LAW 108A | private law: contracts - LAW 108A Outline... · 2013. 9. 11. · LAW 108A | private law:...

LAW 108A | private law: contracts

final outline | 2012-2013

John Bullock

Private Law: Contracts

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TABLE OF CONTENTS

Interests Protected & Consequences of Contract ......................................................... 9 Remedies ................................................................................................................................................................................ 9 Damages .................................................................................................................................................................................. 9

Kinds of Promises Legally Enforced ............................................................................ 10 Offer & Acceptance ........................................................................................................................................................... 10 Formalisation & Certainty ............................................................................................................................................. 11 BC Sale of Goods Act – Ascertainment of Price ................................................................................................................................................... 12 Correspondence ................................................................................................................................................................ 13 BC Electronic Transactions Act .................................................................................................................................................................................. 13 Consideration ..................................................................................................................................................................... 14 Two Basic Legal Rules/Ways to Enter into Contract ........................................................................................................................................ 14 What is Consideration? .................................................................................................................................................................................................. 14 Going Transaction Adjustments (GTAs): ............................................................................................................................................................... 15 Debt Settlements & BC Law and Equity Act ......................................................................................................................................................... 16 Charitable Pledges ........................................................................................................................................................................................................... 16 Cases to Refer to: .............................................................................................................................................................................................................. 16 Intention ............................................................................................................................................................................... 16 Non-‐Bargain Promises .................................................................................................................................................... 17 Past Consideration ........................................................................................................................................................... 18 Reliance & Estoppel ......................................................................................................................................................... 18 Unilateral Contracts ......................................................................................................................................................... 18 Government Programmes ............................................................................................................................................................................................ 19 Early Cancellation of Unilateral Contracts ............................................................................................................................................................ 19

Contracts & Third Parties ........................................................................................... 20 Third-‐Party Beneficiaries .............................................................................................................................................. 20 Application of Exclusion Clauses to Third Parties (Eurymedon) ................................................................................................................ 20 Subrogation Rights .......................................................................................................................................................................................................... 20 Limitation of Liability Clause ...................................................................................................................................................................................... 20 Mistaken Identity – Void & Voidable Contracts ................................................................................................... 21 Non Est Factum – Waldron Only ................................................................................................................................ 21

Contract Interpretation .............................................................................................. 22 The Parol Evidence Rule ................................................................................................................................................ 22 Clauses Excluding Liability ........................................................................................................................................... 23 Misrepresentations & The Relationship between Contract & Tort ............................................................. 23

The Residual Power of the Court in Contract Enforcement ......................................... 24 Unconscionability, Undue Influence & Duress ..................................................................................................... 24 Trebilcock Excerpt ........................................................................................................................................................................................................... 24 Leff Excerpt ......................................................................................................................................................................................................................... 24 Unconscionability ............................................................................................................................................................................................................ 25 Undue Influence ................................................................................................................................................................................................................ 25 Spousal Guarantors ......................................................................................................................................................................................................... 26 Duress ................................................................................................................................................................................................................................... 26 Penalties & Forfeitures ................................................................................................................................................... 27 Illegality ................................................................................................................................................................................ 28 Common Law Illegality .................................................................................................................................................................................................. 28 Statutory Illegality – Waldron Only ......................................................................................................................................................................... 29 Mitigation Consequences of Illegality – Waldron Only .................................................................................................................................... 29


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Mistakes About… ....................................................................................................... 30 Mistakes About Contractual Terms ........................................................................................................................... 30 Mistakes in Assumptions ............................................................................................................................................... 31 Equitable Mistake ............................................................................................................................................................................................................ 31 Contract ‘A’ Situation ...................................................................................................................................................................................................... 32 Rectification ........................................................................................................................................................................................................................ 32 Mistake as to Future -‐ Frustration ............................................................................................................................. 32

Remedies for Breach of Contract ................................................................................ 33 The Interests Protected .................................................................................................................................................. 33 Restitution ........................................................................................................................................................................................................................... 33 Reliance ................................................................................................................................................................................................................................ 33 Expectation – Normal Award for Breach of Contract ....................................................................................................................................... 33 Special Problems in Measurement ............................................................................................................................ 34 Measuring Damages ........................................................................................................................................................................................................ 34 Lost Volume ........................................................................................................................................................................................................................ 34 Loss of Profit ...................................................................................................................................................................................................................... 34 Intangible Injuries & Punitive Damages ................................................................................................................. 34 Remoteness ......................................................................................................................................................................... 35 Mitigation ............................................................................................................................................................................. 36

Cases ......................................................................................................................... 38 Damages ................................................................................................................................................................. 38 Wertheim v. Chicoutimi Pulp Company (1911 UK) ...................................................................................................... 38 Precedent for expectancy ....................................................................................................................................................................................................... 38

Hawkins v. McGee (1929 USA) ............................................................................................................................................... 38 Surgery leads to a “hairy hand” and awarded expectation damages ................................................................................................................. 38

Specific Performance ......................................................................................................................................... 38 Falcke v. Gray (1859 UK) .......................................................................................................................................................... 38 One of the leading cases on specific performance ....................................................................................................................................................... 38

Warner Bros. Pictures Incorporated v. Nelson (1937 UK) ........................................................................................ 38 Injunction case, Bette Davis was in 52-‐week exclusive contract, breached it ................................................................................................. 38

Offer & Acceptance .............................................................................................................................................. 39 Denton v. Great Northern Railway Company (1865 UK) ........................................................................................... 39 Said there was a train, there wasn’t, but kept saying there was .......................................................................................................................... 39

Johnston Brothers v. Rogers Brothers (1899 ONCA) .................................................................................................... 39 Bakers want to buy flour; was initial correspondence an offer? ........................................................................................................................... 39

Lefkowitz v. Great Minneapolis Surplus Store (1957 USA) ....................................................................................... 39 An advertisement can be an offer, normally “invitation to treat” ........................................................................................................................ 39

Scammell and Nephew, Limited v. Ouston (1941 UK) ................................................................................................. 40 Trading a van, rare case where court cannot find some way to make contract work ................................................................................ 40

Durham Tees Valley Airport Ltd. v. BMI Baby (2010 UK) .......................................................................................... 40 BMI backed out but courts couldn’t determine contract, but knew what it wasn’t ..................................................................................... 40

Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd. (1953 UK) ................... 40 Determining where the sale of goods occured .............................................................................................................................................................. 40

Manchester Diocesan Council for Education v. Commerical & General Investments Ltd. (1969 UK) .... 41 Particular acceptance can be waived, if method is not only way to accept ..................................................................................................... 41

Larkin v. Gardiner (1895 ONSC) ........................................................................................................................................... 41 Acceptance must be communicated -‐ agreement to buy was signed but no contract ................................................................................. 41

Dickinson v. Dodds (1876 UK) ................................................................................................................................................ 41 Revocation may be effective when offeree learns about it indirectly ................................................................................................................. 41

Eliason v. Henshaw (1819 USA) ............................................................................................................................................ 42


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Acceptance needs to correspond to offer, wanted to buy some flour .................................................................................................................. 42 Butler Machine Tool Co. Ltd. v. Ex-‐Cell-‐O Corporation (England) Ltd. (1979 UK) ......................................... 42 Battle of the forms, wanted to sell “on our terms only” ............................................................................................................................................ 42

M.J.B. Enterprises v. Defence Construction (1951) (1999 SCC) ............................................................................... 42 Non-‐compliant bidder was chosen, sued for profits they would have made .................................................................................................... 42

Formalisation & Certainty ................................................................................................................................ 43 May and Butcher, Limited v. The King (1929 UK) ......................................................................................................... 43 Wanted some surplus “tentage” as it became available ........................................................................................................................................... 43

W.N. Hillas and Co., Limited v. Arcos, Limited (1932 UK) .......................................................................................... 43 Contrast to May and Butcher, commercial setting requires flexibility of terms ............................................................................................ 43

Foley v. Classique Coaches, Limited (1934 UK) .............................................................................................................. 43 Partial execution of Contract works towards enforceability, even with no set price .................................................................................. 43

Walford v. Miles (1992 Australia) ........................................................................................................................................ 44 Australian case showing that an agreement to negotiate is not a contract .................................................................................................... 44

Empress Towers v. Bank of Nova Scotia (1990 BCCA) ................................................................................................ 44 Court goes far to determine a difficult to enforce contract, rental property .................................................................................................. 44

Correspondence ................................................................................................................................................... 44 Henthorn v. Fraser (1892 UK) ............................................................................................................................................... 44 Postal acceptance rule adopted, acceptance sent before revocation received ............................................................................................... 44

Byrne & Co. v. Leon Van Tienhoven & Co. (1880 UK) ................................................................................................... 45 For business efficacy, postal acceptance rule doesn’t apply for revokation .................................................................................................... 45

Holwell Securities Ltd. v. Hughes (1974 UK) ................................................................................................................... 45 Another exception to postal acception rule, vendor asked for notice in writing ........................................................................................... 45

Eastern Power Ltd. v. Azienda Comunale Energia & Ambiente (1999 ONCA) .................................................. 45 Postal acceptance rule does not apply to other forms of communication ........................................................................................................ 45

Consideration ....................................................................................................................................................... 45 White (Executor) v. William Bluett (1853 UK) ............................................................................................................... 45 Dad would forgive son’s debt if he would stop complaining ................................................................................................................................... 45

Hamer v. Sidway (1891 USA) ................................................................................................................................................. 46 Uncle Promised Nephew money if he would stop drinking, smoking, west-‐coasting ................................................................................... 46

Eleanor Thomas v. Benjamin Thomas (1842 UK) ......................................................................................................... 46 Husband wanted to leave his house to his widow, died, rent for £1 a year ...................................................................................................... 46

The Great Northern Railway Company v. Witham (1873 UK) ................................................................................ 46 Building a railway and need to secure source of supplies, supplier wants to stop ....................................................................................... 46

Tobias v. Dick and T. Eaton Co. (1937 MBCA) ................................................................................................................ 47 Grain grinding machine inventor grants exclusive right to market product .................................................................................................. 47

Wood v. Lucy, Lady Duff-‐Gordon (1917 USA) ................................................................................................................. 47 Lady grants exclusive selling rights to put her name on fashions, then backs out ....................................................................................... 47

Harris v. Watson (1791 UK) .................................................................................................................................................... 48 Sailor did extra work because ship was in danger, with promise of extra pay .............................................................................................. 48

Stilk v. Myrick (1809 UK) ......................................................................................................................................................... 48 Two seamen jumped ship, captain promised to divide their wages amongst the rest ................................................................................ 48

Gilbert Steel Ltd. v. University Construction Ltd. (1976 ONCA) .............................................................................. 48 Price for supply of steel went up after 2 of 3 agreed upon buildings were done ........................................................................................... 48

Williams v. Roffey Bros. Ltd. (1991 UK) ............................................................................................................................. 48 Subcontracted carpentry, ran out of funds, asked for more money .................................................................................................................... 48

Greater Fredericton Airport Authority v. NAV Canada (2008 NBCA) .................................................................. 49 Parties to an agreement, had terms governing capital expenditures, landing system ............................................................................... 49

River Wind Ventures Ltd. v. British Columbia (2011 BCSC) ..................................................................................... 49 Adjustments/modifications to on-‐going contracts should be enforceable ....................................................................................................... 49

Foakes v. Beer (1884 UK) ......................................................................................................................................................... 49 Partial payment of a debt, paid in installments ........................................................................................................................................................... 49

Fairgrief v. Ellis (1935 BCSC) ................................................................................................................................................. 50


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Retired guy asks friends to do housekeeping and he would leave house to them ......................................................................................... 50 Dalhousie College v. Boutilier Estate (1934 SCC) .......................................................................................................... 50 Made pledge on a form to college to maintain and improve teaching, binding? ........................................................................................... 50

Intention ................................................................................................................................................................. 50 Jones v. Padavatton (1969 UK) .............................................................................................................................................. 50 Mother breached a contract to support daughter if she moved and studied .................................................................................................. 50

Rose and Frank Company v. J.R. Crompton & Brothers, Limited (1923 UK) ...................................................... 51 Agreement was specifically stated not to be formal or legal .................................................................................................................................. 51

Past Consideration .............................................................................................................................................. 51 Mills v. Wyman (1825 USA) ..................................................................................................................................................... 51 Son was travelling world, got sick, man took care of him – then he died anyway ........................................................................................ 51

Lampleigh v. Brathwait (1615 UK) ..................................................................................................................................... 51 Exception to past consideration rule – killed a guy, pardoned, promised to pay .......................................................................................... 51

Roscorla v. Thomas (1842 UK) .............................................................................................................................................. 51 Bought a horse, subsequently told it was sound and viceless ................................................................................................................................. 51

Webb v. McGallan (1935 USA) ............................................................................................................................................... 52 Implied request and motive as consideration – not followed in Canada ........................................................................................................... 52

Reliance & Estoppel ............................................................................................................................................ 52 Hughes v. Metropolitan Railway Co. (1877 UK) ............................................................................................................. 52 First known instance of Promissory Estoppel, entitled to compel to repair building .................................................................................. 52

Central London Property Trust Ltd. v. High Trees House Ltd. (1947 UK) .......................................................... 52 Basis of promissory estoppel, had a lease on a block of flats in London before war .................................................................................... 52

Combe v. Combe (1951 UK) ..................................................................................................................................................... 53 Husband promised wife £100/yr, didn’t pay, wife sued ~6 years later .............................................................................................................. 53

Robertson v. Minister of Pensions (1949 UK) .................................................................................................................. 53 Government said no medical evidence required for pension, estopped from reneging .............................................................................. 53

John Burrows Ltd. v. Subsurface Surveys Ltd. (1968 SCC) ......................................................................................... 54 Business was sold, payment was to be over time, form of promissory note ..................................................................................................... 54

Owen Sound Public Library Board v. Mial Developments Ltd. (1979 ONCA) .................................................... 54 Construction contract, needed certificate for payment, wanted further seal ................................................................................................. 54

D. & C. Builders, Ltd. v. Rees (1965 UK) .............................................................................................................................. 55 Defendant refused to pay for services, plaintiff accepted less just to survive .................................................................................................. 55

N.M. v. A.T.A. (2003 BCCA) ....................................................................................................................................................... 55 Came to Vancouver for marriage, broke up, sued for reliance .............................................................................................................................. 55

Unilateral Contracts ............................................................................................................................................ 55 Williams v. Carwardine (1833 UK) ...................................................................................................................................... 56 Going against strict consensus ad idem approach, witness to a murder sought reward ........................................................................... 56

Carlill v. Carbolic Smoke Ball Company (1893 UK) ...................................................................................................... 56 Performance of a condition is sufficient, notification unnecessary ..................................................................................................................... 56

Dale v. Manitoba (1995 MBCA) ............................................................................................................................................. 56 Province offers program to help university students, tries to cancel it part way .......................................................................................... 56

Grant v. Province of NEw Brunswick (1973 NBCA) ...................................................................................................... 57 New Brunswick potato subsidy program, province then refused to pay ........................................................................................................... 57

Errington v. Errington (1952 UK) ........................................................................................................................................ 57 Father bought house for kids, estate tried to take it back – finding second contract ................................................................................. 57

Dawson v. Helicopter Exploration Co. Ltd. (1955 SCC) ............................................................................................... 57 Construing offer as bilateral contract to avoid flagpole problem ........................................................................................................................ 57

Third-‐Party Beneficiaries ................................................................................................................................. 58 Tweddle v. Atkinson (1861 UK) ............................................................................................................................................. 58 Fathers made mutual promises for wedding, son and daughter gave no consideration ........................................................................... 58

Beswick v. Beswick (1966 UK) ............................................................................................................................................... 58 Nephew buys business and promises to pay amount to uncle’s widow, then doesn’t .................................................................................. 58


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Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915 UK) ........................................................................ 59 Discount on tire orders had a price maintenance clause for a minimum price ............................................................................................. 59

The Eurymedon – New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd (1975 UK) ................. 59 Extension of liability protection to 3rd parties when allowed by contractual term .................................................................................... 59

London Drugs Ltd. v. Kuehne & Nagel International Ltd. (1992 SCC) ................................................................. 60 Extension of contractual limitation to employees read in as implied term ..................................................................................................... 60

Fraser River Pile and Dredge Ltd. v. Can-‐Dive Services Ltd. (1999 SCC) ............................................................. 60 Broader exception than London Drugs – Marine Insurer, no subrogation clause ........................................................................................ 60

Mistaken Identity – Void & Voidable Contracts ......................................................................................... 61 Phillips v. Brooks (1910 UK) ................................................................................................................................................... 61 Misrepresentation of identity alone not enough to void contract ........................................................................................................................ 61

Ingram v. Little (1961 UK) ...................................................................................................................................................... 61 When fraudulent identity relied upon to induce contract, it may be void ........................................................................................................ 61

Lewis v. Averay (1972 UK) ....................................................................................................................................................... 62 Law finally settled -‐ for in person deals, rebuttable presumption of contract ................................................................................................ 62

Shogun Finance v. Hudson (2003 UK) ................................................................................................................................ 62 For non face-‐to-‐face deals presumption is intent was not contract with fraudster ..................................................................................... 62

Non Est Factum ..................................................................................................................................................... 62 Saunders v. Anglia Building Society (Gallie v. Lee) (1971 UK) ................................................................................ 62 Elderly woman transfers home to nephew’s friend thinking nephew – transfer good ............................................................................... 62

Marvco Color Research Ltd. v. Harris et al. (1982 SCC) .............................................................................................. 62 Family tricked by daughter’s boyfriend – innocent plaintiff is protected ......................................................................................................... 63

The Parol Evidence Rule ................................................................................................................................... 63 Prenn v. Simmonds (1971 UK) ............................................................................................................................................... 63 Evidence from negotiations not admissible to interpret terms of the contract ............................................................................................. 63

Hawrish v. Bank of Montreal (1969 SCC) .......................................................................................................................... 63 Oral evidence of collateral contract not admissible if contradicts written ...................................................................................................... 63

Tilden Rent-‐A-‐Car Co. v. Clendenning (1978 ONCA) .................................................................................................... 64 Even in signed contracts attention must be drawn to extraordinary terms ................................................................................................... 64

Gallen v. Allstate Grain Co. Ltd. (1984 BCCA) .................................................................................................................. 64 Exceptions to the parol evidence rule – the court stretching to protect reliance ......................................................................................... 64

Clauses Excluding Liability ............................................................................................................................... 65 Photo Production Ltd. v. Securicor (1980 UK) ................................................................................................................ 65 Nightwatchman burns factory – liability limitation applied because they had agreed ............................................................................. 65

Hunter Engineering Co. Inc. et al. v. Syncrude et al. (1989 SCC) ............................................................................ 65 No fundamental breach – limitation applies even if the merchandise is CRAP .............................................................................................. 65

Delaney v. Cascase River Holidays Ltd. (1983 BCCA) .................................................................................................. 66 White water river rafting, doesn’t read waiver, no consideration anyway ..................................................................................................... 66

Tercon Contractors Ltd. v. British Columbia (Ministry of Transportation and Highways) (2010 SCC) 66 Decided the modern rule – BC accepted ineligible bid during RFP process ..................................................................................................... 66

Misrepresentations & the Relationship Between Contract & Tort ..................................................... 66 Heilbut, Symons & Co. v. Buckleton (1913 UK) ............................................................................................................... 66 “We’re bringing it out” – not held as a guarantee or an innocent misrepresentation ................................................................................ 66

Bentley (Dick) Productions Ltd. v. Smith (Harold) (Motors) Ltd. (1965 UK) .................................................... 67 Denning decides a warranty exists when a statement was made to induce a contract ............................................................................. 67

Redgrave v. Hurd (1881 UK) ................................................................................................................................................... 68 Man buys law practice misrepresented as being worth something -‐ rescission ............................................................................................. 68

Leaf v. International Galleries (1950 UK) ......................................................................................................................... 68 Barred due to passage of time-‐however painter’s identity was warranty/condition ................................................................................. 68

Murray v. Sperry Rand Corporation (1979 ONHC) ....................................................................................................... 69 Rep by manufacturer creates warranty though plaintiff didn’t contract with them .................................................................................. 69

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. (1964 UK) ................................................................................... 69


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idea of negligent misstatement of C, inducing A into contract with B, making C liable ............................................................................. 69 Esso Petroleum Co. Ltd. v. Mardon (1976 UK) ................................................................................................................ 69 Estimate not a guarantee of profits, reliance damages because estimate was careless ............................................................................ 69

Unconscionability, Undue Influence & Duress .......................................................................................... 70 Marshall v. Canada Permanent Trust Co. (1968 ABSC) .............................................................................................. 70 Agreement unconscionable due to vulnerability whether or not it was apparent ....................................................................................... 70

Mundinger v. Mundinger (1968 ONCA) ............................................................................................................................. 70 Contract between husband and wife void due to unfairness and wife’s incapacity ..................................................................................... 70

Lloyds Bank Limited v. Bundy (1975 UK) ......................................................................................................................... 71 Poor Mr. Bundy mortgages farm for son – voidable due to unequal bargaining power ............................................................................ 71

Royal Bank of Scotland p.l.c. v. Etridge (No. 2) (2002 UK) ........................................................................................ 71 A wife providing a surety for husband’s debts and the rule of constructive notice ...................................................................................... 71

Pridmore v. Calvert (1975 BCSC) .......................................................................................................................................... 71 Release signed after accident voided due to gross unfairness and unequal footing .................................................................................... 71

Penalties & Forfeitures ...................................................................................................................................... 72 H.F. Clarke Ltd. v. Thermidaire Corp. Ltd. ......................................................................................................................... 72 Excessive penalty reduced in contract for sole distribution .................................................................................................................................... 72

Stockloser v. Johnson (1954 UK) ........................................................................................................................................... 72 Seemingly unfair clause allowing seizure of all goods on non-‐payment upheld ........................................................................................... 72

Common Law Illegality ...................................................................................................................................... 72 Holman v. Johnson (1775 UK) ................................................................................................................................................ 72 You can’t rely on a contract if you know the other party is using goods for crime ...................................................................................... 72

Shafron v. KRG Insurance Brokers (Western) Inc. (2009 SCC) ................................................................................ 73 Ambiguous restrictive covenant applying to metro Vancouver not upheld .................................................................................................... 73

Brissette Estate v. Westbury Life Insurance Co. (1992 SCC) ..................................................................................... 73 Husband kills wife and tries to claim her life insurance policy – srsly? ............................................................................................................. 73

Oldfied v. Transamerica Life Insurance Co. of canada (2002 SCC) ........................................................................ 74 However, if you die committing a crime your beneficiaries can collect ............................................................................................................. 74

Mistake About Contractual Terms ................................................................................................................. 74 Hobbs v. Esquimalt & Nanaimo Railway Company (1899 SCC) .............................................................................. 74 Interprets the meaning of land based on what a reasonable person would think ........................................................................................ 74

Raffles v. Wichelhaus (1864 UK) ........................................................................................................................................... 74 No contracts exist where two parties didn’t agree what ship contract referred to ..................................................................................... 75

Staiman Steel Ltd. v. Commercial & Home Buildings Ltd. (1976 ONHC) ............................................................ 75 “All the steel in the yard” taken to mean what the seller would have intended ............................................................................................. 75

Smith v. Hughes (1871 UK) ..................................................................................................................................................... 75 Mistake re: quality or characteristic – caveat emptor .............................................................................................................................................. 75

Mistake in Assumptions .................................................................................................................................... 76 Bell v. Lever Brothers Ltd. (1932 UK) ................................................................................................................................. 76 Deal to end employment not void just because they could have terminated with cause ........................................................................... 76

Solle v. Butcher (1950 UK) ....................................................................................................................................................... 77 Mistake about maximum rent that could be charged only made contract voidable ................................................................................... 77

Great Peace Shipping Ltd. v. Tsavliris Salvage (International) Ltd. (2002 UK) .............................................. 77 Mistake about proximity of ship not sufficiently fundamental for rescission ................................................................................................. 77

Miller Paving Limited v. B. Gottardo Construction Ltd. (2007 ONCA) ................................................................. 78 Great Peace not adopted in Canada – common mistake remains a possible remedy .................................................................................. 78

Sherwood v. Walker (1887 USA) ........................................................................................................................................... 78 Recovery where mistaken assumption goes to the essential nature of subject matter ............................................................................... 78

McRae v. Commonwealth Disposals Comm. (1951 Australia) ................................................................................. 78 Reliance interest only for a contract to salvage a non-‐existent ship .................................................................................................................. 78

R. v. Ron Engineering & Construction Eastern Ltd. (1981 SCC) .............................................................................. 79 Mistake bidding on a contract ............................................................................................................................................................................................. 79


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Frustration ............................................................................................................................................................. 80 Paradine v. Jane (1647 UK) ..................................................................................................................................................... 80 Have to keep paying lease even though invaders pushed defendant off farm ................................................................................................ 80

Taylor v. Caldwell (1863 UK) ................................................................................................................................................. 80 Since hall destroyed by events beyond either’s control contract is dissolved .................................................................................................. 80

Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975 ONCA) ............................................................... 80 Doctrine of impossibility to sale of land – ends when land can’t be developed .............................................................................................. 80

The Sea Angel – Edwinton Commercial Corp. v. Tsavliris Russ Ltd. (2007 UK) ............................................... 81 Ship ends up trapped in harbour – foreseeable risk so no impossibility ........................................................................................................... 81

The Interests Protected ..................................................................................................................................... 81 Wertheim v. Chicoutimi Pulp Company (1911 UK) ...................................................................................................... 81 Just sets out precedent for expectation damages ........................................................................................................................................................ 81

Bollenbeck v. Continental Casualty Company (1965 US) ........................................................................................... 81 Restitution damages when plaintiff kept paying insurance premiums after expiry .................................................................................... 81

Anglia Television v. Reed (1972 UK) ................................................................................................................................... 82 Reliance damages allowed when too difficult to calculate expectation ............................................................................................................ 82

Hawkins v. McGee (1929 USA) ............................................................................................................................................... 82 Hairy hands, wonder why? ..................................................................................................................................................................................................... 82

Special Problems in Measurement ................................................................................................................ 83 Carson v. Willitts (1930 ONCA) ............................................................................................................................................. 83 Can be different ways to calculate expected position – court chooses easy one ............................................................................................ 83

Groves v. John Wunder Co. (1939 USA) .............................................................................................................................. 83 How to calculate cost of levelling land – increase in value or cost of performance? ................................................................................... 83

Thompson (w.L.) Ltd. v. Robinson (Gunmakers) Ltd. (UK 1955) ............................................................................ 84 Car was sold, but delivery refused, car wouldn’t sell so defendants had to pay ............................................................................................. 84

Charter v. Sullivan (1957 UK) ................................................................................................................................................ 84 Reneged on deal to buy car, sold easily though ............................................................................................................................................................ 84

Injuries & Punitive Damages ........................................................................................................................... 85 Addis v. Gramophone Company Limited (1909 UK) ..................................................................................................... 85 Given six months notice, but essentially fired immediately ..................................................................................................................................... 85

Jarvis v. Swan Tours Ltd. (1973 UK) .................................................................................................................................... 85 Wanted an awesome vacation based on claims in brochure, ended up shitty ................................................................................................ 85

Fidler v. Sun Life Assurance Co. of Canada (2006 SCC) ............................................................................................... 85 Company doesn’t want to acknowledge liability for disability benefits ............................................................................................................ 85

Whiten v. Pilot Insurance Co. (2002 SCC) ......................................................................................................................... 86 House burned down and insurance company refused to pay the rest of policy ............................................................................................. 86

Remoteness ........................................................................................................................................................... 86 Hadley v. Baxendale (1854 UK) ............................................................................................................................................. 86 Delivery of steam engine part was delayed due to neglect ...................................................................................................................................... 86

Horne v. The Midland Railway Company (1873 UK) ................................................................................................... 87 Shoe manufacturer’s shipment was delayed, had to sell at a loss ........................................................................................................................ 87

Victoria Laundry Ltd. v. Newman Industries Ltd. (1949 UK) ................................................................................... 87 Late delivery of a boiler, couldn’t take a profitable contract ................................................................................................................................. 87

Munroe Equipment Sales Ltd. v. Canadian Forest Products Ltd. (1961 MBCA) ............................................... 87 Rented a tractor and it broke down, couldn’t remove wood .................................................................................................................................. 87

Scyrup v. Economy Tractor Parts Ltd. (1963 MBCA) ................................................................................................... 88 Received a faulty bulldozer part, caused a breach with other contract ............................................................................................................ 88

The Heron II -‐ Koufos v. C. Czarnikow, Ltd. (1969 UK) ................................................................................................ 89 Chartered a ship, was supposed to deliver sugar immediately on delivery ...................................................................................................... 89

The Achilleas -‐ Transfield Shipping Inc. v. Mercator Shipping Inc. (2009 UK) ................................................. 89 Rented a vessel, it was returned late, had to change price for next renter ...................................................................................................... 89

Mitigation ............................................................................................................................................................... 90


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Payzu Limited v. Saunders (1919 UK) ................................................................................................................................ 90 Silk dealer, small discount on credit sales ....................................................................................................................................................................... 90

White & Carter (Councils), Ltd. v. McGregor (1962 UK) ............................................................................................. 90 garbage bin advertisements, cancelled, didn’t want to pay .................................................................................................................................... 90

Finelli et al. v. Dee et al. (1968 ONCA) ................................................................................................................................ 91 Paving a driveway even though the contract had been repudiated .................................................................................................................... 91

Wroth v. Tyler (1974 UK) ......................................................................................................................................................... 91 Purchase a house but the seller’s wife registered a binding title, measure damages .................................................................................. 91


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INTERESTS PROTECTED & CONSEQUENCES OF CONTRACT

REMEDIES

Remedies reveal the interests that the law is designed to protect:

a) Equitable remedies -‐ normally the remedy for breach of contract is expectation damages, but in some cases courts will move toward a more equitable remedy… i) Injunction

(1) Negative order, can’t do something. (a) In cases of nuisance. (b) Courts will enforce a negative covenant so long as an injunction does not

amount to specific performance or effectively require the plaintiff to remain idle or starve – Warner Brothers v. Nelson

ii) Specific performance – Falcke v. Gray (1) Requires defendant to perform a specific act, usually what is stated in the contract.

(a) Contract was for a specific car à you get that car. (b) Restitution of specific property.

b) Substitutionary remedies i) Plaintiff suffered harm, so should receive a sum of money to make it right.

(1) Compensatory damages (2) Restitution for unjust enrichment (3) Punitive damages (4) Attorney’s fees

c) Constitutional remedies i) Can have government actions overturned if against the provisions of law. (Released from

jail, etc.)

DAMAGES

1) 4 General Types of Damages: a) Restitution (deals with unjust enrichment) – most important

i) Recovery of benefits that the defendant has received instead of plaintiff. ii) Contract breaker must return the value he has received from the other party.

b) Reliance i) Recovery of a loss or inconvenience suffered on basis of reliance. ii) Costs that have been incurred as a result of relying on the fulfilment of the contract.

c) Expectation – Hawkins v. McGee i) Not only a loss as a result of a promise, but litigant wants fulfilment of promise. ii) Best way to protect expectations is through specific performance. iii) If there’s no reliance or unjust restitution, expectation gives the promisee the value of

where he would have been had the promise been fulfilled. d) Punitive

i) Very rare in contract law, but not so in tort law. ii) Not based on protection of victim, but in the punishment of wrongdoing.


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KINDS OF PROMISES LEGALLY ENFORCED

OFFER & ACCEPTANCE

1) What is a contract? a) Not a thing, but a legal relationship:

i) Created by communication between people ii) Written document is simply evidence of a contract

b) A form of private ordering: i) Most important source of rights is a contract. ii) Multifaceted regulation of the rights and interactions that surround us everyday.

c) The basis of reasonable expectations about what we feel we are obliged to, or entitled to. d) An enforceable agreement.

i) The courts will enforce through the provision of some kind of legal remedy. e) Legal relations governing simultaneous and future exchange. f) A way to expand our options in the world:

i) By planning for the future instead of being limited by immediate exchange. ii) The ability to trade in the future through promises has social value.

g) An element of exchange: i) Socially valuable and therefore subject to legal enforcement. ii) Private individuals as free to enter into exchanges; freedom of contract. iii) Exchange is inherently good; maximises human welfare.

2) Contract law: a) Facilitates freedom of contract b) Provides a policy framework:

i) In determining whether a contract exists, courts need to establish: (1) That there was a reasonable reliance, (2) There were expectations arising out of the transaction/interaction,

(a) There must be an entitlement to assert these expectations, or it would be unfair surprise to enforce these expectations. (i) These considerations exist on a spectrum; must figure out where to draw

the line so as to determine a legal relationship. 3) Bargain Theory of Contract:

a) Builds on a core paradigm: you know there is a legally enforceable agreement that gives rise to enforceable reasonable expectations when there has been an offer, an acceptance, and a bargain or consideration. i) So long as an agreement has the three requirements, it is reasonable and there is no

element of unfair surprise. ii) Typically based on objective assessment of what a reasonable person would interpret

from the interaction. 4) How to turn an offer into a contract?

a) Offer becomes a contract only when it is accepted on its terms. Acceptance must mirror the offer.

b) Acceptance has to come while the offer is open. i) At least three ways in which offer can be terminated:

(1) Offer itself may stipulate a period in which offer is open, (2) Offer can be withdrawn,


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(3) Acceptance must be communicated; silence is not acceptance even when the offeror says silence is acceptance.

5) Tendering: a) Contract A and B – A begins in the Request for Proposals which sets out terms and

conditions for the bidding process (begins legal relationship), serves as both an invitation to treat and an offer (to enter into Contract B).

6) Examples: a) Offer provided in a railway timetable, accepted by customer arriving at station to purchase

ticket (only accepted here because railway could have re-‐printed/put a sign/etc) – Denton b) No contract exists until the offer and the acceptance match – Johnston Brothers c) Advertisements more commonly understood as invitation to treat – Lefkowitz

i) Invitation to treat is not an offer, rather an invitation to make an offer d) Offer is only made when goods are brought to counter to purchase, not when picked up

Pharmaceutical Society e) Acceptance must be communicated. – Larkin f) An exclusive offer to leave offer open is not legally binding. – Dickinson g) Offer can be revoked, indirect communication of revocation is effective even if promise is

stated to be irrevocable – Dickinson h) Acceptance must be sent using method specified in offer, acceptance does not trigger legal

consequences if it violates a term of the offer, even if this term does not seem immediately significant – Eliason

i) Last Shot Rule -‐ Contract is established as soon as the last of the forms is sent and received without objection being taken to it – Butler Machine Tool Co.

j) Request for Proposals is an offer of Contract A and invitation to treat for Contract B; tender is acceptance of contract A and offer of contract B; selection of bid is acceptance of contract B. – MJB Enterprises

FORMALISATION & CERTAINTY

1) Agreements are not enforceable if the terms are too uncertain: a) Obligations are assumed, not imposed b) Avoid unfair surprise c) “The courts will not make a contract for the parties”

2) Courts will strive to enforce agreements that are intended to be binding a) Business reality is that expression and foresight are imperfect b) Reliance and business efficacy c) “As long as an agreement is not being constructed by the court, to the surprise of the parties

… the courts should try to retain and give effect to the agreement…” (Lambert in Griffen v. Martens (1988), 27 BCLR 92d 152 (CA)

3) Summary: a) Courts will not create a contract for the parties; needs to be relative agreement between

parties so that there is no unfair surprise b) Courts will consider:

i) Did the parties think they had a binding agreement or were they really negotiating? ii) Have the parties acted on the agreement and treated it as binding (mutual expectation)? iii) Have the parties relied on the agreement to their detriment or received benefits under it

(reliance and unjust enrichment)?


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iv) Is there evidence, based on past conduct, or practices in the industry to show how the agreement is intended to be interpreted?

4) Three ways in which agreements may create uncertainty & examples: a) Incompleteness – ie, open terms, gaps

i) If price has not been explicitly stated, no price agreed upon, and no method for determining price in future contract is not valid – May and Butcher, Limited

ii) If price is missing but is generally well-‐understood, more familiar business setting, contract will be held (retreats and narrows from May and Butcher) – W.N. Hillas and Co., Limited

iii) Failure to act in good with will often motivate a court to find a contract (e.g. adhering to terms of contract for three years then deciding there isn’t one) -‐ Foley

b) Agreements to negotiate or agree – parties are aware something is missing, but still believe they have an agreement and agree to fill in the blanks as they go i) Agreeing to negotiate and no longer negotiate with a third party not binding – Walford ii) If specified that parties had to mutually agree on price, cannot be sure of terms without

that agreement – Empress Towers c) Ambiguity and vagueness – parties agree on terms/forms of words but they are misleading

or vague i) Item for sale must be reasonably specific – Lefkowitz ii) If agreement is too uncertain, non-‐binding – Scammell iii) If court cannot determine what contract means specifically, but knows exactly what it

doesn’t mean, can enforce minimum level of performance -‐ Durham Tees Valley Airport

BC SALE OF GOODS ACT – ASCERTAINMENT OF PRICE

12 (1) the price in a contract of sale may be a) set by the contract b) left to be agreed in the contract, or c) determined by the course of dealing between the parties

(2) if the price is not determined in accordance with subsection (1), the buyer must pay a reasonable price.

(3) what is a reasonable price is a question of fact dependent on the circumstances of each case

Note: Act was in effect at time of May v. Butcher. Why did it not apply?

• Facts do not align with 12(1)(b),(c) of 12(2): parties set no mechanism to agree on price. o Price was not determined in dealing between parties. o Parties had explicitly excluded implication that it is a reasonable price by stating that it

will be a price they agree on. ∴ the way the parties set the agreement precluded application of BC Sale of Goods Act.


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CORRESPONDENCE

• Postal Acceptance Rule a) Most important technological development to raise this issue b) Principle:

i) Do not have contract until offer and acceptance, and acceptance is not binding until communicated, but when parties are not face-‐to-‐face what counts as communication? (1) Moment of posting letter of acceptance = contract.

c) Reasons for this exception: i) Business efficacy; if no rule, would expose offeree to high risk:

(1) How long would they have to wait to know if they had a contract? ii) Not fair to offerors:

(1) Only applies in cases where post was the way the parties agreed they were going to communicate; therefore consistent with reasonable expectations.

(2) If offeror does not like the risk, they can simply choose to avoid this risk when drafting the contract.

iii) Postal acceptance therefore only applies where post is authorised way to communicate and nothing in offer that indicates the actual acceptance is required.

Note: Most standard form contracts/offers today explicitly exclude postal acceptance rule d) Rule does not apply in case of faxes:

i) Due to instantaneous communication. PAR is to protect offeree (reasonable expectations) but not necessary because offeror receives acceptance right away.

e) Other forms of electronic communication: i) Email now one of most common ways of entering into contracts; automated contracts

also common. ii) How do we apply traditional principles of offer and acceptance in this new context?

(1) Most jurisdictions have created a specific act of parliament to regulate electronic communication.

• Examples: a) Acceptance valid when posted, revocation of offer must be communicated and only

communicated once actually received – Henthorn b) Even if acceptance is sent after revocation, so long as acceptance is received before

revocation is there is a contract – Byrne c) Postal acceptance rule does not apply if its application “would produce manifest

inconvenience and absurdity” (also post was not specified) – Holwell Securities d) Postal acceptance rule does not apply for forms of instantaneous communication – Eastern

Power Ltd.

BC ELECTRONIC TRANSACTIONS ACT

• Digitised information assimilated to talking, etc. – held to be communication. • Contract may be formed by interaction between electronic agent and individual or solely

between electronic agents. o Contracts can be made with no human interaction.

• Electronic signature is anything that shows record of interaction, but signature not necessary for contract – simply proof of interaction.

• s. 15: Contracts can be created through computers, unless parties express otherwise.

LAW 108A | private law: contracts - LAW 108A Outline... · 2013. 9. 11. · LAW 108A | private law:...

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Transcript of LAW 108A | private law: contracts - LAW 108A Outline... · 2013. 9. 11. · LAW 108A | private law:...