Table of Contents1. Is there a Contract?...........................................................................................................................................................3

Bargain Promises:..............................................................................................................................................................3

Intention........................................................................................................................................................................3

Offer..............................................................................................................................................................................3

Acceptance....................................................................................................................................................................4

Consideration................................................................................................................................................................5

Certainty........................................................................................................................................................................6

Unilateral Contracts..........................................................................................................................................................7

Promise Under Seal...........................................................................................................................................................7

Past Consideration............................................................................................................................................................8

2. Has there been any contract modification?......................................................................................................................9

Estoppel............................................................................................................................................................................9

Pre-existing Legal Duty......................................................................................................................................................9

3. Does a third party want the protection or benefit of the K?...........................................................................................10

4. Does some part of the K require interpretation?...........................................................................................................11

5. Has there been a misrepresentation of some kind?........................................................................................................12

Tort of Fraudulent Misrepresentation:............................................................................................................................12

Collateral Contract..........................................................................................................................................................12

Negligent Misrepresentation..........................................................................................................................................12

Innocent misrepresentation............................................................................................................................................12

6. Is the Contract unenforceable for fishy business?...........................................................................................................14

Duress: physical and economic.......................................................................................................................................14

Undue Influence..............................................................................................................................................................14

Unconscionability............................................................................................................................................................15

Penalties and forfeitures.................................................................................................................................................15

Illegal contracts...............................................................................................................................................................16

7. Has there been a mistake?..............................................................................................................................................17

Mistaken identity............................................................................................................................................................17

Non est factum................................................................................................................................................................17

Mistake of terms.............................................................................................................................................................17

Mistake of assumption....................................................................................................................................................18

Frustration.......................................................................................................................................................................18

Rectification of the document.........................................................................................................................................19

8. After the finding, what should the solution be?..............................................................................................................20

General damages............................................................................................................................................................20

Expectation Damages..................................................................................................................................................20

Reliance Damages.......................................................................................................................................................20

Restitution...................................................................................................................................................................20

Limiting Factors...............................................................................................................................................................20

Remoteness.................................................................................................................................................................20

Mitigation....................................................................................................................................................................20

Mental Distress...........................................................................................................................................................21

Special Damages..............................................................................................................................................................21

Punitive Damages........................................................................................................................................................21

Specific Performance...................................................................................................................................................21

1. Is there a Contract?

Bargain Promises: Need (a) intention (b) offer (c) acceptance (d) consideration (e) certainty

IntentionIssue Ratio WhereFamily Relations Presume that agreements between family are not legally binding

Rebutt: show intention to the contrary specificity, significant detriment in reliance, evidence in writing, degree of flexibility

Jones v PadavattonPg 13

Commercial relations

Presume that agreements between business relations are meant to be legally binding

Rebutt: express contrary intention written into the agreement.

Rose v JR CromptonPg 14

OfferIssue Ratio WhereWhat constitutes an offer

Degree of certainty the more certain, the more likely others will rely on it being an offer

DentonPg. 5

Offer vs Invitation to treat

Invitation to treat = many details to figure out still.LOOK AT wording, reasonable expectation that it is an offer or not (did it result in reasonable reliance?)

Johnston BrosPg. 5

An offer must Contain all the terms necessary for the contract to be performed. LefkowitzPg. 5

Policy: Offer or not?

Courts care about the consequences of declaring something a contract, look at the practicalities that would result.

Pharmaceutical SocietyPg. 5

Withdrawal of Offers

An offer can be changed or withdrawn at any time before acceptance, however the offeror MUST communicate a change or withdrawal of offer to the offeree BEFORE acceptance.

DickinsonPg. 5

Firm offers The only way to have a firm offer is to construct a K out of the offer and agreement to negotiate itself as in the tendering process (K A)

MJB EnterprisePg. 6

Withdrawal of Offer by mail

Withdrawal of offer by mail is not considered withdrawn until the offeree receives it.

ByrnePg. 6

AcceptanceIssue Ratio WhereTime limits If acceptance exceeds a reasonable amount of time the K is not valid b/c

A. The offer is considered withdrawn, orB. The offer is seen as refused

ManchesterPg. 7

Communication Acceptance must be communicated to the offeror to form a K. LarkinPg. 7

Mode It is in the power of the offeror to dictate the terms of acceptance, if they are not met there is no K.

EliasonPg. 7

Acceptance vs Counter-Offer

Counter-offer is a rejection of the original offer so it must have a significant difference. A valid counter-offer contains the terms that the agreement is bound by if accepted.

Butler MachinePg 8

Post box rule If both parties would reasonably expect the mail to be used to give acceptance, then acceptance occurs as soon as it is posted. Reasonably expect when: offer sent by mail, live far away, no other options etc.

HenthornPg 7

Rule of acceptance upon posting does NOT apply if express terms of offer specify acceptance must reach the offeror.

HowellPg. 7

Note: The post-box rule does not apply to instantaneous forms of communication. Considered received when capable of being retrieved, can click on an icon to accept.

Eastern powerPg. 7

ConsiderationIssue Ratio WhereFrom whom to whom

Consideration must flow from the promisee to the promisor Thomaspg. 10

What it is Consideration must be a benefit to the promisor OR a detriment to the promisee at the request of the promisor.

Whitepg 10

Detriment “giving up” something is only a detriment if you have a legal right to do the thing you are giving up.Example: ‘not complaining’ ≠ detriment (white) while ‘not smoking, drinking, or playing cards until 21’ is (hamer).

WhiteHamerpg. 10

Burden incidental to a Gift

Consideration must be something more or different than you would necessarily have to do if the item was a gift (i.e. you must feed a horse if someone gives you one, therefore feeding the horse is not good consideration)

Thomaspg. 10

Implicit consideration

A court may imply consideration (i.e. ‘to do your best’), requires evidence is there something that person is required to do that shows must use best effort.

Wood v Lucypg. 11

If a K does not specify when or if something even has to happen at all, then there is no consideration (can’t be implied) instead construe the ‘K’ as an ‘umbrella offer’ that is accepted each time the contract actually occurs.

Tobias v Dickpg. 11

Pre-Existing legal duty

Classic Rule: It is not adequate consideration to do your pre-existing legal obligations. Consideration must be something new, something that isn’t already required.

Stilk v Myrickpg. 11

Therefore, a contractual variation is unenforceable as it fails for want of consideration. Consideration cannot be vague or merely an incident of the variation, the only way to change the consideration of one party is to mutually rescind the original K and make a new K with the new (i.e. price).

Gilbert Steelpg. 11

HOWEVER… these rules don’t reflect the commercial reality of ongoing business relations… therefore…If ALL these conditions are met, a pre-existing legal duty can be good consideration.

1. Pre-existing K for A to do or supply something to B2. B has significant doubt that A will or will be able to complete the K3. B offers A more $ (consideration) to complete on time *without any

economic duress*4. B receives the practical benefit of having K done on time, even if this does

not come directly from B.

William v Roffeypg 11

Applies the test above in Canada, but misses the last requirement (practical benefit)

Fredericton Airportpg. 12

Notes that Fredericton applied the test wrong, so likely go with Williams v Roffey in Canada

River Windpg 12

Pre-existing legal duty to a 3rd party

It is valid consideration to promise to do a pre-existing legal duty to a 3rd party, b/c the 3rd party receives the benefit of being able to enforce the K they aren’t part of.

NZ Shippingpg 11

Money for Money Payment of a lesser sum cannot be good consideration for a greater Foakes v Beerpg. 12

If creditor says part repayment in a certain way is ok, then doing so extinguishes the whole debt however promise not yet acted upon is not enforceable.

Law and Equity Act BCPg. 12

Legal compromise If you have a genuine belief that you have a legal claim, it is good consideration to promise to give it up.

Fairgriefpg. 12

Pledges and Donations

Pledges are gifts and not contracts for lack of consideration on the part of the charity UNLESS the project embarked upon with the donation is at the request of the donator or subject to their conditions (i.e. naming a building after them)

DalhousiePg. 12

CertaintyIssue Ratio WhereVoid for uncertainty The Court will not create a K between the parties. There must be enough

material to work with in the original K in order for the court to ‘fill in the gaps’.

May and Butcherpg. 9

Fill in the Gaps to resolve uncertainty and enforce K

o Evidence of how the arrangement worked in the pasto Industry standards

Hillas v Arcospg. 9

o Use past practiceso Time of operation: can’t claim K void for uncertain if functioning for a

long time.

Foleypg. 9

Imply a term Courts may imply terms into a k to resolve internal inconsistency OR to make the K work.

1. Officious Bystander: what would an objective third party say about the intention of the K imply those termsOR

2. Business Efficacy: did parties act as if legal relationship was intended imply terms to make the legal relationship work.

Empress Towerspg. 9

Unilateral ContractsIssue Ratio WhereRequirements for a binding unilateral K

If an offer is made unilaterally (to ‘all the world’), performance of the conditions is sufficient acceptance AND consideration and therefore creates a binding K upon completion of the conditions. The offer can be revoked at any time before completion as an offer can always be revoked before acceptance.

Carlill v Carbolic Smoke BallPg 19

Required intention for offeree

The reward is a general promise to anyone who fulfills the conditions, therefore if someone does so for whatever reason, they are entitled to the reward. However the offeree must be AWARE of the offer in order for performance to constitute acceptance.

Williams v CarwardinePg 19

What types of conditions may be placed in a unilateral offer?

Offeror can add any conditions to the unilateral offer they choose—including how many ppl can qualify. Therefore it is not unfair to bind offeror when conditions are fulfilled.

Grant v NBPg 19

Unilateral or Bilateral? In a bilateral offer, the offeror promises in return for a promise. In a unilateral offer, the offeror does not have to do anything until acceptance, they remain passive.

DawsonPg 20

What would a reasonable person consider the offer to be, unilateral or bilateral?

GrantPg 19

Unilateral K can be construed where a promise is made upon the fulfillment of a conditionthere is an absence of consideration that is required for a bilateral K.

ErringtonPg 20

Problem: Revocation before completion

If the offer is revoked before complete performance, there is no binding K because there has not been acceptance.

DalePg 21

Get around the problem

Determine what the conditions actually are: perhaps one party thinks they are complete but the other party does not.

DalePg 21

Find an implied term that you can retain the result of the unilateral offer as long as you are performing the conditions but have not yet completed (problematic b/c this seems like a firm offer)

ErringtonPg 21

If the K is bilateral, it cannot be revoked once a promise has been accepted in return for a promise, so if you find the unilateral K to actually be a bilateral K then you may already have a binding K and revocation is no longer possible.

DalePg 21

Promise Under Sealo A promise under seal is enforceable, even without consideration. o A red sticker indicates a sealo A seal performs a similar function as consideration (Fuller):

1. Evidentiary function proves K exists and what it consists of2. Cautionary function less likely parties will breach the K, impresses seriousness on the parties and they

are less likely to enter into rash decision if they know it is under seal3. Channeling Function makes it clear that a legal relationship was intended, that promise is

enforceable, demarks this relationship as legal, both for the courts but also for business or contracting parties.

o However a seal and consideration are NOT interchangeable concepts. A seal functions in a different manner, as it is enforced as an executed transfer of possessory tittle i.e. once something is given under seal it is legally treated as if the promise has already been performed or given. Whereas consideration is enforceable even if it is not performed, a promise under seal must be executed to be enforceable (i.e. delivered) –Brudner

Past ConsiderationIssue Ratio WhereA promise that is given AFTER a gift is completed may be enforceable, if the gift can be construed as ‘past consideration’ for this new promise.

If one party performs a service at the request of the other party, and that service is such that payment would be expected, consideration given after the service has been performed in return for the service is enforceable as the past consideration will be valid.

LampleighPg 15

Past consideration is only good consideration for the enforcement of a later promise if the later promise could have been inferred or implied into the original agreement.

RoscoriaPg 15

2. Has there been any contract modification?

EstoppelIssue Ratio WhereTraditional Estoppel One party is prevented from executing their strict legal rights b/c it would be unfair

to allow them to. The party has ‘waived’ their rights by entering into a negotiation by their own act or consent which leads the other party to reasonably believe that the strict legal rights will not be acted upon.

Hughes v MetroPg 16

Estoppel for contract VARIATION “promisory estoppel”

Promises that are made that vary the terms of an existing contract that are:1. Intended to be legally binding2. Intended to be acted upon by the promisee3. Are acted upon by the promisee

Are subject to estoppel. This means that the promisor will not be allowed to act inconsistently with the new terms (i.e. insist on the old terms)

High TreesPg 16

How can ‘promisory estoppel’ be used?

Only prevents a party from insisting on their strict legal rights. It does NOT give the promisee a right of action. SHIELD NOT A SWORD.

CombePg 16

A fine line between using as a shield and not a sword… hold a party in breach of K b/c they were estopped from cancelling the contract, therefore b/c of the estoppel, they were in breach of K and had to pay damages.

Owen Soundpg. 17

Evidence of intention Can be writing, verbal or conduct alone. Is objective, based on what a reasonable person would think they intended based on their conduct/ words

John Burrowspg. 17

Does not require a direct statement but can be based on inference.

If the promisee reasonably understood and relied on the promisor’s promise as affecting their legal relations, there is said to be the requisite intention.

Owen Soundpg. 17

Restrictions Will not be granted for promises extracted by intimidation. The promise must be made voluntarily. Equitable principle.

D&C buildersPg 18

Not granted the moment one party relies on a promise, rather the promisee MUST have a reasonable assumption or expectation of a legal relationship.

NM v ATApg. 18

Pre-existing Legal Duty

If just a variation of consideration by one party that needs to be enforced see consideration “pre-existing legal duty” for enforcement options.

3. Does a third party want the protection or benefit of the K?Issue Ratio WhereClassic Rule In order to sue for breach of K you must be a party to the K and have offered

consideration. Therefore 3rd parties cannot sue to enforce a K, even if that K is for their benefit.

Tweddlepg. 22

Enforce a benefit to a 3rd party

A party to the contract can sue for breach, (or if they are dead the executor) and the appropriate remedy is then specific performance.

Beswickpg. 22

Get Around Privity:Agency

An agent is an exception to the privity of contract rule, as an agent creates a binding K between a 3rd party and the beneficiaryTo hold one party was acting as an agent for another there must be:

1. Factual basis—there needs to be an express provision or indication that they are acting on behalf of the principal

2. Consideration—there needs to be consideration flowing from the principal to the 3rd party and vice versa.

Dunloppg. 23

Can solve the consideration point by implying a clause was a unilateral offer, and therefore performance is consideration.

Eurymedonpg. 23

Get Around Privity:Limitation of Liability

Employees can benefit from a limitation of liability clause in a contract between their employer and a customer if:

1. The limitation of liability clause expressly or impliedly extends it benefits to the employee(s) seeking to rely on it.

2. The employee(s) seeking the benefit were acting within the course of their employment and performing the exact services provided for in the contract when the loss occurred.

London Drugspg. 24

This protection is extended to other relationships besides employer/ee IF:1. Intentionthe contracting parties must have objectively intended the

benefit to extend to the 3rd party seeking to rely on it.2. Activitiesthe 3rd party must have been doing the activities that come

within the contract generally and that the specific exclusion clause considers.

Fraser River v Can-Divepg. 24

Contracting parties can change or vary their contract at any time… HOWEVER they CANNOT revoke an exclusion of liability clause once a 3rd party’s rights have CRISTALYZED under it.

Fraser River v Can-Divepg. 24

This extension of protection to 3rd parties of exclusion clauses can only be used as a SHIELD and NOT a sword.

Kitimat v Alcanpg. 24

4. Does some part of the K require interpretation?General Tools

The factual matrix: what was known by both parties at the time of formation. Excludes negotiations (parol evidence).

1. The aim and genesiswhat were the parties trying to do2. Reality of how the company functions3. Commercial practice and general law of the area4. Parties own past practicewhat the words means in other parts of the K5. How the K is meant to function6. Linguistic sense/ plain meaning7. Interpret words in a way that does not make the redundant or unnecessary.

Prennpg. 27

If different words are used, they must have different meanings Tercon 31If unambiguous, there is no discretion to change the meaning of the word TerconContrapreferentum if there is an ambiguity in the K, it will be read in favour of the party that did NOT write the document

Tercon

A broad general clause can be modified by a very specific oral respresentation GallenConsider the provision in harmony with the rest of the contract and in light of its purposes and commercial context

Tercon

Parol Evidence

The general rule is that when parties have set down all the terms of a K in a written agreement, extrinsic evidence is not admissible to add to/ vary/ subtract from/ contradict those terms.EXCEPT for use to prove:

1. To show K invalid due to fraud/ misrep/ mistake/ incapacity/ consideration/ intention.2. Dispel ambiguities, establish a term implied by custom, the factual matrix.3. Support a claim for rectification4. Establish a condition precedent to the K5. Establish a collateral K6. In support of a claim that the document doesn’t include the whole agreement7. In support of a claim for an equitable remedy8. In support of a claim in tort

GallenPg 28

Exclusion Clauses

Determine within the factual matrix what the parties intended the exclusion clause to over. If what has happened is within this, then it is covered by the exclusion clause. Factors to consider:

a. Amount charged (the party taking on risk usually charges a lot more)b. Foreseeability of the situation or negligence of the partyc. Clear or express language—to be exempt from negligence must expressly say so.d. Where is the risk most appropriately placed?

Photo ProductionPg 30

What was the intent of the parties @ time of formation that exclusion clause was for? Hunter 30There is a three step test to determine when an exclusion clause applies:

1. Interpret to determine if it applies to the factual circumstanceConsider factors from Photo Production AND all the general interpretation tools.If nostop, does not apply

2. Determine if the exclusion clause was unconscionable at the time it was madeIf yes stop, does not apply

3. Nevertheless, should the Court refuse to enforce a valid exclusion clause because of the existence of an overriding public policy (the burden rests on the party trying to avoid enforcement) Plastex: needs to be something close to criminal activity, i.e. supplying faulty pipe w the plan of relying on the exclusion clause.If yes does not apply

Otherwise the clause will apply.

TerconPg 31

5. Has there been a misrepresentation of some kind?

Collateral ContractIssue Ratio WhereWhat is it If a statement is intended to have contractual force it is a collateral K. This can be deduced

from the totality of the evidence.HeilbutPg 32

Determining Intention

What would a reasonable person conclude from the conduct of the parties? BentleyPg 32If representation was made to induce the other party to enter into the K, and it does in fact

induce them, there is prima facie a collateral contract. Defendant can rebut this presumption by showing they made the statement innocently, without fault, BUT you can’t be innocent if you ought to have known the statement was false.There needs to be objective evidence that the statement was intended to be acted upon and was in fact acted upon

GallenPg 32

FACTORS:o Recipient makes it clear they would not contract w/o the collateral Ko Knowledge maker should have and which the recipient is known to be ignoranto Look at the K in light of the circumstance: does accuracy of the statement likely affect

the substance and foundation of what the K carries out?o Show intention that risk was on the maker

Remedy If you breach a collateral K, you have a right of action in breach of contract and all the available remedies.

Statements of 3rd parties

A third party to a K may be liable for breach of a warranty, if the promise was made in return for the promisee to enter into the main K.

MurrayPg 33

Advertisements Usually advertisements are not collateral contracts, unless special circumstances exist such as this case where the manufacturer went to the farm of the ptf, saw the use the ptf would put the machinery to and declared that the machine would work for the farmer’s purpose.

MurrayPg 33

Negligent MisrepresentationIssue Ratio WhereWhat Statements which turn out to be false but do not amount to fraud.

When someone voluntarily assumes responsibility to perform a service, they can be liable for performing the service negligently even if the loss is purely economic.

HedleyPg 35

Application to contract

Can apply to pre-contractual statements b/c it is a separate area of law and therefore can get around the problem of an innocent misrep that does not amount to a collateral K.

EssoPg 35

Requirements A person who purports to have a special knowledge or skill and makes a representation has a duty to use reasonable care if they do not, liable for negligent misrep

negligent misrep vs collateral K

A collateral K must be a guarantee or a statement of fact, while a negligent misrep is just an estimate or opinion upon which reliance is reasonable.

Suing in Tort instead of K

A ptf can pursue an action in tort of contract as they see fit, but NOT if this would permit them to circumvent or escape a contractual exclusion or limitation liability clause for the act or omission that constitutes the tort.

RafusePg 35

Tort of Fraudulent Misrepresentation: Must be intentionally untrue or reckless as to whether it is true or not Sue in tort, get reliance damages.

Innocent misrepresentationIssue Ratio WhereParol Evidence Rule

The general rule is that when parties have set down all the terms of a K in a written agreement, extrinsic evidence is not admissible to add to/ vary/ subtract from/ contradict those terms. EXCEPT to show a K is invalid due to an innocent misrepresentation.

Gallenpg 28

General There is no liability for an incorrect statement that was innocently made. Heilbutpg 32

Remedy If a representation that induced another party to enter a K is later shown to be untrue, there is a possible remedy of rescission

RedgravePg 34

Inducement If a person makes a statement calculated to induce anther to enter a K and then they enter the K… they are deemed at law to have been induced by the statement.

Classic Example 1. K not yet completed2. Innocent misrep discovered3. Party tries to enforce despit mistake4. Court will not enforce but instead rescinds

Where ptf made the innocent misrep

Can’t enforce a K with an equitable remedy based on an innocent misrep once you know the statement to be untrue, b/c then you would be trying to benefit from the mistake and that is not equitable.

Limitations Rescission is an equitable remedy, therefore MUST:1. Bring the action within a reasonable time2. Be possible for rescission to occur3. Ptf must have clean handsLikely will not be ordered after a K is complete.

LeafPg 34

6. Is the Contract unenforceable for fishy business?

Duress: physical and economicIssue Ratio WherePhysical Physical violence always vitiates a K b/c consent is vitiated. Lloyd’s

BankPg 38

Economic

Unclear whether it exists Pg 37Recognized in circumstances of contract variation. Where the other party has no alternatives and evidence shows they did not consent. Was the change made under protest or w/o consideration = likely duress. Did the party act promptly to set the K aside = likely duress.

NAVPg 12

Undue InfluenceIssue Ratio WhereFirst Way Consent is vitiated b/c the other person had so much control or dominance (pressure

and force). Very close to duressLloyd’s BankPg 38Second Way An advantage is gained by one party because of a relationship of trust and confidence

Prove a relationship of trust and confidence

Actually prove it was a relationship of trust and confidenceFit it into one of the presumed categories which cannot be rebutted:Parent/child; Dr/Patient; Trustee/Beneficiary; Solicitor/client; religious advisor/disciple

Unexplained transaction

After the requisite relationship is established, if there is a transaction that is not readily explicable by the parties relationship prima facie duress has been established.

Defence Dispute the relationshipbut can’t if it is one of the presumed categoriesORThe dominant party can rebut the presumption by showing they acted with scrupulous care, honesty and in the best interest of the subordinate party.

Undue influence from a 3rd party

Anytime a guarantee is given in a non-commercial relationship, and then undue influence is proved from the 3rd party beneficiary to the guarantor (use steps above), the bank will be fixed with contructive notice of undue influence and the K will not be enforceable, UNLESS the bank…

(1) Made sure the guarantor knew the risk—explained carefully and thoroughly(2) In a private meeting—and decided in a private meeting(3) Urged guarantor to get independent legal counsel(4) Exceptional cases must have insisted on independent counsel and then have

received letter from solicitor saying they have given advice.Generally, bank can rely on solicitor’s letter, unless they know the advice was bad and then they run the risk.Solicitor (or bank) when advising MUST:

(1) Explain the nature of the documents and their consequences(2) Seriousness of the risk(3) Ensure they know that they have an individual choice to make(4) Must say it’s a bad deal if that’s what they think(5) Meeting needs to be face to face(6) Can act for both parties if solicitor is giving advice in the best interests of each

individual(7) Check with guarantor as to whether they wish to proceed.

Royal BankPg 38

UnconscionabilityIssue Ratio WhereTest Must meet both requirements:

(a) Gross inequality of bargaining power (if one party incapacitated then this exists)(b) An improvident bargain

MarshallPg 40

Onus Party claiming must prove above test, which makes out a prima facie case. Then onus shifts to the party seeking to uphold the K to prove that their conduct was scrupulous and considerate of the other party

MundlingerPg 40

Example Bank manager knows son’s company is going to go under, but doesn’t tell father AND it was a bad deal b/c father gave whole security in his house for NO added funds—in fact some had to be repaid.

Lloyd’s BankPg 41

Penalties and forfeitures Issue Ratio WhereWhat is a penalty clause

Something that is trying to terrorize the other party into completing the K ‘in terroram’

ThermidairePg 42

General Rule A penalty clause is not enforceable.Liquidated damages

Clauses which simply estimate the damages of breach in advance ARE ENFORCEABLE

Distinguish the two

At the time of K formation, determine the intent of the clause—was it to punish (penalty clause) or was it to estimate the damages (liquidated damages). Consider:

1. Compare the amount stipulated to the reasonably anticipated damages for breach

2. Can’t have only one sum if there would be a wide variety of losses depending how the breach occurred

3. If it would be very difficult to estimate damages, then it makes sense to have a liquidated damages clause

4. Is the amount set out of all proportion to any anticipated loss? Yes = penalty5. Is the clause intended to punish? Yes = penalty

Illegal contractsIssue Ratio WhereClassic Rule No Court shall aid a person whose claim is based on an immoral or illegal act. Holman

Pg 43Common Law Illegality

A restrictive covenant must be reasonable to be enforceable, otherwise it will constitute a restraint of trade which is illegal at common law and therefore unenforceable.Reasonableness based on time length, geographic area.

ShafronPg 43

Public policy bars a criminal or those claiming under the criminal through their estate from profiting from their crime, and Ks which provides benefits due to a crime are unenforceable at common-law.

OldfieldPg 43

However, an innocent beneficiary under an insurance policy is not claiming under the criminal and there is no public policy that prohibits enforcing the insurance K, even if the reason for the payout was a crime

Statutory Illegality

Actions prohibited by a K will only render a K void if the statute expressly says so if it is against public policy to enforce the K

DohertyPg 44

Where a K is expressly or impliedly prohibited by statute, the Court CAN refuse to enforce the K if in all the circumstances—facts, object of statutory prohibition—it would be contrary to public policy to do so.

StillPg 44

Policy Factors:

o Look at what the result would have been had the statute been followed… if not different, no policy issue.

o Don’t want defendant to take advantage and benefit from their own illegal act by declaring the K unenforceable.

o Was the bargain improvident? No public policy against if it was a good bargain.

DohertyPg 44

o Did the person wanting the K enforced despite statutory illegality act in good faith?o Does the K contravene what the statue is trying to protect from? That would be policy

against, if not, no policy problem.o Would it set a bad example or encourage others to act this way if the K was enforced?o Is there a penalty in the statute? Is refusing to enforce the K proportionate or

disproportionate to this?

StillPg 44

Result of illegal clause

There is a spectrum of remedies to deal with the wide variety of circumstances which may render a K illegal. If there is a really bad illegal K, it will render it void. However toher Ks are find but for the illegal clause. In those cases, severance may be affected to render the K legal and enforceable.

New SolutionsPg 45

Blue pencil test

Used when the test for illegality is based on ‘reasonableness’ or something that requires discretion/ judgement.

- Essentially strike out the clauses which violate the statute/ are illegal- Needs to be possible for the K to be made legal while still maintaining the ‘core’ of

the KNotional Severance

Can only be used where there is a ‘bright line’ test for illegality.- Reduce the offending clause/ amount as little as possible so as to be on the legal side

of the bright line.

7. Has there been a mistake?

Mistaken identityIssue Ratio WhereMistaken identity True mistaken identity is when one party intends to contract with someone else,

and only this someone else, and NOT the person standing in front of them.Phillips v BrooksPg 25

If the identity of the person is important to the offeror and they take steps to confirm it, then the offeror is deemed to have made the K to only this person. Thus a person who claims to be this person has no true power to accept as they are not this person

IngramPg 25

Fraudulent misrepresentation

If you intend to contract with the person standing in front of you and they give you a fake name, this is just fraudulent misrepresentation.

PhillipsPg 25

Test to determine which

The law will presume that you intend to contract with the person in front of you, unless evidence is produced to rebut this assumption, a person who accepts based on a false identity will have committed fraudulent misrepresentation.

LewisPg 25

Result Fraudulent misrepresentation results in a voidable contract and therefore if an innocent 3rd party has already obtained rights under the K, they cannot be prejudiced.Mistaken identity results in a K that is wholly void, and therefore an innocent 3 rd party cannot obtain rights as there is no K to obtain them under and the 3 rd party will be prejudiced.

IngramPg 25

Non est factumIssue Ratio WhereWho can claim ‘non est factum’?

1. Only available to those who were not negligent2. There must be a fundamental difference between the document signed and what

they thought they were signing.

MarvcoPg 26

Result A contract that is wholly void no third party can obtain rights under a nullity.If it fails the test Fraudulent misrepresentation, so the K not void only voidable.Policy innocent 3rd party shouldn’t have to suffer just because the signee was negligent and

didn’t both to read/understand the K—the signee through their negligence enable the fraud and thus should bear the cost.If there is no fundamental difference, there is no reason not to hold the signee to the K as the result would have been the same w/o the mistake

SaundersPg. 26

Mistake of termsIssue Ratio WhereTest/ Result 1. The court must decide what a reasonable 3rd party would infer to be the K from the words

and conduct of the parties.2. The K is ONLY void if it is so ambiguous that a 3rd party would not be able to infer a

common intention and hold that no K was created.

StaimanPg 46

Rationale the K will be void for mistake of terms as there was no true agreement to form a K in the first place.

RafflesPg 46

If no ambiguity

The Court will hold the parties to the meaning of the term that a reasonable 3 rd party would infer.

HobbsPg 46

To use as a defence

It has to be the Ptf’s carelessness that led to the mistake NOT the defendant’s own carelessness.

Other remedy Court can also hold a K unenforceable for mistake of terms if it would be unjust to enforce the K due to the mistake… but it won’ be unjust if it was one party’s carelessness that led to the mistake.

Mistake of assumptiono Mistake as to an underlying assumption—NOT written in to the K.

Issue Ratio WhereOriginal Two Rules

At Common-law

If a mistake is an assumption as to the existence or ownership of the SUBJECT matter of the K the K is void.

However, if the mistaken assumption is just regarding the QUALITY of the subject matter then…

The mistake must be fundamental in the sense that it changes the entire character of the K, the assumption of quality must have been the basis for contracting. If this occurs the K is VOID only possible result.

Bell v Lever BrosPg 47

At Equity Equity: can render a K VOIDABLEo If there is a fundamental mistake of assumption (although lower threshold than

the common-law ‘fundamental’)o AND the party seeking to set aside the K is NOT at fault for the mistakeo RESULT K rescinded

Solle v ButcherPg 47

Modern British RuleEnglish RULE

Common mistake of assumption is parallel to the doctrine of frustration and thus the test is similar. There is NO separate equitable doctrine of mistake of assumption solle over-ruled.

English TEST

MUST SATISFY ALL1. There must be a common assumption as to the existence of a state of affairs.2. No warranty given by either party (no allocation of risk for the scenario)3. False assumption NOT attributable to the fault of either party.4. False assumption makes performance of the K IMPOSSIBLE.5. The state of affairs at issue must be or be a vital part of the consideration OR the

circumstances necessary for the performance of consideration to be possible.

Great PeacePg 48

Adopted in Canada?No Great Peace Shipping expressly rejected, rule from Solle still available, BUT this is only an

ONCA decision However does emphasize that if the K itself provides who should bear the risk of

the relevant mistake than the Court cannot apply a mistake of assumption and instead the K terms will govern the result.

Miller PavingPg 48

Maybe Once a K is validly formed and the K indicates where risk is to be placed, a unilateral mistake cannot operate to void the K.Application of law suggests that the SCC would apply Great Peace in Canada, although they have never ruled on it so it is still unclear.

Ron EngineeringPg 48

FrustrationIssue Ratio WhereOld Rule You are bound absolutely to do any promises you make in a contract, regardless of whether

they are possible or not.ParadinePg 49

New Rule Where a K is1. Impossible to perform BEFORE a breach of K but due to circumstances AFTER formation.2. Neither party is at fault for the impossibility3. The impossible thing is NOT in the K NOR is any risk allocated should the impossibility

happen.Then the K is unenforceable due to frustration.

TaylorPg 49

Statutory Result

The statute requires rectification, so one party must give back or adjustments are made according to what has already been performed.

FCAPg 49

Rectification of the document Claim that the agreement was wrongly written down i.e. typo A claim for rectification asks the Court to rewrite the K to reflect the agreement So the mistake is in the written document itself.

Issue Ratio WhereRequired Evidence

Can use a broad scope of evidence, including the party’s conduct from before and after the formation of the K.

BercoviciPg 49

However careful using parties self-serving declarations from after the K was formed as to what they agreed.

8. After the finding, what should the solution be?

General damages

Expectation DamagesThe USUAL form of damages for breach of K

What would have happened had the K been performed?General

Put the ptf in the position they would have been had the K been performed. HawkinsPg 50The difference between what was received and what was promised

Reliance DamagesThe usual form of damages for TORT

What has the plaintiff lost?When to claim

When the expectation damages are impossible to determine. AngeliaPg 50

What they include

Wasted expenditure from both before and after the K was concluded.

Limitations Max reliance losses that can be claimed is the max expectation losses so if the def. proves the Ptf would have taken a loss on the K, then no damages are awarded. Don’t want to saddle the def. with the ptf’s bad bargain.

LoggingPg 50

RestitutionWhat is the benefit that has been transferred from one party to the other that they have no right to retain?

A benefit transferred by one party to the other which is now unreasonable for that party to keep (no juridical reason for that party to keep it)

Limiting Factors

RemotenessIssue Ratio WhereWhat is recoverable

A. Costs that naturally arise from the breach or that would reasonably be in the contemplation of both parties at the time of K formation to be the consequence of the breach

B. Any special or unusual consequences of the breach that were communicated at the time of contract formation.

HadleyPg 51

Scope of branch A

Compensation is only available for a serious possibility or real danger. Heron IIPg 51

Other Factors Reasonably expect parties to have knowledge of the industry and the particular legal consequences of that industry can’t recover outside of this except if communicated.

TransfeildPg 51

MitigationIssue Ratio WhereObligations of innocent party

Innocent party expected to take reasonable steps to minimize their loss. Can only recover the amount they would have lost had they taken the reasonable steps to mitigate.

PayzuPg 52

Exception However, the innocent party does have a choice: they can except the repudiation and sue for breach of damages, at which point they must also take steps to mitigate OR they can refuse the repudiation, and continue to hold the K open and incur expenses, suing at the time the K was supposed to be completed. (it must be possible for one party to perform without the other parties assistance to do so, naturally)

White & CarterPg 53

Limitation of Exception

You can only exercise this second ‘choice’ if you also have a reasonable claim for specific performance. Once you lose your claim for specific performance (i.e. 3rd party rights come into play) you can no longer exercise this second option and you must accept repudiation, sue for damages and take steps to mitigate.

Asamera pg 53

Mental DistressIssue

Ratio Where

Rule The test to determine what is compensable is the Hadley test and based on the principle of remoteness. There is no need for a special test or exception in order to compensate for mental distress if mental distress passes the test, the ptf can be compensated for it.

FidlerPg 52

Test To meet the Hadley test and have been reasonably within the contemplation of the parties at the time of formation, must:

(1) Object of the K was to secure a psychological benefitDegree of mental suffering caused is sufficient to warrant compensation no damages for mere frustration, need serious and considerable mental distress.

Special Damages

Punitive DamagesIssue Ratio WhereWhat they are

Punitive damages are awarded in exceptional cases for “malicious, oppressive and high handed misconduct that offends the court’s sense of decency” marked departure from ordinary standards of decent behaviour.

WhitenPg 54

Threshold there must be an actionable wrong independent of the loss claim under the K to award punitive damages. This can either be a tort or a breach of an independent obligation under the K.

Purpose Purpose: retribution, deterrence, denunciation NOT compensation.Test - Only awarded where compensation does not meet the three other objectives

- No greater than necessary to rationally accomplish the purpose- Ptf keep punitive damages as ‘windfall’- Moderate punitive damages are generally sufficient- Only award where other fines or penalties are non-existent or insufficient.- An appellate court is entitled to intervene if they are excessive.

Specific PerformanceIssue Ratio WhereEquitable principle

Cannot prejudice an innocent 3rd party, be guilty of sharp practice, must bring w/n reasonable time and be possible to perform. Specific performance is only used a remedy where damages would be inadequate.

FalckePg 54

Chattels and Real Property

If an article in a K is of unique character the court can order SP to enforce the K to sell it.

Personal Service

The court will not enforce a positive covenant for personal service b/c it is tantamount to indentured servitude, it is too difficult to enforce, and is too detailed requiring too much supervision.

Warner BrosPg 54

Negative covenants can be enforced, but not if doing so leaves the individual with nothing else to do but starve or perform the personal service.