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Contracts - Short Summary

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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
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