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UNIVERSITY OF CALGARY LAW

Contracts CANS
1st Year, Fall 2012
Lindsay Amantea Fall, 2012

Contracts CANS

Fall, 2012

Contents
Framework .............................................................................................................................................. 5 Topics .................................................................................................................................................... 14 Essential Elements of a Contract ...................................................................................................... 14 Agreement .................................................................................................................................... 14 Offer .......................................................................................................................................... 14 Definition .............................................................................................................................. 15 Offer or Invitation to Treat ................................................................................................... 15 Auctions and Tenders ........................................................................................................... 16 Communication of Offer ........................................................................................................... 17 Acceptance ................................................................................................................................ 18 By Words or Contract............................................................................................................ 18 Silence as Acceptance ........................................................................................................... 18 Acceptance, Counter Offer and Request for Information .................................................... 18 Unilateral and Bilateral Contracts ......................................................................................... 19 Communication of Acceptance ................................................................................................. 19 Mode of Communication ...................................................................................................... 20 Time of Acceptance – Postal Rules ....................................................................................... 21 Termination of Offer ................................................................................................................. 21 Rejection ............................................................................................................................... 23 Revocation ............................................................................................................................ 23 Revocation of Unilateral Agreement .................................................................................... 23 Lapse of Time ........................................................................................................................ 24 Certainty.................................................................................................................................... 24 Ambiguous, Vague or Missing Terms.................................................................................... 27 Agreement to Negotiate ....................................................................................................... 27 Agreement with Formal Contract to Follow ......................................................................... 28 Conditional Agreements ........................................................................................................... 28 Condition Precedent to Existence or Performance .............................................................. 29 Parties’ Obligations ............................................................................................................... 30 Unilateral Waiver .................................................................................................................. 30 Intention to Create Legal Relations .............................................................................................. 31 Consideration and Reliance .......................................................................................................... 31 Definition of Consideration ....................................................................................................... 32 Past Consideration .................................................................................................................... 33 1

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Adequacy of Consideration ....................................................................................................... 33 Forbearance .............................................................................................................................. 33 Public Duty ................................................................................................................................ 33 Duty Owed to Third Party ......................................................................................................... 33 Duty Owed to Other Contracting Party .................................................................................... 33 Discharge of Duty by Part Performance ............................................................................... 33 Promises Under Seal ................................................................................................................. 33 Promissory Estoppel and Waiver .............................................................................................. 34 General.................................................................................................................................. 34 Requisite Promise ................................................................................................................. 34 Equitable Nature of Doctrine ................................................................................................ 34 Suspension or Extinguishment of Rights ............................................................................... 34 Variation of Existing or Creation of New Relationship.......................................................... 35 Tests ...................................................................................................................................................... 36 Charts ...................................................................................................................................................... 0 Case Briefs ............................................................................................................................................... 0 Canadian Dyers Assn. Ltd. v. Burton (1920), 47 O.L.R. 259 (HC) ........................................................ 4 Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256 (CA) ................................................................... 4 Pharmaceutical Society of GB v. Boots Cash Chemists (Southern)[1953] (CA) .................................. 4 R. v. Dawood, [1976] 1 W.W.R. 262 (Alta. CA).................................................................................... 4 R. v. Ron Engineering & Construction (Eastern) Ltd. (1981), (SCC)..................................................... 5 M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. (1999) (SCC) ......................................... 5 Williams v. Carwardine (1833), 110 E.R. 590 (KB) .............................................................................. 5 R. v. Clarke (1927), 40 C.L.R. 227 (Aus. HC)......................................................................................... 6 Blair v. Western Mutual Benefit Assn., [1972] 4 W.W.R. 284 (BCCA) ................................................ 6 St. John Tug Boat Co. v. Irving Refinery Ltd., [1964] S.C.R. 614 .......................................................... 6 Felthouse v. Bindley (1862), 142 E.R. 1037 (Ex. Ch.) .......................................................................... 7 Livingstone v. Evans, [1925] 4 D.L.R. 769 (Alta. SC) ............................................................................ 7 Butler Machine Tool Co. v. Ex-Cell-O Corp., [1979] 1 All E.R. 965 (CA) .............................................. 7 Tywood Industries v. St. Anne-Nackawic Pulp & Paper (1979), (Ont. HC).......................................... 8 Dawson v. Helicopter Exploration Co., [1955] 5 D.L.R. 404 (SCC)....................................................... 8 Eliason v. Henshaw (1819), 4 Wheat. 225 .......................................................................................... 8 Henthorn v. Fraser, [1892] 2 Ch. 27 (CA) ............................................................................................ 9 Holwell Securities v. Hughes, [1974] 1 All E.R. 161 (CA) ..................................................................... 9 Brinkibon Ltd. v. Stahag Stahl, etc., [1982] 1 All E.R. 293 (HL)............................................................ 9 2

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Dickinson v. Dodds (1876), 2 Ch. D. 463 (CA) ..................................................................................... 9 Petterson v. Pattberg, 161 N.E. 428 (N.Y. Ct. Apps. 1928) ............................................................... 10 Errington v. Errington and Woods, [1952] 1 K.B. 290 (CA) ............................................................... 10 Manchester DCE v. Commercial and General Inv. Ltd. [1969] .......................................................... 10 Barrick v. Clark, [1950] 4 D.L.R. 529 (SCC) ........................................................................................ 11 May and Butcher Ltd. v. The King, [1934] 2 K.B. 17 (HL) .................................................................. 11 Hillas and Co. Ltd. v. Arcos Ltd. [1932] All E.R. Rep. 494 (HL) ............................................................ 0 Foley v. Classique Coaches Ltd., [1934] 2 K.B. 1 (CA).......................................................................... 0 Wellington City Council v. Body Corporate 51702 (Wellington), [2002] (CA) .................................... 0 Empress Towers Ltd. v. Bank of Nova Scotia (1990), 73 (4th) 400 (BCCA) ......................................... 0 Mannpar Enterprises Ltd. v. Canada (1999), 67 B.C.L.R. (3d) 64 (CA) ................................................ 1 Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), (Ont. CA) ................................................. 1 Wiebe v. Bobsien, [1985+ 1 W.W.R. 644 (B.C.S.C.), aff’d *1986+ (BCCA) ............................................ 1 Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978), 85 D.L.R. (3d) 19 (SCC) .................................... 2 Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), (Ont. CA)............................................... 2 Turney v. Zhilka, [1959] S.C.R. 578...................................................................................................... 2 Beauchamp v. Beauchamp (1972), 32 D.L.R. (3d) 693 (Ont. CA) ........................................................ 2 Barnett v. Harrison, [1976] 2 S.C.R. 531 ............................................................................................. 3 Balfour v. Balfour, [1919] 2 K.B. 571 (CA) ........................................................................................... 3 Brantford General Hospital Foundation v. Marquis Estate (2003), (SCJ) ........................................... 3 Lampleigh v. Brathwait (1615), 80 E.R. 255 (KB) ................................................................................ 4 B. (D.C.) v. Arkin (1996), 138 D.L.R. (4th) 309 (Man. Q.B.), aff’d *1996+ (CA) ..................................... 4 Royal Bank of Canada v. Kiska, [1967] 2 O.R. 379 (CA) ....................................................................... 4 Stilk v. Myrick (1809), 170 E.R. 1168 (Nisi Prius) ................................................................................ 4 Gilbert Steel Ltd. v. University Construction Ltd. (1976), (CA) ........................................................... 5 Williams v. Roffey Bros. & Nicholls (Contractors) Ltd., [1990] (CA).................................................... 5 Greater Fredericton Airport Authority Inc. v. NAV Canada (2008), (NBCA) ....................................... 5 Foakes v. Beer (1884), 9 App. Cas. 605 (HL) ....................................................................................... 6 Re Selectmove Ltd., [1995] 1 W.L.R. 474 (CA) .................................................................................... 6 Judicature Act ..................................................................................................................................... 6 Royal Bank of Canada v. Kiska............................................................................................................. 6 Hughes v. Metropolitan Railway Co. (1877), 2 App. Cas. 439 (HL) ..................................................... 7 Central London Property Trust Ltd. v. High Trees House Ltd., [1947] 1 KB ........................................ 7 John Burrows Ltd. v. Subsurface Surveys Ltd. (1968), (SCC) ............................................................... 9 3

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D. & C. Builders Ltd. v. Rees .............................................................................................................. 11 Saskatchewan River Bungalows v. Maritime Life Assurance (1994), (SCC) ...................................... 12 International Knitwear Architects Inc. v. Kabob Investments(1995) (CA) ........................................ 13 The Post Chaser, [1982] 1 All E.R. 19 (QBD)...................................................................................... 14 Combe v. Combe, [1951] 2 K.B. 215 (CA) .......................................................................................... 16 Robichaud v. Caisse Populaire de Pokemouche Ltée. (1990), (NBCA).............................................. 17 Waltons Stores (Interstate) Pty. Ltd. v. Maher (1988), 62 A.L.J.R. 110 (HC)..................................... 18 M. (N.) v. A. (A.T.) (2003), 13 B.C.L.R. (4th) 73 (CA) .......................................................................... 20

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Framework
1. Is there Consideration? a. Definition of Consideration  Some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other b. Is it past consideration? i. To be valid past consideration it has to be requested from the other party (Lampley) c. Was there forbearance? i. To forbear you have to have a valid claim which is on reasonable ground, that could be executed (Arkin) ii. WHO ASKED YOU 2. If there is no Consideration look to Estoppel a. 5 points that are essential to prove promissory estoppel (High Trees) i. Existing Legal Relations (Combe v Combe) 1. However Walton Stores says you don’t need a pre-existing relationship just there to be something that is inequitable “PRETTY DAMN UNFAIR” ii. Clear Promise/Representation (Jon Burrows) iii. Reliance iv. Detriment (However El Nasr says that this element is not essential to invoke estoppel) 1. Can have prejudice and not detriment (Post Chaser)  further erosion of detriment v. Need to have equitable reason for employing the doctrine (DC Builders, Walton) 3. Has the party waived there right to enforce their legal rights? a. 4 point test for waiver (Sask River) i. Full knowledge of rights – you don’t waive rights that you don’t know of ii. Unequivocal and conscious intent to abandon those rights iii. Reliance on the waiver (did the other party rely on the waiver) iv. Was the waiver retracted with reasonable notice? 1. Waiver can only be retracted in an ongoing contractual relationship 4. Are there any Privity Issues in the Contract a. As a general rule if you don’t have privity you cannot sue (Beswick, Wimpey) b. 7 ways around privity: i. Statute ii. Specific Performance iii. Trust 1. Trustee is obligated to protect the interest of the 3rd party whereas an agent is only to act within the authority given to him iv. Agency (New Zealand) 1. Test for agency relationship a. Contract makes clear that the stevedore is intended to be protected by exclusion provisions. b. Contract makes clear that the carrier acts on its own behalf and that of the stevedore i.e. contracting as agent. Carrier must have authority of the stevedore to contract on its behalf. c. Stevedore provided some consideration (a valid unilateral contract between shippers and stevedores and the 5

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promisee is getting the benefit of the situation. (The bill of lading.)) v. Employment (London Drugs) 1. If they are expressly or impliedly protected 2. They are acting in the course of there employment 3. They are providing the very services in the contract vi. Subrogation (Fraser River Pile) 1. subrogation clauses will cover 3rd party beneficiaries when: a. Intention of parties is to confer benefit on 3rd party b. When the action in question by the 3rd party came within the scope of the agreement between parties vii. Collateral viii. Torts 5. CONTRACTUAL TERMS a. Is it a term i. Test for implied term: 1. Whether the term is "necessary" with regard to the inherent nature of the K and of the relationship between the parties. Is the term necessary for the fair functioning of the contract? 2. Can be implied by fact, law, and custom and usage. ii. Expressed Terms: 1. Parol Evidence Rule a. Cannot contradict the written (Hawrish) b. Can be read together (Merzario, Butterly) b. Interpretation i. Was it a term or a pre-contractual banter? 1. For it to be characterized as a term there has to be evidence that it was intended to be term (Halibut, Carmen Construction) 2. Imply reasonable bystander test (Dick Bentley) 3. If someone has more knowledge and skill this could conceive this as a term (Esso)  this proposition is counter to Heibut c. Classification i. Is it a fundamental breach 1. Does it take away substantially the entire benefit under the contract (Hong Kong) a. Can the aggrieved party repudiate d. Enforceability i. Is it a standard form – Unsigned Document? 1. Reasonable notice test – (Harker) a. Is the condition an onerous one? If it is the party trying to enforce must make the condition known the other party (Thornton, Interfoto) b. Actual knowledge is needed not constructive knowledge ii. Is it standard form – Signed Document? 1. General rule is if you signed it your bound by the terms (Cornell Engineering) 2. However if the condition is not reasonable the person needs to be informed of it (Tilden) 3. TEST: to determine whether a signed exclusion clause is valid: a. Social utility of the action. b. Expectations/knowledge of the signor. 6

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c. Adequacy of notice. d. Conduct of parties. e. Consequences and context. iii. Fundamental breach with respect to exclusion clauses arose in (Karsales) but was killed in (Photo Production) this concept is replaced by unconscionablity 1. With respect to exemption clause contracts fundamental breach does not apply but it is still applicable to contracts without an exemption clause. iv. Test for whether a standard form contract/exclusion clause term is unconsciounable (Davidson) 1. Was the contract a standard form contract drawn up by the bailee? 2. Were there any negotiations as to the terms of the contract or was it a commercial form which may be described as a "sign here" contract? 3. Was the attention of the plaintiffs drawn to the limitation clause? 4. Was the exemption clause unusual in character? 5. Were representations made which would lead an ordinary person to believe that the limitation clause did not apply? 6. Was the language of the contract when read in conjunction with the limitation clause such as to render the implied covenant made by the bailee to use reasonable care to protect the plaintiffs' property meaningless? 7. Having regard to all the facts including the representations made by the bailee and the circumstances leading up to the execution of the contract, would not the enforcement of the limitation clause be a tacit approval by the Courts of unacceptable commercial practices? v. When it is a business to business dealing the doctrine of unconsciounability will not be enforced as stringently b/c of allocation of risk 6. MISREPRESENTATION a. If concluded that it is not a term, then next step is to see if there was a misrepresentation b. Framework (Smith) i. Was there a representation 1. Simple step ii. Was it a misrepresentation 1. was it fraudulent  need evidence to prove it. If you do argue and lose you have to pay costs so you are better off going in negligence b/c the remedy is the same. a. remedy = damages, and rescission 2. was it negligent  should the person have known a. remedy = damages, and rescission 3. was it innocent a. possible rescission and indemnity (Whittington) iii. Was it material 1. Would reasonable person rely on it (Smith) iv. Was the statement relied upon v. Are there any bars to rescission? 1. Affirmation or Lapse of Time (Leaf, Ennis) 2. Restitution Impossible (Item cannot be returned in same condition as bought)  (Kupchek) 7

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3. Executed Contract – Contract has been formed (Caveat Emptor) a. For real property (Redican) b. If it is the sale of goods then you can rescind the contract (Ennis) 4. Third Party Rights (Lewis, Daewood) 5. Exemption Clauses

7. MISTAKE a. If there is no term, no misrepresentation then you come mistake b. What type of mistake is it? c. 3 types of mistake: i. Mistake in Assumptions 1. When both parties think it is A when it is B a. Remedy = rescission but that is rare b. To void a contract it has to go to the actual subject matter of the contract (Bell) ii. Mistake as to Contractual Terms 1. Mutual Mistake a. When party A thinks they are buying X and party B thinks they are buying Y b. Apply reasonable person test to see which one of the two competing terms should be abandoned and which should be used (Lindsey, Staiman Steel) c. Remedy = Can void but on if equitable to do so (Solle) 2. Mistake Known to the other party a. Once you have knowledge that what they want is not what your offering (Smith) b. Equity will intervene when one party has taken advantage of the other party (Glasner) iii. Unilateral Mistake 1. A party does not have to correct a unilateral mistake d. Can the Contract be Rectified i. When there is a common intention that was not reflected in the contract then we can rectify it (Bercovici, Sylvan Lake) ii. Rectification cannot occur when 3rd party rights have intervened (Lewis) WHETHER A BINDING, ENFORCEABLE AGREEMENT HAS BEEN FORMED

OFFER Was the piece of communication an offer? Whether the parties intended and considered creating a legal relationship at the outset  A binding agreement needs both intent to have legal consequences and consideration: Balfour  The natural give and take of natural love and affection between family members is not usually deemed a contract and enforceable by the courts: Balfour  In a commercial setting, the part that is saying that there is no contract has the burden of proof: CAE Industries  Balfour (missing intention); Branford (missing consideration); Gilbert Steel (missing consideration for the variation)  Are they family or friends? Strangers? Companies? Do they have a written document? Does the communication have all the elements of an offer? 8

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X for Y to YOU: Canadian Dyers The identity part can be specified at a later date for unilateral contracts: Carbolic Identity of the person in a unilateral contract will be filled in later by the terms set out by the rules: Carbolic “We quote” is an invitation to treat; lacks identity and is in negotiation phase: Johnson v. Roger “Shall be happy to have an order from you” is an offer: Harty v Gooderham

Was the offer communicated?  Offer needs to be communicated. Intention to offer is not enough: Blair v WMB Did the “acceptor” have knowledge of the offer? (usually in unilateral contexts)  Motivation is not a factor if the person has knowledge: Williams v. Carwardine  If person admits to forgetting about it completely, then no offer: R. v. Clark Was the “offer” certain enough or just an invitation to negotiate/agreement to agree?  See below Was this a commercial sales issue?  Items on a shelf are an invitation to treat. You go to the cashier and offer to purchase the items. The cashier accepts the offer and then performance is the exchange of money: Boot; Dawood  Items on a shelf is an offer for a unilateral contract. By bringing it to the cashier and completing performance (giving money), you are in a biding contract. Cashiers often are not agents of the company and do not have the authority to accept an offer: Dawood dissent Bilateral or Unilateral? Courts tend to treat offers as bilateral rather than unilateral where the language can be fairly so construed for reasons of business efficacy: Dawson Note the mode of communication – does the postal rule apply? CERTAINTY AND CONDITIONS Whether the courts will enforce the agreement. Are the terms of the agreement ambiguous, vague or missing?  Are there terms that are vague? What are the terms? Anything left out? How would this deal work? Would there be any disagreements later? Arbitration clause? Can they be resolved by mechanism? Compare and differentiate with Hillas.  A court will try to find meaning in a contract by looking at the substance, but if there are material terms missing, the court will not write a contract on behalf of the parties: R. V. CAE Industries  If material terms are missing, then contract has not formed May and Butcher, except if those terms can be found through pre-determined mechanism (arbitration, someone getting the right to make final decisions) and/or formula (5% below market price: Hillas v. Arcos (or except when there is partial performance: Foley).  A contract that is too vague can not be enforced by the court, however, a contract is not vague or incomplete when loose language can be defined using the intention of the contract: CAE Industries Is this an agreement to negotiate?  An agreement to agree, or agreement to negotiate is not a contract known to the law. It lacks certainty. Courts can not determine what the outcome of the negotiations would be and, therefore, unable to award damages: Courtney & Fairbairn v. Tolaini Brothers 9

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An agreement to negotiate in good faith is not binding (subjective, discretionary), but to negotiate reasonably or using best endeavours is binding (objective, measurable: Wellington City Council 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: Wellington City Council If it is obvious that you are not negotiating in “good faith” a court can find a contract only if there are external mechanisms to find material terms and it is a renewal contract: Empress Towers v. Bank of Nova Scotia. Compare effort with Empress and differentiate

Was there an implied term to negotiate in good faith?  If there is a contract to be renewed, the courts can imply a term to negotiate in good faith if there is an external mechanism (can combine with a subjective element) to find material terms and it is a contract renewal: Empress continuing lease, objective benchmark  Lacked an objective benchmark. Renewal was subject to subjective decisions. Court can not imply term to negotiate renewal: Mannpar Enterprises v. Canada only anticipated renewal K Was this an agreement to make a formal contract at a later date?  When a formal document is contemplated after an oral agreement, the written document is essential to the formation of the contract itself: Bawitko Investment v. Kernels Was the agreement conditional? Was the condition subjective, objective or subjective/objective?  A condition can either prevent formation of a contract until the condition has been met or it can merely suspend the contract pending the condition’s satisfaction: Wiebe  Subjective conditions are not enforceable: Weibe  Aberfoyle Plantations v. Cheng: Seller could elect not to perform the condition precedent  Black Gavin & Co v. Cheung: my inspection of and approval of premises  Murray McDermid v. Thater: approval from company president  Objective conditions are enforceable: Wiebe (majority)  Weibe: subject to the sale of my home  Griffin v. Martens; Dynamic: Subject to satisfactory financing  Subjective/objective conditions may be enforceable if you can evaluate the effort using business efficacy principles and the officious bystander: Wiebe (dissent) Was the contract silent on who is to obtain approval?  A court can determine which party is to obtain approval by implying terms. Can look at legislation or use the officious bystander: Dynamic Transportation v. O.K. Detailing Did the party use best efforts to meet the condition?  The party must use best efforts (at least try) to fulfill the condition, but damages may not be awarded if the outcome is the same regardless if they tried to meet condition or not: Eastwalsh Homes v Anatal Developments Can you unilaterally waive the condition?  A condition can be waived if a term is for the sole benefit of one party and the condition is severable unless the condition is a true condition precedent: Turney v. Zhilka; Barnett v. Harrison (majority)  Subject to board approval – true condition and can not waive: Turney v. Zhilka, Barnett  Subject to obtaining two mortgages – sole benefit and can waive: Beauchamp  A vendor can not use the purchaser’s clause against him: Barnett (dissent)

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If the condition to be met is about the “what” and not about the “how”, the court will give the condition a broad interpretation, even if condition not met on a strict reading. Beauchamp v. Beauchamp

ACCEPTANCE Whether the offer was accepted. Whether it was acceptance or merely a counter offer?  If you change a term of the offer, you are rejecting the offer and sending a counteroffer: Livingstone  If you make an inquiry, the original offer still stands: Livingstone  “Send lowest price” was considered an inquiry: Livingstone  Conditional acceptance can be acceptance: Manchester Was acceptance communicated?  What mode was contemplated by both parties? Must look at context. How was the offer communicated? Anything explicitly written in the offer?  Was the offer “accepted” in the correct mode?: Dickinson v Dodds (at mother-in-law’s house)  Was the offer “accepted” at the correct place? Eliason v Henshaw  Express mode of acceptance can be overcome if actual mode is no less advantageous to the offerer: Manchester If acceptance was not communicated, was the offer accepted by silence or conduct?  Acceptance can be silence if there is a prior contractual relationship (renewal contracts): St. John Tug Boat (silence was accepted & parties acted like they were in a contract), Felthouse v. Bindley (silence not valid acceptance) Was the offer accepted before it was revoked (and timing issues)? Does the “Postal Rule” apply?  Acceptance: when in mail system. Revocation: when received (knowledge!). Henthorn  Used when post was a method in contemplation by both parties: Henthorn  Postal rule does not apply when the nature of the subject matter under consideration makes using the postal rule absurd and when express terms are present: Holwell Securities  Modified postal rule - Fax is more similar to telephone than mail. Acceptance when there is receipt in the system (fax machine or email server) and a reasonable expectation for the possibility of receipt (business hours can be used as implied time frame): Brinkibon  No universal rule to cover all cases; must be resolved by intention of parties, sound business practice and, in some cases, by judgement of where the risks should lie: Brinkibon Did revocation happen before acceptance?  If revocation happens after acceptance, binding contract: Henthorn  If you have knowledge that the offer can no longer be accepted, then that offer has been revoked, regardless of explicit language: Dickinson v Dodds knowledge is key  If acceptor has merely heard a rumour, offer is still capable of acceptance Barrick v. Clarke compare to Dickinson – was it rumour or actual knowledge? Consider source.  If offerer dies, then offer is revoked: Errington Was the contract unilateral?  offer  (knowledge)  performance then/is acceptance: Carbolic , Petterson

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Revocation  any time before full performance, usually some physical act: Petterson (don’t forget about dissent)  Petterson: revoked when acceptor was at the door  Dissent – should accept full performance in good faith and not take advantage of the failure. Errington: can not revoke once the pre-determined steps (according to the rules) are being completed.

Was the contract bilateral?  offer  acceptance  performance: Carbolic  Revocation  any time before acceptance: Dickinson v. Dodds (at train station) Was there a lapse in time to suggest the offer has been revoked?  If there has been a lapse in time, there is a test to determine if that lapse was acceptable: Barrick v. Clark looks like this is applied at the outset; Manchester looking back  Test: 1. Nature and character of the item. 2.Normal or usual course of business in negotiations leading to sale. 3. Context (“trusting to hear from you soon”, “closing date in 2 months”) Argue both sides of all three criteria.  An acceptable amount of time can be implied: Eliason (round trip of wagon); Carbolic (court implied timeframe to accept to be the current flu season).  Conduct of the parties after an offer has been made can suggest if lapse of time is acceptable for not: Manchester Are they acting like the offer has been withdrawn or refused? CONSIDERATION/INTENTION TO CREATE LEGAL RELATIONS Whether there was valid consideration Whether there was consideration Identify what is being exchanged  Consideration for the benefit of another is valid consideration: RBC v. Kiska Was it a gratuitous promise?  A charitable donation (without anything in return i.e. naming rights – Allegheny College) is a gratuitous promise and therefore lacks consideration: Brantford Was there past consideration?  If a promise is made in recognition of a benefit previously received, that promise will be enforced by the courts unless there was no implied term that some reward would follow the act: Lampleigh Are all the terms present? Just in wrong order? Implied term of a reward? Was there forbearance?  Forbearance is valid consideration unless it is known that the claim is invalid: B(DC) v. Arkininvalid: RBC v. Kiska - valid Was there a promise under seal?  A wax and seal or an impression or affixed wafer is enough to bind the parties: RBC v. Kiska  To create a sealed instrument, the application of the seal must be a conscious and deliberate act: Friedmann v Final Note 2000 SCC  “Signed, sealed and delivered”, “given under seal”, “seal” are merely anticipatory of formality and not a substitute for it: RBC v. Kiska  If a document contains some indication of a seal, the fact that a person intended to execute the document as a deed is sufficient adoption or recognition of a seal: Linton v. RBC (1967 – Justice Hartt applied English case law) Use this case to argue the other side of the other cases in this section. 12

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Was the agreement a variation of a previous agreement?  A promise is not enforceable if no change has occurred due to that promise: Stilk v Myrick  If there is mutual abandonment of an old contract and a new contract is formed, then the consideration will be the same as for the old contract: Gilbert Steel  Benefit to both parties and a lack of any detriment, is valid consideration: Williams  Avoiding a breach on contract is valid if it is not joined with economic duress: Williams  If you want to argue against the agreement, the traditional approach is Gilbert (1979 Ontario); River Wind Ventures (2009 BC)  If you want to argue for enforcing the agreement, use Williams (UK 1990) or NAV Canada (NB 2008); Harrity and Northeast Yachts (NB 2009) (use it carefully) Was this a credit/debit situation?  Payment of a lesser sum in satisfaction of an existing debt is not satisfaction of the whole debt unless something extra was promised in exchange for the creditors foregoing part of his debt: Foakes v. Beer  Payment of a lesser sum is no consideration: Re Selectmove  Judicature Act: Statute allow for variation of deals so that a lesser amount can be paid. ANSWER THE QUESTIONS! ADVISE CLIENTS!! MAKE PREDICTION   If there is a binding agreement, then the client cannot withdraw from it without being in breach of the contract and liable for damages. But, for the reasons discussed above, the agreement may not be binding; therefore, the client is under no obligation to fulfill the terms of the contract.

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Topics
Essential Elements of a Contract
Agreement An agreement entered into between two parties is only enforceable if the parties entered into the agreement with the intention of creating legal relations. How do we find intention? 1. Objective, not a subjective test. o The Reasonable Person Test- Court will look at circumstances in which the parties were placed. Would a reasonable person regard this agreement to be legally binding? 2. Rebuttable Presumptions o A fact will be presumed in a certain set of circumstances unless there is evidence to the contrary.  In a commercial context, it is presumed the parties intended to create legal relations.  In a family situation enough evidence must be provided to rebut the presumption that the two parties did not intend to create legal relations. (Balfour v. Balfour) Offer 1. In order to have a contract you must have an offer and not merely an “invitation to treat” (Canadian Dyers). 2. A mere quotation of price, including an advertisement, is not generally considered to be an offer, however every case turns on it’s own facts (Canadian Dyers; PepsiCo; CSB; Lefkowitz) 3. The determination of whether there is an offer requires consideration of the intention of the person said to have made the offer (Canadian Dyers; CSB) 4. Intention is identified through the language and circumstances of the parties and their dealings, including occasionally the conduct of the parties after the alleged offer was made (Canadian Dyers; CSB) 5. The role of the court is not to determine what a particular person intended, but is rather to determine what a reasonable person in theses circumstances, using this language, would have intended. In other words, the test is objective no subjective. (Canadian Dyers; PepsiCo; CSB) 6. This determination of intention requires consideration of how the statement would have been perceived by the person hearing it – E.g. “ How would an ordinary person reading this document construe it?” (Canadian Dyers; CSB; PepsiCo) 7. If the statement is clear, definite, explicit and leaves nothing open to negotiation it is reasonable to find that that the person making the statement intended to make an offer (Lefkowitz; PepsiCo) 8. Judges may be more likely to find a statement to be an offer if unfairness or exploitation would otherwise arise. (CSB) 9. In retail sales, the general approach has been that an offer is made when the customer brings the good to the cashier, and that the cashier accepts the offer (at which point a contract is formed); that is, that a mere display of goods for a price does not constitute an offer to sell those goods to anyone willing to pay the price. However, this approach may defy commercial reality, and there are circumstances in which a court will not follow it. In every case the language and circumstances must be analyzed to determine the intention of the parties (Boots; Dawood [dissent]; Sanchez-Lopez) 14

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10. In a tender situation contracts are formed. In the first, the offer is the invitation to submit tenders. The acceptance is the submission of the tender (Contract A). The second contract is with respect to the actual work contemplated in the first process (Contract B). For Contract B the offer is the submitted tender and the acceptance is the acceptance of the submitted tender y the inviting party. 11. Although sometimes characterized as unilateral, Contract A is more accurately described as bilateral. In a unilateral contract the accepting party’s performance of the condition fully discharges their contractual obligations. In a bilateral contract there can be continuing obligations on both sides. Under Contract A the party submitting the tender (i.e., the accepting party) has ongoing legal obligation to the offeror after the submission of the tender. (Ron Engineering; MJB). 12. The terms of Contract A are set out in the invitation to submit tenders. These clauses can include a “privilege clause” which gives the inviting party some latitude with respect to which tender it accepts. Terms can also, however, be implied into the invitation to tender. Implied terms can include, for example, a requirement that only compliant bids will be accepted. (Ron Eng; MJB). 13. A term can be implied if it is part of the normal “custom and usage” in the relevant industry (Chinook), as a legal incident to the contract or because it is presumed to have been intended to be included by the parties (MJB). Presumed intention occurs where the parties would have agreed with an officious bystander that the term should be included (MJB). Questions and issues for exam: 1. Was there the intention to create legal relations? (Canadian Dyers) - Language, subsequent conduct, previous relations, circumstances, reasonable person test. 2. Was there an offer or merely and invitation to treat? - Advertisement is an invitation to treat (Fischer, Pepsico, Partridge) - Advertisement is an offer (Carill, Lefkowitz) - Store situations – invitation to treat, offer comes from customer (Boots, Dawood, Fisher). 3. Is it a case of a tender of an auction? - Contract A and Contract B (Ron Engineering) - Not always a Contract A and B situation (MJB) - Is there a privilege clause? (Chinook, MJB) Definition X FOR Y TO YOU     An offer to the world at large is not an offer “We quote you” is an invitation to treat; lacks identity; negotiating Johnston v. Rogers (1899) “Shall be happy to have an order from you” is an offer Harty v. Gooderham (1871) Dedicated phone line gives identity to the parties even if there was not verbal identification: Hong Kong Bank Of Canada V. Richardson Greenshields Of Canada (1989)

Offer or Invitation to Treat Offer - A communication to the offeree indicating a willingness to enter into an agreement with the offeror on certain terms that signals to a reasonable offeree the power of acceptance by simply accepting those terms.

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Difficult to determine when a particular communication is a preliminary negotiation or an actual offer

Invitation to treat – an invitation to begin bargaining, typically understood as an invitation to the other party to make an offer of some kind Courts are reluctant to find that advertisements are offers to sell. Why? If you consider an advertisement to be an offer, the offeror would be obligated to sell perhaps more stock than they 15

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have. It is not reasonable for retailers to keep unlimited stock (although for manufacturers it may be considered reasonable). 1) Generally speaking, an advertisement is merely an invitation to treat 2) An advertisement may sometimes constitute an offer (ex. Carlill v. Carbolic Smoke) Various Store Situations 1) Self-service store – contract is made when customer places items for purchase at checkout counter (offer to purchase) and cashier rings the items through (acceptance) An item displayed on a store shelf is not an offer but merely an invitation to treat (ex. Pharmaceutical Society v Boots and R. v. Dawood) 2) Non self-service store – the contract is made when the customer indicates what he wants to buy and the attendant tells him the price and gives him the item. (ex. Fisher v. Bell) 3) Display in shop windows – not an offer but merely an invitation to treat. 4) Gas station – Common sense would dictate that the price listed by gas station must be offer and pumping gas is acceptance.  In all instances the offer to buy comes from the customer, not from the store. Therefore, there is no difference between self-serve, non self-serve stores and window displays (note difference in gas stations). Auctions and Tenders TENDER AGREEMENTS – UNIQUE TYPES OF CONTRACTS  KA: unilateral contract; Tender Documents = ground rules of the game Ron Engineering  Offer: Call for tender Documents. Performance/Acceptance: Submit tender  KB: bilateral contract; contract to do the actual project. Ron Engineering  Offer: We selected your tender. We offer you the job. Acceptance: We accept (or else give up the deposit). Performance: Actual work to be done.  Deposit: Penalty to revoke offer after deadline. Penalty to not accept KB. Refundable if bid not selected. Ron Engineering  Privilege clauses are interpreted (by industry norms) as protecting vendors from being bound to take lowest offers in case that offer comes from a less than reputable source. Chinook, MJB  Industry standards “everyone knows” this is how things are done. It can help to create implied terms or to determine a reasonable shared assumption.  A preference for local vendors should be disclosed in the Tender Documents  Damages:  Found breach of tender contract, but price was not only factor. Could not say “but for” the breach Martel would have won the bid. Nominal damages were awarded. Martel  Found breach and, on a balance of probabilities, price was determining factor. “But for” the breach, π would have won bid MJB Generally speaking, there are two contracts arising in tender cases:  Contract A - arises upon the submission of the tender. o Call for tenders is an offer  unilateral K (invites act). Submitting tender is the acceptance. You K with as many people as submit tenders. Whose ever tender is accepted has agreed to sign the service K, Contract B. Terms and conditions specified in contract A must be upheld when acceptance is made in contract B.  Contract B – arises upon the acceptance of the tender (is the construction contract itself) o Submitted tender is the offer and the firm choosing the winning tender is the acceptance. This is a bilateral contract.

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Communication of Offer 1. To form a contract an offer must be communicated (Blair; Williams; Clarke) 2. Communication of offer is generally only an issue with respect to unilateral contracts – it arises where an offer can be accepted without communication of the acceptance. 3. There must be a temporal relationship between the communication of the offer and the acceptance of it – a contract is not formed if knowledge of the offer only arises after the party has done the act required for acceptance (Clarke). 4. If a party has knowledge of the request prior to performing the requested act it is presumed that they performed the act with the intention of fulfilling the requirements of the offer. The presumption can be rebutted (Clarke). 5. If a party has the necessary intention to fulfill the terms of the offer – either because it has been presumed or otherwise – their motive for doing the act is irrelevant (Williams; Clarke; Fitzsimmons). Questions and Issues: 1. Was the offer communicated? - Objective test of intention considering subjective factors - Did offeree have knowledge of the offer? This is required (Clarke). - Was it communicated to the offeree? This is required (Blair) - Did the offeree rely upon offer in subsequent actions? (Carbolic Smoke Ball). NEED KNOWLEDGE OF THE OFFER, BUT THE OFFER DOES NOT HAVE TO BE MOTIVATION TO DO SOMETHING (UNILATERAL CONTRACT CONTEXTS)  Motivation is not a factor if the person has knowledge at “acceptance” Williams v. Carwardine  If forgot of the offer at the time of “acceptance”, then no contract R. v. Clark  Man saw reward to catch a certain fish. He went fishing but did not have contest in mind. Learned identity of the fish he caught ½ hour after catching it. “So long as the outstanding offer was known to him, a person may accept an offer for a unilateral contract by rendering performance, even if he does so primarily for reasons unrelated to the offer” Simmons (US court). INTENTION TO OFFER IS NOT GOOD ENOUGH, YOU NEED TO COMMUNICATE THE OFFER Blair v. Western Mutual Benefit Association Consensus ad idem – in order for there to be a contract there has to be a meeting of the minds - Communication of offer is generally only an issue in unilateral contracts, where an offer can be accepted without communication of acceptance - To form a contract the offeree must know of the offer (communication must have occurred), however their motives for completing the action have nothing to do with their right to recover under the contract. Williams v. Carwardine (1833) KB - A party must have knowledge of the offer prior to performing the contract and must have the intent to accept the contract by performance. If the party has the knowledge of the offer before they perform the act it is presumed that they perform the act with the intention of fulfilling the offer. R. v. Clarke (1927), Aus HC o Tension between the act being done so the offeror has benefited and rewarding someone who has no moral or legal entitlement to the reward - If one wishes to accept a reward for fulfilling an act, it is not material whether they intended to fulfill the act. The lack of intent does not make the reward a gift instead of a reward Simmons v. US (1962) - Unilateral contracts made to the world are capable of being accepted by conduct. Carill v. Carbolic Smoke Ball - The offer must be communicated directly to the employee. Blair v. Western Mutual benefit Assn. [1972] BC CA

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Acceptance 1. The overarching question on acceptance is whether the person purported to have accepted the contract has evidenced an intention to enter into a legal relationship with the offeror. 2. The identification of whether acceptance has taken place – of whether there is an intention to enter into a legal relationship – depends on the “language and conduct” of the acceptor. While acceptance must be clear and unequivocal, it does not need to take a particular form, or to expressly use the words “I accept”. (Dawson). 3. The test is an objective one: doe the language and/or conduct lead to a reasonable inference of consent? (SJTB). 4. Silence does not generally constitute acceptance. (SJTB; Felthouse). 5. Silence can constitute acceptance where the silent party has either an express or an implied undertaking to speak. However, such an undertaking cannot be imposed by the offeror. (Felthouse). 6. An implied undertaking to speak arises where the circumstances otherwise give rise to an inference of acceptance/consent. That is, in that case, unless the person speaks, the circumstances will give rise to an inference of acceptance (SJTB). 7. To find that the circumstances give rise to an inference of acceptance requires determination that the person a) knows that the consideration is being rendered by the other party in the expectation that they will be paid/receive a benefit, b) acquiesces in the consideration being rendered, and c) takes the benefit of the consideration (where silence is “so deceptive that it may become necessary for one who receives beneficial services to speak in order to escape the inference of a promise to pay for them” (SJTB). 8. The form of the acceptance can depend on the terms of the offer – e.g., in the case of a unilateral contract, acceptance will take place when the stipulated conduct is performed. (CSB; Williams; Clarke). 9. In general it should be presumed that a contract is a reciprocal exchange or promises (bilateral), rather than a unilateral contract in which acceptance is demonstrated by performance of the requested act. A contract cannot be construed as unilateral where the performance of the act of “acceptance” requires the cooperation of the requesting party (Dawson). 10. A counter-offer does not constitute acceptance, and terminates the original offer. (Livingstone v. Evans). 11. When parties enter into a contract, but the terms of the contract are contained in competing forms exchanged between the parties, then the terms of the contract should be determined on the totality of the dealings between the parties. (Butler, Tywood). 12. In some circumstances the key event for setting the contract terms may be the first document setting out the terms (the “blow in first”). In other circumstances the key event may be the last document sent (“last shot”). In still other cases the terms may be determined by documents from both sides (“shots fired on both sides”) (Butler). Questions and Issues: 1. Was the offer accepted? - Must be unqualified and unequivocal, offeror can waive need for acceptance (offeree can’t). By Words or Contract Silence as Acceptance  Prior contractual relationship, silence can be acceptance of renewal; look at context: St. John  No prior contractual relationship, silence not acceptable acceptance: Felthouse Acceptance, Counter Offer and Request for Information  OFFER/COUNTER OFFER/INQUIRY

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Changing terms of an offer is a rejection of the original offer and a counter offer, regardless of language used Livingstone, Butler Machine Tool, Tywood Industries, Hyde v. Wench

BATTLE OF THE FORMS – usually contract not formed, but main component completed anyway THREE APPRAOCHES Butler Machine Tool  Track their communication with “offer”, “counteroffer” language with dates/time. 1. Battle is won by the man who fires the last shot: if latest terms not rejected by other party, he may be taken to have agreed to them 2. Battle is won by the man who gets the blow in first: if difference in the buyer’s terms are so material that they would affect the price, the buyer should not be allowed to take advantage unless he draws specific attention to the changes 3. Battle depends on the shots fired on both sides: Look at both sides – holistic approach. When was last true sense of strong new terms? Tywood; Butler Machine Tools Effect Of: 1. ACCEPTANCE - creates a K 2. COUNTER-OFFER - kills the original offer (ex. Butler Machine Tool and Livingstone v Evans) 3. REQUEST FOR INFORMATION- has no effect, all stays the same 4. ADDED TERSM – new added terms at the time of acceptance have no effect (ex. Tywood Industries) 5. REJECTION - kills the offer Unilateral and Bilateral Contracts BILATERAL = OFFER  ACCEPTANCE  PERFORMANCE  Christie v. York Corporation: Offer to purchase beer at a pub. Acceptance denied by waiter “not to serve coloured people.” No common law remedy; people should be able to create contracts with whoever they want. Situation changed by statutes.  Boots: I offer to purchase, cashier accepts, money is performance. But does the casher really have the authority to accept? Now, it would depend on the context (car dealership v. McDonalds or Wal-Mart). UNILATERAL = OFFER  (knowledge)  PERFORMANCE  ACCEPTANCE  Binds offerer and identity of the person can be filled in later by terms set out by the rules. Party sets the rules or road map to specify future identity.  Search and reward offers are unilateral contracts  Can be revoked at any time before 100% of performance is completed.  Cabolic is classic search and reward example of unilateral contract.  Dawood dissent: Typical stores. Offer on shelf, performance is taking it off the shelf and paying for it at the cashier (or now, self-checkout). Cashier has no authority, just a machine.  Other unilateral cases: Williams v. Carwardine, R. v. Clarke, Petterson GENERAL COMMENTS  Do not look at actual intention of a party, look at what a reasonable person looking at the situation would think.  A contract does not have to be perfect to be binding  To fill in any gaps, think of how a reasonable person would interpret the intention (implied terms). Look at context. Communication of Acceptance 1. In order to forma a contract acceptance must be communicated (Trans-Pacific Southin J.A.). 2. An offeror can waive the requirement that acceptance be communicated (CSB).

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3. An offeror can specify a form or mode of acceptance. If s/he does so then that mode of acceptance must be complied with in order for a contract to be formed (Eliason; Trans-Pacific per Rowles J.A.) 4. Courts will not impose undue rigidity on the mode of acceptance used where the offeror has not unambiguously communicated that a particular mode of acceptance is required or the offeror’s interest in specifying a mode of acceptance has been duly satisfied by the mode actually chosen. The courts will attempt to identify and respect the intentions of the parties with respect to the mode of communication of acceptance (Carmichael). 5. Where parties intend that acceptance is to occur through a non-instantaneous mode of communication (e.g., by mail or by courier) then, unless the offeror provides otherwise, acceptance is valid when it is dispatches (e.g., mailed or provide to the courier). This is because in that case it is understood that the parties intend that acceptance will be valid at that point. That is, they intend for the contract to be formed at the point of dispatch not at the point when acceptance is received. This is the “postal rule”. Its application depends on identification of the intentions of the parties (Henthorn; Holwell; Trans-Pacific; Commercial Credit Corp.). 6. The postal rule may apply even if the acceptance is never actually received (Sibtac). 7. The more instantaneous the communication the less likely it is that the postal rules will apply. However, ever case “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” (Brinkibon). Questions and Issues: 1. Do the postal rules apply? - Will only apply in non-instantaneous forms, but may apply to other mechanisms fax, e-mail, telex (Brinkibon). - Will not apply for anything but acceptance (Henthorn). - Will not apply when express terms say acceptance must reach offeror in a certain method, e.g. By e-mail or fax, or if the use of postal rule would create absurdity. (Holwell). 2. Is it unilateral or bilateral contract? - Is offeree passive or does he have obligations as well? (Carlill, Williams, Dawson). 3. Was there an exclusive mode of communication? - unilateral contracts are capable of being accepted by conduct (Carlill). - Has offeror imposed specific mode of communication for acceptance in the terms? (Eliason). - Not unreasonable to see need for writing as implied term for real estate/land (Jen-Den Invest.). - Is timing of reply the relevant factor rather than mode? 4. Was there acceptance, counter-offer or request for information? - Acceptance by words, conduct or silence – was there an expectation of reliance? (silence – SJTB, silence not enough – Felthouse). - Counter offer kills original offer (Livingstone). - Mere inquiry for information is not a counter-offer and does not kill an offer (Livingstone). - Is this a battle of the forms case? Did the party let the other party know if a term was added, new to do this (Tywood). Mode of Communication MODE OF ACCEPTANCE:  implied that mode of acceptance will be same mode as mode of offer or can be explicitly expressed in the offer Eliason v. Henshaw  no universal rule can cover all cases; they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by judgement where the risks should lie Brinkibon obiter  POSTAL RULE: Acceptance: when in mail system. Revocation: when received (knowledge). Henthorn  used when the post was a method in contemplation by both parties Henthorn 20

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Does not apply when explicit language saying it does not apply or subject matter implies postal rule could not have been intended that rule will apply. Howell BY FAX: Acceptance is when fax is received by the other party Brinkibon Acceptance occurs when there is a reasonable expectation for the possibility of receipt.  If fax is sent in the middle of night, reasonable to assume receipt at business hours  All about context, but actual receipt of knowledge of acceptance will always do away with implied time-frame.

Time of Acceptance – Postal Rules TIMING OF ACCEPTANCE: if explicit mode of acceptance provided in offer, timing can be implied from that information; court can imply how long offer was willing to wait for acceptance Eliason v Henshaw General-Postal Rules: 1) Acceptance becomes effective once posted. 2) K is binding even if offeror does not receive acceptance. 3) Offeror can exclude the postal rules if they wish, but must be done expressly. 4) There are differences between Postal rules and specific modes of acceptance  Postal rules can apply even if not specified or can become a specific mode if expressly stated that postal rule is to be considered as such 5) Reasons for postal rules is to provide some protection for offerees as regard to changes that made be made by offerors and for business efficacy. 6) Offeror can't retract when acceptance placed in the mail. 7) Non-instantaneous forms of communication. When Postal Rules Do Not Apply: 1) Where terms of the offer exclude them (ex. Holwell) 2) Where their application would cause absurdity or inconvenience. 3) Where parties did not intend a binding contract to exist until offeror received acceptance (ex. Holwell) 4) Where instantaneous forms of communication are used (ex. Brinkibon) 5) To a revocation of an offer (ex. Henthorn) Termination of Offer 1. Unless a separate option contract has been formed, an offer can be revoked at any time prior to acceptance, even if the offer is said to be open for a period of time. (Henthorn; Dickinson). 2. For revocation or termination of an offer to be effective it must be communicated to the offeree. (Henthorn). 3. The communication of a revocation or termination does not need to take a particular form. The question in each case is whether, given the language and circumstances, a reasonable person in the position of the offeree would have understood the offer to have been revoked. (Dickinson interpreted in light of Henthorn and other cases, Financing Ltd.). 4. An offer will also terminate where it has been rejected by the offeree by, for example, provision of a counter-offer or undue delay. (Livingstone; Manchester Diocesan). 5. Where an offer contains an option – i.e., the offeree has paid consideration to have the right to accept the offer up until a particular point in time – then that option is irrevocable (although the terms of its exercise must be strictly complied with). An option can be granted for nominal consideration and the remedies for breach of an option are the same as the remedies for breach in the underlying contract (Holwell; Mountford). 6. Where an offer is for a unilateral contract then the offer can be terminated prior to performance of the stipulated conduct. However, in some circumstances the court will imply a term that the offer is not revocable once performance of the conduct has commenced. Also, in some circumstances the court will deem the conduct to have in effect been completed. Finally, the 21

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offeror cannot prevent performance of the conduct through his/her own actions (Pattberg (in part contra); Errington; Daulia). 7. An offer can contain in its terms conditions for its own termination. For example, if an offer is said to expire after a period of time, then it cannot be accepted after the expiry of that period of time (this term can be express or implied). Or, for example, if an offer is said to only be available for acceptance if certain facts are still true at the time of acceptance, then the offer cannot be accepted if the facts are no longer true (Barrick; Financings Ltd. V. Stimson). Questions and Issues: 1. Was the offer accepted within a “reasonable time”? - Where there is no fixed time limit for acceptance, it must be accepted within a reasonable time (Manchester) or will be seen either to have been withdrawn or rejected. - Reasonable time: consider (1) nature of the goods, (2) indications provided by the parties, and (3) surrounding circumstances (Barrick). - If offeree states intention to accept and offeror knows of this, reasonable time could be extended (Manchester). 2. Had the offer expired explicitly? 3. Was the offer revoked? - For bilateral offer, can be revoked prior to acceptance unless there is an option in place - Was it a unilateral offer? If yes, then it is revocable at any time up to complete performance (Petterson). BUT, it cannot be revoked once performance has been commenced if the offeree is continuing to fulfill the performance requirements (Errington). Is there an implied obligation that offeror will not prevent performance once offeree beings to peform as per the Daulia Principle? 4. Was the revocation communicated to the offeree? - Objective test suggests an actual reading would not be required, but very little law – CB 92, note 3. Some dicta that revocation is effective when it should have been read in the course of business. - Knowledge does not have to come directly from offeror (Dickinson) but consider the source or the information when deciding if it a source that can communicate it. WAYS AN OFFER CAN BE TERMINATED: 1. Counter offer. 2. Rejection of offer. 3. Revocation of offer. 4. Lapse of time open to accept offer. 5. Occurrence of contemplated termination condition. 6. Death.  An offer can be withdrawn at any point prior to being accepted  General significance: o Whether an offer has been terminated depends on whether a legal obligation has been formed between the parties o Given the language and conduct, is it appropriate that there be a legal obligation here?  the real issues come down to: o When does the offeror’s conduct constitute sufficient and binding withdrawal/revocation of the offer? o When does the offeree’s conduct constitute rejection of the offer? o When are the circumstances and language such that we should imply particular terms preventing withdrawal or terminating the offer due to the lapse of time Counter-offer  Generally speaking, a counter-offer brings the original offer to and end o The original offer can be re-animated (ex. Livingston case)  Why is this so?

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When the courts look at what is going on, they look at what the reasonable person looking at the particular circumstances and looking at the particular language construe it  The reasonable person would assume that if he made a counter-offer, the original offer had terminated  Ex. If A says I will sell you my bike for $20 and B says I will buy it for $15, B implies that he is not willing to buy for $20.

Rejection - Offers cannot take rejection. If you reject it, it is dead (unless revived later). - Counter-offers are considered to be rejections Revocation  If the acceptor has knowledge that the deal can not go through any more, then he can not accept the offer; there can not be a meeting of the minds; he can’t accept something that can’t be accepted anymore. Dickinson v. Dodds  If acceptor has merely heard a rumour, offer is still capable of acceptance Barrick v. Clarke  Bilateral contracts can be revoked any time before acceptance Dickinson v. Dodds  Unilateral contract can be revoked any time before full performance Petterson v. Pattberg  Should accept full performance in good faith. Petterson v. Pattberg (dissent)  Performance in a unilateral contract does not have to be one moment in time. It can be made in pre-determined steps. If steps are being completed according to the “rules” parties are in a binding contract and offer can not be revoked. Errington v. Errington and Woods Revocation  When does the conduct of the offeror constitute a withdrawal of the offer?  Henthorn Case: where there is no consideration for the right of first refusal, there is only a gratuitous promise which is not binding  Unless there is an exchange of something material between the parties, there is no K, only a gratuitous promise  A  B: I will sell you my dog for $20, and I will keep that offer open to you if you give me $1 now  this binds the offeror Revocation of Unilateral Agreement  Revocation of Unilateral offers: o Unilateral offers are no different than other offers: they can be revoked prior to acceptance, as long as it is communicated  But, how do you communicate in a unilateral world?  What is the effect of partial performance? What are the issues around timing?  What obligations are there on the offering party to cooperate with the performance o The answers to these will depend on the particular circumstances of the case o If the unilateral offer is to the whole world (like Carbolic Smokes Ball), you can revoke the offer in the same manner that you made the offer  Ex. If you had an ad in the newspaper, an ad revoking the offer is sufficient o If the unilateral offer is to a particular person, it must be personally communicated to that person to be successfully revoked o But when do you have to revoke by? And when is to too late to revoke?

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o o

o

On the one hand, the person accepting the unilateral offer is under no obligation to do the act  little reason to protect them (unlike the case of a bilateral offer)  On the other hand, it is not hard to imagine unfair situations if you can revoke in the middle of performance(ex. Erington case: it would be unfair to revoke the offer if they had been living in the house for so many years and performing successfully the terms of the offer) The courts are generally cautious about recognizing an offer to be a unilateral one The courts will also say that performance was complete (ex. If you arrive with the money to pay, that constitutes performance; you do not need to put the money in the hands of the offeror) They will also say that if completion requires your cooperation, you cannot prevent completion by refusing to cooperate (ex. Carmicheal case: you cannot make an offer and then hid out until the time is up!)

Lapse of Time  If there has been a lapse in time, look at test to determine if that lapse was acceptable  Nature and character of item  Some items will infer a longer time, some will infer a shorter time  Normal or usual course of business in negotiations leading to sale.  Reasonable time in particular industry. “Everyone knows” should take X days.  Circumstances of the offer including the conduct of the parties in the course of negotiations  “trusting to hear from you as soon as possible”  No doubt an offer remains open only for the time stated in the offer or, if no time is mentioned, for a reasonable time having regard to the nature and circumstances of the offer provided that it has not in the meantime been withdrawn Certainty 1. In order to have an enforceable contract the terms of the contract must be sufficiently certain – that is, it must be clear that the parties intended to enter into a contract, and were not simply attempting to, or agreeing to, negotiate one (May & Butcher; Hillas). 2. In determining whether there is sufficient certainty the courts will strive to give meaning to the parties intentions, even if those intentions are poorly or inartistically expressed. They will look for legal standards which they can give meaning to, a course of dealings which indicates the existence of a clear contractual intention (and what it means), or a mechanism such as arbitration which the parties have accepted as a means of resolving specific issues which cannot yet be agreed upon. The court will no, however, impose its view of what would be a reasonable contract on parties who have not intended or agreed to enter into that contract (CAE; May; Hillas; Foley; Calvan). 3. Where the parties have agreed to a mechanism for resolving uncertainty – e.g., arbitration – the failure of that mechanism, particularly if arising from the conduct of a party will not necessarily render the contract uncertain (Sudbrook Trading). 4. Where a contract fails the test for certainty – so that there is no substantive agreement between the parties – an issue remains about whether there is nonetheless an enforceable process contract. That is, whether there is a contract to negotiate which the courts will enforce (Hillas; Empress). 5. In general, the courts in Canada and the UK have been unwilling to enforce contracts to negotiate. They view performance (or not) of such agreements as impossible to assess, and damages as incapable of measurement (Courtney & Fairbairn; Walford).

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6. Courts will only enforce such agreements if the agreement has specific measurable standards, whether express or implied, against which the party’s conduct in the negotiations can be measured, and on the basis of which a breach (or not) can be assessed. “Good Faith” is not generally seen as sufficiently certain and specific to result in an enforceable process contract (Wellington City Council; Empress; Mannpar). Questions and Issues: 1. Is there any uncertainty in the terms of the contract? - The fact that a contract contains vague provisions will not normally be enough to invalidate a contract on uncertainty, in that it won’t be fatal. - Greater difficulties arise when essential terms are missing, or where the contract is incomplete. If essential terms are missing (left for future negotiation) a Court might not be able to imply terms (May v. Butcher) but this is not determinative (Foley, Sykes). - Courts can imply terms into an agreement, this is more likely in commercial contexts, or if parties have had past dealings before (Hillas). - Contracts can be saved if machinery exists (arbitration) as in (Foley, Sykes). These can include objective measures such “market rate”, or “reasonable rate”. - If the machinery does exist it will not be viewed as an essential term – failure of the machinery will not necessarily mean failure of the contract. (Sudbrook). - The way the parties have acted upon the contract is important (an issue of fairness), (CAE, Hillas, Foley, Sykes, Sudbrook, Empress), as a court is unlikely to strike down an option clause of a contract becomes without it the contact is mission a large part of what enticed them into contract in the first place. 2. Was there an agreement to negotiate? - There is real uncertainty as to under what circumstances law will realize duty to negotiate in good faith. Unknown to common law (Welling, Wolford). - But in Empress Towers, a majority of the BC CA was willing to imply such an obligation at least where: there was some objective criteria set out for negotiations (market price), AND the court was dealing with a clause in a pre-existing contract (the whole basis of which was not to negotiate the one item, but that one item is a part of the broader contract.) - Mannpar seems to have closed the door on the obligation found in Empress that would extend in other situations. 3. Was there an agreement with a formal contract to follow? - There is a degree of certainty required before and agreement can be held to be a binding contract (even in oral agreements), and a Court will look to the conduct of the parties after the initial agreement (Bawitko v. Kernels). As a general principle, before you can have a contract, terms of contract must be reasonably certain. Courts are reluctant to find terms are uncertain if intention of parties was to be bound (won’t strike down on technicality). Problem is that parties often want to retain a certain level of flexibility. It’s hard to make an offer that’s both flexible and certain. Courts recognize this and so won’t usually strike down. They may imply terms in the contract. No rules as to when terms are uncertain or not – each case has its own facts. Can only extract guidelines from the cases. Cases raise various fact patterns. a) terms may be present but uncertain b) terms clear but others missing c) terms not only missing but have been left to future agreement d) parties may have reached agreement but there’s an understanding that some formal contract will be executed

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Normally the fact that you have vague or uncertain terms will not be fatal because courts will construe it as best they can and come up with a reasonable interpretation. However, it’s not favorable either because you don’t know how court will construe your offer. Problem is usually when terms are actually missing. In such a case, court is more likely to say that parties are still negotiating – no contract. Guidelines about Certainty Questions to Ask: 1. Did the parties intend to contract? - Or were they trying to create just a framework to conduct business w/in and do not intend to be bound by a contract. (Framework not binding) - If it is clear that the parties intended to contract the courts will tend to fill in the gaps (eg. reasonable price). The crts will not make contracts, will not uphold agreements that are to uncertain (essential terms missing) - Courts will be inclined to imply reasonable terms when 1) commercial context 2) prior dealings. - If there is machinery in contract, some agreements can be saved (ex. Arbitration clause) (Foley) - If parties acted on agreement, court will strive to uphold its validity. (Foley) - Agreement to agree is not enforceable. 2. Have the parties finalized their contract? - sometimes vagueness arises b/c parties are still negotiating. 3. Even if they intended to contract and have finalized the contract are the terms too vague for the law to give effect? How would this arise? 1. Terms may be vague. - inferences which kill contract : parties had no intention to contract OR parties are still negotiating. - inferences that save a contract : parties were just sloppy or that is just the nature of the business. (Hillas) - court can save contract through imposing reasonable terms. 2. Terms may be missing. 3. Terms may be left for future agreement 4. Future formal document - do parties intend to be bound now or after the actual document. Tests to determine if contract was formed: 1. Conduct of parties (Foley) 2. Did the parties believe they were bound? (Hillas, Foley) 3. Is there some mechanism for resolving uncertainty (arbitration)? (Foley, Tolaini, Sudbrook) 4. Has one party benefited? (Foley) 5. Are the parties still negotiating? (Hillas) 6. Are the essential term expressed? (May and Butcher, Tolaini) 7. If the parties have acted or relied on contract, the courts will find a contract (Sudbrook, Foley) 8. Courts may sever an uncertain part 9. May be obligations to negotiate in good faith (Walford) Courts cannot make a contract - but the will try to give effect to it, even though the terms are difficult or are missing altogether. General - Two Constructions for Cases Mentioning a Future Formal Contract: 1) Reference to formal contract is a mere formality- parties are obligated to follow agreement. 26

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2) Parties intend the formal contract to be the binding contract-creates no obligation to follow what has been agreed to that point and allows one last opportunity to back out.    We have been asking: is what the parties have done sufficient to constitute a binding agreement? Put more formally, we ask: when are the dealings of the parties sufficiently certain to give rise to legally enforceable obligations? This legal question can be broken down into more specific topics: o Vagueness and ambiguity: When will the courts say that the terms agreed to are too vague or ambiguous to be binding? o Missing Terms: If there are missing terms that would be central to the agreement, there is no K o Agreements to agree: “lets agree into negotiations so I can buy your house”  no K on the purchase of the house o Interim agreements: if we agree on a short bullet form version of our K and leave details to be hammered out later; but we cannot agree on all the details; is the bullet form version still enforceable? A lost his dog; A tells B “I would love to have you find my dog”; B says: “I would love to find you dog, but only if you give me a fee”; A says: “sure, I will pay you a fee”; B finds A’s dog, but A refuses to pay the fee; what argument could B make?  B would say we had a K; but how much was the fee?  B had a weak case since there is a major missing term in the agreement (fee) If the court cannot find a certain K here, they will not try and enforce it; still, the court will try and give meaning to what the parties have actually intended to do, regardless of how poor of a job they have done so; still, it will depend on the totality of the circumstances If A had said: “I will give you a reasonable fee”, the courts would interpret it much differently  would consider what was reasonable

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Ambiguous, Vague or Missing Terms  If contract is too vague, ambiguous or is missing key terms, then courts will be unable to enforce it R. v. CAE Industries, Manpar  Courts can imply meaning of words in contract through context, purpose R. V. CAE Industries  Even if there was an intention to contract, it may not form due to uncertain terms R. V. CAE  If material terms are missing, then contract has not formed May and Butcher, Manpar except if those terms can be found through pre-determined method/formula: Hillas v. Arcos (or except when there is partial performance: Foley).  Need to have a contract formed to be able to go to arbitration: May and Butcher  An agreement to agree is no contract: May and Butcher  Partial performance will be strenuously protect: Foley Agreement to Negotiate  An agreement to negotiate in good faith is no more than an agreement to agree: Wellington  Negotiate in good faith is not enforceable whereas negotiate reasonably or best endeavours/efforts is enforceable: Wellington  For lease renewals, there is an implied term to negotiate in good faith: Empress Towers  Breach of good faith can occur if it is blatantly obvious: Empress Towers  Three categories from Brown v. Gould where options are analyzed 1. Where rent is simply “to be agreed” Not enforced 2. Where rent is to be established by a stated formula but no machinery is provided for applying the formula to produce the rental rate. Often the courts will supply the machinery and will find binding agreement 27

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3. Where the formula (what we’re seeking; market price) is set out but is defective and the machinery (method, TSX) is proved for applying the formula to produce the rental rate. In those cases, machinery may be used to cure the defect in the formula and will find binding agreement Rental/Permit Renewal: Implied term for Empress but not for Manpar (relied on language). Parties to an agreement who have done no more than agree to agree in the future on essential aspects of a transaction have not accepted reciprocal obligations to perform on ascertainable terms and thus have failed to make a K. Ex. A executes an agreement in hope of securing a firm source for the supply of goods in the future  But A may not be prepared to purchase at whatever peeve the market may dictate.  In this case, a term under which the parties agree to agree on price may reflect the fact that the buyer is not making a commitment involving acceptance of the risk of significant market fluctuation  Problems may arise if market prices are too high for A’s budget  Still, market price is normally the determinant of what amounts to a reasonable price  is the judge who finds a binding K here imposing a risk on A that he did not accept? Even if the parties would not be bound to buy or sell at absolutely any price, the agreement would at least commit them to seriously attempt to negotiate terms with the objective of establishing a mutually satisfactory price Distinction between an agreement to complete a transaction on unspecified terms or on terms to be agreed, and upon and agreement to negotiate in an endeavor to arrive at terms pursuant to which a transaction will be complete:  In the 1st kind of case, the subject of the agreement is the transaction itself  In the 2nd kind of case, the subject is the process by which it is hoped a transaction will be concluded The view that an express of implicit agreement to negotiate may in itself constitute a K has found new adherents among the judiciary; 2 problems with this:  Impossible to determine the content of the duty to negotiate: too uncertain to support a K  No basis upon which to determine damages for breach of such duty

Agreement with Formal Contract to Follow  Let’s say parties sit down and come up with the general premises of the agreement, but agree to make it a formal document later  In the event that they fail to get the formal document done, under what circumstances will the preliminary agreement be construed as a K? o If they have set out a number provisions, but have not agreed on all the essential terms, the preliminary agreement is not a K o If they have set out all the essential terms and basic principles that are the totality of what their dealings are and are just anticipating the formalization of the K, then the courts will find the preliminary agreement to be a K o If there is a basic agreement on all the necessary elements, but one or both of the parties wants a bit more time to think about it (the formal K will not add anything, but the parties choose not to be bound for some time), there is a need to decided which category the case falls under  generally, the court asks: “given the language and circumstances, had the parties the intention to be in a K at this point in time?” Conditional Agreements 1. Conditions can either form part of a conditional agreement, in which the obligations of the parties are in suspense pending satisfaction of the condition, or they can prevent the formation of an agreement until the condition is satisfied. (Wiebe). 28

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2. Whether a condition either (a) forms part of an agreement or b) prevents formation of an agreement, depends on its subjectivity: I. If the condition is totally subjective then no agreement will exist. II. If it is totally objective then there will be a conditional agreement. III. If it is partially subjective and partially objective then the outcome will depends on whether it is something to which the court can give meaning – i.e., whether it is sufficiently certain that the court can ascertain whether the obligation to fulfill the condition has been breached. (Wiebe). 3. Where a condition is not part of an agreement either party can terminate the offer/acceptance of which the condition is a part. However, if neither party does so, and the condition is fulfilled, then the parties will have a non-conditional agreement upon communication that the condition has been satisfied (unless the need for communication has been waived). 4. Where a conditional agreement has been formed, it will be a breach of that agreement not to do what is required for satisfaction of a condition (OK Detailing). 5. The court can imply terms with respect to who is required to satisfy a condition (OK Detailing). 6. The court can order specific performance of a subsidiary obligation to satisfy a condition (OK Detailing). 7. The Court can order damages for breach of a subsidiary obligation to satisfy a condition. Damages will be discounted to the extent that there is a chance that the condition would not have been satisfied even without the breach. In addition, damages will only be awarded if there is “some reasonable probability” the condition could have been satisfied without the breach (Eastwalsh). Questions and Issues: 1. Was there an option? - Separate contract with, upon exercise of the option, forms a valid second contract (Mountford). Irrevocable offer and nominal consideration is sufficient (Mountford). 2. Was it a conditional offer? - Have the circumstances changed so dramatically that any reasonable person would understand offer is not intended to remain open? (Financings v. Stimson). 3. Was there a condition precedent to existence or a condition precedent to performance? - Courts prefer to find a condition precedent to performance over existence (Dynamic Transport). - Is there a contract? (Wiebe). - A condition precedent prevents the creation of a contract in situations where the fulfillment of the condition is under the subjective control of one of the parties (Wiebe). - If satisfaction of condition is entirely subjective or too uncertain, a Court can’t imply obligation to a party that used “reasonable efforts” and there will be no contract, merely and offer (Wiebe). If not a contract, no binding obligations can be implied, and if there is a contract but there is no obligation to perform primary obligation(s) until condition is satisfied, Court may imply requirement to use “best efforts” because agreement is binding. Condition Precedent to Existence or Performance  A condition precedent can prevent formation of a contract subjective condition) or merely suspends the performance of the contract (objective condition). Wiebe v. Bobsien  There are three types of conditions: subjective, objective and subjective/objective. Wiebe dissent  “Subject to home inspection” = subjective. “Subject to satisfactory home inspection” = more objective. “Subject to home inspection with recommendation of improvements less than $500” = very objective. “Subject to satisfaction of proposed tenant” = completely external (true condition precedent). OBJECTIVE: event beyond the control of parties, external party to evaluate  “Subject to selling my home” Wiebe majority 29

Contracts CANS

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 “Subject to getting leave from military” Dawson  “Subject to share price of oil being above $X”  “Subject to satisfactory financing” Griffin v. Martens (need the include the qualifier)  “Subject to approval of subdivision” Dynamic SUBJECTIVE: event totalling in control of the parties; whim  “Subject to condition that could be elected not to perform” Aberfoyle Plantations v. Cheng  “Subject to my inspection of and approval of premises” Black Gavin & Co v. Cheung  “Subject to approval from president” Murray McDermid v. Thater OBJECTIVE/SUBJECTIVE: event to occur with some effort of one of the parties  “Subject to selling my home” Wiebe dissent  Business efficacy (why), officious bystander (who), best efforts (how) Parties’ Obligations  If contract is silent on who is to obtain approval, then an implied term may be found in legislation: Dynamic Transport  STEPS FOR BUSINESS EFFICACY: 1. Is condition binding? 2. Determine who will perform condition (bystander). 3. Evaluate the performance effort of the condition  Business Efficacy is a common law assumption to fill in the gaps.  Why use Business Efficacy? So when there is gaps in contracts, they all won’t fail  If a contract fails due to an external element, the courts will still not award damages for breach if the chances of success were extremely low. Eastwalsh Homes Unilateral Waiver 1. Parties can mutually agree to waive the need for a condition to be satisfied. 2. Where a condition requires a party A to take action solely for the benefit of B, B can unilaterally waive the need for A to do so (Barnett). 3. Where a condition requires party B to take action, or for a third party to take action, party B cannot unilaterally waive the need for satisfaction of that condition even if the condition exists only for B’s benefit (Turney; Barnett). 4. A right of unilateral waiver can be found on interpretation of the provisions of the contract – that is, it can be provided for by the parties (Barnett; Beauchamp). Questions and Issues: 1. Can one party waive the condition (is it for his sole benefit)? - parties can mutually agree to waive condition - one party cannot unilaterally waive if it is for the benefit of both parties. - When there is no express agreement, it is not possible to waive a true condition precedent (dependent on 3rd party and future event) (Turney v. Zhilka). And when there is no express agreement, party can unilaterally waive strict compliance with a condition if for sole benefit / protection of one party (Beauchamp).  A condition can be waived if a term is for the sole benefit of one party, the condition is not a true condition precedent and the condition is severable. Turney v. Zhilka, Barnet v. Harrison, Beauchamp v. Beauchamp  Severable – can’t change the subject matter (condition precedent can’t be subject to building another floor) Courts will usually find financing not a true condition precedent: Beauchamp is example. If the condition to be met is about the “what” and not about the “how”, the court will give the condition a broad interpretation, even if condition not met on a strict reading. Beauchamp v. Beauchamp Offeror is entitled to waive communication expressly, or can be implicitly waived, especially in a unilateral contract by indicating condition that has to be performed 30

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Contracts CANS
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Fall, 2012

From a common sense point of view, it makes sense for offeree to communicate acceptance and intention to complete condition (nonsensical agreement because intent to complete action is not action which is not acceptance) Once the act is complete the offeror is not permitted to revoke the offer even if it has not yet been communicated to them that the act was completed Offeror may also define the mode in which acceptance can be communicated (all other modes not allowed)

Intention to Create Legal Relations Balfour v. Balfour – the agreement that the husband and wife had was written down, and there was an intention. But court said that these matters were non-legal things, and not the subject of legally binding contracts. In some circumstances if you do A, B and C you have a contract. But there are certain arrangements where it is not assumed that a contract is created. These include family/marital as it is assumed that the parties did not intend to bring their matter before the court, and political promises (CAE industries). There is a presumption against intentionality in these situations, and in commercial cases where the parties expressly indicate no intention to contract, it is presumed unless rebutted. NEED INTENTION AND CONSIDERATION TO CREATE A LEGAL RELATIONSHIP  Balfour v. Balfour had consideration but was missing intention (family matter)  Brantford had intention but was missing consideration (gratuitous promise)  Gilbert Steel had intention but was missing consideration (for the variation) Consideration and Reliance 1. Consideration is a necessary prerequisite for the formation of a contract. Without consideration, there is only a “naked” exchanged of promises, which will not be legally enforceable as a contract (Dalhousie). 2. To have consideration each party to a contract must either provide a benefit to the other side or suffer a detriment (“trouble, prejudice or inconvenience”). 3. The “detriment” may not be negative, but it can simply involve the party in some way changing its legal position (Hamer v. Sidway (1891) NYCA – a promise not to use alcohol or tobaccos, swear or play cards until 21 constitutes good consideration even if it is beneficial to the promisor). 4. The court will not generally assess the adequacy of consideration, so that things as inconsequential as a “peppercorn” or 1 pound have been found to be good consideration, but the consideration must nonetheless be “real”. Thus, a promise to stop complaining is not good consideration (White v. Bluett) although payment of 1 pound for an option is (Mountford). 5. A promise to do something can be good consideration. Its adequacy as consideration is, though, assessed through analysis of the thing promised – the thing promised must count as consideration. 6. A promise to give money to charity does not create a binding obligation unless the charity gives consideration for that promise. Consideration does not arise from the promises of other subscribers, or from general promises by the charity to do good things with the money. However, a specific promise by the charity to use the money for a particular purpose, made in response to a particular request by the donor that that be done, may constitute good consideration (Dalhousie). 7. Past acts cannot be good consideration unless they form a single transaction with the later promise. The single transaction will arise where the past act was requested, then performed and then a promise of payment was made. In those circumstances the court will imply a promise of payment in the original request (Lampleigh). 8. A promise not to sue is good consideration. The mere fact that a legal suit is of doubtful validity does not change the fact that the promise not to pursue that suit is good consideration. 31

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9. 10.

11.

12.

13.

14.

However, the promise not to sue must be made in good faith. If the party promising knows that its legal claim has no chance of success, and has not serious intention of pursuing it, then the promise not to pursue that claim is not good consideration (Arkin). A promise not to sue a third party, or to delay bringing action against a third party, is good consideration (Kiska). It is likely, however, that a promise to forbear must be clearly made in order to be good consideration – the fact that you have legal rights which you do not immediately pursue does not equal a promise not to pursue them (Laskin, dissenting in Kiska). An act which is done as a matter of public or legal duty can constitute good consideration absent some public policy reason why it should not be. To be good consideration the act must be of benefit to the person to whom the promise to perform the act is made (Ward v. Byham (1956) Engl. CA). An act which is done pursuant to a legal obligation to “A” can be good consideration relative to “B”, if the act is of benefit to “B”. Thus, I can promise to do a service for “A” and also promise “B” that I will do that service. My doing the service is good consideration relative to both “A” and “B” (Shadwell; Satterthwaite). Where two parties have a contract, a change to that contract which benefits only one side (and/or imposes a detriment only on the other side) may not be legally enforceable because made without consideration (Stilk; Gilbert Steel). Recent cases have, however, modified the application of that doctrine so that the practical realities of the parties dealings can be analyzed to determine whether, as a practical matter, there is actually consideration. To constitute consideration the circumstances must resemble the following: I. If the parties have a contract. II. One side, B, starts to doubt the other side’s ability to complete. III. B offers to pay A more for A’s promise to actually complete. IV. As a result, B obtains a benefit of obviates a disbenefit. V. A has not committed fraud or exercised economic duress. VI. The benefit or obviated disbenefit to B is the consideration (Roffey). Economic duress can be said to arise when 1) the variation in the contract was extracted as a result of the exertion of pressure on the other party (e.g., an express or implied threat to breach the contract); and 2) the “coerced party has not practical alternative but to agree to the coercer’s demand to vary the terms of the underlying contract”. A practical alternative would include someone else to do the work for you and then suing the would be coercer for damages. Once these requirements are satisfied then the court must focus on the key question of whether the coerced party consented to the change. Determination of consent will take into account a) consideration (although this is not determinative); b) whether the party qualified its agreement by saying it was given “under protest” or “without prejudice”; and c) whether the party withdrew its agreement shortly after giving it (Greater Fredericton Airport).

Definition of Consideration  If there is no consideration in charitable donation pledge, the pledge is not an enforceable contract: Brantford  If a donation was made on the naming of the fund condition, then there is consideration and the agreement is a contract: Allegheny College  Consideration for the benefit of another is valid consideration. Kiska  If there is mutual abandonment of an old contract and a new contract is formed, then the consideration will be the same as for the old contract: Gilbert Steel v. University Construction  If there is a variation to an existing contract, then there needs to be new consideration. Gilbert Steel v. University Construction  Benefit to both parties (and a lack of any detriment) is valid consideration. Williams v. Roffey 32

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Avoiding a breach on contract is valid if it is not joined with economic duress. Williams v. Roffey Consideration must flow FROM the party in the contract, but not necessarily TO the other party Consideration is the price for which the promise (or the act) of the other is bought

Past Consideration  Past Consideration: If a promise is made in recognition of a benefit previously received, that promise will be enforced by the courts unless there was no implied term that some reward would follow the act: Lampleigh  1. Act done at promisor’s request. 2. Parties would have understood there was an expectation of reward. 3. Promise would have been enforceable if it had been in advance; only an issue of ordering. Adequacy of Consideration Consideration can be a peppercorn: legal proverb - the court will not generally assess the adequacy of consideration (Mountford) Forbearance  Forbearance: Forbearance is valid consideration unless it is known that the claim is invalid. Arkin  Deliberately refraining from doing something you could do can amount to consideration  promise by a party not to sue can be a form of consideration so long as done in good faith (Arkin)  a promise to not sue a third party, is good consideration - a legal detriment to the suing party (Kiska) Public Duty  Performance of a public duty is not consideration unless something more is asked on top of duty already owed.  an act which is done as a matter of public or legal duty can constitute good consideration absent some public policy reason why it should not be  to be good consideration the act must be of benefit to the person to whom the promise to perform the act is made (Ward) Duty Owed to Third Party  No consideration because the plaintiff is only doing what they are legally bound by contract to do; same argument as public duty  - if you owe a duty to a third party, it can still be good consideration to another party (Shadwell: Satterthwaite) Duty Owed to Other Contracting Party - to carry out an existing contractual duty can amount to good consideration if there is practical benefit to the promisor (Roffey) this is a modification to Stilk  test in CANS Discharge of Duty by Part Performance - part payment of a debt is not enough for consideration, an independent benefit is required (Foakes upheld in Selectmove) - there are several qualifications to this - Foakes is qualified by Judicature Act where part performance is okay as long as expressly accepted, or when part performance has been completed Promises Under Seal - promises made under seal are binding (Kiska: Laskin – dissent)

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Contracts CANS
Promissory Estoppel and Waiver

Fall, 2012

General - Promissory estoppel exists to qualify the existing obligations of a party to a contract, even where no consideration has been given by that party for that charge. - Difference between waiver and promissory estoppel is that waiver occurs where there has already been a breach – conceptually no difference - The primary significance of any difference between waiver estoppel is that waiver may operate after contractual relations between the parties have ceased (because of the breach), while promissory estoppel cannot (Canadian Superior; Petridis) - Promissory estoppel will arise where a. There is an existing agreement; b. One party represents or promises that it will not strictly rely on or enforce the agreement; c. The course of dealings between the parties now means that it would be inequitable to allow strict reliance on, or enforcement of, the original existing agreement. That is, the promise to modify should be enforced (Hughes; High Trees) - one can vary a contract and then change it back with notice (High Trees) FRAMEWORK 1) Existing Legal Relationship 2) Clear Promise 3) Reliance 4) Detriment 5) Equities 6) Sword and Shield 7) Retraction  Promissory Estoppal Test – The essential elements o Is there an existing relationship o Is there clear representation o Is there reliance o Detriment o Equity

Requisite Promise - for promissory estoppel or waiver to arise, there must be some clarity in the promise or representation which has been made. A simple granting of friendly indulgences will not be sufficient - promise can be from implied conduct –test would be a reasonable person (Burrows) - mere failure to exercise rights will not be seen as a waiver of rights (Burrows) Equitable Nature of Doctrine - to rely on estoppel, must demonstrate that it would be inequitable for the promisor to back out of their promise - cannot extort a promise from someone (Rees) - promissory estoppel applies to part payment of debt and if you accept you’ll be estopped, despite Foakes – extinguishes right (Rees) Suspension or Extinguishment of Rights - waiver is where a party of a contract forgoes reliance on something that should be relied on (SRB) - the party making a promise/representation must have full knowledge of their rights and an “unequivocal and conscious intention to abandon them” (SRB) 34

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Retraction - a waiver can be retracted on notice – can’t be done immediately (SRB; Kabob) - if other party has not relied on waiver, you don’t need to give notice and you can just retract it (SRB) - there may be circumstances where retraction is not possible - if there is something about the promise that it appears to be the nature of the promise so that it covers the whole relationship, it cannot be retracted (W.J. Alan) - retraction looks forwarded, you cannot retract going backwards - detrimental reliance by the promisee on the promise will indicate that it would be inequitable not to enforce it (Post Chaser) Variation of Existing or Creation of New Relationship - the promise must be for relaxation of existing obligations; it cannot impose an additional obligation on one of the parties. (Combe) - If the promise imposes an additional obligation, it must be supported by consideration. (Sloan; Combe) - if promissory estoppel can be used as a defence, it can also be used as a grounds of action(Robichaud) - if consideration is given to the promise being acted upon (Sloan) - if a contract comes to an end, there is no contract existing and it is NOT a pre-existing contract  promissory estoppel does not apply (Canadian Super Oil) - if you have a pre-existing contract that has come to an end because a breach of a party, waiver can be used to allow continuance of the relationship (Petridis) - you cannot use promissory estoppel as a cause of action (Reclamation Systems) – overrules Robichaud and Canadian Super Oil potentially – no consideration - point of the case – when you look at all of the estoppel together. - if you make a promise to someone, they act on that promise to their detriment, and it would be unfair or unjust or inequitable for you to ignore it then the court will hold you accountable (Wooley re: Waltons) - Is the Sword and Shield stuff!! - Variation of contract: Nasr involves a variation of an original contract (for which each party gave consideration of the variation of the contract in Nasr – different currencies).

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Contracts CANS

Fall, 2012

Tests
Test for Communication of offer: 1) Did offeree have knowledge of offer? REQUIREMENT (ex. Clarke) 2) Was the offer communicated to the offeree? REQUIREMENT (ex. Blair v Western Mutual) 3) Was offeree motivated by the offer in completing the condition? IRRELEVANT (ex. Williams v Cawardine) 4) Did offeree rely upon offer in subsequent actions? YES (ex. Carlill v Carbolic Smoke Ball) Test for Acceptance: I) Was acceptance implied by conduct (subsequent conduct)? II) Was consideration rendered for the offeror's benefit? III) Was there an expectation or reliance? QUESTIONS TO ASK: 1) Was there an offer, or mere quotation of price, or merely an invitation to treat? 2) Consideration present? 3) Was the offer communicated? 4) Was it a conditional offer? What were the conditions? 5) Was the offer still open at the time of acceptance? 6) Was the offer revoked? 7) Was the revocation communicated to the offeree? 8) Was the offer accepted? 9) Was acceptance communicated to the offeror? Effectively? In expected time and mode? 10) Was the offer rejected or was a clarifying question asked? (counter offer vs. inquiry) 11) Are all of the terms of the agreement clear? 12) Were the parties ad idem? 13) Can one part of the contract be severed without affecting the rest or the contract? 14) If conditional, does it go to performance of the condition, or to the contract itself? 15) Can one party waive the condition (it is for his sole benefit)? Need to have: a) Agreement i) offer ii) acceptance b) Requirements i) consideration ii) contractual intention (reliance) c) Special Circumstances (refuse to enforce) i) misrepresentation - both parties must be certain as to what is affected ii) illegality iii) capacity - cannot contract with a drunk or a child. TEST FOR PROMISSORY ESTOPPEL: 1) Is there a pre-existing legal relationship between the parties? (see Petridis below) 2) Is there consideration for the variation? If so, the agreement (promise) stands on its own and promissory estoppel is not necessary. Or, could it be viewed as an Unilateral contract, whereby consideration is the performance of the requested act? 3) Is there a clear promise or representation, not just a mere friendly indulgence (See Burrows below) that the party was not enforcing his legal rights? Does this promise concern the enforcement of his existing legal rights? 4) What was the scope of the promise?

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Contracts CANS
5)

Fall, 2012

Is there reliance on the promise by the p/ee? (See W.J. Alan below)(reliance need not be detrimental, but it is relevant to determine whether it is equitable to allow promisee to go back on his promise). 6) Did the p/ee rely on promise to his detriment? (See W.J. Alan below) Or did the p/ee alter his position? (See The Post Chaser below. Tool Metal) 7) Were the rights extinguished or merely suspended? (courts are reluctant to find rights extinguished unless it was made absolutely clear). If only suspended, was reasonable notice given about the reversion back to the strict rights? 8) Did the p/ee himself act equitably? (See D & C Builders below) 9) Would it be inequitable to allow the promisor to go back on his promise? (Post Chaser) 10) Was there reasonable notice to terminate suspension of rights? (See Tool Metal below)

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Charts Necessary Elements to Form Contract
Consideration Mistake

Offer
x for y to z (any other material terms) An offer must be a clear, unequivocal and direct offer to another party Price quotes are not offers Canadian Dyers Intention to offer ≠ offer Blair Self service stores: offer = customer, acceptance = clerk Dawood Boots Tender: offer to contract Ron Engineering Construction

Acceptance
It also must be clear, unequivocal, unconditional and made by the person to whom the offer is intended even if imperfectly expressed Dawson Helicopter or pending further gov’t agency approval Manchester Diocesan Council for Education Offeror can dictate terms of acceptance: time limit, method, where to send but if not specified, reasonableness a factor By words or conduct St. John Tugboat v. Irving Silence cannot be acceptance. Exception Felthouse v. Bindley As performance Errington v. Errington Carlill v. Carbolic Smoke Ball Co. Note: counter offer = rejection of offer, so go back to beginning. Livingstone v. Evans Battle of the forms  last shot wins (unless sig.  & no attention drawn to it)

Communication of offer
Must be knowledge of offer in order to accept Williams v. Carwardine R. v. Clarke Blair

Comm’n acceptance
Occurs when & where offeror hears Postal rules or instantaneous? Henthorn v. Fraser Must be under terms specified in contract Eliason v. Henshaw Or a reasonable approximation Carmichael v. BMO

Revocation
Can revoke until communication of acceptance received No specified deadline: offer naturally expires “in a reasonable time”  Barrick v. Clark (depends on nature of transaction, behaviour of parties Cannot try and accept if aware property already sold (implied communication of revocation Dickson v. Dodds) Unilateral contract: can’t revoke once performance has begun  Errington

Contracts CANS
Agreement

Fall, 2012

Binding

Non-binding

Consensus between the parties (behaviour, words) indicating they understood it to be binding Foley v Classique Coaches

If disputed, then welcome “the reasonable man” Smith v. Hughes

Absence of a material term May v. Butcher
logic: easier/fairer for court to determine no contract than to try & guess what the missing terms would have been

Agree to negotiate Wellington City Council
Burden: what satisfies req/t to negotiate? No basis to determine damages. Terms?

Uncertainty
Vagueness not fatal (Agreement w/ unspecified terms)

Behaviour CAE Industries Foley v Classique Coaches

Objective mechanism Sudbrook Trading Estate v. Eggleton

Obj. formula Hillas & Co. Ltd v. Arcos Ltd

Absence of Consideration Dalhousie logic: some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other CONTRACT LAW DOES NOT ENFORCE GIFTS

Reasonableness Empress Towers v. Bank of NS

1

Canadian Dyers Carbolic Smoke Ball Pepsico

Man wants to sell house beside factory

Boots

Dawood

Ron Engineering Chinook MJB

Carwardine

Clarke

Blair

St John Tugboat

Felthouse

Dawson

Livingstone

An invitation becomes an offer when specification is made (that a reasonable bystander would understand) Woman uses smoke ball and gets Unilateral offer- the performance of the conditions flu and claims funds indicate acceptance and form a binding contractcommunication is through the offer itself Guy collects pepsi points and An ad is not an offer into a K unless it is clear, wants Harrier jet definite, and explicit, leaving no room for negotiation Breach of statute having In a self-service business, the consumer makes the pharmacist supervise transactions offer at the till and the clerk has the power to accept or reject the offer, under the supervision of the pharmacist Price tag switcher busted for theft Clerk has authority to make a binding contract with a customer- offer and acceptance, therefore no theft occurred Company makes a VERY low bid on Submitting a tender bid is an acceptance of the offer a tender and wants to back outmade by the offering company- it is a binding Ka and law of mistake cannot be withdrawn without penalty Privilege clause relied on by offeror The privilege clause in a tender document does not of tender to chose local company override the obligations the vendor has to bidders Bids to construct a pipe where Ka imposes an obligation on the owner to bidders different types of fills will be used regardless of the privilege clause- the owner must and bidders have to give overall accept a bid that is VALID only- ie that complies with price the terms of the tender application rules Woman on deathbed confesses to Knowledge of offer and performance of known identity of murderer- lives and terms, regardless of motive, is sufficient for a claims reward contract to be binding Informer forgets about reward at Motive of informer may be immaterial but consent is time of offering information vital in K- if informer has no knowledge of offer then leading to arrest of killer there is no consent/acceptance and no K **ILG DISAGREES WITH THIS RULING Motion passed by company to give The intention of a resolution cannot be considered secretary retirement bonus but to create legal obligations or be a K w/out company folds before she can communication and evidence of acceptance collect Tug boats on call but not paid for If a person knows consideration is being rendered for his benefit without an expectation of pay and he acquiesces, he is bound to pay- silence for beneficial services not an excuse Nephew sells horse to uncle that is An intention that remains unexpressed cannot result later auctioned off by mistake in legally binding obligations- an offer without formal acceptance is not binding Army man knows where minerals In a bilateral agreement, each party is protected are and tries to set up K with an from revocation (a retraction of the offer that excavator cancels K before it is formed) Offer to sell land reaffirmed by If an offeror gets a counter-offer, and he replies in letter saying he cannot reduce the such a way as to not reject the offer but reaffirm the original price original offer, then the offeree can accept that original offer

Contracts CANS
Butler Machine Tool Purchase of machine where terms of seller and buyer are different (buyer asks for fixed terms and orders machine with these termsseller accepts but then tries to insert variable price terms) K for sale of pulp and paper where term of arbitration is disputed K where delivery of offer is by wagon but acceptance is by different form and is sent to the wrong place House purchase where seller is unavailable to accept offer, including the banker Faxed proposal for pulp logs and accepted by mail being sent- is the only way of accepting by fax? Vienna-London contract made via telex

Fall, 2012
When looking at a battle of the forms, the correspondence should be considered as a whole and the last set of forms that is sent and received without raising objections is the basis of the contract In battle of forms, any terms that are obscure of unclear, or whose notification is not clear, are not binding If the acceptor reasonably meets the intention of the terms of the contract the contract should be binding- in this case use of mail versus wagon was NOT an acceptance way to communicate acceptance If an offeror set the terms of K, he must ensure that it is possible to meet such terms and if he does not ensure this, reasonable compliance by an offeree is binding The terms of the mode of acceptance that are set by the offeror must be complied with to create a K. Postal rules- In instantaneous forms of communication, the K is completed upon receipt of acceptance at the place and time where the offer originated from (not where the acceptance is sent from) or at place and time where and when performance of acceptance occurs Postal rules- Where there are circumstances where it could be assumed that the post could be used as a means of communication of acceptance, the acceptance is complete as soon as it is posted Revocation of an offer can occur at any time or knowledge of the revocation can end an offer without communication- acceptance is not possible after revocation- revocation can supersede acceptance As long as performance is maintained the performer is protected from revocation at any time including before the completion of the offer- equitable protection because revocation would be unfair When no time limit is set in the terms a reasonable time limit for acceptance can be determined by examining the context of communication and the nature of the transaction (town gossip is not certain information like in Dickinson) If a person’s actions or words demonstrate a manifest intention to enter into K regardless 1

Tywood

Eliason

Carmichael

Trans-Pacific Trading Brinkibon Ltd

Henthorn

Selling property and withdrawing offer where secretary involved

Dickinson v Dodds

Dickinson wants to buy land from Dodds, before he makes offer to Dodds, he finds out through 3rd party it is already sold Mortgage that is revoked near the end of term of mortgage (because father dies and mortgage is through him) Seeling farmland where there was no time limit on acceptance and initial offeree hears through gossip of purchase by someone else

Errington v. Errington & Woods

Barrick v. Clark

Lindsey v. Heron

Purchase of Eastern Cafeteria shares where two companies have

Contracts CANS
a similar name

Fall, 2012
of an error or other intentions, K is binding (Dissent- there is no concensus ad idem so no contract If a person’s intention manifested by works or actions and the evaluation by a 3rd party despite a mutual mistake suggests a K exists, a K does exist Passive acquiescence of a seller in the selfdeception of the buyer does not entitle the buyer to avoid K- rule of law comes from rule of morality- a promise is to be performed Equity will relieve against performance of a K obtained by a party who knew the other side was mistaken about a material fact, and who then took advantage of that mistake Terms of K can be assessed within the context of K for clarity An agreement between two parties to enter into an agreement in which some critical part the K matter are left undetermined = there never was a K at all Court may infer terms into a contract based on the past dealings of the parties rather than void the agreement

Staiman Steel v. Commercial & Home Builders Smith v. Hughes

Glasner v. Royal LePage

R. v. CAE

May and Butcher v. the King Hillas v. Arcos

Auction of steel where terms are mistaken- plaintiff though it was commercial AND used steel and refused to sign waiver that he was accepting only used steel K for old oats not new oats- buyer believed he was buying old oats, seller believed it was an order for new oats Mistake in signing deal to purchase a house based on calculated decision by seller to trick buyer about insulation CAE enters into agreement with gov’t to run an airplane maintenance base Agreement without the price for surplus tentage within the terms

Foley v. Classique Coaches Wellington Empress Towers v. Bank of NS

Purchasing timber from Russia (?) with option to purchase more- this option implied the terms as equivalent to the terms of the previous contracts 3 year petrol deal- part of other contract- that contract had exclusivity clause that they would buy petrol from them exclusively An agreement to agree was established to purchase a property Bank leases space and on the day the lease expired was given tenant’s terms

Mannapar Enterprises Wiebe v. Bobsein Wiebe v. Bobsein

Had a 5 year deal to get sand/gravel from reserve Sale and purchase of BC houses with an interim agreement Trial decision affirmed on appeal but dissent shows how satisfaction of Cond. Prec. dependent on subjective eval can be illusory

If parties are operating under the assumption of a K where a term is periodically set, this lack of agreement on the term cannot void the K An agreement to negotiate in good faith is too uncertain to constitute a binding K In light of the renewal clause, landlord should not be compelled to enter into a renewal tenancy at a rent which it has not accepted as market value- BUT landlord has obligation to negotiate in good faith and not to withhold agreement unreasonably No duty to negotiate in good faith since there was no benchmark to provide ‘fair value’ or ‘market value’ A condition precedent merely suspended the obligations of the contract thus revocation is not possible Refer to notes on Alifeyah’s CAN- page 16

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Contracts CANS
Dynamic Transport v. OK Detailing Barnett v. Harrison Turney v. Zhilka Seller wants out of selling land

Fall, 2012
The court will imply (where terms are objective enough) an obligation on the parties to make best efforts to bring about the event which constitutes the cond prec A true condition precedent cannot be unilaterally waived A true condition precedent is one where an obligation exists on both parties which depends on a future uncertain event which depends entirely on a 3rd party and thus neither party can waive the condition A naked voluntary promise cannot be converted into a binding legal K by the subsequent action of the promise alone without the consent, express or implied, of the promisor

Sale of land where the purchaser could not get site plans approved Waving of condition precedent of the sale of land in Streetsville

Dalhousie v. Boutilier Estate

Money subscribed/left to college as part of a subscription drive

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Contracts CANS

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Case Briefs
Canadian Dyers Assn. Ltd. v. Burton (1920), 47 O.L.R. 259 (HC)
FACTS: π asked for a quote and Δ provided one. Π “is that the lowest you can go?” Δ “the last price I gave you is the lowest I am prepared to accept … if it were any other party I would ask for more.” Π accepted the offer and sent a deposit cheque. Δ’s solicitor set a draft deed and said they would be ready to close on the 1st. ISSUES: Whether there was an offer capable of acceptance or merely an invitation to treat. HOLDING: Yes, it was an offer capable of acceptance. REASONING: X (house) for Y (money) to you (price I gave you; if it were any other party). Actions strengthen conclusion: kept cheque, drafted deed, and estimated closing date RATIO: If there is “X for Y to YOU” then an offer has been made. Actions of the other party may strengthen the conclusion.

Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256 (CA)
FACTS: Δ’s ad in paper: Reward will be paid to anyone who uses the product as directed and still gets the flu. There is money in a bank “shewing our sincerity in the matter.” Π used product as directed, got the flu, came forward to collect reward. ISSUES: Whether elements of a binding contract are present (offer, acceptance, consideration). HOLDING: Yes, there was a binding, enforceable contract. REASONING:  Offer: X (reward $) for Y (performance  use product, flu, come forward) to YOU (person who completes all elements of the performance). Intention shown by having money in a bank account set aside of this specific purpose.  Acceptance: Came forward to collect reward. Acceptance comes after performance in a unilateral contract.  Consideration: Change of behaviour, inconvenience  Contracts do not have to be perfect. Offer can’t be given forever. Court implied timeframe to be the current flu season. RATIO: An offer to the world becomes a binding contract when it contains the means of specifying identity.

Pharmaceutical Society of GB v. Boots Cash Chemists (Southern)[1953] (CA)
FACTS: Pharmaceutical company needs to comply with Pharmaceutical Society regulations. Instead of asking a person for an item behind the counter, people can take items off the shelf and bring to cashier to purchase. ISSUES: Whether the item on the shelf is an offer capable of acceptance or merely an invitation to treat. HOLDING: It is an invitation to treat. REASONING:  If the item of the shelf was an offer, as soon as you took it off the shelf and put it in your basket, you have accepted that offer and cannot change your mind and put it back on the shelf.  It is an invitation to treat. You take it off the shelf and go to the cashier, who accepts your offer to purchase. Performance is money changing hands. Further, items on the shelf lack identity. RATIO: If an offer lacks identity, it is merely an invitation to treat.

R. v. Dawood, [1976] 1 W.W.R. 262 (Alta. CA)
FACTS: Δ charged with theft. Change price tag in store and went up to cashier to pay. ISSUES: Whether switching constituted theft. HOLDING: There was no theft. 4

Contracts CANS

Fall, 2012

REASONING: Using Boots, Dawood offered to purchase item and cashier accepted. Cashier found to have authority to accept offer. If she did not have authority then it could be theft. Contract could be void for fraud. RATIO: If price tags are changed and new price is offered to cashier and cashier accepts, it is not theft unless the cashier does not have authority to accept transactions. DISSENT: Transactions of this type are unilateral contracts. The teller does not have authority to act on behalf of the company. Offer (price on shelf). Performance (take off shelf and give money to cashier). Acceptance. More evident now with self service check outs.

R. v. Ron Engineering & Construction (Eastern) Ltd. (1981), (SCC)
FACTS: Tender was submitted by Ron Engineering. Ron revoked it after the deadline set by Tender Agreement Documents. Ron Engineering wanted deposit back. ISSUE: Whether a contract had formed between Crown (gov’t project) and Ron Engineering HOLDING: Yes, a contract had formed. REASONING: Contract formed when tender submitted (completion of performance). At that time the relationship is governed by the Tender Agreement Documents. Documents said that you can revoke up until a certain date (usually can’t revoke once submitted because you have a contract). RATIO: If a tender has been submitted (completion of performance, unilateral contract), then party’s relationship is governed by the Tender Agreement Documents.

M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. (1999) (SCC)
FACTS: MJB and another party submitted bids. Other party won bid and completed the work. MJB said that their bid was invalid because it was a referential bid. ISSUE: Whether a privilege clause in Tender Documents includes the ability to disregard the lowest bid in favour of a non-compliant one. HOLDING: No, cannot accept a non-compliant bid. REASONING:  Canadian Pacific Hotels. V. Bank of Montreal (LeDain, J.) Terms may be implied by  Custom or usage (community/industry standards; Chinook). Implied that only valid submissions would be accepted.  Incidents to a particular class of contract: Rules from court. Changing the rules set out by Tender Documents makes the bid invalid.  Business efficacy through shared assumptions: What would bystander think was agreed to? Bystander looking it would assume that invalid tenders would not be accepted.  Damages: Vendor appears to only be concerned about lowest price so, but for the breach, MJB would have had the contract  Non-complaint bid does not meet the performance necessary to enter into unilateral KA. RATIO: If a bid is invalid, then, according to industry standards and implied terms, it cannot be accepted.

Williams v. Carwardine (1833), 110 E.R. 590 (KB)
FACTS: Walter Carwardine murdered. William Carwardine (brother) had handbill published “whoever gives information that leads to conviction of Walter’s murder will receive an award (unless you are the murderer).” William Williams beat Mary Ann Williams. Mary Ann, believing she was going to die, decided to ease her conscience and voluntarily gave information that lead to arrest and conviction of William Williams. ISSUE: Whether Mary Ann Williams is entitled to the reward. HOLDING: Yes, she is entitled to the reward. REASONING: Mary Ann completed the necessary performance set out by the offer made by William Carwardine. Although Mary Ann’s motivation was to ease her conscience, court decided that they

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Contracts CANS

Fall, 2012

could not go into her motives. Court also found that she must have had knowledge of the reward since it was posted all over the area where she lived. RATIO: If a person is aware of the reward for information offer and performance is completed (unilateral contract), then the person is entitled to that reward, regardless their motivation for completing the performance.

R. v. Clarke (1927), 40 C.L.R. 227 (Aus. HC)
FACTS: Government offered reward for information essential to conviction of two murders. April: murders took place. May 21: proclamation issued. June 6th: Treffene arrested with Clark. June 10th: Clark gave information. June 10th: Coulter arrested. Convictions for one murder. Inspector Condon suggested to Clark that he should claim reward. Clark had previously seen the proclamation, but stated that, when he gave the information, he did so because he was breaking down under the strain and he had no thought of the reward. ISSUE: Whether Clarke is entitled to the reward. HOLDING: No, he is not entitled to the reward. REASONING:  Technical reading: “arrest and convictions of the person or persons who committed the murders.” Information only lead to arrest of 1 of 2 people who committed only one of the murders.  Clark said he had lost the knowledge of the reward at the time he gave information; took himself out of the pool of applicants with that statement. Carwardine did not go that extra step. RATIO: If stated that knowledge of reward had be lost at time of performance, then there is no meeting of the minds/contract. Problem: If reward must be within one’s thoughts at the time of acceptance to qualify as consent, how might this relate to ongoing performance where thoughts of reward may be put aside from time to time. How do you measure if knowledge was at forefront of just subconscious?

Blair v. Western Mutual Benefit Assn., [1972] 4 W.W.R. 284 (BCCA)
FACTS: Board meeting where executives unanimously agreed to give π $8,000 retirement for long service. Π typed out minutes to the meeting as her role of secretary to the board. ISSUE: Whether typing out the minutes constituted an offer to the π. HOLDING: No, lacks communication of an offer REASONING:  The company never communicated an offer to π. There was intention, but that is not good enough. An offer needs to be ‘from company to π”.  Finding out about the offer indirectly. They weren’t talking to her, she was just listening.  Board is the brain of the company. Just because the company “thought” it, nothing was communicated. RATIO: If an offer is not communicated, then there can be no contract. Intention to offer something is not enough to bind parties.

St. John Tug Boat Co. v. Irving Refinery Ltd., [1964] S.C.R. 614
FACTS: Series of previous “one off” contracts. Irving continued service without a formal contract and issued invoices. St. John was silent. ISSUE: Whether silence can be acceptance. HOLDING: Yes, silence was acceptance. REASONING:  There was a pre-existing relationship. The relationship continued (service and invoices) without a new formal offer/acceptance. St. John’s silence speaks of affirmation.

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Contracts CANS

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No reason why St. John would think the services were free (were not before and is receiving invoices). If he had an issue with Irving’s services, he should have said something at the beginning, not months later.  A reasonable person would think there was intention to still be found in being in a contract; the conduct of the companies affirms this position. RATIO: If there is a prior history of contractual relationship, then silence can be a form of acceptance; implied acceptance of renewal contract.

Felthouse v. Bindley (1862), 142 E.R. 1037 (Ex. Ch.)
FACTS: Uncle wanted to buy horse from Nephew. Uncle: If I don’t hear from you, then I assume you accept offer.” Nephew did not respond.  Jan 2nd: Uncle sets terms and price (offer)  Feb. 25th: Nephew conveyed intention to sell horse to uncle to auctioneer; horse sold (oops)  Feb. 27th: Nephew conveys to uncle that he intended to sell him the horse. ISSUE: Whether there was a contract between Nephew and Uncle. HOLDING: No, there was no contract. REASONING:  Nephew did intend to accept, but there was no communication of the acceptance to the uncle; intention is not good enough. Communication of acceptance to Uncle occurred after horse was sold.  Cannot have “meeting of the minds” to sell horse if Nephew knows it is impossible since he doesn’t own it anymore.  No prior contractual relationship, so “if I don’t hear from you, then I assume you accept offer” is meaningless. RATIO: If there is no prior contractual relationship, silence cannot be a form of acceptance.

Livingstone v. Evans, [1925] 4 D.L.R. 769 (Alta. SC)
FACTS: Δ: Offer to sell land $1800. π: Send lowest price, countered $1600 cash. Δ: “Cannot reduce price.” Π Accepted ISSUE: Whether π’s counteroffer was a rejection and new offer and whether “cannot reduce price” was just a rejection of π’s counteroffer or a renewal of the original offer. HOLDING: It was a counteroffer. It was a renewal of the original offer. REASONING:  If you change a term of the offer, you are rejecting the offer and sending a counteroffer. If you make an inquiry, the original offer still stands: Hyde v. Wrench  Π: send lowest price = inquiry. Counter = rejection and new offer.  Δ: cannot reduce price = standing by original offer. Not only rejecting $1600 cash. Referred back to original price. RATIO: If you change a term in an offer, you have rejected the original offer and are making a counter offer, regardless of language actually used. If you are making an inquiry then the original offer still stands (no change of terms).

Butler Machine Tool Co. v. Ex-Cell-O Corp., [1979] 1 All E.R. 965 (CA)
FACTS: Seller: quote to buyer with terms. Buyer: Placed order with own terms. Seller: Sent buyer’s tear off slip from order and attached letter “buyer’s order was subject to seller’s terms.” ISSUE: Whether the buyer’s or seller’s terms prevail in this agreement HOLDING: The buyer’s terms prevail. REASONING: Used Holistic Approach. Buyer’s variation was very clear whereas writing a note on the tear off slip “other terms” too vague.

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Contracts CANS

Fall, 2012

RATIO: If material aspects of a contract have been carried out but there was not actually a contract between the parties, there are three different approaches to take to determine whose terms and conditions governed the agreement.

Tywood Industries v. St. Anne-Nackawic Pulp & Paper (1979), (Ont. HC)
FACTS: Buyer and seller had own terms and conditions. Buyer placed two orders with their terms and conditions with “mail acceptance copy of this order…” Nothing was mailed nor any follow up when acceptance not received. Order went through anyways. ISSUE: Whether the buyer’s or seller’s terms prevail in this agreement HOLDING: The Seller’s terms and conditions prevailed. REASONING: The buyer’s terms and conditions came late in the game and no attention was drawn to it. The buyer had no reaction and did not complain when acceptance was not mailed. Used Holistic Approach RATIO: If material aspects of a contract have been carried out but there was not actually a contract between the parties, there are three different approaches to take to determine whose terms and conditions governed the agreement.

Dawson v. Helicopter Exploration Co., [1955] 5 D.L.R. 404 (SCC)
FACTS: H.E. offered to give Dawson a percentage of the value of mineral deposits in exchange for showing him the location. First part of offer was to go on the trip if he can get leave from military and if he could get a pilot. Dawson agreed. H.E. found a pilot, but employee had visited the site and said the mining there was doubtful. H.E. returned to site later and mined anyways. ISSUE: Whether Dawson had a contractual right to a percentage of the mineral development project. HOLDING: H.E. is in breach of contract. REASONING: Stage 1: Scouting Trip  Go on trip and show the location  Conditions: If can get a pilot and if Dawson can get leave  Valid failure is being unable to get a pilot or get leave  Invalid failure is fulfilling condition but still not going through with contract  Invalid failure because pilot was obtained but did not want to go on trip. Stage 2: Exploration (knowledge for money) RATIO: Courts prefer to find a bilateral contract over a unilateral contract. If there is contract with conditions, once that condition is met, you are in a binding relationship. If conditions on both sides, once one side had met conditions, that side is binding on the condition that the other side can make their condition.

Eliason v. Henshaw (1819), 4 Wheat. 225
FACTS:  Feb. 10: Buyer offers to purchase flour from sellers “Please write by return wagon whether you accept our offer”. Sent from Harper’s Ferry  Feb. 14: Sellers accepts offer and sets letter by post to Georgetown  Feb. 25: Buyer says “too late, already bought flour somewhere else” ISSUES: Whether acceptance was too late and whether acceptance was in the correct location. HOLDING: Timing: not too late. Location: incorrect, should have been to Harper’s Ferry. REASONING: Timing Issues  Buyer requested acceptance by wagon, but was sent by post. Court found that the request to be sent by wagon was more about the timing of the response and not the mode.  Court estimated the time a return trip by wagon would take and implied that buyer should have waited for that long

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Post was acceptable mode of acceptance since the response would be received within the implied timing Place Issue  An acceptance communicated at a place different from that pointed out by the buyer, and forming a part of their proposal, imposed no obligation binding upon them, unless they had agreed to let the matter go and be nice. RATIO: Acceptance needs to be sent to the same place the offer was sent from unless otherwise stated in the offer. If the offer specifies a mode of acceptance, the court can imply a time that the offer must wait to receive the acceptance.

Henthorn v. Fraser, [1892] 2 Ch. 27 (CA)
FACTS: 11:00 - posted revocation in mail. 3:30 – posted acceptance in mail. 5:30 revocation received at destination. 8:00 – knowledge of revocation. Next AM – knowledge of acceptance ISSUE: Whether revocation or acceptance occurred first. HOLDING: Acceptance occurred before revocation. Contract formed. REASONING: Use postal rules because it was in contemplation by both parties that mail system would be used since seller lived somewhere else and no other mode expressed. Acceptance is when letter is in the mail (11:00). Revocation occurs when person has knowledge (8:00). RATIO: Postal rule can apply when it is contemplated by both parties that the post will be the method of communication (look at context). Postal rule: acceptance when in mail. Revocation upon knowledge (receipt).

Holwell Securities v. Hughes, [1974] 1 All E.R. 161 (CA)
FACTS: Exercised an option to purchase a house by posting a letter to the Δ which he never received. “Notice in writing to the Intended Vendor” ISSUE: Whether the postal rule applies. Whether acceptance occurred. HOLDING: No, subject matter and explicit instructions. Acceptance did not occur. REASONING: 1. “Notice in writing to the Intended Vendor…” = notice must be in hand, not just in the mail. 2. Some contracts to be performed need to have knowledge of the acceptance (stockbroker/stocks). Needs to have actual acceptance so he can perform. If not in hand, can’t perform. Postal rule does not have work with certain subject matters and does not always apply. RATIO: Postal rule does not apply when there is explicit language saying otherwise or if the subjectmatter implies that it could not have been intended that the postal rule apples.

Brinkibon Ltd. v. Stahag Stahl, etc., [1982] 1 All E.R. 293 (HL)
FACTS: Parties are from different countries and want to sue. Communication is over a fax. London sent, Vienna received. ISSUE: Which jurisdiction covers this contract? HOLDING: Vienna REASONING: Fax is more like a telephone than mail because it’s almost instantaneous. On a telephone, acceptance is when it is heard by the other person; therefore, acceptance occurs when fax is received. RATIO: If acceptance is communicated by fax, acceptance occurs when fax is received.

Dickinson v. Dodds (1876), 2 Ch. D. 463 (CA)
FACTS: Wed: Seller written offer to Buyer, including time limit to accept. Thurs: Agent tells buyer that seller sold to 3rd party. Buyer attempts to accept seller’s offer and gives letter to mother-in-law. Fri: personal delivery at train station and seller refuses to accept delivery. ISSUE: Whether buyer accepted seller’s offer. Whether revocation occurred. Whether the time limit to accept offer was binding. HOLDING: No acceptance. Revocation occurred (offer can not be accepted). Time not binding 9

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REASONING: ACCEPTANCE: At home to mother-in-law, not acceptable mode. Other communication was in person; home was not contemplated. At train station, can revoke any time so revoked when saw buyer coming up with piece of paper. TIMING: Tried to accept after knowledge that deal can no go through anymore. Agent told that the house was sold. “Revoked” when had knowledge that deal could not longer be accepted. TIME LIMIT TO ACCEPT: not binding, no consideration, not purchased, gratuitous promise. RATIO: If the acceptor has knowledge that the deal can not go through any more, then he can not accept the offer; there can not be a meeting of the minds; he can’t accept something that he knows can’t be accepted anymore.

Petterson v. Pattberg, 161 N.E. 428 (N.Y. Ct. Apps. 1928)
FACTS: “I hereby agree to accept cash for the mortgage … It is understood and agreed as a consideration I will allow you $780 providing said mortgage is paid on or before May 31 and the regular quarterly payment due April 25, is paid when due.” May, buyer went to seller’s door “It’s Mr. Petterson. I have come to pay the mortgage.” Pattberg barley opened the door and did not accept the money. Pattberg had already sold mortgage to someone else. ISSUES: Whether the unilateral contract was revoked when Mr. Petterson had given Mr. Pattberg notice of acceptance (was at the door). HOLDING: Yes, revocation occurred. REASONING: Unilateral contract can be revoked at any time before full performance is completed. Unilateral: pay mortgage early and in cash; performance/acceptance is to give cash early. Full performance in this case would be putting the money in the seller’s hands which did not happen. Notice does not count, need physical action. RATIO: If it is a unilateral contract, revocation can occur at any time up to acceptance, even if you are the reason performance can not be completed. DISSENT (LEHMAN): If promisor is himself the cause of the failure of performance either of an obligation due to him or of a condition upon which his own liability depends, he cannot take advantage of the failure. Should accept full performance in good faith.

Errington v. Errington and Woods, [1952] 1 K.B. 290 (CA)
FACTS: Dad paid down payment for a house for son and daughter-in-law. “If you make the mortgage payments on time, when you pay off the mortgage you will get the house.” Couple made payments. Dad dies and estate wants to evict son and daughter-in-law. ISSUE: Whether revocation of the offer can occur and if the couple must move out. HODLING: Revocation cannot occur. Already in a binding contract. Couple can stay. REASONING: Unilateral – offer is pay mortgage and will get house. Performance occurs after acceptance; not a contract breach if they stop paying the mortgage. It could not be revoked by him once the couple entered on performance but it would cases to bind him if they left it incomplete and unperformed. If that was the position during the father’s lifetime, so it must be after his death. Performance had visible steps, smaller pre-determined performances that needed to happen for the overall performance was to be completed. RATIO: Performance in a unilateral contract does not have to be one moment in time. It can be made in pre-determined steps. If steps are being completed according to the “rules” parties are in a binding contract and offer cannot be revoked.

Manchester DCE v. Commercial and General Inv. Ltd. [1969]
FACTS: Sale of school. Condition: subject to approval of purchase price by Minister of Education. No time frame discussed between the parties regarding approval.  Aug 25: CGI offers to purchase  Sept 1: Unofficial acceptance from MD’s solicitor “we shall write to you when we receive 10

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formal instructions  Sept 14: CGI to MD’s solicitor “look forward to receiving formal acceptance  Sept 15: MD to CGI: Acceptance pending approval from Minister  Nov 18: Ministerial approval  Dec 23: MD to CGI’s solicitor “Mister approved, binding contract. Kindly confirm”  Jan 5: CGI to MD “cannot confirm binding contract”  Jan 7: MD to CGI “what do you mean not bound?”  Jan 8: MD sends formal notice of acceptance. CGI wrote MD “no longer wish to proceed with purchase” ISSUES: Whether there was acceptance. Whether acceptance can still occur after lapse of time. HOLDING: “Pending approval” was held to be binding conditional acceptance (weird). Formal acceptance was held to have occurred after Minister approved price. REASONING: ACCEPTANCE: Sept 15. We accept your offer subject to Minister approving the acceptance in the future. There could be valid or invalid failure. dJan 7. Court more likely to find contract here. RATIO: Conditional acceptance can be acceptance; behaviour of the parties my alter terms of K

Barrick v. Clark, [1950] 4 D.L.R. 529 (SCC)
FACTS: Oct 30: Offer to purchase. Nov. 15: Seller counter-offer. Sends to Mrs. Buyer. Mrs. Buyer asks for more time because Mr. is away. Nov. 28 – Dec. 3: Sold to 3rd party. Dec. 10: Buyer accepts and sends money. “Did you sell, heard rumour.” Dec. 12: Yes did sell, here is your money. ISSUE: Whether acceptance was done in reasonable time. HOLDING: No REASONING: Test for reasonable time: 1. Nature and character of item a. Some items will infer a longer time, some will infer a shorter time 2. Normal or usual course of business in negotiations leading to sale. 3. Circumstances of the offer including the conduct of the parties in the course of negotiations a. “trusting to hear from you as soon as possible” b. closing date was aimed for January 1. Could not expect to close in 2 weeks. RATIO: If there has been a lapse in time, look at test to determine if that lapse was acceptable

May and Butcher Ltd. v. The King, [1934] 2 K.B. 17 (HL)
FACTS: Contract at end of WWI. Price and delivery to be determined at later date. Disputes would go to arbitration. ISSUES: Whether the terms of the agreement are sufficient to form a contract. HOLDING: No, missing material terms (price, delivery). REASONING: No method to objectively determine material terms on a contract. Courts will not write contracts for parties. Price is a material item. RATIO: If material terms are missing then a contract has not been formed.

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Hillas and Co. Ltd. v. Arcos Ltd. [1932] All E.R. Rep. 494 (HL)
FACTS: Option to purchase timber. Price, quality and delivery to be determined. Price is 5% below price list. Quality is “fair specification”. Arbitration clause. ISSUES: Whether the option provision was binding agreement. HOLDING: Yes, provided roadmap to determine missing terms. REASONING: Price: 5% price list is objective, an external means; formula or method to arrive at terms is provided. Quality: can use experts to illustrate industry standard. Delivery: nature of product or a Sale of Goods Act may be used to indicate a reasonable standard; in this case, needed to be flexible and not capable of determining details at the outset. Arbitration: contract formed so arbitration clause enforceable. RATIO: If there is a formula or method in the contract that can help determine missing key terms, the contract will have deemed to be formed.

Foley v. Classique Coaches Ltd., [1934] 2 K.B. 1 (CA)
FACTS: Δ agrees to buy land from π subject to Δ’s commitment to purchase all fuel from π, with price to be agreed upon from time to time. Agreement operated for 3 years. Arbitration clause. ISSUE: Whether the agreement is binding contract or an agreement to agree. HOLDING: Binding contract. Arbitration clause valid. REASONING: Price (material term) is missing and no external mechanism to determine. Court found that parties intended and acted like contract had been formed; arbitration clause valid. RATIO: If there is an agreement to agree, the courts will find a contract if the bulk of the transaction has already occurred and you cannot undo the contract.

Wellington City Council v. Body Corporate 51702 (Wellington), [2002] (CA)
FACTS: “Council officers will negotiate, in good faith, sales of Council’s leasehold interest to existing lessees at not less than the current market value.” ISSUE: Whether a contract to negotiation in good faith is binding. HOLDING: No, in most cases, an agreement to negotiate is no more than an agreement to agree. REASONING: An agreement to negotiate is not sufficiently certain to be enforceable in law. There were no external formulae or mechanisms for the court to find terms objectively. Negotiate in good faith and reasonably are different because good faith can not be evaluated. RATIO: Agreement to negotiate in good faith (discretionary, subjective) is not binding, but to negotiate reasonably or using best endeavours is binding (measurable, objective). * House of Lords and Canada accept this position, but with a few exceptions

Empress Towers Ltd. v. Bank of Nova Scotia (1990), 73 (4th) 400 (BCCA)
FACTS: Lease renewal: “rent at market rate as mutually agreed.” Bank’s independent appraisal for rent at $5400. Empress did not negotiate until last day of old contract. Countered with something completely different than previous rental agreement. Evidence of other motivation for changing the scheme. ISSUE: Whether the renewal clause was merely an agreement to agree. HODLING: Renewal clause binding; Empress did not negotiate in good faith. REASONING: External benchmark (rent at market rate), so court could objectively find rental rate. Renewal carries implied term to negotiate in good faith. Empress’s suggested market rate was blatantly and transparently based on something else AND waited to negotiate on the last day; held to be unreasonable. RATIO: If a landlord withholds an agreement unreasonably, he is not acting in good faith and in breach of an agreement to negotiate. For lease renewals, there is an implied term to negotiate in good faith and when material term can be found using an external mechanism (market value), the landlord will loose.

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* but said “mutually agreed” and “agreement may be terminated at the option of either party” so contemplated that market price wasn’t the final say, still negotiating…

Mannpar Enterprises Ltd. v. Canada (1999), 67 B.C.L.R. (3d) 64 (CA)
FACTS: “The Permittee (Manpar) shall have the right to renew this Permit for a further five year period subject to satisfactory performance and renegotiation of the royalty and annual surface rental. Under no circumstances shall the royalty rate or surface rental be less than the rates received in the preceding term.” ISSUES: Whether the clause is uncertain. Whether Canada should have negotiated for a renewal in good faith (implied term). HOLDING: The language was uncertain and there is no such implied term. REASONING: No external mechanism/benchmark to determine key elements; “rate will not be less than current terms” does not determine how high rates will go. Renegotiation was employed to convey the meaning or intent that the Crown was reserving unto itself a broad ambit or scope to enter or to refuse to enter into any new arrangements that might be discussed or proposed concerning the possible renewal of permit. Crown also need approval from Band. RATIO: If language does not provide an objective benchmark to measure key terms, then contract has not formed.

Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), (Ont. CA)
FACTS: Appellant and respondent were contracting to grant a franchise. They had met, and agreed on terms orally. Bawitko gave deposits for the franchise fee, and they discussed various aspects of moving forward, including rental spaces, etc. When it came time to sign the franchise agreement Batwitko Investments would not sign it, as it was the original agreement with none of the agreed on changes. ISSUES: Was the oral contract found by the trial judge a complete and binding contract or was its enforceability subject to the parties’ subsequent agreement on all of the terms and conditions to be contained in the contemplated written franchise agreement? HOLDING: For the appellant, Bawitko Investments. No contract was formed through oral negotiations, a hand shake, and saying “you’ve got a deal”. REASONS: This was a contract to make a contract, i.e. agree to in the future make a formal written contract. This is normally enough to form a contract, but when 1) not all of the essential elements are agreed on, or 2) the contract is too general or uncertain, or 3) if the parties believe that their duties and obligations do not commence until the formal written contract is signed then it does not constitute a formal contract. The terms other than the ones that were expressly agreed to at the meeting on April 18 had not been discussed or decided on. The nature of franchisor-franchisee relationships requires that ALL terms are contemplated and agreed to. RATIO: When 1) not all of the essential elements are agreed on, or 2) the contract is too general or uncertain, or 3) if the parties believe that their duties and obligations do not commence until the formal written contract is signed then it does not constitute a formal contract.

Wiebe v. Bobsien, [1985] 1 W.W.R. 644 (B.C.S.C.), aff’d [1986] (BCCA)
FACTS: Purchaser “Will purchase your home in Surrey subject to sale of my own home in Port Moody.” If bona fide offer from 3rd party for purchase of Surrey, seller has 72 hours to remove the condition precedent so no longer subject to sale of Port Moody. Surrey decides to revoke offer; not accepted. Port Moody sells home and notifies Surrey; Surrey refuses to close. ISSUES: Whether contract was binding on the condition. HOLIDING: Condition was binding; already in contract and can not revoke. REASONING: A condition precedent may be of a nature that creates no binding agreement or it may just act as an ingredient which suspends performance of an otherwise complete contract.  Subjective clause (fancy or whim; no invalid failure)  prevents formation of contract 1

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 Objective clause (external decision maker)  suspends performance of contract Selling house was an objective clause because based on other people wanting to purchase home. RATIO: A condition precedent can prevent formation of a contract subjective condition) or merely suspends the performance of the contract (objective condition). DISSENT: There are three types of conditions: subjective, objective and subjective/objective. Real Estate transactions involve the participation of one of the parties so not completely objective; problem with evaluating best efforts to sell home. More subjective is included term “at market price” or “anything over $X”, something to make it more objective and observable.

Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978), 85 D.L.R. (3d) 19 (SCC)
FACTS: Agreement subject to approval of subdivision. ISSUE: Whether agreement binding and which party was to apply for that approval? HOLDING: Agreement is binding; vendor to obtain approval. REASONING: Binding: condition was objective/external. Who: Planning Act (Alberta): a person who proposes to carry out a division of land shall apply for approval” vendor should be the one to apply. Vendor is under a duty to act in good faith and to take all reasonable steps to compete the sale. Obvious breach since no effort was made. RATIO: If contract is silent on who is to obtain approval, then an implied term may be found in legislation.

Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), (Ont. CA)
FACTS: Agreement for Real Estate transaction. Best efforts for one party to have subdivision plan registered before closing date of sale. If condition did not occur, agreement terminated. Plan was not registered and sale did not happen. ISSUE: Whether a breach of the agreement occurred. HOLDING: Yes, but damages were nominal; failure would have occurred with best efforts REASONING: Breach occurred because no effort to obtain approval from municipality. Damages were nominal because even if best efforts were used to obtain approval, parties did not leave enough time to complete the task. Outcome was the same. RATIO: If a contract fails due to an external element, the courts will still not award damages for breach if the chances of success were extremely low.

Turney v. Zhilka, [1959] S.C.R. 578
FACTS: Purchase subject to condition that land should be annexed to the Village and that plan for subdivision was approved. Attempt to meet condition unsuccessful and want to waive. ISSUE: Whether purchaser had right to waiver. HOLDING: No, true condition precedent, therefore, no right to waiver REASOING: Purchaser is attempting to waive a condition that is central to the contract. All that a waiver means in these circumstances is that one party to a contact may forgo a promised advantage or may dispense with part of the promised performance of the other party which is simply and solely for the benefit of the first party and is severable from the rest of the contract. BUT HERE, there is no right to be waived. The obligations under the contract, on both sides, depend upon a future uncertain event, the happening of which depends entirely on the will of a third party. This is a true condition precedent. RATIO: A condition can be waived if a term is for the sole benefit of one party, the condition is not a true condition precedent and the condition is severable.

Beauchamp v. Beauchamp (1972), 32 D.L.R. (3d) 693 (Ont. CA)
FACTS: Purchase home subject to obtaining two mortgages ($10 000 and $2 500) and pay in cash. Purchasers got mortgage of $12 000. Trial Judge: that the condition was not strictly met. ISSUE: Whether the purchaser had the right to waive the condition. 2

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HOLDING: Yes REASONING: Parties were not subject to one bank. They met the condition of raising funds (which is what the condition was all about) and paying in cash. Also, condition sole benefit of Purchaser (Vendor just wants the money), in control of Purchaser and severable. RATIO: If the condition to be met is about the “what” and not about the “how”, the court will give the condition a broad interpretation, even if condition not met on a strict reading.

Barnett v. Harrison, [1976] 2 S.C.R. 531
FACTS: Convey land subject to gaining municipal approval. Allowed to revise application. Several attempts made. Purchaser, realizing approval will not be obtained advised the Vendor that he was prepared to take land under current zoning. ISSUE: Whether the condition was one that the Purchaser could waive. HOLDING: Majority: Can not waive. Dissent: Can waive REASONING: Straight application of Turney. Condition involved future uncertain event dependant upon will of their party. Unlimited right to revise application does not mean a right to forgo approval process altogether. If allowed to waive, Purchaser would have been granted an option without consideration. RATIO: Majority: Upheld Turney Dissent: Relaxation of the rule. DISSENT: Laskin: Vendor is using purchaser’s clause against him. Vendor should not have had an interest in whether application was approved, therefore, Turney does not apply [although Turney wasn’t interested in condition either…+ Looks like dissent is trying to qualify/do away with Turney and is more relaxed with waiving conditions.

Balfour v. Balfour, [1919] 2 K.B. 571 (CA)
FACTS: Agreement between husband and wife. ISSUE: Whether there was consideration in the exchange of promises between husband & wife HOLDING: No, agreement not a contract REASONING: Arrangements made between husband and wife are arrangements in which there are mutual promises, or in which there is consideration in form within the definition but they are not contracts, and they are not contracts because the parties did not intend that they should be attended by legal consequences. The consideration that really obtains for them is that natural love and affection which counts for so little in these cold courts. Onus was upon plaintiff (wife), and she was not able to establish a contract RATIO: Not all agreements are contracts, even if it looks like there was valid consideration. Must look at the intention of the parties at formation. The natural give and take of a natural love and affection between family members is not usually deemed a contract and enforceable by the courts.

Brantford General Hospital Foundation v. Marquis Estate (2003), (SCJ)
FACTS: Mrs. Marquis pledged $1,000,000 to hospital for expansion project. Was to give over 5 year period; died after paid first instalment. Hospital offered to name expansion after her and late husband; subject to board approval. ISSUE: Whether the pledge is enforceable. HOLDING: No, lacking consideration. REASONING: Donate money in exchange for nothing. Naming of expansion was not part of the deal; was not even approved by board yet (timing issue). Her intention was to donate the full amount, but intention is not enforceable without consideration. RATIO: If there is no consideration in charitable donation pledges, the pledge is not an enforceable contract.

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Lampleigh v. Brathwait (1615), 80 E.R. 255 (KB)
FACTS: Δ murdered someone and asked π to endeavour to get a pardon from the King. Π tried to get pardon. Π returned and Δ promised him money but never did. ISSUE: Whether past consideration is valid. HOLDING: Yes, all elements are present, just in a different order. REASONING: π rode to King at the request of Δ and not voluntarily. All elements of a contract are present: request, expectation, performance, promise. Performance was conducted or given in a way that the reward will be figured out later; implied that a request like that is commercial in nature and there is an expectation of some sort of reward. Terms will need to be filled in by parties after performance, but it was held acceptable. The agreement was binding once the promise of reward was made (once all the elements were present.) RATIO: If a promise is made in recognition of a benefit previously received, that promise will be enforced by the courts unless there was no implied term that some reward would follow the act.

B. (D.C.) v. Arkin (1996), 138 D.L.R. (4th) 309 (Man. Q.B.), aff’d [1996] (CA)
FACTS: Π’s son caught shoplifting at Zellers. Zellers has theft compensation scheme. Arikin (working on behalf of Zellers) sent mom a letter “will not sue for theft damages if you send payment”; proposing settlement. Mom paid, but later found out she did not have to. ISSUE: Whether the agreement has proper consideration. HOLDING: No REASONING: Well settled that a forbearance to sue is good consideration and that monies paid in exchange for a promise not to sue is valid and enforceable legal contract. But, a promise is not binding if the sole consideration for it is a forbearance to enforce (or a promise to forbear for enforcing) a claim which is invalid and which is either known by the party forbearing to be invalid or not believed by him to be valid. Arkin/Zellers is not giving up anything; didn’t have a right to sue so are not giving up anything. They just sent a trumped up demand letter and they should have known that there was no basis for claim and that his was outside the realm of legal action. RATIO: Forbearance is valid consideration unless it is known that the claim is invalid.

Royal Bank of Canada v. Kiska, [1967] 2 O.R. 379 (CA)
FACTS: Δ signed Document #1 at bank; security for brother’s debt. Not under seal. Δ unhappy and ate Document #1. Police called. Document #2 was signed under seal with police in room. ISSUE: Whether the π provided forbearance in exchange for Δ’s security. Whether consideration for the benefit of a 3rd party is valid. HOLDING: Yes and Yes. REASONING: Document #1 was an offer of security in exchange for forbearance. Court found forbearance did occur; although not expressed by bank, their actions spoke. “Seal” by signature was not good enough. Document #2 invalid contract because signed under duress. RATIO: Consideration for the benefit of another is good consideration.

Stilk v. Myrick (1809), 170 E.R. 1168 (Nisi Prius)
FACTS: Voyage, two shipmen left ship. Captain said that he would split their wages among the rest of the crew if he couldn’t find replacements. No replacements were found. He didn’t pay the increased wages to the crew. ISSUES: Whether there was consideration in the promise to pay increased wage. HOLDING: No consideration. Promise was gratuitous, and therefore, not binding. REASONING: Contract was to get the ship there and back. Already providing services; doing everything they can do to achieve goal. No change in behaviour occurred due to increase wages. RATIO: If a variation in a contract does not bring about a change, the variation is not binding (gratuitous).

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POLICY REASONS: Concerned about extortion of more funds/wages (economic duress) or else stop working and ship will sail into rocks.

Gilbert Steel Ltd. v. University Construction Ltd. (1976), (CA)
FACTS: Parties had a written contract. Price of steel was increasing. Gilbert Steel asked for more money and University Construction agreed (oral). ISSUE: Whether there was consideration in the promise to pay increased prices. HODLING: No consideration. Promise was gratuitous, and therefore, not binding. REASONING: Increase price for steel was a variation to the original contract. Was not a new contract because all the terms were still in old contract; nothing expressly communicated about mutual abandonment of old contract. Paying increase price in exchange for what? Increased credit rejected because not really a benefit. Assurance for a good price in future rejected because it was merely an agreement to agree (uncertain, vague, terms missing and no external mechanism). RATIO: If there is mutual abandonment of an old contract and a new contract is formed, then the consideration will be the same as for the old contract. If there is a variation to an existing contract, then there needs to be new consideration.

Williams v. Roffey Bros. & Nicholls (Contractors) Ltd., [1990] (CA)
FACTS: Construction project. Roffey to pay penalty if project not completed on time. Williams was an independent contractor. Roffey was concerned Williams would not finish on time. Roffey offered Williams more money and different payment scheme (per flat instead of flat rate). ISSUE: Whether there was consideration in the promise to pay increased rates. HOLIDING: Yes, there was consideration for the contract variation. REASONING: GILDEWELL: Promise not made under fraud or economic duress; Roffey was the one that proposed the deal. Distinguishes from Stilk policy concerns. PURCHAS: If both parties benefit from an agreement it is not necessary that each also suffers a detriment; commercial advantage to both sides. Holding with hesitation. RUSSEEL (traditional): Work done was same but how the work was done constituted a change of behaviour as a result of more money. Change in behaviour is consistent with Gilbert RATIO: Benefit to both parties (and a lack of any detriment) is valid consideration. Avoiding a breach of contract is valid if it is not joined with economic duress.

Greater Fredericton Airport Authority Inc. v. NAV Canada (2008), (NBCA)
FACTS: AA requested that NAV relocate equipment to an expansion runway. NAV concluded that it made better economic sense to replace a portion of the existing equipment with new technology rather than relocating the entire system. Dispute arose as to who is to pay. NAV refused to relocate until AA agreed to pay. AA agreed to pay under protest; they needed to become operational. ASF contract was not applicable (where NAV should pay); parties had made a new contract and AA should pay. ISSUE: Whether the new contract was legally binding. HOLDING: AA must pay. Do not need fresh consideration for contract modification. REASONING: Who knows? RATIO: A post contractual modification, unsupported by consideration, may be enforceable so long as it is established that the variation was not procured under economic duress. Harrity and Northeast Yachts v. Kennedy: NB C.A (2009)  Did not over rule NAV Canada but still looked for consideration River Wind Ventures v. BC BC S.C. (2009)  Did not follow NAV Canada; applied Gilbert

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Foakes v. Beer (1884), 9 App. Cas. 605 (HL)
FACTS: Parties entered into agreement that Foakes owed Beer money. Beer extended the time to pay and allowed incremental payments in exchange Beer too no legal action. Beer claimed interest. ISSUES: Whether installation payments are consideration or if you need something else HOLDING: No, installation payments are not fresh consideration; Foakes pays Beer the interest REASONING: The common law rule is the doctrine that a promise to pay less than the total amount of a debt in instalments is not really a contract. RATIO: Payment of a lesser sum in satisfaction of an existing debt is not satisfaction of the whole debt unless something extra was promised in exchange for the creditors foregoing part of his debt.

Re Selectmove Ltd., [1995] 1 W.L.R. 474 (CA)
FACTS: Company failed to pay tax deductions. Company met with tax collector to discuss a payment plan. Company said they could pay in instalments; subject to approval from tax collector’s boss. Company made payments, but not strictly according to schedule. Company went under. Crown brought winding-up petition, which it sought the compulsory liquidation of the company and full payment of debt. ISSUE: Whether the payment plan was binding. HOLDING: Crown never accepted the proposal. Company needed to pay in full. Payment plan was not a binding contract because lacking consideration. REASONING: Proposal offer was never accepted by the Crown. Also, proposal lacking consideration. Applying Foakes, paying back same amount to debt is no consideration. RATIO: Payment of a lesser sum is no consideration.

Judicature Act
13(1) Part performance of an obligation either before or after a breach thereof shall be held to extinguish the obligation (a) when expressly accepted by a creditor in satisfaction, or (b) when rendered pursuant to an agreement for that purpose though without any new consideration. RATIO: Statutes allows for variation of deals so that a lesser amount can be paid

Royal Bank of Canada v. Kiska
In Laskin’s dissent in obiter, he discusses documents signed under seal:  There has been a relaxation of the common law with regards to requirement of a wax impression  “Signed, sealed and delivered”, “given under seal” “seal” are merely anticipatory of a formality which must be observed and are not a substitute for it.  A more difficult situation would exist if, instead of the bracketed word (seal), there was an imprint of a wafer seal reproduced on the document ….but that doesn’t have to be answered right now. Linton v. Royal Bank of Canada 1967 Ontario High Court (same year and province)  From English cases that if a document contains some indication of a seal, the fact that a person intended to execute the document as a deed is sufficient adoption or recognition of the seal  USE THIS CASE TO ARGUE IN THE ALTERNATIVE Friedmann v. Final Note 2000 SCC  Today, while the creation of common law does not require a wax seal, there are still formalities that need to be observed. Mere inclusion of “signed, sealed, delivered” is not enough. Some indication of a seal is required.  To created a sealed instrument, the application of the seal must be a conscious and deliberate act. 6

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Fall, 2012

Hughes v. Metropolitan Railway Co. (1877), 2 App. Cas. 439 (HL) Central London Property Trust Ltd. v. High Trees House Ltd., [1947] 1 KB
Facts: Plaintiff, CLP let a block of flats to the defendant, HTH. CLP held all the shares of the defendant. Lease was for a term of 99 years, starting in 1937. By 1939 the occupancy was low and with war prevailing, the rent could not be paid out of the profits. After discussions between directors, the landlords wrote to tenants confirming the annual rent would be reduced to one-half the amount (1,250) ID’d in lease (2,500). Reduced rent was paid for the duration of the war, including 1945, by which time the premises were fully let. Receiver who was appointed to manage the affairs of the landlords brought an action to test the position in law of the amount of rent payable. Landlords' position was the full rent was payable once the flats were fully let. Tenants maintained the reduced rent was to apply for the full 99-year term or for the period up to Sept. 24, 1945. Claimed 8,000 pounds owed (demanding all arrears – for all unpaid rent). Defendant Arguments:  The promise that you find in the letter of 1940 extends right through the whole agreement (up until 2046)  There is a written contract for the lesser sum – would extend the 99 years – the court found this argument legit, equity should rule, even if there was consideration the contract was only to last for a certain time. Problem was that the contract length was undefined but there are circumstances here that will define the duration of the lesser rent.  Estoppel – court found that there was a promissory estoppel – even without consideration for the promise nevertheless there was an existing legal relationship and the plaintiff said they would claim less rent and later the plaintiff said they wanted the difference.  Central London was estopped from alleging that the rent was above 1250pds  The estoppel would only endure until the conditions altering the contract had changed.  Waiver – having failed to demand the higher rent as they went along, all those amounts were subject to a waiver – and they waived there right to these amounts. Plaintiff Arguments: 1. gave consideration for the contract of 1940 (reduced rent) – arguable there’s consideration by applying the RWB test – the rent was the only source of income 2. rescission of initial contract (releasing of obligations) and new contract was formed – court not likely to agree Issue: Was the payment for lost money due?  The Plaintiff is asking for the payment of $625 pds: a payment that is due from Sept to Dec?  Denning allows it! Reasoning: 1. Denning J. observed that the variation of a seal under lease may be permitted by equity, but here there was no consideration for the variation. 2. Estoppel did not apply because the representation was not one of fact; the representation related to the future event that the full rent would not be charged. Estoppel – an old concept – Jordon v. Money – any representation also future conduct to be enforceable must be framed as a contract or when a party with legal rights represents that he won’t enforce those rights strictly he may be unable to enforce them strictly: (2) b/c it would inequitable for him to do so and (2) they cannot be enforced strictly without giving the party some notice. 3. Denning J. decided the case on the principle that a "promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply.” Here the promise was found to be that the rent was to be reduced only as a temporary expedient, while the block was not fully or substantially let due to the war. Was found that the conditions prevailing when the reduction went into effect had changed by early 1945. Therefore, the claim for full payment of rent succeeded for the last two quarters of 1945. 7

Contracts CANS
4. Denning says Foakes and Beer is old school and should be tossed out. 5. Denning thinks that the promise was complete by 1945 by its own language 6. Denning on Estoppel i. Estoppel might end in early 1945 or by notice.

Fall, 2012

Ratio: One can vary a contract and change back with notice. Estoppel does not apply when the representation is not one of fact (here the representation related to the future event that the full rent would not be charged). (Discussion of estoppel is only obiter.) CLASS:  In all cases with estoppel look for consideration  This case paved the way for promissory estoppel. Does away with Foakes  Key 1st step is to examine the scope of the promise: Denning J said that one must follow through with the scope of the promise  Can the doctrine be used to extinguish rights or to suspend legal rights?  could have arisen here had the plaintiff asked for rent in arrears  the promise was until the conditions initiating it changed  with notice one can change their mind to the future  Must there be detrimental reliance? only reliance here was that the defendant paid 1/2 the rent - no detriment  Does the doctrine create a cause of action or just adjust existing relationships? - haven't used it to create a relationship only not to allow them to breach a promise (variation)  There was no consideration the contract is still enforceable (promissory estoppel).  Waiver refers to something that has already occurred and estoppel refers to a representation into the future  Must you give an interval or can the estoppel end immediately by notice? NOTE:  questions to look at: (1) Can the doctrine suspend rights or extinguish rights? - extinguish if sued for all arrears - (a) would have to determine if LL had lost the rights to his claim - Denning prob. would not allow all arrears b/c emphasized promise - (b) if plaintiff had told def. before the end to the war that in the future they had to pay full amount - Denning looks like he would say you can't change your mind, BUT doesn't answer this question  Future cases will show that most judges say you can retract ...can turn back the clock unless there has been some detriment or reliance  (2) Do you need detrimental reliance (promisee relies to detriment) in order to have promissory estoppel? - High Trees - no evidence of detrimental reliance; only detriment was paying  (3) Can it be used to create new relationship, or only to change old? - only to change existing contract (can be used in place of consideration) Hughes v. Metropolitan Railway Co., (1877), U.K.H.L., Cb pg. 224, 226, 230, 240, 243, 250 - example of estoppel - states broad principle of promissory estoppel - where the parties are in an existing contractual relationship, one party promises that it will not enforce its strict rights and the other party has relied on this promise, then the promisor will not be allowed to retract the promise and insist upon strict rights without some warning - in some circumstances will enforce promise for which there is no consideration Marchischuck v. Dominion Industrial Supplies (1991), S.C.C., Cb pg. 228, 234 - Could an insurer rely upon expiry of limitation period? 8

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- plaintiff argued insurer was estopped from relying on it b/c it had negotiated prior to the period and that defendant had waived reliance on the period by continuing to negotiate after the period both claims were defeated on the facts Oppenheim pg. 235 - buyer pressed for delivery of Rolls Royce - by continuing to press for delivery the buyer waived his rights to terminate - b/c it was a continuous breach he had right to set up reasonable time notice Ratio: Waiver can be retracted if reasonable notice is given. Notice requirement should not be imposed where reliance is not an issue.

John Burrows Ltd. v. Subsurface Surveys Ltd. (1968), (SCC)
Facts: Subsurface Surveys Ltd. (defendant) purchased plaintiffs business for a price in excess of $127.000. A promissory note for $42,000 was granted for part of the cost, which was to be paid in monthly installments. The defendant was always late making the payments and a condition existed that if a payment was more than 10 days late, the whole amount could be claimed. Sub Surface always paid late and there was never any complaint. Plaintiff and defendant's boss became estranged. SS paid late again, Plaintiff sued for whole amount. Acceleration Clause:  Miss one payment and the whole amount is due Arguments:  assumption that the acceleration clause wasn’t going to be enforced.  SS said JB was estopped from claiming b/c SS was late every month and JB said nothing  Jim calls the defense estoppel by conduct Issue: Can D claim defense of equitable estoppel? NO Reasoning:  General principle: o Terms o Strict rights o Negotiations o Not enforced = rights cannot be enforced  this type of equitable defense cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced (ie there musts explicit evidence of the intention to alter the contract)  law of equity states that if parties agree to terms and then one party acts as if won't enforce terms, that party cannot later attempt to enforce them  In order to prove estoppel you have to prove that the promise you are relying on was actually spoken to you. o JB never made a promise waiving the acceleration clause - doesn't see that in this case... need evidence that the party mislead the other in this way - sees this case as just being a friendly gesture to an associate, until they became estranged - harder to find requisite intention to create legal relations from conduct, easier with express indication - once the creditor received that month's rent late they could not sue for whole amount - could sue however in the future if it occurred again - fact that creditor allows debtor to get away with late payments, does not amount to a waiver... more difficult to infer through conduct or friendly indulgences - mere failure to exercise rights will not be seen as waiver of rights Ratio: NO ESTOPPEL BY CONDUCT ALONE (clear intent is needed)  not enforcing an obligation (sans explicit statement of un-enforcement) cannot be interpreted as a waiver of rights to enforce these obligations

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Fall, 2012

Only an explicit action (conduct + intent) on behalf of the party may be interpreted as an intention to alter the agreement and make the right unenforceable.  To rely on estoppel, must show a clear representation or promise to you made to alter legal relations, cannot say conduct showed it. Party claiming to rely on estoppel, must show clear representation or promise (but conduct argument can be made). Need same level of commitment as offer.  Mere indulgence extended by P is not enough to amount to waiver of P's right to enforce contract. NOTES: - What would have happened if Burrows would have accepted the last payment and said he would accept the default payment if they make the Dec payment and make the Jan payment on time and then later put into force the acceleration clause: - Jim says it would not work b/c the acceptance of the late payment is in essence a waiver. And the acceleration clause could not be invoked - Decision seem harsh; debtor was always late and no problem (although later than usual). Court should have required warning before enforcing full amount. On all previous occasions, there seems to have been a waiver so creditor couldn't invoke penalty for reason of past payments (b/c had already accepted them as late) ** b/c of past conduct, debtor assumed could pay late; should have given reasonable notice to debtor that would have to pay on time in future. - other cases haven't stressed the need for legal relations - they say any reliance on the conduct brings it about - can estoppel arise from conduct alone? In Burrow it was found that the conduct did not amount to estoppel. However, El Nasr finds that you can. - Accerleration clause – borrow on a demand loan – creditor can decide when u must pay it out. When repayment is scheduled, if the debtor is slow or late in paying the creditor can try to enforce a payment thru small claims or ask for additional interest or use an acceleration clause to rule that in a breach a demand for the entire amount of the mortgage is required. - If the late payment was accepted by Burrows – can he still exercise the acceleration clause? No (?)  THREE KEY THINGS WE WILL LOOK AT: - Estoppel i. supra - Waiver i. supra - Election i. Ability to avoid or affirm a contract. Pick one and then your stuck with it. Estoppel: 1. Existing relationship – There is an existing/previous legal relationship upon which rights arise and now one of the parties claims that one of the terms won’t be strictly enforced 2. Need a clear promise or representation 3. Reliance – The defendant must show that there is reliance on the plaintiff’s conduct = permission to be late. Ask – did you rely on this fact in this case? 4. Detriment – Reliance on this promise to the defendant’s detriment. (I would have paid on time this time I knew you were going to be tough.) 5. Equities – the party who is now said to be estopped is only subject the restriction when it would be inequitable to enforce the rights (*Denning’s paramount concern!) 6. Sword/shield 7. Retraction of the waiver or the reassertion

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Fall, 2012

D. & C. Builders Ltd. v. Rees
Facts: D & C hired by R to do repair work. Work completed but only a portion of bill paid. £482 outstanding. Defendant's wife offered £300 in full satisfaction of the debt, saying the plaintiffs would have to accept the £300 or get nothing. As plaintiffs in difficult financial circumstances, they accepted defendant's cheque for £300 and then brought an action for balance. Defendant alleged poor workmanship and asserted there was a binding settlement. Question of settlement was tried as a preliminary issue, and the plaintiffs succeeded. Defendant's appeal to the CA was dismissed. Arguments:  Rees questioned the workmanship of DC Issue: Would it be inequitable for P to renege from his promise? NO Reasoning:  Court says economic duress is a situation in which a creditor can renege on a promise  makes it clear the doctrine of promissory estoppel applies to part payment of debt  legal rights could be extinguished (doctrine does this)  creates situation where creditor can't sue for the balance (b/c rights are extinguished)  court did allow creditor to get back rest of money b/c of duress/ransom  It’s an equitable doctrine…can't get $ where would be inequitable, but here it was equitable  ** Never forget where the equities lie **  Denning wants to rid Foakes thru this case. The payment towards a larger sum would only be binding where it would be equitable or fair.  Promise is voidable so long as the plaintiff acts in timely fashion. Ratio: The payment towards a larger sum would only be binding where it would be equitable or fair.  To rely on estoppel must demonstrate it would be inequitable for the promisor to back out on their promise.  PE applies to part payment of debt and if you'll accept you'll be estopped despite Foakes - it extinguishes rights. NOTE:  Robichaud v. Caisse Populaire - also applied estoppel to not allow creditor to get balance in part payment situation. Only can suspend in an equitable situation. LOOK AT SCOPE OF PROMISE: - may give info about whether suspended or extinguished rights - may be able to infer intention to only suspend (i.e. until further notice, or for certain time) - to extinguish rights forever is rarely used (rarely referred to by courts) -very often, the issue is by-passed - tied into ext./susp. distinction is RELIANCE (equitable) - Denning (High Trees) - not needed, only need acting upon promise - Gilbert Steel - yes, reliance Nick - b/c it's an equitable doctrine, DETRIMENT AND RELIANCE must be relevant - the more prejudiced the promisee has become b/c of the promise, the more it should be relevant - general principle (of estoppel)...can detract promise/waiver upon some reasonable notice, unless it would be inequitable to do so (i.e. promisee has relied on promise to his detriment) - in many cases, detriment can be dealt with by reasonable notice - but, in some cases, it can't be rectified - Denning is extreme ===> if make promise, have to stick with it Hughes v. Metropolitan - notice to repair property, in 6 mos.„ or lease over - soon after LL and T began to negotiate sale, where T would sell lease back to LL (fell through), ..after 6 months, elapsed.. .no repairs.. .tried to evict - court decided LL had suspended rights by entering negotiations and until negotiations ended, T had relied on it.....promise to suspend

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Fall, 2012

Saskatchewan River Bungalows v. Maritime Life Assurance (1994), (SCC)
Facts: Maritime Life Insurance issued insurance policy for Mr. Fikowski, which was taken over by wife, but, was taken care of by Sask. River Bungalows Ltd. (SRB). Policy had condition that if premium not paid by end of grace period, policy was terminated. Could apply to have it reinstated, under certain conditions (must be in good health). Payment was sent by mail, but was not received. Correspondence was sent, but not received until later (April, 1985). SRB sent payment in July, was returned. Mr. Filowski died in August, Maritime wouldn't pay claim. Premium notice sent in August. After grace period had elapsed, ML offered to reinstate the policy is the check is post-marked. Insurance Co was more concerned about keeping the policy than enforcing the payment. Nov. 7 – notice of lapse.  Policy stated that if premium was not paid during the grace period then the policy would lapse but would be reinstated if the conditions were met. Issue: Was Maritime right to refuse to reinstate the policy, or should they have accepted the payment in July, 1985? Was there a waiver? YES, waiver of right to compel timely payment but did not effectively retract the waiver. Was it relied on? NO Was it effectively withdrawn? YES, Maritime successful. Arguments:  Plaintiff argued that accepting late payment amounted to a waiver (Burrows argument – but in this case it’s a yr late) and argued that payment was authorized by mail. The Nov. letter and the retention of the $45. Delay in lapse notice to arrive  Defendant argued that the policy had lapsed  Defendant argues there is no waiver and in any event there was an effective retraction of the waiver o In regards the retraction of waiver:   Court found all the elements of a waiver were present in the abstract except the reliance by the plaintiff. Had the plaintiff received the Nov. letter n December there would have been the basis for the waiver. Reasoning:  S.C.C. - refused to differentiate b/n waiver and estoppel; dealt with it as "waiver" - Reasoning for this was that counsel had only presented as a waiver - Nov. letter was the waiver (which can be retracted on notice) Components of waiver: Waiver occurs 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  Requirements for waiver - Waiver will be found when the party waiving (1) had full knowledge of there rights, (2) there is an unequivocal and conscious intention to abandon these rights  By failing to return the $45 and accepting late payment until November were some of the reasons that the court said that Maritime waived its right  They did not send a lapse notice until February  Major J. says that the November letter is enough to constitute a waiver Test for Waiver a) Full knowledge of rights – you don’t waive rights that you don’t know of (yes) b) Unequivocal and conscious intention to abandon these rights (yes) c) Reliance on the waiver (can’t rely on a waiver u don’t know about) d) Retraction of the waiver with appropriate notice

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Waiver can't arise by accident - notice is required for the person who RELIES on the waiver (here no reliance) 2. - here SRB didn't rely on the waiver b/c didn't know about it thus reasonable notice not needed 3. - when they did finally open the mail they immediately become aware that M retracted waiver 4. - if reasonable notice was required it was adequately met by M - they didn't respond in time (it was only after 3 months after they became aware of M's intentions - failure to act on SRB's part) M's waiver was no longer in effect when RSB attempted to make payments.  Purpose of notice requirement is to protect the reliance - If you get the lapse notice and the waiver on the same day – the waiver cannot trump the notice requirement Ratio: Test for Waiver a) Full knowledge of rights – you don’t waive rights that you don’t know of b) Unequivocal and conscious intention to abandon these rights c) Reliance on the waiver d) Retraction of the waiver with appropriate notice (Notice from April to July was clearly sufficient – because they didn’t pay right away there was a retraction of the waiver) Waiver can be retracted if reasonable notice is given to the party in whose favour it operates (effect of protecting reliance by the party in whose favour the waiver operates) but a notice of requirement is not an issue where reliance isn't present. CLASS: * is it equitable to go back on the promise? * waiver (something that already happened) * No reliance - no need for reasonable notice  Waiver arose out of the letter, had that letter been received towards the end of Nov, then the P could have paid right away. Justice Major says although the letter was sufficient to create a waiver, they cannot rely on it b/c the waiver was received at the exact same time as the lapse notice.  Estoppal vs. Waiver: o Waiver has already happened o Estoppal is in reference to something that is occurring in the future  Insurance Act of Alberta – there is a 31 day grace period to pay  November letter was a waiver: they just requested late payment, and did not say hey your policy is out of force. The letter said nothing about the process of reinsuring.  There was evidence that would help the plaintiff: the defendants own rep. said that the $45 led them to wait as late as Jan. for the rest of the premium  Argued as case of waiver  Letter of waiver sent Nov. 28  Letter of reliance sent Feb. 2

International Knitwear Architects Inc. v. Kabob Investments(1995) (CA)
Facts: Plaintiff tenant leased commercial premises from defendant landlord for a 5-year term: from May 1 1987 to 30 April 1992 for a basic rent of $2,290, increasing yearly to $3,150 from 1 May 1991, plus additional rent (taxes, rates and assessments). On May 1 1989, the tenant was experiencing difficulties and landlord agreed to reduce the rent to $1,000. On 13 Dec. 1991, no payment having been made on 1 December, 1991, the landlord distrained for arrears of basic rent throughout the term of the lease and on 24 December, 1991, demanded arrears ($1200 per month from 1989 to current + interest), interest and payment in full from 1 Jan 1992. Tenant sued for damages for illegal distress, the landlord counterclaimed for rent and other money owing under the lease for the whole term. Issue: 13

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Could notice be given to reinstate original contract? YES Was the notice given in a reasonable time to be effective? YES Court awarded that from Feb 1 to the end of the term the landlord could have the rent Reasoning: Counterclaim extends over the whole of the term failed at least until December 1991 b/c of the trial judge's findings on the issue of promissory estoppel.  The tenant's position is that if the promissory estoppel contained within it a term that the appellant could revive the obligation to pay full rent upon giving reasonable notice, the demand of 24th December, 1991, was ineffective to revive the obligation before the term ended on 30th April, 1992, - In the alternative the tenant says the notice could not take effect until at least the 1st February, 1992.  Where notice must be given to effect a purpose, at least two questions arise: 1. Must the notice be for a reasonable period? 2. If so, must the notice specify the period correctly—a so-called "dated notice.  Notice of retraction only gave a week for renewing the payment – that is not reasonable notice. You must give reasonable notice to retract your waiver. In light of the course of conduct between the tenant and the appellant over more than two years the landlord was entitled to give, and the tenant was obliged to accept, notice reasonable in length to revive the obligations of the lease, but the notice need not be a dated notice. In this case, a reasonable time, from the 24th December, 1992 , to revive the obligation for both the basic rent and the additional rent, was to the 1st February, 1992. The tenant is therefore liable for the amounts payable under the lease for the final three months of the term. NOTE: If the term "time is of the essence" is included, means that the innocent party can terminate the agreement for any delay. Brikom case: the burden and the benefit of an estoppel " run down the line of assignor and assignee on each side" (Denning - relied on the doctrine of estoppel) Note 4. In Ajayi v. Briscoe (R.T.) (Nigeria) Ltd., [1964] 3 All E.R. 556 (P.O.), Lord Hodson described the principle of promissory estoppel as follows: When one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favor of the other party. This equity is, however, subject to the qualification (a) that the other party has altered his position, (b) that the promisor can resile from his promise on giving reasonable notice, which need not be a formal notice, giving the promisee reasonable opportunity of resuming his position, (c) the promise only becomes final and irrevocable if the promisee cannot resume his position. CLASS: - b/c of the scope of the promise it could be retracted by way of reasonable notice - to have a valid, clear retraction, only need reasonable time, not specific time Ratio: where the other party is relying on a promise, the promise can be retracted with a reasonable notice but does not need to be dated.

The Post Chaser, [1982] 1 All E.R. 19 (QBD)
Facts: Plaintiff agreed to sell palm oil to defendant. Defendant had, in turn, a string of subpurchasers. An essential term (if seller was in breach, defendant could back out) of the contract was that ASAP after sailing the plaintiff would declare the ship to the defendant. Plaintiff declared late (waited over a month) with no protest by defendant. Plaintiff (sellers) delivered oil, shipment was rejected by defendant (b/c sub-buyer already refused the declaration). Plaintiff forced to sell goods at a loss so sues for breach of contract (claimed the difference from the loss). Issue: Was there sufficient reliance by the sellers to give rise to estoppel? NO Did the plaintiff suffer prejudice? NO 14

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Reasoning: GOFF J. - Call for the documents on Jan 20th amounted a waiver – as of Jan 20th we had right to refuse it - On Jan 22 they returned the document and wanted to restore there right to refuse those documents - Must be prejudice ---> Based on what is equitable, i.e. to what extent the promise was acted upon and therefore prejudiced. Seller (P) could have suffered prejudice (missed a chance to sell to another at higher price) - Court talks about Estoppal - The judge found no reliance, and no evidence of detriment - If the price of palm oil had plummeted on Jan 21 then it would have been different and that the sellers could show detriment. And in that situation it would be inequitable to allow the buyers to renege on agreement. - There is no evidence that the price of Palm Oil dropped thus showing that the sellers were in no different position on Jan 22nd from what the were on Jan 20th. - quotes Hughes: Issue of estoppel depends upon extent to which the promisee relied upon the promise - would be inequitable to retract even though there had been reliance because reliance led to no prejudice on part of sellers - if sellers had shown they had another offer or that the market price fell within 2 days, they would have had requisite prejudice (no prejudice as short time b/w representation and rejection + Plaintiff found another buyer) - Plaintiff trying to assert equitable estoppel, but not to be used as a sword, only a defensive shield. Ratio:  Estoppel depends upon w/o/n it is equitable for the individual to retract the promise. Must show prejudice, reliance not enough.  Prejudice not as strong as detriment.  The representor will not be allowed to enforce his rights where it would be inequitable having regard to the dealings which have thus taken place b/w the parties. To establish such inequity, it is not necessary to show detriment; indeed, the representee may have benefited from the representation, and yet it may be inequitable, at least w/out reasonable notice, for the representor to enforce his legal rights. CLASS: - this is more of a waiver case but parties agreed to estoppel Always see if you can find a variation - Why is this case referred to as the Post Chaser - The boat was named the Post Chaser - Because this is an equitable doctrine, we have to look at what is equitable for the parties (no inequities here) - Although there had been some acting upon, it would not have been inequitable for the retraction. - The seller hadn’t been prejudiced by the delay. - This case constitutes some of the limits of Denning J. feeling towards estoppel. - Variation of existing or creation of new relationship (this can tie in or overlap with unilateral contracts). *This case challenges El Nasr - here says detriment is a necessary element.  Equitable doctrine: extent to which they are estopped depends on what is equitable.  Relevant factor to retraction: extent of prejudice (couldn't see the prejudice because retraction only 2 days after the waiver)  No evidence of prejudice from acting from the waiver.

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 

Fall, 2012

  

Detriment is not an essential element of the4 waiver but all that is required is reasonable notice of intention to resume. By calling for the documents the defendant waived the right to reject the documents (which he could have done) on Jan 20. On Jan 22, the defendants reject the documents. Court says they could retract their waiver only where it was not unfair to the other party. There was no detriment because it only took two days to retract the waiver and there was no significant change in the price of palm oil. Estoppels and waivers can be retracted – because there was no harm to the plaintiff in allowing the waiver to be retracted. Wanted to decide based on election – once elected you can’t change your mind. Both in this case and Sask. River the court found a waiver, but found that the waiver could be retracted Jim talks about the issue of election and whether that would be an appropriate concept for this judgment:  According to Jim election had not been argued  If you were going to argue election and that the palm oil belonged to the plaintiffs b/c they elected to take the documents – the seller could not sell the palm oil  Election results in a party claiming specific performance

Combe v. Combe, [1951] 2 K.B. 215 (CA)
Facts: Wife obtained a decree nisi for divorce against defendant, her husband. By an exchange of correspondence between the parties' solicitors, it was established that the husband agreed to pay maintenance of £100/year, free of income tax. He never made any of the agreed payments. Wife pressed him for payment but did not make any application to divorce court for maintenance. 7 years later wife brought action in King's Bench for amount in arrears. Trial – Portion of claim was statute barred (6 yr time limit), but wife obtained judgment of £600 at trial. Held the husband's promise was enforceable on the basis of the principle in Central London Property Trust Ltd. v. High Trees House Ltd. Appeal  Appeal – no consideration for his promise to pay wife ths support therefore wife lost. To create obligations there must be consideration. Issue: Can wife insist on strict legal rights? NO Reasoning:  On appeal, Denning distinguished the High Trees case. He said that since the principle "never stands alone as giving a cause of action in itself, it can never do away with the necessity of consideration when that is an essential part of the cause of action". Estoppel is not a complete substitute for consideration.  Denning says no consideration for husband’s promise to pay and that this was a new contractual relationship  All three members of the CA found no consideration. The wife did forbear from applying to the court for maintenance. There was, however, no evidence that she had made a promise to forbearance arose from any request of the husband. There was, therefore, no consideration and the appeal was allowed.  Estoppel cannot be used to create legal relations, only applies to existing legal relations.  Principle in High Trees should not be stretched too far - does not create new causes of action but only prevents a party from insisting upon his strict legal rights when it would be unjust to allow him to enforce them  What looks like a gratuitous promise may constitute a unilateral contract  rejected b/c even though wife suffered detriment for forbearing to apply to court., this was done not at husband's request  Must be a link between the promise and the act for something to be a unilateral promise (forbearance not to sue) 16

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The principle never gives rise to a cause of action in itself - therefore, consideration is important for the formation of a contract - no consideration here, promise not enforceable Ratio: Estoppel can only be applied to existing legal relations, the one who makes the promise can not be allowed to revert to the previous legal relations as though no such promise or assurance has occurred. It never gives rise to a cause of action in itself - consideration is essential element. If you find unilateral contract, you have consideration (sword). Apply test: 1. Persisting legal relationship? NO 2. Clear promise? NO 3. Reliance? NO 4. Detriment? NO 5. Equities? She loses - here relative income was a factor Decision: Held for husband: no consideration was found CLASS:  P can use estoppel as part of a cause of action, just not an action in itself. Won't be necessary find unilateral contract in every case of estoppel. Estoppel can't create a contract.  The doctrine can apply where there is an existing legal relationship, and one party agrees not to enforce some legal rights. Here, there was no existing legal relationship.  The doctrine cannot be used to supplant the need for consideration in a unilateral contract.  To say that the doctrine cannot be used to create a cause of action is not the same as saying that it cannot be used by a Plaintiff. The doctrine can be used as part of a cause of action. (see Rickards, auto sale, Pl uses doctrine to say D had agreed to late sale and is therefore bound to accept).  Issue of legal relations between spouses probably was not raised here as in Balfour because in Balfour the two were in amity, and here they were not.  Only referring to past payments – but can possible to enforce payments in the future.  Sword and shield – to make a promise enforceable – a plaintiff can’t use estoppel but a defendant can. Here, Denning says a plaintiff can use estoppel but not as the basis for its claim.  Estoppal operates when established rights can be identified and that one party says it will not utilize its legal rights and the other party relies on it, that the party that says it will not utilize its legal rights cannot go back on its promise to not use those legal rights where it would be inequitable to do so.  Sword and Shield

Robichaud v. Caisse Populaire de Pokemouche Ltée. (1990), (NBCA)
Facts: P owed $3,787 to D and $10,000 to Royal Bank. Both D and Royal Bank agreed to remove these debts providing P paid $1,000 to each of them. P paid $1,000 in cheque to D which was refused by D’s directors (didn't cash the cheque). P sued to compel D to accept as agreed and to remove the judgement for the larger sum. He wants to remove the judgment from the registrar. Robichaud is petitioning the court to remove him from the registrar so he is not shown as an unpaid debtor Issue: Can estoppel be used as a right of action, or only as a defence? BOTH Holding: Appeal allowed Reasoning: Can use estoppel as a grounds of action. To refuse it would be contrary to the principles of equity on which it is based. Here made promise and relied on it to his detriment Ratio: If the principle of PE could be successfully invoked by D, then, considering the relations b/t them, to refuse its application on the pretext that it is not invoked as grounds of defence is untenable to the principles of equity. P is merely asking that D respect the promise made to him and on which he relied to his detriment CLASS: 17

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- If valid unilateral contract you don't have to rely on estoppel - This case supports the idea of estoppel as a sword as well as a shield. - Doctrine used here by the Plaintiff (sword) (but really in a defensive mode).  Using estoppel to remove their defence – this case comes close to a plaintiff using estoppel as the basis of his claim  Pushes estoppel close to the sole action by the plaintiff  Situation is what we talked about during Foakes, o When you have a situation where you have a number of creditors and consideration can be found when there are promises made of receiving something instead of nothing.  Going with trend of overturning Foakes o Jim says its useful to not that this is the expression which is present in this case  If the plaintiff’s entire cause of action does not rest on estoppel then the estoppel may be made available.

Waltons Stores (Interstate) Pty. Ltd. v. Maher (1988), 62 A.L.J.R. 110 (HC)
Facts: W negotiated with M for a lease of land. Some proposed amendments to the lease remained to be agreed. Target date for occupation created a need for urgency. W's solicitors had verbal instructions to accept amendments, but would have to get formal instructions. He sent M's solicitors a letter saying they believed approval would be forthcoming and they would let them know whether or not the amendments were agreed to. M was not notified of any objections. Their solicitor sent to W's solicitors the amended lease proposal, executed "by way of exchange". They began to demolish the old building and partly erect the new building. Weeks later, W's solicitors return the unsigned lease and state their intention not to proceed. - Don’t need pre-existing relationship but need equities. - The contract was agreed to in every respect but they did not take that formal step – somewhat of a technicality. - M, hearing nothing, assumed there was a final contract and W knew that M was relying on this. - Jim says what you have in the case is an exchange of documents and not a face to face negotiation between the parties. - Jim says Maher’s may have jumped the gun – similar to the Christmas exam and Mrs. Palmer paying the deposit for the baseball team Issue: Is the app. estopped from denying the existence of a binding contract? Was the app. entitled to stand by in silence when it must have known that the resp were proceeding on the assumption that they had an agreement and that completion of the exchange was formality? Reasoning:- at trial, the estoppel argued by the respondent was common law estoppel by representation - but does not apply b/c representation must be as to an existing fact, not a promise or representation as to future conduct  Therefore, must look at promissory estoppel which extends to representations as to future conduct - but, can it apply to enforce a promise on which the representee has relied to his detriment where there is no pre-existing relationship of any kind? o They contemplated relationship - parties negotiating toward contract  Two added factors: urgency and the respondent executed the counterpart deed which they forwarded to the app's solicitors and thereafter acted on the assumption that completion of the exchange was a formality o The Walton’s knew from Dec. 10th what exactly Maher was doing – in regards to the demolition and rebuilding of the complex.  Appellant under obligation to communicate within a reasonable time after receiving the deed their intention not to proceed - especially because they knew that the demolition was proceeding

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App's inaction constituted encouragement to the respondent to continue their acts = unconscionable because they knew that the resp were acting to their detriment  Respondent asking the court in the absence of a pre existing relationship of any kind a noncontractual promise on which the representee has relied to his detriment. Ratio:  Estoppel used as a cause of action. In those situations where it would be unconscionable for the promisor to go back on his promise, the promisor will be estopped from going back on promise even formal K not completed - must show detriment (despite fact that there were no legal relations). CLASS: ties 2 doctrines of promissory and proprietary estoppel together - this has not been done yet in Canada - The party asked for specific performance, or damages in lieu of, and a declaration by the court that there was a valid contract. - Jim suggests that misrepresentation could have been a ground on which this case could have been argued but that concept was not fully developed. - The concept of unconscionability according to Jim: - How does the reference of unconscionability help us? - It is very useful here b/c you can see how it bears out in the court. It is a highly emotionally charged word that means “BLOODY DAMN UNFAIR” - Here, estoppel was used as a cause of action. (Australian case, therefore not binding). The way the Australian HC brought together various forms of estoppel is interesting. Generally in the Canadian system, the forms of estoppel tend to be ‘compartmentalized’ and not amalgamated. They relied heavily on proprietary estoppel (as known in Canada). - In Canada, proprietary estoppel can be used to create a cause of action. IE. Where a person acts on reliance of a belief that they will acquire rights over another’s land to be able to construct buildings, the landowner may be precluded from denying those rights where the landowner knows of a (your) mistake but allows construction to continue. Will also apply when a  has acted upon a landowners encouragement of some right (Crabb v. Arun Dist. County p.256 proprietary estoppel) - Nick points out note 6 on torts might be expanded into K. Increasing signs that court is expanding negligent misstatement to include promises as well as what it traditionally referred to IE negligent misstatements of fact, consultation, etc. - Court turns to the element of fairness. Asked for specific performance and acknowledgement of contract or damages. - At trial – found for plaintiff b/c of estoppel based on representation. P assumed an exchange of contracts had taken place. - High Court – P assumed a contract would be put in place. P argued promissory estoppel. Key to equitable estoppel is unconscionability. A failure to fulfil a promise is not unconscionable conduct. The promisee in that situation should not rely on the promise to be fulfilled. - The mere exercise of the defendant’s right not to exchange contracts is not unconscionable. What was unconscionable was to not do that in the surrounding circumstances – because they knew about his reliance and about the demolition of the building – the defendants instead decided to wait – not to notify the plaintiff under these circumstances was unconscionable. - The heart of the doctrine of detriment in the United States is the reasonableness of the promisor that his promise will induce action or forbearance by the promise, - Also talks about the unconscionablity of the conduct (pg 258) - Two ways that Jim says that you can look at this case to get the same result - To use misrepresentation – a concept that applies when your in the pre-contract stage - Misrepresentation is a tort - St. John Tugboat – “If you will build it we will come (live in the building” that is an offer and acceptance 19

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- High trees was a example of the defensive use of estoppel 1. Existing relationship – Walton Stores: Australian case but influential. Use if arguing for plaintiff. 2. Clear promise or representation – Burrows: 3. Reliance – acting on the representation 4. Detriment – Denning didn’t think it was required, need to show that it was acted on 5. Equities 6. Sword and shield – Combe, Robertson, Albertheim? 7. Restoration – retraction of waiver or estoppel, an open file, in some cases you can restore you legal rights and some can’t, in some cases you can revert to your legal rights. Walton stores is the “Sine Qua Non” in regards to the estoppel

M. (N.) v. A. (A.T.) (2003), 13 B.C.L.R. (4th) 73
Facts: A resigned from permanent job in England & moved to Victoria, Canada on promise from M that he would pay her mortgage if she moved to Canada w/ a view to marriage. M didn’t pay mortgage, but loaned her $100,000 promissory note. A applied funds to her mortgage. M evicted A from Vancouver residence & A w/o employment or home. A sued, wanted court to enforce promise on which A relied to her detriment. Trail  failure to establish legal relationship at the time the promise was made (no estoppel) Issue: Should the court enforce the promise made to A, on which she relied to her detriment? NO Analysis: Equitable estoppel “wears an appearance” of contract b/c the promisee’s action or injunction “looks like consideration”. A flexible doctrine requiring a broad approach to preclude unconscionable conduct estoppel does not apply b/c Waltons criteria are not met  a necessary element of promissory estoppel is the intention to or expectation of a legal relationship. Fulfilling a voluntary promise does not amount to unconscionable conduct. There is no evidence that M intended his promise to have a binding effect nor that A was of the view that the promise was binding  she took the risk of assuming so. Ratio: Promissory estoppel will only be enforced when there has been a mutual intention or expectation of creating legal relations. The courts are reluctant to find legal relations arising out of a romantic relationship. Class Comments: - a potential extension of estoppel in the Canadian context - the courts are going to be very reluctant to use language of enforceability for a deal which arises out of a romantic relationship - he promises to pay her mortgage down if she relocates with him - was it relied upon? yes, there was some fairly serious detriment - was the gratuitous promise intended to alter their legal claims & rights? - would the promise have been treated as seriously and enforceable at law b/c it emerges out of a relationship, again, courts will be very hesitant to find so - not adopting the middle “Australian” position - even if this position were adopted, the something more of a legal relationship, or the expectation that this is a legal relationship, or unconscionability is missing - would come under the common law question of enforceability - how to enforce against the husband? Time frame? Other obligations? - the idea of both sides of the equation - if it was truly a contract under consideration, what parts of the contract should be enforced? - Was this a seriously intended promise that we would go to the court to resolve? NO - Mutuya lit ÷ if it is a contract there are mutual expectations and contracts; courts can never enforce the emotional part of the contract - they could enforce the mortgage, but you are not going to enforce the “togetherness”

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