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THE UNIVERSITY OF BRITISH COLUMBIA
FACULTY OF LAW
FINAL EXAMINATION
-
APRIL 2012
LAW 110
Contracts
Section 2
Professor Biukoviá
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
fully, please state those facts and explain why they are necessary.
3.
Please write legibly.
THIS EXAMINATION CONSISTS OF 2 QUESTIONS. PLEASE ANSWER BOTH
QUESTIONS.
Page 2 of 5
Law 110, Section 2
MARKS
60
Question 1 —60 points
Samuel purchased a commercial property on Water Street, Vancouver, hoping to open a
model agency and photo studio in the new premises. He saw a lot of potential in the
location and really liked some old furniture and fixtures that came with the premises,
especially an old 1906 Berry Wood Coin Operated Nickelodeon Player Piano. However,
the property needed a complete renovation, including a new heating system. He decided
to put all furniture and equipment into a nearby self-storage “Clever City Storage” while
the contractors finished their renovation job. The storage owner is Peter Bread, his wife
Maya, and their sons Gordon and Thomas being the only employees. Samuel phoned
Clever City Storage and learned from Maya Bread that the storage has been open for 3
years, that it consists of prefabricated metal units that look like a line of garages which
share common walls, that units are very basic, with no water pipes, no climate control but
are well secured with a modern surveillance system and well lit. Clever City’s rental
price is also lower than the price of other rental places in the neighborhood. When
Samuel visited Clever City Storage he saw that it was a clean place and that the
surveillance was appropriate. Thomas Bread explained that their price is lower than other
rental prices in the neighbourhood because they only rent units for a minimum one-year
term. Samuel asked Thomas if they had any problems with storage and Thomas said:
“Never. In the three years since we have been running this place we have been
completely problem free. It has always been a safe and dry place.” On April 20, 2010,
while Gordon and Thomas were moving Samuel’s furniture and equipment into the unit
#88, Samuel was signing a standard Clever City Storage agreement on terms of storage
withPeter Bread in the offices of the storage. Samuel just glanced over the agreement
without reading it carefully. All contracts looked the same to him anyway. Each page of
the agreement needed to be initialized by both parties and signed by them at the last page.
The following clauses were on page 1:
OCCUPIERS’ DUTY
3.1. In accordance with the Occupiers’ Liability Act, [RSBC 1996]
CHAPTER 337, Clever City Storage (an occupier of premises) owes a duty to
persons entering on the premises and to any person, whether on or off the
premises, whose property is on the premises, to take such care as, in all
circumstances of the case, is reasonable to see that the person or property, as
the case may be, will be reasonably safe while on the premises.
LOSS OR DAMAGES TO GOODS
5.1 Renter acknowledges that Clever City Storage is only providing space to
the Renter for the storage of goods at Renter’s own risk and that Clever City
Storage is not a bailee or warehouseman, and does not have custody of and
has no obligation to care for or preserve Renter’s goods.
Page 3 of 5
Law 110, Section 2
Question 1, continued
MARKS
60
The liability clause was on page 2 and it specified that:
7.1. Renter agrees that under no circumstances shall Clever City Storage, its
directors, representatives, or employees be subject to any liability whatsoever
for loss, theft, or destruction of, or damage to, any goods stored by the Renter
in the unit, whatever the cause of such loss, theft, destruction or damage.
At the last page of the agreement there was the following provision:
FAILURE TO PERFORM
13.1. In the event the Renter terminates this agreement prior to the expiration
of this one year term, the Renter agrees to pay as liquidated damages an
amount equal of the sum of the Renter’s monthly billing for the most recent
six months. The Renter acknowledges that the foregoing liquidated damages
are reasonable in light of the anticipated loss caused by the termination and
are not imposed as a penalty.
When Samuel came to collect his items from the storage on November 19, 2010, he
found that his stored goods, including the antique piano, were damaged by water that had
probably leaked into the unit and flooded it. Thomas and Gordon, who were moving the
items out of the unit, could not deny the damage but they could not figure out where the
water came from since not a single unit in the storage had any water pipes. Samuel was
upset and said that he would like them to follow up on the water leak with the engineers
who had installed the units. He subsequently made a claim on his insurance policy but the
insurance rejected it. That was all bad news for Samuel who ended up paying extra
money for renovation of his business premises since he could not use any of the stored
items. Moreover, finding new furniture and fixtures delayed opening of his modeling
business and ultimately caused further loss of income. The insurance agent told him to
sue Clever City Storage and its employees for damage especially since it made no sense
that people would store their goods in self-storage unless it would be implied that
storages were dry and safe places. The insurance agent also mentioned that the storage, or
rather its employees Gordon and Thomas, probably acted carelessly since they had put
Samuel’s goods in that particular unit and failed to check on them regularly. The agent
persuaded Samuel that Peter Beard should not be allowed to get away with such practice.
Page 4 of 5
Law 110, Section 2
Question 1, continued
MARKS
60
In the meantime, Samuel received a notice from Clever City Storage to pay liquidated
damages stipulated in the contract. However, he does not have any intention of paying
that amount but instead is now considering possibilities to recover loss from Clever City
Storage. Advise him as to his contractual rights considering principles of common law
that you studied so hard in your Contract Law class. Your professor of Contract Law will
take care of any statutory interpretation and application if necessary.
40
Question 2—40 points
Cherie Dee has a Ph.D. in creative writing but no job. She just lost her position in a video
rental store “Celluloid Dreams” that recently went bankrupt. Inspired by numerous
movies she saw, Cherie decided to write a book that would be easily turned into a movie
or TV mini-series. If J.K. Rowing could rise to glory from a desperate jobless reality,
Cherie thought she should be able to bounce back too. She has also been applying to
university jobs whenever a position in an English department becomes available.
Prodigal Publishing Company (PPC) has favorably reviewed one of Cherie’s
manuscripts, a novel called “The Girl Without Tattoo.” The editors suggested that Cherie
could make the book shorter by reducing the number of main characters in the novel.
Cherie understood that changes would require lot of additional work but was willing to
do so after PPC suggested that the revisions would make the book attractive to a huge
market of e-readers. Six months later, after she submitted her revised draft electronically,
a publishing manager for PPC, Susanne Sew, and Cherie exchanged several e-mails in
which Ms. Sew explained PPC’s publishing policy, such as royalty, complementary
copies, wholesale price and publicity, and suggested that Cherie might need some further
work on the manuscript. In her final e-mail, Ms. Sew emphasized that she could not make
a final commitment to publish the book but that only the Editorial Committee would do
it. However, she did attach to her e-mail Author’s Publicity Form and Publishing
Proposal Form, which specified the format of the book (paperback), number of copies
(2,500) and a price per copy ($23.45).
When Cherie finished her third draft she signed the Publishing Proposal Form and sent it
as an attachment to PPC with the novel. She started dreaming big again and anticipated
some advance payment from PPC after submission of the novel and the form. She bought
a new iPad and Bang & Olufsen headphones. She also bought some new clothes and
Page 5 of 5
Law 110, Section 2
Question 2, continued
MARKS
40
shoes, and went to a spa for a full treatment for the first time in her life. She wanted to
feel good about herself and to prepare for a job interview at a newly established College
of Creative Writing in Vancouver, for which she was recently shortlisted. The
advertisement asked for a person with a graduate degree in English literature, creative
writing or an equivalent degree to work as a lecturer without review. The ad also
specified that the starting day would be July 1, 2012 and that the appointment was subject
to final budgetary approval.
When Cherie came back from the job interview she received a letter from PPC explaining
that “due to a change of climate in publishing and a need for further improvement of the
manuscript” they had decided not to proceed with the publication of her book. Cherie was
devastated and immediately sent an e-mail to Ms. Sew demanding an explanation why
they had decided to break the contract with her. The following day, Ms. Sew replied by e
mail suggesting that Cherie should take her draft to other publishers. At the end of the
week, Cherie received a letter from the College of Creative Writing saying that she would
not be offered a position. All her effort to get transcripts, references, a new wardrobe for
an interview, was just a waste. The following week Cherie heard that the position was
offered to a person without a Ph.D. Then she went to the law library at Allard Hall and
did some research on her own. She concluded that on the basis of the rules of Contract
Law she could sue PPC for a breach of contract, demand something called a specific
performance of the contract, or in alternative damages for expenses she incurred during
the period of writing and awaiting publication, coupled with damages for mental distress
she suffered when they crashed her dreams. She further concluded that her job
application situation is similar to creation of unilateral contracts and that she might be
able to sue the college as well for breach of contract, although she is not sure if she would
still want to work at the College. Cherie asked the librarians for an explanation and they
suggested that she send her case to the Contracts 100.02 class list. You are on that list and
you know that Cherie is better off reading fiction than case law. Advise Cherie and
explain what legal arguments Cherie could make and what counter arguments PPC and
the College of Creative Writing could make? How would a court view them and why?
END OF EXAMINATION
LAW 110.002: Contract Law
Syllabus 2011/2012
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 2011), 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 2012), 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 non-performance of contractual obligations.
Course materials (required):
•
•
Stephanie Ben-Ishai and David Percy, Contracts: Cases and Commentaries,
Carswell, 2009)
Biukovic, Supplementary Materials (available online at the course web page)
http://faeulty.law.ubc.ca/biukovic/Contracts%2Olaw/con lractsindex.htm
th
8
ed. (Toronto:
Other sources (Law Library):
•
•
•
•
•
thi
4
ed.
Waddams, McCamus, Waidron, Neyers and Girgis, Cases and Materials on Contracts,
(Toronto: Edmond Montgomery Publications, 2010)
Swan, Canadian Contract Law, 2d ed. (Lexis/Nexis Canada, 2010)
th
ed. (Lexis/Nexis Canada,
Swan, Reiter and Baja, Contracts, Cases, Notes and Materials, 8
Butterworths, 2010)
B. MacDougall, Introduction to Contracts (Lexis/Nexis Canada, 2007)
McCamus, The Law of Contracts (Toronto: Irwin Law, 2005)
The Law Library collection related to common law of contracts includes many valuable casebooks and
textbooks which could be used for further readings (Anson Law ofContract, Cheshire, Fjfoot and
Furmston ‘s Law ofContract, Chitty on Contract, or Treitel on Law of Contract). NOTE: The US materials
available in the Law Library are based on primarily US case law, the Restatement of Contracts and
Unjform 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.
1
COURSE SYLLABUS
Note:
All cases are available in Ben-Ishai & 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 Bail Co.
Goldthorpe v. Logan
Harvela Investments Ltd. v. Royal Trust Co of Canada
R. v. Ron Engineering & Construction (Eastern) Ltd.
MJB. Enterprises Ltd. v. Defence Construction (1951) Ltd.
Double NEarthmovers Ltd v. City ofEdmonton, 2007 SCC 3
Williams v. ‘ar’.vardine
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.
Feltho use V. Bindley
Saint John Tug Boat Co. v. Irving Refinemy Ltd.
ProCD v. Matthew Zeindenberg and Silken Mountain Web Services Inc.
Household Fire v. Grant
Holwell Securities v. Hughes
Brinkibon v. Stahag Stahl
Rudder v. Microsoft Corp.
Kanitz v. Rogers Cable Inc.
Electronic Transaction Act [SBC 2001] C.10 -ss. 11 & 15
International Convention on Sale of Goods, Art. 1 8(2)(3) and 24
54
56
25
66
72
75
61
81
85
88
93
(Supp.)
(Supp.)
(Supp.)
3. Termination of Offer: revocation, rejection and counter-offer, lapse of time; problems
with unilateral contracts
Dickinson v. Dodds
Byrne V. Van Tienhoven
97
100
2
Erringlon v. Errington and Woods
Cariill v. Carbolic Smoke Ball Co.
Livingstone v. Evans
Dawson v. Helicopter Exploration Co.
Barrick v. Clark
102
25
54
66
103
4. Certainty of Terms; vagueness, incompleteness, agreements to negotiate, anticipation of
formalization
R. v. CAE Industries Ltd.
May & Butcher v. R.
Hiiiasv.Arcos
Foley v. Classique Coaches Ltd.
Sale of Goods Act ss. 12 & 13 Ascertainment of price
E,npress v. Bank ofNova Scotia
Mannpar Enterprises Ltd. v. Canada
Bawitko Investments Ltd v. Kernels Popcorn Ltd.
Wallace v. Allen, 2009 ONCA 36
-
114
119
122
126
(Supp.)
131
134
145
(Supp.)
5. Consideration: nature of consideration, past consideration, forbearance, pre-existing
duty
The Governors ofDalhousie College v. the Estate ofArthur Boutilier
Thonas 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 Selectmnove
Foot v. Rawlings
Law and Equity Act (R.S.B.C. 1996, c. 253) s. 43
156
169
166
168
173
177
178
182
186
192
195
197
(Supp.)
6. Waiver and Promissory Estoppel
Hughes v. Metropolitan Railway Company
Central London Property v. High Trees House
John Burrows v. Subsurface Surveys
D &CBuilders v. Rees
Combe v. Combe
Walton Stores v. Maher
M(N) v.A.(TA.)
201
203
205
208
224
230
239
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
3
8. Formality: The Requirement of Writing
Dynamic Transport Ltd. v. O.K Detailing Ltd.
Deglinan v. Guaranty Trust Co.
III.
PRIVITY OF CONTRACT
Tweddle v. Atkinson
Dunlop PneumaticTyre Co. v. Seifridge & Co. Ltd.
Besweck v. Beswick
London Drugs Ltd. v. Kuehne & Nage! International Ltd.
Fraser River Pile & Dredge Ltd. v. Can-Dive Services
IV.
258
262
276
277
283
298
310
CONTENT OF THE CONTRACT
1. Misrepresentation and Rescission: Representations and Terms, Parol Evidence
Rule
Redgravev.Hurd
Sinith v. Land & House Property Corporation
Kupchak 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.
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
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
Fairbanks v. Sheppard
Sumpter v. Hedges
Howe v. Smith
Stevenson v. Colonial Homes Ltd.
3.
(Supp.)
450
454
455
457
Standard Form Contracts and Exclusion Clauses
Machtinger v. Hoj Industries Ltd.
Thornton v. Shoe Lane Parking Ltd.
McCutcheon v. David MacBrayene Ltd.
Tilden Rent-A-Car CO. v. Clendenning
Karroll v. Silver Star Mountain Resorts Ltd.
463
478
488
492
496
4
Zhu v. Merrill Lynch
Tercon Contractors Ltd. v. BC (Transportation and Highways)
(Supp.)
(Supp.)
V. EXCUSES FOR NON-PERFORMANCE: MISTAKE AND FRUSTRATION (TBA)
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 Protection Act (S.B.C.2004, c.2) ss. 4-10
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.
Vifi.
762
730
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)
Asamera Oil Orp. v. Sea Oil
Semelhago v. Paramadevan
2.
793
801
805
814
816
821
825
858
861
868
871
879
Aggravated and Punitive Damages
Whiten v. Pilot Insurance Co.
Fidler v. Sun Lfe Assurance
Honda v. Keays
846
(Supp.)
(Supp.)
5
3.
Liquidated Damages, Deposits and Forfeitures
Shall/la v. Feinstein
H.F. Clarke Ltd. v. Thermadaire Corporation Ltd.
.1G. Collins Insurance Agencies Ltd. v. Esley
Stockloser v. Johnson
4.
885
889
896
898
Equitable Remedies (Specific Performance,Injunctions, Rectifiction)
John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd.
Warner Bros. v. Nelson
Zipper Transportation v. Korstrom
Zipper Transportation v. Korstroin
Shafron v. KRG Insurance Brokers (Western) Inc.
904
910
916
917
730
NOTE: Cases and readings are subject to additions,
deletions and reordering which will be announced in class
6
Canadian Dyers Ass. Ltd. v. Burton
(1920)47 O.L.R. 259 (H.L.)
Pharmaceutical Society v. Boots
[1953] 1 Q.B. 401, [1953] All E.R.
482 (C.A.)
R. v. Dawood
[1976] 1 W.W.R. 262 (Alta. C.A.)
Goldihorpe 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.)
[2]
[3]
[4]
[5]
[6]
Case
[I]
Law
110.02
Contracts
Biukovic
•
•
•
•
•
.
•
.
.
.
.
.
.
Formation:
Communication of
Offer public offer
to anyone who does
something;
Communication of
Acceptance;
Unilateral
Contracts
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 andperform the condition on the faith of
the advertisement (following the indicated method of acceptance).
—
Formation:
Communication of
Offer,
Intention to create
lal obligations
Formation: Public
offer or invitation
to treat
Formation: Offer &
Invitation to Treat
(retail sale)
Formation: Offer &
Invitation to Treat
(retail sale)
Formation: Offer &
Invitation to Treat
Topic
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
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
1
Harvela Investments Ltd. v. Royal
Trust Co. ofCanada
[1986] A.C. 207, [1985] 2 All E.R.
966 (H.L.)
R. v. Ron Engineering &
Construction (Eastern) Ltd.
[1981] 1 S.C.R. 11 13 B.L.R. 72
M.J.B. Enterprises Ltd. v. Defence
Construction (1951) Ltd)
[1999] 1 S.C.R. 619
[8]
[9]
[10]
[11]
,
R. v. Clarke
(1927) 40 C.L.R. 227 (Aust. H.C.)
[7]
Case
Williams v. Carwardine
(1883) 4 B. & Ad. 621, 1 10 E.R.
590 (K.B.)
Law
110.02
Contracts
Biukovic
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
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
construction contract to be entered into upon the acceptance of a tender (contract B). But it
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
tender is valid.
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
.
•
•
•
.
.
.
•
-
Formation: Offer &
Invitation to Treat
tenders
-
Formation: Offer &
Invitation to Treat
tenders
-
Formation: Offer &
Invitation to Treat
tenders
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).
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 baiik (the vendors) was to sell the
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.
.
—
.
•
.
—
Formation:
Communication of
Offer public offer
to anyone who does
something
Formation:
Communication of
Offer public offer
to anyone who does
something
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.
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
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 bi-lateral contract knowledge is
required (to enable meeting of the minds), but motive is irrelevant,
Topic
•
Rule
2
Ci
[17]
[16]
[15]
11
v.
Bindley
(N.S.
C.B.
1037 (Ex. Ch.)
(1962)
Feithouse
869,
142 E.R.
(1979) 100 D.L.R. (3d)(Ont. H. C.).
Tj’wood Industries v. St. AnnNackawic Pulp & Paper
Butler Machine Tool v. Ex-cell-o
Corp.
[1979] 1 W.L.R. 401, 1 All E.R.
965 (C.A.)
[1925] 4
.
Dawson v. Helicopter Exploration
Co. [1955] S.C.R. 868
D.L.R. 769 (Alta S.C.)
v.
Livingstone Evans
[1925] 3 W.W.R. 453,
Double N. Earthmovers Ltd
ofEdmonton, 2007 SCC 3
Case
[14]
[13]
[12]
110.02
Contracts
Biukovic
Law
•
•
•
•
•
.
•
•
•
•
•
.
.
.
Silence does not amount to acceptance.
Even though the nephew (seller) might have intended to sell, he never communicated this
a
treat offers “as calling for bilateral rather than unilateral action when the language can be
fairly so construed”
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
taking into consideration conduct of the acceptor
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
Lord Denning restated the traditional last shot formula for the resolution of the battle of the
forms, identif’ing several possibilities for courts:
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: 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.
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,
in order to find out if they considered any terms other than those found on the face of the
documents.
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.
circumstances.
In order to avoid problems with contract formation (and revocation of offer) courts should
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 surrounding
A counter-offer is a rejection ofthe original offer, a mere inquiry is not.
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
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
An offer that has been rejected is thereby ended and it cannot be afterwards accepted
without the consent of the one who made it.
rest of the tender documents—it does not override the obligation to only accept compliant
Rule
tenders
—
and
and
—
of
Acceptance
Communication of
Formation:
battle of forms
—
forms
Formation:
Acceptance
counter-offer;
battle
counter-offer;
Acceptance
Formation:
bilateral contracts
unilateral
Formation: offer
and acceptance;
counter offer
rejection
counter-offer;
Acceptance
Formation:
-
Treat
Offer &
Invitation to
Fonnation:
Topic
3
Household Fire v. Grant
(1879) 4 Ex. D, 216 (C.A.)
Hoiwell Securities v. Hughes
[1974] 1 W.L.R. 155, 1 All E.R.
161 (C.A.)
Yates Building Co. V. Pulleyn &
Sons Ltd. (1975) 119 SJ 370
Rudder v. Microsoft Corp.
[1999] O.J. 3778 (Ont. S.C.J.)
Byrne v. Van Tienhoven
(1880) C.P.D. 344
[20]
[21]
[221
[23]
[24]
[25]
Dickinson v. Dodds
(1876) 2 Ch. D. 463 (C.A.)
Brinkinbon v. Stahag Stahl
[198312 A.C. 34 [1982] 1 All E.R.
293 (H.L.)
[19]
‘
Eliason v. Henshaw
(1819)4 Wheaton 225,4 U.S. (L.
Ed.) 556
[26]
Saint John Tug Boat Co. v. Irving
Refinery Ltd. [1964] S.C.R. 614
Case
[18]
Contracts J
Biukovic
Law
110.02
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.
•
•
The mailbox rule does not apply to revocation—revocation must be received by the otTeree
to be effective.
The postal rule does not apply if the express terms of the offer specify that the acceptance
must reach the offeror. The requirement for “notice” was held to invoke the recipient rule.
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 “1 agree” button results in formation of a valid contract.
•
•
•
•
.
•
•
•
•
.
.
.
.
.
intention to his uncle (buyer).
In general, the offeror is in control of the mode of acceptance but the courts are reluctant to
allow silence to be specified as the mode of acceptance.
The conduct of an offeree, unaccompanied by any verbal or written undertaking, could
under certain circumstances (for example, continuing serviced on terms previously agreed)
be reasonably constructed as valid acceptance
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).
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
p 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
Rule
-
Formation:
Termination of
Offer Revocation
-
Formation:
Termination of
Offer Revocation
Formation:
Communication of
Acceptance
—
—
—
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
Topic
4
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.)
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.)
[27]
[28]
[29]
[30]
[31]
[32]
Case
Errington v. Errington and Woods
[1952] 1 K.B. 290, [1952] 1 All
E.R. 149 (C.A.)
Contracts
Biukovic
110.02
Law
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
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.
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
meanmg.
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
•
•
•
•
•
•
•
•
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.
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 detennine 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.
•
•
•
.
.
•
.
Rule
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Unconsionability:
arbitration clause
-
Formation: On-line
contract
reasonable notice
—
Formation:
Termination of
Offer Lapse of
Time
—
Formation:
Termination of
Offer Lapse of
Time
—
Formation:
Termination of
Offer Unilateral
contracts
Topic
5
[39]
[38]
[37]
[36]
[35]
[34]
[33]
Contracts
Biukovic
Law
110.02
v.
Arcos
147
L.T.
503
(HL.)
v.
Tolaini
Ltd.
v.
173
D.L.R.
(4)
v.
243
Ltd.
v.
(B.C.C.A.)
Bawitko Investment Ltd. Kernels
th)
4
(
Popocorn Ltd (1991) 79 D.L.R.
[1999]
Canada
Mannpar Enterprises
Empress
Bank ofNova Scotia
[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.)
Courtney and Fairbairn
Foley
v. Class ique Coaches
[1934] 2 K.B. I (C.A.)
(1932)
Hillas v. Arcos
(1932) 40 Lloyd’s Rep. (c.A.)
Hillas
Case
•
•
•
.
The oral agreement in contemplation of a formal written agreement not enforceable due to
agree—the
The court held that the renewal clause in the rental contract was a mere agreement to
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 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.
•
•
•
Lord Denning held that the price
contract is of fundamental importance.
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.
in a building
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 modern 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 of the sale of gas
agreement had been performed.
.
•
•
.
.
.
.
•
.
Rule
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Formation:
Certainty of Terms
Certainty of Terms
Formation:
Terms
of Terms
of Terms
Formation:
Certainty of
Certainty
Formation:
Certainty
Formation:
Topic
6
Rose and Frank v. JR. Crompton
Bros., [1923] 2 K.B. 261 (C.A.)
Jones v. Padavatton
[1969] 2 All ER 616, [1969] 1 WLR
328 (C.A.)
[43]
[44]
[45]
[49]
[48]
[47]
[461
Balfour v. Balfour
[1919] 2 K.B. 571
The Governors ofDalhousie
College at Haflfax 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.)
ProCD v Matthew
(1996) 86 F. 3d 1447
Wallace v. Allen, 2009 ONCA 36
97(Ont. C.A.)
Wellington City Council v. Body
Corporate 51702
[2002] 3 N.Z.L.R. 486 (C.A.)
Case
[42]
[411
[40]
Law
110.02
Contracts
Biukovic
Moral obligation is nudum pactum, a voluntary 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,
Letter of intent could amount to an enforceable contract if the parties clearly express their
intention to be bound by the terms of LOT which were later to be incorporated into a main
contract, if the terms of LOl are precise and complete, and if the parties after signing LOl
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 L.J.: 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.
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.
•
•
The process contract or the agreement to negotiate in good faith is unenforceable for the
lack of certainty
•
the lack of certainty; it is a contract to make a contract
Rule
Enforcement of
Promises: Past
Consideration
Enforcement: Past
Consideration
Enforcement of
Promises: Intention
to Create Legal
Obligation
Enforcement of
Promises:
Consideration
Enforcement of
Promises: Intention
to Create Legal
Obligation
Enforcement of
Promises: Intention
to Create Legal
Obligation
Enforcement of
Promises: Intention
to Create Legal
Obligation
Formation:
Certainty of Terms
Formation:
Certainty of Terms
and letters of intent
Formation:
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
Wardv. 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.)
Gilbert Steel v. University
Construction Ltd.
d)
2
(1976) 12 O.R. (
19, 67 D.L.R.
(3d) 606 (C.A.)
Williams v. Roffey Bros.
[1990] 1 All ER. 512 (C.A.)
[511
[521
[53]
[54]
[551
[56]
Case
[50]
Law
110.02
Contracts
Biukovic
•
•
•
•
•
•
•
•
•
•
•
•
•
.
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 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.
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 Silk 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.
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
to the Promisor
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
to the Promisor;
Reference to Silk
v. Myrick (1809)
170 E.R. 1168
Enforcement of
Promises: Pre
existing Legal
Dut’—Duty Owed
to a Third Party;
Economic Duress;
Past Consideration
Enforcement of
Promises:
Forbearance
Enforcement of
Promises:
Compromise and
Consideration
Enforcement of
Promises: Nature of
Consideration
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 fide believes he has a reasonable ground for suing, his forbearance to sue
will constitute a good consideration
Consideration can be anything beyond a basic legal duty.
Enforcement of
Promises: Nature of
Consideration
Topic
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.
Rule
8
[64]
[63]
[62]
[61]
[60]
[59]
[58]
[57]
Law
110.02
Contracts
Biukovic
John Burrows v. Subsurface
Surveys
[1968] S.C.R. 607, 68 D.L.R. (2)
354
D. C. Builders v. Rees
Central London Property 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.)
Foot v. Rawlings [1963] S.C.R. 197
Foakes v. Beer
(1884)9 App. Cas. 605 (H.L.)
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 (NB.C.A.)
Case
•
•
•
•
•
.
•
•
•
•
.
.
.
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 Denrnng 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
“[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”
1n 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
and kept paying by post-dated cheques as subsequently agreed between the two, the
creditor’s right to sue on the notes was suspended.
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.
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.
The promise to pay a sum which the debtor was already bound to pay was not good
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
Rule
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Promises: Duty
Owed to the
Promisor
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
to the Promisor
Enforcement of
Promises:
Part payment of
debt
Enforcement of
Promises: Pre
existing Legal
Duty—Duty Owed
to the Promisor
Topic
9
[67]
International Knitwear Architects
Inc. v. Kabob Investments (1995) 17
[71]
v.
Saskatchewan River Bungalows
Maritime Lfe Assurance
[1994] 2 S.C.R.490
Société Italo-Belge Pour Le
Commerce v. Palm and Vegetable
Oils (The Post Chaser) [1982] 1 All
E.R. 19 (Q.B.)
W.J. Alan & Co. V. El Nasr Export
& Import Co. [1972] 2 Q.B. 189
[70]
[69]
[68]
N.M. v. A.TA. (2003), 13 B.C.L.R.
th)
4
(
73 (B.C.C.A.)
[66]
v.
Walton Stores (Interstate) Ltd.
Maher
(1988) 62 A.L.J.R. (H.C.)
[65]
[1966] 2 Q.B. 617
Case
Combe v. Combe
[19511 2 K.B. 215, 1 All E.R. 767
(C.A.)
Law
110.02
Contracts
Biukovic
Waiver will be found where the evidence demonstrates that the party waiving had (1) a full
rights; (2) an unequivocal and conscious intention to abandon them
Waiver can be retracted if a reasonable notice is given to the party in whose favour it
operates
The notice to revive waived obligations could be reasonable in length even if it is not a
dated notice
•
•
•
•
•
•
•
knowledge of his/her
Denning on waiver: if one party by its conduct leads another to believe that the strict rights
arising under the contract will not be insisted on, intending that the other should act on that
belief and he does act on it, then the first party will not afterwards be allowed to insist on
the strict rights when it would be inequitable for him to do so
On some occasions it is possible to revert to the strict rights if the reasonable notice is
given; but not if that would be inequitable
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
Estoppel 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
.
Enforcement of
Promises:
Promissory
Estoppel and
Waiver
Enforcement of
Promises:
Promissory
Estoppel and
Waiver
Enforcement of
Promises:
Promissory
Enforcement of
Promises:
Promissory
Estoppel and
Waiver
Enforcement of
Promises: Waiver
and Promissory
Estoppel
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, in
which there was a reasonable expectation of a legal obligation.
•
•
Enforcement of
Promises: Waiver
and Promissory
Estoppel
enforce them.
Promises: Waiver
and Promissory
Estoppel
Enforcement of
Estoppel
and Promissory
Promises: Waiver
Topic
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.
.
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
Trees:
Lord Denning explained his
duress should not be estopped.
own principle set out in High
A
.
.
promise made under
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.
the creditor to insist on them.
.
Rule
10
[79]
[78]
[77]
[76]
L’-’i
[74]
[73]
[72]
Biukovic
Contraar
Law
110.02
(1982) 132
v
.
Atkinson (1861)
589
.
1 B &
as a sword
.
.
can
sue on
it.
with an enforceable
promisee really
107 D.L.R. (4
tb
)
169
(S.C.C.)
Edgeworth Construction Ltd. v.
ND. Lea & Associates Ltd. (1993)
London Drugs Ltd. v. Kuehne &
Nagel International Ltd.
[1992] 3 S.C.R. 299
in
administratrix of her husband’s
estate
•
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_privily rule_found_in this_case.
Followed London Drugs analysis re: application of limitation of liability clause on
tender as they were not parties to the contract.
McLachlin J held that Engineers were not protected from clause limiting their liability in a
•
Limited Exception to privily, employees may use as ‘shields’.
•
contract between their employer and the customer when the loss occurred
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
they were not parties to the contract.
lacobucci J held employees were protected from clause limiting their liability even though
she had a right as
and
-
in this case the widow sued in her capacity as
also in her personal capacity (Denning held that joint claim was
a trustee relationship
•
•
.
is
H.L.: Lord Reid found that although the widow in her personal capacity had no right to sue,
party
executrix of the estate,
third
C.A: Lord Denning MR fmds an equitable exception to general rule of privily where the
contracted as his agent.
there still must be
it if the
right,
A principal not named in the contract, however, may sue upon
party
a contract
a contract provides a third
consideration.
if
Only a person who is a
Even
sufficient consideration.
party to
contract.
Love and affection are not
sued on that
119 (H.L.)
•
and
A person who is not engaged in a contract (a third party) can generally neither sue nor be
Promissory estoppel used both as a shield
Promissory estoppel could only apply when there was a legal relation between the parties
good).
•
•
.
•
•
•
•
•
Rule
Besweck v. Beswick [1966] 1 Ch.
538; [1966] 3 All E.R. I (C.A.)
[1968] A.C. 58;[l967] 2 All E.R.
Dunlop PneumancTyre Co. v. Selfrzdge
& Co. Ltd. [1915] A.C. 847(H.L.)
.
Tweddle
S 393
(N.B.C.A.)
(1990) 69 D.LR.
th)
4
(
Robichaud c. Casse Populaire
D.L.R. (3d) 430 (Ont. H.C.)
Petridis v. Shabinsky
B.C.LR. (3d) 125 (B.C.C.A)
Case
—
of Contract:
Privily of Contract:
Exceptions
Privily
Employees
Exceptions
Privity of Contract:
Benefits
Privity of Contract:
Third
Parties to Acquire
Ways for
Beneficiaries
Tiairu.1 Party
Privity of Contract:
Beneficiaries
Third Party
Privity of Contract:
estoppel
Promissory
Promises:
Enforcement of
Estoppel
Promissory
Promises:
Enforcement of
Waiver
Estoppel and
Topic
ii
Dynamic Transportation Ltd. v.
O.K Detailing Ltd [1978] 2 S.C.R.
1072
Redgrave v. Hurd
(1881) 20 Ch.D. 1 (C.A.)
Smith v. Land & House Property
Corporation
(1884)28 Ch. D. 7 (C.A.)
Derry v. Peek (1889), 58 L.J. Ch.
864, [1889] All E.R. Rep. I
Kupchak v. Dayson Holdings
(1965) 53 W.W.R. 65, 53 D.L.R.
(2d) 482 (B.C.C.A.)
V.K Mason Construction Ltd v.
The Bank ofNova Scotia (1985) 58
N.R. 196 (s.c.C.)
S-244 Holdings Ltd. Seymour
[811
[82]
[83]
[84]
[85]
[86]
Fraser River Pile & Dredge Lt. v.
Can-Dive Services. [1997] 39
B.C.L.R. (3d) 187 (B.C.C.A.)
Case
[80]
Contracts
Biukovic
110.02
Lt,w
•
•
•
•
•
•
•
.
•
.
•
•
—
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
true or false. In 1889 type (c) was classified as fraudulent misrepresentation, but today (c)
would likely be considered to be negligent misrepresentation.
General rule: there is no rescission for misrepresentation if a 3 party has acquired rights,
or when restitutio in integrum is impossible, or if the action to rescind is not taken within a
reasonable time, or the contract is executed (except in the case of fraud), or if the injured
party affirms the contract.
The court dealt with the possibility of rescission for fraudulent misrepresentation using the
2 step test: a) is rescission practical and restitution possible? b) was the claim to rescind
submitted in timely fashion?
When rescission is impossible then the injured party may get monetary compensation (in
this case fair market value for the property plus interest).
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
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
financing. The court awarded expectation damages (anticipated profits) in addition to
wasted expenses.
In the case of innocent misrepresentation the court relying on Lord Denning (Leaf v.
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.
However, if the facts are not equally known to both sides, then a statement of opinion by
the one who knows the facts best very often involves a statement of a material fact.
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
contract by a false representation.
employees in order to enforce the insurer’s waiver of its rights of subrogation against the
charterer
Does not modifS’ 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
Rule
Misrepresentation
Misrepresentation:
Negligent
Misrepresentation
and Rescission:
fraudulent
misrepresentation
Fraudulent
misrepresentation
Misrepresentation
and Rescission:
material
representation,
fraudulent
misrepresentation
Misrepresentation
and Rescission:
statement of
opinion or
misrepresentation
Requirement of
Writing
Exceptions other
than Employees
Topic
12
Charbonneau v. Brawn
(2002) 113 A.C.W.S. (3d) 620
B.C.S.C.
Leafv. International Galleries
[1950] 2 K.B. 86, 1 All E.R. 693
(C A)
[89]
[90]
Bank ofB.C. v. Wren Developments
(1973), 38 D.L.R. (3rd) 759
(B.C.C.A.)
Dick Bentley v. Smith Motors
[1965] 1 W.L.R. 623 (C.A.)
[88]
[91]
Heilbut, Symons & Co. v. Buckleton
[1913] A.C. 30 (H.L.)
Building Systems Ltd. (B.C.C.A.)
Case
[87]
Contracts
Biukovic
Law
110.02
•
•
•
.
.
.
.
.
.
.
.
.
.
.
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.
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)
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.
International Galleries) and Canadian case law held that rescission may be available 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 because of the
plaintiff’s undue delay in seeking a remedy or because rescission might affect 311 parties, or
would otherwise be inequitable.
Denial of rescission could, in certain circumstances, be inequitable because rescission is an
“all or nothing” remedy.
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
remedy.
An affirmation at the time of sale is a warranty, provided it appears on evidence to be so
intended, else it is only an innocent misrepresentation.
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:
breach of
warranty;
Parol evidence rule:
admissibility of
extrinsic evidence;
Interpretation of
contract
Misrepresentation
and Rescission:
innocent
misrepresentation;
rescission and
lapse of time
Misrepresentation
and Rescission:
omissions
Misrepresentation
and Rescission:
innocent
misrepresentation;
breach of warranty
Misrepresentation
and Rescission:
innocent
misrepresentation;
breach of warranty
and Rescission:
rescission when the
contract is
executed
Topic
13
v. N. Tessis (1977), 17
O.R. (2d) 158 (Ont. C.A.)
[941‘
[97]
[96]
[95]
Redican v
.
Nes bitt
[1924] S.C.R. 135
.
No. 2002 Taurus Ventures Ltd. v.
Intrawest Corp.
2007 BCCA 228
,
B. G. Checo mt 1 Ltd. v.
[199313 1
c R 12
1
Sodd Corp.
B. C Hydro,
v. Mardon
[1976] Q.B. 801, 1 All E.R. 5 (C.A.)
Esso Petroleum
[93]
1
[921j
Case
Hedley Byrne & Co. Ltd. v. Heller
& Partners Ltd, [1964] A.C. 465
Biukovic
Contracts
110.02
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
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
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.
,.
.
•
.
.
.
,
.
.
.
.
.
..
.
.
.
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 if the contract is executed unless
the benefit provided differs m 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
.
.
.
.
•
.
•
.
.
Rule
Misrepresentation
and Rescission:
Availability of
remedies
Misrepresentation
and Rescission:
concurrent liability
in torts and
contracts and the
entire agreement
clause
Liabilifuin Torts
and Contracts
Misrepresentation
and Rescission:
concurrent
Liability in Torts
and Contracts
Misrepresentation
Misrepresentation
and Rescission:
concurrent liability
in contract and
tort; negligent
misrepresentation
Misrepresentation
and Rescission:
negligent
misrepresentation
Topic
14
Guarantee Co. ofNorth America v.
Gordon Capital Corp. (1999)
th)
4
178 D.L.R. (
(s.c.c.)
Harwish v. Bank ofMontreal
[1969] S.C.R. 515
Bauer v. Bank ofMontreal
[1980] S.C.R. 102
Gallen v. Bullerley
(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. Ulrvchova
(1996)40 Alta. L.R. (3d) 196 (Alta.
Prov. Ct.)
Wickman v. Schuler
[1974] A.C. 235, 2 All E.R. 39
(H.L.)
[98]
[99]
[100]
[101]
[102]
[103]
[104]
[105]
Case
Bank ofBC v. Wren
(1973) 38 D.L.R. (3d) 759
(B.C.S.C.)
Law
110.02
Contracts
Biukovic
•
•
•
•
•
.
•
•
•
.
.
•
•
•
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 nonrepudiating 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 wntten
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 iii written contracts, to show misrepresentation, etc.
It is only a presumption that a collateral agreement cannot be admitted if it is inconsistent
with, or contradicts, the written terms.
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.
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
caused by the guilty party.
Rule
Classification of
Terms
Classification of
Te
Classification of
Terms
Parol Evidence Rule
Parol Evidence Rule
Parol Evidence Rule
Misrepresentation
and Rescission:
applicability of
exclusion clauses
and options for the
innocent party
Misrepresentation
and Rescission:
Enforcement of
terms
Topic
15
[1111
[110]
[109]
[108]
[107]
[106]
Law
110.02
Contracts
Biukovic
v. Sheppard
1 S.C.R. 314,2 D.L.R. 193
v.
55
Lohnes
T.D.)
(1973), 22 D.L.R. (3d) 493 (N.S.
v.
(USA) Ltd.
Maridand Associates Ltd
Jacyk
2007 SCC
Jedfro Investments
v.
Colonial Homes Ltd.,
[1961] O.R. 407 (Ont. C.A.)
Stevenson
(1884)27 Ch.D. 89 (C.A.)
Howe v. Smith
Sumpter
v. Hedges
[1898] 1 Q.B. 673 (C.A.)
[1953]
Fairbanks
Case
•
•
•
it
if
is recoverable
Where the work was done, but badly, and the defects have been or can be remedied, the
courts tend to find that there has been substantial performance and that the builder should
have the agreed price less the cost of correcting the defects and omissions
terminate the contract.” [20]
it
if it
amounts to a new contract in which the
“Abandonment discharges a contract only
parties agree to abandon the old one.”[17 A new contract could be made explicitly or
implicitly but must be clear that the parties have made a new contract
More than a simple ignorance of a contractual obligation is needed to establish repudiation.
“A contract may be said to be repudiated when one party acts in a way that evinces intent to
no longer be bound by the contract. The other party then may, at its option, elect to
part payment on account of the purchase price then
in
.
•
To determine the payment is a deposit or a part payment the court will look at the
intention of the parties in the circumstances of each case as indicated by the actual words of
the contract and evidence of what was said
advance to guarantee the performance of the K)
If the payment is a deposit (money paid
there would be no return when the contract is set aside. However the money is paid as a
.
if
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
performance by the other party, would depend on what terms are to be implied
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.
defendant to take or not to
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.
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
.
.
.
the work done could be inferred.
In certain circumstances the general rule (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.
In order to recover for the work that is “substantially” completed, the party in default who
wants to recover must provide evidence from which any new contract to accept and pay for
.
.
If the parties intend to give a condition such an effect they must make that intention clear.
.
Rule
a
party
in
a party in
party
lump sum
Discharge by
Performance or
Breach: cases of
diation
abandonment/repu
Discharge by
Performance or
Breach:
the
before
work
in
some money
was given
performance
started
when
uncompleted
Discharge by
Performance or
Breach: cases of
default
paid by a
Discharge by
Performance or
Breach: Deposit
default
for
Discharge by
Performance or
Breach: Remedy
default
for
Discharge by
Performance or
Breach: Remedy
Topic
16
[117]
[116]
[115]
[114]
[113]
[112]
Law
110.02
Contracts
Biukovic
125, 1 All E.R.
Tilden Rent-A-Car Co. v.
Clendenning
(1978) 18 O.R. (2d) 601 (Ont. C.A.)
1 K.B. 532
Olley v. Marlborough Court, [1949]
Ltd.
[1964] 1 W.L.R.
430 (H.L.)
McCutcheon v. David MacBrayene
[1971] 2 Q.B. 163, 1 All E.R. 686
(C.A.)
Thornton v. Shoe Lane Parking Ltd.
(1877)2 C.P.D. 416 (C.A.)
Parker v. South Eastern R.y. Co.
[1992] 1 S.C.R. 986
Machtinger v. Ho/ Industries Ltd.
Case
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
.
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.
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 modem commercial 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
.
•
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.
•
•
.
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.
•
•
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).
.
Rule
—
—
documents
Standard Form
Contracts:
Exclusion Clauses
and signed
documents
and unsigned
Contracts:
Exclusion Clauses
—
documents ticket
case
Standard Form
and unsigned
Standard Form
COncts:
Exclusion Clauses
case
and unsigned
documents ticket
Standard Form
Contracts:
Exclusion Clauses
case
Standard Form
Contracts:
Exclusion Clauses
and unsigned
documents ticket
Standard Form
Contracts:
Exclusion Clauses
contracts and
uncompleted work
Topic
17
•
•
Karroll v. Silve Star Mountain
Resort Ltd.(1988) 33 B.C.L.R (2d)
160 (B.C.S.C.)
Schuster v. Blackcomb Skiing
Enterprises Ltd. Partnersh4,
[1995] 3 W.W.R. 443 (B.C.S.C.)
Interfoto Picture Library v. Stiletto
[1989] Q.B. 433
Zhu v. Merrill Lynch HSBC
[2002] B.C.J. No. 2883 (B.C.P.C)
Century 21 Canada v. Rogers
Communications Inc.
2011 BCSC 1196
[119]
[120]
[121]
[122]
[123]
.
•
•
.
.
.
[118]
Case
Delaney v. Cascade River Holidays
Ltd.
(1983)44 B.C.L.R. 24 (B.C.C.A.)
110.02
Contracts
Biukovic
Law
•
•
The court defines the browse wrap agreement the one that “does not require that the
purchaser indicate their agreement by clicking on an “I 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 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
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.
-
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 of the 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 between the parties or the nature of
the venture involvecL
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
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 ofthe 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 witnessing the signing) would
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
The waiver was found to exclude liability.
also considered in the reasonable steps test
Rule
Exclusion Clauses
in web posted
contracts (browse
wrap agreements)
Standard Form
Concts:
Exclusion Clauses
Standard Form
Contracts:
Exclusion Clauses
and signed
documents
Sd&d Form
Contracts:
Exclusion Clauses
and signed
documents
Standard Form
Contracts:
Exclusion Clauses
and signed
documents
SIÜUd Form
Contracts:
Exclusion Clauses
and signed
documents
Topic
18
Photo Production v. Securicor
Transport Ltd.
[1980] A.C. 827, 1 All E.R. 556
(H.L.)
Hunter Engineering v. Syncrude
Canada Ltd
th)
4
[1989] 1 S.C.R. 426, 57 D.L.R. (
321
[127]
[128]
[126]
[125]
Karsales v. Wallis
[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.)
[124]
Case
Dell Computer Corp. v. Union des
consommateurs and Olivier
Dumoulin,
2007 SCC 34
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 fundamental 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 Allantique 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 primary and secondary 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.
Dicbon 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
.
•
•
.
•
•
•
•
A defendant will not be permitted to rely on a liability limitation clause if it would be
unconscionable in the circumstances.
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 hyperlink to the Terms and Conditions of Sale was in smaller print, located at the
bottom of the Configurator Page, this is consistent with industr’ standards. It can therefore
be concluded that the hyperlink was evident to defentand.
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
Conditions expressly to defendant’s attention.
•
.
.
.
to accepting them
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 reading the terms posted
Rule
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
Standard Form
Contracts:
Incorporation of
Terms
Topic
19
Davis Contractors Ltd v. Fareham
UDC
[1956] A.C. 696, [1956] 2 All E.R.
145 (H.L.)
Capital Quality Homes Ltd. v.
Colwyn Construction Ltd
[132]
11331
L
11341
1
j
Paradine v Jane
(1647) AleY 26 82 All E R 897
‘
Tercon Contractors Ltd v. BC
(Transportation) 2010 SCC 4
Fraser Jewellers Ltd. v. Dominion
Electric Protection Co.
th)
4
(
(1997) 148 D.L.R. 496
(Ont.
C.A.)
Case
Taylor v. Caidwell
(1863) 3 B&S 826, 122 E.R. 309
(Q.B.)
[131]
[130]
129
r
1
Biukovic
Contracts
Law
110.02
•
•
•
•
•
•
•
•
.
•
•
.
.
.
.
.
.
.
,,
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
SCC referred to Dickson 3. in Hunter Engineering in stating that the doctrine of
fundamental breach should be lay to rest and that an analytical approach of Binnie 3. to
exclusion of liability clauses applicability should be applied
Bmme J. held (dissentmg) 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 of the 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 ofbeing performed because the
circumstances in which performance is called for would render it a thing radically
different from that which was undertaken by the contract....
The event must be unforeseeable and must occur after the formation of the contract.
It is nut hardship, inconvenience or material loss which calls the principle of frustration
into play, but a change in the signflcance ofthe obligation such that the thing undertaken
would, jfperformed, be a different 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
Rule
Frustration:
intervening
-
Frustration: Excuse
f
nance
—
Doctrine of
Frustration: Excuse
for non
performance
contract voidable
Before Doctrine of
Frustration
Fundamental
Breach: analytical
framework for
application of
exclusion clauses
Fundamental
Breach: Canadian
courts follow Photo
Production
Topic
20
Pao On v. Lau Yiu Long
[1980] A.C. 614 (P.C.)
Gordon v. Roebuck
(1992) 9 O.R. (3d) 1, 92 D.L.R.
670 (Ont. C.A.)
Gotaverken Energy Systems Ltd. v.
Cariboo Pulp & Paper Co, [1993]
B.C.J. No. 149 (B.C.S.C.), aJJ’d
[1994] B.C.J. No. 1545 (B.C.C.A.)
Greater Fredericton Airport
Authority Inc. v. NA V Canada,
(2008) N.B.J. No. 108 (N.B.C.A.)
Geffen v. Goodman Estate
[136]
[137]
[138]
[139]
[140]
[141]
th)
4
(
Fibrosa Spolka v. Fairburn
[1943] A.C. 32
[135]
(1975) 9 O.R. (2d) 617, 61 D.L.R.
(3d) 385 (C.A.)
Case
Victoria Wood Development
Corporation v. Ondrey
(1977) 14 O.R. (2d) 723, 1 R.P.R.
141, 74 D.L.R. (3) 528 (H.C.)
Law
110.02
Contracts
Biukovic
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 of the 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
practicable
Wilson J. said that the plaint1ff must establish the presence ofa dominant relationship in
•
•
•
•
•
Affirmed the requirements for duress set out in Pao On and Gordon.
•
•
•
.
Undue Influence:
Economic duress:
modification of
contract
Duress: Economic
Dur
Duress: Justifiable
Economic Duress
Duress: Economic
Duress
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 held that the pressure exerted was justified and that the appellant had the onus of
proving that Roebuck was not entitled to the amounts required in the agreement.
Fition:
Consequences of
supervening
illegality
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.
Webster) deciding that in this case the Polish company could recover back the money paid
beforefrustration because ofthe totalfailure of consideration (the machine had not been
delivered).
.
•
Frustration:
Intervening
legislation
legislation
The court interpreted strictly and narrowly the terms of the contract and held that “the very
foundation of the 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.
was contemplated by the parties and provided for in the agreement.”
Intervening legislation which was not within the contemplation of the parties and which
destroys the very foundation of the agreement does discharge both parties from
performance.
Topic
•
•
Rule
21
Morrison v. Coast Finance Ltd.
(1965) 54 W.W.R. 257, 55 D.L.R.
(2d) 710 (B.C.C.A)
Marshall v. Canada Permanent
Trust Co. (1968) 69 D.L.R. 2d) 260
(Alta. S.C.)
Lloyd’s Bank v. Bundy
[1975] Q.B. 326, [1974] 3 All E.R.
757
Harry v. Kreu:ziger
(1978) 9 B.C.L.R. 166, 95 D.L.R.
(3d) 231 (B.C.C.A.)
[142]
[143]
[144]
[145]
[146]
th)
4
[1991] 2 S.C.R. 353, 81 D.L.R (
211
Case
Royal Bank ofScotland v Etridge
(No. 2), [2001] 3 W.L.R. 1021
Contracts
Biukovic
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 relief to 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 J 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
divergentfrom community standards of commercial morality that it should be rescinded.
The court held that the defendant was entitled to rescission of the 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.
Unconscionability:
relief
Unconscionability:
relief
Unconscionability
Unconscionability:
presumption of
unconsionability
.
A presumption of unconscionability requires: a) proof ofinequality in the position of the
parties arising out of the ignorance, need or distress ofthe weaker, which left them in the
power of the stronger, and b) proof 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
and reasonable.
.
Undue Influence:
Potentially
dominant
relationships
Potentially
dominant
relationships
Topic
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 nse to a rebuttable evidential presumption of undue influence.
The term ‘manifest disadvantage’ causes confusion and should be discarded.
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 of the disadvantage or benefit is cogent evidence
going to the issue of whether undue influence was exercised).
Rule
22
J G. Collins Inc. Agencies Ltd v.
ElsIey, [1978] 2 S.C.R. 916
Still v. Minister ofNational Revenue
[1998] 1 F.C. 549 (C.A.)
Shafron v. KRG Insurance Brokers
(Western) Inc., 2009 SCC 6
A. V.G. MGMT. Science Ltd. v.
Barwell Dev. Ltd
[1979] 2 S.C.R. 43, [1979] 1
W.W.R. 330
McRae v. Commonwealth Disposals
Commission
(1951) 84 C.L.R. 377 (Aust. H.C.)
Bowlay Logging Ltd. v. Domtar Ltd.
[1982] 6 W.W.R. 528 (B.C.C.A.)
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.)
Hunt v. Silk
(1804) 5 East 449, 102 E.R. 1142
(K.B.)
[148]
[149]
[150]
[151]
[152]
[153]
[154]
Case
[147]
Law
110.02
Contracts
Biukovic
. -.
-
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 conimon law rule was established that the right to restitution could be lost if the
plaintiff enjoyed any benefit under the contract (the plaintiff’s occupation after knowledge
was a waiver of the right to terminate).
•
•
•
•
.
•
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).
A covenant in restraint of trade is enforceable oniy if it is reasonable between the parties
and with reference to the public interest.
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 modem 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 refuse to grant relief to a
when
it would be contraxy to public policy, reflected in the relief claimed, to do so.
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. Forhergill did not apply when the vendors had voluntarily
disabled themselves from conveying good title by engaging in concurrent dealings with
other purchasers. ft 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?
.
•
•
•
.
.
.
Rule
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”
Illegality: Restraint
of Trade
Topic
23
Ruxley Electronics v. Forsyth
[196] 1 A.C. 344 (H.L.)
AG v Blake, [20011 1 A.C. 268
Hodgkinson v Simms,
[162]
[163]
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.)
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 pooi as specified by the owner.
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.
Undue influence focuses on the sufficiency of consent and unconscionability on the
•
•
.
.
•
•
•
•
•
If the contract is terminated, abandoned or discontinued after substantial completion, then
the service provider is entitled to payment less damages for non-completion.
•
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.
Markiand Associates v Lohnes
by its expenditure.
•
“The fact that damages cannot be assessed with certainty does not relieve the wrong-doer
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 Peevyhouse v. Garland Coal Mining Co., 382 P. 2d 109 (OkIa. S.C., 1962)
Where a builder is in breach of his 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 value to be gained
(1975) 59 D.L.R. (3d) 292 (Alta.
C.A.)
Thunderbird
[161]
[160]
[159]
[158]
[157]
v.
.
.
.
.
.
Rule
Petroleums
Nu-West Homes
Wunder Co.
[156]
John
v.
(1939) 286 N.W. 235 (Minn.C.A.)
Groves
[155]
Chaplin
Case
v.
[191112 K.B. 786(C.A.)
Law
110.02
Contracts
Biukovic
Damages:
Damages:
Quantification
Damages:
Quantification
Specific
performance
Damages:
Quantification
Damages:
Quantification
Damages:
Quantification
Damages:
Quantification
Damages:
Quantification-cost
of performance or
diminution of value
Damages:
Quantification
Topic
24
[167]
[166]
[165]
[164]
Law
110.02
Contracts
Biukovic
Victoria Laundry v. Newman
[1949] 2 K.B. 528
(1854) 9 Exch. 341, 156 E.R. 145
Hadley v. Baxendale
(B.C.S.C.)
Wharton v. Tom Harris Chevrolet
(1999), B.C.D. Civ. J. 3186
752 (Ont. Co.Ct.)
Newell v. Canadian Pac/lc
Airlines, Ltd. (1976), 14 O.R. (2d)
[1994] 3 S.C.R. 377
Case
•
•
•
•
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 (particularly the breaching
party).
Everyone has imputed knowledge of ordinary 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.
would ordinarily result from such a breach of the contract under the given special
fld
2
Hadley rule).
circumstances (
•
•
Recoverable losses are those arising naturally from the breach which should have been
within the reasonable (objective test) contemplation of the parties (1 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 injury which
.
The failure of a sound system in a luxury vehicle is only one aspect of the operation of the
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.
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
reasonablyforeseeable consequence of the defendant’s breach of contract, for which the
plaintiffs were entitled to recover damages.
General rule is that if the loss flowing from breach is too remote then it cannot be
recovered.
•
•
•
.
.
.
.
.
.
reasonableness of a given transaction
The existence of a contract does not necessarily preclude the existence of fiduciary
Rule
Damages:
Remoteness
Remoteness
Damages:
distress
Damages: mental
Conditions &
warranties
Damages: mental
distress
Quantification
Topic
25
Koufos v. Czarnikow (The Heron II)
[1969] 1 A.C. 350
Vorvis v. ICBC
[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
Fidler v. Sun Life Assurance,
2006 SCC 30
[169]
[170]
[171]
[172]
Case
[168]
Law
110.02
Contracts
Biukovic
•
•
.
•
.
•
•
•
.
•
.
-
Mcintyre:
o Aggravated damages may be awarded in a case of wrongful dismissal particularly
where the acts complained ofwere also independently actionable
o Punitive damages may oniy 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.
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
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.
Rule
Damages:
Aggravated and
Punitive Damages
Damages:
Aggravated and
Punitive Damages
Damages:
Aggravated and
Punitive Damages
Damages:
Aggravated and
Punitive Damages
Damages:
Remoteness
Topic
26
Semelhago v. Paramadevan
[1996] 2S.C.R. 415
Dunlop Pneumatic Tyre ltd. v. New
Garage and Motor Co.
[1915] A.. 79 (H.L.)
Shatilla v. Feinstein
[1923] 1 W.W.R. 1474, 16 Sask.
L.R. 454 (Sask.C.A.)
H.F. Clarke Ltd. v. Thermidafre
Corp.
[1976] 1 S.C.R. 319
[175]
[176]
[177]
[178]
[179]
[180]
Wroth v. Tyler
[1976] Ch. 30
[174]
Honda v. Keays,
2008 SCC 39
Case
White and Carter (Councils) v.
MacGregor, [1962] A.C. 413,
[1961] 3 All E.R. 1178 (H.L)
[173]
Law
110.02
Contracts
Biukovic
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
.
•
•
•
•
•
•
.
The provision will be liquidated damage if it contains nothing unreasonable,
unconscionable or extravagant
•
•
.
.
.
.
be independently actionable (as a claim in tort or independent contractual obligation to act
in_good faith)
Sec 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 Had1ey v. Baxendale should apply
sec 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 spec Wc performance as
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).
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.
Rule
Damages:
Damages:
Liquidated
Damages and
Penalties
Damages:
Liquidated
Damages and
Penalties
Damages:
Liquidated
Damages and
Penalties
Damages: Time of
Measurement
Damages: Time of
Measurement
Damages:
Repudiation and
Mitigation
Damages:
Aggravated and
Punitive Damages
Topic
27
Mennonite Land Sales v. Freisen
[1921] 3 W.W.R. 431 (Sask. K.B.)
[182]
[183]
Asamera Oil Corp. v. Sea oil and
General Corp. [1979] 1 S.C.R. 633
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.
[185]
[186]
[187]
[188]
[184]
Stockloser v. Johnson
[1954] 1 Q.B. 476, [1954] All E.R.
630 (C.A.)
John E. Dogde Holdings Ltd V.
805062 Ontario Ltd. [2003] O.J.
No. 350, 63 O.R. (3d) 304 (On.
C.A.)
Howe v. Smith
(1884) 27 Ch. D. 89 (C.A.)
J. G. Collins Insurance Agencies
Ltd. v. Elsley
[1978] 2 S.C.R. 916
Case
[18 1]
Contraas
Biukovic
110.02
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
Applying the test as set out in Elsley v. J 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
Specific performance is not available in the context of agreements for the purchase of
publicly traded shares and the plaintiff was obliged, within a reasonable time to acquire
substitute shares (the buyer has to mitigate loss by securing substitute shares in the market)
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.
•
•
The court held that the plaintiff was not entitled to specific performance because it was
clear that damages would afford an adequate remedy.
. .
Where there is no forfeiture clause, if money is handed over in part payment of the
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.
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.
•
•
•
•
.
•
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—if the
actual loss turns out to exceed the penalty, the party should be allowed to recover only the
agreed sum.
Rule
Equitable Remedies:
Injunction
(Interlocutory)
Equitable Remedies:
Injunction
Equitable Remedies:
injunction
Equitable Remedies:
Specific
Performance
Equitable Remedies:
Specific
Performance
Equitable Remedies:
Specific
Performance
Damages:
Forfeiture as
Liquidated
Damages or
Penalties
Damages:
Forfeiture as
Liquidated
Damages or
Penalties
Liquidated
Damages and
Penalties
Topic
28
[189]
Law
110.02
Contracts
Biukovic
Shafron v. KRG Insurance Brokers
(Western) Inc.,
2009 SCC 6
C.A.)
Case
•
-
So
confirmed that rectification is an equitable remedy correcting mistaken written records
oral agreement of the parties) but not dealing with the intention
of the parties and lack of clarity of the terms of contract
(which differs from a prior
SCC
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
let Korstrom keep the “stolen client” (Piston ring) until the result of the trial is known.
Rule
Remedies:
Rectification
Equitable
(Interlocutory)
Topic
29