Beruflich Dokumente
Kultur Dokumente
c) COMMERCIAL ARRANGEMENTS...............................................................51
Rose and Frank Co. v. J.R. Crompton and Bros. Ltd. 1923, K.B. CA.............................51
Toronto Dominion Bank v. Leigh Instruments Ltd. (Trustee of) Ont.CA, leave to appeal
refused (2000)............................................................................................................ 52
Simple negotiations, there is no intention yet to enter a contractto actually make an offer
(the person who makes the offer is the offeror), the offeror is prepared to enter the contract
once the offeree accepts so the power of acceptance is in the hand of the offeree.
There usually are terms with it (payment is due upon delivery, for ex.) there can only be an
offer if the offeree accepts those terms exactly the same way as they were offered by the
offeror. (mirror image rule)
If there is a change in the terms, we have a counter offerno acceptance. Then the only thing
on the table is the counter offer.
Invitation to treat is an invitation to start bargaining, this is not an offer.
The distinction between the offer and the invitation to treat is the willingness of the offeror to
be bound by the next communication of the offeree, as long as they have not withdrawn the
offer before the offeree accepts. The offeror can always withdraw the offer up until the point
the offeree accepts
the first prerequisite to contractual liability based on consent is that the parties must have
reached an agreement
1. communication of the offer
2. acceptance of the terms of the offer
3. (consideration) or communication of the acceptance (value? Usually monetary, doesnt
have to be though)
this is to assist in defining the moment of responsibility rather than a priori statements to
be blindly applied in a broad variety of circumstances
meeting of the minds or consensus ad idem - contract made on the terms and
conditions that were agreed upon.
Canadian Dyers
Assn. Ltd. v. Burton
(1920), H.C:
- D requested lowest price
from B who offered $1,650
- B said willing to accept
$1650 for them only
(stresses this point)
- D sent cheque and B
received though not
deposited.
- B drew up draft deed
- B then claimed no K
Issues/Holding
- Had a contract been made
out?
- the conduct of B indicates
that there was a contract
Reasoning/Ratio
- The mere quotation of the price does
not constitute an offer to sell
- No contract unless there is offer to sell
and acceptance of that offer
- there was intention of an offer since said
willing to accept $1650, and the fact that
they went on to draft a deed, those are all
actions that they knew they made an offer
- a party must intend for it to be an offer.
- whether or not theres an offer (or
intention) will depend on the language
used and the circumstances of a
particular case...courts can also look at
subsequent actions of the parties.
Pharmaceutical
Society of GB v.
Boots Cash Chemists
(1953), C.A:
- self service drug store,
place in basket
- pharmacist is to make the
decision if customer can
buy.
- pharmaceutical company
thought she was not in
compliance with the
legislation because
customers allowed to come
into store put it in shopping
cart and thats when offer is
completed.
- seen as not an offer,
plaintiff appealed, appeal
dismissed
Case/Facts
Issue/Holding
Reasoning/Ratio
Notes
Goldthorpe v
Logan (1943)
C.A.
- Logan guaranteed
hair removal, in an
advertisement,
Goldthorpe received
the treatment, but it
failed.
- Was there a
contract between
Goldthorpe and
Logan?
-
Yes.
- A unilateral contract
provides a technique which
ensures the enforcement of
promises made to the world (or
public) at large.
- consideration
was the
detriment and
inconvenience
sustained by the
plaintiff
- did not suggest any
exemptions
(Ontario has Consumer
Protection Program)
Invitation to Bid
Case/Facts
Issue/Holding
Reasoning/Ratio
Notes
Harvela
Investments
Ltd. V Royal
Trust Co. of
Canada (1986)
A.C
P competing to buy
shares from D, who
says he will accept
highest offer. P puts
highest offer.
Competitor puts in
referential bid says
he will go higher than
anyones highest
offer.
D accepts
competitors offer.
In an auction,
when the
auctioneer
yells sold, the
contract is
made! (or
when he
bangs gravel)
- When asking for highest bidder, Vender can use AUCTION or FIXED BIDDING at
auction, each bidder can adjust their bid in reference to rival bids (winner is who will pay more
then any other person is willing to pay)
o However, in fixed bidding, bidder may not adjust his bid. Each bidder specifies a
fixed amount which he hopes will be sufficient, but not more than sufficient, to
exceed any other bid
The purchaser in a fixed bidding does not necessarily pay as much as the
purchaser was prepared to pay to secure the property
Tendering
Tender documents are often numerous and there will big large books of tendering documents.
These tendering documents tell the people who are placing the tenders what they need to do.
In general it is Crown Corporation, municipal government, and generally government agencies
that place tender document ads in the paper.
They are the party that is most likely to issue public tenders because they want to be fair in
giving the entire public chance to submit the tenders.
The tendering system was put in place to ensure that the governments were fairly and equally
choosing companies without regard to politics.
Case/Facts
R v Ron
Engineering and
Construction
(1981)SCC
- D submits tender and
deposit, but forgot to
include significant costs.
Sent message requesting
to correct tender and
Issue/Holdi
ng
Reasoning/Ratio
Was contract
entitled to
withdraw its
tender and
recover its
deposit?
- Contract
or can
retract
tender, but
Notes
Ron
engineering
changed the
precedent on
the law of
tender
contracts!
-Deposit is the
consideration
to form a
8
not regain
deposit.
contract?
It forces you
into the next
contract,
contract B
lose deposit if
you do not end
up wanting to
do the job
Snaps into effect on the deadline for the call for tenders
This contract is enforceable at this time because the bidders have accepted the
owners offer for tenders
This means that all the bidders are actually in a binding contract with the owner
for a short period of time, essentially forming an implied unilateral contract.
The non-chosen bidders are released when contract B comes into force.
Contract B
This case is so important because it created this Contract A and Contract B rule
Up until this case courts generally allowed tenderers to make mistakes on good
faith
Which tenders cases raise this contract A and B rule? All government and quasi government and
all other private with this type of complexity to it will have to subscribe to contract A and B rule.
But simple tenders like getting someone to paint your house will not be subject to this rule.
Contract A: invitation to tender and submission of tender form a unilateral contract where the
terms and conditions are comprehensive and specific (limited to a large contracts@ that
have comprehensive and specific terms) The contract is formed immediately on submission
of the tender at the time and date specified. All bids submitted are bound by Contract A.
Contract B: After the tender period, those who were not accepted could follow certain
conditions and recover their deposit, something the contractor did not do. Those accepted
formed a new contract, the construction K to actually complete the terms of the accepted tender
(Contract B)
PROBLEM: what about the quality of the project?
- now that bidders have a contract (contract A) recourse may be taken if they are
not chosen when they were rightfully supposed to be chosen
- deposit is there to force you into the next step to enter into that construction
contract! If you breach and dont want to do the job anymore, you lose your deposit
(owner can then sue if they really want to to force the job to be done)
(The principle term of contract A is the irrevocability of the bid, and the corollary term is the
obligation of both parties to enter into a contract (contract B) upon the acceptance of the tender.
Other terms include the qualified obligations of the owner to accept the lowest tender, and the
degree of this obligation is controlled by the terms and
conditions established in the call for tenders)
9
Case/Facts
Issue/Holding
Reasoning/Ratio
Notes
10
MJB Enterprises v
Defense
Construction Ltd.
(1999) SCC
- Respondent invited
tenders, 4 received
including MJBs; Contract
awarded to Sorochan,
lowest tenderor, MJB second
lowest tenderor; Contract A
had privilege clause lowest
tender shall not necessarily
be accepted.
- Parties agree that:
Sorochans bid was not
compliant; Contract A/B
analysis from Ron
Engineering; respondent
accepts Sorochans bid in
good faith and their note as
clarification.
- MJB argues that Ss bid
should have been
disqualified
(Privilege Clause in tender
form saying lowest bid may
not be accepted.
- bid accepted was noncompliant
- MJB wants its tender
accepted, it was the next
lowest)
- Does the
respondents
inclusion of a
privilege clause in
the tender
document at issue
allow the
respondent to
disregard the
lowest bid, in
favour of any
other tender, even
a non-complaint
tender?
Crt holds no based
on presumed
intentions of the
parties and the
interpretation of
the documents.
(2) Was there an
implied term
which obligated
the respondent to
- Duty on party
accepting
tender offers
and those
submitting
tends to act
fairly.
-the
clarification
may be seen
as a
referential
bid and
therefore not
complaint.
The privilege clause does not imply that a tender could be accepted on the basis of some
undisclosed criterion simply gives discretion to take a more nuanced view of cost than the
prices quoted in the tenders
11
Ex, they may choose a certain company because they get the job done quicker,
resulting in more money made for owner
2. Communication of Offer
-
Consensus ad idem: Must be a meeting of the minds between offerer and offeree- some form of
acceptance, the offeree must know that offer is made, cant be assumed by the offeree.
to symbolize acceptance, offeree has to take steps communicated by offerer in order to show an
acceptance of the offer.
Must also be an intention to accept the offer!
Case/Facts
Issue/Ho
lding
Reasoning/Ratio
Notes
12
Was the
resolution
to give the
appellant
employee
at least two
years
salary upon
retirement,
an offer
accepted
upon valid
considerati
on?
HELD: No.
No
evidence of
promise or
offer
communica
ted to Blair.
No
evidence
Blair relied
upon
promise
did not
retire b/c of
it
Discretion
in Unilateral Contracts
Unilateral Contact can be a
tool that judges use to decide
what is and what is not a
contract.
Realistically the judge could
have decided that this was a
unilateral contract.
If her lawyer had instructed
her to say that she had retired
based on the money then she
may have won.
-When people pass a bare
resolution, unless it is
communicated to the person,
then it is simply a bare
resolution to do something,
not a promise, there was no
communication.
- courts generally
presume, based on
compliance with
conditions in the
offer, that the
person had the
intention to accept
the offerthis is not
always the case!
13
Williams v Carwardine
[1833] U.K.
Mary witnessed a murder (it
was her brother who
committed the murder);
Walters brother (the
deceased) offered a reward for
capture of arrest of people
involved in brothers murder;
Marys brother beats her up
and because she is afraid for
her life she gives the
information to police in order
to save herself;
She claims the reward should
be hers because she told, on
what she thought was her
death bead, who committed
the murder
Defendant does not want to
pay her.
Whether P
was
induced by
the reward,
if she
entitled to
recover it?
HELD:
YES
unilateral
contract.
Reasons
for coming
forward do
not matter,
she
performed
the action.
- It was
deemed
she had
knowledge
of offer, b/c
posters all
over the
town.
Rewards are
unilateral offers,
which become
contracts upon
successfully
performance.
A party may
satisfactorily fulfill
contractual
requirement without
being induced by the
promise or by acting
on a motivation
preferred by the
promisor.
Person is deemed to
know about the
reward
Knowingly perfoming
a condition of an
offer is acceptance
- she never said that she
didnt do it for the award
RATIO:
-the motive of an informer of
accepting a reward has
nothing to do with
recovering the reward under
the contract
- what is important is that
they must have knowledge
of the offer. i.e. the offer
must be communicated
14
R v Clark [1927]
Australia HC
ISSUE: was
there a
contract?
HELD: NO!
He does
not get the
reward. He
explicitly
stated
several
times that
the reward
had
nothing to
do with
him
coming
forward.
15
3. Acceptance
(A) Acceptance by Conduct
-
Questions:
- Are they accepting?
- Has the acceptance been communicated?
- Rejecting?
- Counter-offering?
Case/Facts
Livingstone v
Evans [1925] Alta
SC
Vendor wants to sell land
for $1,800; Buyer
counter-offers $1,600 and
asks what is your best
price; Vendor replies by
telegram: cannot reduce
price; arguably
reinstating the original
offer; buyer still wants
original price and accepts
the Vendors price.
The Vendor sells the land
to a third party
throughout all of this.
The Vendor argues that
the Buyers counter offer
made his (the vendors)
original over null and
void.
Buyer argues that it was
not a counter offer and
was an inquiry, still wants
the original price.
Issue/Hol
ding
ISSUE:
was Ps
counter
offer a
rejection
of Ds
offer?
Was there
a biding
offer?
HELD:
YES there
was a
binding
offer! For
P judge
says
cannot
reduce
price is
rejection
of
counteroffer, but
implies
reiteratio
n of
original
offer.
Reasoning/Ratio
Notes:
Making a
counter-offer
results in a
rejection of the
original offer.
The offeror is
the only person
who can revive
the original
offer.
Rejection of the
counter offer
nullifies the
original offer,
however,
If the rejection
includes a
renewel of the
original offer
then the right
to bind the
offeror remains
Forms
Issue/Hold
ing
Reasoning/Ratio
Issue: On
whos
terms was
the
contract
concluded?
Held:
Buyer
succeeded
on appeal
because
they
brought
attention
to the
material
change.
there
was a
battle of
the forms,
the buyers
countered
original
offer,
therefore
negating it
(Hyde v.
Wrench, in
Livingstone
supra)
note 2 International Convention- convention says rules related to contract: 1. Reply to offer that
seems like an acceptance that puts forth rules, additions, or limitations is a rejection of an offer, and
is a counter offer. 2. Reply to offer and with conditions that do not materially alter the terms is an
acceptance. 3. Alterations that deal with price, ect. Then there will be no contract.
- If you have a condition you want to prevail, you must reiterate it over and over again.
- (Lord Denning) USE WHEN IN FAVOUR OF THE SELLER! this is a tough type of case; the court
could of decided there was no contract, because there was no agreement on the terms and conditions.
He said that the buyer should have pointed out the increase-price clause because it was incompatible to
them
- Suggests that the traditional analysis is out of date- proposes new traditional, you should take the
terms and conditions
and put them together, if they can be reconciled, so be it, if they cannot be reconciled such that they
are mutually
contradicting, than the conflicting terms are to be scrapped and replaced by reasonable conditions
- Says documents should be considered as a whole
- His view was not accepted by the panel nor by current Canadian courts
Case/Facts Battle of
Issue/Holding
Reasoning/Ratio
Notes:
ISSUE: is the P
(seller) bound to
arbitration clause
even if they did not
acknowledge it?
BATTLE
OF THE
FORMS
case
(subsecti
on of
accepta
nce)
-used
similar
approac
h as lord
denning)
CANADIAN EXAMPLE
Tywood Industries
LTD. v St. AnneNackawic Pulp &
Paper Co. LTD.
[1979] Ont HC
Battle of Forms #2
Sellers (p) send bid which
contain no arbitration
clause. Buyers send back
form, with Arb. Clause (did
not draw attention to this
change). Sellers do not sign
form or return it, but deliver
goods.
Help to understand case:
T = Vendor, SA = Buyer
SA invitation to tender =
RFQ (contained 13 terms
without arbitration clause).
HELD:
no
arbitration clause.
Not binding- not
pointed
by
defendant.
Last
blow wins
T: PO not signed, no
acknowledgment
of
SAs terms. PO was
void b/c it was never
sent back. T terms
prevail.
18
- because it so often happens that two documents do not coincide, the rule is that the major terms
must comply. This is in recognition that often times, contracts are not mirror images of each other.
- If there are unique terms in the contract, you must draw attention to them to the other
party. Arbitration clause should have been brought to the attention of the seller.
E-Commerce
Case/Facts
ProCD v Matthew
Zeidenberg and
Silken Mountain
Web Services, INC.
[1996] US C.A
Short FACTS: E
Commerce Shrink-wrap
Issue/Hold
ing
Issue: Is a
shrink-wrap
license a
valid
binding
contract?
HELD: for
ProCd(appe
llant)
- can put
terms
inside box,
as long as
the product
can be
returned.
Reasoning/Ratio
Arguments:
Plaintiff argues that copying the application program onto its
hard disk violates the copyright laws
Defendant argues that there must be printed terms on the
outside of a box for a contract to stand, he says he is not
bound by the traditional conception of contract law.
Says that contract was complete at cash register and that the
license happened after the contract and therefore are invalid.
Reasons:
Looking at the fact that terms and conditions can apply
afterwards.
For instance with a plane ticket, or a movie ticket there is a
notice that there are terms and conditions you must abide
by, so we are DEEMED to know that terms and conditions
exist and we should look into them.
Judge says that in Ecommerce we are DEEMED to know that
terms and conditions will be in the box, and that we must
agree to the terms and conditions and if we do not than we
can return the items.
We need to extend the traditional concept of contracts to
apply to E-Commerce, the contract does not end at the cash
register it ends when the individual accepts the terms and
conditions on the computer.
Consumer goods work the same way as something like a
warrantee.
Someone who wants to buy something pays and walks out
with a box
Inside the box is a leaflet contains some terms and the most
important of which usually is the warranty, read for the first
time in the comfort of home (not on the outside for the box)
By the defendants arguments, the warranty in the box is
irrelevant; in reality, however, every consumer gets the
standard warranty implied by the UCC in the event the
contact is silent
Unified Contract Code (American law) s.2-204(1): a contract
for sale of goods may be made in any manner sufficient to
show agreement including conduct by both parties which
recognized the existence of such a contract (equivalent to
sale of goods act Canada)
ProCd proposed a contract that a buyer would accept by
using the software after having an opportunity to read the
licence at leisure. So although the district judge was right to
19
Licenses
- Zeid. Bought ProCDs
product and formed
company.
- Z argues the terms
forbidding resale of the
product are inside the box,
and therefore constitute
adding terms after K
formed. Won at trial
say that contract can be, and often is, formed simply by
paying the price and walking out of the store, the UCC
permits contracts to be formed in other ways.
ProCd proposed such a different way and without protest the
defendant accepted.
- S.2-606 UCC, which defines, acceptance of goods,
reinforces this understanding. A buyer accepts goods under
s.2-606(10)(b) when after an opportunity to inspect, he fails to
make an effect rejection (the opportunity to return goods van
be importance; acceptance of an offer differs form acceptance
of goods after delivery)
RATIO:
- Offerer may invite acceptance by conduct and may
propose limitations on the kind of conduct that
constitutes acceptance. The offeree may accept by
performing acts that the offerer proposes to treat as
acceptance
- Computer software Shrink Rap terms and conditions
are acceptable i.e. In modern contract the seller may
sell a product that incorporates terms and conditions
not immediately visible but which the buyer accepts by
conduct
. Buyer can prevent the contract by returning the
product
NOTES:
Shows how the court extends the rules of traditional contract law to E
Commerce situation
American case, but suggests what would happen in Canada as well.
(B) Silence
D doesnt reply
HELD:
there were
obligations
on both
sides
bilateral K.
- Heli. has
obligation
to Dawson
- no
abandonme
nt of
contract,
no
revocation
of Ss
unilateral
offer.
NOTES: Important Case because Court made an incremental change to the law, the law of
contracts evolved.
IMPLIED ACCEPTANCE introduced [contracts no longer limited to] CLEAR AND
UNEQUIVOCAL ACCEPTANCE
Issues
Remedy
Sought
Argumen
ts
Plantiff argues that he had a contract with his nephew for the horse, thus he had property
title in it.
Defendant argues that the defendant did not vest a property title in the horse at the time
of the sale.
21
Holding
Reasons
The contract was completed after the sale of the horse when the nephew wrote a letter to
Felthouse apologizing for selling the horse.
NO CONTRACT! Nephew never accepted offer.
The uncle did not have a right to the horse; there was no contractnephew did not accept
the new price fo the horse
There was no meeting of the minds on the price;
Nephews silence does not constitute acceptance of uncles price.
Despite intentions there was no valid contract because he didnt communicate his
acceptance of what can be considered a counter offer
We need something more than a failure to reject an offer to constitute acceptance.
Offeror cannot stipulate that silence is binding acceptance
So, defendant sold nephews horse, not uncles.
Ratio/
Rule
Comment
s
St. John tug boat co. v Irving refinery ltd. (1964) SCC
Procedural History
At trial they find for Saint John and they award them damages
Irving Appeals and at the Court of Appeal the judge subtracted the handling charge and reduced
the amount that Irving had to pay Saint John.
They then appealed to the Supreme Court of Canada (and LOST AGAIN)
Facts
Saint John had an agreement to supply Irving with Tug Boats
Irving needed the Tug Boats to guide in the Kent Lines boats (subsidiary of Irving)
There was an agreement between Saint John and Irving to provide stand by on a daily basis for
$450/ day and when Irving doesnt need Saint John they are free to do other work and then
deduct their profits (but charge 10% handling charge) from the costs invoiced to Irving.
The agreement was initially one month and then extend to the middle of august.
No problem with paying invoices until august when Irving gets a new President.
Silence between August 15th and the end of February (boats are still standing by, and invoices
are being sent to Irving, but Irving is not paying.
Irving does not want to pay for the extra standby boat because they argue there was no
acceptance of this contract for the boats to continue. (The courts didnt accept this argument)
Issues
Did the Irving Refineries conduct during the months in question constitute a continuing
acceptance of these offers as to give rise of a binding contract to pay for the standby services of
the tug at the rate specified in the invoices
?
Arguments
Appellant argues that there was a contract
Respondent argues they did not communicate acceptance.
Holding
22
Irvings conduct showed they accepted renewal of contract after the elapsed date. There was a
contract.
Reasons
The test of whether conduct, unaccompanied by any verbal or written undertaking, can
constitute an acceptance of an offer so as to bind the acceptor to the fulfillment of the contract:
If A allows B to work for him under such circumstances that no reasonable man would suppose
that B meant to do the work for nothing. A will be liable to pay for it. The doing of the work is the
offer, the permission to do it, or the acquiescence in its being done, constitutes the acceptance.
Neither the absence of an express agreement nor the fact that the respondent did not consider
itself liable to pay for the stand-by service can however, be treated as determined the issue
raised y this appeal
The respondent must have known that the boats were being kept standing by for its use and
the respondent made no effort to either dispense with the service or complain about the charge
Respondent must have been known the boats were on standby.
And the Irving acquiesces which means their conduct overrides their silence.
The act of the tugboat services remaining on standby for the oil boats was the offer
(this act)acceptance was them saying nothing, knowing they are there waiting for
them, and doing nothing about it, and not disputing the invoice right away!
Respondents conduct was sufficient of acceptance and trial judges decision was restored! There
was a contract
Ratio/ Rule
Builds on Felthouse case and the ratio of silence. Sets out that although silence cannot
be acceptance, silence with conduct can be acceptance.
(exception to the rule that silence does not constitute acceptance)
-Silence and conduct formed acceptance
-A way to GET AROUND THE FELTHOUSE V BINDLEY rule that says silence does not form
acceptance conduct of not complying is how this case is distinguished from a mere
conduct of silence
- SC case very authoritative!
H offered to buy Es flour and asked for acceptance in Harpers Ferry by return of wagon
E sent acceptance by mail to Georgetown, not by wagon
23
H acknowledged acceptance letter but withdrew offer. E never got withdrawal-delivered flour
The Defendents said that they did not receive an acceptance, and so they bought flower from
someone else, so they will not pay the Miller for his flower.
_______________
offeror wanted acceptance by return of wagon (because the offeror is the master of
the offer)
- day after received by defendant (h)write a letter accepting the offer, but sends it
to Georgetown (where the buyers were) by mail on feb 19, not by wagon.
- since he hadnt received response by wagon, he went to buy his flour elsewhere.
- sellers still send flour to buyer, and buyer refused to accept the flour, so sellers
bring an action for damages
Issues
Argumen
ts
did the sellers acceptance by the offer by mail as opposed to wagon mean that the buyer
was no longer obligated to purchase the flour?
The Miller is going to argue that the wagon was not going back to Harpers Ferry and the
Defendants knew that the Wagoner was not going to return to Harpers Ferry because the
Wagoner was an employee of the Miller.
Could argue that because they knew the wagon was not going back, what he did was not
unreasonable.
Also could have argued that the Offeror must make the act of accepting reasonable
The courts did not agree with these arguments.
Holding
Defendants argue that the Miller did not send the acceptance back.
acceptance was not sent by proper mode; no contract---buyer
not obligated
to buy.
The acceptance was received in a different place than what was specified by the Offeror, and
by the wrong method
The plaintiff should have taken the efforts to get the acceptance to Harpers Ferry
Ratio/
Rule
The offerer is the master of the offer and sets out the terms and conditions of that
offer which the offeree must accept on those terms and conditions made by the offerer and any
departures from those terms invalidates the offer unless such departure is agreed to by the
person who made the offer.
Commen
ts
24
Issues
Was there a contract despite the fact that defendant did not receive letter of allotment?
Decision
- YES! Acceptance effected when letter dropped in the mail. Acceptor concludes the
contract by posting the letter
Thesiger L.J: Majority: The contract is complete when the acceptance is put in the
mailbox.
Bramwell L.J:Dissent says: no communication means no acceptance leads to the meeting
of the minds question.
Meeting of the minds is French law and we need to be careful with this argument
Court says to consider to facts:
Reasons
Postal Rule: If both parties agree, the post office is a common agent for both of them.
If it is not explicit, it must seem reasonable to send it by mail. Postal rule only applies
to acceptance. A contract is concluded where and when the letter of
acceptance is posted where the post office is the agent for both parties
The contract is completed as soon as the letter accepting the offer was put
into the postregardless of the fact that the letter was never received
In order to have a postal rule, not only is the K concluded when the letter is posted but you also have
to have an agreement between the parties stating that the post office will be the agent for the
parties the agreement can be expressed or implied (if offer sent by mail it is logical to accept by
mail)
26
Issues
Held
Reason
s
-Hughes granted Holwell option to purchase land, exercisable by notice in writing within six
months. Holwell posted letter posted prior to the deadline, but it never arrived.
-Defendant refused to sell the land because they did not get the letter.
-D never received letter, but a letter to the defendants lawyers from the plaintiffs lawyers WAS
received, and the defendants lawyer talked to his client.
- Case had an option caluse which is a legal term
- contract stated that the offeror required notice in writing
Does the Postal rule apply here?
ISSUE: did the plaintiff exercise an option to purchase the premises by posting a letter to the
defendant which he never received???
NO! required notice!
Option clause (legal form of art, it is a lawyer type clause, need to be concise) does not fall
under the postal rule.
Acceptance not tendered because the letter was not received in writing.- the act of posting
the letter was not enough-acceptance had to be communicated to offerer
Postal Rule does not apply because both parties did not agree to use post office as
common agent.
Court says 2 ways to examine this issue:
1. Short Rule- notice in writing implied that they needed actual delivery (if it was acceptance
in writing postal rule would have appliedbut NOTICE in writing means offeror must be notified
of the acceptance!)
But Plaintiff argued that the postal rule applied as main argument. But courts says is a little
different because of the notice in writing clause which requires actual delivery.
So, the Plaintiffs then argue that the defendants knew the letter was coming because the
defendants solicitors knew because the Plaintiffs sent two letters one to the solicitors and one
to the defendants stating that they wanted to exercise their option.
The plaintiff did not follow the options requirement for notice (i.e. actual notice).
Ratio
- where you have an option and it says notice in writing, the postal
rule will not apply because the law relating to options is that the
grantee must comply strictly with the conditions stipulated..
acceptance in writing (postal rule) does not equal notice in writing (actual direct
communication)
- notice in writing = acceptance must actually be delivered
- >Notice in writing= only received when acceptance actually reaches offeror.
>Acceptance in writing= received when mailed.
- where you have notice in writing, the postal rule will NOT apply guarantee must comply
strictly with the conditions stipulated
1. Postal rule only applies when offerer does not prescribe a particular mode of communication
2. Where application of rule would lead to an absurdity or manifest inconvenience it will not apply
3. Applies only when the letter of acceptance is properly stamped and addressed (i.e. Adams v.
Lindsell - supra)
27
Issues
Holding
Argumen
ts
Reasons
- buyers suing sellersmust show that contract was formed in UK so that UK law applies, not
Austrian.
Parties in London are trying to say the contract came into effect in London the second they sent
the telex to Vienna (as per the Postal Rule).
Brinkibon wanted to buy steal from Stahag
May 3rd counter offer from seller (in Vienna) to buyer (in London) indicating buyer must open a
letter of credit.
May 4th the buyer accepts by opening the letter of credit and sending telex back to seller (is
received same day)
Where did acceptance occur?
When a telex is instantaneous communication where is the contract formed?
ISSUE: Is an acceptance of an offer by telex from London but received in Vienna a contract
made within the jurisdiction within the UK?
for respondent K formed in Austria
- acceptance by instantaneous communication was received in Vienna!
Ratio: A contract is formed when acceptance of an offer is communicated by the offeree to the
offerer when dealing with instantaneous communication
Brinkibon said that contract was formed in London (needed to show that contract was made in
Britain jurisdiction in order to sue)
But rule form Entros says that Contract was formed in Vienna (where acceptance was received)
Brinkibon try to argue that their case does not apply to Entros Rule because they say that when
they opened the letter of credit in Britain they were accepting the contract by conduct the
telex was just confirmation of their already completed acceptance.
But Court says that was not acceptance, the telex was the acceptance. Thus, the contract was
completed where the acceptance was received
The letter of credit was not conveying their acceptance to the seller and the telex was the
actual acceptance.
-
although in cases where two parties agree where contractual obligations occur by
instantaneous communication, general rules should apply, but it isnt a universal rule
(not in all cases) no universal rule can cover all modes of instantaneous
communication, when conflict, look at reference of parties, sound business practice, and
judgements of where the risks should lie.
Concurring judge: Telex should be treated like any other forms of instantaneous
communicationwhen a message has been received on an offerers telex, it is not
unreasonable to treat it as delivered to the principle offeror because it is his
responsibility to arrange for the prompt handling of messages in his office- therefore,
once it is received by offeror, because delivery failures can be seen by person sending so
they can resend.
The telex was instantaneous communication contract formed in Vienna, where it was
received! Offeree is in a better position to know if acceptance has been sent during
instantaneous communication. Party who was accepting knows if the fax did not go through.
Ratio
of acceptance sent by the offeree results from the fault of the offeror
or from a defect in the communication with respect to which the
offeror should be deemed to have assumed the risk
- unless the failure by the offerer to receive the communication of acceptnce results in a fault
from the offerer or from a defect in the communication- offerer should be deemed to have
assume the risk.
- This is not a universal rule, in cases where there was an error
Issues
Arguments
Holding
customers of MSN had complained that Microsoft breached contract by taking money from credit cards
and not giving the customers a proper accounting.
Class action suit and was looking for 75 million dollars
Now these two guys bringing suit on their own (no more class action)
29
Reasons
Ratio/ Rule
4. Termination of Offer
NOTE FOR EXAM:
General rules 5 ways an offer can be terminated:
1. Revocation of an offer at any time before it is accepted MAIN ONE
a. Minor Exception: the revocation must be communicated,
b. unilateral contract there is no revocation where one of the parties has decised to substantially
perform.
2. If you refuse an offer that puts an end to it
3. Lapse of Time: if an offer is stated to be open for a fixed time then it cannot be accepted after that time
4. Non-Occurrence of a Condition suggests there is revocation.
5. Death: the offeree cannot accepte the offer after ther person who makes the offer dies and the offeree knows
about it
o Exception: if the offeror dies and you dont know and you accept than in some cases the
representatives of the dead person may be able to conclude the contract
a) Revocation
Dickinson v. Dodds (1876) CA
Facts
Wed June 10 - Defendants offer to sell to the Plaintiffs (the offer was open until Friday 9am)
June 11 - Plaintiffs accepts the offer
30
Issues
Held
Reaso
ns
Mother in Law forgot to pass on message from the Agent that the land had already been sold.
A third party (real estate agent) told the Plaintiffs Mother in Law that the land had been already
sold
Plaintiff tries to accept on Friday 7am at the train station
But the property was already sold.
Plaintiff brings an action for specific performance
whether or not the defenent was in breach of contract by selling property to third party before
expiration of the offer?
Plaintiff had knowledge of revocation, therefore there was no contract.- mere promise to hold the
offer for a period of time was not binding on the defendant- free to wtihdraw
Mr. Dodds the Defendant had communicated revocation through a third party (real estate agent)
There was no contract. Although offer was open until Friday, that did not bind Dodds.
Offeror may accept the highest bid despite giving the initial offeree a specific deadline.
The deadline was not a promise to the Plaintiff it was a general deadline
Dodds did not have to keep promise of deadline (it was not a binding promise) because he does
not say it was a revocable deadline and it is just an offer not a contract (there is no consideration
for the promise)
BUT If there were no other offers, Dodds would be bound.
Because he hears it was sold to someone else, There was no meeting of the minds.
BUT If Dickinson (plaintiff) had received no information of revocation from the agent he would have
won the case.
Ratio
Notes
-- an offer can be withdrawn before it is accepted even if the offerer states that it will
be open for a period of time- must be communicated or otherwise come to knowledge
of offeree
-- Revocation can be communicated indirectly, through a third party. (If the other party
has knowledge of the revocation, that is sufficient.)
BUT what if the third party was not reliable, this concept is vague in this case and that is a
problem. The case does not clarify who constitutes a third party, what if this third party was a guy
from the bar.
Conforms to the rule that revocation can take place at any time before an offer is accepted. Pp 97
Issue
s
Reas
ons
revocation.
Ratio
Postal Rule applies to acceptance but does not apply to revocation - must be
communicated. Revocation must be communicated before acceptance.
No communication of revocation is equal to no revocation
-- it is a principle of law that an offer can be withdrawn before it is accepted, and it is
immaterial whether or not the offer is expressed to be open for acceptance for a given
time frame or not
- The only thing that falls under the postal rule is a letter of acceptance
Com
ment
s
(1880) (C.A.), p. 99
an offer can be terminated any time before it is accepted
termination of an offer must be communicated
person who has accepted an offer not knowing it has been revoked has a valid acceptance and can
act on the footing that the offer and acceptance constitute a binding contract
Issue
s
Held
Reas
ons
Plantiff (Fathers Estate) put down payment on house and promised the son that if they paid the
mortgage then he would transfer the title to them once mortgage was done. (1930)
Action for Widow to have the Daughter-in-Law Evicted (an eviction action) in 1945
Couple had been paying the mortgage for over ten years faithfully
Father dies before he transfers the title to the son and daughter in law
So then the title is sent to the Fathers estate and thus the Widow
The Son runs off and leaves the Daughter-in-law in the house
The Widow wants the Daughter out and technically has title of the property
Estate argues there was no contract. Was there proper acceptance to create a contract?
if the daughter in law pays all the building company installments, will the couple have the
property transferred to them as soon as the mortgage is paid off?
Yes.
Fathers contract was unilateral offer to the daughter in law and son, and could not be revoked once
performance began. As long as the daughter in law continued the payments
Denning
To help the daughter out of this dilemma Lord Denning says that there was a unilateral contract that
gives the Daughter-in-law title
Father made the offer, the daughter-in-law paying the mortgage was acceptance, once the
mortgage is paid then the contract is binding
This is a unilateral contract. (Not bilateral? In bilateral, there is an exchange of promises they did
not promise to make the payments.)
As it is unilateral, the promiser cannot revoke the unilateral offer if the other party has started
performing
Payment of the mortgage was performance i.e. acceptance
--unilateral offer could not be revoked once they started making the paymentsif they failed to
make installments, then it would be an unfulfilled condition
Ratio
Note
s
- A unilateral offer can be made to a single person, it doesnt have to be made to the
world at large.
- the promissor cannot revoke a unilateral contract if the offeree has started
performance of the act that is required by the offer
Note: persuasive, not adopted universally in Canada
A Little Background For Understanding this Case:
Contract law is very Eurocentric and reflects the practices of Europe.
In this culture the notion of property ownership was very strong
There is commenced performance, sustained performance, and substantial performance
pp 102
32
b) Lapse
Barrick v. Clark (1951) SCC
Proced
ural
History
Facts
Holding
given that there was no date for acceptance, what is a reasonable time for the offer to stay
open? Did the counter offer lapse in time?
Defence (Berrick) is arguing that too much time had elapsed so the offer had expired so re
made offer to someone else
Plaintiff (Clark) argues that it was not a reasonable time because there was no rush, the
negotiations had history,
Finds for Mr. Barrick, a reasonable time had lapsed and the offer was expired
Reason
s
No time was specified so then you look at the circumstances to figure out what a reasonable
time for Mr. Barrick to have kept the counter offer open he said reply as soon as possible.
Issues
Argume
nts
33
Court says that the letter itself has a sense of urgency since he uses the word immediately
Also because there was a third party interest then perhaps there is urgency to sell
Main reason for saying that this was a reasonable time was because no time to finish the sale
before Jan 1st
Ratio/
Rule
Notes
Revocation
Lapse
Did a reasonable amount of time pass if it has then it can be inferred that the offeree has rejected the
offer (look at the commodity itself, circumstances, nature, character and usual course of business in
industry)
In the offer, is there an implied term that it will expire after a reasonable time
Did the offeree state that they were still thinking about the offer, if they did then the offer remains open
but the offeror still has the opportunity to revoke it
34
1. Vagueness
R. v. Cae industries ltd. (1986) CA
Vagueness (court of appeal) leave to appeal to S.C. refused
Facts
Government sought out the respondents to take over the running of their Air Canada
maintenance base
Government wanted to maintain a valuable air space and keep employment opportunities in
the area for the city of Winnipeg
Negotiations took place b/t the government of Canada (appellant) and CAE Industries (the
respondent) about the possibility of the respondent taking over and running an aircraft
maintenance base.
March 26 1969- letter was written to respondent giving certain assurances in connection
with the proposed purchase of the maintenance base (letter written in response to request for
assurances from the respondent)
Clause B of the article was a guarantee of a certain level of workload government will
employ its best efforts to secure the employment hours
After receiving letter the respondent then arranged for the purchase of the base by a
subsidiary company
1971 the workload at the maintenance base diminished and the respondent sued for breach of
contract
Issues
Argume
nts
Holding
Reason
s
Court held that it was clear from the evidence that the parties treated the document as a
binding contract to the extent that is was partly performed
Is the contract vague and uncertain or incomplete
Court held that the conclusion that the parties intended to enter into a binding contract does
not mean that they succeeding in doing so
Court held that the document was not too vague to render it unenforceable
Ratio
Looked to Marquest Industries Ltd v. Willow Poultry where it was states: difficulties in
interpretation do not make a clause bad as not being capable of interpretation, so long as a
definite meaning can properly be extracted
Court held that the agreement does not leave anything unsettled that was necessary to be
settled between the parties. It in itself an entire contract capable of standing on its own feet
Contract can still be enforced despite a certain looseness of language used throughout the
agreement (i.e. assurances can guarantee set-aside and best efforts)
Court said that as they understand the words the government has a binding contract to
provide 40 thousand hours of man hours
Court says language not so uncertain that a contract cannot be formed and enforced and
nothing against the public interest
- **- Government pronouncements may be legally binding rather than mere
statement of intention ******
- To determine the intention of the parties, apply an objective test/reasonable
person test- would reasonable person think it was intended to make contract
- contract will not be held void for uncertainty if terms can be meaningfully
construed.
-Public interest must be kept in mind in determining if a contract exists
from class:
- the court will use an objective test, the reasonable person test, to
determine gov intention
This case created a problem, because now ministers have to check their letters to ensure there
is no contract put in place, however this case was still decided correctly
THIS CASE HAS BEEN RELIED ON BY OTHER CASES
Intention to contract is t be gathered from the surrounding circumstances, the government took
the initiative to find the purchaser and therefore this is not merely a political initive but an
intention to contract.
- most cases in which a person sues the government for non-compliance of a
proclamation or statement, usually do not succeed.
Note
1. The symbiotic relationship between the question of intention to contract and that of certainty of terms is illustrated by
the decision in V.K. Mason Construction ltd v. Bank of Nova Scotia. In this case a construction company contracted with a
property developer to build a retail complex on the strength of what is often called a comfort letter provided by the
property developers bank. The letter advised that we have accorded the developer interim financing sufficient to cover the
cost of the complies? The construction company competed the project but the bank did not advance sufficient funds to over
the developers costs with the result that the construction company was not fully paid. The court acknowledge that in
principle a unilateral contract could have arisen if the letter amounted to a promise on the part of the bank that if the
construction company agreed to build the compel the bank would ensure threat sufficient funding was available to cover
the developers costs. However, it concluded that based on the imprecise wording of the letter, no contract arose. The
courts decision on the point was fulfilled rather because the language used did not define the nature of and extent of the
banks obligations with sufficient precision, it could not support the conclusion hat the bank intended the letter to have
contractual effect. Though the bank was therefore not liable for breach of contract.
36
2. Incomplete terms
- whether an agreement that incomplete on its face, may constitute a contract.
- Parties leave an aspect of their agreement unspecified in these cases, is it possible to
determine the parties
obligations? Remember, a contract to contract is not enforceable.
Argume
nts
Holding
Whether or not the terms of the contract were sufficiently defined to constitute a legal binding
contract
Was the agreement to agree on a price a contract
Crown argues that the price was never agreed
Suppliants say even if the price was not agreed, the arbitration clause in the contract was
intended to cover this very question of price and that consequently the reasonableness of
piece was referred to arbitration under the contract
Contract not binding. No K, merely an agreement to agree. failed to agree on essential factor
of price
it is a recognized principle of law that two parties enter into an agreement where essential
terms of that contract are undefined then they entered into no agreement at all .
Reason
s
Court held that the first arrangement made between the Disposals Board and the appellants
was in April 1920
Transactions between the parties appear to have taken a similar form, there was an
agreement for the sale of the goods; there was an agreement that the price for the goods
should be subsequently fixed between the parties; and there were provisions with regard to
arbitration in the event of dispute
Court held that the whole matter depended upon the construction of the actual words of the
bargain itself
What resulted was this: it was impossible to agree to the prices and unless the appellants are
in a position to establish either that this failure to agree resulted out of a definite agreement to
buy at a reasonable price or that the price had become subject to arbitration it is plain on the
first tow points that this appeal must fail
Under Sale of Goods Act, section 8. says if parties cannot agree on a price it will be a
reasonable price, but the court holds that this only applies if the contract is silent about how to
get a price, but here it was not silent, the contract had a mechanism of how to come to an
agreement to come to a price, but it failed.
Court says there is no way at getting at a price with this contract
37
Court held there never was a concluded contract between the parties because there was no
certainty of terms
Looking at the arbitration clause which refers disputes with reference to or arising out of this
agreement to arbitration but until the price has been fixed, the agreement is not there
The arbitration clause relates to the settlement of whatever ma happen when the agreement
has been competed and the parties are regularly bound (no contract, thus arbitration clause of
no effect)
Ratio
From class:
--a reference to a future agreement may not be necessarily construed as an intention
not to be bound
--an agreement between parties to agree in the future on a essential term such as
price is no contract at all
1930 there were a consortium of companies who bought lumber from the Russian distributorArcos
1930 all these companies backed out on Arcos except for Hillas and made contract to buy the
lumber
In this contract they got a special dealoption for contract for following year in 1931 for
discounted price of 5% of the list price (clause 8)
Gave them the option to enter into a contract for purchase of 100,000 standards for delivery
during 1931 at the discounted price (clause 9)
End of 1930 the consortium came back and offered to buy all the timber and before Jan 1 1931
they sold all of their timber
Thus there was no timber left for Hillas to buy the timber at their 5% discount
Hillas sues for a breach of contract
Trial Judge said that Clause 9 was a binding contract
Court of Appeal reversed the decision based on May and Butcher case saying that it was not a
contract it was an agreement to agree because no price fixed
- Plaintiff has option clause to buy timber from Arcos (Russ. Govt)
- Prior to exercise of option, Arcos sells all timber to another bidder.
- Arcos argues option clause was merely agreement to agree no terms (price,
quantity etc) were agreed on.
- Hillas argues these terms are never in place, are to be negotiated.
Issues
Argume
nts
Holding
Reason
s
Ratio
Notes
Court
1.
2.
3.
4.
Arcos argues that the option provision was not binding because it was not a contract, it was an
agreement to agree
Argued that the terms were to vague for the contract of 5% discount and 100,000 standards
Hillas argues that everything in this business is negotiated and that there was never a fixed
price or a fixed anything in this business
YES clause part of original K, an installment K.
- opposite to May case
Court says that when you read the contract as a whole and the context of the business
Contract had already begun to be performed because the buying of the lumber when the
consortium left was beginning performance
Both parties actions appear that they intended to contract
With respect to the price, the court held that the price was certain because it was less than 5%
the going rate, so even if you have not put out a price list, a price list will come.
With respect to the time, dates, ect are to vague the court held that the standard business
practices and in the industry are this way (negotiating every single thing) then it is not too
vague
Courts will strain to find a contract where they can if the parties look like they intended to
contract
This court looked back at the trial judge, because the trial judge hears things first hand, and
because the trial judge was an expert in this area (international business transactions)
- A court will strain to find a contract where common sense tells you that there is one
- In contracts for future performance over a period the parties may not be able to nor
may they desire many matters of details (such as delivery) but leave them to be adjusted in the
working out of the contract and this still may constitute a valid contract
(above is from class)
Courts will look to any prior part performance between the two parties to help determine
contract.
- If any missing terms, courts may infer them from any prior part performance between
parties, and customs of the trade.
- It is the duty of the courts to strain in favour of enforceability, without demanding perfection
from the terms of the contract. Dont be too clever in finding defects.
- An agreement to agree may in some cases, be an enforceable contract
Different from May and Foley above, but court of appeal in procedural history uses May
Makes up Test
Was there an intention to contract by parties?
Look at the language and context
Look at the practices of the trade
Was this a contract to contract?
Defendants (classique coaches), the operators of a fleet of motor coaches agreed to purchase
a piece of land from the plaintiffs who operated a service station on adjacent premises
Sale was made subject to the defendants entering into a supplemental agreement to purchase
all the petrol required for their business from the plaintiffs a a price to be agreed by the
parties in writing and from time to time
Supplement agreement had an arbitration clause, clause 8: if any dispute of difference shall
arise on the subject matter or construction of this agreement the same shall be submitted to
arbitration in the usual way in accordance with the provisions of the Arbitration Act, 1889
Following the execution of the supplemental agreement on the same day as the agreement for
the sale of the land, the land was conveyed to the defendants
For 3 years the defendants obtained all their petrol from the plaintiffs until they thought they
could purchase their supplies on the better terms elsewhere.
Defendants then attempted through their solicitor to repudiate the supplemental agreement
39
and the plaintiffs sought a declaration that the agreement was binding and an injunction to
present the defendants from purchasing their petrol elsewhere
The plaintiffs and defendants had what was called a solus agreement which meant that as
part of their agreement for the land they Classique Coaches had to buy all their oil and gas
from this single supplier
PROCEEDRUAL HISTORY: at trial decided in favour of the plaintiffs, defendants appealed
Ratio
Notes
4. Agreement to Negotiate
Agreements to agree (good faith negotiations) where parties to an agreement have done no more
than agree to agree in the future, and thus have not accepted any obligations no contract. As
opposed to an agreement to contract on unspecified terms, or on terms to be agreed in the future.
Agreements to negotiate have found few adherents among the judiciary
1. It is impossible to determine the content of a duty to negotiate; the notion is too
uncertanint to support a contract
a. What is it that a person subject to such a duty is obliged to do or not do?
2. There is no basis upon which to determine damages for breach of such a duty
a. It cannot be presumed that the negotiations would have succeeded if undertaken.
b. No way of determining what the terms of the agreement would have been
c. No basis to assess monetary value
40
The landlord Empress Towers Ltd. brought a petition under s. 18 of the Commercial Tenancy Act
R.S.B.C. 1979 c. 54 against the tenant, the Bank of Nova Scotia, seeking to obtain a writ of
possession under s. 21 of the Act.
1972 first lease between the parties was made
1984 first lease expired; new lease was made with clause for renewal landlord grants to the
tenant two renewal rights of 5 years eachaccepting the rental rate at market rate for any
renewal price mutually agreed between landlord and tenant.
May 25 1989 bank exercised its option to renew the lease for further term of five years from
Sept 1 1989
June 23 1989 bank proposed a rental rate of $5,400 (market value) a month up to $3097.92
under the lease that was about to expire
No written reply was received from Empress Towers
July 26 1989 the bank wrote again to Empress Towers
July 26 1989 solicitors for Empress Towers wrote to the bank saying that his client was still
reviewing the offer
August 23 1989 Nova Scotia wrote to Empress to see if any progress had been made
August 31st on the day when the first five-year term was due to expire, Empress Towers made
its response, allow the bank to remain on a month-to-month basis if $15000 was paid before
September 15 1989 and a rent of $5,400 a month was paid thereafter
The $15000 was motivated by the fact that Empress Towers had been robbed and lost $15000
from the insurance compensation (very strange factor)
FACTS:
Renewal clause which said that the rent was to be the market price as
mutually agreed
Bank exercised option in accordance with terms
E waited until day before lease expired and then demanded much higher
amount
Issues
Argume
nts
Holding
Reason
s
whether the renewal clause was void either for uncertainty or was fundamentally the same as
an agreement to agree?
Empress Towers argue that the renewal clause was void for uncertainty because they put in a
clause saying they needed mutual agreement an agreement to agree and there was no
mutual agreement here.
Nova Scotia argues (essence of this case) that the Landlord failed to negotiate even though
there was a clause for an agreement to agree.
For Bankclause is binding contract. Landlord did not negotiate in good faith
It is well established that if all that the parties say is that they will enter into a lease at a rental
to be agreed, no enforceable lease obligation is create there may, however, be an obligation
to negotiate
In Brown v. Gould thee categories of options analysed:
o Rent is simply to be agreed
o Rent is to be established by a stated formula but no machinery is provided for
applying the formula to produce the rental rate
o The formula is set out but is defective and the machinery is provided for applying the
formula to produce the renal rate
Courts will try, wherever possible, to give the proper legal effect to any clause that the parties
understood and intended was to have legal effect
Requirements are to negotiate in good faith and not to withhold agreement unreasonable
Court said that the Landlord failed to negotiate at all.
Courts implied that there was an obligation on the Landlord to negotiate in good faith
Landlord did not negotiate in good faith.
41
renewal clause came with it an implied term that the landlord was to negotiate in
good faith with the objective of reaching an agreement of what the market rental rate would be
- also required not to unreasonably withhold a renewal agreement at the market rate
- parties had said they were willing to enter a rental rate to be agreed, then it was
likely an unforceable agreement for lack of certaintybut because they included the
requirement of mutual agreement, it implied to negotiate in good faith and not to unreasonably
withhold its consent to a renewal agreement
- market rate was something that could be ascertaineddid not fail for lack of
certainty
Ratio/
Rule
If parties state they must agree on a term (i.e. will go with market rate as agreed between us),
there is an obligation to proceed in good faith (prevents stalling on behalf of some parties).
An agreement to negotiate in the absence of some objective measures is void in law and
unworkable in practice.
In an agreement where terms are to be negotiated a court MAY imply a term that parties will
negotiate in good faith.
(1) Where rent is to be agreed cannot be enforced.
(2) Rent formula present, no machinery courts will supply machinery.
(3) Rent formula is defective, machinery present courts use machinery to cure formula
In an agreement where the terms are to be negotiated the courts may imply terms that the
parties will negotiate in good faith and that agreement may not be unreasonably withheld
-Courts will try wherever possible to give the proper legal effect to any clause that the parties
understood and intended to have legal effect
- Key to decision- if they failed to agree than there is a right of termination- would have been
an entirely different decision if no clause there at all.
In my opinion the effect of the requirement for mutual agreement must bte that the landlord cannot be
compelled to enter into a renewal tenancy at a rent which it has not accepted as market rental - also
carries with it Applied term- that the landlord will negotiate in good faith with the tenant with the
objective of reaching an agreement on the market rental rate
- mentioned business efficiency test and officious bystander testTechnique for
determining if an unexpressed condition was implied at the time a contract was drawn. In this test,
an arbitrator or investigator tries to ascertain what would have been the reply of the contracting
parties if a nosy-bystander had then asked them, "Do you intend to include the term 'x' in the
contract?" If the parties, under the circumstances prevailing at that time, would have answered
"Yes, definitely!" then the term 'x' is assumed to be an implied term. However, a term is not
deemed to be implied simply because it seems logical or reasonable under the current
circumstances.
That agreement on a market rental will not be unreasonably withheld
Mannpar held a permit under contract with the crown, acting through the department of
Indian and northern affairs, to remove and sell sand and gravel located on an Indian reserve
The permit had an initial term of five years and included clause 7: the permittee shall have
42
the right to renew this permit for further five year period subject to satisfactory performance
and reneogotiation of the royalty create and annual surface rental under no circumstances
shall the royalty rate or surface rental be less than the rates received in the preceding term.
In early 1933, Mannpar gave written notice of its intention to renew the permit for an
additional 5 years commencing September 1933
Skyway nor the Department Band were willing to renegotiate prior to the expiration of the
original permit on August 31 1993
Ultimately Mannpar took the position that the Department was repudiating its obligations to
renew in good faith (cited Empress Towers case) and elected to accept the repudiation and
sue for damages
Mannpar argues that this contract was intended to last until the job was done, the job is
clearly not done, why should the government be able to pull out now, should be required to
renogtiate the contract.
Mannpar submitted that there was duty cast upon the Crown in this case to exercise good
faith by negotiating to see if an agreement could be reached between them.
Mannpar asserts that the Crown failed to do this and that the failure should sound in damages
with the damages to be asses by the trial court
Crown argues that they have a fiduciary duty to the skyware band which effects their decision
to renew the contract
Crown argued that there was a clause that said the work would be completed within 5 years
(a limited time)
FACTS
Renewal clause for permit subject to successful negotiation (remove gravel
from Indian Reserve)
Govt refused to negotiate b/c they had fiduciary duty to Band
M claimed repudiation of obligation
Issues
1. Having regard for the language used in the permit agreement, was the renewal clause
uncertain? (in trial, yes) yes, uncertian
2. ought there to have been an implied term requiring the defendant to negotiate for the
renewal or negotiate in good faith for the renewal? No, there was no contractit was
unforceable
Procedur
al
History
Trial judge held that there was no obligation to negotiate in good faith
On appeal two substantial issues were raised:
1. Having regard to the language used in the permit agreement, was clause 7 uncertain as
found by the learned trial judge
2. Ought there to have been implied a term requiring the defendant respondent, Her Majesty
the Queen in right of Canada, to negotiate for a renewal or negotiate in good faith for a renewal
Holding
Reasons
Court found that the language used by the Crown was deliberately loose and broad and there
was no arbitration clause
It was clearly a contract intended to end after 5 years if it needs to
It appears that the court went out of its way to hold for the Crown
43
1. each contract must be looked at in the context of its own facts and the
language used by the parties
2. the implication of a term can only be made if it is the case that both parties
would be likely to agree that such a term should be applied in order to satisfy
the officious bystander test
3. a term can be implied in a contract if it is found to be necessary by a court in
order to give business efficacy to the contract
a court will not however imply a term into a contract merely because the
court may think that such term would be reasonable or would likely be more
satisfactory
4. a duty to negotiate in good faith will not be implied into an agreement if
there is no language that could provide an objective benchmark to measure
such a duty such as fair value or market value
Commen
ts
fiduciary obligation exists in relationships where one party has special rights
(Crown and native peoplescrown has fiduciary duty to them, same with doctor and patient)
In Lease Renewal Cases (where there is an existing contract) You must look to see if there is a
benchmark. If there is no benchmark to measure against, no duty to negotiate in good faith. On an exam,
mention both cases on one hand, Empress, on the other, Mannpar
Manpar Enterprises has been cited as authority for the general principle that there is no contract duty to
negotiate in good faith. Manpar established that concept of a duty to negotiate is unworkable in the
absence of an objective benchmark or standard against which to measure the duty.
The Wellington city council appeals from a judgment of Wild J. holding it liable to pay to the
second respondent, Alirae Enterprises Ltd damages of $580,209 for breach of contract
The contract which the trial judge held to have been breached was what he called a process
contract (not in Canada, in Canada might be understood as an agreement to agree)
This process contract obliged the Councils officers to negotiate in good faith with Alirae the
sale of the Councils interest (sell the title) of the premises at 20 Brandon St. Wellington
44
March 2 1999 Council wrote to Alirae council officers will negotiate in good faith sales of
councils leasehold interest to existing lessees at not less than the current market value of
those interests
Issues
Argum
ents
Councils first challenge to Wild Js judgment rests on the proposition that the process contract
was not a contract enforceable at law
Council argued that the process contract amounted to no more than an agreement to try to
agree which the law does not recognize as an enforceable contract
Council further argued that an agreement of this kind did not present sufficient certainty to be
enforceable by law
Alirae argues that the council offered to negotiate in good faith, which offer Alirae accepted by
its conduct in entering into negotiations on that basis. Each party provided consideration to the
other by their mutual exchange of promises
Holdin
g
Reaso
ns
If the substantive agreement is not sufficiently certain to be enforceable, the negotiations will
have failed to bring about an enforceable contract
Handley JA in Coal Cliff held that a promise to negotiate in good faith is illusory and therefore
cannot be binding. His primary reasons were that parties negotiating for a contract are free to
pursue their own interests
An obligation to negotiate in good faith is not the same as an obligation to negotiate
reasonably an obligation to negotiate in good faith essentially means that the parties must
honestly try to reach an agreement
Looked at Walford v. Miles, Courtney and Fairbairn Ltd v. Tolaini Brothers (Hotels) Ltd, and
Channel Home Centers, Decision of Grace Retain Corporation v. Grossman-- position summed
up as: for there to be an enforceable contract, the parties must have reached consensus on all
essential terms; or at least upon objective means of sufficient certainty by which those terms
may be determined. Those objective means may be expressly agreed or they may be implicit in
what have been expressly agreed
Good faith is essentially a subjective concept, there is thus no sufficiently certain objective
criterion by means of which the court can decide whether wither party is in breach of good faith
obligation
It is implicit in what we have just said that there will be come circumstances in which a process
contract is enforceable i.e. tender cases
Found that there is no such thing as a negotiation in good faith, because subjectively we can
never tell if someone is negotiated in good faith, because in contract law we always have our
own interests in mind
An agreement to agree is not enforceable
This case shows that the notion of negotiating in good faith is alien to contract law
Negotiate in good faith WAS NOT in the actual contract and that is why it is not enforceable
Reasoning/Ratio: in New Zealand there is no duty to negotiate in good faith in contract law
- would not be very persuasive in Canada
- An obligation to negotiate in good faith essentially means that the parties must honestly try to
reach agreement.
Ratio/
Rule
45
Process contract between the council and Alirae was a contract to negotiate in good faith with
no more definition regarding obligations and thus unenforceable.
Notes
4. One of the objections raised by Lord Denning to the enforcement of an agreement to negotiate
is the difficulty of assessing damages for breach of that duty. Damages cannot be based on loss of
the benefits associated with performance of the contract to be negotiated, since it cannot be
presumed that, even if properly pursued, negotiations would have resulted in agreement. Further,
there is no way of knowing what the terms of the agreement would have been, had agreement
been reached.
5. Agreement to negotiate- case has to do with corporate divorce. Initial agreement that Brasscan
would sell off its interests in labatts to the public and in return Labbattte would sell its interests in
Brasscan. These companies made a letter contract Labbatts refused to take some shares offered
by Brasscan. A price mutually agreed is uncertain. (SEE NOTE p 143)
Court of appeal in Ontario said this negotiating in good faith not really part of canadian contract
law e.g Edward brasshand or note 7 (p.160) Denning- we cant do this because we wont be able to
assess damages or note 8 says is possible to assess damages. Thus this is a LIVE issue in
Canadian contract law should we put this notion of forcing parties to negotiate in good faith as
part of formal contract law. DOUBLE CHECK THIS WITH PROFESSOR! Cases say there is a
duty but this says no duty very confused
5. Anticipation of Formalization
Anticipation of Formalization
Appellant is Ontario Kernels Popcorn Company
Respondent is Bawitko Investments Limited
March 23 1984 Respondents real estate broker Anthony Passander approached
appellant with a view to acquiring franchise rights for the Kernels store in Jackson
Square
April 3 1984 the appellant provided Passander with a Kernels information package
46
FACTS
B wanted to buy popcorn franchise from K
B took steps to secure loan and a deposit was put down in accordance
with oral agreement but no formal agreement had been signed
Some essential terms were missing
Arguments
Appellant argues that even if there was an oral contract it was unenforceable by s. 4 of
the statute of frauds RSO 1990.
Appellant said they needed formal written document and that the essential parts of the
contract were not agreed upon
Issue
Was the oral contract found by the trial judge, a complete and binding
contract or was its enforceability subject to the parties subsequent
agreement on all of the terms and conditions to be contained in the
contemplated written franchise agreement?
Can the oral contract in itself constitute, as trial judge held, a complete and
legally enforceable contract, or is the oral contract not in itself a complete and
legally enforceable contract but was subject to and dependent upon a formal
written franchise document being settled, approved and executed by the
parties.
Decision
Reasoning
Ratio
This is an appeal from a judgment declaring the appellant in breach of an oral contract
To be enforceable a preliminary contract must contain all essential terms and
conditions
IMPORTANT recognize these words in preliminary contracts/ agreements
subject to contract means there is no contract until the formal document
a letter of intent there may be a contract fairness will make the courts say it is
enforceable.
NOTES:
3. In this case, court accepted that parties had in fact agreed orally on the terms alleged by the
respondent, but concluded that those terms did not give rise to a contract. The Statute of Frauds
ordinarily requires that to be enforceable, a contract for the sale of an interest in land (including a
leasehold interest) must be evidenced by a written memorandum.
4. Parties who anticipate the completion of a further written document embodying their contract
may stipulate that the agreement outlined in an informal document is subject to contract or
wording to similar effect. Language of that kind is often viewed as an indication that the parties
did not intend to be bound until a formal document is executed.
policy question of whether the courts should monitor the fairness of contracts and if
so, by what means.
b. As a deed: common law has for centuries afforded people the power to render their
promises legally binding by making them in a particularly formal manner. A promise
that is signed, sealed and delivered is binding as a deed, which is a legal
instrument distinct from a contract but with virtually the same legal effect.
c. By way of estoppel: when the law enforces a promise as a contract or as a deed it
generally does so as a means of giving effect to the exercise by the promisor of a
power to create a voluntary legal obligation. A promise is a potentially powerful
social mover: promises often inspire their recipients to act, sometimes to their
considerable prejudice, in reliance on the expectation that the promise will be
performed. Viewed from this perspective, promises are not binding undertakings but
potentially harmful social acts. The law is alive to this perspective and will in a
limited range of cases enforce promises that are neither supported by consideration
nor given under seal, as a means of preventing harm from befalling a reliant
promise. The doctrine that is concerned with remedying this kind of promissory
mischief is equitable in origin and is known as promissory estoppel.
Reasons: Insufficient
consideration: (1) Just because D
started spending money they had
not yet received is not enough for
consideration; (2) This was a
pledge drive, he pledged, he did
not expect anything in return, (3)
Just because other subscribers
pledged does not mean there was
consideration. [If B said he would
donate in subscription of others it
would be different.]
--A bare promise by way of a
pledge or gift cannot be converted
into a binding legal obligation
because there is no consideration
Holding: No binding K
for lack of
consideration. Appeal
dismissed.
note: if you put the donators name on a building, this may constitute consideration
Issue: Was
there consideration and if
so can the contract be
enforced when there is no
explicit promise made by
the plaintiff?
Holding: There was
implied consideration b/c
there was an exchange of
rights and money.
Reasoning: A promise
may be lacking and yet the
whole writing may be
instinct with an obligation
imperfectly expressed if
that is so there is a
contract. Defendant L gave
plaintiff W an exclusive
privilege (shows
consideration). Plaintiff had
duties.
- Implied promise of
one party can be sufficient to
constitute consideration for a
contract and to support a
cause of action against the
other party for breach of the
contract
2. Past Consideration
-
ISSUE: is there a
RATIO:
50
binding contract to
pay the amount of the
loan or does it fail for
lack of consideration?
HELD: NO!- Held for
defendant, E not
entitled to money. No
consideration
REASONS: Taking the
promise of the
defendant to have
been an express
promise, the
consideration for it
was past and executed
long before and was
not laid to have been
at the request of the
defendant. All there is
here is a benefit
voluntarily conferred
by plaintiff and
received by defendant
with an express
promise by defendant
to pay $
- what purchased
the promise of the
husband?
- The husband
hasnt done
anything new!
-Past Consideration is no
consideration at all: a
preexisting moral duty does not
confer consideration
- Theres no consideration for
voluntary gift not requested by
the person receiving it
51
Request of
defendant!!
Distinguish based
on this fact
Consideration may be
something small as long as it
is of some value in the eyes
of the court; Courts do not
inquire into the adequacy of
the consideration
52
executors (brother of
husband) refused to honour
the promise
She must demonstrate that
there is contractual
obligation
Peppercorn Theory consideration must be of value in the eyes of law however it can be as
meager as a dollar, or a peppercorn
Just because
something is taken to
be true that destroys
an argument, it does
not vitiate the contract
and destroy the
validity of what is
alleged of the
consideration.
Ratio:
1. Claims known to be
invalid. A promise is
not binding if the
sole consideration for
it is a forbearance to
enforce a claim which
is invalid and which
is either known by
the party forbearing
to be invalid or not
believed by him to be
valid.
Holding:
Zellers isnt giving up
anything if there claim is
invalid in the first place.
Appeal is allowed and the
plaintiffs claim is allowed with
interest and costs.
Forbearance:
- A forbearance of a disputed claim can be valid consideration if:
o The claim is reasonable in itself, and not vexatious or frivolous
o That the claimant has an honest belief in the chance of success and,
o That the claimant has not concealed from the other party any fact,
which to the claimants knowledge, might affect the validity of the
claim
o [claimant has a serious intent to pursue the claim]
6. Pre-Existing Legal Duty
Suppose that B makes a promise to A in return for As promise to perform some act X that A is
already legally bound to perform. Is the promise by A to do X good consideration for Bs promise?
One could argue that the answer ought to be o. from the laws point of view, a promise to do what
one is already bound to do should be indistinguishable from a promise to do what one has already
done. Having judged that A must do X, the law regards that act as non-optional: as far as the law
is concerned X is necessary. From this perspective then, A gives up precisely nothing in exchange
for Bs promise. He simply does or promises to do what from the laws exclusively prescriptive
point of view there was no possibility that he would not do.
Example (mentioned in class) (p. 179)
Ward v. Byham
- Where the father pays up to 1 pound a week allowance for the mother to make sure
that the illegitimate child will be happy and also that she is allowed to decide for
herself whether she wishes to live with the father or mother
- Father stops paying because he said she has a public duty to do that
- However, there is consideration
o That she remains happy and has a choice
o Also gains the right to enforce these obligations, whereas typically only
the crown would have that right to enforcement.
-
Duty to pay a debt: general rule is that payment of a lesser sum cannot be satisfaction for whole several exceptions.
PUBLIC DUTY
- the principles that stem from this are pretty self-evident, make common sense
- idea that promises given by public officials to carry out their public responsibilities are
unenforceable when talking about contracts
- general rule is that if you are agreeing what you have a public responsibility to do then
there is no contract, but if it goes above and beyond then it may constitute a contract
- example cant agree to be a witness to a crime in a contract, already obliged by public
duty
- traditional view: if, in exchange for a promise, the promise agrees to perform, or actually
performs a public duty, there is NO CONSIDERATION. However, courts were able to find
consideration if it could be shown that the promise provided something extra, beyond the
requirements of the public duty.
DUTY OWED TO A THIRD PARTY
The performance of a duty owed to a third party has traditionally been viewed as good
consideration, particularly in the family context.
Promise to a third party is good consideration
ISSUE: Is there
good consideration, a duty to the
third party?
RATIO:
HOWEVER:
RATIO:
Note: FOUNDATIONAL
CASE!!!! REMEMBER THIS FOR
EXAM!!! For pre-existing legal duty!
56
ISSUE:
was the agreement to pay the
higher prices legally binding upon
the defendant, or did the agreement
fail for lack of consideration?
HELD: there was no consideration
for the oral contract.
ARGUMENTS:
Defendant (U): past consideration is
no consideration and plaintiff was
already obliged before the alleged
oral agreement was entered into to
deliver the steel at original prices.
Plaintiff (G): the promise of a good
price on the second building was the
consideration the defendant
received for agreeing to pay the
increased price on the first. (the
court said that this is too vague
P claimed that the parties agreed to
give up the established agreement.
Court said that this would be valid if
the evidence supported it.
Third argument: the plaintiff said by
giving them 60 days to pay. And by
extending the period to pay, they
have given more credit to pay the
higher price.
Fourth Argument (not on
consideration): that the D is
estopped from denying that he
would pay the higher price. (the
court said the estoppel should be
used as a defensive argument, not
as a sword)
-Promise to perform a
preexisting contractual duty already
owed to the promisor does not
constitute consideration without
something more i..e cant amend an
existing contract without something
more than a promise from one party to
do what they were already obligated to
do in the context of the original
agreement
DULUX FRENCH FRIES LTD. v. McCARDLE (1976, PEI CA) opposite case to Gilbert Steel preexisting legal duty may be abandoned where the parties rescind and create a new contract, where
price went up over the term of the contract.
Williams v. Roffey Bros & Nicholls (Contractors) Ltd. 1990, C.A. England
FACTS
-Plaintiff hired as
subcontractor by
Defendant to work on
apartments
- D (Contractors)
worried project would
not be completed on
time, and they would
be liable (financial
penalty)
- D offers P (Bros) more
money to finish
apartments on time,
per apartment finished.
2. where party
undertakes to make an additional
57
3. it is no longer
the promise to pay more as a result of
necessary to look for an
economic duress, the promise would have
exchange of promises or
been unenforceable
detriments on the part of the
Modern approach; different from Gilbert promisee to enforce a variation of
Steel.
a contract so long as the
promissor obtains some benefit
or advantage
58
Note ^: this case has not been followed like Gilbert Steel.
59
F owed $ to
B and made
payment
plan
B agreed
not to sue
(forbear) if
F adhered
to payment
plan
F paid back
whole sum
Plan did not
mention
interest
B sued for
interest
Ms. Beer
say she is
entitled to
interest for
the five
years.
ISSUE: Whether
the agreement of
July 15, 1991 (if
it was accepted)
was supported
by
consideration?
HELD: NO. Court
found that there
was no K - Crown
did not accept
and even if there
was an
agreement the K
was
unenforceable
for lack of
consideration.
Appeal
dismissed.
Arguments: Government said they do not need to follow deal because they never accepted it and because
there was no consideration (Pinnells rule: there will be no consideration for part payment in replacement of the
whole debt) therefore contract terminated
Selectmove argued that the government stood to derive practical benefits b/c would get more money from
following the agreement (real consideration)
- Court unwilling to overrule Pinnels Rule says look to Parliament for that reform.
ISSUE: is there
note?
If the case had been the exact same but paid in cash then R would have won.
WE have the legislative change under Section 16 Mercantile Law Amendment Act RSO 1990.
When you bring the accord, it has to be agreed upon by the creditor.
Need an expressed acceptance!
Need evidence of the accord!
Also, look below
b) Statute ^
61
1. There must have been an existing legal relationship between the parties at the time the statement on
which the estoppel is founded was made. (need this for PE- if waived then there is no legal relationship i.e.
no PE)
2. Promise: there must be a clear promise of representation made by the party against whom the estoppel is
raised, establishing an intention to be bound.
3. Reliance: There must have been reliance, by the party raising the estoppel, upon the statement or conduct
of the party against whom the estoppel is raised.
4. Notice: The party to whom the representation was made must of acted upon it to his/her detriment
5. Equity: The promisee must of acted equitably
6. Sword or Shield? : Promissory estoppel can only be argued as a shield, not a sword.
ISSUE:
Whether or not the
landlord waived its right to
insist on strict
performance of agreement
such that it could not now
insist on a strict
enforcement.
HELD: Was a
waiver on part of landlordie in support of tenant!
Was an instance of
equitable Estopple.
RATIO:
If parties who have entered into
definite and distinct terms involving
certain legal results afterwards by
there own act or with their own
consent enter a course of negotiation
which has the effect of leaving one of
the parties to suppose that the strict
rights arising under the contract will
not be enforced or will be suspended
the person who otherwise might have
enforced those rights will not be
allowed to enforce them where it
would be inequitable having regards
62
Estopple
denied from pursuing
your legal rights
Equity against
the forfeiture of their
leasehold right.
Central London Property Trust Ltd. v. High Trees House Ltd. K.B. 1947
Most important case in promissory Estopple
FACTS
Plaintiff C promised defendant
H lower rent during war time,
during time when flats were
only partially let.
H keeps paying lower rent after
war time
Now C now wants to raise rent
and get full payment of
arrears
H says no, that he had promise
with C
Agreement to lessen payment
Goes into receivership. The
receiver wants the difference
between the lower rate and
standard rate for the last ____
years. And wants the
standard rate going forward.
Arguments
The Respondent makes
reference to common law
estopple
Example of this, someone can
be estopped from that
representation.
REASONS:
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.
Lord Denning: once youve made the
promise that you will accept the lower
rent, it is binding so long as the terms
apply. The term that had to be met here
is : once the flats are fully rented, at
which point the lower rent ends.
Ps promise was restricted to time period
of economic recovery and thus was only
a TEMPORARY relinquishment of Ps
rights. P was entitled to full amount
once economic depression ended.
NOTE: when circumstances that give
rise to promissory estoppel end, so does
the estoppel!
The cprts have not gone so far as to
give a cause of action in damages for
the breach of such a promise, but they
have refused to allow the party making
it to act inconsistently with it.
(Shield not a sword)
Promissory Estoppel
Where one party has by his her conduct or words made to the other party a promise or
assurance which has intended to affect the legal relations between the parties, then,
once it is acted upon by the other party, the party making the promise or giving the
assurance cannot afterwards revert to the previous legal position without notice as if
no promise or assurance had been made.
B) The Equities
D. & C. Builders Ltd. v. Rees 1966, Q.B.
FACTS
Outstanding debt for work
done
R forces D to accept lesser
amount (wife of man-man
sick in bed)
D about to go bankrupt and
accepts offer under duress
We have no choice
but to accept
R argues PE as defense
Issue: is D estopped
from claiming the
whole debt?
Holding: no true
accord there was
intimidation and
undue pressure D
is not estopped
RATIO:
- In cases of promissory estoppel, he who seeks
equity must do equity
RATIO:
However, a notice
requirement should not be imposed
where reliance is not an issue
- the underlying principle is that a
person should not be allowed to go
back on a choice when it would be
unfair to the other party to do so
Waiver and promissory estoppel are
treated the same way by the Supreme
Court
65
Facts
Issue
Decisi
on
Reaso
ns
Ratio
Notes
When one party to a contract in the absence of fresh consideration agrees not to
enforce his rights an equity will be raised in favour of the other party. This equity is,
however, subject to the qualification
(a) that the other party has altered his position
(b) that the promisor can resile from his promise on giving reasonable notice,
which need not be a formal notice, giving the promise reasonable opportunity of
resuming his position
(c) the promise only becomes final and irrevocable if the promise cannot resume
his position
d) THE RELIANCE
66
deals with the issue of the degree to which you have to have reliance for the doctrine to apply
(expressed in High Trees) : where somebody makes a promise intended to be binding and acted upon
and which is in fact acted upon the promise should be considered as binding
here we are dealing with issue of reliance- extent to which the promise needs to be relied upon
whether or not the reliance must be detrimental to the person intending to revoke
Letter of credit we will extend our credit to the buyer. The letter will be sent to the seller.
The seller will need to provide documentation bill of laden (title of the goods), bill of
sale (contract between buyer and seller), and an insurance document (if the documents
are damaged while being shipped). Protects both parties. Irrevocable Letter of credit.
Will not act on the clients instructions to revoke payment.
W.J. Alan & Co. v. El Nasr Export & Import Co. 1972 QB CA
FACTS
seller stipulates payment
for coffee to be in Kenyan
shillings
buyer pays in sterling and
seller does not object and
continues more
transactions
sterling eventually
depreciates
seller sues for difference
Seller accepted the letter
of credit in Kenyon shilling
RATIO:
As long as there is a
change of position, that is
sufficient.
Notes
RATIO:
E) SWORD OR SHIELD?
68
FACTS
Husband on courtroom steps
makes promise to pay 100
pounds a year. He never pays
and she sues after 7 years
In contracts the Statutes of
Limitations says she can only
claim for 6 years
The Wife can only enforce the
promise if there was consideration
for it.
YES
Robichaud c.Caisse Populaire De Pokemouche Ltee 1990, N.B. C.A
FACTS
R owed $ to Royal
Bank & Cassie
Populaire
RATIO:
-PE can
be used as sword if
equity permits it69
RB and CP both
agreed to accept less
in exchange for
dropping judgment
Board of Directors
refused to accept deal
R sued CP for
rengagning on their
promise
no legal
relationship!
- Australian Case not
binding
-
NO Sword
RATIO
minimum
element required to give
rise to an estoppel and
thus of an
unconscionable conduct
include and assumption
or expectation as to a
legal relationship
between the promisor
and promisee
- B.C. court says this is not an appropriate case to investigate the principle, but kind of leaves the door ajar
for a future court to investigate. Pg.256-257 talks about Waltons notion that there has to be very
INJURIOUS reliance/unconsciousable not to enforce promise.
70
B) FAMILY ARRANGEMENTS
Balfour v. Balfour 1919, Eng.C.A.
FACTS
Couple who while they are
married have a domestic
arrangement that husband will
pay wife 30 pounds a month for
maintenance
Then husband takes off and
decides not to come back and
she sues
Husband argument: entered
into no contract with his wife:
there are agreements between
parties which do no result in
contracts within the meaning of
that term in our law.
RATIO: closely
associated parties such as
spouses would be presumed not
to create legal relations in the
absence of clear evidence to the
contrary
There is a presumption
in family relationships that the
parties do not intend to have
contractual relationships.
Reasoning:
Not contracts because the
parties did not intend that
they should be attended by
legal consequences.
It would mean that when
the husband makes his wife
a promise to give her an
allowance of 30s. a week,
71
c) COMMERCIAL ARRANGEMENTS
Rose and Frank Co. v. J.R. Crompton and Bros. Ltd. 1923, K.B. CA
FACTS
R and F were sole
distributors of JRs paper
products
Signed new agreement with
clause, containing an
honourable pledge claim (no
legal remedy agreement
only an expression of intent,
not legal K)
JR refused to fulfill orders
one day
Toronto Dominion Bank v. Leigh Instruments Ltd. (Trustee of) Ont.CA, leave to
appeal refused (2000)
FACTS
- TD has advanced
financing to the
instruments based on a
letter of comfort
- L issues comfort letters
in connection with a
series of loans from TD,
expressing intent that
they not be liable for
subsidiary company who
took out the loan.
Two arguments
Letter of comfort
established a contract
Also a tort action by
saying it was a negligent
misrepresentation.
RATIO:
The signature: may be initial, printed, may be authorized by an agent, may be other than at
the bottom of the page
o Must have been placed with the intention of authenticating the document
- Joined Documents: In order to find a contract, may be able to bring two documents together Must be
something on basis of the two documents to conclude that they are related to the same project; if they
reference each other, if they obviously relate to one another or if you can imply the relationship; If the
connection between the two documents can only be established by parole evidence (actual oral testimony)
it cant be joined.
4. Contracts for sale of interest in land still valid!!!!!!!!! after enacting of a
statute that required contracts of sale of land to be in writing, courts of equity
decided to enforce contracts that were not in writing- but certain
circumstances had to be proved in order for court of equity to do so---doctrine of
part performance!
Where one party to the oral agreement partially performed his or her obligation,
the oral agreement may be enforced in order to avoid injustice to the party
conferring value- (so if provided services, the service provider will seek equitable
remedy of performance in a transaction in relating to land (transfer land to me) requires
other party to transfer that land because they have partially performed their obligations
under contract---doctrine of part performance)
There are three types of contract invalidities
(1) Void (ab initio or de futoro) there never was (is) a contract
(2) Voidable the plaintiff can avoid the contract but it is a good contract until brought to an end by a court
(3) Unenforceable no action can be brought upon the contract for its enforcement, but, it is valid as long
as the parties wish to proceed under it.
Part Performance:
The intervention by equity and the circumstances that must be proved to allow equity to dispense
with the writing requirement has become known as the doctrine of part performance.
A defense to this is to say that this is a dealing of real property and the contract needs to be in
writing.
Ratio:
RATIO: the courts will
strain to find sufficient
writing to satisfy the
statute of frauds and in
certain cases oral
evidence will be permitted
for the purposes of
74
explanation.
MIGHT BE WRONG
Bad case- Berryman
Deglman v. Guaranty Trust Co. S.C. 1954 ONE OF THE MOST IMPORTANT IN
CANADIAN LAW
FACTS
Nephew of deceased was
promised that if he did
services from time to time,
his aunt would leave him
one of the two houses
(adjoining lot and house on
it)
She dies without putting
nephew in her will
Nephews services only lasted
for a short period of time
Nephew doesnt have a
transfer of land in writing so
this case comes up against s.4
of the Statute of Frauds
Nephews acts of part
performance should trigger the
relief of equity
Nephew took her on rides and
did chores on both houses
- RATIO: In
order to invoke the
doctrine of part
performance, the acts
must be unequivocal in
the sense that they
must have relation to
one agreement and to
no other.
Acts should
demonstrate that they are
directly related to the
promise
- this case
introduced doctrine of
unjust enrichment
Referred to Madison v
Alderson where that in
order to invoke the
doctrine of part
performance, the acts
must be unequivocal,
must have relation to
one agreement relied
upon and to no other.
- High level of standard
written
document)
Wrong
documentation.
Supposed to
have a will
written up, but it
ends up being a
power of
attorney
Issu
e: Whether the
acts of part
performance
override the
statute of
frauds?
Maddison v. Alderson (1883)- acts must suggest that you were expecting to get the land (NO
LONGER APPLICABLE IN CANADA)
REQUISITE TEST BUT, as long as there is some part performance that is not inconsistent with the
oral agreement, then the agreement would be enforced (Stedman v. Stedman)
Provender v. Wood in 1600s a third party COULD sue RATIO: party to whom
the benefit of the promise is the one who brings the action
ISSUE: could
the plaintiff (the groom,
son of the decased, father)
sue on the contract which
was made for the benefit?
HELD: NO! son cant sue:
he wasnt privy to the K.
The son have not provided
consideration, therefore,
does not have privity of
contract
RATIO: No stranger to
the consideration of a contract
can take advantage of the
contract even if it has been
made for his/her benefit
Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. 1915, H.L
FACTS
A price maintenance
scheme
RATIO:
- No
stranger to a
77
- Privity
tire in liquidated damages
promise not to sell below the list price.
is a fundamental
Dunlop sells tires to
(There is also no consideration between the principle of
Selfridge and tells them
two parties) and no agency, which would
English law
to promise not to sell
permit
it
- If an
below list price
Justice: Appeal ought to fail In the law of
Selfridge gets tires from
agency can be legit
Dew and sells them below England certain principles are fundamental. established then the
1. A person who is a party to a contract suit may
list price
can sue on it
successfully be
Dunlop sues Selfridge for
2.
If
a
person
with
whom
a
contract
not
argued by the
breach of an agreement
under seal has been made is to be
principle against the
with Dew to not sell below
able to enforce it consideration must person with whom
list price
have been given by him to the
the agent
Selfridge is the third
promisor or to some other person at
contracted with.
party
the promisors request
Dunlop says that Dew
3. A principal not named in the
was acting as their
contract may sue upon it if the
agent, while they were
promise really contracted as his
the principle
agent. But, in order to entitle him so
However, no evidence of
to sue, he must have given
this relationship
consideration either personally or
If agency, what did
through the promise, acting as his
Dunlop do, or forbear
agent in giving it.
to do, in a question
with Selfridge?
Liquidated damages are a genuine pre estimated cost of not fulfilling the contract
Puts the burden on the defendant instead of the plaintiff in proving damages
A Third Party may Acquire the Benefit through:
(When the Privity rule does not apply)
a) Statute: Insurance Legislation claiming insurance money owed to you (contract was
between the insured person and the insurance company) Insurance Act R.S.O. 1990, c. I.8
- Survivor has the right to sue the insurance company for the compensation!
Also with consumer protection legislation (Not in Ontario, they have another way of enforcing
contacts on manufacturers. This is done through multi level contracts)
b) Specific Performance:
- the common law did not specifically enforce contractual obligations except those to pay money
Specific Performance of other contractual obligations was available only through equity.
RATIO:
-The remedy of
specific performance may be
useful for circumventing the
doctrine of privity
performance
- The strict law of Privity still
exists in both English and
Canadian law. However,
Dennings reasoning of
joining two parties to bring
an action (procedural
method) would probably
be tried in a Canadian
court.
- Mutuality is a ground in
favour of specific
performance.
Note: Lord Denning she can do it both ways- where the contract is made for the
benefit of third person, who has legit interest in enforcing it , it can be enforced by the third party in the
name o the contracting party or jointly with him. Lord Reed- that third party can bring action is not
consistent with common held view- Lord Denning was wrong to say that because she stands to personally
benefit she has right to sue. The only way she can sue is as an admin to the estate.
IMPT: Specific performance is an acceptable remedy of this case and is only way in
which the estate can enforce
c): Trust: Arise in circumstances where property is held by a person (trustee) to deal
with property for benefit of third person (beneficiaries). Once the trust is established the
beneficiaries is entitled to enforce the trust or obligations directly. Express words of a trust are not
required but there has to be some type of evidence that establishes an intention to create a trust.
A promise to benefit a third person is some type of evidence that a trust is in existence.
ISSUE:
driving the car with
permission held in
trust by the father for
the benefit of the
daughter?
HELD: NO! 1) she is
not party in the
contract btwn the
insurance company
and herself 2) no
evidence that the
father had any
intention to create a
beneficiary interest for
RATIO:
- A trust will only arise
to benefit a third party
beneficiary in
circumstances where it
is clear that the parties
actually intended to
create a trust
relationship
79
if promisee is
contracting as
agent on behalf
of third party,
doctrine of
privity has no
application
between the
third party and
the promisor
the success of
agency
argument will
depend on
whether:
Four point test
to show
agency. If
agency, no
longer a privity
problem.
1. THE THIRD
PARTY WAS
INTENDED TO
RECEIVE
BENEFIT
80
UNDER THE
CONTRACT
2. THE
PROMISEE IS
ACTING AS
AGENT FOR
THE THIRD
PARTY (I.E.
RELATIONSHIP
AND HOW
DONE IN PAST)
3. PROMISEE
HAS
AUTHORITY
FROM THIRD
PARTY TO ACT
AS ITS AGENT
4.
CONSIDERATIO
N MUST MOVE
FROM THE
THIRD PARTY
(NZ PROVIDED
BENEFIT TO
PURCHASERS)
Employment
True exception to the doctrine of privity
London Drugs LTD v Kuehne & Nagel International LTD 1992 SCC
FACTS
London storing
transformer in
warehouse
Movers damaged
transformer when
moving it - $33500 in
damages
London makes claim to
warehouse
Warehouse says that
they only took limited
liability of $40, thats
all they get if dont
exercise reasonable
care and diligence
London sues two
employees for
negligence
Employees argue they
should be cut some
slack and should come
under limited liability
coverage of owner
London argues wording
of contract
warehouseman no
indication that it
includes employees of
warehouse
-
ISSUE
RATIO
The employee
Whether the contract btwn E and the province
exception made in
negated the duty of care owned by the
London drugs is
engineers to E which would otherwise had
dependent on
arisen on the facts pleaded?
intention of the
Whether the Engineers not being parties to the
parties and not just
contract could claim the benefit of its
as their status as
exclusion of liability for the representation of
employees
the tender documents.
HELD
Where 3rd party is an
No ND cant rely on the clause!
independent
London drugs doesnt apply because the clause
contractor or
wasnt intended to protect the engineers
professional body
They have their own capacity to get their own
where it can be
protection.
assumed they
REASONS
insure themselves,
Contractor E was relying on the accuracy of the
it cant come
engineers ND design just as much as after it
under insurance of
entered into contract with BC and before
contracting body
Neither the ministry of contractor ever
Exception to
assumed the risk of errors
employee rule
Clause cited in contract absolved BC from any
from London
liability- does not purport to protect
Drug
engineers from liability
In order for third party to seek protection under
exclusion clause must demonstrate that the
contract clause provides protection or should
be implication (i.e. like warehouse man where
we implied employees) provide protection for
the very persons that are claiming the benefit
Limited clause did not seek to protect
engineers- did not give rise to inference that
ND should have the benefit of the exclusion
clause
Subrogation
Fraser River Pile & Dredge LTD v Can-Dive Services LTD 1993 SCC
FACTS
2 parties: Fraser River and
insurance company
Fraser provides ships charter
ships to Can-Dive
Can-Dive sinks a ship that
belongs to Fraser
Clause with insurance company
waived right of subrogation
against any charterer cant sue
charterer waived right to sue
(aka if loss is caused by
charterer we will not step in your
shoes)
Insurance company and Fraser
get together and modify contract
waive right to waive right to
sue- meaning Ins will step in for
FR
Insurance contracts can always
be modified
Modified contract has nothing to do
with Can-Dive (3rd party)- Can dive
being sued but want to rely on this
clause that says I cant be suedINS company you waived that rightcant suspend the waiver of that
right in side agr- but are they privy
to this contract such that they can
rely on this clause?
stranger to the
contract on the basis
of principled
exception to the
doctrine of privity
established in lond.
HELD: YES! for CanDive. Cant change
after the event (the
sinking of ship).
Could of altered it
before.- cant revoke
once the benefit is
developed.
Subrogation: i.e.
insurance company
gives you the money,
but stands in your
shoes to sue for the
damages done to you
A principled
exception to privity
Contingent Agreements
November 26, 2015
84
When there is a condition subject to third party, the SCC will not
provide a unilateral waiver.
Effect is for the parties to provide a clause in the contract
to mention that something is in the interest of the
purchaser and it can be waived.
EXAM:
o 2 hour closed book examination
o 1 hour Canadian and hour American
o The importance of time management***
Common mistake of spending money on 1 question.
o Easier to get first 60 percent of a question that the last 40%
o 1 or 2 hypothetical questions. 1 or 2 short answer
o Dont try to pick subjects. Exam favours knowledge of everything
o Will get Table of Contents from the casebook.
o Importance on SCC and Ontario Court of Appeals Cases.
o Hypotheticals
Identify issues, and render advise!
Common mistake is to recite the facts. Not good idea.
However, identify the LRFs
Answer: This is a question regarding! Is it this, if so, these
consequences flow. If not, these consequences flow. It is more
likely that it is this (conclusion)!
o Have confidence in yourself!
Representations next class Up to to page 390 is going to be examinable
Representations
Rescission
1. It is commonly used to denote the setting aside of a contract because of
some defect affecting its formation, such as misrepresentation, duress or
undue influence
2. It is also used to describe the discharge of an existing contract by
subsequent agreement of the parties.
3. It is incorrectly, but commonly, used to refer to the situation in which an
innocent party is discharged from having to carry out his or her obligations
under the contract because of the other partys serious breach of contract or
failure to perform. Here, the contract is not wiped out but, on the contrary,
the innocent party is entitled to be compensated by virtue of its previous
existence to the extent necessary to put him or her in the position he or she
would have been in had the contract been performed
The effect of a suit for rescission, on the other hand, is to determine that the
contract is one that ought not to be enforced. Hence, any monetary award
made upon rescission should have as its object the restoration of the parties
to their pre-contract positions
86
Issue
Reasoni
ng
Solicitor negotiates to buy part of practice and a house. R says the firm earns 300-400 / year, but documents show 200.
Further documents provided but not looked at apparently show a further income. Buys the home (precondition of
contract) and joins the practice. Realizes practice is useless. Seller is suing for specific performance, counter-claim for
rescission and damages. Argues he was induced by misrepresentation about the finances.
CA: could the defendant rescind the contract as a result of the alleged misrepresentation by the plaintiff?
Trial: for plaintiff.
CA: Yes- for the defendant, counter-claim held.
Trial: because he didnt review the documents that were false he could not have relied on them and therefore was not
induced by them.
CA: when a person makes a material misrepresentation to another inducing him to entire into a contract and as a result
the other person enters into the contract, the law infers that he was induced by the representation to enter into the
contract.
87
In order to take away the remedy of rescission from the aggrieved party you must demonstrate either (1)
aggrieved person first had knowledge of the facts contrary to representation; (2) states or showed by his conduct that he
did not rely on representation.
Ratio
In this case there was no evidence that he didnt rely on the inducement to enter in the contract.
When a person makes a material misrepresentation to another to induce the other to enter into the contract it is
an inference of the law that he was induced by the misrepresentation to enter into it and the representation being
untrue is a sufficient ground for rescinding the contract.(2 exceptions that arise in fact scenario)
Note: misrepresentation must relate to a material matter
Material misrep. must be considered by any reasonable person to be relevant to the decision to enter into the contract.
Issue
Reasoni
ng
Ratio
Offer of sale of a house, current tenant was described as a most desirable tenant. Defendants agree to buy the hotel.
Tenant then goes bankrupt. Defendants refuse to complete transaction. Plaintiff bring suit for spec. Performance.
Defendants claim the description of the tenants virtues amounted was a misrepresentation. Plaintiffs argue the reference
to the tenant was a mere opinion and not a statement of fact.
Can a statement of opinion serve as a basis for rescission due to misrepresentation?
H: Yes.
-if the facts are not equally known to both sides, then a statement of opinion by one person who is in the position to best
know the facts, the opinion is deemed to be a statement of fact, which justifies the opinion.
In applying the above rationale to the case, the landlord knew all the relations, which was not conferred to the seller,
such as when the tenant did not pay his rent perfectly.
A statement of opinion can serve as a basis for rescission
If the facts are not equally known to both sides, then a statement of opinion by the one who
knows the facts best involves very often a statement of a material fact, for he impliedly states
that he knows facts which justify his opinion.
Bank of British Columbia v Wren Developments LTD 1973 BC SC
Facts
Issue
Reasoni
ng
P claims for $25K against Allan and Wren, as they have signed written guarantees for a loan given by the bank. Alan is
a director for the company so he signs the guarantees. Wren defaults on the loan payments. There are a series of
negotiations and guarantees in which Wren deposits shares in the bank as collateral on the loan. Smith (another
director) asks for release of some shares without Alan knowing. Loan comes up for renegotiation; Alan gives new
guarantee. Alan finds out that Smith had made satisfactory arrangements for the payment of the loan and signed a new
guarantee, only routine procedure for Alan to sign. Company defaults on the loan and they go after Allan as a guarantor.
I: Is the defendant, Allan, liable for the balance of the amount claimed under and by virtue of
his written guarantees?
H: NO
When Allan signs the second guarantee, he was misled by words, acts, and conduct of the bank into believing there had
been NO change in the security (shares) held by the plaintiff, otherwise he wouldnt have signed the second guarantee.
The bank was seen as negligent which was the misrepresentation.
When Allen signed the second guarantee, he was misled by the actions and conduct of plaintiff;
88
mislead into believing that there was no change in the collateral of securities, otherwise they
come to conclusion that he would not sign guarantee; unilateral mistake on Allens behalf,
induced by the P in a failure to disclose the relevant facts to him. Allan is not liable on the
second collateral agreement b/c there was a defect in the formation of the contract due to
misrepresentation; bank was negligent b/c shares were not released properly Smith acting a
lone
Misrepresentation of terms can result from a combination of words, acts, and conduct on the part of the party
making them
Ratio
K purchases shares of a hotel from D (gave up two of their properties and mortgages moved in and worked there) K
learns misrep of the past earnings of the hotel stop making mortgage payments. D sell interest in one of the pieces of
land and tear down existing building. K claims fraud.
Doctrine of Laches: an equitable doctrine which is a defense that may be raised in a case in which the defendants
position has been prejudiced by the plaintiffs delay in taking action.
Election: In such cases the question is, has the person on whom the fraud was practiced, having notice of the fraud,
elected not to avoid the contract?
Could the court order rescission even though one of the properties could not be given back to
the appellant in the original state?
Issue
Reasoni
ng
Ratio
Did the appellant by conduct, word, or silence, 1) elect to affirm the exchange? And 2) whether
their claim is barred by latches?
H: Damages awarded to the appellants (rescission not possible)
(1) property which they acquired by fraud should not bar their action by rescission unless its impractical or unjust to the
R that it ought not to be imposed on a guilty party.
- Rescission is an equitable remedy - court has power to order that the aggrieved party pay money compensation in
order to affect substantial restitution under a decree for rescission.
(2) If the party had the right to avoid the contract by their own words, conduct and lapse of time (it took them a year to
bring it forward!) elect to adhere to it; the other party has a defense against a suit or rescission.
- Obligation existed to continue to manage the hotel and could not have transferred it back prior to a court order.
Barred by laches? Letter to D put them on notice for a proposed action against them. - No prejudice because they were
put on notice.
1) Rescissions is an equitable remedy and the courts have the power to order a
power to pay money compensation to the other party, in order to effect substantial
restitution under a decree for rescission.
2) If the party who had a right to avoid a contract by word or actions, definitively
elected to adhere to it, the other party has a complete defence to any proceedings
for rescission.
3) If the party has done with regard to lapse of time or delay put the other party in a
situation in which it would be unjust to give a remedy, the doctrine of latches will
apply.
Issue
-H (buyer) are rubber merchants, underwrote a large number of shares in Rubber company.
-any prospectus for the company? which there is not. suggests they are bringing it out - good enough for the B.
-Value of the shares drop B brings action against appellant for fraudulent misrepresentation and in
the alternative for damages for breach of warrantee.
Was the statement that the company was a rubber company a collateral contract (was it a
warrantee) or was it merely an innocent misrepresentation?
Can you claim damages for innocent misrepresentation?
It was an innocent misrepresentation and you cannot claim damages for innocent
89
Reasoni
ng
Ratio
misrepresentations?
Not contested that the A said it was a rubber company. A have to show a warrantee, a contract
collateral to the main contract to take shares. The main contract here was for the sale of the
shares, it entailed application for shares in the rubber company. Collateral contract was the
guarantee that this was a rubber company. In consideration of the other company purchasing
shares, the rubber company was warranting that they were a rubber company.
- not contested that the company was presented as a rubber company.
- H have to show a warranty (a collateral contract to the main contract to take shares whereby the appellants in
consideration of the respondents in taking the shares promise that the company itself was a rubber company).
A warranty exists when there is an affirmation at the time of the sale provided it appears on evidence to be so intended.
In this case there is no evidence to support the existence of this contract.
- statement in saying that the company was rubber company was simply an answer to a question, a statement of fact. No
intention for a warranty to develop.
A person is not liable in damages in any way for an innocent misrepresentation. In order to establish a cause for
damages, the statement must be fraudulent or made recklessly without care (negligently). Must have evidence of
intention between parties to create a warranty
--As a proposition of law that the affirmation of the time of sale is a warrantee provided that it
appears on the evidence to be so implied. The present case is an absence of evidence to
support a collateral contract. There statement in response to the inquiry by R was a mere
statement of fact. The statement in responses to the inquiry by R was a mere statement of
fact, in response to a question of information, it was not meant to be a warrantee. Statement
was innocently made which gives no right to damages in law. Absolutely no evidence of an
intention on either or both of the parties that there should be contractual liability in regards to
the statement regarding the rubber company.
Principle of law a person is not liable in damages for innocent misrepresentation. In order to
establish a cause of action for damages the statement must be fraudulent or recklessly made.
An affirmation at the time of sale is a warranty provided it appears on the evidence
to be so intended.
Principle of law a person is not liable in damages for innocent misrepresentation no
matter in what way or in what form it is made.
Reasoni
ng
Ratio
act on it, and it induces him to act on it by entering into the contract, that is prima
facie grounds for inferring that the representation is warranty.
2) The maker of the misrepresentation can rebut this inference, if he can show that
it was really an innocent misrepresentation that he was innocent in fault in making
it and it would not be reasonable in these circumstance for him to be bound by it.
Ratio
Buyer buys oil painting from seller and seller says it was painted by Constable and is on label on pack of picture and on
bill of lading. 5 years pass and b advised it wasnt constable and brings claim for rescission.
I: Whether the buyer is entitled to rescind the contract after he accepted the painting and had
it for 5 years?
H: NO
Court emphasized the action was for rescission and not damages because damages werent claimed by plaintiff.
Term here was a condition - if he came in proper time he could have rejected the goods (SofG Act), but the right to
reject for breach of condition is limited by rule that once buyer has accepted or deemed to accept the goods in
performance of contract, he cannot thereafter reject the goods and is confined in his claim for damages.
Condition = term of contract of the most material nature and a claim to reject for breach of condition is barred then a
claim for rescission on the ground of innocent misrepresentation is also barred.
You are deemed to accept the goods and you retain them and you do not intimate to the seller that you are rejecting
them.
If the term of the contract was a condition, the buyer could reject the picture for breach of the condition at any
time before he accepted it or was deemed to have accepted it, whereas, if it was only a warranty, he could not
reject it but was confined to a claim for damages.
On a contract for sale of goods, an innocent misrepresentation may in proper case be a ground for rescission even
though the contract has been executed but once the buyer is deemed to have accepted the goods, the claim is
barred.
91