contract? (If yes, the vendor is not bound to sell because the
mode of ascertaining the price was not fulilled).
Analysis: The majority rules that the paries were indeed agreeing to sell at a reasonable price, and their
valuaion formula was merely a suggesion of a method to achieve a fair price. Seeing as the intent was
to arrive at a fair price, the speciic mode of coming to this price is not an essenial condiion. However,
in the dissent the judge states that by seing a “reasonable price” the court is efecively wriing a
contract for the paries, which is exactly something that they stated that they would not do.
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Outcome: The appeal is dismissed, the contract is sill binding and a reasonable price will be set by
valuers despite the defendant’s unwillingness.
Notes/Raio: When it is evident that the intenion of the paries in a business relaionship is to establish
a reasonable price in a sale, the speciic manner in which this price is reached is not an essenial
condiion of the contract – even if a manner is suggested in the actual contract.
R. v. CAE Industries Ltd. (1986, FCA)
Aircrat Hanger; Not Enough Hours; Courts Make Efort to Find Meaning in Vague Clauses
Facts: The respondent wished to take over and run an aircrat maintenance base no longer required by
Air Canada and the Government. An agreement was made, which contained many vague statements,
but essenially stated that although the base usually generated 700,000 man-hours per annum, the
Government could not commit to guaranteeing more than 40-50,000 – although they would use their
“best eforts” to increase this number. The contract was formed, however the hours fell below 40,000
and the respondent sued.
Proceeding: The purchaser was successful at trial; this is the appeal.
Issue: Are the terms in the contract so uncertain that they render the contract unenforceable?
Analysis: First, the judge determines that the paries deinitely intended to enter into a contract –
paricularly because they acted as if they did unil the respondent brought this acion (part performance
– grant). The onus is on the Government to prove that the paries did not intend to enter into a contract
(as per Edwards v. Skyways) and they failed to prove this. Then the judge carefully scruinizes all of the
“uncertain” clauses cited by the appellants and determines that none of them are so vague as to render
no meaning to the contract. He states that in business relaionships the courts must make every efort
to interpret vague terms and determine their intended meaning at the ime the contract was formed.
He determines that the Government guaranteed a certain amount of work, and this was not provided;
therefore, the Government breached the contract.
Outcome: The appeal is dismissed; the contract was binding despite its vagueness.
Notes/Raio: In business relaionships, the courts will make every efort to apply deinite meaning to
vague terms in a contract so as not to render it unenforceable. This is especially true if it is obvious that
the paries intended to enter into a binding relaionship, or if there was part performance.
Secion Three – Construcive Communicaion: Ticket Cases
L’Estrange v. Graucob (1934)
Cigarete Machine Contract With Small Print; Signature = Consening to All Terms
Facts: The plainif purchased a cigarete vending machine from the defendant. The plainif signed the
standard form contract that was issued to them. There were several terms on the back of the contract,
which the plainif did not read, that were in small print and excluded the defendant’s liability in
negligence. The defendant was negligent.
Issue: Does it mater that the plainif did not read the exclusion clauses?
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Analysis: It does not mater that the plainif did not read the terms. When one signs a contract they can
be assumed to assent to all of the terms on the contract even if he did not read the clauses, or did not
know that they existed.
Outcome: The defendants are successful; they were excluded from liability.
Notes/Raio: A party signing a contractual document, including one containing exclusion or limitaion
clauses, is bound by it even if he or she does not read it or does not know the clauses existed. On its
face (i.e. the absence of fraud) a signature is conclusive proof of consent.
Hollier v. Rambler Motors Ltd. (1972)
D’s Negligence Causes Fire in Parking Lot, But They “Weren’t Liable For Fire”; Ambiguity – Liability!
Facts: The plainif’s car was damaged by ire while parked in the defendant’s parking lot. There was an
exclusionary clause in the contract staing that the defendant was not liable for damage caused by ire to
cars while parked in the parking lot. The ire started as a result of the defendant’s negligence.
Issue: Does it mater that they exclusionary clause did not exclude the defendant from liability resuling
from their own negligence speciically?
Analysis: The court held that there was ambiguity present, and the exclusionary clause did not exclude
the defendants from liability stemming from their own negligence speciically, but only “ires”. There
was no statement made concerning the cause of these ires. In this case the weaker party must be
protected.
Outcome: The defendant was held liable for the damages resuling from the ire.
Notes/Raio: Exclusionary clauses must be very speciic, as any ambiguity will be interpreted in favor of
the weaker party – generally the party acceping the exclusionary clauses.
Parker v. The South Eastern Railway Company (1877, UK CA)
Lost Bags on Train; Small Print on Ticket; Don’t See = Not Bound; See = Bound if Reasonably Delivered
Facts: Two plainifs checked their luggage on a train. They were given ickets with a number on one
side, and small print on the other side. The small print stated that the railway would not be responsible
for bags lost worth more than £10. Both plainifs had received the ickets before but had never read the
small print. They both lost their bags, and brought acions against the defendant for the value of the
bags and their contents – both were greater than £10.
Proceeding: In the lower court both plainifs were successful; this is the appeal by the defendant.
Issue: Are the plainifs bound by the terms on the back of the ickets?
Analysis: The court states that there is no deinite law in situaions like this, for it depends on the speciic
circumstances. If the person receiving the icket does not know that there is wriing on the back of the
icket, then he cannot be bound by its condiions. However, if he knew that there was wriing and he
either neglected to read it, or read it and did not think that it contained condiions of the contract then
he is bound by the terms as long as the icket was delivered to him in a manner that gave him reasonable
noice that there were condiions on it. Thus the judge states that a new trial must be awarded and the
jury must determine if there was reasonable noice that the wriing contained condiions. The second
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decision agrees, but goes further to state that if the plainif sees the wriing and either does not read it,
or reads it and does not object, he must be held to consent to its terms and be bound. He states that
this is a quesion of law, and therefore is not for a jury to decide – he states that the verdict must be
given for the defendants here.
Outcome: The appeal is essenially allowed – a new trial is awarded with new direcions for the jury.
Notes/Raio: If a plainif does not see wriing that contains “condiions” of the contract and no
reasonable efort was made to ensure he was aware of it, then he is not bound by its terms. If he does
see it and either does not read it, or does not think that it contains condiions, then he will be bound by
its terms so long as the defendant delivered it in a manner that gave him reasonable noice that there
were condiions on the icket.
Olley v. Marlborough Court Ltd. (1949, UK CA)
Condiions in Noice on Back of Hotel Room Door are NOT Binding; Weren’t Known at Signing
Facts: The plainifs checked into the defendant’s hotel and paid for a week in advance. When they got
into their room they noiced that there was a noice on the back of their door staing that “the
proprietors will not hold themselves responsible for aricles lost or stolen, unless handed to the
managers for safe custody”. When the plainifs let for the day they handed their key to the front desk,
however when they were out someone took the key and stole valuables from the room.
Proceeding: The judgment was given for the plainifs at trial, and the iniial appeal was dismissed. This
is another appeal by the defendant.
Issue: Were the terms of the noice posted in the room binding condiions of the contract?
Analysis: Lord Denning states clearly that the hotel owners had a duty to take reasonable care to see that
the key to the room was not taken by a third party when the plainifs handed it in at the start of the day,
and that they failed to live up to this duty. Therefore, at common law they are liable for the loss. But, if
the contract is binding then they could have freed themselves from their common law duies. In order
for a contract that negates the defendant’s common law duies to be valid the intenion to create the
speciic legal relaion must be evident. This is best done by having the other party of the contract sign in
wriing at the ime the contract is formed, hand them a clear statement of the condiions at this ime, or
by making a prominent public noice that is reasonably noiceable at the ime the contract is signed.
Nothing short of these three opions will suice. Therefore, because the noice in the bedroom was not
noiceably unil ater the contract had been signed and the hotel had accepted the plainifs as guests it
cannot be deemed to be part of the original contract, unless the guests clearly agree to be bound.
Outcome: The appeal is dismissed; the hotel is liable for the losses.
Notes/Raio: Condiions of contracts must be a) on the signed contract; b) handed to the party signing
the contract at the ime of the contract, or c) be displayed publically and noiceably at the ime and
locaion of the signing. If none of these circumstances were the case, then the party signing the contract
cannot be bound by the condiions in quesion unless the clearly agree to be bound.
Union Steamship Ltd. v. Barnes (1956, SCC)
Family on Ship; Man Hurt Negligently; Condiions Removing Liability on Ticket – No Liability!
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Facts: The plainif and his family boarded the defendant’s boat very early in the morning. The icket was
not purchased unil ater the boat had started on its voyage. On the front of the icket there was red
wriing that stated that the purchaser was bound by the icked was issued subject to the condiions on
the back of the icket. On the back it stated that the shipping company was not liable for any personal
injury caused on board by negligence of the company or its agents, and that the holder of the icket
agreed to the sipulaions listed. The plainif fell and injured himself as a result of the negligence of the
shipping company.
Proceeding: The plainif was successful at trial, and the decision was upheld upon irst appeal. This is
the SCC appeal.
Issue: Is the plainif bound by the condiions on the back of the icket?
Analysis: The majority states that the burden of proof lies on the defendant to show that it has done all
that it could reasonably be required to do to bring the limiing condiions to the plainif’s noice. They
ind that the shipping company made a reasonable efort to let the plainif know the condiions by
including the noice on the front of the icket. The plainif submited that he had seen that there was
wriing on the icket, but he did not read it. There were no other reasonable methods suggested, and
the statement that a verbal statement must be made was rejected in a precedent case.
The dissening judge states that the circumstances are more important – this was very early in
the morning, the icket could not be purchased unil ater the ship had started to move, and there was
no adverisement made at the ime of purchase that these condiions existed. He states that the only
reason why no such adverisement was made was because it would deter customers, which is not a valid
excuse. Therefore he states that the company did not make a reasonable efort to let the plainif know
of the condiions.
Outcome: The appeal is allowed; the defendant is not liable for the negligent damages.
Notes/Raio: Placing noice on the front of a icket staing that it is subject to the condiions on the back
is suicient noice to bind the purchaser to these condiions. No verbal statement must be made.
McCutcheon v. David MacBrayne Ltd. (1964, House of Lords)
Ship Sinks on Day Plainif Doesn’t Sign Long Contract; Didn’t Know Terms; Past Dealings Irrelevant
Facts: The plainif has shipped things with the defendant’s company many imes before. Each ime
previous he had signed a very long contract which he had never read – he was unaware what was in the
contract. On the day in quesion the ship sank due to negligence and the plainif lost a car that was on
board. The plainif did not sign the contract on this day.
Proceeding: The defendants were successful in the lower courts; this is the appeal by the plainif.
Issue: Is the plainif bound to the contract, despite not having signed it that day, because he knew the
condiions from signing it before?
Analysis: The judge states that there can be no condiions in any contract unless they are brought into it
by expression, incorporaion, or implicaion. In this speciic case there was not contract formed on the
day of the negligent acion, and there was no efort made by the defendants on that day to inform the
plainif of the intended condiions of the contract. The fact that the plainif had signed the contract on
imes previous was of no relevance in the case – paricularly because the plainif had never read it, and
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did not know the contract. Previous dealings are relevant only if they prove knowledge of the terms and
assent to them, which was not the case here.
Outcome: The appeal is allowed; the defendant is liable for the damages.
Notes/Raio: Previous dealings are only relevant if they prove i) actual knowledge of the terms of the
contract and ii) agreement to them.
Briish Crane Hire Corp. Ltd. v. Ipswich Plant Hire Ltd. (1974, UK CA)
Crane Sinks In Mud; Contract Not Signed But Sill Enforceable!
Facts: The plainif and defendant are both in the business of rening out large machinery. In this case
the plainif rented a large crane to the defendant. They had done similar business in the past. There
were two “mishaps”. In the irst, the negligence of the driver (an employee of the plainif) caused the
crane to be stuck in the muddy ground, and costs were incurred in the removal. In the second, it was the
negligence of the defendant that caused the crane to get stuck and it was very expensive to remove it.
In this instance the defendants had not signed the contract with the limiing condiions on it.
Proceeding: The plainifs were successful at trial; this is the appeal by the defendant.
Issue: Were the defendants bound to the terms of the contract, even though it was not signed?
Analysis: Lord Denning adopts the view that in this case, although the contract was not signed, the
adherence to its condiions was implied. There are a few reasons for this. First, the two companies are
in the same business and use similar condiions in their contracts, so the defendants knew what the
condiions were. Further, the defendants had agreed to the condiions in previous dealings. Lastly, the
defendants tesiied that it was not unusual in rushed situaions like this for the condiions to be
delivered ater the fact for signing. Thus, it is clear that the defendants knew what the condiions were
and knew that their acions were going to be governed by them. However, the irst incident remained
the fault of the plainif, as it was their employee who acted negligently.
Outcome: The appeal is dismissed; the defendants were bound despite not having signed the contract.
Notes/Raio: If it can be proven that a party knew the condiions of the contract, and reasonably knew
that their acions were going to be governed by these condiions, then they may be bound to the
condiions even without having signed the contract. It helps if they have had past dealings and are very
familiar with the situaion. This case is not decided on the basis of the previous dealings.
Thornton v. Shoe Lane Parking Ltd. (1971, UK CA)
Parking With Auto Ticket Dispenser; Contract Formed When Money Inserted – No Later Condiions!
Facts: The plainif parked his car in the defendant’s parking lot while he was at a musical performance.
He received a icket from an automaic machine. On the icket was printed the ime of issue, and a
statement that the icket is issued subject to the condiions posted in the parking lot. These condiions
were posted in the oice where you had to pay upon departure, and on the wall opposite the icket
machine, however the poster was not very prominent. The condiions included exemping the
defendant’s from any liability for injury caused to the customer while their car was in the parking
building. The plainif was seriously injured when placing goods in his trunk before leaving by another
car.
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Proceeding: At trial the judge found that the plainif was 50% responsible for the act, but awarded him
50% damages from the defendant.
Issue: Is the agreement subject to the posted condiions? Does the fact that the icket was dispensed
automaically mater?
Analysis: Lord Denning states that this case difers from the preceding cases because the icket is issued
automaically and not from a clerk. Therefore, there is no chance to look at the condiions, reject them,
and get your money back. Efecively the ofer is made by the defendant in having the machine posted
with the prices, and this ofer is accepted when the driver places money in the machine. This contract
cannot be subject to condiions that are presented ater this ime. The wriing on the icket staing that
it was subject to the condiions was not visible unil ater the contract had been formed, therefore the
contract is not truly subject to the condiions. The icket is simply a receipt showing that the contract
had been formed. Further, the defendant did not make do what was reasonably suicient to give noice
of the condiions to the plainif – a driver would have to wander around the parking lot to discover
them, which is more than can be asked of a sensible patron. The second judge agrees, but focuses
exclusively on the fact that the defendant did not give reasonable noice rather than the formaion of
the contract prior to the condiions being delivered. The third judge agrees, and states that in cases
involving an automaic icket machine there is something disinctly irrevocable about the ofer made by
the company owning the parking lot.
Outcome: The appeal is dismissed; the defendants remain liable for 50% of the damages.
Notes/Raio: In cases with automaic icket dispensers, the contract is formed when the plainif inserts
money into the machine and receives the icket. Condiions that are not seen unil ater this ime are
not binding as the contract has already been agreed upon without the condiions. In these cases, the
ofer made is irrevocable and cannot be altered ater the plainif has accepted it.
Tilden Rent-a-Car Co. v. Clendenning (1978, Ont. CA)
Renter Paid For Extra Coverage; Drunk, Accident; Exclusionary Clauses Don’t Apply, Not Known About!
Facts: The defendant rented a car from the plainif company. He paid an extra $2 a day for addiional
coverage, which he believed exempted him from all possible damage caused to the car unless it was
caused by a criminal acion on his part. It stated on the contract that he signed that the agreement was
subject to the condiions on the back of the contract, however the defendant did not read them and the
plainif’s clerk made no efort to inform him of their content. One of these condiions read that the
defendant would be liable for any damage caused ater he had consumed any amount of alcohol. The
defendant was in an accident – while swerving to miss an oncoming care he ran into a pole and damaged
the car. He had been drinking, and had pled guilty to a charge of impaired driving.
Proceeding: The defendant was successful at trial; this is the appeal by the plainif.
Issue: Whether the defendant is liable for the damage caused to the car while being driven by him by
reason of the exclusionary provisions that appear in the contract.
Analysis: The majority states that it is clear that the plainif’s clerk knew that the defendant had not
read the exclusionary condiions before he signed the contract, and therefore the plainif cannot rely on
these condiions as they had no reason to believe that the defendant had assented to them. This
disinguishes this case from the L’Estrange rule, which states that a party is bound by all the terms of a
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signed contract, even if he has not read them as long as the contract was not entered into on the basis of
fraud or misrepresentaion. The judge states that the party seeking to rely on the exclusionary clauses
should not be able to do so without taking reasonable measures to noify the other party of them. If
these measures have not been taken, then the signer does not need to prove misrepresentaion or fraud
to not be bound by the condiions.
The trial judge found that the L’Estrange rule applied, however that the contract was entered
into upon a misrepresentaion by the plainif’s clerk and therefore the defendant was not bound by the
condiions. The majority disagrees, staing that the L’Estrange rule does not govern here but simply that
the defendant is not bound by the condiions because no efort was made to ensure that he was aware
of them.
The dissening judge believes that these condiions are reasonable and not unusual, and
therefore that they are binding for the defendant. He says that the common law only strikes out clauses
from contracts if they are so unreasonable to amount to fraud, or are irrelevant to the object of the
contract. As this is not the case here, the defendant is bound by the contract.
Outcome: The appeal is dismissed; the defendant is not bound by the exclusionary condiions.
Notes/Raio: If a party wishes to have exclusionary condiions included in a standard form contract then
the onus is on them to prove that they made a reasonable efort to inform the other party of these
condiions before the contract is signed. The principle in L’Estrange concerning signatures in writen
contracts is subject in Canada to consensus ad idem.
Secion Five – Request for Promise or Performance: Bilateral and Unilateral Ofers
Dawson v. Helicopter Exploraion Co. (1955, SCC)
Exploring Potenial Mines in BC; Party Cannot Prevent Performance of Other Party - Breach!
Facts: There were a series of leters exchanged between Dawson and Springer (employee of the
defendant) discussing a contract to explore a certain area of B.C. and decide whether or not it was worth
mining there. When they set the terms, it was agreed that Springer would noify Dawson when he had
obtained a pilot for his helicopter so that Dawson could leave his post with the military and come with
them to show them the area, and was enitled to a percentage of the earnings if they decided to develop
the land. When a pilot became available Springer noiied Dawson, however he also stated that based
of of third party advice they would probably not be exploring the area that year. Dawson did not reply.
Without noifying Dawson, the defendants explored the region and later contracted with another party
for the development of the land.
Proceeding: In the lower court the defendant was successful as it was found that no contract had been
formed. This is the SCC appeal.
Issue: Was there a contract formed, and, if so, did the defendant’s acions violate the contract?
Analysis: In the dissent, the Chief Jusice argues that no contract was formed. However, all of the other
judges agree that a unilateral contract was indeed formed. They state that the performance that was
required of the defendant was noifying the plainif that a pilot was ready, and taking him along on the
exploraion. However, by their acions the defendants prevented the complementary performance of
the plainif that would have enitled him to his share of the earnings, and in doing so they breached the
contract.
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Outcome: The appeal is allowed; the case is sent back to the BCSC to determine the damages for the
plainif.
Notes/Raio: Where a complementary acion is contemplated for both paries, the oferor in a unilateral
contract cannot revoke the contract for want of performance if he or she fails to discharge his or her
complimentary obligaion to perform. In such case, the oferor is not a passive oferor but an acive one
with obligaion to facilitate the oferee’s performance.
CHAPTER TWO – MUTUAL ASSENT: HOW A BARGAIN IS MADE
Secion One – Problems of Acceptance: Who Can Accept an Ofer
Williams v. Carwardine (1833, King’s Bench)
Sister Gives Evidence on Brother’s Murder; Intent Is Not Necessary As Long as Reward is Known!
Facts: The plainif’s brother was murdered, and the defendant put out a reward for £20 to anyone who
gave evidence that led to a convicion. Two men were tried and acquited. The plainif was severely
beaten by Williams and made a convicion to clear her conscience that led to his convicion for murder.
Proceeding: The lower court said that she was enitled to the money; this is the appeal by the defendant.
Issue: Can someone accept an ofer for reward even if the intent of his or her acions is not to recover
the reward?
Analysis: All of the judges agree that the speciic intent of the plainif does not mater in this case. The
ofer was made to anyone who provided evidence that led to a convicion. The plainif did this, and
therefore she is owed the £20. It does not mater that she was not seeking the money when she made
the statement, because she sill completed the speciic performance necessary for acceptance. The
judges ind that she must have known of the reward, because posters were printed all over the pplace
where she lives.
Outcome: The appeal is dismissed; the plainif is given the money.
Notes/Raio: The intenions of an acceping party are of no importance; if they complete the speciic
performance necessary of acceptance then a contract is formed regardless of their intenions. However,
they must be aware of the award. They don’t have to be acing to get the reward, but they must know of
the reward before their acion.
Gibbons v. Proctor (1891, Queen’s Bench)
Oicer Gives Convicing Info Before Reward Ofered, Received Ater It is ofered – Enitled to It!
Facts: A reward of £25 was ofered to anyone who gave informaion leading to the convicion of
someone in the sexual assault of a 14-year-old girl to a speciic police superintendant. A police oicer
gave informaion that led to a convicion, and delivered it to the superintended through two agents.
When the oicer irst gave the informaion, the reward had not yet been ofered. However, by the ime
it reached the superintendant the reward had been ofered.
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Proceeding: The case was dismissed in the lower court; this is the appeal by the plainif.
Issue: Which ime is more important – when the oicer made the statement, or when it reached the
superintendant?
Analysis: The judges state that the important fact is that when the informaion reached the
superintendant he was aware of the reward. Therefore, the ofer was accepted upon the
superintendant’s receipt of the informaion. The police oicer had saisied the performance necessary
for the reward.
Outcome: The plainif is successful, and is enitled to the reward of £25.
Notes/Raio: An ofer is accepted when word of the acceptance is received, not when it is made.
The Crown v. Clarke (1927, Australia High Court)
Accused Gives Statement That Convicts Other Man; Not Enitled To Reward; Need Intent to Accept
Facts: There was an ofer for a reward of £1,000 made to anyone who gave informaion leading to a
convicion in a murder case. There were two suspects apprehended and quesioned. In order to clear
his own name, the defendant gave a statement that led to the other man being convicted, and him being
cleared of all charges. He did not intend to do this for reward, he was simply trying to prove his
innocence – he was not thinking of the reward at the ime that he made the statement. Aterwards, he
made a claim to the reward.
Proceeding: In the iniial trial the decision was for the crown, however it was overturned on appeal. This
is the inal appeal.
Issue: Does a party have to intend to accept an ofer in order for there to be true acceptance, and a
contract formed?
Analysis: The judge makes it very clear that the rule laid out in Williams v. Carwardine no longer applies.
He says that because consensus ad idem is a fundamental necessity of a contract, the party acceping
must know of the ofer and be intending to accept it in order for a binding contract to be formed. In
acceptance there must be assent of the ofer, and there can be no assent without knowledge of the ofer.
Outcome: The appeal is allowed, and the Crown is successful. The defendant does not get the reward.
Notes/Raio: The acceping party must know of the ofer, and intenionally assent to it in order for a
binding contract to be formed. The mental state of the acceping party must be considered.
Con-Force Products Ltd. v. Rosen and Boyle (1967, Sask. QB)
P thinks Contract is with D; D is Acing for Corporaion; Objecive Test Favours P – D is Liable
Facts: The plainifs were a construcion company who made steel supports. They heard of a new motel
being built by the defendants, and inquired as to whether their services could be rendered for a fee. The
engineering irm whom put the plainifs in contact with the defendants told them that Rosen and Boyle
were the owners of the hotel. They did not tell them that Rosen, Boyle and another man had
incorporated a new company to own the hotel. The plainifs sent a bid to Rosen personally, who
thought he was acing on behalf of the corporaion when he had an agent send the plainifs the
acceptance. There was a term in the plainif’s bid saying that the defendant’s acceptance would create
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a contract valid unil all of the details were worked out. Eventually, the defendants refuse to hire the
plainifs.
Proceeding: This is the original trial.
Issue: Is the agreement with Rosen binding, even though he thought he was acing on behalf of the
corporaion?
Analysis: The judge says that it is clear that the plainifs believed they were dealing with Rosen
personally, and that Rosen believed that he was acceping on behalf of the corporaion. The judge
employs an objecive test to determine that the onus is not on the plainif to inquire further into the
situaion, as he was led to believe that Rosen was a personal owner by one of Rosen’s agents. Therefore,
the onus was on Rosen to let the plainifs know that he was acing on behalf of a corporaion – this
would have created a new situaion and allowed the plainifs to back out of the deal if they wanted to.
Looking at the situaion objecively yields a decision that the defendants accepted in their personal
capacity.
Outcome: Rosen is liable for damages for the breach of contract between the plainif and himself.
Notes/Raio: When determining what the paries intended when entering into a contract, you must
employ an objecive test to determine what a reasonable man would conclude. The quesion in the
objecive test is “not what the paries had in their minds, but what reasonable third paries would infer
from their words and conducts”. The defendants intended to contract in their personal capacity,
employing this test (similar to Grant v. NB). When there is diiculty in inding acceptance because the
paries do not understand each other’s intenions, you use an objecive test to resolve the issue.
Blair v. Western Mutual Beneit Associaion (1972, BCCA)
Woman Takes Minutes Staing She Will Get A Bonus; Reires, Doesn’t Get It – Need Intent for Ofer
Facts: The plainif was a secretary, and reired ater many years working for the defendant. Towards the
end of her employment, she was given oral minutes of a meeing of the board of directors that she
copied down into print. In these minutes was a discussion that if she were to reire, she would be given
approximately two years’ pay as a bonus for her long service. She does reire, but does not get this
money. She sues the company for the lost wages claiming that a contract was formed.
Proceeding: The case was dismissed at trial; this is the appeal by the plainif.
Issue: Was this an ofer that was capable of acceptance by Miss Blair?
Analysis: The irst judge states that this is not a contract for three reasons: (1) no promise was made and
accepted for consideraion, (2) no change in the exising relaionship took place, and (3) there was no
evidence of an intenion to change the relaionship to create new legal obligaions. He says that a “bare
resoluion” that is delivered, such as here, cannot be considered to indicate an intenion to create a legal
obligaion capable of acceptance. It is not unequivocal. This could be refuted if the plainif could show
something to indicate the intent of the defendant to be bound, but nothing could be shown to this
efect.
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The second and third judges agree with the decision. The second judge says that another
problem is there is not suicient connecion between the resoluion and Miss Blair’s reasons for
reirement to imply that she accepted the ofer through her performance (reiring) – which is what she
claimed (that this was a unilateral contract). The third judge simply says that this publishing cannot be
considered to be an ofer, as a reasonable person would not think that the employer intended to be
bound.
Quantum meruit is also denied as the woman did not rely on the terms of the “contract” in any
of her acions, and therefore sufered no losses.
Outcome: The appeal is dismissed; the plainif does not get the money.
Notes/Raio: A party must intend to make an ofer for it to be an ofer capable of acceptance, and it must
be communicated to the party to whom it is directed in order to prove that the oferor intended to be
legally bound. It makes no diference if the oferee knows about the ofer by another means – it must be
deliberately communicated to them by the oferor.
Campbell v. Inverness (County) (1990, NSSC TD)
Resoluions Are Not Binding Contracts!
Notes/Raio: A resoluion passed by a board of directors in a corporaion, or a municipal corporaion
does not give rise to a contractual obligaion. Regulaions are not passed with the intent to enter into
contractual obligaions; they can be reconsidered, amended and rescinded.
Wilson v. Belfast Corporaion
Unauthorized Communicaion of Ofers, Even in the Media, Cannot be Accepted
Notes/Raio: Acceptance of an “ofer” cannot be premised upon unauthorized communicaion of the
ofer, even where the ofer is published in the media.
Secion Two – Time Limits on the Power of Acceptance: Life of an Ofer
Cooke v. Oxley (1790, UK KB)
P asks D to Keep Ofer Open Unil 4 PM; Ofers Need Consideraion to Be let Open
Facts: The defendant proposed to sell some good to the plainif. The plainif asked to have unil 4:00
PM to decide, and the defendant agreed. Before 4:00 the plainif said that he would like to purchase
the goods. The defendant did not deliver them.
Proceeding: The plainif was successful in trial; this is an appeal (I think!).
Issue: Was a contract for sale formed?
Analysis: In this case the judge overrules the previous decision and states that there is clearly not a
contract here. He says that to sustain a promise, there must be damage to the plainif or an advantage
given to the defendant as a result of the acions, and this did not occur here. There was no
consideraion for keeping the ofer open unil 4 pm. He rejects the idea that the contract of sale was
complete when the plainif agreed to purchase them, for the defendant sill has to agree to sell them.
Outcome: The appeal is allowed; there was no contract of sale.
Notes/Raio: Ofers need consideraion in order to be let open.
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Adams and others v. Lindsell and Another (1818, UK KB)
Wool Sale Gets Lost in the Post; Acceptance Happens When Oferee Accepts Ofer, Not When Oferor
Received Noice! Mailbox Rule of Acceptance!
Facts: The defendants are wool dealers who wish to sell wool to the plainifs. The send a leter to the
plainifs staing the terms of the deal, and say that acceptance must be given by a certain date.
However, as a result of the defendant’s negligence, the leter gets lost in the post and arrives late to the
plainifs. They accept the ofer, and mail it before the deadline, but it does not reach the defendants
unil ater the deadline has passed. Thinking that the plainifs had not accepted the ofer, the
defendants sold to wool to another party. The plainifs sued.
Proceeding: The defendants were held liable at trial because it was their negligence that caused the
delay; they appealed.
Issue: When does acceptance come into force – when it is given, or when it arrives at the oferor?
Analysis: The judge states that acceptance must be deemed to be given at the instant that oferee
accepts the ofer and puts it in the mailbox. This was before the deadline; therefore a contract was
made. If it was not really accepted unil the oferor received noice, then the plainifs ought not to be
bound unil they received noice of the defendant’s receipt, and so on ad ininitum.
Outcome: A contract is formed; the defendants are liable.
Notes/Raio: An acceptance comes into force at the instant that the oferee puts the acceptance in the
mail, not when the noice of acceptance is received by the oferor.
Barrick v. Clark (1951, SCC)
Ofer of Land Let Open For Reasonable Time – Acions of Paries Help Determine Reasonable Time
Facts: Barrick owned farmland that Clark wanted to buy. They entered into negoiaions, which resulted
in Clark making an ofer of $14,500. Barrick wrote back staing that the price was $15,000. However, at
this ime Mr. Clark was away on a huning trip. His wife received the leter and responded asking Mr.
Barrick to hold the ofer open unil her husband returned – in about 10 days. Mr. Barrick did not reply.
Thirteen days later, Clark sold the property to someone else for $15,000. Mr. Barrick did not return for
20 days ater his wife received the ofer.
Proceeding: The case was dismissed at trial, but reversed for Clark on appeal. This is the SCC appeal by
Barrick.
Issue: What is the reasonable amount of ime that the ofer must be let open for?
Analysis: The judge states that the reasonable ime that this speciic ofer must be let open for is longer
than for goods that luctuate in price (stocks), or perishable goods. The ields could not be used unil
Spring anyway, which must be considered. However, through his acions and insistence on replying to
Mr. Barrick’s leters by wire Clark indicated that he did not have a Spring date in mind, but wanted to get
the sale done, or go of to pursue other opions. Further, Barrick did not respond to Mrs. Clark’s leter,
so he was not bound to any paricular period of ofer. Therefore leaving the ofer open for thirteen days
was reasonable ime, as Clark had indicated that he wanted to accept and close the sale ASAP.
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In the concurring judgment, the judge discusses the fact that much of the Appeal Court’s
reasoning was based of claims that Mr. Barrick made concerning his intent to sell as soon as possible
outside of his communicaion with Clark. The judge states, “an intenion not expressed or
communicated to the other party is immaterial in deciding whether there was an agreement.
Outcome: The appeal is allowed, Clark gets nothing and Barrick’s sale to the third party goes through.
Notes/Raio: Courts will take the acions of the paries into account when determining what a
reasonable ime for an ofer to remain open will be. Goods that luctuate in price or perish obviously
have a shorter window. Statements made outside of a contract have no bearing in deciding whether
there was an agreement.
Manchester Diocesan Council for Educaion v. Commercial and General Investments Ltd. (1969, UK)
Sale of School Needs Gov’t Approval; Objecive Test Used to Determine if Time was Reasonable
Facts: The plainifs owned a school that they had the right to sell, upon approval by a government
oicial. Ater receiving interest, they decided to create a tender for sale. The defendants placed the
highest tender, and conirmed this in a leter on Sept. 15 th. All that was let to do ater this was obtain
approval from the government oicial. This was completed on December 23 rd, and communicated to the
defendant. The defendant’s lawyers said that they did not wish to accept the ofer and they were not
bound by the contract. The plainif delivered oicial word of the acceptance of the contract, with
consent from the government, on January 7th.
Proceeding: This is the original trial.
Issue: When did acceptance occur? If not unil January, was this reasonable amount of ime to leave the
ofer open?
Analysis: The judge states that he believes that the contract was completed on September 15 th, and that
waiing for government approval had no impact on the status of the contract. However, he goes on to
say that if he was wrong, and the contract was not completed unil January 7 th, then the contract is sill
enforceable. The defendants gave no noice of their intent not to be bound unil they received a leter
informing them that the approval had been obtained, and that the deal could be oicially closed. The
plainif had no reason to expect that the defendants did not intend to be bound, as they did not act in a
way that made this apparent – in fact, they acted to make the opposite seem likely.
The test that should be applied is not one of considering what a reasonable ime is from either
the oferor or oferee’s point of view, but an objecive test that determines whether or not the oferee
could fairly be deemed to have refused the ofer. Employing this test involves looking at the acions of
the oferee for indicaion of their intenion, and these acions show no intent to reject the ofer unil
ater they had been told that it was complete.
Outcome: The plainif succeeds, and the defendant must purchase the school.
Notes/Raio: An objecive test should be used to determine if the ime that an ofer was let open is
reasonable. This should include analyzing the acions of the paries to determine their intenions.
Secion Three – Revocaion of the Ofer: Withdrawal of Power to Accept
Dickinson v. Dodds (1876, UK CA)
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Ofer “Open Unil Friday”, Oferor Not Bound; Oferor Can Revoke Any Time Before Acceptance
Facts: Dodds delivered an ofer to sell to Dickinson on Wednesday, staing that the ofer was to stay open
unil 9:00 AM on Friday. Dickenson apparently decided to accept the ofer on Thursday, but didn’t say
anything to Dodds because he thought he had unil Friday morning. However, he was informed that
Dodds had sold the property to someone else on Thursday evening and tried to reach Dodds. When he
did, the next day, he was told that the property was already sold.
Proceeding: The plainif was successful at trial; this is the defendant’s appeal.
Issue: Was the leter more than an ofer? Was Dodds bound to not revoke the ofer and sell to someone
else?
Analysis: The two judges agree that the leter was merely an ofer, and nothing more. When an ofer has
been made, the oferor is as free to revoke it as the oferee is to accept or reject it. The plainif tries to
contend that the only way the oferor can revoke the ofer is by explicit communicaion to the oferee,
but this is rejected. It is clear in law that an ofer does not amount to an agreement, and can be
withdrawn at any point. Even though it was said that the ofer was to remain open unil Friday, this did
not bind Dodds. There must be a “meeing of the minds” at the ime the contract is formed, and this
obviously could not occur here, so there could be no contract.
Outcome: The appeal is allowed; Dodds can sell the property to the third party.
Notes/Raio: Oferors are free to withdraw their ofer at any point unil the oferee has accepted it, so
long as the oferee has not provided any sort of consideraion. They do not need to communicate this
withdrawal to the oferee.
Paterson v. Patberg (1928, NY CA)
P Wants to Buy Out Mortgage to Save $; Ofers in Unilateral Contracts Can Be Revoked Any Time
Before Performance has been Completed
Facts: The defendant agrees to give the plainif $780 of his mortgage if he completely pays for it by a
certain date. The plainif comes to pay for the rest of the mortgage before this date, but the defendant
refuses to take his money and tells him that he has sold the mortgage to someone else. Now, if the
plainif wants to purchase the mortgage he will have to buy it from the third party and pay the extra
$780.
Proceeding: The judgment was for the plainif at trial; this is the appeal by the defendant.
Issue: In a unilateral contract, does the acceptor have to complete his obligaion before he is enitled to
what he was promised?
Analysis: The majority states it is elementary to contract law that a unilateral ofer can be revoked at any
ime before the performance is complete. The promise of the contract does not become binding unil
the party has completed their performance. Here, because the plainif had not completed his
performance the contract is not binding.
The dissening judge says that if the reason that the plainif was not able to complete his
performance is because the defendant would not accept payment, then this is not fair and should not be
held against the plainif. Further, the defendant intended to be bound by the terms at the ime the
contract was formed, even though it was subject to condiions. He goes on to say that even though the
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promise does not have to be followed through unil the performance is complete, part performance
must count for something, and the defendant cannot withdraw the ofer while the plainif is in the
middle of compleing his performance.
Outcome: The appeal is allowed; the defendant can sell the property and the plainif has to purchase it
from the third party and lose the $780.
Notes/Raio: Ofers made in unilateral contracts can be revoked at any ime before the speciic
performance has been completed.
Errington v. Errington and Woods (1952, UK CA)
Father Buys Mortgage For Son & His Wife; He Dies; House is Sill Theirs If they Complete Payments
Facts: A father bought a house for his son and daughter in law. He borrowed money to buy it, and told
the couple that once they paid of this mortgage then the house would be theirs. They made the
payments regularly as requested, however other rates eventually arose that were too much for the
couple to pay. The father agreed to pay these extra fees, and the couple coninued to pay the mortgage.
The father dies, and his wife sued for the house.
Proceeding: The defendants were successful at trial; this is the father’s estate’s appeal.
Issue: Does the couple have a contractual right to coninue paying installments, and upon compleion of
payments, take itle of the house? Does their agreement remain binding despite the father's death?
Analysis: Denning states that this is a unilateral contract, and once the couple began to perform their
part of the bargain neither the father, nor his estate could withdraw the ofer. As long as the couple
coninues to make their payments on ime then the house will transfer to their name when the
mortgage is paid of. This protects the interests of the party who is acing on the promise of the oferor
(the couple, in this case).
Outcome: The appeal is dismissed; the couple can sill own the house if they coninue to make their
payments.
Notes/Raio: Within a unilateral contract, there is an implied promise not to revoke once performance
has commenced. The promisor cannot retract his promise if the promisee has begun to complete his
performance, even if it is not inished, when the ofer requires coninuing performance and there is no
evidence that the oferee is going to stop their performance.
Secion Four – Problems Concerning Communicaion of Acceptance
Re Irvine (1928, Ont. CA)
Man Accepts Contract on Deathbed; Son Mails it Ater Death; Acceptance Not Valid – Wife Gets Dower
Facts: The Crown is trying to prevent the widow plainif from recovering dower ater her husband’s
death – they claim that he did not have itle to the land when he died, and therefore that he cannot pass
it on. The husband signed the acceptance of the ofer for the land on his deathbed and gave it to his son
to mail. However, the son did not mail the acceptance unil ater his father had died.
Proceeding: The lower courts held that the woman could recover the dower; this is the Crown’s appeal.
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Issue: Was the deceased man the itleholder of the property, or had a contract been formed?
Analysis: The judge states that the deceased is enitled to the land because there was no contract. The
acceptance had not technically been given at the ime of the man’s death, so he sill had itle to the land.
A test to determine whether or not someone has itle is to ask if the person brought an acion for the
enforcement of the contract, based upon the facts at the ime of death, would it be enforced? In this
case the judge says that it would have been successful, and therefore the man sill has itle.
Outcome: The appeal is dismissed; the woman is sill enitled to the dower.
Notes/Raio: Acceptance can be revoked up unil the ime that it is mailed, and cannot be enforced unil
this ime that the acceptance is entered.
Carlill v. Carbolic Smoke Ball Co. (1893, England CA)
In Unilateral Contracts Acceptance doesn’t need to be communicated to Oferor to Create a Contract
Notes: Here the judge is talking about what is needed for acceptance. As a general rule, you need to
inform the oferee of the acceptance in order to guarantee that there is a “meeing of the minds”.
However, in some unilateral contract noiicaion does not need to be given as the oferor’s willingness
to enter into a contract with anyone who accepts the ofer in implied. This is paricularly the case with
adverisements to the general public for speciic performance. Think of a reward for a lost dog – when
someone brings the dog to you, are you going to turn him (and the dog) away because you don’t want to
grant his acceptance? No – your willingness to be bound was implied in the adverisement. Other things
that you can look at when the case isn’t so clear are looking at the wording of the ofer, and the
character of the transacion.
Saint John Tug Boat Co. Ltd. v. Irving Reining Ltd. (1964, SCC)
Tugs Used Ater Deadline; Don’t Want to Pay; (Objecive) Implied Acceptance in Allowing Work
Silence + Conduct may Imply Acceptance
Facts: The plainif had a deal with the defendant to supply them the use of their tugboats for assising
incoming oil tankers to their shipyard. However, eventually the plainif stated that they would only have
two boats available, and advised the defendants to look elsewhere for help. The plainifs ended up
inding two more tugs, and told the defendants that they could use them if they paid $450/day to have
them “on call” unil a certain date. This date passed, and the plainif coninued to keep the tugs on call,
and the defendants coninued to use them for a few months. However, when billed for these months
ater the original end of the contract, the defendants refused to pay.
Proceeding: The defendants were held liable for all of the payments at trial, however on appeal the
charges past the original end date were taken away. This is the plainif’s appeal.
Issue: Did the defendant, in their acion, imply acceptance? Were they therefore bound by the contract
unil the very end?
Analysis: The judge says that ater the original deadline passed, the plainifs were essenially serving the
defendants with a new ofer every ime they sent them an invoice and kept the tugs on call, and that the
defendant coninued to imply acceptance by their coninuaion of using the service. The defendants
must have known that the tug was sill standing by, and that the plainifs expected to be paid for their
services.
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Outcome: The appeal is allowed; the defendants are liable for all of the costs.
Notes/Raio: If A allows B to work for him under such circumstances that no reasonable person would
suppose that B meant to do the work for nothing, then A will be liable to pay for it. The doing of the
work is the ofer; the permission to do it, or the acquiescence in its being done, is the acceptance.
Silence can consitute acceptance when combined with conduct.
Carr v. Canadian Northern Railway Co. (1907, Man. KB)
D’s Build Railway on P’s Property; Acceptance Implied through Acion – Followed Direcions to Accept
Acceptance By Conduct!
Facts: The defendants wanted to build railway tracks on the plainif’s land. The negoiaions did not
come to an agreement. Eventually, the plainif worked up a large and very speciic list of what he
wanted in return for allowing them to build upon his land. He handed this to the defendants and said
that if they came on his land and began construcion then he would assume that they had accepted the
ofer, because he would not let them enter on his property on any other terms. The defendants began to
build the railway, and two weeks later told the plainif that they were not going to be bound by his
terms.
Proceeding: This is the original trial
Issue: Did the defendants, in their acions, accept the condiions of the contract?
Analysis: The judge says that it is clear that the defendants knew of the terms of the ofer, and that the
plainif would not allow them to build upon any other terms. Further, the plainif told them a way to
accept the ofer – by beginning to build. Conduct or an acion can accept an ofer as long as the party
acceping follows the indicated mode of acceptance. Here the indicated mode of acceptance was
beginning to build the track, and the defendants did that. In doing this they accepted the plainif’s ofer
and entered into a binding contract.
Outcome: Judgment for the plainifs in full.
Notes/Raio: An oferee can accept an ofer through his or her own acions so long as the acions are the
ones indicated in the ofer as the mode of acceptance. There is an element of objecivity required to
show that acceptance has occurred.
Dominion Building Corp. Ltd. v. The King (1933, Privy Council)
Gov’t Won’t Give Land to P Despite Order in Council; No Noice Necessary When Acceptance Implied
Facts: The plainif wanted to purchase two adjacent plots of land for the purpose of building a high-rise
building. The Crown owned one of the plots. He gave them a very speciic ofer that they had discussed,
including terms that they would be able to rent some loors for oices. In the ofer he said that that if
the ofer was “accepted by the Governor in council” then a binding contract shall ensue. The
government never actually sent the plainif acceptance, but they forwarded him an Order in Council
that approved the terms. When he tried to take possession of the land the Crown would not let him.
Proceeding: In the original trial the plainif was successful. In the SCC appeal the appeal was allowed
because there was not writen contract, and the Order was only permission to accept, not acceptance in
itself – however the deposit was returned. This is the inal Privy Council appeal.
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Issue: Did the defendants imply acceptance in their acions? Was acceptance even needed?
Analysis: The Privy Council inds that the defendant did imply acceptance through their forwarding of the
Order staing that the government had approved the terms. However, in this case the delivery of
acceptance was not necessary because all that was needed for acceptance was the creaion of an Order
in Council, which was created. This creaion was the speciic performance required to consitute
acceptance.
Outcome: The appeal is allowed; the defendant has to give the plainif the property.
Notes/Raio: When acceptance has been implied through conduct, it is not necessary to deliver
noiicaion of that acceptance to the oferor. It is the SCC precedent that stands ater this case.
Subsequent cases have relied on the SCC decision and not the Privy Council one.
Felthouse v. Bindley (1862, UK Court of Common Pleas)
Nephew Thinks He Sold Horse to Uncle; Didn’t Noify or Act Like It; Therefore No Acceptance!
Facts: The plainif negoiated to purchase a horse from his nephew. There was a mix-up with the price,
as the uncle ofered less than the nephew desired. The uncle gave a deinite ofer to the nephew in
January, however no acceptance was given, and no acions were performed as the horse remained in the
possession of the nephew. In February the nephew sold all of his farm stock in an aucion, including the
horse. Ater this he acknowledged that he thought he had sold the horse to his uncle. The plainif tried
to sue the aucioneer in conversion to recover the horse.
Proceeding: The plainif was successful at trial; this is the defendant’s moion for a non-suit.
Issue: Did the nephew accept his uncle’s ofer, or was the horse sill his property at the ime of the
aucion?
Analysis: The judge says that it is clear here that nothing had been done at the ime of the aucion to
imply that the property had changed hands to the uncle, and the nephew had given no acceptance.
Therefore, with no acceptance or implied acceptance through acions the property remained that of the
nephew at the ime of the aucion, and the uncle has no case against the aucioneer for selling goods
that were not owned by the nephew – because the nephew sill owned the horse! If the nephew
wanted to enter into the contract he must have given clear indicaion of his acceptance.
Outcome: The appeal is allowed – the case is thrown out.
Notes/Raio: Acceptance cannot be assumed if there is not noiicaion of acceptance, or implied
acceptance through acion present. Without either of these, a contract cannot be created. You cannot
impose obligaions on an unwilling party.
Vollmer v. Jones (2007, Ont. Sup. Ct.)
Divorce Setlement; Husband’s Silence Indicates Acceptance in Common Sense – He had to say No!
Facts: The plainif and defendant were going through a divorce. Ater many hours of negoiaion, the
plainif wife accepted a huge decrease in her child support payments in order to meet the terms of the
defendant. At this point the paries shook hands and it was said that they “had a deal”. However, when
Ms. Vollmer tried to enforce the contract, Mr. Jones said that he had never accepted – he had remained
completely silent.
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Proceeding: This is the original trial.
Issue: Whether the verbal agreement was merely an “agreement to agree”, or whether it was a binding
contract.
Analysis: The judge looks at the history of cases where silence was deemed to be considered acceptance,
however he gets the basis of his decisions from Canadian Contract Law, which essenially states that
common sense rules must apply. In this case, ater several hours of negoiaions, one can only assume
that shaking and agreeing that “a deal was had” indicates an acceptance of the ofer. At the very least,
remaining silent does not indicate an unwillingness to accept. In this instance, common sense would
indicate that Mr. Jones and/or his lawyer were required to noify the other party if they did not accept
the ofer – however they did nothing. The oferor (wife) here can assume that her ofer had been
accepted on the basis of common sense rules.
Outcome: Judgment for the plainif wife.
Notes/Raio: Silence can consitute acceptance. When the oferor can reasonably rely on the oferee’s
acceptance as a mater of common sense, then the oferee must inform the oferor is he or she does not
accept the ofer, or a binding contract is formed.
Wheeler and Another v. Klaholt and Another (1901, Mass. SC)
Shoe Sale; Defendants Had Duty to Accept/Return; Failed to Live up to Duty – Contract Enforced
Facts: The plainif sent a large number of shoes to the defendant, thinking that a contract had been
formed. However, it became apparent that no contract had been formed. The plainifs told the
defendants that they could have the shoes for a certain price, or that they should return them
immediately. The defendants wrote back with a drat for paying at a discount of four percent. The
plainifs did not accept this, and told the defendants to either pay in full or send the shoes back. The
defendants sent the shoes back ater a long ime, but they were defaced when they arrived.
Proceeding: This is the original trial.
Issue: Has a contract been formed because the defendants did not accept, or return the goods in a
reasonable ime? Does it mater that the paries had done business before?
Analysis: The judge states that it is a general rule that a party cannot send goods to a stranger and send a
noice that will end up with the stranger being a purchaser without will. However, in this case the two
paries knew each other and had done deals like this in the past. He states that the defendants
therefore had a duty to return the goods in a reasonable ime or pay for them, which they failed to live
up to. The fact that the defendants didn’t do anything when the plainifs said to accept/return at once
indicates that they accepted.
Outcome: The plainif is successful.
Notes/Raio: If a duty is created upon an oferee to accept an ofer or return the goods ofered, then a
failure to live up to this duty will result in the contract of sale being binding.
Secion Five – The Efecive Time of Acceptance
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Household Fire & Carriage Insurance Co. v. Grant (1879, UK CA)
D Buys Shares in P Company, Doesn’t Receive Noice of Acceptance; D Liquidates, P Won’t Pay –
MAILBOX RULE!
Facts: The defendant had negoiated to purchase shares in the plainif company. His applicaion was
accepted, and his name was added to the list of registered shareholders. However, the leter informing
the defendant of this never reached him. The defendant never paid for the shares. His earnings from
dividends were credited to his account. Eventually the plainif company went into liquidaion and the
liquidator applied for money from the defendant. He refused to pay on the grounds that he was not a
shareholder – he didn’t know that he was because he had never received the noiicaion in the mail.
Proceeding: The plainif was successful in court and recovered the funds; this is the defendant’s appeal.
Issue: Is there a legally binding contract formed even without the noice of acceping being received?
When do acceptances becoming binding when they are sent in the mail?
Analysis: The trial judge found that the defendant implied that the plainif was to send him the
noiicaion that he had been issued the shares in the mail, and therefore they were not to be penalized
for sending the noiicaion that way. The majority agrees with his decision that the contract was formed
when the acceptance was mailed. They discuss the pros and cons of this rule, and decide that the pros
outweigh the cons. They state that the oferor can always choose to make the acceptance binding only
upon his receipt of the noiicaion that it has been accepted. However, to state that this must happen in
all cases would reduce the eiciency in the business world. The contract is complete and absolutely
binding upon the transmission of acceptance through the mail as long as that is a medium of
communicaion that the paries contemplated.
The dissening judge disagrees, and gives several examples of situaions where he believes that
the postal rule would hinder transacions. He says generally that the noice of acceptance must reach
the party who made the ofer before it can be considered binding. He says that if the rule proposed in
the majority is accepted then it must be adhered to in all instances of noices via mail. For example, if
you mail money to someone in an acceptance, then you have paid…even if the money never reaches the
other party. Is this logical? No.
Outcome: The appeal is dismissed.
Notes/Raio: A contract becomes binding the instant that the acceptance is put in the mail, so long as
the paries have contemplated the mail as a viable means of communicaion in their dealings.
Henthorn v. Fraser (1892, UK CA)
P Mails Acceptance Before He Receives D’s Noiicaion of Withdrawal; Contract Formed
Postal Rule Does Not Apply to Revocaion of Ofer
Facts: The plainif wanted to purchase houses from the defendant. A secretary for the defendant
ofered to sell them to him for £750, and said that he would have 14 days to decide whether to accept
the ofer. The same day, a third party ofered to purchase the houses for £760. The defendant said that
it would be accepted so long as they could noify and withdraw their ofer to the plainif. They mailed a
leter to the plainif around noon saying that their ofer was revoked, but it did not arrive at his place
unil between 5 and 6 PM, and he did not receive it unil about 8:00 PM. Meanwhile, the plainif’s
lawyer had mailed a leter of acceptance at 3:50 PM that arrived at the defendant’s at 8:30 PM, and
opened the next morning. The secretary replied saying that the ofer had been withdrawn.
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Proceeding: The trial judge dismissed the claim; this is the plainif’s appeal.
Issue: Was the acceptance in efect before the ofer was revoked?
Analysis: The judge says that if the rule that acceptance comes into force at the moment it is mailed,
then this withdrawing of the ofer is inefectual. He says that a person who makes an ofer must be
thought of as coninually making it unil he has brought the knowledge to the other party that it has
been withdrawn. The trial judge said that there was no explicit statement that mail was to be used to
communicate, as the ofer was made in person. However, the judge in this court says that the usage of
the mail was implied as being approved, as the plainif lived in a diferent town. Any reasonable person
would have concluded that he would accept by mail from his home. The mailbox rule stands, and the
contract for sale is binding.
Outcome: The appeal is allowed; a binding contract was formed.
Notes/Raio: Where the circumstances are such that it must have been within the contemplaion of the
paries that, according to the ordinary usages of mankind, the post might be used as a means of
communicaing the acceptance of an ofer, the acceptance is complete as soon as it is posted. The postal
rule does not apply to noices of revocaion of an ofer!
Holwell Securiies Ltd. v. Hughes (1974, UK CA)
6 Month Ofer Requires “Noice In Wriing” – Noice Lost in Post; Postal Rule Doesn’t Apply When
Speciic Means of Acceptance Required by Contract
Facts: The defendant granted the plainif a six-month opion to purchase a property, and stated that the
opion had to be exercised “by noice in wriing”. Before the six months were up, the plainif’s lawyer
wrote to the defendant’s lawyer staing that his client was exercising his opion, and also included a
cheque for the deposit. This leter was hand delivered. The plainif’s lawyer also sent a copy of the
leter to the defendant, but it was never delivered. The defendant refused to sell the property to the
plainif.
Proceeding: The lower courts found for the defendant; this is the plainif’s appeal.
Issue: Was there a contract here? Does the postal rule apply?
Analysis: If the postal rule applies, then there is a contract as the agent of the plainif mailed the
acceptance. Here the judges say that although the paries intended to use the post as the means to
communicate acceptance, they have not displaced the general rule of acceptance – that it requires
communicaion. The use of the words “noice in wriing” meant that the defendant required actual
noice of acceptance. The postal rule does not apply when the terms of a contract point to the necessity
of actual communicaion, even if the post is the desired medium of communicaion. The recipient
doesn’t actually have to read or understand the acceptance; it must just arrive and be seen by the
oferor.
Outcome: The appeal is dismissed; there is no contract.
Notes/Raio: The postal rule does not apple in situaions where a speciic means of acceptance has been
speciied.
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List of Excepions to Postal Rule (p. 204)
The rules do not apply:
-
Where the oferor speciies actual receipt of acceptance.
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Where it will result in “manifest inconvenience and absurdity” (note the examples).
-
Wider principles: the rule does not apply if, having regard to all the circumstances, including the
nature of the subject mater under consideraion, the negoiaing paries cannot have intended
that there should be a binding agreement unil the party acceping an ofer or exercising an
opion had in fact communicated acceptance or exercise to the other.
-
The court has to look at the nature of the transacion to determine whether or not the postal
rule applies.
-
Note how these excepions relect the dissent from Household Fire.
Charlebois v. Baril (1928, SCC)
D Hand-Delivers Ofer; P Accepts By Post; Leter Gets Lost – Postal Rule Doesn’t Apply, Postal
Acceptance Not Implied as Being OK!
Facts: The defendant hand delivered his ofer to the plainif. When the plainif accepted the ofer he
sent it in the mail, but the defendant claims to have never received it. The plainif received a leter
withdrawing the ofer in the mail the day ater he posted his leter of acceptance.
Proceeding: The plainif was successful in the lower courts; this is the defendant’s appeal.
Issue: Is there a contract here? Does the postal rule apply?
Analysis: The lower courts held that the postal rule did apply, and therefore that there was a contract
because acceptance occurred when the plainif mailed his leter of acceptance. However, the SCC
disagrees and states that using the post to accept a hand-delivered leter is not a proper form of
acceptance. If postal acceptance cannot be implied by the nature of the transacion or the conduct of
the paries, then the postal rule does not apply. In this case there was nothing to consitute an
implicaion that the post should be used, and therefore the general rule of acceptance applied – actual
communicaion was required.
Outcome: The appeal is allowed; there is no binding contract and the postal rule does not apply.
Notes/Raio: The postal rule only applies if postal acceptance is implied by the nature of the transacion
or the conduct of the paries. If it doesn’t apply, then the general rule of acceptance applies and
communicaion of the acceptance is necessary – the oferor has to receive noice.
Milinkovich v. Canadian Mercanile Insurance Co. (1960, SCC)
P Burns Down House; D Insures him for $10K; D Mails P Form, P Mails it Back, It Gets Lost, Postal Rule!
Facts: The plainif accidentally set ire to a building and caused a great deal of damage. The defendant
insured him for $10,000. He tried to contact them several imes unsuccessfully, and eventually he hired
a lawyer to do it for him so that he could get the insurance money. The defendant’s lawyer mailed form
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of proof of loss to the plainif’s lawyer and requested them to be returned when inished. The plainif
illed them in, and his lawyer mailed them back. The defendant never received the forms. Eventually
the plainif sued, and the defendant objected, staing that this was premature, as they had never
received the proof of loss forms.
Proceeding: The plainif was successful at trial, but overturned on appeal. This is his SCC appeal.
Issue: Did the plainif have to wait unil the defendant received his forms unil he had a cause of acion?
Analysis: The judges say that the defendants virtually invited the plainif’s lawyer to send the forms in
the mail, because they sent them in the mail themselves! The plainif’s lawyer’s obligaions were
fulilled the minute he mailed the forms. Therefore the acceptance of the ofer was made at the ime
and place that the acceptance was mailed.
Outcome: The appeal is allowed; the defendants must reimburse the plainif.
Notes/Raio: If the oferor uses the post to make an ofer, then the postal rule applies because their
acions imply that the oferee can accept also using the post.
Entores Ltd. v. Miles Far East Corp. (1955, UK CA)
Telexes Between London and Amsterdam; Instantaneous Communicaion = Contract Formed Where &
When Acceptance is RECEIVED [Postal Rule Does Not Apply!]
Facts: The plainif, located in London, telexed an ofer to the defendant in Amsterdam. The defendant
telexed their acceptance back to the plainif in London. The defendant is allegedly breaching the
contract, and the plainif wants to sue in London, but is unsure which jurisdicion applies.
Proceeding: The lower court found that England has jurisdicion. This is the defendant’s appeal.
Issue: Where was the contract completed? Where the acceptance was sent (Amsterdam), or where it
was received (London)?
Analysis: Denning says: “The contract was made in England. Unlike the postal rule, in case of acceptance
by telex what is required is the actual communicaion of acceptance. There is no acceptance unil it was
actually received by the oferor in the place where he is located. That place is the place of contract. In
this case, it is England and English courts have jurisdicion.”
Outcome: The appeal is dismissed; the contract was formed in England.
Notes/Raio: In cases of instantaneous communicaion, the contract is only complete when the
acceptance is received by the oferor: and the contract is made at the place where the acceptance is
received. This also applies to the telephone, and other similar ways of communicaing.
Re Viscount Supply (1963, Ont. SC)
Canada Adopts Entores Raio Re: Instantaneous Communicaion!
Facts: There was an instantaneous contract formed between a party in Quebec and a party in Toronto.
The oferor was in Toronto, and the acceptance took place in Toronto. There is a dispute over which
province has jurisdicion.
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Proceeding: The lower court found that Quebec had jurisdicion; this is the oferor’s appeal.
Issue: Which province has jurisdicion? Where was the contract formed?
Analysis: The lower court found that Quebec had jurisdicion because it did not wish to follow the
decision in Entores. This judge says that Denning’s decision must be applied, and therefore the
acceptance took place in Ontario, meaning that the contract was formed there, and that Ontario has
jurisdicion.
Outcome: The appeal is allowed; Ontario has jurisdicion.
Notes/Raio: Canada adopts the Entores raio. In instantaneous communicaion, the contract is formed
at the ime and place where the acceptance is delivered to the oferor. Also note that telegrams follow
the postal rule, similar to leters.
Brinkibon v. Stahag Stahl (1983, UK HL)
Helpful Reminder
Facts: The plainifs, located in London, telexed their acceptance of the ofer to the defendants in Vienna.
The plainifs wanted to serve the defendant with a writ claiming damages for breach of contract in
England.
Proceeding: The lower courts didn’t allow this, as Austria had jurisdicion. This is the plainif’s appeal.
Issue: Which country has jurisdicion? Where was the contract formed?
Analysis: This case follows the raio of Entores, and therefore, as the acceptance was delivered to the
oferor in Vienna, Austria has jurisdicion over the issue. Lord Wilberforce goes on to discuss the
implicaions of the rules of instantaneous communicaion at length. He essenially states that no
universal rule of acceptance can cover all cases of instantaneous communicaion – they must be resolved
with references to the intenions of the paries, and the speciic circumstances of the case.
Outcome: The appeal is dismissed; Austria has juridcion.
Notes/Raio: The Entores raio is applied again. There is no universal rule of acceptance in cases on
instantaneous communicaion; they must each be decided based on the intenions of the paries and the
circumstances of the paricular cases.
Secion Five – Electronic Contracts
Rudder v. Microsot (1999, Ontario)
Microsot Wants Washington Law to Apply; Terms of E-Contract Are Not Small Print!
Facts: The plainifs launched a class acion suit against Microsot’s MSN Corporaion in Ontario claiming
that they fraudulently breached the terms of their contracts by charging them without noice. There
was a clause in the electronic contract that stated that by signing the contract the paries were agreeing
to be subjected solely to the laws of the state of Washington.
Proceeding: This is the original trial.
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Issue: Is this clause binding?
Analysis: The plainifs argue that the clause was similar to “ine print” in writen contracts, which must
be brought to atenion, and that it was not suiciently noiceable to be considered a binding term of the
contract. However, the court disagreed, staing that it was no more diicult to ind than any other terms
in the contract, and that by clicking “I Agree” the paries accepted all of the terms of a contract.
Although the enire contract could not be viewed on one screen, the Court said that this was no diferent
than a muli-page document.
Outcome: The case is dismissed; the laws of Washington are all that apply.
Notes/Raio: If all of the terms of a contract appear in the same format, and are accepted, then they
cannot be treated as “small print”, and require express noiicaion. Muli-page e-contracts are OK!
Kanitz et al. v. Rogers Cable (2002, Ontario Superior Court)
Rogers Posts Amendments on Website as Said in Contract; This Term Is Binding!
Five Clicks Isn’t Too Many!
Facts: The plainifs tried to launch a class acion suit against Rogers because they made amendments to
their user contract and only posted noice on their website. They posted an amendment saying that any
lawsuits could only be iled in arbitraion and not through the courts. The plainifs tried to say that this
was insuicient noice, and further that they were simply trying to prevent class acion suits. However, a
term of the original contract stated that this is the method that would be used. It took ive navigaions
from Rogers’ homepage to get to the amendments. The plainifs signed up for the contracts online.
Proceeding: This is the original trial.
Issue: Is this noiicaion binding?
Analysis: The plainifs try to parallel this case with Tilden Rent-a-Car, where it was stated that paries
must not be seen as always acceping all of the terms of a contract when it is very long and not gone
through completely with the oferor. The court rejects this argument, and stated that the raio from that
case only applied in cases where the defendant was trying to contract out of liability. Here, the Court
states that the paries agreed to all of the terms of the contract when they signed them originally, and
therefore it was reasonable to expect them to visit Rogers’ website periodically. They found that
navigaing to the actual site of amendments was not unreasonable. The fact that the plainifs signed up
for the contract online implies that noice via the Internet was acceptable.
Outcome: The case is dismissed.
Notes/Raio: Oferees are deemed to accept all of the terms of an electronic contract when they sign it,
so long as all of the clauses are displayed in an equally reasonable manner. Requiring actual acive acts
from the oferees is also permited as long as they are reasonably implied in the contract.
Robet v. Versus Brokerage Services Inc. (2001, Ont. Sup. Ct.)
Defendant Broker Tries to Escape Liability for Inaccurate Purchases;
Illogical One-Sided Clause Cannot be enforced
Facts: The plainif was a customer of the defendant’s online stock brokerage business. He sufered
losses because of inaccuracies in the company’s purchases compared to the desired purchases that he
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entered. The defendants had a clause in the contract staing that they were exempt from all liability
resuling from inaccuracies.
Proceeding: This is the original trial.
Issue: Is this clause enforceable?
Analysis: The judge says that this clause cannot be enforceable because of the obvious one-sidedness
that it creates. There is no possible way that there could be a meeing of the minds with respect to this
clause, as it deies common sense.
Outcome: The plainif is successful; the defendants are liable for the plainif’s losses.
Notes/Raio: Clauses in e-contracts cannot be so one-sided that there could not be said to be a meeing
of the minds. If they are, then they are not enforceable.
Zhu v. Merrill Lynch HSBC (2002, BC Prov. Ct.)
P Gets Noice of Cancellaion, Sill Charged – One Sided Liability Exempions Cannot Stand!
Facts: The plainif used the defendant’s online brokerage business. He placed an order to sell shares
from his RRSP, but immediately cancelled the transacion. He received noiicaion of his cancellaion,
but he was forced to buy back his shares at a higher price and lose a signiicant amount of money. There
were a number of disclaimers on the site that limited the defendant’s liability.
Proceeding: This is the original trial.
Issue: Were the liability limiing clauses enforceable?
Analysis: The judge says that the limitaion of liability clauses cannot be given efect, because the very
nature of the defendant’s business requires them to adhere to a higher duty of care and performance
than ordinarily expected because of the high risk of loss of a customer’s investments. This clause was
too one-sided to be enforced.
Outcome: The plainif is successful; the defendants are liable for his loss.
Notes/Raio: One-sided clauses cannot be eliminated from liability in e-contracts, similar to writen
contracts.
Specht v. Netscape Communicaions Corp (2002, NY District Court)
Browse Wrap Doesn’t Bind Ps to License; Oferees Need To Accept Terms – Usually Acively!
Facts: The plainifs were visitors to the defendant’s website. Upon visiing the site they downloaded
sotware that did not make them accept a license agreement before downloading. The only reference to
the license agreement simply required the user to scroll to the next screen, which requested for other
terms of agreement to be accepted before downloading. The license agreement contained a clause
requiring all disputes to be iled in arbitraion in California.
Proceeding: This is the original trial.
Issue: Were the terms of the license agreement enforceable?
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Analysis: The court says that the plainifs would only be bound to the arbitraion clause if they had
agreed to it. Therefore, they had to determine whether the plainifs had given assent through their
acions, and whether the website gave suicient noice of the existence of the license. The defendants
argued that the downloading of the sotware indicated assent, but the court disagreed and said that an
acive acion such as clicking an “I Agree” buton was required. Without this, there was no meeing of
the minds and mutual assent to the terms of the contract.
Outcome: The plainif is successful; the terms of the license do not apply.
Notes/Raio: In order to accept terms in e-contract, you must agree to them – this is usually achieved
through the acive performance of an acion such as clicking an “I Agree” buton.
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