NIKI CONTRACTS CANS - TRU Society of Law Students · Carlill%v.%Carbolic%Smoke%Ball%Co.%advertisements%are%usually%aninvitationtotreat% unless%the%language%can%be%interpretedas%an%offer%by%the%ORP%

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Table of Contents

Offer and Invitation to treat ................................................................................................ 6 Synthesis of Offer and Invitation to treat: ................................................................................ 6 Canadian Dyers Assn v Burton –mere quotation does not constitute an offer. ........... 6 Pharmaceutical Society of Great Britain v. Boots Cash Chemists (southern LTD.) – display of price = invitation to treat. .......................................................................................... 7 Carlill v. Carbolic Smoke Ball Co. advertisements are usually an invitation to treat unless the language can be interpreted as an offer by the ORP ........................................ 8 Goldthorpe v. Logan – Advertisement can be seen as an offer depending on the language used, words indicate intent. An individual’s conduct can signal acceptance. .......................................................................................................................................... 9

Tenders: ..................................................................................................................................... 9 Synthesis: ............................................................................................................................................ 9 Harvella Investments Ltd. v Royal Trust Co of Canada – freedom of contract, you can control your own contractual process. ............................................................................ 11 Ron v. Ron Engineering & Construction (contract A + Contract B) ................................ 11 MJB Enterprises ltd. v. Defense construction: (It is implied that only compliant bids will be accepted) ............................................................................................................................. 12 Double Earthmovers ltd. v. City of Edmonton: Waive trivial requirements plus 4 more. ................................................................................................................................................... 13

Communication of Offer ...................................................................................................... 15 Synthesis: .......................................................................................................................................... 15 Blair v Western Mutual Benefit Assn. An offer must be directly communicated between parties (to demonstrate intent). .............................................................................. 15 William v Cowardine As long as you are aware of the offer and intend to accept this offer consciously motive is not important for a unilateral contract. ............................ 16 R. V. Clarke (must first be aware of offer before performing the act that would constitute acceptance) .................................................................................................................. 17 Carlil v. Carbolic SmokeBall – unilateral contract ............................................................... 18

Termination of Offer ............................................................................................................ 18 Synthesis: .......................................................................................................................................... 18 Revocation ........................................................................................................................................ 19 Dickinson v Dodds (An offer can be revoked anytime before acceptance, a promise to not revoke is not a binding promise) .................................................................................................. 19 Byre v Van Tienhoven (posting a letter does not = revocation if the party has already accepted, it has to be communicated to count) ............................................................................... 20 Errington V. Errington and Woods (Once someone embarks on a unilateral offer you cannot revoke it) .......................................................................................................................................... 21 Dawson v Helicopter Exploration Co (courts prefer bilateral contracts over unilateral ones) .................................................................................................................................................................. 22

Rejection: ........................................................................................................................................... 23 Livingston v Evans (a rejected offer cannot be accepted, a counter offer constitutes a rejection) .......................................................................................................................................................... 23


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Lapse of Time: .................................................................................................................................. 25 Barrick v Clark (How long does an offer remain open? 1 industry custom 2. Specific circumstances of the case ......................................................................................................................... 25 Manchester Diocesan Council of Education v Commercial and General Investments (Contextual circumstances determine reasonable time lapse). ............................................... 26

Acceptance: ............................................................................................................................. 27 Battle of Forms Synthetsis: .......................................................................................................... 27 Shrink Wrap Synthesis: ................................................................................................................ 27 Silence Synthesis: ........................................................................................................................... 28 Communication of Acceptance: Mail and instantaneous modes Synthesis: ............... 28 Butler Machine Tools v. Ex-‐cell Corp (Denning’s global approach to battle of forms) ............................................................................................................................................................... 29 Tywood Industries LTD v ST. Anne-‐Nackawic Pulp and Paper co LTD (Application of Denning’s global approach + no sneaking power clauses in) .......................................... 30 Shrink Wrap ..................................................................................................................................... 31 ProCD v. Matthew Zeidenberg and Silken Mountain WebServices: Clicking I accept = formation of a valid contract, in certain instances contract is formed after purchase .. 31

Silence ................................................................................................................................................ 31 Carlil v. Carbolic Smoke Ball – Performance can constitute acceptance in a unilateral contract and acceptance does not need to precede performance. ......................................... 32 Dawson v. Helicopter Exploration co – acceptance can be implied by language and conduct of the acceptor. ............................................................................................................................ 32 Felthouse v. Bindley (English Case) – Silence does not constitute as acceptance in a bilateral contract because you cannot impose obligations on unwilling parties. ............ 32 Saint John Tug Boat Co v. Irving Refinery LTD. (if an arrangement has been made before, silence does not mean rejection, it is assumed that acceptance is continued, there is a difference between silence, positive conduct and deceptive acquiescence) . 33 Eliason v. Henshaw: Offeree must follow the terms of the offeror (time/place/manner) for an acceptance to be valid and binding ......................................................................................... 34

Communication of Acceptance: Mail and Instantaneous Modes: ................................... 34 Household fire v. Grant – Postbox rule, as soon as letter is sent, it is accepted. Unless the parties of the contract agree otherwise. ..................................................................................... 34 Holwell Securities v Hughes: Postbox rule applies unless expressly said it does not and if its application leads to inconvenience and absurdity. ............................................................. 35 Brinkibon v. Stahog Stahl: The time and location of the contract is determined when and where the offeror gets notice of acceptance. This does not apply in all circumstances. ............................................................................................................................................... 36

Certainty of Terms ................................................................................................................ 36 Vagueness Synthesis: ..................................................................................................................... 36 Incompleteness and Agreements to Agree synthesis: ........................................................ 37 The Sale of Goods Act – excludes services and land, only applies to goods. ............... 38 Agreements to negotiate synthesis: ......................................................................................... 38 Anticipation of Formalization Synthesis: ............................................................................... 39 Vagueness .......................................................................................................................................... 40 R. v. CAE Industries: If serious intent to form legal contract, the court will try and define vague terms to render the contract enforceable. ............................................................. 40


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Incompleteness and Agreements to Agree ............................................................................ 41 May v. Butcher v. R (an agreement to agree on an essential term is not enforceable) .. 41 Hillas v. Acros (Price, description of goods, date/time of delivery are all esstential terms) ................................................................................................................................................................ 41 Foley v. Classique Coaches Ltd – May and Butcher does not provide a universal principle on the construction of a contract, and each case must be decided on the construction if the particular document – in some cases an agreement to agree on something like price, if accompanied by some universal metric to help quantify it, will be enforced by the courts. ........................................................................................................................ 42

Agreements to negotiate .............................................................................................................. 43 Empress v Bank of Nova Scotia – Agreement to renew has two contractual obligations .............................................................................................................................................................................. 43 Mannpar enterprises v. Canada – Bare agreement to negotiate is not enforceable if it is too uncertain .................................................................................................................................................. 44 Wellington City Council v Body Corporate – In some instances an agreement to negotiate in good faith in unenforceable because its subjective nature leads to uncertainty ...................................................................................................................................................... 45

Anticipation of Formalization .................................................................................................... 46 Bawitko Investments v. Kernels Popcorn Oral contracts are valid if all of the essential terms are agreed upon. If not then the oral contract is no contract at all. .......................... 46

Intention to Create Legal Obligations ............................................................................. 47 Intention to create legal obligations synthesis: ................................................................... 47 Balfour v. Balfour – promises motivated by love and affection are presumed to not have intended legal consequences. .......................................................................................... 48 Rose and Frank v. JR Crompton Bros – business parties must clearly express intention for their contract to not have legal consequences/legal obligations. ....... 49 TD Bank v. Leigh Instruments – when deciding whether there are intentions to create legal obligations you have to consider factual background between the parties as well as the commercial reality .......................................................................................................................... 49

Canadian Taxpayer Association v. Ontario (Minister of Finance) – Political candidates promises, written or oral, are not intended to have legal consequences) ............................................................................................................................................................... 51 Family law act S.3 and 92 ............................................................................................................. 51

Formality .................................................................................................................................. 52 Promises under seal ...................................................................................................................... 52 Requirement of Writing ............................................................................................................... 52 BC Sale of Goods Act .................................................................................................................................... 52

Contracts under Seal ..................................................................................................................... 53 Royal Bank v Kiska: If seal then contract is valid, anything counts as a seal if you intended for it to be a seal. If a contract is under seal and the seal itself is in question but the contract has all of the elements of a valid contract then it is enforceable ........... 53

Dynamic Transport Ltd. v. O.K. detailing Ltd. – examples of legitimate descriptions of land ................................................................................................................................................. 54 Delgman v. Guaranty Trust Co. (1954) SCR-‐ requirement of writing for a contract regarding land to be valid ............................................................................................................ 54

Consideration ......................................................................................................................... 55


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Nature of Consideration Synthesis: .......................................................................................... 55 Past Consideration Synthesis: .................................................................................................... 55 Forbearance ..................................................................................................................................... 55 Pre-‐existing duties: ........................................................................................................................ 56 Nature of Consideration ............................................................................................................... 56 Thomas v. Thomas (consideration must have value in the eyes of the law (commercial value not important), there must be mutual exchange. .............................................................. 57 Governors of Dalhousie College at Halifax v. The Estate of Arthur Boutilier (performance or lack of performance must be done at the request of the party) ........... 57

Past consideration: ........................................................................................................................ 58 Eastwood v. Kenyon (A promise based on past consideration is not binding). ................ 58 Lamleigh v. Brathwait (An act done before the giving of a promise can sometimes be consideration for that promise if three requirements are satisfied) ..................................... 59

Forbearance ..................................................................................................................................... 60 D.C.B and Harold J Arkin and Zellers inc (usually forbearance to sue is valid consideration (there are requirements though, 4 step test) ..................................................... 60

Pre-‐existing duties ......................................................................................................................... 61 Pao On v. Lau Yiu Long (in three party cases A’s promise to do something for B is also valid consideration for C) ......................................................................................................................... 61 Stilk v Myrick (Promising to do what you already have to do is no promise at all) ........ 62 Gilbert Steel v. University Construction ltd (this is the law in Ontario) ............................... 62 Wiliams v. Roffery Bros (very important case) If practical benefit + promise is not given under duress then pre-‐existing duty can be consideration ........................................... 63 Greater Fredericton Airport Authority Inc v. Nav Canada (Promising to do what you already have to do is valid consideration as long as there is no duress) ............................. 64

Promise to accept less ................................................................................................................... 64 Foakes v. Beer (the promise to accept less in satisfaction of a larger sum is no promise at all) .................................................................................................................................................................. 64 Re-‐Selectmove LTD: Even in cases where there may be practical benefit to accepting a lesser sum in payment of a debt, this is not sufficient consideration to finding a binding contract. ............................................................................................................................................................ 65 BC Equity Act s. 43 ....................................................................................................................................... 66 PAI v. Norstream – Common Law + Statue to render certain contracts as lacking in consideration ................................................................................................................................................. 66

Promissory Estopple ............................................................................................................ 67 General Principles .......................................................................................................................... 68 Hughes v Metropolitan Railway (Birth of Estopple, later solidified by Denning, makes reference to reliance and detriment although not stated, seems to be implied. .............. 68 Central London Property Trust LTD. v High Trees House: If a party makes a promise and the other party relies upon the promise the original promisor cannot take back the promise at a later stage because the promise has relied on the new promise and it is unfair to back out. ........................................................................................................................................ 69

Elucidation of Principles .............................................................................................................. 70 John Burrows LTD. v. Subsurface Surveys LTD. (looking at the nature of representation requirement of estopple in isolation) -‐ Friendly Indulgence ................................................... 70 D & C Builders v. Reese : No person can insist on a settlement procured by intimidation. ................................................................................................................................................... 71


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Collier v. P&M J. Wright: A strange sort of Survival for Pinnel’s case: .................................. 72 Saskatchewan River Bungalows LTD. v. Maritime Life Assurance Co. (waiver and its retraction, reliance) .................................................................................................................................... 73 W.J Alan & Co v. El Nasr Export & Import: In regards to step 3 of estopple: detrimental reliance is not necessary for valid estopple. ..................................................................................... 74 Socitite Italo-‐Belge Pour Le Commerce Et L’industrie S.A v. Palm and Vegtable Oils (Malaysia) The Post Chaser. Dealing with step 3 of Estopple: To go back on a promise is inequitable if there is prejudice (kind of like detriment) ........................................................... 76

Shield Not a Sword ......................................................................................................................... 77 Combe v. Combe: estopple is a sword not a shield. ....................................................................... 77 Walton Stores (interstate) PTY LTD v. Maher: Estopple used as a sword in Australia and succeeded ............................................................................................................................................... 78 M.(N) v. A(A.T): estopple is only a shield not sword in Canada. .............................................. 79

Privity: ...................................................................................................................................... 79 Tweddle v. Atkinson –third parities to a contract do not derive any rights from that agreement nor are they subject to any burdens imposed by it. ............................................... 80 Dunlop Pneumatic Tyre Co. v. Selfridge & Co. Ltd-‐ analogous to Tweddle v Atkinson, third party = no privity = can’t sue ....................................................................................................... 81 Beswick v Beswick court of appeal – Adminstratrix step into the shoes of the deceased and therefore can sue for specific performance of promises made in contracts with the deceased person. .......................................................................................................................................... 82

Exceptions to Privity: .................................................................................................................... 82 London Drugs LTD v. Kuehne & Nagel International LTD. test for exception of Privity + shield not sword. .......................................................................................................................................... 82 Edgeworth Construction v. N.D Lea & Associates + Identity of Interest .............................. 85 Fraser River Pile & Dredge LTD v. Can-‐Dive Services. (Test in London Drugs applies, not only in employer employee relationships. It extends to external parties ) + Crystallization ................................................................................................................................................ 87


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Offers and Invitation to treat

Offer and Invitation to treat

Synthesis of Offer and Invitation to treat: • The rules of offer and acceptance are not ridged and are extremely

contextual. • A mere quotation does not constitute an offer, we must look at conduct to

determine if language exceeds a mere quotation (Canadian Dyers Association v Burton)

• A price of an item is an invitation to treat (not an offer), the customer can take the product and make an offer to the owner in which they will decide to accept or reject the offer.

• A puff is sales talk – Carbolic Smokeball. • The contract is completed at the register, not when the item is placed in your

cart. o This is for practical reasons; it doesn’t make sense to bind individuals

at the point of putting products into your cart. They must have the freedom to look around and change their minds. The law must be conscious of economic practicality.

• Advertisements are generally viewed as an invitation to treat however, contextual facts can assert that they are offers. (Carlill v. Carbolic Smoke Ball and Goldthorp v. Logan).

• Performance can be seen as acceptance. • The words used in the advertisement can indicate offer (words such as

Guarantee) (Goldthorp v. Logan)

Canadian Dyers Assn v Burton –mere quotation does not constitute an offer. Facts:

• The plaintiff wrote asking about the lowers price the defendant was willing to sell their house.

• Defendant responds with a quote of $1,650. • Plaintiff responds with the intention of negotiation • Defendant replied using language that would suggest an offer (the lowest I’m

willing to accept) and future correspondence suggested affirmation of that statement (searching for title and initially accepting the $500 cheque)

Issues: • Does a quotation/ inquiry about price constitute an offer?


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• Did the discussion between the plaintiff and defendant actually exceed a mere quotation and therefore constitute as a binding contract?

Ratio: • Precedence indicates that a mere quotation does not constitute an offer.

The case at hand indicates that the parties’ correspondence exceeded a mere quotation and is therefore a binding contract.

• On exam consider whether the parties conduct indicate a level exceeding mere quotation. Courts are very conscious of the parties conduct and use it to evaluate intent of the parties. Be weary of language used “the lowest I’m willing to accept” is not a quotation, its an offer.

• Hallmark of offer is readiness to sell. Analysis:

• We know that an invitation to treat is not an offer. (Johnston v Rogers) • Post-‐contractual conduct can imply intention to make a legitimate offer and

the courts will see this as a binding contract. (The acceptance of the offer and the following actions (searching for the deed and sending of a cheque) also confirm that a contract had formed. )

• (1920s case) In order to have a binding contract an offer and acceptance must be made clear. A discussion merely about a quotation does not constitute as a valid offer and/or acceptance. As this case has demonstrated, the defendant’s language and conduct expressly indicated a legitimate offer and thus the contract should remain valid.

Pharmaceutical Society of Great Britain v. Boots Cash Chemists (southern LTD.) – display of price = invitation to treat. Facts:

• Boots Cash Chemists operate a Chemist department, which is exclusively devoted to the sale of drugs.

• In that section there are some drugs that are classified as Poisons. • Two customers grabbed substances that fall under “poison” classification. • They then proceeded to the checkout where a registered pharmacist

supervised the sale. • Pharmaceutical society of GB asserts that the point of purchase is the

placement of substance into basket rather than exchange of money (and thus required the presence of the registered pharmacist at the counter where the drugs are being placed in baskets as opposed to when they are paid for).

Issues: • When an actual transaction/completion of a contract occurs in a shop (when

it is put in the basket or when it is paid for) Ratio:


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• A contract/transaction is completed at the moment of payment, not when the product is placed in a basket.

• Display of price = Invitation to treat Analysis:

• The actual point of sale occurred at the register, where the registered pharmacists were, and not at the point of putting a product in the basket (made clear via the bookstore reference).

• Price = invitation to treat, Customer makes offer to purchase, the seller can refuse/accept that offer.

o People should have the freedom to think about products and exchange them freely before paying for them. Its impractical to make the point of purchase (Offer and acceptance) the moment the item is put in the basket.

• Policy considerations are impacted by the elements of a contract

Carlill v. Carbolic Smoke Ball Co. advertisements are usually an invitation to treat unless the language can be interpreted as an offer by the ORP Facts:

• Carbolic Smoke Ball Co created an advertisement that asserted the use of the “smoke Ball” would prevent the contraction of Influenza. In addition, if anyone used this product as directed, (3 times a day for two weeks) and still contracted influenza, they would be entitled to 100L.

• Carlill contracted influenza even though she used the product. Issues:

• Was the advertisement a legitimate contract? • Was the advertisement an offer and the mere participation in the challenge

acceptance? Ratio:

• Advertisements are usually an invitation to treat unless the language interpreted as offer by the Reasonable Objective Person

Analysis: • Firstly, the advertisement and its specific language (stating that 1000L was

put in the bank for this challenge etc..) constitute as a legitimate offer. • Even though the term of the offer was not explicitly outlined in the

advertisement, the judge stated that an objective reasonable individual would interpret the advertisement to imply that influenza would not be contracted whilst using the smoke ball.

• the offer was indeed accepted. Even though there was no notification of acceptance, both judges concluded that the mere “performance of the condition” posed by the advertisement constituted as a proper acceptance of the offer.


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• It doesn’t matter how foolish a contract is, as long as it meets the requirements of a valid contract it is enforceable.

Goldthorpe v. Logan – Advertisement can be seen as an offer depending on the language used, words indicate intent. An individual’s conduct can signal acceptance. Facts:

• Anne Graham Logan published an advertisement in which she stated “HAIRS…removed safety and permanently by electrolysis…No marks, no scars, results guaranteed. Anne Graham Logan..140 Carlton St”.

• The procedure proved to be ineffective and the hairs from Goldthorpe’s face were not removed.

Issues: • Was the advertisement a valid offer?

Ratio: • Advertisement can be seen as an offer depending on the language used

“guarantee”. • An individuals conduct can signal acceptance (doesn’t have to be

explicitly said) Analysis:

• Anne Graham Logan did breach the contract by not being able to fulfill their required task.

• The advertisement certainly acted as a legitimate offer and the conduct of both parties indicated that an acceptance of the offer was made.

• Assuming that other aspects of a contract were met, the aforementioned relationship constitutes the creation of a legally binding contract.

• Acceptance does not always have to be notified.

Tenders

Tenders:

Synthesis:

• Harvella: Owner/vendor gets control of their own contract process. If they say this is an invitation to treat, it will be that (freedom of contract). But this has to be extremely clear or else you’ll be in contract A and B.

• A call for tenders in Canada is an offer for Contract A, a submission for Contract A is simultaneously an acceptance of that offer and an offer for Contract B. (Ron v. Ron Engineering)


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• Although this is the structure that the SCC adopts, it’s not going to be the case always.

• Contract A + B is entirely artificial and was developed for policy reasons (Ron v. Ron Engineering)

o Protect the integrity of the bidding process by implying obligations on both parties.

o We look at business efficacy; it costs a lot of money to put together a bid so it has to have some weight.

o They don’t tell parties what to do, they imply terms. o The intent of the parties is huge

• Things that are implied: o How do you imply a term? o Terms may be implied in a contract (Canadian Pacific Hotels v Bank of

Montreal) § Based on custom or usage § As the legal incidents of a particular class or kind of contract § Based on the presumed intention of the parties where the

implied terms must be necessary to give business efficacy to a contract or as otherwise meeting the officious by standard test as a term which the parties would said, if questioned, that they had obviously assumed.

o The following are implied. § Duty to accept compliant bids § Duty to treat all bids fairly (Martell case) § No duty to investigate compliance of bids (It’s impractical) § You have the power to but no obligation to. (Double Earth

Movers) § No duty to accept lowest bid

• Privilege clause o Over-‐ride implied obligations (Via freedom of contract) o Ultimate test is the ORP and intent to see if privilege clause is valid in

various tenders. • Qualifications of accepting compliant bids.

o Owner can wave trivial non-‐compliance (substance of the requirements are met) (Double Earth Movers)

o Obligation only survives until you create contract B, after contract B contract A is now terminated and you can renegotiate without breaching anything. (Double Earth Movers


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Harvella Investments Ltd. v Royal Trust Co of Canada – freedom of contract, you can control your own contractual process. Facts:

• Harvella sets out an invitation to sell their shares: • Harvella, Sir Leonard Outerbridge and Royal Trusts all owned shares in

Harvey and Co LTD investment company. • Royal Trust wished to sell its shares to the other two parties. • Royal Trust requested that each (who is interested) to send an offer via seal

tender/telex without the knowledge of the other’s offer. • Royal Trust would then sell its shares to the highest bidder. • Harvella offered $2,175,000 and Sir Leonard offered $2,100,00 OR $101,000

in excess of what Harvella’s offer would be. • Royal Trust decided to sell their shares to Sir Leonard.

Issues: • Who made the highest valid bid? • Was there an invitation to participate in an auction (referential bids) or a

fixed bid? Ratio:

• Owner gets control of their own contractual process, they can say it’s an invitation to treat but they have to be very clear about it.

• If there is a fixed bid, the concept of a referential bid (increasing bid to match or better another parties bid) cannot be accepted.

Analysis:

• The intention of the seller, based on his/her actions, was to conduct a sale of their product via a fixed bid, which excludes the ability to place referential bids.

• A reasonable and objective individual would understand Royal Trust’s invitation to purchases their shares through only a fixed bid.

Ron v. Ron Engineering & Construction (contract A + Contract B) Facts:

• A contractor submitted a tender to build a project for a price of $2,748,000. • In addition, the contracted submitted a deposit for $150,000 to ensure they

would not withdraw their offer. • Their withdrawal of the offer would result in the loss of their deposit and the

owner’s discretion to choose any tender provided by any other contractor. • The contractor made an error in their calculations and submitted a letter

stating a difference of $750,058.00 bringing up their bid to $3,498,058.00, which no longer made them the lowest offer by far.

• In doing so, it was seen that they had revoked/withdrawn their original offer and thus sacrificed the $150,000 deposit.


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Issues: • Can the bidder revoke his bid? (No, since he has already accepted the offer,

and made his own offer now via contract A+B concept) Ratio:

• Tender process involves TWO contracts: 1. Contract A: A call for tender by a vendor and submission of

tender by bidders = acceptance of Contract A: 2. Contract B: The submission of tender (contract A) also acts as an

offer for completion of the job, which is Contract B (The vendor can accept or reject this).

• A call for tenders is not an invitation to treat, rather its an offer to form unilateral contract A. Anyone who sends a tender has accepted unilateral contract A and has also put a valid offer for contract B.

Analysis:

• The contract A + Contract B concept was created to protect the integrity of the bidding process by imposing obligations on parties.

• This was done for policy reasons and business efficacy since a lot of work and money goes into creation of bids etc.…

• In essence, it re-‐enforced that a submitted tender has the effect of a contract and if penalties exist for its withdrawal, they are justified.

MJB Enterprises ltd. v. Defense construction: (It is implied that only compliant bids will be accepted) Facts:

• Defense Construction sent out a request for bids to contractors for the construction of a pump house in Alberta.

• They provided specific details for their tender requirements, one of which was a “privilege clause”, which stated that the lowest bid might not necessarily be picked and that the owner reserves the right to choose any bid it desires.

• An amendment was added to the tender, which stated that the bidders not provide any qualifications to their bids regarding the different types of pipes used.

• The winning tender provided qualifications and won the bid regardless. Issues:

• Does the respondent’s inclusion of a privilege clause in the tender documents at issue in this case allow the respondent to disregard the lowest bid in favor of any other tender, including a non-‐compliant one?


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Ratio:

• It is implied, regardless of the privilege clause, that only compliant bids would be accepted

• Owner does not have to accept lowest priced bid because price and cost are distinguishable terms (lowest price may be more costly to use for a company if it takes longer, the reputation of the company is hindered by using a certain company etc.…)

Analysis: • This case determined that even the inclusion of a privilege clause could not

give freedom to the owner in choosing a winning bidder. Also, that the lowest bid technically is not always synonymous with the least costly. However, in this case the courts decision to award damages to the appellant illustrates that non-‐compliant bids are not valid regardless of a privilege clause.

• Terms may be implied in a contract: Canadian Pacific Hotel v. BMO o Based on custom or usage o As the legal incidents of a particular class or kind of contract o Based on the presumed intention of the parties where the implied

terms must be necessary to give business efficacy to a contract or as otherwise meeting the officious by standard test as a term which the parties would said, if questioned, that they had obviously assumed.

Double Earthmovers ltd. v. City of Edmonton: Waive trivial requirements plus 4 more. Facts:

• In 1986 the City of Edmonton issued a call for Tenders for a 30-‐month contract to supply heavy equipment and operators.

• The tender form had a huge list of requirements, one of which was that all equipment must be 1980’s or later.

• Additionally, the required all bidders to be local and that the city reserved the right to pick any bidder it wished, regardless of the lowest bid.

• Also the city reserved the right to waive any informalities if it desired. • 2 of the lowest bidders were disqualified for not complying with the bid

requirements, this left 2 subsequent bidders. • Sureway ended up winning the bid but after the bid was accepted it became

evident that they used earlier models of bulldozers and thus did not comply with one of the clauses (that all products/machinery be 1980’s or younger)

• Double N earthmovers subsequently called for action saying that the City of Edmonton breached the contract.

Issues:

1. Did the City accept a non-‐compliant bid?


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2. Does an owner have a duty to investigate suspicions of non-‐compliance? 3. Did the City engage in bid shopping? 4. Did the City award based on terms different from those in the tender? 5. Do Contract A obligations survive the formation of Contract B?

Ratio:

• For a bidder to sue on Contract A, an owner would have had to engage in conduct that amounted to breach while Contract A was still in effect.

• Contract A of a tender is not void if the owner does not know the bidder would be providing something different than that of what they stated.

• You can waive trivial requirements in a bid and the bid does not become non-‐compliant if a trivial requirement is waived.

• You can renegotiate contract B since the contractor has no obligation to unsuccessful bidders once contract B is formed.

• Once a contract is made under contract B, there are no further obligations for contract A.

Hunt: • What is trivial? Maybe something that makes no difference in performance

and cost? But how far do we push that? We don’t know. It must not make a difference in substance.

• 1) For a bidder to sue on Contract A, an owner would have had to engage in conduct that amounted to breach while Contract A was still in effect.”

• They said that the difference in 1 year is trivial so it wasn’t a breach of contract A.

• 2) They take a narrow reading of the contract in regards to the non-‐compliance argument.

o The bid was compliant (they said they would supply 1980 equipment). Even though they didn’t, if there was a breach it would be of contract B.

• 3) If the bid has requirements then there should be an obligation on the vendor to investigate the compliance of a bid (not just on their face).

o Its not written anywhere in the agreement and it is not an implied term to investigate. Fails the test of implied term (intention of both parties). Gives them the power to investigate not the obligation to. It’s the opposite of business efficacy, its impractical to investigate all bids. So the parties did not intend to have an obligation to investigate.

• 4) There was a renegotiation. Can you put out a tender and pick a party you assume is compliant and then renegotiate contract B?

o Yes, because once you pick a company then all other bids for Contract A are terminated and you can do whatever you want. Justified under practicality and flexibility required for business.


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Communication of Offer

Communication of Offer

Synthesis: • Offer must be communicated directly between parties to demonstrate intent

such ambiguity as the one resulting in this case, is not sufficient to form a legally binding contract (Blair v Western Mutual Benefit Association)

• Motive is not important for a unilateral contract. As long as the performance is completed it is a valid contract. (Williams v Cowardine)

• The acceptance of an offer MUST be communicated via an intended action or verbal/oral/written response. (R. v. Clark)

• The actual terms of the offer must also be met. (R. v. Clark)

Blair v Western Mutual Benefit Assn. An offer must be directly communicated between parties (to demonstrate intent). Facts:

• Ms. Blair worked as a stenographer and secretary at the respondent’s firm. • She had transcribed and sent to the president of the company a resolution

that discussed giving her two years salary upon her retirement, although the actual offer was never given to her directly.

• She subsequently retired and was not given the $8000, which was two years pay. She believed that she had entered into a unilateral contract, and that her resignation triggered acceptance.

Issue: Did the resolution count as a form of communication of an offer to Ms.Blair? Ratio:

• An offer must be directly communicated between parties (to demonstrate intent).

Analysis: • Intention of the corporation was considered. • They believed that the existence of this resolution, even though Ms. Blair

knew of its existence, did not constitute as proper communication between parties to enter into a unilateral contract.

• This was reinforced by analyzing Ms.Blaire’s resignation letter in which she did not disclose the reason for her retirement or the anticipation of two years pay.


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• They used the Irish case to re-‐enforce that unless offers are directly communicated they are not binding.

• You have to have knowledge of an offer and intend to accept it. Conclusion: Hunt: It set the standard that offers must be directly communicated among parties and such ambiguity as the one resulting in this case, is not sufficient to form a legally binding contract. Intent is also very important.

William v Cowardine As long as you are aware of the offer and intend to accept this offer consciously motive is not important for a unilateral contract. Facts:

• Walter Carwardine was murdered on March 24th 1831. • Miss Williams was apprehended and interrogated but her testimony did not

result in the conviction of any individual. • The brother of the deceased created and advertisement offering a reward for

anyone with information that would lead to the conviction of the individual who killed Walter Carwardine.

• The plaintiff, Ms. Williams was then assaulted by William Williams and after she went to the police and gave testimony that lead to the conviction William Williams for the death of Walter Cowardine.

• She felt that she was now entitled to the 20L reward. Issues: Was an offer properly communicated and accepted? Do her motives to finally give information AFTER a fall out with Mr.Williams effect her eligibility to obtain the reward? Ratio:

• As long as you are aware of the offer and intend to accept this offer consciously motive is not important for a unilateral contract.

• As long as the performance is completed it is a valid contract. • Wanted/Rewards posters are valid forms of communication of offer.

Analysis:

• The court ruled that her motives were irrelevant in deciding weather a legally binding contract had been created.

• The concurred that the reward advertisement was an offer and therefore Ms.Williams testimony and subsequent conviction of Mr.Williams fulfilled the elements to bind a unilateral contract.

• Parallel motives are irrelevant


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R. V. Clarke (must first be aware of offer before performing the act that would constitute acceptance) Facts:

• Clarke along side 2 others were arrested in relation to two murders. Clarke was being charged with being an accessory to murder. At the same time, the crown provided a reward for anyone who would provide information leading to the arrest of those accountable for the murders. Clarke did provide information that lead to the conviction of the other suspects but he claimed in a statement that at the time of providing information to the investigators, he was not even thinking of the reward and that his main intention was to free himself of the charges. His information did lead to the conviction of the other two individuals so he subsequently applied to receive the reward from the crown.

Issue: • Did a contract exist between Clarke and the Crown. • Did Clarke provide information with the primary intention of getting the

reward? Ratio:

• Must first be aware of offer before performing the act that would constitute acceptance.

• The actual terms of the offer must also be met. Analysis:

• For one, he stated that he did NOT intend on getting the reward and that it was not even on his mind. He stated clearly that his main intention was to free himself from the charges.

• Therefore, the judges concluded that he was in no way communicating the acceptance of the crown’s offer to provide information that would lead to the arrest of those involved in the murders.

• Secondly, the judge’s looked closely at the actual offer and determined that the offer required information to lead to the arrest of those responsible for the murders. In fact, those guilty were actually arrested prior to Clarke’s information as they were already suspects. Therefore, they believed that no contract existed between the crown and Clarke.

• He didn’t even know about the existence of the contract. • No intention to accept if you didn’t know about the contract. • On that basis you have not entered into contract.

Conclusion:

• This case made references to the Williams v Carwardine and Smokeball cases. The judges concluded that this case was actually different than that of


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the former case simply because Clarke had no intention of getting the reward while Ms Williams sharing of information was entirely dependent on it.

• Secondly, they distinguished that the Williams case dealt with the motivation of the individual as opposed to the direct act of communication.

Carlil v. Carbolic SmokeBall – unilateral contract Ratio:

• Offer can be communicated via advertisement, and will be read as valid communication if the ORP would assume that to be the intent of the advertiser.

Termination of Offer

Termination of Offer

Synthesis:

An offer can only be accepted until its open. If not open it can’t be accepted. The termination is directly related to the acceptance. (Manchester Dioscan)

Offer can cease to exist in three ways:

• Revocation –Dickins v Dodds – can revoke anytime, but in order to be effective, it has to be communicated to the other party.

o Posting a letter does not equate to rejection. Rejection has to be communicated. ß this has been established for practical reasons

o Once someone embarks on an effort, you cannot revoke it, you have to give them reasonable time to complete the performance (Erringtone v, Errington) – issues that arise: What is a reasonable time?

• Lapse of time – period of time or a reasonable time (objective test, in the offeror’s position, look at factors: variability, industry conduct, language/conduct) (Barrick v. Clarke)


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o If an offer is not accepted within a reasonable time it is withdrawn. o If the offeree does not accept the offer within a reasonable time it

is rejection (both points from Manchester Diocesan Council of Education v. Commerical & General Investments Ltd.)

• Rejection: counter-‐offer counts as a rejection (Livingston vs. Evans), if you don’t want it to have that weigh you identify it as a mere inquiry. If it’s a new proposal then it’s a counter offer and thus a rejection. (Livingstone vs. Evans)

Revocation

Dickinson v Dodds (An offer can be revoked anytime before acceptance, a promise to not revoke is not a binding promise) Facts:

• Dodds provides an offer in writing agreeing to sell his property to Dickinson for 800L.

• He gives Dodds until Friday 9 o’clock to accept the offer. • In the meantime, Dickinson finds out that the property has actually been

sold to another person by the name of Allan. • He then goes to provide a letter in writing to Dodds to accept his offer of sale.

However, at the point where he reaches Dodds, (still before 9 o’clock on Friday) Dodds tells him the property has been sold.

Issues:

• If an offer has been made for the sale of property and before that offer is accepted, the person who has made the offer enters into a binding agreement to sell the property to somebody else, and that person to whom the offer was first made receives notice in some way that the property has been sold to another person, can he after that make a binding contract by the acceptance of the offer? No, if he knows the offer has been accepted by someone else, he no longer can accept, the offer has been revoked.

• If he said he would keep it open until Friday, can he revoke it before hand? Yes, a promise to revoke is not a binding promise).

• Can the purchaser accept an offer when he knows the property has been sold to someone else? No, if you know, it means the offer has been revoked.

Rules: An offeror can revoke an offer anytime before acceptance. For revocation to be valid


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1) Revocation has to be communicated to offeree (this communication can be implied, one way this is achieved is by seeing the offeror do an act inconsistent to the maintenance of the offer)

2) Revocation doesn’t need to come from the offeror, it can be from anyone, such as an agent, newspaper,

Analysis:

• The court held that the notification by a third party of an offer's withdrawal is effective just like a withdrawal by the person who made an offer.

• Nudam practum – gratuitous promise, not binding. • A promise is only binding when there is reciprocation. The reason you

can revoke your offer, is because it’s your offer (freedom of contract). Revocation HAS to be communicated even if it’s through a third party. Revocation can be expressed or implied (selling the house was implied). Communication can be direct or indirect (call up or it reaches you some how).

Hunt: • He’s done an act that is inconsistent to the maintenance of the offer

(that will be taken as an implied revocation, as long as this information reaches the person whom the offer was made for then it is revoked.)

• Communication of withdrawal of the offer can be made by any reliable third party.

Byre v Van Tienhoven (posting a letter does not = revocation if the party has already accepted, it has to be communicated to count) Facts:

• On October 1st the defendants mailed an offer to sell to the plaintiffs in New York 1,000 boxes of tin plates at a fixed price.

• The offer was received on October 11th and the plaintiffs immediately accepted by telegram on the 11th and confirmed by letter on the 15th of October.

• On the 8th of October, the defendant mailed a revocation of the offer which was received on the 20th of October.

• The plaintiffs, on the assumption that they had purchased the tin plates had already sold them to a third party. Consequently, they brought an action for breach of contract for failure to deliver.

Issues:


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• Whether a withdrawal of an offer has any effect until it is communicated to the person to whom the offer has been sent. Whether posting a letter of withdrawal is a communication to the person to whom the letter is sent.

Rules:

• Revocation of an offer must be received and understood by the offeree before it comes into effect. ß practical reasons

• An acceptance by the offeree before they receive notice of the revocation will be considered valid

Analysis: Even though the contract is complete the moment the letter accepting the offer was posted on the 11th, the moment the letter of revocation was sent (three days earlier) was deemed invalid by the judge. The plaintiff accepted the offer of the 1st, which they had no reason to suppose had been withdrawn. He made this judgment on the basis of practicality. He stated that if the defendant’s contention were to prevail no person who had received an offer by post and had accepted it would know his position until he had waited such a time as to be quite sure that a letter withdrawing the offer had not been posted before his acceptance.

Errington V. Errington and Woods (Once someone embarks on a unilateral offer you cannot revoke it) Facts:

• The father bought a house for his son and daughter in law. • He paid 250 cash and borrowed the rest from a building society on the

security of the house repayable with interest by monthly installments. • He told the daughter in law that the 250 was a gift but they would be

responsible for the monthly payments. • He also stated that he would turn over the house to them once the mortgage

was fully paid off. • He died and left his estate to his wife. The son and daughter in law separated

and subsequently the daughter in law tried to take possession of the house. Issues: Can a unilateral contract be revoked after the death of the offeror? What if there are a series of acts and you complete the majority of those acts? Can you revoke the offer then? Rules:


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• An offeror can only revoke a unilateral contract if the offeree did not live up to their side of the contract.

• You also have to give the person the chance to complete the desired act. • Once performance has started the offeror cannot revoke the offer.

Analysis: Denning characterizes the father's promise as a unilateral contract; the performance act paying for the mortgage, and thus it would only be revocable if the couple did not make the payments. Once performance has started the offeror cannot revoke the offer. Conclusion: Intention of the father here is important. Unilateral contract cannot be revoked if the offeror dies. Hunt: You have to give the person the chance to complete the desired act, I can’t revoke until they’ve stopped performing. This introduces uncertainty, even though in this case it was a fair ruling. When does the person stops performing? How long do we have to wait until we’re sure you have stopped? It’s not as concrete as Denning says. You have to give them a reasonable chance to perform. can’t revoke once the party has begun performance.

Dawson v Helicopter Exploration Co (courts prefer bilateral contracts over unilateral ones) Facts:

• Company contacts Dawson, take us to your secret mine and if we like we will give you 10% of the stake.

• Dawson says I’m in the military and don’t have a helicopter so I can’t show you so if you can help me out and give me enough notice to leave the military I’ll show you the place. Dawson finds out the company went and saw the land w/o him.

• Dawson wants his 10%. Issues: Was there a valid offer and acceptance to form a contract? Can the offeror in a unilateral contract revoke the contract for want of performance if he or she fails to discharge his or her complimentary obligation to perform? Company says, he never showed up and so the unilateral contract wasn’t met. Dawson says it was a bilateral contract.

Ratio:


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• Where a complementary action is contemplated for both parties, the offeror in a unilateral contract cannot revoke the contract for want of performance if he or she fails to discharge his or her complimentary obligation to perform.

• The courts will prefer bilateral contract as opposed to a unilateral contract. They will usually try to interpret a contract as bilateral contract because it provides more protection and more certainty. Correspondence is instinct with obligation.

Analysis:

A bilateral contract was indeed formed. • They state that the performance that was required of Springer was notifying

Dawson that a pilot was ready, and taking him along on the exploration. However, by their actions Helicopter Exploration prevented the complementary performance of the appellant that would have entitled him to his share of the earnings, and in doing so they breached the contract.

Hunt: • The formation of a bilateral, as opposed to a unilateral contract, gives

Dawson protection. This makes the formation of the contract at the time they had the conversation, not necessarily the performance of the action.

• Whether a contract is bilateral or unilateral has serious timing implications as to when the contract is formed. Bilateral is formed the time promises are exchanged, you are bound at that point; unilateral is when the performance is completed, here you can revoke before the party has taken part to complete the act. Because the acceptance comes at a different time revocation is different for each kind of contract. ISSUE WITH TIMING. Formation occurs at different times because acceptance happens at different time.

• Unilateral and bilateral contracts are malleable contracts. You can easily interpret cases as either or. It’s an artificial concept. You want to manipulate them to make things fair.

• Ratio of the case: the take home message is that the courts will prefer bilateral contract as opposed to a unilateral contract. They will usually try to interpret a contract as bilateral contract because it provides more protection and more certainty. Correspondence is instinct with obligation.

Rejection:

Livingston v Evans (a rejected offer cannot be accepted, a counter offer constitutes a rejection)


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Facts: •

Evans wrote to the plaintiff offering to sell him the land in question for $1800 on terms. The plaintiff responded “send lowers cash price, will give $1600 cash. The agent replied “cannot reduce price” Immediately upon the receipt of this telegram the plaintiff wrote accepting the offer of 1800. The defendant sold the land to someone else. The plaintiff is stating that a contract had bounded between them.

Issues: • Was the offer rejected? Does a counter offer count as a rejection? Did the

defendant’s response act as a rejection of the counter offer or the renewal of the original offer?

Rules:

• A rejected offer cannot be accepted. • A counter-‐offer constitutes a rejection. • An offer can be renewed after a counter-‐offer through ambiguous

language Analysis

o Walsh held that under Hyde v Wrench a counter-‐offer constitutes a rejection, very firmly established.

o Livingstone's first telegram is a counter-‐offer and an inquiry and although both, the counter-‐offer kills original offer.

o Evans' reply "Cannot reduce price" is, however, a renewal of the original offer, which Livingstone then accepted. (had he said NO, it would have been the end of the discussion).

o The defendant’s last response was a renewal of the original offer or at any rate an invitation to the plaintiff that he was still waiting to treat on the basis of it.

o His response had the meaning that he was still standing by his original offer and therefore still open to accept it.

o Consequently, the plaintiff’s quick response of acceptance is regarded as the acceptance of the offer.

Hunt:

• Once an offer is rejected it can no longer be accepted, it’s dead. • They make a distinction between new proposal and a mere inquiry. Mere

inquiry is not a counter offer, meaning it’s not a rejection. • If we have a mere inquiry we have no rejection. • If we have a counter offer it’s a rejection. • In this case:

o Counter offer was in law a rejection


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o “Cannot reduce price” = renewal, in which there was an acceptance so there was a binding contract:

• We have to see which of the two it is. o How to distinguish between these two concepts? Here the court said

that this was a counter offer, and that’s a rejection. Offering a different price is a new proposal. When you quote a new price that counts as a counter offer / new proposal (only in this case though).

o In the context of rejection (purposes of this class) 1. Rejection means, if an offer is rejected it cannot be accepted

unless its renewed (you can cite this case for this). 2. Counter offers count as rejections. Counter offers are different

than mere inquiries. Look at a reasonable person to distinguish.

Lapse of Time:

Barrick v Clark (How long does an offer remain open? 1 industry custom 2. Specific circumstances of the case Facts:

• Clark wanted to buy a piece of land from Barrick. Barrick put a price of $15,000, which Clarke counter offered with $14,500. Then Barrick went back to $15,000 but Clarke was out of town and his wife requested that they hold the deal open until he returns. On Dec 10th Clarke accepts the offer and encloses the required deposit via wire transfer, but Barrick had already sold the land to someone else.

Issue: • Was the offer still open? • Was there a reasonable lapse of time to render the contract dead? • What is the reasonable amount of time that the offer must be left open for?

Rules:

• Offer is open for as long as the offeror says it’s open. • If the offeror doesn’t indicate a time then:

o Industry Custom: Volatility of the goods, perishable vs. non-‐perishable goods.

o Any specific circumstances in the case: Analysis àIts an objective test to see how an objective reasonable person would behave or think in the same circumstances. àClarke did not accept Barricks offer within a reasonable time.


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àBarricks obvious indication to close the deal as quickly as possible should have evoked Clark to act in a more quick fashion. àThe land had not been on the market for a long time and there was interest in its purchase. àBarrack did not respond to Mrs. Clarke’s letter, so he was not bound to any particular period of offer. àLeaving the offer open for thirteen days was a reasonable time. Clark should have closed the deal ASAP. Hunt: These indicate how you determine a reasonable time for an offer to remain open: we look at the offeror’s offer as the objective reasonable person:

1) Industry standard: The price fluctuates then the reasonable time the offer will be open will be shorter. You can look at market volatility. Why the parties would want it and when they’d want to use it. Perishability of the goods. By analogy it could be the commercial reality. 2)Specific behavior between the parties: language indicates a shorter reasonable time.

The wife couldn’t dictate how long the offer should be open for. Can this amplify the reasonable time?

• NO she has no effect on the reasonable time the offer should remain open.

Even if the offeror says the deal will be open until a later day, the offeror is not bound by it. (Dawson v. Dodds) this is not inconsistent with that case. It might amplify the “reasonable time” to a later date.

Manchester Diocesan Council of Education v Commercial and General Investments (Contextual circumstances determine reasonable time lapse). Analysis:


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• If an offer is not accepted within a reasonable time, it must be treated as withdrawn.

• Alternatively it may be said that if the offeree does not accept the offer within a reasonable time, he must be treated as having refused it.

• Circumstances regarding the offer can determine what a reasonable time is to keep an offer alive. Until his offer has been accepted, it is open to the offeror at any time to withdraw it or to put a limit on the time for acceptance.

• On the other hand, the offeree can at any time refuse the offer or, unless he has been guilty of unreasonable delay, accept it. Neither party is at a disadvantage.

Hunt: • Why would the offer lapse after a reasonable amount of time?

o Offers are not open forever! o You can justify the lapse in time with the offeror’s INTENT

• If you don’t accept within a reasonable time, the court will see it as a rejection of the offer. ß This is preferred

Acceptance

Acceptance:

Battle of Forms Synthetsis: àGlobal approach: The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If the differences are irreconcilable, so that they are mutually contradictory, terms have to be scrapped and replaced by a reasonable implication. (Butler Machine Tools v. Excell Corp) àIf there is a discrepancy look to the essence of the contract. (Butler Machine Tools) àOne cannot sneak powerful clauses into contracts without proper notification. (Tywood industries) Examples of powerful clauses:

• Price escalator clause • Arbitration clause.

àLook to actual conduct of business (Tywood Industries v St. Anne)

Shrink Wrap Synthesis: à Clicking accept = valid acceptance and formation of contract. àTraditionally we have seen in the Boots case that the contract forms at the point of purchase of a product.


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àThis causes issues in certain circumstances where there are terms and conditions that need to be read (in the box). You cannot join a contract without knowing what it includes. à Therefore, court says that the contract can be formed at home in these circumstances because the juggled timing of the acceptance helps accommodate the difficulties that would arise following the boots perspective. à If consumer does not want to accept the terms, they can return the product.

Silence Synthesis: àPerformance can constitute acceptance in a unilateral contract (Carbolic Smokeball) àAcceptance can be implied by the conduct and language of the acceptor (Dawson v. Helicopter Exploration Co) àSilence does not constitute acceptance in a bilateral contract because we cannot impose obligations on unwilling parties (Felthouse v. Bindley) àCaveat to Bindley case: In narrow circumstances silence can mean acceptance. Silence + positive conduct + acquiescence (silence on purpose to deceit) equals acceptance (St. John’s Tug Boat v. Irving) àWe look at the conduct of the would-‐be-‐acceptor to see if their actions/past dealings demonstrated intent to accept. àWe also look to see what the ORP in the offeror would be reasonably led to believe based on the actions of the other party. This is to protect the offeror because all they can do is react based on how people behave (St. John’s Tug boat v. Irving) àIn order for an acceptance to be valid, the acceptor must abide by the conditions of acceptance set out by the offeror (Eliason v. Henshaw)

Communication of Acceptance: Mail and instantaneous modes Synthesis: à Postbox rule-‐ the contract is formed as soon as the acceptance is sent in the mail. (Household fire v Grant) à However, although the postbox rule generally applies, in cases where it is expressly said it does not and in cases where its application would lead to inconvenience and absurdity it should not be enforced (Holwell securities v. Hughes.) à In regards to instantaneous modes of communication and negotiations between parties in different countries, the contract is formed as soon as the acceptance is received. (Brinkibon v. Stahag) à Contract is formed at the time and in the jurisdiction where the acceptance is received but this rule does not always apply due to commercial


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realties (agents + servants could get the notice before the principal party) (Brinkibon v Stahag)

à not a universal rule for the following reasons: à when is it received? When the machine recives it or when

you look at it? EX. Email sent Friday night to bank, not received until Monday. SO business practices help us resolve this issue, in the aforementioned case of email to the bank, it would be likely that the time of receiving would be Monday.

Butler Machine Tools v. Ex-‐cell Corp (Denning’s global approach to battle of forms) Facts:

• The buyer and seller of a machine both had terms and conditions in their offers, and both stated that theirs would prevail over the others (seller had a price variation clause).

• Upon delivery of the machine, the seller had an increase price of almost $3000.

• The buyer took the position that their order prevailed and that there was accordingly a fixed price contract.

• Trial judge assumed that the seller’s price variation clause was intended to prevail over the buyers.

Issues: • What were the actual terms of the contract? Which terms and conditions

prevail? Rules:

• The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If the differences are irreconcilable, so that they are mutually contradictory, terms have to be scrapped and replaced by a reasonable implication.

Analysis: • The buyer’s terms and conditions are valid since Denning believed that

the purchase was made on the terms of the buyer not the seller. Characterizes three approaches

• Usually when there is a battle of the forms, the last shot wins o Problem with that approach is that sometimes some people can

sneak in clauses without the knowledge of the other party. In these situations we don’t prefer the last shot wins

• In the minority of cases, the first shot wins o They are controlling and bargaining from the beginning, the most

important issues are discussed in the first offer.


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§ The problem is that this wont work if the reply to the first shot makes a change.

§ We’re in the process of discovering the party's intent. • Read all of the documents together and decide if we can read them

harmoniously, if we can then that will be the deal. o What if you can’t read it harmoniously?

§ We choose what we want. § Dennings global approach. § Helps avoids arbitrariness § Creates uncertainty.

Tywood Industries LTD v ST. Anne-‐Nackawic Pulp and Paper co LTD (Application of Denning’s global approach + no sneaking power clauses in) Facts:

• Documents went back and forth between 2 parties with terms and conditions

• Arbitration clause: any controversy shall be settled by arbitration (surrendering rights to litigate)

• Tywood never signed the order with the new terms and conditions, but they delivered the goods, does this constitute acceptance of the offer, and therefore a contract?

Issue: Under whose conditions was the contract formed? Rules:

• If there is a discrepancy look to the essence of the contract. • One cannot sneak terms into contracts without proper notification. • Look to actual conduct of business (do people really read the

terms?) Analysis:

àIf you have a powerful clause, you cannot sneak it in, you have to specifically draw the other party’s attention to it (courts prefer this approach because it is fair). àLord Dennings global approach is how courts will deal with battle of the forms. àWhen you’re applying this global approach, the courts are very much minded by fairness in the sense, they’re going to insist that any powerful or unusual clauses will have to brought to the attention of the other party otherwise it’ll be hard to get it enforced in court. Examples of powerful clauses:


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• Price escalator clause • Arbitration clause.

Shrink Wrap

ProCD v. Matthew Zeidenberg and Silken Mountain WebServices: Clicking I accept = formation of a valid contract, in certain instances contract is formed after purchase Facts:

àZeidenberg bought a consumer version software program. àHe opened the product and clicked “I accept” on the terms and conditions. àUsed the product of commercial purposes and was sued for breaching the l

icensing agreement. Issues:

àWas the shrink-‐wrap license + click constitutes a valid acceptance of a contract.

Ratio: àShrink-‐wrap license and click constitute the formation of a valid contract.

Analysis: àShrink-‐wrap offers and acceptance by the clicker constitute the formation of avalid contract. àDue to practical reasons and commercial realities the offer cannot be on the box or in a manual, it needs to be on the disk and accessible. àTraditionally we know that the formation of contract occurs at the point of purchase, but this would make shrink-‐wrap irrelevant because you can’t join a contract without knowing what it includes. àBut, if we say that the contract for the products inside the box is not apart of the contract, you are severely constricting the software company in doing what it wants. àIn this case, the UCC has created another way + time that the contract can be formed. àThe contract is formed at the home/office of the individual upon them clicking I accept. àBy changing the timing of the acceptance we allow the consumer to have reasonable time to read and comprehend the terms and conditions. If they disagree they can return the product. ß not always easy though. àAirplane ticket: Call airline, get a quote, reserve a seat, pay, get ticket. Terms and conditions are on the ticket, you accept by boarding the plane. If you don’t then you can return the ticket.

Silence


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Carlil v. Carbolic Smoke Ball – Performance can constitute acceptance in a unilateral contract and acceptance does not need to precede performance. Issues: à Does silence constitute the acceptance/rejection of an offer? Ratio:

à Silence can constitute as acceptances as long as the offeror indicates that acceptance can be achieved via performance of an act and a notice of acceptance is not required.

Analysis: à Smokeball clearly challenged the public (and thus didn’t require particular notice to perform a certain task, and if a certain outcome occurred, they would be willing to pay them. à Performance can precede acceptance

Dawson v. Helicopter Exploration co – acceptance can be implied by language and conduct of the acceptor. Issues:

àDid Dawson’s silence constitute as an acceptance? Ratio:

àAcceptance does not need to be in express terms. It can be implied by language and conduct of the acceptor.

Analysis: àIn this particular case, the courts decided that Dawson’s letter of waiting for the pilot constituted as acceptance.

Felthouse v. Bindley (English Case) – Silence does not constitute as acceptance in a bilateral contract because you cannot impose obligations on unwilling parties. Facts:

àPaul Felthouse wanted to buy a horse off of his nephew. àWrote him a letter saying “If I hear no more about him, I consider the horse mine” àNephew did not reply, told Bindley to not sell the horse at auction but he does by accident. àFelthouse sues Bindley for selling his property

Issue: àDid the silence of the nephew constitute acceptance of the offer?

Ratio: àSilence does not equate acceptances in a bilateral contract because you cannot impose obligations on an unwilling party.

Analysis:


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àAcceptance must be communicated clearly and cannot be imposed due to silence of one of the parties. àThe uncle had no right to impose a sale through silence whereby the contract would only fail by repudiation. àThough the nephew expressed interest in completing the sale, there was no communication of that intention.

Saint John Tug Boat Co v. Irving Refinery LTD. (if an arrangement has been made before, silence does not mean rejection, it is assumed that acceptance is continued, there is a difference between silence, positive conduct and deceptive acquiescence) Facts:

àS had a deal with Irving to supply them the use of their tugboats àNo firm arrangements were made, S said that they would only have two boats available unless special arrangements were made. àS ended up having two more tug boats available and told Irving that they could use them if they paid $450 a day to have them ‘on call’ until a certain date. àDate passed and S continued to keep the tugs on call for Irving. àIrving kept using the tugs for a few months, then refused to pay the bill saying that they never accepted.

Issues: àWhether or not the respondent’s course of conduct during the months in question constituted acceptance.

Ratio àIf and arrangement has been made before, silence does not mean rejection. It is assumed that acceptance has still continued.

Analysis: àObjective test: would a reasonable bystander in the offeror’s perspective believe that the offer has been accepted? We do that to protect the offeror because all he/she can do is react based on how people behave. àIf you find positive conduct then it’s acceptance. Acquiesced is not usually acceptance unless it is there to deceive the other party. àAfter the deadline passed, S were essentially serving Irving a new offer every time they sent them an invoice and kept the tugs on call, Irving’s continued use implied acceptance àAfter using the services for 6 months you’ve demonstrated that you have in fact accepted or intend to accept. It’s not entirely a silence situation rather it’s an implied acceptance situation. àMust look at length of time and Irving’s knowledge to determine which route to go (positive conduct or acquiesce) àIrving must have known that S expected to be paid for their services. àThere’s no reason they would offer services now for free. àDistinction between commission and omission:


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àGenerally we don’t tell people to do anything, you have the right to do nothing. àIf you decide to do something, we can impose a lot of obligations on you. (if you want to drive a car you are bound by a lot of obligations, but you can just not drive.

Eliason v. Henshaw: Offeree must follow the terms of the offeror (time/place/manner) for an acceptance to be valid and binding Facts:

àEliason writes letter to Henshaw offering to buy flour at Georgetown and asks “please write by return of wagon whether you accept our offer” àHenshaw wrote in acceptance and the letter was sent by regular mail carriage. àEliason sent reply acknowledging the receipt of the latter, but said that the response was too late as it was not returned by the wagon. àHenshaw suied for non-‐performance.

Issues: àWas there a valid form of acceptance?

Ratio: àOfferee must follow the terms of the offeror (time/place/manner) for an acceptance to be valid and binding.

Analysis: àCourt held that there had been no acceptance and no contract. àThe offer was not accepted within the proper time àThe offer was not accepted in the right place (should have been sent to àHarper’s Ferry, not to George town) àThe offer was not accepted by the correct manner, should have been sent by wagon not mail

Communication of Acceptance: Mail and Instantaneous Modes:

Household fire v. Grant – Postbox rule, as soon as letter is sent, it is accepted. Unless the parties of the contract agree otherwise. Facts:

àGrant offers to buy shares and the Company accepts: àThey send him their acceptance in the mail, but it never reaches him. àWhen company goes bankrupt he needs to pay, but there was no contract because he never got the allotment acceptance letter.

Issues: àDoes sending the letter of allotment constitute acceptance?

Ratio:


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àPostbox is treated as agent for both parties (they accepted this) àOnce the letter is taken to the post office, a binding contract is formed. àYou can make the formation of the contract dependent on actual communication of acceptance TO the person (freedom of contract, but this has to be expressly stated)

Analysis: àContract is suppose to be meeting of the minds, minds must be brought together through mutual communication. Appreciated that this postbox rule presumption would lead to àinconvenience and hardship at some points, like this case, but the benefits out weight the costs. àSays its impractical to force people to wait until they are sure that their acceptance has been reached. àParties of a contract can choose their mode of acceptance and request communication of acceptance.

Holwell Securities v Hughes: Postbox rule applies unless expressly said it does not and if its application leads to inconvenience and absurdity. Facts:

àHughes offered to sell his property, with 6-‐month period to purchase. àHowell posted a letter to purchase, Hughes never received it. àHowell is suing for the house.

Issue: àWas there a valid contract?

Ratio: à Postbox rule applies unless expressly said it does not and if its application leads to inconvenience and absurdity.

Analysis: à Postbox rule sometimes leads to absurdity, therefore parties must have regard to all the circumstances, including the nature of the subject-‐matter under consideration, to see whether the parties intended that there should be a binding agreement until the party accepting the offer or exercising an option had in fact communicated the acceptance or exercise to the other. àCourt decides that the postbox rule does NOT apply in all cases. àFor one, it doesn’t apply when the express terms of the offer specify that the acceptance must reach the offeror. àSecond, it probably does not operate if its application would produce manifest inconvenience and absurdity.


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Brinkibon v. Stahog Stahl: The time and location of the contract is determined when and where the offeror gets notice of acceptance. This does not apply in all circumstances. Facts: à Series of negotiations between parties in different countries. à Telex was sent from London to Vienna accepting the sellers offer Issues: à When and where was the offer accepted? Ratio:

à Brinkibon Rule: In regards to instantaneous modes of communication, the time and location of the contract is determined when and where the offeror gets notice of the acceptance. This does not apply in all circumstances.

Analysis:

à Formation generally occurs in the place the acceptance is received. à This rule does not apply in all circumstances though because the à recipients may not be the principals to the contemplated contract, they may be servants or agents with limited authority. à The message may not reach, or be intended to reach the designated recipient immediately. à No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.

Certainty of Terms

Certainty of Terms

Vagueness Synthesis: àIf serious intent to form legal contract, the court will try and define vague terms to render the contract enforceable (R v. CAE Industries)

àSerious intent in this case, government’s readiness to sell. àWhether a clause is to uncertain depends on whether I can be given a definite meaning:

àExample of definite meaning: Best efforts = no-‐stoned un turned àThe courts look at the deal objectively (no one’s shoes though). They look at the situational matrix, language of contract it self, not necessarily a microscopic view of the clause but rather a look at it in the context of the whole contract, the motives of the parties, their interest, and industry custom


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Incompleteness and Agreements to Agree synthesis: àGenerally speaking, an agreement to agree is not a contract (May v Butcher)

àWhy? Because imposing legal obligations on a party of the contract could be to their surprise and the courts will try and avoid that. (I enter into a contract to buy something at a price determined later, the market price is too high for me to pay, I’m simply not willing to make a commitment that involves acceptance of the risk of significant market fluctuations. As long as the market price is within my range, we will likely have no difficulty establishing a price when the time comes. However, if the market price has become too high for my budget, any attempt to fix a price is likely to fail. àMarket price determines as to what amounts to a reasonable price in most cases, and the judge who decides that the agreement is a contract to purchase at a reasonable price is imposing on the buyer a risk that he or she did not accept.

àIn certain circumstances there are exceptions. In the instance where uncertain terms are within the contract, if there is a reasonable benchmark to resolve that and it can be assigned to that uncertain term, the courts will do their best to enforce it (Foley v Classique and Hillas v Arcos). àExamples of essential terms are: price, time of delivery, method of delivery, and subject matter. àReconciling Foley v Classique Coaches and May v Butcher:

à Seem like opposites on the question of whether agreements to agree are contracts or not. But they can be reconciled. à May v Butcher says not a contract, Foley v Classique Coaches says it is BUT they do so for different reasons and the courts distinguish why:

àReasonable price discrepancies: àGas price more predictable, it is not unqiue, all within a tight range, which we can quantify. àTent prices are kind of random and hard to set prices for. What is reasonable for a tent? No comparison, no market. Not appropriate for the court to put in a reasonable price, and if they imposed a price then one party would be surprised.

à There is an external metric that will allow us to settle on a price will make it okay to have uncertain terms because a reasonable price is easy to find. (Foley v. Classique Coaches)

à Principles of freedom of contract, we don’t want to put a deal on the parties to their surprise. If the court struck down the Foley contract, it would be unfair because he sold the land at a lower price because of the agreement to purchase gas from him in the future. Had


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that not existed maybe he would have had a different price for the purchase of the land.

The Sale of Goods Act – excludes services and land, only applies to goods. àAscertainment of price

à12 (1) The price in a contract of sale may be à (a) Set by the contract, à (b) Left to be set as agreed in the contract, or (against M v B) à (c) Determined by the course of dealing between the parties.

à (2) If the price is not determined in accordance with subsection (1), the buyer must pay a reasonable price. à (3) What is a reasonable price is a question of fact dependent on the circumstances of each case.

àAgreement to sell at valuation

à13 (1) If there is an agreement to sell goods on the terms that the price is to be set by the valuation of a third party, and the third party cannot or does not do so, the agreement is avoided. (you can have an arbitration clause) à (2) If the goods or any part of them have been delivered to and appropriated by the buyer, subsection (1) does not apply and the buyer must pay a reasonable price for the goods. à (3) If the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain an action for damages against the party in fault.

Agreements to negotiate synthesis: àAn agreement to negotiate is an endeavor to arrive at terms pursuant to which a transaction will be performed (Percy et al) àA binding promise to negotiate is often of real practical value, since its fulfillment may offer a much greater likelihood that the parties will complete a transaction than would be the case were they not obliged to make a serious effort to reach agreement. (Percy et al) àThis is especially true when most of the contract is complete and only one or two terms are to be determined. (Percy et al) àIssues that arise with agreements to negotiate:

àWhat is it that a person subject to such a duty is obliged to do or not do? (Wellington City Council v Body Corporate)


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àThere is no basis upon which to determine damages for breach of such a duty because it cannot be presumed that the negotiations would have succeeded if undertaken. (Percy et al)

Duty to renegotiate

àThe courts will strive to uphold these agreements if there is a strong intent (Empress v BNS). àIf there is no strong intent to uphold these agreements then the courts will not try to save them. (Mannpar) àThe bare agreement to renegotiate is not enforceable because it is too uncertain (Mannpar)

àAn agreement to renegotiate can overcome this uncertainty and be enforceable if there are some objective mechanisms to measure the duty (As seen in Empress v BNS). àExternal metrics and ways of giving content to what the parties intended help in getting rid of uncertainty, but in the case of Mannpar there was no general market rate, no element of objectivity and no way to calibrate the value at hand. (Mannpar).

à Duty to negotiate can carry with it obligations to negotiate in good faith. A duty to negotiate will be implied when the ORP says it is necessary in order to give business efficacy to the contract (in Empress, this test was satisfied because it made commercial sense, contract between sophisticated commercial parties). However, in Mannpar the test was not satisfied because the government would not want to reasonably bind itself because it had a fiduciary interest for the Indian Band. àAn agreement to negotiate in good faith is unenforceable in certain cases because its subjective nature leads to uncertainty (not all of the time though) àBUT if a contract specifies the way in which the negotiations are to be conducted with enough precision for the court to be able to determine what the parties are obliged to do, it will be enforceable.

Anticipation of Formalization Synthesis: à When the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon, or the contract is too general or uncertain to be valid in it-‐self and is dependent on the making of a formal contract, their legal obligations are to be deferred until a formal contract has been approved and executed. àThe original agreement cannot constitute and enforceable contract.


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à essential terms have to be agreed upon for there to be a valid contract.

Vagueness

R. v. CAE Industries: If serious intent to form legal contract, the court will try and define vague terms to render the contract enforceable. Facts:

àCAE industries wanted to take over an aircraft base no longer required by àGovernment of Canada. àAgreement was made which contained vague statement that although the base usually generated 700k of hours per annum, the government could not commit to guaranteeing more than 40-‐50 thousand, though they would use their best efforts to increase the numbers. àNumbers fell below 40 thousand.

Issues:

à Was the contract clear enough to be enforced? Ratio:

àGenerally speaking, if a contract is too vague and unclear then it cannot be enforceable, BUT, if the parties indicate serious intent to create a contract and the contract has been legally created, the courts will make every effort to apply definite meaning to vague terms in a contract so as not to render it enforceable.

Analysis: àCourt is going to save contract if the parties want to save the contract (threshold)

àWe have a threshold matter of finding serious intent before getting into definite meaning àIf you do not have serious intent, the court will not look hard into saving your deal.

àIn this case, based on their conduced, parties showed the intent to have this contract, the government showed the readiness to sell. àwe are not dealing with an absence of a term but the vagueness/abstractness of terms. àCourts then try to define the vague term “best effort”. àThey say that “best effort” is not vague, it means no stoned unturned, try your hardest. àWhether a clause is to uncertain depends on whether I can be given a definite meaning:

àExample of definite meaning: Best efforts = no-‐stoned un turned àThe courts look at the deal objectively (no one’s shoes though). They look at the situational matrix, language of contract it self, not necessarily a


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microscopic view of the clause but rather a look at it in the context of the whole contract, the motives of the parties, their interest, and industry custom

Incompleteness and Agreements to Agree

May v. Butcher v. R (an agreement to agree on an essential term is not enforceable) Facts:

àMay & Butcher wanted to buy surplus tentage from the Disposal Board and form the following agreement:

àThe board agrees to sell (and May & butcher agree to purchase) all old tents àThe price and dates on which payment will be made shall be agreed on by the parties as the tents become available.

àDelivery shall be taken as agreed upon by the parties. àAll disputes will be summited to arbitration àMay & Butcher made deposit of $1,000 as security. àSale of tentage is confirmed àCould not agree on price.

Issues: àCan a clause in a contract that states agreements to agree on smething in the future make the contract legally binding? àWere the terms of the contract sufficiently defined to constitute a legal binding contract between the two parties?

Ratio: àAn agreement between two parties to enter into an agreement in which some critical part of the contract matter is left undetermined is no contract at all.

Analysis: àCourt held that there was never a legally binding contract since the agreement implied that the two parties agree on the price in the future. àSeemed too incomplete for the courts to enforce. àContract was seen as unenforceable, and therefore the arbitration clause also did not come into effect.

Hillas v. Acros (Price, description of goods, date/time of delivery are all esstential terms) Facts:

àHillas wanted to purchase timber from Arcos. àReached an agreement to purchase 22,00 standards of timer, under the specific condition that they also have the option of enter into into a contract with Arcos to purchase 100,00 standards following year with a 5% reduction on price.


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àArcos refused to sell them the subsequent 100,000 Issues:

àDid the lack of a definite price set on the 100,00 of timber make the contract incomplete?

Ratio: àA contract to negotiate is enforceable àCourts should intervene to determine the terms of an agreement through context and intentionality of the parties. àPrice, date of delivery, description of goods, time of delivery are all essential terms.

Analysis: àContract was held to be valid because it wasn’t uncertain because:

àSubject matter àNot too uncertain, they had exposure to the Russian standard already, they know what is meant. àThe court looked at the whole transaction. It was obvious in the circumstances and because of their previous dealings that they were obviously talking about the Russian Standard.

àDate of Delivery àContract is over a course of a season so the desired dates of delivery (shipment cannot be done all at once) are uncertain on purpose. àThey meant within a reasonable time in that context. àReasonable time is not unbounded, it has limits and in this case it was the timber season.

àPrice: àRussian government puts out price list every year.

It has a definite meaning, it is not imaginary at all. (analogy to market prices) àCan’t be speculative (Gold is a standard and it’s set so that could have definite meaning.

àThere was serious intent for the parties to contract so the courts found a way to enforce it.

Foley v. Classique Coaches Ltd – May and Butcher does not provide a universal principle on the construction of a contract, and each case must be decided on the construction if the particular document – in some cases an agreement to agree on something like price, if accompanied by some universal metric to help quantify it, will be enforced by the courts. Facts:

àClassique coaches agreed to purchase a piece of land from the plaintiff, who operated the adjacent premises.


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àThe sale was made subject to the defendants entering into a supplemental agreement to purchase all the petrol required for their business from the plaintiffs at a price to be agreed by the parties in writing and from time to time. àContract was executed àFor three years the defendant obtained all of their petrol from the plaintif until they thought they could purchase their supplies on better terms elsewhere àThey tried to repudiate the supplemental agreement

Issues: àWas the supplementary contract valid, especially since it had uncertainty of an essential term?

Ratio: àMay v Butcher does not provide a universal principle on the construction of a contract, and that each case must be decided on the construction of the particular document. àIf contract has arbitration clause and the validity of the contract is in question, then the arbitration clause is not applicable because it presupposes there is a contract. à part performance will indicate that the contract is binding

Analysis: àAgreements to agree can be valid under certain circumstances

àSerious intent to contract by the parties identified is the post contractual behavior of the parties (3 years of purchasing petro) àAgreement to agree – they meant a reasonable price, and that is sufficiently clear in regards to petro prices. à if there is an external metric that will allow us to settle on a price, it is okay to have uncertain terms because a reasonable price is easy to find. à The court is motivated to not find uncertainty àArbitration clause not applicable, presupposes there is a contract, but that’s what we are trying to solve.

Agreements to negotiate

Empress v Bank of Nova Scotia – Agreement to renew has two contractual obligations Facts:

àEmpress, the landlord, were leasing a piece of land to BNS, which had a renewal clause stating that the tenant has the right to renew the lease for two consecutive periods of 5 years each and the intention to do so must be negotiated three months prior to the expiration of the original clause


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àThey set out a formal that the new rental rate will be market value. If they can’t agree on terms then this agreement may be terminated at the option of either party. àThey failed to agree on a term and then right before the expiration date Empress asked for 15K to be paid before the month and then a fixed amount per month.

Issues: àWas the renewal clause void for uncertainty or was it the same as an agreement to agree?

Ratio:

àAgreement to renew has 2 contractual obligations: 1) Negotiate in good faith 2) Do not withhold agreement unreasonably.

àIf there is serious intent in a contract, court should strive to save the contract, especially with sophisticated commercial parties) àAn agreement to agree is not enforceable. (There are exceptions however).

Analysis:

àCourt can go two ways: àMay v Butcher: An agreement to agree is no agreement at all àHillas v. Arcos -‐ The courts should try and find meaning if there is an agreement between parties

àState that the price must be determined by market rental value, if nothing more was said then the rental value could have been determined based off of valuations and this would have been an objective matter. à But the clause stating that both should agree on terms indicates that:

à1) There was an implied term that the landlord would negotiate in good faith. à2) An agreement on the market rate would not be unreasonably withheld. à3) Empress could not be compelled to enter into Market rental value

à The three points above were said to imply under the officious bystander and business efficacy principles in order to permit the renewal clause, which was clearly intended t have legal effect, from being struck down as uncertain.

Mannpar enterprises v. Canada – Bare agreement to negotiate is not enforceable if it is too uncertain Facts: Parties entered into a contract for the extraction of gravel from Indian reserve. Permit was 5 years with a renewal clause subject to satisfactory performance and renegotiations of the royalty rate.


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Mannpar gave written notice of its intention to renew the permit for an additional 5 years, however the crown rejected it because the band became less satisfied with the permit arrangement. Issues: Was the renewal clause void for uncertainty Ratio: The bare agreement to negotiate is not enforceable if it is too uncertain. There is no duty to negotiate in good faith if there is no language, which implies a benchmark of measurement. Analysis:

àWe saw in Empress v BNS that the courts will strive to uphold agreements if there is a very serious and strong intent. àThe clause in this case is distinguishable from Empress, there was a specific clause, commercial contract and real intent. In this case there was no specific clause, there was the government’s fiduciary duty (special circumstances) and therefore the test does not apply. àIntent threshold was not met in this case due to fiduciary duty of the Crown to the Band. They were not in a position to create this contract without their consent. àIf there is no strong intent to uphold these agreements then the courts will not try to. àThe bare agreement to renegotiate is not enforceable. àAn agreement to negotiate can overcome this uncertainty and be enforceable if there’s some objective mechanism to measure the duty (Empress v BNS) àExternal metrics and ways to giving content to what the parties intended must exist. àWhen there is a duty to negotiate, by itself is too unenforceable, we can imply that you have to negotiate in good faith and make it sufficiently certain. That will help save the renegotiation clause.

Wellington City Council v Body Corporate – In some instances an agreement to negotiate in good faith in unenforceable because its subjective nature leads to uncertainty Facts:

à Wellington City Council enters into “process” contract with body corporate, which obliges wellington council to negoitae in good faith and for not less than market value.


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àNegotiations broke down and body corporate sued for breach alleging that they failed to conduct negotiations in good faith.

Issues:

àIs an agreement to negotiate in good faith enforceable? Ratio:

àAn agreement to negotiate in good faith is unenforceable because its subjective nature leads to uncertainty (not all of the time though) àBUT if a contract specifies the way in which the negotiations are to be conducted with enough precision for the court to be able to determine what the parties are obliged to do, it will be enforceable.

Analysis: àA contract purporting to bind the parties to negotiate, whether expressed in terms of good faith, best endeavors or otherwise, is in substance a contract to try to agree. Breach lies in failure to try, either at all according to whatever may be required. Breach does not lie in failing to agree. à The enforceability of an agreement to negotiate will depend on their terms, and particularly the specificity of those terms. Whether the terms of a process contract are sufficiently specific to be enforceable is an issue separate and apart from whether the substantive agreement, if reached, is sufficiently certain to be enforceable. à A promise to negotiate in good faith is illusory and therefore cannot be binding because parties negotiating for a contract are free to pursue their own interests. Generally speaking neither party is under any legal duty to consider the interests of the other. àBUT if a contract specifies the way in which the negotiations are to be conducted (like in tender cases) with enough precision for the court to be able to determine what the parties are obliged to do, it will be enforceable. àObligation to negotiate in good faith is not the same as an obligation to negotiate reasonably.

àObligation to negotiate in good faith essentially means that the parties must honestly try to reach an agreement. They remain able to pursue their own interests within what is subjectively honest, rather than what is objectively reasonable. ß This is why it is hard to enforce negotiations of good faith.

àThis contract had not laid out any specific obligations of the parties therefore it is unenforceable.

Anticipation of Formalization

Bawitko Investments v. Kernels Popcorn Oral contracts are valid if all of the essential terms are agreed upon. If not then the oral contract is no contract at all. Facts:


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à Parties spoke about a deal, Kernels verbally stated “you’ve got a deal” but the draft was left negotiated. à Bawitko made payments towards the franchise fee and had discussions about the store. à The formal contract had not been signed yet. So Kernels said the store is going to open in 8 days and you have four days to sign. àThe agreement sent to Bawitko offered him the franchise but not in the form the parties had agreed upon at the earlier meeting (orally). àBawitko asked for an extension in time àKernels refused and returned his deposit.

Issues: à Was the oral contract binding?

Ratio à Oral contracts are valid if all of the essential terms are agreed upon. If not then the oral contract is no contract at all.

Analysis: à When the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon, or the contract is too general or uncertain to be valid in it-‐self and is dependent on the making of a formal contract, their legal obligations are to be deferred until a formal contract has been approved and executed. àThe original agreement cannot constitute and enforceable contract. à The unsettled detailed of the complex agreement were not mere formalities. à Essentially a contract to make a contract here. In theory you can have a contract to contract but it is extremely narrow. àEvidence has to be clear that they are bound at that time. àEssential details have to be hammered out at that time, all that’s left to fuss about are trivial matters. If that’s the situation then its fine. àBUT if complex terms are not agreed upon there is no contract.

Intention to Create Legal Obligations

Intention to Create Legal Obligations

Intention to create legal obligations synthesis: àThere is a presumption in favor intention of creating legal obligation for commercial parties. We can overcome it if the objective reasonable person would say there is no intent to create legal obligations (Rose n Frank v, JR Crompton Bros) (TD v Leigh Instruments)


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àWe look at the overall relationship, the commercial reality, and a close reading of the documents to see if this intention to create legal obligations exists. (TD v. Leigh Instruments) àIf we can put an interpretation on the document that its not absurd and not binding then that’ll help us in proving its not a contract (TD v. Leigh Instruments) àWe also know that there is such a thing as a comfort letter and it’s not binding – generally speaking. (TD Bank v. Leigh Instruments) àIf people hate each other and are not motivated by love and affection, then the implied presumption of lack of intent to create legal obligations do not apply. (Balfour v Balfour he gave the allowance when they were still in love). à The Family Relations act overrides Balfour and Balfour in regards to spouses/ex spouses. BUT you must fit in the definition and it only applies to the division or property, assets and debts.

Balfour v. Balfour – promises motivated by love and affection are presumed to not have intended legal consequences. Facts:

à Husband promised his wife 30L a month for when he was away for her maintenance à they divorce after a while and she claims that his promise is still valid and therefore there was a contract between them. à She still wants the 30L

Issues: àDid the husband intent for their agreement to have legal effect?

Ratio: àCertain promises, such as those between a husband and wife are not intended to have legal effect. àWhen married couples, family members, friends are motivated by love and affection that the presumption is that there is no legal intention/obligation (can be rebutted, the party who is saying there was serious intent has to rebut the presupposition)

Analysis àThe promise did not result in a contract because no one would suggest in ordinary circumstances that those agreements result in what we know as a contract. àPresumed that parties did not intend to have legal consequences. àIt would be the worst possible example to hold such agreements to have legal obligations and subsequently enforced by the courts (flood gate of frivolous law suits) àTest is via ORP and if they would assume there be any intended legal purpose?


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àDid the parties intend objectively that breach of this agreement to have consequences? àIf she has a right to sue for lack of payment then really he can sue her for not doing things around the house properly, it sounds stupid. àWhen married couples, family members, friends are motivated by love and affection that the presumption is that there is no legal intention/obligation. àThis preposition can be rebutted but, the person who is saying that they had a serious agreement has a higher burden of proof to trump this presupposition.

Rose and Frank v. JR Crompton Bros – business parties must clearly express intention for their contract to not have legal consequences/legal obligations. Facts: à parties had an agreement in regards to the sale of paper products.

à the agreement expressly stated that the contract was to have no legal effect, and rather it was bound by honor. à Defendant refused to fulfill some of the plaintiff’s orders and terminated the agreement.

Issues: àIs a contract legally binding when there is expressed intention for it to not have legal effect?

Ratio: à Established the opposite presumption that there is serious intent to create legal obligations between business parties unless it has been expressed directly that they do not wish for there to be legal consequences.

Analysis: à In social and family relations an intention to not have legal obligations is implied. In business matters in order to relinquish legal consequences it has to be expressly stated that they parties do not wish to give the contract any legal effect.

TD Bank v. Leigh Instruments – when deciding whether there are intentions to create legal obligations you have to consider factual background between the parties as well as the commercial reality Facts: à Plecy is the parent company of Leigh Instruments.

à TD and Plecy exchanged a series of comfort letters in regards to a LOC for Leigh inudstries. à In the 5th letter Plecey states that “it is our policy that our wholly owned subsidiaries (such as Leigh) be managed in such a way to always be in a position to meet their financial obligations including repayment of all amounts due under the above facility.


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à Bank gave them the loan thinking that the meaning of the clause was intended to mean that plecey would manage its subsidiary to make sure it would be profitable. à Leigh goes bankrupt and TD wants its money.

Issues: àWas there a contract between Plecey and TD? Ratio:

àWhen looking for intention to create legal obligations, you have to consider the factual background between the parties as well as commercial realities. à Comfort letters do not have any legally effect, especially if it is expressed directly.

Analysis: à It was well known that Plecy would not provide any guarantee on the loans made to Leigh by the bank. The letter was crafted to avoid suggestion that Plecy had any legal responsibility for the loans. à It’s common corporate standard that the parent company does not guarantee its subsidiaries. àThe bank provided the loan to Leigh in order to establish a relationship with Plecey. àThe court read the letter in the overall contract, and then looked at the factual background between the parties as well as the commercial reality. à What were the common sense business objectives that the parties have? àThe aforementioned points have to be considered via the ORP to assume intent or not. àThey look at the plain language of the contract “be managed” àParent management or subsidiary independent management?

à the plain reading looks to mean that the phrase “be managed” suggested passive, not active phrase

à Overall context: àBehavior between the parties. The Bank and Plecy knew that Plecey was not undertaking the debts of Leigh à Corporate law principle: corporations are independent and operate individually; Parent companies are not obligated to pay for their subsidiaries. It’s corporate principle

àOne may wonder how this affects the value of comfort letter? à Not absurd, they have commercial value because the mother company, by saying they stand behind Leigh, to say these things, even if they are not binding, does have some weight. àMatter of reputation à Point of advocacy


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Canadian Taxpayer Association v. Ontario (Minister of Finance) – Political candidates promises, written or oral, are not intended to have legal consequences) Facts:

àCanadian Taxpayers suing McGinty for raising taxes when he promised he wouldn’t in his political campaign on TV. à He even signed a document

Issues: à Is a campaign promise intended to have legal consequences? Ratio:

àPolitical candidates promises, written or oral, are not intended to have legal consequences

Analysis: àIt would create policy implications if it did because sometimes one politician cannot control the entire actions of the government. à Even though he signed a document, it’s no different than him standing at a podium and saying it. à In some ways it looks like there is serious intent but obviously it is not intended to be legally binding because it’s dumb

Family law act S.3 and 92 àSection 3:

àDefines spouse: àa spouse is a married person àor it’s a person who has lived in a marriage like relationship in the same house for at least 2 years. àSpouse also includes an ex-‐spouse àA PRE-‐Spouse is not included in this legislation. (BF, Fiancé)

àSection 92 àMarital agreements

àNow deals with division of property, assets and debts ****If you quality as a spouse this legislation over-‐rides the Balfour v Balfour case. (the agreements to divide property, assets and debts IS legally binding)****

àYou have to be a spouse àYou can no longer be a spouse and still make a legally binding agreement. àAlimony is not capture by this (anything that isn’t property, asset and debts).

Formality: Contracts Under Seal and the Requirement of Writing


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Formality Promises under seal

àThe common law continues to enforce such promises even in the absence of consideration àHistorically seals were necessary for all contracts and sufficient for all contracts. àContract not enforceable if you didn’t have a seal – no longer true. Once you had a seal it was enough (sufficient) àIf you have a seal, they are legally binding. àKey issue becomes: is what we have a seal or not. What qualifies as a seal? Because if it’s a seal then it’s a contract! àWe don’t need the wax seal anymore because now we have different devices to determine intent. àThe seal serve several different functions:

àEvidentiary: presence of a seal provides clear evidence that the promisor intended to create a legal obligation àCautionary: the act of sealing a promise serves to encourage the promisor to carefully contemplate the legal consequences of his actions.

àSeal is sufficient to create a contract (that even is missing consideration) If the seal is not valid it doesn’t mean it’s not a contract. If the contract has all of the elements of a valid contract then it is binding. (Royal Bank v. Kiska)

Requirement of Writing

BC Sale of Goods Act àWhen dealing with land, radar should go up, there are plenty if implications and regulations/statues. àStatue of frauds:

àBeen inherited in Canada and then overruled in certain jurisdictions. àIn BC it has been overruled.

àOne thing about statue of frauds àImposed a writing requirement in regards to the sale of land àGuarantees had to also be evidenced in writing. àThe reason for this was to prevent fraud in those contexts.


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àWhat we need to focus on is guarantees and sale of land in the BC equity act section 59.3(a)

àSale of land has to be indicated in writing (Delgam v. Guaranty Trust Co). àIt must be signed àIt must be a reasonable description of the subject matter. (Dynamic Transport ltd v. O.K Detailing) àIf the above is not satisfied then you go to 59.3(b) which states:

àThe person denying the contract does an act that demonstrates they behaved as though there was a contract then it’s a binding contract

àIf that’s not satisfied then you go to 59.3© àThe person has relied on that contract in a way that it would be unfair to see if there wasn’t a contract.

àThe act imposes a writing requirement for contracts of guarantee and contract’s respecting land or dispositions in land (not including leases of 3 years or less) àNon-‐compliance with the statute only renders a contract unenforceable. An unenforceable valid contract àHas all the hallmarks of a contract but does not follow the statue and is therefore rendered unenforceable. àHas significance in the following way. àIt may be used by way of defense àThe essential validity of an unenforceable contract means that evidence sufficient for a court of common law to permit enforcement may arise subsequent to the formation of a contract.

Contracts under Seal

Royal Bank v Kiska: If seal then contract is valid, anything counts as a seal if you intended for it to be a seal. If a contract is under seal and the seal itself is in question but the contract has all of the elements of a valid contract then it is enforceable Facts:

àThe plaintiff, bank, brought an action on a guarantee which had been signed by the defendant. àAt the time of signature, no wafer seal was attached to the guarantee but the word “seal” was printed on the document, next to the space in which the defendant wrote his signature.


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àSeal gets rid of the consideration aspect and still keeps the “contract” enforceable. àConsideration = mutual exchange.

Issues: àWas the contract legally binding in the absence of a wafer seal?

Ratio: àAnything counts as a seal as long as you intended for it to be a seal.

Analysis: àThere was a basis of consideration and there is no need to have a seal to make contract legally binding. àWe are seeing a relaxing the formality of contracts. àAnything counts as a seal as long as you intended for it to be a seal. àSo a seal is sufficient but be careful if that was on an exam. If the seal is not valid it doesn’t mean it’s not a contract. If the contract has all of the elements of a valid contract then it is binding.

Dynamic Transport Ltd. v. O.K. detailing Ltd. – examples of legitimate descriptions of land

àGives us examples of what is certain description of land and what isn’t a certain description of land. àLook at the example they use bleakly and smith case (certain)

àProperty sold on Cable Street, the guy had no other land on that street. àThey look at the overall case àInfer that what he meant is clear. (the guy only had one piece of property on the street)

Delgman v. Guaranty Trust Co. (1954) SCR-‐ requirement of writing for a contract regarding land to be valid Facts: àNephew took care of Aunt because she promised him that if he did she would make adequate provision for him in her will (premises at no. 548) àNephew did his chores , took his aunt around on trips, etc. àThe will didn’t leave the house to him, he sued Issues: àWas there a contract between the nephew and aunt if there was nothing in writing? Holding: àSCC held no contract, must be a written document. Ratio: àThere is a requirement of writing.


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Consideration

Consideration

Nature of Consideration Synthesis: àIt must have value in the eyes of the law (this DOES NOT MEAN COMMERCIAL VALUE). Thompas v. Thomas àConsideration must flow from EACH party (Thomas v Thomas case) àIt doesn’t follow from that that consideration must flow TO each party (they don’t have to give to each other, as long as they each give SOMETHING) àReciprocity principle – (Dalhousie cause) àMutual exchange must be done at the request of the other party (Boutlier v. Dalhousie) àCan find an explicit request àUsually the request won’t be explicit but it’ll be implied.

Past Consideration Synthesis: à A promise based on past consideration is not binding. (Eastwood v Kenyon)

àAn act done before the giving of a promise can sometimes be consideration for that promise (THIS IS PRECEDENT) if three requirements are satisfied (Lamleigh v Brathwait)

à1) the act was done at the promisors request à2)the parties must have understood at the time that the act was to be rewarded in the future even though they weren’t explicit about the reward/price. à3)it must have been a legally valid contract.

Forbearance àUsually forbearance to sue is valid consideration (unless the forbearance is made on a bogus claim) (D.C.B and Harold Arkin v. Zellers) àForbearance to sue = agreeing not to sue as consideration for a contract If it is a bogus claim forbearance may still be valid consideration ONLY if:

à (a) the suer doesn’t know it is invalid à (b) it is reasonable à (c) they actually intend to go ahead and sue initially à (d) if payment is already made for forbearance, then forbearance will be valid for consideration ( this is what happened in this case) àALWAYS START WITH THE LAST ONE


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Pre-‐existing duties: à In third party situations, for Party A to promise something to party B, can be valid consideration to party C (Pao On)

à Why? Because it generally just re-‐enforces the contractual obligations of party A, because if they breach, they have two potential causes of action against them.

à Traditionally, we know that a promise to do what you were going to do anyways is no promise at all (Stilk v. Maryck)

à Why? Conceptually there is no new consideration and for practical reasons, we do not want people to be able to extort or force individuals in circumstances where they have to pay more to receive the same thing they were suppose it.

à In Canada this has gone two ways: à In Gilbert Steel v. University construction we see the Ontario Court

of Appeal re-‐enforce the rule from Stilk v. Maryck that the promise to do what you already had to do is not valid consideration. Again the reasons were because conceptually you are not promising to do anything knew and also for practical reasons.

à In England, the case of Williams v. Roffey Bros modifies the rule derived from stilk v maryk stating that pre-‐existing duties can amount to valid consideration IF there is

1) a practical benefit to both parties and 2) If there was no duress

a. We can identify what duress is by looking at the overall bargain (if it’s too good of a deal there may be duress)

b. We look to see who approached who in order to see whether there was duress.

à So, in Greater Fredericton Airport Authority Inc v. NAV Canada this rule was further relaxed. It was concluded that modifications to deals can be made and pre-‐existing duties will be valid consideration if one requirement is met:

1) there is no duress à So they effectively got rid of the mutual practical benefit bit and made the test even easier to satisfy.

à At the moment there is no rule in BC regarding pre-‐existing duties so if a case arrives dealing with this issue there are two roads which the parties could take.

Nature of Consideration


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Thomas v. Thomas (consideration must have value in the eyes of the law (commercial value not important), there must be mutual exchange. Facts:

àJohn Thomas, shortly before dying, orally expressed a desire for his wife to have either the house used as their residence and its contents or £100 in his will. àAfter his death the executors of his estate into an agreement with Eleanor (his wife) “in consideration of John's desires” whereby Elanor would take possession of the house and in return maintain the house and pay £1/year for the "ground rent". àThe respondent remained in the house for some time; however after the death of àSamuel, the appellant refused to complete the conveyance, claiming that consideration was lacking. àThe lower court found for Eleanor and Benjamin appealed.

Issues: àIs respecting the wishes of her dead husband (motive) sufficient consideration? àDoes the willing of the house constitute a voluntary gift and hence the respondent has no rights?

Ratio àConsideration means something which is of some value in the eye of the law. àMotive is not consideration. àConsideration must involve mutual exchange. Analysis: Take away points

à1) Consideration has to have value in the eyes of the law àCourts found that the $1 annually was sufficient consideration. àHaving value in the eyes of the law does not equal commercial value.

à$1 is not a legit rent but its accepted àas long as each party gives something, that is sufficient is value in the eyes of the law.

à2) Consideration must move from each party. Each party must give something. In this case the dead guy gave a house and she gave rent.

àThe peppercorn example is imperative in the freedom of contract, if two parties think its sufficient then it should be.

Governors of Dalhousie College at Halifax v. The Estate of Arthur Boutilier (performance or lack of performance must be done at the request of the party) Facts:


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àBoutilier promised to pay Dalhousie $5,000 in a campaign run by the university to raise funds to "improve the efficiency of the teaching, to construct new buildings àNo letter ever followed and Boutilier fell on hard economic times and could not pay. He acknowledged that he still intended to pay, and would do so when he could afford to. àHe died, and Dalhousie claimed against his estate for the money. Dalhousie was successful at trial, which was overturned on appeal.

Issues:

àIs a gratuitous subscription promise sufficient to find a binding contract. Ratio:

àA gratuitous promise does not have sufficient consideration to be considered a binding contract. àTo bind a promise consideration must flow both ways, parties must both exchange promises and do something at the request of the other.

Analysis:

àCourt decides that this gratuitous promise did not receive any consideration, and therefore that it is not a binding agreement. àBoutilier did not promise to pay the money for any specific reason; he was not getting a specific benefit out of it. àIf he had donated money specifically for the construction of a certain new building this could be consideration; but no such purpose is found in this case and therefore there is no binding agreement. àNaked promises – bare promise w/o consideration.

à1) Look at the language of the contract objectively and see whether there are connections between the promises. Scrutinize the document and if this mutuality is satisfied. Look at the overall circumstances. à2)request test – you can solve this puzzle by looking if there is a request. (if then statement). He just wanted to give a bunch of money. Had he said IF A then B, then this would be sufficient consideration.

à Conceptually if there isn’t a request, we aren’t sure that we have bargain by contract.

Past consideration:

Eastwood v. Kenyon (A promise based on past consideration is not binding). Facts:

Eastwood (Sarah’s guardian) finances her education, and when Sarah comes of age she promises to pay the plaintiff back.


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Sarrah marries Kenyon, and Kenyon also promised to pay the plaintiff back for Sarah’s education costs, but fails to make any payments. Eastwood sues Kenyon

Issues: Was there consideration on behalf of Kenyon’s promise to pay on a past benefit? Ratio: A promise based on past consideration is not binding. Analysis:

àNo, can’t have promise on past consideration and the benefit conferred was not on the defendant. àKenyon didn’t ask for anything in return, his promise would have been a gift. à1. Promise must be done at the request of the individual (this wasn’t done at the request of Kenyon, he didn’t even know her then!) à2. Parties must understand that the act was to be remunerated. àWe have here another case of a bare/naked promise. àNo consideration here because the request element is missing (the promise to give money couldn’t be done for the raising of the girl because that was done before he made his promise to pay) conceptually there can’t be this mutuality because of this timing issue. àThey didn’t find an implied request.

Hunt: àGenerally past consideration is NO consideration, this is what we learn from this case. àIf I promise to pay you today for something you did yesterday, that is not binding because you didn’t do it at my request. àWe would have rather an exchange of gifts in the above situation.

Lamleigh v. Brathwait (An act done before the giving of a promise can sometimes be consideration for that promise if three requirements are satisfied) Facts: Brathwait killed a man and then requested Lampleigh seek a pardon for this crime from the King. Lampleigh rode around the country to obtain this pardon. Plaintiff successfully obtained the pardon. Afterwards, Braithwait promised but failed to pay him a reward of 100 pounds, Lampleigh sued. Issues:

àCan a promise to pay after a request has been fulfilled be binding? Rules:

àAn act done before the giving of a promise can sometimes be consideration for that promise (THIS IS PRECEDENT) if three requirements are satisfied


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à1) The act was done at the promisor’s request à2) The parties must have understood at the time that the act was to be rewarded in the future even though they weren’t explicit about the reward/price. à3) It must have been a legally valid contract.

Analysis: à The court held that while a mere voluntary promise is not sufficient consideration, there was a prior request and then the promise to pay. àThis is then not a naked promise, but rather coupled with the prior request and therefore a binding contract.

Hunt: àIn Eastwood we learned that generally that past act don’t count as

consideration. àBut Lampeigh is different because we have a clear request to do something. Even though the promise to pay came after the riding around, the riding around happened at the REQUEST of the guy. Reciprocity is seen here. This case is consistent with the Eastwood case. àRead page 174 as the law NOW for consideration.

Forbearance

D.C.B and Harold J Arkin and Zellers inc (usually forbearance to sue is valid consideration (there are requirements though, 4 step test) Facts: à2 teens shoplift from Zellers, but the stolen items were returned to the store unharmed. àLawyer for Zellers sent letter to teens mother demanding payment of $225 to help the store recover incremental costs of shoplifting. àIf money was not paid, store threatened to commence civil action against the mother. àMother paid the $225 but realized later she did not need to pay for parents are not liable for tortuous conduct of their children. Issues: Is forbearance to sue good consideration where the foundation of the forbearance is invalid? No. Ratio:


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àUsually forbearance to sue is valid consideration (unless the forbearance is made on a bogus claim) àForbearance to sue = agreeing not to sue as consideration for a contract If it is a bogus claim forbearance may still be valid consideration ONLY if:

à (a) the suer doesn’t know it is invalid à (b) it is reasonable à (c) they actually intend to go ahead and sue initially à (d) if payment is already made for forbearance, then forbearance will be valid for consideration ( this is what happened in this case) àALWAYS START WITH THE LAST ONE

Analysis: àWhere the foundation of forbearance is invalid it is not enforceable, however in this case the mother already made the payment. àThis trumps the invalidity and there IS consideration.

Pre-‐existing duties 3 party deals

Pao On v. Lau Yiu Long (in three party cases A’s promise to do something for B is also valid consideration for C) Facts:

àWe have three agreements: àMain agreement: Shing corp. promise to give all of their shares to Fu Corp in exchange Fu Corp will give 4.5 shares to Shing Corp. Party of that deal, Fu Corp wants Shing Corp to hold on to half of those shares to prevent saturation of their shares. àAgreement number 2 (subsidiary agreement) between Shing Corp and Shareholders of Fu Corp. Shing Corp wanted to have the option to sell back for $2.50 per share. àAgreement number 3: Agreement number 2 is a bad agreement, so they are going to recreate it. Get rid of agreement number 2. Basically the share holders of Fu promise to indemnify shing any loss as a result of the dropping of the value of the shares. In exchange Shing said they would sign agreement number 1. àThe shares did fall in value and Pao tried to enforce the guarantee agreement. Lau argued the guarantee agreement was not valid (1) because there was no consideration, only in the past and under a pre-‐existing duty, and (2) because it was a contract procured by duress.

Issues àIs there any consideration for agreement number 3?


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àShing Corp is promising to do what they were already going to do in consideration for the indemnify the shares. Is this real consideration?

Ratio: à In three party cases, A’s promise to do something for B is also valid for C. Analysis:

à This is valid consideration because: àThe promise to do what you already have to do is going to a different party. àit re-‐enforces the obligations that party A has. If A breaches, they have two possible causes of action against them

Two Party Cases:

Stilk v Myrick (Promising to do what you already have to do is no promise at all) Facts:

àSailor had an agreement to be paid $5 per month for a voyage from London to the Baltic Sea. àDuring the voyage, two of the workers deserted and therefore the remaining crew was promised the other two worker’s wages as a result of extra work they had to do. àThe company said no and the sailor subsequently sued. àI promise you to pay you more for you doing exactly what you were going to do to begin with. àSailors already had to do work

Issues:

àWhether the promise to pay the money was enforceable? Ratio: à Promising to do what you already have to do is no promise at all. Analysis:

à Dominant interpretation of this case is a point we’ve made already, promising to do what you already have to do is no promise at all ( On a conceptual level there is no consideration) à Emphasizes a public policy point. We don’t want as a matter of policy sailors threatening to quit to extort the captain for more money.

Gilbert Steel v. University Construction ltd (this is the law in Ontario) Facts:

àParties are in a contract for steel construction. à2 Price increases are set by the PL since the original agreement.


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àThe parties orally agree over increased price, but defendant only pays the original price àDefendant continues to accept deliveries of steel but fails to make the “new” payments against the invoices. àPlaintiff sues for breach of contract of balance owing

Issues: à Whether or not this constituted a legally binding contract or failed for consideration

Ratio: à In Ontario, the promise to do what you already have to do is no promise at all.

Analysis: à Modern example of Stilk v. Maryk à Promising what you already have to do. à Parties can always rip up an agreement and make a new contract, even if we are promising the same things. à This wasn’t a rip up. But In theory you can impliedly rescind a previous agreement and make a new one but the court is very loathed to do that and you will need VERY clear evidence to do that.

Wiliams v. Roffery Bros (very important case) If practical benefit + promise is not given under duress then pre-‐existing duty can be consideration Facts: àCase is in England àRoffey Bros subcontracted carpentery to Lester Willaims for $20,000

à Some work was done but the Williams ran into financial difficulty, as the price they agreed upon was too low à Roffey agreed to pay more to avoid having to pay a penalty àWilliams finished the job and asked for the money, Roffey refused.

Issue: àwas the contract to pay more binding? Ratio:

àA pre-‐existing duty to the promissor can be legally sufficient consideration if: à Practical benefit flows to both parties from the agreement and à The promise is not given under duress.

Analysis: àCourt didn’t want to overturn Stilk v. Maryck but in certain circumstances they will allow past consideration to be sufficient consideration if: àPractical benefit flows to both parties from the agreement and àThe promise was not given under duress


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àIn this case both parties benefit: Roffery doesn’t pay penalty and Subcontractor gets more money àHere we have an example of practical benefit: not paying penalty, being able to finish the job sooner and moving on to other projects and so forth.

Greater Fredericton Airport Authority Inc v. Nav Canada (Promising to do what you already have to do is valid consideration as long as there is no duress) Facts:

àAgreement between government and NAV under which NAV assumed responsibility for air navigation services at airports across Canada àAgreement included terms assigning responsibility for certain capital costs àIssue over costs for new equipment, Plaintiff promised by way of a letter to pay the costs of the equipment àBased on this letter, NAV acquired the equipment but PL refused to make the payments àArbitration clause held that the agreement did not entitle NAV to claim reimbursement

Issues: à Was the promise made by the plaintiff enforceable? Ratio:

à Pre-‐existing duties can count as valid consideration if there is no economic duress.

Analysis: à This case was in NEW BRUNSWICK

à Took the William v Raffey bros a step further and got rid of the requirement to have practical benefit. à Huge relaxation of Stilk v Maryck. à Look at how good the bargain is for evidence of duress à Look at who is proposing the modification to see if there is real duress or not.

Promise to accept less

Foakes v. Beer (the promise to accept less in satisfaction of a larger sum is no promise at all) Facts:

àFoakes owes Beer around $2000. Beer agrees to allow him to pay in installments until it’s paid up and therefore she won’t take any action against Foakes. Foakes completes payments but Beer demands interest.

Issues:


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àIs accepting less in satisfaction of a larger sum valid? Ratio: àA promise to accept less in satisfaction of a larger sum is no promise at all. Analysis:

à There is no contract because a lesser sum cannot be satisfactory to the creditor and therefore is not sufficient consideration àThis case cited a principle from Pinnets case where it was established that no one would really be satisfied in receiving less than what they are owed.

Re-‐Selectmove LTD: Even in cases where there may be practical benefit to accepting a lesser sum in payment of a debt, this is not sufficient consideration to finding a binding contract. Facts:

à Company deducted money from employers for the purpose of taxes, which they would forward to the crown. àHad financial difficulties and stopped making the payments àTax collected discussed the problems and the company said it would make 1000 payments monthly. Tax collector said he had to check with superiors. à Company made various payments, went out of business à Crown sough compulsory liquidation of the company and the remaining payments.

Issues: à Did the discussion between the tax collector and the company regarding payments of installments amount to a valid contract? (the agreement to pay less)

Ratio: àUpheld Foakes v Beer rule that a promise to pay less is not good consideration and therefore renders the contract invalid. àThe performance of a pre-‐exiting duty is good consideration when there is a practical benefit to the promise, but this principle cannot apply where the existing obligation is to pay less

Analysis: àThere is mutual benefit to not enforce the debt, and in the Williams and Roffey bros case this was sufficient to find consideration but the court held that it did not apply here and if applied it would in effect leave the principle in Foakes v. Beer without any application.

Foot v. Rawlings: Something new added = consideration Facts:

àThe respondent modified terms of repayment (and accepted less money in terms of interest) in order to allow the appellant to pay him/her back. àIn the promisory note the respondent outlined the terms of the agreement and the appellant complied, making the proper payments.


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àAfter a few months, the respondent sued for the remainder of the debt. Issues:

à Was the new method of payment and form of payment valid consideration?

Ratio: à Where in consideration money is substituted with a negotiable security such as cheques, or anything for that matter (peppercorn), consideration is still valid because we have something new added to the deal

Analysis: àIntroducing something new , like in this case cheques, will be valid consideration. à There is a practical benefit and the court is not held down by Foakes v. Beer. à Foots consideration: Cheques: àRawlings consideration: Forbearance: à Court found that as long as Foots continued to perform his obligations under their agreement, the respondent’s right to sue on the note was suspended. àCourt doesn’t want to overrule Foakes v. Beer but it starts to scrutinize modifications to find something new to render it consideration.

BC Equity Act s. 43 à States that the payment of a lesser sum is valid consideration if it has been expressly stated: “Part performance of an obligation either before or after a breach of it, when expressly accepted by the creditor in satisfaction or rendered under an agreement for that purpose, though without any new consideration, must be held to extinguish the obligation.”

PAI v. Norstream – Common Law + Statue to render certain contracts as lacking in consideration Facts: à Respondent received a letter of credit to build a station in Iraq àrespondent subcontracted to PAI, PAI subcontracted to someone else.

àCost was $260,00 àProject was completed late and PAI had to pay a penalty of $18000 àNorstream wasn’t paying back and PAI was frustrated àNorstream finally got the payment from the ministry àNorstream met with PAI and presented a contract, which basically offered him $90,000 or nothing.


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àPAI accepted it, seeing as he had subcontracted it out and needed to pay them àPAI found Norstream got more money àPAI is suing saying their donut shop contract is invalid for a lack of consideration.

Issues: à was there valid consideration? Ratio:

à Although s. 16 of the MLAA certainly displaces (and indeed, reverses) the common law rule in Pinnel’s Case and Foakes v. Beer, there is nothing, either within the MLAA or that can be implied from the legislation, that would indicate that s. 16 should apply to agreements or contracts that courts have found to be unconscionable or voidable for undue influence or economic duress. Analysis:

àStatue was silent on the existence of duress. àQuestion is did the statue displace the entire common law, or do we read it very narrowly. àCourt found that if the promise to accept less is formed under duress it will not be valid. (look at the whole bargain and the person offering to see if duress exists)

Promissory Estopple

Promissory Estopple • Courts enforcement of promises that are neither supported by

consideration nor given under sear, as a means of preventing harm from befalling a reliant promise.

• For the purposes of now, every contract requires consideration except if its under seal or promissory estopple.

• General notes on Estopple: o It is an equitable concept (lots of equitable concepts we’ll

encounter, like trusts) o What is equity?

§ Equity is a parallel system of rules that are essentially concerned with fairness and conscience or more particularly unconscionability.

§ Common law and precedent is not always very fair. § Court of equity does not overrule precedent but excepts

decisions due to fairness.


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§ When one side represents or indicates that they will not insist upon their contractual right, even though there is no consideration for this promise, he will be estopped from taking action if certain requirements are met.

§ Equitable maxims • You’re generally dealing with unfairness • Equity is a dense not a sword. • He who seeks equity must seek equity (have to

have clean hands. § Outline of estopple requirements

• You need to be in a contractual relationship already

• Must be a clear representation by the one party to the other that the first party will not insist upon their right from the contract. (John Burrows v. Subsurface Surveys and D&C Builders v Reese)

• Reliance, I must rely on the gratuitous promise given to me.

• It must be inequitable to permit the promisor to back on his promise.

General Principles

Hughes v Metropolitan Railway (Birth of Estopple, later solidified by Denning, makes reference to reliance and detriment although not stated, seems to be implied. Facts:

• Landlord tells tenants they have to finish repairs on a property in 6 months • Tenant writes back asking to defer the repairs and negotiate the sale of the

lease • They negotiate for some time but the negotiations halt • Three days before the notice to repair was due to the expire the tenant wrote

to the plaintiff saying that in light of the breakdown in negotiations it would undertake the repairs.

• Landlord served a writ of ejectment on the tenant for not having completed the repairs in the time asked.

• Tenant completed repairs in June • Landlord sued to enforce the writ.

Issues: • Is the writ enforceable?

Ratio:


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• If a contract has definite and distinct terms involving certain legal results and by the parties OWN actions leads to 1 of the parties thinking those terms are suspended, the other party will not be allowed to impose a penalty on them (or enforce those rights outlined in the contract that they assumed was suspended).

Analysis: • Court ruled that during the negotiations it was implied that the requirement

to do repairs was suspended. • Its unfair to impose a penalty on someone if they believed that they had

complied, or didn’t believe they hadn’t complied to a contractual obligation. • Tenants relied on this representation from the landlord and that’s why they

didn’t do the repairs. • So not to insist on the antecedent right CAN be implied and we have an

example in this case.

Central London Property Trust LTD. v High Trees House: If a party makes a promise and the other party relies upon the promise the original promisor cannot take back the promise at a later stage because the promise has relied on the new promise and it is unfair to back out. Facts:

• Flats are leased for $2,500 per year and subsequently rented out. • War time and lack of tenants makes the rent unreasonable so the landlord

agrees to reduce the yearly lease to $1250. • The war ends, economy picks up and the flats are fully rented out. • The landlord says that it is owed $2500 per year now. • Denning makes up his hypothetical regarding IF the plaintiff was to sue for

the lease retroactively. Issues:

• Was that promise to reduce rent binding? Ratio:

• The promise to reduce rent was binding only in the circumstances that made the agreement arise out of to begin with. Since the circumstances were no longer the same, the old agreement no longer applied. SO tenant has to pay $2500 per year now.

• If a party makes a promise and the other party relies upon the promise the original promisor cannot take back the promise at a later stage because the promise has relied on the new promise and it is unfair to impose the old one back on him.

Reasoning • Equity and Common law have fused, so we need to have regard for both. • As a result as a purely gratuitous promise is not enforced via common law

(Foakes v. Beer) • But in certain circumstances a gratuitous promise are enforceable if its fair.


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• There are cases where we have promises intended to be binding, intended to be acted upon and in fact acted upon. These promises will be binding in equity (even though they are not in Common Law) even with a lack of consideration.

• Estopple will have implications for Foakes v. Beer. • Denning said that when the agreement was made between the parties it was

implied that it was due to the circumstances surrounding the unlikelihood of profit and tenancy. Since those circumstances no longer exist, that agreement no longer applies and the landlord is entitled to the original agreed lease.

• Exam in light of these two cases:

o In Canada: § Statue – when there is an express agreement where 9 will

satisfy 10, you don’t need consideration § Common Law – if you don’t have explicit agreement (Footin v.

Rawlings) if something new is there we can find consideration. Something new can be cheque, timing (owe on Aug 1st, but I say give me less a day before, that’s something new). Newness satisfies consideration.

§ Promisory Estopple 1. Have to have a contractual relationship already 2. Must be a clear representation (can be implied) by the one party to the other

that the first party wont insist upon his rights from the contract. 3. Reliance, I must rely on the gratuitous promise given to me. 4. It must be inequitable to permit the promisor to back on his promise. • Result: in some sense you are just estopped from invoking your contractual

right.

Elucidation of Principles

John Burrows LTD. v. Subsurface Surveys LTD. (looking at the nature of representation requirement of estopple in isolation) -‐ Friendly Indulgence Facts:

• Defendant buys a business for a large sum, some of which is secured by a promissory note in the amount of $42,000.

• Promissory not set up a monthly payment plan and the right of the plaintiff to sue for the whole amount at once if the defendant defaulted on the payments for more than 10 days.

• The defendant was late more than 10 days consistently and the plaintiff had had enough eventually and therefore sued for the whole amount owing.

Issues:


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Was it unfair to make the defendant pay because he believed that since he hadn’t paid on time before and bore no consequences the plaintiff would not enforce that aspect of the note? Ratio:

• There is a difference between suspension of rights/ right to enforce a term due to negotiations and a friendly indulgence.

Analysis: • Court held that just because a party is being nice about not enforcing a

particular term of a contract doesn’t mean they relinquish the right to enforce it eventually. This is to protect the party from being taken advantage of.

Hunt: • Higher level of intent than the intent to create legal obligation because an

estopple can remove the doctrine of consideration which is a prereq to a contract.

• To raise estopple we need a clear representation that you intend not to enforce the contractual right.

• Narrowing the scope of estopple. • Would the ORP think that the intent is represented. • One way avoiding the application to say that what happened is friendly

indulgence.

D & C Builders v. Reese : No person can insist on a settlement procured by intimidation. Facts:

• D & C Builders do work for the defendant • After completion they charge the defendant around $400 • Defendant doesn’t pay for some time and finally says that she can pay 300,

take it or leave it, its better than nothing. • Plaintiff was in financial hardship and would have been bankrupt if he didn’t

accept the $300. • He finally accepts the 300 and the lady forces him to mark the receipt as paid

in full. • He sues for the balance owed.

Issues: • Was the plaintiff estopped from taking action against the defendant?

Ratio: • No person can insist on a settlement procured by intimidation. • Qualification of true accord is necessary.

Analysis:


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• Denning, being an awesome dude, said that the wife held the creditor to ransom. She knew the creditor was in need of money.

• Her language is indicative of her true nature and intent, it wasn’t really we can’t afford to pay you, it was more like, either accept this or get nothing.

• She was putting undue pressure on the creditor. • She was making a threat to break the contract (by paying nothing) and she

was doing it so as to compel the creditor to do what he was unwilling to do (accept the 300 in settlement).

Hunt: • What do we mean by inequitable? • Do we have a clear a promise to take less for the satisfaction for more. • Nothing inequitable by backing down your promise. • The equities do not favor estopple when you put undue pressure on the

creditor. • Not equitable = no estopple • We have cases where the equities would favor the promissory estopple • When no undue pressure, a true agreement to accept less for satisfaction of

more. EG Hightrees case.

Collier v. P&M J. Wright: A strange sort of Survival for Pinnel’s case: Facts:

• Three partners take out a loan in the sum of $46,000 • Have to make payments of $600 collectively ($200 each) • Two of the partners claim bankruptcy • Collier is left, he claims it was agreed that he only pay his $200 a month

because asking him to pay for the whole thing would force him into bankruptcy.

• Collier makes his $200 payments and completes his 1/3 of the debt • Wright wants the whole sum (the other two as well + interest)

Issues: • Was Wright estopped from making Collier pay the whole debt?

Ratio: • Uphold D & C builders precedent saying that Wrights acceptance of Collier’s

payments is enough to make it inequitable to pursue Collier for the balance. • A person is estopped from pursing action against an individual when they

have made a promise to accept less, if it is equitable to go back on that promise.

Analysis: • Reducing the scope of Foakes & Beer (and Pinnel) even more (the promise to

accept less is no promise at all because its not supported by consideration) • Collier decision:


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• Double edged sword • Commercial reality: it would be better to accept a lower sum than nothing at

all. • It is always possible to make a promise to accept less by a way of a deed

(which is really easy).

Saskatchewan River Bungalows LTD. v. Maritime Life Assurance Co. (waiver and its retraction, reliance) Facts

• SRB was insured by MLA, and they didn’t check their mail and thus didn’t get the policy change notices, and requirements to pay

• SRB didn’t pay and MLA sent a letter in November stating “we will need immediate payment”.

• SRB is saying that MLA waived its right to compel timely payment under their policy with this November letter

Issues: • Was there a waiver of contractual rights by Maritime Life Assurance?

Ratio: • A waiver of contractual rights occurs when:

o 1)the party waiving had a full knowledge of their rights o 2)an unequivocal ad conscious intention to abandon them.

• BUT, a waiver can be retracted if reasonable notice is given to the party in whose favor it operates. (in this case 3 months was sufficient to retract waiver).

• If no reliance you don’t need reasonable time, because they weren’t relying on your waiver. – once you’ve acted on it, you’ve relied on it.

Analysis: • Introduction of a new term called a waiver: • Where one party to a contract or to proceedings takes steps which amount to

foregoing reliance on some known right or defect in the performance of the other party.

• There has to be unequivocal intention to relinquish the right to rely on it. • Intention may be expressed in some informal fashion or inferred from

conduct. • The intention to relinquish the right is communicated, the conscious

intention to do so is what must be ascertained. • Waiver happens when:

1. the evidence demonstrates that the party waiving had a full knowledge of rights and,

2. an unequivocal and conscious intenton to abandon them.


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• Strict and stringent test is justified because we are getting rid of the pre-‐requisit of consideration here. An overly broad interpretation of waiver would undermine the requirement of contractual consideration.

Application of the waiver test: • Maritime knew full well of their rights. This is not contested • Maritime’s conduct of continually accepting late payments and in particular

willing to continue coverage under the policy upon payment of July is indicative of “unequivocal and conscious intention to abandon rights”. November letter does not mention evidence of insurability, nor does it speak of reinstatement. How does the court differentiate between this and a “friendly indulgence” that we saw in the Burrows case? Just because the parties are not really friends doesn’t mean it wasn’t a friendly indulgence. (phone companies always let you pay your phone bill late, it doesn’t mean that they show unequivocal and conscious intention to waive their rights?

• The nature of waiver is such that hard and fast rules for what can and cannot constitute waiver should not be proposed.

• The demand for payment AFTER the grace period had passed (their OWN policy) indicates their intention to waive their rights BUT this is not always the case.

• The fact that they waited around too had a lot to do with the waiver claim and intention.

• Waiver can be RETRACTED if reasonable notice is given to the party whose favor it operates.

Hunt: • Relationship between waiver and estopple is ambiguous • In this class we will use waiver and estopple as the same concept.

W.J Alan & Co v. El Nasr Export & Import: In regards to step 3 of estopple: detrimental reliance is not necessary for valid estopple. Facts:

• Company buys 500 tons of coffee from the seller. • Contract says the purchase should be in Kenyan Shillings • At the time it didn’t matter because the Kenyan Shilling and English Sterling

were of equal value. • Buyer actually pays in Sterling for both purchases • Seller sends a subsequent invoice of 165,000 Kenyan Shillings in order to be

paid in full because the sterling currency had devalued Issues:

• Can the seller sue for the balance in Kenyan Shillings? Ratio:


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• Detrimental reliance is not necessary for valid estoppel, what is necessary is simple reliance on the decision or alteration of a position. (you don’t necessarily have to be in a state of detrimental reliance for estopple to apply)

• Variation in payment currency in a revised agreement constitutes estopping your right to the original currency.

Analysis: • Court looks at post contractual conduct, and the behavior of both parties. • The opening of the account, sending of sterling credit and acceptance of the

sterling credit by the seller indicate that they were bound by the new terms. • “they incurred legal obligations as a result of the seller’s acceptance” of the

money to begin with. Maybe if they had declined and requested to be paid in Shillings right away it would have been a different story.

• Court said that if they Kenyan currency had devalued its not as if they byer pay less for the contractual goods than the promised sterling payment of 262 per ton.

• Seller says that they were entitled to make use of the conforming letter of credit offered to them, without impairing their rights for the future under the original terms of the contract (if they chose to revert). They said that this is analogous to the situation where goods are deliverable by installments, and on installment falls short of the prescribed quality. The buyer is not obliged to treat the contract as repudiated but he is in no way precluded from insisting that for future installments of the goods the seller conform with the precise terms of the contract as to quality. (Similar in this case, just in terms of price).

• Court rejects this argument because this purchase was not suppose to be in installments, it was a one time purchase.

• Once it has been accepted by the seller (as it was) the bank is committed in accordance with its accepted terms and no other terms.

• Seller cannot escape from the consequences of the acceptance of the offered credit by any argument that their apparent acceptance involved a merely temporary acquiescence which they could revoke or abandon at will, or on giving notice.

• It was an acceptance which once made related to the totality of the letter of credit transaction: and the letter of credit transaction was, by the contract of sale, the one and only contractual provision for payment.

• Denning –goes into detail about waiver o Basically says that the waiver is a good instance of the application of

estopple (basically the same thing). o There doesn’t need to be consideration, or benefit, no detriment,

nothing in writing. o Once you waive your strict rights, you cannot afterwards insist on

them. Hunt:


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• What do we mean with reliance? • Do we need detrimental reliance (worst position because you relied on this)

or simple reliance (just do something) • BOTH OPTIONS ARE ON THE TABLE AND YOU USE WHICH EVERONE THAT

BENEFITS YOUR CLIENT. • Stevenson:

o I don’t know, the question is controversial • McGaugh

o He’s not in favor in finding detriment in addition to reliance. o Says Hughes case is the test: there was determent there but McGaugh

says there was no mention of determent • Denning:

o Don’t need determent; you just need to act on it. o As a matter of precedent this cases establishes that determent is not

required. o If a court is wrong – the ratio is not binding. if you misread a previous

case, your reading is wrong then the ratio is wrong. • McGaugh is rendered inarguably puro incurium.

Socitite Italo-‐Belge Pour Le Commerce Et L’industrie S.A v. Palm and Vegtable Oils (Malaysia) The Post Chaser. Dealing with step 3 of Estopple: To go back on a promise is inequitable if there is prejudice (kind of like detriment) Facts:

• Palm & Vegetable Oils sold palm oil to Societe who sold it to sub buyers • Palm was supposed to give notice to the buyers (Societe) immediately after

ship sailing (part of the contract), but they didn’t-‐-‐‐ instead they waited a month to give notice.

• Societe was okay with this, but the sub buyers were not okay with this The breach gave the buyers the right to reject the goods.

• The goods were rejected by the buyers & sub buyers, and Palm had to sell in open market, thus losing money

Issues: • Did the buyers waive their right to reject the sellers tender of documents? • Did Palm rely on this waiver?

Ratio: • It does not follow that in every case in which the represented has acted, or

failed to act, in reliance on the representation, it will be inequitable for the presentor to enforce his rights for the nature of the action, or inaction.

• Detrimental reliance for it to be equitable, but only reliance is needed for estoppel

Analysis: • The court held that the buyers waived their rights to reject the sellers tender

of documents because they accepted it and had no problem with it


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• The court also held that because of the 2 day time period between the notice and the rejection, it was impossible to assume that the sellers relied on the waiver

• In the case at bar, Société Italo-‐Belge did represent that they were waiving their right to reject the tender, but in order for Palm and Vegetable Oils to use estoppel, they would have had to rely on that representation in a way which would render it inequitable for Société Italo-‐Belge to enforce their rights.

• The principle that detrimental reliance is not necessary, he finds nothing on the evidence that there was any change in actions by the sellers which would make enforcement of the buyer's rights inequitable. Noting the very short time (two days) before notice was given, he found it impossible to infer any prejudice by the enforcement. As there was no reliance interest, the complete elements of promissory estoppel were absent and thus he found for Société Italo-‐Belge.

Hunt: • It is equitable for you to go back on your promise, you need prejudice • Lord Gauf, you must find some sort of prejudice (example Hughs) in order

for it to be inequitable for me to go back on my promise. • We have Hightrees, Hughes and DC builders that are telling us (directly) that

we don’t need detriment for estopple. • Its controversial if reliance is acting on the promise or whether there’s

something more that’s required, which is detrimental reliance, as a result of relying on the promise.

• This is a fork in road. You can argue either. • Look at page 224 in collier – English Court of Appeal has moved away from

Lord Gauf, they don’t insist on prejudice or detrimental reliance.

Shield Not a Sword

Combe v. Combe: estopple is a sword not a shield. Facts:

• Combe agreed to pay the plaintiff (his ex wife) 100 pounds per year after they separate.

• Mrs. Combe agrees to forgo her rights for recovery in divorce court in consideration of this. Husband does not pay, and wife sues claiming he was estopped from ceasing his promise since she relied on it

• At trial, plaintiff wins case because trial judge holds that she relied on it (necessary for estoppel)

• Husband appeals Issues:

• Was the promise enforceable? Ratio:


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• The principle of Estopple does not create a new cause of action where non existed before. It ma be part of a cause of action but not a cause of action in itself.

Analysis: • Because the principle of Estopple has the ability to relinquish an important

pre-‐requisite of a valid contract, consideration, it cannot be expanded and exaggerated to fit various cases, especially in terms of a sword. The doctrine of consideration is too firmly fixed to be overthrown by a side-‐wind.

• There was no sufficient consideration to support the husband’s promise. (what was he giving up?).

• Assuming that she has suffered some detriment by her forbearance, nevertheless, as the forbearance was not at the husband’s request, it is no consideration.

• Most equitable doctrines are defenses only. • Why cant the wife use estopple to enforce a gratuitous promise?

Walton Stores (interstate) PTY LTD v. Maher: Estopple used as a sword in Australia and succeeded Facts:

• Walton negotiated with Maher for a lease of land owned by Maher. • Said they would need to have a demolition and replacement of some building

on the land in order to move forward. • Maher said if they were to do those things they’d have to start right away and

they do. • Walton backs out after some of the modifications had happened • Maher sues to enforce contract. • Waltson says there was no contract

Issues: • Was this a binding contract or can Walton be estopped from backing out?

Ratio: • The principle of Promissory Estopple can be used as a cause of action

(Sword) in circumstances where in action of one party constituted clear encouragement or inducement to the other to continue to act on the basis of the assumption which they had made.

Analysis: • This is only accepted in AUSTRALIA. In Canada you cannot use estopple as a

sword. It is only a defense. • Most equitable doctrines are defenses only. • Why cant the wife use estopple to enforce a gratuitous promise?

Hunt: • You’ve led us to believe that you’re going to intend to create a contract with

us and we did all of these things. • You should be estopped from backing out. We’ve incurred tons of expenses.


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M.(N) v. A(A.T): estopple is only a shield not sword in Canada. Facts:

• Mr.A tells Mrs N to move from England to Canada so they can continue their romantic relationship.

• Mrs. N claims that Mr.A said he would pay for her mortgage. • She ups and leaves her house and job in England. • He loans her $100,000 (promissory note) • Relationship doesn’t last, he kicks her out, and she sues to say he can’t

enforce her to pay that money Issues:

• Can Mrs N estopp Mr A in asking to be repaid? Ratio:

• In Canada promissory estopple cannot be extended to be a cause for action. • Intent to create a legal binding relationship is imperative in even considering

estopple Analysis:

• First, promises arising out of love and affection are not binding. • The court presumes in these circumstances that parties do not intend to have

legal relations, unless otherwise specified. • In this case it wasn’t specified. • There is also a lack of mutuality, as Ms A could be under no enforceable

obligation to stay with Mr.M if he fulfilled that promise to pay her mortgage.

Privity

Privity: • An independent pre-‐req for a contract • You need for every contract • What is privity • It deals with people in a connection to each other. • If you’re a stranger you cant enforce it, you don’t have any rights. • Why do we have this rule? • Its probably the oldest rules in the law of contracts • No one understands why we have it. • There are a few theoretical justifications. 1. Consideration rational – the idea is that if X and Y are in a contract and Z is

not in that contract, Z shouldn’t be allowed to enforce to take benefit to that contract because he has given nothing.


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• The problem here is why do we even have privity if consideration will suffice?

2. Intentions of the parties. If we make a deal together we simply don’t intend the third party to be able to sue on it. Intention is a fundamental principle of a contract. HUNT THINKS THIS ONE IS MORE CONVINCING. • In some circumstances a third party was intended to have some rights so

they can have the right to sue.

Tweddle v. Atkinson –third parities to a contract do not derive any rights from that agreement nor are they subject to any burdens imposed by it. Facts:

• John Tweddle and William Guy agreed to each pay a portion to William Tweddle upon his marriage to William Guy’s daughter.

• The contract they made said that William Tweddle can sue to enforce this payment.

• William guy never made the payment • William Tweddle sued.

Issues: • Can a third party beneficiary sue to enforce a contract which he is not a party

to? Ratio:

• 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

Analysis • These guys put this clause in the contract, what about freedom of contract?

There are clear intentions to create legal obligations here and both parties have agreed and consented to it.

• Love and affection is not a sufficient consideration for a promise upon which an action may be maintained.

• It would be a monstrous proposition to say that a person was a party to the contract for the purpose of suing upon it for his own advantage and not a party to it for the purpose of being sued.

• So can’t have the benefit to sue and the benefit to not be sued. Hunt:

• The contract between the two dads shows that consideration doesn’t have to flow TO each party, but FROM each party.

• Strangers can’t enforce a contract, even in circumstances when the stranger is the reason why the contract existed.


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Dunlop Pneumatic Tyre Co. v. Selfridge & Co. Ltd-‐ analogous to Tweddle v Atkinson, third party = no privity = can’t sue Facts:

• Dunlop Pneumatic Tyre co sold tires to Dew and Company with the caveat that they cannot sell the tyres below Dunlop’s list price.

• Drew agreed to sell Dunlop Tyres to two customers at prices below those specified by the appellants (got the tires from Dew).

• They signed an agreement under which they promised not to sell or offer them below the list priced and agreed to pay $5 to the appellant by way of liquidated damages for every tire sold or offered in the breach.

• The respondent then sold the tires below the appellants list price which they agreed they wouldn’t do in a contract with Dew.

Issues: • Can Dunlop sue Selfridge when they did not have an express contract?

Ratio: • Only parties to a contract can sue for a breach of the contract. • The only exception to this rule is if a party named in the contract was acting

as an agent of an unnamed party; in this case, the unnamed party can be sued.

Analysis: • Three principles:

o Only a person who is a party to a contract can sue on it. o If contract is not under seal, consideration must be present. o Principal not named in the contract may sue upon it if the promise

really contracted as his agent. (must prove this and also have given consideration either personally or through the promise, acting as his agent in giving it).

• No doubt it was provided as part of these terms that the appellant should acquire certain rights, but these rights appear on the face of the contract as the right of a third party to recover, which the appellants could not enforce.

• There is also a problem of consideration disclosed by the contract. The consideration flows from Messer and Dew (not as the appellants agents) but as principals acting on their own account. NO consideration from appellant since the respondent got the tires from someone else.

• They conclude that the discussion of consideration will answer whether a third party can sue or not.

• One contract cannot be between party A + party B and Party A – and Party B (an agent of Party C), you need two contracts for that. ( 1 party cannot have two capacities)

• Lord Dunedin says that even if we were to accept that Dew was acting as an agent of Dunalop (which gave him an action to sue) there is no consideration flowing from Dunalop here. They haven’t promised anything.


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o Dunlop did not give anything to Selfridge here (Selfridge made a promise to Dunlop to only sell at a certain price but it was gratuitous because Dunlop gave no consideration in return, since Selfridge got the tires from Dew!)

Hunt: • This case is quite analogous to the previous case. • There is benefit to Dunalop (like the son) • Privity is independent of everything else and is required. Look at page 278.

Beswick v Beswick court of appeal – Adminstratrix step into the shoes of the deceased and therefore can sue for specific performance of promises made in contracts with the deceased person. Facts:

• Old Peter Beswick ran a business with his nephew. • Peter Beswick was getting old so he gave the business to his nephew with the

caveat that he pay him a $6 per month and once he died to pay his widow $5 per month.

• Peter died and the nephew refused to give the widow money. • The widow sued.

Issues: • Does the widow have a right to sue?

Ratio: • Executors of wills can sue for specific performance of promises made in

contracts with the deceased person • Analysis • Respondent has no right to sue but she has a right as administratrix of her

husband’s estate to require the appellant to perform his obligation under the agreement.

• It would be unfair otherwise because it would • mean that he has not paid the rightful price for the business. • Specific performance ordered.

Hunt: • House of Lords reverses the third party rule brought by Denning. • Maintains the adminstraterix rule though.

Exceptions to Privity:

London Drugs LTD v. Kuehne & Nagel International LTD. test for exception of Privity + shield not sword. Facts:


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• London drugs creates a contract with Kuehne and Nagel international for the storage of a transformer.

• The Storage company has a limited liability clause. • The employers of the storage company damage the transformer • London Drugs sues them directly for the $33K in damages • They want to benefit from the liability clause.

Issues: • Can the respondents obtain the benefit of the limitation of liability contained

in the contract between their employer and London Drugs? Ratio:

• An employee can obtain the benefit of limitation of liability from a contract between their employer and another company if the following requirements are satisfied:

o The limitation of liability clause must, either expressly or impliedly, extend its benefits to the employees seeking to rely on it and. (intention to extend benefit must be made clear)

§ What is implied? – we have an example of implied extension of rights here in this case.

o The employees seeking benefit of the limitation of liability clause must have been acting in the course of their employment and must have been performing the very services provided for in the contract between their employer and the plaintiff.

Analysis: • Appellants:

o Rely on the doctrine of privity which states that a party who is not party to a contract cannot incur a benefit or a detriment to it.

o They argue that contractual protection can be extended to non-‐contracting parties only in limited circumstances, where the facts support a finding of agency or trust (Beswick v Beswick)

§ Why? Because as we learned in the previous cases, there are issues with consideration and the intention to create legal obligations.

• Respondent’s argue for a relaxation of the doctrine of privity of contract as it applies to this case:

o Its completely out of step in commercial reality. o With the expectations of the parties and with the way in which the

parties allocated the risk of damages or loss. • Therefore they argue that employees should benefit from their employers

contractual limitations of liability when: o There is a contractual limitation of liability between their employer

and another party o A loss occurs during the employer’s performance of its contractual

obligations to that third party


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o The employees are acting in the course of their employment when the loss occurs.

Holding: • The respondent’s were third party beneficiaries to the limitation of liability

clause and may benefit from the clause, notwithstanding, that they are not a signing party to the contract.

• Agree that this goes against privity. • This is a factual opportunity in which the court must reconsider the scope of

this doctrine and limit its application. o WHY? Commercial Reality and Common Sense.

• Privity does not respect allocations and assumptions of risk made by the parties to the contract and it ignores the practical realities of insurance coverage.

o Permits one party to make a unilateral modifications to the contract by circumventing its provisions and the express or implied intention of the parties.

• It is inconsistent with the reasonable expectation of all the parties to the transactions, including the third party beneficiary.

• The doctrine also creates uncertainty in the law. • Say that any major reforms to the rule denying third parties the right to

enforce contractual provisions made for their benefit must come from legislature.

o They are not going to get rid of privity all together though. • They will make changes to common law if it represents emerging needs and

values of society. • There are gaps between the contract theory and commercial realities. (While

the contract theory, and in general privity, looks conceptually attractive/pure, it is blind to reality)

• Common law recognizes certain exceptions to the doctrine, such as agency and trust, which enable courts in appropriate circumstances, to arrive at results which conform with the true intentions of the contracting parties and commercial reality.

o But the availability of these exceptions does not always correspond with their need.

o Since exceptions already exist, then this court can expand on them. • Why it should be accepted:

o No worries of double recovery or floodgates of litigation. o There is no concern that it would be unjust to allow a party to sue on a

contract when he or she cannot be sued on it. • This is not the right for the third party beneficiary to SUE but rather the right

of the third party beneficiary to be protected under a limitation clause. • Employees will have the prime responsibilities related to the performance of

the obligations which arise under the contract.


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• Employees, most of the time, are the ones performing the contractual obligations so it makes no sense to not have them under the protection of the limited liability claim.

• The nature and scope of the limitation of liability clause in such a case coincides essentially with the nature and scope of the contractual obligations performed by the third party beneficiaries.

• Privity in this case allowed the appellant to circumvent the liability clause by just suing the employees.

• There is an identity of interest between the respondents and Kuehne & Nagel as far as performance of the latter’s contractual obligations is concerned.

• The appellant knew and consented to the limitation of liability and KNEW that the employees would be the ones who would be dealing with the performance of the contractual obligations so it seems as though they are trying to unfairly circumvent the existence of the liability clause. LD knowing was an important factor.

• Not saying that employees are parties in their employers contracts in the level where they can sue for breach.

• Kind of continuing the approach denning began in regards to third parties with interest.

• Could we see an instance when the employer doesn’t want the employee to benefit from the liability clause?

Hunt: • Trust and agency are not exceptions to privity, it’s a finding of privity. But

don’t worry about this. • This case is a TRUE exception to privity of contract. In this situation the

third party is a stranger to the contract. • Party 1 of the test in dealing with intent

o LD knows that the employees will be handling the stuff o Identity of interest: there’s such a close identity between the

employer and employee. It makes no sense to separate the two. You know that KN cannot perform this contract w/o their employees.

o Commercial reality of the situation. (read my notes, I already have this point up there somewhere).

• Part 2: o Easily met. On an exam be weary of this. If they are doing something

not work related and damage the device then they do not get covered. o This is used as a SHIELD not a SWORD. Third party cant SUE or be

SUED just get to use this as a shield.

Edgeworth Construction v. N.D Lea & Associates + Identity of Interest Facts:

• Edgeworth construction creates a bid to work on a highway for the province


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• Uses N.D Lea engineering company to create the bid • Edgowrth wins the bid and the bid was totally off, causing them to lose

money on it • They sued the engineers • The Engineers said that the Ministry’s exclusion clause should apply to them.

Issues: • Can the Engineers rely on the Minister’s exemption clause to avoid liability?

Ratio: • A 3rd party can benefit from an exclusion clause when they are not directly

in the contract only when they are expected to do the work, and they don’t have the power to change or enact the contract them selves.

Analysis: • Court stated that the exclusion clause does not extend to the engineering

group because it was not expressly stated. • The court also says that the plaintiff relied (to their detriment) on the

engineer’s plans. • They distinguish this case from London Drugs saying that the engineers

could have taken measures to protect themselves from the liability in question. They could have placed a disclaimer of responsibility on design documents.

o They could have refused to agree to provide design without outgoing supervision.

o They could have gotten insurance o In essence they were not powerless.

• Apply the 2 part London Drugs Test: • 1) limitation of liability clause must extend to the 3 party – TEST FAILS HERE

o expressly stated in cl.42 that the protection was intended for the benefit of the province alone, not the engineering firms

o the engineering firm could have taken measures to protect itself from liability (disclaimer of responsibility) opportunity to protect oneself -‐-‐‐ exam because it fails the first part of the test we don’t even need the 2nd part of the test (was it in the scope of employment)

Hunt • Government cant be sued because of a non-‐reliance clause. • Engineers argued that there is a closeness of interest. • Engineers says that the parties wanted to extend this benefit to us.

o London Drugs is extinguished. • Part 1

o Very obviously not expressly said to include o Implied: they don’t have the same identity of interest. That’s very

different than when you don’t. § Why is there no identity of interest?:


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• They are not employees, they are independent contractors. This matters because of the independence of the contracting firm.

o They would have insured themselves (its not illogical to think they wouldn’t).

o The one off nature of producing a document, than just showing up and doing a bunch of tasks. They are professional society, they have their own standards).

Fraser River Pile & Dredge LTD v. Can-‐Dive Services. (Test in London Drugs applies, not only in employer employee relationships. It extends to external parties ) + Crystallization Facts:

• Boat owned by Fraser River sank while being chartered by Can Dive. • Insurance company had the right to step into the show of the insured and sue

the wrongdoer. • Contract between the insurance company and Fraser River Pile had a

subrogation against any charterer though. Issues:

• Is Can Dive protected under the subrogation clause? Ratio:

• Test in London Drugs applies, not only in employer employee relationships. It extends to external parties

Analysis: • Did not want to limit the application of the principled approached reached in

London Drugs to situations involving only an employer-‐employee relationship.

• Its okay to extend the principle on this appeal. • Must look at the intention of the contracting parties.

o Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision – Yes, it included the word Charterer, which the defendant is one.

o Are the activities performed by the third party seeking to reply on the contractual provisions the very activities contemplated as coming within the scope of the contract in general. Yes

• Court says that this is even a stronger case than that of London Drugs because it expressly states that charterers are exempt.

Hunt: • After Edgworth, the difference between LD and Edgworth, fundamental

difference had to do with the status of the party. • Was seen as an employee exception.


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• We go to this case tells us that this is NOT the case, we intended to create a general exceptions.

• The insurance company can’t enforce that subrogration clause against charters (commercial realities, to look more attractive).

• Step 1: o Yes, expressly said

• Step 2: o Yes, this happened while they were chartering when the troubles

happened. • Crystallization

o The boat sinks, the damage occurs and fraser river goes and talks to his insurances company.

o Asked to waive the subrogation clause (and Fraiser does it) § Wanted to take away this benefit that flows to CanDive

o They should be allowed to change things anytime they want. § Generally they can, they are not hostage to a third party, but in

this particular case they can’t because the problem has occurred. Once a benefit has turned into a right in favor of the third part, the two parties can no longer take it away.

§ Before it crystalizes its something else. Inchoate right (undeveloped right) and crystalized right.

§ When the right becomes a actual benefit it crystalizes. • When does that happen?

o In this context it will be an actual benefit when it’s a defense to a tort action.

o The cause of action must already be started. The difficulty is that this isn’t what happened in this case. It seems that the right crystalized the moment the boat sank, once a potential cause of action materialized.