CONTRACTS – MIDTERM
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Created almost entirely from PubDocs and online summaries. Thank you to those who came before
Offer (may be withdrawn anytime before acceptance)
CCQ
1388
1387
1389
Made
Carabolic
Smokeball
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NOT made
Revocation
Offer Revoked
NOT Revoked
Acceptance
CCQ
1386,
1388
1387
1389
1394
Offer Accepted
Unilateral
Contract
Bilateral
Contract
Shatford v. BC
WineGrowers (offer not
accepted due to
reasonable term for
fruit)
Bristol Cardiff v. Maggs
Term:
CCQ
1390
1391
1392
Non
instantaneous
communication
Dawson v
Helicopter
Explor
Acceptance by Performance
(unilateral contract CML)
Rejection
Kleinwort v. Malaysia
Minning co. (A comfort
letter is not contract)
Butler Tool
v. Ex-CellO (last shot
wins)
CUQ v.
Beaudry
(precursor
to art
1393)
Preliminary Negotiations
Pharmaceutical
Society v. Boots
Lavoie c. Bernier
(use art, 1388)
CounterOffer kills
an offer
(mirror
image rule)
Harmer v Sidway
Carabolic Smokeball
Dahl v. HEM
Pharmaceuticals
Haenyo
CCQ
1395
Richard v. Time inc.
(Misleading offer)
Offer NOT Accepted
Counter Offer
Instantaneous
Communicati
on
Entores Ltd v.
Miles Far East
Leonard v.
Pepsi (ad is
an invitation
to treat, not
an offer)
Contracts
Civil
Law
Common
Law
NO CONTRACT
Promise
CCQ 1396,
Jones v.
promise to
Padavatton
contract is a
(domestic
contract (thus relations/CML
CCQ 1385
promise)
capacity); CCQ
1415 (contract
form not
applicable to
promises); CCQ
1397 (damages
for breach of
sale)
Cere c. Neely
(Unilateral
promise, with a
term) 2
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Conditions (to contract)
Implied Obligation
Capacity to Contract
Wood v. Lady Duff
CCQ 1385
Legality (next
page)
No legal effect intended
(gentleman’s agreements)
cv
Terms
Jones v.
Padavatton
(domestic
relations/CML
promise)
CCQ 1373
Consideration
Agreement on essential terms
Forbearance;
Detriment
Consent
Cause
CCQ
1371
1410
1411
Object
CCQ
1412
1413
1371
Dahl v. HEM
Pharmaceuticals
White v. Bluett must
abstaining from a
possessed right
Gift
(CVL)
Nominal
Consideration
Thomas v
Thomas
(Motive not
consid. +
consid. must
have value in
eyes of law)
Les Terrasses
Holdings (use of
CCQ 1493 –
unjust enrichment
Law requires real
consid, but will not
question the value.
Implied
Terms
Changed Circumstance (not in Canada yet)
Williams v. Roffey Bros; Nav Canada
Past Consideration
Roscorla v. Thomas
Lampleigh
Exception (Pay for
services rendered);
Court should avoid
unjust enrichment
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Manufacturer’s
warranty
c
v
Moral Obligation
Kirksey v. Kirksey
(family relations,
promise)
Economic Duress
Nav Canada v. GFA
Cannot use Legal /
Contractual Obligation
Harris v. Watson
Stilk v. Myrick
Gilbert Steel
Foakes v. Beer
promised partial
payment
cv
Peerless
(Raffles v
Wichelha
us)
Kirksey v.
Kirksey
(family
relations/C
ML promise)
Good Faith
(next page)
No
Reliance
Implied promise (Promissory Estoppel)
CCQ 1824, 1812
No Consideration
Empress
Towers v
Bank of N.S.
No agreement/
missing terms
Agreement
Miami Coca-Cola
v. Orange Crush
(NO Mutuality of
Performance, No
Consideration)
c
Hutchin
son v.
RIL
(CVL &
CML)
Harmer v Sidway
Consid. definition
Minimal Consideration
(Peppercorn Theory)
High Trees Ltd (Introduced estoppel)
As a Sword
Combe v. Combe
Gilbert Steel
Exception:Proprietary Estoppel (land)
Crabb v. Arun D.C.
Post
Chaser (no
detriment
required)
As a Shield
Hughes v. Metro Railway Co
(Landlord waiver or rights)
Kirksey v. Kirksey (not an ex.
But would be in recent times)
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Waltons Stores v.MaherAUS
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Written Terms
Contractual Interpretation
Oral Terms
Parole Evidence
Rule (CML) with
exceptions (oral
terms excluded
Gallen v. All-State
Grain Co.
CCQ
1425 – common
intention
1426
2863
2865
2864 (proof by
testimony is
admissible)
CML: reasonable listener
standard of word meaning
(except in limitation of
liability). Contract interpreted
against drafter (last resort)
CML preference for
objective/ explicit/
written text
Signed
CVL: Parties intent (1)
Content over form (1425,
1431); (2) must have effect
(1428); (3) holistic
interpretation (1427; 1429)
Unsigned
L’Estrange v Graucob (If
you signed it your bound
to it, irrespective of
reading it)
Ticket rule
McCutcheon v.
MacBrayne British
Crane Corp
Parker v. South
Eastern Railway Co.
Extrinsic aids/sources
2864 (proof by
testimony is admissible)
only common intention;
Slow adoption of post contract
conduct/statements
Exclusion of prior negotiations
(accept to show general aim)
Implied Terms
CCQ 1434
(usage, equity,
law)
1426
MJB Enterprises v.
Defence Construt.
(Customs/usage in
industry contracts)
McCutcheon v. David
MacBrayne Ltd. (also
onerous conditions)
British Crane Corp v
Ipswich Ltd (also industry
knowledge)
Usage
CCQ 1434
Nominate
(industry
contracts)
1377
Course of Dealings
Georgia
Construction Co
v. Pacific Rail
Co (notorious)
Officious By-stander Test (CML)
Reluctance (GF in negotiation)
Any term which the parties would
say they had obviously assumed
Martel Building Ltd. (no duty of GF
in negotiations based on economic loss)
Industry standards
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British Crane Corp v Ipswich Ltd
Transamerica Life
Additional terms
Automated Tickets
CCQ 1435 external
clause in CVL
Thornton v. Shoe
Lane Parking (also
onerous conditions)
Dell v. Union des
consommateurs
Good Faith
CCQ 1375 test of reasonableness
Reluctant to adopt in CML
National Bank of Canada v.
Soucisse
Duty to cooperate (to secure
Provigo v. Supermarché
Duty not to evade
contractual obligations
General (non contractual gf
provisions: CCQ 6, 7, 9 (public
order)
Abuse of Right
(rules for court use of GF)
Houle v. National bank of Canada
performance/Objectives
Duty to exercise
discretionary powers
reasonably (not to harm)
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McKinlay Motors v. Honda
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1386. The exchange of consents is accomplished by the express or tacit manifestation of the will of a person to accept
an offer to contract made to him by another person.
1388. An offer to contract is a proposal which contains all the essential elements of the proposed contract and in which
the offeror signifies his willingness to be bound if it is accepted.
1387. A contract is formed when and where acceptance is received by the offeror, regardless of the method of
communication used, and even though the parties have agreed to reserve agreement as to secondary terms.
1389. An offer to contract derives from the person who initiates the contract or the person who determines its content
or even, in certain cases, the person who presents the last essential element of the proposed contract.
Lavoie c. Bernier (2010) - Lavoie signs a promise to purchase a property at the asking price appearing on the description
sheet, however Bernier receives a higher offer and chooses to sell to that party. Lavoie claims not to promise to purchase it but only to
accept the offer to sell from the Bernier under CCQ 1388. Court concludes Bernier is free to refuse the first promise to purchase b/c
real estate ads cannot constitute an offer to contract or unilateral promise to contract. Thus Bernier never made an offer to contract
under 1388 but an offer to make a counter offer, and bilateral promise of a contract following acceptance by the customer.
Richard v. Time Inc. (2002) SCC – Court found Time Magazines representations would have misled a consumer
with ‘average level of intelligence skepticism and curiosity’. Awarded damages under Consumer Protection Act.
1390. An offer to contract may be made to a determinate or an indeterminate person, and a term for acceptance may
or may not be attached to it.
Where a term is attached, the offer may not be revoked before the term expires; if none is attached, the offer may be
revoked at any time before acceptance is received by the offeror.
1391. Where the offeree receives a revocation before the offer, the offer lapses, even though a term is attached to it.
1392. An offer lapses if no acceptance is received by the offeror before the expiry of the specified term or, where no
term is specified, before the expiry of a reasonable time; it also lapses in respect of the offeree if he has rejected it.
The death or bankruptcy of the offeror or the offeree, whether or not a term is attached to the offer, or the institution of
protective supervision in respect of either of them also causes the offer to lapse, if that event occurs before acceptance is
received by the offeror.
CUQ v. Construction Simard Beaudry (1987) QC – Bidding on a construction contract,
Simard Beaudry was supposed to use CUQ forms but didn’t. Court rules that Beaudry’s contract was used b/c it a
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counteroffer. Acceptance that does not correspond substantively to the offer constitutes a counter-offer (now in CCQ
1393). Must be agreement on essential terms, and extent of one party’s liability to another is an essential term.
1393. Acceptance which does not correspond substantially to the offer or which is received by the offeror after the offer
has lapsed does not constitute acceptance.
It may, however, constitute a new offer.
1394. Silence does not imply acceptance of an offer, subject only to the will of the parties, the law or special
circumstances, such as usage or a prior business relationship.
1395. The offer of a reward made to anyone who performs a particular act is deemed to be accepted and is binding on
the offeror when the act is performed, even if the person who performs the act does not know of the offer, unless, in cases
which admit of it, the offer was previously revoked expressly and adequately by the offeror.
1396. An offer to contract made to a determinate person constitutes a promise to enter into the proposed contract from
the moment that the offeree clearly indicates to the offeror that he intends to consider the offer and reply to it within a
reasonable time or within the time stated therein.
A mere promise is not equivalent to the proposed contract; however, where the beneficiary of the promise accepts the
promise or takes up his option, both he and the promisor are bound to enter into the contract, unless the beneficiary
decides to enter into the contract immediately.
1385. A contract is formed by the sole exchange of consents between persons having capacity to contract, unless, in
addition, the law requires a particular form to be respected as a necessary condition of its formation, or unless the parties
require the contract to take the form of a solemn agreement.
It is also of the essence of a contract that it have a cause and an object.
1415. A promise to enter into a contract is not subject to the form required for the contract.
1590. An obligation confers on the creditor the right to demand that the obligation be performed in full, properly and
without delay.
Where the debtor fails to perform his obligation without justification on his part and he is in default, the creditor may,
without prejudice to his right to the performance of the obligation in whole or in part by equivalence,
(1) force specific performance of the obligation;
(2) obtain, in the case of a contractual obligation, the resolution or resiliation of the contract or the reduction of his own
correlative obligation;
(3) take any other measure provided by law to enforce his right to the performance of the obligation.
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1812. The promise of a gift does not constitute a gift but only confers on the beneficiary of the promise the right to
claim damages from the promisor, on his failure to fulfil his promise, equivalent to the benefits which the beneficiary has
granted and the expenses he has incurred in consideration of the promise.
2316. A promise to lend confers on the beneficiary of the promise, failing fulfilment of the promise by the promisor, only
the right to claim damages from the promisor.
1712. Failure by the promisor, whether he be the seller or the buyer, to execute the deed entitles the beneficiary of the
promise to obtain a judgment in lieu thereof.
1397. A contract made in violation of a promise to contract may be set up against the beneficiary of the promise, but
without affecting his remedy for damages against the promisor and the person having contracted in bad faith with the
promisor.
The same rule applies to a contract made in violation of a first refusal agreement.
Cere c. Neely (1980), QC - Neeley gave Cere the option of purchasing land for $4000 within two years. During the two
years Cere informed Neeley of his desire to purchase the land. Prior to this action, Cere had sold the land to a third party for $9000.
Cere learned that Neeley had already sold the property. Court ruled a unilateral promise existed. Neeley must pay Cere $5000
damages. Agreement had involved a unilateral promise by Neeley, because of fixed term of two years, Neeley could not prematurely
withdraw the promise (Cere prematurely selling the land has no impact). Thus, a unilateral promise must be upheld by the promisor
for the period of time in which the promisee may act upon it.
Les Terrasses Holdings v. Saunders (1998, QC) – Les Terrasses hired Saunders to rent our suites in their
building offering a bonus that could be as high as $60,000 to $70,000 to rent out remaining suites. Despite Saunders hard work, he
was told he would not receive a bonus b/c Les Terrasses did not have the means. Court questioned whether the bonus had enough
terms to form a contract of it’s own. And if no contract was formed did Les Terrasses unjustly benefit from the service of Saunders, to
his detriment? Ratio: In order for a contract to be formed, the essential terms of the promise such as the amount of a bonus must be
precisely defined and accepted by both parties. Court can not arbitrarily assign this, must be determined by parties. Court decides there
was no contract (as no agreement on amount of bonus, and how many apartments should be rented to earn it), but unjust enrichment
(CCQ 1493). Saunders awarded $60,000 in damages.
1493. A person who is enriched at the expense of another shall, to the extent of his enrichment, indemnify the other for
his correlative impoverishment, if there is no justification for the enrichment or the impoverishment.
1371. It is of the essence of an obligation that there be persons between whom it exists, a prestation which forms its
object, and, in the case of an obligation arising out of a juridical act, a cause which justifies its existence.
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1373. The object of an obligation is the prestation that the debtor is bound to render to the creditor and which consists
in doing or not doing something.
The debtor is bound to render a prestation that is possible and determinate or determinable and that is neither forbidden
by law nor contrary to public order.
1412. The object of a contract is the juridical operation envisaged by the parties at the time of its formation, as it
emerges from all the rights and obligations created by the contract.
1413. A contract whose object is prohibited by law or contrary to public order is null.
Hutchinson v. RIL [McGill] (1931, QB->SCC) - Ross (trustee: Hutchinson) offered McGill $150,000 for
the building of a gymnasium, after acceptance building was deferred due to the war. After the war Ross pledged
$200,000 to RIL (under the condition the previous $150,000 would be secured via this agreement, thus releasing Ross
from the first agreement). Ross then paid $100,000, but offered a promissory note for the other $100,000 payable in three
years, then Ross went bankrupt and Hutchinson (trustee) denied payment. Court found that both Common and Civil law
rules lead to the same out come in this case. Ross was bound under civil law for offering a promissory note (the cause)
under art. 982, 984, 1131 CCLC. His first promise to pay $150,000, then his release from that obligation, and promise to
pay $200,000. The release from the payment of the $150,000 also forms adequate consideration in the common law for
the second agreement of $200,000 to be binding (But in common law initial donation for the gym would not have been
binding).
1410. The cause of a contract is the reason that determines each of the parties to enter into the contract.
The cause need not be expressed.
1411. A contract whose cause is prohibited by law or contrary to public order is null.
1824. The gift of movable or immovable property is made, on pain of absolute nullity, by notarial act en minute, and
shall be published.
These rules do not apply where, in the case of the gift of movable property, the consent of the parties is accompanied by
delivery and immediate possession of the property.
2863. The parties to a juridical act set forth in a writing may not contradict or vary the terms of the writing by testimony
unless there is a commencement of proof.
2865. A commencement of proof may arise where an admission or writing of the adverse party, his testimony or the
production of a material thing gives an indication that the alleged fact may have occurred.
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1435.
An external clause referred to in a contract is binding on the parties.
In a consumer contract or a contract of adhesion, however, an external clause is null if, at the time of formation of the
contract, it was not expressly brought to the attention of the consumer or adhering party, unless the other party proves
that the consumer or adhering party otherwise knew of it.
Dell Computer v. Union des consommateurs – Class action brought against Dell Computer on behalf of
D, who had used a deep link to get a lower price on a computer by exploiting a mistake on their website. Dell refused to
honour the lower price and referred the motion to arbitration, pursuant to the arbitration clause in the terms and conditions
of sale. The arbitration clause was accessible by hyperlink located on the online contract. Court upheld the validity of the
arbitration clause using art. 1435 CCQ, which upholds external clauses (physically separated from the contract as
binding). This case applies traditional contract theory to online contracts. Court finds that clicking a hyperlink is equivalent
to turning a page of the contract. The arbitration clause was sufficiently accessible to consumers, and thus binding.
(thought this case occurred prior to Consumer Protection Act).
1425. The common intention of the parties rather than adherence to the literal meaning of the words shall be sought in
interpreting a contract.
1426.
In interpreting a contract, the nature of the contract, the circumstances in which it was formed, the interpretation
which has already been given to it by the parties or which it may have received, and usage, are all taken into account.
1431.
The clauses of a contract cover only what it appears that the parties intended to include, however general the
terms used.
1428. A clause is given a meaning that gives it some effect rather than one that gives it no effect.
1427. Each clause of a contract is interpreted in light of the others so that each is given the meaning derived from the
contract as a whole.
1429. Words susceptible of two meanings shall be given the meaning that best conforms to the subject matter of the
contract.
2864.
Proof by testimony is admissible to interpret a writing, to complete a clearly incomplete writing or to impugn the
validity of the juridical act which the writing sets forth.
1434.
A contract validly formed binds the parties who have entered into it not only as to what they have expressed in
it but also as to what is incident to it according to its nature and in conformity with usage, equity or law.
1377. The general rules set out in this chapter apply to all contracts, regardless of their nature.
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Special rules for certain contracts which complement or depart from these general rules are established under Title Two
of this Book.
6. Every person is bound to exercise his civil rights in good faith.
7. No right may be exercised with the intent of injuring another or in an excessive and unreasonable manner which is
contrary to the requirements of good faith.
9.
In the exercise of civil rights, derogations may be made from those rules of this Code which supplement intention, but
not from those of public order.
1375. The parties shall conduct themselves in good faith both at the time the obligation is created and at the time it is
performed or extinguished.
National Bank of Canada v. Soucisse (QB->SCC, 1981) – Soucisse are heirs who inherit a binding
suretyship, but the bank only informed the heirs of the suretyship of its possibility of revocation, and continued to increase
the debt of the suretyship after death of client. The bank then sued Soucisse for the debt the inherited under the
suretyship. Court found there was a duty on the bank to disclose, which can be read into the contract using the implied
term of good faith. Bank had an obligation as soon as it learned of the death to disclose to the heirs of the surety that the
suretyship existed and was revocable. Because it was at fault, the Bank could not carry out its action. Respondents could
plead a fin de non-recevoir based on the fact that “no complaint can be based on, nor advantage derived from, one’s own
action, negligence, imprudence or incapacity, much less fault, to the detriment of another.” They are estopped from
continuing their suit against the hiers.
Provigo v. Supermarché ARG (QB-1998) - Supermarche ARG becomes “partners” with Provigo. In
return, they gain the right to open up supermarkets under the mark of Provigo, as long as they fulfill certain contractual
provisions (e.g., allowing Provigo 90% of profits, allowing Provigo to inspect the stores, etc.). ARG opens up two stores
next to a grocery stores owned by Provigo. ARG has a publicity campaign for their stores (conducted with the agreement
of Provigo). Provigo releases a publicity campaign at the same time, advertising the same products as ARG under a lower
price. ARG suffers lost profit. ARG sues Provigo for breach of franchise contract. Court rules Provigo owed a duty of good
faith to its franchisee, and breeched this duty by holding the promotion campaign (since by not filling contractual
provisions and good faith ARG suffered harm, which is a casual link). Court identifies two conditions for civil responsibility:
a wrong and a casual link.
Houle v. National Bank of Canada (QB-> SCC, 1990) – Houle a corporation had a credit line with
National Bank of Canada. Houle shareholders had impending negotiations to sell their business to new shareholders,
which the bank knew. Bank informed Houle of loan recall and took possession of the company 3 hours later, liquidated the
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assets. Houle still sold the company but received $700,000 less than expected and claimed this from the bank in
damages. Court asked if the bank abused its right, and if the Houle shareholders can raise the corporate veil to collect
damamges. The court ruled Recall of loan without a reasonable delay amounted to an abuse of bank’s contractual right to
recall loan with no notice. Respondents must ground action in extra-contractual liability. Damages for $250,000.
Jusitification is implied obligation to exercise K-ual right in a reasonable manner. Now codified in Art 7 CCQ.
DIFFERENCE B/n SOUCISSE and HOULE: Soucisse adds an obligation. Houle overrides a right. In this way Houle
goes further than Soucisse. The K, here, was not silent. It gave the bank expressly the right to do what it did.
X c. b (QB, 2009)
8. No person may renounce the exercise of his civil rights, except to the extent consistent with public order.
1474. A person may not exclude or limit his liability for material injury caused to another through an intentional or gross
fault; a gross fault is a fault which shows gross recklessness, gross carelessness or gross negligence.
He may not in any way exclude or limit his liability for bodily or moral injury caused to another.
1417. A contract is absolutely null where the condition of formation sanctioned by its nullity is necessary for the
protection of the general interest.
1418. The absolute nullity of a contract may be invoked by any person having a present and actual interest in doing so;
it is invoked by the court of its own motion.
A contract that is absolutely null may not be confirmed.
1419. A contract is relatively null where the condition of formation sanctioned by its nullity is necessary for the protection
of an individual interest, such as where the consent of the parties or of one of them is vitiated.
1420. The relative nullity of a contract may be invoked only by the person in whose interest it is established or by the
other contracting party, provided he is acting in good faith and sustains serious injury therefrom; it may not be invoked by
the court of its own motion.
A contract that is relatively null may be confirmed.
1438. A clause which is null does not render the contract invalid in other respects, unless it is apparent that the contract
may be considered only as an indivisible whole.
The same applies to a clause without effect or deemed unwritten.
Villa v. Brasserie Labatt (QB, 1995) – Villa worked for Labatt and was offered a position in Montreal and
told Labatt would pay his moving expenses. Villa agrees to move to Montreal individually, but refuses to relocated his
family to Montreal, Labatt says in writing Villa will be fired if he does this. Court rules the dismissal wasn’t legally justified,
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dismissing the respondent for not having respected the contractual obligation to move his family is the same as dismissing
him because he is married. Ratio Can not discriminate in contracts. Cannot use a contract to impose on a person’s
private life (i.e. dictate how it must be led).
1437. An abusive clause in a consumer contract or contract of adhesion is null, or the obligation arising from it may be
reduced.
An abusive clause is a clause which is excessively and unreasonably detrimental to the consumer or the adhering party
and is therefore not in good faith; in particular, a clause which so departs from the fundamental obligations arising from
the rules normally governing the contract that it changes the nature of the contract is an abusive clause.
Cameron c. Canadian Forces (QB ,1971) - C signed an employment contract with Canadian Forces. In it
he promised (1) for five years after leaving the company to not steal clients from Canadian Forces and (2) that for five
years after leaving the company he would not work in a finance or factoring company or with any competitor of Canadian
Forces or with any prospect with whom CF was negotiating anywhere in Canada. If he violated that contract, he accepted
a penalty of $10,000. C resigned from his post and three weeks later started working for a competitor of CF and also stole
clients. Court held the entire contract is null. The contract’s wide scope, long duration and pan-Canadian application
(when CF only operates in Québec) show that it goes far beyond legitimate protection of the employer’s interests. Thus it
is invalid.
Dissent: In French and Québec civil law, prohibitions of this sort are legal. They only become invalid if they impair freedom
of employment by being too general in terms of time, space or activity. Excessive non-competition clauses will be harshly
policed by the courts, to the extent that they render entire contracts invalid.
2089. The parties may stipulate in writing and in express terms that, even after the termination of the contract, the
employee may neither compete with his employer nor participate in any capacity whatsoever in an enterprise which would
then compete with him.
Such a stipulation shall be limited, however, as to time, place and type of employment, to whatever is necessary for the
protection of the legitimate interests of the employer.
The burden of proof that the stipulation is valid is on the employer.
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Carlill v. Carabolic Smokeball (1893) UK – Carlil bought a CSB on the basis of an advertisement which stated
that if the ball was used three times daily for two weeks and the person contracted influenza, the company would pay them 100£. The
ad stated that 1,000£ had been deposited in a bank for this purpose. Carlil used the ball as directed but caught influenza. Her request
for the money was refused, and she brought suit for reimbursement. : (1) Unilateral contracts become binding once the condition
specified in the offer is completed; this need not be communicated to the offeror for the contract to be binding. (2) Contracts must be
interpreted from the perspective of a reasonable third party.
Leonard v. Pepsi (1999) - NY Commercials for the Pepsi Points program ended with a harrier jumpjet and the caption “7
million pepsi points.” The jet did not appear in the PP catalogue. Plaintiff sent a certified cheque for the sum needed to purchase 7
million pepsi points and wrote “1 Harrier Jet” on the catalogue order form. Pepsi refused to provide a jet, plaintiff sues for specific
performance. (1) Advertisements are generally “offers to treat” (2) Intent to create legal relations must be assessed from the
perspective of an objective, reasonable person.
Pharmaceutical Society v. Boots (1953) UK - PS alleges Boots violated the Pharmacy and Poisons Act which
requires that controlled substances must be “sold by, or under the supervision of, a registered pharmacist.” Boots stores had one
chemist at the checkout counter, who would verify that customers were allowed to purchase the medicine they selected from the
shelves. PS alleges that the purchase took place when the customer took the item off the shelf, so the chemist was neither selling nor
supervising it. “The contract is not completed until the customer has indicated the article which he needs and the shopkeeper or
someone on his behalf accepts that offer.”
Jones v. Padavatton (1968) UK – Mother (Jones) promised to pay her daughter $200 per month if she gave up her job
in the US and went to London to study Law. In this initial agreement the daughter believed the $200 was US dollars whereas the
mother meant Trinidad dollars which was about less than half. The Mother then purchased a house for the daughter to live in, but the
daughter married and did not complete her studies. The mother sought possession of the house. Mother retook ownership of the house,
and daughter started an action to enforce the agreement. The question for the court was whether there existed a legally binding
agreement between the mother and daughter or whether the agreement was merely a family agreement not intended to be binding.
Court decided the agreement was a domestic agreement which presumes the parties do not intend to be legally bound. Legal relations
are not presumed to exist in family arrangements.
Kleinwort v. Malaysia Minning co (1989) UK - MMC created a company called MMC Metals (“Metals”) and
negotiated a loan to Metals from KB. KB wanted MMC, as the parent company, to guarantee the loan. Instead, MMC accepted a
higher interest rate and provided a “comfort letter” to KB. This letter had three provisions: 1) “We hereby confirm… [that you loaned
Metals the money because it is owned by MMC] 2) “We confirm that… [we won’t sell our shares in Metals without KB’s consent
until the loan is repaid] 3) “It is our policy to ensure that [Metals] is at all times in a position to meet its liabilities to you under the
above agreements.” Metals went bankrupt and MMC refused to pay Metals’ outstanding debt to KB. KB sued for breach of contract,
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specifically the third provision. MMC claimed the comfort letter was not legally binding. (1) A mere statement of present intention is
not a contractual promise (2) The circumstances in which a document is signed are admissible evidence for determining how a
reasonable person would see the contract.
Shatford v. BC WineGrowers (1927) BCSC - BCWG sent Shatford a letter offering to sell loganberries, and
Shatford did not accept for six days. Ordinarily, such offers were accepted within one business day of arrival. The definition of
reasonable time must be defined by referring to the context of the offer.
Bristol Cardiff v. Maggs (1889) UK - Maggs offers to sell his bread shop for a given price. The bread company
agrees to buy it. The next day, the company sends an amendment that includes a non-compete clause. Maggs rejects it, but offers to
consider a less burdensome clause. The company rejects that. Maggs says “the hell with the whole deal.” The bread company sues.
Court says negotiation of an essential contract term after completion of the contract shows the contract was not complete. Thus there
was no contract in this case due to missing essential terms, and lacking agreement. And Maggs was allowed to withdrawl his offer at
anytime, (irrespective of term) which he did.
Butler Tool v. Ex-Cell-O (1977) UK - parties agreed to a contract with Butler’s standard terms which include a
price variation clause (wherein if manufacturing costs go up, the price increase is passed onto Ex-Cell-O). Companies engage in a war
of the forms with each wanting to use their form. Court decides “last shot” wins, Ex-Cello-O’s form was used last so theirs is binding
(without the price increase clause). Court used an ‘objective look at the documents as a whole’ test to decide whose terms should
prevail.
Entores Ltd v. Miles Far East Corporation (1955) UK - A contract was concluded over Telex (a kind of
typewriter-fax machine combo) between a British firm in London and the Dutch offices of an American company. After negotiation
by Telex and phone, the second last message was from London to Holland asking about the price (offer - all other details being
settled). The last message was from Holland to England confirming the price (acceptance). Contractual breach occurs later and the
English company asks for a writ out of the jurisdiction. (1) Acceptance via telephone or Telex must be receieved to be effective (2)
Instantaneous two way communication creates contracts in the jurisdiction where the offer is received.
Dawson v. Helicopter Exploration Co. (1955) SCC (BC) - D staked a mineral claim in BC and contacted
HEC to get the claim developed. HEC offered a 10% share in the claim in return for D’s help in locating it. D was called up for
service in the Korean War, but told HEC he would ask for a leave of absence so that he could help them locate the claim. HEC agreed
to the deal, but delayed and eventually located the claim on its own and started developing it. D sued HEC for contractual breach.
HEC claimed its offer was a unilateral contract that could be withdrawn at any time. (quoting Williston on Contract) “… whenever
possible, as a matter of interpretation, a court would and should interpret an offer as contemplating a bilateral rather than a unilateral
contact… Courts are now more likely to recognize fair implications as effective. ‘A promise may be lacking, and yet the whole
writing may be instinct with an obligation, imperfectly expressed,’ which the courts will regard as supplying the reciprocal promise.”
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Empress Towers Ltd. v Bank of Nova Scotia (1990) - Bank of NS leased property from Empress. Leases
lasted 5 years, and the contract contained a renewal clause stating: Bank of NS could renew for up to two successive 5-year terms,
each provided they gave 3 months written notice and the renewed rental price shall be at the prevailing market rate at the
commencement of that renewal term as mutually agreed between the landlord and the tenant. Bank of NS proposed an arbitrator
suggested renewal rate but received no reply from Empress. Over 2 months later Empress told Bank of NS they would be allowed to
stay if they made a payment of $15,000 prior to paying the Bank of NS proposed renewal rate (Empress had lost $15,000 a few
months when an employee was robbed in a Bank of NS branch), with the tenancy terminable on 90 days notice. Empress sought in
court to evict Bank of NS, but lost. Court interprets the renewal clause as meaning (1) Empress not compelled to enter into a market
rental valuation; (2) implied term to negotiate in good faith; (3) an agreement on market rate would not be unreasonably withheld.
Implying terms was acceptable for reasonability and business efficacy. Also Empress had not negotiated in good faith by adding the
$15,000 penalty. Ratio: Agreements to agree cannot be enforced. And court will try, where possible, to give the proper legal effect to
any clause that the parties understood and intended to have legal effect.
Peerless - Raffles v. Wichelhaus (U.K.) - : R agreed to provide a shipment of cotton from India to W on
board the ship Peerless. There were, however, two ships Peerless leaving Bombay with cotton bound for Liverpool. One
sailed from Bombay in October, the other in December. R attempted to sell his cotton from the December ship, but W
refused to accept it, claiming that he contracted for the cotton delivered on the October ship. R brought suit for breach of
contract, claiming that it was immaterial which ship they arrived on, since sailing time was not specified in the contract,
and that the parol evidence rule prevent W from contradicting a contract valid on the face of it. Unknown, although lively
doctrinal debate exists. The consensus appears to be that error voids contract even if the letter of agreement is fulfilled.
Harmer v. Sidway (US, 1891) – Uncle (Sidway) agrees to pay nephew (Harmer) $5000 if nephew refrains
from drinkinking, smoking, swearing and gambling until he turns 21. When nephew turned 21 his uncle sent a letter saying
nephew had earned the $5000, but uncle would hold it with interest until the nephew could use it responsibly, to which the
nephew accepted. The uncle died with out having transferred the money. Court rules not exercising a legal right is
sufficient consideration for a promise for a contract (or refraining from doing something one is legally entitled to do.
Consideration is not measured as a benefit to a promisor, but can be a right, interest profit, benefit, OR a forbearance,
detriment, or loss. Courts should interpret contracts based on whether they are acceptance by performance, or
acceptance by promise to perform, in this case it was acceptance by performance.
Miami Coca-Cola v. Orange Crush (US, 1924) – Crush gave Coca-Cola the exclusive right to bottle
and distribute Orange Crush in a designated territory, while Crush would supply concentrate and advertise in the territory.
Coca-Cola would purchase concentrate use its best efforts to promote sales. The license was perpetual and terminal at
any time by Coca-Cola. Crush terminated the agreement after one year and Coca-Cola sued to compel performance.
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Court held that if one party’s obligation under the contract is terminable at any time, the other party may terminate at any
time, regardless of contractual obligation. Contracts like this lack mutuality of performance, thus lack consideration, and
are unenforceable.
Thomas v. Thomas (UK, 1842) – J. Thomas before dying orally expressed a desire for E. Thomas (his wife)
to have either their residence and its contents, or £100. Sons as executors made an agreement with E. Thomas where E.
Thomas would take possession of the house and in return maintain the house and pay £1/year rent. Sons refused uphold
agreement claiming consideration was lacking. Court held that husbands wishes (motive) was not sufficient consideration,
and that consideration must be something of value in the eyes of the law. Thus the court found the £1/year rent was not a
voluntary gift, but sufficient consideration.
Dahl v. HEM Pharmaceuticals (US, 1999) – Dahl enrolled in a medical experiment where he tested a
new medicine made by HEM to treat Chronic Fatigue Syndrome. All patients signed a consent form disclosing possible
side effects, and volunteers were free to withdraw at any time. HEM promised a full year’s supply of the drug. FDA
determined drug was not safe for public sale, but allowed clinical tests to continue. HEM refused to supply patients with
year long supply of the drug, so Dahl sought a mandatory injunction, but HEM argued there was no contract, because
there was no consideration (because participants participated voluntarily and could have withdrawn at anytime). Court
held if there is performance of an offer, it does create an obligation to fulfill the contract once performance is rendered.
Arrangement was a unilateral offer, thus because Dahl completed the experiment HEM was required to supply the years
supply for free.
White v. Bluett (UK, 1853) – Bluett ‘s father had lent him money, which defendant acknowledged in a
promissory note. The father’s executor sued on the son on that note for repayment. Son claims father agreed said if son
didn’t complain anymore (about other siblings getting more money) he would discharge Bluett of liability in a promissory
note. Court found there was no consideration (reciprocal exchange). Fathers promise regarding complaining is no defence
against a promissory note. Court asks if the promise to forgive the debt was binding. Court finds promise to forgive the
debt it not binding, because its not consideration, since the son had no right to complain in the first place. Defendant is not
giving anything in return for what the father is giving him. Giving up a freedom you have that does something of value is
adequate consideration, but there is no consideration when you give up something you aren’t legally entitled to do, thus
no enforceable contract existed. Ratio: A promisee's suspension of a right constitutes consideration for a binding promise.
Promises without consideration are not binding contracts.
Wood v. Lucy, Lady Duff-Gordon (US, 1917) – Celebrity Duff-Gordon attached her name to products to
help sell them in return for payment. She employed Wood to help her get business, granting him exclusive right to license
out her name in exchange for 50% of the profits he earned. After signing contract, she secured her own licensing
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agreements and did not pay Wood. Court asked if there is an enforceable contract even when there is no express promise
by one of the parties. Duff-Gordon claimed Wood supplied no consideration, since he didn’t promise/bind himself to
anything. However, court rules there is an implied term (in all contracts of this type) that Wood would do his best to
implement the agreement (and get new clients). Ratio: for a term to be implied it has to be very obvious; A promise may
be lacking, and yet there might have be ‘instinct with an obligation’ imperfectly expressed; common law contracts has
extended beyond formalism.
Roscorla v. Thomas (AUS, 1824) – Roscorla purchased a horse from Thomas. Thomas then promised the
horse was sound. But the horse was not sound (aggressive) and sued for breach of contract. Court found there was no
consideration for the promise that the horse was sound, as this came after the sale contract (which contained
consideration). Since the promise came after, and past consideration is not valid consideration (exceptions: agreements
to agree; Lampleigh Exception - services performed with implication they will be paid for, otherwise resulting in unjust
enrichment; minors contract). Consideration must be contemporaneous (at the same time) with the contract.
Harris v. Watson (UK, 1791) – Harris was a sailor was promised extra wages by Watson if he performed extra
work while at sea, due to the ship being in danger. Court questioned whether or not this promise was enforceable. On a
policy principle, this can not be enforceable because then captains would always have to pay their sailors more to induce
them to work harder when in danger --> Cannot let sailors hold Captain over a barrel (duress). Court ruled A promise to
change the term of a contract needs fresh consideration. Promising to do what you had a pre-existing duty to do is not
consideration. The reformation of the contract to provide extra wages in exchange for extra work under exigent
circumstances was not enforceable for public policy reasons. If such an agreement were enforceable it would enable
sailors to act opportunistically while at sea. The contract to pay more is invalid. A promise to do what is necessary for the
original contract is not consideration for the subsequent contract. (Though practical benefit of a prior contract comes to
suffice as consideration in Williams v. Roffey Bros [not applicable in Canada]).
Stilk v. Myrick (UK, 1809) – Stilk was contracted to work on a ship owned by Myrick for £5 a month, promising
to do anything needed in the voyage regardless of emergencies. After the ship docked mid-journey two men deserted,
and after failing to find replacements the captain promised the crew the wages of those two men divided between them if
they fulfilled the duties of the missing crewmen as well as their own. After arriving at their home port the captain refused to
pay the crew the money he had promised to them. The court held that the original contract bound Stilk to perform any and
all duties on board the ship, and thus performing the additional work of the deserted crewmen was not sufficient as
consideration in light of the new promise. Court found there was no new consideration to bind the captain to that
agreement. Performance of a pre-existing duty is not legally sufficient consideration.
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Gilbert Steel v. University Construction Ltd. (On, 1976) - Gilbert Steel entered into a written
contract to deliver steel products to University Con., after 2 of 3 separate projects the price of steal greatly increased.
Gilbert approached University Con and a new written contract was agreed entered into. The next year Gilbert again raised
the price of steel and allegedly reached a binding oral agreement with a University Con representative to increase the
price. The defendant then accepted deliveries of steal with the invoices showing the new increased price. Court asked if
there was sufficient consideration to form a binding agreement. Court finds there is insufficient consideration, as a prior
duty owed to the promissor is not legally sufficient consideration. Also Gilbert tried to use promissory estoppel as a sword
by claiming that if University Con continued accepting invoices they are estopped from denying liability, the court rejected
this on account of estoppel as a sword, and no demonstration of detrimental reliance.
Foakes v. Beer (UK, 1884) – Based on a previous judgment Foakes owed Beer £2,000. Parties reached an
agreement where Foakes would pay £500 immediately and £150 every 6 months until he had paid off the debt, in
exchange for Beer not taking any action against him. Foakes paid off the entire principal and sought leave to proceed on
the judgment. Beer claimed she was entitled to interest because the debt was not paid off immediately. Foakes claimed
there was a contract with no mention of interest. Beer claimed contract was invalid because she did not receive any
consideration. Court asked if partial payment of the debt is sufficient consideration for the contract made between the two.
Court rules Beer is not bound because there is no consideration, and interest payments are due. Ratio: Payment of a
lesser amount cannot serve as satisfaction of a larger amount.
Williams v. Roffey Bros. (UK ,1990) – Roffey were contracted to refurnish 27 flats in London and
subcontracted carpenter Williams for £20,000. After some work was done and Williams had been paid £16,000 he ran into
financial difficulty as the price was too low. Roffey Bros. were going to liable under a penalty clause for late completion, so
they promised Williams and extra £575/flat for on time completion. Williams stopped after completed 8 more flats b/c he
had only received £1500. New carpenters were brought in to complete the work and Williams took action in court. The
court asked if there is sufficient consideration for the increased amount for on time completion. Court held Williams had
provided good consideration even though he was performing a pre-existing duty. The test for whether or not a contract
could legitimately be varied: (1) A has a contract with B for work; (2) Before completion, A has reason to believe B may
not finish; (3) A promises more money to finish on time; (4) A either gets a benefit in practice, or avoids a disbenefit from
the promise; (5) There must be no economic duress or fraud. The practical benefit of timely completion, even though a
pre-existing duty is performed, constitutes good consideration. This dismissed Stilk v Myrick (UK, 1809) as no longer
applicable in the present day. A pre-existing duty to the promissor can be legally sufficient consideration if the promisor
derives practical benefit from the agreement and if the promise is not given under economic duress. Promissory estoppel
was not argued in this case (b/c promisor offered to pay more, rather than promise asking, thus no sword vs shield
debate). Not yet adopted in Canada.
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Nav Canada v. Greater Fredericton Airport [GFA] (Nb, 2008) – As part of a $6,000,000 runway
extension project at Fredericton Airport the GFA asked Nav Canada to relocate an instrument landing system to the
runway being extended. Rather than relocate existing equipment, Nav Canada concluded that it made better economic
sense to replace the navigational aid with another type labelled a distance measuring equipment. GFA said Nav Canada
should pay the acquisition cost of $223,000. However, in a letter Nav Canada said it would not provide for the purchase of
the DME unless GFA paid the acquisition cost, so GFA agreed to pay ‘under protest’. Nav Canada acquired the DME and
GFA refused to pay the $223,000 expense. The dispute went to arbitration who ruled in Nav Cnaada’s favour, saying
nothing in the agreement entitled Nav Canada to reimbursement of the costs, but the subsequent letters had presented
consideration and a binding contract, which allowed Nav Canada to recover costs. Court asked if there was sufficient
consideration for a binding contract/modification, and whether or not the promise was obtained under economic
duress. Court found the contractual variation was not supported by fresh consideration. However they took the opportunity
to suggest the doctrine of consideration should not be frozen in time, and that contractual changes can be warranted and
acceptable. Thus, the Court accepted that a post-contractual modification, unsupported by consideration, may be
enforceable as long as it is established that the variation was not procured by economic duress.
On the issue of duress, the Court lays out a framework for deciding if a contract was established under coercion or
economic duress. First, two conditions must be met: (1)the promise must be extracted as a result of the exercise of
pressure (a demand or a threat); (2) the pressure must be such that the coerced party had no practical alternative but to
agree If those conditions are present,
it must then be determined if the coerced party legitimately consented to the item in the contract. Three factors must be
analyzed: (1) whether the promise was supported by consideration; (2) whether the coerced party made the promise
"under protest" or "without prejudice"; (3) whether the coerced party took reasonable steps to disaffirm the promise as
soon as possible. Court found GFA had no alternative options, and did not consent to the contract modification based
upon the ‘under protest’ statement. NOT UPHELD BY SCC YET! Ratio: Post-contractual modification, unsupported
by consideration, may be enforceable so long as it is established that the variation was not procured under
economic duress (modification of Stilk v. Myrick).
Kirksey v. Kirksey (US, 1845) – Kirksey (P) was sister-in-law to defendant. After plaintiff’s husband died,
defendant offered to put plaintiff up on his land. Plainiff gave up her land and moved to defendant’s property, but two
years later defendant made Plaintiff leave his property. Court held that the defendant’s promise to the plaintiff was
gratuitious and as such cannot be enforced due to lack of consideration (plaintiff moving, giving up her land and relocating
is not adequate consideration, though dissent claimed it was). Some think court was reluctant to interfere in a family
dispute. Today the facts of the case would likely use promissory estoppel as it can be used when consideration is not
present.
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Hughes v. Metropolitan Railway Co (UK, 1877) – Hughes leased a property to the Metro Rail Co.
Under the lease he could compel the tenant to repair the building within 6 months of notice. After Hughes sent notice to
repair, the Metro Rail Co. sent a letter proposing to purchase the building form Hughes, and negotiations ensued. Nothing
was settled, and at the 6 month mark Hughes sued Met Rail Co for breach of contract and attempted eviction. Met Rail Co
finished repairs 2 months after the 6 month deadline. Court asked if there was an implied promise that the 6 month term
would be suspended during the negotiations. Court found Hughes did not take advantage of Met Rail Co, but negotiating
and in the process delaying repairs (as this was not his intent) but it would be unfair to make defendants liable for not
meeting the deadline in this case. The implied promise of a deadline extension is seen as enough to allow promissory
estoppel to apply. Landlord has in effect waived his right to strict performance on the deadline during the negotiations.
Ratio: If a promise is implied in negotiations and one party relies on that promise then it is inequitable to allow
the other party to act as though the promise does not exist.
HIGH TREES [Central London Property v. High Trees Ltd.] (UK, 1946) – High Trees
leased a block of flats from Central London Prop. Due to the war and heavy bombing occupancy rates were far lower than
normal. The parties made a subsequent agreement to reduce the rent by 1/2, but with stipulation as to when the reduced
rate would expire. London Prop, then sued for payment of the full rental costs starting after an initial 5 year term (as flats
were now at full occupancy and the war was over). Court rules that it is clear that the promise of reduced rent was only
valid for the duration of the war when it was difficult to find tenants (and thus expired when the flats reached full capacity).
However, Central London Prop could not have sued for lost rent prior to the first 5 year term because they had lead High
Trees to believe they would not enforce their legal rights, thus a court would prevent them from enforcing these rights at a
later date (this obiter created the doctrine of promissory estoppel). Ration: Doctrine of promissory estoppel - If a party
makes a promise and the other party relies upon the promise the original promisor cannot take back the promise
at a later stage.
Non-consistent adoption of High Trees… it was meant to replace the holding in Foakes v. Beer (payment of a
lesser amount will not suffice for full payment), but courts have applied Foakes v. Beer since High Trees.
Combe v. Mrs. Combe (UK, 1951) – Mr. Combe agreed to pay his wife £100/year after their separation, Mrs.
Combe claims she agreed to forego her rights for recovery in divorce court in consideration of this. The husband did not
pay the £100, and the wife sued claiming that he was estopped from ceasing his promise because she had relied upon it.
Court asked if promissory estoppel can be used as a cause of action (a sword). Court clarifies High Trees ruling stating
estoppel cannot be used as a cause of action, but only as a defence when someone is trying to claim that a promise they
made did not have consideration and is therefore not binding; estoppel is a "shield", not a "sword". Therefore, the only
issue in this case is whether or not the wife gave consideration for the yearly payments. Denning decides that she did not,
as there is no evidence the husband never requested the wife not to go to court. Even if she had promised not to do so,
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there would still be no cause of action as one cannot waive a statutory right. Ratio: Estoppel is only a defense, not a
cause of action (or creation of a right) where one did not exist before.
Post Chaser (UK, 1982) – Palm and Veg Oils (D) were contractually obligated to give notice to buyers of a ships
sailing with a cargo of oil for buyers, but breeched this duty by giving notice one month late. Buyers rejected the lateness,
and Palm and Veg Oils had to sell the oil on an open market at a greatly reduced price. Palm and Veg Oils tried to use
promissory estoppel as a defense by claiming the plaintiffs had waived their right to reject tender. Court rejected this
because Palm and Veg Oils would have had to rely on the representation in a way that would make it inequitable for the
plaintiffs to enforce their rights (reliance). Court rules for the plaintiffs as there was no reliance. Ratio: Estoppel only
takes effect where equity demands; there must be reliance (BUT NEED NOT BE DETRIMENTAL RELIANCE)
Crabb v. Arun District Council (UK, 1976) – Crabb wanted to sell part of his land, but first asked Arun
for access to a road and access point to the portion of land they planned on keeping. Defendant representative agreed to
provide Crabb with both access, but after Crabb partitioned and sold his land the defence fenced off the access point,
leaving Crabb landlocked. Court used Proprietary Estoppel to role in favour of the plaintiff Crabb. Because the
defendants had misled the plaintiff to his detriment by erecting a fence and allowing him to believe he would have access.
Proprietary Estoppel: gratuitous promises concerning the creation of interest in land are, if relied upon,
enforceable (estoppel as a sword).
Waltons Stores v. Maher (AUS, 1988) – Waltons negotiated to lease a property owned by Maher. Parties
agreed Maher would demolish an existing building and erect a new one which Waltons would occupy. Agreement was
reached on terms and rent. Maher began demolished the old building before Waltons had signed the lease. Walton
continued stalling on the lease while the new building was being constructed. Waltons finally informed Maher he no longer
wished to proceed, and Maher took action in court. Court held that although formal contracts had not been exchanged,
Maher was entitled to assume the exchange was merely a formality. Maher could rely on promissory estoppel which
extends to representations or promises as to future conduct. In Australia promissory estoppel can be used both as a
'sword and a shield'. Ex. Of use of promissory estoppel as a sword. NOT USED IN CANADA (but could one day be
expanded/
L’Estrange v. Graucob (UK, 1934) – L’Estrange purchased a cigarette vending machine for use in her cafe.
She signed an order form which stated in small print 'Any express or implied, condition, statement of warranty, statutory or
otherwise is expressly excluded'. The vending machine did not work and the claimant sought to reject it under the Sale of
Goods Act for not being of merchantable quality. Court held that in signing the order form she was bound by all the
terms contained in the form irrespective of whether she had read the form or not. Consequently her claim was
unsuccessful.
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Parker v. South Eastern Railway Co. (UK, 1877) – Parker and friend checked their luggage and
received a ticket with small print on one side stating the South Eastern Rail Co. would not be responsible for lost bags
worth more than £10. Parker and friend lost their bags, and had gotten bag tickets many times, but had never read the
fine print. Court orders a new trail, but says these circumstances should be treated on a case by case basis using the
ticket rule. Ticket rule: the person receiving the ticket does not know that there is writing on the back of the ticket,
then he cannot be bound. However, if he knew that there was writing and he neglected to read it, or read it and
ignored it he is bound by the terms as long as the ticket was delivered to him in a manner that gave him
reasonable notice that there were conditions on it.
Thornton v. Shoe Lane Parking Ltd. (UK, 1971) – Thorton parked his car in Shoe Lane Parking by
receiving a ticket from an automated machine. The ticket contained a statement directing customers to further conditions
posted on the wall of the parking garage. These conditions exempted the parking lot from any liability for injury to car or
customer. When leaving the parking garage Thornton got into an accident and was injured. Court had to ask if the
exempting condition posted on the wall of the garage was part of the contract. Court draws attention to automated ticket
dispenser (not a clerk) creating a different environment from other cases. There is no chance to look at the conditions,
reject them, and get your money back. Effectively the offer is made by Shoe Lane in having the machine posted with the
prices, and this offer is accepted when the driver places money in the machine. This contract cannot be subject to
conditions that are presented after this time. The writing on the ticket stating that it was subject to the conditions was not
visible until after the contract had been formed, therefore the contract is not truly subject to the conditions. Court also
suggests in order to have such onerous conditions as shoe lane parking had (excusing them from all liability) they must
draw exceptional attention to them (like by big red text).
McCutcheon v. David MacBrayne Ltd. (UK, 1964) – McCutcheon had a friend ship his car to
Scotland with David MacBrayne Ltd, as both he and the friend had used the services on many occasions. Customers are
made to sign a contract prior to shipping will relieves David MacBrayne Ltd. of all liability (regardless of fault), as
McCutcheon had done many times in the past. The ship sunk on this occasion and McCutcheon lost his car. Though he
had signed the form before he had never read it, and did not know of the condition relieving David MacBrayne Ltd. of all
liability. David MacBrayne Ltd. tried to use a ‘previous course of dealings’ as a defense, but court said that could only
apply when other party subjectively knew of and appreciated the terms contained in the contract, as was not the case
here. (Had McCutcheon signed the contract he would have lost, but since this one time he did not, and he did not know
the terms, he could hold David Macbrayne Ltd. liable).
British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd. (UK, 1975) – Ipswich urgently required a
crane, though they rent out their own cranes they called British Crane Hire whom they rented from before to supply one.
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Arrangements were made over the phone, and the crane arrived and was used before the written contract was signed.
Crane driver got stuck in a swamp after disobeying Ipswich’s suggestion to wait for navimats, British Crane had to pay to
retrieve the crane (since their driver had disobeyed instructions). After the navimats arrived the crane got stuck again.
Parties disagree over who should pay for the second crane removal. Court notes both parties are experienced in the field
and thus have equal bargaining power, and both use a variation of the same standard form contract. Where consent is not
determined, knowledge of terms is necessary for their implication into a contract. Knowledge requirement is satisfied by
the fact that conditions were part of industry standard. Thus Ipswich would have known of the clause making them
responsible for any costs associated with recovering the crane. Additionally, court notes that in almost all leases of
equipment the is an assumption the equipment will be returned to the leaser at the end of the lease. So Ipswich would
have no choice but to extract the crane if only to return it to British Crane Hire. Judicial task is not to discover the actual
intention of each party: it is to decide what each was reasonably entitled to conclude from the attitude of the other.
MJB Enterprises v. Defence Construction (AB->SCC, 1999) – Defence construction tendered for
construction bids according to a “lowest or any other tender shall not necessarily be accepted” clause. One bidder
submitted a bid suggesting an alternative clause, which caused this bidder to be chosen ahead of MJB Enterprises who
had the next lowest bid. MJB brought an action stating that the alternative clause invalidated their tender, and therefore
they should have been awarded the contract. Court asked if only complying bids could be accepted in tender, and if
Defence Construction had to accept the lowest bid (even if they had a privilege clause). The court holds that IS an implied
term in tenders that only complying bids will be accepted, and that the alternative bid did not comply with the terms and
cannot be accepted. In accepting the bid Defence Construction is in a breech of contract with the other bidders. The
privilege clause does not allow Defence Construction to accept the alternative bid, however it does mean they don’t have
to accept the lowest bidder. Therefore Defence Construction is under no obligation to contract with MJB Enterprises (the
obligation is only to not accept the alternative bid). The court does however, on the balance of probabilities find that MJB
would have been awarded the contract and assesses damages. With out a privilege clause tenders are bound to accept
the lowest offer.
Georgia Construction Co v. Pacific Great Eastern Rail Company (BC->SCC, 1929) –
Georgia Co had a contract with Pacific for work on the Railway and there was a disagreement about clause interpretation.
Court said “Usage may annex an unexpressed incident to a written contract; but it must be reasonable certain and so
notorious and so generally acquiesced in that it may be presumed to form an ingredient of the contract.” This fact must be
proven by evidence , a reference to standard practice is not sufficient.
McKinlay Motors v. Honda (NFLD, 1989) – McKinlay was a Honda Dealership, and had cars allocated
to them based on a mathematical formula combined with Honda employee discretion. McKinlay began receiving less and
less cars from Honda based not having completed an extensive renovation (however McKinlay required the profits from
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selling more cars in order to complete the renovation). Honda then terminated the agreement with McKinlay after proving
notice. McKinlay took action in court claiming Honda had breached the agreement by acting in bad faith in the way they
terminated the agreement. Court found Honda had acted in bad faith because poor sales were not a genuine factor in
Honda’s decision to terminate the dealership, rather McKinley received a disproportionate reduction in the number of cars
it received, court suggests the zone manager had a bias against McKinlay. Ratio: It is an implied term in business
agreements that the parties involved must act in good faith towards each other.
Martel Bulding Ltd. v. Canada (On-> SCC, 2000) – Martel owned a building and leased space to the
Government of Canada. Parties began to negotiate renewal when lease was about to expire. Canada led Martel to belive
it would be willing to renew the lease on certain terms. Martel extended an offer on those terms, but Canada rejected it
and called for tenders, accepting a tender from a third party. Martel took action alleging they were owed a duty of care by
Canada. Court ruled duty of care does not extend to contractual negotiations based on economic loss. Negligence in
negotiation does not fit the limiting categories; it is a novel claim. The court applies the Anns/Kamloops Test:
→ Proximity: negotiations are not enough, but a pre-existing relationship and the communications that occurred were
sufficient
→ Policy considerations: There are compelling reasons for not holding one party liable for an other party's loss during
negotiations
⇒ Indeterminate liability is important (but not relevant to this negotiation)
⇒ Quantum of damages is limited in this case by the nature of the transaction being negotiated
⇒ Object of negotiation is to achieve most advantageous financial bargain against the other party
Transamerica Life Canada Inc. c. ING Canada Inc. (On, 2004) – Third insurance company sold
by ING to Transamerica Life. Post sale, Transamerica claimed ING had misrepresented the value of sold company. ING
claimed Transamerica knew of accounting errors that were the misrepresented issues, but was “wilfully blind” to them.
This, ING says, is a failure to disclose and a breach of implied duties of good faith. Thereby, Transamerica is disentitled
from using them as part of a claim. ING wants to see good faith added as an implied term (though it is referred to in the
contract, but only as binding ING). This, ING says, is a failure to disclose and a breach of implied duties of good faith
thereby disentitling transamerica from using them as part of a claim.
Court says :Terms may be implied into a contract in 3 situations:
1. based on custom or usage
2. as the legal incidents of a particular class or kind of contract
3. based on the presumed intention of the parties where the implied term must be necessary ‘to give business efficacy to
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a contract or as otherwise meeting the ‘officious bystander’ test as a term which parties would say, if questioned, that they
obviously assumed. [same as Ipswich case).
Court refuses to imply an obligation of good faith in this case.
Baby M (US, 1988) - A man and woman entered into a surrogacy contract, where a baby is born of the surrogates
egg and husbands sperm (after birth surrogate should give up all rights so wife can adopt the child). Surrogate is to be
paid $10,000 after the child’s birth. When the woman gave birth she did not want to give the baby up. Court found the
surrogacy contract cannot be valid, as the law prohibits giving or accepting money in adoption. There are, in a civilized
society, some things that money cannot buy. It is against public policy of the state to buy and sell babies.
Public Policy
Prohibited to: commit unlawful acts; immoral conduct; undermine marriage; undermine admin of justice; undermine state interests;
restrict trade
Illegal contracts are unenforceable (except where one part was unaware of illegality, victimized, or repented before completion)
Remedy/Res
titution
Public Policy
X c. b
CCQ 8, 9, 1411,
1413, 6 (good
faith), 1474
(cannot exclude
liability for
injury)
Baby M (Court
will not accept
contracts against
public policy)
Cameron c. Canadian Forces (noncompeting
clause nullifies in CML, ok in CVL) CCQ 2089
CCQ null
1417,1418
1419,1420
Also
abusive
clause
1437 is null
or severed
Restitution
Illegal contracts
are
unenforceable
Severability
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CCQ 1438
Villa v. Brasserie
Labatt (married man)
Breach of contract
Non offending portion of
agreement can still stand. Blue
pencil test used.
CCQ 1590
Contract/pro
mise is a
personal
right
Specific
Performance
(Promise to sell
CCQ 1712)
Damages
(Promise to donate CCQ
1812; Promise to loan
CCQ 2316; Damages
for 3rd party sale CCQ
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25
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Extra Notes:
Promise vs. Offer
Promise (Option)
Offer
To determinate person
Determinate or not
Offeree must clearly indicate that he will consider and reply
No action required
within the delay
Offeree has all of the essential elements to form a contract (essential terms) and has the power to form a contract by acceptance
A contractual promise (to contract) – (a synallagmatic juridical
act – consent of both required [reciprocal], but a unilateral
contract – only one is left with an obligation)
Promise survives offeror’s death, bankruptcy (because it is a
Offer dies with offeror or patrimony
contract)
Promise not opposable to 3rd parties
Accepted Promise
Accepted Offer
Acceptance in both cases forms a synallagmatic (two-way) contract.
Rule: A contract whereby each is bound to enter into the proposed The actual contract
contract
Exception: The proposed contract
Promisor must have capacity at the time of the promise and
promise: at the time of taking up the option
HEIRARCHY
Mandatory legal rule
Written Contract Term
Course of dealings
Usage
Default Legal rule
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