Contracts 209
Professor Biukovic
I.
II.
Introduction to Contracts ............................................................................................ 3
Formation of the Contract ........................................................................................... 3
1. Offer ........................................................................................................................ 3
A. Offer and Invitation to Treat ............................................................................... 3
Canadian Dyers Association Ltd. v. Burton, 1920 ............................................. 4
Pharmaceutical Society of GB v. Boots: 1953 CA Eng...................................... 4
Goldthorpe v. Logan: 1943 ENG CA ................................................................. 4
Consumer Protection Act .................................................................................... 4
Carlill v. Carbolic Smoke Ball Co: 1893 ENG ................................................... 4
Harvela Investments v. Royal Trust: 1985 HL ................................................... 5
R. v. Ron Engineering and Construction (Eastern) Ltd.: 1981 SCC .................. 5
MJB Enterprises Ltd. v. Defence Construction Ltd.: 1999 SCC ........................ 5
B. Communication of Offer ..................................................................................... 5
Blair v. Western Mutual Benefit Association: 1972 BCCA – orally.................. 5
Williams v. Carwardine: 1833 ............................................................................ 6
R. v. Clarke: 1927 Australian H.C. ..................................................................... 6
2. Acceptance .............................................................................................................. 6
A. General ................................................................................................................ 6
Livingstone v. Evans: 1925 Alberta S.C. ............................................................ 6
Butler Machine Tools v. Ex-cell-o Corp: 1979 Eng CA .................................... 7
Tywood Industries v. St. Anne-Nackawic Pulp & Paper: 1979 Ont HC ............ 7
ProCD v. Mathew Zeidenberg and Silken Mountain Web Services: 1996 US
CA ....................................................................................................................... 8
B. Communication of Acceptance ........................................................................... 8
Felthouse v. Bindley: 1862 NSCA...................................................................... 8
Carlill v. Carbolic Smoke Ball Co: 1893 HL ...................................................... 9
Eliason v. Henshaw: 1819 US ............................................................................ 9
Brinkbon v. Stahag Stahl: 1983 Eng ................................................................... 9
Household Fire & Carriage Accident Insurance v. Grant: 1879 ENG CA ......... 9
Holwell Securities v. Hughes: 1974 Eng CA...................................................... 9
C. Electronic contract formation and related problems ........................................... 9
Rudder v. Microsoft Corp, Ont. S. C. (1999) ..................................................... 9
Kanitz v. Rogers Cable Inc. .............................................................................. 10
Electronic Transaction Act, 2001 ..................................................................... 10
P. Fasciano, “Internet Electronic Mail”, 1971 .................................................. 10
J. Gregory, “The UETA and the UECA – Canadian Perspective’, 2001.......... 10
3. Termination of Offer ............................................................................................. 10
A. Revocation ........................................................................................................ 10
Byrne v. Van Tienhoven: 1880 CPD [tin plates] .............................................. 11
Dickinson v. Dodds: 1876 CA [indirect revocation] ........................................ 11
Errington v. Errington and Woods: 1952 KB [unilateral revocation] .............. 11
B. Unilateral Contracts .......................................................................................... 11
C. Rejection and Counter Offer ............................................................................. 11
1
D.
Lapse of Time ................................................................................................... 12
Barrick v. Clark (1951) – SCC, [reasonable lapse of time] .............................. 12
Manchester Diocesan Council v. Commercial Investments Ltd: 1970............. 12
4. Certainty of Terms ................................................................................................ 12
R. v. CAE Industries Ltd. [1986] ...................................................................... 13
Nicolene Ltd. v. Simmonds (1953) – QB Eng. ................................................ 13
May v. Butcher: 1929 KB ................................................................................. 14
Hillas and Co. Ltd. v. Arcos Ltd.: 1932 HL ..................................................... 14
Foley v. Classique Coaches Ltd: 1934 CA Eng ................................................ 14
Empress Towers Ltd. v. Bank of Nova Scotia: 1991 BCCA ............................ 14
Mannpar Enterprises Ltd. v. Canada: 1999 BCCA........................................... 14
Wellington City Council v. Body Corporate, 2002, N.Z. C.A. ........................ 15
Bawitko Investments Ltd. v. Kernels Popcorn Ltd, 1991, Ontario C.A. .......... 15
5. Intention to create legal relations .......................................................................... 15
Balfour v. Balfour: 1919 Eng CA ..................................................................... 15
Rose and Frank Co. v. JR Crompton and Bros. Ltd.: 1923 Eng CA ................ 16
Toronto-Dominion Bank v. Leigh Instruments Ltd, 1999, Ontario CA ........... 16
Jones v. Padavatton, 1969, All ER.................................................................... 16
6. Consideration ........................................................................................................ 16
Thomas v. Thomas: 1842 Eng QB .................................................................... 17
Eastwood v. Kenyon: 1840 QB ........................................................................ 17
Lampleigh v. Braithwait: 1615, Eng. K.B. ....................................................... 18
B. v. Arkin: 1996 Man QB [forbearance] ......................................................... 18
A. Duty owed to a third party ................................................................................ 18
Pao On v. Lau Yiu Long: 1980, PC .................................................................. 19
B. Duty owed to promisor ..................................................................................... 19
Gilbert Steel Ltd. v. University Construction Ltd.: 1976 Ont CA .................... 20
Williams v. Roffey Bros & Nicholls (Contractors Ltd.): 1990 Eng CA........... 20
Foakes v. Beer (1884) – Eng. HL ..................................................................... 20
Re Selectmove Ltd. [1995] English CA ........................................................... 20
Foot v. Rawlings [1963] SCC ........................................................................... 20
C. Waiver and Promissory Estoppel ...................................................................... 21
Central London Property v. High Trees House Ltd.: 1947 ............................... 22
John Burrows Ltd. v. Subsurface Surveys Ltd.: 1968 SCC .............................. 22
D & C Builders Ltd. v. Rees: 1966 England CA .............................................. 22
Saskatchewan River Bungalows Ltd v. Maritime Life Assurance, 1994, SCC 23
International Knitwear Architects Inc. v. Kabob Investments, 1995, BCCA ... 23
W.J. Alan & Co. v. El Nasr Export & Import Co., 1972, English QB CA ....... 23
Societe Italo-Belge v. Palm and Vegetable Oil (Malaysia), 1982, English QB 23
Petridis v. Shabinsky, 1982, Ontario HC .......................................................... 24
Robichaud c. Caisse Populaire, 1990, NB CA.................................................. 24
Combe v. Combe: 1951, England KB CA ........................................................ 24
Walton Stores v. Maher: 1988 Aus HC ............................................................ 24
M. (N.) v. A.(A.T.), 2003, BC CA .................................................................... 24
III.
Exam Notes ........................................................................................................... 26
2
I. INTRODUCTION TO CONTRACTS
 Elements of a K (in common law):
o Consensual Agreement
 Offer
 Acceptance
o Consideration (something of value to law exchanged for promise)
o Intention to create legal relations
o Requirements of form (legality). More important in civil law.
o Maturity (age), Capacity (mental health), and Consent
II. FORMATION OF THE CONTRACT
1. Offer
A. Offer and Invitation to Treat
Invitation to treat:
 a statement of willingness to entertain an offer; invitation to others to make an
offer; often a prelude to a K.
Offer:
 A promise to do or refrain from doing some specified thing in the future
 A final and definite willingness to enter into a K and be bound by its terms.
General Rule:
 Giving a mere price quote or placing goods on shelf for sale or publishing
advertisement is not an offer but an invitation to treat: Pharmaceutical Society v.
Boots
Exceptions:
 need to take into consideration the intention of the parties, their conduct and the
surrounding circumstances to determine whether price quote or ad is offer instead
of invitation to treat: Canadian Dyers Association Ltd. v. Burton, Goldthorpe v.
Logan
 promise to world at large give something in return for performance of some action
is not invitation to treat but a unilateral offer: Carlill v. Carbolic Smoke Ball Co
Tenders / Bids / Auctions (tenders not on exam):
 invitation to treat can specify the type of offer (bid) required; e.g. whether fixed
price or auction bids: Harvela Investments v. Royal Trust
 in a formal tendering process, call for tenders is not just an invitation to treat but
an offer (to accept tenders); submission of valid tender is acceptance of this offer
(contract A); the tender that is chosen is then basis for forming actual contract to
do work (contract B); R. v. Ron Engineering, MJB Enterprises Ltd. v. Defence
Construction Ltd.
3


if submitted tender is not valid (i.e. it does meet terms stated or implied in call for
tenders) then it does not result in a contract (contract A): MJB Enterprises Ltd. v.
Defence Construction Ltd.
In auction, auctioneer is making invitation to treat; those who are bidding are
making offer; invitation or offer can be revoked before hammer is hit.
Canadian Dyers Association Ltd. v. Burton, 1920
FACTS: Burton selling house, quotes price to P who sends deposit; Burton accepts
deposit and sends deed but later refuses to acknowledge contract.
ISSUE: Was there an offer? Yes, because of conduct of D.
RATIO: a mere price quote is usually only an invitation to treat but to decide if there was
an offer need to look into the intention and conduct of the parties and the surrounding
circumstances.
Pharmaceutical Society of GB v. Boots: 1953 CA Eng
FACTS: Boots is a self-service pharmacist; P charges Boots with selling without
supervision;
ISSUE: is displaying goods in a store an offer to sell? No, only an invitation.
RATIO: goods on a shelf are an invitation to treat and the offer is at the cash register with
the acceptance being the taking of the customers’ money.
Goldthorpe v. Logan: 1943 ENG CA
FACTS: P sees an ad in the paper advertising hair removal that guarantees results; goes
thru with the procedure but it was unsuccessful
ISSUE: Was there a K based on the ad? Yes, ad was an offer because it made explicit
promises (guaranteed success) based on consumer’s performance.
RATIO: general principle is that ads are invitations to treat but that depends on the
language used and the conduct of the parties – can be an offer.
Consumer Protection Act
 Allows people to get out of certain K’s
 Stemmed from the misuse of standard form K’s
Carlill v. Carbolic Smoke Ball Co: 1893 ENG
FACTS: D advertised that their smoke ball if used properly would prevent the user from
contracting the flu; offered money if didn’t work; P used it as directed and still got the flu
ISSUE: Was there an offer? Yes, it was a unilateral offer, not an invitation to treat,
because of guarantee and reward.
RATIO: if an ad promises something in return for performing certain actions then it is a
unilateral offer made to the public, not an invitation, a K is only concluded with those
that fulfill the conditions on the faith of the ad. No written notification of acceptance is
required.
4
Harvela Investments v. Royal Trust: 1985 HL
FACTS: the R sent an invitation to the A and to Sir Leonard to bid on shares; the A
offered $2,175,000 and Leonard offered $2,100,00 or $101,000 higher than the next
bidder; R gave it to Leonard
ISSUE: was the sale a fixed bid or an auction? It was fixed, based on intention of seller.
RATIO: the seller that controls the type of bidding and the intention of the seller can be
deduced through reading the provisions set out in the invitation to treat.
R. v. Ron Engineering and Construction (Eastern) Ltd.: 1981 SCC
FACTS: contractor D wanted to withdraw bid after deadline because of mistake in costs;
ISSUE: Is the D entitled to recover his tender deposit? No, he breached contract.
RATIO: the tender process is a 2 contract process (A and B); the call for tenders is the
offer and the bid submission is the acceptance; this leads to the formation of KA; entering
into KA leads to the contractual obligation that if bid is accepted will enter into KB
which is the construction K.
N.B. Contracts related to tenders are not going to be on the exam.
MJB Enterprises Ltd. v. Defence Construction Ltd.: 1999 SCC
FACTS: the lowest bidder was non-compliant but was chosen anyway; the A says that
privilege clause allows it to choose whomever they please.
ISSUE: Does the privileges clause allow them to accept a non-compliant bid? No, only
allows them to choose between valid tenders.
RATIO: two key points to remember: 1) notion of implied term of contract, in this case
the fact that contract A must be a valid contract to be considered, 2) decision that
privilege clause does not override the need to consider only valid contracts (implied
terms of contract override explicit terms of contract).
B. Communication of Offer
General rule:
 An offer must be explicitly and intentionally communicated in order to be valid:
Blair v. Western Mutual Benefit Association
Rewards:
 Notices for rewards constitute a unilateral offer. Whoever has knowledge of the
offer and fulfills the stated requirements gets the reward regardless of motive:
Williams v. Carwardine
 Exception: if don’t act on reliance of offer (are not aware of offer or give no
regard to offer) then not entitled to reward: R. v. Clarke
Blair v. Western Mutual Benefit Association: 1972 BCCA – orally
FACTS: P was the stenographer at board meeting; there was a resolution passed about
increasing the P’s retirement package; P retired to get package.
5
ISSUE: Was what was said in the board meeting in the form of an offer to Ms. Blair? No,
because it was not intended to be an offer to her.
RATIO: there needs to be intent to communicate the offer.
Williams v. Carwardine: 1833
FACTS: the D offered reward for information regarding brother’s murderer; the P
motivated by self-preservation gave a statement that lead to the conviction of the
murderer; asked for reward and was denied.
ISSUE: Is P entitled to the reward? Yes, because was aware of offer although had ulterior
motive for consenting.
RATIO: in the cases of reward the motive for fulfilling the requirements sent out should
not be considered; as long as the requirements are met (consciously).
R. v. Clarke: 1927 Australian H.C.
FACTS: reward offered for info regarding murderer; D snitched to save own skin; says
that he was aware of the reward but had no thought of it when he gave the information
(he had forgotten about it).
ISSUE: should the D get the reward even though he was not induced by the reward? No,
must have some reliance on offer to get reward.
RATIO: a person is not entitled to a reward if they did not act in any reliance on the
offer; must be aware of the offer to get the reward; in general acceptance has to be in
response to an offer.
2. Acceptance
A. General
Counter-offers / Battle of forms:
 replying to offer with modified terms is a counter-offer (not acceptance); a
counter-offer is a rejection of the original offer (a mere inquiry is not a counteroffer or rejection); the original offeror accept counter-offer, make new offer or
revive the original offer; an offer that has been rejected cannot later be accepted
except with the consent of the offeror: Livingstone v. Evans
 in battle of forms general rule is ‘last shot’ rule: there is a contract as soon as the
last form is sent and accepted without objection; however, in cases of dispute over
terms must reconcile totality of correspondence (look at all shots not just first shot
or last shot): Denning in Butler Machine Tools v. Ex-cell-o Corp
 specifically, terms added during battle of forms that are not central to deal may
not be binding if there was no attention drawn to their importance: Tywood
Industries v. St. Anne-Nackawic Pulp & Paper
Livingstone v. Evans: 1925 Alberta S.C.
FACTS: D offers to sell P land for $1800; P counter-offers lower price; D replies that he
cannot reduce the price; P writes accepting the offer but D sells to someone else.
ISSUE: Was reply “can’t reduce price” a renewal of original offer? Yes, because
reiterates original price.
6
RATIO: a counter-offer is a rejection of the original offer but it is possible to revive an
original offer by replying back to a counter-offer, depending on the surrounding
circumstances; an offer that has been rejected cannot later be accepted except with the
consent of the offeror; (note that a mere inquiry is not a rejection).
Butler Machine Tools v. Ex-cell-o Corp: 1979 Eng CA
FACTS: buyer and seller send forms back and forth regarding price of a machine; when
delivery comes the seller has increased the price and there is a dispute about it.
ISSUE: Who’s terms and conditions prevailed? In this case, circumstances were such that
the buyer’s terms prevailed since the seller finally signed and returned their form.
RATIO: battle of forms:
 Lord Denning identifies several possibilities for courts:
1. Last shot: a contract is concluded upon the terms of the last document sent by
one of the parties and not objected to.
2. First shot: a contract is concluded upon the terms of the first document.
3. All shots count and the court must discover its terms on an objective basis:
a) a contract is concluded upon terms drawn from all the documents that
have passed between the parties when the terms can be reconciled as to
give a harmonious result; or
b) if material points are not agreed upon then a contract is not concluded
since differences are irreconcilable
 Which test prevails depends on circumstances; need to look at totality; courts
have discretion to choose;
Tywood Industries v. St. Anne-Nackawic Pulp & Paper: 1979 Ont HC
FACTS: battle of forms during which D adds arbitration clause at one point; forms never
signed and returned but goods delivered; dispute over arbitration clause;
ISSUE: Did the contract include the arbitration clause? No, because added without
drawing any attention to it and it was not key term in deal.
RATIO: If neither party considered other’s terms then assumption is that closing business
deal was main concern and non-key terms not binding.
 NB: could also be considered an ‘unconscionability bargain’ (see notes below)
 NB: traditionally held that in order to constitute a completed contract, the forms
exchanged must contain no variant terms (the “mirror image” rule: acceptance
mirrors terms and conditions of offer). If this is not the case then the responding
forms constitute a counter-offer, not an acceptance; contract not formed. Strict
application is a thing of the past, when formality was considered basis of contract.
Now, contract is considered formed as long as material core terms of offer are
accepted.
Unconscionable Bargain:
 an unfair bargain where one party takes advantage of the other (e.g. by adding
fine print and not drawing any attention to it). Especially important in consumer
setting. (Gross imbalance of considerations).
 one party is in a better bargaining position and they impose an inadequate/unfair
K to serve their own purposes and hope that the other party does not realize
7
ProCD v. Mathew Zeidenberg and Silken Mountain Web Services: 1996 US CA
FACTS: D buys consumer version of ProCD software but uses for commercial purposes.
Trial judge found for D since license terms were not visible on package and a contract
cannot include hidden terms. P appeals decision.
ISSUE: Are license terms enforceable if on inside of box? Is acceptance at time of sale?
RATIO: Acceptance is dictated by terms of offer. Software not accepted till agree to
license, at which point buyer is bound by license terms (buyer can return goods for refund
if don’t accept license).
B. Communication of Acceptance
General rules:
 Acceptance must be communicated to offeror (silence is not valid acceptance):
Felthouse v. Bindley
 Recipient rule: acceptance is effective when received by the offeror (true for all
instantaneous communication; e.g. phone, telex): Brinkbon v. Stahag Stahl
 The offeror determines (expressly or implied) the method of communication of
the acceptance: Eliason v. Henshaw
 If an offeror has not insisted on one mode of acceptance, an acceptance
communicated to the offeror by same mode or any mode which is no less
advantageous to the offeror will conclude the contract: Manchester Diocesan
Council v. Commercial Investments Ltd
Exceptions:
 Unilateral offers do not require communication of acceptance (acceptance is
based on performance): Carlill v. Carbolic Smoke Ball Co
 Mailbox rule: acceptance still needs to be communicated but is effective when it
is delivered to post office, not when received (true for non-instantaneous
communications; e.g. mail, courier, telegraph): Household Fire & Carriage
Accident Insurance v. Grant
 Exceptions to mailbox rule: does not apply if it leads to absurdity or
inconvenience; does not apply if the offer explicitly states that the acceptance
must reach the offeror: Holwell Securities v. Hughes
Felthouse v. Bindley: 1862 NSCA
FACTS: nephew offers to sell a horse to his uncle (P); the uncle makes a counter-offer;
nephew intends acceptance but before can deliver horse it is accidentally sold at an
auction; P sues the auctioneer.
ISSUE: Was there a complete K between the nephew and the P (and therefore did P own
the horse)? No, acceptance was not clearly communicated.
RATIO: silence is not acceptance of an offer save for exceptional circumstances (e.g.
where an offeree indicates that an offer is to be taken as accepted if she does not indicate
to the contrary in an ascertainable time); in general the offeror is in control of the mode
of acceptance but the courts are reluctant to allow offeror to impose acceptance when a
party is silent.
8
Carlill v. Carbolic Smoke Ball Co: 1893 HL
FACTS: see above
ISSUE: Is there a contract if there has been no notice of acceptance? Yes, the acceptance
was the conduct of using the ball in the prescribed manner.
RATIO: Acceptance of a unilateral contract is through fulfilling the conditions of the
offer; i.e. notification is not then required.
Eliason v. Henshaw: 1819 US
FACTS: offer to buy flour includes stipulation of mode of acceptance; D accepts offer
but sends notice by post not by wagon (as specified); P refuses to acknowledge
acceptance and claims no K.
ISSUE: Was there acceptance of the offer and therefore a K? No, the acceptance was
invalid because did not meet terms specified by the offeror.
RATIO: if there is a specified mode of acceptance and the acceptance was not made in
that mode then there is no K
Brinkbon v. Stahag Stahl: 1983 Eng
FACTS: offer (by seller in Vienna) and acceptance (by buyer in London) sent by telex.
ISSUE: Where was contract formed? The recipient rule applies, so contract formed when
acceptance received by sellers in Vienna.
RATIO: General recipient rule applies to instantaneous communications such as telex.
Household Fire & Carriage Accident Insurance v. Grant: 1879 ENG CA
FACTS: D makes an application to buy shares; P confirms the sale by a letter sent thru
the post; the letter never made it to the D; company goes under and P seeks payment.
ISSUE: was there a K here for the sale of shares? Yes, because of mailbox rule.
RATIO: the establishment of the mailbox rule – the K is complete when the acceptance is
posted and the offeror is bound by that acceptance even if he never receives it (the post
office was the agent of both parties).
Holwell Securities v. Hughes: 1974 Eng CA
FACTS: Hughes sent a letter by post to exercise an option; it was never received; it was
expressly stated in offer that acceptance must be received in writing;
ISSUE: Does the postal rule apply and was there a K? No, postal rule does not apply
because of specification that acceptance must be received.
RATIO: postal rule s/ not apply if it leads to an inconvenience or absurdity; the rule does
not apply if the offer explicitly states that the acceptance must reach the offeror.
C. Electronic contract formation and related problems
Rudder v. Microsoft Corp, Ont. S. C. (1999)
Didn’t cover in class and not in case chart.
9
Kanitz v. Rogers Cable Inc.
FACTS: argument over addition of arbitration clause to electronic contract for ISP.
Notice of change was prominent, but actual contract text was not.
ANALYSIS: Contract for Internet service was a “take it or leave it” contract. The
original agreement allowed for changes to the contract; given the alert message on the
main page it is reasonable to expect a customer who uses the Internet to be able to go
further than the main page of the website and check for changes to the contract. There
was a clear inequality of bargaining position of the parties, however notice of the
amendment was not unreasonably buried in the agreement, but was set out in plain
language without legalese.
HELD: The arbitration clause was held not unconscionable as both parties are obliged to
arbitrate and resulting contractual arrangements were not improvident.
Electronic Transaction Act, 2001
Important point is that statute makes “click-through” contracts enforceable. Adopted in
all provinces including Quebec. Electronic contracts treated same as non-electronic
contracts. Email treated (by statute) as instantaneous although scholars think mail-box
rule should apply – no precedent in case law. Parties are free to decide of they want to
use e-modes, that’s fine, but need to be consistent and agree. Recall Big Sky where courts
didn’t spend too much time qualifying e-stuff – just accepted it.
P. Fasciano, “Internet Electronic Mail”, 1971
E-mail is more suited to mailbox rule than recipient rule, since it is neither two-way nor
instantaneous.
J. Gregory, “The UETA and the UECA – Canadian Perspective’, 2001
Comparison and American and Canadian Codes on Uniform rules of Electronic
Transactions. Note also in USA there is UCITA and the parent of them all, UCC.
3. Termination of Offer
A. Revocation
General Rules:
 An open offer can be revoked any time before offer is accepted. The revocation of
an offer takes effect when it is communicated to offeree and mailbox rule does not
apply: Byrne v. Van Tienhoven
 Acceptance of offer by one party amounts to revocation of offer to all other
parties; offer is dead (as if offeror had died) and revocation does not have to be
directly communicated: Dickinson v. Dodds
 General rule for unilateral contracts used to be that could any time before
performance completed but now rule is a unilateral K cannot be revoked once
performance has begun: Errington v. Errington
Other forms of rejection (by offeree) or revocation (by offeror):
 Explicit rejection or silence
10




Counter-offer (terminates original offer)
if offeror dies then offer dies with him/her; cannot accept after death
Time lapse (explicitly stated or “reasonable” time): see next section
If offeree does not comply with terms of offer: see Eliason v. Henshaw above
Byrne v. Van Tienhoven: 1880 CPD [tin plates]
FACTS: buyer accepts offer from seller before it receives revocation notice from seller
(but after revocation notice was put in mail)
ISSUE: Was revocation effective or did contract stand? The contract was binding because
revocation received too late.
RATIO: an offer can be withdrawn before it is accepted but communication of
revocation, in order to be effective, has to reach the offeree before they accept the offer;
the revocation of an offer only takes effect when it is communicated to the offeree; the
mailbox rule does not apply to revocation;
Dickinson v. Dodds: 1876 CA [indirect revocation]
FACTS: the D was selling house; made offer to P, specifying date that offer was open
till; P found out indirectly that D offered house to another and who had accepted; the P
gave his acceptance but D said it was too late b/c he had already sold it to another.
ISSUE: Was the D bound to hold an offer open till date specified? Does the revocation
have to be directly communicated to the affected party? No on both counts, the offer was
revoked as soon as 3rd party accepted offer.
RATIO: a promise to hold an offer open is not binding unless the consideration is
provided in return; once offer is accepted by one party it is no longer open to other
parties; in this case revocation can be communicated indirectly or even not at all;
Errington v. Errington and Woods: 1952 KB [unilateral revocation]
FACTS: father-in-law made a unilateral promise to give house to daughter-in-law as long
as they made mortgage payments; he died; the estate owned the house
ISSUE: Was the promise binding and if so did it survive his death? Yes, there was a
unilateral K and the daughter-in-law was performing.
RATIO: a unilateral K cannot be revoked once the offeree has started performing (even if
offeror dies).
B. Unilateral Contracts
See Errington case above for rule concerning unilateral contracts; Dawson case doesn’t
seem important (concerns enforcement of bilateral contract).
NB: skipped over Baughman case: options won’t be on exam.
C. Rejection and Counter Offer
Livingstone v. Evans: See Acceptance – General above.
11
D. Lapse of Time
General Rules:
 An offer that is expressly stated to last for a fixed time cannot be accepted after
that time; and
 An offer that contains no express provision limiting its duration terminates after
lapse of a ‘reasonable time’; determination of reasonable time is based on
conditions and conduct within each case: Barrick v. Clark
Barrick v. Clark (1951) – SCC, [reasonable lapse of time]
FACTS: A potential purchaser took 25 days to respond to an offer of farm land. By that
time, the land had been sold to someone else.
ISSUE: Was acceptance within reasonable lapse of time of offer? No, based on
correspondence of this case, offeree took too long.
RATIO: An offer will expire in a reasonable amount of time depending on the nature and
character of the offer and normal business practices. Rule = Words + Conduct +
Circumstances + Nature of the K.
Manchester Diocesan Council v. Commercial Investments Ltd: 1970
FACTS: the P was selling property; D sent acceptance letter conditional on the approval
of minister of Education; by time approval was given the D no longer wanted it.
ISSUE: Was this a reasonable delay? Yes, the seller knew would take time and intended
to stick with offer.
RATIO: re-emphasis of last ratio; an offer must be accepted within a reasonable time
based on conditions of each case; may be extended if the conduct of the offeree within
that period indicates an intention to accept and this is known to the offeror.
Also, if an offeror has prescribed a particular method of acceptance, but not in terms
insisting that it be the only mode of acceptance, an acceptance communicated to the
offeror by any other mode which is no less advantageous to the offeror, will conclude the
contract.
NB: it is offeror’s conduct and intentions that are relevant to determining if offer has
lapsed. Look to offeree’s conduct and intentions to see if offer is rejected or accepted;
e.g. if offeree does not respond at all to offer..
4. Certainty of Terms
General rules:
 if terms are so vague and uncertain as to be unenforceable then contract is no
good, but if can give terms meaning based on intent of parties then contract
binding under those meanings: R. v. CAE Industries Ltd
 if there is a meaningless term and by its nature it is severable from the K, there is
no need by the court to strike down the whole K – i.e. a meaningless clause does
not kill the K if the parties treat the K as being in force: Nicolene Ltd. v.
Simmonds
 general rule is all essential terms have to be settled on to conclude a valid
contract; a bare agreement to agree is not binding: May v. Butcher
12


however where possible courts will try to save contract by giving reasonable
meaning to vague terms (softens May v. Butcher); this meaning must be based on
some benchmark, formula or mechanism provided in the contract: Hillas and Co.
Ltd. v. Arcos Ltd
o exception: the actions and intention of parties can be enough to enforce a
K that is missing an essential term such as price: Foley v. Classique
Coaches Ltd
general rule is it is not sufficient for essential term to be ‘negotiated in good faith’
since this mechanism is to subjective: Mannpar Enterprises Ltd. v. Canada and
Wellington City Council v. Body Corporate
o exception is if formula is provided then can possibly imply mechanism of
good faith to enforce contract: Empress Towers Ltd. v. Bank of Nova
Scotia
Two latin rules:
- contra proferentem: if terms are vague, interpretation goes against drafter of
contract.
- ejusdem generis: general terms should be interpreted to follow meaning of
specific terms
Statutes:
- Sale of Goods Act: provides guidelines for interpreting contracts if terms are not
specified. Section 12: if price not set (or means of determining price not set),
buyer must pay “reasonable price”. Section 13: if third party fails to set price then
contract is void unless goods have already been delivered.
R. v. CAE Industries Ltd. [1986]
F – Crown sold former Air Canada aircraft maintenance base to CAE subsidiary; Crown
made vague assurances about hours of work CAE could expect; the workload diminished
and CAE sued for breach.
I – Were assurances binding in contract? Yes, even though vague, court enforces contract
terms based on conduct of parties.
R – “intention to enter a contract may be gathered from the surrounding circumstances”;
if terms are so vague and uncertain as to be unenforceable then contract is no good, but if
can give terms meaning based on intent of parties then contract binding under those
meanings; court considers nature of legal relationship between parties and whether the
contract has been partially performed.
Nicolene Ltd. v. Simmonds (1953) – QB Eng.
FACTS: A clause to the effect that "the usual conditions of acceptance apply" was held to
be so vague and uncertain as to be incapable of any precise meaning. The court then
severed the clause "but the contract, nevertheless, remains good." This is an example of
meaningless phrases.
RATIO: Denning rules that if a meaningless clause exists, the court can strike it out and
still enforce the contract, assuming the clause is severable.
13
May v. Butcher: 1929 KB
FACTS: wanted to buy tentage but left price and dates open to negotiation from “time to
time”; there was arbitration clause included; the two parties cannot reach an agreement
ISSUE: Are the terms of the K sufficiently defined to constitute a legally binding K b/w
the parties? No, an agreement to agree is not binding.
RATIO: All essential terms must be defined; an agreement to agree is not binding;
NB: Not considered a good decision since this strict interpretation does not follow later
decisions that recognize right to use of arbitration.
Hillas and Co. Ltd. v. Arcos Ltd.: 1932 HL
FACTS: the D was to supply timber at price that would be determined according to
published price list; D opted out; P sued for breach;
ISSUE: Is the contract enforceable? Yes, since vague terms can be given meaning and
parties intended to be bound by contract.
RATIO: Where possible courts will interpret vague terms in context of whole contract;
this meaning must be based on some benchmark, formula or mechanism provided in the
contract; softens May v. Butcher
Foley v. Classique Coaches Ltd: 1934 CA Eng
FACTS: the D agreed to buy land from the P and buy petrol from them; the price of the
petrol was not specified; after three years D went elsewhere for petrol
ISSUE: Is the D bound to buy the petrol from the P? Yes, since had not objected for three
years, contract was still enforceable.
RATIO: the actions and intention of parties can be enough to enforce a K that is missing
an essential term such as price.
Empress Towers Ltd. v. Bank of Nova Scotia: 1991 BCCA
FACTS: P leased to the D bank with an option to renew; the rental rates would be market
value prevailing at the start of the renewal term as mutually agreed upon; D wanted to
exercise their option to renew the lease but P stalled;
ISSUE: was renewal clause in contract binding? Yes, even though price not set, since
benchmark was given. Parties must negotiate in good faith.
RATIO: this is exception to CL rule that duty to negotiate in good faith is not
contractually binding; if there is a formula (market value) but no mechanism, then court
can supply a mechanism (good faith).
Mannpar Enterprises Ltd. v. Canada: 1999 BCCA
FACTS: P granted permit to extract gravel; there was a right to renew but price not set; D
elect not to give P renewal;
ISSUE: is the renewal clause binding? No, since price not set.
RATIO: an agreement to agree is not binding without formula, benchmark or objective
mechanism to determine rent; good faith is of no help.
14
Wellington City Council v. Body Corporate, 2002, N.Z. C.A.
FACTS: P sued for breach by Council to negotiate in good faith to sell leased property.
Council appealed.
ISSUES: was duty to negotiate in good faith binding? No, too subjective.
RATIO: a bare agreement to negotiate in good faith is not sufficient to enforce a contract;
‘good faith’ is a subjective concept is not legally binding. If contract specified clear
objective mechanism for parties to follow then the process could be enforceable (e.g.
tender contracts).
NB: in civil law countries, ‘good faith’ is a legal obligation. In common law it is not and
whether it is enforced depends on very fine distinctions between cases (e.g. long term
relationship, evidence of intent, presence of formula).
Bawitko Investments Ltd. v. Kernels Popcorn Ltd, 1991, Ontario C.A.
FACTS: parties made an initial oral agreement to grant the franchise; talks broke down
over written contract.
ISSUES: was the oral contract a binding agreement to grant the franchise? No, because
not all essential terms were agreed upon.
RATIO: contract not formed until all essential terms are agreed on.
NB: certainty, intention and consideration are usually wrapped up together; if all three are
present then court will be more likely to rule for binding contract.
5. Intention to create legal relations
General rules:
 an agreement will not constitute a binding contract unless it is one which can
reasonably be regarded as having been made in contemplation of legal
consequences
 there is a strong presumption in social and family agreements that they are not
intended to be legally binding unless they are expressly specified otherwise:
Balfour v. Balfour
 there is a strong presumption in commercial agreements that they are intended to
be legally binding unless they are expressly specified otherwise: Rose and Frank
Co. v. JR Crompton and Bros. Ltd
 consider all factors; intent, certainty, consideration and sophistication of parties,
reasonable person test, to decide legality of agreement; e.g. comfort letters known
by businesses not to be binding: Toronto-Dominion Bank v. Leigh Instruments
Balfour v. Balfour: 1919 Eng CA
FACTS: P sued her husband for allowance money promised; they separated; husband did
not pay; lower court found for wife
ISSUE: was there a binding obligation? No, an agreement b/w a husband and a wife
(when made while amicable) is one where there was no intention of legal consequences.
15
RATIO: there must be proven intention of the parties to create an agreement with legal
consequences in order for the courts to treat is as such and there is a presumption that an
agreement b/w a husband and a wife is not such an agreement.
NB: definition of consideration given: “consideration, as we know, may consist either in
some right, interest, profit, or benefit accruing to one party, or some forbearance,
detriment, loss or responsibility given, suffered, or undertaken by the other.”
Rose and Frank Co. v. JR Crompton and Bros. Ltd.: 1923 Eng CA
FACTS: the parties signed an ‘honourable’ agreement that was said not to be legally
binding; D breaches agreement;
ISSUE: Was the honourable pledge clause binding? No, because there was explicit
intention not to be legally binding..
RATIO: intent will usually be inferred in a concluded business contract, but not if there is
clear language expressing otherwise.
Toronto-Dominion Bank v. Leigh Instruments Ltd, 1999, Ontario CA
FACTS: ‘comfort letters’ were provided to Bank to assure them loans would be repaid; as
a result Bank provided Leigh line of credit; debt not paid
ISSUE: Were comfort letters binding? No, based on circumstances and sophistication of
parties it should have been understood that letters were not legally binding.
RATIO: consider all factors; intent, certainty, consideration and sophistication of parties,
to decide legality of agreement.
Jones v. Padavatton, 1969, All ER
FACTS: daughter left good job in States to go to law school in England, mother promised
support (first by monthly allowance then by providing house). After few years, relations
break down and mother sues to get house back.
ISSUE: Was there intention to be legally binding? Were the terms too uncertain to be
binding? Is there good consideration?
RATIO: family agreements are presumed not to be legally binding; terms too vague and
uncertain cannot be binding;
NB: what daughter gave up, even if not a direct benefit to mother, does constitute good
consideration (see next section).
6. Consideration
6.1
Nature of Consideration
Consideration:
An act, forbearance, or promise by one party to a contract that constitutes the price for
which he buys the promise of the other.
General Rules:
 A consideration of some legal and economical value is required.(unless contract is
formally made under seal, e.g. deed): Thomas v. Thomas
16




Consideration must be sufficient but not necessarily adequate (must have some
economic value, but doesn’t need to be a realistic price for the promise it buys):
Thomas v. Thomas
If there is evidence of duress (coercion) or fraud (misrepresentation with intent to
induce action) or undue influence, then is not good consideration: Pao On v. Lau
Yiu Long
Consideration must move from the promisee; can be a benefit given to the
promisor or a detriment or loss from the promisee: Thomas v. Thomas
Consideration must be ‘fresh’: i.e. it may be executory (future promise) or
executed at time of contract (present act or forbearance) but must not be in past
(except for certain exceptions – see next section)
Thomas v. Thomas: 1842 Eng QB
FACTS: dying husband declared it was his wish that wife have the house;
executors complied under condition she pay 1l a year for repairs and that she not
marry again; after the co-executor died the D tries to evict her;
ISSUE: Was the agreement b/w the P and the D legally binding? Was there
consideration? Yes, because of 1 pound payment.
RATIO: moral obligation (to respect wishes of deceased) is not consideration
since does not move from promisee and does not have economic value, but
payment of nominal fee is valid consideration. “Consideration means something
which is of some value in the eye of the law.”
6.2
Past Consideration
General rule:
 any act or forbearance that occurs before promise is given is not valid
consideration: Eastwood v. Kenyon
Exception when following three conditions are met (taken from Pao On v. Lau Yiu Long):
1. the act of the promisee must be done at the pomisor’s request; see Lampleigh v.
Braithwait
2. the parties must have understood that the act was to be remunerated by a payment
or the conferment or some other benefit, and;
3. the payment, or the conferment of benefit must have been legally enforceable had
it been made in advance
Eastwood v. Kenyon: 1840 QB
FACTS: P was guardian of girl and spent $ on her education; she promised to pay
the debt; Sarah married the D and he promised to pay but never did;
ISSUE: was D’s (husband and wife) promise binding? No, because consideration
occurred before promise.
RATIO: the court says that moral obligation is nudum pactum (a voluntary
promise without consideration); and past consideration is not valid consideration.
17
Lampleigh v. Braithwait: 1615, Eng. K.B.
FACTS: D killed somebody; P rode around to get a pardon from the king at the
request of D; the D then promised 100l for the P’s effort but never paid.
ISSUE: should the P get the $ based on promise or was consideration past?
RATIO: A past act is good consideration for a subsequent promise if that act was
requested by the promisor and a reasonable person would expect to be paid.
6.3
Forbearance
General Rule:
 If there is honest and serious intention to sue, forbearance or settlement (two
forms of compromise) can be valuable consideration at common law.
Exception:
 forbearance is not binding consideration in cases where the threatened claim is
invalid: B. v. Arkin
B. v. Arkin: 1996 Man QB [forbearance]
FACTS: kids caught shoplifting in Zellers; mom pays fee in return for not being
sued in civil court; finds out she could not be sued and seeks to recover money.
ISSUE: Can she get money back? Yes, since agreement was not valid.
RATIO: forbearance is not binding in cases where the claim is invalid; but if it is
a valid claim then forbearance is good consideration; sets important precedence of
exception to rule that forbearance is good consideration.
6.4
Pre-existing Legal Duty
Duty imposed by legal/public duty

Traditional legal doctrine is promising to perform an act when already under a
legal duty to perform is not sufficient consideration to support another
promise (Collings v. Doefroy, (1831) 1 B. & Ad 95);

But, an act done, which is in excess of the legal duty, will be sufficient
consideration (Glasbrook Brothers v. Glamorgan County Council [1925] AC
270); re: family settings - see Lord Denning in Ward v. Byham [1956] 1
W.L.R. 496 and Williams v. Williams [1957] 1 W.L.R. 148

Public duty: traditional view is that if, in exchange for a promise, the promisee
agrees to perform, or actually performs, a public duty, there is no
consideration .
A. Duty owed to a third party

The performance of an existing obligation to a third party is sufficient
consideration to support a promise between the promisor and promisee
18
(Shadwell v. Shadwell (1860) 9 CBNS 159; uncle’s promise to nephew if
marries is enforced), particularly in the family context.

Pao On v. Lau Yiu Long [1980] A.C. 614: the past performance of a preexisting contractual obligation to a third party can be valid consideration if
meets test for past consideration above:
Pao On v. Lau Yiu Long: 1980, PC
FACTS: P’s company agrees to sell out to D’s company in exchange for shares; the P
agrees to hold on to 60% of the stock, with understanding that he get some protection in
case the stock crashes; later makes protection deal with the D directly (not D’s company)
but when stock does crash D refuses to buy back shares;
ISSUE: Was there valid consideration for side deal? Was this deal cut under duress?
Consideration was valid and there was not undue duress.
RATIO: a promise to perform, or performance of a pre-existing duty to third party can be
valid consideration. Past performance can be consideration if three conditions are met:
1. The act of the promisee must be done at the promisor’s request
2. The parties must have understood that the act was to be remunerated by a
payment or the conferment or some other benefit
3. The payment, or the conferment of benefit must have been legally
enforceable had it been made in advance
NB: there was commercial pressure to contract but this is normal business practice and
experienced commercial parties should be able to handle it; there was no fraud, coercion
or undue duress so as to vitiate consent.
B. Duty owed to promisor





General rule is that promises made on basis of existing contractual duties already
owed promisor are not binding. There must be new consideration to support new
promise. Stilk v. Myrick (promise to pay sailors more midway through voyage not
binding). Hartley v. Ponsonby (sailors that brought ship back to port after other
deserted were awarded their promised reward since they went above and beyond
their normal duty.)
A modification to a contract is invalid unless supported by new consideration or if
original contract is rescinded: Gilbert Steel Ltd. v. University Construction
Pre-existing legal duty owed to the promisor may be a valid consideration for a
subsequent promise if the promisor derives practical benefit from the agreement
and if not given under economic duress: Williams v. Roffey
Agreement to accept lesser sum in satisfaction for whole amount is not good
consideration (in creditor/debtor situation): Foakes v. Beer, and Re Selectmove
(Canada)
Forms of payment other than cash can be ‘new’ consideration for agreements to
repay debts: Foot v. Rawlings
19
Gilbert Steel Ltd. v. University Construction Ltd.: 1976 Ont CA
FACTS: P entered into a written K with the D to deliver steel at fixed price; a new
written K was subsequently entered into with a higher price; there was then an oral K for
a second price increase;
ISSUE: was the 2nd increase binding? No, there was no new consideration.
RATIO: a modification of a K must be supported by new consideration (or by rescinding
original contract and entering into whole new contract.)
NB: a good contract should include clause to allow such modifications to take effect, e.g.
by automatically rescinding and reinstating contract.
Williams v. Roffey Bros & Nicholls (Contractors Ltd.): 1990 Eng CA
FACTS: the D entered into a K to renovate 27 flats; the D was concerned would not
finish in time so promised additional money for each flat finished;
ISSUE: was there consideration for the D’s promise to pay an additional price per flat?
RATIO: the benefit that the D received was sufficient for consideration – finish the
construction on time and avoid penalty costs; no economic duress found here b/c it was
the D that suggested the increase in $;
NB: This case has not been followed (yet) in Canada, but could be used to make
distinction from general rule set by Gilbert Steel.
Foakes v. Beer (1884) – Eng. HL
FACTS: Foakes owed $ to Beer who promised that she would not sue him as long as he
made down payment and paid instalments; Foakes paid her back full amount; Beer sued
him when he refused to pay interest.
ISSUE: Was Beer’s promise binding? No, because agreement to pay lesser sum in
satisfaction of whole amount (including interest) is not binding.
RATIO: Agreement to accept lesser sum in satisfaction for whole amount is not good
consideration; rule provides full protection to creditors, but can get around it using
promissory estoppel; see High Trees (England) and Robichaud (Canada).
NB: this CL law rule has been overruled by legislation in many provinces; Law and
Equity Act, s.43 in BC.
Re Selectmove Ltd. [1995] English CA
FACTS: Selectmove proposed income tax repayment schedule; tax rep did not have
authority to accept but said would ask supervisor; there was no response; Selectmove
made some payments and wanted to enforce arrangement; Govt wanted full amount
ISSUE: Was repayment deal enforceable? No, since not clear acceptance and no
consideration (confirms Foakes v. Beer).
RATIO: General rule in Canada concerning pre-existing duty to promisor set by Gilbert
Steel but be aware of English cases; if creditor/ debtor situation can apply Foakes; if
goods and service contract situation then can apply Williams.
Foot v. Rawlings [1963] SCC
FACTS: made repayment deal including acceptance of lower interest in return for regular
instalment payments; Rawlings sued for full amount part way through repayment;
20
ISSUE: Was repayment deal enforceable? Yes, since there was slight modification of
consideration.
RATIO: Forms of payment other than cash can be ‘new’ consideration for agreements to
repay debts, even if full amount is not repaid. The SCC circumvented Foakes v. Beer,
which has generally been superseded anyway by Denning judgement in Central London
case below (estoppel).
C. Waiver and Promissory Estoppel
Estoppel – A bar that prevents one from asserting a claim or right that contradicts what
one has said or done before or what has been legally established as true.
Promissory Estoppel:
 Modern concept of promissory estoppel established by House of Lords in Hughes
v. Metro Railway Co (1877) 2 App. Cas. 439 (H.L.)).
 Lord Denning developed the modern law of promissory estoppel in Central
London Property Trust Ltd. v. High Trees House Ltd. [1947] K.B. 10 indicating
that the following elements are required to found a promissory estoppel (referring
to Hughes):
o a clear and unequivocal promise or representation as to future conduct
which indicates that the promisor will not enforce all his rights under the
existing contract with the promisee
o which the promisee relies on and which it would be unconscionable or
inequitable for the promisor to revert and insist upon his full contractual
rights
General rules of promissory estoppel:
1. Existing legal relationship between the parties at the time the statement on which
the estoppel is founded was made: Combe v. Combe
2. Promise - there must be a clear promise or representation made by the party, by
words or by conduct, against whom the estoppel is raised, establishing her or his
intent to be bound by what she or he has said: John Burrows Ltd. v. Subsurface
Surveys
3. Reliance - there must have been reliance, by the party raising the estoppel, upon
the statement or conduct of the party against whom the estoppel is raised: Societe
Italo-Belge v. Palm and Vegetable Oil (Malaysia)
4. Detriment/Alteration of Positions - action by the promisee based on the belief
induced by the promisor: W.J. Alan & Co. v. El Nasr Export & Import
5. Inequitable to go Back - estoppel only enforced if it would be inequitable and
unconscionable for promisor to go back on promise: D & C Builders Ltd. v. Rees
6. Sword or Shield - promissory estoppel can usually only be argued as a shield
against existing contractual rights, and not as a sword to create new rights: Combe
v. Combe (no), Robichaud c. Caisse Populaire (yes)
7. Suspensive / Extinctive – estoppel/waiver can be temporary or permanent
suspension of rights of promisor; can revive rights with reasonable notice if
equitable to do so: W.J. Alan & Co. v. El Nasr Export & Import
21
Waiver:
 Denning; “The principal of waiver is simply this: if one party by his conduct,
leads another to believe that the strict rights arising under the contract will not be
insisted on, intending that the other should act on that belief and he does act on it,
then the first party will not afterwards be allowed to insist on the strict legal rights
when it would be inequitable for him to do so.”: W.J. Alan & Co. v. El Nasr
Export & Import Co
 Must have (1) a full knowledge of rights, and (2) an unequivocal and conscious
intention to abandon them; Saskatchewan River Bungalows Ltd v. Maritime Life
Assurance
 Can retract waiver and revive waived rights if not inequitable and give reasonable
notice: International Knitwear Architects Inc. v. Kabob Investments, Petridis v.
Shabinsky (not enough notice)
Central London Property v. High Trees House Ltd.: 1947
FACTS: P reduces the rent for D during the war b/c they could not fill the flats; when the
war was over they were able to fill the flats; the P asks for the original agreed rent
retroactively from when the flats were full.
ISSUE: Is the promise to accept a lower rent enforceable? If so, for how long?
RATIO: Denning decision establishing promissory estoppel; uses equity to get around
strict Foakes v. Beer principle; a promise intended to be binding, intended to be acted on
and in fact is acted on, is binding even if there is no consideration. Duration of
promissory estoppel is determined by circumstances – in this case only for the duration of
low vacancy.
John Burrows Ltd. v. Subsurface Surveys Ltd.: 1968 SCC
FACTS: P selling business to D; payment by instalments except contract allowed P to
demand full amount if the D failed to make payments on time; P allows some late
payments but then gets fed up and demands full payment;
ISSUE: Did the P relinquish his rights to original contract by initially allowing late
instalment payments? No, because never intended to waive his rights.
RATIO: waiving of rights must be clear and unequivocal; friendly indulgence cannot be
regarded as intention to waive rights permanently;
D & C Builders Ltd. v. Rees: 1966 England CA
FACTS: P owed money for work done for the D; D’s wife paid partial sum only and
bullied P into signing a receipt that it was accepted as payment in full.
ISSUE: Is the partial payment sufficient based on receipt? No, because promise was
made under duress and equity only aids those with clean hands.
RATIO: promissory estoppel only used when it would be inequitable not to do so; if there
is not true accord between parties (e.g. if promise was made under duress) then estoppel
is not applicable.
22
Saskatchewan River Bungalows Ltd v. Maritime Life Assurance, 1994, SCC
FACTS: cheque for life insurance payment was lost in mail; R sent late notices, then
finally sent notice policy had lapsed; A tried to renew policy but R said too late;
ISSUE: did insurance company waive right to refuse late payment? They did at first but
then gave notice they were retracting that waiver and so were entitled to terminate policy.
RATIO: - waiver will be found where the evidence demonstrates that the party waiving
had (1) a full knowledge of his/her rights; (2) an unequivocal and conscious intention to
abandon them; waiver can be retracted if a reasonable notice is given to the party in
whose favour it operates.
International Knitwear Architects Inc. v. Kabob Investments, 1995, BCCA
FACTS: tenant (P) got discount on rent from landlord (P); tenant failed to make a
payment and landlord gave notice for reinstatement of full rent;
ISSUE: Can landlord demand full payment of rent again, and if so, how much notice is
required? Yes, but must give reasonable notice.
RATIO: Can revive waived rights but must give reasonable notice.
W.J. Alan & Co. v. El Nasr Export & Import Co., 1972, English QB CA
FACTS: buyer contracted with seller to buy coffee in Kenyan shillings; seller accepted
payment in English sterling at first; English currency was devalued; sellers sent invoice
to make up loss in exchange
ISSUE: does seller have right to enforce payment in Kenyan shillings after accepting
initial payment in sterling? No, seller waived right.
RATIO: Denning; “The principal of waiver is simply this: if one party by his conduct,
leads another to believe that the strict rights arising under the contract will not be insisted
on, intending that the other should act on that belief and he does act on it, then the first
party will not afterwards be allowed to insist on the strict legal rights when it would be
inequitable for him to do so.” There does not need to be detriment to the party that acts
on the waiver – “all that is required is that one should have ‘acted on the belief induced
by the other party.” Also, in this case withdrawal of waiver is not possible; once waiver is
accepted it is binding if it would be inequitable to change it.
Societe Italo-Belge v. Palm and Vegetable Oil (Malaysia), 1982, English QB
FACTS: buyers (R) rejected sale of palm oil two days after receiving documents; sellers
claim that buyers led them to believe that sale was ok since they did not complain right
away but accepted documents initially…
ISSUE: did buyers waive their rights to reject sale by waiting for two days? No, two days
is not enough time to create reliance.
RATIO: If element for the application of estoppel is missing, then it will not be applied;
specifically if there is not sufficient reliance on promise and/or it would not be
inequitable to revoke promise, then promise can be revoked.
23
Petridis v. Shabinsky, 1982, Ontario HC
FACTS: P ran restaurant and was tenant of D; supposed to give six months written notice
for renewal of lease; P and D negotiated renewal for months leading up to end of lease;
landlord gave up and kicked out P;
ISSUE: did landlord waive right to forgo renewal; did he give sufficient notice to retract
waiver? Yes, he waived right by entering into negotiations and did not give sufficient
notice to withdraw waiver.
RATIO: if waiver is relied upon then sufficient notice is required to retract waiver
because it would be inequitable otherwise.
Robichaud c. Caisse Populaire, 1990, NB CA
FACTS: guy made deal to pay lesser sum of debt to local bank manager; he sent his
payment but bank directors refused to accept deal; he sued to enforce his deal;
ISSUE: can P use estoppel as sword to stop bank from reverting to their original rights?
Yes, principals of equity still apply whether used by P or D.
RATIO: it is irrelevant who is P and who is D; estoppel can be applied as long as all the
key criteria are met (there is reliance on a subsequent promise such that it is inequitable
to enforce original strict rights).
Combe v. Combe: 1951, England KB CA
FACTS: 7 years after divorce wife claims instalments of money that was promised to her
by husband during divorce.
ISSUE: Can the wife use estoppel to enforce this promise? No, cannot use estoppel to
enforce a promise where no legal obligation existed before.
RATIO: Denning warns against stretching High Trees principle to create new legal
obligations between parties where none existed before; this is more extreme case of
trying to use estoppel as sword than in Robichaud above.
Walton Stores v. Maher: 1988 Aus HC
FACTS: the A (Walton) wanted to lease land from R and wanted R to demolish building
and begin new construction immediately; the R prepared lease and A said that they would
notify R if had any objections within one day; the R started to demolish and erect the new
building; 3 weeks later A told them that the lease changes were not approved;
RATIO: promissory estoppel usually requires a pre-existing legal obligation but it can be
used in the absence of that relation if there is a reasonable expectation of legal relations
and a reliance on the promise such that it would be inequitable to not enforce it.
Estoppel used as sword; can’t encouraging (even by silence) other party to act to their
detriment based on your representation when unconscionable outcome will result.
NB: this precedent used in Canada but only in proprietary estoppel cases; is persuasive
but not highly so; not followed yet in England;
M. (N.) v. A.(A.T.), 2003, BC CA
FACTS: Mr. M made promise to Ms. A. that would pay her mortgage in England if came
to live with him in Canada; she did come but relationship broke down and he did not pay
mortgage;
24
ISSUE: Is promise binding? No, because no pre-existing legal relations and no
reasonable expectation of legal relations.
RATIO: BC decision upholding Denning view that estoppel not intended to use as sword
where no legal relations pre-exist: court said “a necessary element of promissory estoppel
is the promisee’s assumption or expectation of a legal relationship.”
25
III. EXAM NOTES
Must know these cases:
Carbolic (re unilateral Ks), Pao On (definition of past consideration & economic duress),
High Trees (promissory estoppel), Williams V Roffey (concept of practical benefit –
modifies common law concept of consideration), Eastwood v Kenyon (moral obligation
put aside as sufficient consideration) Foakes v Beer (protection of creditors but recall,
not in Canada). Know why these are seminal.
Important according to Biukovic:

Start with good outline

Identify all issues

Always address issue of formation of contract? Why or why not?

All arguments organized

Good conclusion
Suggested strategy:
1. read the Q once – w/o writing
2. read it again – and do an outline – try to id the material facts that may be
important to answer the Q(s) – write down in terms of the dates everything
happened – then fill in w reference to the case chart
3. do not go into description of what happened
4. if you say you feel this was a valid offer – need to say why – don’t just make a
statement w/o saying why
5. once you have an outline (flowchart) then start writing
6. structure & organization of argument gets at least 5 points
7. Another mistake students make is stating that maybe there is a problem with, say,
certainty – when it is not a main point of issue. Stick to main issues.




Note re intention – more an issue in family relations.
Many cases of modification of K have ended up being argued on whether there has
been sufficient consideration – that’s why it important to change, perhaps the method
of payment, or something – just so you can say its fresh consideration – set aside old
K and putting the new K in place
Another way – one who makes K – puts a term in saying they can unilaterally change
and if they don’t hear from the other party – will consider this silence as acceptancethis is a standard form K – Prof used e.g. of internet provider
W v R – was practical benefit that folks could move in on time – made extra promise
to avoid penalty.
Xmas Exam notes:
- reference cases more
- don’t make args for issues that are not applicable
- do develop args for all issues raised; cover all the basic elements of issue
(e.g. knowledge requirement of unilateral acceptance)
- stick to IRAC structure
26