Fall 2019 Contracts CAN

Professor M. Ilg (LAW 402.02)

Jordan Eeles
UNIVERSITY OF CALGARY
Table of Contents
A. Offer and Acceptance

1. Offer........................................................................................................................................................4
I. Offer vs Invitation to treat....................................................................................................................4
Canadian Dryers Association v Burton, (1920).....................................................................................4
II. Bilateral Contract.................................................................................................................................4
Pharmaceutical Society of GB v Boots, [1953].....................................................................................5
III. Unilateral Contract.............................................................................................................................5
**Carlill v Carbolic Smoke Ball Co., [1893]...........................................................................................5
IV. Tender Competitions..........................................................................................................................6
R v Ron Engineering & Construction Ltd., (1981).................................................................................6
MJB Enterprise Ltd. v Defence Construction, (1951)............................................................................7
2. Communication of Offer..........................................................................................................................7
Williams v Cowardine, (1833)..............................................................................................................7
R v Clarke, (1927).................................................................................................................................7
3. Acceptance..............................................................................................................................................8
I. Acceptance by Silence or Conduct........................................................................................................8
Felthouse v Bindley, (1862)..................................................................................................................8
St. John Tugboat v Irving Refinery, (1964)...........................................................................................8
II. Battle of the Forms..............................................................................................................................8
Butler Machine Tool Co. v Ex-Cell-O Corp., [1979]...............................................................................8
III. Acceptance by Performance...............................................................................................................9
Dawson v Helicopter Exploration Co., [1955].......................................................................................9
4. Communication of Acceptance................................................................................................................9
I. Mode of communication......................................................................................................................9
Eliason v Henshaw (1819)....................................................................................................................9
II. Time and Place of Acceptance: “Postal Rules”...................................................................................10
Household Fire & Carriage Accident Insurance Co. v Grant (1879)....................................................10
Holwell Securities v Hughes, [1974]...................................................................................................10
Brinkibon Ltd. v Staghag Stahl, etc. [1982]........................................................................................10
III. Modern Developments.....................................................................................................................11
5. Termination of Offer..............................................................................................................................11

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 I. Counteroffer.......................................................................................................................................11
Livingstone v Evans [1925].................................................................................................................11
II. Revocation.........................................................................................................................................11
Dickinson v Dodds (1876)...................................................................................................................11
III. Revocation of Unilateral Offer..........................................................................................................12
Errington v Errington and Woods [1952]...........................................................................................12
IV. Lapse of Time...................................................................................................................................12
Barrick v Clark [1950].........................................................................................................................12
B. Certainty of Terms

1. Incomplete Terms..................................................................................................................................13
May and Butcher Ltd. v The King [1934]............................................................................................13
Hillas and Co. Ltd. v Arcos Ltd. [1932]................................................................................................13
Foley v Classique Coaches Ltd. [1934]................................................................................................13
2. Agreement to Negotiate........................................................................................................................14
Walford v Miles..................................................................................................................................14
Wellington City Council v Body Corporate 51702 (Wellington) [2002]...............................................14
Empress Towers Ltd. v Bank of Nova Scotia (1990)............................................................................14
Mannparr Enterprises Ltd. v Canada (1999)......................................................................................15
3. Modern Developments..........................................................................................................................15
0856464 v Timberwest Forest Corp. – BCSC.......................................................................................15
C. Conditional Agreements

1. Condition Precedent to Existence of Performance................................................................................15

**Wiebe v Bobsien [1985].................................................................................................................16
2. Parties’ Obligations................................................................................................................................16
Dynamic Transport Ltd. v O.K. Detailing Ltd. (1978)..........................................................................16
3. Unilateral Waiver...................................................................................................................................16
Turnery v Zhilka [1959]......................................................................................................................16
Barnett v Harrison [1976]..................................................................................................................17
D. Enforceability of Promises

1. Promises under seal...............................................................................................................................17

2. Intention to create legal relations.........................................................................................................17
Balfour v Balfour, [1919]....................................................................................................................17
3. Consideration........................................................................................................................................18

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 Currie v Misa......................................................................................................................................18
Brantford General Hospital Foundation v Marquis Estate (2003)......................................................18
a. Past Consideration.............................................................................................................................18
Lampleigh v Brathwait (1615)...........................................................................................................18
b. Forbearance...................................................................................................................................18
Hamer v Sidway (1891)......................................................................................................................18
c. Pre-existing legal obligation...............................................................................................................19
(i) Duty Owed to Promisor.................................................................................................................19
Stilk v Myrick (1809)..........................................................................................................................19
Gilbert Steel Ltd v University Construction Ltd. (1976).......................................................................19
Williams v Roffey Bros. & Nicholls (Contractors) Ltd. (1990)..............................................................19
Greater Fredericton Airport Authority Inc. v NAV Canada (2008)......................................................20
(ii) Accord and Satisfaction.............................................................................................................20
Foakes v Beer (1884)..........................................................................................................................20
Re Selectmove Ltd. [1995].................................................................................................................20
(iii) Statute......................................................................................................................................21
Judicature Act – 2000........................................................................................................................21
(iv) Recent Developments................................................................................................................21
Rosas v Tosca (2018)..........................................................................................................................21
d. Promissory Estoppel..........................................................................................................................21
Hughes v Metropolitan Railway Co. (1877).......................................................................................21
Central London Property Trust Ltd. v High Trees House Ltd. [1947]...................................................21
(i) Promise..........................................................................................................................................22
John Burrows Ltd v Subsurface Surveys Ltd. (1968)...........................................................................22
(ii) Equities......................................................................................................................................22
D & C Builders Ltd. v Rees [1966].......................................................................................................22
(iii) Notice........................................................................................................................................23
Saskatchewan River Bungalows v Maritime Life Assurance Co. [1994].............................................23
Int’l Knitwear Architects Inc. v Kabob Investments Ltd. (1995)..........................................................23
(iv) Reliance.....................................................................................................................................23
WJ Alan & Co v El Nasr Export & Import [1972].................................................................................23
The Post Chaser (Société Italo-Belgian v Palm and Vegetable Oils [1982])........................................24
(v) “Sword” or “Shield”?.................................................................................................................24

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 Robichaud v Caisse Populaire de Pokemouche Ltée (1990)................................................................24
Combe v Combe [1951]......................................................................................................................25

A. Offer and Acceptance

1. Offer
 Initiates potential for a contract, opening opportunity to enter into a legal relationship.
o Contains all the ground rules for the contract and acceptance.
 3 parts: (1) What? (2) For what? (consideration) (3) To whom?
 Offeror holds all the power and sets the terms. Offeree only has the power to accept.
 Law of offer and acceptance – Parties held to have reached and agreement when they have
formed a mutual intention and agree on all material terms.  “Meeting of the minds” (requisite
consensus)

I. Offer vs Invitation to treat

 Invitation to treat has 2 of the 3 requirements of an offer.

o Subject matter (what, for what) but lacks identity (to whom)

Canadian Dryers Association v Burton, (1920)

FACTS:

 P asked for lowest price for house on Hanna Ave; D wrote back with price.
 After 1.5 years, P asked if offer was available; D says lowest price still available, only to them.
 P sent down payment and asked for deed; D had deed drafted, then backed out of deal.

RULE: Distinguishes Invitation to treat for Offer. Offer requires specificity (to whom); Invitation to treat
has elements of offer except specificity.

ANALYSIS: Was there a contract made? – YES

 First price given is Invitation to treat (What [house], for what [$$$])
 Second price given is offer because specific to 1 person – “their special price” (What, for what,
to whom)
o Contract formed on acceptance.
 D then proceeds as if K formed – so clearly K formed in his mind.

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II. Bilateral Contract
Traditional bilateral model:

Pharmaceutical Society of GB v Boots, [1953]

FACTS: Boots makes ‘novel’ self-serve pharmacy that moved non-dangerous drugs to aisles, still under
supervision of pharmacist at time of purchase at counter. Argued against regulations that require
pharmacist to supervise sale of drugs.

RULE: Self-serve shopping – Storefront is invitation to treat, customer is offeror (just happens to offer
same as price tag), store has control to accept or reject offer. BILATERAL CONTRACT (see note below).

ANALYSIS: Is contract formed when customer takes item from shelf? – NO

 Pharma GB says customer is offeree. (Open sign is Inv to treat, Price tag is offer)
o Tempting but public policy consideration – puts all self-serve shopping at risk.
o If this is the case, putting an item back on the shelf = breach of contract!
 Customer must be one to make the offer and cashier accepts offer.

NOTE: This rule seems problematic still, since it allows for fraud such as price-tag swapping to be
perfectly legitimate. Now understood as UNILATERAL (store puts out offer to public, full performance
by customer on paying for item.)

III. Unilateral Contract

Offers to the world at large (or individuals) that become binding upon full performance. (agreement is
full performance)

‘Roadmap’ to completion:

1. Posted to world at large (or individual).

a. Narrows to smaller class – those who fulfill the conditions
2. Someone fulfills conditions.
3. Person comes forward.

Unlike BILATERAL (requires notice of acceptance), UNILATERAL is binding only on full performance (no
notice of acceptance.

**Carlill v Carbolic Smoke Ball Co., [1893]

Typically a pivotal case for exams. (along with Wiebe)

FACTS:

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  D made CSB that claimed to prevent influenza – reward in newspaper for anyone who got
influenza while using CSB (company put money in bank to show serious),
 P used CSB, contracted influenza. Believes entitled to reward.

RULE: An offer to the world may nonetheless narrow according to its own terms, through performance.
– UNILATERAL CONTRACT.

ANALYSIS: Was advertisement a contract? YES. Was it too vague to enforce? NO.

 D argued not contract but “mere puffery” – not a product guarantee since too vague:
o Not product guarantee since not tied to purchase – any CSB
o Extravagant guarantee not meant to be taken seriously.
 Court: Making such a claim must be beneficial to you.
o How long is offer available?
 Court: As long as product in use or until offer rescinded.
o Not verifiable that terms met exactly.
 Court: Tough, you took that risk.
o Not to individual but to world at large.
 Court: Not everyone. Narrows to only those who satisfy the conditions.
 While no notification the offer had been accepted, no mode of acceptance outlined, so sufficient
to say the performance of the condition was the acceptance.

IV. Tender Competitions

Want to set up competition for someone to do something for the lowest price

 Whenever a contest, come back here and use KA and KB.

Contract A: Offeror (vendor) communicates to world at large, accepting tenders. Offerees (companies)
respond by submitting bids in specified manner. Appears unilateral as acceptance indicated by specific
performance, however actually BILATERAL (see MJB) since Offeror is bound to give fair contest.
Reciprocal relationship.

Contract B: The project contract.

R v Ron Engineering & Construction Ltd., (1981)

FACTS: Contracting group submits (sealed) bid. Employee sticks around and sees they won, but by a
wide margin. Company tries to back out before project starts and get deposit back. – If they can do this,
anyone could back out whenever they don’t get their ideal number ($1 below next guy).

RULE: Submission of bid is acceptance of UNILATERAL offer (MJB clarifies it is in fact BILATERAL), cannot
revoke after full performance.

ANALYSIS: Was there a contract established by submitting the tender? YES.

Judge splits into 2 contracts (KA - bid & KB - project)

 KA formed when bids come in. (Deposits held from winner until they sign KB, deposit returned
to losers.)
o Performance of action (submitting of tender) sufficient to fulfill acceptance requirement

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 o Conditions to reclaim deposit not met.

MJB Enterprise Ltd. v Defence Construction, (1951)

FACTS: Bids received for construction contract based on 1 of 3 materials. Vendor had privilege clause
saying lowest bid doesn’t necessarily win. Company that won had non-compliant bid

RULE: Party that writes the rules of the bid have an obligation (to run a fair contest) just as bidders
have obligations – Makes KA a BILATERAL contract – reciprocal relationship.

ANALYSIS: Can a privilege clause permit for selection of a non-compliant bid? NO.

 While privilege clauses are both useful and important (many reasons to not pick lowest
number), privilege clause must be in harmony with KA.
o If bid is non-compliant, not in KA. Offeror cannot reach outside of KA.

Breach of contract is not equal for all 15 parties. On the balance of probabilities 14 still would have lost
(nominal damages) – only 1 would have significant damages.

2. Communication of Offer
Williams v Cowardine, (1833)
FACTS: Reward poster for info about murderer. Reward claimant (1) Knew of offer, but (2) seemingly
offered info for other reasons (on death bed)

RULE: When performance rendered in Unilateral, the offer does not need to be uppermost of mind.
You only need to know about the offer and accept through performance.

ANALYSIS: Can you fulfill a unilateral contract with alternative intentions? YES.

 “We cannot go into the plaintiff’s motives.” “Brought herself within the terms, therefore entitled
to recover.”

THIS IS PREFERABLE TO CLARKE

R v Clarke, (1927)
FACTS: Gave info in murder trial to clear his name. Later reminded about the reward, but barred from
collecting.

RULE: Cannot accept and offer you did not know about or had forgotten about.

ANALYSIS: Can you accept an offer you had forgotten about? NO.

 Motivation may not matter, but knowledge of offer is crucial. Claimant initially knew about offer
but admittedly “completely forgot about it”
o This judgement is problematic because do people ever really forget about things fully? –
Guy still remembered offer when prompted. You can’t always credibly be thinking of
something.

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3. Acceptance
I. Acceptance by Silence or Conduct
Felthouse v Bindley, (1862)
FACTS: Nephew wants to sell horse to Uncle. Negotiation over currency. Uncle says “If I don’t hear from
you, I assume the horse is mine for $X. Nephew thinks he has deal with uncle so tells auctioneer to keep
horse out of auction. Horse sold by mistake, Uncle sues auctioneer, Auctioneer says uncle never was
owner of horse since no contract formed with Nephew.

RULE: An offer cannot be accepted by silence alone.

ANALYSIS: Was the uncle the owner of the horse at time of auction? NO.

 In order to form a contract to be formed, there must be communication of acceptance, silence

not enough. Because no communication, nephew still owned horse.

St. John Tugboat v Irving Refinery, (1964)

FACTS: Irving rent tugboats from St John Tugboats on a standby fee. Terms come to an end, renewal
question never answered by Irving BUT service continued for another 3 months

RULE: Silence may be acceptance where a positive onus arises for a recipient to decline services.

TEST: Would a reasonable bystander assume, given context, that silence actually looked like
acceptance?

ANALYSIS: Did Irving’s behaviour look like acceptance to a reasonable bystander? YES.

 Relationship is commercial in nature. – Nobody would expect them to do the work for free.
o Expectation of compensation.

II. Battle of the Forms

When agreement occurs with contradictory or inconsistent terms.

Butler Machine Tool Co. v Ex-Cell-O Corp., [1979]

FACTS: Large machinery being sold. Both parties “accepted”, but changed terms, so no contract should
be formed. (Seller: $ + clause 13 (can change price to market price), Buyer: yes $, but no 13, please sign
endorsement if you agree. Seller: Yes $, signed form – but we still want 13) BUT 1 year later, buyer still
wants and uses machine, seller doesn’t want it back. Both still want to be in contract.

RULE: When an agreement occurs with contradictory or inconsistent terms there is a battle of the
forms; the best communicated and least disputed will win based on holistic analysis.

ANALYSIS: On who’s terms was the contract agreed to? BUYER

 There was never true acceptance since each “acceptance” changed material terms – looks like
counter offer. But because machinery taken and still used, we impose contract on them.
 Traditional model looks for last clear counteroffer. This is the buyer (seller just tacked on cl 13
after)

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 o Lord Denning says to take more holistic approach. Who had the best credible argument
to set the rules of the game? How did a term get introduced? (emphasized or tacked on
after?) – Buyer made clear, no 13 and asked for endorsement. Seller didn’t ask for
endorsement.

III. Acceptance by Performance

Dawson v Helicopter Exploration Co., [1955]
Significant for (1) Courts recognizing vulnerability under unilateral contract. (2) Introduction of
contractual contingencies and conditions (i.e. if statements).

We should try and interpret contracts as bi-lateral whenever possible. Want both parties to have
obligations.

FACTS: P claims knowledge of mineral deposit, but underground, so uncertain. Offers knowledge of site
for 10% stake in mineral rights to D. P is in military and needs to get leave. D agrees to fly P out if he gets
leave, and if he is right about location, he gets cut. Right before they are supposed to leave, D says no
longer interested, tell him to find his own way there. D develops site themselves, without knowledge
from P.

RULE: Contingency = Reciprocity = Bilateral. Cannot just decide to back out, deal must expire naturally
(contingency not met) or by mutual agreement.

ANALYSIS: Was there a valid offer and acceptance to form a contract? YES

 Looks like a unilateral, so offer can be revoked at anytime.

o However, we should strive to find bilateral whenever possible.
 Court views it as a multi-stage contract with contingencies (if-statements). Agreed to process,
not outcome.
o First stage is D supplies pilot in exchange for P getting leave. – This is BILATERAL.

4. Communication of Acceptance
I. Mode of communication
Acceptance must comply with instructions issued by offeror. Offeror sets the rules for offer and the
method it can be accepted by.

Eliason v Henshaw (1819)

FACTS: P sent offer to purchase flour to D, with request that response be sent back by wagon. No wagon
going back, so D sent acceptance by post. P rejected acceptance because no made in right manner.

RULE: Offeree must follow terms of Offeror for an acceptance to be valid and binding.

ANALYSIS: Was the offer accepted in the right time, place, and manner? NO

 Argued wagon was time limit (knew when wagon would arrive).
 Location for acceptance was strictly treated and had no available substitute.

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II. Time and Place of Acceptance: “Postal Rules”
Generally: Offeror sets method of acceptance that can be used. If not specified, we look at what could
reasonably be expected as a method of acceptance.

When in person, acceptance upon hearing. When not by voice, we don’t rely on actual receipt (i.e.
reading) since this would allow Offeror to avoid acceptance by not receiving. Instead we rely on when
acceptance is CAPABLE of being read.

In person: When heard.

Letter: When received (capable of being read – can’t just not open letter).

Fax: When received by fax machine. (capable of being read)

Email: When received by recipient’s server. (Capable of logging into email and reading)

HOWEVER

POSTAL ACCEPTANCE RULE: Post office considered agent of parties, so acceptance at time of posting.

Household Fire & Carriage Accident Insurance Co. v Grant (1879)

FACTS: Communication via post. Agent for D makes application (offer) for shares in P’s company. P’s
acceptance sent, but never arrives in D’s possession. Did P purchase share?

RULE: Post offices are considered agents of the parties. So, acceptance at time of posting.

ANALYSIS: Majority – Requiring actual receipt would be impractical.

 Post office is agent of parties.

o Therefore, once posted = acceptance.

Holwell Securities v Hughes, [1974]

FACTS: D granted P 6-month option to purchase property, and stated acceptance by “notice in writing”.
Acceptance posted, but never delivered.

RULE: Postal Acceptance Rule is subject to expressed terms and conditions. Does not apply when (1)
Expressly asked for something different (ex. notice in writing) (2) Context does not lend to postal rule.

ANALYSIS: Does postage rule always apply? NO

 “Notice in writing” clause suggest letter must be received to be binding. Receipt of letter was
manner of acceptance.
 While both parties expected and intended to use mail, postage rule does not apply because
Offeror expressed expectation to see/receive letter before an agreement was come tom.

Brinkibon Ltd. v Staghag Stahl, etc. [1982]

Facts: Dispute over location of where contract formed. Acceptance was faxed overseas.

RULE: For instantaneous communication, contract complete when acceptance is received by Offeror
(capable of being read – cannot just avoid reading). Contract made at place where acceptance is
received.

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ANALYSIS: Where is contract formed when between parties in two jurisdictions? PLACE OF ACCEPTANCE

 Acceptance usually at location communicated. Difficult when not mutually present.

 Fax is generally close to voice, therefore treated under RECIEPT RULE. – Capable of being read.

III. Modern Developments

Acceptance is deemed to be received if it arrives at a time and by method that it would in a normal
course of business be deemed to have been received. – Can’t act in non-business way to avoid receipt
(i.e. not checking email, fax, letters etc., during business hours).

5. Termination of Offer
I. Counteroffer
Until an offer is accepted, open to Offeror to withdraw or revoke.

Counteroffers are changes in material terms and cancel previous offer. – Important because it gives
certainty to Offeror. If someone counteroffers, free to treat with others.

Inquiry is a change in non-essentials (i.e. time of delivery), asking for clarification. Does NOT cancel
previous offer.

Livingstone v Evans [1925]

FACTS: A: Land for $1800. B: Send lowest, Will give $1600 cash. A: Cannot reduce price.

RULE: Counteroffer cancels initial offer. HOWEVER, referring to extinguished offer can revive it.

ANALYSIS: Was the counter offer a rejection of initial offer? YES

 Inquiries do not extinguish offer, but changes to material terms (i.e. price) do. Offeree becomes
Offeror in counteroffer.
 Court held reference to initial offer (“Cannot reduce price”) revived it.

II. Revocation
Dickinson v Dodds (1876)
FACTS: D offered to sell house to P. Available until 9am Friday. Thursday night, P hears D sold house to
someone else. Gave letter of acceptance to MIL of D that night, and both P and P’s lawyer gave letters of
acceptance to D the next morning. Told, too late, house sold.

RULE: An Offeree must have knowledge of revocation, but explicit communication is not required.

ANALYSIS: Does Offeror have to communicate revocation of offer before selling to another? NO, but
risky.

 Revocation occurred when P learned of sale to another. – Impossibility of K formation in his

mind. Revocation did not need to be explicitly communicated.
 D can make offer to another since possibility of revocation right up until moment before
acceptance.

III. Revocation of Unilateral Offer

Generally, unilateral offer can be revoked right up until before full performance.

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Errington v Errington and Woods [1952]
FACTS: Promise of title transfer if P pays mortgage in full. FIL (Offeror) dies, estate does not want to
transfer. Mortgage payments regularly made, but mortgage not paid yet in full.

RULE: BROAD – Road to York. No revocation during discrete steps of segmented performance. NARROW
– No revocation once an equitable property interest emerges (property law, not contracts).

ANALYSIS: Can a unilateral be revoked after part performance? NO

 Denning ruled unilateral since P not bound to make payments. – Can be revoked at any time?
 Adds another principle – “on the road to York”. As long as performance is ongoing, offer held to
be valid. As long as they make payments, offer has to stand.
 Possibly also because payment of mortgage gives rise to a property interest. D benefits of the
part performance.

FOR ROAD TO YORK NEED: (1) PART PERFORMANCE (2) OTHER SIDE BENEFITS.

IV. Lapse of Time

An offer can’t be open indefinitely, so every offer has a time limit.

Time limit is binding on Offeree, not Offeror.

Barrick v Clark [1950]

FACTS: D sent offer to P to buy D’s farmland. P away, wife send notice asking D to hold deal open. D sent
acceptance immediately upon return, then hears P sold land to someone else. Sends telegram asking if
this is true.

RULE: Reasonable time limit on offer is determined by (1) conduct and language of the parties (2)
nature of the goods (3) other reasonable indications (parameters of deal)

ANALYSIS: Did time limit on offer elapse? YES

 Unlike in Dodds, acceptance sent before revocation occurred.

o BUT wife not agent of P, even so cannot change terms of time limit.
 No explicit time limit so look to other factors.
o LANGUAGE: Any implied urgency from parties? (i.e. as soon as possible, etc.)
o SUBJECT MATTER: Does product has price fluctuations?
 If large flux, short window, if little to no flux, longer window.
o PARAMETERS: does context of deal impose external time limits where one might need
to close by a certain time?
 In this case, P waited too close to date where deed needed to be transferred by – time limit had
elapsed.

B. Certainty of Terms
1. Incomplete Terms
To be enforceable, parties must have agreed on all the essential terms.

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Law of certainty of terms: Agreement may suffer from:

1. INCOMPLETNESS
2. AGREEMENT TO AGREE
3. VAGUENESS

May and Butcher Ltd. v The King [1934]

FACTS: Gov’t disposal of tents post WWI. Deal to sell surplus. 2 Previous contracts to do this worked.
Deal says price determined “from time to time” – Uncertain material term. P paid a deposit.

RULE: Cannot salvage a deal if there is uncertainty at the heart of it. Agreement to agree is
UNENFORCEABLE.

ANALYSIS: Were the terms sufficiently defined to constitute a legal binding K? NO

 Intent to form K, but not done correctly. – Court will not fill in the gaps.

P Argues (court rules): (1) Default price should be reasonable price (no default of reasonable price). (2)
Arbitration could provide assistance (Arbitration works within K, does not initiate it). (3) There was
consideration in deposit (No K right to an opportunity based on a deposit.

Hillas and Co. Ltd. v Arcos Ltd. [1932]

FACTS: Timber deliveries over time. Intention to enter K for upcoming season. Option to purchase
100,000 units: price, quality, delivery all tbd. BUT, price pegged at 5% below price list, “fair specification”
delivery during 1931

RULE: An agreement that has workable mechanism for determining price will not fail on
incompleteness. Courts can intervene to determine terms through context and intentionality.

ANALYSIS: Was the term negotiating the future sale a condition of the contract? YES

 Price: Tied to annual price list (external, objective method – the ‘machinery’)
 Quality: Worked previously to do this. Could use expert or arbitration.
 Delivery: Sale of Goods Act can be used to det reasonable standard. – Normal to need flex.

Foley v Classique Coaches Ltd. [1943]

FACTS: P owned small gas station. Sold some land to bus company. Condition of sale was $ + that D must
buy all gas from P’s station. Unspecified price, indefinite time. K operated for 3 years – D wants out
without giving up land. There was an arbitration clause.

RULE: When conduct indicates the parties have been acting on a valid contract, an arbitration clause can
be a means to determine the price in the future. – Part performance key here.

ANALYSIS: Does fact of no stated price mean that contract was void for uncertainty? NO

 Part performance is key – operated for 3 years – so arbitration must assist.

 D must stay in deal and reconcile uncertain terms.

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2. Agreement to Negotiate
Agreement to negotiate even less certain than agreement to agree.

Walford v Miles
In notes but not on syllabus.

RULE: Duty to negotiate in good faith incongruent with adversarial system where each pursues his own
individual interests – Not objective.

What would breach look like? What would remedy look like?

Wellington City Council v Body Corporate 51702 (Wellington) [2002]

FACTS: D leases floors in building to P. Commit to negotiate in good faith on purchase. Arguably
breached when officials did not show up to neg. Trial judge awarded damages based on parties showing
up and agreeing to sell at price X. – Looks like courts writing Ks. Appealed.

RULE: Duty to negotiate is ‘illusory’ – Affirmation of classical approach.

ANALYSIS: Could the trial judge award damages based on breaking commitment to neg in GF? NO

 Affirmation of classical approach. Agreement to negotiate more uncertain than agreement to

agree.

Empress Towers Ltd. v Bank of Nova Scotia (1990)

FACTS: Renewal of bank’s commercial lease. 5-year lease, commitment by both parties to try and find 5-
year renewal. Tied to market rate AND both parties agreeing. Bank proposes price based on appraisal. D
says that plus lump sum payment, plus change from 5-year lease to month to month lease.

RULE: An expressed or implied commitment to negotiate in good faith is enforceable when (1) it is a
renewal, (2) there is some objective benchmark.

ANALYSIS: Was the clause void for uncertainty? NO

 Objective standard (market rate) indicates GF. Must show you are honestly working towards a
deal.

Distinguishing formula and mechanism:

Formula: spelled out term (i.e. market value)

Mechanism: means of finding (how do we get to a number?)

 Formula was market rate (objective), mechanism was agreement by parties (subjective)
o If not subjective standard, court could find right to renew. Bank has no right to renewal.
 BUT because of agreement to neg in GF breached by D, court determined machinery to impose
new renewal.

Mannparr Enterprises Ltd. v Canada (1999)

FACTS: Construction and remedial work on aboriginal land. Right to renew permit subject to satisfaction
of performance and renegotiation of rate.

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RULE: In cases of renewal: (1) Unworkable without objective benchmark, (2) Objective benchmark
cannot be implied in light of Crown’s fiduciary obligation.

ANALYSIS: Was renewal clause void for uncertainty? YES

 Unlike Empress: (1) no objective benchmark, (2) Gov’t has fiduciary duty to put band interest at
forefront, so could never bind themselves in this way, so no unspoken objective benchmark.

3. Modern Developments
Use in exam as a “just so you know”, appellant level more authoritative. – This is just a BC ruling.

* Will need this on exam *

0856464 v Timberwest Forest Corp. – BCSC

FACTS: Express renegotiation in GF without objective benchmark. D wanted to restructure – not renew.
P gave reasonable numbers but denied.

RULE: Commitment to GF implies honest performance, thus no benchmark needed, and can result in a
reasonable price default.

ANALYSIS: Can commitment to neg. renewal be enforceable without an objective benchmark? YES???

 Judge extracts commitment to honest performance from GF.

o So honest performance doing work, not objective benchmark.
 Coupled with honest performance, GF neg can automatically produce reasonable price default.

C. Conditional Agreements
1. Condition Precedent to Existence of Performance
3 types of condition precedent:

1. Purely subjective – NON-BINDING. Like agreement to agree (ex. I’ll buy if I like, subject to
unfettered discretion. These can be unilaterally waived, because not a true K.
2. Objective – BINDING. Purely external condition (ex. market price). Cannot be unilaterally
waived. Equally binding on buyer and seller.
3. Subjective/Objective – IT DEPENDS. Involves some subjective effort and external decision
making (ex. agree to purchase price subject to subdivision approval. As per Dynamic.)
a. Business efficacy requires these.
b. Use officious bystander to assign roles
c. Standard is best efforts or GF.

**Wiebe v Bobsien [1985]

Typically a pivotal case for exams. (along with Carbolic)

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FACTS: Home purchase dependant on sale of purchaser’s home (IF preconditions – sale, THEN deal).
Seller changes mind (no longer wants to sell at that price), purchaser ignores revocation and removes
precondition.

RULE: DISSENT – If condition precedent is NON-BINDING, simply outstanding offer, NOT a contractual
agreement.

ANALYSIS: Was there a binding condition precedent? – Trial court says YES, SCC dissent, NO (FOLLOW
DISSENT).

Trial Court:

 Contract to sell subject to purchaser selling his current home; cond. prec. is BINDING
o Purchaser won, seller could not rescind offer. Offer was suspended until cond. prec.
met.

SCC Dissent (Lambert) – prof follows this:

 Condition precedent was purely subjective.

o Would he be a breach to refuse a price in selling his own home? – NO nobody can tell
him what to sell for.
 Therefore, purely subjective – not an external decision, but discretionary. NON-
BINDING

2. Parties’ Obligations
Dynamic Transport Ltd. v O.K. Detailing Ltd. (1978)
FACTS: Purchase of home subject to subdivision approval. Cond. prec. not met, buyer still wants in.
Agreement silent on who is responsibility to seek approval. Seeking specific performance.

RULE: Ex. of SUBJECTIVE/OBJECTIVE binding. Must use best efforts/good faith.

ANALYSIS: Is sale agreement enforceable? – YES

 Business efficacy requires this kind of deal to work.

 Seller trying to get out of deal by not seeking approval.
 Officious bystander determines who should have responsibility to seek approval - SELLER

3. Unilateral Waiver
Turnery v Zhilka [1959]
FACTS: D agreed to buy property subject to annexation from village to secure subdivision. D realized this
would be difficult, so ‘waived’ the annexation condition. P refused to go through with sale, D sued for
specific performance.

RULE: Condition precedent can be unilaterally waived when: (1) for their sole benefit (2) it is a severable
condition (3) it is not subject to a 3rd party whim. – Applies to subjective conditions precedent – True
(binding) condition precedent cannot be unilaterally waived.

ANALYSIS: Can the D unilaterally waive the cond. prec? – NO (but sometimes yes.)

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  A party may waive a right under a contract, provided it is for their sole benefit.
o But here, the obligations under the contract depend on the outcome of an external
uncertain event, which depends entirely on the will of a 3 rd party. – TRUE CONDITION
PRECEDENT SO BINDING.

Barnett v Harrison [1976]

FACTS: Sale conditional on board approval. Failed 15 times to get approval. P wants to waive cond prec.

RULE: Turnery affirmed. Condition precedent cannot be unilaterally waived when it would give one
party a free option (like stock option).

ANALYSIS: Majority, if waiver permitted;

 Would be rewriting K.
 P would be given an option without consideration.
 No greater injustice to P, legitimate interest in D in predictability.
 Rule in Turney is well-established.

D. Enforceability of Promises
1. Promises under seal
Promises under seal do not require consideration and are enforceable. (Not very common)

2. Intention to create legal relations

Did parties intend to create legal relations? Did the anticipate a public resolution?

Balfour v Balfour, [1919]

FACTS: Husband promises allowance to wife, then they sperate.

RULE: In a domestic setting, there is a presumption of no intention to create legal relations.

ANALYSIS: Was the offer legally binding? NO

A bargain emanating out of marriage is not binding because:

(i) Parties would never anticipate court involvement.

(ii) Courts would never intrude.

3. Consideration
Consideration is a promise which directs something of value – Not Necessarily a straight exchange,
either a benefit or some detriment.

Currie v Misa
RULE: Consideration is concerned with “Sufficiency, not Adequacy”

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Brantford General Hospital Foundation v Marquis Estate (2003)
FACTS: Couple with long history of donations. Husband dies and had hospital named after him. Wife
pledge 1 mil in installments. She dies after paying 1 instalment. Executors refused to pay rest. Hospital
claimed not just pledge, but exchange (naming for donation).

RULE: For something to be consideration, there must be an “if” statement/some sort of exchange, not
just the presence of two gifts.

ANALYSIS: Is a pledge document enforceable in law? NO

(i) Gift Promised

(ii) Naming promised

(i) was never tied to (ii) – No IF statement.

a. Past Consideration
Lampleigh v Brathwait (1615)
FACTS: D kills man then send P to seek a pardon from the King. After P returns, D promises to pay him.

RULE: Past consideration can be binding if all elements were present and the court can reorder them.

ANALYSIS: Cana promise to pay after a request has been fulfilled be binding? YES

 Proper ordering of elements should not defeat claim.

o Was done at promisor’s request
o Parties would understand expectation of reward.
o Promise would be enforceable if made in advance
 All elements present, just bad order.

b. Forbearance
“I won’t do X if you give me Y.”

Hamer v Sidway (1891)

FACTS: Uncle offers Nephew reward for clean living (giving up alcohol, gambling, etc.). Uncle
acknowledges the debt. Estate resists paying after death of Uncle.

RULE: Forbearance can count as consideration and can include maintaining the status quo.

ANALYSIS: Was a contract formed? Was there consideration? YES

 Unilateral contract – binding by performance.

 Consideration is usually something new done
o But MAY DIRECT SOMEONE not TO DO SOMETHING.
 This can include maintaining the status quo (how legal settlements work).

c. Pre-existing legal obligation

(i) Duty Owed to Promisor
Stilk v Myrick (1809)
SEMINAL CONTRACT VARIATION CASE

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FACTS: K for wages while working at sea. Gets difficult, some crew leave. Captain agrees to pay more to
remaining crew to no desert.

RULE: Performance of pre-existing duty is not sufficient consideration for a K variation. Need FRESH
CONSIDERATION.

ANALYSIS: Was there sufficient consideration for K variation? NO

 Crew did not have fresh consideration, so K variation not binding.

 Even the wage increase offered voluntarily, unenforceable since no consideration.

Gilbert Steel Ltd v University Construction Ltd. (1976)

FACTS: Multiple attempts to raise price in steel contract. K1 ends, endorse K2 with higher price (goof
because formal), Tries to do K3, but not endorsed.

RULE: Stilk upheld – Contract variation requires fresh consideration.

ANALYSIS: Is K3 binding? NO

 No fresh consideration on K3, same amount of steel.

Williams v Roffey Bros. & Nicholls (Contractors) Ltd. (1990)

SEMINAL RELAXATION OF CLASSICAL POSITION ON CONSIDERATION

*** Followed in UK, but only CONSIDERED in Canada.***

FACTS: Subcontractor (P) struggling, behind on performance (K price too low & poor management).
Main Contractor (D) has a penalty is P is too slow. D offers more money to try and speed up. P providing
same physical performance already promised.

RULE: Consideration in K variation can be found in a practical benefit, so long as not under economic
duress.

ANALYSIS: Is the contract variation binding? YES?

 Stilk intended to present economic duress.

 Consideration can be found in practical benefit to D (avoid penalty)
o So long as not under economic duress.
 In this case, the more powerful party approached weaker party, not vice versa,
so no coercion.
 (But isn’t there always a practical benefit to avoiding a breach???)

Greater Fredericton Airport Authority Inc. v NAV Canada (2008)

FACTS: Airport construction project. NAV refuses to proceed unless equipment costs covered by GFAA.
GFAA agrees under protest.

RULE: Consideration in a K variation can be found if variation made WITHOUT ECONOMIC DURESS.

ANALYSIS: Sufficient consideration for K variation? NO ; Economic duress? YES

(i) Consideration is inherently malleable.

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 (ii) Built on Roffey Bros without needing consideration to be in form of “practical benefit”.
a. Binding variation in agreement without duress.
i. Duress here (protesting) so variation not binding.

Stilk could have applied here to reach same conclusion, so courts offering this voluntarily.

 Gives them two tools to resolve variation

o Stilk – Variation requires fresh consideration
o NAV Canada – Variation binding if not made under duress.

Majority of Canada (including Alberta) follow Stilk, not NAV Canada. – BUT momentum is clearly on
the side of NAV Canada.

(ii) Accord and Satisfaction

Promises to accept less for the purposes of winding up a deal.

Foakes v Beer (1884)

NOT USED MUCH ANYMORE, BUT SHOULD KNOW

FACTS: Agreement in writing for forbearance on collecting debt – more time to pay.

RULE: Payment of lesser sum in satisfaction of whole cannot constitute consideration.

ANALYSIS: Suspension of enforcement binding? NO

 Follows classical (Stilk) approach to consideration. Need fresh consideration.

Re Selectmove Ltd. [1995]

RULE: Practical benefit to accepting a lesser amount in payment of debt is not sufficient consideration
for a binding K.

(iii) Statute
Judicature Act – 2000
Part performance of an obligation shall extinguish the obligation:

1. When expressly accepted in satisfaction.

a. Winding up the deal – Accord and satisfaction.
2. When rendered for that purpose without any new consideration.

(iv) Recent Developments

Rosas v Tosca (2018)
FACTS: Lottery winner informally lends money to friend. Implied 1 year term with no interest. Repeated
requests to “pay next year” accepted. Friendship sours. When claim brought, past statutory limitation
period.

RULE: Application of NAV Canada. Limitation period reset at each K variation.

ANALYSIS: Hard case because D would gain huge windfall due to inability to repay and would benefit
from their lack of consideration. Harshness seems to be from limitation period. Stilk would say they can

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get their money back (lacking consideration). NAV Canada would say each variation was binding.
Therefore, clock on limitation period resets each time extension given.

d. Promissory Estoppel
PE is the prevention of a reversion to earlier K terms after a variation when it would be unfair to do so.

 “I later said X, but let’s revert back to the written document.”

Hughes v Metropolitan Railway Co. (1877)

FACTS: K1 says repair obligation on railway tenant – 6 months. During that 6-month period, failed
negotiation to buy out. Tenant initiates repairs close to end of 6-month period, not done in time.

RULE: When 1 party leads the other to believe the strict rules will not be insisted upon, those terms will
not be enforceable when inequitable to do so.

ANALYSIS: Was there a K variation that should be upheld by PE? YES

 Landlord did not expressly accept neg offer but gave an implied waiver to the time limit
enforcement by engaging in negs.

Central London Property Trust Ltd. v High Trees House Ltd. [1947]
*** Centrepiece case on promissory estoppel. Very important. ***

FACTS: Lease rate lowered for block of flats given altered rental demand in onset of WWII (on 90-year
lease). A changed rate, without consideration. Promise to accept less rent. War ends, want to raise price
and charge retroactively.

RULE: PE will maintain a K variation until (1) The implied reasons for the relief end AND/OR (2) When it
would no longer be inequitable to return to the original K terms.

ANALYSIS: How long will equity protect the variation? The entire 90 year lease period? Until the end of
the war?

 A gratuitous promise can spark another’s reliance, which equity will protect if reversion would
be inequitable.

(i) Promise
Waiver = willingness to forgo or accept less.

 Usually after a breach. “You were late with payment, but that’s ok”

Promise = A change to future terms.

 More likely prospective and prior to a breach. “I agree to accept less payment next month.”

John Burrows Ltd v Subsurface Surveys Ltd. (1968)

FACTS: Instalment payments owes. Acceleration available to creditor in event of late payment. Multiple
repeated payments, but acceleration not exercised (Multiple breaches). Personal disagreement between
friendly parties, acceleration clause triggered, whole debt claimed.

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RULE: For PE to be available as a defence, it must be a promise or assurance intended to alter the legal
relations between the two parties.

ANALYSIS: Some course of neg must have led one party to suppose clause would not be enforced.

 It must be shown that D intended to alter legal relations under K.

o It is not enough that one has taken advantage of friendly indulgences.
 Otherwise these would always result in waiver, and parties would not be keen
to give them.

(ii) Equities
D & C Builders Ltd. v Rees [1966]
FACTS: Small construction firm does work for a hardware store. Firm needs payment. Store says they will
only pay part of debt (knowing that the small firm was in financial trouble. Firm sues for remaining debt.

RULE: PE will not protect from a reversion where (1) the K variation was made under economic duress,
and (2) It would not be inequitable to return to the original K terms.

ANALYSIS: P succeeds at trial on basis of Foakes v Beer. (Payment of lesser sum cannot constitute cons
for payment of the whole.

 Denning reiterates equitable exception to common law & consideration requirement for
promises to accept less (also note the Judicature Act).
o No true accord (made under duress)
o Not inequitable to return to the original K terms
 When not inequitable, will revert.
 In terms of Judicature Act – perhaps can interpret act as requiring accord.
 No radical change to NAV Canada – just fills out the picture more.

(iii) Notice
Saskatchewan River Bungalows v Maritime Life Assurance Co. [1994]
FACTS: Insurance policy grants 31-day grace period to pay for continuation of policy. Otherwise
reinstatement requires proof of health insurability. P has irregular payment history. But pattern of
missed payments and policy continuance. Nov letter – Policy out of force, but if you pay now, will
continue coverage. Feb letter – Out of force, need to reapply. Letters not received/opened until April.
Payment arrears sent in July.

RULE: Reliance on a waiver must be a true reliance and must be acted upon within a reasonable time.

ANALYSIS: Since Nov letter is waiver, did attempted payment occur while waiver still operated? NO

 While waiver operated was it equitable to revert back for P?

 Was reliance on waiver within a reasonable time post-revocation?
 While waiver still operated
o P knew of waiver for about 5 seconds before opening second letter.
 No true reliance.

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 o Even so, reasonable time would have started with second letter and run out well before
July.

Int’l Knitwear Architects Inc. v Kabob Investments Ltd. (1995)

FACTS: Commercial tenant doesn’t pay on Dec 1. Dec 13, LL distrained. Dec 24, LL claimed for remainder
+ interest, & full rent Jan 1 onward.

RULE: PE protects against a return to original K terms up until a reasonable amount of time after notice
given. In this case, 1 month (rent paid monthly).

ANALYSIS: LL entitles to give reasonable notice to return to the original terms. This need not be express
but can be implied with stated desire for a return to the original terms.

 Dec 24 = time of notice given & therefore effective return to original K terms becomes Feb 1.

(iv) Reliance
WJ Alan & Co v El Nasr Export & Import [1972]
FACTS: Deal for sale of coffee. Question of currency. On face of K – Kenyan shillings (pegged to Pound
sterling, on par). Buyer arranges letter of credit at bank in Pounds Sterling (contrary to K). Seller does not
object & receives first payment in Pounds Sterling. Sterling devalued. Seller issues another invoice in
Sterling. Sends additional invoice for discrepancy between Sterling and Kenyan.

RULE: When a party conducts their affairs on the basis of waiver, it is inequitable to return to the
original K.

ANALYSIS: K variation is payment currency.

 Change introduced by buyer without neg. Seller is claimed to have waived R.

 Problem is reliance.
o Buyer can’t be said to have relied on waiver, since it only set up the bank account and
took no further steps afterwards.
 Denning: Not K variation, but waiver
o So detrimental reliance not required under equity, simply that it was acted upon.
 Partly conducted their affairs on the basis of waiver and would inequitable to
return to original K terms.
o CRITICISM: Seems to set the standard of “acting upon” very low.
 Can anything now be captured?

The Post Chaser (Société Italo-Belgian v Palm and Vegetable Oils [1982])
FACTS: Deal for delivery of palm oil, through chain of purchasers. Term saying must deliver shipping
documents ASAP after shipping. Ship at sea over a month before docs are delivered. Middle-man has R
of refusal, but allows them to deliver docs anyways (waiver). BUT next purchasers in chain not ok with
breach, so middle-man wants to take back waiver,

RULE: For PE to protect, detrimental reliance not required, but some prejudice to the position of
promisee.

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ANALYSIS: The sellers “acted upon” the waiver by submitting the documents. So conducted their affairs
on basis of the waiver. According to El Nasr this should make waiver binding?

 Court notes, ship sailing, but no new expense involved because of the waiver.
 Returns to basic element of an inequitable return.
o Approach doesn’t endorse Denning or the detriment approach – sort of a hybrid.
 Detrimental reliance not required, but some prejudice to the position of the
promisee should be found.
 Detrimental reliance is consideration to what the promise did in
response.
 Prejudice is what they suffer if waiver is taken away.
o No change in short-term knowledge while ship continued – So no prejudice.

(v) “Sword” or “Shield”?

Normally Promissory Estoppel can only be used by a defendant – can be used a shield, not a sword.
However, equity should not be ruled out just on technical grounds.

Robichaud v Caisse Populaire de Pokemouche Ltée (1990)

FACTS: Bank agrees to settle and erase debt in exchange for lesser payments. Bank reneges. Client sues
bank to hold them to accord and satisfaction.

RULE: PE can be used to bring an action where the cause is purely defensive in nature.

ANALYSIS: CAUTION – Judicature Act in AB would make this case non-existent.

 Trail court follows historical approach (unenforceable because no consideration).

 Normally a plaintiff can’t rely on PE because it is a shield, not a sword and P is suing to pay less
(seeking protection by PE).
o PE and traditional equity favours a promise to pay less…
 Court says: Were it a contract variation, debtor would have succeeded under PE.
Though technically brought on by plaintiff, cause is purely defensive in nature,
and a finding for the P would keep with the equitable spirit of PE.

Combe v Combe [1951]

FACTS: Annual allowance payments to wife under divorce settlement are claimed after years of non-
payment. Because no consideration, K can not be found under CL, so ex-wife claims K formed under PE.
Contrasted with Balford because no longer married.

RULE: PE is a defence only. It cannot be used to form a K.

ANALYSIS: Payments found binding by trial judge – despite lack of consideration, parties intended them
to be binding and acted upon the terms (terms of PE).

 Overturned by Denning. Says you cannot have equity start a K, can only be a defence. Also
clarifies:
o (1) PE does not operate “de novo” – does not form a K. Ks must form through the CL.
o (2) Even if it could form the K, no inequitable to prevent wife (who is better off and
waited for so long) from coming down on husband for the whole.

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