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THE UNIVERSITY OF BRITISH COLUMBIA
FACULTY OF LAW
FINAL EXAMINATION
-
APRIL 2014
LAW 110
Contracts
Section 2
Professor Biukovió
TOTAL MARKS: 100
TIME ALLOWED: 2 HOURS
and 20 minutes reading time
********************
NOTE:
1.
This is a LIMITED OPEN BOOK examination. You may use only
a CLEAN copy of the syllabus and case chart provided to you in
the exam.
2.
If you think that additional facts are necessary to answer any
question fuiiy, please state those facts and explain why they are
necessary.
3.
Please write legibly.
THIS EXAMINATION CONSISTS OF TWO (2) QUESTIONS.
PLEASE ANSWER BOTH
LAW 110, Section 002
Page 2/5
MARKS
50
1. Carolyn and Markus started dating in Squamish in 2009 when she came
from Hamilton, Ontario, to visit her relatives in BC. She moved in with
Markus in 2010, and they got engaged in May 2013. Before they broke up
on January 8, 2014, the following story had unfolded:
When Carolyn moved into Markus’ house, she started working as a Sales
Assistant in a local hardware store. Markus owned a few apartments that
he rented to students attending Quest University. It is possible to say that
Markus always lived comfortably without breaking a sweat. On the other
hand, Carolyn could not make enough money to meet her needs. She could
not even get her own credit card so Markus had to come to her rescue. He
asked his bank for an “additional card” and authorized Carolyn to use it.
Although the credit card agreement between Markus and his bank
provided that he was the primary holder that was responsible for any debt
arising through the use of either of the cards, Carolyn had verbally
promised Markus that in exchange for his agreement to let her use the
additional card, she would pay down the card whenever Markus would
receive the balance from the bank showing that Carolyn spent money. So
Carolyn started spending: first on gifts to Markus, then on their
entertainment and dining, but most often on her own travels back east. She
would use the credit card almost every day, sometimes several times per
day during the period of 2012-2013. She made cash advances on top of
using the card for her purchases.
Markus tried to talk to Carolyn about her shopping spree but she would
not accept any responsibility and would tell him that it was all spent for
their well-being. In 2013, she was making only sporadic payments on the
card and by the end of year, she owed $14,000. Markus finally cancelled
Carolyn’s card after Christmas and she completely stop making payments
although her indebtedness continued to grow along with late charges.
Carolyn was dreaming of having a wedding in Las Vegas’ Luxor Resort,
in an ancient Egypt-themed ceremony replicating her favourite movie,
Cleopatra, where she would be Cleopatra, Markus would be her Mark
Antony, and their guests would be dressed as Egyptian and Roman
royalty. Only two months after the engagement, and despite the fact that
no specific wedding plans had yet been made, Carolyn secretly visited
Bonny’s Atelier, a tailoring studio of an old Vancouver seamstress
formerly employed in Milan by a famous Italian haute couture designer,
and asked for an appropriate custom-made wedding dress. Bonny said that
that the work would be very challenging, considering Carolyn’s broad
shouldered physique and extraordinary height, and that it would take 150
hours and 3 fittings to create a feminine dress that would be a perfect fit.
LAW 110, Section 002
Page 3/5
(Question 1 Continued)
The $13,000 price was to be paid within 10 days after delivery. Carolyn
would pay the costs of fabrics and other necessary materials on the day of
the first fitting session. Carolyn asked Bonny if it would be proper to put
their agreement in writing, but Bonny insisted that in her world of haute
couture, the relationship between a seamstress and a client is a question of
trust.
The wedding dress, a thing of ultimate beauty, was completed and
delivered the afternoon before the wedding. Carolyn couldn’t wait to put it
on.
Three days after she had picked up her wedding dress, Carolyn received a
text message from Markus saying that he was breaking up with her. He
told her that he was fed up with her compulsive overspending and lies, and
that she should pick up her things from his house, leave her engagement
ring behind, and pay him back all the money she had spent by using his
credit card, including the interest charges accumulated.
Distressed Carolyn tried to return the dress to Bonny’s Atelier and to
recover money she had paid for the material. She said that her wedding
plans were totally ruined, that she could have not predicted this happening,
and that she had no use for such a dress. The Store Manager, Helena,
refused to take it back. Helena said that Bonny had performed her
obligation and that she should be indemnified as previously agreed.
Besides, Helena said that it would be impossible to resell such a special
wedding dress to any other lady in Canada and that Carolyn should keep
the dress for another occasion, be that Halloween or another wedding.
Carolyn said that she has no money on her at the moment and that she
would send her cheque later. Helena explained that Carolyn had 10 days to
pay Bonny the full price or they would see her in court.
Carolyn decided to contact a lawyer, but since she had no money, she
visited the student legal clinic at Allard Hall. Somebody wrote down this
story and the file is now on your desk. Carolyn is upset and thinks that she
should get remedy for all distress she suffered. Take the file and advise
Carolyn regarding her relationships with Markus and Bonny Atelier.
Imagine that no statutes are applicable and that you have to explain
Carolyn’s rights and duties arising out of these relations on the basis of
common law of contracts.
MARKS
50
2.
Min-Jun Kim, aka Super Dry, is a twenty-two year old songwriter, trying
to make a living in the music business in Vancouver, BC. He still lives
LAW 110, Section 002
Page 4/5
(Question 2 Continued)
with his father in Burnaby, and occasionally helps in his father’s home
business of producing organic kimchi.
Super Dry entered into an agreement with a local music publishing
company, Happy Tunes, whereby the company engaged the musician’s
exclusive services for a period of 4 years. Happy Tunes specializes in
Asian pop music and is relatively well-known in North America as well.
Happy Tunes gave the young artist a standard form contract that included
Super Dry assigning to the publishing company the full copyright for
Europe, the Americas and Asia in all of his original music and lyrics
created by him or in collaboration with other artists. Super Dry also agreed
not to do any work in the music publishing business with anybody other
than Happy Tunes during the term of their contract. Happy Tunes agreed
to pay Super Dry 50% of all fees collected in respect of performing rights
as well as a royalty of 10% of the marked selling price of all copies of his
work, regardless of the form of distribution. Under the contract, Happy
Tunes was not under obligation to publish any of Super Dry’s work, but in
order to help him create music, they were obliged to give him yearly
advances of $5,000 against payable royalties.
Super Dry soon regretted that he had signed this contract. He could not get
his peace of mind with the $5,000 advance payments given by Happy
Tunes and he spent more time making kimchi than making music. He also
thought that Happy Tunes was not proactive in trying to promote the
music he occasionally made. Therefore, he decided to create and record
music in the basement of his father’s home. In order to set up his studio,
he needed computers, microphones and other necessary equipment. Of
course, he needed money to pay for all of these things and decided to
approach his father for help.
Mr. Kim is a fifty year old immigrant from South Korea. He is a widower
and Super Dry is his only child and the only family he has in Canada. Mr.
Kim moved to Canada when he was twenty but his command of English is
less than average. Still, he manages his own home business and supports
all his needs without any problems. However, Mr. Kim does not have any
savings or any assets other than his business and his home. Although he
does not understand his son’s desire to become a musician, he agrees to
help him by mortgaging his home to provide security for money borrowed
from the bank to help his son.
The Bank Manager who saw Mr. Kim and Super Dry was very nice and he
let the father look over the contract at home. The following day, Mr. Kim
signed the papers in front of the same Bank Manager and Super Dry got
his $25,000 loan.
LAW 110, Section 002
Page 5/5
(Question 2 Continued)
Super Dry now has all the equipment he needs and is able to make music,
but is still not making any money because he does not know how to sell it
without Happy Tunes’ knowledge. One of his musician friends told him
that if Happy Tunes finds out what he is doing, they would try to stop him
in court by seeking an order of injunction. Super Dry knows nothing about
injunctions and court proceedings but knows that he is already late in
paying back his loan and is afraid of showing his father a letter the bank
sent him, noting that they would claim possession of the house.
Super Dry cries for your help. He is not quite sure what will happen to him
now but he is pretty certain that it is not going to be good. More than
anything he wants to help his father to keep the house. Advise him with
respect to the relevant legal issues we have covered in our Contract Law
class. Provide him with your well-reasoned opinion.
EN]) OF EXAMINATION
LAW 110.002: Contract Law
Syllabus and Outline 2013/2014
Professor:
Class schedule:
Classroom:
Office:
Office hours:
Telephone:
E-mail:
Secretary:
Ljiljana Biukovié
Tuesdays & Thursdays 9:00 10:30
# 121 Allard Hall
#454 Allard Hall
Wednesdays 1 3 pm (or by appointment)
604-822-0312
F1ii@.law. u bc.ca
Abbey Barley (barlcy@law.ubc.ca)
—
-
Course description and objectives:
The aim of this course is to introduce the basic concepts that underlie contractual
obligations and to examine contract law in Canada in its social and political context.
While the focus is primarily on common law, different ideas on which contract law is
founded in civil law in Quebec are also discussed. The main objective of the course is to
enable students to acquire basic legal skills to competently identify, analyze, synthesize
and apply the law of contract. Students will learn to analyze and evaluate judicial
opinions, statutory provisions and contractual clauses.
In the first term (September-December 2013), the objectives are to help students
understand the relationship between contract law and other categories of obligations
recognized by the common law (tort and restitution), to familiarize them with different
functions of contract law, and to introduce them to the key concepts of contract
formation, such as an agreement between the parties, certainty, intention to create legal
obligation, consideration, and privity.
In the second term (January-April 2014), the focus is on interpretation of contractual
obligations and on remedies for breach of contract. The objectives are to enable students
to distinguish terms of the contracts from representations and puffs, to understand the
importance and consequences of classification of terms of the contract, to learn when and
why terms will be implied into a contract, and to understand consequences of nonperformance of contractual obligations.
Course materials (required):
•
•
Stephanie Ben-Ishai and David Percy, Contracts: Cases and Commentaries,
ed. (Toronto: Carswell, 2009)
Biukovic, Supplementary Materials (Connect course web page)
http:I/faculty.Iaw.u bc.calbiukovic/Contracts%2Olaw/contractsindex.htm
t8
h
1
Other sources (Law Library):
•
•
•
•
•
B. MacDougall, Introduction to Contracts (Lexis/Nexis Canada, 2012)
McCamus, The Law of Contracts, 2 ed. (Toronto: Irwin Law, 2012)
Waddams, McCamus, Waidron, Neyers and Girgis, Cases and Materials on
Contracts, 4 ed. (Toronto: Edmond Montgomery Publications, 2010)
Swan, Canadian Contract Law, 2d ed. (Lexis/Nexis Canada, 2010)
th
Swan, Reiter and Bala, Contracts, Cases, Notes and Materials, 8
ed.
(Lexis/Nexis Canada, Butterworths, 2010)
The Law Library collection related to common law of contracts includes many valuable
casebooks and textbooks which could be used for further readings (Anson ‘s Law of
Contract, Cheshire, F(foot and Furmston ‘s Law of Contract, Chitty on Contract, or
Treitel on Law ofContract). NOTE: The US materials available in the Law Library are
based on primarily US case law, the Restatement of Contracts and Uniform Commercial
Code (UCC). The Restatements (Second) ofContracts were drafted by the American Law
Institute and they summarize in statute-like form the major common law rules on
contracts. The UCC is statutory law that covers contracts for the sale of goods and is
applicable only in the US.
Key dates:
September 3, 2013
November 28, 2013
December 9, 2013
January 7, 2014
February 17-21, 2014
April 8, 2014
April14, 2014
First Contracts class I term
Last Contracts class I term
December examination (1:30 pm)
First Contracts class II term
Midterm break
Last Contracts class II term
Final examination (1:30 pm)
2
COURSE SYLLABUS
Note:
All cases are available in Ben-Ishal & Percy (8th edition) and the on-line
Supplement
INTRODUCTION TO THE STUDY OF THE LAW OF CONTRACT
Boyle & Percy
II.
1-15
FORMATION OF THE CONTRACT
1. Offer, invitation to treat, tenders, communication of offer
Canadian Dyers Ass. Ltd. v. Burton
Pharmaceutical Society v. Boots
Carlill v. Carbolic Smoke Ball Co.
Goldthorpe v. Logan
Harvela Investments Ltd. v. Royal Trust Co of Canada
R. v. Ron Engineering & Construction (Eastern) Ltd.
MJ.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.
Double N Earthmovers Ltd v. City ofEdmonton,
htpj//sccJexuçg/en/2OO7/2007scc3/2007scc3.htrn1
Williams v. Carwardine
R. v. Clarke
18
20
25
30
33
35
38
(Supp.)
50
51
2. Acceptance, communication of acceptance, electronic contracts
Livingstone v. Evans
Butler Machine Tool v. Ex-cell-o Corp.
Carlill v. Carbolic Smoke Ball Co.
Dawson v. Helicopter Exploration Co.
Feithouse v. Bindley
Saint John Tug Boat Co. v. Irving Refinery Ltd.
TimberwolfLog Trading Ltd v. Columbia National Investments Ltd.
54
56
25
66
72
75
(Supp.)
Household Fire v. Grant
Holwell Securities v. Hughes
Brinkibon v. Stahag Stahl
Rudder v. Microsoft Corp.
Century 21 Canada Ltd. v. Rogers Communications Inc.,
81
85
88
93
(Supp.)
Electronic TransactionAct [SBC 2001] C.10 ss. 11 & 15
(Supp.)
-
3. Termination of Offer: revocation, rejection and counter-offer, lapse of time; problems
with unilateral contracts
Dickinson v. Dodds
97
3
Byrne v. Van Tienhoven
Errington v. Errington and Woods
Carlill v. Carbolic Smoke Ball Co.
Livingstone v. Evans
Dawson v. Helicopter Exploration Co.
Barrick v. Clark
100
102
25
54
66
103
4. Certainty of Terms; vagueness, incompleteness, agreements to negotiate, anticipation of
formalization
R. v. CAE Industries Ltd.
May&Butcherv.R.
Hillas v. Arcos
Foley v. Classique Coaches Ltd.
Sale ofGoods Act ss. 12 & 13 Ascertainment of price
http://www.bclaws.calEPLibrariesfbclawsnew/document/ID/freeside/0O 96410
Empress v. Bank ofNova Scotia
Mannpar Enterprises Ltd. v. Canada
Bawitko Investments Ltd v. Kernels Popcorn Ltd.
Wallace v. Allen
http://www.canlii .org/en/on/oncaldoc/2009/2009onca36/2009onca36.html
-
114
119
122
126
(Supp.)
01
131
134
145
(Supp.)
5. Consideration: nature of consideration, past consideration, forbearance, pre-existing
duty
The Governors ofDaihousie College v. the Estate ofArthur Boutilier
Thomas v. Thomas
Eastwoodv. Kenyon
Lampleigh v. Brathwait
Pao On v. Lau Yiu Long
Stilk v. Myrick
Gilbert Steel v. University Construction Ltd.
Williams v. Roffey Bros.
Greater Fredericton Airport Authority Inc. v. NA V Canada
Foakes v. Beer
Re Selectmove
Foot v. Rawlings
Law and EquityAct (R.S.B.C. 1996, c. 253) s. 43
http://www.bclaws.calEPLibraries/bclaws new/document/ID/freeside/00 96253
156
169
166
168
173
177
178
182
186
192
195
197
(Supp.)
01
6. Waiver and Promissory Estoppel
Hughes v. Metropolitan Railway Company
Central London Property v. High Trees House
John Burrows v. Subsurface Surveys
D &C Builders v. Rees
Combe v. Combe
Walton Stores v. Maher
M(N) v.A.(T.A.)
201
203
205
208
224
230
239
4
7. Intention to Create Legal Obligation
Balfour v. Balfour
Rose and Frank v. JR. Crompton Bros.
TD Bank v. Leigh Instruments Ltd.
243
246
247
8. Formality: The Requirement of Writing
Dynamic Transport Ltd. v. O.K Detailing Ltd.
Degiman v. Guaranty Trust Co.
III.
PRIVITY OF CONTRACT
Tweddle v. Atkinson
Dunlop PneumaticTyre Co. v. Selfridge & Co. Ltd.
Besweck v. Beswick
London Drugs Ltd. v. Kuehne & Nagel International Ltd.
Fraser River Pile & Dredge Ltd. v. Can-Dive Services
IV.
258
262
276
277
283
298
310
CONTENT OF THE CONTRACT
1. Representations and Terms: Misrepresentation and Rescission: Parol Evidence
Rule and Rectification; Classification of Terms
Redgravev.Hurd
Smith v. Land & House Property Corporation
Kupehak v. Dayson Holdings
Hielbut, Symons & Co. v. Buckleton
Leafv. International Galleries
Sodd Corp. v. N. Tessis
B. G. Checo Int’l Ltd. v. B.C. Hydro
No. 2002 Taurus Ventures Ltd. v. Intrawest Corp.
http://courts.gov. bc.caijdb-txt/ca/07102/2007bcca0228.htm
Hawrish v. Bank ofMontreal
Bauer v. Bank ofMontreal
Gallen v. Butterley
Hong Kong Fir v. Kawasaki Kisen Kaisha Ltd
Wickman v. Schuler
Business Practice and Consumer Protection Act
http://courts.ov.bc.ca/jdb-txt/caJ07/02/2007bcca0228.htrn
355
359
363
371
378
392
395
(Supp.)
412
415
422
436
443
(Supp.)
2. Discharge by Performance or Breach
Jedfro Investments (USA) Ltd. v. Jacyk
(Supp.)
Fairbanks v. Sheppard
Sumpter v. Hedges
Howe v. Smith
Stevenson v. Colonial Homes Ltd.
450
454
455
457
5
3.
Standard Form Contracts; Interpretation; Incorporation of Terms; Exclusion and
Limitation of Liability Clauses
Machanger v. Ho] Industries Ltd.
463
Thornton v. Shoe Lane Parking Ltd.
478
McCutcheon v. David MacBrayene Ltd.
488
Tilden Rent-A-Car CO. v. Clendenning
492
Karroll v. Star Mountain Resorts Ltd.
496
Kanitz v. Rogers Cable Inc.
(Supp.)
http://www.can1ii.org/enJonJonsc/doc/2002/2002canli14941 5/2002canl11494 I 5.htmlSilver
Tercon Contractors Ltd. v. BC (Transportation and Highways)
(Su pp.)
http://scc.1exum.org/en/20lO/2010scc4/200scc4.htrn1
Loychuk v. Cougar Mountain Adventures
(Supp.)
http://can Ii i.calen/bc/bccaldoc/20 12/201 2bcca 122/201 2bcca I 22.html
V. EXCUSES FOR NON-PERFORMANCE
1. Mistake
Smith v. Hughes
Bell v. Lever Brothers Ltd.
McRae v. Commonwealth Disposals Commission
Solle v. Butcher
Great Peace Shipping v. Tsavliris Salvage Ltd.
Miller Paving v. Gottardo
Sylvan Lake Golf& Tennis Club v. Performance Industries Ltd.
546
560
565
571
574
579
604
2. Frustration (TBC)
Paradine v. Jane
Taylor v. Caldwell
KBKNo. 138 Ventures Ltd. v. Canada Safeway Ltd.
620
621
636
VI. THE PROTECTION OF WEAKER PARTIES: DURESS, UNDUE INFLUENCE,
UNCONSIONABILITY
Pao On v. Lau Yiu Long
Greater Fredericton Airport Authority Inc. v. NA V Canada
Geffen v. Goodman Estate
Royal Bank ofScotland Plc. v. Etridge (no. 2)
Morrison v. Coast Finance Ltd.
Marshall v. Can. Permanent Trust Co.
Harry v. Kreutziger
Business Practices and Consumer ProtectionAct (S.B.C. 2004, c.2) ss. 4-10
http://www.bclaws.calEPLibrariesibclaws new/document/ID/freeside/04002 00
173
666
680
688
697
701
709
(Supp.)
VII. ILLEGALITY AND PUBLIC POLICY
Still v. Minister ofNational Revenue
Shafron v. KRG Insurance Brokers (Western) Inc.
762
730
6
VIII.
REMEDIES
Damages: interest protected, quantification, certainty, causation and remoteness,
mitigation, time of measurement
McRae v. Commonwealth Disposals Commission
Sunshine Vacation Villas Ltd. v. Hudson Bay Co.
Attorney General v. Blake
Chaplin v. Hinks
Groves v. John Wunder Co.
New West Homes Ltd. v. Thunderbird Petroleums Ltd.
Jarvis v. Swans Tours
Hadley v. Baxendale
Victoria Laundry v. Newman
Koufos v. Czarnikow (The Heron II)
Semeihago v. Paramadevan
Southcott Estates Inc. v. Toronto Catholic District School Board
http//vww.Iexisneds.ca/documents/20 1 2scg5IpçW
2.
Aggravated and Punitive Damages
Whiten v. Pilot Insurance Co.
Fidler v. Sun Ljfe Assurance
1,”exumoig/en/2006/2006scc3/2006scc3OJitn
Honda v. Keays
/2008scc39.htrnl
http://scc.1exum.org/en/2008/2008scc3 9
3.
846
(Supp.)
(Supp.)
Liquidated Damages, Deposits and Forfeitures
Shatilla v. Feinstein
HF. Clarke Ltd. v. Thermadaire Corporation Ltd.
J. G. Collins Insurance Agencies Ltd. v. Esley
Stockloser v. Johnson
4.
793
801
805
814
816
821
825
858
861
868
879
(Supp.)
885
889
896
898
Equitable Remedies (Specific Performance, Injunctions, Rectification)
John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd.
Warner Bros. v. Nelson
Zipper Transportation v. Korstrom
Zipper Transportation v. Korstrom
Shafron v. KRG Insurance Brokers (Western) Inc.
904
910
916
917
730
CASES AND READINGS ARE SUBJECT TO ADDITIONS,
DELETIONS AND REORDERING WHICH WILL BE ANNOUNCED IN CLASS
NOTE:
7
Canadian Dyers Ass. Ltd. v. Burton
(1920) 47 O.L.R. 259 (H.L.)
Pharmaceutical Society v. Boots
[19531 1 Q.B. 401, [1953] All E.R.
482 (C.A.)
R. v. Dawood
[1976] 1 W.W.R. 262 (Alta. C.A.)
Goldthorpe v. Logan
[1943] O.W.N 215, [1943] 2 D.L.R.
519 (C.A.)
Blair v. Western Mutual Benefit
Assn.
[1972] 4 W.W.R. 284 B.C.C.A.)
Carlill v. Carbolic Smoke Ball Co.
[1893] 1 Q.B. 256 (C.A.)
Williams v. Carwardine
(1883)4B.&Ad. 621, 11OE.R.
590 (K.B.)
[2]
[3]
[4]
[5]
[6]
[7]
Case
[1]
Contracts
Biukovic
110.02
Law
•
•
•
.
•
•
•
•
•
•
•
An ad was held to be an offer for a unilateral contract, an offer to the public at large—to
everyone who does something (a guarantee in an ad was held to be an indication of the
intention to create legal obligations).
An ordinary rule of law is that acceptance of an offer requires the offeror to be notified in
order that the two minds may come together.
However, in the case of a unilateral contract an offer is made to the public but the
contract is not concluded with everybody (all the world). It is only formed with that
limited portion of the public who come forward and perform the condition on the faith of
the advertisement (following the indicated method of acceptance).
The court held that in the case of rewards (or an offer to anyone who can give the
information requested) the defendant is entitled to the reward regardless ofher motives
(fear of God’s punishment) because she knew ofthe reward and she performed the act in
question.
In general, in order to be binding an offer has to be communicated to an offeree and it has
to be intended as an offer.
A bare resolution without advice, formal or otherwise, cannot be considered ipsofacto to
create or indicate an intention to create a legal obligation capable of acceptance.
There can be no contract of sale unless there can be found an offer to sell and an
acceptance of the offer.
A mere quotation of price does not constitute an offer to sell; it is no more than an
invitation to treat.
The courts will look at the language used in the light of the circumstances in which it is
used and into the subsequent actions of both parties to determine whether what is said by
the_seller is_a mere_quotation_of price_or an_offer to_sell.
The general assumption in the case of retail self-service sales is that placing goods on
shelves is an invitation to treat.
An offer and acceptance take place at the cashier when a customer offers to buy and a
cashier accepts the offer.
An offer in a supermarket sale was held to be made by the customer at the cash desk and
the contract was held to be formed when a cashier took the money.
Note that the S.C.C. overruled R. v. Dawood on the criminal law issue in R. v. Mime
[1992] 1 S.C.R. 697, saying that “property does not pass for the purpose of the criminal law
if the law of property creates a right of recovery”. Under R .v. Mime, actions such as
Dawood’s would result in a criminal conviction.
The general assumption is that advertisements published in newspapers are invitations to
treat, not offers.
However, the court looked at the surrounding circumstances, the actions ofboth parties
(direct contact, consultation, examination, etc.) and the language used in the ad and held
that Logan’s electrolysis ad was an offer to the public at large.
Rule
—
Formation:
Communication of
Offer public offer
to anyone who does
—
Formation:
Communication of
Offer public offer
to anyone who does
something
Communication of
Acceptance;
Unilateral
Contracts
Formation:
Communication of
Offer,
Intention to create
legal obligations
Formation: Public
offer or invitation
to treat
Formation: Offer &
Invitation to Treat
(retail sale)
Formation: Offer &
Invitation to Treat
(rel sale)
Formation: Offer &
Invitation to Treat
Topic
1
*
[12]
[11]
[10]
[9]
[8]
Biukovic
Contracts
Lay
110.02
Double N. Earthmovers Ltd v. City
ofEdmonton, 2007 SCC 3
[1999] 1 S.C.R. 619
M.J.B. Enterprises Ltd. v. Defence
Construction (1951) Ltd)
[1981] 1 S.C.R. 111, 13 B.L.R. 72
R. v. Ron Engineering &
Construction (Eastern) Ltd.
[1986] A.C. 207, [1985] 2 All E.R.
966 (H.L.)
Harvela Investments Ltd. v. Royal
Trust Co. of Canada
(1927) 40 C.L.R. 227 (Aust. H.C.)
R. v. Clarke
Case
•
•
•
•
•
•
•
•
‘
•
•
•
The owner does not have a duty to investigate as to whether a submitted bid is compliant or
to look beyond the face of the bid to ensure compliance; it only has a duty to treat all bids
rest of the tender documents—it does not override the obligation to only accept compliant
The submission of the tender is good consideration of the owner’s promise, as the tender
was of benefit to the owner, prepared at a not an insignificant cost and accompanied by the
bid security.
The privilege clause is only one term of contract A and must be read in harmony with the
tender is valid.
is always possible that contract A does not arise upon the submission of a tender (if the
tender is invalid).
The invitation for tenders may be characterized as an offer to consider a tender, if that
construction contract to be entered into upon the acceptance of a tender (contract B). But it
tenderer.
The submission of a tender in response to an invitation to tender may give rise to
contractual obligations (contract A), quite apart from the obligations associated with the
Analyses the tender process a 2 phase process which includes formation of two contracts
(A and B). This changed the traditional analysis of a call for tenders as an invitation to
potential tenderers to make offers.
The tender call is the offer and the bid submission is the acceptance of that offer which
leads to formation of contract A; the consideration is the preparation of the bid;
consequence of formation of contract A is the imposition of contractual liability on the
tenderer (not to withdraw from the bid) and the owner (to treat tenderers fairly and in good
faith).
Contract B is the construction contract to be formed between the owner and the successful
shares to the promisor whose offer was the highest and any obligation to the other tenderer
under the other unilateral contract came to an end.
The legal nature ofthe invitation was that of unilateral contracts; if an offer was received
from both Harvela and Sir Leonard, the obligation of the bank (the vendors) was to sell the
Whether an invitation from a seller to prospective buyers was to be construed as an
invitation to participate in a fixed bidding sale or in an auction sale depended on the
presumed intention of the seller as deduced from the express provisions of the invitation to
bid (an invitation for the submission of “offers” was held to be an invitation for a “fixed”
bid).
required (to enable meeting of the minds), but motive is irrelevant,
—
public offer
tenders
Formation: Offer &
Invitation to Treat
-
Formation: Offer &
Invitation to Treat
-
tenders
Formation: Offer &
Invitation to Treat
tenders
-
invitation to Treat
Formation: Offer &
to anyone who does
something
Offer
Communication of
to the reward because he did not act in reliance on the offer but for other reasons (to clear
himself from a false accusation).
Reconcile with Williams v. Carwardine by noting that in a hi-lateral contract knowledge is
something
Formation:
Topic
The case does not give offer-acceptance analysis but deals with human motives,
In contrast with Williams v. Carwardine, the court held that the defendant was not entitled
Rule
2
-I
[18]
[17]
[16]
rL
L
[13]
LBiukovic
rL’
1102
.
4
v.
Ex-cell-o
(3d)
and
it
cannot be
afterwards accepted
—
Silence does not amount to acceptance.
a
Saint John Tug Boat Co.
The conduct of an offeree, unaccompanied by
any verbal
or
could
are reluctant to
written undertaking,
In general, the offeror is in control of the mode of acceptance but the courts
allow_silence to_be_specified_as_the_mode_of acceptance.
Even though the nephew (seller) might have intended to sell, he never communicated this
intention to his uncle (buyer).
a
•
The court only considered the terms on the face of the documents. The other party’s
attention_must be drawn to the_important terms,_else unconscionable.
Follows the test in Butler Machine that in a battle of the forms the court will examine all of
the documents exchanged between the parties and look into their commercial relationship,
m order to find out if they considered any terms other than those found on the face of the
documents.
•
•
1. Last shot: a contract is concluded upon the terms of the last document sent by one of the
parties that was 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) a contract is not concluded since the differences are irreconcilable.
—
—
of forms
Formation:
Acceptance
Communication of
Formation:
battle
counter-offer;
Formation:
Acceptance
battle of forms
counter-offer;
Acceptance
Formation:
Lord Denning restated the traditional last shot formula for the resolution of the battle of the
forms, identifying several possibilities for courts:
•
a
unilateral and
bilateral contracts
Although in theory an offer for a unilateral contract can be revoked any time before the
acceptance, such as offer could be interpreted to have an implied term that an offeror who
controls conditions of cooperation of an offeree would not be allowed to prevent
performance/acceptance of an offeree
Formation: offer
and acceptance;
rejection and
counter offer
counter-offer;
Formation.
Acceptance
tenders
Where acceptance is not expressly given the question of whether the language used
amounts to acceptance will be a matter of construction of the court which may include
In order to avoid problems with contract formation (and revocation of offer) courts should
treat offers “as calling for bilateral rather than unilateral action when the language can be
fairly so construed”
If an offeror replies to the rejection, the reply (“cannot reduce price”) may amount to a
renewal of the offer. The answer is dependent upon considering all surroundmg
circumstances.
A counter-offer is a rejection of the original offer, a mere inguir’ is not,
An offer that has been rejected is thereby ended
without the consent of the one who made it.
-
Topic
taking into consideration conduct of the acceptor
•
v. Irving
E.R.
fairly and equally
When an owner accepts a compliant bid and enters into Contract B on the terms set out in
the tender documents, Contract A is fully discharged and an owner has no any further
obligations to unsuccessful_bidders
Rule
.
•
•
•
Ch.)
1037 (Ex.
142
(Ont. H. C.).
Feithouse v. Bindley
(1962) 11 C.B. (N.S. 869,
(1979) 100 D.L.R.
.
Tywood Industries v. St. Ann
Nackawic Pulp & Paper
.
[1979] 1 W.L.R. 401, 1 All E.R.
965 (C.A.)
Corp.
Butler Machine Tool
Co. [1955] S.C.R. 868
Dawson v. Helicopter Exploration
Livzngstone
v. Evans
[1925] 3 W.W.R. 453, [1925]
D.L.R. 769 (Alta S.C.)
.
Case
3
Hoiwell Securities v. Hughes
119741 1 W L R 155 1 All E R
161 (C A)
1221
1
1231
[26]
25j
.
Ltd. (1975) 119 SJ 370
2011 BCSC 1196
Communications Inc
‘
Century 21 Canada v. Rogers
[1999] O.J. 3778 (Ont. S.C.J.)
Rudder v. Microsoft Corp.
Sons
Yates Building Co. v. Pulleyn
..
Household Fire
&
v. Grant
(1879) 4 Ex. D, 216 (C.A.)
[21]
1241
v. Stahag Stahl
[1983] 2 A.C. 34 [1982] 1 All E.R.
293 (H.L.)
Brinkinbon
Eliason
[201
2011 BCSC 864
Columbia National Investments Ltd.
Trading Ltd V.
[1964] S.C.R. 614
TimberwoifLog
Refinery Ltd.
Case
v. Henshaw
(1819) 4 Wheaton 225, 4 U.S. (L.
Ed.) 556
[19]
Law
11002
Contracts
Biukovic
.
.
..
.
.
The mailbox rule (the contract is concluded where and when the acceptance is mailed)
applies only if acceptance by mail is required or if that has been a regular business practice
of the parties or if the offer is made by mail and no acceptance requirements are specified
The receipt rule (the contract is made when and where the acceptance is received) applies
to instantaneous communications such as phone or telex or facsimile.
•
The court upheld the general mailbox rule in situations where the acceptance is lost in the
pq and as a consequence the offeror was bound by the offer even though acceptance was
not received. The majority held the post office to be the agent of both parties. The dissent
rejected this and applied the recipient rule,
•
The postal rule should only apply if it does not lead to “manifest inconvenience and
absurdity
•
The postal rule does not apply if the express terms of the offer specifj that the acceptance
must reach the offeror. The requirement for “notice” was held to invoke the recipient nile.
.
The method of acceptance isn’t essential so long as the acceptance is received at the proper
place at the proper time and with no disadvantage to the offeror.
•
Must consider the purpose of the stipulated manner of acceptance in the offer to determine
whether it is essential or not,
• Terms of a contract entered into on the Internet can be displayed on multiple pages. Users
are expected to follow the links and become familiar with all terms before accepting the
terms of the contract.
.
Clicking the “I agree” button results in formation of a valid contract.
• The court defines the browse wrap agreement the one that “does not require that the
purchaser indicate their agreement by clicking on an “1 Agree” button. All that is required
is that they use the product after being made aware of the product’s Terms of Use.” [92]
The act of browsing could constitute the acceptance of terms (of use) of the web agreement
and the formation of contract as long as a user of the web site continues to browse after
•
•
•
•
•
under certain circumstances (for example, continuing serviced on terms previously agreed)
be reasonably constructed as valid acceptance
When there was no written contract between the parties the court had to review all
communications between them to see if they made an oral agreement, as well as to consider
their conducts over the relevant period of time and in the context of a particular industry
(BC logging industry)
Held that “where one party represents through conduct and silence that a contract has been
formed so as to lead the other party to reasonably conclude that such is the case, that the
law finds a contract to have been formed”. [para. 1161
General rule re-emphasized: an offer of a bargain by A to B imposes no legal obligation
upon A until it is accepted by B according to the terms in which the offer was made.
If the offeror specified the mode of acceptance and the acceptance was not made in the
requested manner, there is no contract (Mirror image rule).
Rule
Formation:
Acceptance by
Browsing;
Terms of Contract
Exclusion Clauses in
Formation:
Communication of
A ccep tance
—
—
—
—
Formation:
Communication of
Acceptance
Instantaneous
communication
Formation:
Communication of
Acceptance
mailed acceptance
Formation:
Communication of
Acceptance
mailed acceptance
Formation:
Communication of
Acceptance
mailed acceptance
Formation:
Communication of
Acceptance
Formation:
Communication of
Acceptance
Communication of
Acceptance
Topic
4
Byrne v. Van Tienhoven
(1880) C.P.D. 344
Dickinson v. Dodds
(1876) 2 Ch. D. 463 (C.A.)
Errington v. Errington and Woods
[1952] 1 K.B. 290, [1952] 1 All
E.R. 149 (C.A.)
Barrick v. Clark
[1951] S.C.R. 177, [1950] 4 D.L.R.
529
Manchester Diocesan Council v.
Commercial and General
Investments Ltd.
[1970] 1 W.L.R. 241, [1969] 3 All
E.R. 1593 (Ch.D.)
Kanitz v. Rogers [2002] O.T.C. 143
(Ont. S.C.J.)
[28]
[291
[30]
[31]
[32]
Case
[27]
Law
110.02
Contracts
Biukovic
•
•
•
•
•
•
•
.
•
•
-
Formation: On-line
contract
reasonable notice
A contract for Internet service was a “take it or leave it” contract. The original agreement
allowed for changes to the contract and given the alert message on the main page it is
reasonable to expect a customer who uses the Internet to go further than the main page of
—
Formation:
Termination of
Offer Lapse of
Time
—
Formation:
Termination of
Offer Lapse of
Time
—
Formation:
Termination of
Offer Unilateral
contracts
-
Formation:
Termination of
Offer Revocation
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.
Re-emphasizes the basic principle that where an offer is made in terms which fix no time
limit for acceptance, the offer must be accepted within a reasonable time to make a
contract.
The general principle is that if a person who makes an offer dies, the offer cannot be
accepted after they are dead.
The court held that an offer could be revoked by indirect communication applying the same
general rule logic—that is, once the person to whom the offer was made knows that the
property has been sold to someone else, it is too late for them to accept the offer and the
contract is impossible to make.
A promise to hold an offer open is not binding unless have consideration or a deed. Equity
cannot be applied when a third party has acquired rights.
Legal consequences of family arrangements are difficult to ascertain.
Unilateral contracts are formed when all conditions of the offer are met.
In general, offers for unilateral contracts can be revoked any time prior to complete
fulfillment by the offeree, but the court held that in this case an offer for a unilateral
contract could not be revoked by the promisor once the promesee entered on performance
of the act (but it would cease to bind the offeror if performance was left incomplete and
unperformed).
An offer will lapse if it is not accepted within a time limit determined by the offeror, or if a
time limit is not specified, then it will lapse within a reasonable time.
The court will determine what is a reasonable time using the rule of construction
(objective test)—it will depend upon the nature and character of the item being sold, on the
normal or usual course of business in negotiations as well as the circumstances of the offer,
including the_conduct of the parties_in the_course_of negotiation.
Formation:
Termination of
Offer- Revocation
web posted contracts
(browse wrap
agreements)
reading the terms posted
The court found that there was an enforceable browse wrap agreement on the Century 21
web site and that terms of use were properly incorporated because the terms of use were
clear and a person who browsed the web site had enough time to read them prior to
accepting them
The mailbox rule does not apply to revocation—revocation must be received by the offeree
to be effective.
Topic
Rule
5
R. v. CAE Industries Ltd.
[1986] 1 F.C. 129 (F.C.A.)
Nicolene v. Simmonds
[1953] 1 Q.B. 543, [1953] 1 All
E.R. 822 (C.A.)
May & Butcher v. R.
[1934] 2 K.B. 17 (H.L.)
Hillas v. Areas
(1932) 40 Lloyd’s Rep. (C.A.)
Hillas v. Areas
(1932) 147 L.T. 503 (H.L.)
Foley v. Classique Coaches Ltd.
[1934] 2 K.B. 1 (C.A.)
Courtney and Fairbairn v. Tolaini
[34]
[35]
[36]
[37]
[38]
[39]
Case
[33]
Law
110.02
Contracts
Biukovic
•
•
•
•
•
•
•
•
•
•
•
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.
The arbitration clause was held not unconscionable as both parties are obliged to arbitrate
and resulting contractual arrangements were not improvident.
The court dealt with vagueness of a “best efforts” term by constructing its reasonable
meaning in the context of the language used by the parties and the overall purpose of the
contract which has also been partly performed
Preliminary issue was ifthe contract was intended and the court held that it could be
answered by analyzing the surrounding circumstances as well as the letter itself
Lord Denning held that a clause which is meaningless can often be ignored, whilst still
leaving the contract good; whereas a clause which has yet to be agreed may mean that there
is no contract at all, because the parties have not agreed on all the essential terms.
A meaningless clause is a clause so vague and uncertain as to be incapable of any precise
meaning.
A meaningless clause has to be clearly severable from the rest of the contract.
To be a good contract there must be a concluded bargain which settles everything that is
necessary to be settled and leaves nothing to be settled by later agreement between the
parties.
It has long been a well-recognized principle of contract law that an agreement in which
some critical part of the contract matter is left undetermined is no contract at all.
It is perfectly possible to contract to sign a document which will contain all the relevant
terms, but it is not acceptable to agree that the parties will in the future agree upon a matter
which is vital to the contract.
Court of Appeal with “great regret” upheld May & Butcher’s general rule that if there are
any essential terms of a contract of sale undetermined, and therefore to be determined by a
subsequent contract, there is no enforceable contract.
House of Lords took a more modem approach: Business men often record the most
important agreements in crude and summary fashion; modes of expression sufficient and
clear to them in the course of their business that are far from complete or precise.
It is the duty of the court to construe such documents fairly and broadly, without being too
astute or subtle in finding defects.
Interpreted the general principles of H.L.’s decision in Hillas to mean that each case should
be decided on the construction of the particular document.
Held that an agreement to agree on price from time to time was certain enough since the
parties believed they had a contract and had acted for 3 years as if they did i.e. there was
already partial performance: The land had been transferred and a portion ofthe sale of gas
agreement had been performed.
Lord Denning held that the price in a building contract is of fundamental importance.
Rule
Formation:
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Vagueness of
Terms
arbitration clause
Unconsionability:
Topic
6
th)
4
(
243
th)
4
(
Kernels
Balfour v. Balfour
[1919] 2 K.B. 571
Rose and Frank JR. Crompton
Bros., [1923] 2 K.B. 261 (C.A.)
[46]
[47]
v.
Pro CD v Matthew
(1996) 86 F. 3d 1447
Wallace v. Allen, 2009 ONCA 36
Wellington City Council v. Body
Corporate 51702
[2002] 3 N.Z.L.R. 486 (C.A.)
97(Ont. C.A.)
Popocorn Ltd
Bawitko Investment Ltd.
v.
(1991) 79 D.L.R.
[1999] 173 D.L.R.
(B.C.C.A.)
Canada
v.
Bank ofNova Scotia
Mannpar Enterprises Ltd.
Empress
v.
[1991] 1 W.W.R. 537 (B.c.c.A.)
Bros.
[1975] 1 All E.R. 716, [1975] 1
W.L.R. 297 (C.A.)
Case
[45]
[44]
[43]
[42]
[41]
[40]
110.02
Contracts
Biukovic
Law
The process contract or the agreement to negotiate in good faith is unenforceable for the
lack of certainty
The court held that the renewal clause in the rental contract was a mere agreement to
agree—the contract did not provide a formula or objective measure to determine rent (such
as fair market value) or a mechanism to apply the formula.
The oral agreement in contemplation of a formal written agreement not enforceable due to
the lack of certainty; it is a contract to make a contract
The court will try, wherever possible, to give the proper legal effect to any clause that the
parties understood and intended to have legal effect.
Agreements to agree cannot be enforced.
When the parties stated a formula (e.g. market rental) to ascertain a clause, but did not
supply machinery (e.g. arbitration) for applying the formula, the courts will supply (be) the
machinery and apply the formulae so long as the formulae is not defective.
Where the formula is set out but is defective, and machinery is provided for applying the
formula, the machinery may be used to cure the defect in the formula.
While there is no common law obligation to negotiate in good faith (because it is
unworkable), in this case there was an implied term requiring good faith negotiations for
the renewal of the rental agreement.
There is no contract unless the price is agreed or there is an agreed method of ascertaining
it that is not dependent on the negotiations of the two parties themselves.
•
Letter of intent could amount to an enforceable contract if the parties clearly express their
intention to be bound by the terms of LOl which were later to be incorporated into a main
contract, if the terms of LOT are precise and complete, and if the parties after signing LOT
conducted themselves as if the deal is completed.
• Shrink-wrap licenses are enforceable unless their terms are objectionable on grounds
applicable to contracts in general.
•
If the buyer does not want to be bound by the terms contained inside the box the buyer has
the right to return the goods promptly (unused) for a refund, but will otherwise be bound
by those terms.
• Atkin U.: the common law does not regulate agreements between spouses.. .The
consideration that really obtains from them is that natural love and affection.
•
There is a strong presumption that family agreements are not intended to produce legal
consequences.
•
There is a strong presumption that business agreements are intended to produce legal
consequences.
•
•
•
•
•
•
•
•
•
Rule
Enforcement of
Promises: Intention
to Create Legal
Obligation
Enforcement of
Promises: Intention
Formation:
Certainty of Terms
Formation:
Certainty of Terms
and letters of intent
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Certainty of Terms
Topic
7
Thomas v. Thomas
(1842)2 Q.B. 851, 114 E.R. 330
Callisher v. Bischoffsheim
(1870) 1 L.R. 5
Ward v. Byham, [1956] 1 WLR 496
(C.A.)
B. v. Arkin
[1996] 8 W.W.R. 100 (Man.Q.B.);
affirmed [1996] 10 W.W.R. 689
(Man. C.A.)
Pao On V. Lau Yiu Long
[1980] A.C. 614 (P.C.)
[54]
[55]
[56]
[571
The Governors ofDaihousie
College at Halifax v. The Estate of
Arthur Boutilier, Deceased
[1934] S.C.R. 642
Eastwood v. Kenyon
(1840) 11 Ad. & E. 438, 113 E.R.
482 (Q.B.)
Lampleigh v. Brathwait, (1615)
Hobart 105, 80 E.R. 255 (K.B.)
Toronto Dominion Bank v. Leigh
th)
4
Instruments (1999) 178 D.L.R. (
634 (Ont. C. A.)
Jones v. Padavatton
[1969] 2 All ER 616, [1969] 1 WLR
328 (C.A.)
Case
[53]
[551
[51]
[50]
[49]
[48]
110.02
Contracts
Biukovic
Law
•
•
•
•
A forbearance to sue is good consideration and monies paid in exchange for a promise not
to sue is a valid and enforceable legal contract. The forbearance can be good consideration
even if the validity of the claim is doubtful or not known to be invalid (but not if the claim
is known to be invalid).
Past consideration can sometimes be good consideration if: 1. The act was done at the
promisor’s request; 2. The parties understood that the act was to be remunerated; and 3.
Payment would have been legally enforceable had it been promised in advance,
Consideration can be anything beyond a basic legal duty.
If an agreement is made to compromise a disputed claim, forbearance to sue in respect of
that claim is a good consideration
If a person bona tide believes he has a reasonable ground for suing, his forbearance to sue
will constitute a good consideration
•
•
Consideration is something which is of some value in the eyes of the law.
Consideration must move from the promise.
Consideration must be sufficient but need not be adequate.
Moral obligation is nudum pactum, a voluntaiy promise without any consideration.
Past consideration is not a good consideration for a new promise made after a benefit was
conferred and when the benefit was not conferred at the request of the promisor.
Past consideration may be a good consideration for a subsequent promise if the benefit was
conferred at the request of the promisor.
For a promise to be binding as a contract it has to be supported by a good and sufficient
consideration which moves from the promisee at the time of and in exchange for the
promise which is sought to be enforced
A comfort letter is a form of undertaking that is deliberately designed with the intention not
to create enforceable obligations.
However, if there is a clear and definite expression of the business parties that they do not
intend to be subject to legal jurisdiction, there is no reason in public policy why effect
should_not be_given to_their_intention.
Held that the arrangement between mother and daughter was throughout a family
arrangement depending upon the good faith of the parties in keeping the promises made
and not intended to be a rigid binding agreement;
The family arrangement was held far too vague and uncertain to be itself enforceable as a
contract.
•
•
•
•
•
•
•
•
•
Rule
Enforcement of
Promises: Pre
existing Legal
Enforcement of
Promises:
Forbearance
Enforcement of
Promises:
Compromise and
Consideration
Enforcement of
Promises: Nature of
Consideration
Enforcement of
Promises: Nature of
Consideration
Enforcement of
Promises: Past
Consideration
Enforcement: Past
Consideration
Enforcement of
Promises:
Consideration
Enforcement of
Promises: Intention
to Create Legal
Obligation
Enforcement of
Promises: Intention
to Create Legal
Obligation
to Create Legal
Obligation
Topic
8
[60]
Foakes v. Beer
(1884) 9 App. Cas. 605 (H.L.)
Foot v. Rawlings [1963] S.C.R. 197
[62]
[63]
Re Selectmove Ltd. [1995] 2 All
E.R. 531 (C.A.)
Greater Fredericton Airport
Authority Inc. v. NA V Canada
[2008] N.B.J. No. 108 (N.B.C.A.)
[59]
[61]
Williams v. Roffey Bros.
[1990] 1 All ER. 512 (c.A.)
[58]
Case
Gilbert Steel v. University
Construction Ltd.
h1d•)
2
(1976) 12 O.R. (
19, 67 D.L.R.
(3d) 606 (C.A.)
Contracts
Biukovic
110.02
Law
—
The promise to pay a sum which the debtor was already bound to pay was not good
•
•
.
•
•
In the case of the debtor who owed the creditor a large sum under a series of promissory
notes as full payment of the debt, as long as the debtor continued to perform his obligation
The traditional common law position is that an agreement to accept a smaller sum in
satisfaction of a debt of a larger sum is not a good consideration.
This case has been overruled in B.C. by s.43 of the Law and Equity Act.
consideration (confirms Foakes v. Beer)
Williams v. Roffey principle not applicable where the existing obligation is to pay money
but rather only where the existing obligation is to supply goods or services
Robertson J.A. held that it is time to build upon UK decision in Williams v. Roffey and
accepted that post-contractual modification, unsupported by consideration, may be
enforceable so long as it is established that the variation of contracts was not procured
under economic duress.
Commercial reality needs to be recognized and considered—that is, that the parties
frequently varied and modified their contractual obligations and that the law has to protect
their legitimate expectations that the modifications or variations will be regarded as
enforceable.
•
•
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 the subsequent
promise is not given under economic duress (note Glidewell’s 6 point test).
A promise to perform, or the performance of a pre-existing contractual obligation to a third
party can be valid consideration.
Duress, whatever form it takes, is a coercion of the will so as to vitiate consent; duress may
render a contract voidable, but this must be claimed promptly.
The commercial pressure alleged to constitute duress must be such that the victim entered
the contract against their will, they had no alternative course open to them, and they were
confronted with coercive acts by the party exerting the pressure.
A unilateral promise to increase price is unenforceable because there is no clear agreement
to rescind the existing contract the new provisions were unilaterally imported into the
document and accordingly, consideration of the oral agreement was not found in a mutual
agreement to abandon the earlier written contract and assume the obligations under the new
oral one.
In Stilk v. Myrick (1809), when two out of 11 sailors deserted the ship, the captain
promised to pay the remaining sailors extra money if they sailed the ship back. However,
he later refused to pay that extra money. The court held that the captain was not obliged to
pay the extra money because the obligation to sail the ship back was not a valid
consideration for the subsequent agreement which varied the original one.
•
•
•
•
•
•
Rule
Owed to the
Promisor
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
to the Promisor
Enforcement of
Promises:
Promises: Duty
Enforcement of
to the Promisor
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
to the Promisor
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
Reference to SUlk
v. Myrick (1809)
170 E.R. 1168
to the Promisor;
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
Economic Duress;
Past Consideration
to a Third Party;
Duty—Duty Owed
Topic
9
D.C. Builders v. Rees
[1966] 2 Q.B. 617
Combe v. Combe
[1951] 2 K.B. 215, 1 All E.R. 767
(C.A.)
Walton Stores (Interstate) Ltd. v.
Maher
(1988) 62 A.L.J.R. (H.C.)
N.M. v. A.T.A. (2003), 13 B.C.L.R.
th)
4
(
73 (B.C.C.A.)
[66]
[67]
[68]
[69]
[70]
Central London Properly v. High
Trees House
[1947] 1 K.B. 130, [1956] 1 All
E.R. 256
Hughes v. Metropolitan Railway
Co. (1877) 2 A.C. 439 (H.L.)
Case
John Burrows v. Subsurface
Surveys
[1968] S.C.R. 607, 68 D.L.R. (2j
354
[65]
[64]
Law
110.02
Contracts
Biukovic
•
•
•
•
•
•
•
•
•
•
•
B.C.C.A found little evidence in Canadian authorities to indicate a move toward a more
generous approach to promissory estoppel and distinguished the case from Walton, fl
which there was a reasonable expectation of a legal obligation.
“[I]t is the first principle upon which all Courts of Equity proceed, that if parties who have
entered into definite and distinct terms involving certain legal results—certain penalties or
legal forfeiture—afterwards by their own act or with their own consent enter upon a course
of negotiation which has the effect of leading one of the parties to suppose that the strict
rights arising under the contract will not be enforced, or will be kept in suspense, or held in
abeyance, the person who otherwise might have enforced those rights will not be allowed
to enforce them where it would be inequitable having regard to the dealings which have
thus taken place between the parties”
A promise intended to be binding, intended to be acted on and in fact acted on, is binding
even if there is no consideration (Lord Denning relied on the doctrine of promissory
estoppel).
Estoppel was used as a shield by tenants against the landlord who wanted to enforce a
higher rent.
The passive conduct of the appellant was not taken by the court as a waiver of his rights to
seek enforcement of the contract, but only as friendly indulgences.
When there is no consideration or deed, any relaxation of terms must be clear and
unequivocal.
A creditor is barred from enforcing their legal rights only when it would be inequitable for
the creditor to insist on them.
Where there has been a true accord, under which the creditor voluntarily agrees to accept a
lesser sum in satisfaction, and the debtor acts on that accord by paying the lesser sum and
the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the
balance, but they are not bound if there was no true accord.
A promise made under duress should not be estopped.
Lord Denning explained his own principle set out in High Trees: a) promissory estoppel
cannot be used as a sword, to create new causes of action where none existed before, b)
promissory estoppel can only be used as a shield, as a part of a cause of action, to prevent a
party from insisting upon his strict legal rights when it would be unjust to allow him to
enforce them.
Australian court made an exception to the general rule that promissory estoppel cannot be
used in the absence of a pre-existing legal relationship.
The court held that the doctrine can be used in the absence of a pre-existing legal relation if
there was a reliance on the promise that was a reasonable expectation and if a departure
from the promise is unconscionable behavior.
and kept paying by post-dated cheques as subsequently agreed between the two, the
creditor’s right to sue on the notes was suspended.
Rule
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforuement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Waiver
and Promissory
Estoppel
debt
Part payment of
Topic
10
[78]
[771
[76]
[75]
[74]
[73]
[72]
[71]
Biukovic
Contracts
110.02
Law
(3d)
125
(B.C.C.A)
c.
conduct
leads
another
strict rights if the reasonable notice is
can be retracted
if a reasonable notice is given to the
notice
are
not
and
•
Besweck v. Beswick [1966] 1 Ch.
party to
party
C.A:
Lord Denning
MR
contracted_as_his_agent.
finds an equitable exception to general rule of privity where the
it
if the promisee really
with an enforceable right, there still must be
a contract can sue on it.
contract provides a third
is not a
can generally neither sue nor be
principal not named in the contract, however, may sue upon
if a
Only a person who is a
Even
if it
in whose favour it
a legal relation between the parties
as a sword
was
person who is not engaged in a contract (a third party)
sued on that contract.
sufficient consideration.
Love and
affection
Promissory estoppel used both as a shield
Promissory estoppel could only apply when there
A
party
notice to revive waived obligations could be reasonable in length even
dated
The
operates
Waiver
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
and waiver require reliance on representation but detriment is not needed
It must be inequitable to allow the party who waives his or her rights to revert
Estoppel
A
•
•
•
•
its
Waiver would operate even if there is no detriment for the parties as long as there is some
alteration of the parties’ positions and one party acts in reliance on waiver
•
(1861) 1 B &
•
by
On some occasions it is possible to revert to the
given; but not if that would be inequitable
847(H.L.)
393
Atkinson
589
•
one
Rule
to believe that the strict rights
party
Denning on waiver: if
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 aflerwards be allowed to insist on
the strict rights when it would be inequitable for him to do so
consideration.
.
v.
h)
(
t
4
17
•
•
•
•
•
•
•
•
Dunlop PneumaticTyre Co. V.
Seifridge & Co. Ltd. [1915) A.C.
s
Tweddle
(N.B.C.A.)
132
Casse Populaire
(1990) 69 D.L.R.
Robichaud
v.
Petridis Shabinsky (1982)
D.L.R. (3d) 430 (Ont. H.C.)
B.C.L.R.
International Knirwear Architects
Inc. v. Kabob Investments (1995)
[1994] 2 S.C.R.490
Saskatchewan River Bungalows v.
Maritime Ljfe Assurance
E.R. 19 (Q.B.)
Sociétd lialo-Belge Pour Le
Commerce v. Palm and Vegetable
Oils (The Post Chaser) [1982] 1 All
Wi Alan & Co. V. El Nasr Export
& Import Co. [1972] 2 Q.B. 189
Case
and
of
Party
Privity
of Contract:
Beneficiaries
Third
Privity of Contract:
Beneficiaries
Third Party
Privity of Contract:
estoppel
Promissory
Promises:
Enforcement of
Estoppel
Promissory
Promises:
Enforcement of
Waiver
Estoppel
Promissory
Promises:
Enforcement
Waiver
Estoppel and
Promissory
Promises:
Enforcement of
Waiver
Estoppel and
Promises:
Promissory
Enforcement of
Waiver
Estoppel and
Promises:
Promissory
Enforcement of
Topic
11
.
)
169 (S.C.C.)
‘.‘
Redgrave v Hurd
(188flI 20 Ch D 1 (C A
[85]
.
Deglman v. Brunet Estate
[19541J S C R 725 S C C “
L
[84]
.
Dynamic Transportation Ltd. v.
O.K Detailing Ltd [1978] 2 S.C.R.
1072
Fraser Rn’er Pile & Dredge Lt. v.
Can-Dive Services [1997] 39
B • C L R (3d) 187 (B C C A)
.
107 D.L.R. (4
th
.
Edgeworth Construction Ltd.
ND. Lea & Associates Ltd. (1993)
London Drugs Ltd. v. Kuehne &
Nagel international Ltd.
[1992] 3 S.C.R. 299
538; [1966] 3 All E.R. 1 (C.A.)
[1968] A.C. 58;[1967J 2 All E.R.
119 (H.L.)
Case
[83]
[82]
rfl
I
[80]
[79]
Contracts
Biukovic
110.02
Law
•
•
•
•
•
•
•
•
•
•
•
•
.
-
.
third party is in a trustee relationship in this case the widow sued in her capacity as
executrix ofthe estate, and also in her personal capacity (Denning for C.A. held that she
could make ajoint claim and that a personal claim was good as well but HL disagreed with
him on the point of a personal claim— see below),
H.L.: Lord Reid found that although the widow in her personal capacity had no right to sue,
she had a right as administratrix of her husband’s estate to sue and seek for specific
performance of a contract (rather than damages); the widow is in that way enforcing the
contract in her benefit
lacobucci J held employees were protected from clause limiting their liability even though
they were not parties to the contract
The employee could rely on the limitation of liability clause if such clause expressly or
implicitly extends its benefits to the employees and if the employees have been acting in
the course of their employment and performing the very services provided for in the
contract between their employer and the customer when the loss occurred
Limited Exception to privity, employees may use as ‘shields’.
McLachlin J held that Engineers were not protected from clause limiting their liability in a
tender as they were not parties to the contract
Distinguished the exception in London Drugs as specific to powerless employees who were
the only ones who could do the work. Here the engineering firm could have taken measures
to protect themselves (ie disclaimer) unlike the employees in London Drugs. No exception
to privity rule found in this case.
Followed London Drugs analysis re: application of limitation of liability clause on
employees in order to enforce the insurer’s waiver of its rights of subrogation against the
charterer
Does not modify the test of London Drugs but extends its application on contracts other
than employment contracts as long as the contract explicitly or implicitly extends its
benefits to the third party and if the third party has been performing the activities
contemplated in the contract
Statutory requirement that a contract be in writing has been satisfied with a memorandum
evidencing the agreement (that is, description of land) with a sufficient certainty of
description that enables the property to be identified
Equitable doctrine of part performance could be used to enforce an (oral) agreement for
transfer of land which is non-compliant with a statutory requirement of form if an oral
agreement is partially performed (part performance relevant to an oral agreement, not
‘wholly neutral and it would be unjust to refuse enforcement of an agreement
If the doctrine of part performance is not applicable, the plaintiff could still have a claim in
quantum meruit based on the reasonable value of services rendered, if those services would
otherwise “unjustly enriched” the defendant
A contract can be rescinded (set aside) due to a material false representation: “a man is not
to be allowed to get a benefit from a statement which he now admits to be false”,
Failure to exercise due diligence is not relevant if a person is induced to enter into a
Rule
Misrepresentation
and Rescission:
material
Requirement of
writmg: effects of
non-compliance
Re uirement of
Writing
Privity of Contract:
Exceptions other
than Employees
Privity of Contract:
Exceptions
—
Privity of Contract:
Exceptions
Employees
Ways for Third
Parties to Acquire
Benefits (choice of
remedy)
Topic
12
v.
[91]
[90]
Seymour
Heilbut, Symons & Co. v. Buckleton
[1913] A.C. 30 (H.L.)
Building Systems Ltd. (B.C.C.A.)
S-244 Holdings Ltd.
[89]
.
V.K. Mason Construction Ltd.
The Bank ofNova Scotia (1985) 58
N.R. 196 (S.C.C.)
Ch.
[88]
(C.A.)
Kupchak v. Dayson Holdings
(1965) 53 W.W.R. 65, 53 D.L.R.
(2d) 482 (B.C.C.A.)
28 Ch. D.
Derry v. Peek (1889), 58 L.J.
864, [1889] All E.R. Rep. 1
(1884)
7
Land & House Property
Corporation
Smith
Case
[87]
[86]
Biukovic
Contracts
Law
110.02
if the
or false.
In 1889 type
restitutio in integrum
is impossible, or
if the
if
a 3” party has acquired rights,
step test: a) is rescission practical and restitution possible?
(in
was the claim to rescind
intended, else
it
is only an innocent misrepresentation.
An affirmation at the time of sale is a warranty, provided
remedy.
it appears
on evidence to be so
A person is not liable in damages for an innocent misrepresentation no matter in what way
or under what form the attack is made, therefore if rescission is not possible there is no
•
parties, or would otherwise be inequitable.
a remedy or because rescission might
Denial of rescission could, in certain circumstances, beinequitable because rescission is an
“all or nothing” remedy.
3
in seeking
•
affect
because of the plaintiffs undue delay
despite the execution of the contract—execution or performance is a relevant but not
decisive factor to be considered when deciding whether rescission should be denied
International
In the case of innocent misrepresentation the court relying on Lord Denning (Leaf V.
Galleries) and Canadian case law held that rescission may be available
wasted expenses.
financing. The court awarded expectation damages (anticipated profits) in addition to
special relationship with the plaintiff and the bank’s false statement induced the plaintiff to
sign a contract with another party in reliance on the bank’s false statement regarding
—
The Supreme Court of Canada held that there was no contract between the bank and the
plaintiff but that the bank was liable for negligent misrepresentation the bank had a
b)
•
submitted in timely fashion?
2
When rescission is impossible then the injured party may get monetary compensation
this case fair market value for the property plus interest).
•
a
The court dealt with the possibility of rescission for fraudulent misrepresentation using the
or when
action to rescind is not taken within
reasonable time, or the contract is executed (except in the case of fraud), or if the injured
party affirms the contract.
General rule: there is no rescission for misrepresentation
(c) was classified as fraudulent misrepresentation, but today (c)
would likely be considered to be negligent misrepresentation.
true
Fraudulent misrepresentation requires proof of a misrepresentation
and that it was known
to be incorrect at the time it was made; that is, a proof that a false statement is made: (a)
knowingly; or (b) without belief in its truth; or (c) recklessly, careless as to whether it be
are not equally known to both sides, then a statement of opinion by
the facts best very often involves a statement of a material fact.
facts
the one who knows
However,
In the case where the facts are equally well known to both parties, what one of them says to
the other is frequently nothing but an expression of opinion.
•
•
•
•
•
•
contract by a false representation,
Rule
the
breach of warranty
misrepresentation;
and Rescission:
innocent
Misrepresentation
contract is
executed
and Rescission:
rescission when
Misrepresentation
Negligent
Misrepresentation:
misrepresentation
fraudulent
and Rescission:
Misrepresentation
misrepresentation
Fraudulent
opinion or
misrepresentation
and Rescission:
statement of
Misrepresentation
misrepresentation
fraudulent
representation,
Topic
13
Dick Bentley v. Smith Motors
[1965] 1 W.L.R. 623 (C.A.)
Charbonneau v. Brawn
(2002) 113 A.C.W.S. (3d) 620
B.C.S.C.
Leaf V. International Galleries
[1950] 2 K.B. 86, 1 All E.R. 693
(C.A.)
Bank ofB. C. v. Wren Developments
(1973), 38 D.L.R. (3rd) 759
(B.C.C.A.)
Hedley Byrne & Co. Ltd. v. Heller
& Partners Lid, [1964] A.C. 465
Esso Petroleum v. Mardon
[1976] Q.B. 801, 1 All E.R. 5 (c.A.)
[93]
[94]
[95]
[96]
[97]
Case
[92]
110.02
Contracts
Biukovic
Law
•
.
•
•
•
•
•
The court found that the bank’s failure to disclose material facts to the defendant (i.e. that
there had been a change to collateral securities held by the bank) constituted
misrepresentation by words, acts and conduct which induced the defendant to sign the
guarantee which he otherwise would not have signed (unilateral mistake induced by
negligent misrepresentation)
Omissions can be misrepresentation where the omissions are related to the material aspects
of the contract
If a party’s skill and judgment is foreseeably being relied upon, a duty is owed to take care
in making statements. If care is not taken, and injury results, the party that was relied upon
will be liable,
Special relationship must be shown,
Denning held: a negligent misrepresentation inducing a contract gives rise to actions in tort
(negligence) and contract (breach of collateral warranty).
If a party, who has or professes to have special knowledge or skill, makes a representation
by virtue thereof to another (advice, information or opinion) with the intention of inducing
the other to enter into a contract, they are under a duty to use reasonable care to see that the
Lord Denning held: rescission may be available in cases of innocent misrepresentation if
no other option is available and the innocent party behaved reasonably.
But, no rescission is available for innocent misrepresentation when the contract is executed
and a reasonable time for a claim lapses.
Distinction drawn between the quality of the painting (who painted it) and the substance of
the painting (picture of Salisbury Cathedral). Only allow rescission if differs in substance.
•
•
•
Interpretation of a contract is an exercise in determining the intention of the parties in an
objective sense.
The court does not question what the parties subjectively intended, but instead ascertains
what their intentions were from the circumstances,
Evidence of the subjective intention of the parties is not admissible.
Extrinsic evidence is admissible to show that words in an agreement have by custom or
usage a peculiar meaning; or when the words are susceptible to more than one meaning, or
if an ambiguity emerges.
A collateral warranty must be proved strictly, not only the existence of such terms but the
existence_of animus contrahendi_must be_clearly_shown.
Lord Denning: if a representation is made in the course of dealings for a contract for the
very purpose of inducing the other party to act on it, and it actually induces him to act on it
by entering into the contract, that is primafade ground for inferring that the representation
was intended as a warranty.
The maker of the representation can rebut this inference if they can show that it really was
an innocent misrepresentation, in that they were in fact innocent of fault in making it, and
that it would not be reasonable in the circumstances for them to be bound by it.
•
•
•
•
Rule
Misrepresentation
and Rescission:
negligent
misrepresentation
Misrepresentation
and Rescission:
concurrent liability
in contract and
tort; negligent
Misrepresentation
and Rescission:
omissions
Misrepresentation
and Rescission:
innocent
misrepresentation;
rescission and
lapse of time
Misrepresentation
and Rescission:
breach of
warranty;
Parol evidence rule:
admissibility of
extrinsic evidence;
Interpretation of
contract
Misrepresentation
and Rescission:
innocent
misrepresentation;
breach of warranty
Topic
14
No. 2002 Taurus Ventures Ltd v.
Intrawest Corp.
2007 BCCA 228
Redican v Nesbitt
[1924] S.C.R. 135
Bank ofBC v. Wren
(1973) 38 D.L.R. (3d) 759
(B.C.S.C.)
Guarantee Co. ofNorth America v.
Gordon Capital Corp. (1999)
th)
4
178 D.L.R. (
1 (S.C.C.)
[101]
[102]
[103]
[1993] 1 S.C.R. 12
B. G. Checo Int’l Ltd. v. B. C. Hydro,
Sodd Corp. v. N. Tessis (1977), 17
O.R. (2d) 158 (Ont. C.A.)
Case
[100]
[99]
[98]
110.02
Contracts
Biukovic
Law
—
Liability for negligent misrepresentation may be found both in contract and tort where
there is a special relationship creating a duty of care the defendant as a professional
accountant and trustee in bankruptcy and the party submitting an accepted tender were in
such a relationship
•
•
•
•
•
•
Limitation clauses may be valid even in the case of illegal rescission.
For the purpose of triggering a limitation period, knowledge of the right to make a claim is
deemed to arise when there are sufficient facts available to cause a reasonable person to
assume that a loss of a type covered under the contract has occurred.
Rescission is a remedy available for misrepresentation, and is independent of whether or
not the guilty party accepts the rescission.
The_effect of repudiation_depends_on the_attitude_of the_non-repudiating party._If the_non-
An obligation to disclose material facts arises when a party asks a direct question.
Failure to disclose a material fact which would have prevented a party from making a
guarantee, may render that party not liable for the terms of the guarantee.
SCC held that the limitation clauses in the contract did not negate Hydro’s duty of care.
Held that actions in contract and tort may be concurrently pursued unless the parties by a
valid contract explicitly indicate that they intended otherwise.
•
lacobucci in dissent said that a contract precluded the concurrent liability, but the majority
of SCC held that the mere fact that the parties have dealt with a matter expressly in their
contract does not mean that they intended to exclude all the rights to sue in relation to that
matter (in this case, tort).
• [38] “The SCC made it clear.. .that breach of precontractual representations may be
actionable as both a breach of contract and negligent misrepresentation, with clear
exceptions arising from the express terms of the contract.”
•
The entire agreement clause in the contract between the parties did not explicitly refer to
negligence but BCCA held that where the parties were both “sophisticated, commercial
entities” and the contract was not a standard adhesion contract and was clearly intended to
govern the relationship between the parties, “it would not accord with commercial reality
to gove no effect to the entire agreement clause in determining whether Taurus can claim
a tort remedy”[59]
• Rescission not allowed for innocent misrepresentation ifthe contract is executed unless
the benefit provided differs in substance from that promised.
•
For fraudulent misrepresentation rescission may be granted even if the contract is
executed
• Impossibility of restitution will prevent rescission unless that impossibility has been
caused by the guilty party.
•
•
•
•
representation is correct. If they negligently give unsound advice or misleading information
and thereby induce the other side into a contract, they are liable in damages.
Breach of a collateral warranty gives the right to damages.
Rule
Misrepresentation
and Rescission:
applicability of
exclusion clauses
and options for the
innocent party
Misrepresentation
and Rescission:
Enforcement of
terms
Misrepresentation
and Rescission:
Availability of
remedies
Misrepresentation
and Rescission:
concurrent liability
in torts and
contracts and the
entire agreement
clause
Misrepresentation
and Rescission:
concurrent
Liabil in Torts
and Contracts
Misrepresentation
and Rescission:
concurrent
Liabifity in Torts
and Contracts
misrepresentation
Topic
15
Bauer v. Bank ofMontreal
[1980] S.C.R. 102
Gallen v. Butterley
(1984) 53 B.C.L.R. 38, 25 B.L.R.
314 (B.C.C.A.)
Hong Kong Fir v. Kawasaki Kisen
Kaisha Ltd.
[1962] 1 All E.R. 474 (C.A.)
Krawchuk v. Ulrychova
(1996) 40 Alta. L.R. (3d) 196 (Alta.
Prov. Ct.)
Wickman v. Schuler
[1974] A.C. 235, 2 All E.R. 39
(H.L.)
Fairbanks v. Sheppard
[1953] 1 S.C.R. 314, 2 D.L.R. 193
Sumpter v. Hedges
[1898] 1 Q.B. 673 (C.A.)
[104]
[105]
[106]
[107]
[108]
[109]
[110]
[1111
Case
Harwish v. Bank of Montreal
[1969] S.C.R. 515
110.02
Contracts
Biukovic
Law
•
•
•
•
•
•
•
•
•
•
•
•
The general rule is that where there is a contract to do work for a lump sum, until the work
is completed the price of it cannot be recovered.
repudiating party agrees that the contract should be dissolved, then the contract is at an
end and there are no further obligations, but if the non-repudiating party wants to continue
the contract, they can reject the repudiation and sue for damages.
The court upheld the traditional principle that any agreement collateral or supplementary to
the written agreement may be established by parol evidence, provided it is one which could
be made as an independent agreement without writing and that it is not in any way
inconsistent with or contrary to the written agreement.
Confirmation of the general principle that oral evidence which contradicts the main written
contract is inadmissible under the parol evidence rule.
There are many cases where evidence of an oral statement is relevant and may be admitted:
the written agreement is not the whole contract, in support of interpretation of the contract,
to correct a mistake or an error in written contracts, to show misrepresentation, etc.
The parol evidence principle cannot be an absolute one. It is only a presumption that a
collateral agreement cannot be admitted if it is inconsistent with, or contradicts, the written
terms. But the presumption is “strongest when the oral representation alleged to be contrary
to the document, and somewhat less strong when the oral representation only adds to the
document.” It would be” more rigorous in a case where the parties had produced and
individually negotiated document that it would be where a printed form was used.”
In addition to traditional common law categorization of terms of contract into two groups
(conditions-the breach of which give rise to repudiation; warranties-the breach of which
give rise to damages only) there are intermediate terms-those which are neither conditions
nor warranties.
The test the court used to determine if the term was a condition or intermediate term is the
nature of event and its practical effect—does it deprive the party to perform of substantially
the whole benefit of contract.
The court applied Hong Kong Fir test and held that the gravity of the consequences of the
breach did not deprive the party to perform of substantially the whole benefit of the
contract; accordingly the court found only a breach of warranty and ordered damages (not
repudiation).
The contract should be interpreted as a whole and word “condition” should, on the facts of
this case, be given an ordinary meaning not as a term which will entitle the innocent party
to repudiate the contract in the event of a breach.
If the parties intend to give a condition such an effect they must make that intention clear.
In certain circumstances the general rule related to the so-called “entire” contracts (that
there is no recovery for a contract to do work for a lump sum until the work is fully
completed) could be interpreted to mean that the recovery for a contract to do work for a
lump sum is possible if the work is “substantially” completed albeit defectively,
What constitutes “substantial” performance is to be determined on the facts of each case
Rule
Discharge by
Performance or
Breach: Remedy
for a party in
default
Discharge by
Performance or
Breach: Remedy
Classification of
Terms
Classification of
Terms
Classification of
Terms
Parol Evidence Rule
Parol Evidence Rule
Parol Evidence Rule
Topic
16
Machtinger v. Hoj Industries Ltd.
[1992] 1 S.C.R. 986
Parker v. South Eastern R.y. Co.
(1877) 2 C.P.D. 416 (c.A.)
[117]
T.D.)
Markiand Associates Lid. v. Lohnes
(1973), 22 D.L.R. (3d) 493 (N.S.
[116]
[115]
2007 SCC 55
Jedfro Investments (USA) Ltd. v.
Jacyk
[113]
[114]
Stevenson v. Colonial Homes LtdL,
[1961] O.R. 407 (Ont. C.A.)
[112]
Case
Howe v. Smith
(1884) 27 Ch.D. 89 (c.A.)
Law
110.02
Contracts
Biukovic
•
•
•
•
•
•
•
•
.
A reasonable notice period is an implied term of an employment contract and the intention
of the contracting parties is not relevant to terms implied as a matter of law (but only to
terms implied as a matter of fact).
The test for implication of a term as a matter of law is necessity or whether the term sought
to be implied is a “necessary incident” of the contract.
In ordinary cases where an action is brought on a written agreement which is signed by the
parties the agreement is proved by proving the signature and, in the absence of fraud, it is
wholly immaterial that the party has not read the agreement and does not know its contents
have the agreed price less the cost of correcting the defects and omissions
performance by the other party, would depend on what terms are to be implied
Exclusion Clauses
Contracts:
Standard Form
Exclusion Clauses
Standard Form
Contracts:
contracts and
uncompleted work
lump sum
Discharge by
Performance or
default
for a party in
Topic
Breach: Deposit
paid by a party in
default
Discharge by
To determine if the payment is a deposit or a part payment the court will look at the
Performance or
intention of the parties in the circumstances of each case as indicated by the actual words of Breach: cases of
the contract and evidence of what was said
uncompleted work
If the payment is a deposit (money paid in advance to guarantee the performance of the K)
when some money
there would be no return when the contract is set aside. However if the money is paid as a
was given before
part payment on account of the purchase price then it is recoverable
the performance
started
“Abandonment discharges a contract only if it amounts to a new contract in which the
parties agree to abandon the old one.”[17 A new contract could be made explicitly or
Discharge by
implicitly but it must be clear that the parties have made a new contract
Performance or
More than a simple ignorance of a contractual obligation is needed to establish repudiation. Breach:
“A contract may be said to be repudiated when one party acts in a way that evinces intent to abandonment/repu
no longer be bound by the contract. The other party then may, at its option, elect to
diation
terminate the contract.” [20]
Discharge by
Performance or
Where the work was done, but badly, and the defects have been or can be remedied, the
Breach: cases of
courts tend to find that there has been substantial performance and that the builder should
Whether, in absence of an express stipulation, a party in default who paid money as a
deposit on the signing of a contract, could recover that deposit or he has lost all right to
There are cases in which, though the plaintiff has abandoned the performance of a contract,
it is possible for him to raise the inference of a new contract to pay for the work done on a
quantum meruit basis from the defendant’s having taken the benefit of that work. But in
order that that may be done, the circumstances must be such as to give an option to the
defendant to take or not to take the benefit of the work done.
The mere fact of the appellant remained in possession of their land is not evidence upon
which an inference of a new contract can be founded.
Rule
17
Thornton v. Shoe Lane Parking Ltd.
[1971] 2 Q.B. 163, 1 All E.R. 686
(C.A.)
McCutcheon v. David MacBrayene
Ltd.
[1964] 1 W.L.R. 125, 1 All E.R.
430 (H.L.)
Olley v. Marlborough Court, [1949]
1 K.B. 532
Tilden Rent-A-Car Co. v.
Clendenning
(1978) 18 O.R. (2d) 601 (Ont. C.A.)
Delaney v. Cascade River Holidays
Ltd.
(1983) 44 B.C.L.R. 24 (B.C.C.A.)
Karroll v. Silve Star Mountain
[119]
[120]
[121]
[122]
[123]
Case
[118]
Contracts
Biukovic
Law
110.02
•
•
•
.
•
•
•
•
•
•
•
•
In modern conmiercial practice, many standard form printed documents are signed without
being read or understood and in many cases the parties seeking to rely on the terms of the
contract know or ought to know that the signature a party to the contract does not represent
the true intention of the signer and that the party signing is unaware of the stringent and
onerous provisions which the standard form contains.
The party seeking to rely on such stringent and onerous terms should not be able to do so in
the absence of first having taken reasonable measures to draw such terms to the attention
of the other party, and, in the absence of such reasonable measures, it is not necessary for
the party denying knowledge of such terms to prove either fraud, misrepresentation or non
estfactum; what is reasonable is the question offacts in each instance.
In a split decision ofthe BCCA (Nemetz dissenting, Taggart concurring) McFarlane J. held
that the language of the standard liability release must be interpreted and understood
having regard to the whole purpose ofthe relationship bet3veen the parties or the nature of
the venture involved.
The purpose was to engage in what must have been intended to be an exciting and thrilling
challenge_and_such_intent was_involved_in the_language of the_release.
The court held that whether the duty to take reasonable steps to advise of an exclusion
All terms must be disclosed prior to formation of the contract if they are to form part of the
agreement, regardless of the length of the ensuing relationship between the parties.
Previous dealings between the parties are relevant only if they prove (1) knowledge of the
terms (actual and not constructive), and (2) assent to the terms in the previous dealings.
If previous dealings show that a person knew of and agreed to a term on 99 occasions, it
th
can be imported into the 100
contract without an express statement, but without proving
knowledge there is nothing.
In the case of unsigned documents the party imposing a condition (or an exclusion clause)
has to take reasonable steps to give the other party notice of the condition.
The test to determine what constitutes reasonable steps is an objective test—not whether
the party knew of the condition but whether the party imposing the condition did what was
reasonably sufficient to give the other party notice of the condition.
Lord Denning on the formation of contracts in a parking lot: the ticket is no more than a
voucher or receipt for the money that has been paid on terms which have been offered and
accepted before the ticket is issued... The offer was accepted when the plaintiff dove up to
the entrance and by the movement of his car, turned the light from red to green, and the
ticket was thrust at him. The contract was then concluded and it could not be altered by any
words printed on the ticket itself.
The court should not bind a party by unusually wide and destructive exclusion clauses
unless they are drawn to their attention in the most explicit way.
Rule
Standard Form
Sdard Form
Contracts:
Exclusion Clauses
and signed
documents
Standard Form
Contracts:
Exclusion Clauses
and signed
documents
—
Standard Form
Contracts:
Exclusion Clauses
and unsigned
documents ticket
case
Standard Form
Contracts:
Exclusion Clauses
and unsigned
documents
—
Standard Form
Contracts:
Exclusion Clauses
and unsigned
documents ticket
case
—
and unsigned
documents ticket
case
Topic
18
L
p1281-I
127
[
i
L
[1261
[125]
[124]
Biukovic
Contracts
Law
110.02
..
33 B.C.L.R (2d)
2007 SCC 34
Dumoulin,
consommateurs
and Olivier
Dell Computer Corp. v. Union des
[2002] B.C.J. No. 2883 (B.C.P.C)
Zhu v. Merrill Lynch HSBC
.
[1989] Q.B. 433
Interfoto Picture Library v. Stiletto
Adventures 2012 BCCA 122
Loychuk v. Cougar Mountain
[1995] 3 W.W.R. 443 (B.c.s.c.)
Schuster v. Blackcomb Skiing
Enterprises Ltd. Partnership
160 (B.C.S.C.)
Resort Ltd. (1988)
Case
.
•
•
•
•
•
•
•
(Tercon test)
.
.
.
.
..
The arbitration agreement is not null on the ground that it is found in an external clause that
was not expressly brought to the attention of defendant as required under art. 1435 C.C.Q.
While the hyperlillk to the Terms and Conditions of Sale was in smaller print, located at the
bottom of the Configurator Page, this is consistent with industry standards. It can therefore
be concluded that the hyperlink was evident to defendant.
Furthermore, the Configurator Page contained a notice that the sale was subject to the
Terms_and Conditions_of Sale,_available by hyperlink, thus bringing the Terms and
.
A disclaimer which is extremely broad and excludes almost all liability for any poor
performance may be unenforceable,
The more onerous the condition of the contract, the more stringent is the duty to draw it to
the attention of the other party.
No overriding public policy reasons to refuse to enforce the waiver
Financial, Harry v Kreutziger, and Tercon.
clause arises depends on many factors, such as the nature of the contract, the length and
format of the contract and the time available for reading and understanding it
The purpose of the contract was to engage in a hazardous activity upon which Karroll
voluntary embarked, the exclusion clause was consistent with the purpose of the contract,
there was no fine print, no unusual terms, and she was an experience racer who had signed
such clauses before
Delaney’s decision is followed and it is held that the 2 step test of requiring (1) reasonable
must be considered in examining whether the party relying on the unusual exclusion
clause did what was necessary to bring it to the other party’s attention and (2) that the
purpose ofthe relationship and the nature of the venture involved must be considered.
In examining the “reasonable steps test” the court referred to Karroll v. Silver Star
Mountain where the circumstances of the signing were such that a reasonable person
(competition organizer witnessmg the signing) would not have known that the signor did
not intend to agree to what she signed. The purpose of permitting the signor and others to
engage in such an activity and where and how the exclusion clause was represented were
also considered in the reasonable steps test -* The waiver was found to exclude liability.
Enforceability of a waiver of liability was challenged by the plaintiff on the basis of: 1.
misrepresentation by omission (lack of notice), 2. unconscionability; 3. violation of statute
(deceptive and unconscionable acts in BPCPA); lack of fresh consideration in exchange for
signing a release
Delaney’s majority reasoning followed with respect to analysis of the lack of a sufficient
notice and past consideration and held for the defendant. No statutoiy violation established
and no actionable unconscionability in common law established (as per Morrison v Coast
Rule
Terms
Incorporation of
Standard Form
Contracts:
documents
and signed
Exclusion Clauses
Contracts:
Exclusion Clauses
Standard Form
Standard Form
documents
and signed
Standard Form
Contracts:
Exclusion Clauses
documents
and signed
Exclusion Clauses
Standard Form
Contracts:
documents
and signed
Exclusion Clauses
Contracts:
Topic
19
Hunter Engineering v. Syncrude
Canada Ltd.
th)
4
[1989] 1 S.C.R. 426, 57 D.L.R. (
321
Fraser Jewellers Ltd. v. Dominion
Electric Protection Co.
th)
4
496 (Ont.
(1997) 148 D.L.R. (
C.A.)
Tercon Contractors Ltd. v. BC
(Transportation), 2010 SCC 4
[1311
[132]
[133]
[134]
Karsales v. Waiis
[1956] 1 W.L.R. 936, 2 All E.R.
866 (C.A.)
Soiway v Davis Moving and
Storage, [2002] O.J. 4760 (Ont.
C.A.)
Case
Photo Production v. Securicor
Transport Ltd.
[1980] A.C. 827, 1 All E.R. 556
(H.L.)
[130]
[129]
Law
110.02
Contracts
Biukovic
•
•
•
•
•
.
•
•
•
•
•
•
Lord Denning formulates his doctrine of fundamental breach: A party cannot rely on an
exemption clause when they deliver something “different in kind” from that contracted for,
or when they have broken a “fundamental term” or a “fundamental contractual obligation”.
Doctrine of flindamental breach says that a breach which goes to the root of the contract
disentitles the party from relying on the exemption clause,
This doctrine has been overruled by the House of Lords in Photo Production v. Securicor
Transport Ltd.
Confirms the Suisse Atlantique case ruling that the question whether, and to what extent, an
exclusion clause is to be applied to a fundamental breach, or a fundamental term, or indeed
to any breach of contract, is a matter of construction of the whole contract.
Lord Diplock’s analysis of primaiy and secondaiy obligations is based on the fundamental
principle of the common law of contract that parties to a contract are free to determine for
themselves what primary obligations they will accept.
If the exclusion clause is clear and unambiguous it will protect the party relying on it from
liability.
Dickson J. (relying on Photo Production and inclined to lay the doctrine of fundamental
breach to rest) held that if on its true construction the contract excludes liability for the kind
of breach that occurred, the party in breach will generally be saved from liability, unless
the contract or the clause is unconscionable, as might arise from situations of unequal
bargaining power between the parties.
Wilson J. held that the test for whether an exclusion clause or a contract will be enforced is
one of unreasonableness as between the parties and in light of the nature of the breach.
Refers to both Hunter and Photo Production cases in holding that an exclusion clause
should be enforced according to its true meaning provided that it is not unconscionable
(Dickson J. in Hunter) or “unfair or unreasonable” (Wilson j. in Hunter).
If an exclusion clause is not obscure, if it is visible, clear and unambiguous, and not the
result of abuse of bargaining power, there is no basis for the court to disturb the agreement
made between the parties.
The question of the applicability of exclusion of liability clause properly incorporated was
an important issue
A defendant will not be permitted to rely on a liability limitation clause if it would be
unconscionable in the circumstances.
Conditions expressly to defendant’s attention.
Rule
Fundamental
Breach: analytical
Fundamental
Breach: Canadian
courts follow Photo
Production
Fundamental
Breach: Canadian
courts follow Photo
Production
Fundamental
Breach: Lord
Denning’s doctrine
overruled
Fundamental
Breach: Lord
Denning’s doctrine
of fundamental
breach
Standard Form
Contracts:
Exclusion Clauses
and signed
documents
Topic
20
-‘
[138]
‘-
137
r
i
[136]
[135]
110.02
Contracts
Biukovic
Law
Capital Quality Homes Ltd. v.
Colwyn Construction Ltd.
(1975) 9 O.R. (2d) 617, 61 D.L.R.
(3d) 385 (C.A.)
Davis Contractors Ltd. v. Fareham
UDC
[1956] A.C. 696, [1956] 2 All E.R.
145 (H.L.)
Taylor v. Caidwell
(1863) 3 B&S 826, 122 E.R. 309
(Q.B.)
‘
Paradine v Jane
(1647) Aleyn 26 82 All E R 897
Case
•
•
•
•
•
•
•
•
•
•
.
.
.
.
.
.
.
SCC referred to Dickson J. in Hunter Engineering in stating that the doctrine of
fundamental breach should be lay to rest and that an analytical approach of Binnie J. to
exclusion of liability clauses applicability should be applied
Binnie J. held (dissenting) that because categorizing breach as “fundamental” is not
helpful, especially when the parties are big, sophisticated, commercial entities, the courts
should focus on: whether as a matter of interpretation the clause applies to the
circumstances of the case; and if so, whether the exclusion clause was unconscionable at
the time the contract was made, and if the clause is valid and applicable, whether the court
should nevertheless refuse to enforce it because of an overriding public policy [122-123]
Court held that the military occupation did not frustrate the lease contract (strict pacta sunt
servanda): “When the party by his own contract creates a duty or charge upon himself, he
is bound to make it good, if he may, notwithstanding any accident by inevitable necessity,
because he might have provided against it by his contract.”
Court further held that frustration is a part ofthe risk a party has to bear (“As the lessee is
to have the advantage of casual profits, so he must run the hazard of casual losses....”).
The court confirmed the general principle of contract law that a party to a contract had to
either perform or pay damages (“if the performance of a contract has become unexpectedly
burdensome or even impossible in consequence of unforeseen accidents”) but held that the
parties should be excused from their obligations because there was an “implied condition”
to excuse the parties in the case that performance becomes impossible without default of
the contractor... “[T]he parties contracted on the basis of the continued existence of the
particular person or chattel.”
“Frustration occurs whenever the law recognizes that without default of either party a
contractual obligation has become incapable of being performed because the
circumstances in which performance is called for would render it a thing radically
dfferent from that which was undertaken by the contract....
The event must be unforeseeable and must occur after the formation of the contract.
It is not hardship, inconvenience or material loss which calls the principle of frustration
into play, but a change in the signiflcance of the obligation such that the thing undertaken
would, jfperformed, be a djfferent thingfrom that contractedfor.”
“There can be no frustration if the supervening event results from the voluntary act of one
of the parties or if the possibility of such an event arising during the term of the agreement
was contemplated by the parties and provided for in the agreement.”
Intervening legislation which was not withm the contemplation of the parties and which
destroys the very foundation ofthe agreement does discharge both parties from
performance.
Rule
Frustratiow
mtervenmg
legislation
Frustration: Excuse
f
nance
—
Doctrine of
Frustration: Excuse
for non
performance
contract voidable
Before Doctrine of
Frustration
framework for
application of
exclusion clauses
Topic
21
Wood Development
Ondrey
v.
Cariboo Pulp & Paper Co, [1993]
B.C.J. No. 149 (B.C.S.C.), aff’d
[1994] B.C.J. No. 1545 (B.C.C.A.)
Greater Fredericton Airport
NA V Canada,
Authority Inc.
(2008) N.B.J. No. 108 (N.B.C.A.)
[1]
[145]
th)
4
(
v.
Gotaverken Energy Systems Ltd.
Roebuck
Lau Yiu Long
Gordon v.
(1992) 9 O.R. (3d) 1, 92 D.L.R.
670 (Ont. c.A.)
Pao On
[1431
v.
v.
[1980] A.C. 614 (P.C.)
Fibrosa
Fairburn
Ventures
Spolka v.
[1943] A.C. 32
Canada
138
Ltd.
KBKNo.
Safeway Ltd.
2000 BCCA 295
Corporation
v.
(1977) 14 O.R. (2d) 723, 1 R.P.R.
141, 74 D.L.R. (3) 528 (H.C.)
Victoria
Case
[142]
[1411
[140]
[139]
Biukovic
Contracts
110.02
Law
•
•
•
•
•
•
•
•
•
•
•
•
•
•
total
Duress: Economic
Duress
Economic duress:
modification of
contract
Robertson J. said his analysis applies to the plea of economic duress regarding the
enforceability of variations to an existing contract and not in regard to the formation of the
contract;
(whether a “demand” or a “threat”) and that pressure must have been such that the coerced
party had no practical alternative but to agree to the demand to vary the contract; in this
context, he found that a criterion of illegitimate pressure is unnecessary
The contractual variation must be extracted as a result ofthe exercise of “pressure”
Once it was established that the variation was under the press ion and that no practical
alternative was available, the focus of analysis should be whether the coerced party
contested to the variation (was there consideration, was the promise made under protest and
if not whether the_coerced_party took reasonable_steps to_disaffirm the_promise_as soon as
Duress: Justifiable
Economic Duress
Duress: Economic
Duress
Frustration:
Consequences of
supervening
illegality
Frustration:
Intervening
legislation
Frustration:
Intervening
legislation
Topic
Affirmed the requirements for duress set out in Pao On and Gordon.
The court held that the pressure exerted was justWed and that the appellant had the onus of
proving that Roebuck was not entitled to the amounts required in the agreement.
Webster)
Frustration occurs when there is such a radical change in the significance of the obligation
that the thing undertaken would, if performed, be a different thing from that contracted for.
Even though the contract contained a clause that allocated the risk in case of re-zoning
legislation in the plaintiff, the parties did not actually contemplate such a change. Any
reasonable person in the position of the parties likely would not have contemplated such an
event.
The House of Lords overruled the old common law rule that rights which had accrued
before frustration remained unenforceable (as held in the coronation case Chandler v.
deciding that in this case the Polish company could recover back the money paid
failure ofconsideration (the machine had not been
before frustration because ofthe
delivered).
The Privy Council held that “duress, whatever form it takes, is a coercion of the will so as
to vitiate consent”.
In a contractual situation commercial pressure is not enough.
Test: did the person protest; did he have a practical and reasonable alternative course open
to him; was he independently advised; did he try to avoid the contract.
The court interpreted strictly and narrowly the terms of the contract and held that “the very
foundation ofthe agreement” had not been destroyed.... The agreement was in no sense
made conditional upon the ability of the purchaser to carry out its intention.
The court also emphasized the nature of the business—that is, that a developer in
purchasing land should always contemplate the effects of intervening zoning legislation.
Rule
22
th)
4
(
Lloyd’s Bank v. Bundy
[1975] Q.B. 326, [1974] 3 All E.R.
757
Harry v. Kreulziger
(1978)9 B.C.L.R. 166,95 D.L.R.
(3d) 231 (B.C.C.A.)
J. G. Collins Inc. Agencies Ltd v.
Elsley, [1978] 2 S.C.R. 916
[151]
[152]
Trust Co. (1968) 69 D.L.R. 2d) 260
(Alta. S.C.)
Marshall v. Canada Permanent
Morrison
v. Coast Finance Ltd.
(1965) 54 W.W.R. 257, 55 D.L.R.
(2d) 710 (B.C.C.A)
(No. 2), [2001] 3 W.L.R. 1021
Royal Bank ofScotland v Etridge
v. Goodman Estate
[1991] 2 S.C.R. 353, 81 D.L.R
211
Geffen
Case
[150]
[149]
[148]
[147]
[146]
Biukovic
Contracts
110.02
Law
•
•
Lord Denning said that there are different categories of cases where there has been
inequality of bargaining power (duress, unconscionable transactions, undue influence,
undue pressure and salvage agreements) and that the English law gives reliefto one who,
without independent advice, enters into a contract upon terms which are very unfair or
transfers property for a consideration which is grossly inadequate, when his bargaining
power is grievously impaired by reason of his own needs or desires, or by his ignorance or
infirmity, coupled with undue influences or pressures, brought to bear on him by or for
the_benefit_of other.
Mclntire 3 referred to the test in Morrison for unconscionability: Inequality of position of
the parties due to the ignorance, need or distress of the weaker, coupled with proof of
substantial unfairness in the bargain,
Lambert J. A. introduced a new test: whether the transaction seen as a whole is sufficiently
divergent from_community standards of commercial morality_that it should be rescinded
A covenant in restraint of trade is enforceable only if it is reasonable between the parties
and with reference to the public interest
•
•
•
•
The court held that the defendant was entitled to rescission ofthe contact for sale of land
because he was incapable of protecting his interests and because the transaction was
improvident for him
The court held that it was not material whether the plaintiff was aware of defendant’s
incapacity—it was enough that the plaintiff was aware that the price agreed upon by the
defendant was considerably less than the actual value of that land and of any comparable
land in the same general area. The onus was on the plaintiff to show that the price given for
the land was the fair price and he failed to establish that.
and reasonable.
•
•
•
practicable
Wilson 3. said that the plaintiffmust establish the presence of a dominant relationship in
order to give rise to a presumption of undue influence. Then the onus moves to the
defendant to rebut it (to show that the plaintiff acted full, free and informed and that he
had independent advice. The magnitude ofthe disadvantage or benefit is cogent evidence
going to the issue of whether undue influence was exercised).
The creditor must always take reasonable steps to bring home to the individual guarantor
the risks that he is running by standing as surety.
A transaction that is not reasonably expected to occur between the parties is necessary to
give rise to a rebuttable evidential presumption of undue influence,
The term ‘manifest disadvantage’ causes confusion and should be discarded.
A presumption of unconscionabifity requires: a) proof of inequality in the position of the
parties arising out of the ignorance, need or distress of the weaker, which left them in the
power of the stronger, and b) pro of of substantial unfairness of the bargain in favour of
the stronger.
The stronger party must rebut the presumption by proving that the bargain was fair, just
Rule
Illegality: Restraint
of Trade
Unconscionability:
relief
Unconscionability:
relief
Unconscionability
Unconscionability:
presumption of
unconscionability
Undue Influence:
Potentially
dominant
relationships
Undue Influence:
Potentially
dominant
relationships
Topic
23
A. V.G. MGMT. Science Ltd. v.
Barwell Dev. Ltd.
[1979] 2 S.C.R. 43, [1979] 1
W.W.R. 330
[1541
[155]
[158]
[160]
Hunt v. Silk
(1804) 5 East 449, 102 E.R. 1142
(K.B.)
Chaplin v. Hinks
Sunshine Vacation Villas Ltd. v.
Hudson Bay Co.
(1984) 58 B.C.L.R. 33, 13 D.L.R.
th)
4
(
93 (B.C.C.A.)
[159]
Bowlay Logging Ltd. v. Domtar Ltd.
[1982] 6 W.W.R. 528 (B.C.C.A.)
(1951) 84 C.L.R. 377 (Aust. H.C.)
[157]
[156]
Shafron v. KRG Insurance Brokers
(Western) Inc., 2009 SCC 6
McRae v. Commomvealth Disposals
Commission
Still v. Minister ofNational Revenue
[1998] 1 F.C. 549 (c.A.)
Case
[153]
110.02
Contracts
Biukovic
Laiv
The court held that where the non-breaching party cannot meet the burden of proof with
respect to net profits he may be entitled to recover damages measured by reference to
expenditure incurred and wasted in reliance on the promise given by the Commission.
The burden was then thrown on the Commission of establishing that the expense incurred
would equally have been wasted (in order to reduce the amount of the reliance damages).
C.A. upheld the trial decision which held that the law of contract compensates a plaintiff
for damages resulting from the defendant’s breach, but not for damages resulting from the
plaintiff making a bad bargain.
The onus is on defendant to prove that none of the plaintiffs costs would have been
recovered and that the plaintiff is thus entitled to nominal damages only.
The Court of Appeal held that the defendant could not recover for loss of capital and loss
of gross profit because they were alternatives and it was wrong to make awards based on
mixture of two approaches.
The court also held that the plaintiff could elect to claim its expenses but that, if the owner
could show that the plaintiff would have incurred a loss had it completed the contract, only
nominal damages should be awarded.
The common law rule was established that the right to restitution could be lost if the
plaintiff enjoyed any benefit under the contract (the plaintifrs occupation after knowledge
was a waiver of the right to terminate).
“The fact that damages cannot be assessed with certainty does not relieve the wrong-doer
•
•
•
•
•
•
-
•
.
Severance is applied to allow courts to alter terms of the original agreement in accordance
with the intention of the parties when they entered into the contract;
Both “blue pencil” and notional severance should not be invoked when the doctrine of
severance is to be applied in cases of ambiguous or unreasonable restrictive covenants in
employment contracts; such restrictive covenants should be void and unenforceable
SCC held that the rule of Bain v. Fothergill did not apply when the vendors had voluntarily
disabled themselves from conveying good title by engaging in concurrent dealings with
other purchasers. It awarded the plaintiffs not only loss of bargain damages ($37 000 for
lost appreciation in property price) but also 6,628.50 in reliance (wasted land title
investigation fees etc)
Double compensation?
•
...
In assessing the reasonableness of the restraint of trade clause several questions must be
asked: whether the party seeking to enforce the clause has a proprietary interest entitled to
protection, were the temporal or spatial features of the clause too broad, whether the clause
is unenforceable as being against competition generally
The modern approach to the law of illegality rejects the understanding that simply because
a contract is prohibited by statute it is illegal and therefore void ab initio. Where a contract
is expressly or impliedly prohibited by statute, a court may refhse to grant relief to a party,
when
it would be contrary to public policy, reflected in the relief claimed, to do so.
•
Rule
Damages:
Damages:
Restitution Interest
Damages: Reliance
Interest
Damages: Reliance
Interest and
Nominal Damages
Damages: Reliance
Interest
Damages:
Expectation
Interest
Illegality: restraint
of trade;
application of
severance
Illegality: The
“modern
approach”
Topic
24
v.
Thunderbird
AG v Blake, [2001] 1 A.C. 268
Tabcorp Holdings Ltd Bowen
[167]
[168]
v
Ruxley Electronics v. Forsyth
[1996] 1 A.C. 344 (H.L.)
Tito v. Waddell
[1977] 2 W.L.R. 496 (Ch.D.)
Jarvis
v. Swans Tours
[1973] 1 Q.B. 233 (C.A.)
(1973), 33 D.L.R. (3d) 493
(N.S.T.D.)
Markiand Associates v Lohnes
(1975) 59 D.L.R. (3d) 292 (Alta.
C.A.)
Petroleums
Nu-West Homes
Groves v. John Wunder Co.
(1939) 286 N.W. 235 (MinlI.C.A.)
[19111 2 K.B. 786 (C.A.)
Case
[166]
[165]
[164]
[163]
[162]
[161]
Law
110.02
Contracts
Biukovic
Peevyhouse v.
value to be gained
Lord Denning held that there are cases where one can recover damages for the mental
distress, disappointment and discomfort caused as a result of breach of a contract for a
package holiday.
The court held that the right measure of damages is to compensate the plaintiff for the loss
of entertainment and enjoyment which the plaintiff was promised and which he did not get.
Damages for breach of a contract to do work on the land of another may be assessed either
on the basis of the cost of completing the work or on the decrease in the value of the land
by reason of the work not having been done.
Specific performance may be refused if the cost of performance is wholly out of proportion
to the benefit which performance will confer.
A failure to achieve the precise contractual objective does not necessarily result in the loss
which is occasioned by a total failure.
Damages are designed to compensate for an established loss and not to provide a gratuitous
benefit to the aggrieved party.
House of Lords only awarded damages for the loss of “a pleasurable amenity” for the
breach of failing to build a pool as specified by the owner but not the costs of repair of the
pool (the costs of repair would be wasteful in terms of a difference in the value of the pool)
In exceptional cases where the normal remedies of damages, specific performance and
injunction are inadequate compensation for a breach of contract, the court can, ifjustice
demands it, grant the discretionary remedy of requiring the defendant to account to the
plaintiff for the benefits_received from the_breach_of contract.
The High Court of Australia decided that where a deliberate breach of contract resulted in
•
•
•
•
•
•
•
•
•
If the contract is terminated, abandoned or discontinued after substantial completion, then
the service provider is entitled to payment less damages for non-completion.
expenditure.
Garland Coal Mining
of the necessity of paying damages for his breach of contract.”
The plaintiff was awarded damages for the loss of the chance of selection.
In a construction contract, the law attempts to give the injured party what he was promised
and the cost of remedying the defect is the amount awarded as compensation for failure to
render the promised performance—”the owner is entitled to compensation for what he has
lost, that is, the work which he has been promised” (cost of performance test).
Not followed in
Co., 382 P. 2d 109 (Okla. S.C., 1962)
Where a builder is in breach ofhis obligation under a building contract, the owner is
entitled to damages measured by the cost of making good the defects and omissions
(general rule) unless that cost is unreasonably high in relation to the
by its
The law is satisfied if the party placed in a difficult situation by reason of the breach of a
duty owed to them has acted reasonably in the adoption of remedial measures, and they
will not be held disentitled to recover the cost of such measures merely because the party in
breach can suggest that other measures less burdensome to them might have been taken.
•
•
•
•
•
Rule
Damages:
Damages:
Quantification
Damages:
Quantification
Specific
performance
Damages:
Quantification
Damages:
Quantification
Damages:
Quantification
Damages:
Quantification
Damages:
Quantification-cost
of performance or
liminution of value
Quantification
Topic
25
v. Baxendale
(1854) 9 Exch. 341, 156 E.R. 145
[172]
Hadley
Wharton
[171]
752
(1976), 14 O.R. (2d)
(Ont. Co.Ct.)
Canadian PacWc
Airlines, Ltd.
Newell v.
[1994] 3 S.C.R. 377
Hodgkinson v Simms,
Investments Ply Ltd
[2009]HCA 8
Case
v. Tom Harris Chevrolet
(1999), B.C.D. Civ. J. 3186
(B.C.S.C.)
[170]
[169]
Biukovic
Contracts
110.02
Law
•
•
•
•
•
•
•
•
•
•
General rule is that if the loss flowing from breach is too remote then it cannot be
recovered.
Recoverable losses are those arising naturallyfrom the breach which should have been
within the reasonable (objective lest) contemplation of the parties (1’s Hadley rule).
If the contract was made under special circumstances which were communicated to the
defendant, and thus known to both parties, the damages will be the amount of iijuiy which
would ordinarily result from such a breach of the contract under the given special
hId
2
circumstances (
Hadley rule).
The failure of a sound system in a luxury vehicle is only one aspect of the operation ofthe
vehicle and it is not a fundamental breach but is a breach of an implied warranty.
The plaintiff was entitled to special damages ($2,257) and non-pecuniary damages for loss
of enjoyment of the luxury vehicle and for inconvenience in the amount of $5,000.
property damage, the proper measure of damages is the cost of repair rather than the
diminution in the value of the property because the costs of repair would put the injured
party in the position it would have been had the contract been performed as agreed (but
diminution in value damages would not
The costs of repair assessment of damages ensures that the tenant honors his contractual
obligation to the full
Undue influence focuses on the sufficiency of consent and unconscionability on the
reasonableness of a given transaction
The existence of a contract does not necessarily preclude the existence of fiduciary
obligations between parties
The proper approach to damages for breach of a fiduciary duty is restitutionary. The
innocent party is entitled to be put in as good a position as he would have been in had the
breach not occurred.
A court exercising equitable jurisdiction may consider the principles of remoteness,
causation, and intervening act where necessary to reach ajust and fair result.
Where a party can show that but for the relevant breach it would not have entered into a
given contract, that party is freed from the burden or benefit of the rest of the bargain. The
wronged party is entitled to be restored to the pre-transaction status quo.
Damages must be foreseeable as to kind, but not extent
The special circumstances of this case were brought home to the defendant at the time it
entered into the contract with the plaintiffs.
Damage to the plaintiffs’ health, anguish, unhappiness and inconvenience were a
reasonably foreseeable consequence of the defendants breach of contract, for which the
plaintiffs were entitled to recover damages.
Rule
Damages:
Remoteness
Damages: mental
distress
Conditions &
warranties
Damages: mental
Damages:
Quantification
Quantification
Topic
26
Koufos v. Czarnikow (The Heron II)
[1969] 1 A.C. 350
Vorvis V. JCBC
[1989] 1 S.C.R. 1085,36 B.C.L.R
(2d) 273
Wallace V. United Grain Growers
[1997] 3 S.C.R. 701
.
Whiten v. Pilot
Insurance Co.,
2002 SCC 18
11741
[175]
[176]
[177]
.
Victoria Laundry v. Newman
[1949] 2 K.B. 528
Case
[173]
110.02
Contracts
Biukovic
Law
.
•
•
.
•
.
•
•
•
•
•
.
.
independently actionable. Punitive damages may only be awarded in respect of
conduct which is of such nature as to be deserving of punishment because of its harsh,
vindictive, reprehensible and malicious nature (must be an actionable wrong).
Wilson J. relied on the remoteness test in Hadley: “The issue in assessing damages should
be whether the plaintiff should be compensated for damage the defendant should
reasonably have anticipated”. Wilson J. did not agree that a separate actionable wrong is
needed for either of aggravated damages or punitive damages.
lacobucci J.(majority): Damages for mental distress were not recoverable for wrongful
dismissal unless there was a separately actionable course of conduct, but did account for
mental distress by lengthening the notice period -* “Wallace damages”.
McLachlin J. (dissenting): the action for wrongful dismissal is an action for breach of
implied term in the contract of employment to give reasonable notice of termination.
Would have awarded $15000 aggravated damages as well.
SCC awarded 1 million in punitive damages for a breach of the contractual duty of good
faith (separate actionable wrong) in the case of a breach of an insurance contract (breach of
a duty to pay the loss).
Punitive damages are awarded in exceptional cases for malicious, oppressive and highhanded misconduct that offends the court’s sense of decency.
may be awarded in a case of wrongful
dismissal particularly where the acts complained of were also
McIntyre: Aggravated damages
The Court of Appeal criticized Victoria Laundry and held that the crucial question is
whether, on the information available to the defendant when the contract was made, they
should, or the reasonable person in their position would have, realized that such loss was
sufficiently likely to result from the breach of contract to make it proper to hold that the
loss flowed naturally from the breach or that loss of that kind should have been within their
contemplation.
In contracts, if one party wishes to protect themselves against a risk which to the other
party would appear unusual, they can direct the other party’s attention to it before the
contract is made and the court need not stop to consider in what circumstances the other
party will then be held to have accepted responsibility in that event.
Everyone has imputed knowledge of ordmary circumstances, but there may have to be
actual knowledge of special circumstances for recovery to be granted on these special
grounds.
It is not necessary to prove that the wrongdoer contemplated the loss. It is enough if they
could foresee the Loss was likely to result.
‘
Only damages which are reasonably foreseeable as arising from the breach are recoverable
(objective test).
What is reasonable depends on the knowledge of the parties Q,articularly the breaching
Rule
Damages:
Aggravated and
Punitive Damages
D
asn
es
at d d
P.c Damages
Damages:
Aggravated and
Punitive Damages
Damages:
Remoteness
Damages:
Remoteness
Topic
27
Wroth v. Tyler
[1976] Ch. 30
Asamera Oil Corp. v. Sea Oil &
General Corp.
[1979] 1 S.C.R. 633
Semeihago v. Paramadevan
[1996] 2 S.C.R. 415
[180]
[1811
[182]
[183]
Honda v. Keays,
2008 SCC 39
Fidler v. Sun Life Assurance,
2006 SCC 30
Case
White and Carter (Councils) v.
MacGregor, [1962] A.C. 413,
[1961] 3 All E.R. 1178 (H.L)
[179]
[178]
110.02
Contracts
Biukovic
Law
•
•
•
•
•
•
•
•
•
•
•
•
•
. . .
Where a purpose of a commercial contract is to provide a peace of mind (either if it is an
essence of a contract or just a part of the bargain) it is within reasonable contemplation of
the parties that its breach would cause mental distress (the right to compensatory damages
arises out of the contractual breach not from aggravating circumstances)
True aggravated damages arise out of aggravating circumstances and are not awarded
under the principles of Hadley v. Baxendale
Punitive damages are awarded to punish for a misconduct that departs from ordinary
standards of decency (malicious, oppressive conduct) and claim for punitive damages must
be independently actionable (as a claim in tort or independent contractual obligation to act
in good faith)
SCC rejected the “Wallace” type of aggravated damages (extension of the period of
reasonable notice) for wrongful dismissal cases and stated that the principles of
compensation stated in Hadley v. Baxendale should apply
SCC confirmed the Whiten analysis of the standard of punitive damages (separate
actionable wrong of a high-handed manner of employer breaching a duty of good faith)
General rule: When a party to a contract repudiates, the innocent party has an option: to
accept that repudiation and sue for damages or to disregard or refuse to accept it and then
the contract remains in full effect. Finelli v. Dee (1968), 67 D.L.R. (2d) 393 Ont. C.A.
distinguished this case.
The general common law rule to affix damages as at the date of the breach does not seem to
be inflexible.
The court has jurisdiction to award damages in substitution for specific performance
will put the plaintiffs into as good a position as if the contract had been performed, even if
to do so means awarding damages assessed by reference to a period subsequent to the date
ofthe breach (in this case at the time ofjudgment).
The general (but not absolute) rule establishes that the time of breach is the time relevant
for assessing damages.
Estey J.: Subject always to the precise circumstances of each case, this will impose on the
injured party the obligation to mitigate on the date of breach (or knowledge thereof in the
plaintiff) or more frequently within a period thereafter which is reasonable in all the
circumstances. By claiming specific performance and/or damages a plaintiff does not
avoid its duty to mitigate.
“Where circumstances reveal a substantial and legitimate interest in seeking performance
as opposed to damages, then a plaintiff will be able tojustii’ his inaction and on failing in
his plea for specific performance might then recover losses which in other circumstances
might be classified as avoidable
Sopinka, J: Specific performance should not be granted as a matter of course absent
evidence that the property is unique to the extent that its substitute would not be readily
available, but specific performance was given in this case.
Sopinka J:. Where the vendor reneges in anticipation of performance, the innocent party
has two options: to accept repudiation and commence an action for damages, or to insist on
Rule
Specific
performance:
Damages: Time of
Measurement
Specific
performance
Damages: Time of
Measurement, duty
to mitigate
Damages: Time of
Measurement;
damages in lieu of
specific
performance
Damages:
Repudiation and
Mitigation
Damages:
Aggravated and
Punitive Damages
Damages:
Aggravated and
Punitive Damages
Topic
28
Dunlop Pneumatic Tyre lid. v. New
Garage and Motor Co.
[19151 A.C. 79 (H.L.)
Shatilla v. Feinstein
[1923] 1 W.W.R. 1474, 16 Sask.
L.R. 454 (Sask.C.A.)
HF. Clarke Ltd. v. Thermidaire
Corp.
[1976] 1 S.C.R. 319
1G. Collins Insurance Agencies
Ltl v. Elsley
[1978] 2 S.C.R. 916
[184]
[185]
[1861
[187]
[188]
Case
Southcott Estates Inc. v. Toronto
Catholic District School Board,
2012 SCC 51
110.02
Confracts
Biukovic
Law
•
•
•
•
•
•
•
•
•
•
.
•
When the damages which may arise out of the breach of a contract are in their nature
uncertain, the law permits the parties to agree beforehand as to the amount to be paid in
case of breach.
Whether the sum agreed upon is a penalty, must depend upon the circumstances of each
case.
An agreement for payment of a fixed sum on any one of a number of breaches, some trivial
and some serious, is presumed to be void as a penalty since “the strength of a chain is its
weakest link”.
It is always open to the parties to make the predetermination, but it must yield to judicial
appraisal of its reasonableness in the circumstances.
The sum will be held to be a penalty if it is extravagant and unconscionable in amount in
comparison with the greatest loss that could conceivably be proved to have followed from
the breach (Snell’s principles).
The formula of gross trading profit was not defined and it departs markedly from any
reasonable_approach to_recoverable_loss_or actual loss.
Held that the power to strike down a penalty clause is a blatant interference with freedom
of contract and is designed for the sole purpose of providing relief against oppression for
the party having to pay the stipulated sum. It has no place where there is no oppression
A penalty clause shouldfunction as a limitation on the damages recoverable—ifthe
actual loss turns out to exceed the penalty, the party should be allowed to recover only the
agreed_sum.
The provision will be liquidated damage if it contains nothing unreasonable,
unconscionable or extravagant.
The defendant, having breached the contract, bears the onus of proving that the plaintiff
unreasonably failed to mitigate is loss. This entails, on a balance of probabilities: (1) that
opportunities to mitigate the loss were available to the plaintiff and (2) that the plaintiff
unreasonably failed to pursue these opportunities.
“Failure to mitigate may not be unreasonable for a variety of reasons [such as J... a ‘fair,
real, and substantial justification’ for claiming specific performance... [and] lack of
financial resources...”
The key factors for determining uniqueness and the availability of specific performance are
that the remedy of damages is comparatively inadequate to do justice and that the plaintiff
show ‘some fair, real and substantial justification for the claim to specific performance.’
performance. A claim for specific performance has the effect of postponing the date of
breach. For these reasons, it is not inconsistent with the rules of the common law to assess
damages as ofthe date oftrial.
Rule
Damages:
Liquidated
Damages and
Penalties
Damages:
Liquidated
Damages and
Penalties
Damages:
Liquidated
Damages and
Penalties
Damages:
Liquidated
Damages and
Penalties
Damages and
Equitable Remedies:
Specific
Performance,
Uniqueness and
Mitigation of Loss
uniqueness
Topic
29
Mennonite Land Sales v. Freisen
[1921] 3 W.W.R. 431 (Sask. K.B.)
[191]
Warner Bros. v. Nelson
[1937] 1 K.B. 209, [1936] 3 All
E.R. 160
Zipper Transportation v. Korstrom
(1997) 122 Man. R. (2d) 139 (Q.B.)
Zipper Transportation v. Korstrom
(1998) 126 Man. R. (2d) 126 (Man.
C.A.)
Shafron v. KRG Insurance Brokers
(Western) Inc.,
2009 SCC 6
[193]
[194]
[195]
[196]
[192]
Stock!oser v. Johnson
[1954] 1 Q.B. 476, [1954] All E.R.
630 (C.A.)
[190]
John E. Dogde Holdings Ltd. V.
805062 Ontario Ltd. [2003] O.J.
No. 350, 63 O.R. (3d) 304 (On.
C.A.)
Hoive v. Smith
(1884) 27 Ch. D. 89 (C.A.)
Case
[189]
110.02
Coniracts
Biukovic
Law
•
•
•
•
•
•
•
•
•
•
•
The Court of Appeal applied a different test considering irreparable harm and balance of
convenience and denied the injunction; holding that if the injunction is upheld, no benefit
would accrue to Zipper by regaining the Piston Ring runs and that no irreparable harm
would result to Zipper if the relief is denied since it was possible to quantify damages -) So
let Korstrom keep the “stolen client” (Piston ring) until the result of the trial is known.
SCC confirmed that rectification is an equitable remedy correcting mistaken written records
(which differs from a prior oral agreement of the parties) but not dealing with the intention
of the parties and lack of clarity of the terms of contract
Applying the test as set out in Elsley v.1 G. Collins the court held that the agreement was
reasonable and that it would not be contrary to public interest to enforce the injunction.
In order to establish that a property is unique the person seeking the remedy of specific
performance must show that the property in question has a quality that cannot be readily
duplicated elsewhere. This quality should relate to the proposed use of the property and be
a quality that makes it particularly suitable for the purpose for which it was intended
followed
The time when a determination of the uniqueness of the property is to be made is the date
when an actionable act takes place
The court granted an injunction, and found an award of damages not an appropriate remedy
since they could not reasonably and adequately compensate the defendant’s “special,
unique, extraordinary and intellectual” services and no adequate damages were
available.
Equitable Remedies:
Recfifltion
Equitable Remedies:
Injunction
(Interlocutory)
Equitable Remedies:
Injunction
(Interlocutory)
Equitable Remedies:
Injunction
Equitable Remedies:
Specific
Performance
Equitable Remedies:
Specific
Performance
Damages:
Forfeiture as
Liquidated
Damages or
Penalties
Where there is no forfeiture clause, if money is handed over in part payment ofthe
purchase price and then the buyer makes default as to the balance.. .once the seller rescinds
the contract or treats is as at an end the buyer is entitled to recover their money in law, but
the seller can claim damages.
Where there is a forfeiture clause or the money is expressly paid as a deposit a party may
have a remedy in equity but two things are necessary: 1. the forfeiture clause must be of a
penal nature and 2. it must be unconscionable for the seller to retain the money.
The court held that the plaintiff was not entitled to specific performance because it was
clear that damages would afford an adequate remedy.
Damages:
Forfeiture as
Liquidated
Damages or
Penalties
Topic
A deposit is a sum of money paid as a guarantee that the contract shall be performed and at
common law it is generally irrecoverable unless the contract provides otherwise (the COurt
held that the purchaser has lost all rights to recover by his delay)
A part-payment is simply a payment of a part of the contract price.
Rule
30