contracts law - tru sls · carlill v. carbolic smoke ball co. .....7 goldthorpe v. logan ......

CONTRACTS LAWFall 2015 CAN

IQRA AZHAR

Contracts CANs– Fall 2015 – Iqra Azhar 1

1. Table of Contents1. FORMATION OF A VALID CONTRACT........................................................................................... 5

Offer and Invitation to Treat ....................................................................................................................... 5

Canadian Dryers Association v Burton................................................................................................... 6

Pharmaceutical Society v. Boots............................................................................................................. 6

Carlill v. Carbolic Smoke Ball Co. ......................................................................................................... 7

Goldthorpe v. Logan ............................................................................................................................... 7

Tenders........................................................................................................................................................ 8

Harvella Investments Ltd. v. Royal Trust Co of Canada ........................................................................ 8

R. v. Ron Engineering & Construction (Eastern) Ltd............................................................................. 8

M.J.B. Enterprises Ltd. v. Defence Construction ................................................................................... 9

Double N. Earthmovers Ltd v. City of Edmonton .................................................................................. 9

Communication of Offer ............................................................................................................................... 10

Blair v. Western Mutual Benefit Assn .................................................................................................. 10

Williams v. Carwardine ........................................................................................................................ 10

R. v. Clarke ........................................................................................................................................... 11

Revocation (Termination of Offer) ........................................................................................................... 11

Dickinson v. Dodds............................................................................................................................... 11

Byrne v. Van Tienhoven ....................................................................................................................... 12

Errington v. Errington and Woods........................................................................................................ 12

Dawson v. Helicopter Exploration Co .................................................................................................. 12

Livingstone v. Evans............................................................................................................................. 13

Lapse of Time (Termination of Offer) ...................................................................................................... 13

Barrick v. Clark..................................................................................................................................... 13

Manchester Diocesan Council v Commercial and General Investments .............................................. 14

ACCEPTANCE ............................................................................................................................................ 14

The Postal Rule: ........................................................................................................................................ 14

Household Fire v. Grant........................................................................................................................ 15

Holwell Securities v. Hughes................................................................................................................ 15

Brinkibon v. Stahag Stahl ..................................................................................................................... 15

ProCD v Matthew Zeidenberg .............................................................................................................. 16

Eliason v. Henshaw............................................................................................................................... 16

Silence....................................................................................................................................................... 16

St. John Tug Boat Co. v. Irving Refinery Ltd....................................................................................... 16

Felthouse v. Bindley ............................................................................................................................. 17


Battle of Forms: ........................................................................................................................................ 17

Butler Machine Tool v. Ex-cell-o Corp ................................................................................................ 18

Tywood Industries Ltd. v. St. Anne-Nackawic Pulp & Paper Co. Ltd................................................. 18

Tekdata Interconnections Ltd v. Amphenol Ltd ................................................................................... 18

CERTAINTY OF TERMS............................................................................................................................ 19

R. v. CAE Industries Ltd....................................................................................................................... 20

Incompleteness and Agreements to Agree................................................................................................ 20

May & Butcher v. R.............................................................................................................................. 20

Hillas v. Arcos Ltd ................................................................................................................................ 21

Foley v. Classique Coaches .................................................................................................................. 21

Good Faith (Bhasin v Hrynew) ................................................................................................................. 21

Agreements to Negotiate : Case Law........................................................................................................ 22

Empress v. Bank of Nova Scotia .......................................................................................................... 22

Manpar Enterprises Ltd. v. Canada....................................................................................................... 22

Wellington City Council v. Body Corporate ........................................................................................ 22

Bawitko Investments Ltd v. Kernels Popcorn Ltd ................................................................................ 23

INTENTIONS TO CREATE LEGAL OBLIGATIONS (RELATIONS AND FORMALITIES) ............... 23

Balfour v Balfour .................................................................................................................................. 24

Rose and Frank Co v. JR Crompton and Bros ...................................................................................... 24

Toronto Dominion Bank v Leigh Instruments Ltd ............................................................................... 24

Canadian Taxpayers Federation v Ontario Minister of Finance ........................................................... 24

Formality: Contracts Under Seal and the Requirements of Writing......................................................... 25

Royal Bank v Kiska ............................................................................................................................. 25

Delgman v Guaranty Trust.................................................................................................................... 25

ENFORCING PROMISES ........................................................................................................................... 26

CONSIDERATION ...................................................................................................................................... 26

Thomas v Thomas................................................................................................................................. 27

Governors of Dalhousie College v The Estate of Arthur Boutilier....................................................... 28

Wood v Lucy, Lady Duff Gordon......................................................................................................... 28

Past Consideration..................................................................................................................................... 28

Eastwood v Kenyon .............................................................................................................................. 28

Lampleigh v Brathwait.......................................................................................................................... 29

Performance of Existing Duties .................................................................................................................... 29

A Duty Arising Under a Contract between the Promisee and a 3rd Party................................................ 30

Pao On v. Lau Yiu Long ....................................................................................................................... 30


A Duty Arising Under a Contract Between the Promisor and the Promisee ............................................ 30

Stilk v Myrick ....................................................................................................................................... 31

Gilbert Steel v. University Construction Ltd ........................................................................................ 31

Greater Fredericton Airport Authority Inc. v. Nav Canada .................................................................. 31

William v Roffey Bros .......................................................................................................................... 32

PART PAYMENT: A Duty Arising Under A Contract Between The Promisor And The Promisee:Promises To Accept A Lesser Payment .................................................................................................... 32

Section 43 – Part Payment ........................................................................................................................ 32

Foakes v. Beer....................................................................................................................................... 33

Re Selectmove....................................................................................................................................... 33

Foot v Rawlings .................................................................................................................................... 34

Process Automation Inc. v. Norstream Intertec Inc. & Arroyave......................................................... 34

Value in the eyes of the law - Compromises and Forbearance to Sue...................................................... 34

D.C.B. v Harold J. Arkin and Zellers Inc. ............................................................................................ 35

PROMISSORY ESTOPPEL......................................................................................................................... 35

Waiver....................................................................................................................................................... 37

General Principles of Promissory Estoppel .............................................................................................. 37

Hughes v. Metropolitan Railway Company.......................................................................................... 37

Central London Property v. High Trees House..................................................................................... 37

Collier v. P & M J Wright..................................................................................................................... 38

Elucidation of Principles ........................................................................................................................... 38

John Burrows v. Subsurface Surveys.................................................................................................... 38

D & C Builders v. Rees......................................................................................................................... 39

Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance ...................................................... 39

WJ Alan v El Nasr ................................................................................................................................ 39

The Post Chaser .................................................................................................................................... 40

Shield or Sword......................................................................................................................................... 40

Combe v. Combe................................................................................................................................... 40

Walton Stores (Interstate) Pty. Ltd. v. Maher ....................................................................................... 41

M. (N.) v. A. (T.A.)............................................................................................................................... 41

PRIVITY OF CONTRACT .......................................................................................................................... 42

Tweddle v Atkinson .............................................................................................................................. 42

Dunlop Pnewmatic Tyre co ltd v Selfridge & co.................................................................................. 43

Beswick v. Beswick .............................................................................................................................. 43

Exceptions to the Doctrine of Privity........................................................................................................ 44


London Drugs Ltd. v. Kuehne & Nagel International Ltd.................................................................... 44

Edgeworth Construction v ND Lea Associates..................................................................................... 44

Fraser River v. Can-Dive ...................................................................................................................... 45


1. FORMATION OF A VALID CONTRACT

Elements of a Valid Contracts lack of these makes the contract VOID

1. Agreement (Offer and Acceptance)2. Intention to create legal relations3. Certainty of terms4. Consideration (Promise must be bought in some way to be enforceable)

Offer and Invitation to Treat

An offer consists of an indication, by words or conduct, that the person making it – the OFFEROR – iswilling to accept a legal obligation to do, or to refrain from doing, something if the person to who it isaddressed – the OFFEREE – agrees to its terms. Doesn’t require further negotiation

An invitation to treat is a preliminary step in negotiations – an invitation to another person to make anoffer/ An express willingness to negotiate

Invite to treat can specify the type of offer (bid) required (ex: fixed price OR auction)

Importance of distinction because only an offer is capable of acceptance. You can’t accept aninvitation to treat.

General Rule: Giving a mere price quote, or placing good on display, or publishing an advertisement isNOT an offer but an invitation to treat

You can tell if something is an offer by the language and intention through the reasonably objectiveperson in the place of the recipient (Canadian Dyers)

Post-contractual conduct can be also be looked at (Canadian Dyers) Unilateral contract: a promise in exchange for an act - no need for notification of acceptance -

performance of obligations and acceptance coincides (Carbolic)o Unilateral contract is made where there is complete performance (Errington v Errington)

Bilateral contract: a promise in exchange for a promise (performance and acceptance do not coincide) You have to look at the nature of the offer to know if the contract is unilateral or not - whether the party

who made the offer had the intention (either implicitly or explicitly) for notification of acceptance(Carbolic)

the law distinguishes bw offer and invit to treat

Offer – can be accepted Treat – invitation to negotiate, cant be accepted Adverts are not offers, they’re invitations to treat

o EXCEPTION: But its possible that sometimes an advert is an offer ie carbolic smokeball/Goldthorpe


Canadian Dryers Association v Burton

Post-contractual conduct of the seller may indicate an offer valid of acceptance

Facts: P asked D twice (a year apart) for the lowest price of sale (1$,650). The second time was treated asan offer and accepted. A $500 cheque was sent, the D sent a draft deed and said they would close on the 1st

of the following month. On Nov 5th, the P said there was no offer and returned the cheque.

Issue: Whether the statement of the lowest price constitutes an offer to sell

Rules: The mere quotation of price is not an offer, it’s an INVITATION TO TREAT (allows that person tomake an offer now). Sending a quotation is not binding, it’s the basis of negotiation

Analysis: The D’s actions (sending the deed) show that he regarded the first letter as an offer and the secondas making a contract.

Why is offer and acceptance important in contract formation?

Offer and acceptance provides an indication that the parties have consented to the transaction You need offer and acceptance to constitute a contract in CL In communication, you have to be able to clearly identify in the correspondence that this is an offer and

this the acceptance

Pharmaceutical Society v. BootsDisplay of goods in a store is an invitation to treat

Facts: D pharmacy where customers selected the articles from the shelf & then pay at the cashier. Some ofthe products, according to the Pharmacy and Poisons Act, had to be sold under the supervision of apharmacist. The Society argued that displays of goods were an "offer" and when a shopper selected and putthe drugs into their shopping basket, that was an "acceptance". Therefore because no pharmacist hadsupervised the transaction at this point, Boots was in breach of the Act. Boots argued that the sale waseffected only at the till.

Issue: when the agreement of sale takes place. Whether its when the customer places the item in their buggyor when they go up to the cashier to pay it.

Rule: Goods on a display are invitation not an offer; the customer makes an offer when they take the goodsto the register.

Test for distinguishing an offer from a mere quotation of price:

1. Apply an objective test of the words and actions of the parties involved to determineif they constitute an offer or an invitation to treat.

2. Check the language used, the specificity of the advert focus on the intention (usually objectively ascertained) of the parties and the

circumstances


Judgement: The Court held that the display of a product in a store with a price attached is not sufficient tobe considered an offer, but rather is an invitation to treat. The sale takes place at the till and that it where thepharmacist is there to supervise, thereby not in violations of the respective legislation

Carlill v. Carbolic Smoke Ball Co.(Unilateral contract; public advertisement; acceptance by performance; offer can be made to large group

or indiv; EXCEPTION CASE: Advert is an offer)

Facts: D made an advert in the newspaper to compensate anyone who used their product and still caughtthe influenza. They said they put money in the bank, which indicates their commitment to the offer to satisfytheir promise

Issue: 1) Whether acceptance of an offer has to be clearly expressed to the offeror, in the case of anadvertisement?

2) Is notice of performance enough of a notice of acceptance? by using the machine did they implicitlyagree to the contract - YES

Rule: An advertisement can constitute a unilateral contract, which can be accepted by fulfilling theconditions of the contract; no formal acceptance required. Acceptance is complete when you satisfy all the conditions. Rule regarding silence: you can accept unilateral contract by silence through performance of

conditions

Analysis: The contract was not with the whole world, but rather with those who fulfill the stipulatedconditions. The only condition was using the smoke ball, not the taking of the influenza. If one used the ball before

the ad and got the flu there would be no contract. Inconvenience sustained by one party ) at the request of another is enough to create a consideration

judge thinks its consideration enough that the plaintiff went through the trouble of using the smoke ball

Goldthorpe v. LoganImplied promise – offeror bears the risk of extravagant promises – unilateral contract; EXCEPTION

CASE: Advert is an offer

Facts: Logan had ad guaranteeing the results of full and permanent hair removal procedure. P gets hairremoved through several treatment but the result is unsatisfactory. P claims damages suffered due tonegligence

Issues: Whether an advertisement declaring a guarantee constitute an offer that, if accepted, results in thecreation of an enforceable contract?

Rule: An advertisement constitutes an offer that can be accepted on the terms it proposed, no matter howextravagant the promise.

Analysis: The advert says it’s a guarantee, which the court treats as an offer. So there was a breach ofcontract because the D did not fulfil their promise. The D made promises that were absolute and unlimited they were reckless and rash without regard to what was required or suggested.


Tenders

The tendering process is characterized by two contractual stages. At the first stage, the owner issues a tender,in response to which bidders submit bids. This creates a first contract — "Contract A" — between the ownerand every compliant bidder. At the second stage, when the owner accepts a bid, a second contract —"Contract B" — is formed. This is the actual contract to supply the equipment or to perform the work thatwas the subject-matter of the tender. A bidder's bid thus constitutes both an acceptance and an offer. Itconstitutes an acceptance of the owner's offer to receive and consider tenders, and it simultaneouslyconstitutes an offer to perform the tendered contract.

It’s a 2 part contract formation: An invitation to tender is treated as an offer

1. Contract A: Submission of a valid tender (bid) is acceptance of the offer. It’s an actual contract and can be breached. The courts can imply terms into this contract. Treat it as

any other contract!!2. That tender (bid) that is chosen is the basis for forming an actual contract to do the work (Contract B)

made bw the owner and only one of the bidders (the one chosen to contact with) If you have a winning bid, you subsequently enter into contract B

Harvella Investments Ltd. v. Royal Trust Co of Canada(Tenders; auction, referential bid; fixed bidding)

Facts: Royal Trust invited Harvella and a 3P to make offers to purchase shares. The invitation said that thehighest bid would be accepted. Harvella offered a fixed bid, 3P made referential bid (after Harvellapreviously submitted a higher bid). Harvella sued for breach of contract, saying referential bid was invalid

Issues: Whether the D’s offer to purchase shares was a fixed bidding sale or an auction sale

Rule: The invitation is controlling the nature of the offer -> the invitation invited only fixed bids, notreferential. So it controls what the offer should look like

Analysis: Although the invitation to treat isn’t an offer, it doesn’t mean that its legally insignificant (thoughits still not binding)The judges said the D was bound to accept the higher original offer (the plaintiff)

R. v. Ron Engineering & Construction (Eastern) Ltd(The terms of contract A can be binding; Sets out contract A/B process)

Facts: RE submitted a tender with a deposit (as required). After the tender closed, RE realized they made amistake and sent in the wrong bid. They informed the owner of the mistake and tried to have the offerchanged. The change was refused, the contract was given to another company, and the owner kept RonEngineering's bid deposit. Ron Engineering sued to get their deposit back

Issue: (a) whether the acceptance of a call for tenders for a construction job could constitute a bindingcontract. - YES(b) Whether the contractor was allowed to withdraw his bid and recover his deposit -NO

Rule: Bids at once become irrevocable if filed in conformity with the terms and conditions under which thecall for tenders was made, if such terms so provide.


Analysis: This was a unilateral contract. The invitation to tender is an offer, the submission of bid in responseto that invitation is acceptance of that offer. Then it becomes a contract. So the contract you enter into onthe basis of invite to tender, says that you can’t get your money back. The P went into court thinking thatan invitation to tender could be treated as an invitation to treat, not invitation to offer.

M.J.B. Enterprises Ltd. v. Defence Construction(Privilege clause; valid bid only; Tenders

Facts: D invites tenders for construction project. MJB has the second lowest offer. A schedule was missingin the invitation for tenders, & the prices of the tender bids did not reflect their material costs. There wasalso a clause in the tender docs called the “privilege clause” which said that its wasn’t necessary that thelowest/or even any tendered would be accepted. The tenderer that was accepted, had included a note sayingthat their price didn’t reflect the material costs and if that was the case their costs were higher. MJB said thatthis note invalidated the tender. But the D said it was merely a clarification of the bid.

Issue: Whether the inclusion of a “privilege clause” in the tender doc allows the person calling for tenders(owner) to disregard the lowest bid in favour of any other tender, including a non-compliant one? Wasthere a contract A in this case and what obligation did it impose on the owner?

Rule: (i) A privilege clause is only compatible with accepting compliant bids.(ii) In the absence of a privilege clause, you are most likely to be bound to accept the lowest offer.

Analysis: The implied obligation was to accept only a compliant tender. It was an invitation for valid tenders.A contractor submitting a tender is not at liberty to negotiate over the Terms of the tender docs (as lowestbidder did in its note)

Judge says even tho privilege clause isn’t ambiguous, it has to be read in harmony with the rest of the TenderDoc. Since the respondent did breach its obligation to the appellant and others that it would only acceptcompliant tender Contract A breached

Double N. Earthmovers Ltd v. City of EdmontonNo duty to investigate compliance; duty to treat bids fairly; A discharged when B is entered

Facts: City awarded contract to rival company despite non-compliant bid

Issue: Whether the City breached a contract with P by awarding the tender to a non-compliant bid - NO

Rule: When owner accepts compliant bid and enters Contract B, Contract A is fully discharged and ownerhas no further obligations to unsuccessful bidders.


Communication of Offer

Offers need to be communicated in a way that the reasonable person would consider to be capable ofacceptance and the offeree is able to respond (Blair Mutual)

Offers can be communicated to an indiv or a large grp of ppl, (You can’t object by saying that the grpwas too large – Carbollic Smoke Ball)

You must intend to accept an offer (Williams v Cowardine) – BUT you can’t intend to accept unless youare aware of the offer (R v Clarke)

If the circumstances are such that you must have been aware of the offer and you fulfilled the act required,then it will be presumed you intended to accept (Williams v Cowardine)

But if you say you have no knowledge of the offer and/or didn’t to accept, then the court won’t presumeintention to accept (Clarke)

Blair v. Western Mutual Benefit Assn(Must be effective comm. of an offer w/ the intention to deliver the offer capable of acceptance)

Facts: Blair was a secretary and was asked to transcribe meeting notes in which it was said that if she retiredshe’d get a retirement fee. She took that resolution as an offer. Though it was never communicated directlyto her. When she retired they said there was no promise of a retirement.Issue: Whether there was communication of an offer? Was the meeting resolution an offer - NO

Rule: For an offer to be valid, it must be communicated to the person intended to accept it and must becommunication in a reasonable way capable of acceptance.

Analysis: The use of the A’s tech services (to transcribe notes) can’t be meant as an intention tocommunicate the offer. But the offer wasn’t communicated in a way that gave her the option of accepting it(therefore, not an offer) No way of acceptance was created in the offer

Williams v. Carwardine(Must be aware of offer if you intent to accept – as long as you are aware of it & fulfill the conditions,intention to accept presumed and other motives don’t matter)

Facts: P responded to a public ad (handbill) offering reward to info that leads to the discovery of themurderer of D’s bro (P’s husband was involved in murder). P thought she didn’t have long to live and wishedto clear her conscience (motive).

Issue: Whether a contract was formed even though P didn’t confess to claim reward? (P wants reward noweven tho she didn’t know of it before) – Yes, unilateral contract formed

Rule: The motive of an indiv in accepting the contract offered has nothing to with their right to recover [thereward] under the contract because is it difficult to OBJECTIVELY ascertain

Analysis: P clearly performed the terms of the offer [provided info abt murder]. And she must’ve known bcthe ad was posted all over town. A contract was formed with any person who performed the condition,regardless of their motivation


R. v. ClarkeTo accept a contract thru performance, you have to intend to accept, & to do this you must have knowledgeof the offer

Facts: Clarke wants the Crown to pay a reward it had offered for info leading to the conviction of a murderer.But he gave it while he was under investigation himself for murder. It was uncertain whether he was thinkingabout the reward at the time he provided the information. And then later decided to claim the reward

Issue: Whether there was a valid contract? – NO,

Rule: You cannot accept an offer you don’t even know exists, or that you have forgotten exists

Analysis:The law treats intention to accept as significant but the motive behind acceptance immaterialBECAUSE: At the time of giving the info, the reward wasn’t on his mind (tho he was previously aware ofthe award he forgot)

Contracts involve voluntarily assumed obligations, you can accept obligations that you aren’t aware ofbecause you aren’t even aware of the existence of the offer. Thus you can’t accept it

Acceptance should mirror the terms of the offer, if it deviates, it will be seen as a counteroffer

Revocation (Termination of Offer)

Rejection is a response to an offer. It destroys/terminates the original offer, although it may berevived by the offeror. (Livingston v Evans)

Nature of a counter offer counteroffer also terminates/destroys an original offer. Counter offer isnot an acceptance, its in essence a rejection

TEST for counter offer vs request for info: whether a reasonable person in the position of therecipient would regard the response to the offer as introducing a new term into the bargain and notas a clean acceptance of the offer.

o Material nature of the term introduced [See Livingston v Evans] if you change the price ofthe item, that’s a counter offer

Effect of a counter offer is to destroy the original offer

Dickinson v. DoddsYou can revoke an offer expressed or implied any time prior to acceptance; must be communicatedbeforehand directly/indirectly; No binding promise to keep offer open

Facts: D made an offer to sell property to P but then accepted an offer from another buyer. P found out Dwas selling to someone else, then tried to submit his own acceptance of offer

Issues: Is an offeror bound to not revoke the offer and sell to someone else? – No, someone else acceptingis an implied revocation of your offer of acceptance

Rule: a) An offeror is free to withdraw their offer at any point until the offeree has accepted it, so long asthe offeree has not provided any sort of consideration.b) An offeree must have knowledge of a revocation, but explicit communication is not required.


Analysis: A promise to keep an offer open is not binding on the offeror, they can revoke it anytime. If theofferee wants the promise to keep it open off, then they have to provide consideration to prove they willaccept the offer

Byrne v. Van TienhovenRevocation of an offer doesn’t have effect until communication of the revocation is received by the offeree;Postal Rule

Facts: D made an offer on the 1st which was received by P on the 11th and immediately accepted by telegram.But on the 8th the D had sent a revocation of the offer which was received by P on the 20th, after P has alreadyagreed to sell shipment to a 3rd party. So P sued for breach of contract for failure to deliver

Issue: 1) Whether withdrawal of offer has any effect until it is communicated to the person to whom theoffer was made- NO

2) Whether sending a letter of withdrawal is a communication to the person to whom the letter is sent – NO.Postal rule doesn’t apply (only applies to acceptance of offer)

Rule: Revocation is only effective once it has been communicated to/received by the offeree

Errington v. Errington and WoodsUnilateral contract; Exception to revocation: you can’t revoke on part performance w/o giving a reasonableamount of time to fulfill performance requirements

Facts: Father offers to purchase house on the condition that his daughter and her husband pay off themortgage – upon which he would transfer house to them- couple made payments. They couldn’t keep upwith the payments, so the father paid those too. Father dies, Errington wants possession of the house

Issue: Can a unilateral contract be revoked after the death of the offeror

Rule: A unilateral offer cannot be revoked once the offeree entered on performance of the act requested; butit would cease to bind him if the offeree left the requested act incomplete or underperformed

Analysis: Fathers contract was unilateral and he wasn’t bound to transfer the house to them if they failed topay the installments. He didn’t promise the house in return for paying the mortgage instalment

Dawson v. Helicopter Exploration Co(Bilateral contract; Offer could only be accepted by the requested performance of an act)

Facts: D approached P about mining area of his land - wanted to take him there - P in military so neededhelicopter provided by D - P waited for response in arranging helicopter - D responded said they changedtheir minds and were not going to go - later D contracted with another party for the development of the land

Issues: Whether there was a valid contract established through the correspondence? -YES

The issue was of performance. One had to perform in order for the other to perform

Rule: the offeror in a bilateral contract cannot revoke the contract for want of performance if he or she failsto discharge his or her complimentary obligation to perform.


Analysis: Court is saying this was a promise for a promise. One’s obligation was to take into the land, theothers was to pay 10% this is the contract

Livingstone v. Evans(REJECTION & ACCEPTANCE; A counter-offer is a rejection of the original offer; a mere inquiry ofprice is not)

Facts: Evans wrote to Livingstone proposing to sell a piece of land for $1,800. Livingstone wired in return"Send lowest cash price. Will give $1600 cash." Evans responded with "Cannot reduce price." Livingstonethen wrote to accept the original offer of $1,800. Evans no longer wanted to sell to Livingstone, Livingstonesued for specific performance

Issue: a) Whether the 1st telegram from L was a counter offer? - YES

b) If so, did this counter-offer constitute a rejection of Evans offer and free Evans from it? - YES

Rule: when an offer has been rejected it is thereby ended and it cannot be afterwards accepted without theconsent of the one who made it.

Analysis: You can’t accept an offer once it’s cancelled. The offeror can make a new offer, it would have tobe a new contract Distinguish bw a mere request for info and a counter offer (a rejection of the offer, and proposes diff

terms) In this case there was a counter offer A counter offer rejects the original offer

Lapse of Time (Termination of Offer)

Barrick v. ClarkAn offer is open for the period of time specified/or a reasonable amount of time

Facts: P makes offer on D’s property. D makes counteroffer. That letter isn’t received by P but by his wifewho requests that D hold the offer for 10 days. On the 10th day D accepted offer from someone else but onthe 10th day P had also sent a letter of offer/acceptance and deposit cheque.

Issue: what was the reasonable time that the offer could’ve been left open for?

Rule: The offer is open for the period of time specified in the offer , otherwise its open for a reasonableamount of time assessed

Analysis: Case demonstrates that an offer may be terminated if the time passes Reasonable time depends on the circumstances of the case and the terms of the communication bw the

parties


Manchester Diocesan Council v Commercial and General InvestmentsAn offer must be accepted within a reasonable amount of time or it can be considered refused/withdrawn

Issue: Is an offer refused simply by not responding to it within a reasonable amount of time? YES

Rule: Identifies 2 theoretical bases for the rule that an offer is open for acceptance only for a reasonabletime

1. There’s an implication that if an offer isn’t accepted within a reasonable time, it must be treated as awithdrawal.

2. Or if an offeree doesn’t accept an offer within a reasonable time for acceptance, then its treated as arefusal

ACCEPTANCE

A contract isn’t complete until the offerree indicates their acceptance of the offer. It completes a contractand signifies the end of negotiations

The offeree’s acceptance is the consideration for the promise. BUT consideration and acceptance are notthe same. You can accept an offer by performing an obligation you already promised. But that’s notconsideration in the eyes of the law

Who may accept? Only the person to whom the offer is addressed How is offer accepted? Oral, writing, conduct (referable to offer and unequivocal)

Communication of acceptance

Crucial because its constitutes the consideration of the offerees acceptance acceptance must be unequivocal, absolute and unconditional Acceptance involves a manifestation of an intention to be bound. That intention is objectively ascertained Objective test principles can be qualified or deviated in some circumstances. Ex: of the offeree knows

the offeror doesn’t intend to make an offer, but still accepts. The court won’t hold that as a contract

Acceptance should be consistent with mode of acceptance suggested by the offero If offer says to accept by post, that’s what you doo Offeror controls mode of communication and form of acceptance required

The Postal Rule: a posted letter of acceptance takes effect at time of posting (from CL) Rule only applies to acceptance, NOT revocation Rule doesn’t apply where its application would be grossly inconvenient Doesn’t apply if its addressed to someone else accidently by the offeree


Household Fire v. Grant

Facts: D applied for shares in P’s company. P sent the allotment letter to D but it was never received. But Dkept receiving credit on his account w/o knowing. Then company went into liquidation. The liquidatorapplied for the sum sued for from the D. but the D refused to pay bc he wasn’t a shareholder

Issue: When do acceptances becoming binding when they are sent via mail? - It’s a complete final andbinding contract once an acceptance of an offer is POSTED

Rule: The offer is accepted when the acceptance [letter] is placed in the mail/posted, not when the offerorreceives the acceptance

Analysis: Judge decides to treat the post office as the agent of both parties

So, as soon as the letter of acceptance was delivered to the post office, the contract is made as completeand final and absolutely binding.

Holwell Securities v. Hughes(Postal rule exceptions: If “notice” is expressly required OR if its application would produce inconvenienceand absurdity.)

Facts: D granted P 6 month option to purchase property & stated that the option had to be exercised by“notice in writing”. P’s lawyer sent letter of acceptance to D by mail, but it was never delivered. D refusedto sell P the property

Issue: What constitutes “notice” - The postal rule does not apply in situations where a notification ofacceptance has been specified. [RULE]

Analysis: The postal rule does not apply where an express term in the offer specify that acceptance mustreach the offeror; or if its application would produce manifest inconvenience and absurdity; or if havingregard to all the circumstances, the negotiating parties cannot have intended that there be a binding agreementuntil the party accepting the offer had in fact communicated acceptance

Brinkibon v. Stahag Stahl

(Instantaneous communication; multi-jurisdiction; Acceptance by fax is effective upon its receipt)

Facts: The appellants (buyers) sued the respondents (the sellers), an Austrian company, for breach of analleged contract for the supply of steel. There was a provision which said that the buyers must show thecontract was made within the jurisdiction

Issue: Where is a contract created when it is between parties in two jurisdictions?

Rule: In cases of instantaneous communication, the contract is only complete when the acceptance isreceived by the offeror and the contract is made at the place where the acceptance is received.


ProCD v Matthew Zeidenberg(Shrink Wrap; electronic license agreements)

Facts: ProCD is the manufacturer of a software program - use price discrimination to charge consumers lessthan commercial users for profitability - company turned to contract by declaring that all software comeswith restrictions stated in the enclosed license - Zeidenburg purchased a consumer package and ignored thelicense by reselling the product online for cheaper (as commercial)

Issue: Did Zeidenburg breach license agreement with ProCD? - YES

Rule: Shrink-wrap licenses are enforceable, unless their terms are objectionable on grounds applicable tocontracts in general

Analysis: A vendor can invite acceptance of offer through conduct. A buyer can accept by performing theacts the vendor proposes to treat as acceptance

ProCD proposed a contract that a buyer would accept by using the software after reading the licence.Zeidenberg did, he had to always see the license displayed on the screen before using the software andclick “accept”

A buyers accepts goods when after an opportunity to inspect, he fails to make an ineffective rejection ProCD did offer an opportunity to reject if the buyer found the licence terms unsatisfactory

Eliason v. Henshaw(Offeror’s Control; The offeror can stipulate the time and the manner of acceptance)

Facts: E wanted to purchase flour from H - terms of the agreement stipulated that H write by return of wagon– but the wagoner would not be returning - a response was written and dated a day later than the date receivedand sent to Georgetown on the next available wagon - E acknowledged receipt of the letter but said theresponse was too late and not returned by wagon

Issue: Whether there was a contract? – NO, E has the right to dictate terms upon which they would purchaseflour unless complied with they are not bound by them

Rule: Offeree must follow the terms of the offeror (time/place/manner of acceptance) for an acceptance tobe valid and binding.

Analysis: the contract specifically mentioned to which place the offer was sent, constituted an essential partof the Ps offer. So an accepted communicated at a diff place than in the offer, imposes no obligation bindingon the D

Silence Silence cannot be acceptance Exception: when offeree is silent but takes the benefit of the offer (St.

johns tugboat)

St. John Tug Boat Co. v. Irving Refinery LtdPositive conduct indicating acceptance will show there was acceptance

Facts: SJ had a deal with Irving to supply them use of tugboats - with no firm arrangements having beenmade, SJ stated that they would only have two boats available unless special arrangements were made, andadvised Irving to look elsewhere for help - SJ ended up having two more tugs available, and told Irving that


they could use them if they paid $450/day to have them "on call" until a certain date - this date passed, andSJ continued to keep the tugs on call and Irving continued to use them for a few months - when billed forthese months after the original end of the contract, Irving refused to pay

Issue: Whether a party’s actions/conduct can imply their acceptance of an offer

Rule: conduct unaccompanied by any verbal or written undertaking can amount to acceptance of an offer soas to constitute a contract

Analysis: TEST for determining if conduct = acceptance:

The test is objective. Despite intentions, the conduct is still of a reasonable person SJTB were essentially serving Irving a new offer every time they sent them an invoice and kept the

tugs on call, and that Irving continued to imply acceptance by their continuation of using the service.

Felthouse v. Bindley

Silence does not constitute acceptance in a bilateral contract

Facts: P and his nephew had diff prices for the horse. P wrote letter to his nephew offering to split thedifference, telling him when to send the horse and that if he didn’t hear anything back by march 25, thenhe’d consider the horse his at 30 pounds and 15 shillings. Nephew sent no reply. On feb 25th nephew heldan auction sale of his farming stock and told D (Bindley) to reserve the horse though, but D forgot and thehorse was sold.

Issue: Whether the nephew had accepted P’s offer to constitute a binding contract? – NO At the time of sale, who was the owner of the horse?

Rule: You cannot impose silence as a means of acceptance on the offereeAcceptance cannot be assumed if there is no notification of acceptance, or implied acceptance through actionpresent.

Analysis: What the nephew did wasn’t enough bc of the lack of communication, the other party wasn’taware, as they should be, that the nephew was accepting the offer

Battle of Forms:

RULE in Battle of Forms cases ‘the traditional offer and acceptance analysis must be adopted unless thedocuments passing between the parties and their conduct show that their common intention was that someother terms were intended to prevail’ The paradigm battle of the forms occurs where A offers to buygoods from B on its (A’s) conditions and B accepts the offer but only on its own conditions

Two approaches to resolving ‘battle of forms’ problems

1) Traditional offer and acceptance approach. The first letter sent was the offer, the second was a counteroffer, but the contracted concluded on the acceptance of the last letter (offer accepted) term is putforth last without objection is final last shot” doctrine has been explained as meaning that where conflicting communications are

exchanged, each is a counter-offer, so that if a contract results at all it must be on the terms of thefinal document in the series leading to the conclusion of the contract


2) Second approach is to examine all the docs passing bw the parties and then determine from the conductof the parties and transaction as a whole which terms the parties accepted and agreed on. So focus on thepoint at issue, in this case the price variation, and then determine from the conduct and transaction as awhole this is the mechanical approach

Butler Machine Tool v. Ex-cell-o Corp

Facts: Butler sent an offer to E to sell some machinery - with it was a price variation clause - E replied andsaid they would order the machinery, but on their own standard terms which did not have a price variationclause - Butler replied on the tear-off slip from E's terms reading that they would accept the order on theterms and conditions stated therein - upon delivery B asked for more money on the basis of the clause

Issue: which form, or which part of which form, is a term or condition of the contract? Is the price variationclause a term of the contract? - NO

Rule: Term is put forth last without objection is final

Tywood Industries Ltd. v. St. Anne-Nackawic Pulp & Paper Co. Ltd

Facts: D’s invitation to tender was Sept 19, 1977, titled “a request for quotations”, on the back were 13T&C, none dealing with arbitration. One term said no modification of the condition of sale. P sent revisedproposal w/ same T&C submitted on Nov 7. Then two purchase orders from D on Jan 6 and July 3 w/ diffT&C(including arbitration clause) . The P didn’t sign or return the purchase order. But delivered the goodstill. The conduct of both parties indicates that neither party considered any terms other than those foundon the face of the docs

Issue: Whether the arbitration clause was part of the contract? – NO. The arbitration clause was tooimportant not to pay attention too. So its not binding

Rule: One cannot sneak terms into contracts without proper notification

Tekdata Interconnections Ltd v. Amphenol Ltd

Facts: Tekdata bought connectors for harnesses from Amphenol. T said some connectors were deliveredlate and weren’t fit to sell and said the contract of purchase was on its order. Amphenol said no, the termsof the purchase contract were on its acknowledgement of purchase order and those terms excluded/limitedits liability for any breaches of contract

Issue: Whether the traditional offer and acceptance analysis be displaced by reference to the conduct of theparties over a long terms relationship

Rule: According to traditional view, unless any other docs were passed bw the parties, that would be thefinal contract terms

- So even tho their conduct suggested T’s terms were to apply, A’s terms must apply


CERTAINTY OF TERMS

If an agreement is to be enforced as a contract the parties to it must have reached agreement on all itsessential terms which must be expressed with sufficient clarity to permit enforcement.

If the terms of an agreement are incomplete, unclear, ambiguous or uncertain it will often be assumedthat the parties did not intend their agreement to be legally binding, or that they have not yet reached afinal agreement.

EXCEPTION: Courts will tolerate a degree of imprecision in commercial agreements (Hillas v Arcos)o Business ppl/layman can proceed on the basis of trust and business customso Courts are sensitive to this fact that not everyone can’t be legally precise, so they tolerate a

degree of imprecision in commercial agreemento Doesn’t always mean that uncertainty = void contract the courts will strive to save these

agreements if possible

There is a close relation bw certainty and an intention to be bound or intention to create legal relations.[R v CAE Industries]

o Where parties intent to be bound, they express themselves clearly with precision bc theyunderstand they are assuming certain obligations or imposing certain obligations on themselves

SOMETIMES Courts can imply terms into the contract to save the agreement -> like saying the priceshould be a reasonable price, usually based on Sale of Goods Act that is market value at the time

Sale of Goods Act RSBC 1996 c. 410 s. 12(2) ‘If the price is not determined in accordance with subsection(1), the buyer must pay a reasonable price’. Usually market value. Reasonable price is a question of facts depending on the circumstances

Sources of Uncertainty1. Absence of essential terms (e.g. price, , nature of good, quantity, delivery date) [Ex: May &

Butcher] Ex: if the parties are silent (on the price for ex. If they agree to agree. That’s not definite) or they omit

to include essential terms in the contract

2. Ambiguity and vagueness in expression or internal contradictions (e.g. ‘best efforts’, ‘good faith’, ‘acthonorably’)

3. Failure to complete the contracting process (e.g. ‘subject to contract’ ‘informal agreement to bereduced into writing at a latter date’ ‘performance preceding contract’, ‘agreement to agree’ [BawitkoInvestment]

An agreement to negotiate, like an agreement to agree, is unenforceable, is simply because it lacksthe necessary certainty. The same does not apply to an agreement to use best endeavours (goodfaith).

There is a duty of honest performance which requires the parties to be honest with each other inrelation to the performance of their contractual obligations (see Bhasin v Hrynew)


R. v. CAE Industries LtdVagueness; Commercial contract; Court says they can resolve uncertainty by method of interpretation, byfinding the meaning of the words

Facts: Negotiation in 1969 bw Cdn govt and CAE abt govt taking over and running an air base no longerused by Air Canada. The negotiations stated that 700,000 hrs of direct labour per annum were required forthe operation of the base. Govt said it could only provide 40,000-50,000, but it would try “its best efforts”to get addition work from other govt depts.. And crown corps to meet the 700,000 hrs. Then 1971 theworkload at maintenance decreased and CAE sued for breach of contract.Issues:

1) Whether they intended a contract by the first letter In the end the court says, YES there’s a binding contract bw the parties. By looking of the

circumstances of the two commercial parties. They had also performed part of the contract

2) Was the contract vague, uncertain or incomplete?

Judge says NO the contract isn’t so vague/incomplete so as to render is unenforceableo It doesn’t leave anything unsettled that was necessary to settle bw the parties

Court says that an intention to enter into the contract is essential to forming a contract

Rule: (a) an intention to enter into a contract is an essential element of a valid contract and that suchintention may be gathered from the circumstances surrounding the contract.

(b) The fact that parties cast their agreement in an unusual form will not prevent a court from giving effectto it. Through a process of interpretation the court will find meaning to the words and phrases used by theparties, including words that appear vague at first sight.

Analysis: So in this case “best efforts” = “best endeavours” leave no stone unturned “best efforts” created a broad obligation to secure for CAE aircraft repair and overhaul work up to

700,000

Incompleteness and Agreements to Agree

May & Butcher v. R“an agreement to agree is not a contract”

Facts: Arrangement for purchase of “tentage”- terms of arrangement left price to be subsequently agreedupon “from time to time” as tentage became available

Issue: Whether or not the terms of contract were sufficiently defined to constitute a legal biding contractbw the parties – NOT BINDING, You can’t agree to a contract that hasn’t determined the vital termsof the agreement yet

Rule: Agreement to agree on a price is not an enforceable contract


Hillas v. Arcos LtdException case; Commercial agreement;

Facts: P agreed to buy “100,000 standards” of timber from D – agreement included provision stating Pshould have option of entering contract with D for purchase of timber the following year with a 5%reduction price – D refused to sell to them the following year

Issue: Whether the option provision reproduced above was a binding agreement – Yes

Rule: Courts will tolerate a degree of imprecision in commercial agreements

Analysis: When considering uncertainty, you cannot look at a passage or word in isolation, they must beread in context of whole contract, in given circumstances - “reasonable time of delivery” is implied byindustry custom

This is an instalment contract goods delivered in instalment. So they don’t want to fix the prices sothey can account for any extra shipping costs or something that may arise per shipment

Foley v. Classique Coaches( “reasonable price” overcomes uncertainty; past performance to determine contract)

Facts: D operate fleet of motor coaches. They agree to purchase land from P. Sale made subject to Dentering into a supplemental agreement to purchase all the petrol required for their service station businessfrom the P. Petrol to be sold at a price agreed to by the parties in writing from “time to time”. Then D triedto get out of the contract to buy petrol elsewhere

Issue: Does the fact that no price is quoted mean that the contract was void for uncertainty? - NO

Rule: Past performance will indicate that a contract is binding (reliance interest).

Analysis: Court saved the transaction bc the parties had been performing the transaction already for 3years, so there was something to save The parties believed they already had a contract. There was an underlying transaction already

Good Faith (Bhasin v Hrynew)

Good faith contractual performance is a general organizing principle of the common law of contract whichunderpins and informs the various rules in which the common law, in various situations and types ofrelationships, recognizes obligations of good faith contractual performance

this organizing principles underlies all the applicable situations. It exemplifies the notion that incarrying out the obligations of the contract the parties must have appropriate regard of the legitcontractual interests of the other parties don’t enforce unreasonable obligations, or try and takeadvantage of the other party

How does the organizing principle manifest itselfo It manifests itself in existing doctrines like implied terms situations where relationships

continue to be relevanto New situations may arise in which you may want to impose this standard and act in good faitho Good faith is an organizing principle that is a standard in all these cases


Rule: That there is a common law duty which applies to all contracts to act honestly in the performanceof contractual obligations. (Bhasin v Hrynew). It applies to all contracts entered into intentionally.

Agreements to Negotiate : Case Law

Empress v. Bank of Nova ScotiaFacts: The first lease bw Empress and BNS expired and a new lease was made which included arenewal clause, which said basically that the for every renewal term the rent cost would change to themarket rental prevailing at the time of the renewal terms OR be mutually agreed upon by both parties.So when they renewed in 1989, the Bank suggested a rental rate of $5,400.No written reply from ETwas received . Bank sent letter again saying it was willing to negotiate and it was advised this wascurrent market rental rate. ET said ok.

Issue: Whether the renewal clause was void either for uncertainty or as an agreement to agree. – Yes

Rule: agreements to agree cannot be enforced

Analysis: The mutual agreement also means that there’s an implied term that the landlord will negotiate ingood faith with the tenant to reach an agreement on market rental AND that the agreement won’t beunreasonably withheld. Basically: negotiate in good faith and not withhold agreement unreasonably“best efforts. But Empress didn’t

Manpar Enterprises Ltd. v. Canada

Facts: Manpar (M) had 5 yr term contract with the crown to remove and sell sand and gravel located on aNative reserve (Skyway Indian Band). Also included a renewal terms, this indicates both parties expectedthe operation to last over 10 yrs. But when Manpar tried to renew contract, renegotiations failed. SoManpar sued for damages

Issue: Was the renewal clause void for uncertainty? – YES, court can’t imply terms unless both partieshad that in mind

Rule: the implication of a term into a contract can (in this instance a duty to negotiate in good faith) onlybe made if it is the case that both parties would be likely to agree that such a term should be implied (i.e.officious bystander test).

Analysis: The matter of future renewal, if any, was purposefully left intentionally at large to be“renegotiated”. No enforceable agreement arose out of the language of the renewal clause. There wasno duty to negotiate in (ie like fair market value”)

Wellington City Council v. Body Corporate(New Zealand case; cannot enforce agreements to negotiate in good faith because “god faith” is subjectiveand cannot be measured (lack of certainty)

Facts: Parties had a “process contract” which obliged P to “negotiate in good faith and for not less thanmarket value” with DIssue: Whether there was a legally enforceable contract – NO

Rule: An agreement to agree lacks necessary certainty and is thus unenforceable


Bawitko Investments Ltd v. Kernels Popcorn Ltd(Anticipation of Formalization)

Facts: agreement bw parties for a franchise to operate a retail store at a shopping centre. B says K verballyagreed on the date to grant them the franchise agreement to the store they shook hands K said “you’vegot a deal”

BUT B had agreed to the Apps draft form, he just assumed that all the additional franchise agreements theydiscussed would be included too (from the April 18 meeting where all this went down

Issue: Whether an oral agreement in contemplation of a formal contract is enforceable?

Rule: An oral agreement in contemplation of a formal agreement is not enforceable due to lack ofcertainty; it was a contract to form a contract

Analysis: Judge says the fact that a written doc is prepared and sign afterwards, doesn’t alter the bindingvalidity of the original [verbal] contract

But if the original contract in incomplete or not settled, then its not an enforceable contract until aformal one has been drawn up contract to make a contract is NOT a contract

INTENTIONS TO CREATE LEGAL OBLIGATIONS (RELATIONSAND FORMALITIES)

Intention to create legal relations as an essential and separate element of a valid contract NOTE: Civil law doesn’t require consideration

TEST: Objective assessment of agreement and surrounding circumstances Ex: a contract around a family/personal context can mean there were no real intentions to be legally

binding

How to ascertain the legality/consideration of an agreement:

The wording of the agreement and its terms, if its in writing, the setting the agreement was made in,relationship bw the parties (stronger presumption for commercial than family), duration of the agreement

EXCEPTION TO THIS RULE: *** the intention to create legal relations can be expressly excludedfrom the contract like in Rose and Frank v JR Compton Bros

Excluding intention to be bound: Approaches:o Express indication of intention to exclude enforceabilityo Implied exclusion of enforceability


Balfour v Balfour(Personal/social context: no intention to create legal relationship)

Facts: P suing her husband bc he promised to pay her $30/mo until he returned to England, then a fewmonths later he mailed saying it was better if they stayed apart

Issue: Whether the husband’s promise was legally binding? – NO

Rule: Agreements bw spouses are mutual promises outside the realm of contracts

Rose and Frank Co v. JR Crompton and Bros(EXCEPTION CASE; Commercial context: no intention to create legal relations)

Facts: R&F were the sole agents if the D’s paper distribution company. Until 1913, they had vague butlegally binding agreements. Then they signed a new agreement which said: That the agreement wasn’t aformal legal agreement, but was a definite expression and record of the purpose and intention of the partiesto which they honourably pledge themselves too. D refused to fulfil some of the Ps orders for theirproducts and terminated the agency agreement

Issue: Whether there is a contract despite the clause saying it’s not legally binding? – NO

Rule: There is a presumption there there’s intention to create legal intentions unless arrangementsexplicitly state otherwise

Toronto Dominion Bank v Leigh Instruments Ltd

Facts: TD is financing a subsidiary of a parent company Plessey, and L is the subsidiary - the bank opens aloan for L and they go bankrupt so the bank goes after P since L could not pay - P sent comfort letters toTD saying that their subsidiary company L “be managed in such a way to meet their debts”

Issue: Whether there was intention to create a contract? - NO

Rule: Comfort letters are generally deliberately designed with the intention not to create enforceableobligations – but this can be rebutted by looking at the entire context, the factual background, and thewider comm. reality

Canadian Taxpayers Federation v Ontario Minister of Finance

Facts: Dalton McGuinty makes and signs a promise during election campaign not to raise taxes, but thenafter being elected he does raise taxes

Issue: Whether there was an intention to enter into legal relations? – NO, not binding contract

Rule: Parl supremacy deems that election promises do not amount to an offer to contract and do not createlegally enforceable rights


Analysis: Politicians make lots of promises during the course of elections. By putting the promise in writingat a press conference the promise drew favourable publicity as well as praise from the CTF. Favourablepublicity of this kind does not, however, amount to consideration so as to constitute a binding contract withthe CTF. While favourable publicity was expected there was no agreement to exchange the written promisefor a specific program of publicity.

Formality: Contracts Under Seal and the Requirements of Writing

The general rule: the common law does not require contracts to be made in any particular form Though there’s higher accountability for written than oral

This is the only CL rule imposed on formal requirements: Promises under seal (Royal Bank v Kiska –‘any representation of a seal made by the signatory will do

Contracts Under Seal• Historically, promises had to be sealed for contract to be valid• Today, a seal is not necessary but is still sufficient so if there is a seal, it is binding

Note: If there is a seal, consideration is not required

STATUTORY EXCEPTIONS (to the general rule that there’s no formalities in CL): Statute of Frauds Has formal requirements to facilitate proof and prevention of fraud

Royal Bank v Kiska

Facts: P brought action on a guarantee which had been signed by D. At the time of signature, there wasn’tan actual wax seal but there was the word “seal” printed on the doc

Issue: Whether sufficient formality is preserved by the inclusion in the printed form of the bracketed word“seal” – NO, it’s merely an invitation to place a seal at the spot

Rule: The word “seal” is not sufficient to count as a seal - you need a seal in some form affixed to thedocument

Delgman v Guaranty Trust

Facts: Regarding part performance of a contract. The resps aunt told him that if he was good to her etc,she would leave him her property in her will. Regarding part performance of a contract relating to landsunenforceable at law

Issue: Whether this constitutes a valid contract – YES, valid but unenforceable


ENFORCING PROMISES

A promise can be enforceable (1) as a contract, (2) as a deed, (3) by way of estoppel

Contract:• A promise is not a binding contract unless it forms part of an agreement in accordance with the

principles of offer, acceptance, certainty, and completeness• The fact that a promise is part of an agreement, however, is not sufficient to make it a binding contract• The promise must always (1) be supported by consideration, and (2) the promisor must intend to create

legal obligations [(3) requirement occurs in some cases where it must also be in writing]

Deeds:• A promise that is signed, sealed, and delivered is binding as a deed (which is a legal instrument distinct

from a contract but with virtually the same legal effect)

Estoppel• Promises are potentially harmful social acts in that promises often inspire their recipients to act in

reliance on the expectation that the promise will be performed• The doctrine that is concerned with remedying this kind of promissory mischief is equitable in origin

and is known as “promissory estoppel”

CONSIDERATION

How to answer consideration questions: (1)Isolate the promise, (2) look for the consideration proposed,(3) that apply the rules of consideration to that proposal

In Canadian law the principal test used to distinguish between enforceable and unenforceablepromises is whether the promise is ‘supported by valuable consideration’. A promise is onlyenforceable as a contract if the promisee can show that he provided consideration for it.

CONSIDERATION: A valuable consideration, in the sense of the law, may consist either in some right,interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility,given, suffered, or undertaken by the other’

What is being given in return for the promise consideration

Not all promises can give rise to legal obligationsMoral obligations aren’t enforceable in law The diff bw moral and legal obligation is if the promise is supported by consideration

ALL promises must be supported by consideration except ‘EXCEPTIONS’o Promise executed under seal the seal is a substitute for considerationo Doctrine of promissory estoppel

The requirement of consideration is the test to distinguish bw enforceable and unenforceablepromises


Consideration must be bargained for, there has to be negotiation, it has to be requested bythe other party and then you provide

Consideration is given in return or a promiseo “price” doesn’t always mean money. It means what you provide in return for the promise

The promisee provides something in return for something else opposite of law of gifts 2 types

o Executory: when the D’s promise is made from a counter promise by the P ex: agreement bw seller and buyer for the sale of goods on further agreement on

credito Executed: promise for an acto Ex: offer of a reward for an act.

This isn’t past consideration (situations when the act is done before the promise;This is when the act is done and then the promise is fulfilled

RULES:

1. Past consideration is not good consideration:The promise to pay for work already done is notwithout more enforceable

EXCEPTION: Lampleigh v Brathwait; Eastwood v Kenyono The only exception is that the acts precedes the promise, but the act was requested by the

promisors but both parties understood and intended that it would be paid for one day

2. Consideration must move from the promisee: Promisee must show that he provided theconsideration for the promise

Consideration should come from the promisee (person to whom the promise was made) The benefit of consideration doesn’t necessarily go to the promisor

o Ex: I promise you money to take my daughter to school the benefit of the considerationis going to the daughter, but the benefit of the promise is defs going to the promisee (persontaking the kids to school)

EXCEPTION: Doctrine of Privity!

3. Consideration must be sufficient, consideration need not be adequate Consideration must be something of value in the eyes of the law

Thomas v Thomas

Facts: Prior to his death, Mrs. Thomas’ husband expressed he wished his wife to have the house in whichhe lived - defendant consented to carry out the intentions and entered agreement with Mrs. Thomas -agreement stated she would pay defendant £1 yearly towards ground rent – defendant now claims therewas no consideration

Issue: Was there sufficient consideration? – Yes, the rent and that she would maintain and repair thepremises

Why was respect for the testator’s wish not considered good consideration in the eyes of the law? - Its pastconsideration given before the promise was made


Rule: ‘Motive is not the same thing with consideration. Consideration means something which is of valuein the eyes of the law moving from the plaintiff’

Analysis: Motive is subjective. It comes from the promisor but for consideration we have to look atsomething which is being given by the promisee (not the promisor)

Governors of Dalhousie College v The Estate of Arthur Boutilier

Facts: Boutilier promised to pay P $5,000 in a campaign run by the university to raise funds with terms ofpayment "as per letter from Mr. Boutilier” - no letter ever followed and Boutilier fell on hard economictimesand could not pay - he acknowledged that he still intended to pay, and would do so when he could afford to-he died, and Dalhousie claimed against his estate for the money

Issue: Was there sufficient consideration to enforce the promise? - NO

Rule: A gratuitous promise does not have sufficient consideration to be considered a binding contract unlessthe money was given for a specific purpose which can be seen as of some benefit to the promisor.

Analysis: consideration in subscription of others not good consideration bc there’s no relationship bwthem. The consideration isn’t coming from the promisee (College), but from other ppl

consideration can be a promise in return, but not in this case, bc this promise from the collegewas never even requested

Wood v Lucy, Lady Duff Gordon

Facts: L was a fashion designer that hired W to help her make money through exclusive rights to place herendorsement on the designs of others and sell and market them - in return she was to have one half of all theprofits from any contracts he made - L broke the contract by placing her endorsement w/o W’s knowledgeand withheld the profits

Issue: Whether there was sufficient consideration to enforce a promise – YES

Rule: Example of terms being implied using the ORP business efficacy approach

Past Consideration Consideration made in the past is no consideration at all (Eastwood v Kenyon)

o The promise should always precede the act, not come after it Exceptions: Lamleigh v Brathwait

Eastwood v KenyonFacts: P is Sarah’s guardian, borrowed money from Blackburn (to spend on Sarah’s education) in returnfor a promissory note. When Sarah came of age she promised the P she would repay the amount of thenote, which she did with 1 yr interest. Sarah married D, who had also promised to pay the amount too, andwhen he failed, P sued him

Issue: Is the consideration sufficient to form a contract? – NO, Ps consideration was paying for Sarah’seducation BUT this was not was not good consideration (it was past consideration)


Because this promise was made after the fact, after she was already educated. She took care ofSarah then offered that as consideration in return for promise of the repayment of the loan. Thisis consideration that had already passed

Rule: Generally speaking, past consideration is no consideration (b/c there is no mutuality and thereforenot done in light of the other promise/no reciprocity)

Lampleigh v Brathwait(EXCEPTION CASE – past consideration sufficient

Facts: D murdered someone and requested the P to work and seek him a pardon from the King. P travelledat his own expense to the King and obtained for the D a pardon. After the pardon was granted the D promisedto give the plaintiff £100 but did not fulfill that promise.

Issue: Whether there was sufficient consideration to enforce a promise - YES, past consideration BUT:This past consideration was sufficient bc it was requested for (one of the exceptions to the past considerationrules)

Rule: Past consideration is no consideration however sometimes past consideration is consideration IF (1)the past act was done at the promisor’s request (explicitly or impliedly) and (2) the parties at the timeunderstood there would be a conferrable benefit in the future

Performance of Existing Duties

Can you enforce such a contract for which the consideration is already a pre-existing legal contractual duty(could be statutory duty, contractual etc)

A promises to pay B a sum of money in return for B’s promise to perform a duty imposed by the law. Shouldthe law enforce A’s promise?

Yes: Promotes freedom of contract AND Such agreements may offer some practical benefitsNo: Enforcing such agreements encourages extortion, duress and other forms of unconscionable dealings

Public Duties

A promises to pay B in return for B’s performance of, or promise to perform a public duty imposed on B bylaw (e.g. policing, giving evidence in court under a subpoena, maintaining ones child)

Legal Position: you cant use an existing public duty as consideration bc you’re already under anobligation to do the act, you haven’t provided anything of value in the eyes of the law (consideration)

‘EXCEPTION’: B’s performance of his existing public duty is sufficient consideration to make A’spromise enforceable if B does something more than the public duty entailed You have todemonstrate you did something more beyond the existing public duty in order for it to be used asconsideration for a promise


A Duty Arising Under a Contract between the Promisee and a 3rd Party

B has a contract with C. A, a stranger to that contract, makes a promise to B in return for B performing, orpromising to perform, one or more of his obligations under that contract (i.e. the contract with C)

Legal Position: Notwithstanding the pre-existing contractual duty owed to C, B provides sufficientconsideration for A’s promise by performing or promising to perform duties arising under his contract withC

Justification: A obtains direct contractual relations with B which allows him to enforce that performance. Bsuffers a detriment by opening himself up to two potential actions for breach

Pao On v. Lau Yiu Long(New principle : Promise to perform a pre-existing contractual obligation to a third party can be validconsideration to enforce a promise)

Facts: P owned all the shares in a private company, Shing On, which owned a bldg. D were shareholders incompany Fu Chip which wanted to buy the bldg. P agreed to seell all their company shares to Fu Chip for4.2 million shares in that company. But they kept 2.5m shares and a subsidiary agreement was that the Dwould buy back from P those shares at. $2.50/share. But then the P wanted to cancel sub agreement andreplace it with simple guarantee that Fu Chip shares would retain their value. D agreed and took asconsideration the fact that P agreed to sell its ShingOn shares. But then the price of Fu Chip shares felldramatically and the D refused to fulfill their guarantee

Issue: Whether past consideration was sufficient consideration to enforce the promise – YES

- P says the consideration was that they were going to enter into the main contract with the public company but these were owed to the company, not to the D, But court says that consideration owed to a 3rd

party is sufficient

Rule: The promise to perform, or the performance of pre-existing contractual obligation to a 3rd party canbe valid consideration

Analysis: This case decides that an act done before the giving of a promise may be valid consideration forthat promise if the act had been done at the promisor's request, the parties had understood that the act was tobe remunerated either by payment or conferment of a benefit and the payment or conferment of a benefitwould have been enforceable had it been promised in advance This was a promise to be performed inthe future though made in the past

A Duty Arising Under a Contract Between the Promisor and the Promisee

A has a contract with B. A makes a new promise to B to secure B’s performance of one or more of theobligations owed under their pre-existing contract.

Legal Position: The performance of the pre-existing contractual obligation owed by B to A, or the promiseto so perform is not sufficient consideration for A’s new promise

EXCEPTION: Something new has occurred. You have to demonstrate that you’ve conferred somebenefit or suffered some detriment in order to enforce the new promise


Stilk v MyrickThe performance of a pre-existing obligation does not qualify a fresh or valid consideration thus, suchan agreement to vary an existing contract remains unenforceable

Facts: Action for a seaman’s wages on a roundtrip voyage from London to the Baltic. P (seaman) was to bepaid 5ls/month. During the voyage, 2 crewmembers deserted and the captain entered into an agreement withthe rest of the crew that they could divide the wages of the deserting 2 men if he couldn’t replace them atone of their stops, which was found impossible

Issue: Whether the P was entitled to a higher rate of wages as promised by the captainwas there sufficientconsideration? – NO, it wasn’t sufficient bc: They weren’t doing anything extra bc they were already boundto do that based on their original contract

Rule: Performance of a pre-existing duty isn’t legally sufficient consideration

Gilbert Steel v. University Construction Ltd(Promising to do something that you already have to do is not consideration)

Facts: GS has contract to deliver steel to UC – GS wants to raise prices – GS alleges UC orally agreed toprice increase - UC accepts deliveries of steel against invoices reflecting new price but makes unrevisedpayment amounts resulting in balance owing to GS

Issue: Whether the oral agreement was legally binding upon the D or if it failed for lack of consideration –Lacked consideration, P was promising something they were already obligated to do

Rule: A prior duty owed to the promissor is not legally sufficient consideration.

Analysis: The mutual abandonment of rights under the old contract and its substitution with a wholly newcontract, and the increased credit offered to the defendant were proposed as consideration. this arg. failedb/c the 2nd agreement was oral and the first one was written, but may be applicable in other cases - you canalwayscreate a new contract and it would not be impossible for the Court to find that the making of a new agreementrescinded the old one

Greater Fredericton Airport Authority Inc. v. Nav Canada(EXCEPTION CASE: overturns rule from Stilk v Maryk; trying to find mutual benefit)

Facts: Nav refused to relocate ILS equip unless Airport agreed to pay for new equip - Airport maintainedit wasn’t responsible for costs but they wanted to ensure runway operation - Airport signed a letter underprotest to pay the costs - on basis of letter, Nav acquired and installed the equipment however, Airportrefused to make the promised payment

Issue: whether the promise by the Airport was supported by consideration from NAV (for agreeing to it) –NO BUT still allowed bc: bc as a matter of commercial efficacy, it sometimes becomes necessary toadjust the parties respective contractual obligations and the law must protect their legitimate expectationsthat the modifications/variations will be adhered to and regarded as enforceable OPPOSITE OF STILK

Rule: a post-contractual modification, unsupported by consideration, may be enforceable as long as it isestablished that the variation was not procured by economic duress.


William v Roffey Bros(EXCEPTION CASE: consideration valid under pre-existing contract)

Facts: D entered into contract to renovate flats. They subcontracted the P to carry out carpentry work on theproject for 20,000ls. During the course of work, the P encountered financial problems. D became worriedthat P might not complete the subcontract on time, bc D was potentially liable to the owners under an agreeddamages clause if the entire reno wasn’t complete by the due date. agreed to pay P 10,300 extra at a rate of575/per flat. The D made one payment of 1,500 under this agreement and the P completed 8 more flats. Butwhen D stopped payments, P stopped work and claimed over 10,000 in damages

Issue: whether there was consideration for the D’s oral promise to pay an additional price at the rate of 575/completed flat? – YES, [Analysis] Even tho the P didn’t undertake to do any additional work from whichhe had originally agreed to to do anyways, but the terms on which he was to carry out the work were variedand that variation was supported by consideration the benefit to P can be the consideration for P’s promise,which makes its legally binding he wouldn’t be held in liability to his original contract, didn’t have tofind a new subcontractor etc

Rule: Promising to do something that you already have to do may be consideration if (1) there is no duresswhereby you are forcing someone to pay for something that they would already be getting and, (2) if thereis practical benefits (commercial advantage) flowing to each both party

PART PAYMENT: A Duty Arising Under A Contract Between The Promisor AndThe Promisee: Promises To Accept A Lesser Payment

A owes B $200. B promises to accept $150 and to treat the debt as discharged. B subsequently sues to

recover the outstanding $50

Legal position (at common law): The payment of a lesser sum on the day in satisfaction of agreater, cannot be any satisfaction of the whole or a promise by a creditor to accept a smalleramount in the payment of a debt is void for a lack of consideration and therefore, will not constitutean ‘accord and satisfaction’.

EXCEPTION: Promissory Estoppel

Section 43 – Part Payment

Legal position (under statute) Law and Equity Act (BC) s. 43 ‘Part performance of an obligationeither before or after a breach of it, when expressly accepted by the creditor in satisfaction orrendered under an agreement for that purpose, though without any new consideration, must be heldto extinguish the obligation’. NOT ENFORCEABLE BY CL

Section 43 outlines the circumstances where part payment will extinguish a debt. It providestwo methods of determining when part performance will extinguish an obligation:

a. Part performance may be "expressly accepted by the creditor in satisfaction”


In this situation it’s when there’s an express unilateral acceptance by the creditors.There’s no prior agreement bw the parties, but a part payment is made and thecreditor accepts it

b. Part performance may be "rendered in pursuance of an agreement for that purpose” This is when there is already a prior agreement to accept the part performance

In respect of an express acceptance the onus is on the payor (person paying) to prove that thepayee has expressly accepted the part payment as full payment

o So there has to be something more than just part payment the mere receipt of paymentwouldn’t be enough

In respect of ‘an agreement for that purpose’, the agreement is subject to the general commonlaw on contract including the doctrines of duress, undue influences, unconscionability, mistake etc[See Process Automation Inc].

Foakes v. Beer(the payment of less can never be satisfaction of the whole This rule has been modified by s.43!)

Facts: Foakes owed $2,090 to Beer but needed time to repay her. They entered into an agreement in 1876to set the terms of repayment. The consideration of Foakes was that he paid 500 of that sum upon signingand then after he would pay 150 on July 1 or Jan 1 every year until fully paid. In return D promised not totake any proceedings (wouldn’t claim interest). By 1882, he had repaid her but Beer claimed interest.

Issue: Whether the agreement to accept less than the whole debt was legally binding- No the agreementwasn’t under seal, it cant be legally enforced against Beer unless she received consideration for it fromFoakes, or unless w/o consideration the agreement operates to extinguish the claim for interest

Rule: (i) The promise by a creditor to accept a lesser sum is void for want/lack of consideration(ii) By no forcibility can a lesser sum be substituted for the whole sum

Re Selectmove(EXCEPTION to Williams v Roffey rule)

Facts: S required to deduct income tax from its employees but failed to do so - Co and Tax collectoragreed on repayment schedule but collector indicated he needed approval from supervisor - Crowndemanded full payment - S says Crown had accepted his agreement

Issue: Whether there was sufficient consideration in the partial payment of the existing debt to find alegally binding contract

Rule: Even in a case where there may be a practical benefit to accepting a lesser amount in payment ofdebt, this isn’t sufficient consideration to find a binding contract

Analysis: The proposition that a promise to perform an existing obligation can amount to goodconsideration provided that there are practical benefits to the promisee (Williams v Roffey Bros)


Judge says this case can’t be applied here bc it was only applicable where the existing obligationwhich is pre-promised is to supply one with good/service, not where its an obligation to repaymoney

Foot v Rawlings(EXCEPTION to Foakes v Beere Law)

Facts: Rawling owed Foot large sums of money under a series of promissory notes. The agreement (1958)for the payment of debt was sent from F to R stating that he wanted 300 of the debt monthly and he agreedto lower the interest to 5%, and this offer only stood as long as he never missed a payment the appellantwould pay less money monthly as long as he gave post-dated cheques every six months for the following sixmonths). Foot agreed. But later, in 1960 the F sued for the balance of his debt

Issue: Whether there was sufficient consideration given by the Rawling to enforce the contract – YES The post-dated cheques from Rawling was sufficient consideration for Foot’s promise to hold back fromtaking action (suing) on the promissory notes as long as appellant Rawlings continued to send cheques

Rule: Exception which draws a distinction between cash and cheque - by giving something new there isconsideration b/c you are doing something that you did not have to do

Analysis: According to Foakes v. Beer there would be no consideration, but by introducing cheques insteadof cashthey are introducing something new and therefore is sufficient consideration

Process Automation Inc. v. Norstream Intertec Inc. & Arroyave(contract without consideration

Facts: Application of the Ontario Law and Equity Act (same as BC)

Rule/Analysis: Effect of it is to kill Foakes v. Beer - the legislation does not discuss duress or unduepressure that may occur - it is silent on the issue - so on the Courts view, the common law still applies(Foakes v. Beer) if the agreement to accept more is brought about in a situation of undue pressure - Courtdefines undue pressure by looking at Lord Denning case: low standard & ordinary meaning

Value in the eyes of the law - Compromises and Forbearance to Sue

1. Consideration for a promise may be found not only in a positive act but also in an act offorbearance, i.e. forbearing to act in a particular way

2. Forbearance is sufficient consideration if the act forborne is one which the promisee had a legalright to perform and the forbearance is regarded as being of legal value

3. Forbearing to pursue a legal claim. Such a promise is generally enforceable. It has to bedemonstrated that:

The promisee honestly believed in the validity of the claim That the claim was reasonable The promisee did not conceal from the promisor any facts know to him and relevant to the

validity of the claim


D.C.B. v Harold J. Arkin and Zellers Inc.

Facts: the plaintiff sues the defendants for money she paid to them as compensation for damages thedefendant Zellers (Zellers) sustained resulting from thefts committed by her young son.

Issue: Can you use forbearance to sue as consideration for a promise?

Rule: A promise is not binding if the sole consideration for it is a forbearance to enforce (or a promise toforbear from enforcing) a claim which is invalid and which is either known by the party forbearing to beinvalid or not believed by him to be valid.

EXCEPTION: Consideration can be the decision not the act (forbearance), esp when it forbearinga legal right to act

PROMISSORY ESTOPPEL

Promissory estoppel is an equitable doctrine which intervenes when promises are made withoutconsideration and it’s demonstrated that the promise was intended to be binding and you acted uponit, you have a defence

A promise, which is not contractually binding because it is unsupported by consideration, maynevertheless be binding on the promisor by virtue of the doctrine of promissory estoppel

PE protects the reasonable expectations of the parties, promotes good faith behaviour Can also perform an economic function saves the time of lawyers and courts PE is founded on contract, but unlike a contract the promise in PE is naked (nudum pactum) in

the sense that its not supported by any consideration This doctrine is only used when you have a promise not supported by consideration

‘A promise, intended to be binding, intended to be acted on and in fact acted on, is binding so far as itsterms properly apply’ [Denning J in High Trees] This is the essence of the doctrine of promissoryestoppel s

Says the promise is binding then so far as its terms apply

You can rely on this doctrine as a SHIELD but you cannot begin action on it (SWORD) Creates no new cause of action: It can be used as a shield not a sword you can’t go to court on

the basis of actin, it can only be used as a defence

PE only operates to suspend the rights, not extinguish. Though sometimes bc of the nature of theright, it may operate to extinguish it


Requirements for invoking the Doctrine of Promissory Estoppel (in order):

1. Representation: The essence of promissory estoppel is that where A makes a representation (bywords or conduct) to B that he will not insist upon his strict legal rights and B relies upon thatrepresentation, A will not be permitted to assert those rights inconsistently with his representationwhere it would be inequitable for him to so do.

2. Demonstrate that B relied (Reliance) on that representation; that B acted in some way thru hisreliance

3. Demonstrate that it would be inequitable to go back on the promise

Representation:

Promise or representation must be “clear” or “unequivocal,” or “precise and unambiguous.” So this means that the promise doesn’t have to be expressed, it can be implied form the

circumstances Promise must have the same degree of certainty as would be needed to give it contractual effect if

it were supported by consideration it should look like a promise which is capable of acceptanceas tho the regular rules of promise and contracts applied

Promise or representation can be by words or conduct, but mere inactivity will not normally suffice so silence will not suffice

Reliance:

Representee must show that he relied on the representation the promise or representationmust have somehow influenced the conduct of the party to whom it was made

Nature of reliance (detrimental reliance or a mere change in position?)

Inequity: It must be inequitable for representor to act inconsistently with representation; It must be

“inequitable” for the promisor to go back on the promise. Crucial aspect of the doctrine bc itdefined the scope of the benefit of the doctrine. To see if the court will even allow the applicationof the doctrine

Conduct of representee the promisee must have relied on the promise in such a manner thathe can no longer be restored to the position before he took action

Effect on representor

Lord Denning’s four part test for estoppel (High Trees):

1. There must be an existing relationship (contract between the parties)2. Representation that you wont enforce the right (must be clear and unambiguous - does not have

to be express, can be implied)3. Was it relied on (there must be reliance simplicitor which in a dictionary sense means you have

relied upon the promise and acted upon it - but it is unclear whether we need detrimental reliancewhich means that you are worse off from relying on the promise)

4. Was it unfair (all things considered) to go back on the gratuitous promise


Waiver

The principle of waiver is simply this: If one party, by his conduct, leads another to believe that the strictrights arising under the contract will not be insisted upon, intending that the other should act on that belief,and he does act on it, then the first party will not afterwards be allowed to insist on the strict legal rightswhen it would be inequitable for him to do so.

Relationship with promissory estoppel:

Both waivers and PE are used by courts to give support to promises that don’t have consideration.Both require relevance of reliance, both doctrines protect the reasonable expectations of the parties

But a waiver doesn’t rely on a promise Ex: Forbearance is a waiver waiving your strict legal right to sue

General Principles of Promissory Estoppel

Hughes v. Metropolitan Railway Company(Establishes doctrine of Promissory Estoppel)

Facts: Hughes owned property leased to the Metropolitan Railway Company. Under the lease, Hughes wasentitled to compel the tenant to repair the building within 6 months of notice. Notice was given on October22, 1874 from which the tenants had until April 22, 1875 to finish the repairs. On November 28, the tenantrailway company sent a letter proposing to purchase of the building from Hughes. Negotiations began andcontinued but which point nothing was settled. three days before the notice was to expire MRC replied sayingthey would undertake the repairs - H served writ of ejectment

Issue: Was there an implied promise that the 6 month term (to repair the bldg.) would be suspended duringthe negotiations

Analysis: H impliedly told the MRC they were not going to enforce the six month term by entering intonegotiations – therefore bound by this and estopped from their right that they otherwise might have - existingcontract, representation that it won’t be enforced, the tenant relied on it, and it would be unfair now for thelandlord to be resiled for this (all four elements are here)

Central London Property v. High Trees House(Lord Denning: four essential requirements for estoppel)

Facts: In 1937 High Trees House Ltd. leased a block of flats for a rate £2,500/year from Central LondonProperty Trust Ltd. Due to the war and the resultant heavy bombing of London occupancy rates weredrastically lower than normal. In January 1940, to ameliorate the situation the parties made an agreement inwriting to reduce rent by half. However, neither party stipulated the period for which this reduced rental wasto apply. Over the next five years, High Trees paid the reduced rate while the flats began to fill and by 1945,the flats were back at full occupancy. Central London sued for payment of the full rental costs from June1945 onwards.


Issue: Did the agreement of January 1940 constitute an agreement that the rent would be £1,250 relate tothe whole lease?

It was in writing and they kept accepting the 1250 payments without issue They in fact acted on indication of how serious they take the promise

o But also a distinct element bc it’s the element of reliance

Rule: a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as itsterms properly apply

Analysis: Here the representation was a representation into the future so it’s a promise.The promise here, to reduce the price of rent was meant to be a temporary expedient until the flats were fullyoccupied. But in 1945, the flats were fully occupied so the rent then should have been the original amount.So by 1945, the time limit for reduced rent had passed, bc the parties has understood the promise was onlyto apply under the condition prevailing at the time when it was made and did not extend further than that

Collier v. P & M J WrightFoakes v. Beer says you can collect on a promise to accept less since payment of a lesser sum cannot besatisfaction of a larger sum - but if the elements of promissory estoppel exist then you cannot

Facts: D made a loan to P and his two partners - it was found that the three partners were jointly liable forrepayment of the loan - two of the partners ceased to make payments (became bankrupt) - P alleged that thecreditor promised that he would not pursue him for the whole debt as long as he paid his one third – Pfinished paying his one-third and the creditor came after him for the rest

Issue: whether there had been a binding agreement that the company would accept the applicant as a debtoronly for a one-third share of the judgment debt and, if not, whether the company was nevertheless estoppedfrom proceeding against him for more than that amount

BC law would say there was an agreement to accept part performance of a monetary agreement s.43

S. 43 only deals with part performance of an obligation the intention behind accepting behind partpayment must be that it extinguishes the obligation to pay the rest

Rule: While Foakes v. Beer says you can collect, if the elements of promissory estoppel exist then youcannot - Rescinding from a serious promise not to enforce a right is inherently inequitable BUT s. 43 canhelp instead

Elucidation of Principles

John Burrows v. Subsurface Surveys(Waiver; A friendly gesture is not a binding agreement, and if it is relied upon estoppel will not be availableas a defence.)

Facts: Burrows agreed to sell all of the shares in his company to Whitcomb, in the name of his corporation– Subsurface Surveys. Of the cost, $42,000 was to be a promissory note paid annually for 10 years with 6%interest. The two were friends at the time of the deal. Whitcomb was late on a few payments, but Burrowsdid not take any action. Eventually their relationship turned sour, and when Whitcomb was late on anotherpayment Burrows demanded the full $42,000 in payment, as per the condition in the contract stating this wasthe remedy for late payments. Whitcomb claimed estoppel as defence.


Issue: Whether D can claim estoppel? – NO, doesn’t apply. There was no representation: Parties did notenter in to negotiations that would have had the effect of leading D to believe that P had agreed to disregardthat part of the contract.

Rule: There must be evidence from which it can be inferred that the first party intended that the legalrelations created by the contract would be altered as a result of the negotiations

D & C Builders v. Rees(Economic duress = inequitable; NO Promissory estoppel

Facts: D&C completed a building job for R - R gave them partial payment and owed the rest in sum (at thispoint there was no complaint of the work) - D&C wrote twice asking for the sum and received no response- R fell ill with influenza and his wife phoned D&C offering them a settlement - the company would gobankrupt if they did not accept so they did, - she demanded a receipt

Issue: Can a party accept a lesser amount for satisfaction of a debt and then demand payment in full? – YES.There was no consideration and this promise was made under econ duress so it’s not binding and would beinequitable not to allow creditors to claim the rest of the money

Rule: It is only inequitable where there has been true accord (agreement) and the creditor voluntarily acceptsa lesser amount in sum - a promise made under duress should not be estopped (fourth part of Hight Treestest)

Analysis: This agreement comes within the scope of 43. But its problematic bc it comes under econ duress& intimidation. Comes within the scope of the 2md aspect of 43 bc in this case, bc there was an agreementabt part performance

Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance

Issue: Estoppel: Giving NoticeIf I tell you I’m not going to enforce my right and then I change my mind, can I go back to the originalpromise if I give you notice? (Can X reinstate antecedent promise by giving notice to Y?)

Generally the answer is yes, as long as it meets 2 requirements (Saskatchewan River Bungalows)

Rule: X may reinstate an antecedent promise by giving notice to Y as long as 2 requirements met: (1) Xmust give notice to Y, and (2) X must give notice to Y before Y relies on the gratuitous promise

WJ Alan v El Nasr(Uses the Governing Law Clause)

Facts: Buyers purchased coffee from sellers under a contract which had a price stated in Kenyan shillings –buyers sent letter or credit in English sterling for 2 shipments to which sellers made no complaint - whenEnglish sterling devalued, sellers demanded outstanding amount of Kenyan shillings to offset devaluation

Issue: Promissory estoppel? YES - Court determines you do not have to rely on it to detriment This looks like a case of waiving their right to be paid in shillings


Rule: Under stage three of the High trees test, the promise does not have to be relied on to detriment, justrelied on (there are some cases that show detriment - may be able to get around it by saying a misreading ofthe law

Analysis: The offer (letter of credit) and acceptance of that offer (making use of the credit to receivepayment) constitutes the contract of sale as varied from Kenyan to English - once the seller contends toaccept the letter of credit as satisfactory, it is regarded as if it were a conforming letter of credit

The Post Chaser

Facts: agreed to sell palm oil to D who in turn contract to sell to a string of further sub-buyers - contractrequired declaration of the ship be made to buyers in writing as soon as possible after vessel’s sailing - sellerdid not provide declaration until 1 month into ship’s sailing - buyer initially accepted documents however,when sub-buyer rejected, so did the buyer

Issue: whether it is sufficient for this purpose that the representee should simply have conducted his affairson the basis of the representation, or whether by so doing he must have suffered some form of prejudicewhich renders it inequitable for the representor to go back on his representation

A change of position is enough to see if it was detrimental to see if reliance is an equitable way toanalyze the case

Here its not inequitable to allow the D to insist on their strict legal rights

Rule: the representor will not be allowed to enforce his rights "where it would be inequitable having regardto the dealings which have thus taken place between the parties

Shield or Sword

Combe v. Combe

Facts: Parties divorced and 7 yrs after H agreed to pay W maintenance fee, but never did and did not agreeto pay. W makes more than H. There was no consideration in exchange for the promise and so no contractwas formed. Instead, she argued promissory estoppel as she had acted on the promise to her own detriment.

Issue: Was there sufficient consideration to support the promise, if not can promissory estoppel be used asa cause of action alone? – No

Rule: Denning states that it cannot be used as a cause of action, but only as a defence when someone istrying to claim that a promise they made did not have consideration and is therefore not binding; estoppel isa "shield", not a "sword".

The person to who the promise or assurance was made cannot sue on the promise unless she is ableto demonstrate she provided consideration for it.


Walton Stores (Interstate) Pty. Ltd. v. Maher(Australian case (therefore only persuasive – intention to be in a legal relationship)

Facts: W negotiated with M for the lease of land on the agreement that M demolished one of the buildings- M not able to do so by the completion date and made oral agreement with W to extend - M not notified ofany objections and began demolishing which W knew of - later returned the lease saying he was notinterested Due to the absence of a pre-existing relationship (contract), the respondents are asking forpromissory estoppel to enforce directly a non-contractual promise on which the promisee has relied to hisdetriment.

Issue: Can a promissory estoppel enforce directly in the absence of a pre-existing relationship a non-contractual promise on which the promisee has relied to his detriment? – YES, there was defs reliance

Rule: promissory estoppel may allow for the enforcement of voluntary promises in situations where adeparture from the basic assumptions underlying the transaction between the parties would beunconscionable An estoppel may be part of a cause of action, but not a cause of action itself.

Analysis: Promissory estoppel extends to promises as to future conduct. Until now, the doctrine wasconfined to a person in a pre-existing contractual relationship: it prevented his departure from a promise thathe would not enforce one of his contractual rights

M. (N.) v. A. (T.A.)(No intention to be in a legal relationship)

Facts: Mr. M made a promise to Ms. A to pay the balance outstanding on the mortgage of her home inEngland if she moved to Canada. She moved to Canada, but he refused to pay her mortgage and kicked herout of his house. She sued him, claiming estoppel as a cause of action because she relied, and acted upon hispromise.

Issue: Whether she can claim promissory estoppel? – NO, it’s only a shield not sword

Rule: Sword not Shield

Analysis: She says to use Walton Stores as precedent in Canada. To others such rights can arise only out ofa legal relationship existing between the parties before the making of the promise or representation. To applydoctrine where there was no such relationship would contravene the rule that the doctrine creates no newrights.

- Once you hold that promissory estoppel can be the basis for a cause of action then you might end upforcing legal relationships and contract where there really wasn’t one.


PRIVITY OF CONTRACT

Doctrine of privity a contract cannot confer right or obligations on any person who is not a party to theobligation (so third parties can’t sue on the basis of the rights of the contract)

2 distinct aspects of the doctrine: Precludes parties from imposing liabilities on a 3rd party It prevents 3rd parties from obtaining rights and obligation from a contract they aren’t part of

Who is a third party to a contract?

A 3rd party can be a complete stranger to the contract, or a named beneficiary under the contract . In essence a 3P is a stranger to the consideration someone who hasn’t provided consideration to the

contract

Relationship with Consideration: The doctrine of privity is a by-product of the requirement of consideration. DoP flows from the CL

principle that consideration should move from the promisee this is the relationship bw the doctrineof privity and the doctrine of consideration. So if you haven’t provided consideration, you can’t sue bcyou’re stranger to the contract

The idea here is that once the contract is for the benefits of the 3P, you cant go back and change theterms of the contract to that eprsons determinant Fraser River

A third party is often merely a donee, and a system of law which does not give a gratuitous promisee aright to enforce the promise is not likely to give this right to a gratuitous beneficiary who is not even apromisee

You can also argue that a 3P is simply a donnee, its not right to give this right to a gratuitousbeneficiary

o The 3P beneficiary can have an underlying contract, even if they’re not an exact party to thecontract. esp if they’re named in the contract as a beneficiary under the contract thisperson should be treated diff than someone who just happens to benefit from the contract

Tweddle v Atkinson(Personal contract; Third parties to a contract cannot sue regardless of whether the entire point of the contract isto confer a benefit to them)

Facts: John Tweddle, father of William Tweddle, agreed with William Guy to pay William Tweddle £100after marrying his daughter. The written agreement contained a clause which specifically granted WilliamTweddle the power to sue for enforcement of the agreement. William Guy died, and the estate would notpay and William Tweddle sued.

Issue: whether children can sue upon a contract if it was made for their benefit

Rule: No stranger to the consideration can take advantage of a contract, although made for his benefit Third parties to a contract do not derive any rights from that agreement nor are they subject to any

burdens imposed by it.


Natural love and affection is not sufficient consideration in the eyes of the law.

Dunlop Pnewmatic Tyre co ltd v Selfridge & coFacts: Dunlop sold their tires to Dew who agreed not to sell them for below price - Selfridge purchased tiresfrom Dew and agreed not to sell them for below price set by Dunlop - S breached the contract

Issue: Whether the appellants (Dunlop) can claim that a bargain was made in this contract by Dew as theiragents

Rule: Third parties to a contract cannot sue regardless of whether the entire point of the contract is to confera benefit to them

Analysis: Dunlop has a direct interest but they do not have a contract with S - “Our laws knows nothing ofthe right of a third party to recover damages arising out of a contract” - (1) only a person who is party to acontract can sue on it; (2) for contract to be enforceable, promisee must have given consideration to promiser;(3) principle not names in the contract may sue upon it if the promisee really contracted as his agent

Beswick v. Beswick(Can sue as 3rd party; Administrators of estates are, for all intents and purposes, the person who is party tothe contract and thus can enforce the contract for that person)

1996 CaseFacts: Mr. Beswick and nephew entered agreement in which Mrs. Beswick was to be paid $5 /week. Mr.B died, and nephew did not pay her. Agreement bw Mr. B and nephew. Wife was 3P

Issue: Privity? – Yes, as executrix.

Rule: where a contract is made for the benefit of a 3P who has a legit interest to enforce it, it can beenforced by the 3P in the name of the contracting party.

Analysis: Bc of RULE, she has a right arising by way of the contract, an interest protected by law Mrs. B is suing in her capacity as executrix of her husband therefore is a contracting party

1968 Case

Facts: The P sued in 2 diff capacities, in her personal capacity and as the administrator of the estate. Shecouldn’t in her personal capacity bc she didn’t provide any consideration to the contract. If it’s through theestate it is in principle an action by the husband then, who had provided consideration

Rule: Where a contract is made with A for benefit of B, A can sue on the contract for the benefit of B, andrecover all that B could have recovered if the contract had been made with B himself

Analysis: The nephew has already received the while benefit of the contract and now he must perform hispart of the bargain


Exceptions to the Doctrine of Privity1. Court can hold the 3rd party as a party to the contract if: You can sue in the name of the promisee or

argue to be characterised as a party to the contract

A makes a promise to B for the benefit of C, C can enforce the promise if B has constituted himself trusteefor A’s promise to C. ( Beswick v Beswick)

2. Agency: An agent enters into a contract with another party, the principle can sue through the agent3. Statute Ex: Insurance Act RSBC, Law Reform Act RSNB

London Drugs Ltd. v. Kuehne & Nagel International Ltd(In this case they were invoking a term of the contract to limit their liability; This case is a good exampleof making incremental changes to the doctrine of privity)

Facts: London Drugs delivered a transformer to the respondents for storage until it was to be used. Intransfer, two employees of D negligently dropped the machine causing $33,000 of damage. There was aclause in the contract stating that the "warehouseman's liability was limited to $40" unless specificallystated otherwise. No further statements had been made. The employees were found liable in trial, but theirappeal was allowed at the Court of Appeal and London Drugs appealed to the Supreme Court. Respswere 3P beneficiaries to the limitation of liability clause in the contract of storage bw their employer andthe appellant.

Issue: Whether the employees were excluded from liability under the limitation clause? – YES

Rule: the exception to privity: permitting employees who qualify as 3P beneficiaries to sue theiremployer’s limitation of liability clauses as “shields” in actions brought against them

Establishes TEST (Requirements: for employee to benefit from that condition)

1. Did the parties intent to extend the benefits from the contract either expressly or implied to the3P?

2. Are the activities performed by the 3P the very activities contemplated as coming within thescope of the contract in general?

Edgeworth Construction v ND Lea Associates

Facts: Edgeworth Construction Ltd. was engaged in the business of building roads in British Columbia. In1977, it bid on a contract to build a section of highway in the Revelstoke area. Its bid was successful, andEdgeworth entered into a contract with the province for the work. Edgeworth alleges that it lost money onthe project due to errors in the specifications and construction drawings. It commenced proceedings fornegligent misrepresentation against the engineering firm which prepared those drawings, N.D. Lea &Associates Ltd. as well as the individual engineers who affixed their seals to the drawings.

Issue: Whether the engineers, who are 3rd parties to the contract, could claim the benefit of its exclusionof liability for the representations in the tender doc – NO, Court said there was no intention to benefit the3P


Analysis: London Drugs test applied: failed at first step b/c there was not a close identity of interest(engineers are independent, more autonomous, therefore intent to cover was unlikely, and own safetymeasures could have been taken)

Fraser River v. Can-Dive(EXCEPTION CASE)

Facts: F charter a barge to Can-Dive which sank - subrogation clause allows insurance company to stepinto shoes of the insured and sue whoever caused loss

The 3P beneficiary sought to rely on the terms of the contact by way of defence (to resist a claimbrought by a party to the contract. they were relying on it to resist a claim)

Issue: Whether Can-Dive can claim privity? – YES , entitled to waive on waiver of subrogation clause

Rule:

Analysis: where the circumstances are appropriate the court may allow an exception to the doctrine ofprivity if it is satisfied that the parties to the contract intend to extend the benefit in question to the thirdparty seeking to rely on the contractual provision; and (b) the activities performed by the third partyseeking to rely on the contractual provision are the very activities contemplated as coming within the scopeof the contract in general, or the provision in particular, again as determined by reference to the intentionsof the parties

contracts law - tru sls · carlill v. carbolic smoke ball co. .....7 goldthorpe v. logan ......

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