Table of Contents INTENTION TO TREAT ......................................................................................................................... 2 POWER TO BIND .................................................................................................................................... 3 ACCEPTANCE ........................................................................................................................................... 3 MEETING OF THE MINDS ........................................................................................................................................ 3 BATTLE OF THE FORMS ......................................................................................................................................... 3 HOW & WHEN TO ACCEPT .................................................................................................................................... 3 REVOCATION OF (BILATERAL) OFFER........................................................................................... 4 TENDERING PROCESS .......................................................................................................................... 5 FORMATION AND CERTAINTY .......................................................................................................... 5 INCOMPLETENESS ................................................................................................................................................... 5 VAGUENESS ............................................................................................................................................................. 5 USUAL TERMS ......................................................................................................................................................... 6 BEST EFFORTS ......................................................................................................................................................... 6 CONSIDERATION .................................................................................................................................... 6 FORBEARANCE ........................................................................................................................................................ 6 NOMINAL CONSIDERATION .................................................................................................................................... 6 MUTUAL PROMISES .............................................................................................................................. 7 PRE-EXISTING DUTY (PED) ................................................................................................................ 7 INTENTION .............................................................................................................................................. 8 NON-BARGAIN PROMISE ..................................................................................................................... 9 PAST CONSIDERATION ........................................................................................................................................... 9 SUBSEQUENT RELIANCE ................................................................................................................... 10 GRATUITOUS UNDERTAKINGS ............................................................................................................................ 10 ESTOPPEL ............................................................................................................................................................. 10 ESTOPPEL BY REPRESENTATION ....................................................................................................................... 10 PROMISSORY ESTOPPEL ..................................................................................................................................... 10 INFERRING UNDERTAKINGS FROM CONDUCT................................................................................................... 11 PROPRIETARY ESTOPPEL AS A SWORD ............................................................................................................. 12 UNILATERAL CONTRACTS ................................................................................................................ 12 OPTIONS CONTRACTS ......................................................................................................................................... 13 UNEQUAL BARGAINING POWER ..................................................................................................... 13 UNCONSCIONABILITY .......................................................................................................................................... 14 UNDUE INFLUENCE .............................................................................................................................................. 14 DURESS ................................................................................................................................................................. 16 MISTAKE ................................................................................................................................................. 17 MISREPRESENTATION ......................................................................................................................................... 17 THE RELATIONSHIP B/W CONTRACT & TORT .......................................................................... 18 MISTAKE ABOUT CONTRACTUAL TERMS ........................................................................................... 18 MISTAKE IN ASSUMPTIONS ................................................................................................................................. 19 FRUSTRATION ...................................................................................................................................... 20 ILLEGALITY............................................................................................................................................ 21 PERFORMANCE AND BREACH ......................................................................................................... 22 BREACH ................................................................................................................................................................ 22 GOOD FAITH ........................................................................................................................................................ 23 DAMAGES.......................................................................................................................................................... 24 NON-ECONOMIC INJURIES......................................................................................................................... 25 REMOTENESS.................................................................................................................................................. 26 MITIGATION .......................................................................................................................................................... 26 REMEDIES ........................................................................................................................................................ 27 POLICY ..................................................................................................................................................... 27 OFFER Offer - An objective manifestation of intention by the offeror of a willingness to be bound by the terms proposed to the offeree as soon as the offeree signifies acceptance of the terms An offer contains: i. a proposal of the terms of the exchange; and ii. an expression of willingness to be bound as soon as the offeree manifests acceptance. Note that an offer confers a power on the offeree to bind the offeror at the precise moment of acceptance INTENTION TO TREAT - Invitation to come to make an offer and negotiate; it is NOT an offer itself Limited supply conditions often imposed Case Denton v Great Northern Railway (1856) ENG Train to nowhere Johnston Brothers v Rogers Brothers (1899) CAN Price list for flour Harvey v Facey (1893) ENG “what’s your lowest price?” Ratio Train schedule is not an offer OFFER Notes Quotes are not an offer NOT successful Mere statement of lowest price at which vendor would sell contains no implied contract to sell at that price to the persons making the inquiry. NOT successful Pharmaceutical Society of GB v. Boots Cash Chemists (Southern) Ltd (1953) ENG Displayed sale price on goods is a mere “invitation to treat” and not a valid offer on which can claim acceptance and a binding contract NOT successful “poison” on shelf Lefkowitz v. Great Minneapolis Surplus Store (1957) USA only women can buy coats Generally ads are “offers to the word” = mere invitation to treat. However, where an ad contains sufficient conditions to make it an offer (“first come, first served” = negates limited supply problem), such an offer is valid NOT successful POWER TO BIND Case Storer v. Manchester City Council (1974) ENG nvm we won’t give you this house Ratio An agreement is not precluded by the anticipation of further steps in the formalization or recording of the agreement Notes Successful Bound by when the letter is signed & sent, not received ACCEPTANCE - Requirements for a Valid Acceptance → these will freeze everything in place: terms cannot be changed after valid acceptance; time of response cannot be changed; withdrawal now impossible - Corresponds with the offer - Made in response to the offer - Made by the appropriate method - Is communicated to the offeror MEETING OF THE MINDS - Mirror Image Rule: acceptance must PRECISELY match the terms of the offer Case Hyde v Wrench (1840) ENG tried to accept initial offer after rejecting it Ratio Upon making a counteroffer, any previous offers are rejected and not available for acceptance (without the offeror accepting) Notes NO contract BATTLE OF THE FORMS Case Butler Machine Tool Co Ltd v ExCall-O Corporation Ltd (1979) ENG Accepted counter-offer w/o price variation clause Bristol, Cardiff, And Swansea Aerated Bread Company v Maggs (1890) ENG Ratio Official terms depend on who fired the last shot Notes Contract on last terms Adding a clause which is so significant as to limit one party’s livelihood after negotiations have completed cannot be binding NO contract Tried to add non-competition clause afterward When a counteroffer is made, the parties are still in a state of negotiations and no agreement is established until the other party accepts the new offer at hand. Before which time, the latter party may withdraw from negotiations at any time. Choudhury disagrees w/ the Court - This should be recognized as a contract b/c both parties agreed to terms and signed. HOW & WHEN TO ACCEPT Case Ratio Notes Shatford v BC Wine Growers Ltd (1927) CAN Took too long to buy the berries Larkin v Gardiner (1895) CAN Agent didn’t communicate acceptance, D withdraw offer first Felhouse v Bindley (1862) ENG Cannot buy horse through silence Wheeler v Klahot (1901) USA So many shoes Acceptance must be conferred on the offer within a period of time that is reasonable for the offeror Bad reasonable amount of time Until the offeror knows of your acceptance, there is no possibility for concluding a contract – must communicate acceptance Bad Communication of Acceptance Courts look for a signal of acceptance through some positive action EXCEPTION TO NO ACCEPTANCE VIA SILENCE Second Restatement of Law of Contracts (USA) 1) Where offeree takes benefit of offered services with reasonable opportunity to reject 2) Where offeror has given offeree reason to understand that assent may be manifested by silence or inaction and offeree in remaining silent and inactive intends to accept the offer 3) Where because of previous dealings or otherwise it is reasonable that offeree should notify offeror if he does not intend to accept Eliason v Henshaw (1819) USA Acceptance must be communicated via return wagon MASTER OF THE OFFER Offeror can stipulate terms of acceptance, but also has the right to refuse acceptance when it is not on the stipulated terms Manchester Diocesan Council for Education v Commercial & general Investments Ltd (1969) ENG Offeree can violate the stipulated terms if they are no less convenient for the Master of the Offer UNLESS VERY EXPLICIT NO acceptance via silence YES acceptance via silence You have the reject once given the reasonable opportunity to reject CAN stipulate manner of acceptance EXCEPTION to manner of acceptance REVOCATION OF (BILATERAL) OFFER Case Byrne v Van Tienhoven (1880) ENG Revoked plates offer after P sold to 3rd party Ratio An uncommunicated revocation is for all practical purposes and in point of law no revocation at all Notes NOT good revocation of offer A state of mind not notified cannot be regarded in dealings between parties An offer can be withdrawn before it is accepted. Immaterial whether the offer is expressed to be open for acceptance for a given time or not (gratuitous promise) Revocation is effective only upon receipt of mail, not posting of mail EXCEPTION TO (BILATERAL) REVOCATION RULE The offer to keep an offer open for a certain Dickson v Dodds (1876) ENG Hears property went to some else, tries amount of time is not a contract (gratuitous to force acceptance promise) NO contract Must give consideration to ensure that an offer is held open TENDERING PROCESS What is the tendering process? - Contractor/owner sends out a call for tenders ○ Asks interested parties to submit a bid for a particular job - Party calling for tenders typically provides extensive terms and conditions - Once bid process is closed tenders are considered and one is selected - Job is awarded to most successful compliant bid - Parties submitting tender must be unable to amend or revoke tenders during consideration process ○ Must be willing to accept job if awarded - Generally, submitting a tender is Contract A, which later gives rise to Contract B ○ Tenderor’s consideration: follow rules of tender ○ Tenderee’s consideration: tender itself Case M.J.B Enterprises v Defence Construction (1951) SCC Ratio It is always possible for Contract A to arise upon tender, but it depends on the terms of the tender call. Notes BAD tender acceptance Didn’t accept compliant tender bid The privilege clause does not override the obligation to accept only compliant bids. The privilege clause is, however, incompatible w/ an obligation to accept only the lowest compliant bid. FORMATION AND CERTAINTY INCOMPLETENESS Case May and Butcher, Limited v The King (1929) ENG agreement to agree on essential term of price WN Hillas and Co, Limited v Arcos (1932) ENG Foley v Classique Coaches Limited (1932) ENG Land and gas contract not linked Ratio All essential terms of the contract must be established and agreed upon for the contract to be formed and valid Agreements to agree are not enforceable. A contract to enter into an enforceable contract (negotiation) is simply THAT enforceable contract Partial execution of the agreement is likely to weigh in favour of enforceability (prevention of unjust enrichment) Notes NO contract Contract Foley and Hillas both indicate that the absence of a price term is not necessarily fatal to the enforceability of an agreement VAGUENESS Case Scammell (G.) and Nephew, Limited v. Ouston (1941) ENG Ratio Courts will do their best to give effect to intention, but if words fail to evince definite Notes Too vague hire-purchase term not agreed on for van meaning on which courts can safely act, courts have no choice but to say there is no contract USUAL TERMS Case Buyers v Begg (1952) BCCA Ratio Can’t rely on usual terms if they don’t exist in your industry. You have to prove that those certain terms do exist within your industry Notes Cannot get around certainty problems by referring to usual terms BEST EFFORTS - You have to stipulate “best efforts” in the contract if you want it Very hard to prove best effort Higher standard than reasonable efforts Case R v CAE Industries (1986) CAN Empress Towers LTD v. Bank of Nova Scotia (1990) BC Did not negotiate in good faith Ratio Best efforts in the contract; best efforts clause is not a guarantee to get it all just a higher effort Contract parties must negotiate in good faith with the intent to reach an agreement Notes NO best efforts Mutual agreement has 2 implied terms: 1) an implied term that the landlord will negotiate in good faith with the tenant, and 2) that agreement on the market rental rate will not be unreasonably withheld. In certainty of terms an agreement to agree to the following terms is binding CONSIDERATION To acquire the right to enforce another’s undertaking, a party must undertake (promise or forbear) to give, or actually give (perform/forbear), something stipulated by the other as the price for her undertaking FORBEARANCE Case Hamer v Sidway (1891) USA Gave up drinking, smoking, swearing & playing cards until 21 White (Executor) v William Bluett (1853) ENG Son, stop complaining! Ratio Restricting one’s liberty, giving up a legal right to something can be sufficient consideration as an act of forbearance (act of value) even if promisor doesn’t benefit Promise to do/don’t something you don’t have a legal right to is not good consideration. Notes Good Consideration Bad Consideration NOMINAL CONSIDERATION Case Eleanor Thomas v Benjamin Thomas (1842) ENG: Dead husband wanted wife to have estate, wife paid £1 and made repair on property Ratio Doctrine of consideration doesn’t require that the consideration is equivalent in value to the promise to be enforced - only needs to be sufficient (Peppercorn Theory) Notes Good Consideration MUTUAL PROMISES Case Great Northern Railway Company v Witham (1873) ENG Refused to supply any more iron Tobias v Dick and T Eaton Co (1937) CAN exclusive right to sell machines, but like are you gonna sell them? Wood v Lucy, Lady Duff-Gordon (1917) USA exclusive right to designs + profitsharing agreement Ratio Where there is a commitment to purchase goods or only purchase from said suppler, that is sufficient consideration Mutual promises to supply when called upon is sufficient to bring about consideration A contract that only gives Party A the exclusive right “to sell” Party B’s products is not good consideration (lacks mutuality) Mutuality of promises involving best efforts which is sufficient consideration Notes Good Consideration Option contract Bad Consideration Good Consideration Implicit obligation for D to make best efforts in order to get paid himself PRE-EXISTING DUTY (PED) Case Harris v Watson (1791) ENG no extra wages in ship emergency b/c bad public policy Stilk v Myrick (1809) ENG didn’t split lost crew members wages b/c no new consideration Smith v Dawson (1923) ONT house fire, contractor wanted more money to finish work Gilbert Steel Ltd v University Construction Ltd (1976) ONT 3 steel deals – reached agreement for new price before project 3, P tried to amend again during project 3, but D didn’t want to. D only paid amount set out in deal 2. NAV Canada v Greater Fredericton Airport Authority Inc (2008) NB Refused to pay for NAV equipment Foakes v Beer (1884) ENG partial payment of debt not valid consideration Harley v Ponsonby (1857) ENG too few crew to set sail – option to refuse so good consideration Raggow v Scougall and Co (1915) ENG lesser salary during war Ratio Extra wage for extra work (even state of emergency) isn’t sufficient fresh consideration and is therefore PED Court will not consider that there has been consideration if you were agreeing to something that you have already legally-bound to do Performance of an existing contract by one party cannot be considered consideration for a new promise even when made by the other party Buyer beware = caveat emptor If you are going to amend a contract, you have to give fresh consideration Notes Bad Consideration Post-contractual modifications unsupported by consideration may be enforceable, as long as there was no economic duress to cause the modification. Partial payment of a debt is not valid consideration for the discharge of the whole debt Bad Consideration Bad Consideration Bad Consideration Bad Consideration Bad Consideration Contradicted by Mercantile Law Amendment Act (ONT) EXCEPTIONS TO PED Pre-existing duty precludes new consideration b/w both parties unless there is an option not to accept the new terms Performing pre-existing contract is not good consideration EXCEPT when there is mutual Good Consideration Good Consideration Williams v Roffey Bros Ltd (1991) ENG Avoiding a disbenefit from 3rd party Richcraft Homes Ltd v Urbandale Corp (2016) ONT clarified terms to divide lots equally Mercantile Law Amendment Act (ONT) rescission of prior agreement and a substitution of a new agreement Promise to pay another party more to perform a PED to obtain a benefit or avoid a dis-benefit or liability is good consideration as long as the promise wasn’t given because of economic duress or fraud and the promisor initiated the promise for additional payment 6-Part Rule - exception to PED: 1) A entered into contract with B 2) At some time before A completed performing obligation, B has reason to doubt completion 3) B thereupon promises A addition payment to finish (pre-existing duty) 4) B obtains practical benefit from giving this promise or avoids detriment 5) B’s promise not given under duress or fraud on the part of A, (it must be voluntary); then 6) Benefit to B can be consideration for B’s promise- making agreement legally binding Clarifying an unclear term in a long-term contract, in order to create certainty and to avoid future costly disputes, ensures to the parties’ mutual benefit, and is something of value that flows from and to each contracting party. Partial performance of obligation or payment of debt is good consideration Good Consideration Good Consideration Good Consideration INTENTION Intention to contract: Would a reasonable person in the position of the promisee consider that the promisor “intended” to make a promise that would affect the promisor’s legal status? Two presumptions: - Parties do not intend to create legal relations in social and domestic agreements; and o Family Law Act (1990) ONT: A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed [55(1)]. - Parties do intend to create legal relations in commercial agreements Case Balfour v Balfour (1919) ENG wife stays overseas; husband promises allowance Merritt v Merritt (1970) ENG separated couple; wife pays mortgage for sole ownership of house Jones v Padavatton (1969) ENG Ratio General presumption against the finding of an intention to create legal relations in family and social settings Where the parties are separated or about to separate, they bargain keenly and do not rely on ongoing understandings. Thus, there is a presumption that they intend to create legal relations General presumption against the finding of an intention to create legal relations in family and social settings. Notes Bad Intention Good Intention Bad Intention Bad Reasonable Time daughter studying in UK; mother takes back house Rose and Frank Company v JR Crompton & Brothers, Limited (1923) ENG clause says no intention to create LR (commercial contract) Salmon J (Dissent): Intention to create legal relations at the commencement of the arrangement isn’t relevant. However, implied term of reasonable amount of time so same outcome. Possible detrimental reliance. If parties expressly state in an agreement that they do not wish to be bound, the courts must respect their actual intentions. Bad Intention NON-BARGAIN PROMISE *Check Q&A for definition* PAST CONSIDERATION - A promise given in recognition of or in return for benefits received by the promisor in the past is unenforceable Since consideration must be given IN RESPONSE TO (in return or as payment for) the promise, it cannot logically be given or done before the other’s promise was made Case Roscorla v Thomas (1842) ENG Vice-free horse Ratio Consideration past and executed will support no other promise than such as would be implied by law EXCEPTIONS TO PAST CONSIDERATION A promise made after performance can be Lampleigh v Brathwait (1615) ENG pardon from the King enforced, if it was made by the promisor and it was understood that there would be some kind of reward prior the performance. Pao On v. Lau Yiu Long (1980) ENG An act done before the giving of a promise to avoided selling shares, exception to make a payment or to confer some other benefit past consideration rule can be consideration for the promise if: 1) Act was done at the promisors’ request 2) Parties have understood that the act will be remunerated either by a payment or the conferment of some other benefit o Has to be a big enough task that the reasonable person would assume that there would be a benefit 3) Payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance Notes Past Consideration Exception to Past Consideration Exception to Past Consideration Restatement of Law of Contracts (2nd) USA 86(1) Past Consideration IS binding EXCEPT: 86(2)(a) gift; or (b) if the act IS not quantifiable proportionate to the benefit received by the promisee Exception to Past Consideration Civil Code of Quebec Past consideration IS binding - 1482. Lays out situation of past consideration - 1484. The offeree can’t withdraw part way through the act - 1486. Even if the desired result was not obtained, the offeree must be reimbursed Exception to Past Consideration - 1487. Act must be necessary at the time 1490. Manager (promisee) can’t be inflicting duress on promisor When you’ve expended services but there was no contract in place and you want to claim in quantum merit for wages/resources Quantum meruit (doctor example) Exception to Past Consideration SUBSEQUENT RELIANCE - You rely on someone’s word and they take it back, and it’s to your detriment You can’t bring a cause of action just because it didn’t go well, it has to be because the promisor tries to enforce an earlier agreement BASIS OF ESTOPPEL – all forms of estoppel are based on subsequent reliance in different ways GRATUITOUS UNDERTAKINGS Case Baxter v Jones (1903) CAN agent didn’t notify about insurance policy change De La Bere v Pearson, Limited (1908) ENG financial advice from newspaper Hedley Byrne & Co Ltd v Heller & Partners Ltd. (1964) ENG Asked D’s bank about D’s creditworthiness Ratio Gratuitous undertakings can be enforceable when the additional promise was part of the same transaction in which consideration had already been given. Court may find artificial consideration on the facts to avoid absurdity. You should make a tort claim instead of looking for nominal consideration Notes Enforceable Enforceable NOT enforceable ESTOPPEL Estoppel: One party can stay or do something that induces the other party to act to his or her detriment ESTOPPEL BY REPRESENTATION Case Skidmore v Bradford (1869) ENG uncle incrementally buying nephew warehouse, then uncle dies Ratio Estate must honour the representation of the uncle because he made the representation on the faith of which the nephew had entered into a contract Notes Re Hudson (ENG) intention to send money to the committee Maddison v Alderson (1883) ENG Representation of facts in the prest; not future Estoppel by representation must be one of FACT; not of intention. Not successful doctrine of estoppel by representation is applicable only to representation as to some state of facts alleged to be at the time actually in existence, and not to promises de futuro (in the future) Not successful Successful PROMISSORY ESTOPPEL Requires: - A to make clear promise to B that she will not enforce her strict legal rights against B; - B to act in reliance on it; and - Inequitable for A to resile from the promise. Case Ratio Notes Hughes v. Metropolitan Railway Co. (1877) ENG suspended repairs during negotiation, then landlord enforces repairs Central London Property Trust Ltd. v High Trees House Ltd (1947) ENG landlord wants full rent from war period Combe v Combe (1951) ENG wife said she wouldn’t sue for maintenance money, then she did lol NM v ATA 2003 BC I’ll move to BC if you pay off my mortgage; tried to use PE as sword in CA If you rely on something and you change your position, and that's enough to for the court to find a reliance interest. Successful Debut of promissory estoppel Successful Where one has given a gratuitous promise that was intended to be binding and intended to be acted upon which was in fact acted upon, the promise should be considered to be binding Estoppel is a shield, not a sword NOT successful A necessary element of PE is an intention, on the part of the promisee, to create legal relations (or at least induce belief in legal relations). NOT Successful No intention no legal relationship no estoppel D & C Builders, Ltd v Rees (1965) ENG partial payment of debt under duress (Foakes situation + duress) Did not establish PE as sword in CAN No person can insist on settlement procured by intimidation NOT successful You need to act equitably yourself if you want to rely on an estoppel defence that comes from the Court of Equity EXCEPTION: PROMISSORY ESTOPPEL AS A SHIELD Heffey, et al, Principles of Contract Law 2nd ed Promissory estoppel can be used as a cause of Walton Stores (Interstate) Ltd. v. action between parties involved in pre-contractual Maher (1988) AUS negotiations when there has been some Demolished building w/o lease signed encouragement of the mistake of fact on part of D and other party relied on that assumption to their detriment. Successful Used where allowing one party to go back on the promise would be unconscionable INFERRING UNDERTAKINGS FROM CONDUCT What you would look for when you are inferring undertakings from conduct: - Were there negotiations that would lead the party to believe rights were abrogated? - When a party does not enforce a right, is it a friendly indulgence? Case John Burrows Limited v Subsurface Surveys Limited (1968) CAN allowed late payments then enforced full amount Owen Sound Public Library Board v Mial Developments Ltd. (1979) ONTCA Certificate by architect Ratio Friendly indulgences are not a waiver of contractual rights or enough to use promissory estoppel Notes Not successful The intent necessary for promissory estoppel can be based on an inference drawn from the evidence Successful PROPRIETARY ESTOPPEL AS A SWORD Case Crabb v Arun District Council (1976) ENG Ratio Exception to the general rule that estoppel cannot be a sword blocked access to highway, proprietary estoppel as a sword Proprietary estoppel is applicable in cases of gratuitous promises concerning the creation of interests in land and where it would be inequitable for the defendant to insist on its strict legal rights to renege on the arrangement can use proprietary estoppel as a sword if it is equitable and meets these 3 things: Cowper-Smith v Morgan (2017) CAN brother moves to look after mom, sister takes inheritance Notes Successful Successful 1) Representation or assurance is made to the claimant on the basis of which the claimant expects that they will enjoy some right or benefit of the property 2) Claimant relies on that expectation by doing or refraining from something and his reliance is reasonable in the circumstances 3) claimant suffers a detriment as a result of reliance such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on their word UNILATERAL CONTRACTS Case The Civil Code of Quebec Williams v Carwardine (1833) ENG gave info about murderer to police Carlill v Carbolic Smoke Ball (1893) ENG got influenza, notification of acceptance unnecessary in unilateral contracts Goldthorpe v. Logan (1943) CAN electrolysis guarantee Ratio The offer of a reward made to anyone who performs a particular act is deemed to be accepted and is binding on the offeror when the act is performed, even if the person who performs the act does not know of the offer Is a plaintiff entitled to a reward when completing the act required for, but not motivated by that reward? YES Contrary to the general rule that acceptance must be communicated, in unilateral contracts, an offeror can waive the requirement of notification of acceptance either expressly or impliedly as performance of the condition and acceptance occur concurrently and thus there may be no need to communicate acceptance where the performance of the act is sufficient. In unilateral contracts, where performance is completed and the reward is not satisfied, there is a breach. When making a promise of a service where results may vary per person, you need to make an express disclaimer stating so in order to avoid liability for individuals not receiving the desired results. Notes Successful Successful Successful Grant v Province of NB (1973) NB buy my potatoes Errington v Errington Woods (1952) ENG It doesn't matter what is it is that is meant by a unilateral offer, but what a reasonable person in the position of the parties would have thought that it meant. A unilateral contract cannot be revoked once performance of the act begins Successful Successful couple making payment on home from dad; dad dies Restatement of The Law of Codifies Errington - cannot revoke offer once Contracts (Second) 1981 USA options contract has been made EXCEPTION: THE CIVIL CODE OF QUEBEC where one explicitly admits they didn’t know of offer or where the offer was previously revoked and communicated by the offeror Is a plaintiff entitled to a reward when completing NOT successful The Crown v Clarke (1927) AUS give info to police to clear yourself of the act required for, but not motivated by that charge; clearly stated that he was not reward? NO b/c in a unilateral contract, aware of reward performance will not suffice if there is compelling evidence that the party performing the act was not aware of the existence of the offer at the time of performance EXCEPTION: WHERE COURTS CHOOSE BILATERAL ANALYSIS INSTEAD OF UNILATERAL Where the language of an offer may be Successful Dawson v. Helicopter Exploration considered to be ambiguous, courts can interpret (1955) CAN Take leave from work in order to find the contract as a bilateral rather than unilateral D minerals; D ditches P for another when fair to do so and where there is some basis mineral man for a promise on the part of the offeree. OPTIONS CONTRACTS - Options contract: You have the option to fulfill the acceptance of the contract, but don’t need to exercise the option e.g., Great Northern Railway Company v Witham (1873) ENG…refused to supply more iron ○ I will sell iron from date X to Y ○ They had an option to buy from him ○ So you can exercise the option, and the option can’t be revoked during the period of time specified in the contract ○ Even if they don’t want to exercise the option, the option still has to stand during the time of performance - An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer UNEQUAL BARGAINING POWER Standard Form Contracts Unequal bargaining power because of “take it or leave it” character of most standard form contractual offerings; but they reduce transaction costs • Don’t have to renegotiate or vet the terms for every contract Imperfect information between parties; parties may not read or understand them so meaningful consent is absent 5 historical categories of unequal bargaining power 1) Duress of goods - 2) 3) 4) 5) The owner is in a weak position because he is in urgent need of goods and the stronger demands more than is justly due Unconscionable transaction - A man is in need of special care and protection, yet a stronger party exploits his weakness and his property is taken for grossly under value Undue influence - The stronger party is guilty of fraud to gain the advantage of the weaker; or - The stronger has taken advantage of their relationship of the weaker to gain an advantage for himself. Undue pressure - The stronger party forces the weaker to enter into an unfair agreement by threatening them Salvage agreements - When a ship is sinking and requires assistance, the rescuers cannot take advantage of the sinking ship's urgent position to demand ridiculous fees - e.g., Harris v Watson (1791) ENG UNCONSCIONABILITY Procedural unconscionability and substantive unconscionability “substantive” – where normal bargaining capacity but still unequal bargaining power – (i.e. relating to consumer protection), uncon based on unfairness of the terms “procedural” – infirmity or vulnerability leads to inability to engage in effective bargaining - i.e., old age, sickness, incompetence, etc…) Requirements (Uber) 1. Inequality of bargaining powers; and An inequality of bargaining power exists when one party cannot adequately protect their interests in the contracting process 2. Unfairness fail to meet the reasonable expectation of the weaker party or cause unfair surprise. Case American Home Improvement v Maclver (1964) USA overcharged for home improvement work Ratio Contract made by found void where there is evidence that the defendant received v little in exchange for paying a lot Williams v WalkerThomas Furniture Co (1965) USA Where there is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to such party, such contract may be set aside Defaulted on contract, took all her possessions Terms of the contract must be considered in light of the circumstances existing when the contract was made NOT JUST WHAT WAS IN THE AGREEMENT ITSELF Forced arbitration clauses in standard form contracts are unconscionable and therefore unenforceable when they prevent the weaker party to an agreement from meaningfully pursuing a dispute against the stronger party Uber Technologies Inc v Heller (2020) CAN Arbitration clause in Netherlands Unconscionability can also arise in relation to exorbitant financing transactions UNDUE INFLUENCE General Requirements 1. That complainant had trust and confidence in the other party Notes SUCCESSFUL Substantive unconscionability SUCCESSFUL Procedural unconscionability SUCCESSFUL Substantive & procedural unconscionability • 2. What are the past interactions between these two parties? Just one person rely on the other person to take care of details or issues?. • Undue influence PRESUMED in parent and child, guardian and ward, trustee and beneficiary, solicitor and client, and medical advisor and patient relationships. o Here don’t have to prove trust and confidence in other party; just prove relationship o Presumption does not apply to husband and wife relationship BUT third parties (i.e., bank) are put on inquiry whenever a wife offers to stand surety for her husband’s debts That transaction is not readily explicable by relationship of the parties • If the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the done to support the gift (Allcard v Skinner) o Is the gift SUBJECTIVELY large? o Woman joined the nunnery – cut off from contact w/ all family & friends. She donated a large piece of her estate to the church. The Court looked at whether or not the (large) gift could be accounted for on the grounds of charity or other ordinary motives Once put on inquiry (i.e., every non-commercial case), the lender (i.e., bank) must (Royal Bank of Scoland v Ethridge (No 2) and Other Appeals) i. communicate directly with the guarantor that the lender will require a confirmation from a solicitor to the effect that she has been duly advised in order to prevent her from later challenging the guarantee. The solicitor may also act for her husband, or even the lender; ii. disclose the necessary financial information to the guarantor’s solicitor: ordinarily this includes information about the purpose of the loan, the debtor’s current indebtedness and overdraft facility, and the terms of the new loan; iii. obtain a confirmation from the guarantor’s solicitor to the effect that the guarantor has been advised about the nature and effect of the transaction, in the absence of the primary debtor and, for a sufficient duration to: (a) explain the nature and effect of the guarantee in a meaningful way; (b) emphasize the seriousness of the risk of her being made bankrupt or losing her home; (c) discuss her financial means, the value of the property being charged and the availability of other assets to meet the repayment; and (d) state clearly that she has a choice whether to proceed and ask whether she wishes to renegotiate particular terms (eg to lower her liability or vary the order of call between various securities). Case Lloyds Bank Limited v Bundy (1975) ENG Ratio Where there is a relationship of trust and confidence, such that one party may blindly follow the advice of the other, especially where no independent advice has been sought, the contract cannot be enforced Loans on farm for his son under the presumption of undue influence. If a 3rd party suspects undue influence, they must: Credit Lyonnais Bank i. take reasonable steps to allay any such suspicion; and Nederland NV v Burch ii. the result of the steps taken must be such as would (1997) ENG reasonably allay any such suspicion Employee guarantee for How to do this: employer iii. Offer independent legal advice to the one being influenced; ensure all relevant information is provided to him/her (this may be sufficient in some cases) i. communicate directly with the guarantor that the lender will Royal Bank of Scotland require a confirmation from a solicitor to the effect that she has PLC v Ethridge (No 2) and been duly advised in order to prevent her from later challenging Other Appeals (2001) HL Wives claim unduly the guarantee. The solicitor may also act for her husband, or influenced by husbands even the lender; ii. disclose the necessary financial information to the guarantor’s solicitor: ordinarily this includes information about the purpose of the loan, the debtor’s current indebtedness and overdraft facility, and the terms of the new loan; Notes SUCCESSFUL Undue Influence SUCCESSFUL Undue Influence UNSUCCESSFUL NO Undue Influence iii. obtain a confirmation from the guarantor’s solicitor to the effect that the guarantor has been advised about the nature and effect of the transaction, in the absence of the primary debtor and, for a sufficient duration to: (a) explain the nature and effect of the guarantee in a meaningful way; (b) emphasize the seriousness of the risk of her being made bankrupt or losing her home; (c) discuss her financial means, the value of the property being charged and the availability of other assets to meet the repayment; and (d) state clearly that she has a choice whether to proceed and ask whether she wishes to renegotiate particular terms (eg to lower her liability or vary the order of call between various securities). DURESS Economic Durrest Test for Formation of Contract (Universe Tankships of Monrovia v International Transport Workers’ Federation, 1983 HL) 1) Pressure amount to compulsion of the will of the victim; and Victim’s intentional submission arising from realization that there is no other practical choice open to him/her May involve protest but not required; must show party claiming duress had no practical alternative but to submit to arrangement 2) Illegitimacy of the pressure exerted Threats with flavour of blackmail illegitimate Is threat unlawful or unreasonable in the circumstances But if party making threat is seeking to enforce a right to which it believes, in good faith, it is entitled to, the threat is legitimate Economic Duress FOR VARIATION OF A CONTRACT Test for Variation of Contract (Nav Canada) 1. The contractual variation must be extracted as a result of the exercise of “pressure,” whether characterized as a “demand” or a “threat.” 2. The exercise of that pressure must have been such that the coerced party had no practical alternative but to agree to the coercer’s demand to vary the terms of the underlying contract Then look to whether the coerced party “consented” to the variation. To make that determination examine 3 factors: (1) whether the promise was supported by consideration; (2) whether the coerced party made the promise “under protest” or “without prejudice”; and (3) if not, whether the coerced party took reasonable steps to disaffirm the promise as soon as practicable Note: fact that coercer is acting in good faith in making the demand is not relevant & not relevant that they obtained independent legal advice Case Stott v. Merit Investment Corp. (1988) Ont CA Gordon v. Roebuck (1992) Ont CA Ratio Economic duress involves (A) a pressure which the law does not regard as legitimate and (B) it must be applied to such a degree as to amount to a coercion of the will, or it must place the party to whom the pressure is directed in a position where he has no realistic alternative but to submit to it Defence of economic duress must consider whether: plaintiff protested; coercion was exerted; an alternative course was open to plaintiff; plaintiff was independently advised; after entering contract plaintiff took steps to avoid it Notes NAV Canada v Greater Fredericton Airport Authority Inc (2008) NBCA Refused to pay for nav equipment Post Contractual modifications unsupported by consideration may be enforceable, as long as there was no economic duress to cause the modification DURESS SUCCESSFUL 1. The contractual variation must be extracted as a result of the exercise of “pressure,” whether characterized as a “demand” or a “threat.” 2. The exercise of that pressure must have been such that the coerced party had no practical alternative but to agree to the coercer’s demand to vary the terms of the underlying contract Then look to whether the coerced party “consented” to the variation. To make that determination examine 3 factors: (1) whether the promise was supported by consideration; (2) whether the coerced party made the promise “under protest” or “without prejudice”; and (3) if not, whether the coerced party took reasonable steps to disaffirm the promise as soon as practicable Note: fact that coercer is acting in good faith in making the demand is not relevant & not relevant that they obtained independent legal advice MISTAKE MISREPRESENTATION Fraudulent or innocent misrepresentation Elements of misrepresentation (Redgrave) An unambiguous false statement of fact; the fact that is misstated must be material to the decision of the claimant to enter the agreement and; the misrepresentation must induce the claimant into entering the contract Statements that do not amount to fact • Puffery • Vague and imprecise expressions or statements puffing or bigging up the virtues of a good • land is “improved: or an “uncommonly rich” water meadow - Andronyk v Williams (1985), (Man CA); Scott v Hanson (1829) Eng. • E.g., “It was one of the nicest cars we’ve had in a really long time” (Bentley) • Statements of Opinion • Opinions offered by someone who has no particular expertise in the matter • i.e. estimate by land vendor of sheep-bearing capacity of land - Bisset v Wilkinson (1927) PC • BUT one who possesses superior knowledge or expertise with respect to the opinion offered may be held to have made an implicit statement concerning the nature of the information upon which the opinion is based • i.e. seller of a hotel indicates current lessee was “a most desirable tenant”, statement of fact found • Smith v Land and House Property Corp (1884) Eng CA Case Heilbut Symons & Co v Buckleton (1913) HL - Ratio To establish a cause of action sounding in damages for misrepresentation, the statement must be fraudulent or, what is Notes UNSUCCESSFUL Sure it’s a rubber company Bentley (Dick) Productions Ltd v Smith (Harold) (Motors) Ltd (1965) UK Car only has 20,000 miles Redgrave v Hurd (1881) UK Buy my worthless legal practice Newbigging v Adam (1886) UK Induced into partnership with shitty machinery equivalent thereto, must be made recklessly, not caring whether it be true or not A person is not liable in damages for an innocent misrepresentation, If a representation is made in the course of dealings for a contract for the very purpose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract, that is prima facie ground for inferring that the representation was intended as a warranty MATERIAL INNOCENT REPRESENTATION Where there is an innocent material representation, unless shown the defendant can show otherwise, the inference remains that the claimant relied on the statement and its untruthfulness is sufficient grounds to rescind the contract. - RESCISSION In rescission there ought to be a giving back and taking back on both sides, including giving back and taking back of advantages. Rescission (but not damages) is available for innocent misrepresentation *OVERRULED by Bentley (no warranty) SUCCESSFUL warranty SUCCESSFUL Material innocent representation Contract rescinded SUCCESSFUL Contract rescinded THE RELATIONSHIP B/W CONTRACT & TORT What is a Special Relationship (Hedley Byrne) Can depend on the representor’s profession (Queen v. Cognos (1993) SCC) As a general proposition, it appears to be sufficient to establish a “special relationship” if the reliance of the representee on the representor’s statement was both foreseeable by the representor and reasonable on the part of the representee (Queen v. Cognos) Where the misrepresentor does not possess any particular expertise or access to superior skill and knowledge, reliance may well be unreasonable and the special relationship will be held not to exist (Kingu v Walmar Ventures Ltd (1986) BCCA) Includes professional advisers, but only in exceptional cases, such as in Esso Petroleum v Mardon, do they apply “between counterparties in a commercial context” (Par OS plc v Worldlink Group plc, [2012] EWHC) Case Hedley Bryne & Co Ltd v Heller & Partners Ltd (1964) HL Ask customer’s bank about credit of potential customer Esso Petroleum Co Ltd v Mardon (1976) UK Sure you can sell 20,000 gallons of gas/year - - - Ratio A negligently false statement made by A, which induced B to enter into a contract with C, could expose A to tort liability in a suit brought by B When two parties in a "special relationship" are parties to a contract, the party with special knowledge has a duty not to be negligent in the representations that they give to the other party. If a person with knowledge and skills makes a forecast, intending that the other should act upon it—and he does act upon it, it can well be interpreted as a warranty that the forecast is sound and reliable in the sense that they made it with reasonable care and skill. If the forecast turned out to be an unsound forecast such as no person of skill or experience should have made, there is a breach of warranty. *Important b/c other people in this kind of relationship would not have a special relationship MISTAKE ABOUT CONTRACTUAL TERMS Types of Mistakes • Mistake about terms: what is in the contract or what the contract is for Notes UNSUCCESSFUL Warranty given by D SUCCESSFUL Breach of warranty • • Occurs when one party is not clear about correct meaning of a term or terms of agreement (unilateral mistake) or where both parties understand the meaning of a term or terms differently, neither being correct (mutual mistake) • Can arise because agreement contains a term that is ambiguous, vague or imprecise so that each party can reasonably have different understanding of the meaning Mistake as to background assumptions: some fact or law that affects a party’s reasons for entering the contract Case Raffles v Wichelhaus (1964) UK Which ship are you talking about? Hobbs v Esquimalt and Nanimo Railway Co (1899) SCC Land mineral rights Staiman Steel Ltd v Commercial & Home Buildings Ltd (1976) ONT HCT Bulk lot steel Henkel v Pape (1870) UK Ratio When there is a mistake of terms, there can be no meeting of the minds and therefore no binding contract. Ambiguity can be resolved if the term which is ambiguous has a main [ordinary/objective] meaning than one party having their own separate different definition to the term. What can one reasonably infer from a mutual mistake? Ambiguity in terms – K not enforceable UNSUCCESSFUL Ambiguity resolved by ordinary meaning UNSUCCESFUL Contract enforceable Where an uninvolved third party is responsible for the mistake of terms, there cannot be consensus ad idem and therefore, no contract. 50 riffles v 3 riffles Smith v Hughes (1871) ENG Wrong type of oats for my horses Notes SUCCESSFUL - - Where a specific article is offered for sale, without express warranty, or without circumstances from which the law will imply a warranty—as where, for instance, an article is ordered for a specific purpose—and the buyer has full opportunity of inspecting and forming his own judgment, if he chooses to act on his own judgment, the rule caveat emptor applies However, if the seller was aware that the purchaser believed that the seller had warranted that a quality of the goods, the contract would fail for lack of consensus ad idem SUCCESSFUL Contract not enforceable *new trial MISTAKE IN ASSUMPTIONS Questions to ask when there is a mistake in assumptions (Bell v Lever Bros): Did the mistake as to quality of the thing “make the thing without the quality essentially different from the thing it was believed to be? (focus on subject matter of agreement) Did the mistake make the agreement “different in kind”? Case Bell v Lever Brothers Ltd (1932) ENG Shitty employee traded against his contract Solle v Butcher (1950) ENG You can’t charge rent that high on this property Ratio Mistake must be fundamental to the contract Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake. Contracts can be avoided for equity 1) If it was unconscionable for one party to have benefits from the mistake; AND one of the following: a. If the mistake of one party was induced by a material misrepresentation of the other (even if not fraudulent or fundamental); OR - Notes SUCCESSFUL *but didn’t talk about money… OVERRULED BY GREAT PEACE BUT YOU CAN USE IN CAN Contract rescinded b. Magee v Pennine Insurance Co (1969) ENG Fake insurance policy If one party lets another one stay under the delusion of the mistake; c. If the parties were under a common mistake that was fundamental and the party seeking equity was not at fault A common mistake, even on a most fundamental matter, does not make a contract void at law, but it makes it voidable in equity TD v Fortin (1978) BCSC Didn’t have the authority to sell companies At some point, a mistake can be so fundamental that a compromise agreement cannot stand, where the consensus was reached on the basis of a mistaken fundamental assumption. Restatement Law of Contracts (USA) 152. When Mistake of Both Parties Makes a Contract Voidable (1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances 154. When a party Bears the Risk of Mistake A party bears the risk of a mistake when • (a) the risk is allocated to him by agreement of the parties, or • (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or • (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. A common mistake requires an element to make contract performance impossible Great Peace Shipping Ltd v Tsavliris Salvage International Ltd (2002) ENG Too far away to rescue sinking ship *Has not been adopted in CAN and Choudry doesn’t think it should b/c it would losing flexibility to assess circumstances (i.e., a step backward) SUCCESSFUL Contract set aside *Overruled by GREAT PEACE SUCCESSFUL *affirming Solle and Magee Void ab inito (from the beginning) SUCCESSFUL *If applied to Bell, then Lever Brothers would have bared the risk – aka same result NOT in CAN This is why we still have equitable mistake in CAN (Denning: “…length of a judges foot”) FRUSTRATION What is frustration? • Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract • Frustration means ‘it was not this that I promised to do’ Frustration vs Mistake • Frustration • Contract impossible of performance by reason of non-existence of coronation process which was foundation of contract (Krell) • Discharges contract from time of frustration • Mistake • Contract voided for being based on “missupposition on the state of the facts which went to the whole root of the matter” (Griffith) • Contract voided ab initio (from the beginning) Case Krell v Henry (1903) ENG Flat to view coronation Ratio A frustration occures where a parties’ common false assumption occurs after contract formation Criffith v Brymer (1903) ENG Room to view coronation A mistake occurs where parties common false assumption occurs before contract formation Paradine v Jane (1647) ENG King’s enemies ran him off the land Taylor v Caldwell (1863) ENG Music hall destroyed by fire Where a party creates a duty or charge upon himself by virtue of a contract, he is bound to perform the duty or pay the charge, notwithstanding any accident, unless there is a clause in the contract that states otherwise. An implied condition that the parties shall be excused if performance becomes impossible from the perishing of the thing without fault of the offeror. The Sea Angel (2007) ENG Ship detained while salvaging oil When the event was foreseeable but not foreseen by the parties, it is less likely that the doctrine of frustration will be held to be inapplicable Fibrosa Spolka Akcyna v Fairbairn Lawson Combe Barbour Ltd (1943) HL There is a right to recover prepaid money in cases of frustration arising from supervening circumstances as it arises on frustration from destruction of a particular subject-matter. The Frustrated Contracts Act (ONT) 3(1)(a) pre-paid money can be refunded and (b) any future payments cases to be payable (2) if the court considers it just, given the circumstances, a party can recover some or all of the expenses incurred before frustration (3) Where a party has benefited (other than the payment of money, if the court considers it just, given the circumstances, the other party may be allowed to recover some or all of that benefit (4) for the purpose of section 3: any benefit in consideration of an obligation under the contract (5) court won’t take insurance into consideration when awarding recovery, unless a party was supposed to have insurance under the contract (6) Force majeure clause – if an act of god happens, the parties do not have to fulfill the contract; you can then discuss quantum merit if applicable (7) If it is possible for part of the contract to be severed, then the court will do so Notes SUCCESSFUL Frustration - no contract SUCCESSFUL Mistake – No contract void NOT SUCCESSFUL No force majure clause SUCCESSFUL Frustration; P’s loss is recoverable NOT SUCCESSFUL Detainment was foreseeable SUCCESSFUL *DON’T WORRY ABOUT frustration *No requirement for just in Frustrated Contract Act (BC) *more narrow than the BC one ILLEGALITY Illegal b/c prohibited by statute/legislation OR by public policy Case In The Matter of Baby “M” (1988) NJSC Kingshot v Brunskill (1953) ONCA Ungraded apple sale Ratio Surrogacy contracts are contrary to public policy b/c they guarantee the separation of a child from its mother. Contracts that are prohibited by statutes are unenforceable. Notes SUCCESSFUL Contract unenforceable SUCCESSFUL ParkingEye Ltd v Somerfield Stores Ltd [2012] UK Illegality will not be found if: If the wrong doing was either unintentional, or, if intentional, pertained only to a minor and partial mode of performance; it could have been corrected if drawn to the plaintiff’s attention; the wrongdoing was “hardly central to the performance of the contract”; Denying relief was not required by the various policy considerations underlying the illegality principle Still v MNR (1998) Fed CA Thought she had immigration benefits Where a contract is expressly or impliedly prohibited by statute, a court may refuse to grant relief to a party when, in all of the circumstances of the case, including regard to the objects and purposes of the statutory prohibition, it would be contrary to public policy, reflected in the relief claimed, to do so Contract unenforceable UNSUCCESSFUL Contract enforceable SUCCESSFUL Entitled to benefits! PERFORMANCE AND BREACH BREACH Breach: A party breaches a contract when, without lawful excuse, she fails to perform any of her contractual obligations. The burden of proof is on the claimant alleging breach. Types of breaches Anticipatory: by (i) repudiation (expressly or impliedly refusing to perform), or (ii) impossibility (being unable to perform) before performance is due; or Actual: by (iii) failure to perform when performance is due Repudiation • Occurs when one party by words or conduct evinces an intention not to perform part, or all, of the contract. Absent an express refusal, the question is whether the defendant’s acts or omissions would lead a reasonable person to conclude that she no longer intends to perform her contractual obligations (Guarantee Co of North America v. Gordon Capital Corp (1999) SCC) • Effect of repudiation depends on actions of non-repudiating party • If they elect to treat contract as still being in force, the contract remains in force for both sides (then can sue for damages); • But if non-repudiating party accepts repudiation, contract is terminated and parties are discharged from future obligations Conditions • Contingent condition - for which neither party is responsible, but upon which both parties’ obligations to perform or keep performing depend • Condition precedent – performance of one party precedes performance of second • Condition subsequent – A condition that stipulates a state of affairs under which the obligations of the parties cease to be enforceable • If the condition precedent fails or the condition subsequent occurs, there is no question of breach – and therefore no question of termination for breach – because the obligation to perform the contract does not arise or is discharged Three types of covenants (Kingston v Preston): 1. Mutual and independent • Where promissory condition undertaken by A is independent of B’s performance, A cannot terminate the contract on B’s breach, A must still perform; eg a tenant’s covenant to pay rent is independent of the landlord’s covenant to repair 2. Covenants and dependent (condition subsequent) • 3. Performance of one depends on the performance of the other, till the prior condition is performed the other party is not liable to an action on his covenant • Kingston v Preston Mutual conditions to be performed at the same time • Eg. Employer promises to provide a safe working space while employee promises to do the tasks assigned by the employer Conditions, Warranties, & Innominate Terms Previously: • Condition: an essential term, the breach of which gives the claimant the right to terminate and claim damages • Warranty: a non-essential or subsidiary term, the breach of which yields no right to termination; Now: Innominate terms: whether termination is available for breach of such terms depends on ‘waiting and seeing’ whether the actual consequences of breach are sufficiently grave for the claimant Case Kingston v Preston (1773) ENG Security bond in xchge for business Bettini v Gye (1876) ENG Poussard v Spiers And Pond (1876) ENG Opera singer falls ill Hong Kong Fir Shipping Co Ltd v Kawaski Kisen Kaisha Ltd (1962) ENG Ship only at sea for 2/7 months Cehave v Bremer (1976) ENG Animal pellets weren’t in as good condition when arrived Ratio 3 types of covenants: mutual and independent, covenants and dependent and mutual conditions to be performed at the same time Notes Major breach: If there is no express declaration, a breach will warrant repudiation where a failure to perform it would render the performance of the rest of the contract a thing different in substance from what the contract had stipulated NO REPUDIATION Minor breach: If the breach only partially affects the contract it may be compensated for in damages, but there is NO repudiation Failure to perform a contract due to illness is sufficient to breach a contract and cause repudiation The legal consequences of the breach of innominate terms depend on whether the breach has deprived or will deprive the claimant ‘of substantially the whole benefit which it was intended he should obtain from the contract’ When there is a breach of an innominate term, you may only repudiate a contract where the breach substantially deprives the nondefaulting party of the whole benefit for which they entered the contract warranty REPUDIATION condition NO REPUDIATION Seaworthiness = innominate term NO REPUDIATION innominate term GOOD FAITH Implied Terms in Contracts • Implied in Fact – terms that represent implicit or tacit understandings of the parties to the agreement with respect to the matter in question; may be found if necessary to give “business efficacy” to the agreement or, if the need for such a term obvious • Implied in Law - terms implied by courts to ensure the fair functioning of standard types of contracts • Implied from custom or usage - arise from well-established expectations within a particular trade or commercial context as to the terms on which business is normally conducted • Implied obligation of good faith Duty of Good Faith Areas • where the parties must cooperate in order to achieve the objects of the contract; • where one party exercises a discretionary power under the contract; and • where one party seeks to evade contractual duties • Classes of relationships “that call for a duty of good faith to be implied by law” • Employer terminating employment relationship; • Obligation on an insured to disclose material facts at the time of formation of an insurance contract and the insurer’s duty to deal with its insured’s claim fairly; • Duty of fair dealing imposed on parties who conduct tendering processes Case Bhasin v. Hrynew (2014) SCC - Ratio Parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily (aka don’t lie) Don’t have increase the other party’s benefits, but you can’t act to give them a disbenefit C.M. Callow Inc. v. Zollinger (2020) SCC Lets him do freebie work w/o renewing contract A breach of the duty of honest performance can occur both where a party actively lies to another party, and due to a party’s failure to act to correct misleading impressions caused by that party’s representations or actions Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District (2021) SCC Can dump waste in whichever site they choose Contracting parties have a duty to exercise contractual discretion in good faith in a reasonable manner. The loss of anticipated benefit is not dispositive, but could be relevant where it substantially nullifies the benefit of the contract. Notes *NOT GOOD FAITH H won, but third party didn’t act in good faith NOT GOOD FAITH *Adds to Bhasin v Hrynew GOOD FAITH DAMAGES Purposes for Awarding Damages • Restitution Interest: Involves preventing gain by defaulting promisor at expense of the promise or preventing unjust enrichment • Reliance Interest: damages given for purpose of undoing the harm which claimant’s reliance on the defendant’s promise has caused him. • Expectation Interests: give damages to put plaintiff in as good a position as he would have occupied had the defendant performed his promise • Expected value – actual value = expectation damages Case Wertheim v Chicoutimi Pulp Company [1911] PC Anglia Television Ltd v Reed [1972] ENG Actor repudiated contract Hawkins v. McGee (1929) NHSC (USA) “100% good hand” Carson v Willitts (1930) Ont CA Drilling holes to find oil Ratio General intention of law: The party complaining should be placed in the same position as he would have been in if the contract had been performed If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was concluded. He can claim also reasonable expenditures incurred before the contract. Expectation damages awarded should be equal to the difference b/w the value of what the claimant expected to receive and what they in fact received. COST OF SUBSTITUTION PERFORMANCE It may not be easy to compute what that chance was worth to the plaintiff, but the difficulty in estimating the quantum is no reason for refusing to award any damages Notes Reliance damages Expectation damages Expectation damages Groves v. John Wunder Co. (1939) Minn. (USA) The proper measure of damages is the reasonable cost of performing the part of the contract that the defendant willfully failed to complete. Darbishire v Warran Where the cost of replacement is higher than the market value, the market value is the awarded damages • (a) The claimant’s purpose(s) in contracting: the extra depth stipulated constituted a loss of pleasure or amenity since F wanted the comfort of a deep pool. The cost of cure is the appropriate starting point where the claimant’s purpose for a building contract is not purely financial, • (b) Cure or intention to cure: on the facts, the cost of cure exceeded the extent of F’s loss because the court found that F had no genuine intention to cure the defect. The intention to cure is evidence of the extent of their non-pecuniary loss flowing from the breach. If the claimant does not care enough to cure, awarding him the cost of cure while he keeps the existing pool would over-compensate him. • (c) Proportionality: given the benefit F had received, the House of Lords thought the cost of cure wholly disproportionate to the disadvantage F suffered from having a pool shallower than he wanted. F still had a useable and safe pool which enhanced the value of his property no less for its shallowness Ruxley Electronics and Construction Ltd v Forsyth (1995) HL Diving pool 9” short Radford v de Froberville (1977) Chaplin v. Hicks (1911) Beauty contest Folland v Reardon (2005) ONCA If C intends to sell the property or cure the property, then his interest in the property would be purely financial and the diminution of value measure would have sufficed. LOSS OF CHANCE Damages possible for loss of chance Restitution damages Expectation damages *no cost of cure awarded Expectation damages *cost of cure awarded SUCCESSFUL Loss of Chance Test: 1) P must establish on balance of probabilities that but for defendant’s wrongful conduct, plaintiff had a chance to obtain benefit or avoid loss 2) P must show that chance lost was sufficiently real and significant to rise above mere speculation 3) P must demonstrate that outcome, that is, whether the plaintiff would have avoided the loss or made the gain, depended on someone or something other than the plaintiff himself or herself 4) P must show that the lost chance had some practical value NON-ECONOMIC INJURIES Case Jarvis v. Swan Tours (1973) ENG Disappointing vacay Turczinski v Dupont Heating & Air Conditioning Ltd (2004) Ont CA Farley v Skinner [2002] HL Property on airplane path Fidler v Sun Life Assurance (2006) SCC Ratio When a contract is made for entertainment or enjoyment, it is reasonably foreseeable that failure to enjoy would cause mental distress, and under such basis you can recover damages. Generally before damages for mental distress can be awarded for breach of contract, the contract must be one where peace of mind is what is being contracted for, such as a contract for a holiday Notes SUCCESSFUL *could also be misrepresentation *CAN version of Jarvis v Swan Tours It is not necessary for the contract as a whole to be one for peace of mind so long as one important object of it was peace of mind SUCCESSFUL As long as the promise in relation to state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable SUCCESSFUL *basically CAN version of Farley Tried to revoke disability benefits (aka fuck you) REMOTENESS Case Hadley v Baxendale (1854) ENG Mill closed while waiting for replacement part Horne v Midland Railway Co (1872) UK Shoes delivered late Cornwall Gravel Co Ltd v Purolator Courier Ltd (1978) ONCA Missed out on tender due to late delivery Victoria Laundry Ltd v Newman Industries Ltd (1949) UK Couldn’t do lucrative dyeing contracts while waiting for boiler Ratio A party can only successfully claim for losses stemming from breach of contract where the loss is reasonably viewed to have resulted naturally from the breach, or where the fact such losses would result from breach ought reasonably have been contemplated of by the parties when the contract was formed. If special circumstances are communicated, the breaching party must pay the damages. If the special circumstances are wholly unknown to the breaching party, he is not liable to the additional damages that result from the special circumstances beyond those that would normally. In order that the notice may have any effect, it must be given under such circumstances, as that an actual contract arises on the part of the defendant to bear the exceptional loss. Damages resulting from special circumstances which were communicated, flowed from the contract breach and were damages which the breaching party would “reasonably contemplate” to flow from a breach of contract under such circumstances, are recoverable. - - Koufos v Cxarnikow Ltd (The Heron II) (1969) HL Missed out on sugar market - In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach What was at that time reasonably foreseeable depends on the knowledge then possessed by the parties, or at all events, by the party who later commits the breach For this purpose, knowledge “possessed” is of two kinds—one imputed, the other actual (Imputed knowledge is knowledge of the “ordinary course of things” that everyone, as a reasonable person, is presumed to have. Actual knowledge is knowledge of special circumstances outside the ordinary course of things that, if communicated to the other party, may attract the second rule in Hadley v Baxendale) What must be foreseen? D is liable if she foresees the general type (contemplated as a serious possibility the type of consequence), even if she does not foresee the extent, of the loss How foreseeable must the loss be? Must be a ‘serious possibility’, a ‘real danger’, or a ‘very substantial’ probability) than in tort actions (a ‘slight possibility’ is enough). The same loss may be too remote in contract, but not in tort Notes NOT LIABLE NOT LIABLE LIABLE LIABLE *elaborated on Hadley v Baxendale test LIABLE *quantifying how foreseeable something must be MITIGATION What does the duty to mitigate entail? • Claimant must take positive action to minimize the loss flowing from the breach • What is required is fact-specific • Mitigation may even require the claimant to renegotiate the contract with the contract-breaker • Don’t incur unreasonable expenses while mitigating Case Payzu Ltd v Saunders Thought P didn’t pay for silk Ratio In commercial cases, a party can be generally expected to consider and accept a reasonable offer made by the contract-breaker Notes LIABLE didn’t mitigate REMEDIES Punitive damages (per Vorvis v. Insurance Corporation of British Columbia (1989) SCC) • Punitive Damages • designed to punish and are an exception to general common law rule that damages are designed to compensate the injured • punitive in nature and may only be employed in circumstances where the conduct giving the cause for complaint is of such nature that it merits punishment • While it may be very unusual to do so, punitive damages may be awarded in cases of breach of contract • The conduct of the defaulting party must “be of such a nature as to be deserving of punishment because of its harsh, vindictive, reprehensible and malicious nature” • The conduct must be extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment • Vorvis opened the doors to punitive damages in Canadian law for breach of contract Case Whiten v Pilot Insurance Co (2002) SCC Falsely claimed arson and didn’t allow insurance claim - - Ratio Punitive damages are awarded against a defendant in exceptional cases for “malicious, oppressive and high-handed” misconduct that “offends the court’s sense of decency”: …. The test thus limits the award to misconduct that represents a marked departure from ordinary standards of decent behavior; AND Must be an independent actionable wrong Notes PUNITIVE DAMAGES *first case where punitive damages were awarded POLICY Courts want to uphold contract - Hobbs v Esquimalt and Nanaimo Railway Co - Dawson Problems with Equitable Mistake - Under Lord Denning’s doctrine: a contract will be set aside if it is unjust in all the circumstances to enforce it and the party seeking to set aside has not been at fault. But who is to say what is ‘‘unjust in all the circumstances” or what constitutes ‘‘fault”? Under Lord Denning’s doctrine equity would vary not only with the length of the chancellor’s foot, but with the feet of every judge in the land - Beyond the suggestion that there must be a common and fundamental misapprehension either as to facts or as to relative and respective rights, the opinion offers virtually no guidance as to the factors to be taken into account to determine whether or not such a misapprehension is present in a particular fact situation Do you agree with such and such decision
