CHAPTER 4- THE ENFORCMENT OF PROMISESConsideration

We need consideration for a contract to be binding Something has to be given from the promisee “in consideration of” the promise for it to be legally enforceable. AN AGREEMENT IS NOT ENFORCEABLE ABSENT CONSIDERATION Consideration must have value

o The principal does NOT require that consideration be of a certain value or be adequateo Courts generally do not inquire into the adequacy of consideration

However, if there is a huge discrepancy/shock the conscience, a red flag might arise and the judge may inquire Example: If I promise to mow your lawn when you go on vacation and you promise nothing in return, I am not legally bound to mow the lawn

Gifts Gifts are not enforceable

Dalhousie College v the Estate of Arthur Boutilier(promises need consideration/not third party consideration)

R: Consideration must flow from the promisee. Third party consideration is no consideration. No consideration from an implied promise. Reliance by the promise can’t turn a gratuitous promise into a binding one.

F: In 1920, Boutilier pledged $5,000 to Dalhousie College. He then fell on hard times and wasn’t able to pay it. He died on October 29th, 1928. Dalhousie then tried to sue his estate to get the $ A: 1) Consideration must flow from the promise, the idea is that it must come from the promisee: it can’t come from a third party. 2) Mutual Promises: Boutilier stated the purpose of the money, so consideration was Dalhousie accepting this request. Judges says you cannot get consideration from an implied promise. 3) Dalhousie made increased expenditures on the strength of the promise. Judge: reliance on a promise can’t turn a gratuitous promise into a binding one.C: No contract because no consideration.

Brantford General Hospital Foundation v Marquis Estate (must be reciprocal to be legally binding)

R/A: The hospital argues there consideration was commitment to naming the new unit after Helmi and Jack. Helmi did not ask for or desire her name on the building. The court relies on Dalhousie, Helmi did intend to donate but it is not a binding contract.

F: Helmi and her late husband Jack donated money to the hospital and a Cardiac Unit was named after Jack. In 1998, Helmi made a pledge of 1 million to the hospital. There were talks of the new wing being named after her. She gave them 1/5 of the money and in her will she left more but not the full million.C: No contract because no consideration.

Wood v Lucy, Lady Duff-Gordon (implied promise can be consideration)

R/A: The implied promise is to “use reasonable efforts to place the D’s endorsements and market her designs.” A promise may be lacking, and yet the whole writing may be instinct with an obligation. Woods promise to pay half of the revenues can be turned into a promise. His exclusive right means Lucy would be at his mercy, so it has to be implied that he has an obligation. 50% of the profits means he must put in effort. It’s a binding promise.

F: Lady Lucy promises Wood that he shall have exclusive rights to place her product endorsements, subject to her approval. These exclusive right was to last a year and then to run year-to-year with the possibility of termination. In return, Lady Lucy gets half of all of the profits and revenues. Lady Lucy placed an endorsement on some products without his knowledge. Wood sues for breach of contract. C: Lady Lucy breached contract.

Past Consideration 3 PRONGED TEST: Pao On v Lau Yiu Long

o 1- The act must be done at the promisors requesto 2- The parties must have had an understanding that payment or some other benefit in exchange was expectedo 3- Payment must have been legally enforceable if it had been promised in advance.

If the three-pronged test is met, the court will find an implied obligation to pay a reasonable amount for the work done (quantum meriut).o Issue: it cannot account for situations where there is no request but there is still unjust enrichment

EX, A took care of your cat at your request. Later you promise to make a cake in return. You don’t make the cake. Here you are not bound.Lampleigh v Brathwait (Past consideration is not good consideration unless it was requested)

R: Past consideration is not good consideration. If the act was done in the past and the promise comes later, then it is not really part of a bargain or exchange (when the act is done there is no exchange. The subsequent promise is more of a gratuitous promise). Exception: the past consideration principal does not apply if the initial benefit had been requested by the promisor. Even though the promise comes later, it is not a bare promise because it attaches to the earlier act done at the promisor’s request.

F: Lampleigh is the lawyer suing for payment for his services. Brathwait killed Patrick and wants a pardon from the king. He ask Lampleigh to ride to Roiston and seek a pardon for him. Lampleigh rides and tries to get the pardon. Upon Lampleigh’s return, Brathwait agreed to pay Lampleigh 100 pounds but now refuses to pay. A: Brathwait requested Lampleigh to do it. There is consideration.C: Brathwait must pay.

Bona Fide Compromises of Disputed Claims = Consideration One legal issue is whether giving up a claim counts as good consideration. General legal principal: the forbearance to sue does count as consideration You are giving up something of value (your right to sue)

B(DC) v Arkin(Zellers) (promise to release a VALID claim is good consideration)

R: Promise to release a valid claim (to sue) is good consideration. Exception: Claims known to be invalid- a promise is not binding if the sole consideration for it is a forbearance to enforce a claim which is invalid and which is either known to be invalid or not believed by him to be valid. Doubtful claims are good consideration- a promise to abandon it involves

F: After the shoplifting incident, stolen items were returned to the store. Zellers threatens to sue his mom for $224 as compensation for damages. Mom responds to letter and pays. The alleged consideration is that Zellers will not sue her in exchange for payment. Mom then asks for money back.A: Zellers is the party forbearing in this case. They knew

the possibility of detriment to the potential claimant and of benefit to the other party. Claims wrongly believed to be valid- it is good consideration even if the claim is clearly invalid in law but there is a genuine belief that it will have potential of success. 1- You cannot deliberately hide facts that would allow the other party to defeat the claim. AND 2- must show serious intention to pursue the claim.

that their claim was not valid and they did not seriously intend to pursue it to court if it was not paid. If it’s not known to be invalid, then it could also be that the claims were wrongly believed to be valid.C: Mom is entitled to a refund.

Pre-Existing Legal Duty = Not good Consideration in General Fulfilling of a pre-existing public duty by the promisee at the request of the promisor is generally not good consideration since the promisee is

only doing what she is already required to do. Exception

o Where promisee obligates herself to do more than what is already required, there can be consideration. EX, you can’t hurt a child. The additional duty is to care for it if the infant was left on your door step.

o Even if there was no obligation above and beyond the legal duty, there could be consideration (Denning so be very cautious). Duty owed to Third Party (anomaly Shadwell)

o Fulfillment by the promisee of a pre-existing legal duty to a third party at the request of the promisor is good consideration for the promisor’s promise.

o That is, consideration must flow from the promisee but it need not flow to the promisor.Shadwell v Shadwell (anomaly-promises to uphold a duty to third party you already have can be good consideration)A: There is a suggestion that the uncle gains a benefit because he now has a direct obligation. However it makes no sense why this reasoning couldn’t be applied to public duty

F: Nephew was engaged. He had a legal obligation to marry the fiancé. Uncle promised $150 per year upon the marriage. Court found that the promise was enforceable even though he already had a legal obligation to the fiancée.

Duty Owed to the Promisor- Traditional Position There are situations in which a post-contractual variation is made to an already legally binding contract. Two types:

o Promise to vary an existing contract by adding to the duties owed by promisor to the promiseeo Promise to vary an existing contract by subtracting from the duties owed by the promisee to the promisor

Tradition Position= both are unenforceable.Promise to Pay or Provide More

Stilk v Myrick(you need fresh consideration for a new promise)

R: Performance of or a promise to perform a pre-existing contractual obligation is not consideration for a new promise made by the other party (the promisor). (you cannot enforce a new promise if you are doing the same job as previously agreed to because you have not given new consideration for the new promise)

F: When two of the crew deserted at port, the captain promised the wages of the deserters to the remaining crew members. Crew member Stilk, wants to be paid by Myrick the captain.A: As the mariners had contractually committed to do all that they could under all the emergencies of the voyage, they were not entitled to enforce the captains promise to pay more. They still continued the duties they originally had done. There is also a public policy argument raised: agreements struck in circumstances where the crew might take advantage of the vulnerability of the captain ought not to be enforced.C: Captain Myrick is not liable for the extra promised amount.

Gilbert Steel Ltd v University Const

R: Further promises must have fresh consideration.

F: Sept 4: Gilbert was to supply steel to D for 3 projects. Gilbert provides steel to 2 of the projects at the agreed contract price. Oct 22: price of steel increased, Gilbert asked D for more money. A new contract was entered into. March 1: Another price increase for steel and then Gilbert seeks additional money from D. The parties discuss and Gilbert argues there is a binding oral agreement to alter the price. Gilbert wrote up a new contract but it was never signed. Gilbert billed the D according to the new price agreement. D continued to accept deliveries of steel but did not pay the higher price.A: Gilberta argues there consideration is: 1, gilbert promise to give the defendants a good price on steel in the future. 2, the mutual abandonment of the first contract and a new agreement being put in its place. 3, the increased access to credit which the defendant receives as a result of the price hike. Therefore: gilbert does not succeed. The agreement was a variation on the contract and there was no fresh consideration for the variation. A good price is too vague, the contract was not abandoned just altered, increased credit is not a real and substantial benefit.C: No fresh consideration. Gilbert cannot get hiked up price.

Promise to Accept Less Traditional view is that if one is to accept less for more in a way that is legally binding one will need Accord and Satisfaction Accord and satisfaction is the purchase of a release from an obligation by means of any valuable consideration, NOT being the actual

performance of the obligation itself. (Tablot)o The accord is the agreement by which the obligation is discharged. o The satisfaction is the consideration which makes the agreement operative.

Foakes v Beer (Less for more agreements are NOT enforceable)

R: Less for more agreements are NOT enforceable: Payment of a lesser sum on the day is satisfaction of a greater, cannot by any satisfaction for the whole, because a lesser sum cannot satisfy a greater sum

F: Beer secured judgement against Foakes in the amount of 2, 090 pounds plus. Foakes asks for time to pay and they enter into a written agreement whereby Mrs. Beer agreed forgive interest on the judgment. She agreed not to take any further proceedings to collect on the judgment in consideration of an immediate down payment plus a series of installments until the amount of the debt was reached. Foakes paid the down payment and made ALL the installments. Beer then claims 300 pounds for the interest and says there was no consideration.A: Foakes argued that the agreement was an accord and the payment constituted satisfaction. The court did not accept this argument because the doctrine of accord and satisfaction does not create an exception to the normal requirement of consideration.” The ‘satisfaction’ has to come in a different form, because less money cannot be exchanged for more money. Foakes loses. Even though the doctrine has been criticized it has never been over turned so it must be applied.

C: Beer can claim the interestFoot v Rawlings (Cheques aren’t money, can be consideration for a lesser sum/Criticized Often)

R: Cheques are a different thing than money and so they can exchange for a lesser sum, even if cash could not.

F: Rawlings (creditor) said he would lower the existing interest rate if the debtor made regular payments. Foot (debtor) substantially complied with these new terms but the creditor changed his mind and sued for what is owed under the first agreement. Rawlings says the agreement is unenforceable for want of consideration.A: The agreement is enforceable. Giving the postdated cheques was consideration for the promise of release of the debt at a lower interest rate. So long as the appellant continued to perform his obligations under the agreement the respondent’s right to sue on the notes was suspended, consequently his action brought on Dec 7 was premature and should have been dismissed on that ground.C: Foot is not liable for higher interest rate.

Robichaud c. Caisse Populaire de Pokemouche (Practical benefit can be consideration)

R/A: A financial institution, of its own accord, and knowing all the consequences of its actions entered into an agreement in which it accepted to forego the ranking of its judgment for part payment of the debt owing. The financial institute gain some benefit from the new contract so there is a practical benefit. The consideration is the result of saving time, effort and expense.

Practical benefit= more than just getting some money back, look to other things like not chasing someone down, paying lawyers/investigators, etc

F: Robichaud owed money to Caisse Populaire. Caisse secured judgment against Robichaud for $3,787 and registers it. Robichaud decides to consolidate his debts with Avco. Avco negotiates with Robichaud’s creditors and commits to lend money to Robichaud to pay his judgment creditors. Subsequently, as part of an Avco debt consolidation plan, Caisse agrees to remove its judgment against Robichaud from the registry in return for a $1,000 payment by Robichaud in full satisfaction. Caisse received its cheque from Avco but the Board refused to approve the compromise agreement. The cheque was not cashed and the judgment was not removed.C: The agreement is enforceable. Caisse is liable.

Statue- Judicature Act Even with legislative response, some cases may still need to be decided on the precedent set out in Foakes. Only applies to debt forgiveness Part performance (applies where you promise to pay $100 out of $200) 13(1) Part performance of an obligation either before or after a breach thereof shall be held to extinguish the obligation

o (a) when expressly accepted by a creditor in satisfaction, oro (b) when rendered pursuant to an agreement for that purpose though without any new consideration.

Issues Per McCamus o Provision would have problems with agreements where creditor forgives a debt completely. (only applies to part performance)o Not totally clear if the provision would treat an agreement to accept less as binding if it has been partially performed. I.E. If you only

have paid $50 so far out of the $100/$200 you promised, this act might not applyDuty Owed to the Promisor- Judicial Reform

NAV Canada v Greater Fredericton Airport Authority Inc (might be enforceable w out fresh consideration)

R: Consideration must move from the promisee (NAV) to the promisor (Authority). If there isn’t fresh consideration it may be enforceable provided that it was NOT procured under economic duress.

F: NAV Canada was responsible for air navigation services and equipment at Canadian airports, pursuant to ASF. The airport asked NAV to relocate an instrument landing system. NAV suggested instead buying a new distance measuring equipment that cost $223,000. Under the ASF, NAV was responsible for the cost. However, NAV refused to pay and said they wouldn’t relocate the landing system. The airport signed letter “under protest” agreeing to pay for the equipment. NAV installed new system and now the airport now refuses to pay.A: NAV was required to provide navigational services. So that duty was pre-existing, and the Authority’s promise to pay more looks to be in return for nothing. The promise was obtained under economic duress and this makes it unenforceable. So, the court concludes that post-contractual variations unsupported by consideration can be enforceable if not procured under economic duress. C: The contract is unenforceable.

Williams v Roffey Bros (Not Binding, widening consideration)R: As long as the promise wasn’t made under duress, and if the contractor obtains some practical benefit, it can be enforceable.

F: Contractor hired a carpenter that was too slow in part because the agreed price was too low. The contractor was worried about getting a penalty if the job was finished late. So they offered a price increase to the carpenter in return for the carpenter completing the job already agreed to (no fresh consideration from carpenter). A: The court held that as long as the promise wasn’t made under duress, and if the contractor obtains some practical benefit, it can be enforceable. The benefit was avoiding the late penalty (which has to do with their relationship with a third party, not the carpenter).C: Must pay the additional money.

Rosas v Toca (consideration signals intention which is important/consideration may not be required for a subsequent promise to be binding)

R: Consideration is a signal of intention to be bound, it does not need to be a central concern beyond that evidentiary role. “When parties to a contract agree to vary its terms, that variations should be enforceable without fresh consideration, absent duress, unconstitutionality or other public policy concerns, which would render an otherwise valid term unenforceable.” In cases where there have been reforms, two issues have been central: 1) Seriousness of the party’s intentions. 2) Legitimate expectations of business parties.

F: Rosas won the lottery and lent $600,000 to Toca to buy a home. The loan was to be repaid in one year but the P granted numerous extensions at the Ds request. Eventually, the P sued on the debt but lost at the trial due to the Ds successful limitations defense. According to the trial judge, the plaintiff’s extensions for repayment did not move the due date.A: The modifications are enforceable. Therefore the limitation period runs from the last extension. This means Ms. Rosas can collect on the debt. We could keep searching for consideration, and we could probably find it: in the help provided by Toca to Rosas (driving her, helping her shop) or in the benefit to their ongoing friendship. But the court says why bother. Circumstances change and contractual modifications may be desirable and beneficial to both parties. C: Toca must pay the debt.

SUMMARY The traditional position is that promises to accept less are not binding without consideration. (Foakes v Beer)

o But it is overturned for cases that fit the AB statutory provision for debt reduction (Judicature Act). However, Rosas (BC) & Nav Canada (NB) indicate a willingness to see post-contractual variations unsupported by consideration as binding in

the absence of duress or unconscionability.What do you do?

If they asked for advice in advance?o Get the promise under seal ORo Provide clear consideration

If they asked after the fact?o Common law: is there fresh consideration? Can recent case law that relaxes the fresh consideration requirement apply?.o Statute: Does the Judicature Act apply?o Equity: Can promissory estoppel be claimed?

Equity- Promissory Estoppel and Waiver It is an Equitable Doctrine:

o Are applied in a discretionary fashion (unlike ordinary legal claims which apply as a matter of right)o Require the person claiming them to come with “clean hands”

Estoppel: A person is estopped or prevented from doing or claiming a certain thing, because of their own prior actions Promissory estoppel: It depends on a person having made a representation, which they are estopped from going back on

o “a promise was made which was intended to create legal relation, and which, to the knowledge of the person making the promise, was going to and was acted on by the promisee. In such cases the courts have said that the promise must be honored.” (High Trees)

Promissory Estoppel Requirements o 1) There is a legal relationship between the parties (pre-exiting relationship)o 2) There is a clear promise, assurance or representation by the representor.

We need to establish that there was a promise made (through conduct or words) which was intended to affect the legal relationship or the parties, and intended to be acted on.

o 3) The representee acts on/ relies on the promise, assurance or representation of intention by the representor So, the person needs to actually act or rely on the promise Detriment:

Should be considered in a broad and flexible manner (McDougall) Look at factors such as prejudice, wasted expenditure (not just a loss of the benefit they gained)

It’s complicated as to whether that reliance has to be detrimental (some yes, some no) Gilbert/Nav Canada/Post Chaser/Ryan- detriment is required (PROF AGREES) WJ Alan/Maracle- detriment is not required

o 4) Promissory estoppel is an equitable doctrine such that: a) the representee must have acted equitably in order to raise the defense of Promissory Estoppel AND b) it must be inequitable to allow the representor to resile/change. (not inequitable going forward/might be going

backward)o 5) Shield not Sword:

MacDougall: The greatest constraint of promissory estoppel is that it cannot be used to found a cause of action. If the other party has a claim against you though, you can use this to block it

Hughes v Metropolitan Railway Company (representation by conduct can be binding)

R/A: “If parties who have entered into a definite contract and afterwards by their own act or with their own consent enter into a course of negotiations which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.” Essentially, the negotiation of the parties led the tenant to believe that the landlord was not going to enforce the time limit. The landlord has waived his right to insist on strict performance of the agreement and could not now insist on doing so.

F: under its lease, the railway company had an obligation to repair the property within six months of the landlord’s written notice. Oct 22 the landlord serves the notice to repair. Nov 28 the tenant offers to sell leasehold back to landlord and purposes to defer repairs pending the landlord’s decision. Landlord never responded to T’s proposal to defer repairs. Parties negotiate until end of Dec at which point negotiations break down. April 19, three days before notice to repair would expire, tenant said it was now undertaking repairs. April 28, landlord serves tenant with writ of ejection. June the tenant completes repairs. Landlord wants the eviction to be enforced.C: Landlord cannot evict the railway company.

Central London Property Trust Ltd v High Trees House Ltd (sometimes promises are enforceable without consideration- Introduces promissory estoppel)

R: A promise intended to be binding, intended to be acted on and is acted on, is binding so far as its terms properly apply. Denning widened the scope of waiver and essentially create the doctrine of promissory estoppel.

F: Sept 24, Landlord and Tenant entered into a 99 year lease at 2,500 pounds a year. Jan 3, L volunteers to reduce rent to 1,250 pounds in response to war time conditions. Jan flats were fully let. Sept 1945 the receiver discovered this and demanded full rent from T going forward plus arrears of 7,916 pounds.A: Denning decides in favour of the P for the amount claimed for the final 2 quarters when the flats were full. There will be no pay back for the period before that. The classic position does allow the P to recover the full rent due to no consideration being given. He discusses estoppel by representation, but says it will not apply because the doctrine refers to representations as to a present of past fact. Representations about the future are different: they are promises and need to be in the proper form of contracts. But there have been developments beyond thus traditional position (Ratio).C: D must pay the difference to the P

The Nature of RepresentationJohn Burrows Ltd v Subsurface Surveys Ltd F: D purchased Ps business for 127000. There was a promissory note

(Nature of conduct/behavior can indicate a promise made)

R/A: This type of equitable defense cannot be invoked unless one of the parties entered into a course of negations which had the effect of leading the other to suppose that the strict right under the contract would not be enforced. Here burrows had just granted friendly indulgences while retaining his right to insist on the letter of the obligation. Promissory estoppel cannot be used to prevent Burrows from insisting on his legal rights. He can sue for the entire amount

whereby the D promised to make regular monthly payments to the P. The acceleration clause permitted the P to claim the entire balance at once if there was a default of more than 10 day on any given monthly payment. Over 18 months, D was always more than 10 days late with each payment but the P never complained nor invoked the acceleration clause. Then the parties had a falling out and when the D was late again the P invoked his acceleration clause and sued for the whole amount.C: D must pay P.

The EquitiesD & C Builders Ltd v Rees (You need clean hands to get equity, as equity stops unjust results)

R: Foot is widely critiqued. Creditor is not bound by a promise to accept less under intimidation.

F: Rees, employed D&C to do work on his house. D&C did the work. Part of the amount was paid, and no dispute about the quality of the work was made, 482 was still owing. D & C started to press for payment, and only then did Rees start to complain about the equity of the work. Mrs. Rees offered 300 pounds on a 480 pound account. In her view: “300 pounds is better than nothing.” D&C accepted because the needed the money immediately. Nov 14 Mrs. Rees gave Casey a cheque and insisted on a receipt stating that the tendered sum was “in completion of the account.” Casey felt he had no choice and Rees knew that. Nov 23, D&C saw a lawyer and the lawyer wrote to Rees saying the whole amount was owed. A: There is no reason in law or equity why the creditor should not enforce the full amount of the debt due to him. Accord and satisfaction require an accord (the agreement) and satisfaction (something that is not monetary) in satisfaction of accepting less money. There is no accord and satisfaction. Rees says there is accord in agreeing to accept 300 and satisfaction in the accepting of a cheque instead of cash (Foot). The judge says a cheque is not consideration of the smaller amount. No true accord because Rees held the credit to ransom. Promissory estoppel will not apply here as it is not inequitable for the P to go back on promise.C: Rees must pay the remainder of the bill.

The RelianceWJ Alan & Co v El Nasr Export & Import Co (if a variation is endorsed by conduct, there is reliance and a future focused intention, it cannot be changed later)

R/A: the contract has been varied. The parties may agree to vary their contract in a way that can benefit either party which normally generates its own consideration. If there is a variation to the currency in which payment is to be made, it would make no difference that the currency was later devalued in relation to the old currency as it could not be expected (either party could benefit). Denning: you don’t need detriment. You need reliance. Stephenson: there is detriment and the contract was varied for good consideration.

F: Contracts calls for Kenyan shillings but the letter of credit was opened in British sterling. Sellers did not object as the two currencies were largely on par. After 2 shipments paid in sterling, the value of sterling dropped. The sellers then demanded an extra 165,000 Kenyan shillings to offset the devaluation. Buyers refuse to pay extra.C: The pounds were accepted

Sword or Shield? Promissory Estoppel does not create a new cause of action It simply prevents parties from relying on their strict legal rights when to do so would be unjust in light of the party’s previous interaction.

Combe v Combe (Shield not a sword)R: Promissory estoppel prevents parties from relying on strict legal rights when it would end in unjust results.

F: There was an agreement that husband pay wife 100 pounds a year as permanent maintenance. Aug 26 the now ex-wife wrote to the husband for the first instalment but the ex-husband never paid. The ex-wife pressed for payment privately but never instituted an action. July 28 ex-wife brought an action for arrears,A: High trees should not be stretched too far. The wife cannot sue on the husbands promise as a separate and independent cause of action by itself, where there is no consideration.C: No consideration. Wife doesn’t get money.

Robichaud c. Caisse Populaire (for limited purposes promissory estoppel can be used as a sword- NOT PRECEDENT TO FOLLOW)

R: Even if we don’t find consideration, we have to ask about promissory estoppel. Application of promissory estoppel does not need to be determined on who sues who (then one party would have to just wait until the other sues him).

F: Robichaud owed money to Caisse. Caisse secured judgment against Robichaud for $3,787 and registers it. Robichaud decides to consolidate his debts with Avco. Avco negotiates with Robichaud’s creditors and commits to lend money to Robichaud to pay his judgment creditors. Subsequently, as part of an Avco debt consolidation plan, Caisse agrees to remove its judgment against Robichaud from the registry in return for a $1,000 payment by Robichaud in full satisfaction. Caisse received its cheque from Avco but the Board refused to approve the compromise agreement. The cheque was not cashed and the judgment was not removed.A: Caisse must cancel its judgment against Robichaud. Practical benefits can be good consideration: the bank saves time effort and expense in not having to pursue debtor. Perhaps consideration is less important than recognizing that Caisse was a sophisticated financial actor and willingly entered into the agreement with full knowledge. Robichaud relied on the promises of Caisse. Then, in order to resolve is financial difficulties, he undertook to hire lawyers and to mortgage his home. He suffered the detriment referred to in the doctrine of promissory estoppel. A right of action cannot be founded on the principal of estoppel (since it is a shield only). It’s irrational to make enforceability based on chance. C: Robichaud wins

Duress The law will not enforce contracts made as a result of one party being threatened with physical harm or actually harmed (coercion). Duress includes economic duress

o Economic duress often take the form of one party placing financial pressure on the other.o Ordinarily commercial pressure is acceptable but going beyond ordinary commercial pressure is not.

Test:o 1) Pressure amounting to compulsion of will of the victim (no practical alternative) ANDo 2) The illegitimacy of the pressure exerted.

The presence, or absence, of protest, may be of some relevance when considering whether the threat had coercive effect. But, even the total absence of protest does not mean that the payment was voluntary. (Attila Dogan)

Indica of Duresso 1) Whether the party protested at the time of the arrangement was entered intoo 2) Whether the party had a realistic alternative to entering into the agreemento 3) Whether the party had the opportunity to speak with independent legal counselo 4) Whether, after entering into the agreement, the party took steps to avoid it within a reasonable period of time; ando 5) Whether the pressure exerted was illegitimate.

Intention to Create Legal Relations (only mention if family parties) This element is expressly to protect the autonomy of parties and their voluntary will The Presumption

o In commercial contexts, where there is offer, acceptance, and consideration, there is a presumption that the parties intended to create legal relations

It falls to the person disputing intention to dislodge the presumption and show that no intention to create legal relationso In the domestic sphere there is a presumption that the parties did not intend to create legal relations

It falls to the person alleging contract to prove that such an intent existso Moral promises

Not intended to be a legally binding promise (offer to drive friend to the airport)Family Arrangements

Balfour v Balfour (marriage (close familial relations) assumes no binding promise, you can displace this)

R: the presumption is that in the domestic sphere legal relation are not intended.

F: Mr. and Mrs. B married in 1900; lived in Ceylon until 1915. Husband returned to England. Mrs. B stayed behind, on doctor’s advice. Prior to leaving Mr. B orally promised to pay her 30 pounds a month. A few months later, Mr. B wanted to separate. They divorced, with Mrs. B securing an order for alimony. For 14 months, Mrs. B was without any financial support. A: While the courts had previously refused to enforce agreements where the parties had deliberately excluded legal sanction, this was the first time they had denied liability simply because the plaintiff could not prove that legal sanctions were intended. Judge made a new obstacle for P’s. 1) Draws an analogy between the agreement in this case and an agreement to take a walk. 2) Treating agreements of this sort as contractual would lead to disastrous outcomes/would set a bad precedent. 3) Holding these agreements to be enforceable would result in so much litigation that the courts would be overwhelmed. 4) There was no real intention to be bound here. 5) The consideration that really obtains for them is that natural love and affection which counts for so little in these cold Courts. C: Mr. doesn’t owe Mrs. Alimony.

Formality: Promise under Seal Promises made under seal are enforceable . It is common for a sticker to be affixed to the document to symbolize the seal. The seal plays evidentiary role: it is evidence that the parties intended to legally bind themselves What constitutes a valid seal is a question of law, and it is a question of fact whether a document is effectively sealed.

Royal Bank v Kiska (absent a seal and consideration, contract is not binding)

R/A: The document was not under seal. Printing the word seal does not constitute a seal. It is rather an instruction to affix a seal. Formality serves a purpose here and some semblance of it should be preserved. So since it’s not under seal, if there was no consideration then kiska wouldn’t need to pay.

F: Kiskas brother borrowed bank money. Kiska was guarantor. At Kiska’s signing, no seal was attached. The word “seal” was written on the document next to the signature. Bank is now calling on the guarantorC: There was consideration so Kiska must pay

Formality: The Requirement of Writing Affixing a seal can be sufficient condition of enforceability (sufficient = it’s enough) This formality is a necessary condition of enforceability in some cases (necessary= required but not sufficient) Some kinds of agreement must be in writing to be enforceable. What counts as writing:

o It must adduce the existence of the contract and not fail for uncertainty. Needs the 3 essential P's: parties, property, and price. o It is sufficient if the memo comes into existence any time before the action is commenced.o It can be constituted by several pieces of paper.o It must be signed by the party against whom the contract is being alleged. (McCamus)

mere initialing is sufficient hand-printed name is sufficient printed name of the contracting party on top of a standard form is sufficient

Electronic Contracts A memorandum in an email (or a series of emails) can satisfy this writing requirement.” Main aim of the requirement is accessibility, so electronic record is acceptable as long as it is enduring and assessable Signatures can be in electronic form

Statute Statute of Frauds (6. FOR LAND)

o Certain kinds of contracts have to be in writing to be enforceable.o Aims to prevent people from perpetrating fraud by alleging promises that were not madeo Alberta: The writing requirement is still in existence and in some categories it has been supplemented.

Rules :o 1. Contracts to Charge an Executor or Administrator on a Special Promise to Answer Damages Out of His or Her Own Estate.

Still required to be in writing in Alberta. Rarely an issue. o 2. Contracts Made upon Consideration of Marriage

Still required to be in writing in Alberta. Not about promises to marry but promises to transfer property in exchange for marriage

o 3. Contracts to Answer for the Debt, Default or Miscarriage of Another Person Still required to be in writing in Alberta. Supplemented by Guarantees Acknowledgement Act, “which requires additional

formalities for guarantees given by individuals.” No benefit flows to the guarantor, so “a special cautionary device is useful.” (Think of Kiska) Guarantees Acknowledgement Act

Requirements: 3(1) No guarantee has any effect unless the person entering into the obligation (a) appears before a lawyer, (b) acknowledges to the lawyer that the person executed the guarantee, and (c) in the presence of the lawyer signs the certificate referred to in section 4.

o (2) The lawyer referred to in subsection (1) must not represent or be employed by a person or corporation who stands to benefit as a result of the guarantee.

Certificate: 4(1) The lawyer, after being satisfied by examination of the person entering into the obligation that the person is aware of the contents of the guarantee and understands it, must issue a certificate in the prescribed form.

o 4. Contracts not to be Performed Within a Year Still required to be in writing in Alberta. Justification is witnesses’ memories, but not helpful since the suit can still be brought more than a year after the breach. Adams v. Union Cinema: If it is of indefinite duration but could be performed within a year, it doesn’t fall within the

statute, even if it will likely last longer than a year. Hanau v. Ehrlich: If there is no mention of time and time is uncertain or indefinite, the agreement is not within the statute. Further, “an agreement that stipulates a specified period of performance of more than one year is caught by the provision

even though the contract also stipulates that the contract may be terminated within that period of time.”o 5. Contracts for the sale of any goods of the value of $50 or upwards

Sale of Goods Act, s. 6(1) A contract for the sale of any goods of the value of $50 or more is not enforceable by action (a)unless the buyer accepts part of the goods so sold and actually receives that part, or gives something in

earnest to bind the contract or in part payment, or (b) unless some note or memorandum in writing of the contract is made and signed by the party to be charged

or the party’s agent in that behalf.o 6. Contracts for the Sale or an Interest in Land

Still required to be in writing in Alberta. This is the most important category and the most likely to arise in modern times

Part Performance – Exemption to Statute of Frauds (oral can count for transfer of land ONLY) Effects of Non-compliance

o No action shall be brought. This this does not mean that they have failed to create a valid contract, but rather that it is unenforceable. This enables the equitable doctrine of part performance to apply

This doctrine that exempts people from the requirement in the Statute of Frauds “in circumstances where it would be unjust to refuse enforcement of the agreement.”

Part Performance Doctrine:o Where one party partially performs their undertaking, the agreement may still be enforced to avoid injustice, even if it is oral.

Narrower view: that acts relied on must be referred to the ACTUAL contracto Part performance must be preferable to the oral agreement that is relied on (Mcmillen v Chapman)

Broader view: that acts relied on must be unequivocally and in their own nature, referable to SOME such agreement as that allegedo Acts need not be preferable to NO OTHER TITLE than the one alleged. They need only prove the existence of some contract, and are

consistent with the contract alleged.Deglman v Guaranty Trust Co (narrower)(There must be a connection between the act and the agreement)

R/A: As per Maddison v Alderson, the acts of performance by themselves give no reason to believe that he would inherit the house. It could have merely been him helping his aunt due to expectation. He can get payment for services rendered by quantum meruit. The services weren’t given gratuitous.

F: Aunt promised nephew she would leave him her house if he would do various acts she might request from time to time. This agreement was never recorded in writing. C: Gets compensation ($3,000) for his errands.

Madison v AldersonR: They applied a strict test according to which the acts had to shows some connection to the agreement.

F: The P had been a housekeeper for over 20 years on the basis of a promise that she would inherit the manor. C: No part performance

Thompson v Guaranty Trust Co (broader - Precedent)(need a fundamental connection between the act and the agreement)

R/A: Distinguished from Deglman. Practically every act of part performance was unequivocally referable to a contract in reference to the very land in question. He did many acts that were fundamentally connected to the running of the farm in question. Duration may also be considered.

F: Gus worked on Dick’s farm for 48 years. Gus alleges that this work was done as consideration for Dicks promise to devise and bequeath his land to Gus. Gus tool a somewhat marginal farming operation and made it successful. No will was found but it seemed very clear that Dick’s intention was to bequeath the farm to Gus.C: Part performance occurred. Gus gets specific performance.

CHAPTER 5: PRIVITY OF CONTRACT Definition of Privity

o A contract cannot, as a general rule, confer rights or impose obligation arising under it on any person except the parties to it.

o As a general proposition, someone who stands to benefit from a contract between two parties cannot sue on the contract. History

o Parents of a bride and groom promise each other that they will give a certain amount of money to the groom.o Legal Issue: If one or both of the fathers fail to pay, can the groom successfully sue?

Provender (1630): Yes Tweddle (1861): No So Tweddle changes the law and introduces privity of contract.

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd (can’t be Privity of contract with third party)

R: Only a person who is a party to the contract can sue on it. Consideration must have been given by the person seeking to sue to the promisor.

F: Dunlop has a contract with Dew (Contract 1). Dew has a contract with Selfridge (Contract 2). Selfridge has a contract with customer (Contract 3). Contract 1: tires won’t be sold for less than Dunlop’s price and others that buy from Dew can’t sell them at a lower price either. Contract 2: Selfridge promised Dew that it would not sell below list price. If they breach they have to pay Dunlop. Contract 3: Selfridge sold below the list price to their customer. So contract 2 has been breached. Dunlop wants to sue Selfridge. A: Dunlop is a third party beneficiary here. Dunlop is not a party to the contract and consideration flows directly from Dew and not directly or indirectly from the appellants. Therefore Dunlop cannot sue. Agency argument: Dunlop tried to argue that Dew was actually only an agent. If Dew was the agent and Dunlop is the principal then that will give Dunlop a right to sue. But if that’s the case, then consideration from Selfridge promise not to sell under the set price would have to flow from Dunlop to Selfridge. There is no consideration of that sort, so no enforceable contract.C: Dunlop loses.

Ways in Which a Third Party May Acquire the Benefit There are a number of situation in which the Privity rule does not apply. Exceptions:

o 1- Statuteso 2- Specific Performanceo 3- Trusto 4- Agencyo 5- Employmento 6- Principled Exception

1- Statute Insurance contracts, because when someone purchases life insurance, the benefit is assigned to a third party.

2- Specific Performance RemedyBeswick v Beswick (in certain cases you must actually perform the act (discretionary order))

R/A: She is liable to sue as the administrator of the estate. However if suing in that capacity, it would seem that she has suffered no damages, so the court may award only nominal damages. To get around this, the court held that she was entitle to the remedy of specific performance. Specific performance enable the court to force the nephew to continue to pay the widow on an ongoing basis. Denning: went far to say that Privity is just procedural but does not affect the underlying right (this is not followed). Reid: she cannot sue in a personal capacity but she can as the administrator.

F: Peter was the previous business owner. John was peters nephew and purchaser of the business. Mrs. Bewsick was peters widow. Peter sells the business to John on these terms: Peter to stay on as a consultant at 6 pounds a week. On peters death, John must pay the widow 5 pounds a week until her death. John paid once but refuses to continue. Mrs. B sues for specific performance and in her personal capacity. C: She is not barred due to Privity of contract.

3- Trust One way to get around a lack of relationship between the third party and the party, is to show that there is a legal relationship (trust.

o Settlor transfer property or rights to the trustee (who hold or manages the property for the benefit of the third party). The third party is the beneficiary.

o Once a trust is created, the beneficiary is entitles to enforce the trust obligation directly.4- Agency

Where a principal authorizes an agent to enter into contracts on the principals behalf with third parties, the result of the agents doing so is that the principal has a direct contractual relationship with the third party.

EX) Promissor (A) promises B to confer a benefit on C. If promisee B was acting as an agent on behalf of C, C would have a direct contractual relationship with A and the third party beneficiary rule would be avoided.

New Zealand Shipping Co Ltd. v AM Satterthwaite & Co Ltd (Intention with consideration)

R: To give the appellant the benefit of the exemptions and limitation contained in the bill of lading is to give effect to the clear intentions of a commercial document, and can be given within existing principals. Intention is the test for an agency relationship.

F: Ajax makes the drill and wants to ship it to Satterthwaite. They contract federal steam to be the carrier (Contract 1). Contract 2: Fed steam and NZ shipping, NZ is contracted to unload the drill. NZ drops the drill and damages it. Satterthwaite wants to sue NZ shipping for the drill dropping due to their negligence. (Bill of lading= contract between Fed steam and Satterthwaite)A: Satterthwaite argues that NZ could not rely, as third party beneficiaries, on the provision of the bill of lading that appeared to be designed to protect them. Case law relied on: 1. the bill of lading makes it clear that the protection is intended to extend to NZ. 2. The bill of lading makes it clear that Fed Steam is contracting and an agent for the NZ. 3. Fed Steam has authority from NZ to act as agent. 4. Any issues about consideration moving from NZ are overcome. The contract satisfied this criteria. Consideration is questionable but the contract is commercial in character and not gratuitous, and Ajax agreed to exempt Fed Steam and its independent contractor NZ Shipping in the performance of the contract of carriage. This covered the act more than the parties. They look at it as a unilateral contract: by calling NZs performance the consideration, the consideration problem is overcome. That means Privity is displaced and NZ can take advantage of the exemption clause.C: NZ shipping cannot get sued by Satterthwaite.

5- Employment A new exception arises out of London drugs with respect to employees.

London Drugs Ltd v Kuehne & Nagel International Ltd (Employers work through employees, Limited Liability should extend to employees)

R: Employer preforms its contractual obligation through its employees. There is an identity of interest between them. There must be: 1) LL clause expressly or impliedly extends the benefit to the employees. 2) Employees were acting in the course of their employment and preforming the services provided for in the contract. Exception: depends on the parties intentions. It is similar to the agency exception but here consideration is not needed

F: London Drugs wanted to store a transformer at a Kuehne & Nagel warehouse. The storage contract included a limitation of liability clause limiting the liability of warehouse workers to $40 per package unless a special valuation has been declared. London Drugs did not opt for the extra coverage. Dennis and Hank negligently tried to move the transformer and it sustained $33,955.41 of damages.A: Dennis and Hank can take advantage of the limitation clause, even though they are not parties to the contract. Commercial reality and common sense require the reconsideration of the rule of privity. Applying the Doctrine of Privity so as to prevent a third party from relying on a limitation of liability clause which was intended to benefit him/her frustrates sound commercial practice and justice. It is inconsistent with party’s expectation as it places all the burden on the third party beneficiary. There are no good reasons not to make this exception. C: Dennis and Hank are only liable for $40

6- The Principled Exception It is a development of the idea behind the employment exception, but extended more generally to other situations.

Fraser River Pile & Dredge v Can-Dive Services Ltd (Broadest approach to Privity of Contract. Intention of the party’s must be considered)

R: The Principled Approach: Depends on the intention of the contracting parties. Requires 2 factors to be present: 1) Did the parties of the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision? 2) Are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general or the provision in particular

F: Fraser owned a barge. It was under charter to Con-Dive and it sank (allegedly due to Can-Dives negligence). Subrogation: insurance companies generally have the right to step into the shoes of the party whom they compensate and sue any party whom the compensated party could have sued. Fraser’s insurer normally could have sued Can-Dive. However in the contract the subrogation clause was waived. Insurer paid Fraser for its loss of the barge. Insurer secured Frasers agreement to waiver the insurers waiver of subrogation, freeing the insurer to sue Can-Dive by way of subrogated claim.A: Can-Dive can rely on the waiver of subrogation clause as a defense, even though it is a third party. The court extends the justification relied on in London Drugs. 1) They did intend to protect their charters (Can-Dive) and they can’t change things after the removal of the subrogation clause was crystallized. 2) They were chartering the barge so this part is met. C: Fraser’s insurance company cannot sue Can-Dive

CHAPTER 6: CONTINGENT AGREEMENTS Also called a conditional agreement, “subject to the following condition” An agreement is conditional if its operation depends on an event which is not certain to occur Contingent v Promissory Conditions

o 1) Condition as an event (a contingent condition) VERSUS The contingent condition is an event which neither party undertakes to bring about

o 2) Condition as a term ( a promissory condition) Promissory condition is a term where one party’s duty to perform is contingent on the other party performing her

undertaking Conditions Precedent vs Conditions Subsequent

o Condition Precedent describes a state of affairs that must exist before one or more of the promises set out in the agreement becomes enforceable (“precedes”)

o Condition Subsequent prescribes a state of affairs that will bring an already enforceable and binding obligation to an end. Legal obligations: (Wiebe)

o 1) The condition may be a condition precedent to the creation of any contract at all. In that case there is no binding agreement yet. OR

o 2) The condition may be a condition precedent to the duty to perform. In that case, there is a binding agreement but the obligations to perform are suspended until the condition is fulfilled. (more common than 1) OR

o 3) Where it is not clearly category one or two. It is partly subjective and partly objective. Implies a term that the purchaser will take all reasonable steps to fulfill the condition which creates an obligation. But some cases it will not be possible to imply the missing term, and the agreement will fail for uncertainty.

Intention, Certainty and ConsiderationWiebe v Bobsien (Three categories of condition precedent)R: 1) Circumstances where a condition precedent prevails the formation of a contract. Things that fall into this category is when the condition precedent is “illusory,” it is based on “whim, fancy, or dislike.” It has no objective content and therefore cannot be enforced. No binding agreement results from this kind of condition (ex, I’ll buy your house if I like it. This does not work because you will never be able to test if you used best efforts). OR 2) Circumstances where a condition precedent suspends the performance of the contract. The condition is clear precise and objective. A binding agreement results but whether the primary contractual obligations depends on whether the condition precedent is fulfilled. A general rule is that in real estate contexts this applies. Such agreements can

F: Bobsien was selling his property. Wiebe wanted to buy it but he wanted to sell his own Port Moody house first. They entered into an interim agreement making the sale of the house subject to Wiebe selling his own residence “on or before 18 August 1984.” On July 22, Bobsien tried to “cancel” the interim agreement. Wiebe did not accept this. On 18 August he sold his home, fulfilling the condition. He notified Bobsien that the “subject clause” was removed, and increased deposit by $10,000. Bobsien refused to close.A: Wiebe says that it is a binging contract. It was condition precedent but there was an agreement. The contract was merely in suspense pending the sale of his house. Majority: There was a binding contract. Dissent: says there is a third class of condition precedent. Into that class fall the types of conditions which are partly subjective and partly objective. This type of case has been dealt with by implying a term that the purchaser will take all reasonable steps to fulfill the condition. But some cases fall in this third class of condition precedent where it

have subsidiary obligations breach of which is actionable. THIRD CATEGORY: Dissent argued there’s a third category for where it is not clearly category one or two. It is partly subjective and partly objective. So if we can imply a term that one party applies, then the condition will be fulfilled and we can say there are obligations here.

will not be possible to imply the missing term, and the agreement will fail for uncertainty. It could have been made certain if the condition was removed or the house was sold, but until then it was revocable. It was withdrawn before the house was sold so there was never any contract. C: There is a binding contract.

Reciprocal Subsidiary ObligationsDynamic Transport Ltd v OK Detailing (courts can find implied subsidiary obligations)

R: Where an agreement is subject to non-promissory condition precedent, such as being conditional upon approval of a third party, courts will often imply subsidiary promissory obligations on the part of one or both the parties. There is a general principal that courts can imply promises to do what is necessary for performance

F: Dynamic wanted to buy land from OK. They entered into a contract to sell it for $53,000. The contract was made subject to condition that the land can be subdivided, but it was not clear who would seek the approval. Present market values of the land is now $200,000. Now OK is trying to resist the sale on the basis that it is unenforceable because of the failure to specify who would obtain the approval. Dynamic seeks an order for specific performance to force the sale of the particular piece of land.A: Obtaining the approval was a condition precedent to the obligations to buy and sell. This falls into the second category. Yes the performance of some of the provisions was not due until the condition was fulfilled, BUT that in no way negates or dilutes the force of the obligations imposed by those provisions. The vendor is the one who typically has the obligation to carry out the subdivision. The vendor is under a duty to act in good faith and to take all reasonable steps to complete the sale. Failure to fix responsibility for obtaining planning approval does not render a contract unenforceable. Here the vendor OK is responsible for the planning application. C: There was a binding contract. Court awarded specific performance because damages would be insufficient.

Remedies for Breach of Subsidiary ObligationEastwalsh Homes Ltd v Anatal Developments Ltd (damages can be given for a chance but there must be more than a trivial chance of loss)

R: First, the P has the obligation to establish that the loss was a reasonable and probable consequence of the breach (on the balance of probabilities). If no loss or trivial loss, P can only get nominal damages. Second, if that has been proven, but the loss is difficult to quantify, this is no reason for denying the P the award. It is difficult to figure out what the award should be in cases of lost chance to receive benefit. But in such cases the courts have attempted to estimate the value of the lost chance and awarded damages on a proportionate basis. In short in assessing damages the court must discount the value of the chance by the improbability of its occurrence.

F: Anatal agreed to sell Eastwalsh 147 building lots in a proposed subdivision plan. A contractual term required Anatal to use its best efforts to have the plan of subdivision registered prior to closing date. If this failed to happen, the agreement would be terminated. Anatal breached this term. Eastwalsh sued for specific performance or damages.A: Anatal failed to use best efforts. Appeal: Proof of the loss of a mere chance is not enough. P has to prove that the chance was a reasonable probability and that the lost possibility was of real substantive value. They held that notwithstanding the breach the transaction would not have been completed within the contract period. Therefore, only nominal damages should be awardedC: Only nominal damages awarded.

Chaplin v Hicks (guesswork can be used for potential loss)

R: The court held that just because it is difficult to figure out what the chances of her winning were, that does not mean she cannot recover. The jury must do the best they can to figure out what is owed, even if there is an element of guesswork involved

F: Hicks, manager of a theatre, advertised a competition for aspiring actresses. Chaplin was highly voted in the contest and would have been one of the finalists. However, when Hicks wrote to her asking her to come in for the second round of selection, she did not get the letter in time, and was unable to qualify for the competition. She then sued for loss of chance of being chosen.

Unilateral Waiver What happens if one party wants to waive the condition?

o If both do, there is no problem. They can agree to vary or waive it.o But if there is disagreement about it, an issue can arise

In other jurisdictions, it is more straightforward that the party who benefits from the condition can waive it, as long as the other party does not also have an interest in the condition being fulfilled.

But in Canada, there is a limitation on unilateral waivers that comes from the case of TurneyTurney v Zhilka (a party cannot unilaterally waive a condition in a true condition precedent because there’s no obligation yet)

R: A true condition precedent is an external condition upon which the existence of the obligation depends (not sure what a true condition precedent entails). Until the event occurs there is no right to performance on either side. The parties have not promised that it will occur.(To avoid this altogether just say it’s an agreement in the contract)

F: Parties entered into a contingent agreement for the purchase and sale of land. Condition was that the property can be annexed to the village and a plan is approved by council for subdivision. Completion date 60 days after plans are approved. Neither party was tasked with seeking this approval. Purchaser made some efforts to secure fulfillment of the condition but it was not looking promising. Purchaser purported to simply waive fulfillment of the condition. Purchaser then sued for specific performance. Vendors claim that they are not bound by the agreement because the condition was not fulfilled. A: SCC doubts whether the condition was for the sole benefit of the purchaser but in any event, the defence of the vendor falls to be decided on broader grounds. The purchaser had no right to waive the annexation condition which was a true condition precedent. C: P cannot remove the condition.

SUMMARY So: when it comes to waiver, if it is a true Condition Precedent, you cannot waive. If it is NOT a true condition precedent (i.e. not a

Turney situation), then you can waive – if the condition is for your sole benefit.o The best thing to do is draft around it. Make it clear that you are not in Turney territory. Make it clear that you have an

agreement, whether it is one that is able to be waived or not. CHAPTER 7: REPRESENTATIONS AND TERMS: CLASSIFICATIONS AND CONSEQUENCES

Statements can fall into 3 categories:o 1) Mere puffs/sales talk: statements made without intent that they form part of the contracto 2) Mere representations: not terms of the contract but can have some legal consequenceso 3) Actual terms of the contract: more serious legal liability if broken

Misrepresentation and Rescission Misrepresentation: a misstatement of some fact which is material to the making or inducement of a contract General rule (Trietel): No relief for a misrepresentation unless it is a statement of existing fact

o Mere puffs do not count as misrepresentationso Statements of opinion or belief do not counto Representation as to the future do not count either

Remedy:o Rescission- the contract is rescinded or cancelled/undoneo It tries to restore the party’s position before the contract . So the remedy is restitutionary in nature.

Redgrave v Hurd (misrepresentations about crucial matters will not be binding)R: Not necessary to prove that the person making the representation knew it was false. The crucial thing is that it was false and it is now known to be so, and therefore the person cannot be allowed to get a benefit from that false statement.The misrepresentation must be of an existing fact and it must be false. It must also be:

Unambiguous Material:

o It must be one which would affect the judgment of a reasonable person in deciding whether or on what terms to enter into the contract without making such inquiries as he would otherwise make

o The misrepresentation must relate to a matter that would be considered by a reasonable person to be relevant to the decision to enter the agreement in question

Inducement/Relied on by the representeeo The misrepresentation has to actually induce the person to enter the

agreemento If they undertake their own investigation they will not be held to be relying on

the misrepresentation claimso But they have no duty to engage in such investigations.

F: Redgrave was selling his practice and home to a new lawyer. Redgrave told Hurd that it made around 300 to 400 pounds per year. Papers shown only indicated £200 per year. Hurd inquired and was given additional papers that he claimed showed the difference. Hurd did not examine these papers in detail but went ahead with the sale. When he saw that the practice was worthless he refused to close the deal. Redgrave sues for specific performance. Hurd countersues for rescission, return the deposit and damages. A: It doesn’t matter that Hurd didn’t look at his papers. The effect of a misrepresentation does not go away because the other party was negligent. There is a presumption that has to be rebutted by actual knowledge. The misrepresentation of finances is material and serious to a reasonable person. If it was less than a 1% difference it wouldn’t be but here it’s close to 50%.C: Hurd can rescind the contract and have his deposit returned.

Smith v Land and House Property Corp (Exception to opinion not being binding/if the other individual has more knowledge, their opinion can be considered a misrepresentation with legal consequences)

R: Distinction between situation in which both parties are equally informed of the relevant facts and one of them provides an opinion: that opinion will not be able to form a misrepresentation. But if the facts are not equally well known to both sides, the statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion.

F: P wanted to sell a hotel and stated that it was leased to Fleck and described him as a most desirable tenant. D agree to buy hotel. Fleck goes bankrupt. D doesn’t want to buy anymoreA: The tenants had a history of paying rent late. So the P had represented material facts he knew in the form of an opinion about his desirability as a tenant. C: D is not bound by the contract.

Silence and MisrepresentationThe general position, silence does not constitute a misrepresentation. Three exceptions are:

1) Half-truths: saying ‘I’m not aware of any restrictive covenants on the land’ when you haven’t checked.2) Active concealment of the truth: covering a crack in a wall with bricks.3) When circumstances change after a representation, you have a duty to the person about the change.

There are also some categories of relationship requiring additional good faithBank of British Columbia v Wren Developments Ltd (silence can be a misrepresentation contrary to the general rule)

R/A: When Allan signed the second guarantee he was misled by the words acts and conduct of the P into believing that there had been no change in the collateral securities. In short, there was a unilateral mistake on the part of the defendant Allan which was induced by the misrepresentation of the P in failing to disclose material facts to him. The failure to disclose material facts to Wren constituted a misrepresentation.

F: Wren took a loan from the bank and deposited shares in a number of companies by way of security. This was done via a hypothecation agreement. Hypothecate means to pledge property as security of collateral for a debt. Overtime P released some of these shares to Smith without Allan or Wrens knowledge or consent. This negatively affected Allan’s position under his June guarantee. Allan asked about the position of the shares but did not wait for an answer he simply signed on the assumption that there had been no change. Bank already has default judgment against Wren on the loan and summary judgment against Smith of his guarantee.C: Wren is not bound to the contract

Kupchak v Dayson Holdings Ltd (alternate way to use

F: Kupchaks purchased shares in a motel company. As part of the sale, the kupchaks transferred two properties to Dayson Holdings. The Kupchaks soon discovered that the statement made by the Dayson about

rescission/traditional rescission won’t be ordered if it would be unjust to the complainant)

R: The Respondents dealing with the property, which they acquired by fraud, ought not to bar rescission of the transaction unless it be impractical or so unjust to the respondents that ought not to be imposed upon a guilty party.

earnings of the hotel had been false. They stopped paying the mortgage and consulted their lawyers. There was fraud inducing them to enter the contract. A: Normally rescission would be granted and the aim would be to put the parties back in the pre-contract position. But here, one of the properties that was given in exchange for the Motel shares had been torn down and a modern apartment building had been built in its place, and they have sold a half interest in it to someone else. The kupchaks ask instead for its value as agreed in the transaction ($80,000). Equity cannot award damages, technically speaking. The court ordered parties to pay compensation in order to effect substantial restitution under a decree for rescission. Equity has the power to do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract. C: Dayson must pay compensation

Rescission The agreement is enforceable until rescission is actually concluded. But when rescission does take place, the aim is to restore parties to their pre-contractual position. Bar to Rescission

o Relief will not be available if it is not possible to effect a mutual restoration of the benefits conferred by the parties (ex, if the goods have perished or been altered, restoration won’t be possible). (Kupchak)

o Equity does not allow damages , but it can take account of profits, and especially in cases of fraud courts are willing to exercise their discretion more liberally.

o Affirmation If a party has affirmed a transaction, they can no longer rescind it, this has to occur after they are aware of the

misrepresentation, and aware that they have the right to rescind It can take place via words or conduct. It can be inferred just from lapse of time in some situations. But the fundamental

question is whether the person chosen to continue with the contract.o Rights of Third Party

If a bona fide purchaser has acquired a right for value, the original misrepresentee may not be able to get the property back

o Execution of the Agreement In certain contexts, once a transaction has actually closed, it cannot be rescinded for innocent misrepresentation, but it

can for fraudulent misrepresentation. In land, traditionally, execution is regarded as a bar (absent a finding of fraud). This is because the purchaser has

the opportunity to discover problems in advance of completion of the contract In sale of goods , some courts argue that it is not a bar as long as it is done in a reasonable period of time to

determine if it was a true representation (as unlike land, there is not the advanced ability to assess it prior)o Laches (unreasonable delay in bringing the claim)

Delay alone is not enough. It must be unfair to the misrepresentor (ex, it appears they waived their right to the remedy)Representations and Terms

When someone is induced into an agreement by a representation, and it turns out to be false, there can be many different results:o 1) If it was a misrepresentation that induced formation of the contract, equity may award rescission, whether it was innocent or

fraudulent (redgrave). If it was fraudulent or negligent, there may be an additional claim in torto 2) If we can argue that the misrepresentation was subject to an implicit undertaken that the representation is true, then we might

be able to say that that undertaking is enforceable as a collateral contract or as a term of the contract. Remedy is damages, not just rescission.

o 3) If the statement of fact was explicitly stated in the contract, it will then be a term and damages will be available These differences create an incentive to try to argue that it is a term (damages) rather than misrepresentation inducing formation (rescission)

Heilbut, Symons & Co v Buckleton (A promise could be a collateral contract but it must be the parties’ intention)

R: Warranty: is an undertaking or guarantee that a particular statement of fact is true or will continue to be true or will become true on a particular future occasion. Innocent misrepresentation leads to rescission not damages. People often try to get an innocent claim to be a warranty to attempt to get damages. Therefore its needs to be a strictly construed test. Assess the totality of the evidence and if it indicated an intention that the affirmation form part of the contract. The representation made before formation becomes a term of a collateral unilateral contract. If you enter into the main contract, I promise that the representation is true. (Collateral contracts exist but are rare. It would be more natural to vary the terms of the main contract. Must been found minimally and intention to be a warranty should be assessed.)

F: Heilbut underwrite a large number of shares in Filisola Rubber. On April 12 Buckleton called Johnston and he said it was a rubber company. The Buckleton agreed to purchase a large number of shares in the company. However, a deficient was discovered and the shares subsequently fell in value. Now, Buckleton sues for fraudulent misrepresentation, or alternatively for damages for breach of warranty that the company was a rubber company.C: Innocent misrepresentation. No damages.

Intention and Promise Intention is the central thing at issue: Was the representation intended as a promise?

o Contract is about promise. For it to be a part of the contract or a collateral contract, what we need is promissory intention.o However, if it is just a statement of fact not intended to be a promise, it will more likely be a pre-contractual misrepresentation.

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (intention is central/intelligent bystander test)

R: If an intelligent bystander would reasonably infer that a

F: Smith told Bentley a number of things during the negotiation for the sale of the Bentley. He stated that the car had only 20,000 miles since it was fitted with a replacement engine and gearbox. Bentley bought it and Smith said it was guaranteed for 12 months including parts and labour. He ended up having to take it back for work

warranty was intended, that will suffice. If a representation is made in the course of dealings for a contract for the very purpose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract that is prima facie ground for inferring that the representation was intended as a warranty. But this presumption can be rebutted if we can show that it was actually an innocent misrepresentation.

numerous times. He eventually brings this action for breach of warranty.A: Distinguishing Bentley from Oscar Chess: Oscar, nonprofessional vendor, passes on log-book which states year of car to be 1948, no warranty based on reasonable bystander test, the statement is an innocent misrepresentation. Bentley: professional vendor, stated a fact that should have been in his own knowledge, it is a warranty based on a reasonable bystander test. There was a warranty as it was intended to be part of the sale.C: Bentley is liable.

Innocent Misrepresentation v Breach of Condition An innocent misrepresentation is much less potent than a breach of condition. A condition is a term of the contract of a most material character. It wouldn’t make sense to allow someone to do better if it is only an innocent misrepresentation than he would if it were a term of the

contract.Leaf v International Galleries (assess both remedies to find one)R/A: Denning: The 2 remedies have to work in tandem. We must consider what one is entitled to in both realms to figure out the right result in one realm. Either there was an innocent misrepresentation inducing formation so rescission is available, or it was a term of the contract and damages are available. Misrepresentation is the “weaker” path. Promissory is a “stronger” path. There was a term of the contract that was either a condition or a warranty (if a condition, he could have rejected the picture before he accepted it. If a warranty, he would have had a claim in damages only) It is a condition but five years is much longer than a reasonable time so he can get damages (but he didn’t bring that claim). It wouldn’t make sense to allow him to do better if it is only an innocent misrepresentation than he would of it were a term of the contract. He cannot get rescission five years later. Evershed: He did get the item that the contract said. If both parties make a mistake about an essential or fundamental factor it does not void the contract because there is no mistake about the subject matter of the sale. Policy, there is a disagreement about whether pieces of are genuine or fake and this would result in costly and difficult litigation. People should choose to buy art on the faith of a representation, then once the article is accepted, that is the end of the transaction.

F: Leaf purchased a painting which the vendor claimed was a constable. During contractual negotiation, D represented the painting in question as done by Constable and recited in the contract as a term. 5 years later the P decided to sell the painting and at that point, he was advised that it was a fake. P now seeks rescission only. He would like the purchase price back. He is arguing innocent misrepresentation.C: No rescission, could have got damages but didn’t ask for it.

Mistake Generally, the law of mistake is that the contract entered into is void. The mistake must be fundamental such that performance is impossible

o For example, if the subject matter does not actually exist Mistake as to quality do not typically count as mistakes that will render a contract void

o Example, Scott- contract for tea was valid even though there was a mistake about the quality of the tea that decreased its valueo However, if the mistake about the quality is such that it goes to the identity of the thing , we may have a mistake that makes the

contract voido Trietel: The test could be asking the parties “what are you contracting about?” This is to determine whether the quality in question

goes to the very subject-matter of the contract. Mistake about the habitability of a house will similarly not render the contract void

Statutes Sales of Goods Acts S. 13(4) when the buyer has accepted the goods or part of them, the breach of any condition to be fulfilled by the seller shall only be treated

as a breach of warranty and not as a ground for rejecting the goods unless there is a term of the contract expressed or implied to that effect. S. 35 The buyer shall be deemed to have accepted the goods

o (c) when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them. Consumer Protection Act The act provides a number of protections against specific wrongs that may be done by sellers, including misrepresentation of various kinds

o S 7(1) specific that cancellation of the transaction is an available remedy, in addition to any remedy available at common law, such as damages.

It ONLY affects the rights/remedies of the consumers . If you have commercial parties they are still governed by the law we have been examining so far

Concurrent Liability in Contract and Tort When someone has made a false statement of fact/misrepresentation causing loss, the victim can sue in tort as well as in contract (Hedley)

o If it was fraudulent, you might have a claim in tort of deceito If it was negligent or careless, you might have a claim in negligenceo Note: that you can have liability in both tort and contract but you cannot recover twice. No double recovery.

Esso Petroleum Co v Mardono Esso gave a false estimate of the annual volume of petro sales at a location Mardon wanted to lease. This induced Mardon to enter

the contract. Volume was lower and Mardon lost money. Esso was held liable for the negligent misrepresentation (tort).Sodd Corp v N Tessis (concurrent liability allows P can succeed in multiple ways)

R: If there is a binding promise, the exemption clause cannot be used. A collateral warranty cannot use the exemption either (this is how the court is getting around

F: Tessis was selling the bankrupt assets and put out a tender for the sale of furniture. The P Sodd put in a tender for the stock in reliance of a representation that Tessis nelgigently told Scodd to calculate the retail value of goods by doubling the wholesale costs. This was bad advice. This generated an overvaluation of about doubleA: A prima facie duty of care exists where there is proximity and reasonable foreseeability. Proximity established is there is a close and direct relationship or what is sometimes called

the clause). The exception only applies to the main contract. So: on the right hand side, we have a term and we can get damages. Alternatively, they could get damages on the left hand side for negligent misstatement. Just because they are in a contract, doesn’t mean there can’t be liability in tort. Concurrent liability is upheld.

a special relationship between the parties. Here there was a special relationship. Reasonably foreseeability is established if: a) the D should have reasonably foreseen that the P would rely on his/her representation AND b) such reliance would, in the particular circumstances of the case, be reasonable. Here the tender was created based on the information provided which was foreseeable. Therefore the duty was breached. C: D is liable in tort.

BG Chenco International Ltd v BC Hydro & Power Authority (Concurrent liability is the law)

R: Concurrent liability is the law. Rather than attempting to establish new barriers to tort liability in contractual contexts, the law should move towards the elimination of unjustified difference between the remedial rules applicable to the 2 actions, thereby reducing the significance of the existence of the 2 different forms of action and allowing a person who has suffered a wrong full access to all relevant legal remedied.

F: Hydro called for tenders. BC Chenco inspected area by helicopter – assumed that tree cleaning that had begun would be completed by Hyrdo. Chenco’s tender was accepted. Hydro did not complete clearing the right of way. “Dirty” condition of right of way caused Chenco loss. Chenco sues for negligent misrepresentation or alternatively breach of contract. It later amended its statement of claim to include fraud as it emerged. Hydro knew of problems with right of way clearing and how it would negatively impact the successful tenderer A: Contract: The court must question how to reconcile seemingly inconsistent provisions. The general rule of the construction of contract that the various parts of the contract are to be interpreted in the context of the intentions of the parties as evident from the contract as a whole. General terms are secondary to specific ones. Here the general term is the obligation on Chenco to satisfy itself about the state of the site. The specific obligation is that Hydro has the obligation for clearing, so the specific obligation to clear was not negated by the general clause and hydro has breached this specific clause. Measure of Damages: The measure of damages is what is required to put Chenco in the position it would have been in had the contract been performed as agreed. Chenco would have avoided some overhead and it can recover some of that but not profit on the clearing of the right of way because that was not bargained. Tort: they can sue in tort as well unless the contract indicates that the parties intended to limit or negative the right to sue in tort. It all depends on how they have dealt with it. Three Possibilities : 1) Where the contract stipulates a more stringent obligation than the general law of tort would impose. 2) Where the contract stipulates a lower duty than that which would be presumed by the law of tort in similar circumstances. 3) Where the duty in contract and the common law duty in tort are co-extensive. This is a type three situation. So Chenco can sue in both.C: Hydro is liable

The Parole Evidence Rule (more for terms) In certain circumstances, the party wishing to rely on the oral undertaking may be prevented from introducing evidence of an oral

understanding that supplements or is inconsistent with the written agreement. o The rule applies not just to oral communications, but any prior communication

Traditional and Modern versions of the Ruleo Traditional: Where a written agreement appears on its face to be a complete agreement, parole evidence cannot be admitted that

contradicts, varies, adds to or subtracts from the terms of the written agreemento Modern: places emphasis on the need to demonstrate that the parties actually intended to reduce their agreement into writing as a

precondition to the application of the rule First stage, we are trying to determine whether the parties really intended to reduce their agreement full to writing. At

this stage, evidence of prior communications IS permitted. Only then , if it is proved that the document was intended to be the entire statement of the agreement, is parole evidence excluded.

o It is not clear whether Canadian courts adhere to the traditional or modern approach. Different cases go different ways Hawrish and Bauer– traditional (though not explicitly stated) Butterley and Allstate – modern (presumption in favour of the written agreement but this is not decisive)

Exemptions o Even on the traditional version, there are a number of exceptions

Does not preclude evidence of an oral agreement about a precondition. (ex, the agreement is written but the condition precedent was oral)

Does not preclude oral evidence that consideration in fact did pass when the document states that it did not (or evidence it did not, when contract states it did)

Does not preclude oral evidence of collateral contracts Clearest when the collateral contract only supplements the main contract When it is in conflict with the main contract, this will be more controversial, but it can still sometimes prevail.

Oral Testimony re: fraud, undue influence or mistake is permissible Evidence that the written document incorrectly records the oral agreement is permitted (remedy of rectification) Evidence of subsequent oral agreements to vary or terminate is permitted. Evidence brought to establish waiver or promissory estoppel is permitted Oral or written pre-contractual communications may be brought to demonstrate the correct interpretation of the

document Sattva Capital Corp v Creston Moly Corp

o Parole evidence does not exclude surrounding circumstanceso The surrounding circumstance are facts known or facts that reasonably ought to have been known to

both parties at or before the date of contracting, therefore the concern of unreliability does not arise. The parole evidence rule does not apply when the contract is intended to be partly oral and partly written.

It is unclear if this is best seen as an exception to the Promissory Estoppel rule or an example of the modern view

Entire Agreement Clauses Entire agreement clauses can be used to prevent the reliance on any materials beyond the written agreements

However, courts do construe these narrowly and will look to see that they are genuine representation of the parties intentions

If the entire agreement clause is in a standard contract and one party may not be aware of its effect, courts are often more willing to allow the oral undertaking to have some force

Statutory Modification of the Ruleo Some jurisdictions have enacted legislation (BC) to overturn the parole evidence rule. This is not the case in Alberta

Classification of Terms These are distinguished according to parties’ intentions (can be hard to discern). One test is how central the term is to the contract:

o Condition goes to the very root of the contract Breach of condition entitle the victim to terminate and also damages

o Warranty concerns some less important or subsidiary element of the contract Breach of warranty entitle the victim to damages only

Given that there are different remedies depending on the classification of the term, it is very important to establish what the term is. Terminological Clarification

o Repudiation: is the choice by the innocent party to treat the contract as terminated by the breach (best practice)o Terms, Conditions, Warranties: Remember that contracts can have two kinds of terms

Category 1) promises that establish parties’ obligations Category 2) conditions which set out states of affair that will make a promise enforceable (recall conditions precedent:

these are non-promissory in nature, they are about external factual states of affairs) However BEWARE: we are now talking about terms that fall under category 1: they are promises or undertakings. And

here we are asking whether these promises are conditions or mere warranties. So here we are using “condition” slightly different.

Pre-Hong Kong Scheme Traditional test for distinguishing a condition from a warranty: Whether the term and its non-performance went to the whole root and

consideration of the contract?o Breach of condition would allow the innocent party to repudiate and/or seek damages. o Breach of warranty would allow the innocent party only to seek damages.

Under this scheme, a breach of term defined to be a condition triggers the right to repudiate, even if the event cause by the breach is minor.Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (First, is it a condition or a warranty? Then assess is the particular breach to see if it deprives the whole benefit of the contract)

R: Consequences of breach of these kinds of promises don’t depend on whether was call it a condition or a warranty. They depend on the nature of the event to which breach gives rise.

F: Kawasaki wanted to charter the vessel for 24 months from Hong Kong. The contract included the following provision: Cl 1: vessel was in every way fitted for ordinary cargo services. Cl 3: stated that the owners would maintain the ships seaworthiness throughout 24 month. Ship was delivered with an unmanned/incompetent engine room staff despite owners’ knowledge that ship was old and needed a better crew. During the voyage there was a 5 week delay for repairs. Then the ship needed 15 weeks of repairs. Kawasaki purported to “repudiate” twice as there was a steep drop in freight rates. Ship is made seaworthy and has an adequate engine room staff. Still available for 17 months at this stage. A: The ship was there’s for 5 months but only useable for 3 but there are still 17 months left. The real issue is the happening of the event and not the fact that the event was the result of a breach by one party. Two consequences of realizing this: First, the test for whether there has been a breach or not. Second, We can’t answer the question by the simple distinction between conditions and warranties. 1) Some promises will be the kind where every breach will deprive the party of the whole benefit of the contract (conditions). 2) Some promises are the sort where breach will never deprive the party of the whole benefit of the contract (warranties). 3) But there are some that cannot be classified as either. Here you just asses if the breach will give rise to an event that will deprive the party substantially of the whole benefit the contract intended. This is an undertaking is third category: Kawasaki still had benefit. C: Kawasaki cannot repudiate the contract.

The New Approach: Innominate Terms (Post Hong Kong) Seeks to mitigate the potential harshness of the old scheme by introducing a third possibility, namely the innominate term. TEST:

o STEP ONE: Is the intention to be a warranty (damages) or a condition (damages and repudiation)? MUST interpret words in their factual matrix or surrounding circumstances

Surround circumstances : objective evidence of the background facts at the time of the executions of the contract that is, knowledge that was or reasonable ought to have been within the knowledge of both parties at or before the date of contracting

Relevant background facts 1) the genesis, aim or purpose of the contract 2) the nature of the relationship created by the contract AND 3) the nature or custom of the market of industry in which the contract was executed

“Ultimately, the surrounding circumstances can include “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man”

Further guidance Even where the breach of a term has produced a minor event, it can be treated as a breach of a condition.

Wickman: “Parties may think some matter, apparently of very little importance, essential; and if they sufficiently express an intention to make the literal fulfillment of such a thing a condition precedent, it will be one.”

Common sense has a role to play . (Wickman)o Using the word condition in the contract may be enough to establish this intention but not

conclusively. The fact that a particular construction leads to a very unreasonable result must be a

relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.

o STEP TWO: If neither, is it an innominate term? Does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the

whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing said undertakings?

If yes, the innocent party will be discharged from further performance under the contracto STEP THREES: Assess gravity of the breach if it is still not clear

What kind of Breach amount to repudiation? (Testing severity) Quake Technologies suggested five factors to consider in determining whether there has been a breach going to the root of the contract

o The factors to assess in the third category of Hong Kong (don’t need all) 1) the ratio of the party’s obligations not performed to the obligation as a whole (ex,5 months in, but 19 months left) 2) the seriousness of the breach to the innocent party 3) the likelihood of repetition of such breach 4) the seriousness of the consequences of the breach (more broad then 2)) 5) the relationship of the part of the obligation performed to the whole obligation

Frustrationo If the event occurs dues to no fault of the party, the contract may be frustratedo The key to both the understanding and the application of the doctrine of frustration in modern times is the idea of a radical change

in the contractual obligation, arising from unforeseen circumstances in respect of which no prior agreement has been breached, those circumstances having come about without default by either party. (ex, Taylor v Caldwell)

Wickman Machine Tool Sales Ltd v L Schuler AG (language of the parties matter, but might not be decisive if it would end in an absurd result-if you were serious you should specify clearly)

R: Denning presented three meanings of the word condition that could be relevant:

1) Proper meaning/dictionary definition 2) common meaning 3) The term of art (this is the sense of condition as

a term going to the root of the contract, breach of which entitles the wronged party to terminate and seek damages).

F: Wickman had the exclusive right to sell Schuler products. Wickman had a duty to undertake certain quite aggressive sales tactics, including sending representative to six car manufacturers at least once per week to seek orders for panel process. Wickman failed to comply strictly with the clause. They sent representatives regularly but on a few occasions they failed to do so. Schuler repudiated the agreement. A: Denning held that the term was just the common meaning of it. The breach was not a repudiatory breach. This breach would give rise to damages only. Lord Reid says the clause did apply and set out the only way to terminate the agreement. This avoids the unreasonable result that missing a single visit would result in a right to terminate. This is a breach that can be remedied.C: Schuler only gets damages

The Performance Obligation: The Principle of Good Faith and the Duty of Honest Performance It is for performance of the contract NOT formation of it. Parties will often specify in detail the precise performance requirements. But if they don’t there are additional duties that courts will imply Implied terms:

o 1) as a matter of custom/usageo 2) Implied in fact: this depends on Presumed intentiono 3) Implied in law: not based on intention but by operation of law in certain kinds of contracts. Necessity is the touchstone here.

Bhasin v Hrynew (Good faith is a principal, not a duty-but can lead to a duty) (assess in performance of contract)

R: Good faith is a standard/principal that underpins contract law as a whole. Parties must generally perform their contracts honestly and reasonably and not capriciously or arbitrarily. It has 2 functions: 1) it is the source of a justification for certain aspects of contract aw already in existence. 2) It is the foundation for the courts to devise new contract rules or elements, though this must be in a restrained, incremental, and precedent-respecting manner. The good faith principal cannot directly insert content into a contract as it is not a free standing rule. It is not a cause of action. It is broad but gives rise to more specific actionable doctrines. It does not require the same level of duty as that of a fiduciary. 1. Good faith as reasonableness (depends on the case in one of the 3 cases) led to implied terms. Examples are: implied by operation such as insurance, employment, etc contracts, implied in fact with the intention of the parties such as tendering contract, and implied in types of situations such as 1) where the parties must cooperate in order to achieve the objects of the contract, 2) where one party exercises a discretionary power under the contract and 3) where one party seeks to evade contractual duties (could be more situations). The cause of action is breach of contract for all cases where a term is implied. 2. Good faith as honesty (part of all contracts) is a simple requirement not to lie or misled the other party about ones contractual performance. This is independently actionable but it is not a term. Entire agreement clause cannot totally exclude the duty, though parties may be entitled to relax the duty

F: Hrynew wanted to take over Bhasin’s business. Bhasin was not interested. Hrynew asked Can-Am to make it happen. Can-Am appointed Hrynew to audit the employees (including Bhasin’s private financial information). Bhasin objected. Can-Am to Bhasin falsely that nothing could happen. Bhasin asked Can-Am whether the merger was going to happen and Can-Am didn’t provide a straightforward reply (while knowing the merger would go ahead). Can-Am then forced a merger and terminated Bhasin. The Enrollment Director Agreement: a non-renewal clause exercisable on 6 month notice by either side. An entire agreement clause seeks to define the scope of the parties contract in order to preclude allegations of terms beyond what is written in the contract there are no representations, warrantied, agreements, terns, conditions or collateral agreements.A: Can-Am breached this new duty of honesty.C: Hrynew is liable

CHAPTER 8: STANDARD FOR CONTRACTS AND EXCLUSION CLAUSES Standard form contracts reduce transaction costs and make it easier to engage in contractual relationships.

However, a problem arises when those contacts exclude liability for certain harms/wrongs, especially when they are signed in circumstances where the parties were not of equal bargaining power and/or had no real choice or alternative

Unsigned Document It’s harder to demonstrate that the party really assented to the terms but even signed documents leave some room for ambiguity about

whether the terms are really part of the agreement properly understood Approach 1- The ticket cases, where the contract was made with a person, held that the notice was sufficient because the person could

withdraw Approach 2- The ticket cases do not apply to machine issued tickets because the notice comes too late (Thornton) Reasonable notice of terms : fact specific but can consider the following

o Reasonable notice for one class of customers may not be reasonable for another class.o Where the person receiving the document might reasonably assume that the document has some purpose other than

communication contractual terms, courts incline to the view that reasonable notice has not been given. This will often be the case in carpark cases: the ticket can reasonably be understood to be a receipt or voucher the

purpose of which is to determine ownership of the car Signage can be helpful but it must be visible at the time of signing Tickets that are designed to hide the limitation (small print) may not fulfill the requirement Notice requirement will escalate in proportion of the harshness if the terms in question

Interfoto Picture Library: Good faith is in essence a principal of fair and open dealing. Sufficient notice should be read in light of good faith.Thornton v Shoe Lane Parking Ltd. (UNSIGNED/ must provide reasonably sufficient notice/practical possibility of finding out)

R: Different Approaches: Approach A- ticket is delivered by an attendant (traditional analysis). Offer is made by issuing ticket via attendant. Acceptance given by customer retaining ticket without objection. The customer is bound by the exempting condition if he knows the ticket is issued subject to it or if the company did what was reasonably sufficient to give him notice of it. Approach B- Ticket is delivered by an automatic machine. Offer made by proprietor who holds out the machine as ready to receive money. Acceptance given by customer when the customer puts his or her money into the slot. The terms of the offer are contained in the notice places on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice beforehand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late.

F: Thornton parked in a parkade and was seriously injured (1/2 his fault & ½ parkades negligent fault). Clause states: D shall not be liable for any damage of whatever kind to the customer’s motor vehicle or customer, no matter how the harm was caused. The ticket was issued by a machine. The exclusion condition was found displayed on a pillar that one needed to drive into the garage to view.A: In this case the offer was made at the entrance, where the assign detailed the charged and said at owner’s risk. That is understood to refer to damage to the car. Acceptance is P driving to the entrance and taking the ticket. At that point, the contract was concluded, and it could not be altered by any words printed on the ticket itself (so as to exempt the company from liability for personal injury due to their negligence). IF it was an automatic machine then we apply the three questions from Parker: the customer is bound by the exempting condition if he knows that the ticket is issued subject to it OR if the company did what was reasonably sufficient to give him notice of it. If it is an intrusive right, in order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it – or something equally startling” Defendants also argued that the plaintiff knew or believed there were conditions. Denning says the defendants did not prove that that P knew about the clause and therefore cannot be bound by it. . The P did not know of the condition and the D did not do what was reasonably sufficient to give him notice of it. Megaw: there must be a practical possibility of finding out the content of the conditions. C: Parkade is liable and cannot use the exempting condition.

Signed Documents The classic/traditional rule for signed documents is: (L’Estrange)

o When a document containing contractual terms is signed, then, in the absence of fraud or misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.

This means that it is the responsibility of the signing party to read the document. o Agreement is proved simply by proving that it is your signature o However: the worry of insufficient notice of problematic or unfair terms can arise

Tilden Rent-A-Car Co v Clendenning (signature is not enough if there are onerous terms that are not given notice)

R: The strictness of the clause is assessed. It was super strict so it couldn’t have been expected by a reasonable person. The signature is only one way of manifesting assent to contractual terms. We have to ask whether the other party entered into the contract in belief that the D was assenting to all such terms.

F: “Customer agrees vehicle will not be operated by any person who has drunk or consumed any intoxicating liquor, whatever be the quantity.” Clendenning crashed the car into a pole. He pleaded guilty to a charge of driving while impaired but claims he was capable of proper control. While inquiring, he had been told that he would be provided full non-deductible coverage. It was his assumption that he would only be responsible for the damage if he was so intoxicated as to not be capable of proper control.A: Rent-a-car could not believe that Clendenning assented to the contract terms. Here a signature is not enough to really demonstrate agreement to unusual and onerous terms which are inconsistent with the true object of the contract. Reasonable measures must be taken in this case. C: Clendenning is not liableDissent: printing is not difficult to read and he was told the conditions were on the back. He drank so he broke the contract. This is a substantial breach. The clause is strict but that was the intent of it and it is comparable to others. The parties must be held to it.

Karroll v Silver Star Mountain Resorts Ltd(LEADING CASE/there’s not general requirement to bring attention to a clause/restricts Tilden)

R: Start with L’estrange presumption that if you sign you’re bound.

F: Karroll signed a document releasing the ski resort from liability. She had previously competed in this same race, and signed the same liability form. She broke her leg in a collision with another skier. The form explicitly included acts caused by the negligence of the resort. A: The court assesses Tilden in a limited scope and as a special

Then we ask is there are any exceptions: 1. Non est factum- the signature is not representative of the signer’s genuine act. 2. Fraud or misrepresentation. Finally, was it a situation in which the party signing was mistaken about a term and the other party knew or had reason to know this (Tilden)? If the circumstances suggest that the signing party does not intend to be bound by a term, the party benefitting from the clause has a duty to take reasonable measures to bring it to the signing party’s attention.

circumstance. L’estrange is the general principal. Karroll signed the release with knowledge that it would affect her rights. No exemptions apply. She does not fall into the Tilden circumstance because: the release was consistent with the purpose of the contract, the release was short clear and easy to read, and the type of release is common and she had signed it before.C: Karroll cannot sue for negligence

When there is a need to take reasonable steps to advise: (Karrol) Factors that may be relevant (not an exhaustive list)

o Effect of the clause in relation to the nature of the contracto Length and format of the contracto Time available for reading and understanding it

Statutory intervention In the case of risky sports, consumer protection legislation sometime intervenes to require that the services offered must be of reasonably

acceptable quality and bar the enforceability of some waivers. (BC not AB)Principles of Contractual Interpretation

Implied Terms To understand when a term can be implied, we have to ask about the role of intention.

o Intention is relevant to terms implied as a matter of facto Intention is not relevant to terms implied as a matter of law (employment?)

Three types of implied terms: o As a matter of custom/usageo Implied in fact (intention matters) – EX, can imply a term if it fits in the context and the parties intended ito Implied in law (intention doesn’t matter) – EX, imply a term no matter what the parties want

Test for implying terms as a matter of lawo Necessity is the touchstoneo The obligation should be read into the contract as the nature of the contract implicitly requires no more, no less (Necessity)o Necessity does not mean it must be necessary for the very existence of the contract.

Instead we ask: is it necessary in a practical sense to the fair functioning of the agreement, given the relationship between the parties? (nature of contract and nature of relationship)

Employment contracts (Machtinger)o The employer must provide the employee with reasonable notice of termination.o Factors to look for (Machtinger)

Character of the employment (what kind of work it is) Length of service in the role Age of the employee; availability of other similar employment Experience, training and qualification of the employee

These considerations will go to the appropriate notice period. They are the kind of thing that may not be known at the time of contracting, so therefore the implication can’t

be a matter of presumed intention. This is why is it implied by lawMachtinger v Hoj Industries Ltd (implied in law v implied in fact)A: Here the reasonable notice term is implied by law and requires notice of this situation

C: Hoj is liable

Ambiguity (Contra proferentum principle) If there is ambiguity in a clause, it will be interpreted against the interest of the party who drafted is Most relevant for standard form contracts: Courts are more likely to apply the rule in context where there is an inequality of bargaining power

and/or a take it or leave it bargaining situation Rationale: the drafting party had the chance to protect their interest, and they only get to protect those interests to the extent that they

clearly communicated that to the other party. Strict Construction

This is a related idea to contra proferentum (ambiguity) Courts will often apply a principle of strict construction to exclusion clauses generally

o In particular, clauses excluding liability for negligence o As a general proposition, very clear words must be employed in order for one party to protect from liability for negligenceo General words won’t be enough to preclude liability for negligence

But this principle has been relaxes somewhat in Miida. They took into account that it was a contract between commercial parties and they applied the principle of interpreting the contract as a whole.

Context and the Factual Matrix Ask to what extent the context and factual circumstances surround the contract are relevant to its interpretation Old view : evidence of party’s prior negotiation is not admissible. It is really only the final document we should look at New View : the modern Canadian position is more flexible and is in favour of admitting such evidence, though weighting it carefully, where

there are at least two reasonable interpretations of the contract in questiono Evidence of subjective intention is still not admissible. We are looking for the intention of the parties as seen objectively

Specific rules of interpretation:

o If contract typed and hand written addition are made, those will prevail (these are supposed to be a better reflection of parties intentions)

o Ejusdem generis: if a list is used, followed by a general term, the general term is meant to include things of the same type as the enumerated examples (ex, chips, cookie, candy, and other things)

o Interpretation must be in context: we may be able to make sense of an ambiguous term when we read it in the context of the entire document, or when we examine the surrounding circumstances.

Sattva: the goal of contractual interpretation is to understand the mutual and objective intentions of the parties expressed in the words of the contract

o This involves the plain meaning rule and the contracts factual matrixo The interpreter must read the contract as a whole, giving the words their ordinary and grammatical meaning with the surrounding

circumstances known to the parties at the time of the formation of the contract.IFP Tech v EnCana Midstream and Marketing (consider factual circumstances even if no ambiguity)

R: considering the surrounding circumstances of a contract does NOT offend the parole evidence rule. The factual matrix must be considered even absent ambiguity. Surrounding circumstances consist of objective evidence of the background facts at the time of execution of the contract that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Examples include 1) the genesis, aim or purpose of the contract 2) the nature of the relationship created by the contract 3) the nature or custom of the market or industry in which the contract was executed (this is not exhaustive- it can include anything that would have an effect it would have been understood by a reasonable person).

F: IFP argued that the clause gave it and undivided 20 percent working interest in oil and gas leases for the property in question. EnCana argues only through thermal and other enhanced recovery methods.A: prior agreements such as memorandum of understanding can be appeals to as evidence of the background circumstances/factual matrix (even if there is an entire agreement). IFPs interpretation of the contract is successful. C: IFP wins

The Doctrine of Fundamental Breach Problematic doctrine that held that a party could not rely upon an exclusion clause where it had committed a fundamental breach of contract Issue: determining what counted as a fundamental breach

Tercon Contractors Ltd v British Columbia (5 point test/fundamental breach shouldn’t be used- but new test similar factor)

R: Doctrine of fundamental breach is NOT used anymore. An exclusion clause should be interpreted narrowly. We should not read any provision in isolation.

1) Is there a breach of contract?2) If yes, is the exclusion clause at issue part of the contract? (Tilden,

Karroll, Thornton analysis)3) If yes, does the exclusion clause apply to the circumstances as a matter

of interpretation? (depends on parties intentions)4) If yes, is the exclusion clause unconscionable(unreasonable) at the time

the contract was made (versus at time of breach)a. Might arise out of situations of unequal bargaining powerb. Might arise out of policy considerations arising from relevant

legislation5) Assuming validity, is there any overriding public policy reason (weighed

at time of breach) that would justify the court’s refusal to enforce it? a. (ex, Plas-Tex making fault pipes knowingly and then asking for

help from the court= no help)

F: Brentwood lacked experience so they joing up with a non-qualified bidder. Submitted a non-compliant bid (joint ventures were ineligible), mis-described EAC as a major member of the team instead of a joint venture. BC accepted the non-compliant bid (which they knew). Tercon sues. In contract A there is an exclusion clause that says you can’t claim compensation of any kind from BC. A: Majority: liability under contract A. The no claims clause does not provide a defense. When assessing the clause narrowly it only applies to compliant bidders. BC went broad and chose a non-compliant bidder so the clause no longer applies. BC could not have an easy way out if they don’t follow their own rules for the process. Alternatively, if this interpretation is wrong, then there is ambiguity and on that basis they would also be barred from using the exclusion clause. Tercon can recover. Dissent: No liability under contract A. Ministry misconduct was not so egregious as to generate public policy reasons depriving the ministry of protection of the no claims clause to which Tercon freely agreed.C: Tercon wins

CHAPTER 9: PROTECTION OF WEAKER PARTIES 1. Duress 2. Undue Influence

o Equitable doctrine engaged when one person has used their power over another to induce them to enter a transaction. Can be: 1. Actual undue influence: P must demonstrate the actual use of the power in this situation 2. Presumptive undue influence: P must prove that the parties have a relationship of such a nature that the court may

presume that power was exercised in this case Recognized relationships such as solicitor/client, doctor/patent Relationship not falling into such a category, but the particular nature of the relationship here gives rise to the

presumption of power. 3. Unconscionability

o Equitable doctrine similar to undue influence. However it permits courts to set aside agreements where, even in the context of bargaining by complete strangers, unfair agreements resulted from an inequality of bargaining power.

o It can also apply in situation where there is a pre-existing relationship.Downer v Pitcher 2017 NLCA 13 (unconscionability is a high threshold in AB/look for disparity of bargaining powers and an unfair transaction)

R/A: Not required to inform about the contents of the release document. The mere fact that a bargain turns out to be improvident or foolish for one party does not provide a basis for relieving that party from the product of his or her

F: the parties reached an agreement independent of their insurance companies. Liability was not disputed. Donner was at fault. He

foolishness. There was no particular disadvantage: no mental or physical impairment, no suggestion that she was not able to look out for her own interests.Cain Test: Applies to AB (this is the law)

1) A grossly unfair and improvident transaction2) Victims lack of independent legal advice or other suitable advice3) Overwhelming imbalance in bargaining power caused by victims ignorance of business, illiteracy, ignorance of

the language of the bargain, blindness, deafness, illness, senility, or similar disability (if relevant to situation); AND

4) Other party’s knowingly taking advantage of this vulnerabilityDowner Test:

1. A person claiming relief on grounds of unconscionability may succeed where:A. there is an inequality of bargaining power between the parties resulting from or created by a special and

significant disadvantage by reason of some condition or circumstance that provides an opportunity for the other party to take advantage of the party suffering from the disadvantage; and

I. C.F. “overwhelming imbalance in bargaining power” in AB testB. The other party unfairly or unconscientiously (in the sense of lacking conscience) takes advantage of that

opportunity I. this includes constructive knowledge

II. C.F. knowingly taking advantage in AB testC. The advantage resulting from the inequality of bargaining power need not be a financial advantage; it

could be more of an intangible kind (ex, sentimental) that results in a transaction that, but for the disadvantage, the relief seeker or no reasonable person in the position of the relief-seeker would not likely have entered into.

I. C.F. a grossly unfair and improvident transaction in AB testThis is equity, so even though the AB test is precedent, the court may use the lower threshold in the Downer Test to find a claim for the victim. Don’t focus on the specific rules or language.

agreed to pay for repairs and $300 to cover lost income during repairs. In exchange, Pitcher signed a legal release of her rights. Signed a full and final release: releasing all liability including damages that were yet to be discovered. Parties accept that the wording was broad. Pitcher later developed symptoms of soft tissue injury. She now wants to sue Downer. She argued that the agreement is not binding because she was under the impression that it dealt only with property damage/lost income.C: Release is enforceable. Downer can’t sue.

Compare to facts in cases if it helps DO mini conclusion after each issue Slowdown in analysis in Exam No matter how obvious it seems, you have to include the explanation On exam, if asked to use these, do so in this order

1. Common Law2. Statute3. Equity