Acceptance, Communication of (Req’d for contract) (see STANDARD FORMS, REVOCATION
OF OFFER)
Must be communicated clearly and unambiguously; must be accepted in timely fashion
Blair v. Western Mutual Benefit Ass’n – Secretary typed up minutes giving her pension – ruled not to be an
offer b/c not comm’d to P in a way that would constitute an offer
Implied Terms (see OPEN TERMS): Hardwick Game Farm v. Sussex Agri Poultry Producers Ass’n – 36
mos of transactions = limits liability even if P never read contract; can be read in thus
Br. Crane Hire Corp v. Ipswich Plant Hire Ltd: crane sinks; Same biz = understood terms
Instant Communications: Acceptance must be confirmed rec’d.
Mode of acceptance: “By return of post” = any form of response in the time it’d take for mail;
Eliason v. Henshaw (p. 84)(wagon) – acceptance went to wrong place = no contract
Brinkibon v. Stahag Stahl… (p. 89) - contract formed where acceptance communicated to offeror: use of
telex = rec’d in Austria = contract made in Austria (+letter of credit in Au)
Postal Acceptance Rule: Byrne v. Van Tienhoven (p. 106)– acceptance takes place when posted
Household Fire Insurance v. Grant (p. 98): D wanted shares, did not get P letter, so D acc’t credited.
Company went under = D liable; P posted acceptance of share sale; D accepted risk of mail getting lost
(Bramwell diss: rule may be impractical; Postal acceptance does not work if absurd.)
BUT Howell Scys. v. Hughes (p. 103): P exercised option to purchase property – “need notice”:
“notice”=knowledge. Postal acceptance applies when not otherwise specified (like here)
Silence: Works if reasonable (St. John Tugboat Co. v. Irving Refinery Ltd), BUT
Felthouse v. Bindley (p. 76): Uncle cannot impose contract by nephew’s silence
Rewards: Williams v. Carwardine (51); R. v. Clarke (52) – rewards unilateral; accepted if P has ~ in mind
when performing terms; cannot incidentally accept contract
Unilateral Contracts: Carlill v. Carbolic Smoke Ball Co (p. 25) – performance = acceptance
Unsigned Documents: Parker v. S.E. R.R. Co. – D loses P bag, claims OK b/c ticket stipulates no liability;
P unaware, did not sign etc = P cannot be held to accept/know
Auctions
Auctions Proper: unilateral contract A situation, no obligation; contract to fair treatment
Auctioneer is liable for selling/not selling – has authority as an agent
Requests accepted by auctioneer on owner’s behalf; acceptance with striking the gavel
Seller can terminate sale prior thereto; higher offer nulls other offers (like counteroffer)
Harvela Investments v. Royal Trust Co. of CA (p. 33): 3p offers to sell shares for best price: P offers X, D
offers <X or X + Y. D loses b/c intention is fixed bidding (not auction – bid not compliant)
Bidding Competitions / Tender Calls
R. v. Ron Engineering (p. 35): - forgot to factor in own labour costs; didn’t technically withdraw, wants
deposit back: case law says D realizing mistake = forfeiture of contract
Estey: Contract A (deals with deposit, tender, Con. B), Contract B (contract to perform) = contract A
crystallized before realizing mistake (criticized b/c binds P w/o D commitment; Crown hasn’t relied on
Ron’s bid): need to protect bidding process (Reliance Loss vs. expectation loss)
Privilege Clause in Tenders: MJB Enterprises v. Defence Construction (p. 39): P loses to Strochan, but bid
incomplete: privilege clause = can choose COMPLIANT BIDS only!
Chinook Aggregates: Must spell out privilege clause, not just have stated policy
Breach A sole breach is generally not a cause to end contract.
Upon breach, you have rights to disaffirm or rights to insist on contract, but can’t chance mind if accepted.
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Breach of…
Condition
Major Term
Minor Term
Warranty
Option to Terminate
Yes: Affirm/Disaffirm
Yes: Affirm/Disaffirm
No
No
Damages
Y
Y
Y
Y
Restitution
Only if disaffirm
Only if disaffirm
N
N
Anticipatory Repudiation: When A tells be it know it won’t be able to uphold the deal. Innocent party
need not wait to commence actions. Requires imitation of intent, to abandon/refuse fundamental
performance, by words or conduct
Hochster v. DeLaTour: D cancels deal for 1 Jun on 11 May; P gets new deal before 1 Jun; D says P
breached. Courts laugh b/c D’s actions let P repudiate; P free to mitigate
Frustration: does a circumstance out of the control of each party substantially deprive both parties of the
contract’s benefit?
Fundamental Breach: were you deprived of “substantially the whole benefit” of the contract? The
consequences of the breach the important bit. Like frustration with fault.
Hong Kong Fir Shipping v. Kawasaki (p. 462): 24 month charter of ship in disrepair; constantly being held
up etc, so charterers said in June (rec’d in August) this was a fundamental breach according to contract’s
terms (for “seaworthy” ship), tried to get out of it. (Also, Charter rates cheap b/c Suez Canal re-opened:
new contract would cost ¼.) D: “Ship ready, we fixed it. We want damages for the 17 months left.”
Courts: yes, they did breach, but not bad enough to be fundamental. “Seaworthiness” might mean one
piece in the engine, or a hole in the hull.” Look at the consequences of breach: “In the end, you could
still get 17 months of good ship, substantially the whole benefit of the remaining contract.”
Bunge Corp v. Tradax Export: similar rationale re failure to notify re ship readiness within 15 days.
Bettini v. Gye: P promises to show up 4 days early to rehearse. D cancels after P shows up late. P wins b/c
this does not deprive D of the substantial benefit of the contract.
Sun Cheong Holdings v. Gold Ocean City Supermarket: effluent leaking gives perception of sanitary
conditions in D’s place = deprives of substantial benefit.
Imperial Brass v. Jacob Electric: Shitty D software suggests problems would continue – justifies
repudiatory breach.
Recission: Contract cancelled ab initio (retroactively). Restores everyone to square one. No damages, no
breach. Reserved for undue influence, unconscionability, frustration, misrepresentation, duress… Not
available for breach because breach requires part performance.
Repudiatiatory Breach: Renunciation of the contract tantamount to breach: “I’m not going to perform,
don’t look at me.” P can either wait, or accept the repudiation.
Modified by 1) If breach could’ve been fixed by talking about it; 2) Waiver/estoppel concerns
White & Carter (Councils) v. McGregor (p. 923): D pays for ads on P litter bins. D sales manager
accidentally renews (no authority); D calls and demands recission; doesn’t want new 3-year contract. P:
“We’re providing the same service we contracted for, we didn’t know re authority.” D: “You must
mitigate loss, give ad space to those who want it.” House of Lords: “P could take it or end the contract
and collect 3 years’ damages. They still have a right to perform.” Diss: “This is reverse specific
performance. Specific performance is only allowed when damages are inadequate.”
Restitution: breacher may have to pay back property/money in his hands.
Right to Affirm: can insist on performance anyway: must communicate, but failure /= bound forever and
ever more; also irrevocable after affirmation.
Finelli v. Dee: customer has driveway paved after deciding he doesn’t want it; customer refuses to pay
saying they repudiated the agreement. Distinguished from White & Carter because they had to either
trespass or get cooperation.
Termination: Response to a (fundamental) breach. Future performance no longer required; damages
available.
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Fairbanks Soap v. Sheppard (p. 481): D contracted to build soap flaking machine for P. Paid on deposit. D
delivered near the end, unfinished, demanding more money b/c had been burned before. D made
machine difficult to use etc = substantially unfinished. D refusing to do more = P as right to terminate.
Sumpter v. Hedges (p. 486): Building contract; P trying to claim quantum meruit for work done despite
abandonment. P cannot force collection from D because D has no choice in taking the benefit of P’s
work in a construction / property case. (Chattels, on the other hand…)
Photo Production v. Securicor Transport (p. 462): D provides security services for P, with exclusion clauses
for liability of employees unless it’s the fault of management. D employee is an idiot and burns P’s
place down. Denning at CA: “Because this ends the contract, D is no longer covered by the exclusion
clause.” (Wallace v. Karsales: D liable for nonworking car despite “take it as is” clause b/c Denning
says the essence of the contract is about providing something that moves. Harbuts Plasticine: Cannot
contract out of fundamental breach.) House of Lords: this is bunk and contrary to freedom of contract.
The agreement (and exclusion clauses) still stand; all that changes is D does not need to perform.
Primary Obligations = terms of contract. Secondary Obligations = pay damages in breach. Exclusion
clause is about secondary obligations if primaries are violated.
Capacity
Infants’ Act: Contract made w/ infant unenforceable unless made under amendment; affirmed once of age;
partially performed/not repudiated within 1 yr of coming of age
Adults can be held liable to terms of contract as if infant were an adult
Mental ~: Hart v. O’Connor (p. 766): P purchased land from D, D disabled. Unequal bargaining
unenforceable, but P was not exploitive, was a bona fide purchaser; ALSO, D had lawyer make deal =
OK!
Collateral Contracts: contract on the side (“If you enter our contract, we promise…”)
(see MISREPRESENTATION)
Heilbut Symons & Co. v. Buckleton (p. 398): P did not give warranty that shares were in a rubber company –
just a statement of fact, not a guarantee
Dick Bentley v. Harold Smith Motors (p. 402): P looking for car, told it was good (was not). This is not
necessarily a collateral contract, maybe a misrepresentation
Conditions:
Promissory Conditions: something the party can control (Non-~ = like approval by local gov’t.)
Concurrent Conditions: must perform your part to bind the other.
Conditions Precedent: Can prevent contract, suspend performance, subject to this condition.
Cannot be whimsical or allow election not to perform: “I buy the goods subject to me liking them”
BC L&E Act: Can waive conditions precedent if the sole party which benefits waives it before completion.
Weibe v. Bobstein (p. 342): P offers to purchase D house subject to P selling his own house. If D found
another offer, P had 72 hours to sell his house. D sells house to someone else, then P sold his house
within the time. Conditions precedent cannot act as options not to perform, because true options need
consideration. D agreed to be bound, had to give P chance to complete, which P did. (Lambert Diss: (p.
348) this forces P to use best efforts to sell; at what price etc?)
Dynamic Transport v. OK Dealing: arrangement of purchase/sale of land. Condition was approval by
planning authority to subdivide; P wants specific performance because the land value increased 4x.
Courts look to biz efficacy: Because D (vendor) must legally apply for subdivision, contract is subject to
D using best efforts to successfully obtain approval.
Conditions Subsequent: promises cease enforceability after a circumstance comes about.
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Consideration (see MODIFICATION OF TERMS): “to be enforceable, promises must be
“purchased” w/ something of value” And quid pro quo in detriment to promisee. Can even be “A, in
exchange for bargain with B, promises to deal with C.”
Firm offer: Promising to hold price /= contract b/c promisee gives nothing up.
(Dickinson v. Dodds (p. 108)– offer not kept open is OK – see ACCEPTANCE)
Dalhousie v. Boutilier Estate: subscribing to charities /= contract b/c no mutuality; promising to name
building /=consideration; relying on promise /= contract
Forebearance: Consideration may sacrifice freedom of action: Hamer v. Sidway: D promised P $5k for no
vices before 21; estate argued that P had only gained, but court: “P still sacrificed.”
BUT White v. Bluett: D promised to forgive P debt if P stopped complaining; not done. Unenforceable b/c
D can use property as he likes; P has no right to complain anyway
Implied ~: Wood v. Lucy, Lady Duff Gordon (p. 182): exclusive agreement that D would put seal of
approval on P, split revenue 50-50; D violates & claims no contract, but P wins b/c exclusive privilege
implies biz agreement; P gave consideration in profitsharing etc.
Nominal ~: Thomas v. Thomas (p. 186) P gets late husband’s house for 1L a year for maintenance etc; D
tried to turf P out: 1L went to executor (not home) = consideration (to stay in home); But gift with
burdens still a gift (if 1 L/yr fee came with house)
Past ~: see MODIFICATION OF TERMS
Damages: Try to make you whole had you not been wronged. Victim must still mitigate as much as
possible. Your position past performance vs. your position as it actually is. Different than tort because
tort is about collecting from tortfeasor; contract is about risk management. To be least burdensome
possible (X +/- 5 = X-5: Hamilton v. Open Window Bakery).
Awarded based on at least two of the following:
Expectation Interest: If you haven’t spent, you haven’t lost, but are entitled to the profit that is the
difference. Compensates for loss of future gain.
Jacobs and Youngs v. Kent: small damages for installing wrong pipe brand because changing it is way too
fucking difficult.
Reliance: Compensates for $ you lost relying on a promise.
Shadwell v. Shadwell: uncle’s estate (uncle told kid to marry) bound to promises to support kid b/c kid
relied on this promise to his detriment.
McRae v. Commonwealth Disposals: P incurs great expense to salvage ship that doesn’t exist. Obviously
relied on information presented by P. (Compare with Chaplin: incurring huge cost/risk for chance here)
BUT Anglia TV v. Reed: P making show, start hiring, book d as actor, but D double-booked. P claims all
expenditures, D claims they were incurred regardless of his breach. Denning finds for X for subsequent
losses only.
Restitution: Getting back $ given to the other party (like reliance, but the other side is enriched)
Kewitt v. Eakins: D tells P to do more than he was contracted to, and had to. P doesn’t want to, sues D.
SCC: “once you performed, you conceded it was necessary. Should’ve held out for more $ to create a
new contract.”
BUT S. 62 Law and Equity Act: If you do this under protest, you can sort it out afterwards.
Groves v. Jim Wonder Co: D liable for $60 k in restoration work for $12 k land because otherwise
nonprofitable enterprises are not protected in contract.
Peevyhouse v. Garland Coal Mining Co: P wants D to carry out obligation to fill mine after stripmining.
Can’t let D get away with reaping the benefit of the whole contract.
Aggravated Damages: Punitive to punish wrongdoer, added on to reflect that the tort was so harmful to V.
Damage: Can get the net difference between contract price and current price. (A tries to buy $100 property
from B; B screws A, property worth $110. A entitled to $10.) If you terminate you must also mitigate.
1) If breach would cause P to lose a sum more than X, P is entitled to no damages.
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2) If P would have still lost, but lost less than X, had performance succeeded, P is entitled to the difference.
3) Neither side can prove P would have lost or gained = P can recover expenses, but no profits etc.
4) P can prove net gain (surplus) of Z, but are at X (deficit). Are entitled to difference between Z and X
Bowlay Logging v. Domtar (p. 838): D fails to supply some trucks, P terminates as breach and sues for
“losses” up to termination. BCCA: “You would’ve lost this anyway. You would’ve lost more had D
not given you an excuse to terminate. You should be thanking them.”
Deposits: deposits supposed to compel performance (in terrorem), anticipate damages. If they do not (IE
one payment for any breach), they’re penalties, which are not permitted b/c they violate efficient breach.
Coal Harbour v. Liu: P made contract to buy condos, decided not to, D keeps deposit of $400k (20% of
price) and sells to 3p for way more. P claims deposit was actually a penalty because it’s out of
proportion with the loss. BCCA: “20% is a reasonable deposit on unbuilt condos given the real estate
market. Just because the market is good means nothing.”
Ellsley v. Collins: if your deposit is really a penalty, but your damages are beyond that, too bad. The penalty
works to put an agreed ceiling on damages.
Loss of Chance: Losses of chance etc based on percentage of whole damages.
Chaplin v. Hicks (p. 855): P enters into beauty pageant, was one of 50 who might be selected for the
winning 12. D didn’t give enough notice to P, so P lost her chance. CA: “She lost something of value.
That it’s not quantifiable now should not excuse D’s breach of contract. Give her ¼ b/c that’s what her
chance was.” (Compare with McRae: huge risk/cost for them, but no risk/cost here)
Sunshine Villas v. HBC (p. 843): P deal with D stores re travel concept. Invested and borrowed lots of
money, D breaches. No way to tell what P might or might not have lost, so BCCA gives
Mitigation: damages assessed at the date of breach (after that, you can mitigate) EXCEPT in specific
performance cases (where you can defer mitigation while you claim specific performance). If I buy for
$100 something to be worth $110 at the time of performance and it’s $150 by the time I take it to trial, I
should’ve mitigated at $150; I’m only entitled to $10.
Azamerga Oil: “you were waiting for so long for these shares, at some point you should’ve realized it
wasn’t going to happen.”
Leisbach: damages to dredger, no $ to mitigate: P cannot collect b/c who cares if he’s poor? He failed to
mitigate! (Quasi-overturned today: need to mitigate as much as possible.)
Non-Pecuniary Issues:
Jarvis v. Swans Tours: P wants exceptional damages for crappy Swiss holiday. “This was a contract for fun.
And he got negative fun.”
Newell v. Canada-Pacific Airlines: Bonbon and Pataschou are gassed by dry ice. P awarded emotional
damages.
Fiddler v. Sun Life: P has chronic fatigue syndrome etc., has long-term benefits. D investigating for fraud
and cuts P’s benefits. Yes, P is entitled to emotional damage because a substantial part of the contract
was for emotional security, but D was acting zealously but not maliciously, ergo no punitive damages.
Emotional damages require no proof, but aggravated damages do, even though you have to prove the
same thing.
Penalties: see Deposits, above
Punitive Damages: For no good reason, punitive damages in contract require a separately actionable wrong
(see Fidler v. Sun Life, above)
Wallace v. United Grain Growers: D fired after 14 years w/o reasonable notice = damages for bad faith
Vorvis v. ICBC: can get money if dismissed in a humiliating way.
Whiten v. Pilot Insurance (p. 889): D insisting P burned down their own house hoping they’ll go away or
take a loss in the teeth. SCC upholds $1 million in punitive damages against the company for putting up
with their bullshit.
Remoteness: P can recover for what D knew or ought to have known would ensue as a loss.
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Hadley v. Baxendale (p. 901): D failed to deliver crank shaft for mill for repair, so P lost lots more $.
Damages can only arise from things “naturally” or “within the contemplation” of D. This circumstance
was not terribly uncommon, and P usually had spares, so D could not know.
Victoria Laundry v. Newman Industries (p. 903): P wants a new boiler from D for increased laundry
capacity. D damages it, so P loses contract with Ministry of Supply. “We lost a huge contract!”
Courts: “Because this was so out of the ordinary contract-wise, there’s no way D could’ve seen it
coming.” (But this ignores the thin skull principle that loss was foreseeable, and P was particularly
vulnerable to losing this contract.)
The Heron II (p. 910): vessel bringing sugar to Basra, but D deviated course,g costing 9 days. Ship arrives
after another sugar shipment, causing a glut in the sugar market. D didn’t know P wanted to sell sugar.
Courts: “Tough. You know you had a sugar cargo. Markets go up and markets go down.” Not remote.
Waddell v. Blockey: P instructs D to buy rupee paper; D sells his own to P; market crashes. P cannot
recover b/c this was all about the market crashing, nothing to do with D.
BUT Allan v. McLennan: D sells his own shares in bank to P, not bank’s shares = bank deprived of money =
bank goes under, P can claim for this.
Hodghenson v. Simms: P broker induced by D to invest in real estate tax shelter. D got commissions on this,
P loses; causation established because P would not have invested thus w/o D’s influence.
Cory v. Thames Ironworks: P wants a coal hull, D could only reasonably expect it could be used to store
coal, not transport it = minimal damages.
Cornwall Gravel v. Purolator: D liable for loss of tender from negligent delivery b/c D told P.
Specific Performance: Is a right. Go for it if money won’t do it (IE this house, this piece of art etc). Can
force conveyances but can’t force work. Can also order injunctions (orders NOT to do something).
Semelhago v. Paramadevan (p. 926): P wants house, D breaks deal. P no longer wants specific
performance b/c it’s taken so long to get the house. Gets damages calculated for the house as it would
be worth to have today. (He has a specific performance claim, ergo can ignore mitigation requirements,
even if he doesn’t want specific performance per se.)
Duration of Offer
Carlill v. Carbolic Smoke Ball Co.(p. 25) – offer open until revoked in same manner by D
See Barrick v. Clark (114)(in REVOCATION) – offer expires after reasonable time
Electronic Transactions (Act)
Electronic writing valid (except S. 2 – wills, trusts of ~, documents transferring land, etc.)
Offer and acceptance can be expressed in electronic form (writing or “activity”)
Errors must be rectified by the individual; contracts active when they leave control of sender
Enforcement (criteria to determine seriousness)
Formality (Roman form, writing); Intentions of serious promises (“important enough?”); reliance;
Exchange and bargains (reciprocal agreements, consid.)
Exemption Clauses:
Hunter Engineering v. Syncrude (p. 552): P sold gearboxes through 3p to D. Gearboxes are awful, require
work after 18mos (not 10yrs). Warranty with time limit = expires. But another clause said that if they
know why the gearboxes were being used, they produce to those specifications. Some bought via P
(warranty and that’s it), some bought with exemption clause.
Wilson J (Obiter): Can ignore exemption clause if there’s fundamental breach, or if the exemption
clause is not “fair and reasonable”. Dickson: “You can always use unconscionability to get out of this.”
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Plas-Tex v. Dow Chemicals: Pipe P used made with faulty resin from D. Cracks, leaks, explosions, have to
remove and replace pipes, P goes bankrupt but sues D. D knew about defective resin. ABCA:
“Unconscionable to enforce a broad exemption clause such as this.”
Frustration
If law makes it illegal to perform; if impossible to perform; if conditions radically change
BC Frustrations of Contract Act: Divide losses equally between sides
McRae v. Commonwealth Disposals Commission – D advertises sunken tanker, sells it to P, but tanker isn’t
there. Courts: “You guaranteed it was there = breach”
Taylor v. Caldwell – Concert hall burns down; implied term can be read in if self-evident (+like bailment);
faultless loss of concert hall revokes contract’s existence to rent hall.
Incomplete Agreements: ways to read:
1) “To be agreed” = not binding, don’t intend to be bound; will negotiate further
2) “To be agreed with fallback formula”: binding: agreed on a process to determine X (IE market value)
3) “Implicit meaning”: binding
4) Failure to specify a material term despite agreement: intention not always enough.
Empress Towers v. Bank of Nova Scotia: 5 year lease with option to renew at market rates. All terms
renewed except rent, “to be agreed”. Does “market rate” or “TBA” take precedence? BCCA: valid
renewal option, can look at market rates to determine what would have been agreed.
R. v. May and Butcher (p. 134): D sells surplus P tentage every now and again, with terms to be agreed per
contract; did have arbitration clause. Key problem is that the price is undefined; cannot imply a
reasonable price for something with no market value = just an agreement to agree = not binding; P
breach causes no discernable loss to D. Arbitration clause about arbitrating the agreement, not about a
part of the agreement.
Hillas v. Arcos (p. 136): UK Co P buying D’s Soviet lumber – promises to buy at normal rate in return for
discount of 5% next year. D breaks deal, P sues. Courts: Different from May and Butcher for 3 reasons:
i) sufficient certainty in price because the contract was for the going rate less 5%. You can figure out
what this will be. ii) Option to enter into contract different from agreement to agree. iii) Paying 5% more
in year 1 counted as good consideration for the next year’s discount.
Mannpar Enterprises v. Canada (p. 149): P has gravel pit on reserve, potential renewal after 5 years; D
drags feet. P wants damages for lost profits they were relying on. D says renewal clause not in the
agreement. Courts: besides fiduciary duty to Aboriginals, there’s no explicit right to renewal, just
“Crown can agree. Or not.” No objective standard to measure anyway.
Martel v. Canada: Crown tenant in P building, P wants to keep it that way. Crown is lazy, P loses out.
Court: “no duty to negotiate means you can negotiate carelessly”
Intention to Create Legal Relations (see CONSIDERATION): Always look @ parties’ intentions
to be bound; assumed+ in biz; assumed– in family etc.
Basic Intention
Rose & Frank Co. v. JR Crompton & Bros(p. 263) – Explicit agreement not to be bound
Mello Developers v. Portage La Prairie – D denied it was tender call, but deposits = intention
Domestic Situations: Balfour v. Balfour (p. 258) – Husband promises wife stipend, leaves and decides no:
implicit assumption families don’t intend to create legal relations
Exceptions: Merritt v. Merritt (divorcing etc. – suspicious = don’t rely on spouse)
Jones v. Padavatton – mom urges & sends daughter to leave DC, study law in England, gets her house, after
5 yrs, mom wants house: Looks like formal agreement, 5 yrs enough
Letters of Comfort: explicitly about NOT creating legal relations
Kleinwort Benson Ltd. v. Malaysia Mining Corp; TD Bank v. Leigh Instruments (p. 266)
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Comfort letter has real function but not enforceable: you want guarantee, you ask for ~
BUT Banque Brussels v. Australian Nat’l Indies: Bank refused letter w/o binding devoirs
Vagueness: Kalvan Consolidated Oil & Gas v. Manning: vague prelim agreement can be binding
CA Sq. Corp. v. Versafood Services – promise to occupy floor in unfinished building is binding
Interpretation All about intent of parties: look at extrinsic aids
Prior agreements generally inadmissible; correspondence can show goals, not terms, of contract; specific
evidence regarding term. Handwritten / typed amendments to be viewed favourably. If terms conflict,
go with the first.
Misrepresentation: No duty to dissuade stupidity, but cannot mislead yourself (see
COLLATERAL CONTRACTS, MISTAKE)
Deliberate Misrepresentation: Redgrave v. Hurd (p. 379): P promises to sell D house & practice by
selling house; D misled, P wants performance. But D not negligent – P’s books were nonsense, how
could D have relied on them? +P made knowingly false statement, unconscionable to profit from ~
(ALSO, if I make a true statement on Tues and it becomes false on Fri, I will be liable)
Honest Mistake
Derry v. Peek: D honestly believed claim was true & not reckless = no misrepresentation
S. 244 v. Seymour: Misunderstand stucco contract – rescind part not done, pay for work
Opinion can be misrepresentation if your opinion constitutes special knowledge
Smith v. Land & House (p. 382): “Most desirable tenant” not really ~; this opinion gives effect of fact
Missing / Vague Terms:
Implied Terms
Can be implied for…
1) Custom: ~ of the trade (rare)
2) Fact: parties must have intended X. Test A) Business efficacy (The Moorecock) B) Officious Bystander
3) Law: liberates you from intent: “this is reasonable no matter what you wanted”
R. v. CAE Industries (p. 127): Air Canada phased out a base in MB, government got D to take it after
promising to redirect as much business as possible to make it worth D’s while. Letter signed by
ministers not a letter of comfort because everything indicates it’s a contract. Context of negotiations,
language, explicit “best efforts” promise, etc.
Machtinger v. HOJ Industries (p. 494): D signs contract with unstatutorily low notice period. D:
“Obviously, the intent was as low as possible.” Court: “No, that term is illegal, ergo nonexistent, ergo
we start from scratch: must consider time, context of employment etc”
Dawson v. Helicopter (p. 70): P talks to D, D says they’d carry P up to prospecting area in return for interest
in profits. P had to leave (naval reserve), promises to get leave if possible. D wrote back and said they
couldn’t go soon, says P should find someone else. D goes up on his own. P sues D for failure to
perform. Court: 1) there was consideration in P promising to wait (see Wood v. Lady Duff Gordon) and
2) This is just subject to conditions precedent (P to get leave, D to get chopper). D got the chopper and just
didn’t tell P. Only way to make sense of the deal is to see this, call it exclusive.
3) D trying to make abandonment out of P’s silence. 4) P owed 10% of company, but only re shares at
$1/share, should’ve mitigated, so not entitled to 10% of current value ($5 / share).
Errington v. Errington (p. 112): Dad buys home to be transferred to kids as long as they pay the mortgage.
Dad dies, daughter wants to keep house, son living with mom has estate. Courts: “this is like a unilateral
contract: if you pay, we’ll transfer title of the house to you. Once performance has begun, offeror must
give them a chance to complete as per implied term that the contract be left open.”
Multi Malls Inc v. Tex-Mall Ltd.: Contract subject to appropriate zoning implies no bad faith efforts to get
land rezoned and hurt these chances.
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Mistake: Under no obligation to disabuse consumer of mistake unless you create ~
Mistake of Identity: if contract was void, 3p loses; if contract was voidable, 3p wins. Issue is when
acceptance is not directed to the person in front of you. If the person is ~, you intend to deal with him.
Avery v. Lewis: “Richard Green” bought car, cheque bounced after he sold it to D. Denning: “P really
intended to contract with the Rogue, ergo it’s voidable. The original owner is in the best position to
avoid the loss, ergo it’s up to him, except in cases of fraud.”
Shogun Finance v. Hudson (p. 629): Rogue wants to finance a car, sells it to D. P wants car back: False
Patel offers to P who accepts to real Patel = no contract b/c no agreement between any two parties.
Ergo, transfer to Rogue was void ab initio, ergo nemo dat quod non habet. Plus, hire-purchase contract
= company owns it until you pay it all off. (BF3P not protected if transfer not reg’d.)
King’s Norton Metal Co v. Eldridge Merrett Co: R made himself look like good company, sold to P, P sues
D when rogue cheque bounces, but P knew he was dealing with R (writer of letters) and was only
mistaken as to R’s quality
Phillips v. Brooks: R goes to P, says he’s Sir George, gives right addy. P sells, loses, sues D in conversion,
but P knew he was dealing with R in front of him.
Mistake of Integration: prior agreement, with which written ~ does not accord.
Sylvan Lake v. Performance Industries (p. 651): prior oral agreement about developing property. Bell
retained option to develop strip of land by 18th fairway, but O’Connor drafted width in feet, not metres.
O says it’s tough b/c he signed and didn’t read. B: “Deal said I could develop 2 rows of houses; 1 row
not economic.” SCC: Go for rectification, straighten out contract. This isn’t like Smith v. Hughes,
because here P and D had agreed on ‘yards.’ O cannot rely on B negligence to profit from his fraud.”
See RECTIFICATION
Mistake of Terms No consensus if the misunderstanding is irreconcilable, about a material term.
Smith v. Hughes (p. 602): P sells oats, D thought they were old oats – was there a warranty that the oats be
old? (Warranty part of contract): Subjective understanding of contract may therefore void objective
terms
Staiman Steel v. Commercial & Home Builders (p. 590): D unwilling to deliver steel b/c P refuses to sign
waiver that there’s no building-grade steel in the lot P bought. D liable for not delivering this lot of
steel, but NOT liable for building steel.
R v. Ron Engineering (p. 596): Ron’s mistake was on their own bit, not on terms of contract = tough luck
Glasner v. Royal LePage (p. 592)– P refuses to buy house which had UFFI; D alters contract to say it
doesn’t have UFFI, P was misled & effectively given a false warranty
Ron Engineering; Imperial Glass: Calculating error not a mistake about a “term” per se
(Raffles v. Wichelhaus: P agrees to sell D cotton via ship “Peerless”; 2 of that name = no consensus as to the
ship; Hartog v. Colin and Shields: agreement to sell on /lb basis, not /piece, out of ordinary practice,
ergo buyer should have known. Hobbs v. Esquimalt RR Co: P cannot rely on private understanding to
create mistake.)
Non est factum: (SEE NON EST FACTUM)
Modification of Terms: needs consideration to be valid; past consideration is no consideration
Adding to Obligations
Gilbert Steel v University Construction (p. 197): Steel price changes after project 1, renegotiated for #2.
Then price goes up once more, so oral agreement to pay more for steel on #3. D refuses to pay. Courts
reject arguments that consideration came from agreeing to rescind contract, promising good steel price,
“borrowing” earlier steel at lower price. No consideration for the promise to pay more, ergo not
enforceable.
Williams v. Roffey Bros (p. 202): P subcontracts require more money to complete; D suggests and gives
additional money, modified payment / work plan. P stops working. Courts: “While P is already doing
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what they contracted to do, consideration is found in the benefit that D gets from ensuring the work is
completed. Consideration doctrine is really there for duress, and here there was none.
Foregoing Rights
Foakes v. Beer (p. 207): P owes D money; they both agree to let P pay interest-free, but D then sues. P
protests: “D agreed to give up her right to interest if I paid.” House of Lords: “No consideration for
such a promise; also while $1.00 can be consideration for anything from a peppercorn to a ship, it cannot
be consideration for $2.00.” Even giving a cheque might be good consideration
BUT Law and Equity Act: Valid if reductions expressly accepted “in satisfaction” and rendered in an
agreement for that purpose.
Past Consideration: generally no consideration
Lampleigh v. Braithwait (p. 193): D kills 3p, promised to pay P to get pardon.
Webb v. McGowin: D promised to pay P for saving life (and hurt forever): enforceable for moral reasons.
Stilk v. Myrick: Ships’ captains’ promises to pay more money are not binding because of duress, past
consideration rule.
Promissory Estoppel: (see PROMISSORY ESTOPPEL)
Non Est Factum: “I signed but it’s a nullity.” Must be a radical mistake, only re the essence of the
contract, not a specific term. “Where they mistaken, and by how much?” Cannot be careless.
Saunders v. Anglia Building Society (p. 637): Ms. G has nephew Wally. W: “gift me your house, you can
live here, I can use it to raise money.” W gets her to sign a paper that actually transfers it to W’s friend
Lee. Lee mortgages it at the bank, absconds, D tries to foreclose. P dies, estate pleads that this was void
ab initio because she didn’t know what she was signing. HL: “this wasn’t a mistake about the essence
of the contract. This transfer-gift distinction is irrelevant. P intended to transfer house, just not to Lee.
Anyway, P was careless.”
Marvco Colour Research v. Harris (p. 639): J and S buy P, owe $ in mortgage. J wants to buy out S but P
wants money from J in security. J goes to GF’s father (D) and asks him to sign “modification of
mortgage from BMO”, actually a new mortgage: BMO tries to enforce mortgage against D’s house.
Courts screw D: “D knew what a mortgage is. Just trusting J is not reasonably careful, ergo D loses.”
Offer and Acceptance (see COMMUNIACTION OF ~, REVOCATION OF OFFER)
Counteroffer voids previous offer; (negots on) varied term counts as a counteroffer:
Livingstone v. Evans (p. 57) – “Can’t reduce price” = revives initial offer
Disagreement: Tywood Indies v. St. Anne Pulp & Paper Co – dispute about clause= still negot’ing
Display of Price: Harvey v. Facey; Harty v. Gooderham: Quoting a price is not an offer
Christie v. York Corp. – black refused service @ bar – ordering drink an offer, not acceptance of ~
R. v. Dawood – taking tags off clothes to make look like 1 set is an offer @ till
Pharm Society of Gr. Br. v. Boots Cash Chemists (p. 20) – offer made by customer @ till
Intention: CN Dyers v. Burton (p. 17) P contracted to buy D property; D said it was invitation to treat
(quoting of price), but they were negotiating, D responding as such (“lowest I am prepared to accept”)
etc = intention to be bound
Warranties: Goldthorpe v. Logan – failure of product violates “satisfaction guaranteed”
Parol Evidence: Except w/misrepresentation, only valid if not contradictory to written
Byers v. MacMillan: Agreed to cut 500 cords of wood, P not paid, P claimed lien on wood until paid, but not
in writing: OK b/c doesn’t contradict written argument
Hawrish v. BMtl (p. 438). – P signed guarantee holding himself liable for company debt, claims oral
agreement that this expired after BoD changed. Judson: “Too bad, see parol rule”
Bauer v. BMtl (p. 441)– P guarantor of loan; bank did not register debts = no priority over other creditors. D
cost P money, but promise to register was oral.
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Galen v. Butterly (p. 448): farmer bought buckwheat understanding it’d smother weeds; failed.
Hawrish not absolute – oral promise was a specific guarantee, supp to contract, etc.
Part performance (see UNJUST ENRICHMENT): Not necessarily evidence of
contract, but maybe unjust enrichment?
Steadman v. Steadman: Husband promises to pay arrears if wife releases interest in home; wife refuses, but
past performance leaves this enforceable
Brownscombe v. Public Trustee of AB – P did odd jobs for D on D farm; P wants to leave = “build a house
and I’ll give you farm when I die” = built house refers to prior deal
Thompson v. Guaranty Trust Co – same, except P did improvements etc.
Dagley v. Dagley – Dad leaves property to son, son improves it, Dad tries to give to wife – not allowed
Privity: if A and B contract, C cannot enforce it even if C benefits therefrom b/c C gives no consideration.
London Drugs v. Kuchne & Nagel (p. 320): B says “I won’t sue C,” and C works for A. P buys transformer,
gets it stored in D’s warehouse. Signs exemption clause (“Will not be liable for more than $40”). 2
employees screw up, transformer falls. Can they at least sue the employees?
SCC: “P assumed the risk: it makes commercial sense to extend contractual benefits to employees
because they obviously do the work.” Subcontractors might be different.
BUT doesn’t this mean that they might also share in liability?
Fraser River Pile and Dredge: Chartered crane on barge negligently sunk. “We won’t come after you or
any charterer” covers anyone chartering the crane, not just “employees”.
Promissory Estoppel: a shield, not a sword. Promises which affect legal relations must be protected.
Creates no cause of legal action, but protects against recission of negative promises.
Central London Property Trust Ltd. v. High Trees House Ltd (p. 216). D gets P to agree to halve the rent
during the war b/c can’t find renters. Postwar, P sues D to enforce first rent agreement. D: “The
agreement was to reduce the rent the whole time; P estopped from claiming retroactively!” P: “We gave
no consideration for this promise.” Denning: Estoppel says this promise to halve rent was intended to be
binding, was intended to be acted upon, crystallized by reliance. However, only binding up to the point
that the situation (lack of renters) was remedied.
Hughes v. Metro Rwy: P wants to use right to renew, but must repair X first, and doesn’t want to before
negotiating. Negotiations unsuccessful, P didn’t fix, deadline missed. Court agrees D had waived right
to force P to meet deadline while negotiating.
John Burrows v. Subsurface Surveys (p. 220): D bought business using promissory notes etc. Consistently
late in payments. After falling out, P demands money back. D: “We relied on P’s consistent behaviour
of letting us pay late.” Courts: “No, you relied on their ‘friendly indulgences’. This isn’t like High
Trees because there was no explicit promise or discussion about letting you pay late. You shouldn’t
have relied on them. Smith and Hughes was caveat emptor, this was caveat debtor.”
Saskatchewan River Bungalows v. Maritime Life Insurance (p. 225): insurance policy had lots of conditions,
incl. grace period and automatic lapse if not repaid thereafter. 1981: D accepts late cheque. July 1984:
D doesn’t receive cheque, say they’ll accept late payment. Nov: “July payment missed, out of force.”
Coveree dies, P tries to collect, saying D letters show willingness to accept late payment. SCC: “the
same time they got those letters, they got a retraction; P relying on tolerance of D, so tough shit. Postal
acceptance rule is not a postal payment rule.” At any rate, estoppel not permanent: niceties can be
enforceable after reasonable notice.
D&C Builders v. Rees (p. 222): D refuses to pay full price knowing P is going under, P accepts far less, D
says P can’t go after them for the rest. Courts: “Not inequitable to enforce against D because they put
the screws on P knowing they were hurting. P’s promise was not fairly given.
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Combe v. Combe (p. 245): Husband agreed to pay wife £100/yr, does not. Wife cannot enforce through
estoppel b/c no consideration; she makes more than he; estoppel cannot be a sword (cause of action).
Waltons Stores v. Maher (p. 243): work to start immediately; D had started understanding that P would let
them know if there were any problems. P said nothing. Legally, no lease, but D are led to believe there
will be one and act immediately, act to perform. Pressure creates a de facto contract: P knew D was
acting on it, so unconscionable to prevent D from collecting when D was acting thanks to P.
Proprietary Estoppel DOES operate as a sword; more for US than Canada.
Inwards v. Baker: D owns land, P led to assume he’ll get interest therein. P relies on this, improves land. D
may have to give an interest to P even if he only acquiesced.
Rectification (see MISTAKE)
Sylvan Lake v. Performance Industries: (p. 651)
1) Must show inconsistent prior oral agreement.
2) Written document inconsistent, and that D knew about the inconsistency.
3) Must be able to show “precise form” by which this can be corrected (IE “feet” into “metres”).
4) Must have “convincing proof”. 5) P cannot have been negligent.
Revocation of Offer (see ACCEPTANCE OF OFFER):
Must be communicated (rec’d) before acceptance to be valid (Byrne v. Van Tienhoven)
Offeror sets terms, plus otherwise can never know when acceptance is confirmed etc.
Revocation of promise can happen at any time if give notice, even if promise not to
Dickinson v. Dodds (p. 108): D offers house, goes and sells it to 3p. P knew D was doing this, “accepted”
offer but knew D would sell to 3p = no consensus ad idem, no consideration for promise
Barrick v. Clark (114): P and D discussing sale of land, taking too long and P out hunting, D sells to 3p. “D
had right to reasonable time, deal must close soon, regardless of P intent”
D asks P to respond ASAP; did not ~; +timeline for possession=no reasonable acceptance
Signed Documents (see ACCEPTANCE, STANDARD FORMS)
Must prove one side should have been aware of conditions, else like unsigned document
See Clendenning, Interfoto Picture, Parker v. S.E. R.R. Corp, etc.; Delaney v. Cascade River Holidays Ltd:
death on rafting tour, no att’n drawn to condition limiting liability = too onerous even if signed
Standard Forms:
Battle of Forms – respond last = you win: Butler Machine Tool. Co. v. Ex-Cell-O-Corp (p. 59) “last shot
wins” is arbitrary, try to have “last reasonably understood bid”
Vienna Convention Article 19 – slight variations OK if do not materially alter contract
Reasonable Terms: Electronic: ProCD v. Zeidenberg (p. 65) – P sells CDs, D used contrary to T.o.S.: no
need to have T.o.S. on box b/c P put them inside; P gave chance to refuse terms and return to P for
refund
Rudder v. Microsoft: (p. 94) click “I agree” = signing; ToS on screen like multiple-page contract unless it’s
in unreasonably-sized font, unreasonable language, etc.
Reasonable Terms: Non-Electronic
Schuster v. Blackcomb – standard form waiver on front in evident font; lots of time; reasonable; P knew she
was signing a waiver but felt her ski accident was different
Unreasonable terms: Interfoto Picture v. Stiletto Visual Pgms. – P sent transparency samples out, to be
returned within 14 days or else; not enough att’n drawn to penalties
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McCutcheon v. David MacBrayne Ltd (p. 522) – P got car shipped to mainland, but D ferry sunk; P did not
accept conditions b/c did not read/sign document = no knowledge of conditions
Thornton v. Shoe Lane Parking (p. 514) P parks car, gets hurt; D claims not liable b/c of disclaimer;
however, reasonable notice not given (only inside etc.); (per Parker) no way to assume P understood; no
way for P to withdraw acceptance
Tilden Rent-A-Car v. Clendenning (p. 527) clauses inconsistent with liability waiver; unreasonable
conditions, TLDNR = cannot assume he read contract = no consensus
Statute of Frauds – makes serious undertakings go in writing b/c of assumptions of intent
1)
2)
3)
4)
Guarantee debts (A sells to B, B sells to C, C backs B so A feels confident about $); also LAND etc
Promises made under consideration of marriage (archaic)
Force compliance if you really want security (memo denying contract may confirm ~)
Non-Compliance: Part performance, use statute to commit fraud, Restitution
Unconscionability (see EXEMPTION CLAUSES)
Harry v. Kreutzinger (p. 754): dumb P fisherman with crappy boat, valuable license, strongarmed and
pestered by D into selling boat for next to nothing; told he could get another license. BCCA: “This is
clearly unconscionable: must be unequal bargaining position and must be a substantially unfair deal.”
Justice Lambert: “Look at community standards.”
Crabb v. Arun District Council: D knew P was relying on D keeping easement open. Unconscionable to
cancel it.
Unjust Enrichment (Test: acts must be referable to contract alleged) (see CAPACITY)
Maddison v. Alderson: P unpaid housekeeper for 20 yrs understanding D would leave house. Past
performance /=contract, but certainly unjust enrichment
Degelman v. Guaranty Trust Co: P did odd jobs for promise of house when Aunt died. Court: just as much
reason to think P is nice, but D estate was unjustly enriched
Rules:
Consensus ad idem – both sides have mutual intention etc.
Contra Proferentem: strict construction in interpretation of contract (for P benefit)
Latches: Equitable defence – P delays too long = D at unfair disadvantage
Mirror Image Rule – Terms of acceptance must be substantially identical to offer
Oliver Wendell Holmes: Put P on as good of footing if contract were executed
Pacta sunt servanta – promises should be kept/executed
Promisory Estoppel (injurious reliance) = screw with it to extent necessary to prevent injustice
Quantum Meruit – as much as it’s worth
Recission: not an option if contract executed
Restitutio ad integrum: Restore to status quo ante
“Time is of the essence”:
Verba ita sunt intelligenda ut res magis valeat: words should be understood in their ordinary meaning
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