Ratios

Offer and Acceptance

Offer = communication by the offeror to the offeree indicating a willingness to enter into an agreement
with the offeree on certain terms
Invitation to treat = an indication of willingness to receive an offer (invitation to commence bargaining)

Criteria for Recognizing Offers:

1. Words must be unequivocal
2. Consider circumstance (language, conduct, relationship, etc.)
3. Consider presumptions
 Statement of intent it NOT offer
 Price quotation is NOT offer
 Statement of inquiry is NOT offer

Canadian Dyers Assn v Burton: Apply an objective test of the words and actions of the parties
involved to determine if they constitute an offer or an invitation to treat. Intention to be bound by
language and conduct of the parties. Must specify the important elements of a contract: item, identity
and for what consideration. Test on: 1.) is the offer capable of acceptance 2.) The offer is the primary
source of rules in the contract 3.) the terms if the exchange, and the terms need to be particularized
(they need to be directed at the individual).

Pharmaceutical Society of Great Britain v Boots Cash Chemist: Items on display are an invitation
to treat, not an offer. Offer is accepted when the cashier rings the items through.

Carlil v Carbolic Smoke Ball: A unilateral contract can be formed if there is a implied sincere offer to
the world at large, and that offer does not expressly or impliedly require notification of performance.
Performance of the specified condition in the offer will constitute acceptance of the offer and
consideration for the promise- don’t always need notice. The offeror bears the risk of extravagant
promises.

R v. Dawood: A case refining the opinion in Boots where a customer manipulated price tags. Under the
Boots model, which the courts held, there was no theft as the contract formed when the clerk accepted
the offered price, even though the price tags had been manipulated (case when dissent is stronger).
Dissent: was that the contract in this case was more a unilateral contract (performance is to pick up the
item, take it to the cash and pay for it, then the contract is formed and you get the item) than a bilateral
contract as defined in Boots. A better characterization of retail items in the shelf is an implied unilateral
offer.

Tenders
Tender Competitions
 These cases are either CENTRAL to the resolution or they will not be central at all
 Only certain contest circumstances
 Tender competitions
o When we want work to be done
o Want the lowest price
  Different from auction where you want the highest prices
 There can be more layers of concern added
o Aesthetic
o Environmental
o Price (not the only factor!!!!)

Privilege clause = A clause reserving the right of the owner to accept/ reject the lowest, or any, tender

Fixed bid = gives on stipulated price for bid

Referential bid = gives a fixed price, and a clause which can add to the bid upon a condition (ex. $50 or
$10 more than the highest bid)

Modern Analysis (Ron Engineering): Two contract model

1. Contract A: Arises on submission of a tender in accordance with the tender call (“submitted
contract/ bid contract”)
upon each bid submitted, there is a contract formed between submitter and owner –
the submitter cannot pull bids once submitted (forfeit deposit)
 Terms of contract A:
o Bid is irrevocable
o If accepted, must execute contract B at stipulated price
o Must submit irrevocable deposit
o Tender must comply with terms and conditions of tender call for bid
contract to arise – expressed or implied terms
 These are bilateral contracts – because of implied obligations of owner (MJB
Enterprise)
o Owner can only accept compliant bids

2. Contract B: Comes into existence upon communication by owner of its acceptance of the
tender (“Construction Contract”)
 contract between the owner and the successful bidder
 Bilateral contract

R v Ron Engineering: The tender call itself constitutes an offer that is accepted by the submission of a
bid, thereby creating KA (relating to the bidding process itself). Under KA, bidder typically required to
enter KB if selected. If bidder refuses, subject to forfeit deposit of some kind.
 KA: All those who submit tender documents are part of the competition (unilateral contract)
– contract occurs when contest closed (contract exists between the owner and each tender
submission)
 KB: Construction contract itself – acceptance of the tender

MJB Enterprises v Defence Construction: An owner has an implied obligation to only consider
compliant bids in Contract A. Contract A is therefore bilateral because both parties have obligations.
Privilege clause is allowed but needs to follow the rules.
Communication of Offer
For Offer & Acceptance to occur you need:
1. Communication of Offer
 RULE: A statement is NOT an offer unless it is communicated and accepted as an
offer
2. Knowledge of Offer
 RULE: Offeree, in performing the act of acceptance, must have acted with knowledge
of the offer

Williams v Carwardine: The offer does not have to be the motivation for the act. Simply knowing of
the offer and completing the required conditions is enough for acceptance and thus a binding contract.
But you must KNOWINGLY perform on the offer. KNOWLEDGE + PERFORMANCE is KEY

R v Clarke: There must be meeting of the minds for a contract to exist. There cannot be an agreement
without knowledge of the offer before the performance. Knowledge of the offer is necessary but
motivation of the offeree is irrelevant when accepting an offer.

Acceptance
To Accept an Offer: Acceptance must be communicated back from the offeree to the offeror (meeting of
the minds)

 Offeror is the “master of the offer” and can choose the form of acceptance. Any alternative form of
acceptance must be NO LESS ADVANTAGEOUS to offeror.

Acceptance by Silence or Conduct

RECALL: Offeree must communicate acceptance to offeror. THEREFORE silence alone cannot constitute
acceptance (Felthouse v Bindley)

BUT silence may constitute acquiescence when there is an ongoing arrangement in which one party is
receiving a benefit, and the other party is under the impression that they will be paid for providing this
benefit (St John Tug Boat Co).

Felthouse v Bindley: Silence cannot constitute acceptance

St John Tug Boat v Irving Refinery: Silence cannot constitute acceptance, but it can sometimes
constitute acquiescence. This occurs if a person acquiescence and the person is benefiting, and there is
an implied promise that the person is going to pay for the benefits – there is an implied promise
coming from an original offer.

Counter Offers
RULE: If the purported acceptance varies the terms of the offer, it will be treated as the proposal of new
terms, and classified as a counteroffer, not an acceptance
 EFFECT: Kills the original offer

 Can get around this harsh rule if:

 1) It was a statement of inquiry
2) Changes are so minimal that they’re not changing the terms (major terms are price, payment
quality, quantity of goods, time and place of delivery, extend of liabilities, settlement of
disputes)
3) It shows an interest in continuing negotiations

Livingstone v Evans: A counter-offer means a rejection of the original offer. The original offer can only
be accepted after a counter-offer if revived by the offeror.

Battle of the Forms

Battle of the Forms = parties entering into agreements and purporting to do so on the basis of their own
forms
 When two companies have two different standard form contracts, and they sign each others
assuming them to have the same terms, disputes arise – whose wins?
 We must find a contract between parties in a dispute over contracts – we know there is
intention for legal relations and often there has been reliance

Means of Resolving Battle of the Forms:

1. Mirror Image Rule – there is no contract if both forms are not mirror images
2. First Shot Doctrine – Person who sent first contract wins (this contract prevails)
3. Last Shot Doctrine – Person who sent last contract wins (this contract prevails)
4. Unjust Enrichment – One party will be enriched at detriment of other, fixes this
 Works to make the party give back what they have received at the expense of the
other party
 Falls with Mirror image rule – if find mirror image rule, then falls to unjust
enrichment
5. Reconciling the Shots (Denning in Butler) – Reconcile documents
 consistent with reasonable expectations of parties and continuing business relations

Butler Machine Tool Co v Ex-Cell-O-Com: If a court has to retroactively fix something, they’ll take a
holistic approach and find the most recent or credible displacement of the ground rules - Lord Denning’s
Holistic approach  we don’t need to determine based on a specific rule, we can look at the context
and everything that has taken place.

Acceptance by Performance (Unilateral)

Different Forms of Acceptance:
1. Bilateral K: Accepted through promise
2. Unilateral K: Accepted through performance
o Great risk on offeree – you have reasonable reliance, but offeror can withdraw offer at
any time before completed performance
 There is a PRESUMPTION OF BILATERAL CONTRACTS (Dawson)
Dawson v Helicopter Exploration: Courts will try to find a bilateral contract over a unilateral
contract in order to protect the offeree (whenever there’s a credible sense that obligations exist on
BOTH sides).
 Acceptance must be clear but not necessarily directly stated.
Communication of Acceptance
RULE: No contract is created before the communication of acceptance.

RULE: Acceptance must be communicated to offeror.

The Offeror (Master of the Offer) can stipulate the required form of acceptance (writing, verbal,
performance, silence, etc.)
 If someone accepts an offer in a way other than the outlined method, the acceptance MIGHT
still be valid so long as it is NO less advantageous to the offeror

Deemed acceptance:
Fax  machine receipt + business expectation (ex. during business hours) unless intention or context
say otherwise

Email  system post unless intentions otherwise  it’s not the postal acceptance (not when click send),
not necessarily when received but when it is in the inbox (the system – not the computer or at the eyes
of the receiver) on the other side and is CAPABLE of being accepted

Mode of Communication
Eliason v Henshaw: Acceptance must be communicated in the method stipulated by the offeror. An
alternative method of acceptance may be used so long as it is NO less advantageous to the offeror. A
offeror can limit the method of acceptance
 The offeror may stipulate the time frame and location necessary for the communication of
acceptance.

Postal Rules
GENERAL RULE: A contract is formed upon the offeror receiving acceptance from offeree. Until then, no
contract is formed and there are no obligations.
 Covers INSTANTANEOUS communication
 Risk is on the offeree

EXCEPTION – THE POSTAL RULE: Acceptance by mail is effective upon posting.

 Covers NON instantaneous communication (mail)
Acceptance is made when are where it is posted – this is where and when the contract is
made
 For the rule to apply it must be appropriate for the offeree to communicate the acceptance
by mail
 Risk is on the offeror – If the post is lost in the mail, it doesn’t matter (contract holds)

***Postal Rule applies only to acceptance, NOT to offers or revocation***

Henthorn v. Fraser: Postal rule: acceptance occurs at the time of mailing – if acceptance by post was
contemplated.
Postal rule does not apply to revocation – must be brought to mind of offeree, requires actual receipt.
Howell Securities v Hughes: Postal rule does not apply if explicitly excluded by the offeror or if the
context is such that the postal rule would be absurd (ex. Purchase of securities). “Notice” indicated that
the offeror must have knowledge of the acceptance (had to actually receive it)

Brinkibon v Stahag: Acceptance is usually when and where it is communicated to the offeror (except
postal rule, where acceptance occurs where and when posted). Important facts is the context: was it
during office house? In modern day it is when the message is capable of being received…

Termination of Offer
RECALL: There can be no contract unless an offer is accepted (meeting of the minds)
ON THE OTHERHAND: A non-existing offer cannot be accepted. (ex. If its terminated)

 Until an offer has been accepted, it is open to the offeror to withdraw or revoke the offer

 Intention to revoke offer must be communicated by the offeror to the offeree - the revocation may
also be effective if the offeree learns indirectly that the offeror is no longer willing to stand by the offer
(Dickinson v Dodds)

 For an offer to remain open (without the possibility of revocation before a certain date) the offeree
must given something in exchange (ex. deposit) for the time to consider the offer (an option)

How Termination of an offer comes about:

1. Counter offer by offeree
2. Rejection of offer by offeree
3. Revocation of offer by offeror
4. Lapse of time open to accept offer - acceptance must be made within a time deadline
stipulated in the offer or, in the absence of a deadline, within a reasonable time

Revocation of Bilateral Contract

WHAT: A party who makes offer withdraws it before offer has been accepted

RULE: revocation is only effective once it is communicated to offeree

 Revocation may be effective if offeree learns indirectly that offeror no longer willing to stand
by offer

RULE: An offeror is not bound by his promise to keep the offer open unless the offeree provides
consideration in exchange for a promise to keep the offer open
 This promise to keep the offer open is a contract in itself
 Offeror’s consideration = not taking offer from anyone else (promise to keep
offer open)
 Offeree’s consideration = Payment

The Postal rule does not apply to revocations by mail

If you mail a revocation, it is not effective at the point of mailing, its effective at the point
when and where it is received
Dickinson v Dodds: Notification by a third party of an offer's withdrawal is effective revocation of an
offer. If a party know that the offer has been legally completed with a different party then themselves,
they cannot legally enter into a binding contract with the original offeror. The knowledge of another
contract formed destroys the ability to consent, this counts as revocation.

 A promise to keep an offer open (an option) is itself a contract which must have some
consideration for it to be binding.

Revocation of Unilateral Offer

ISSUE: Acceptance of a unilateral offer is complete ONLY when the act has been COMPLETELY
performed (risk to offeree)

SOLUTION: Offers cannot be revoked once offeree commences performance, but offer ceases to bind
offeror is the offeree leaves the contract incomplete and unperformed

How to get to this solution:

1. Assume bilateral contract
2. Carefully construct definition to act in the offer
3. Recognize reasonable reliance on promise worthy of protection

On Exam  say, Carbolic points this way, but we’ve got Dawson and Errington, that say this___ but I
don’t know if we can go this way

Petterson v. Pettberg: The court interpreted the holder of mortgages offer as unilateral (cannot say yes
to perform, offerror is passive), stating that it had been revoked before acceptance had been
performed, thus wasn’t bound as a contract. In Canada we apply the dissent saying there is implied
obligation.

Errington v Errington & Woods: Party B in a unilateral contract can be protected from revocation if
they have begun performance and continue performing the requirements. The offer ceases to exist if
the performance requirements are stopped. This gives equitable protection of a party when the offer is
specific to a person.

Lapse of Time
Duration of offer:
1. May be limited by offeror
2. If no limit specified, power of acceptance expires after reasonable time (consider nature of
the subject matter – ex. Is it regarding perishable food or something where the value can
change considerably in a time period)
3. Offer my also lapse on the occurrence of some condition

Conduct and Context (in determining whether offer has expired):

- Is there an implied time period?
- What is the nature of the subject matter? (is time of the essence? Ex. perishable goods)
- What language is used? (“immediate”; “asap”)
- Practical reading of context (would there be insufficient turn around time (Barrick)
Barrick v Clark: If an offer does not specify the time for acceptance, acceptance is to be made within a
reasonable time, which depends on the nature of the character of business, the circumstances of the
offer including the conduct of the parties in the course of negotiations (otherwise it’s revoked)
 When looking at whether acceptance was made within a reasonable time, you can do an implied
term analysis or the delay = rejection by offeree analysis
 Reasonability is read from: 1) language 2) Subject Matter 3) Parameters of the deal
Death
RULE: Death of offeror puts end to power of acceptance
 because there can be no consensus ad idem if offeror is dead

Certainty of Terms
RULE: A contract may fail to come into existence, even though there’s been offer and acceptance,
because of an uncertainty as to what has been agreed

Traditional Contract View: In order for an agreement to be enforceable, the parties must have reached
agreement on all the essential terms of their agreement AND they must have expressed themselves in a
clear way so that the court can determine the intentions
 Law of certainty of terms

Uncertainty may arise when:

1. Terms are vague
2. Incompleteness (missing terms)
3. Agreement to negotiate
4. Anticipation of formalized agreement

Agreement may suffer from: incompleteness (essential term is simply not present); agreements to
agree (when parties are aware that they cannot agree with respect to a particular matter at the time of
contracting, they may stipulate that they will reach agreement in the future); a term may suffer from
vagueness or “incurable uncertainty”

Machinery  if the machinery for clarifying uncertainty is external to the contract (involving a third
party) then it is enforceable
- External and objective v. Internal and subjective (involving discretion of parties involved)
- Ex. Arbitration
Three categories of agreements to negotiate (options):
1. Price to be agreed upon = not enforceable
2. Price to be agreed upon through formula, but no machinery = may be enforced by supplying
machinery
3. Defective formula, court can use machinery to correct = enforced by courts, machinery used
to fix defect.

Formula = target
 Objective benchmark - what is sought (ex. Market price)
 WHAT
Machinery = The means by which it’s achieved
 According to who? who makes decision?
 Ex. Arbitrator
 WHO

Incomplete Terms- New Contracts

Incomplete Terms arise where parties were unable to articulate in advance, the precise manner in
which the obligations shall be performed

Missing Term vs Vague Term: allegation of missing term is more fatal to the agreement because if a
term is missing, court must supply new words. Means NO meeting of the minds.
Look at the context of the agreement to determine if the missing terms are so important that
the court must conclude that the parties have not yet reached an agreement

The Court cannot make agreements for you - If the Court can’t determine rights and obligations for
each party, they will not make a contract for them

Agreement to agree is not a contract

 Essential elements of an agreement to agree:
1. An important missing term that is material (critical)
2. It was left to the parties to figure it out in the future – Courts will only help solve this
if they are given a method to determine this material term in the agreement
 ex. Agreement to agree on price: There is no reasonable price default in common law
 If contract says nothing about price, it is enforceable contract
 If contract says they will agree on price, it is NOT an enforceable contract

Material v ancillary terms - the core terms of a deal have to be resolved or resolvable  if there is
uncertainty here, NO CONTRACT (ex: price)
 Minor aspects can be filled in later and won’t affect deal

May & butcher  modified by Hillas (mechanisms) & modified by Folley (part performance)

May & Butcher v The King: An agreement between two parties to enter into an agreement in which
some critical part of the contract is left undetermined (such as price) is not a contract at all. No contract
exists where material terms are missing or incomplete.
 An arbitration clause can’t be invoked to create a contract where there was none.
 An agreement to agree is NOT a valid contract
 There is no reasonable price default – Courts can’t establish a pricing term without a provided
method

Hillas & Co v Arcos: An agreement that establishes a workable mechanism for the determination of
price at a later point in time will not fail for incompleteness. Where a material term is missing or
incomplete, the term can be determined if machinery is provided in the contract.
 A contract to negotiate is enforceable. The courts can intervene to determine the terms of tan
agreement where there is an objective standard in the contracts itself to determine the term
(machinery)
Folley v Classique Coaches: When conduct indicates the parties have been acting upon a valid
contract, an arbitration clause can be a means to determine price in the future. Where a material term
is missing or incomplete, and there is partial execution of the agreement, the term can also be
determined by looking at the performance of the parties (what have they been using for the term) – if
there is an arbitration clause, arbitration can be used here to determine the term.
 Partial execution of the agreement is likely to weigh in favour of enforceability, even where there are
uncertain terms.

Agreements to Negotiate- RENEWALS

GENERAL RULE: Agreements to negotiate do NOT constitute contracts. They are too uncertain to
constitute any binding force.  There are some exceptions to this rule

 Negotiating in “good faith” - There is a duty of good faith in defined aspects of contractual
performance

 An agreement to agree to agree in the future to essential aspects of a contract have failed to
make a binding contract.
 But there can be a binding promise to negotiate, although this is usually not considered a
contract because:
1. It is impossible to determine the content of a duty of negotiate
2. There is no basis upon which to determine damages for breach of such a duty
However, expressly including a term obliging the parties to negotiate in good faith can be a response to
those issues. It provides s standard against which the parties’ efforts to negotiate may be measured.

Conditions for voiding a contract out of lack of good faith:

1. Only out of a pre-existing relationship - must be a renewal (Empress)
2. Only in pursuit of an objective benchmark - gives something against which to measure the
other’s behaviour (Empress)
3. No contextual barrier to inference of duty – must consider the circumstance ex. If one party
cannot enter in good faith negotiations (Mannpar)

Empress Towers v Bank of Nova Scotia: Even though the substantive contract may be
unenforceable, there MAY BE an enforceable agreement to negotiate (TO TRY), but only if there is an
objective benchmark against which the parties conduct can be measured – the standard and the
conduct of the parties can be implied. There is an implied duty to negotiate in good faith where there is
a pre-existing relationship.
Mannpar Enterprises v Canada: Machinery isn’t sufficient if it only eliminates options; it must give
the ONLY option. Parties w/ a fiduciary duty (i.e. governments) can’t create implied terms unless they
have the consent of the party they owe a duty to.

Wellington City Council v Body Corporate 51702: There is a difference between negotiating in
“good faith” (parties are free to pursue their own interests beyond what is objectively reasonable) and
negotiating “reasonably” (parties should adhere to a more objectively reasonable standard). If a
“process” or “negotiation” contract is written with enough specificity in terms to allow the court to
objectively determine what the negotiation process should’ve been, it can perhaps be legally
enforceable.
Bhasin v Hynew : Established that the law of contract is infused with a general "organizing principle" of
good faith. The courts articulated the standards of behaviour derived from the organizing principle in
specific situations and relationships and may identity good faith duties in other cases as the law
develops. The organizing principles as manifested in good faith doctrines encompasses two central
obligations. 1)Parties must act honestly and reasonably, not capriciously or arbitrarily 2) Parties may put
their own self-interests before the interests of the opposite party but must have a degree of regard for
the interests of the other that is appropriate for the circumstances.
 Good faith express term to negotiate (can be unspoken commitment)(not for legal strangers)
 But no objective benchmark
 Could still have the duty to negotiate “in good faith” and act honestly
 If you have market price, you could have to accept because that would be breaching good
faith

NumberCorp. v TimberWest: This decision invoked an important part of the SCC decision in Bhasin
that declared "a new common law duty that applies to all contracts as a manifestation of the general
organizing principle of good faith: a duty of honest performance, which requires the parties to be honest
with each other in relation to the performance in their contractual duties"  TimberWest was found to
breach the good faith requirement

Conditional Agreements
Two ways of legally looking at subject to (condition precedent) terms  FROM WIEBE
1. The condition precedent prevents the formation of a contract
a. While the condition precedent remains unfulfilled the contract isn’t formed, and either
party may revoke
2. Condition precedent suspends the performance of a contract
a. A contract is formed, but the fulfillment of the condition suspends any further
performance in the contract, revocation not possible

Types of Conditions Precedent to determine legal view as above  FROM WIEBE:

1. Purely Subjective  non-binding  preventing
a. Condition prevents the formation of the contract
b. Allows discretion to the parties, all on what one of the parties “like”
2. Objective  binding  suspends
a. Has machinery involved that the courts can invoke
b. Suspends the performance of the contract
c. No discretion on the part of the parties, external to their behaviour
3. Subjective / Objective
a. If the objective outcome is contingent on the behaviour of one of the parties
b. Comes down to the last stage of decision making, do they have to accept the external
outcome?
c. Tools for courts to place in two categories/ who must fulfil the duty (Dynamic):
i. Business efficacy: these conditions have to work
ii. Officious Bystander: reasonable onlooker to determine which party has the duty
to carry out behaviour
iii. Held against a standard of best endeavours
d. Working against the parties to fail out of the contract for invalid reason
 
Wiebe v. Bobsien: How to categorize and legal look at conditions precedent. When is conditions
precedent prevents or suspends a contract. 1. Purely Subjective  prevents 2. Objective  suspends 3.
Subjective/ Objective  comes down to if they must accept the external outcome (depends)

Dynamic Transport Ltd. v O.K. Dealing Ltd.: The court is able to infer which party is required to
take the actions required to fulfill the conditions precedent. In this case, due to a statutory duty around
this type of condition precedent (regulatory approval for division of land for subdivisions), the court
found the vendor to be the implied agent to carry out the condition precedent – mainly for hybrids.

Unilateral Waiver

Waiver  where the condition is clearly for the benefit of one party, that party can waive the condition
- If the condition is completely dependent on a third party, it is a true condition precedent and
cannot be waived unilaterally
- Parties can always mutually agree to waive condition
- One parties attempted removal of condition to proceed into contract  sometimes
permissible, but often not
Condition Precedent: when a condition can be waived unilaterally
1. Sole Benefit
2. Severable (doesn’t speak to content of the deal, ex. financing)
3. Not Dependant on determination of Third Party (not waivable – true condition precedent, ex.
statutory requirements) -> has to be purely subjective

 Conditions involving discretion are waivable, conditions demanding external determination are not.

Turney v. Zhilka: if the condition precedent is intended for the sole benefit of one of the parties, it is
severable and it is not subject to a third party, they have the right to waive and demand performance. If
it isn’t, then it is a true condition precedent and can’t be waived by either of the parties.

Intention to Create Legal Relations

General Rule: An agreement entered into by two parties is only enforceable if the parties entered into
the agreement with the intention of creating legal relations

Balfour v Balfour: Courts assume an ABSENCE of intention to create legal relations in family and social
settings and a PRESENCE of intention to create legal relations in commercial settings. However, if these
are related to divorce proceedings, they may be held enforceable, due to a greater intention to create
legal relations.

Promises under Seal

Royal Bank of Canada v. Kiska: For something to be signed under seal – and for that seal to count as
consideration- it must be more than just a stamp that says “seal”.

Consideration & Reliance

GENERAL RULE: The agreements that can be enforced are those that contain the element of
consideration – the mutual exchange of value
Gratuitous Promise = A promise for which no consideration is given in return (unenforceable)

RULE: Promises will be enforced only if they form part of a bargain or are given under seal
 Exception 1: Formal trappings within which the undertaking is given
 Exception 2: Promissory estoppel

**Seal = alternative to consideration, provides a device by which non-bargain promises can be rendered
enforceable**

Basic Principle  Promises will be enforced only if they form part of a bargain or are given under seal
(seal = alternative to consideration, provides a device by which non-bargain promises can be rendered
enforceable)

Doctrine of Consideration  To be enforceable, a promise must be purchased in the sense of being

given in return for something of value provided by the promisee or, for “good consideration”

Consideration  the act, forbearance, or promise given in return for the promise that one wishes to
enforce
- A promise for which no consideration is given in return may be said to be gratuitous
- Bilateral Contract – promise for a promise
o Unilateral Contract – promise for an act or forbearance

RULE: Consideration must flow FROM each party of the contract, but it does not necessarily need to
flow TO the other party (practical benefits are fine)

Consideration = some right, interest, profit, or benefit accruing to the one party or some forbearance,
detriment, loss or responsibility, given suffered or undertaken by the other (Currie v Misa)
 Consideration must be provided by both parties
 Something of positive or negative value
 Detrimental action by the promisee in reliance on the promise, but not in return for it, is not
enough (detrimental reliance cannot replace consideration)

The “Peppercorn Theory”: In a bargain in which something of value is exchanged for something of even
trivial value, such as a peppercorn, the exchange is enforceable (consideration must be sufficient but it
need not be adequate)

Doctrine of Privity: Only parties to the agreement can sue or be sued on the contract

Types of Consideration:
1. Executory Consideration = a promise to act in the future
 Ex. Promise to pay in the future
2. Executed Consideration = Act exchanged for a promise
 Ex. Buying something at a store
3. Past Consideration = An act proceeds a promise
  You act first, and the other person promises they will do something because you
acted – this is NOT valid consideration (the act and the promise are not dependent on
one another)

Past Consideration: A promise given in recognition of or in return for benefits received by the promisor
in the past is unenforceable
 Past consideration is no consideration

Routes of Enforceable Agreements:

1. Formalism  Words used denoted seriousness of commitment and that gives rise to
accountability
2. Reliance  Someone relied on the promise, they changed their course of action or planned
accordingly (reliance alone is not a good filter of enforceability)
3. Equity  Historically, a separate branch of law that wanted a fairness protection when common
law riles didn’t seem to produce just result

Brantford General Hospital v Marquis Estate: Donations are unenforceable gratuitous promises due
to want of consideration. Consideration is composed of two points: 1) Was a promise extracted to bring
about the desired outcome? 2) Was some value given in exchange for the promise?
Consideration cannot be unsolicited, nor can a pledge act as consideration if it’s not a reason
why a party undertook something.

Past Consideration
TEST - Executed or Past Consideration: Are the act (the consideration) and the promise that is
dependent on that act part and parcel of the same transaction?
 A promise to pay B if and when B produces A’s lost dog: consideration is the production of
the dog by B.
 If B produces the dog, then A promises to pay B in consideration of B’s already having
produced the dog = past consideration

RULE: if there is to be a valid, enforceable contract, the promises, or the promise and the act, must have
been exchanged in return for each other.
 PAST CONSIDERATION IS NO CONSIDERATION

Pao On v Lau Yiu Long Test for Enforceable Past Consideration:

1. The act must have been done at promisor’s request
2. Parties must have understood that act was to be remunerated
3. Payment, or conferment of a benefit, must have been legally enforceable had it been
promised in advance

Lampleigh v Brathwait: Promise coupled with prior request constitutes good consideration.
 Generally, past consideration is not good consideration, HOWEVER, if the elements of motivation and
reward are present but in the wrong order, the courts may reorder them to find good consideration
(request, expectation of payment, performance, promise of payment = consideration)

Forbearance to Sue
Forbearance to sue = giving up your right to sue (someone agrees not to sue)
Forbearance to sue can take 2 forms:
1. Prospective litigant can refrain from taking an action in return for the promise of the
intended defendant; or
2. An action, once commenced, can be settled by such agreement.

RULE: Forbearance to sue is good consideration. Means that the resulting agreement between the
parties will be valid and enforceable.
 The promise to forbear from suing will constitute good consideration so long as the party
threatening suit is acting on good faith

**There has to be good faith by the plaintiff - they must think that they have a good, valid case and are
therefore giving up something by settling a law suit**

Situation One: Where a plaintiff would have succeeded at trial, but decides to settle before trial
 Plaintiff’s consideration = relinquishing payment that they would have got from a successful
trial (the detriment they suffer)
 Defendant’s consideration = money they’re giving the plaintiff

Situation Two: Where the plaintiff would have lost at trial, but settles before trial.
 Plaintiff’s consideration = giving up a potentially successful lawsuit (doesn’t really suffer a
detriment, but rather the unknown outcome of the trial that didn’t happen)
 Defendant’s consideration = money paid to plaintiff

BDC v Arkin: Forbearance to sue is good consideration. Monies paid in exchange for a promise not to
sue is a valid and enforceable legal contract.
 The promise to pay money is not binding if the sole consideration for it is a forbearance from
pursuing a claim which is invalid and which is either known by the party forbearing to be invalid, or not
believed by that party to be valid

Pre-Existing Duty
TRADITIONAL RULE: A promise to perform a pre-existing contractual duty is not good consideration
 Originated public policy grounds
 Rule continued, but later enforced on basis of lack of consideration (Stilk v Myrick)

NEW RULE: Is the promise exploiting promisor’s vulnerability? Look at whether there’s additional
consideration. If no additional consideration, agreement fails.

EXCEPTION: Mutual Rescission.

All parties rescind old agreement and make a new one

Gilbert  Strict requirement for something new from plaintiff(Traditional approach)

Williams  Practical benefit to the Def. in the absence of duress (Relaxed approach)
NAV Canada  Absence of duress (Removal of consideration)

KEY POINTS:
 1. Duress invalidates a contract. (NAV)
2. Gratuitous promises won't be enforced (Stilk v Myrick)
3. In specific situations, if there's no duress, it is possible that a finding of lack of fresh
consideration, alone, should not be adequate reason in itself for refusing to enforce the
promise (NAV, Williams v Roffey)
 Ongoing-transactions - they take place over long periods of time will usually be
upheld. Changing circumstances over these periods of time will cause the parties to vary
or modify the contract after the original deal has been agreed to. If there is fresh
consideration for these variations, that's great. But these promises won't always be
unenforceable if there's no fresh consideration (provided there's no duress)
 Presumption that promises of this nature are enforceable. 
4. We only enforce agreements that are within the reasonable expectations of parties - don't
want to enforce agreements that may catch one of the parties by surprise.

Stilk v Myrick: Promising to do what you had pre-existing duty to do is NOT consideration (gratuitous
promises are not enforceable)

Gilbert Steel v University Construction: New terms need to carry with them consideration for them
to be binding. Merely changing a central element doesn’t constitute cancellation of an old contract and
a new contract being formed – it’s a variation. (Contract variations something new)

Williams v Roffey: A promise to carry out a variation of an existing contractual duty can amount to
good consideration if there is a practical benefit to the promise (it can come from somewhere outside of
the agreement itself)  practical benefits amount to good consideration in a contract variation
 If benefits are derived by each party, it is not necessary that each also suffers a detriment
 Consideration through a changed method of performance may be sufficient
 An agreement made under economic duress is not enforceable.

Greater Fredericton Airport Authority v NAV Canada: A variation to an existing contract that is not
supported by new consideration can still be enforceable so long as there is no economic duress
 TO SHOW ECONOMIC DURESS:
1) Show that there was pressure
2) Show that the victimized party had no alternative
3) Show that there was no consideration - no consent (no acquiescence)
Also Rosa v. Toca  applies NAV Canada… revives it.. now its just Nav/ Rosas rule

Accord and Satisfaction

Promise to Pay Part of an Existing Debt: Occurs if debtor (person who owes debt) tries to make a deal
with the creditor in which debtor will only pay part of his debt in return for creditor forgiving him the full
debt.
RULE: payment of a smaller amount in satisfaction of a larger amount is NOT sufficient consideration –
not enforceable agreement (Pinnel’s case)
 Although the creditor may get a practical benefit, the rule from Williams v Roffey does NOT
apply to cases in terms of partial payment of debt

Doctrine of Accord and Satisfaction  the purchase of a release from an obligation by means of any
valuable consideration (not being the actual performance of the obligation itself)
 Accord = agreement between the two
 Satisfaction = consideration given for the release of the debt
 Ex: we’re going to resolve a larger debt that I’m not able to pay, you’ll agree to release that
but in exchange for something else… like livestock

Judicature Act makes it so that you do not need new consideration to accept less performance
 Part performance of an obligation either before or after a breach thereof when expressly
accepted by the creditor in satisfaction or rendered in pursuance of an agreement for that
purpose, though without any new consideration, shall be held to extinguish the obligation

Foakes v Beer: Payment of a lesser sum in satisfaction of an existing debt cannot be satisfaction for the
whole debt unless something extra was promised in exchange for the creditor's foregoing part of his
debt (partial payment of a debt is NOT sufficient consideration)
 Overruled by Judicature Act
 Apply in the sense when the judicate act applies
o Maybe it’s a variation? Acknowledge this as the traditional approach

Promissory Estoppel
RECALL: Doctrine of consideration says that apart from promises given under seal, promises will not be
enforceable unless they are given as part of a bargain or exchange.

PROMISSORY ESTOPPEL: A party is precluded from asserting legal rights under a contract - in other
words, the doctrine prevents a party from retracting a promise that another party has relied upon, even
though no consideration was given for that promise
 One element is that promissory estoppel has to be unequivocal - you must know exactly how
rights will be changed
 For PE to apply, the promisee must have acted equitably (in good fait)
 
Doctrine of Waiver - if parties who have entered into a legal agreement, and afterwards by their own
act, enter upon a course of negotiation which has the effect of leading on of the parties to suppose that
the strict rights arising under the contract will not be enforced, the person who might otherwise have
enforces those rights will not be allowed to enforce them where it would be inequitable having regard
to the dealings which have taken place between the parties (Hughes v Metropolitan Railway, 1877)
 You waive a right that you have in a contract
Doctrine of Waiver results: the party relying on the waiver would commit a breach of
contract on the faith that the other party wouldn’t classify it as a breach of contract
  
*** NOTE: Waiver is something in the contract that is not enforced where promissory estoppel is a
PROMISE to do something within the bounds of a contract ***

REQUIREMENTS FOR PROMISSORY ESTOPPEL TO APPLY:

1. Representation:
 A promise or assurance
 Could be words or conduct
 Must be clear and unambiguous
2. Intention
 The representation must be intended to be relied on or acted on.
 Intention could be actual or presumptive.
3. Reliance
 The party to whom the representation is made must have acted or relied on the promise.
(some cases have required that the reliance be prejudicial or detrimental.
4. Pre-existing legal relationship
 There must be a pre-existing legal relations between the parties
 
 Promissory estoppel generally may be terminated upon reasonable notice of reassertion of strict
rights – UNLESS there is no way to equitably retract the promise
- If the promisee did not rely on the promise or waiver, then no notice required
- Not required that this reliance be detrimental – just a change in course of action
Central London Property Trust v High Trees House: A promise intended to be binding, intended to
be acted on and in fact acted on, is binding so far as its terms properly apply. A promise to the future
may also give rise to estoppel. (PE)
 IF a promise is
1) intended to be binding
2) Intended to be acted upon
3) Acted on
= enforce the promise even if no consideration
John Burrows v Subsurface Surveys: For estoppel to apply, one's conduct must amount to a promise
or assurance intended to alter the legal relations between the two parties

D&C Builders v Rees: Estoppel only exists where it is equitable – a settlement produced through
intimidation cannot be valid (no true accord).  not inequitable to return to original contract terms.

The Post Chaser: Waiver is retractable unless relied upon to some detriment - Reliance requirement
for waiver to apply (no reliance = no promissory estoppel)

SWORD VS SHIELD
A Shield - using PE as a defence within an existing relationship (I didn’t do what we originally agreed
because I relied on your statement that I no longer had to)
A Sword - Using PE as a Cause of Action to create a legal relationship or get more money
 No existing contract. You made a gratuitous promise then revoked it.
 Promise outside of any legal relationship

Combe v Combe: Promissory Estoppel can only be applied where there is an existing contract (Can only
be used as a blunt sword or a shield)
 Detrimental reliance is not sufficient consideration