IV. CONTENT OF THE CONTRACT....................................................................................................31. Formality: The Writing Requirement...........................................................................................................3

Bauer v. Bank of Montreal (1980 SCC) – parol evidence rule...................................................................................3Gallen v. Butterley (1984 BCCA) – oral evidence may be admissible......................................................................3

2. Misrepresentation and Rescission: Representation and Terms..................................................................42.1 Misrepresentation and Rescission.................................................................................................................................4

Redgrave v. Hurd (1881 Eng CA) – K can be rescinded for misrepresentation.........................................................4Smith v. Land & House Property Corp. (1884 Eng CA) – opinion as misrepresentation..........................................4Kupchak v. Dayson Holdings (1965 BCCA) – equity may grant rescission..............................................................4Redican v. Nesbitt (1924 SCC) – cannot rescind for innocent misrep in executed K................................................5Esso Petroleum v. Mardon (1976 Eng CA) – negligent misrep actionable in tort and K...........................................5Sodd Corp. v. N. Tessis (1877 Eng) – special relationship creates duty of care........................................................5BG Checo Int'l Ltd. v. BC Hydro & Power Authority (1993 SCC) – can sue concurrently unless K indicates otherwise.....................................................................................................................................................................5V.K. Mason Construction Ltd. v. The Bank of Nova Scotia (1985 SCC) – negligent misrepresentation test...........6S-244 Holdings Ltd. v. Seymour Building Systems Ltd. (1994 BCCA) – equitable rescission.................................6

2.2 Representation and Terms.............................................................................................................................................6Heilbut, Symons & Co. v. Buckleton (1913 Eng HL) – warranty vs. innocent misrep..............................................6Leaf v. International Galleries (1950) 2 K.B. 86; (1950 Eng CA) – warranty vs. condition......................................7

3. Parol Evidence Rule........................................................................................................................................7

4. Classification of Terms...................................................................................................................................7Hong Kong Fir v. Kawasaki Kisen Kaisha Ltd. (1962 Eng CA) – intermediate terms..............................................7Krawchuk v. Ulraychova (1996 AB Prov. Ct.) – applies test from HK Fir................................................................7Wickman v. Schuler (1974 Eng HL) – breach of condition must be material and reasonable...................................7

5. Discharge by Performance or Breach...........................................................................................................8Fairbanks v. Sheppard (1953 CC) – can recover for substantial completion..............................................................8Sumpter v. Hedges (1898 Eng CA) – can recover for your contribution (quantum meruit)......................................8Howe v. Smith (1884 Eng CA) – deposit made as guarantee of performance not recoverable..................................8Markland Associates Ltd. v. Lohnes (1973 Eng NSSC) – defective work is not a breach.........................................9Stevenson v. Colonial Homes Ltd. (1961 Eng CA) – can recover part payment, not deposit....................................9

6. Standard Form Contracts and Exclusion Clauses.......................................................................................9Machtinger v. Hoj Industries Ltd. (1992 SCC)...........................................................................................................9

6.1 Unsigned Documents....................................................................................................................................................9Parker v. South Eastern R.Y. Co. (1877 Eng CA) – reasonable notice req for unsigned K.......................................9Thornton v. Shoe Lane Parking (1971 Eng QB) – wide exclusion clauses req explicit notice................................10McCutcheon v. David MacBrayene (1964 Eng HL) – previous dealings must prove knowl..................................10

6.2 Signed Documents......................................................................................................................................................10Tilden Rent-A-Car Co. v. Clendenning (1978 Eng CA) – signature may not be adequate......................................11Delaney v. Cascade River Holidays (1983 BCCA.) – waiver's language in circumstances.....................................11Schuster v. Blackcomb Skiing Enterprises (1995 BCSC) – application of Delaney................................................11

6.3 Standard E-contracts...................................................................................................................................................12Zhu v. Merrill Lynch (2002 BC Prov. Ct.) – online disclaimers cannot be too broad..............................................12Dell Computer Corp v. Union des consommateurs (2007 SCC) – e-K must be accessible.....................................12

6.4 Fundamental Breach....................................................................................................................................................12Karsales v. Wallis (1956 Eng CA) – Denning's formulation of fundamental breach...............................................12Photo Production v. Securicor Transport Ltd. (1980 Eng HL) – overturns Denning...............................................12Hunter Engineering v. Syncrude Canada Ltd. (1989 SCC) – complicates Photo Production; freedom of K generally upheld w/ exceptions.................................................................................................................................13Fraser Jewellers Ltd. v. Dominion Electric Protection Co. (1982 ONCA) – reconciles Hunter..............................13Sale of Goods Act, s. 20............................................................................................................................................13Solway v. Davis Moving & Storage Inc. (2002 ONCA) – applies Hunter...............................................................13

V. EXCUSES FOR NON-PERFORMANCE OF CONTRACT...........................................................141. Duress.............................................................................................................................................................14

Pao On v. Lau Yiu Long (1980 Eng JCPC) – establishes economic duress.............................................................14Gordon v. Roebuck (1992 CA) – claimant must prove econ duress unjustifiable....................................................14

2. Undue Influence.............................................................................................................................................14Geffen v. Goodman Estate (1991 SCC) – establishing presumption of UI; rebuttal................................................14Royal Bank of Scotland Plc. v. Etridge (2001) – duty of stronger in non-commercial rel.......................................14

3. Unconscionability..........................................................................................................................................15Morrison v. Coast Finance Ltd. (1965 BCCA) – establishing presumption of UC; rebuttal....................................15Marshall v. Can. Permanent Trust Co. (1968 ABSC) – UC doesn't require knowledge..........................................15Harry v. Kreutziger (1978 Eng CA) – Lambert introduces community std test.......................................................15Business Practices and Consumer Protection Act, ss. 4-10......................................................................................15

4. Illegality..........................................................................................................................................................15J.G. Collins Insurance v. Elsley (1978 SCC) – restraint of trade weighed with other concerns..............................16Still v. Minister of National Revenue (1998 Eng CA)..............................................................................................16

VI. REMEDIES......................................................................................................................................171. Damages.........................................................................................................................................................17

1.1 The Interests Protected................................................................................................................................................181.2 The Expectation, Reliance and Restitution Measures.................................................................................................18

McRae v. Commonwealth Disposals Commission (1951 Aust. H.C.) – reliance damages.....................................18Sunshine Vacation Villas Ltd. v. Hudson Bay Co. (1984 BCCA) – either expectation OR reliance damages........18Attorney General v. Blake (2001 Eng HL) – restitution rare but possible...............................................................18

2. Quantification................................................................................................................................................18Chaplin v. Hinks (1911 Eng CA) – damages for lost opportunity....................................................................................18

Groves v. John Wunder (1939 Minn. C.A.) – economic feasibility of K does not reduce damage amount.............18Jarvis v. Swans Tours (1973 Eng CA) – mental distress, loss of enjoyment recoverable in K................................18Ruxley Electronics and Construction Ltd. v Forsyth (1996 Eng HL) – imperfect result is not total failure............19

3. Certainty, Causation and Remoteness.........................................................................................................19Hadley v. Baxendale (1854 Eng) – test for remoteness: arising naturally? special circumstances?........................19Victoria Laundry v. Newman (1949 Eng) – foreseeability is enough; redefines Hadley test..................................19Koufos v. Czarnikow (The Heron II) (1969 Eng) – adds probability to Victoria Laundry test................................19Whiten v. Pilot Assurance (2002 SCC) – applies test from Vorvis for punitive damages.......................................20Fidler v. Sun Life Assurance (2006 SCC)................................................................................................................20

5. Mitigation.......................................................................................................................................................21White and Carter (Councils) v. MacGregor (1962 Eng HL)....................................................................................21

6. Time of Measurement of Damages..............................................................................................................21Semelhago v. Paramadevan (1996 SCC) – damages in lieu of specific performance; calc date of trial..................21

7. Liquidated Damages, Deposits and Forfeitures..........................................................................................21Shatilla v. Feinstein (1923 SK) (1923 Sask. Prov. Ct.) – penalties and liquidated damages....................................21H.F. Clarke Ltd. v. Thermadaire Corporation Ltd. (1976 SCC) – judicial appraisal of reasoonableness................22J.G. Collins Insurance Agencies Ltd. v. Elsley (1978 SCC) – penalty clause and freedom of K............................22Stockloser v. Johnson (1954 Eng CA)......................................................................................................................22

8. Equitable Remedies (Specific Performance and Injunctions)...................................................................22John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003 Eng CA) – what is "unique" property?.....................22Warner Bros. v. Nelson (1937 Engl KB)..................................................................................................................23Zipper Transportation v. Korstrom (1997 Eng QB)..................................................................................................23Zipper Transportation v. Korstrom (1998 Eng CA)..................................................................................................23

IV. CONTENT OF THE CONTRACT1. Formality: The Writing Requirement

General (B & P pp. 271-277; 294-295) Promise under seal can be unsupported by consideration Some legislation exists around writing requirement

o Statute of Frauds (1677) – writing requirement in K for land (s. 4), goods, wares and merchandise valued at over $10 BP (s. 17)

o Sale of Goods Act, R.S.A. 2000 c. S-2 – slightly more flexible: s. 6: goods over $50, s. 8: written w/ or w/o seal, or orally, or combination, or implied by conduct

Overall, statues have writing requirements foro Land K (i.e. lending, purchase)o Indemnity (to be responsible for another's debts, e.g. insurance)o Guarantee (only if person defaults)

No particular form unless specifically stipulated but essential terms required unless can be reasonably inferred or are established w/ parol evidence

Some movement away from policy of requiring contracts to be in writing Non-compliance with statutes renders K unenforceable but not invalid ; distinction important b/c allows K,

equitable remedy of part performance, act as consideration for new K

Arguments for abolition of writing requirement No justification for particular list supplied Not in accord with social practices Places unjustifiable hardship on litigant who loses otherwise good claim on purely technical defence

Arguments for writing requirement Evidentiary function for essential terms, level of details is useful Possibly leads parties to take K more seriously

Bauer v. Bank of Montreal (1980 SCC) – parol evidence ruleF P was shareholder who gave personal guarantee believing that he would be given book debts. Bank did not register book properly so P was fully liable for all debts. P claimed K should be interpreted contra proferentum (ambiguous term construed against interests of the party that imposed its inclusion in the K; ct will favour innocent party); exclusionary and LLC was unconscionable; induced to enter K by representation of agent of bank e.g. assurances, misrepresentationI Should bank's oral assurances be interpreted as an oral collateral agreement? NO

Parol evidence rule: oral evidence which varies or contradicts the main written K is inadmissible

Gallen v. Butterley (1984 BCCA) – oral evidence may be admissibleF Farmers purchased crop upon oral assurances. Crop failed, farmers sued successfully for breach of warranty; appealedI Should trial judge have admitted oral assurances? YES

Oral and written evidence should be interpreted harmoniously to avoid inconsistency and contradiction

Oral statement may be relevant and may be admitted if Written agreement is not whole K (but should not assume oral assurances form collateral K) Statements support K (but collateral K will not be established if inconsistent/contradicts) Correct mistake or error in K Show misrepresentation

NB: Individually negotiated document is stronger than standard printed form

2. Misrepresentation and Rescission: Representation and Terms

Important terms:o Parol evidence rule; contra proferentum (see above)o Entire agreement clause – written K to be taken as entire agreement, oral agreements and

negotiations should not be considered

Misrepresentation Elements

o More than opiniono False statement of past or present fact; cannot be an opinion or future facto Reliance on statement induces person to enter agreemento CL does consider intent, knowledge, duty (i.e. innocent, fraudulent, negligent misrepresentation)

Effecto Makes K voidable (can continue or step out)

Remedieso Rescission (equitable remedy, restitutio integrum), also damages (depends on type of misrep)o To claim rescission, must act in timely manner

Burden of proofo Is there a duty to investigate (caveat emptore)? No!

2.1 Misrepresentation and Rescission

Redgrave v. Hurd (1881 Eng CA) – K can be rescinded for misrepresentationF D entered K to purchaser P's house and share in P's business. P claimed business was profitable, offered paperwork that D did not examine. D discovered business was worthless, refused to complete transactionI Can D recover? YES, K rescinded, deposit returned.

Establishes principles of misrepresentation (= material false representation): Does not require intent or knowledge of offeror Cannot fail for negligence of offeree Must induce offeree to enter the K Defence: offeree has knowledge of falsity or does not rely on representation Remedy: rescission ("A man is not allowed to get a benefit from a statement which he now admits to be

false")

Smith v. Land & House Property Corp. (1884 Eng CA) – opinion as misrepresentationF D purchased hotel from P on statement that lessee was "a most desirable tenant." Tenant had history of late rent payments to P, eventually went bankrupt. D refused to completeI Can P defend itself because it expressed an opinion, not a fact? NO

When facts are not equally well known to both sides, a misleading opinion functions like a misleading fact

Kupchak v. Dayson Holdings (1965 BCCA) – equity may grant rescissionF P swapped its property for shares in D's hotel. D misrepresented hotel earnings, P refused to continue mortgage payments. D had built apartment on ½ of P's propertyI Can P rescind? YES, awarded rescission, compensation for value of property, interest

General rule: no rescission for misrepresentation if: 3rd party has acquired rights Restitutio in integrum is impossible Action to rescind is not taken in reasonable time ("doctrine of laches") K is executed (exception: fraud) Injured party affirms K

Equity does what is just, though it cannot always restore parties precisely to the state they were in before the K Ct has discretionary powers; extends reach of equity in this case Treats compensation as a form of equitable relief Because D acquired P's property fraudulently, ct ought not to bar rescission

Redican v. Nesbitt (1924 SCC) – cannot rescind for innocent misrep in executed KF D purchased leasehold interest in P's house without prior inspection. Keys and cheque exchanged, but D ordered stop-payment on cheque upon seeing property for first timeI Can D rescind? NO, K was executed, parties received full consideration

Rescission not allowed for innocent misrepresentation if K is executed unless benefit provided differs in substance from that promised

If fraudulent misrepresentation, rescission may be granted even if K is executed

Impossibility of restitution will prevent rescission unless that impossibility has been caused by the guilty party

Esso Petroleum v. Mardon (1976 Eng CA) – negligent misrep actionable in tort and KF Esso leased gas station to Mardon. Because of location, sales much lower than Esso's representation. Esso cut off supplies, claimed possession and overdue rent. Mardon counterclaimed for breach of warranty and negligent misrepresentationI Is there a contractual warranty? YES; factual statement by party claiming to have special skill/knowledge, made w/ intention and success of inducing party to enter K. Esso liable for Mardon's capital losses: $$ put into business and lost, overdraft, loss of earnings, interest

Negligent misrepresentation inducing K gives rise to action in tort (negligence) and contract (breach of collateral warranty)

A party has duty to use reasonable care in their representation if they claim special knowledge/skill and act to induce another to enter a K (Hedley Byrne)

Breach of a collateral warranty gives the right to damages

NB: Usually warranties pertain to present or past facts. In this case, breach of warranty found regarding future facts

Sodd Corp. v. N. Tessis (1877 Eng) – special relationship creates duty of careF D (professional accountant + trustee in bankruptcy) misrepresented the value of inventory of a furniture store he was trying to sell. P relied on those statementsI Is D liable? YES, special relationship and reliance. P gets damages.

Liability for negligent misrepresentation may be found in K and tort where there is a special relationship creating a duty of care

BG Checo Int'l Ltd. v. BC Hydro & Power Authority (1993 SCC) – can sue concurrently unless K indicates otherwiseF Checo entered K to install electrical towers/lines for D. Assumed right of way would be cleared prior to commencement to work; was not, causing difficulties to P. D knew work was inadequate, relied on LLCI Can Checo sue concurrently? YES. LLC did not negate Hydro's duty of care. Mere fact that the parties have dealt with a matter expressly does not mean they intended to exclude all rights to sue in relation to that matter

Can sue in tort and K concurrently unless valid K expressly indicates otherwise K obligations > tort obligations likely pick K b/c higher duties Tort obligations > K obligations dealt with by exclusion clause or LLC in K Tort + K obligations same concurrently or alternatively

May be affected by limitation periods

V.K. Mason Construction Ltd. v. The Bank of Nova Scotia (1985 SCC) – negligent misrepresentation testF P entered K with developer based on bank's assurances of sufficient finance. P substantially completed work when developer ran out of $$; bank sold development but did not have sufficient funds to compensate PI Is bank liable for negligent misrepresentation or breach of K? NM based on Esso, Sodd, Hedley Byrne. P awarded expectation damages and wasted expenses.

Set out four-part requirements for negligent misrepresentation1. An untrue statement2. Statement negligently made3. Special relationship giving rise to a duty of care4. Reliance on the statement was foreseeable

S-244 Holdings Ltd. v. Seymour Building Systems Ltd. (1994 BCCA) – equitable rescissionF Subcontractor gave tender for phase I of building project. Contractor mistook it as a bid for entire project. Work partially completed, then subcontractor quit the job. Other contractors hiredI Is rescission possible? YES b/c equitable. Subcontractor paid for his work.

SCC extends Denning's position on rescission from Leaf v. Int'l Galleries Usually rescission is barred when K is executed (unless: fraud, substantial error, complete failure of

consideration) However, equity may allow rescission in innocent misrepresentation even if K executed Rescission can sometimes be inequitable because it is "all or nothing"

2.2 Representation and Terms

Hierarchy taxonomy of statements: "Mere puff" ----- (Mis) Representations ----- Terms (warranty) Types of misrepresentation:

o Innocent remedy is rescission; if not possible, damages may be awardedo Negligent remedy is damageso Fraudulent remedy is damages

In terms of warranty, what is said before K is treated as an actual term in the K and the remedy for its breach is damages

If other party breaches a condition, CL gives right to innocent party to terminate its primary obligation (performance of K)

If other party breaches a warranty, innocent party still has to carry on primary obligation but still has the right to sue for damages

Has to be a serious breach to give damages and relief from performance Diplock J.: "primary obligations" – within K, "secondary obligations" – created through breach of K Innominate term – not really clear on the face whether they are warranty or condition

Breach of term damages in K; can sue in tort if it is warranty Repudiation – show intention not to be bound by terms of K; innocent party can choose between

accepting repudiation or continuing w/ K (do not confuse w/ rescission)

Heilbut, Symons & Co. v. Buckleton (1913 Eng HL) – warranty vs. innocent misrepF R purchased shares from rubber merchants. Shares turned out to be for another company, did poorly. R sued for fraudulent misrepresentation or breach of warrantyI Did A breach their warranty? NO, no collateral K

Person not liable for damages for an innocent misrepresentation If rescission not possible, no other remedy

Affirmation at the time of a sale is a warranty, otherwise it is an innocent misrepresentation

Warranty is a collateral contract to the main contract Sole effect is to vary or add terms to the main K, thus viewed with suspicion Rare; must be proved strictly to show intention to contract In order to succeed at proving breach of warranty, must show fraudulent misrepresentation or equivalent

recklessness Remedy: damages

Leaf v. International Galleries (1950) 2 K.B. 86; (1950 Eng CA) – warranty vs. conditionF P purchased painting represented to be authentic, discovered it was fake when he tried to resell it 5 years laterI Can P claim rescission? May be available (see below), but not for P b/c K executed for 5 yr

Rescission may be available for innocent misrepresentation even after execution if no other option is available and innocent party behaved reasonably

If term of K is condition … remedy: rescission as long as buyer has not accepted goods (otherwise: damages)

If term of K is warranty … remedy: damages

3. Parol Evidence Rule

MacDougall 67-71Gallen v. ButterleyBPCPA s. 187

4. Classification of Terms

Hong Kong Fir v. Kawasaki Kisen Kaisha Ltd. (1962 Eng CA) – intermediate termsF D contracted with P to charter a fitted, well-maintained ship. Terms: if delays, P would extend K. D discovered that ship required repairs which ultimately lasted 7 months, after which D repudiated K and P brought action for wrongful repudiation.I Did D repudiate K wrongfully? Yes, b/c D still had 17 months of use

Adds to classification: intermediate terms – neither conditions nor warranties

Test: nature of event + practical effect – does it deprive party to perform or substantially the whole benefit of K? If yes … condition – breach: repudiation If no … warranty – breach: damages only

Krawchuk v. Ulraychova (1996 AB Prov. Ct.) – applies test from HK FirF P purchased D's horse and discovered health issue, contrary to vet's letter that D had provided. Vet admitted knowledge of health issue, but stated it was non-serious and had been fixedI Can P repudiate? NO, breach of warranty b/c can still ride horse. Damages only.

Wickman v. Schuler (1974 Eng HL) – breach of condition must be material and reasonable F Schuler entered agreement granting Wickman the sole right to sell its products according to an aggressive sales strategy. Wickmain failed to comply strictly and Schuler repudiated their agreement, claiming these failures amounted to a breach of condition and conferred and absolute right to terminate the agreementI Can Schuler terminate the agreement for a trivial breach? NO, language of contract should be interpreted in a reasonable way ("condition" can mean "terms")

K should be interpreted as a whole to determine definition of "condition" (ordinary vs. specific) To terminate a K, a condition that is breached must be material in fact (not merely in language) Reasonableness is relevant

5. Discharge by Performance or Breach

Rescission is restitutionary, equitable measure, return individual to where they would have been if not for the breach (backward-looking)Damages put individual in position he/she would be in for completion of K (forward-looking)

Pacta suut servanda – "contracts must be performed strictly no matter what"e.g. contract not completed, or not up to quality stipulated

How do you discharge a contract? Performance Breach By agreement of parties Frustration – when K prevented from being fully performed b/c unforeseeable event

Consider extent to which party in default may be able to enforce agreement Cutter v. Powell – sailor who died during voyage from Jamaica to Liverpool; family was his denied salary

b/c "entire K" "Entire K" – work must be fully performed before hirer is liable to pay lump sum

Consider extent to which defaulting party who cannot enforce the agreement may have some other remedy to recover the value of benefits conferred on other party through partial performance

E.g. if contractor completes 4/5 of building project before becoming insolvent and unable to complete E.g. if purchaser pays deposit or partial payment of purchase price before becoming insolvent and

goods are easily resold at a profit to another purchaser

B & P 479-481

Fairbanks v. Sheppard (1953 CC) – can recover for substantial completionF D hired to make soap-chip machine, but stopped before finishing and demanded more money to complete. P refused, sought return of $1,000 payment and termination of KI Can D recover money owed to him if work is substantially complete? YES, but not here. Machine is unusable and conduct is abandonment of K

Recovery for a K to do work for a lump sum is possible if the work is "substantially" completed Loosens general rule (no recovery until work is fully completed)

Party who wants to recover must provide evidence from which any new K to accept and pay for work done could be inferred

Sumpter v. Hedges (1898 Eng CA) – can recover for your contribution (quantum meruit)F P abandoned lump sum building project; D completed work himself. P sought quantum meruit (restitutional remedy – get back what benefit/work you have conferred to another side prior to breach; quatum valebat – services)I Can P claim quantum meruit? NO, gave D no choice

Quantum meruit requires that P give D option to take/not benefit of work done Distinction is important: if D had accepted, new K formed, maybe D could recover Mere fact that D remained in possession of land is not evidence that new K formed

Howe v. Smith (1884 Eng CA) – deposit made as guarantee of performance not recoverableF P placed $500 deposit and part payment of purchase-money for property. K stated that if P defaulted, D could resell and all expenses would be made good by defaulter. P defaulted

I Can P recover his deposit? NO. Also, P waited too long for performance

Deposit money paid as guarantee that K will be performed is irrecoverable unless K provides otherwise (Exception: if depositor has lost all rights to performance by other party to K)

Part-payment is simply a payment of a part of the K price

Markland Associates Ltd. v. Lohnes (1973 Eng NSSC) – defective work is not a breachF Homeowners displeased w/ renovations; refused to pay balanceI Can builder recover? YES, agreed price less cost of correcting defects

Not every breach absolves employer of promise to pay; only when breach goes to root of K (e.g. abandonment)

If work is done badly and defects have been/can be remedied, counts as substantial performance

Builder should have agreed price less the cost of correcting defects or omissions

Stevenson v. Colonial Homes Ltd. (1961 Eng CA) – can recover part payment, not depositF A sued for return of down payment after refusing delivery of cottage. D alleged money was deposit that was forfeitedI Is money a deposit or partial payment? Partial payment. K was drawn up and supplied by D but still ambiguous; if seller uses uncertain language, Ct will not imply terms for his benefit

Deposit or part payment? Ct will look at intentions, circumstances, evidence If deposit … no return If part payment … recoverable

6. Standard Form Contracts and Exclusion Clauses

MacDougall 145-161

Machtinger v. Hoj Industries Ltd. (1992 SCC)A reasonable notice period is an implied term of tan employment K and the intention of the contracting parties is not relevant to terms implied as a matter of law (but only to terms implied as a matter of fact)

The test for implication of a term as a matter of law is necessity or whether the term sought to be implied is a "necessary incident" of the K

6.1 Unsigned Documents

Parker v. South Eastern R.Y. Co. (1877 Eng CA) – reasonable notice req for unsigned KF P deposited bag at railway station, given ticket with clauses limiting liability on back. Bag lostI Is it P's obligation to make himself aware of condition? NO, obligation on company b/c unsigned

General rule for signed documents: agreement proved with signature; immaterial that party has not read the agreement and does not know its contents (exception: fraud)

Unsigned documents: party imposing condition or exclusion clause has to take reasonable steps to give the other party notice of this condition

Objective test : did party imposing condition do what was reasonably sufficient?

If P unaware of condition … not bound did not see/know about writing … not bound

If knew or believed … bound If knew of writing but not whether it included conditions … company must make it obvious Ct will consider context and whether it is reasonable to assume P has knowledge/accepted

Thornton v. Shoe Lane Parking (1971 Eng QB) – wide exclusion clauses req explicit noticeF P injured in parking lot. Ticket referred to conditions posted within lot, disclaimed liabilityI Is P bound by conditions? NO, P not given reasonable/sufficient notice of condition b/c K concluded upon acceptance of ticket at entrance

Ct should not bind party by unusually wide exclusion clauses unless they are drawn to attention in an explicit way

McCutcheon v. David MacBrayene (1964 Eng HL) – previous dealings must prove knowlF Freighter sank, car lost. Carrier had liability exclusion clause, but car owner had not signed it. Carrier tried to rely on previous dealings to have exclusion clause impliedI Can exclusion clauses be implied from previous dealings? NO, carrier failed to prove owner acquainted with conditions in previous dealings

Previous dealings are relevant only if they prove knowledge of the terms, actual and not constructive, and assent to them

6.2 Signed Documents

Negotiations ----- K ----- Performance ----- Discharge

Promissory estoppel – promise for future facts, but no valid K b/c no considerationMisrepresentation – false statement about past or present that would induce one to enter K; K appears to be valid, no breach during performanceSeek different remedies for each: PE – to avoid injustice, ct will construct K; M – get out of K b/c of false statement

HypotheticalClassification of terms

Significant when party is seeking specific remedy other than damages Are color & CD player conditions? Is Mr. Davis deprived of whole benefit of car? Transportation/marketing?

Standard form K most common form nowadays Very little bargaining Level of knowledge is different Understanding of terms is different (Usually drafter in better position … reallocating risks that could be unusual and opt out of statutory

provisions)

General rule: provisions are usually enforceable if they are properly incorporated, cover event that has happened and not contrary to statute … but not all clauses enforced by all ct at all times

Ct and legislators have developed several ways to control SFC1. Statutes2. Challenge incorporation

1. By notice (unsigned K)2. By previous dealings (trade usage and custom)3. By signature (signed K)

3. Challenge content Interpretation

Reasonableness, fairness Doctrine of unconscionability

What is difference b/t Schuster and Tilden? Experienced skier Not signed in a hurry Nothing hidden

Discussion of standard form contracts for ski lift No meeting of the minds, especially over more minute details Then again, person must recognize and understand risks Onerous terms These K are generally enforceable, but are scrutinized

Tilden Rent-A-Car Co. v. Clendenning (1978 Eng CA) – signature may not be adequateF D had a car accident. Rental agreement said that the rental company's insurance would not cover accidents occasioned while the driver was intoxicatedI Does the exclusion clause apply? NO b/c express terms inconsistent with detailed clauses; driver did not assent to terms and Tilden did not believe he assented

In modern practice, many standard form K signed without being read or understood Signature does not represent true intention or awareness of provisions Parties seeking to rely on terms need to take reasonable measures to draw attention to terms Party denying knowledge need not prove fraud, misrepresentation or non est factum

Delaney v. Cascade River Holidays (1983 BCCA.) – waiver's language in circumstancesF White-water rafting waiver signed moments before trip. Participants drownedI Was waiver sufficient for company to disclaim liability? YES in split-decision

Majority: deceased knew would not be taken on trip unless they signed; signature should be treated agreement

Dissent: o Past consideration: release imposed additional and onerous terms to a K that had already been

finalizedo No consideration for signature b/c operators required to take him regardless of whether signedo Insufficiency of notice: language of release was misleading: "standard" induced sense of

security, "loss or damage" did not mention injury or death, did not refer to supply of inadequate equipment e.g. inadequate lifejackets

Language of waiver must be interpreted in regard to whole purpose of relationship between parties or nature of venture involved

Schuster v. Blackcomb Skiing Enterprises (1995 BCSC) – application of DelaneyF P injured during ski package holiday. P read bold part of waiver, not small type on reverseI Can D rely on waiver? YES, P was familiar with programme and document b/c repeat customer. Given opportunity to read, knew she was affecting legal rights by signing.

Signator can be bound by waiver if he voluntarily enters legal relationship and agrees to be bound by terms of document

Application of Delaney's two-step test: 1) Reasonable steps to bring to consumer's attention; 2) Purpose of the relationship and the nature of venture involved

6.3 Standard E-contracts

Zhu v. Merrill Lynch (2002 BC Prov. Ct.) – online disclaimers cannot be too broadF P sold shares with D's internet trading site, but cancelled transaction. Made same transaction again, but first hadn't been cancelled, so sold twice as many intended shares. P purchased additional shares for more, sued D for difference. D has limited liability clause that warns clients that cancellations should be confirmed and P should have calledI Can D rely on clause? NO, disclaimer too broad and did not make clear that online cancellations had to be confirmed by phone.

Disclaimers cannot be so broad to allow companies to be grossly negligent or misleading without liability

Dell Computer Corp v. Union des consommateurs (2007 SCC) – e-K must be accessibleF P erroneously advertised price on web, blocked access the next day. D used deep link to circumvent block. P posted price correction notice, announced it would not fill orders, refused to honor D's order. D filed motion for class action, P applied for arbitration under terms and conditions of sale and dismissal of motion.I Can P rely on arbitration clause? YES b/c accessible from every online page.

E-contracts must be made easily accessible

6.4 Fundamental Breach

Karsales v. Wallis (1956 Eng CA) – Denning's formulation of fundamental breachF D refused to accept car b/c physical and engine damage upon arrivalI Can P recover payment instalments? NO, fundamental breach

Obligation to deliver car in substantially same condition Implied term that car would be kept in suitable condition during bailment P cannot rely on exclusion clause b/c cover for misconduct/indifference

Doctrine of fundamental breach – breach which goes to the root of the K disentitles the party from relying on the exemption clause

Deliver something "different in kind" from that contracted for Broken "fundamental term" Broken "contractual obligation"

Photo Production v. Securicor Transport Ltd. (1980 Eng HL) – overturns DenningF Security company's employee set factory on fireI Can security company rely in LLC? YES, used clear and express language, should've insured

Whether and to what extent an exclusion clause is to be applied to a fundamental breach, fundamental term, or any breach of K is a matter of construction of the whole K

Freedom of K allows parties to agree to exclusions and modifications of obligations as they please, as long as agreement maintains legal characteristics of a K

Commercial K never states all primary obligations in full; many left to be incorporated by implication

If exclusion clause is clear and ambiguous, it will protect the party relying on it from liability

Breaches of primary obligation (thing bargained for) give rise to secondary obligations (damages) Exception: fundamental breach Exception: where parties have agreed by express words or implication of law that any failure by one

party to perform a particular primary obligation shall entitle other party to elect to put an end to all primary obligations of both parties remaining unperformed

Hunter Engineering v. Syncrude Canada Ltd. (1989 SCC) – complicates Photo Production; freedom of K generally upheld w/ exceptionsF P purchased machinery which failed after warranty expired. D relied on exclusion clause to exclude liability even for fundamental breachI Is D liable under doctrine of fundamental breach? NO b/c P not deprived of entire benefit

Dickson J: If true construction of K excludes liability for kind of breach that occurred, party in breach will be saved from liability, unless K or clause is unconscionable (e.g. arises from unequal bargaining power between parties clause upheld unless "unconscionable"

Wilson J: test for enforceability of exclusion clause or K is one of unreasonable as between the parties and in light of the nature of the breach clause upheld unless "unfair or unreasonable"

Fraser Jewellers Ltd. v. Dominion Electric Protection Co. (1982 ONCA) – reconciles Hunter F P sued security company b/c its slow response allowed successful robbery. D's agreement limited liabilityI Can D limit its liability? YES, it is reasonable and makes commercial sense

Companies can limit liability where it is reasonable. No obligation to negotiate, ensure it is read, draw attention. Cannot repudiate b/c mere inequality of bargaining positions; must be abuse.

Exclusion clause should be enforced according to its true meaning provided that it is not "unconscionable" or "unfair or unreasonable" (reconciles Dickson and Wilson JJ – "difference in practice between these alternatives is unlikely to be large")

If exclusion clause is not obscure, if it is visible, clear and ambiguous, and not the result of abuse of bargaining power, there is no basis for the ct to disturb the agreement between parties

Sale of Goods Act, s. 20

Solway v. Davis Moving & Storage Inc. (2002 ONCA) – applies HunterF P's goods stolen when D stored them overnight in a public street. TJ found false assurances led P to enter to LLC; P unaware that goods would be left unattended, had taken special careI Can P recover? YES, using either Dickson/Wilson from Hunter

V. EXCUSES FOR NON-PERFORMANCE OF CONTRACT MacDougall 213-234

1. Duress

Pao On v. Lau Yiu Long (1980 Eng JCPC) – establishes economic duressF Two companies swapped shares; one claimed that their guarantee procured by econ duressI Can P claim (economic) duress? NO, did not meet four point evidentiary test

Duress, whatever form it takes, is a coercion of the will so as to vitiate consent

In contractual situation, commercial pressure is not enough

Four point evidentiary test:1. Did the person protest? 2. Did he have a practical and reasonable alternative course open to him? 3. Was he independently advised? 4. Did he try to avoid the K thereafter?

Gordon v. Roebuck (1992 CA) – claimant must prove econ duress unjustifiableF Parties were trustees in joint venture. D would not execute required documents without pay and promissory notes, which P refused to honour. P sought to have agreement declared voidable for economic duressI Can P succeed in claiming economic duress? NO, met 4-part test but did not prove unjustified

Economic duress must be unjustifiable to succeed in a claim and set aside K. Onus on claimant.

2. Undue Influence

 Comparing duress and undue influence Duress – compulsion under which a person acts through fear of personal suffering at time of making K

o Suffering may be that of someone close to party, but not strangero Makes K voidable but not void

Undue influence – unconscientious use by one person of power in order to induce other to enter Ko Duress falling short of CL requirements may constitute undue influence in equityo Can be established in two ways: i) actual undue influence ii) special relationship b/t parties.

Proof of relationship raises claim of undue influence unless other party can rebut the presumption

o Aim is not to save people from consequences of their own folly, but to save them from being victimized by others

Geffen v. Goodman Estate (1991 SCC) – establishing presumption of UI; rebuttalF Family members contested validity of two different willsI Was there UI? NO, presumption rebutted b/c independent legal advice

P must establish presence of (potentially) dominant relationship to give rise to presumption of UI

Onus then moves to D to rebut it (i.e. P acted full, free, and informed and that he had independent advice)

Magnitude of disadvantage of benefit is cogent evidence of whether UI exercised

Royal Bank of Scotland Plc. v. Etridge (2001) – duty of stronger in non-commercial relF Wife gave guarantee to bank (interest in home as security) for husband's debts. When bank attempted to enforce charge and take possession of home, wife claimed UI from husbandI Can wife claim UI? YES

Creditor must always take reasonable steps to emphasize guarantor of risks Non-commercial relationships: ct will interfere to protect weaker Commercial relationships: ct assume parties "capable of looking after themselves"

Transaction that is not reasonably expected to occur between parties is necessary to give rise to a rebuttable evidential presumption of UI

Three ways to establish UI1. Actual (e.g. duress) – weaker proves actual UI and causal connection between influence and transaction2. Presumed (irrebutable) – inequality of bargaining power; obligation on stronger to look after interests of

weaker. Weaker need only prove special relationship3. Presumed (rebuttable) – weaker proves nature and existence of relationship + disadvantage (except:

gift, bequest); evidentiary burden shifts

3. Unconscionability

Morrison v. Coast Finance Ltd. (1965 BCCA) – establishing presumption of UC; rebuttalF D persuaded P to mortgage her home and lend money to strangers for their debtsI Unconscionable transaction? YES, mortgage set aside. (Claim of UI failed because there was consent and no special relationship)

Presumption of unconscionability requires1. Proof of inequality in the position of the parties arising out of the ignorance, need or distress of the

weaker, which left them in the power of the stronger2. Proof of substantial unfairness of the bargain in favour of the stronger

Stronger party must rebut the presumption by proving the bargain was fair, just and reasonable

Marshall v. Can. Permanent Trust Co. (1968 ABSC) – UC doesn't require knowledgeF P offered to purchase land from D, elderly man living in care facility b/c brain damage, agreed to sell land to P. D's solicitors refused to completeI Unconscionable transaction? YES, D entitled to rescission. Immaterial that P was unaware of D's incapacity; low price was sufficient proof of substantial unfairness (step #2).

Unconscionability can be applied even if there is evidence that stronger was unaware of weaker party's incapacity

Harry v. Kreutziger (1978 Eng CA) – Lambert introduces community std testF P (weaker) sold boat/fishing license to D on D's false/reckless assurances that he could obtain another license. Boat undervalued, P unable to obtain new licenseI Unconscionable? YES, D took advantage of P's background (inarticulate, semi-deaf, poor, uneducated, ill-advised, undereducated) taken advantage of. P entitled to rescission

McIntyre applied Morrison ; Lambert introduced a new test: whether the transaction, seen as a whole, is sufficiently divergent from community standards of commercial morality that it should be rescinded

Business Practices and Consumer Protection Act, ss. 4-10

4. Illegality

J.G. Collins Insurance v. Elsley (1978 SCC) – restraint of trade weighed with other concernsF Sale of an insurance company had a restrictive clause on employment, where each breach was $1000. Ex-employee commenced own business, clients moved with himI Is this enforceable? YES, a mere non-solicitation clause would not suffice

A covenant in restraint of trade is enforceable only if it is reasonable between the parties and with reference to the public interest

Still v. Minister of National Revenue (1998 Eng CA)F P misinterpreted permanent status letter, believed in good faith she was lawfully entitled to work; later denied unemployment benefits

I Can P claim benefits? YES

Modern approach to illegality: Ct may grant relief for illegal K depending on legislative purpose, remedy being sought, public consequences of finding K unenforceable

Ct may say: K is illegal but relief is exception Ct may say: K is not illegal and therefore enforceable Ct may say: if two provisions; one severed and other enforced

VI. REMEDIES1. Damages

MacDougall pp. 293-302

Right to damages arises on any breach of the primary obligations of K Right to and calculation of damages based on CL rules which may be codified in statutes Parties can agree expressly on damages provisions Liquidated damages Logic behind damages: allow parties to move on efficiently, mitigate loss, find a market substitute Efficient breach – allows one party to withdraw to seek advantage elsewhere and just compensate

innocent party. Everyone is happy! (Does this send the message that $ can fix everything and people don't need to be held to their promises?)

Interests protected (i.e. reasons for awarding damages):

i) Expectation interests Forward-looking, put injured person in position that person wanted to be in e.g. loss of profits To assess compensation: if goods not delivered difference b/t contract price & market price; if goods

wrong/defective difference b/t market value of what was delivered and market value of what should have been delivered

Damages compensate; no more, no less Difficult to quantify non-$ expectations e.g. loss of pleasure, relaxation, peace of mind

ii) Reliance interests Backward looking, compensation for wasted expenditure or money to undo loss P would have avoided if

he had not entered K in first place Useful where expectation interest is difficult to calculate Money must have been truly wasted. Cannot claim money that would have incrued anyway, or money

spent on something that the P used for another purpose Generally, P cannot claim for lost profit and one's own expenses, only one or other, but P can choose Cannot claim if D's breach saved P from a greater loss that would have occurred if K carried out

iii) Restitution interests Shifts focus from P to D, calculation of what the D has gained or kept as a result of his own breach Upheld to prevent D from exploiting P for own benefit

Types of damages Compensatory – loss of expectation, usually loss of profit, but there are exceptions (Swan Tours) Aggravated – usually to compensate person for their distress/suffering Nominal – very small damages awarded to show that the loss or harm suffered was technical rather than

actual

Calculating damages Must be able to quantify monetary amount, but there is often an element of certainty

Review: Equitable remedies Specific performance – enforcing K Rescission - Injunction – can be positive or negative, but mainly negative ("do not do" something). Temporary

measure Restitution – ensure wrongdoer doesn't benefit

1.1 The Interests Protected

1.2 The Expectation, Reliance and Restitution Measures

McRae v. Commonwealth Disposals Commission (1951 Aust. H.C.) – reliance damagesF P fitted a salvage expedition for non-existent tanker that D had offered for sale.I How should P be compensated? Reliance interests: salvage expenditures and purchase price

Where innocent party cannot quantify expectation interests, he may recover for reliance interests

Sunshine Vacation Villas Ltd. v. Hudson Bay Co. (1984 BCCA) – either expectation OR reliance damagesF P granted license to operate in D's storefront after D terminated agreements with existing licensees. D renewed existing licenses, negotiations with P broke down, P sued for loss of capital (investment, line of credit) and profitI How should P be compensated? Reliance interests only. Loss of capital; not loss of profits

A party cannot recover for both expectation and reliance interests; treated as alternatives

A party cannot recover for losses it would have incurred even if breach had not taken place (onus on D to show)

Attorney General v. Blake (2001 Eng HL) – restitution rare but possibleF P sued to prevent the advance of funds to D, who breached the Official Secrets Act by defecting to USSR and releasing autobiographyI Can P recover for D's breach of K? YES

In exceptional circumstances, when normal damages, specific performance, and injunction are inadequate,ct may allow restitution damages

"Skimped performance" (D must pay back amount he has saved by breach) Obtained profit by doing very thing he was contracted not to do Ct will also consider whether the breach was cynical and deliberate

2. Quantification

Chaplin v. Hinks (1911 Eng CA) – damages for lost opportunityF P selected as candidate in D's beauty pageant, but was out of town when appointment madeI Is P entitled to damages although it isn't certain she would've won? YES, deprived of opportunity to receive benefit

The fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract

Groves v. John Wunder (1939 Minn. C.A.) – economic feasibility of K does not reduce damage amountF D breached K by removing best gravel and destroying grade on P's property. P sued to complete K ($60,000) but if D had followed through, property would have been worth only $12,600I Is P entitled to the reasonable cost of D completing the work? YES, P entitled to compensation for what he has lost i.e. work promised and deprived of at breach

A party may get damages to put them in the position they would've been in had the K been performed, without factoring in whether it was economically feasible to enter the K at all

Jarvis v. Swans Tours (1973 Eng CA) – mental distress, loss of enjoyment recoverable in KF P sued for failure of holiday to meet expectations generated in brochure and mental distress and aggravationI Can P recover? YES, full cost of trip

Damages for mental distress, disappointment, and discomfort are recoverable. Measured to compensate P for loss of entertainment and enjoyment which he was promised and did not get

Ruxley Electronics and Construction Ltd. v Forsyth (1996 Eng HL) – imperfect result is not total failureF P's pool too shallow, but safe and no decreased value. P refused to pay balance of K sumI Can P recover full sum? NO, only nominal damages

A failure to achieve the precise contractual objective does not necessarily result in loss which is occasioned by a total failure. Ct will consider reasonableness and proportionality

Damages are designed to compensate for an established loss and not to provide a gratuitous benefit to P or punishment for D

3. Certainty, Causation and Remoteness

Hadley v. Baxendale (1854 Eng) – test for remoteness: arising naturally? special circumstances?F D promised next day delivery of P's broken milling machine part. Delay caused P's loss of profitsI Are the damages too remote? YES, special circumstances not communicated

General rule: if the loss flowing from the breach is too remote, it cannot be recovered

Test for whether damages are too remote1. Can damages fairly and reasonably be considered as arising naturally from the breach? 2. Are there special circumstances that should be made known the the party breaching the K for damages

beyond what would ordinarily stem from a breach of ordinary use?

1 = Recoverable losses are those arising naturally arising from the breach which should've been within the reasonable (objective test) contemplation of the parties

2 = If the K was made under special circumstances which were communicated to the D and thus known to both parties, the damages will be the amount of injury which would ordinarily result from such a breach of the K under the given special circumstances

Victoria Laundry v. Newman (1949 Eng) – foreseeability is enough; redefines Hadley testF D damaged P's boiler; delay caused P to lose regular business and opportunities for other KI Is D liable for loss of profits? YES, but only for regular business

Only damages that are reasonably foreseeable as arising from the breach are recoverable (objective test)

What is reasonable depends on the knowledge of the parties

Everyone has imputed knowledge of ordinary circumstances, but there may have to be actual knowledge of special circumstances for recovery to be granted on these special grounds

It is not necessary to prove that the wrongdoer contemplated the loss. It is enough if they could foresee the loss was likely to result

Redefines test from Hadley:1. Imputed knowledge is OK 2. Actual knowledge (not objective standard) for special circumstances. Absolute foreseeable is not

necessary for recovery if loss is a "serious possibility" or a "real danger"

Koufos v. Czarnikow (The Heron II) (1969 Eng) – adds probability to Victoria Laundry testF P chartered ship to carry and sell sugar. D changed route, delayed by 9 days, market value of sugar dropped and P's profits lower

I Can P recover? YES, loss was sufficiently likely

Damages must be more than simply foreseeable, must be sufficiently likely to result from a breach to recover compensation

Vorvis v. ICBC (1989 SCC) – awarding aggravated and punitive damagesF P fired without cause or reasonable notice. Before dismissal, pressure caused by manager caused tension and stress needing medical attentionI Is P entitled to aggravated or punitive damages? NO. No aggravated because mental distress not owed to dismissal; No punitive because conduct wasn't reprehensible enough

McIntyre: both aggravated and punitive damages must be independently actionable wrong Aggravated: possible in wrongful dismissal; purely compensatory Punitive: only for conduct that is "harsh, vindictive, reprehensible, malicious" and deserves punishment

Wilson: remoteness test in Hadley: "Whether the D should reasonably have anticipated"; no separate actionable wrong required for either aggravated or punitive damages

Wallace v. United Grain Growers (1997 SCC) – accounted for mental distress by lengthening notice period in wrongful dismissal ("Wallace damages")F P fired without cause; unable to secure similar employment, required psychiatric assistance for mental distressI Is P entitled to aggravated or punitive damages? SORT OF, ct extended period of reasonable notice

General rule: damages for mental distress are not recoverable for wrongful dismissal unless there was a separately actionable course of conduct

Iacobucci (majority): accounted for mental distress by lengthening the notice period ("Wallace damages")

McLachlin (dissent): action for wrongful dismissal is an action for the breach of implied term in K of employment to give reasonable notice of termination

Whiten v. Pilot Assurance (2002 SCC) – applies test from Vorvis for punitive damagesF Insurance company pursued hostile and confrontational policy to force displaced family to settle claim at lower than its value (e.g. alleged arson despite police chief's report)I Can P claim punitive damages? YES, "actionable wrong" is breach of contractual duty of good faith/pay loss

Test from Vorvis requires "actionable wrong", but this need not be an independent tort

Punitive damages are awarded in exceptional cases for malicious, oppressive, and high-handed misconduct that offends the ct's sense of decency (Purposes: retribution, deterrence, denunciation)

Fidler v. Sun Life Assurance (2006 SCC)F P denied disability benefits to which she was entitled. P sued for mental distress and punitive damagesI Can she recover damages for mental distress? YES, mental distress reasonably within contemplation of parties. Can she recover punitive damages? NO, good faith found

Where a purpose of the commercial K is to provide a peace of mind, it is within reasonable contemplation of the parties that its breach would cause mental distress. Right to compensatory damages arises out of contractual breach

True aggravated damages arise out of aggravated circumstances and are not awarded under the principles of Hadley v. Baxendale

Punitive damages are awarded to punish for a misconduct that departs from the ordinary standards of decency. Claim must be independently actionable (as a claim in tort or independent contractual obligation to act in good faith)

5. Mitigation

White and Carter (Councils) v. MacGregor (1962 Eng HL)F D didn't renew advertising contract, P produced garbage can ads anyways, sued for full K priceI Should D have to pay damages? YES. Does P have to mitigate? NO, P has right to refuse to mitigate by accepting anticipatory breach. No obligation for P to minimize D's losses

General rule: When a party to a K repudiates, the innocent party has an option: to accept that repudiation and sue for damages or to disregard/refuse to accept it and then K remains in full effect

??? No obligation to accept anticipatory breach (statement that breach will occur before time of performance; choice to accept/not) if it will mitigate damages if P can show some reason or legitimate interest why they should continue

Contracts – aggravated damages language shifts to "damages for mental distress"Remoteness is still testSeparate actionable wrong is still required for punitive damages (Whiten)punitive damages: para 61-63; para 39-45 damages for mental distress FIDLERaggravated damages: para 52-55 McLachlinHonda Canada Inc v. Keayes 2008 SCC 39

WHAT: reasonable steps to reduce losses WHY: innocent party has duty to do so to reduce economic inefficiency; point of damages is to bring people back to where they would have been, if they don't mitigate then that pushes them farther away WHEN: from time of breach should be reasonable steps, not additional burdens on innocent party how to determine whether reasonable steps have been taken? Factual Q Who has burden of proof? wrongdoer! say breach of contract during construction. damages = cost of completion OR difference in cost b/t what was promised and what was given linked to causality and remoteness

6. Time of Measurement of Damages

Semelhago v. Paramadevan (1996 SCC) – damages in lieu of specific performance; calc date of trialF D reneged, sold house to another. P sued for specific performance or damages in lieu. Awarded $120,000 of damages at trial, which is difference between purchase price he agreed to pay and value of property at trial date. D appealed because houses had gone up in value; P would be receiving windfallI Were P's damages calculated appropriately? YES

Specific performance should not be granted as a matter of course, absent evidence that the property is unique to the extent that its substitute would not be readily available

Damages should be calculated based on date of trial; will be true/closer substitute for specific performance

7. Liquidated Damages, Deposits and Forfeitures

Shatilla v. Feinstein (1923 SK) (1923 Sask. Prov. Ct.) – penalties and liquidated damagesF D breached non-competitive clause that required payment of $10,000 as liquidated damages on each breachI Is the sum fixed in the covenant a penalty or liquidated damages? PENALTY that ct will not enforce b/c punitive

When the damages which may arise out of a breach of a K are in their nature uncertain, the law permits parties to agree beforehand as to the amount to be paid in case of breach

Whether the sum agreed upon is a penalty depends on the circumstances of each case

An agreement for payment on any one of a number of breaches, some trivial and some serious, is presumed to be void as a penalty since "the strength of a chain is its weakest link"

H.F. Clarke Ltd. v. Thermadaire Corporation Ltd. (1976 SCC) – judicial appraisal of reasoonablenessF A broke K to sell R's products exclusively, had signed K to pay liquidated damages equal to its gross trading profit ($200,000), even though actual loss of net profit over K period was only $92,000I Can R recover gross trading profit as liquidated damages? NO, excessive and punitive. Formula of calculating amount was not defined, departs markedly from a reasonable approach to recoverable or actual loss

Always open to parties to make the predetermination of damages, but it must yield to judicial appraisal of its reasonableness in the circumstances

The sum will be held to be a penalty if it is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach

J.G. Collins Insurance Agencies Ltd. v. Elsley (1978 SCC) – penalty clause and freedom of KF Restrictive covenants for insurance sellerI Is covenant binding? YES, injunction upheld for freedom of K

Striking down penalty clause interferes with freedom of contract, but is done so only to provide relief against oppression

If actual loss exceeds penalty, normal rules of enforcement of K should apply. Recovery of only the agreed sum

Stockloser v. Johnson (1954 Eng CA)F K stipulated that if purchaser defaulted in payment, all payments would be forfeited to vendorI Can purchaser recover his payments? NO

NO forfeiture clause: if money is part payment and buyer defaults, once seller rescinds the K or treats it as at an end, the buyer is entitled to recover their money (but seller can claim damages)

YES forfeiture clause or money paid as deposit: party may have remedy in equity, but1. Forfeiture clause must be of a penal nature 2. It must be unconscionable for the seller to retain the money

8. Equitable Remedies (Specific Performance and Injunctions)

John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2003 Eng CA) – what is "unique" property?F Purchase of land for hotel to be erected near amusement parkI Should specific performance be granted? YES, unique property

"Unique property" – quality especially suitable for its proposed use, cannot be reasonably duplicated elsewhere

Get an injunction so that the land would not be sold in the meantime

SALE OF GOODSStatute says may order specific performance if goods are unique, or if contract for ongoing sale. needs to be inadequacy of damagesOnus on claimant to prove. Remember, specific performance is an extraordinary remedy

If uniqueness not communicated, ct will only give market value without sentimental value (proximity – how could the person have known? Why didn't you insure it?) But if uniqueness communicated, ct may give additional damages, possibly through mental distress (not too remote for them to see that you would suffer)

SALE OF SHARESAlso treated as unique b/c sometimes value of shares is not the same as that represented in the markete.g. amount of shares would change partnership of company

PERSONAL SERVICE:(Think back to illegality – ct reluctant to enforce these K based on public policy)

Doctrine of mutuality – SP should be available to both parties or neither (e.g. K with minor – can't enforce K against minor, so co could argue mutuality)

Supervision for Long-term performance e.g. construction – ct might have to go into supervision, but is more likely to just grant damages

Extreme hardship to either parties (or even third party)

Prohibitory injunctions – require D to not do somethingmandatory injunction – requires D to do somethingEffect is the same: to stop D from breaching a KAlso: permanent or perpetual – binding & finalInterim or interlocutory – pending trial. Usually obtained ex parti (as soon as indication of possible breach, based on how well case can be argued to maintain status quo until D can come to ct and present their case). Applicant must show emergency and irreparable loss

RJR Macdonald1) Serious issue to be tried … 2) Irreparable harm …3) balance of convenience

Warner Bros. v. Nelson (1937 Engl KB)F D breached K to perform solely and exclusively for P. P sought injunction to restrain further breachI Will ct grant injunction? YES. Generally, ct will not enforce a covenant for personal service, and if granting an injunction will have the same result, ct will not grant it. However, ct justified injunctionReasonable – limited obligations to 3 yearsDifficult to estimate damages P will suffer by D's breach; damages will not compensate adequatelyInterest of justice

Ct may grant injunction if damages is not an appropriate remedy (cannot adequately compensate "special, unique, extraordinary and intellectual services") and no adequate damages were available

Zipper Transportation v. Korstrom (1997 Eng QB)F Termination agreement: for 12 months after, D cannot work for another courier company. If he breaches, just pay $30,000 in 5 days, or will be bound to carry out obligationsI Is this enforceable? YES, P granted injunction

Agreement was reasonable and it would not be contrary to public interest to enforce the injunction (Test from J.G. Collins v. Elsley)

Zipper Transportation v. Korstrom (1998 Eng CA)I Did trial judge err in not considering irreparable harm or balance of convenience? YES, no benefit to Zipper and major economic harm to Korstrom. Injunction set aside

Requirements to support injunctive relief: Would applicant suffer irreparable harm? (i.e. nature, not magnitude) Balance of convenience – which party would suffer greater harm?