Contracts Can

CONTRACTS- FALL 2016
TABLE OF CONTENTS
Formation of a Valid Contract…………………………………………………………………….....6
A. Offers and Invitations to Treat……………………………………………………………………..…..6
Canadian Dyers Assn v Burton (1920) –conduct indicating offer (lowest price)……………………………....….6
Pharmaceutical Society v Boots (1953) –goods on counter = offer to owner (pharmacy)……………………..…...6
Carlill v Carbolic Smoke Ball Co. (1892)–promise to the world (influenza)……………………………...….......6
Goldthorpe v Logan (1943)–excessive promises in ads (electrolysis)……………………………………….......7
B. Communication of Offer………………………………………………………………….…………....7
Blair v Western Mutual Benefit Assn. (1972)–transcribing not comm. (secretary)………………………………..7
Williams v Carwardine (1833)–motives fulfilling general promise (handbill)…………………………………...7
R. v Clarke (1927) –reward “present to the mind” (murder)…………………………………………………...7
Tenders
R. v Ron Engineering (1981) –contract A/B framework (forgot labour)……………………………………………..…8
M.J.B. v Defence Construction (1951) –implied only compliant bids accepted (privilege clause)……………………..8
Double N Earthmovers v City of Edmonton (2007) –renegotiation of A if in terms (79’)…………………………...8
True Constr. v Kamloops (City) (2015) –no revision if fairness undermined (sealed envelope)……………………..... 8
C. Termination of Offer………………..………………………………………………………………....9
1. Revocation
Dickinson v Dodds(1896) –withdrawal comm. reliable third party (train station)………………………………..9
Byrne v Van Tienhoven(1880) –postal: revocation effective when received (tin plates)………………………..…9
Errington v Errington & Woods(1952) –performative act begins, unilateral not void at death (mortgage)……….....9
Dawson v Helicopter Exploration Co(1955) –offeror in offer/control performance=bilateral (helicopter) …………10
2. Rejection
Livingston v Evans(1925) –original offer revival…………………………………………………………....10
3. Lapse of Time
Barrick v. Clark(1951) –what constitutes a reasonable time to accept offer? (Hunting)……………………….....10
Manchester Diocesan v Commercial and General Investments –equally effective method………………...……..…..10
D. Acceptance……………..……………………………………………………………………………………..……...11
1. Battle of Forms
Butler Machine Tool v Ex-cell-o(1979) –last before performance (tear-off strip)………………..………………….....11
Tywood Industries Ltd. v St. Anne-Nackawic(1977) –exception to last shot (smuggling) …………...………………...11
Tekdata v Amphenol(2009) –common intention other terms were to prevail (Rolls Royce)…………...……………....11
2. Shrink Wraps
ProCD v Zeinberg(1996) –click-wrap license = reasonable offer (phone #s)………………..……………………......12
3. Silence
Felthouse v Bindley –silence cant be imposed/conduct + silence can = rejection (horse)…………………………......12
Saint John Tug Boat v Irving Refinery(1964) –conduct + silence can = acceptance (tugboat)……………………...…12
4. Offeror’s Control
Eliason v Henshaw –terms of offeror & time/place/manner (Harper’s Ferry)………………………………………....12
Communication of Acceptance: Mail & Internet
Household Fire v Grant(1879) –postal rule of acceptance (shareholders)………………………………………….....13
Holwell Securities v Hughes(1974) –specified method notifying acceptance > postal rule……………………..…….13
Brinkibon v Stahag Stahl(1982) –inst. comm. acceptance complete when/where received (telex)..…………………..13
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E. Certainty of Terms…………...……………………………………………………………………………………13
1. Vagueness
R. v CAE Industries Ltd.(1977) –burden on maker of clause (best efforts) …………………………………………..14
2. Incompleteness and Agreements to Agree
May v Butcher v. R(1934) –price essential matter (army surplus)………………………………………………….....14
Hillas v Arcos(1932) –standard of businessman contracts, option clause not separate contract (lumber) ……….…..15
Foley v Classique Coaches Ltd(1934) –past performance binding (coaches)………………………………………...15
3. Agreements to Negotiate
Bhasin v Hrynew(2014) –good faith performance general organizing principle (Can-Am)……………………….....15
Empress v Bank of Nova Scotia(1991) –formula + no enforcement mech. = implying neg. good faith……………...16
Mannpar Enterprises Ltd. v Canada(1999) –negotiation good faith written explicit or impliedly (gravel)……….....16
Wellington City Council v Body Corporate(2002) –good faith cannot be left undefined/needs procedure ……….....16
4. Anticipation of Formalization
Bawitko Investments v Kernels(1984) –essential elements more specific (franchise-franchisee)………………….....16
5. Intention to Create Legal Relations
Balfour v. Balfour(1918) –intent spousal relations (Ceylon)……………………………………………………….....17
Rose & Frank v. JR Crompton(1923) –explicitly state no intention to be bound (carbon paper)………………….....17
TD Bank v. Leigh Instruments(1999) –comfort letters not legally binding…………………………………………...17
CTF v. Ontario (Minister of Finance)(2004) –campaign promises not contracts………………………………….....18
6. Formality: Contracts Under Seal and Requirement of Writing
Royal Bank v. Kiska –written seal not consideration for actual seal.…..……...............................................................18
Dynamic Transport Ltd. v. O.K. Detailing Ltd. –description of land must be reasonably precise...….........................18
Deglman v. Guaranty Trust Co.…....………………………………………………….................................................18
Girouard v. Drouet (2012) –intention = reasonable bystander totality circumstances……….……………………….19
F. Enforcing Promises………………………………………………………………………………………………….19
1. Nature of Consideration
Thomas v Thomas –motivation not consideration (£1/yr. rent)………………..……………………………………....19
Dalhousie v The Estate of Arthur Boutilier –consideration must move both ways.....………………………………..19
Wood v Lucy, Lady Duff Gordon –instincts with an obligation (vogue)…….....……………………………………...19
2. Past Consideration
Eastwood v Kenyon –request needed for past consideration (infant daughter)………...………..…………………….20
Lampleigh v Brathwait (1615) –past consideration okay if requested (King’s pardon)………......…………………...20
DCB v. Zellers (1996) –forbearance of sue valid consideration if valid reason…………………...…...……………...20
3. Pre-existing Duties
Stilk v. Myrick (1809) –pre-existing duty NOT consideration for new promise (sailor)…....………...….....…………21
Gilbert Steel v University Construction –prior duty to promisor not suff. consideration (uni building)…….…..……21
Williams v. Roffey Bros (1990) –commercial advantage (carpeting)……...………………………...…………………21
Pao On v. Lau Yiu Long (1980) –promise to perform pre-existing duty 3rd party (stock crash)………………………22
Fredericton Airport Authority v. Nav Canada (2008) –post-contract mod. okay if not under duress.………………..22
4. Promises to Accept Less
Foakes v. Beer (1884) –payment of less not consideration….…………………………………………………...........22
Re Selectmove (1995) –Roffey only applicable w goods/services not $ (tax collector)………..……………………...23
Foot v. Rawlings (1963) –alter payment method, fresh consideration (cheque bounce)…………..…………………..23
Process Automation Inc. v. Norstream……………………………….……………………….......................................23
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5. Promissory Estoppel
Hughes v. Metropolitan Railway –promise implied negotiations, reliance, inequity (repairs)…………………………24
Central London v. High Trees –4 principles of PE (WW2 rent)………………………………………………………..24
John Burrows v. Subsurface Surveys –clear representation not intending to be bound by representation……………..24
DC Builders v. Rees –promise generated in duress not inequitable…………………………………………………….24
Combe v. Combe –estoppel only a defense (divorce payment)…………………………………………………………25
M (N) v. A (TA) –promise needs intent (shield not sword)……………………………………………………………...25
SASK River Bungalow v. Maritime Life –knowledge and reasonable time election waiver…………………………….25
6. Privity of Contract
Tweddle v Atkinson –no consideration moving from one no ability to sue for breach (groom)………………………...26
Dunlop Tyre v Selfridge –not privy to contract, cannot sue (tires)…………………………………………………...…26
Beswick v Beswick –administrator of will can become privy to contract (dead man’s shoes)…………………………..26
London Drugs Ltd. v Kuehne -2 step test for employees exclusion from liability (transformers)………………………26
Edgeworth Construction Ltd. v N.D. Lea –ind. contractors lack identity of interest …………………………………...26
Fraser River Pile & Dredge Ltd. v Can-Dive Services –exemption clauses waived before crystallization…………….27
G. Content of the Contract……………………………………………………………………………………………....27

1. Misrepresentation, Recession & Bars
Redgrave v. Hurd –test for innocent misrepresentation (buys firm)……..……..………………………………………27
Smith v. Land and House Property Corp –statements of fact vs. opinions (desirable tenant)…......……....…………...27
Bank of British Columbia v. Wren Developments –duty to disclose…………………………………....…………..…..28
Kupchak v. Dayson Holdings –monetary compensation under rescission possible (demolish motel).............................28
2. Representation and Terms………………………………………………………………………………………….28
Heilbut, Symons & Co. v. Buckleton –term or representation, ORP in circusmtances (rubber)………………………..28
Dick Bentley Productions v. Harold Smith –representation for purposes of inducing, induces = warranty……………29
Leaf v. International Galleries –lapse of time to argue breach of term (painting)……………………………………...29
3. Concurrent Liability………………………………………………………………………………………………...29
BG Checo International Ltd. v. B. C. Hydro –can pursue in tort and contract unless explicitly stated………………...29
4. Parol Evidence Rule………………………………………………………………………………………………...30
Hawrish v. Bank of Montreal –no collateral agreement when contradicts written agreement………………………….30
Bauer v. Bank of Montreal – PE admissible where distinct collateral agreement doesn't contradict written doc..…….30
Gallen v Allstate Grain………………………………………………………………………………………………….30
Business Practices and Consumer protection Act ss.187……………………………………………………………….31
5. Classification of Terms……………………………………………………………………………………………...31
Hong Kong Fir Shipping v. Kawasaki Kisen Kaisha –introduces innominate terms (cargo ship)……………………...31
Wickman Machine Tool Sales Ltd. v. L. Schuler A.G. –“condition" =/= breach & right of rescission…………………31
6. Standard Form Contracts & Exclusion Clauses…………………………………………………………………..31
Thornton v. Shoe Lane Parking (1971) –clause needs to be incorporated to be valid………………………………….32
Tilden Rent-A-Car v. Clendenning (1978) –onerous clause? Bring condition to customer’s attention…………….......32
Karrol v. Silver Star Mountain Resorts –factors to determine duty to draw attention…………………...…………….33
Tercon Contractors v. BC –does clause apply (notice and sig), unconscionability, public policy…...……...…………33
TERCON FRAMEWORK –is clause incorporated + does clause apply “ unconsc + policy………………………….33
Loychuk v. Cougar Mountain Adventures –sufficient time + understanding = exclusion….…………………………..33
Niedermeyer v. Charlton –contracting out of ICBC against public policy….………………………………………….33
McCutcheon v. David MacBrayene –implying terms on past practice…………………………………………………34
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7. Discharge By Performance or Breach……...........................................................................................................34
Sumpter v Hedges –new contract needed for quantum meruit………...……………………………………………….34
Howe v Smith –down payments are recoverable, deposits not………………………………………………………...35
Stevenson v Colonial Homes –partial payment or deposit determinative factors…………………....………………...35
Bhasin v Hrynew……………………………………………………………………………………………………….35
H. Avoiding Performance: Mistakes and Frustration……………………………………………………………....36
1. Unilateral Mistake as to Terms………………………………………………………………………………..…...36
Smith v. Hughes –mistake through one’s own assumption & not a term, no assistance……………………………....36
Hartog v. Colin & Shields –reasonable person standard in unilateral mistakes…………………………………..…..36
McMaster University v. Wilchair Construction Ltd.………………………………………………………………..…37
R. v. Ron Engineering –tenderor aware of mistake at time contract formed…………………………………….……37
Staiman Steel –mutual mistake.……………………………………………………………………………………….37
2. Agreements Made Under Mistaken Assumptions…………………………………………………………...…… 38
Bell v. Lever Brothers –test for common mistake in common law……………………………………..……………..38
McRae v. Commonwealth Disposals –fact subject matter didn't exist doesn't void it automatically………….………38
Solle v. Butcher –test for common mistake in equity……………………………………………………………….…38
Great Peace Shipping v. Tsavliris Salvage -4 part common mistake at common law test……………………………39
Miller Paving Ltd. v. B. Gottardo Construction –common mistake doctrine woven in, look at risk allocation……...39
Lee v. 1435375 Ontario……………………………………………………………………………………..…………39
3. Mistakes as to Identity………………………………………………………………………………………...……40
Shogun Finance Ltd. v. Hudson -4 part test, BOP……………………………………………………………….……40
4.
Frustration …………………………………………………………………………………………………….……40
Paradine v. Jane –pre-frustration, harsh common law………………………………………………………………..40
Taylor v. Caldwell –implied terms, frustration doctrine…………………………………………………………...….41
Davis Contractors v. Fareham UDC –foreseeability of frustrating event ……………………………………………41
Capital Quality Homes v. Colwyn Construction –frustration via legislative changes………………………...………41
Edwinton CC v. Tsavliris Russ The Sea Angel –just solutions theory………………………………………...………41
Maritime National Fish Ltd. v. Ocean Trawlers –self-induced frustration not frustrating event……………………..42
VI. Relief for Weaker Parties to the

Contract ………………………………………………………………………42
1.
Duress ………………………………………………………………………………………………………….……42
Pao On v. Lau Yiu Long –evidentiary factors for whether duress is present…………………………………………42
Greater Fredericton v. NAV Canada ……………………………………………………………..….……………….43
2. Undue Influence ……………………………………………………………………………………………….……43
Geffen v. Goodman Estate –test to trigger presumption of undue influence……………………………….…………43
Royal Bank of Scotland Plc v. Etridge –indep. Advice as rebutting presumption of undue influence………..………44
3. Unconscionability ………………………………………………………………………………………………...…44
Morrison v. Coast finance –requirements for presumption of fraud and rebutting it…………………………………44
Marshall v. Can. Permanent Trust –alternative test for unconscionability………………………………………...…44
Harry v. Kreutziger –education/disability as inequality under Morrison test…………………………………………45
Business Practices and Consumer Protection Act (S.B.C.2004, c.2) ss. 4-10….………………………………..……45
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4. Illegality and Public
Policy ……………………………………………………………………………………...…46
Rheburgen v Creston Vet –restrictive covenants prima facie unreasonable…………………………………………..46
KRG Insurance Brokers (Western) Inc. v. Shafron –exceptions, perspective of both parties, interest of the public…46
Still v. Minister of National Revenue –modern approach to illegality………………………………........………….47
VII. Remedies
1. The Basic Interests Protected by Law: Expectation Interest, Reliance Measure, Restitutionary Response
Percy et al.
McCrae v. Commonwealth Disposal Comm.
Bowlay Logging Ltd. v. Domtar
Sunshine Vacation Villas v. Governor and Company of Adventurers of England Trading into Hudson’s Bay
Attorney General v. Blake (818)
2. Special Issues
Chaplin v. Hicks
Groves v. John Wunder Co.
Nu-West Homes Ltd. v. Thunderbird Petroleum
Jarvis v Swans Tours –loss of enjoyment, mental distress damages recoverable………………………………….
Whitten v. Pilot Insurance
Shatilla v. Feinstein
Super Save Disposal Ltd v Blazin Auto
3. Boundaries to Recovery
Hodgkinson v. Simms
Hadley v. Baxendale –test for remoteness of damages…………………………………………………………..
Victoria Laundry (Windsor) v. Newman Indust.
Scyrup v. Economy Tractor Parts –importance of communication in Hadley test……………………………….
Koufos v. Czarnikow (C) The Heron II –policy considerations in remoteness of damages………………………
Asmera Oil Corp. v. Sea Oil & General Corp
Semelhago v. Paramadevan
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A. OFFERS & INVITATIONS TO TREAT:

• Definition: a communication by the offeror to the offeree indicating a willingness to enter into an agreement
with the offeror on certain terms. Offers create power of acceptance in an offeree
• “Invitation to treat”- invitation to commence bargaining
• Difference with offers: offer communicates a willingness to be bound by the next communication of the
offeree
• Quotation of price is not an offer. Followed by indication one would be pleased wo have an offer from a
potential customer
• QUESTION: Would the ROP assess this as a contract or not? Would they believe that a person is making an
offer (indication readiness to sell)?
Canadian Dyers Assn v. Burton (1920)

Facts: - CDA writes to Burton “with reference to purchasing [this] property, kindly state your lowest price.
We will then give the same our best consideration.” (Answer: lowest price is $1 650)\
- Oct. 21, 1919 plaintiff: “we would be pleased to have your very lowest price”
- Defendant: “…last price I gave you is the lowest I’m prepared to accept”
- $500 cheque sent to defendant, deed prepared, then cheque returned
Issue: For something to be an offer does it have to be clearly written or can it be implied through conduct?
Decision: Burton’s words were not a quotation but an offer
Reasoning: - Conduct by Burton: statement in letter & sending draft deed, suggesting title search, naming date for
early closing suggest offer was made
- Conduct by CDA: sending cheque indicates they felt it was an offer
- Burton’s conduct after cheque sent indicated preparedness to accept offer
Ratio: Conduct can suggest an offer, and indicate preparedness to accept an offer as well.
Pharmaceutical Society v. Boots (1953)

Facts: Boots self-service pharmacy. Statute dictates that certain ‘poisons’ not be sold unless under supervision
of registered pharmacist. Pharmacist (located near cashiers) can stop sale at cash register
Issue: At what point in the shopping experience does the customer accept the storeowner’s offer of sale of that
product?
Decision: Appeal dismissed
Reasoning: Contract forms with when customer indicates article they need, and the shopkeeper accepts that offer.
Sale affected at cash desk (where pharmacist can supervise) therefore they aren’t violating the statute
Ratio: Display of goods does not constitute an offer but an invitation to treat. When the customer places goods
on the cashier’s counter, it constitutes an offer to the cashier/store, which they can either accept or reject.
Carlill v. Carbolic Smoke Ball Co

Facts: To combat influenza, Carbolic Smoke ball invented as remedy. CSBC offers 100-pound reward to
anyone who uses Ball as directed in advertisement and still contracts influenza. Carlill contends she’s
entitled to reward
Issue: Can an advertisement constitute a unilateral contract, and are fulfilling conditions of the ad enough to
form a contract?
Decision: Appeal dismissed, Carlill entitled to award.
Reasoning: Ad implies reward would be paid (says 1000 pounds is at the bank for the purpose). Ad is not a contract
to the world, only an offer to the world –an offer that ripens into a contract when conditions are met.
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Ratio: An ad with a general promise constitutes an offer to the world, and anyone who performs the conditions
specified thereby accepts to offer, the reward to which they are then entitled.
Goldthorpe v. Logan (1943)

Facts: Logan’s newspaper ad: hair removal by electrolysis with “Results Guaranteed.” Goldthorpe treated, hair
continues to grow.
Issue: Does an advertisement that promises something, if particular conditions are met, creates an offer or a
contract with the world?
Decision: Appeal dismissed, Goldthorpe awarded costs.
Reasoning: Wording of advertisement (read in its plain meaning as the public would understand it): created an offer
from her to every person willing to accept the terms and conditions of it
Ratio: When ads imply promised results for a service, no matter the excessiveness, the ad create an offer to the
world to every person willing to accept the terms and conditions of it. Thus, if the performance of
service is not met, then one is liable to reimburse at least the costs of the service.
B. COMMUNICATION OF OFFER:
Blair v. Western Mutual Benefits Assoc
Facts: Ms. Blair secretary for WMBA for 30 yrs. Resolution by Board of Directors: intention to 2-years salary
when she relinquishes her position. Minutes of meeting dictated to her, and she types them. She claims it
was not offered but promised to her.
Issue: Does transcribing a statement constitute a valid communication of offer?
Decision: Appeal dismissed, no need to pay Blair.
Reasoning: Transcribing meeting does not constitute a communication of offer (simply using her technical services).
Without communication of the offer, it is incapable of acceptance. She gave no indication that she
thought the resolution was an offer, as it was not mentioned in her letter of resignation.
Ratio: By transcribing a statement, a valid communication of offer is not created, and therefore, acceptance
cannot follow.
Williams v. Carwardine (1833)

Facts: Handbill created: 20 pound reward (on conviction) for anyone who gives information, which leads to the
discovery or the murderer of Walter Carwardine. Mary Williams severely beaten, fearing for her life,
gives info to convict William Williams.
Issue: Do the motives of a person who fulfills the conditions to a general promise prevent them from collecting
the reward?
Decision: Williams entitled to handbill
Reasoning: Advertisement amounted to a general promise –performance of conditions = reward. Her intention was
to give useful information, as seen by a reasonable person. No evidence to contrary that she wasn't aware
of the existence of the offer of award, signs were plastered everywhere.
Ratio: If actions fulfill the requirements of an offer then a contract is formed, regardless if the actions were not
cone with the intention/knowledge of accepting the offer.
R. v. Clarke (1927)
Facts: Murders committed April 1926, proclamation of reward for information that shall lead to an arrest issued
in May, Treffene arrested June 6th. Information given by Clarke June 10th arrest of Coulter,
conviction of both later
Issue: Does one have to intend to claim a reward if they’ve fulfilled the conditions of a general promise?
Decision: Appeal allowed, Clarke not entitled to award
Reasoning: Clarke did not act on the faith of, in reliance upon, the proclamation, but to try to clear himself from a
charge of murder. Offer was not “present to his mind” when he gave information. Ignorance of offer ≠
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consent no contract
Ratio: To claim a reward for performing the conditions of a general promise, one must have the offer ‘present
to their mind’ when they give the information to constitute a meeting of the minds -which is necessary to
the formation of a valid contract.
Tenders:
R. v. Ron Engineering & Construction (Eastern) Ltd. (1981) SCC
Facts: Call for tenders issued, $150 000 deposit required (Lost if tendered offer withdrawn). Ron Engineering
submits offer along with deposit, but realizes bid was lower than intended –try to have offer changed.
Contract given to another company, deposit kept, Ron sues for deposit back.
Issue: Under what conditions are mistakes allowed.
Decision: Appeal allowed, owner to keep deposit.
Reasoning: Contract A: call for tenders is an offer to the world (unilateral contract), submission of a tender binds
the bidder to the offeror contract –as long as it complies with the terms and conditions set out by the
offeror. Tender submission became irrevocable if they are filed in accordance with terms and conditions
of the call for tenders. Contract B is the contract awarded on the acceptance of Contract A. Deposit was
recoverable by contractors under certain conditions in Contract A, but they didn't meet the conditions.
Ratio: Bids become irrevocable if they are filed in conformity with the terms and conditions of the call for
tenders, if such terms so provide. Sets out Contract A/B framework.
M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.

Facts: Defense Construction tendered for construction bids according to 11 specific documents. Privilege
clause stating: “The lowest or any other tender shall not necessarily be accepted.” Sorochan submits bid
suggesting alternative cost (qualifying their bid). MJB had next lowest bid, claim alternative cost
invalidated Sorochan’s tender
Issue: Does inclusion of ‘privilege clause’ allow the owner to disregard the lowest bid in favour of any other
tender?
Decision: Appellant awarded damages of $398 000 (previously agreed to)
Reasoning: Implied term in calls for tenders: only compliant bids will be accepted (Sorochan’s bid was
noncompliant). By accepting bid from Sorochan, owner breached Contract A with other bidders. Owner
not obliged to sell to MJB because they were the lowest bidder, but balance of probabilities indicates
they would have been awarded the contract
Ratio: The inclusion of a ‘privilege clause’ does not require an owner to accept the lowest bid, but it does not
overrule the obligation to only accept compliant bids
Double N Earthmovers Ltd. v. City of Edmonton, 2007 SCC

Facts: Edmonton calls for tenders to supply equipment and operators to move refuse in a dump (all equipment
specified as needing to be 1980 or newer). Contract awarded to S Ltd., City permitted supply of
equipment made before 1980. City had right to inspect equipment but not a duty to do so.
Issue: Did DNE’s bid receive fair treatment throughout the bidding process? Did S’s bid violate the terms and
conditions of the tender?
Decision: DNE appeal dismissed
Reasoning: Condition 17 of the call for tenders stated: “failure to comply with instructions and Conditions of Tender
may invalidate the bid in question, but not automatically disqualify it,” or “waive any informality.” So
the fact S got the contract with a slight violation isn’t an issue.
Ratio: After owner and bidder agree to Contract A, losers cannot act as a policeman of terms of Contract B.
Once Contract A is agreed to, if the ability to renegotiate the terms of Contract is stipulated in the terms
of Contract A, it can be possible
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True Construction Ltd v Kamloops (City) 2015
Facts: True’s bid did not complete appendices or deliver their tender in sealed envelope to City of Kamloops,
argues instructions to bidders were ambiguous.
Issue: Was True's bid compliant with the terms and conditions of the tendering documents so Contract A was
formed between True and the City?
Decision: True’s appeal dismissed
Reasoning: No ambiguous language in the terms and conditions set by the City. True’s defect would undermine
fairness of the competition among the tenders. By failing to complete Appendix A and omitting
Appendix B, True was permitted to continue negotiations with its subcontractors and suppliers (giving it
a competitive advantage over other bidders.
Ratio: A bid that does not comply with terms and conditions cannot be revised through processes set out in the
call for tenders if the defect undermines the fairness of the process of tendering.
C. TERMINATION OF OFFER
1. Revocation
Dickinson v. Dodds (1876)
Facts: Dodd’s letter indicating his agreement to sell, and expiration of such offer (June 12, 9 AM), given to
Dickenson June 10. Dickenson drops letter of acceptance at Dodd’s home but doesn't reach him June 11.
Dickenson’s agent hands letter in person 7AM, indicates property has been sold to another client
Issue: Can an offeror revoke their offer without explicit communication? Is a time limit on an offer binding?
Decision: Dodd wins
Reasoning: An offer with a deadline of acceptance doesn’t bind the offeror to the offeree. There needs to be a
meeting of the minds for a contract to form. Offeror can withdraw offer at any point (a reliable party
must be aware of revocation though- Dickenson was as he heard about negotiations between Dodds &
other customer)
Ratio: Communication of the withdrawal of the offer can be made by any reliable third party (explicit
communication between offeree and offeror not necessary). An offer with a deadline doesn't bind the
offeror to the offeree.
Byrne v. Van Tienhoven (1880) 

Facts: Oct. 1 VT mails offer to sell tin plates at fixed price. Oct 11, VT’s offer arrives, accepted by Byrne by
telegram. Oct 8 VT sends letter of revocation, received by Byrne Oct. 20. Byrne, assuming they
purchased plates, sold them to third party. Breach of contract, failure to deliver accusation
Issue: When does a revocation of an offer through the mail become effective?
Decision: Byrne successful
Reasoning: Revocation of an offer is not completed once it has been put in the mail, but when it is received.
Creation an unreasonable standard: someone receiving offer by post would need to wait to make sure
letter of revocation wasn't sent.
Ratio: Offer cannot be revoked after it has been accepted by the offeree. An offer becomes effective by post the
day it is sent, as does acceptance of the offer. Revocation of an offer only effective when it is received.
Errington v Errington and Woods (1952)

Facts: Father bought house for son & daughter-in-law. Down payment given as gift, expected to pay mortgage
and own property once it was paid off. Woods pays mortgage payments but father then agrees to help
with them as well. Father dies, estate left to widow, Wood and Errington split, widow sues for
possession of the house
Issue: Can a unilateral contract be revoked after the death of the offeror?
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Reasoning: Unilateral contract was made through the father’s promise, and started once they began the performative
act (paying off the mortgage). As long as the performative act occurred it would not be revocable
Ratio: As long as the performative act in a unilateral contract has or is continuing to be fulfilled, it is not void
in the event of the death of the offeror.
Dawson v. Helicopter Exploration Co. (1955)

Facts: Dawson accepts proposal from Springer to explore one of Dawson’s lapsed mineral claims. Dawson
deployed overseas, asks to be notified if helicopter pilot cannot be found. Dawson receives letter
indicating that trip will not be made. Year later, company arranges to enter development phase of claims
with another company.
Issue: Did the correspondence amount to a binding contract?
Decision: Appeal allowed.
Reasoning: Performance of conditions on both sides was basis of bilateral contract:
• Duty required by Springer: notify Dawson when a pilot was attained…
• Dawson would take them to the particular mineral claim
Dawson didn't accept the letter of repudiation by not replying contract still in force
• Dawson’s actions after he returned to BC (Checking mining office, relocating his lapsed claims)
indicated that he did not intend to abandon his rights under the contract
Ratio: When an offeror must participate in the offer, and the performance is under control of the offeror, it
becomes a bilateral contract, and is broken in the event that the offeree clearly communicates his
repudiation of it.
2. Rejection
Livingstone v. Evans (1925)
Facts: Evans wrote to Livingstone proposing to sell land for $1,800. Livingstone wired in return "Send lowest
cash price. Will give $1600 cash. Wire." Evans responded with "Cannot reduce price." Livingstone
wrote to accept the original offer of $1,800. Evans no longer wanted to sell to Livingstone.
Issue: Can an offer be renewed after a counter-offer through ambiguous language?
Decision: Finding for Livingstone
Reasoning: Livingstone writing, “Send lowest cash price…$1600” constituted a counter-offer = rejection of the
original offer. Evans saying, “Cannot reduce price” constituted a separate offer. The “price” referred to
was the $1800 mentioned earlier in his letter. Entire statement indicates that he was standing by his
original offer, therefore, open to accept it
Ratio: Although a counter offer destroys the original offer, the original offer may be ‘revived’ by the original
offeree and become capable of acceptance. A renewal of an original offer does not have to be
communicated through clear language to indicate the original price is otherwise.
3. Lapse of Time
Barrick v. Clark (1951)
Facts: Clark makes offer of $14500. Barrick replies $15000- could be closed immediately (but Clark went
hunting so wife responds to hold offer open for 10 days). Barrick doesn't reply, sells property to
Hohmann for $15000 after 10 days expires, Clark doesn't return in time period though
Issue: What factors govern the amount of time deemed reasonable to accept an offer?
Decision: Appeal allowed, Barrick not entitled to specific performance
Reasoning: Clark allowed reasonable amount of time to pass before sale (through language & method of comm.)
Ratio: 1) The type of product, and its likelihood to fluctuate or disappear over time affects what constitutes a
reasonable time to accept an offer of sale for said product. 2) Indicating a desire to close an offer quickly
& insistence on expedited communication can affect what is considered a reasonable time as well.
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Manchester Diocesan Council of Education v. Commercial and General Investments
Ratio: Where the offeror has prescribed a particular mode of acceptance, but not in terms insisting that only
acceptance in that mode shall be binding, acceptance communicated to the offeror by any other mode
which is no less advantageous to him will conclude the contract.
D. ACCEPTANCE
1. Battle of Forms
• Traditional analysis: reply of each party by a form asserting different terms and conditions from those
contained in the prior form constitutes the making of a counteroffer
• “Performance doctrine/last shot rule”: Last form utilized followed by conduct that may be considered to
constitute acceptance of the offer contained in that form, agreement is created
Butler Machine Tool v. Ex-cell-o Corp. (1979) 

Facts: Butler sends letter to Ex-Cell-O, offers to sell equipment for $77 000. Offer contained their standard
terms- price variation clause (cost up = price up). Ex-Cell-O replies- they would order machinery on
own terms (no price variation). Butler says they accept ECO offer (signed acknowledgment slip), but
reassert their terms (last shot). ECO doesn't reply, but Butler delivers equipment asking initial price +
variation
Issue: At what point in an exchange, when each party asserts their own terms and conditions, does a contract
begin, and whose forms prevail? Price escalation clause enforceable?
Decision: Appeal allowed, contract on ECO’s terms
Reasoning: The contract was concluded on ECO’s terms: (1) ECO’s letter amounted to a counteroffer, which killed
the initial offer of Butler. (2) Butler signed the tear-off strip on the terms of ECO’s counteroffer (which
constituted acceptance of the offer) –attached letter with the signed tear-off strip wasn't relevant,
contract was already formed.
Ratio: The last to communicate their terms, before performance of the contract starts, is the party whose terms
prevail.
Tywood Industries Ltd. v. St. Anne-Nackawic

Facts: a) St. Anne issued invitation to tender with terms & conditions included, Tywood replies with their own
b) Tywood submits revised proposal with same terms and conditions. St. Anne sends purchase order
with new condition imposing arbitration in disputes.
c) St. Anne sends another purchase order –not signed by Tywood, but goods are delivered to Tywood.
Issue: Can conduct of the parties who are exchanging forms determine whose forms are enforceable? Was
arbitration a term on the contract?
Reasoning: Attention wasn't paid by each party to the terms on the reverse side, exchanges focused on price &
closing the deal only. Defendant tried to smuggle in arbitration terms (didn't complain about lack of
response to their terms either), unaware of the term put in the contract. Arbitration not agreed by parties,
cannot impose it
Ratio: Conduct of the parties is important when determining whose forms are enforceable. Not all times does
the ‘last shot’ rule apply. If one party slips in a term that was not part of the essence of the negotiations
between the parties, it may not be enforceable.
Tekdata Interconnections Ltd v Amphenol Ltd

Facts: Tekdata claimed: some connectors delivered from Am late/poor quality. Am says contracts on terms of
its acknowledgement of the purchase orders, which excluded/limited liability for any breach of contract.
Issue: What are the exceptions to the traditional offer/acceptance analysis?
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Decision: Appeal Allowed
Reasoning: Traditional offer/acceptance analysis adopted unless:
(1) Documents passing between the parties & (2) conduct indicate their common intention was that
some other terms were to prevail (circumstances of the case not sufficiently strong to do so)
Ratio: Conduct & totality of the relationship between the 2 parties can supersede the traditional
offer/acceptance analysis.
2. Shrink Wrap
Pro CD v. Matthew Zeidenberg and Silken Mountain Web Services Inc
Facts: Zeidenberg buys cheaper consumer version of software SelectPhone in 1994. Forms Silken Mtn. Web
Services to resell information in SelectPhone database. Packaging of the CD-ROM stated that there was
a license enclosed. License present when he installed the software, which he accepted by clicking assent
at a suitable dialog box. Pro CD seeks injunction –A violating rights specified in the licenses
Issue: Are click-wrap licences offers and does clicking OK constitute acceptance?
Decision: Appeal Allowed
Reasoning: License valid and enforceable as a contract. Z did accept the offer by clicking through. Zeidenberg could
have rejected the terms of the contract and returned the software
Ratio: Click-wrap licenses constitute a reasonable offer, and confirming with a click indicates acceptance
3. Silence
Felthouse v. Bindley (1862)
Facts: Felthouse negotiated to purchase a horse from his nephew (mix up in price though). Uncle wrote a letter
implying that if he had not heard from his nephew by a certain date he would consider the horse sold to
him. At a date before the ‘acceptance date’ on uncle’s letter, auctioneer Bindley accidently sold the
respective horse against the instructions of the nephew.
Issue: When one is silent (through lack of a written response) to an offer, is the assumption that the offer is
accepted or rejected?
Decision: Property in question (horse) was never transferred from nephew to uncle. Rejection indicated through
lack of response to letter & no actions that implied acceptance either. Uncle has no case against
auctioneer for selling goods owned by someone else
Reasoning: Appeal allowed
Ratio: Acceptance cannot be assumed if there is no notification of acceptance, or through silence. Silence
cannot be imposed by the offeror on the offeree.
Saint John Tug Boat Co. v. Irving Refinery Ltd. (1964)

Facts: SJTB had deal with Irving to supply use of tugboats in assisting them (no firm arrangements had been
made though). SJTB told Irving: permitted use of them, $450/day ("on call" until a certain date). End
date of contract: SJTB keeps tugs on call- Irving continues to use them. Irving billed for months after
end of contract, refused to pay.
Issue: Can a party, in their actions, imply acceptance?
Reasoning: After contract ceased, every invoice sent by SJTB constituted an offer, continual use of the service
implies acceptance. Reasonable person would determine that SJ expected to be paid for their services
Ratio: Silence can constitute acceptance when combined with conduct. In circumstances that no reasonable
person would suppose that the work was being done for nothing, then the first party will be liable to pay
for it.
4. Offeror’s Control
Eliason v. Henshaw (1819)
Facts: Feb. 10: Eliason proposes to buy flour from Henshaw, writes: “Please write by return of wagon whether
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you accept our offer” to Harper’s Ferry. Feb 15: Henshaw writes acceptance of offer, sent through mail
on 19th to Georgetown. Feb 25: Eliason replies, acknowledging receipt of letter, says response was too
late (not returned by wagon).
Issue: Was the offer accepted in the right time, place and manner?
Decision: Appeal rejected.
Reasoning: There was no acceptance, and therefore no contract formed. (1) Proper time: contract was not accepted
within it - not sent back by wagon (2) Right place: acceptance should have been sent back to Harper's
ferry, not to Georgetown (3) Right manner: should have been sent by wagon, but was sent by mail.
Ratio: Offeree must follow the terms of the offeror (time/place/manner of acceptance) for an acceptance to be
valid and binding.
5. Communication of Acceptance
Household Fire v. Grant (1879)

Facts: Grant had negotiated to purchase shares in Household Fire, name added to list of registered shareholders
but his letter of purchase never reaches HF. His earnings from dividends were credited to his account.
Household Fire is liquidation. Liquidator applied for money from the appellant. He refused to pay.
Argued he was not a shareholder – he had never received the notification in the mail and was not aware.
Issue: When do acceptances becoming binding when they are sent via mail?
Decision: Judgment affirmed, Grant owes money.
Reasoning: Contract was formed when the acceptance was mailed. Once someone posts acceptance, there is a
meeting of the minds. The post acts as an agent, through which a meeting of the minds can occur.
Offeror has option of making acceptance binding only in person, but they chose the mail as the primary
means of communication (could have excluded postal rule in the offer if he wanted).
Ratio: A contract becomes binding the instant that the acceptance is put in the mail. Whatever medium the
parties themselves chose to communicate will be used to assess when acceptance occurs.
Holwell Securities v. Hughes (1974)

Facts: Hughes granted Holwell 6-month option to purchase a property- option had to be exercised "by notice in
writing.” Before 6-mo. option, Holwell's lawyer wrote to Hughes' lawyer stating that his client was
exercising his option, and also included a cheque for the deposit. Holwell's lawyer sends copy of letter to
Hughes by mail, never delivered. Hughes refused to sell the property and Holwell sued for breach.
Issue: When do acceptances becoming binding when they are sent via mail?
Reasoning: Parties DID intend to use the post as the means to communicate acceptance (but acceptance still requires
communication). "Notice in writing,” meant that Hughes required actual notice of acceptance.
Ratio: Postal rule doesn't apply in situations where a notification of acceptance has been specified by the terms
of the contract.
Brinkibon v. Stahag Stahl (1982)

Facts: Brinkibon (London) telexed acceptance of a contract offer to purchase steel from Stahag Stahl in
Vienna. Brinkibon wanted to serve the respondent with a writ claiming damages for breach of contract in
England; Stahag Stahl claimed they were not under British jurisdiction.
Issue: Under what jurisdiction would a contract come into force when it is formed over telephone
conversation?
Decision: Appeal dismissed.
Reasoning: In cases of instantaneous communication (telex treated as such):
• Contract complete when acceptance is received by the offeror
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• Contract is made at the place where the acceptance is received.
Ratio: In cases of instantaneous communication, the contract is only complete when the acceptance is received
by the offeror. The contract is made at the place where the acceptance is received.
E. CERTAINTY OF TERMS
Agreement on all the essential terms of the agreement +
Meaning of terms can be determined with a reasonable degree of certainty =
Enforceable agreement
Aspects of doctrine of certainty of terms:

o 1) Agreement may suffer from incompleteness in the sense that an essential term is simply not present (essential-ness
is subjective though)
o 2) Agreement to agree: when parties cant agree to particular matter, they may stipulate that they will reach an
agreement on the matter in the future
o 3) Incurable uncertainty: important term of an agreement may suffer from vagueness (must determine whether, as
result of vagueness, entire agreement fails for uncertainty)
1. Vagueness
o “Best effort” clauses impose higher standard than “reasonable effort” clauses
o Requires promisor to take in good faith all reasonable steps to achieve the objective –doing everything known to be
usual, necessary, and proper for ensuring the success of the endeavor
R. v. CAE Industries Ltd.
Facts: CAE purchases Winnipeg Maintenance Base of Air Canada. Operation of facility would require about
700 000 man-hours per year. 3 ministers indicate Govt. couldn't guarantee more than 40 -50 000 but
would employ its best efforts to attain larger target
Issue: Are ‘best efforts’ lacking in precision in and of themselves?
Decision: Appeal dismissed, govt. had entered binding contract.
Reasoning: Both parties intended to enter into contract with one another. Letter + surrounding circumstances (partial
performance of CAE) = not just political arrangement. Central commitment was to set aside repair and
employ best efforts to secure labour (other aspects were subject to variations to be discussed later). “Best
efforts” equivalent to “best endeavours” - Sheffield District v. Great Central “leave no stone unturned”
(burden on govt.)
Ratio: Best efforts clauses impose a burden on the party that made the clause, which is not in and of itself too
vague to be enforceable.
2. Incompleteness
• Omitted term must be so important it’s clear that an agreement hasn't been reached
• In some circumstances, price is considered an essential element of a contract e.g. building contracts
• If workable mechanism for determination of price at a later point is established, agreement wont fail for
incompleteness
• When one of the parties has discretion, through the agreement, over the TBD price, they must exercise it reasonably
May & Butcher v. R. (1934)
Facts: M&B agree for purchase of army surplus as it became available from Board. Deposit from plaintiff
board agrees to sell. Prices, dates of payment, quantities available, dates of delivery to be agreed to by
the parties in due course
Issue: Whether the terms of the contract were sufficiently defined to constitute a legally binding contract?
Reasoning: There was never a concluded contract between the parties: The matter of price being left at large was an
‘essential matter’ = incomplete. Agreement to agree on price is not binding. In the absence of a binding
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agreement, arbitration clause not applicable
Ratio: In some circumstances, the price of items in an agreement is an essential matter, and if it is not set in the
terms, the contract is incomplete.
Hillas v. Arcos (1932)

Facts: Parties agree to supply lumber for 2-year period. Agreement had option for Hillas to purchase more
standards of lumber in 1931 season. Arcos sells to other rival purchaser instead. (a) Option exercised by
purchaser, (b) seller refuses to perform, says agreement lacked certainty of terms (c) dates and quantities
left at large, prices TBD by 1931 price list
Issue: Are the terms of the contract too uncertain to be legally binding?
Decision: Agreement was enforceable
Reasoning: Standard of businessmen’s contracts: often written in crude or summary fashion, duty of court to
construe them fairly and broadly. Option clause was part of the initial contract formed, buyer simply
needed to exercise it before a particular date for it to come into force (not agreement to agree). There
was clarity in (a) price (clear as it was TBD by 1931 price list) (b) quantity (c) quality of description of
goods (d) time of delivery (somewhere within 2-year limit)
Ratio: Context and intentionality of the parties can imply certain terms. A contract to negotiate can be formed.
If a contract exists, option clause to extend the contract is not considered to be a separate contract.
Business contracts are often written crudely, so courts should construe them fairly and broadly.
Foley v. Classique Coaches Ltd. (1934) 

Facts: CC agrees to purchase piece of land from F, under condition that they purchase the fuel required for their
fleet of cars from them as well (prices TBD “in writing from time to time”). CC obeys for 3 years, then
tries to get fuel from someone else
Issue: Can price be variable, and the contract not be void for vagueness?
Reasoning: Parties had done business for 3 years; conduct indicates that both believed that a contract was formed.
Price TBD by what they had done in the past. CC cannot buy fuel from another source without
breaching it
Ratio: Past performance can indicate that a contract is binding (reliance interest)
3. Agreements to Negotiate
• Distinction: between (a) an agreement to perform a transaction on unspecified terms or on terms agreed &
• (b) Agreement to negotiate in an endeavour to arrive at terms to which a transaction will be performed (subject
of the agreement is the process by which its hoped the transaction will be concluded)
Bhasin v. Hrynew, 2014

Facts: Bhasin and Hrynew were investment sellers for Can-Am. After rejection by Bhasin, Hrynew pressures
Can-Am into merging with him (Can-Am denies to Bhasin that any such plans had been made). Can-Am
tells Bhasin that Hrynew was not bound by confidentiality in his role at the Alta. Securities Commission
(false). Can-Am gives notice of non-renewal, Bhasin sues
Issue: Does Canadian common law impose a duty on parties to perform their contractual obligations honestly?
Was there a breach of that duty?
Decision: Appeal allowed, Can-Am breached their duty.
Reasoning: Can-Am acted dishonestly toward Bhasin in exercising the non-renewal clause, misled Bhasin about its
proposed agency restructuring and Hrynew's role as auditor. Dishonesty was directly and intimately
connected with the performance of the agreement and its exercise of the non-renewal provision.1) There
is an organizing principle of good faith 2) there is a general duty of honesty in contractual performance
Ratio: Good faith contractual performance is a general organising principle of common contract law. Parties to
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a contract are under a duty to act honestly in the performance of their contractual obligations. Good
Faith is not implied, it imposes a minimal standard of honest performance (comes with every contract)
Empress v. Bank of Nova Scotia (1991) 

Facts: Empress (landlord) brought petition under s. 18 of Commercial Tenancy Act against BNS, seeking writ
of possession under s. 21 of the Act. Contained renewal clause that stated price should be at market
value, and must be mutually agreed to by landlord and tenant. In negotiation, Empress proposed a
$15000 sum to be paid before renewal began
Issue: Was the clause for renewal void for uncertainty?
Reasoning: There was an implied term that the landlord would negotiate in good faith with the tenant, the $15 000
penalty doesn't indicate bargaining in good faith. If there is a formula (market value) in a contract, but no
mechanism to enforce the terms, then court can supply a mechanism (Good Faith).
Ratio: Where in an existing contract the parties have agreed to agree on an essential term at a future date, the
court in seeking to give effect to that agreement (and not to hold the agreement void for uncertainty) may
imply a term importing an obligation to negotiate in good faith and not unreasonably withhold consent.
Mannpar Enterprises Ltd. v. Canada (1999)

Facts: Mannpar holds permit under contract of Crown to sell sand/gravel on reserve. Mannpar and Dept.
anticipated operation would extend over 10 years. Clause 7 stipulate that 5-year permit could be
extended ‘subject to satisfactory performance.’
Issue: Is a duty to negotiate in good faith present?
Reasoning: (1) Obligation not expressly written (2) or implied. “Subjective to performance and renegotiation”
indicates ability of Crown to enter/refuse to enter arrangements after the first contract expired
(regardless of anticipation of length of agreement).
Case distinguished from Empress Towers:
• There was no benchmark, an objective standard by which to measure a duty (e.g. market rental).
Good faith undefined in Clause 7.
Ratio: There is no common law obligation to negotiate in good faith; it must be in the contract, either expressly
or impliedly (which also applies to renewal clauses).
Wellington City Council v. Body Corporate 51702

Facts: “Process” contract obliged Council “negotiate in good faith” with Alirae the sale of premises where
Council was a lessee. Council held liable for $580 000 for breach of contract, decision appealed
Issue: Are the terms of the process contract sufficiently specific to be enforceable?
Reasoning: Consensus is needed to form a process contract; agreement on all essential terms (or mechanism by
which to determine the essential terms) was not met. No mechanism to determine essential terms. Good
faith left undefined & no criteria through which to decide whether ‘good faith’ had been breached.
Ratio: An agreement to negotiate in good faith is unenforceable for uncertainty (good faith must be defined). If
a process contract has a specific procedure by which courts can reasonably determine (a) what the
parties are required to do and (b) whether they have done it, it may be enforceable.
4. Anticipation of Formalization
Bawitko Investments Ltd. v. Kernels Popcorn Ltd.

Facts: KPL plans to open 2 locations. Passander approaches KPL to acquire franchise rights. “Information
package” sent to Passander, contained draft form of franchise agreement. Parties meet, discuss particular
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terms, conclude meeting with “you’ve got a deal.”
Issue: Was an oral contract in place?
Decision: Appeal allowed, essential elements missing
Reasoning: Conduct: Passander’s behaviour after the 18th (breaking certain terms set out in the draft) indicate he did
not believe that contract was formed. No meeting of the minds. No intent that the 18 th agreement would
be binding. Specialness: franchise-franchisee relationships are special in that the terms of agreement
must be very detailed to have effect.
Ratio: In a franchise-franchisee agreement, what is considered to be an essential element differs from that of a
regular contract, they are more specific.
5. Intention to Create Legal Relations
• Situations where requisite intention may not be present (1) when the parties agree to be bound in honour only
(2) parties negotiate an agreement may achieve and record in writing a preliminary version of their agreement
• When there is an imbalance in the bargaining power between parties, there is more scrutiny of clauses that dictate
honorable pledges
• Letters of intent/term sheets/memoranda of understanding: when parties write down what they’ve agreed to so far
understanding that it is a preliminary agreement
o If preliminary agreement fails to deal with important aspects of the anticipated agreement, it will fail
due to uncertainty of terms or an agreement to agree
Balfour v. Balfour (1918)

Facts: The Balfours vacation in England, Mrs. becomes ill and stays while Mr. returns to Ceylon. Mr. agrees to
pay her $30/month until he returned when relationship was fine. Relationship sours, Mrs. Expects $, Mr.
declines to pay
Issue: Can there be intent to form a contract in spousal relationships?
Reasoning: No intent to be legally bound when the agreement was made, therefore, no contract. Potential for
frivolous cases if familial agreements were determined to be contracts. Introduction of concept could
cause unneeded disruptions in families.
Ratio: Intent is needed to form a contract. When agreements are made between spouses, they are generally not
contracts, as intent is absent.
Rose & Frank v. JR Crompton (1923)

Facts: RFC distributes Crompton’s carbon paper. Agreement contained clause that agreement was not intended
to be a formal legal agreement & thus not subject to legal jurisdiction of US/UK. JR cancels agreement,
as they were unhappy with RFC proceedings
Issue: Can the clause of a contract state that the contract is not legally binding?
Decision: Appeal allowed, JRC not in breach
Reasoning: Intentions of parties are crucial to formation of a contract. Intentions are clearly stated in their
agreement, that this was not a legally binding contract –no contract existed, so no breach exists
Ratio: Parties can intend not to be bound, if they have explicitly stated so in an agreement. Presumption in
commercial contractual context is that both parties intend to be bound.
TD Bank v. Leigh Instruments (1999)

Facts: Leigh relied on Plessey (parent company) to confirm their reputability to TD. Comfort letters provided
to TD to assure them loans would be repaid
Issue: Are comfort letters binding?
Decision: Appeal denied, comfort letters not binding.
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Reasoning: 5th/final comfort letter had clause that indicated it was not a legally binding obligation. The language of
letter reviewed and accepted by TD officials – intention accepted. External evidence indicated that TD
felt comfort letters were more documentation than security (moral but not legal obligation)
Ratio: Letters of comfort are not legally binding in context of contract law. Letters of comfort can give rise to
course of action in tort because of misrepresentation though.
CTF v. Ontario (Minister of Finance)(2004)

Facts: Dalton McGuinty promises in a platform before an election. CTF- consideration in contract was CTF
support for Ontario Liberals
Issue: Are political campaign promises contractual agreements?
Decision: Dismissed.
Reasoning: Political promises are not intended to be bound, and intention to be bound is needed to form a contract.
Ratio: Political promises do not constitute contracts, as they are not intended to be contracts.
6. Formality: Contracts Under Seal and Requirement of Writing
Presence of a seal provides CLEAR evidence that the promisor intended to create legal obligation.
1. Written, signed, and (subject matter reasonably described Delgman).
a. Bleakly v. Smith subject matter is reasonably described and sufficiently clear to satisfy the agreement.
i. Turney v. Zhilka not clear what was being negotiated over.
b. Sale of land will be VALID if the party denying the existence of the contract acts/behaves in a way that
would indicate the contract exists (Delgman).
Royal Bank v. Kiska

Facts: The word “seal” was printed on the document beside their signature
Issue: Does a signature and written “seal” constitute consideration? No.
Decision: If there is no consideration, seal is needed. More than just a seal is needed
Reasoning: Guarantee was binding but the seal was not valid. However, the court found that the contract had been
supported by consideration in another matter and was thus enforceable.
Ratio: A written “Seal” is not consideration for an actual seal.
Dynamic Transport v. OK Detailing

Facts: Defendant agreed to buy property described in a memorandum, signed by him. Land was going to be
subdivided and needed permission from regulatory authority.
Ratio: Description of the object must be precise enough to identify it and thus be bound in contract.
Delgman v Guaranty Trust Co.

Facts: Respondent nephew of the deceased aunt had promised over the years that she would make adequate
provisions for him and would leave the premises to him but did not. Over the years, he had helped
around the house and while never living there, he continued to take her on drives and do odd jobs for
her. The CA found this to be contractual, the estate appealed.
Issue:
Decision: Appeal allowed, respondent entitled to recover for his services but did not give him the house
Reasoning:
Ratio: When part performance is done on the footing of a contractual relationship, and the party that got
something out of the part performance does NOT complete the contract, the party who performed is
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entitled to recover from that performance.
Girouard v Drouet (2012)

Facts: Interest expressed in condo for sale by Drouet. E-mail discussions occur, through which Drouet claims
that Girouard and him had formed contractual obligations (price agreed to, G claims contractual breach
and seeks specific performance).
Issue: Can an email exchange amount to a binding contract? How is intention through email ascertained?
Decision: Appeal allowed
Reasoning: Statutes of Frauds –writing is needed to est. sale of land, email exchange isn’t writing.
A reasonable bystander would not have concluded, in the totality of the circumstances, that a contract
had been formed (lack of intention). Generally, an exchange of emails qualifies as preliminary
negotiations that may lead to the signing of a formal and binding contract. The typical purchaser doesn't
buy properties without viewing them
Ratio: The test for determining whether intention was present is that of the reasonable bystander in the totality
of the circumstances.
F. ENFORCING PROMISES
Consideration: Either party doing or promising to do something in exchange for the other party doing or promising to do
something (must be of value under the law e.g. some right, interest, profit or benefit accruing to the one party). Past
consideration, when not done at the request of the other party, is no consideration.
1. Nature of Consideration
Thomas v Thomas
Facts: John Thomas left homes to his brother Samuel in his will. John said he wanted his wife to either have
the house he was living in or £100. After John’s death, his wife lived in the house and paid £1 per year
(consideration) and promised to pay this while keeping the house in good repair as rent. When Samuel
died, the executor of his will tried to evict the wife.
Issue: Can a wish constitute consideration? What is “sufficient” consideration?
Decision: Yes, contract is enforceable.
Reasoning: Motives/wishes of the deceased do not constitute good consideration, as it did not “move” from each
party (only from the husband’s end). However, the 1-pound rent was consideration for the promise of
her late husband (promisor).
Ratio: Motivation is not the same thing as consideration – consideration must be something of value in the eyes
of the law moving from the Plaintiff.
Dalhousie College v The Estate of Arthur Boutilier (1934)

Facts: Boutilier signed a subscription promising to pay $5,000 (consideration) to Dalhousie, but dies before
making the payment. Dalhousie looking for the money now to go towards new buildings and brought
claim against his estate.
Issue: Was Boutilier’s promise sufficient consideration for a binding contract?
Decision: Dalhousie not entitled to any of Boutilier’s estate.
Reasoning: Subscription to donate not a legally binding contract. The subscription was a unilateral offer awaiting
performance. Although Dalhousie did build buildings, it did NOT promise to do so in exchange for
Boutilier’s donation.
Ratio: Principle of reciprocity exists; the thing to be done (or not done) must be at the request of each party. To
bind a promise, consideration MUST flow both ways (parties must exchange promises).
Wood v. Lucy, Lady Duff Gordon (1917)

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Facts: Employment agreement met by the D and P would help turn her “vogue” into money, with a 50/50 split
of profits. D is accused of breaching this contract by placing her endorsement on fabrics and
withholding the profits. D claims there was not adequate consideration.
Issue: Was there adequate consideration?
Decision: Yes, the
Reasoning: The 50/50 agreement and the contracted promise to do his best, showed reasonable consideration.
Ratio: For the term to be implied in a contract, it must be very obvious. A promise may be lacking, and yet
there might be “instincts with an obligation” imperfectly expressed.
2. Past Consideration:
An act gone before the promise was made (Past consideration) is not good consideration, except if…
o (1) Act must have been done at the request of the promisor;
o (2) It must have been understood that payment would be made for the act
o (3) The payment, if it had been promised in advance, must have been legally recoverable
Lampleigh v. Braithwait
Facts: Brathwait kills man requested Lampleigh to seek a pardon for this crime from the King. Lampleigh
rode around the country to obtain this pardon, after which Brathwait promised to pay Lampleigh £100.
Issue: Can past consideration ever be considered good consideration?
Decision: Contract formed, judgment for plaintiff.
Reasoning: Past consideration will be consideration if (1) The act done in the past was done at the promisor’s
request (2) The parties understood at the time that the act was to be rewarded with compensation at some
point (3) There was a legally valid contract otherwise in place
Ratio: Past Consideration is good consideration if the act was requested by the promisor, and where service is
provided in circumstances where there is a reasonable expectation of compensation.
Eastwood v. Kenyon
Facts: Sutcliffe dies. Eastwood cared for his infant daughter Sarah. Eastwood spent money on her education
through BORROWING money from Blackburn (gave him a promissory note). Sarah comes of age
promises she would pay Blackburn amount of note. Sarah married Kenyon, he promises to pay back
Blackburn but does not.
Issue: Does one need to request consideration to have it constitute good consideration?
Decision: Yes, therefore no promise was present.
Reasoning: One cannot enforce a promise that was not legally enforceable to begin with – Sarah’s obligation to pay
promissory note unenforceable. Consideration took place before Kenyon knew about Eastwood.
Eastwood volunteered the money for Sarah’s education, she did not wish or request it.
Ratio: Past consideration is NOT good consideration when the benefit conferred was not at the request of the
promisor.
Forbearance of Suit
• Forbearance to sue is good consideration and money paid in exchange for a promise not to sue is a valid
• Forbearance cannot be based on a known invalid claim, unless…
o It was a reasonable claim made in good faith believed by the party forbearing to have at any rate a fair
chance of success (forbearer believed the claim is valid) OR
o The party seriously intended to pursue the claim
DCB v. Arkin & Zellers (1996)

Facts: DCB’s kid shoplifted in Zellers. Took $59.99- recovered unharmed. Zellers wrote to the mother and
demanded restitution of $225 or else they would sue.
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Issue: Did consideration flow both ways?
Decision: Appeal accepted.
Reasoning: Consideration flowed from the mother ($225), but not from Zellers, as the forbearance to sue was not an
honest proposition. Without consideration, DCB did not have to pay Zellers.
Ratio: Forbearance to sue is valid consideration if the party being sued is being sued for a valid reason.
Forbearance is good consideration UNLESS it is based on a bogus claim.
3. Pre-Existing Duties
• A has a contract with B. A makes a new promise to B to secure B’s performance of one or more of the
obligations owed under their pre-existing contract.
• The performance of the pre-existing contractual obligation owed by B to A, or the promise to so perform is not
sufficient consideration for A’s new promise
Stilk v Myrick (1809)

Facts: Stilk contracted to work on Myrick’s ship for £5/mo. Part of the way through the voyage, two men quit.
The captain could not find replacements and he promised the crew that he would split the extra wages of
the two men between all of them if they picked up the extra duties (consideration) –Capt. later refused.
Issue: Was there sufficient consideration to allow the sailors to collect?
Decision: NO
Reasoning: After the two men had deserted, Myrick made a new promise. But the crew was already bound under
contract to return the ship to London. Public policy argument is void because, in order for it to work, a
valid contract needs to be formed in the first place.
Ratio: A promise to do something you already have to do is NO consideration (valueless promise) if the
previous promise is to the same person. Performing a pre-existing duty does NOT suffice to new
consideration when a further promise is given.
Gilbert Steel v University Construction (1976)

Facts: Prior to the construction of the first building, Gilbert announced price increase on steel parties enter
new written contract for the increased price. During first building construction, second price increase
was announced parties entered oral agreement reflecting the second price increase for the first
building. Gilbert also sends a new contract to University but it was never executed. University
continued to accept the steel deliveries but failed to pay the correct amount of the second price increase.
Officially, there was no new contract; the price increase was only discussed. Gilbert argues that the
second price increase and the oral agreement were intended (implied) to rescind the first contact.
Issue: Was the oral agreement legally binding, or does it fail for want of consideration?
Reasoning: The price increase and the oral agreement are not legally binding. There was no new consideration.
Gilbert was NOT providing a new service; he was continuing to provide a product he already promised
he would (Stilk v, Meryk).
Ratio: A prior duty owed to the promissor is not legally sufficient consideration.
Williams v. Roffey Bros. (1990)

Facts: Roffey entered into a contract to renovate flats in an apartment building. Roffey hired Williams as a
subcontractor for carpeting. Williams realized they might not be able to complete the project on time
(penalty clause for Roffey if he did not finish on time), so he promises Williams a further sum to
complete the project by the date. Roffey makes one payment, but refuses any more.
Issue: Can there ever be sufficient consideration for a pre-existing duty?
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Decision: Williams provided sufficient consideration, because Roffey received 'practical benefit’
Reasoning: Mutual benefit occurred. Williams received more money and Roffey Bros. got their flats done on time
(obviation of disbenefit).
Ratio: In certain circumstances, promising to do what you already have to do can be consideration:
1. If there is mutual practical benefit (or obviation of a disbenefit) flowing to both parties from the new
deal (commercial advantage)
2. If it is not completed under economic duress (no undo pressure extorting).
Greater Fredericton Airport v. Nav Canada (2008)

Facts: Nav agrees with govt. to assume responsibility for air navigation services at airports across the country.
The agreement included terms assigning responsibility for certain capital costs. Dispute over costs for
new equipment. GFA letter promised to pay equipment costs under protest. Nav then acquires equipment
but GFA refused to make payments. Arbitration clause held that the agreement did not entitle Nav to
claim reimbursement.
Issue: Can post-contractual modifications, unsupported by consideration, be enforceable?
Reasoning: Existing contracts are allowed to change in order to respond to contingencies and commercial realities.
Ratio: (1) Post-contractual modifications, unsupported by fresh consideration, may be enforceable so long as it
is established that the variation did not occur under economic duress.
(2) Party seeking to enforce the variation must establish it was not procured under economic duress or
that the other party cannot raise the duress doctrine because they agreed to the variation.
Pao On v. Lau Yiu Long (1980)

Facts: LYL (public co.) wants to buy building from PO’s company (private co.). Parties exchange shares. PO
agreed not to sell 60% of its shares for a year (good consideration) with understanding of protection in
event of stock crash. PO’s protection deal done with LYL CEO, not part of contract between companies
but on the side. Shares crash, LYL CEO argues invalidity because of past consideration)
Issue: Can a pre-existing duty be sufficient consideration if the act already promised to so is flowing to a third
party?
Decision: Appeal accepted.
Reasoning: (1) Act must have been done at the request of the promisor (although it was past consideration, not
selling the shares was done at request of LYL)
(2) It must have been understood that payment would be made for the act (parties understood restriction
of selling to be exchanged for guarantee against crash)
(3) The payment, if it had been promised in advance, must have been legally recoverable
Ratio: Performance on a promise to perform a pre-existing duty to a 3rd party is good consideration.
4. Promise to Accept Less

1. Payment of less in satisfaction or more is NOT consideration (Foakes).
2. Practical benefit cannot effect good consideration in a situation where the amount to be paid is less than the agreed
upon amount (Re Selectmove).
3. By altering the payment method of the agreement, the parties generate fresh consideration, and therefore accepting
less (in a different form) is sufficient consideration for more (Foot v. Rawlings).
a. The creation of a new obligations in exchange for paying less generates consideration
i. Accelerated payment plans
ii. Down-payments
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iii. Paying with something different than originally agreed upon
Foakes v. Beer (1884)

Facts: Foakes owes Beer $2090. Beer agrees no legal action if Foakes pays $500 immediately, and $150
instalments every six mo. until debt is paid off (not under seal). Foakes pays it off; Beer claims interest
is owed. Foakes claims no mention of interest in their contract. Beer says no consideration = no contract
Issue: If someone agrees to pay less than what they are obligated to, is there consideration?
Ratio: Payment of less in satisfaction or more is not consideration. Canada not bound by Foakes v Beer
Re Selectmove
Facts: Selectmove fails to submit payroll deductions from employees to the Crown. Selectmove offers to pay
deductions $100/month. Collector sought approval from superiors. Company made some payments not
in accordance with the agreement, Crown then demands full payment. Selectmove argues Crown had
accepted the offer made to the tax collector.
Issue: Does a practical benefit constitute good consideration in a situation where the amount to be paid is less
than the previously agreed-upon amount
Reasoning: Mutual practical benefit doctrine of Roffey is only applicable where the pre-existing obligation is to
supply one with goods or services, not where it is an obligation to pay money.
Ratio: Practical benefit cannot effect good consideration in a situation where the amount to be paid is LESS
than the agreed upon amount partial payments are NOT sufficient consideration.
Foot v. Rawlings (1963)

Facts: Foot owed Rawlings money under a series of promissory notes. Rawlings offers to lower monthly
payment and interest rate Foot has to pay. Foot agrees, gives Rawlings post-dated cheques. If any
cheque bounced, the interest rate/monthly payments would revert to original amounts. Foot complied,
but Rawlings still sued for the balance of his debt.
Issue: When a new form of repayment is negotiated, is fresh consideration generated?
Reasoning: Cheques constituted a new form of payment, so new consideration was given by Foot. Rawlings’
consideration was forbearance (not suing). New consideration because there is a new practical benefit to
both parties (paying by cheque gives more secure form of payment)
Ratio: By altering the payment method of the agreement, fresh consideration is generated, and the agreement is
binding. Therefore, accepting less, but in a different form, is sufficient consideration.
Process Automation v. Nostream Intertec

Ratio: • The statute is SILENT upon duress, and as a result the common law principles continue to apply.
The express agreement to accept less MUST be entered into voluntarily.
• If the promise is extracted during a situation where duress, or undo pressure is present, then the
promise will not be valid.
5. Promissory Estoppel
1. Existing contractual relationship between the parties at the time the promise was made.
2. Representation: Must be a clear promise by one party to the other that he is NOT going to enforce a right against
the other party that he already had (intends to be bound by what he is saying).
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a. If someone says give me $9 instead of $10, then there is a clear representation of NOT insisting on the
contractual rights.
3. Reliance: the representee must show that they relied on the promise & had a change in position (Acting in a
manner differently than they would have but for the promise made)
4. Inequity: promisee must’ve acted in reliance on the promise in a way where they cannot be restored to their
original position
Hughes v. Metropolitan Railway Company

Facts: Metropolitan Railway was a tenant of Hughes. M was asked to repair the property within 6 months of
October 22. They responded on November 28, and suggested the repairs be deferred since they were
talking about purchasing the property. Hughes never responded. M wrote Hughes 3 days before the
notice of repair expired, saying that they would undertake the repairs in light of the communication
breakdown
Issue: Did the 6-month period begin when the parties began negotiating, or was it suspended during the
negotiation phase?
Decision: It was suspended during the negotiation phase – M relied on the implied representation and did not
conduct the repairs
Reasoning: In light of circumstances, period of negotiations extended the notice. One-month period suspended from
period of six months. 18th letter and end of negotiations in November – cannot start counting from the
date that it was served.
Ratio: If a promise is implied in negotiations, and one party relies on that promise, then it is inequitable to
allow the other party to act as though the promise does not exist.
Central London Property v. High Trees House

Facts: High Trees leased from Central London for £2,500 a year. Occupancy rates dropped new written
agreement to reduce the rent by half (£1,250 per year). Neither party stipulated how long this reduced
rate would apply for. High Trees paid this reduced rate for 5 years until the war was over, and all flats
were full again. Central London sued for payment of full price rental rates for the last quarter.
Issue: Was Central London estopped from enforcing the original price? YES, cannot claim the extra money
because that means going back on the initial representation. A promise that one intends to act on is
binding, especially since the two parties put it into writing.
Ratio: See 4 requirements of estoppel doctrine.
John Burrows v. Subsurface Surveys

Facts: Burrows agreed to sell all the shares in his company to Subsurface ($42,000 paid annually for 10 years).
Subsurface missed some payments; Burrows never took legal action. Falling out Burrows demands
full $42,000 as per the acceleration clause (allows claiming entire amount if payment more than 10 days
late on any monthly payment). Subsurface claimed estoppel as a defense.
Issue: Was Burrows estopped from enforcing the acceleration clause?
Decision: YES, he is entitled to collect all the funds at once
Reasoning: Estoppel was NOT a clear and unambiguous representation that he is not going to enforce the clause in
the future. Plaintiff was granting a friendly indulgence, and therefore still retained his right to enforce
the acceleration clause.
Ratio: To raise an estoppel, there must be a clear and unambiguous representation that the party does NOT
intend to seek their full contractual rights intending to be bound by this representation. If a friendly
gesture is relied upon as binding, estoppel will not be available as a defense.
DC Builders v. Rees
Facts: DC billed Rees for £746 for building shop. Rees paid £250, owed £482 (& didn’t pay after DC asked).
DC in financial trouble, Rees’ wife offered the company £300 to settle the debt, D&C –no. Wife says
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$300 or nothing; D&C accepts, would have gone bankrupt otherwise. Eventually sue after they pay.
Issue: When is it inequitable to go back on your promise?
Ratio: When the promise is generated under duress, the courts will NOT find it inequitable to go back on that
promise (estoppel is NOT applicable).
Combe v. Combe
Facts: Mr. Combe agreed to pay his ex-wife £100 per month after they separated. Mrs. Combe agrees to forgo
her rights for recovery in divorce court as consideration for this promise (Husband did not ask for this).
Mr. Combe does not pay and his ex-wife sues on the promise, claiming it was binding on the basis of
primary estoppel through element of reliance.
Reasoning: Primary estoppel only prevents a party from insisting upon his strict legal rights when it would be
UNJUST to allow him to enforce them, having regard to the dealings which have taken place between
the parties.
Ratio: An estoppel is only a defense, NOT a cause of action where one did not exist before
M (N) v. A (TA)
Facts: A came to live with M in Canada after he promised to pay the outstanding mortgage balance on her
home in England. On reliance, A gave up her job and moved to Vancouver. M didn’t pay off the
mortgage, but loaned her money to pay off the debt on a promissory note. A brought action to force M to
fulfill his promise to pay off her house in England.
Issue: Was there a binding contract? NO.
Reasoning: In order for promissory estoppel to be invoked, a voluntary promise needs to have intent that it is to be
binding.
Ratio: In Canada, promissory estoppel CANNOT be a sword; it can only be a shield.
Waivers
When one person intentionally relinquishes their contractual rights
(1) Forbearance Waiver (waiver by estoppel)

• Waivor indicates to waivee that he will not insist on performance strictly in accordance with terms of the
contract (needs sufficient notice)
(2) Election Waiver:
• Party elects to choose one or more alternatives and forbears from doing another
• Waivee doesn't need to show they relied upon the promise (once made it cannot be revoked)
SASK River v. Maritime Life

Ratio: To waive rights there must be full knowledge of rights and an unequivocal and conscious
intention to waive them.
A waiver can be retracted (explicitly or impliedly) through reasonable notice in reasonable time.
6. Privity of Contract
Doctrine exists to PREVENT 2 types of persons from enforcing a contract:
1. A person who is a complete stranger to the contract has no legal right to enforce the promise of any party to that
contract (uncontroversial).
a. If they intended for a “stranger” to be involved, they would have been included as a party to the contract.
2. Third party beneficiary, the person identified and intended by the promisor and promisee to receive all or part of
the benefit of the agreed upon performance (highly controversial).
a. Third party should not be able to benefit because they have given no consideration.
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Tweddle v Atkinson
Facts: Tweedle (groom’s father) and Guy (bride’s father) have written agreement they will pay groom after
marriage. Clause in agreement: groom can sue for enforcement of contract. Guy dies, estate doesn't pay.
Issue: Does groom (3rd party) have standing to sue?
Decision: No, isn’t privy to the contract.
Reasoning: No stranger (to the consideration) can take action, even if it was to his benefit.
Ratio: A party that consideration had NOT moved from CANNOT bring an action against the enforcement of a
contract. Love/affection NOT sufficient consideration for a third party under law.
Dunlop Tyre v Selfridge

Facts: Dunlop sells tires to wholesaler (Dew), terms say Dew wont sell below Dunlop prices except to
customers involved in motor trade (10% off for them) subject to fine every time they sold below price.
Dew sells tire to Selfridge, sells them back to Dunlop.
Issue: Can Dunlop sue Selfridge even though there was no contract?
Decision: No, Dew did not breach the contract. Dunlop not privy to Dew and Selfridge contract, did not provide
any consideration for contract between D & S.
Ratio: No third party can sue, or be sued, on a contract to which he is not a party to, if they do not have
legitimate interest. Only parties to a contract can sue for breach of it.
Beswisk v Beswick
Facts: Beswick agrees to sell business to nephew for certain sum of money if he paid his wife $5 /week for the
rest of his life after he died. B dies (wife executrix of will) and nephew pays only once.
Issue: Can the aunt sue her nephew to enforce the contract?
Decision: Yes, aunt can sue in her capacity as executrix, but not in her own capacity.
Ratio: Administrator of a will can act in place of the deceased, and become privy to the contract even if they
were not when the contract was created?
Exceptions
London Drugs v. Kuehne & Nagel

Facts: LD delivered a transformer to Kuehne for storage. In transfer, Kuehne’s employees negligently dropped
the transformer, caused $33k of damage. Clause in the contract states that a “warehouseman’s liability
was limited to $40” unless stated otherwise (not done).
Issue: Were employees covered under clause limiting liability?
Decision: No, employees ere not acting within job description, they were negligent
Reasoning: LD could have bought more insurance in regards to the transformers
Ratio: An employee can benefit from a contract they are not a party of if:
1. The provision was (expressly or impliedly) extended for the direct benefit of the employee.
2. (a) The employees were acting within their job description, (b) performing responsibilities stated
within the contract between their employer and the plaintiff (customer) when the loss occurred.
Limitation suggested: should be used only as a shield, not a sword
Edgeworth Construction v ND Lea

Facts: E bids on contract, successful, enters contract B. E alleges loss in $ from negligent misrepresentation
against engineering firm that prepared the drawings. Clause in province and E’s contract states tender
docs made as general info not otherwise warranted/guaranteed.
Issue: Does clause of liability impliedly extend to the engineers?
Decision: No.
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Reasoning: Independent contractors lack identity of interest, have ability to protect themselves
Ratio: Status of third parties needs to be that of employee ONLY, not independent contractors.
Fraser River Pile & Dredge v Can-Dive

Facts: Fraser rents boat to Can-Drive- they negligently sink it. Insurer pays policy, attempts to sue CD.
Subrogation clause in contract in Fraser and Insurer’s contract that exempted charterers from liability.
Fraser waives any right to waiver of subrogation clause.
Issue: Can Can-Dive benefit from the exemption clause between F and Insurer?
Decision: 1. Did the limitation of liability clause extend its benefit to the employee (third party)? YES, the
contract expressly stated that it protected charterers.
2. Did the harm occur during the scope of employment? YES.
Reasoning: Could have rewritten subrogation clause before the event that triggered it occurred (crystalized)
Ratio: Expands LD test. For a third party to benefit from an exemption clause in a contract they are not privy
to, the contract must be specifically designed for their benefit, assuming they were performing
acceptable conduct as stated in the contract. (Exemption clauses extending benefit to a third party can be
waived at any time prior to the crystallization of the right)
G. CONTENT OF THE CONTRACT
1. Misrepresentation, Rescission & Bars
Redgrave v Hurd
Facts: P advertised to sell practice. P makes misrepresentation for the practice income at £400; not knowing it
was actually £200. D contracted to buy on reliance of the £400 statement but learnt that it’s actually
£200, now refusing to pay.
Issue: Was a misrepresentation made, if so, what type?
Decision: Appeal decided in favour of defendant. Remedy is rescission. No damages as there was no fraudulent
misrepresentation at the time
Reasoning: The value of his practice was a statement of fact. The fact turned out to be false. The fact was relied
upon to induce P into a contract. The value of the practice was clearly material to the contract.
Presumption of inducement because of the material statement
Ratio: • Test for innocent misrepresentation: (1) There must be a statement of fact (2) The fact must be
False (3) Statement of false fact must have induced the party to enter into the contract.
• There is a presumption of inducement if the statement was material (important and intended to
operate as an inducement).
• Presumption rebutted by: (a) showing the party already knew it was false or (b) proving they would
have entered the contract anyways (then the statement couldn’t have induced them).
Smith v. Land and House Property Corp

Facts: P sells hotel and says that “most desirable” tenant occupies it. The tenant was actually a bad tenant, so
purchaser wants to rescind. Seller argues it was a statement of opinion, not fact.
Issue: What is the difference between an opinion and a statement of fact?
Decision: Rescission is the remedy.
Reasoning: Statement- tenant is great (seller has a monopoly of information over the tenant, buyer has no
knowledge). Statement induced the buyer into the purchase therefore there was a misrepresentation.
Ratio: • Statements of facts are distinguished from opinions – Opinions are not actionable.
• If one party has all the knowledge and the receiver of the statement doesn’t know anything the
opinion will be taken as a fact.
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• If you make an opinion based on facts that are only known to one party, you are impliedly asserting
there are facts to justify the opinion. (Look for expertise and monopoly of information).
Bank of British Columbia v. Wren Developments

Facts: A secretary renewed a personal loan on a misrepresented belief that collateral was still in the bank,
because the president did not tell him that the collateral was no longer there.
Issue: When is there a duty to disclose?
Decision: Unilateral mistake made by Wren, induced by misrepresentation of plaintiff failing to disclose material
facts to him.
Reasoning: In theory you can have a misrepresentation in silence – it’s possible if someone says nothing for there to
be a fraudulent or negligent misrepresentation (fraud in silence is almost impossible to prove).
Ratio: Failure to disclose material facts act can be misrepresentation if the other party is induced to enter into
an agreement, which he would not have entered into had he known the fact. When there is a fiduciary
relationship, you are bound to disclose half-truths in a statement.
Kupchak v. Dayson Holdings

Facts: Kupchaks purchase shares of motel from D. Earnings of the motel were found to be false Kupchaks
stopped making payment on the mortgage. Dayson sold half of one of the properties, and tore down the
existing building and erected an apartment building. Over a year later the respondents (Dayson)
launched foreclosure action against the appellants and appellant’s commenced action for rescission.
Issue: What type of misrepresentation occurred? What remedy should apply, are their bars to rescission?
Decision: Contract rescinded and compensation ordered
Reasoning: In innocent representations, one would be barred from rescission if restittutio in integrum applies.
However, the court wouldn't want a fraudster to benefit. Property cannot be returned, but it would be
unjust, so he may use equitable jurisdiction to seek damages in lieu of recession (approx. value of the
house in money in lieu of the physical structure of the house)
Ratio: Dealings in property obtained by fraud cannot be used to bar restitution - there must be flexible remedies
to attempt to restore parties to their original positions. Monetary compensation may be granted under
rescission where it is impossible or inequitable to restore the original property.
2. Representation and Terms

How to determine a term vs. a representation?
o Intentions of the parties viewed through the ORP looking at the circumstances
o The question asked is it a term? Is it a contractual promise that is part of the contract? Did the parties
intend this to be part of the deal? Anything that is not a term becomes a representation.
Factors to consider:
o (1) The importance of the truth of the statement
o (2) The time elapsed between the making of the statement and the final manifestation of consensus
o (3) Whether the party making the statement was, vis-à-vis the other party, in a better position to ascertain the
truth of the statement;
o (4) Whether the statement was subsequently omitted when the agreement was embodied in a more formal
contract in writing.
True test would seem to be whether there is evidence of an intention by one or both parties that there should be
contractual liability in respect of the accuracy of the statement.
Heilbut, Symons & Co. v. Buckleton

Facts: Heilbut selling shares of a new company is a famous rubber company. Respondent goes to A company
and asks, “I understand you’re bringing out a rubber company”. The company replies “We are”. So he
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goes and buys a bunch of shares and it turns out to not be a rubber company and the shares collapse.
Issue: Was the statement about the company being a rubber company a term of the contract to buy the shares?
Decision: Not a term, but a representation Can’t sue for damages if it’s a representation (breach of contract can
only be argued if it’s a term) - appeal allowed.
Reasoning: Determination of whether statement was intended to be part of the deal: Court said no, because ORP
would say not. Not put in writing, so must have been intended not to be there. If it was that important it
should have been put into the deal. Furthermore it was a short unserious statement. Therefore not term
and no breach of contract.
Ratio: • In order to determine whether a statement is a term or representation we must look at the intentions
of the parties through the ORP given the circumstances.
• If you don’t reduce oral statements to writing when forming a contract it is evidence that it was not
intended to be there (parol evidence)
• Short unserious statements are evidence of not intending to be part of a contract.
Dick Bentley Productions v. Harold Smith

Facts: Bentley wants to buy a Bentley. Smith the Salesman said it had a “new engine & only 20,000km” so
Bentley buys it. But it wasn’t true and Bentley wants to sue for expectation damages.
Issue: Was the statement that the car had only done 20,000 km since it had been fitted with a new engine and
gearbox a term or a representation?
Decision: Statement was a term (warranty) and was breached.
Reasoning: Court finds that it was a term of the contract clearly the statement was a very important to the
valuation of the car, and price is a term of the contract. Was intended to induce as well.
Ratio: - If the statement has a serious effect on the valuation of the contract, it is more likely to be a term.
- If it serves to seriously induce the other party into the contract it will suggest it is an important part
of the relationship and is part of the deal.
- In circumstances when you say something within your area of expertise, that will militate it in
favour of being a term and not a representation.
Leaf v. International Galleries

Facts: Plaintiff buyer bought a painting of a Salisbury Cathedral. Man buys painting described as an “original
printing by the seller”. This characteristic was written down in the contract. Later finds out it’s a forgery.
Issue: Is the buyer entitled to rescind? Was the statement about it being a “Constable” a term or a
representation?
Decision: It is a term; Recession is the wrong action brought – Appeal dismissed.
Reasoning: Because there was such a delay there is a bar to recession. Therefore it would have to be classified as a
term to get expectation damages had the term been fulfilled – the value of a genuine Constable.
Court decides it’s a term because ORP would say the parties intended it to be a term:
• It was written into the contract that it’s a Constable.
• Identity of the artist greatly affects the value of the painting. Very likely to make it a term.
• Lastly sellers had expertise militates in favour of term.
3. Concurrent Liability
• Same circumstances can give a raise to action in Contracts & Torts
• Ex: Banker giving financial advice: invest $1000 & get 10% back, but you end up losing $
o Contract lawsuit – Breach of contract; get expectation damages ($1000 +10%)
o Tort lawsuit – Tort of negligent misrepresentation; compensatory damage $1000
• Difference between Contracts & Torts

o Generally, you can pursue both actions
o There are diffs in remedies, time limitations (C – 2yrs; T – 6 yrs); diff tests
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BG Checo International Ltd. v. B. C. Hydro & Power Authority
Facts: Written contract b/w parties that D would clear their land. They don’t which causes additional costs to P.
P sues for negligent misrepresentation (in tort) and breach of contract.
Ratio: 1. P can pursue action in both tort & contract liability.
2. Tort liability can be excluded by putting in a term in a contract thru exclusion clauses.
4. Parol Evidence Rule

• The Rule: transaction reduced to/recorded in writing by agreement of the parties; extrinsic evidence (not just
oral evidence) in general, inadmissible to vary terms of document.
• Rationale: insures finality, certainty in contractual relations, prevents troublesome litigation.
Exceptions
1. Will not apply to an agreement which is partly oral and partly in writing
2. Doesn’t apply where written document was not intended to contain the whole of the parties’ contract
3. Extrinsic evidence is needed to establish on conditions precedent to the agreement (that a contingency must
happen before a contract becomes effective)
4. **Parole evidence is admissible as distinct (separate) collateral agreement, which goes along with the main
agreement but does not contradict nor inconsistent with the written document.
5. Parole evidence rule does not apply to misrepresentations (ONLY TERMS)
6. Legislation may affect it: e.g. In consumer transactions, extrinsic evidence can be used to understand the
written terms. Business Practices & Consumer Protection Act – s.187
Hawrish v. Bank of Montreal

Facts: Hawrish signed a document that he will pay debts. The bank manager allegedly gave oral assurance that
if they receive a guarantee from someone else, his contract will end. Bank turns around and sues him,
despite receiving guarantee from someone else to pay debt.
Issue: Is the oral statement given by the bank admissible as evidence to change the nature of the contract?
Reasoning: Oral evidence contradicted & was inconsistent with the written contract: (1) the written document said
that Hawrish was bound to pay the debts; (2) written document did not specify an end time. The
extrinsic evidence is not admitted and only the written contract stands.
Ratio: Parol Evidence Rule:
1. Clear contradiction between oral and written.  
2. Oral statement made prior or contemporaneously with the written contract, and it contradicts the
written contract.
If 1 and 2 are satisfied the oral statement is excluded as evidence.
Bauer v. Bank of Montreal

Facts: The bank didn’t register book debts even if it’s normally required because it was specified in the contract
with Bauer that they didn’t have to. Bauer is claiming that the bank manager said that they would
register the book debts.
Issue: Can Bauer rely on the manager’s oral statement? NO – the oral statement directly contradicts what it
was the written statement.
Decision: Parole evidence rule upheld. Appeal dismissed.
Reasoning: Court says that the oral statements were clearly contradictory to the written agreement and therefore
cannot stand due to the parol evidence rule.
Ratio: Parol evidence is admissible where there is a distinct collateral agreement that did not contradict nor was
inconsistent with the written instrument.
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Gallen v Allstate Grain
Facts: Oral representation made from Allstate to Gallen. Weeds would not be a problem if they grew a
particular type of seed. Gallen signed a contract with Allstate (contained provision of no guarantee of
productiveness of the seeds). The oral representation was wrong about the grain crop, and it conflicted
with a clause in the written agreement.
Issue: Can one rebut the presumption of the parol evidence rule? Is the oral term inconsistent with the written
instrument?
Decision: Statement was a warranty (statement of fact not a promise), which didn't contradict the written doc, but
was false, therefore, breach of warranty.
Reasoning: o Parol Evidence Rule isn’t absolute; it is a presumption
o Presumption is strong in cases where negotiated document was written
o Presumption is less strong where the contradiction was between a specific oral statement and a
clause of contract
o If contract is induced by an oral misrepresentation that is inconsistent w/ written contract, the
written contract cannot stand
Ratio: • If the oral statement simply adds to the contract (distinct, collateral agreement), but does not
contradict it, parole evidence does not apply.
• Once parol evidence is admitted, there may be a question of interpretation aimed at reconciling the
admitted extrinsic evidence w/ written terms.
Business Practices and Consumer protection Act ss.187

187 In a proceeding in respect of a consumer transaction, a provision in a contract or a rule of law respecting parole
or extrinsic evidence does not operate to exclude or limit the admissibility of evidence relating to the understanding of
the parties as to the consumer transaction or as to a particular provision of the contract.
5. Classification of Terms
Hong Kong Fir Shipping v. Kawasaki Kisen Kaisha

Facts: Hong Kong Fir agreed to rent their ship for 24 months, but the ship was held up due to inefficient staff
and repairs. Kawasaki repudiated the contract. HK Fir is suing for wrongful repudiation.
Issue: Was the term “seeworthiness” a condition and therefore could they repudiate or was it a warranty in
which they could only sue for damages in breach of contract?
Decision:
Reasoning: Court determines it is a warranty. Delay occurred because of the breach. Isolate events, does the event as
a result of the breach deprive victim of the substantial/whole benefit then treat it as a breach of
condition. Otherwise, treat it as a breach of a warranty.
Ratio: Innominate terms – Court decides on factual consequences what the legal remedy should be after the
breach occurs (warranty or a condition) Only the innocent party has the right to repudiate, it can’t be the
wrongdoer party.
Wickman Machine Tool Sales Ltd. v. L. Schuler A.G.

Facts: Schuler was a manufacturing company and gave Wickman the sole right to sell their products in the UK.
In the terms of their agreement, W was to visit major clients each week, which they failed to do. It was
called a “condition” in the contract. Schuler repudiated.
Issue: If a term is called a condition, does a breach of it lead to a right of rescission?
Reasoning: Court decided that it was a warranty. It would be unreasonable to repudiate the whole contract solely
based on the failure of visits to clients (1 time out of 1400 visits). Warranty & conditions are diff.
Conditions are at root of contract.
Ratio: - Whether something is a condition or a warranty is what the Court is to decide – depending on
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characterization.
- Look at the plain language of the contract could be an indication that the word ‘condition’ in the
contract is meant to be one. Look at how the term is treated would it create an unreasonable result to
treat it as a condition?
Marks and Spencer plc v. BNP Paribas Securities Services Trust Company
Facts:
Issue: Implying terms of facts
Decision:
Reasoning: Business efficacy test: looking for necessity of implying term into the contract. Necessity is different, in
the business sense. Necessary to make the contract effective.
6. Standard Form Contracts & Exclusion Clauses

• STC: a non-negotiated contract that is presented to a succession of contracting parties (e.g. buyers) on a take-
it-or-leave-it basis
• Benefits: (a) Reduce transaction costs (b) Benefits associated with network externalities (as forms go to court,
they put interpretations on the standard form contract, and set precedents) (c) facilitate control of agency costs
in mass-market transactions
Exemption Clauses:
• Definition: clause that excludes or limits liability for breach of contract or other sources of liability like tort.
• Rather than impose an obligation (i.e. conditions, warranties, innominate terms) it seeks to regulate the
consequences of non-fulfilment of contractual obligations or breach.
• Exclusion: liability of X is excluded even if liability is established in law
• Limitation of liability: placed cap on scope and consequences or liability or procedure in est. liability.
• Rationale: freedom of contract and reality of different bargaining strengths, deters parties from performing in a
certain way, allocates risk to the parties
Thornton v. Shoe Lane Parking

(Incorporation of exclusion clause)
Facts: Thornton parks car in parkade. Notice board “all cars parked at owners risk.” Ticket says “ticket is used
subject to the conditions displayed on the premises.” Hit by car when leaving, sues, company says they
shouldn't be liable because of the exclusion clause.
Issue: Was the exclusion clause incorporated into the contract?
Decision: Appeal dismissed, defendants are liable.
Reasoning: Acceptance took place when customer put his money in the machine. The notice came in too late writing
on the ticket (after the contract was already entered into) and was not reasonable (set up in a way that it
would be difficult for T to look for notice before entering the contract). Excluding liability = taking extra
care to notify the parties. No evidence T knew/believed that writing contained conditions.
Ratio: If a clause was brought to your attention after the contract was formed, then it cannot be incorporated in
the contract.
Tilden Rent-A-Car v Clendenning

Facts: C rents car, as he had done before with T. Clerk asks “additional coverage?” He says Yes. Signs
contract, doesn't read it and clerk knows he didn't read it. Exemption clause states no damages caused
while doing something illegal. C gets into impaired driving accident.
Issue: Id the exemption clause valid?
Decision: Appeal dismissed, exemption clause not valid.
Reasoning: L’Estrange rule: reading contract irrelevant unless fraud, misrepresentation, etc. Exception created: the
party who signs the EC is mistaken and the other party knows or ought to have known he is mistake and
doesn't take reasonable steps to bring it up.
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Ratio: If a signed contract contains an inconsistent/onerous clause, and it is apparent to the enforcing party that
the other did not understand the terms then the contract is not enforceable. Must bring the condition to
the customer’s attention. Onerous terms assessed through objective reasonable person in circumstances.
Karroll v Silver Star

Exception states but not applied
Facts: Skier collides with fellow skier after signing a form releasing the mountain form liability. K says not
bound b/c wasn't given (a) ample notice of the contents or (b) sufficient time to read document. Heading
stated to “please read carefully”
Issue: Is the clause binding?
Decision: Yes.
Reasoning: Release form was short, easy to read, bolded. Reasonable person would conclude that K was in a
agreement. L’Estrange Principle: when a contract is signed you will be bound unless the exceptions
apply. Since the contract was signed there is a very presumption that she is bound by the EC.
Ratio: To find if there is a duty to draw attention, look at several factors including: length, format of contract,
time available to read, effect of clause in relations to nature of the contract. Exception: a reasonable
person should have known that the party signing that document was not consenting to the terms of the
document.
Tercon Contractors v. BC
Facts: BC issues call for tenders. Says only 6 original companies can submit bids. B & E submit joint bid (not
part of original 6). T submits bid, B & E is chosen as the winner. T sues govt. for choosing non-
compliant bid. Exemption clause “no bidder can have any claim for any compensation of any kind
whatsoever by participating in the bidding process”
Issue: Was there a breach in tendering contract by accepting bid from an ineligible bidder?
Decision: NO.
Reasoning: Decided on contra proferedum (CP) approach clause does not cover breach in question. Clause says
that no one can make a claim that arises from the tender process (govt.’s argument). Brech was accepting
a non-compliant bid. Breach was not covered because the govt. stepped outside of the “process” because
they accepted a bid that was not part of the “process.” Court would rather use the CP rule to strike down
the clause because using the unconscionability rule or public policy reasons will be difficult.
Ratio: Tercon test (next page)
Loychuck v Cougar Mtn. Adventures

Facts: L injured after collision with another person travelling on zip line due to negligent behaviour by
employees. Sued, but they had signed a waiver excluding liability from CM.
Issue: Is the waiver liability enforceable?
Decision: Appeal dismissed, waiver liability is enforceable.
Reasoning: Tercon framework. Forewarning and Timing of waiver: even if waiver presented last minute, customers
told they couldn't participate unless they signed the document, liability waiver still enforced.
Term not unconscionable (if you read it and sign it). L had done waivers of liability prior to zip-lining
tour. No inequality & no substantial unfairness. Releases in risky activities have precedent of being
binding. *No overriding public policy factors.
Ratio: Reaffirms Tercon. Many tests of unconscionability.
How does one establish that an exemption clause was unconscionable at the time it was made?
Niedermayer v Charlton
Facts: N suffers injuries when bus operated by C left road while returning from zip line activities (operated by
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C). BCSC rules waiver signed by appellant was complete defence to appellant’s claim.
Issue: Was release enforceable, in particular when applied to the motor vehicle accident?
Decision: No.
Reasoning: She can’t argue about incorporation (signed it) or about coverage. Only way to get out of it is by striking
it out (unconscionability or public policy) BUT here there is no unconscionability
- She argues public policy court agrees and strikes the clause out
- The ICBC regime is a system of no fault and is a public benefit would be contrary to public policy to
allow private parties to contract out of this regime
The majority allowing individuals to contract out of universal motor vehicle insurance through a
release of liability clause would undermine the social contract that the government has made with those
who use its roads and therefore held that the Release COULD NOT operate as a defense to N’s claim
Ratio: You can strike out a clause for public policy reason if the clause is a part of an overall regime that is
designed to give a public benefit you can’t away a public benefit.
What role courts should exercise judicial restraint in invoking public policy in contract cases?
How does one establish the existence of public policy?
McCutcheon v David MacBrayene

Incorporation of exclusion clause, implying terms
Facts: M asked his brother in law to ship his car by boat using DM. The car was shipped the ship sank on the
way. The company typically gets customers to sign a document with an exclusion clause, but it was not
signed this time  
Issue: Is M bound by an unsigned contract considering that he has past dealings with the defendant?
Decision:
Reasoning: The contract was purely oral and any terms on the receipt came after the formation and thus cannot be
regarded as terms. Court rejects that the exclusion clause should be implied due to past relationship it
is possible to imply the term, just not in this case  
Ratio: Exclusion clause may be implied when parties have made a series of similar contracts, the practice is
consistent, each containing the same exclusion clause, and there is no evidence to the contrary that they
did not want it at this time.
When will an exemption clause be implied into a contract on the basis of the course of dealings between the parties?
7. DISCHARGE BY PERFORMANCE OR BREACH

Order of Performance - usually parties do not have to perform at the same time
• Bilateral contracts in a bilateral contract between X and Y, X’s obligations may be precedent to, concurrent with,
or independent of Y’s undertakings
• Unilateral contracts: You look to performance to understand the obligations of the parties, seeing if there was
complete performance or frustration of performance etc.
BREACH
• Effects: right to sue for damages, doesn't necessarily allow innocent party to terminate
• Central question: are there circumstances in which a party who is not in breach is allowed to terminate the
contract? Breaches that give rise to right to terminate:
o Repudiation (anticipatory breach) + acceptance of the repudiation by the innocent party this then brings
the contract to an end (but not automatically)
o Fundamental breach (breach of condition). A breach that goes to the root of the contract. Breach of a
condition (also entitles innocent party to terminate and sue for damages)
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Sumpter v. Hedges
Facts: Plaintiff contracted to build defendant’s house for lump sum. Left it partly done, someone else finished
the work. Plaintiff is suing to recover partial payment for work done based on quantum meruit.
Issue: When can a party be compensated for partial completion based on quantum meruit?
Decision: Plaintiff denied recovery, as there was no evidence that any fresh contract to pay for the same.
Reasoning: To be able to sue on QM you must demonstrate a fresh contract. Because the victim of the beach did not
have any option, you cannot demonstrate a fresh agreement here.
Ratio: To recover on a quantum meruit, the parties must enter into a fresh contract stating such. If a partially
completed contract is abandoned, and no fresh contract is made, the party seeking partial payment must
show that the partial completion is of benefit to the other party. When an “entire contract” is breached,
the innocent party can walk away.
Fairbank Soap v Sheppard

Facts: Sheppard promises to build soap machine for Fairbank. Fairbank paid a partial sum (deposit), but before
the machine was finished, demanded a further sum. Fairbank sues to recover the initial sum and for other
consequential losses.
Issue: Was there a substantial completion of the contract?
Decision: Appeal dismissed, Fairbank recovers deposit and costs.
Reasoning: Contract was not substantially completed. The machine was nearly complete, but not good enough as it
did not perform its purpose –making soap chips.
Ratio: Imports Sumpter to Canada. Creates doctrine of ‘substantial completion: if a job is substantially
completed but there are trivial things left undone, the contract remains in force, and the innocent party
cannot repudiate (but may sue for breach of contract for the small amount not done).
Sail Labrador v Challenge One (1999)

Ratio: Performance in the case of a unilateral contract is the acceptance. So no de minimus range/ trivial breach
is possible.
Howe v Smith
Facts: Defendant selling land to plaintiff. Howe puts down deposit (500 of 12 500). Howe doesn't pay the rest
of the 12 000 on time loses property. Smith refuses to return deposit (as stipulated in their contract).
Howe suing to recover his deposit.
Issue: Can someone recover their deposit after that same party breaches the contract?
Reasoning: Howe breached the contract, and did not fully perform. He is not entitled to recover, as the sum was a
deposit.
Ratio: If the sum in question is a partial payment/down payment, the purchaser can get the sum back. If it is a
deposit, the guilty party cannot recover. In order to distinguish between Part Payment & Deposit, must
look at the intention of the parties (did the parties intend it to be a down payment of deposit?), words
that were used, context, and the purpose for which the money was given. In ordinary context, look at
facts of the circumstances: do they expect the money will be returned if the contract does not go
through? (Determined through the ORP test) YES- down payment. NO- deposit.
Stevenson v Colonial Homes

Facts: Plaintiff bought a cottage from Defendant; gave a down payment. Plaintiff ended up reneging on the
sale, and requested down payment back. Defendant contends the sum was a deposit, not a down
payment.
Issue: How does one characterize a sum as a down payment or a deposit? Can down payments be returned?
Decision: Stevenson gets down payment back, Colonial is awarded damages for the rescission of the contract.
Reasoning: Though the contract stated in a box at the top of the page “deposit recorded” it was under “office use
only” which implies that signee did not have to read it.
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Ratio: Consider the words, circumstances, and evidence to determine whether it is a partial payment or a
deposit.
Bhasin v Hrynew (2014)

Reasoning: Good faith contractual performance is a general organizing principle of the common law of contract
which underpins and informs various rules of the common law. There is a common law duty which
applies to all contracts to act honestly in the performance of contractual obligations. Duty of honest
performance operates irrespective of the intentions of the parties. Precise content of honest performance
will vary with context and the parties are free in some contexts to relax the requirements of the doctrine
so long as they respect its minimum core requirements.
Ratio:
H. AVOIDING PERFORMANCE: MISTAKE & FRSUTRATION

I. Common Mistake
• Definition: Both parties make the same mistake. Each party knows clearly the intention of the other and accepts it
(a contract exists). But each party is mistaken about some underlying fundamental fact and that’s where the
mistake is.
• Elements (Great Peace Shipping)
o Effects: renders the contract VOID
Common mistake in equity:

o A contract is also liable in equity to be set aside if the parties were under a common misapprehension
either as to facts or as to their relative and respective rights, provided that the misapprehension was
fundamental and that the party seeking to set it aside was not himself at fault. (Solle v Butcher)
II. Mutual Mistake

• Definition: both parties are mistaken, but do not share their mistake (in different ways). It arises in situations
where the parties are operating at cross-purposes and the question is whether they have, in fact, reached an
agreement. In other words, has there been a consensus ad idem?
• Objective test: Court must decide what a reasonable third party, from the whole of the evidence, would infer from
the parties’ words or conduct the existence of a contract.
III. Unilateral Mistake

• Definition: only one party is mistaken. The other knows, or must be taken to know of his mistake (existence of an
agreement is denied)
1. Unilateral Mistake as to Terms

Smith v. Hughes
Facts: P entered into contract to sell D oats. D refused to complete the contract, on the ground that the contract
had been for the sale and purchase of old oats, whereas the oats tendered by the P were oats were from
the previous year, and not in accordance with the contract. D says there’s evidence that P said he had old
oats to sell, but P says he never said whether oats were old or not. D was a horse trainer and said it was
well-known he only bought old oats.
Issue: Whether the p had believed that the D believed/was under the impression that he was contracting for old
oats? Was there anything in the facts that show that there was a promise to sell old oats?
Decision: NO.
Reasoning: Vendor didn't induce P to buy the oats. The oats not being old was not made a term of the contract. D
had chance to inspect the oats prior to purchase.
Ratio: A vendor is under no obligation to inform a purchaser that he is acting under a mistake, if the mistake is
not induced by any act of the vendor (caveat empetor). The law doesn’t impose a positive obligation on
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the vendor to correct the error but he also cannot take advantage of the mistake. An operative mistake
must generally relate to the terms of the contract.
Hartog v. Colin & Shields

Facts: Parties negotiating the sale of Argentinian hare skins and had discussed a possible sale price of 10 3/4
pence per piece. By mistake, the defendants offered the goods at 10 1/4 pence per pound, which is
significantly less.
Issue: Is acceptance of such an offer is a binding contract?
Decision: No, the contract is void for a unilateral mistake.
Reasoning: The mistake would be known to anyone with knowledge of the trade. The plaintiff could not have
reasonably supposed that the offer contained the offeror’s real intention. Reasonable person standard: in
cases on unilateral mistakes you don't need to prove actual knowledge. Its enough that the reasonable
person would have known, taking in the surrounding circumstances that this was a mistake.
Ratio: An intending purchaser may not accept an offer, which he knows to have been made under an obvious
mistake (to the reasonable person in light of the surrounding circumstances).
McMaster University v. Wilchair Construction Ltd.

Rule: A promisor is not bound to fulfill a promise in a sense in which the promisee knew at the time that the
promisor did not intend it. In considering this question, it matters not in what way the knowledge of the meaning is
brought to the mind of the promisee, whether by express words, by conduct, previous dealings or other circumstances,
If by any means he knows there was no real agreement between him and the promisee, he is not entitled to insist that
the promise be fulfilled in a sense to which the mind of the promisor did not assent
R v Ron Engineering & Construction (Eastern) Canada

Facts: D bidder submits a tender with deposit (as per call for tenders). D realized mistake –sent wrong bid.
They inform owner of the mistake, try to change bid. Change refused, bid given to other company,
deposit kept.
Issue: Was the contractor allowed to withdraw his bid and recover his deposit?
Decision: The deposit was not recoverable.
Reasoning: Bell River Community Arena v EJC Kauffman: offeree cannot accept an offer which he knows had been
made mistake and which affects a fundamental term of the contract. Contract A is created upon the
submission of a tender – if the tenderer had made a mistake in the calculation leading to the tender
submitted with the tender deposit, at least in those circumstances where at the moment
the tender is capable of acceptance in law, the rights of the parties under contract have thereupon
crystallized. The tender deposit (required to ensure the performance of the obligations of the tenderer
under contract A) must therefore stand exposed to the risk of forfeiture upon the breach of those
obligations by the tenderer. The point at which the tender had been submitted, the owner hadn’t been
told about the mistake in calculation, so there was nothing on the case of the tender to reveal an error -no
inference to be drawn that there was a miscalculation.
Ratio: An operative mistake must exist at the time the contract was made, so the owner (person who put out
call for tenders) must be aware of the mistake at the time the contract was made.
Mutual Mistake
Staiman Steel v Commercial & Home Builders
Facts: Staiman put in a bid for land thinking it included used AND building steel. Seller thought just used steel.
Seller is saying there are no meeting of minds, and no contract. Staiman is arguing, that intention should
be manifested by words & actions of parties, which was to sell/buy both.
Issue:
Decision: Contract is valid, no mutual mistake.
Reasoning: In this case, reasonable person would infer that the auctioneer was manifesting an intention to offer for
sale the bulk lot without the building steel. Therefore this is a contract, notwithstanding mutual mistake.
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Ratio: In mutual mistake, parties misunderstand each other and are at cross-purposes.
Court must decide what a reasonable third party would infer from the parties’ words or conduct –
on a ROP standard
It is only a case where circumstances are so ambiguous that a reasonable bystander could not
infer a common intention that the court will hold that no contract was created.
Scriven Bros & Co v. Hindley & Co

Facts: The D bid at an auction for 2 lots believing both to be hemp. In fact, Lot A was hemp and Lot B was not.
D refused to pay for Lot B, and P (sellers) is suing. D’s mistake arose from the fact that both lots had the
same shipping mark.
Issue: Was this a case of mutual mistake? If so, what happens to the contract?
Decision: Court said that the parties were not at the meeting of minds (ad idem) no manifestation of mutual
assent = no contract.
Reasoning: P could not recover $ from D bcus D’s mistake is due to P’s fault and negligence of having shipping
mark on both lots
Ratio: Mutual assent is not required for the formation of valid contract, only a manifestation of mutual assent.
If despite their different mistakes, it would appear to a reasonable bystander the parties were in
agreement as to the contract and its terms, a contract would exist at common law.
2. Agreements Made Under Mistaken Assumptions

Bell v. Lever Brothers
Facts: The company had to terminate execs, and paid severance as it was thought to be without cause. It turns
out that they breached their duties and could’ve been fired without severance. Company said that there
was a common mistake/assumption (that they were good employees) and had they known truth, they
would’ve not paid severance.
Issue: Was the agreement between parties void by reason of a mutual mistake of P? Could the agreement be
voided by reason of P’s failure to disclose his misconduct?
Decision: Agreement not void. Appeal found for Bell.
Reasoning: An agreement to terminate a broken contract should not be treated differently from an agreement to
terminate an unbroken contract. It's still the same contract. The party paying for release gets exactly
what he bargains for and it is immaterial that he could have got the same result in another way
Ratio: TEST: a mistake will not affect assent UNLESS it is the mistake of both parties, and is as to the
existence of some quality which makes the thing without the quality essentially different from the
thing as it was believed to be
McRae v. Commonwealth Disposals Commission

Facts: C sells McRae a sunken tanker, so they can salvage it. The reason M thinks there is a tanker is because C
said so. C thinks it’s there because they heard there is one there. M gets there and tanker is not there.
Issue: Was there a contract made between the Plaintiff and the Commission? Is the contract void?
Decision: There was an enforceable contract that was breached, no mistake.
Reasoning: There WAS an enforceable contract & the D contracted that such a tanker existed in the position
specified. And since there was no tanker there, D breached the contract and P is entitled to damages for
breach. The law doesn’t allow you to take advantage of your own mistake/fault. And knowing you’re at
fault means that you have to take responsibility for the mistake and the risks incurred.
Ratio: The mere fact that the subject matter of a contract did not exist at the time of the contract does not
automatically render the contract void, it is a question of interpretation.
BC Sale of Goods Act

Goods perishing before sale but after agreement to sell
11- If there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the
seller or buyer, perish before the risk passes to the buyer, the agreement is avoided.
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Solle v. Butcher
Facts: Landlord-tenant issue. Both parties thought there wasn’t a rent price limit. It turns out there is a rent
price limit, and the current rent price was higher than this limit. Tenant asked for rebate for the past rent
amount. Landlord is saying contract is void as there is a common mistake.
Issue: Can the lease by void on the grounds of mistake?
Decision: Yes, common law doctrine doesn't apply in this case.
Reasoning: There was definitely a contract here. The parties agreed in the same terms on the same subject-matter D
(Landlord) made a fundamental mistake of believing that the rent he could charge was not limited to a
controlled rent.
Ratio: 1) Under common law, even a fundamental mistake doesn't declare a contract void. A contract is only
void upon failure of a condition precedent. There is no mistake in common law.  
2) Under equity, the court may set aside a contract or relieve a party from its mistake if it is
unconscientious for the other party to retain the legal advantage he acquired, and if no third party rights
will be affected.  
3) A contract is also liable in equity to be set aside IF "(1) the parties were under a common
misapprehension either as to facts or as to their relative and respective rights, provided that (2) the
misapprehension was fundamental and that the party seeking to set it aside was not himself at fault”
Great Peace Shipping v. Tsavliris Salvage

Facts: D hires P to save stranded ship. Contract says that P will rescue the ship but the D has option to cancel
with a 5-day cancellation fee. D thought that P was 35 miles away but was in fact 410 miles so the D
decides to cancel but refuses to pay fee saying contract is void due to common mistake.
Issue: Was there an essential difference because of the mistake?
Decision: No, contract valid despite mistake.
Reasoning: Test: (1) Both parties assume there is a vessel. (2) No warranties present, risk not allocated expressly or
impliedly (3) if any fault at all, it would be the defendant (4) Contract was not essentially different,
conduct of defendant on discovering the truth. If it was that important, they would have immediately
abrogated the contract, they held on to the contract. The contract was not impossible to perform.
Ratio: Test for establishing common mistake at common law (to avoid the contract).
Miller Paving Ltd. v. B. Gottardo Construction

Facts: Miller believes G has paid all its bills and makes a contract releasing them from debt. M later finds that
G actually owes them more money. M is claiming there was a common mistake in contract.
Issue: Was there a common mistake? Should the contract be set aside?
Decision: No.
Reasoning: Risk was allocated to Miller, as it was stated in the contract. Also, in commercial reality, the risk is
typically placed on the supplier. Miller can’t rely on the mistake to void the contract. Common Law Test
#3 – Miller was at fault for the mistake, sloppy accounting error. Common Law Test #4 – Release
contract is not essentially diff now from before, performance is not impossible – release agreement was
signed, got release statement. Court endorses common mistake in both CL & Equity (rejecting GP &
endorsing Solle).
Ratio: The common law and equitable doctrines of common mistake have been woven into the fabric of
Canadian law. Prior to determining whether a contract is vitiated by common mistake – either in equity
or at common law – one should look at the contract itself to see if the parties have provided for who
bears the risk of the relevant mistake look beyond contract for risk allocation.
Lee v. 1435375 Ontario

Facts: Purchaser (Lee) [D was vendor] of dry-cleaning business claimed rescission of the purchase agreement
based on a mistake about the zoning of the property on which the business was situated. There were no
provisions about zoning in the agreement. Prior to sale zoning bylaws permitted the operation of an on-
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site dry cleaning facility. But then by-law was amended and did not list a dry cleaning facility as a
permitted use. Vendor didn't know about these changes.
Issue: Whether the fact the purchaser was operating under the same assumption as the vendor was in fact a
mistake, and who bore the onus of proof?
Decision: Not a common mistake.
Reasoning: No basis for finding common mistake on “permitted use” 􏰇 Since the purchaser signed the agreement
w/o any conditions as to zoning, he implicitly assumed the risk that the zoning would not permit his
contemplated use
Equitable Mistake: there’s no scope for the application of the doctrine of equitable mistake (there wasn’t
even a common misapprehension/mistake). Not equitable because it requires the Purchaser to prove they
weren’t at fault. But here, the P had failed to take reasonable measures to protect himself by
investigating the zoning first etc.  
Ratio: The law of mistake cannot be used to place a risk on party where the contract has allocated that risk to
another party.
3. Mistakes as to Identity 
Shogun Finance Ltd. v. Hudson
Facts: Rogue dishonestly acquired a driver’s license from someone else. Buys car from plaintiff and sells to
defendant. Rogue vanished. Shogun claimed the car, or its value, from H.
Issue: Was the agreement between Shogun and fraudster void on account of mistake as to identity or merely
voidable on account of fraudulent misrepresentation?
Decision: Agreement is void.
Reasoning: If the offeree knows that the offeror doesn’t intend the terms of the offer to be those that the natural
meaning of the words would suggest, he cannot, by purporting to accept the offer, bind the offeror to a
contract (Hartog v Colin & Shield).
Ratio: The person who is mistaken must show on a balance of probabilities: [TEST]
1) That they intended to contract with a specific person (as opposed to contracting with the world)
2) That the other party knew or ought to have known the first party was mistaken as to identity (easy to
prove  factually; if the person comes in with a fake ID they knew they were; can objectively vest them
with subjective  knowledge)
3) That, at the time of the contract, they regarded the identity of the other party as being crucial
importance (it  mattered crucially to the deal that the person is who he says he is)  
4) That they took reasonable steps to verify the identity of the other party (the standard you reach
depends on the  nature of the transaction)  
6. Frustration
Frustration is an equitable doctrine that is essentially a defense to non-performance. The purpose of the doctrine is to
mitigate the harshness from the rule of absolute contracts (binding yourself to perform) (from Paradine v Jane). This
is a flexible doctrine that can be applied to all types of contracts.
Establishing Frustration 
1. Frustrating event
2. Event not foreseen or provided for -doctrine only concerned with unforeseen events
3. No Fault (self-induced frustration) -not a total requirement
• Causal relationship needed between the default and the alleged frustrating event
• ONUS- The onus of proving self-induced frustration lies on the party who asserts that this is the case
o Time and frustrating events
Paradine v Jane (1647)

Facts: D rents land from P. Civil War breaks out and D cannot use the land, so he claims he shouldn't have to
41
pay. A radical change in the circumstances occurred, that was not foreseeable from what he initially
intended when the contract was formed.
Issue: Is Defendant excused from performance because his purpose for entering into the contract was
frustrated?
Decision: Defendant must still pay the rent
Reasoning: Defendant should have taken the possible risks into consideration when making the contract. It was no
one’s fault that he couldn't use the land as intended.
Ratio: When a party creates a duty upon himself he is bound by that duty, because he has the option to provide
against any unfavorable circumstances. Harsh duty of common law- no frustration.
Taylor v Campbell (1863)

Facts: Parties entered into a contract to rent out a music hall for a concert. One day before the concert the music
hall burned down.
Issue: Is the loss suffered by plaintiffs recoverable from the defendant? Was there a serious possibility that the
event would occur?
Decision: Frustration occurred.
Reasoning: Implied terms approach. When you contract to rent a music hall, the parties intend that the thing will
continue to exist until performance is complete. Event was unforeseeable.
Ratio: The frustrating event must not be foreseeable or expressly provided for in the contract. Parties have to
have foreseen a serious possibility of the event occurring for foreseeability to be met. Frustration of a
contract would discharge the parties’ contractual obligations.
Davis Contractors v Fareham UDC (1956)

Facts: Builder entered into a contract to build houses in 8 month time period (done during the end of war in
England). There was a shortage of labour and materials, so it would actually take 22 mos. to finish.
Builder argues that things had radically changed, so his end of the contract need not be fulfilled.
Issue: Can the builder invoke the frustration doctrine?
Decision: Frustration not applicable.
Reasoning: Shortage of materials and labour after a war was foreseeable to the reasonable person.
Ratio: - Frustration is not to be lightly invoked.
- Defines frustration: it occurs whenever the law recognizes that without default of either party a
contractual obligation has become incapable of being performed because the circumstances in which
performance is called for would render it a thing radically different from that which was undertaken by
the contract.
- Materials you need to make decision: terms and construction of the contract, read in the light of the
then existing circumstances, and the events that have occurred. There must be as well such a change in
the significance of the obligation that the thing undertaken would, if performed, be a different thing from
that contracted for.
Capital Quality Homes v Colwyn Construction (1975)

Facts: Buyer wants 26 lots to build houses. Vendor sells it as one big piece of land (and not 26) due to zoning
restrictions. Zoning legislation was newly created. Purchaser wants out of the contract due to frustration.
Issue: Was the contract frustrated? Can a statute frustrate a contract?
Decision: Yes, the contract was frustrated.
Reasoning: The change in legislation was not the fault of either party (an independent decision made by council).
Neither party foresaw that the legislation was going to change. The new circumstances were such that it
required the performing party to do something radically different than what they first promised 
Ratio: Doctrine of frustration can be extended to contracts involving the purchase and sale of land.
Edwin Commercial v Sea Angel (2007)

Facts: Defendant chartered a small storage tanker. 3 days before ship was to be returned, Karachi port trust
42
claimed compensation for pollution cleanup from the D and so refused to grant a "no demand certificate"
which Sea Angel needed to leave port. 3 days after the ship was to be returned, D stopped payment to P.
108 days late for return of boat.
Reasoning: Foreseeability in frustration (and the context of risk allocation) means the supervening event is one
which an ordinary person of ordinary intelligence would think is likely to occur
o If the risk is foreseeable, then the court will work very hard to allocate risk to one of the parties
• In these cases NO doctrine of frustration
If the supervening event is obvious (ORP would consider likely to occur) almost surely the case that
they would have contemplated and allocated the risk between them
Ratio: Within the radically different test, one must factor in the account of justice to the situation.
Maritime National Fish v Ocean Trawlers (1935)

Facts: P owned three fishing boats and rented two more (total of 5). Wanted to use all of these boats for
commercial fishing (but needs licenses). Before performance, govt. changes the rules and boat owner
can only get 3 licenses, NOT 5. Tries to back out of the renting deal, frustrated because he only got 3
licenses.
Issue: Does the legislation frustrate the contract?
Decision: No frustration.
Reasoning: Frustration does not apply because the frustrating event was self-induced. The fisherman caused the
frustrating event himself. Self-induced frustration can arise where the alleged frustrating event is in fact
attributable to (a) a party’s breach of contract (b) other forms of blameworthy conduct (c) criminal
wrongdoing (d) his choice of election to prefer his own interest to those of another customer
Ratio: The essence of frustration is that it cannot be due to the act or election of the party. BASICALLY, you
shouldn’t be able to take advantage of your own wrong
VI. RELIEF FOR WEAKER PARTIES

1. Duress 
1) Coercion of Will some form of pressure, significant cause or reason to enter into the contract (Pao On)
2) Illegitimacy of Pressure
Remedies Void historically. Modern position renders contract voidable; Preferred position: duress makes a contract
voidable not void; Rescission; Damages not recoverable (except form of duress is a tort)
Pao On v Lau Yiu Long

Facts: 1) Main Agreement: Shing On would get 4.2m $1 shares in Fu Chip, and Fu Chip bought all the shares
of Shing On.
2) Subsidiary Agreement: To ensure the share price of Fu Chip suffered no shock, Pao agreed to not sell
60% of the Fu Chip shares for at least one year. Also, in case the share price dropped in that year, Lau
agreed to buy 60% of the Fu Chip shares back from Pao at $2.50.
3) Pao's problem and resulting economic pressure: Pao then realized, if the Fu Chip share price rose over
$2.50 in the year, the price would stay fixed and he would not get the gains on buying back, so he
instead demanded that Lau would merely indemnify Pao if the share price fell below $2.50. Pao made
clear that unless he got this "guarantee agreement", he would not complete the main contract.
4) Facts leading to court: Subsequently the shares did fall in value and Pao tried to enforce the guarantee
agreement. Lau argued the guarantee agreement was not valid
Issue: Was the contract procured under duress?
Decision: Agreement upheld.
Reasoning: Privy Council held that this was simply commercial pressure as per the nature of the market. For
economic duress, it must be shown that the victim’s consent to the contract was not a voluntary act on
43
his part . . . provided always that the basis of such recognition is that it must amount to a coercion of
will, which vitiates consent.
Ratio: Duress is something beyond commercial pressure, such that there must be a coercion of will vitiating
consent. The "coercion of will" principle to show that any seeming agreement was given involuntarily.
Conditions for deciding whether economic duress was established:

Did the party claiming to be coerced protest at the time?
Was there an alternative option available to the party?
Was the party independently advised?
After having entered the contract did the party take steps to avoid it?
Greater Fredericton v. NAV Canada

Facts: Nav Canada and the Greater Fredericton Airport Authority ("GFAA") were parties to an Aviation
Services Facilities Agreement ("ASF Agreement"). $6,000,000 runway extension project -GFAA
requested that Nav relocate an instrument landing system to the runway being extended. Rather than
relocate existing equipment, Nav Canada concluded that it made better economic sense to replace the
navigational aid with another type labeled a distance measuring equipment ("DME"). It was GFAA's
position that Nav Canada should pay the acquisition costs of $223,000 for the DME. In a letter to the
Authority, Nav Canada stated that it would not provide for the purchase of the DME in its fiscal budget
unless GFAA agreed to pay the acquisition cost. GFAA wrote to Nav Canada on February 20, 2003,
indicating it would pay, but "under protest". On the basis of that letter, Nav Canada completed the work,
and incurred the $223,000 expense. GFAA refused to pay.
Issue: Whether or not the variation to the contract was procured under economic duress? What is the
appropriate test for economic duress in Canada?
Decision:
Reasoning:
Ratio: Economic Duress Framework for cases of Contractual Variation of Commercial Contract
Condition Precedents
1. The promise (the contractual variation) must be extracted as a result of the exercise of
“pressure
2. The exercise of that pressure must have been such that the coerced party had not practical
alternative but to agree to the coercer’s demand to vary the terms of the underlying contract
If met, whether the coerced party consented to the variation?
1. Whether the promise was supported by consideration
2. Whether the coerced party made the promise under protest or without prejudice
3. Whether the coerced party took reasonable steps to disaffirm the promise as soon as practicable.
2. Undue Influence
General Principle: A contract may be set aside if, under the direct undue influence of A, B made a contract with A.
There are also cases of lateral undue influence where as a result of the undue influence of A, B makes a contract with C.
It is some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating
and generally, though not always, some personal advantage obtained by the wrongdoer.
What type of undue influence?

1. Actual Undue Influence
2. Presumed Undue Influence (Geffen v Goodman Estate)
3. Undue Influence by a Third Person
What are the applicable remedies?

• Makes a contract voidable not void; Rescission (barred by affirmation or lapse of time); No damages
44
Geffen v. Goodman Estate
Facts: Mother passed away and left estate to daughter who had mental disorder; brothers tried to get the sister
to transfer the property to them.
Issue: Is there a presumption of undue influence?
Decision: Yes, this is a case of undue influence.
Reasoning: Equity has recognized that transactions between persons standing in certain relationship with one
another will be presumed to be relationships of influence until the contrary is shown. Court says
when one speaks of “influence” one is really referring to the ability of one person to dominate the will of
another with some abuse of power. The relationship between the deceased and her bros at the relevant
time does disclose that the relationship between them was such that a potential existed for the bros to
exercise a persuasive influence over their sister.
Ratio: A relationship of influence is one that gives a person the ability to dominate the will of another, whether
through manipulation, coercion, or outright but subtle abuse of power. It should not necessarily be
characterized as a confidential relationship.
Test for what the plaintiff needs to est. to trigger presumption of influence:
1) Demonstrate a relationship of influence in a relationship where their will was dominated
2) Demonstrate the transaction was manifestly disadvantageous or no readily explicable
Royal Bank of Scotland Plc v. Etridge (No.2)

Facts: 8 conjoined appeals concerning banks seeking possession of homes where a wife had signed a charge or
mortgage agreeing to secure the debts of the husband on the family home. Wife claims she signed the
charges under the undue influence of her husband.
Issue: Was the transaction brought about by the exercise of undue influence?
Decision:
Reasoning: To discharge the legal evidence (prevent shift of burden from D to P), the P has to demonstrate
(a) The complainant reposed trust and confidence in the other party  
(b) the transaction is not readily explicable by the relationship of the parties  
The law doesn’t regard sexual relationships as standing in some special category of their own so far as
undue influence is concerned
Ratio: The role of independent advice in undue influence cases can be used as evidence to rebut the
presumption of undue influence
VII. UNCONSCIONABILITY
Morrison v Coast Finance
Facts: Tenants in old lady’s house convinced her to take out a mortgage and lend them money to pay off their
own debts.
Issue: Whether the mortgage voidable for unconscionability?
Decision: YES, By proof of inequality and Proof of substantial unfairness in the bargain.
Reasoning: Argued unsuccessfully through undue influence, then through unconscionability. Court held the D
responsible because they “undertook the preparation of the docs” and took “advantage of the obviously
ignorance and inexperience to further their respective business” this raises the presumption of fraud
on BOP. Could not rebut that presumption, inability to show agreement was fair/just/reasonable.
Ratio: To establish that a contract is Unconscionable:
(1) By proof of inequality  or (2) Proof of substantial unfairness in the bargain (objective test)  
Sets out two requirements that give presumption of fraud, and how to rebut it.
Marshall v Canada Permanent Trust

Facts: Man in retirement home sells land. He has stroke and afterwards had no capacity. Committee in charge
of his affairs refuses to go through with the deal because it was unconscionable.  
45
Issue: Is the purchase void for unconscionability?
Decision: Yes.
Reasoning: When testing for inequality, two criteria must be met:
(1) The party must be unable to protect their interests - no need that the other party be aware of this;
~ Was Walsh capable of protecting his interests? No, Dr. said he definitely wasn't capable of transacting
business.
(2) The transaction must be improvident - the onus is on the stronger party to demonstrate that the
 offer was fair. (subjective test)  
~ Was it an improvident transaction for Walsh? Yes, the price agreed upon was considerably less than
the actual value of the land
Ratio: A court may rescind a contract on the basis of unconscionability where it is established that the party
seeking  rescission was incapable of protecting his interest and the transaction was improvident for
him.  
Harry v Kreutziger
Facts: P was Aboriginal, hearing disability, little education; owned a boat with a fishing licence. D eventually
agreed on a price of $4500, and then unilaterally reduced the price by $570. D assured P that he would
be able to get another license, but P was rejected on the grounds that he had left the fishing industry
when he sold the boat. P sued to have the sale set aside.
Issue: Should the contract be rescinded due to unconscionability?
Decision: Yes.
Reasoning: Morrison Test: For a claim that a bargain is unconscionable to succeed you must show that: there was
inequality in the position of parties due to the ignorance, need or distress of the weaker, which would
leave him in the power of the stronger, coupled with proof of substantial unfairness in the bargain 
~ When this is proved, a presumption of fraud arises & stronger party has to prove the bargain was fair
and reasonable.
Application:
• There is clear inequality between the parties with Ps lack of education, economic circumstances etc. (
• D's actions also demonstrate his power; he was very aggressive in the negotiations and was able to
unilaterally (modify the price. The deal is also clearly unfair 􏰂 price only a quarter of the true value of
the boat and licence. (
• At this point the burden shifts to D, who was unable to demonstrate on the evidence that the deal was
fair. (
Ratio: There are two different approaches to a test for unconscionability:
(1) Morrison v Coast Finance Test - Inequality (of both the circumstances and process) plus substantial
unfairness leads to a presumption of unconscionability which the stronger party must rebut  
(2) Lloyds Bank Test - Community standards of commercial morality 
46
Illegality of Contracts- Statutory Illegality
• A statute may make the creation of a particular type of contract, or the performance of one illegal or unlawful
• Court must consider: purpose of the statute and whether, in the light of all the surrounding circumstances,
declaring the given contract illegal advances the objects of the statutes
o Other factors: serious consequences of invalidating a contract; social utility of such consequences; the class
of people for whom the statutory prohibition was directed
Illegality and Contracts – Common Law

Contracts in restraint of trade (restrictive covenants)
• Functional approach: focus is on the effect/function of the clause in practice over its form
• Formalist Approach: clause must be structured as a prohibition) if yes (a contract in restraint of trade), then the
enforceable unless reasonable in the interest of the contracting parties AND reasonable in the interest of the public.
• Contracts to commit a crime or perform a legal wrong
• Contracts prejudicial to good public administration or the administration of justice
• Contracts prejudicial to good foreign relations
• Contracts which involve or encourage immorality
• Contracts affecting marriage
Effects of illegality:
• Dependent on the terms of the statute (in general, renders the contract unenforceable)
• May allow recovery of property where (a) both parties are not equally blameworthy (b) the party seeking to
recover repented of the illegality before execution of contract (c) party seeking recovery is able to base the claim
on without
Rheburgen v Creston Veterinary
Facts: There was not an outright prohibition of competition. Not conventional restrictive covenant. She was
free to leave but had to pay penalties.
Issue: Was there a valid restrictive covenant?
Decision: Restrictive covenant exists.
Reasoning: (1) Formalist approach: look to see if the clause expressly prohibits competition
(2) Functional approach: examine the consequences of the clause for the party at issue. No express
prohibition on leaving, but there were large penalties
Ratio: Restrictive covenants cannot be ambiguous, if it is prima facie unreasonable.
KRG Insurance v Shafron

Facts: Shafron was employed by KRG in Van. Entered into a non-competition clause contract, where he was
forbidden getting work for 3 year after in “Metropolitan City of Van”. Shafron left KRG to work for a
competitor in Richmond
Issue: Restrictive covenant void?
Decision: Yes. Too vague.
Reasoning: • Restrictive covenant was uncertain and ambiguous. There was no evidence that the parties would have
agreed to remove the word "Metropolitan" w/o varying any other terms of the contract or otherwise
changing the bargain.
• There was no indication that the parties agreed on something and then mistakenly included something
else in the written contract and rectification could not be invoked to resolve the ambiguity in this case
Ratio: A restrictive clause is prima facie unenforceable unless it is shown to be reasonable by asking:
a) Is it reasonable from the perspective of both parties?
Consider the scope of the clause (what it covers); the time/duration of the clause, subject matter.
b) Is it reasonable for the interests of the public? Consider the subject matter (ex - unique talent that
should be available to the world at large, or it’s a special industry w/ a monopoly that should be open
for competition, etc.)
47
1. Notional severance – reading down in the act of interpretation – to make the clause legal and enforceable.
Notional severance should not be applied employment contracts – it would not come to the aid of the employer
(you can’t hope to make a broad covenant in the hopes that the Court will read it down)
2. Blue pencil - effected when the part severed can be removed by running a blue pencil through it. Judge can
strike out only a portion of the contract without altering the meaning of the contract.
Still v Minister of National Revenue

Facts: P was employed as a visitor on the belief that she could work on visitors record. She was later granted
PR. P is laid off and denied unemployment insurance under the unemployment act. They said that her
contract was illegal & thus invalid from the period she was employed until she received PR status.
Issue: Was Still entitled to benefits when she believed that she was entitled to work, even though she had no
valid work permit which was contrary to the Immigration Act?
Decision: Contract was not void.
Reasoning: Traditional Common Law Approach on Illegality
Where a contract which P seeks to enforce is prohibited by common or statute law, the Courts will not
give it effect. Draws distinction between a (1) contract illegal in formation & (2) contract illegal as
performed. In this case, the contract was illegal as performed.
The Modern Approach
Where a contract is impliedly/expressly prohibited by statute, a court may refuse to grant relief to a party
when, in all circumstance of the case, including regard to the objective and purposes of the statutory
prohibition, it would be contrary to the public policy to do so.
Ratio: Two ways to approach illegality: modern approach: interpret statute narrowly, who is the statute directed
at, pay attention to legislative purpose/rationale behind the legislation.
VII REMEDIES:
Jarvis v Swans Tours

Facts: P suing D because the holiday package he bought from them did not live up to what was advertised at
all. Claims loss of enjoyment and mental distress.
Issue: Can P claim damages for mental distress and loss of enjoyment?
Decision: Yes.
Reasoning: The statements in the brochure were representations/warranties, and the breach of them gave a right to
damages. Held: the right measure in damages is to compensate him for the loss of entertainment and the
enjoyment that he was promised and did not get.
Ratio: Overruled the principle that on breach of contract damages cannot be recovered for mental distress. You
can compensate a victim of a breach for mental distress as long as the damage is not too remote  
Hodgkinson v Simms
Facts: Appellant (H.) hired Respondent (S.) to advise him on real estate tax shelter advice. S advised him to
invest in 4 income tax sheltered properties; H lost heavily when a decline in the real estate market
occurred. Unbeknownst to H, S was acting for the developers of the property and benefitted from each
sale/investment. H would not have invested if he had known.
Issue: How to calculate damages?
Decision: Appeal allowed, must restore party to their original position
Reasoning: Proper approach to damages for breach of fiduciary duty is restitutionary. Appellant entitled to be put in
as good position as he would have been had the breach not occurred
Ratio: Remoteness of damages deals with what kind of damage the plaintiff is entitled to recover. Damages are
not too remote simply because the extent of the loss was not foreseen
48
Borealis v Geogas Trading
Facts: Geogas supplied butane feedstock that had been contaminated with fluorides to Borealis, who fed it into
cracking furnaces in an underground cavern at its plastics plant in Sweden. Hydrofluoric acid produced
by the fluorides subsequently caused serious and extensive physical damage to Borealis’ plant. Borealis
claimed damages from Geogas for breach of contract in supplying the contaminated goods
Issue: Remoteness of damages, intervening events.
Decision: Damages for breach of contract awarded.
Reasoning: While Borealis knew or ought to have known of the presence of acid in the system (due to the trigger of
the pH alarm), the generation of hydrofluoric acid and the subsequent alarm was, in the court’s view, an
“unknown breach” which gave rise to an “unknown danger”. Reaction was slow but not unreasonable.
Ratio:
Hadley v Baxendale
Facts: P’s mill has broken crankshaft. It was supposed to arrive in 1 day but D carriers were delayed. P sues for
lost profits.
Issue: Is it too remote to recover?
Decision: Yes.
Reasoning: The loss of profits here could no reasonably be considered such a consequence of the breach of contract
as could have been fairly and reasonably contemplated by both the parties when they made this contract
Ratio: (1) To be recoverable, he loss suffered must be the probable result arising in the usual course of things in
the great multitude of cases. Furthermore, the probability of the result must be in the contemplation of
the parties at the time the contract was formed. Foreseeable in an ordinary sense in that it is probable or
“likely to happen in a majority of cases.”
(2) If contract was made under special circumstances which were communicated between the parties that
make the type of loss likely, then this can make it foreseeable even it was not foreseeable under (1) 􏰇
High standard.
Victoria Laundry v Newman

Facts: Late delivery of bolier from D to P. It was 20 weeks late and caused P to have to turn down a very
profitable government contract because they didn't have the boiler.
Issue: Can the plaintiff recover loss of profits, which they would have made if the boiler were delivered on
time?
Decision: Profits recoverable, not extraordinary profits though.
Reasoning:
Ratio: In cases of breached contract the party is only able to recover the part of the loss reasonably foreseeable
at time of contract. It’s enough if party was likely to see the loss.
For the plaintiffs to recover profit, the defendants would have had to know at the time of contract the
prospects and terms of such contracts.
Scyrup v Economy Tractor Parts

Facts: Parties contracted for the sale of a hydraulic dozer attachment for the Ps tractor. P made known to D that
the attachment was for a tractor which was to be used for a specific job with Supercrete, and that he
needed it in a hurry in working order. The equipment was sold to the P but it did not measure up to the
terms of the contract. Supercrete cancelled the contract with the P sues for loss of profits.
Issue: Is the damage too remote to be recoverable?
Decision: No.
Reasoning: Damages for breach of contract should be measured by what was reasonably foreseeable as liable to
result for the breach. This is turn, depends on the knowledge possessed by the parties or at all event, but
the part that later commits the breach (Victoria Laundry). Under the Victoria rule and Hadley,
reasonable foreseeability is the test: P gave D notice/knowledge that breach of contract in selling the
49
defective equipment would result in damages in the form of loss of profits. D had special knowledge of
the foreseeable consequence of the use.  
Ratio: Notice/knowledge/communication that breach would result in loss of profits is relevant in consideration
of whether damages should be awarded.
Koufos v Carnikow
Facts: P chartered a ship (the Heron II) from D to bring 3,000 tons of sugar to Basra. It was nine days late. The
sugar price had dropped from £32 10s to £31 2s 9d. P claimed the difference in the loss of profit. D
knew there was a sugar market, but not that P intended to sell it straight away.
Issue: Whether the fall in market value can be taken into account in assessing damages?
Decision: Damage was not too remote.
Reasoning: Under the second limb in Hadley v Baxendale it was only necessary that the losses were in the
reasonable contemplation of the parties as a possible result of the breach. There was no requirement as to
the degree of probability of that loss arising. Since the defendant must have known that market prices
fluctuate, the loss would have been in his contemplation as a possible result of the breach. (
Ratio: Use this case for policy considerations. When we talk about foreseeability in contract we are talking
about the probable or likely result (not the fantastic possibilities in tort). The type of loss that would
occur in the vast majority of circumstances. It is about fairness and parties being able to protect
themselves.

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CONTRACTS- FALL 2016

G. Content of the Contract……………………………………………………………………………………………....27

VI. Relief for Weaker Parties to the

A. OFFERS & INVITATIONS TO TREAT:

Canadian Dyers Assn v. Burton (1920)

Pharmaceutical Society v. Boots (1953)

Carlill v. Carbolic Smoke Ball Co

Goldthorpe v. Logan (1943)

Williams v. Carwardine (1833)

M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd.

Double N Earthmovers Ltd. v. City of Edmonton, 2007 SCC

Byrne v. Van Tienhoven (1880)

Errington v Errington and Woods (1952)

Dawson v. Helicopter Exploration Co. (1955)

Butler Machine Tool v. Ex-cell-o Corp. (1979)

Tywood Industries Ltd. v. St. Anne-Nackawic

Tekdata Interconnections Ltd v Amphenol Ltd

Saint John Tug Boat Co. v. Irving Refinery Ltd. (1964)

Household Fire v. Grant (1879)

Holwell Securities v. Hughes (1974)

Brinkibon v. Stahag Stahl (1982)

Aspects of doctrine of certainty of terms:

Hillas v. Arcos (1932)

Foley v. Classique Coaches Ltd. (1934)

Bhasin v. Hrynew, 2014

Empress v. Bank of Nova Scotia (1991)

Mannpar Enterprises Ltd. v. Canada (1999)

Wellington City Council v. Body Corporate 51702

Bawitko Investments Ltd. v. Kernels Popcorn Ltd.

5. Intention to Create Legal Relations

Balfour v. Balfour (1918)

Rose & Frank v. JR Crompton (1923)

TD Bank v. Leigh Instruments (1999)

CTF v. Ontario (Minister of Finance)(2004)

6. Formality: Contracts Under Seal and Requirement of Writing

Royal Bank v. Kiska

Dynamic Transport v. OK Detailing

Delgman v Guaranty Trust Co.

Girouard v Drouet (2012)

Dalhousie College v The Estate of Arthur Boutilier (1934)

Wood v. Lucy, Lady Duff Gordon (1917)

DCB v. Arkin & Zellers (1996)

Stilk v Myrick (1809)

Gilbert Steel v University Construction (1976)

Williams v. Roffey Bros. (1990)

Greater Fredericton Airport v. Nav Canada (2008)

Pao On v. Lau Yiu Long (1980)

4. Promise to Accept Less

Foakes v. Beer (1884)

Foot v. Rawlings (1963)

Process Automation v. Nostream Intertec

Hughes v. Metropolitan Railway Company

Central London Property v. High Trees House

John Burrows v. Subsurface Surveys

(1) Forbearance Waiver (waiver by estoppel)

SASK River v. Maritime Life

Dunlop Tyre v Selfridge

London Drugs v. Kuehne & Nagel

Edgeworth Construction v ND Lea

Fraser River Pile & Dredge v Can-Dive

G. CONTENT OF THE CONTRACT

1. Misrepresentation, Rescission & Bars

Byrne v. Van Tienhoven (1880) 

Butler Machine Tool v. Ex-cell-o Corp. (1979) 

Foley v. Classique Coaches Ltd. (1934) 

Empress v. Bank of Nova Scotia (1991) 