OFFER

A contract requires an offer and an acceptance (Canadian Dyers v Burton).

OFFER – An offer is an expression by reasonable interpretation of their words or conduct of a willingness to be
legally bound on certain terms upon acceptance by the offeree.

a. Offer
i. Not an invitation to treat (Canadian Dyers)
ii. Not quotation of price(Canadian Dyers)
iii. Counter-offer or rejection of offer terminates the offer. (Livingstone – cannot
reduce price) – distinguished from mere inquiry as to change in price
b. Expression
i. The offer must be communicated (Blair v Western Mutual) in a clear and
unequivocal manner, with the intent to be legally bound
ii. Words & conduct used in light of the circumstances. Negotiations stage? Conduct?
Material terms settled? Subsequent conduct? Language to be legally bound? Prior
dealings? Customs?
iii. Not mere inquiry
c. Reasonable interpretation
i. Intent of the offerer based on objective reasonable interpretation of one’s words,
conduct, action manifested (Canadian Dyers v Burton, Carlil Carbolic Smoke Ball)
d. Willingness to be bound – presumed unless domestic/social arrangements. See defects.
e. Terms
i. EXPRESS - Terms must be read in its clear and obvious meaning as an ordinary
person would understand it (carlil carbolic smoke ball - ads)
ii. IMPLIED –
iii. Defects –Where a term is vague or silent as to a material term, courts will try to
give meaning to the term so long as the party intended to contract– Follow the
meeting of the minds.(CAE assurances & best efforts, Hillas & Foley – mechanism to
determine prices)
CAE Test: 1) was contract intended? 2) was the agreement so vague, uncertain, or
incomplete as to render the contract null and void?
a. Vague material terms will be given meaning through an objective
approach -Language of terms, context of parties, reference to
mechanism, conduct of parties (part performance?), existing dealings,
customs, statute, reasonableness, additional negotiations
b. Silent material termsmay result in no contract. (May v Butcher) The key
diff is Hillas and Foley thought of the incomplete term in advance and set
up a determination mechanism to preserve flexibility.Butcher’s
arbitration clause was not directed at a single term – it was used it as a
last resort to save the contract despite its defects. Courts were right to
find a meeting of the mind in the Hillas, Foley, and not in Butcher.
i. “agreement to contract” (agreement to negotiate in future –
May v Butcher)
ii. “agreement to agree” (binding formula/arbitration - Foley,
mechanism that is consistent – hillas on price)
 iv. Battle of the Forms(usually in commercial context)
1. Last Shot Rule: stipulates that last set of terms without objection is the
one recognized in law (Butler Machine)Assumes that commercial parties
are knowledgeable and have read last set of rules/caveat emptor.First
blow used in (Tywood Industries v St Anne Pulp) when “last shot” tried to
smuggle in terms explicitly rejected during negotiations.Modern Principle:
Look for meeting of the minds.
f. Limits
i. No limit on who the offer is made to (Carbolic smoke ball)
ii. Cannot impose contract by asking offeree to take positive action to refute the
contract (Felthouse v Bindley)
g. Revocation& Lapse
i. Offeror can revoke offer at any time to the offeree, but it must be communicated
to the offeree. (Dickson v Dodds)
1. Communication–revocation not effective until communicated& received
by the offeree, so postal rule does not apply (Bryne v Van Tienhoven) Note
– does not have to be direct (Dickson Dodds)
2. Limit: unilateral contracts may not be revoked once offeree has
unequivocally commenced performance (Errington v Errington)
a. Type of contract: options contract, tenders
3. Result: Offeree with reliable knowledge of the revocation cannot accept
the offer (regardless of where that knowledge came from) – Dickson v
Dodds
ii. Lapse - Offer lapse after a fixed time set by the offer or a reasonable period of
time(Barrick v Clark).Reasonable factors include: nature & circumstance, language
used, nature of business, previous conduct, modes of communication, customs
ACCEPTANCE –communication of expression by words or conduct, of assent to the terms of the offer
(livingstone)

a. Unilateral offers -Courts generally presume contracts to be bilateral. In unilateral contracts, an offer is
to be accepted through performance by offeree in accordance to the acts identified in the offer. (Carlil)
b. Counter Offers - Counter-offer or rejection of offer terminates the offer. (Livingstone – cannot reduce
price) – distinguished from mere inquiry as to change in price
iii. Counter-offer may be construed to revive the original offer (cannot reduce price – rejected
lower price & revived original price in Livingstone)
Bilateral Offers
a. Communication
iv. Acceptance mus be communicated to the offeror (lost mail – Holwell) unless permitted
otherwise (unilateral contract)
b. Expression
v. Must be clear and unequivocal
vi. Silence does not constitute acceptance (Consumer Protection Act s. 13) unless in
situations of continuing relationships (st john tug) or where it would be intepreted to
constitute acceptance.
c. Medium of Expression
vii. General receipt (also instantaeous): acceptance occurs when it is communicated to the
offeror (Brinkibon).
viii. POSTAL RULE: acceptance occurs when it is in custody of post office, (Household Fire &
Carriage Accident Insurance)
1. LIMIT: Must be allowed and no intent to the contrary (Holwell securities –
acceptance in writing ).
2. Acceptance in writing = requires offeree to see the acceptance letter, thus
postal rule does not apply
d. Words or conduct
ix. Mirror Image Rule:
1. Time (Holwell – notice within 6 months)
2. Manner (Carlil–buy the ball, use it, get sick, within time)
e. Assent to terms
x. Mirror Image Rule: Acceptance must correspond with the terms of the offer (Eliason v
Henshaw, ProCD v Zeidenberg)
xi. Two cross offers does not make a contract (Tinn v Hoffman)
xii. Offerree must know of the offer to accept (William v Cawardine) – motive irrelevant
f. Terms
xiii. Terms include the means & method which it is to be accepted (Carlil)
g. of the Offer
xiv. Cannot accept offer if it does not exist - offeree with reliable knowledge of the
revocation cannot accept (Dickson v Dodds)
 TENDERING & BIDDING

 Traditional Analysis
a. Invitation to treat –Owner invites parties to bid on contract
b. Offer: Tenderers bid on project
c. Acceptance: Owner accepts the winning project

 Contract A/ Contract B Analysis (Ron Engineering, MJB)

a. Contract A (Unilateral)
a. Offer: Owner invites tenderers to bid on the project (offer to contract)
b. Acceptance: Tenderers submits bids(submittingcontract B’s offer)
b. Owner selects the winning bid
a. Implied term that only compliant bids can be selected, but no obligation to select
the lowest bidder (MJB)
c. Contract B
a. Offer: Per contract A’s terms, tenderer’s bid is the offer
b. Acceptance: Owner accepts the tender’s bid

Key Features to look for

a. Owner’s offer to contract A – is it invitation to treat OR offer to contract?

b. Are bids irrevocable, per terms of contract A?

Some observations

a. Traditional analysis bad for tenderers

The owner has right not to accept any bids or abide by contract law because the offer is one to treat and
not an offer. Unprotected reliance interest by the tenderers cannot be recovered in common law.

b. Tenderers have no obligation prior to submitting bid

c. Winning Tenderer is on the hook, everyone else is let off

After owner chooses a tenderer, all others are released from contract A obligation. But once the
tendering process closes, the winning tenderer cannot back out –the only way out is either performance
or breach.

d. Revocation not allowed

a. By Owner - Contract A is an unilateral contract, thus the owner under A/B analysis cannot
rescind its offer once the tenderers undertook clearly and obviously to prepare for bidding.
b. By Tenderer– if contract A says so, bid may not be revocable.

e. Winner’s breach forfeits deposit

Tenderer is the one performing service for payment, so Tenderer’s money sum = deposit to bind the
agreement.In case of breach by the winning bidder, it is not returned.
 Consideration

For contractual promises to be enforceable in law, there must be consideration, which consists of an
act, forbearance or promise thereof in exchange for other party’s act, forbearance or promise. It must
move from the promisee, with sufficient value in eyes of the law to be performed in exchange for the
promise.

a. Consideration
a. Necessary for the enforcement of contractual promises (Dalhousie College, Thomas v
Thomas)
b. Act, forbearance, or promise thereof
a. Act – Carlil to buy smoke ball, to use it in certain frequency, to contract illness
b. Forbearance – BDC v Arkin forgoing the legal entitlement to sue
c. Promise thereof – Wood v Lucy promise of reasonable efforts,
d. Etc.–right, interest, profit, or benefit accruing to the one party, or some forbearance,
detriment, loss or responsibility, given, suffered, or undertaken by the other (Currie v
Misa)
c. Requested by the other party
a. If not requested, doesn't count (Brantford General, Thomas v Thomas)
d. Move from the promisee
a. Thomas v Thomas – not promise of Mr Thomas, Dal College – not promise of other
donors
e. Value in the eyes of the law
a. Peppercorn(Thomas v Thomas – one dollar nominal rent)but NOT Moral obligation
(Eastwood v Keyon – repayment for upbringing)
b. Past considerationis generally not good consideration (Eastwood v Keyon)unless
performance is
1. Done at the request of promisor, and
2. Understood at the time that payment will follow, and
3. If promised in advance, the benefit would have been legally
enforceable(Lampleigh v Brathwait, Pao On)
c. Pre-existing legal dutyis generally not good consideration, unlesswhen
additional obligations or benefits are created.
i. PUBLIC DUTY of itself is usually not enough, but additionally created legal
obligation or benefit may be sufficient(child flourishingmore than fulfillingduty to look
after child in Ward v Byham, additional security in Glassbrook Bros v Glamorgan, but NOT public
duty to testify at trial in Collins v Godefroy)
ii. DUTY TO 3rd PARTIES is usually enforceable as it creates a separate legal
obligation, allowing the promisee to enforce the promise(Promise not to sell shares
enforceable by promisee - Pao on, promise to marry enforceable by uncle in Shadwell)
iii. DUTY TO PROMISOR is generally not sufficient for new consideration, unless
providing practical benefits.There cannot be duress or unconscionability in
 extracting such a promise. (William v Roffey Bros, NAV)ASK FIRST: was there mutual
agreement to modify terms?
1. Not sufficient -Ship dutiesinStilk v Myrick, Gilbert Steel – promise to pay more
still = promise to pay, not a new consideration)
2. Unless practical benefits - timely completion in William v Roffey Bros, )
3. No Duress/Unconscionability
1) NAV CAN APPROACH:
Two Conditions must be present to find duress:
1) Causation
the promise must be extracted as a result of the exercise of pressure (look for
demand or threat);
2) No practical alternative
the pressure must be such that the coerced party had no practical alternative but
to agree. (NAV Can)
Whether duress is present is then determined by whether there was
consent by coerced party
i. Promise supported by Consideration?
ii. Promise made “under protest” or “with prejudice”?
iii. Reasonable steps taken to disaffirm ASAP?
d. Promise To Accept Lessis allowed through a mutual exchange of promises
(Mercantile Law Amendment Act s. 16 (ON)
1. (Modern) Statute-Mercantile Law Amendment Acts.
16(ON),Judicature Act 2000 (AB)mutual exchange of promises is
sufficient to discharge parties from remaining contractual obligations
– part payment in satisfaction does not requires consideration.
a. S. 16 part performance either before or after a breach shall be
held to extinguish the obligation:
i. when expressly accepted by creditor in satisfaction
ii. when rendered pursuant to an agreement for that
purpose though without any new consideration.
2. (HISTORY) Promise to accept less used to not constitute good consideration
to discharge a party from full legal obligation. (Foakes v Beer) The Traditional
Exception is accord & Satisfaction where mutual exchange of promises and
consideration release the parties from remaining contractual obligations.
(Foot v Rawlings)
a. Foakes v Beer - payment of a smaller sum cannot satisfy as
consideration for the discharge of the entire debt (Foakes v Beer)
b. Accord&Satisfaction (Foot v Rawlings)Accordis the mutual exchange
of promises, supported by consideration, that part performance
release parties from contractual obligation. Satisfaction is the legal
“consideration” which binds the parties to the agreement.
i. Consideration may be less than the original contracted
amount (subjectively beneficial), but needs to be a different
method (cheque v cash in Foot v Rawlings)
 ii. Mechanism - The accord suspends the enforcement of the
contractual obligation, until satisfaction where obligations are
mutually released for both parties.
iii. Creditor Breach of accord - Where the creditor breaches the
accord, the debtor can bring an action on
e. (Promissory Estoppel)where in an existing contractual relationship one party promises
to release the other from certain obligations, that party may be estopped to enforce pre-
promise obligations. (high Trees) Equity is at the heart of PE (high Trees)
i. Existing contract – there must be consideration for the initial contract
ii. Promise– clear and unequivocal, indicating that the promisor intended the promise
to be taken seriously and alter the legal relations of the contract (John Burrows)
1. clear and unequivocal, indicating that the promisor intended the promise to be
taken seriously and alter the legal relations of the contract (John Burrows)
2. Implied from words and conduct – (saskachewan River bungalows – tehcnically
out of force and require immediate payment)
3. (Italo Belge) non-protest at late declaration of shipment, but later changed
mind
4. (ESTOPPED) Creditors may be bound by “indulgences”. (not in John Burrows
tho)
iii. Intention to change legal relations
1. John Burrows – distinguish a gratuitous promise/friendly gesture
2. Delay in pursuing enforcement does not automatically estop legal obligations
(Brown v Brown – child support payments cannot be estopped by delay)
iv. Reliance: The promisee must have clearlyaltered its position in reliance of such
promise, such that it will be inequitable for the promisor to go back on the promise.
1. Detriment
2. Caused by the reversal of the promise
3. Clear reliance by the promisee: Changing course of position, planned,
organized affairs due to the given promise, thus altering legal position (Societe
Italo, Ryan v Moore)
4. Equity –inequitable for promisor to go back on promise
a. (Societe Italo – no detriment as reliance was short + no clear harm. There was
reliance, but no inequity demanding promisors to forgo rights)
b. (SK River Bungalow – cannot rely on something you didn’t know)
v. Balancing the Equities - promissory estoppel shall be denied where there is
inequitable conduct by the promisee. (D&C Builders v Rees)
vi. RETRACTION of the promise- a promisor can resile from its promise by giving
reasonable notice to the promisee, that allows the promisee a reasonable
opportunity to resume its position (I changed my mind & want to enforce rights, must
give reasonable notice) – SK RIVER
1. Notice (Saskachewan River Bungalow, High Trees) Give promisee
reasonable opportunity to resume position
 2. Equity: Not impossible or inequitable for the promisee to resume, but
implied that reliance is still required (no knowledge = no reliance = no
inequity)
vii. Shield not sword – PE not used as a cause of action. (Combe v Combe)
1. There must be consideration in the intial contract
2. PE only addresses inequities of a contractual nature (societal inequities -
support pyaments in combe )
a. Formality
a. Promises under seal – a deed must be signed, sealed and delivered with the formality
of an actual or implied seal through photostatic copy or symbol. The parties must have
intended objectively to create an instrument under seal. (RBC v Kiska)
i. NO: Bracketed word “seal” is insufficient (RBC v Kiska), the presence of the
words “signed sealed and delivered”
ii. YES: words “signed sealed delivered” followed by signature and copies of the
deed with darkened spots resembly photostatic copy of actual seal, instrument
executed in front of lawyer.
iii. YES: Document shows combination of principle circle containing the letters LS
and a signature.
b. Formality: the requirements of writing
i. Statute - Governed by the Statute of Frauds. Other legislation overlays this
piece of legislation such as the Consumer Protection Act, Family Law Act,
Copyright Act.
1. S.4 provides for the types of contract that requires writing to be
enforceable:
b. Contracts to charge executor on promise to answer
damages from own estate
- Executor says: if there’s no more money in dead man’s
chest, I’ll pay the difference
c. Contracts made upon consideration of marriage
a. Not engagement (promises to marry). E.g. I pay you if we
marry
d. Contracts to answer for debts, defaults or miscarriage of
another person
a. ONLY apply to guarrantees – a secondary liability only
when the orignal debtor cannot pay up. See idemnity
where it is an original liability. One special feature is that
no benefit flows to the guarrantor, thus consideration
comes from forbearance of suing or the granting of the
original sum/loan
e. Contracts not to be performed within a year
a. Paternalism where the court thinks peoples memories
aren’t that great. Criticized for over broadness in that
contracts may be made in contemplation of performance
 in the future, but litigated promptly after creation of the
contract. Over narrow since limitation period is two
years, and some contracts will be brought long after one
year mark passed (criticism directed at inconsistency of
paternalism on limitation periods and the writing
requirement for this type of contract)
f. Contracts for the sale or interest in land
i. Non-compliance with the Statute of Frauds, formality of writing will result
in…UNENFORCEABILTIY
a. But can still be valid consideration for other contracts, and rely
on this contract in defence of another claim. Analysis under
equity also possible.
ii. Notice in writing means the notice must be received by the other party & that
postal rule does not apply

William v Blair - In blair the situation was that of a secretary who saw the metionoing of a sum of money
given to her after retirement, but never formally spoken of to her. This communication was deemed not
to be directed towards Blair and as such no offer was created.

There are certain actions, language, behavior that needs to be used to create legal relations
between the party. This is where contract law protects people from creating unintended legal
relations by a passing comment.

In William the eyewitness to the murder claimed the reward even though his motive was not to gain the
reward. The information provided was what was sought in the offer. The manner it was given is in
accordance. It met all the terms of the offer. Key difference from Blair is that Clarke did have knowledge
of the offer (required).

In Blair, the requisite actions were not performed (communication of the offer) and thus even
though there were the intention to perform the promise, there was no binding legal obligation
between the parties created through contract law. In William, it is the opposite where all
required elements fulfilled and thus the contract came into being without the intial intention for
the outcome.

In Clarke, he gave evidence establishing his own innocence and establishing the guilt of another. He later
sought the reward on provision of information on the case. No contract because there was no meeting
of the minds. He was isolated from the crown with no contact.

He did not know of the award. There was no communication of the offer.

ACCEPTANCE

Is it commercial or retail relationship?

 Consumer protected by Consumer Protection Act, where unsolicited goods do not impose
obligations on the consumer, (Consumer Protection Act, 2002, sec. 13)but the consumer must reject
or return the goods or destroy the benefit conferred otherwise silence or inaction may be construed
as acceptance.
 Commercial relationship are more strictly adhered to the agreement by the contract. (Butler
Machine)

contract law construction

 Usually read to give business efficacy, by examining the words, conduct and relationship of the
parties to see if an agreement was reached (tywood)

1. There is no contract unless there has been acceptance of the offer (carlil, Livingstone v Evans)
2. Acceptance is the expression, by words or conduct, expressly or implied of assent of the terms
of the offer. (livingstone)
3. It must be absolute and unequivocal (livingstone, dawson)
4. MIRROR: It must correspond with the terms of the offer. (Livingstone)
5. Acceptance must be in the manner of acceptance set out by the offer. (Eliason v.
Henshaw,proCD, Carlil, Clarke)
a. Limitations on the form of acceptance if it is by conduct prescribed by the offer is
acceptable. (Eliason)
b. In unilateral cases, acceptance is the performance of the offeree of that specific act
(Carlil).
6. The offeror cannot impose a contract by requiring the offeree to take positive action to avoid
contracting(felthouse – if you say nothing then there is a contract),
7. Silenceis generally not an acceptance (felthouse), NO CONTRACT
a. NO CONTRACT especially where the wronged party takes positive action asap to secure
rights. (Dawson)
b. NO CONTRACT –Party receiving benefit must ‘speak…to escape the inference of a
promise to pay…” (St John Tug)
c. YES CONTRACT - Prior commercial relations may creates a unique case where silence
constitute a acceptance as understood.(st John tug)
d. YES CONTRACT –Will of the parties/ in tender processes which sets out two different
contracts, or otherwise agreed (MJB)
8. “last shot” - In battle of the forms context, a contract may be formed when the last of forms are
sent without no objection taken to it. (Butler Machine Tool)taken into consideration the the
construction of the language, conduct and circumstnaces.
a. AGAINST - The “first blow” rule may apply when the litigated term is inserted without
drawing attention to it.(Tywood) It may also matter for was there objection or
acknowledgement of the supremacy of the set terms (Tywood: first shot explicitly said
no arbitration), whether there was notice (Tywood: no notice), and the materiality.
b. implication is that in the battle of the forms context, one should always make
amendments very clear and draw the other party’s attention towards it. The onus is on
 the person with the “lastshot” to make clear any changes that is detrimental to the
other party’s position.

TERMINATION

Rejection of an offer terminates an offer (livingstone). The counter-offer is an rejection of the original
offer (Livingston), Counter offers are not mere inquiries as to whether the offeror will modify its terms
and should be distinguished (livingstone)

Livingstone – the words cannot reduce price has two interpretations – I cannot reduce the price and my
original offer still stands. Or I cannot reduce the price and this does not constitute a counter offer.

Dawson – if you take me in the helicopter to find the deposit, then I will give you 10% interest. But left
with someone else and found it and staked it. Helicopter pilot argues that there was an unilateral
contract, but court recognized bilateral. If it was unilateral the pilot could withdraw at any time, thus
affect offeror ability to plan.

Usually courts don’t like unilateral contracts.

How to enforce the actions prior to a contract has occurred? Contract A, B. Tenders. Option contracts.

PROCD

Acceptance must be in the manner as prescribed. Argued that it wasn’t visible initially when tearing
open shrink wrap, but it is clear that acceptance must be in the manner as prescribed – thinking about
rules and conduct after purchasing a service. He also argue that it was not displayed at once, but the
judge thought it was more akin to flipping the pages of physical documents. Furthermore, Acceptance
was not at the time the shrinkwrap was broken, but rather clicking on the (I agree) button.

Contracts sometimes confer benefit contigent on rules. This case represents one of those cases where
the manufac of the product wants to control how the user uses it. In legal terms, the owner wants to set
mechanisms that govern the contract. It is similar to waivers of liability, or arbitration clauses that
dictates the rules of the contract, but may run into equity considerations.

Felthouse

Uncle tried to impose contract by saying if you don’t respond, then you must sell horse. Silence from the
nephew does not constitute acceptance.

St John Tug

Tug boat chartered for use with contract that was never signed, but implicitly used. The service was
even renewed several times to great benefit of the chartering party. The reliance by and the material
benefit conferred onto the silent party, and the non-objection of the silent party makes silence an
implicit acceptance to the contract. This continued silence was undesrthood by a reasonable offeree

Relating back to software and consumer goods, consumers have the option to return the goods if
unsatisfied upon inspection. If one does not wishes to contract, he must reject the physical good as well
as neutralize all benefit to himself, otherwise even unsolicited goods may create binding contract.

Butler Machine Tool

Agreement made to tear off slip, but alsosaid deal made on own terms (diff from slip) and charges price
accordingly per price variation clause. Last blow wins here, and tear off slip wins.The approach taken is
to examine the communications to see if offer and acceptance can be discerned.

Contracts between commercial parties are often strictly enforced without too much attention to
fairness as it is assumed that business will read the contracts carefully before entering one.

Tywood

First shot rule prevailed because it was not clear in the contract, and unclear about the intentions of
both parties to arbitrate, especially when first shot included no arbitration. The fact that both parties
negotiated extensively on the price and specifications meant there was a contract.

The approach is to see if there was offer and acceptance, and favour finding a contract if there was
indeed a meeting of the minds, even with minor inconsistencies, left out. The idea is to give business
efficacy to contractual agreements.

COMMUNICATION OF ACCEPTANCE

Acceptance must be communicated to the offeror unless otherwise permitted //unilateral//. (carbolic)
Communication of Acceptance must be in the manner and form prescribed by the offer. (Holwell
securities.

The normal rule(INSTANT) is that that the acceptance must be communicated to the offeror for the
contract to be msade, applies (Brinkibon v SSS).

MAIL where distance/delay is possibility –reciept by the mail office consitute acceptance if mail is an
accepted form of acceptance(Household Fire) EXCEPT: Offer expressly require acceptance reach offeror.
(Holwell Securities) Produce manifest inconvenience and absurdity.(Holwell Securities)

Cdn Courts usually follow Household fire and acknowledge that balance of burden justifying
burden of inquiry on offeror. However, one could argue that allocation of the risksshould be
ultimately settled by reference to the intentions or expectations of the parties, sound
 business practice and, occasionally, a judgment as to where the risk should lie
(Brinkibon v SSS)

TERMINATION OF OFFER

REVOCATION

What may limit the offeror’s ability to revocate:

option contracts,

tenders,

unilateral contracts

1. An offeror may revoke an offer at any time prior to acceptance, even where it has
promised to keep the offer open for a given time (Dickinson Dodds)
2. A revocation of offer is not effective until communicated to the offeree (Dickinson
Dodds)
a. An offeree with reliable knowledge of revocation cannot accept even if the
communication has not come from the offeror (Dickinson Dodds)
3. A posted revocation is only effective on receipt by the offeree (Bryne v Van Tienhoven)
4. Offer for unilateral contract may not be revoked once the offeree has unequivocally
commenced performance. (Errington v Errington)

LAPSE

An offer lapses after a time expressly fixed by the offeror. (Barrick v Clark)

If no time is stipulated, an offer lapses after a reasonable period of time (Barrick) –

languageinsisting to reply “asap’, wishes to “close immediately”, ample time to accept.

I. What is reasonable depends on nature and circumstance – language used, nature of

business, previous conduct, modes of communication, customs & traditions.

REJECTION

Rejection of an offer terminates the offer (livingstone Evans, Hyde v Wrench) Counter offer
constitutes a rejection of the original offer (livingstone) but it is distinguished from a mere
inquiry to modify terms (livingstone, stevenson v Mclean)
UNILATERAL CONTRACTS

1. Generally assume bilateral contracts(need citation)

2. Offer for unilateral contract may not be revoked once the offeree has unequivocally
commenced performance. (Errington v Errington)

Livingstone v Evans

Evans wants to sell land, offers 1800 (offer)

Livingstone – send lowest cash price, will give 1600 cash. Wire (rejection of the original offer)

Evans: cannot reduce price (oh no! is this rejection only? Or rejection+ counter offer of original
price?)

Livingstone –tries to accept offer (acceptance – but blocked by own counter offer constituting
rejection)

FORMATION OF AGREEMENT: CERTAINTY OF TERMS

Vagueness(CAE), Incomplete terms (May Butcher, Foley, Hillas)

GENERALLY: No contract is formed if an agreement lacks certainty as to the material terms of

the contract (may v butcher)Where a term is vague, or agreement is silent as to material term,
the courts try to give meaning to the term so long as the party intended to contract. (CAE -
“Assurances” and “best efforts”, Silence - hillas, foley)

CAE Approach: 1) was contract intended? 2) vague, uncertain or incomplete so as to render

null and void?

1. Vague terms will be interpreted by the courts in an objective approach that seeks reasonable
construction of factors:
a. Language of terms, context of parties, reference of parties to external
standard/mechanism, conduct of parties under contract(part performance?), existing
dealings, customs/tradition, statute, standard of reasonableness, indication of
additional negotiation(leaving material term incomplete?)

2. Where party expressly agree to leave a material term for future agreement, courts may find no
contract (may and Butcher)
Distinguish agreement to contract&agremeent to agree by conduct, language (May v
Butcher – agreement to agree)

a. NO: Agreement to negotiate a material term is not certain enough to form a contract
(Manner Enterprise v Canada)
 b. FOUND: There needs to be certainty, even if it was some binding formula, mechanism,
or standard to which the material term is determined in the future. (Hillas, Foley)
c. FOUND: Express promise to negotiate in good faith (molson)

CAE is a case about declining business volume, and gov assurance of min level of volume. Onus of proof
on gov to show no legal effect intended. Letters of assurance are construed in this case to be legally
binding. The test is one of reasonableness in gathered from the party’s outward expression. Intention
was found because the gov took on the initiative to find a buyer, was anxious and eager to find buyer,
seeking to resolve a problem. “Assurance”, “best effort”, “guarrantee” found to be not too vague, but
should consider the party’s roles (gov vs private entity)

The CAE case is really one of a “comfort letter” as in Mason v Scotia Bank. Is it merely a sales pitch or is
it intended to create legal effect? First step is to find out whether there was intention for contract, then
vagueness. If still nothing, there is still misrepresentation.

INCOMPLETE TERMS

(NO) MAY & Butcher is a case about parties wanting to leave the price (a material term) of tents
undefined to preserve some flexibility in the contract. The mechanism was not baked in in the sense
that the arbitration clause exist to resolve all issues of the contract, not specifically in reference to price.

(YES) Hillas was a case about English timber firm demanding fulfillment of lumber shipment. Material
term (dates) were left out. The quality was to be “fair specification”. The court in this case was aware of
BUTCHER, and tried to give meaning to silent term to give business efficacy. Ruling is that “fair
specification” was not too vague or uncertain. Reasons include industry customs and timber standards
are easy for experts, there was existing business relationship, and clues from other parts of the contract.

Policy: Contract law is the law of contracts, which should take into consideration the nature of
how business contracts are formed. If parties agreed to most material terms with the intention
to create legal relations, there is the reliance of the parties to find a contractual relationship.
This may be less so in cases of sophisticated parties i.e. lawyers from both sides are involved.

(YES) Foley was similar to BUTCHER in that the parties want to leave a material term undefined (price to
be agreed by the parties from time to time, but if unagreeable, determined by arbitration)Contract
enforceable because arbitration clause was explicit as tool to determine undefined terms. Additional
reasons include past relation (business ran according to contract for 3 years), reasonable quantities and
price are not too vague.

Reconciling the cases: Butcher used arbitration was some sort of catch all term as last resort, clearly
included as a last ditch effort to save the contract, while Hillas and Foley clearly thought of the
incomplete term. The difference is whether intent to leave the material term incomplete can be
acertained from the expression of the parties. If parties clearly intended for the term to be left
incomplete so as to preserve flexibility, courts should not use the incompleteness, vaguess or
uncertainty to prevent formation legal relations when parties intended otherwise. After all, courts
should try to give meaning to the term so long as the party intended to contract.

CONSIDERATION

[Enforcement of contracutal promises comes from consideration, which consists of act or forbearance or
promise thereof in exchange for other party’s act, forbearance or promise. This consideration moves
from the promisee, with sufficient value in eyes of the law to be performed in exchange for the promise.
Past consideration is generally not permissible, unless it was requested by the promisor, understood at
the time of performce that payment will follow, and if requested prior to act, the promise would be
legally enforceable.]

1. Consideration is necessary for the enforcement of contractual promises. (Dalhousie College,

Thomas v Thomas)
2. Consideration may consist of an act(Carlil) or forbearance (B. (D.C.) v. Arkin – otherwise legally
entitled i.e.not to sue), or the promise thereof (Wood v. Lucy; Thomas v. Thomas ), undertaken
in exchange in exchange for other party’s act, forbearance, or promise. (Currie v Misa)
3. Consideration must be provided in exchange for the other party’s act, forbearance or promise.
(If not requested, then doesn’t count – Brantford General, Thomas v Thomas)
4. Consideration must move from the promisee (Thomas v Thomas – not promise of Mr Thomas,
Dal College–not promise of other donors)
5. Consideration must have some value in the eye of the law (thomas v thomas)–not necessary to
be fair, adequate, or equivalent to be of sufficient consideration. Moral obligation is not good
consideration (Eastwood v Keyon, Thomas v Thomas)
6. Past Consideration is not good consideration: act done before promise was made is generally
not good consideration(Eastwood v Keyon) EXCEPT when performance done at request of
promisor, understood at time of service that payment will follow, and that if promised in
advance, the payment/benefit would have been legally enforceable. (Lampleigh v. Brathwait;
Pao On v. Lau Yiu Long)

Thomas v Thomas: Deceased asking widow to pay 1 pound per year to continue occupying the home.
The consideration is the payment of the 1 pound, in exchange for the deceased offering to rent, with
adequate value in eyes of the law (without needing to be fair or adequate, but not solely moral
obligation). Consideration moved from the promisee to promisor. Thus good consideration.

Policy: dead hand control of assets was on the side of equity in this case, but similarly a
deceased husband can create contracts that are manifestly unfair to the spouse, reflecting
economic inequality in contract law
BDC v Arkin: Forbearance or the promise thereof of an otherwise legally entitled right to sue is good
consideration. Value of the legal right is good consideration.

Eastwood kenyon: Eastwood paid for education of girl and wanted it back from her husband. Husband
made the promise and failed to do so, subsequently sued by Eastwood. Promise to repay debt was
unenforceable since the consideration (payment for education) was already past. Past consideration is
not good consideration.

Policy: moral obligations are not legally enforceable as promises in contract law.

Lampleigh v Brathwat: Lawyer does work but client does not pay up. Promise to pay occurred after the
legal work has already been performed. This past consideration was Held to be good consideration
since: 1) it was done at the request of the promisor 2) reasonable expectation of payment 3) payment or
benefit conferred would have been legally enforceable if promised in advance. In Eastwood, the
payment for educaiton was not requested.

Policy: The law recognizes that intention to enter legal relations or transactions sometimes
create situations where goods and services are conferred without formal agreement. This
exception reflects contract law retaining flexibility and accounting for how people plan and
organize their affairs based on legally binding promises and agreements.

Pao On v Lau Yiu Long: Pao’s promise not to sell shares was a pre-existing legal duty to a third
party(contract 1), but used as consideration in contract 3 for Lau. Pre-existing duty to third party may be
good consideration. The rationale is that because there is an additional burden on the promisor in the
sense that an additional party can now seek to enforce the promise.

This case involves both past consideration and pre-existing duty. Past consideration was met since it was
done at promisor request, the act was to be remunerated, and that it would be legally enforceable in
advance. Pre-existing duty to third party does not bar consideration from being legally recognized, since
Lau holds the right to enforce contract 3 against Pao (on top of his existing obligations under contract 1.

Policy: recognized that one instrument, good, service can produce multiple legal obligations,
each capable of being valid and sufficient consideration in the eyes of the law.

PRE-EXISTING LEGAL DUTY

Line of analysis: defendant using promise to someone else as consideration for the current contract
under analysis.

1. ASK: WHAT KIND OF DUTY IS IT?

Public duty –of itself is not enough – look for extra created legal obligations
Duty to 3P –enforceability by promisee is usually the created legal obligation.
Duty to promisor –usually not enough, but when providing practical benefits
2. OK PRE-EXISTING LEGAL DUTY FOUND TO BE GOOD CONSIDERATION, attend to issues of
unconscionabilty and duress.
 1. Generally a promise to perform or actual performance of duty may be good consideration.
a. (NO) If PUBLIC DUTY -the promise to perform or actual performance of a public duty is
not a good consideration, unless something extra is done or promised beyond the
requirements of the public duty (ward v Byham)– no extra (Collins v Godefroy – public
duty to testify at trial thus cannot enforce promise to pay)something extra (paying for
additional security above what was nromally required is enforceable – Glassbrook Bros v
Glamorgan)
b. (YES) If DUTY TO 3P –the performance or promise thereof usually is good consideration
as newly created legal right is enforceable by the promisee (Pao On, Shadwell)
c. (NO) DUTY TO PROMISOR –performance or promise to perform pre-existing duty owed
to promisor is not good consideration for a new contractual promise. (Stilk v Myrick –
duty to perform ship duties)(Gilbert Steel v University Construction–promise to pay
moreis still duty to pay, thus not good consideration)
i. (YES) EXCEPT when practical benefits were conferred on the promisor when the
promiseeperform or promise to perform a pre-existing legal duty (William v
Roffey Bros, Greater Fredericton Airport)Look to factors such as : practical
difficulties for the promisor, bona fide difficulties for the promisee, suggestion
for modification by the promisor (which is looking for lack of duress)
1. Did the promisor (person performing contract, asking for more) use
undue pressure and influence?Threaten life, property, money? Or is did
they have bona fide difficulties?
2. Did the promisee suggest a change to the existing contract?
3. Was there mutual intention to agree to the new terms?
d. WHEN (YES) a promise to perform a pre-existing duty is claimed to be good
consideriton, courts will attend to issues of duress. (pao on, williams v roffey bros,
greater federicton authority)
e. QUICK NOTE on estoppel:Promisee enforce promise against promisor –but cannot be
cause of action - can only be used as a shield (University Construction)

(NO) Stilk v Myrick – crew (promisor) wanted more pay when there was danger on the seas. The trouble
with their claim is that there are no new consideration on their part in exchange for more pay. The task
performed was what was already agreed on under the old contract.

Gilbert steel –Steel (promisee) provide steel to university (promisor)but raw steel prices increased and
while supplying price stayed constant. Oral agreement between the parties that good price on the first
contract is in exchange for increased price in the future. Judge found oral agremeent lacking in
consideration as it was overly vague and uncertain (promise to pay a future higher pricein exchange for
pay moreon today’s shipment). This was an existing legal duty as it was merely added credit on a larger
sum.

Roffey Bros –Subcontractor(promisee) had some difficulties on a job so the contractor(promisor) offered
more to get it done on time. Refuses to pay. Denning found the “practical benefits” conferred onto the
contractor (avoid effort, time and moneyseeking out new contractor, getting work done on time)may be
good consideration barring absence of unconscionability.

Duress (in context of using pre-existing legal duty to 3P to satisfy consideration)

Duress prevents parties from using improper pressure to generate additional benefits from their existing
legal obligations. Myrick was under direct duress as life and property was threatened. No duress was
found with Roffey bros since it was arms length business transaction and the other party was so much
more powerful with lots of options.

The Law of Duress protects parties from entering into bargains in which they have no other option, and
prevents the party exerting the pressure from taking advnatage of this situation. Thus what the law of
duress really addresses is the discrepancy between formal agreement and meeting of the minds.
Whether duress is present depends on this ultimate question: was there a meeting of the minds
between the parties as to the terms of the contract? However, this question is difficult to answer and
risks unraveling contracts agreed to and consumerated by consideration. This exception thus requires
certain conditions to bring duress into consideration – was the promise extracted by pressure and was
the rpessure so great as to vitiate consent (NAV)? Or in the words of Justice Robertson –there was no
practical alternatives? The existence of these conditions relaxes the standard for evidence on the
meeting of the minds – such as 2) did the parties protest or make clear prejudice 3) was there
immediate disaffirmation (NAV) Robertson J made clear that these two factors will weigh most heavily
on the finding of Duress in NAV canada. Protests and vitiating consent as soon as the “pressure” was
lifted can most directly give evidence to the lack of meeting of the minds. This post-contract formation
analysis raises some questions as to the standard of evidence, but perhaps is warranted as duress leaves
the parties with no other choice.

Another point of interest is the degree of pressure – Robertson JA thinks that 6 million in sunk cost and
no other provider of the equipment is sufficient pressure. The implication is that a huge economic loss (6
mil + loss opportunity cost) could possibility be recognized as “not an option in law”. I am skeptical of
this finding. While 6 mil + not operating the runway for potentially forever is a large sum of money,
Robertson JA dedicated few words to discern what consistutes the lack of alternatives, which in my
respectful opinion consitutes the entirety of this case. Since duress vitiates consent, and by extension
the meeting of the mind, what level of duress should warrant the courts’ refusal of enforcement? The
line between Econoimic Duress and mere business and negotiation pressure is a blur one. When does a
large corporation need to back off when negotiating? Does the doctrine of duress impose a duty for
powerful parties to leave a option open for the weaker party? IF Nav Can gave Fed Airport a slightly less
painful option, say 5.5 million in loss – will that consistute a practical alternative? What about 5 mil or 4
mil? If so, NAV Can is still not much better off and the doctrine of duress is further muddled by an
unclear standard.

The Question of Preexisting legal duty usually comes when there is a need to alter or modify the
contract. Stilk and Myrick’s argument will be that new material terms leads to mutual abandonment of
the old agreement, but this was not accepted in Williams v Roffey Bros. The better and safer approach is
taken by Canadian Courts (maquire v Northland Drug) that any changse to the agreement require fresh
consideration.

Policy:Courts moved away from a strict adherence to Myrick’s rule that pre-existing legal duties does not
satisfy consideration to Roffey bros where practical consideration may consitute consideration, subject
to unconscionabiltiy. This reflects a willingness of courts to look to the intention of the parties and the
balance of powers. Benefits to the promisee coupled with bona fide difficulties with the promisor,
suggestion by the promisor may cause the existing obligation to generate practical benefits, which by
itself suffice as consideration.

The three cases are all similar in that the promisor asked for more money halfway during performance
of the contract. The difference is “practical benefits” in the case of roffey bros, but that is not sufficient
to prevent overruling myrick entirely. Thus the general rule becomes that preexisting legal obligation is
not good consideration, but when practical benefits are involved, the test for unconscionability decides
whether the exception is allowed.

Promisee: Ship capt (Myrick), Gilbert Steel, Contractor in Roffey Bros, NAV (NAV refused to relocate
instrument unless pay up)

NAV Canada –GFAA wanted Nav to relocate and NAV accepted grudgingly on the basis of a letter in
which GFAA promised to pay. NAV relied on this letter and completed the relocation and GFAA refused
to pay. Nav promised to relocate if Airport paid extra.Generally, preexisting legal duty is not good
consideration, which will render Airport’s consideration (paying extra) moot and there will be no
contract. However the promise from GFAA was extracted under economic duress, and thus
consideration, even if found, cannot enforce the contract.

Policy: acknowledged the variety and flexibility of contracts rooted in business realities which
calls for the alw to protect legitimate expectations. Where there was no contract the courts
should not impose one. The case also recognized the need for the law to update and reflect
modern commercial realities.

Note that Court made an error in elaboration of the estoppel doctrine. The defendant NAV can use
estoppel as a shield...But also NAV refused to work unless received extra pay which smells like duress to
me…

PROMISE TO ACCEPT LESS

Part performance generally does not consittute good consideration for a promise to dsicharge a party
from its full legla obligations (foakes v Beer) However, the Judicature Act 2000 sates that part
performace shall extinguish the obligation when expressly accepted by the creditor, or rendered
pursuant to an agreement, even without a new consideration. In situations where there was a new
mutual agreement, the doctrine of accord and satisfaction supports finding consideration when the old
agreement was rescinded to be replaced by a new one through mutual release of obligations (Foakes v
Beer). The perforamcne of prexisting legal duties may confer real and practical benefits on the promisor
when the promisee performs it, which consitutes as consideration for a new agreement. (Roffey Bros,
NAV) Finally, one can turn to the doctrine of promisorry estoppel to defend the defendant from a
change of mind by the promisor and plaintiff to release all contractural obligations. (High tree)

(NO)GENERALLY, part performance or the promise thereof does not constitute good consideration for a
promise to discharge a party of its legal obligations (Foakes v Beer – the payment of a smaller sum
cnanot satisfy as consideration for the discharge of the entire debt)

(YES)STATUTE - Argue Judicature Act 2000, 13(1) Part performance of an obligation either before or
after a breach thereof shall be held to extinguish the obligation a) when expressly accepted by a creditor
in satisfaction, 2) when rendered pursuant to an agreement for that purpose through without any new
consideration

(YES) ACCORD AND SATISFACTION? Where the old agreement is replaced with a new one, with new
consideration moving from each side.

 Accord & Satisfaction is the agreement by both parties to rescind the original contract through a
mutual exchange of promises to release the other party from its remainnig legal obligations
 A difference or change in the performance of the obligation such as timing or method of payment
may constitute good consideration. (Foot v Rawlings)

(YES) PRE-EXISTING LEGAL DUTIES to the promisor: practical benefits were conferred on the promisor
when the promisee perform or promise to perform a pre-existing legal duty (William v Roffey Bros,
Greater Fredericton Airport) Look to factors such as : practical difficulties for the promisor, bona fide
difficulties for the promisee, suggestion for modification by the promisor (which is looking for lack of
duress)

1. Did the promisor (person performing contract, asking for more) use undue pressure and
influence? Threaten life, property, money? Or is did they have bona fide difficulties?
2. Did the promisee suggest a change to the existing contract?
3. Was there mutual intention to agree to the new terms?
a. WHEN (YES) a promise to perform a pre-existing duty is claimed to be good
consideriton, courts will attend to issues of duress or unconscionability. (pao on,
williams v roffey bros, greater federicton authority)

(YES) EQUITIES: PROMISSORY ESTOPPEL (Robichaud v. Caisse Populaire de Pokemouche Ltee)

Foot v Rawlings; Foot (the creditor) offered reduce interest rates, which Rawlings (detor) accepted. Foot
changed mind and sued. The consideration was ruled to be the cheques (timing and manner of
payment)
Note that revocation of the creditor’s offer is governed by unconscionability principles (agree to accept
less and then refuse to accept payment for satisfaction)

Policy Point: Traditional concerns clash with practical considerations. Traditionally, contractual parties
once entered into a contract, must fulfill the obligations to the extent agreed upon. Practically, many
creditors do settle the agreement for a partial performance compared to the alternative, it encourages
settlement and certainty, and there are reliance by the debtor for the creditor to honour the agreement.

PROMISSORY ESTOPPEL

Where a party makes a clear and unequivocal promise or representation to another party that it will not
insist on its strict legal rights under a contract and the other party alters its positino in reliance on the
promise or representation, the first party may be estopped from asserting its strict legla rights. (High
Tree)

Equity is at the heart of the promissory estoppel analysis. Detrimental reliance usually leads to inequity
(DC v Rees – and not detriment)

Elements of the promissory estoppel:

1. The Promise: The promise or representation must be clear and unequivocal, indicating that
the promisor intended the promise to be taken seriously and to alter the legal relations
created by the contract (John Burrows)
The promise or representation must be
a. clear and unequivocal (high trees)
i. Or implied from wordsand conduct(Saskachewan River Bungalows - policy is
technically out of force, and we will require immediate payment…)
ii. (Italo Belge) non-protest at late declaration of shipment, unqualified request by
sellers to present documents, request to be debited.
iii. Delay in pursuing enforcement does not automatically estop legal obligations
(Brown v Brown – child support payments cannot be estopped by delay)
There must be Intention to create legal relations (John Burrows –distinguish a gratuitous
promise/friendly gesture– since it is without the intention to create legal relations
cannot be estopped in contract law, MN v AAT –intent to for binding effect? Believe
someone will follow through promise =/= binding. commercial context may be easier,
but needs a closer look in family and personal matters) – also lacked mutuality
iv. (ESTOPPED) Creditors may be bound by “indulgences”. (not in John Burrows
tho)

2. The Reliance: The promisee must have altered its position in reliance of such promise, such
that it will be inequitable for the promisor to go back on the promise. (altered position, in
reliance, such that inequitable)
 a. CLEAR RELIANCE: Changing course of position, planned, organized affairs due to the
given promise, thus altering legal position (Societe Italo, Ryan v Moore)
b. INEQUITY (societe Italo) representor not allowed to enforce strict rights when
INEQUITABLE with regards to the dealings to the parties.Idea of equity expanded in
Canadian jurisprudence with greater emphasis on detriment:
i. Finding of detriment by estoppel raiser
ii. due to other party abandoning assumption+
iii. caused by reliance(Ryan v Moore,Superior Oil v Paddon-Hughes)

(Societe Italo – failed on detriment as reliance was short + no clear harm. There was
reliance, but no inequitydemanding promisors to forgo rights) (SK River Bungalow –
failed on reliance, since there was no knowledge)

c. It isinequitable for promisor to go back on promise (Societe Italo –not inequitable for
promisor to go back on promise, so no PE)
i. [NO] Althought there are no strict rule for detriment to satisfy reliance, the
guiding principle is that promissory estoppel will only be available when it is
inequitable for the promisor to go back on the promise.

[NO] promissory estoppel shall be denied where there is inequitable conduct by the
promisee. (D&C Builders v Rees)

3. RETRACTION: a promisor can resile from its promise by giving reasonable notice to the
promisee that gives the promisee a reasonable opportunity to resume its position(I changed
my mind& want to enforce rights, must give reasonable notice) – SK RIVER

Scenario: Promisor provide service to promisee, of which promisee cannot repay in full. One
partyoffers the option of part payment to satisfaction, which the other party accepts. Promisor
subsequently attempts to rescinds offer. Can Promisor do so?

a. Notice(Saskachewan River Bungalow, High Trees) Give promisee reasonable opportunity

to resume position
b. Equity: Not impossible or inequitable for the promisee to resume, but implied that
reliance is still required (no knowledge = no reliance = no inequity)

Overriding principle – cannot go back on promise when it is unfair to the other party do
so (Waddams, law of contracts in SK River bungalow).Considerations include:
detrimentalreliance, duress & unconscionable acts by promisee, OR intention to enter
legal relations by promisor

4. Equities fits into reliance: Promissory estoppel may be denied where there is found to be
inequitable conduct by the promisee such as improper pressure or misrepresentation.
What attracts PE is equity and not detriment (Denning in DC v Rees) and where debtor acts on accord by
the paying the lesser sum and the creditor accepts it then it is inequitbale for the creditor afterwards to
insist on the balance.

5. Not as a cause of action: Promissory estoppel itself cannot be used as a basis for a cause of
action. (Combe v Combe – W using PE as cause of action to stop H from backing out paying
support. Failed)

John Burrows was a case about silence acceptance of a lesser payment (late payment) than agreed
upon, and whether that can be taken as evidence for an implied promise to accept less, which should
estop the plaintiff from reverting back on his promise. (NO Es) However, delay as long as it is reasonable
cannot be the sole reason to estop the promisee to enforce his legal rights. (Robertson JA in Brown v
Brown). (No Es) John Burrows also found that without intention to enter into legal relations, gratituous
promises or friendly gestures cannot be estopped. (Yes e) However, one must consider that in some
cases “indulgences” by the creditor may be binding on his future actions and enfrocement of rights. In
Owen Sound Pub Library,

Owen soud public library: Contractor(promisee) promise to build library and agreed to special
instructions for certificate. He never delivered it, and claimed that contract was void for want of
payment. His promise to deliver certificate was estopped as it implied postponing Board’s strict
obligation to pay. Promisee acting in reliance (by not paying).Distinguished from John Burrows since
there was clear intention to enter into legal relations, or at least modify the existing legal relations.
Delivernace of certificate as for the purpose of subseqyent payment to fulfill the contract. It was not an
friendly or gratuitous indulgence, but rather a reliance on the failure to deliver certificatethat was
expressly undertaken by the promisee.

DC Builders v Rees: This is first and foremost a case about promise to accept lesser payment in
satisfaction of debt. However, it’s more know for defendant being aware of P financial difficulties and
trying to settle debt for a reduced value.

P sued and D argued Promissory Estoppel. Denning: D took advantage of vulnerabiltiy of the creditor.

Combe v Combe: This is a deeply disturbing and inequitable case about womens rights and
gender equality. Denning was afraid that the principle in hightrees “stretched too far” – the
circumstance in mind is when creditor forgoes strict legal right enforcement in exchange for part
payment, with the PE doctrine backstopping the reversal of that representation. More generally, PE
prevents one from asserting legal rights when it is unjust to allow him to enforce them. (Hgues v
Metro)Denning gave several examples:

1. Gov cannot accept an illness is war diease and then retract it (Robertson v Min of Pension)
2. Buyer who waived delivery time cannot later set time restriction (Rickards)
3. Tenant who encroached terriroty cannot later say it was not in lease (Perrot)
The rationale behind not expanding it too much is so as to not destroy the consideration doctrine. If one
could sue on a sole promise rooted in unjustness or inequity, then no consideration is required for any
contract. The problem is that using PE as a sword only requires two components – inequity and a
promise, of which embedded the intention to alter legal relations. Inequity exist in the vast majroity of
cases and can be a tough yardstick to measure cases leaving much ambiguity and confusion in
jurisdprudnce and the general planning and arrangement of commercial affairs. This leaves the promise
as the sole enforcement of PE – effectively removing consideration as a necessary component to
enforce promises in contract law.

Doctrine of PE is the idea is that if one party by words or conduct, made to another the promise which
was intended to affect legal relations, which was then acted on by the other party in reliance, the one
who gave promise cannot be allowed to revert to the previous legal relation. This is a protection of
promisees from the promisor without consideration from breaking promises when advantageous to do
so.

PE therefore occupies an interesting realm in contract law, where both parties clearly intended to alter
legal relations, but did not supply fresh consideration. The added ingredient is inequity and a sense of
justness, to be measured through how much reliance bore by and how important they are to the
promisee.

This case is one of injustice and inequity, but no consideration in the contract. This is a warning lesson to
future lawyers that a contract comes first, before PE can apply. PE does not take the place of a contract.

Could the lady have taken a different track? In contract law, one could perhaps find implied or
constructive consideration such as the wife’s contribution to the house or other types of household
work which, although in the past, did conferred real and practical benefit to the husband.

I think Lord Denning in his quest to assert the rule of law and clarify the inequitable component PE
doctrine, overlooked the clear inequity and injustice in the current case he presided over.

Today, she can sue under modern family statutory regimes or human rights tribunal.

SK River Bungalows: Sought to enforce the doctrine of waiver, which requires that the promisor Had
full knowledge of rights + unequivocal & conscious intention to abandon them. Ruled that Insurance
company waived right when allowing for alternative payment in lieu of payment prescribed by the
insruance policy. Waiver no longer in effect because 1) no reliance, thus no notice required 2) in the
alternative, notice to rectract waiver occurred at the same time they became aware of the waiver.

Societe Italo: Middleman asked seller to declare when ship sails, which seller failed to do. This gave
buyer right to reject contract. The lateness was not objected by the middleman intially, but two days
after correspondance with end customer. Seller argues PE against middleman to stop them from
rejecting the contract. The time between the promise (not enforce strict legal right) and the reversal
(demanding to reject contract) is only two days, and court found it so short that there is little
“importance” and expenditure of money. Fundamental principle was that representor not allowed to
enfroce strict rights when INEQUITABLE with regards to the dealings to the parties. So detriment not
necessary, but rather the low reliance by seller in this case did not require equity to intervene – i.e. lack
of loss means there is no equitable issue at stake. Judgement for the middleman: Court found that
reliance existed but inequity did not.

M(N) v A(AT): This case is one of intent to create legal relations. The lack of intent on the Man’s part
made the promise unenforceable. Man promised to pay off woman mortgage if she moved to Canada
with an eye to marriage. After the move, the man gave promissory note for 100k but kicked her out
later. Sued to get money back. Judge ruled that there were no intent to create legal relations.
Equitable estoppel wears apperance of contrat because promisee actions or inaction looks like
consideration…The plaintif (man) also argued that statutory regimes have provided for scenarios like
this and legislation explicitly leaves out enforcement of unfulfilled promise. Judge Huddart rejected the
defendant’s (woman) argument that PE doctrine takes a broead approach to preclude unconscionable
conduct or injsutice. Judge reasoned that both party believed that each other will follow through on
promise, but that did not raise to the level of binding on the actions of the parties. Absent binding, there
is no enforcement and no intention to create legal relations. The absence of mutuality (ability of the
women to back out and not marry guy) is also cited for not finding legal relations.

Specific to the intent to create legal relations, I think the analysis here is lacking in regards to the context
of the case. This is a case about two amorous lovers who planned out their future with an prepardness
to marry sometime in the future. The level of goodwill inherent in the early stages of the relationship
may prevent parties from creating legal relations. Imposing such burdensome requirements to enforce
promises in relational situations is divorcing the law from the realities of human behaviour.

Formality: Promises under seal – a deed must be signed, sealed and delivered with the formality of an
actual or implied seal through photostatic copy or symbol. The parties must have intended objectively
to create an instrument under seal. (RBC v Kiska)

Words or communication of any of those terms does not substitute for the actions.

NO: Bracketed word “seal” is insufficient (RBC v Kiska), the presence of the words “signed sealed and
delivered”

YES: words “signed sealed delivered” followed by signature and copies of the deed with darkened spots
resembly photostatic copy of actual seal, instrument executed in front of lawyer.

YES: Document shows combination of principle circle containing the letters LS and a signature.

Royal Bank v Kiska – The seal is the oldest method for making promises enforceable. Consideration has
replaced the antiquated wax seal, but seals can still serve to make promises enforceable absent seal.

Formality: the requirements of writing

The requirements of writing is governed by the Statute of Frauds and it is relevant because it is still in
force in Canada. Other legislation overlays this piece of legislation such as the Consumer Protection Act,
Family Law Act, Copyright Act. The requirements of writing was effort by parliament to combat fradulent
practices and perjury.

s.4 provides for the types of contract that requires writing to be enforceable:

S. 17 imposed requirement of writing on contracts for the sale of goods for price of 10 pounds and more
(now Sale of Goods Act – value of $50 and above)

1a - not required only if buyer accepts part of goods or gives something back in effort to make
contract binding or as part payment

1b - note or memo in writing of the contract is made and signed by party to be charged.

2 applies to contract even if goods to be delivered in the future, or non-exist at time of contract

3 – acceptance by buyer occurs when accepting goods that recognize pre-existing contract.
Acceptance of performance of contract is irrelevant.

Types of contract that requires writing:

1. Contracts to charge executor on promise to answer damages from own estate

- Executor says: if there’s no more money in dead man’s chest, I’ll pay the difference

2. Contracts made upon consideration of marriage

a. Not engagement (promises to marry). E.g. I pay you if we marry

3. Contracts to answer for debts, defaults or miscarraige of another

a. ONLY apply to guarrantees – a secondary liability only when the orignal debtor cannot
pay up. See idemnity where it is an original liability. One special feature is that no
benefit flows to the guarrantor, thus consideration comes from forbearance of suing or
the granting of the original sum/loan.

4. Contracts not to be performed within a year

a. Paternalism where the court thinks peoples memories aren’t that great.
b. Theoretically criticized for over broadness in that contracts may be made in
contemplation of performance in the future, but litigated promptly after creation of the
contract. Over narrow since limitation period is two years, and some contracts will be
brought long after one year mark passed (criticism directed at inconsistency of
paternalism on limitation periods and the writing requirement for this type of contract)
5. Contracts for the sale or interest in land
Non-compliance with the Statute of Frauds, formality of writing will result in…UNENFORCEABILTIY

- which means that it is unenforceable, but still valid

o Valid contract can be used as consideration for other contracts
o Can rely on unenforceable but valid contract in defense of a claim
o Can be analysed under equity, specifically in context of part performance (if void, then
essentially severed possibility of part performance)

Intention to Create Legal relations

DOMESTIC ARRANGEMENT- the intent to create legal relations is necessary for the formation of
contract, but is presumptively satisfied (Rose & Frank – commercial context) EXCEPT where domestic
or social arrangements are involved. Closely associated parties will be presumed not to intend legal
relations. Clear evidence to the contrary will be assesed on an objective standard.Onus of proofin
commercial context on denier (because presumptive intent – CAE), makes sense for onus to be on
alleger in domestic (because presumed no intent)

- In writing plus signing, sealing, delivery, and witness presence can all point towards intent.
- Keen bargaining (Denning in Merritt v Merritt) repeated assurances in elder support context (Single
v Macharski Estate) also ruled that moral obligation and love is not inconsistent with legal
obgliation.
- This only happens in cases of oral agreements between spouses, family members,close social
situations. They are built on goodwill, trust, amity, and honourable understandings.

The idea is that people conduct and arrange affairs in a way that is consistent to their intention, and
sometimes they do not wish to create legal relations. Promises that stands on moral and social
pressuresand thus cannot be enforced under contract law.

MN v AAT is a classic case – although Statute of Frauds require a promise made in consideration of
marriage to be made in writing – the absence of writing could have dismissed the case outright, btu the
lack of intention to create legal relations to obligate the marriage means that there is no contract.

Balfour v Balfour: is another similar case where husband promises to pay wife after separation, but does
not live up to that promise. The court rule that was a mutual promise and share the intent to create
legal relations. It was ruled that there is no assumption of intent in family settings. Family Law Act
Ontario also requires that all marriage contracts, separation agreements or cohabitation agreements be
made in writing and signed by parties with witness presence. Commentary – the fact that the
case hinges on the requirement of intent is highly problematic, since the assumption of intent depends
on customs, tradition, and history. Promises in a commercial context is assumed to create legal
relations, but not so in a family context. Problem is that the promisor is consistuted mostly by the
husband while the promisee who relies on that promise is largely the wife. Such promises are often
made in consideration of the housework and domestic contributions to matrimonial assets. Although
recent legislation has rectified such arrangements, the intent to create legal relations is a contractual
criterion is still one that disproportionately affects females in familial context. There is also a
clear case of injustice as the wife was in bad health and can be reasonably assumed to rely on that sum
for living and health expenses. Family members are also reluctant to turn to legal contracts
even when making serious promises, in the reliance of good faith and trust in either parties. Is the
obligation to support one’s wife a moral one or a legal one? Does it make a difference? The trial judge
sided with the wife citing the duty to support the wife.

>>1) Promises in family relations do not belong in courts. Family life is filled with promises that are not
intended to be held up to legal scrutiny. The example of a walk in the park (Balfour) illustrates the
absurdity of enforcing offer and acceptance of goodwill and hospitality.2) Floodgate argument. 3)
common law should not intrude into the privacy of the spousal relationship.

Rose and Frank co v JR compton and Bros: Two companies draw up contract and include a clause that
says “this contract is not enforceable by law, just mutual loyalty and friendly cooperation” – there is
assumption of intent in commercial, except clear expression otherwise, which is the case here, and the
courts will respect that.

PRIVITY & 3P BENEFICIARIES

For action to be maintained upon a promise consideration must move from the promisee to the
promisor, subject to the doctrine of privity and statutes. Action can be maintained when:

1. Consideration flows from the promisee to the promisor i.e. not a stranger to
consideration.(Dunlop Tyre, Tweedle v Atkinson)
i. Considerationis not sufficient with natural love and affection (Tweedle v
Atkinson)
ii. Stranger - stranger means consideration did not flow from person to promisor
(Tweedle v Atkinson)
iii. Principal Agent - Principal not named in contract may sue upon it if the
promisee really contracted as his agent. (Dunlop Tyre)
2. STATUTE EXCEPTIONS
allowing 3P to sue
a. The bar on 3P receiving the benefit of the contract will operate unless statute
prescribes otherwise or the existence of unconscionability and inequity.
1. statute: s. 195 beneficiary of an insurance contract (Insurance Act 1990)
2. statute: s. 258(1) motor vehicle insurance
3. statute (indirect): Consumer Protection Act of Saskachewan – where exclusion of
doctrine necessary to give effect to statute
3. TRYING HARD - Where there is a “stranger to the consideration” such as a 3P beneficiary, some
weak precedents for “stranger to the consideration of a promise can still have an action if the
relationship is close enough” but beneficial relationship not sufficient (Bourne v Mason, 1669
quoted by Wightman in Tweedle v Atkinson)
Justifications for enforcing strict doctrine of privity

1. Lack of consideration with 3P

2. Problems with mutuality (3P suing, but not being able to be sued)
3. Hard to draw lines on what is beneficiary & proximity of relationship
4. Benefit is subjective and hard to quantify
5. Analysis of beneficial relationships misplaced, especially in gift situations – contract law
enforce exchanges and reciprocity, not of honour and duty
6. Opening of floodgates for action against public actors

DURESS

Common law protection against coercion of the will of one party so serious as to vitiate meaningful
consent(Pao on)– coercion resulting from unlawful or illegitimate exercise of power.

Pathways:

1) Actual or threatened physical harm to the person (“duress” to person’)

2) Improper refusal to release goods or wrongfully seize goods (“duress” of goods)
(Contracts- Ben Ishai)
3) Economic duress: Acts that create unlawful or illegitimate pressure (pao on, universe
tankships)
Focus on meaningful consent &impact to victim (nav)
a. Nature of Pressure –lack of consent (NAV)
i. Pressure in accordance or violation of Statutory/ criminal code
ii. Nature of the parties, but not definitive (both david and goliath can be
victims - NAV) focus on the weakness of the party claiming duress
iii. Pressure from threat to breach contract is ok
b. Nature of Demand– pressure amounting to compulsion of will/lack of practical
alternatives. Establishment =/= disposition, look to consent.
i. Factors include: other practical alternatives, any benefits received, protest,
subsequently disavow, independent legal advice
ii. Independent legla advice alone not sufficient.
iii. Good faith hardship, uncontrolled change in circumstance (roffey bro)
c. Suffer Detriment - impact on the victims (added by NAV)
i. Fresh consideration = consent = more likely to be commercial presure
ii. Protest = no consent = duress (but not necessary)

NAV Can Robertson JA’s Economic duress framework: two conditions for duress to
occur – 1) extraction of promise from exercise of pressure 2) pressure so great there is
no “practical alternatives”.
 Proceed to ask whether the coerced party “consented” by looking at 3 factors: 1)
whether promise supported by consideration 2) did the parties protest or make clear
prejudice 3) was there immediate disaffirmation.

Remedy: contract is voidable at option of wronged party. Restitution may be made in addition, return
of any benefits unjustly transfered between the parties.

Defense: good faith not complete defense (wallet must be returned to me, even if the robber under
duress with gun to his head)

iii. A factor to consider when using pre-existing legal obligation as

consideration (willam v roffey bros, Pao on, NAV)
iv. Distinguish duress from mere commercial pressure

Protection of weaker parties – policy: Contracts once entered into are legally enforceable and creates
legal obligation on the parties. However, Contract law does not hold weaker parties to all the bargains
they enter into. Weakness is a fact that has to be proven.

PAO ON: Past consideration and existing legal duty as consideration cannot render the promise
enforceable in law if duress is present.

Policy of duress: originally duress only applies to threatened physical violence, but later expanded to
“duress of goods” where there is threat to refuse or seize goods. Now this doctrine has expanded to
include duress that comes from commercial pressure.

Nav Canada:

The threat –withhold perforamnce of obligation.

Relation of parties –NAV canada is the only one that can perform the obligation. Fed airport forced to
work with it.

Duress: Court found that NAV canada had no practical alternatives.

“True cornerstone is the lack of [meaningful] consent” – where fed airport “ paid under protest”

Focused on the impact on the victims, not legitimacy of the action.

- by focusing on the impact on victims, the court is condemning the result and not the illegitimate
action. Thus a resilient victim of duress will be disadvantaged by her position.

Duress is another brick in the bulwark of conditions to pre-existing legal obligation cases. It protects the
consideration doctrine and prevents a floodgate of cases enfrocing guarrantees absent consideration.

Commentary on NAV
Contract law has always focused on the existence of offer, acceptance, and consideration. The presence
of all three indicates a mutuality of consent to exchanging legal obligations. The problem of duress is
thus focused on the “meaningful” part of “meaningful consent”. The yardstick in which to measure
meaningful is whether or not the parties entered into the agreement in a voluntary and deliberate
manner. Judge Robertson repeatedly emphasized the role of consent and impact on the victim.

Although impact on the victim deals most directly with addressing injustice to the weaker party, this
analysis risk being reactive to injustice in individual cases, and thus losing sight of contract law as a
whole. When the courts pick and choose which commercial pressures are acceptable and which are not.
The lack of a definitive line between the two muddles the law in exchange for marginal benefits
provided to individual cases.

Does practical alternatives include going with 3P providers and taking a loss as in NAV canada’s case?
Does it need to be a break-the-company type of loss or any financial losses count as lacking alternatives?
There is no clear bright line from the leading case NAV, but the uncertainty expands the already broad
doctrine of economic duress. The expansion of an once narrow doctrine erodes at other fundamental
tenets of contract law in service of “justice” in the individual case.

The requirements to prove duress is not only vague and general, but also lacks certain ingredients.
Although Robertson JA was cautious of this view, I agree with American jurisprudence that “protest”
should be an element of the duress doctrine. Protest signals to the world that the party objects to the
contractual obligation, a significant element to prove that meaningful consent did not occur. Since
duress is pressure amounting to vitiate consent, protest is the most forward and direct way to signal
that inequity has occurred. The doctrine of duress is concerned at its essence the protection of weaker
parties – the exception to enforcement strict contractual obligations due to injustice that would occur.
The benefit afforded to such parties are not free – it disrupts planning of affairs, undermines reliance of
parties, and reduce the predictability of contract law. The inconvenience placed on the weaker party to
object is minimal compared to the inconvenience to all contracting parties mentioned above.

UNDUE INFLUENCE

Undue influence is found where there is an ability to exercise exceptional power in relation to another
person’s choices and usually arises out of special relationships. First ask, whether it is arms-length
commercial transaction or a gift situation? IT can be proven in two ways:

Path 1. Actual undue influence (an act, behaviour)(Contracts, Ben Ishai)

 ONUS on the complaining party to show influence of(YES) manipulation, coercion or
outright but subtle abuse of power that creates potential to dominate will of
another. Special relations between the parties removes the need to prove lack
of alternatives.
o (NO)no contactbetween parties, independent legal advice (Geffen v Goodman)
NOT REQUIRED - if established not required to show manifest disadvantage
Path 2. Presumptive undue influence: Geffen v Goodman Estate

1. Part 1 of test: Look at the relationship. Does the potential for domination exist in the nature of
the relationship itself.
a. Established?Doctor-patient, lawyer, trustee-beneficiary, parent, guardian-ward
spouse/sibling (geffen) If so, presumptive indue influence is supported.
b. New and open category:relationship between the parties is one of trust, confidence and
signficant influence
2. Gift or Commercial?
a. COMMERCIAL: Second part of test - Nature of transaction needs to involveundue
disadvantage or unfairness to plaintiff or benefit to defendant. Bad bargains where
plaintiff getting less than he gives are not included.
b. GIFT: undue influence is presumed
3. Established presumption shifts onus: Rebuttal of presumption by: providing evidence to show
weaker party acted without undue influence (little contact between Ms. Goodman and
brothers), relying on factors: full understanding and information (after extnesive discussion with
solicitor), independent advice (independent solicitor), limited magnitude of advice
Principle: persuasive influence and the potential for domination of the will of another
REMEDIES include:
Bars to remedy:affirmation of transaction after UI ended, lapse of time, impossibility of restitution,
intervention of 3p rights. Possibly use money to compensate?
1. Suffering party as D: refusal of specific performance
2. Suffering party as P or D: or to set aside the contract (rescission)
3. Suffering party as P or D: restoration to status quo ante – restitution

Duress is common law remedy. You should argue duress first, as it is more strict(no other option, vitiate
consent, suffer detriment). Undue influence is euquity and comes in if you can either prove special
relationship or that there is manifest disadvantage/ domination of the will - does not need to show
detriment.

(overlap with duress and unconscionabiltiy)

Undue influence is founded on the principle that it prevents disadvantage and victimization of one party
by another. It does not protect against “folly, imprudence, or want of foresight”.So people cannot give
away their wealth foolishly and then argue undue influence (Allcard v Skinner)

One point to make about oppression or domination of the will, or will overborne. There’s two
perspective of will – one being physically impossible to choose one option over another (gun to your
head) the other being, fully voluntary consent in situations of extreme need to relief himself of the
straits he is in (economic duress) – Llyods bank, denning. In either of the situation equity will step in.
La Forrest Dissent: focuses on the idea of manifest disadvantage being a requirement is actually
appropriate in commercial context. It may not be suited for gifts, since Wilson CJC point out that giftors
are already at an disadvantage and has no need to prove disadvantage. The “manifest disadvantage”
prevents the abuse of UI doctrine by injecting another requirement prior the the shifting of the onus, so
the defendant can rebutt the presumption.

One view of the undue influence doctrine is that it protects against abuses of trust, confidence or
power. The focus is the undue influence, and not the result. Another view is that the law should not
interfere with reasonable bargains, and doctrine should only address abuses where demonstrable and
significant disadvantage has occurred. Wilson says there is “nothing per se reprehensible about persons
in relationship of trust or confidence exerting influence, even undue influence, over their beneficiaries”
(quoted by Forrest J) which seems to suggest that she is not as concerned with the imbalanced
relationship as much as the result that occurred. Albeit in the context of a gift in Geffen. So far the law is
unsettled.

Unconsionability

(citation of law in Marshall)The courts will intervene where one party was incapable of protecting ones
own interest while the other has made imoderate gain at his expense. It is the combination of inequality
and improvidence that invokes unconscionability. Inequality where the bargain was unfair.
Improvidence where or grossly inadequate consideration. This law seeks to prevents situations where a
more powerful party preying on the incapability of the other party to protect ones own interest. If the
bargain was fair, or if the parties were of similar footing, then unconscionability would not take place.

The marshall test: is there extertion of substantial inequality of bargaining power and a substantially
unfair or improvident bargain.

 Substantial inequality of power: undue exertion of substantial inequality in bargaining

power. Not just a mere difference but unconscientious use, taking advantage of that
difference.
o Note that there needs to be a certain degree of imbalance
o And there needs to be an implied preying, taking advantage component.
 walsh was incapable of protecting his own interests (Marshall v Pemanent
trust)
o Unconscionable party does not need to be aware of the incapacity (Marshal)
 Substantially improvident bargain:
o Marshall: 16k property sold for 7000
o Harry v Kreutixger: 16000 boat sold for 4500
 Once unconscionanbility is proven, the onus lies on the unconscionanble party to prove that
th transaction was a fair and reasonable one. (harry)

Growng doctrine
Inequality in bargaining power (Lloyds Bank v Bundy) – Denning

Expressly rejected by the house of lords in Westminster Bank v Morgan. The reasoning was that
inequality of powers cannot be theappropraite basis for eauitable doctrine. Parliament has also enacted
the relevant laws, thus the burden of defending parties from unconscionable transaction is no longer on
the courts.

 Independent advice relevant but not prevent a finding of unconscionability.

 Still looked for a substantially improvident bargain
 Looked for extra factors to show that the party took advantage of the inequality in power:
o Relationships of trust and confidence
o Knowledge of weakness and infirmity
o Conflicts of interest
o Prescence or absence of independent advice

Community standards test (Harry v Kreutziger – Lambert) –where transactions that are “sufficiently
divergent from the community standards of commercial reality” should be rescineded for
unconscionability. This tests injects morality debate ober what is community standard of commercial
morality. The main issue with this test is that its scope is not yet defined, so it could potentially cover all
cases of inequity.

Llyods Bank v Bundy: Bundy wanted his son to succeed in his business, and took out a loan with his
house as mortgage. He had no other way to repay the loan. The bank tries to evict the father.

 Substantially improvident bargain: consideration moving from the bank was inadequate –
extending the credit
 Relationship of the bank and bundy one of trust, albiet it was mr bundys willing and probably
misconceived notion to put trust in the bank
 Relationship between the father and the son was one of natural affection and had much
influence.
 Conflict of interest between the bank and the father, without advising him to seek independent
counsel

Denning was trying to tie all the equity principles together with the doctrine of “inequality of bargaining
power” – the single thread attempted to cover all instances of inequalities and fraud in contracts where
it would be unconscionable to enforce the contract. However, this inequality of bargaining power puts
too much emphasis on the procedural, while unconscionability is mainly concerned with unwinding
inequitable contracts that result in substantially improvident bargains. It is really about the bad result of
the contract in circumstances where one party cannot properly protect one’s own interest, and the
other party took advantage of that fact.

Criticisms targeted at the unconscionability doctrine for its lack of clarity and preciseness is really
concerned with the reputation of the law and the ability for courts to do justice. Clarity leads to
predictability in transactions and thus promotes the law as an effective mechanism for arbitering
disputes arising out of promises and agreements. The preciseness leads to predictability of the law,
fostering trust and vonfidence in the law. However, for the law to be fair and just, cases like Marshall,
Harry and Lloyd demands a “correct” and equitable results, even if it encroaches upon the fundamental
principles of contract law. At any rate, the mechanicalistic application of law to bring about absurd and
deeply disturbing results will only bring the law into disrepute.

Harry: Using a strict unconscionability test, harry was a weaker party because he wass ignorant to the
boats true value, and that the bargain was substantially unfair to him.

 Substantially improvident bargain: harry selling boat without factoring value of license, did not
know it was irreplaceable. Unilateral witholding of part purcahse price from the buyer
 Inequity of powers: harry argued that he lacked the business judgement and education and
experience, Ignorance and the buyer’s assurance that he can get another licence induced him to
enter into the transaction. He is otherwise capable.
o He was left in the hands of the stronger party, and he was unable to protect his own
interest due to lack of counsel and business judgment.

This is also where judgeLambert coined the “community standards test” where transactions that are
“sufficiently divergent gtom the community standards of commercial reality” should be rescineded for
unconscionability. This tests injects morality debate ober what is community standard of commercial
morality. The main issue with this test is that its scope is not yet defined, so it could potentially cover all
cases of inequity. The SCC has utilized this doctrine in (hunter engineering v Syncrude) (norberg v
Wynrib) but yet to examine the nature and the scope of jurisdiction of this doctrine. Potential cases that
are entered under this new test would not have found relief under the traditional imbalance-
improvident standard. Critics have attacked it on the grounds that it opened the category too wide as to
potentially unwind contract law.

Tiplady: It is better for the law to prevent than to remedy – if the law is a tool for eliminating oppression
and cancel unfiar advantages and make sure dealings are fair, the law should do it expressly and
transparently – justice and certainty are harmonious objectvives – unconscionable doctrine is “an
emotionally satisfying incantation” –attacks the “inequality of bargaining power” to be an appeal to
instinct, which is an inappropriate source of judicial rulings – unstructurted distributive justice caused by
lack of discrete and measurable factors – main point: justice or fairness are descriptoins of how lawyers
and judges handle the law, and should not e made into ends in themselves, or risk having juges making
decisions they are ill equipped to make.

Legislation

Unconscionable Transactions Relief Act RSNS 1989

4. Where interest on money lending is excessive and transaction is harsh and unconscionable.
a. Courts may reopen the transaction
 b. Order creditor to pay excess
c. Set aside in part of in full of security or order to idemnify debtor

Consumer Protection Act 2002 Section 15-19

15(1). it is unfair practice to make unconscionable representation, where consumer cannot protect own
interestdue to disability, ignorance, illiteracy, inability to understand the language of an agreement or
similar factors; significantly greater than market price; unable to receive substantial benefit; no
probability to repay; transaction is overly one sided in favour of someone that's not the consumer;
terms so adverse to consumer that it is unconscionable; misleading statement whivh consumer is likely
to rely to detriment; subject to undue pressure to enter into transavtion

16 unfair practice to use control of consumer goods to pressure consumer into negotiating terms of
transaction.

17 no unfair practice (including things mentioned in 15)

18 (1) consumer can rescind any agerement if it was engaged under unfair practice. Consumer is entitled
to remedy in law including damages. (2) entitled to recover price minus value of goods, or damages, or
both if recission not possible due to return of goods not possible, or deprive BF 3P purchaser for value.
(3) 1 year limitation period to notice (4) in any way as long as intent is to rescind agreement or seek
recovery where not possible (12) J&S liability for all who engages in unfair practice (14) recission
operates to rescind all agreements and related agreements including guarrantees, security for payable,
credit agreements)

Incapacity

MINORS

Minors generally lack full capacity to to be bound under contract:

1. Valid contracts: necessaries as long as reasonable, contract for employment or service-

a. Sale of Goods Act 3(1). Necessaries for minors and person who by reason of mental
incapacity will be paid for at reasonable price. The contract is binding. “necessaries”
include goods suitable for the conditions of life. Contracts for employment or service.
2. Void Contracts: no benefit or to detrient: WIDE VIEW contract must be for minor benefit
otherwise void (Ferguson in Butterfield v Sibbitt) NARROW VIEW - contract as a whole…so much
to the detriment of the infant as to render it unfair that he should be bound by it” is void and
not voidable (Laidlaw in Mcbride v Appleton)
3. Contract binding unless repudiated: contracts concerning land, share contracts, partnership
agreements, marriage settlements
4. Contract not binding unless ratified after majority age: catch all category but judges tend to
include these in all classes of voidable contracts. Ratification is achieved as long as the minor
upon reaching age of majority, demonstrated an intent to adopt and approve of the contract
 MENTAL INCOMPETENCE

1. Mental incompetence: legally incompetent or those who are incapable of appreciating the
nature and effects of what they are doing.
a. Generally, the contract is voidable at the option of the party lacking the competence at
the time of making the contract.
i. IF the other party had no knowledge (possibly reasonable foresaw) of the
incompetence (hart v O’connor), then mental incompetence alone cannot
invalidate the contract (Hart v Oconnor – NZ law)
ii. IF the contract is for necessities, then the contract is binding as long as there are
no unconscionable dealings.
iii. IF the contract is later affirmed, the contract is binding and not voidable.
iv. IF trying hard to void contract, can argue duress, undue influence, or
unconscionability

In Hart v Connor, hart purcahsed land from O connor, but hart did not know that O connor was mentally
incapable. Action from O Connor sought to rescind the contract. There was a good illustration of
inequity principles in general: There are two ways in which a contract can be unfair. The first is how it
came about or procedural unfairness, or otherwise known as duress or undue influence, and the other is
substantive unfairness, described in the judgment as contractual imbalance. The mere existence of
procedural unfairness is not enough to raise unconscionability, although sometimes the contractual
imbalance is so great as to raise an inference of procedural unfairness.

Ruled that mentally incapable person who enters into contract while appearing to be sane to the other
party alone does not invalidate the contract, unless there are unconscionable dealings

Fraud consists of either actively taking or extortion of benefit or the passive acceptace of one in an
unconscionable circumstance. It is not just unconscientous use of power arising out of circumstance and
situation.

The dealings are not unconscionable because defendant was completely innocent in his dealings: not
aware of the incompetency (but raises the question of wilful ignorance or genuine misunderestanding),
the vendor had legal counsel, terms provided by defendant counsel. (raises the question of can
defendant raise bad terms, only to later claim unconscionability) one can say that the plaintiff failed to
prove the “substantially improvident bargain” (Marshall) because the transaction was not unreaosnable.

Scenario: weaker party raises bad terms, only to claim unconscionability later.

However, if this deal was truly improvident and the terms were provided by the waeker party’s solicitor,
it may be unconscionable to the bona fide third party purchaser for value. From his angle, he did not
know about the imbalance of the parties, he is not reasonably expected to know that the deal was
improvident, because the solicitor of the weaker party provided it. How much obligation are we putting
on the innocent party to transaction to do due diligence?
Answer: There are two views and both are not mutually exclusive. 1) The party bringing the
unconscionable claim cannot itself engage in unconscionable dealings, especially using it as foundation
for the claim. And the presence of such will cause the claim to fail. The equities cannot be used to
empower bad faith dealings. 2) It could also be a claim between the weaker party and the solicitor for
breach of fiduciary trust and bad advice. The presence of the lawyer shielded the third party from
liability as the lawyer takes on the role to restore power balance. If he was the cause for the
unconscionable dealings, he should be held liable and not an innocent third party.

GENERAL DEFECTS IN THE CONTRACTING PROCESS

Statute

SCOPE: governs consumer agreements between buyer and supplier ( consumer acting for personal,
family, household supplies with those in business of selling goods and services)

So the statute governs individuals and retail business, while the doctrines of contractual and operative
misrepresentations govern mostly business or more formal contractual situations between individuals
and businesses.

Consumer Protection Act s.14(1)

Protect consumer from unfair practices such as using deceit, selling to those unable to protect one’s
own interest, pressure sales.

It is unfair practice for a person to make a false, misleading, or deceptive representation. (2) some
examples include: sponsorship, approval, ingredients, or benefit that it does not have, person has
approval or sponsor but does not, particular standard, available for non-existant reason, supplied in
accordance with pervious representation when not so, can be delivered when not so, price advantage
that does not exist, misrepresents authority of salesperson, does not involve rights remedies, obligation
if representation is false, exaggeration innuendo or ambiguity as to material fact or failing to state fact
when the failure tends to deceive, representation that misrepresents the purpose of solicitation,
representation that misrepresents purpose of charge, misrepresents or exaggerates benefits to
consumer

15(1) unfair practice to make unconscionable representation (2) Some examples are consumer may not
be able to protect interest due to disability, ignorance, illiteracy, language of agreement etc, price
grossly exceed market price, consumer not receive substantial benefit from agreement, excessively one
sided, terms so adverse as to unconscionable, statement of opinon misleading, undue pressure

16. unfair practice to use custody or control of goods to pressure customer into transaction

17. (1) No person shall engage in unfair practice (2) 14,15,16 are all unfair practices, (3) does not include
printing publishing on someone’s behalf or i.e. advertising
18. (1) Any agreement entered into by vonsumer after or while engaged in unfair practice may be
rescinded by the consumer and the consumer entitled to remedy available In law, including damages.
(2) If return or restitution not possible or will deprive 3P BFPOV of right in the agreement, consumer
entitled to recover amount exceeding the good/services value or damages or both. (3) 1 year limitation
period for ntoice (4) notice valid if indicates intent to rescind agreement or where recission not possible,
to seek recovery. Needs ot meet requrement prescribed (5) delivered by any means (6) deemed notice
when sent

Sale of Goods Act 1990

Sale of goods act offers comprehensive protection in the course of business between individuals and
retail stores. S. 13-15 imposes conditions and warranties on the most common areas of disputes such
as no false advertising, goods quality and purpose are as described.

s. 57 Common law doctrines of fraud, misrepresentation, duress or coercion, mistake or other

invalidating cause applies to the sale of Goods unless inconsistent with express provisions of the Act.

Some policy considerations: There must be a pretty compelling reaosn for the law to interfere with
otherwise valid contracts. The reason for misrepresentation is that one party made a false
representation to the other party. There are two things here: one is that the statement was false within
the context of negotiations to form the contract – this affects the full information of the parties when
entering contracts, the other problem is that sometimes the party is induced to enter the contract on
that misrepresentation. Freedom to contract is defensible when parties entering contract are voluntary
parties made on well informed premises. The limits to the
misrepresentation doctrine is over-imposing positive obligations on all transacting parties, thus
increasing the transactional cost for none other than to be recognized in law. The balance thus lies at “if
the truth of a fact is crucial to a party, then it should be made clear to the other party and bargain to
make it expressly a term of the contract.

Ontario Sale of Goods Act

i. s. 13 Implied conditions and warranties

a. implied condition that seller has right to sell goods (implied refusal)
b. Implied warranty of quiet possession of goods (enjoy w.o interference)
c. Implied warranty that free from any charge or incumbrance in favour of any third party
(contract for sale keeps the benefits & obligations between two parties)
ii. S. 14 Implied conditions when sale description that goods correspond with description (no false
advertising - goods)
iii. S. 15 implied conditions as to quality or fitness (no false ads – quality &purpose)
a. S. 15.1 fitness of purpose: if buyer tells seller purpose of goods and rely on seller
judgment, and those goods meet buyer’s purpose (cannot sell product for purpose not
stated by customer)
 b. S. 15.2 merchantable quality: if seller deals in those goods
iv. Remedy: if breach of condition, option of termination or treating as breach of warranty
a. If breach of warranty, claim for damages s. 51

TORT LIABILITY

Contractual misrepresentation may lead to concurrent liability in tort (fraud or negligent

misrepresentation) and liaibility in contract (breach of term). NOTE: operative misrepresentation not
included. Concurrency generally permissive (BG Checo v BC Hydro)– law should move towards
elimination of unjustified differences. Where a given wrong prima facie supports an action in contract
and tort, the party may sue in either or both (except express contractual term otherwise).

REPRESENTATION

What is a representation? It is any action or conduct that can be turned into a statement of fact. It is
collateral to the contract, so not expressly written down. However, in some circumstances it may be
inequitable for it to not hold legal obligations. The inequity may result in one party deliberately lying or
carelessly stating facts to induce the other party into the transaction. For this inequity to be recognized,
the assumption is that parties sometimes have implicitly assent over material facts, but did not write
them down. The misrepresentation or inaccuracy of those facts may then lead to inequity. Some
examples, profitability of an asset or rubber company, or speedometer of a car.

Misrepresentation:

1) Equitable remedies for operative misrepresentation:

a. In some situations, a misrepresentation that is neither tortious nor a breach of the
contractual term nonetheless will lead a court to refuse to enforce a contract, through a
remedy such as a recession of a recession or refusal of specific perforamcne (Redgrave v
Hurd)
2) Representation as warranty
a. Needs to be an affirmation at the time of sale, if parties intend so (Heilbut)
3) Representation as Contractual liability – breach of a contractual term
a. A representation could have been agreed to be a term of the contract such that
misrepresentation is a breach of contract leading to normal contracual remedies
incuding contractual damages (Symons, Dick Bentley)
4) Tort Liability: Fraud or negligent misrepresentation
a. Tort of deceit for fradulent misrepresentation, or tort of negligent misrepresentation.
Tort elements must be shown in particuar, the intent to deceive, recklessness, or
negligence (Redgrave v Hurd) (Heilbut Symons v Buckleton)
5) Statutory liability
a. Consumer Protection Act s. 18. (1) Any agreement entered into by vonsumer after or
while engaged in unfair practice may be rescinded by the consumer and the consumer
entitled to remedy available In law, including damages. (2) If return or restitution not
 possible or will deprive 3P BFPOV of right in the agreement, consumer entitled to
recover amount exceeding the good/services value or damages or both.

Principle of misrepresentation: to prevent moral delinquincy – no man ought to take advantage of his
own false statements. (But this only deals with express falsehoods. As we later shall see, carelessness
and recklessness can also lead to the conclusion of misrepresentation – the positive obligation to find
out if you ought to know and communicate?)

Misrepresentation as breach of a contractual term

The misrepresentation has to be made by the parties into a contractual term, then the false
representation can form the basis for breach of contract.
ELEMENTS TO PROVE:
i. A fradulent statement (Heilbut, Symons v Buckleton)
ii. Intention of the parties to make representation a contractual term

– Materiality and Reliance

a. Representation is Materialbecause it is important enough to induce the
innocent party to enter the contract. And that the Innocent party did not have
knowledge of fact to the contrary. [look for due diligence, affirmations, any
signs that innocent party acted regardless]
– Intention TEST: there is evidence of intention that the statement was
to be included as a contractual term, and that contractual liabilities
should attach to such a false statement.
a. Traditionally judges require strong evidence from the actual
intent of the parties (Heilbut) “INTENT can only be deduced
from the totality of the evidence” – while “relative states of
knowledge of the parties are [only] relevant”
b. TRYING HARD TO PROVE INTENTION:
i. Modern approach by Bentley Productions v Harold Motors: subjective intent not
so important. Infer intentions from the circumstances based on an assessment
of the words, conduct, and circumstances of the parties
ii. “Totality of the evidence” includes
– relative states of knowledge of the parties “one party knows better due
to experience or expertise”
– ability of innocent parties to verify information
– importance of statement to parties
– Time of making statement
– Later documents referring to term
c. BREACH OF A TERM
 i. Was there an option to terminate according to the contract
ii. What are the contractual remedies that follow a breach of the term
d. REMEDIES

Remedy: reliance, expectation damages

Operative misrepresentation

a. Was there operative misrepresentation?

A false statement of a material fact made by one party before or at the time of the
making of a contract which is addressed to the other party and which induces the
other party to enter into the contract. Redgrave v. Hurd

i. Representation is false or made recklessly

– And is NOT innocent representations, merely providing information
(Dick Bentley) puffery/salesmanship(no reasonable persona will take it
seriously) or opinions
a. Opinionsare usually INNOCENT but
…when innocent party has lesser information, it may be
a representation(smith v Land)
– Intent to deceive irrelevant
– Omission/ Non-disclosure generally not a representation of fact (caveat
emptor)
a. UNLESS partial disclosure amounts to representation (Notts
Patent Brick)Active concealment (Gronau)Special fiduciary
relationships or insurance, Developing situations of good faith?
(Cornell Engineering)
ii. Representation is Material
in that statement must be important enough to induce the innocent party to enter the contract
a. Made before or during contract formation
b. Innocent partydid not have knowledge of fact to the contrary
c. statement induced innocent to enter into the contract (Redgrave) –
independent due diligence may nullify presumption
iii. Due diligence – or lack of is not a complete bar to finding operative
misrepresentation. May factor in when calculating damages (Redgrave)If did
do more DD, then perhaps did not rely on the statement?

iv. REMEDIES: equitable remedies include recession, refusal of specific

performance and is often combined with restitution.
a. Recession – contract void ad initio – the contract gets set aside, the
parties get to return to a position where the contract was not entered
in the first place.
b. Restitution – return of deposit/goods or part payment of price.
 c. NOTE: Successful claims of operative misrepresentations cannot claim
contractual remedies such as reliance or expectation damages
(heilbut, symons, v buckleton)
v. LIMITED BY
a. Can only claim one of equity or contractual remedy.
b. Affirmation by the innocent party subsequent to the
misrepresentation through totality of the circumstance.
c. Delay (Leaf International Galleries)
d. Impossibility of restitution and third party rights limit the power of
rescission and thus courts afford flexibility to monetary adjustments

CHOOSE: Misrepresentation as Breach of Term or Operative Misrepresentation?

1. Ask: will I be better off if the agreement is enforced or not?

a. YES, PERFORMANCE BETTER: Action for Damages is a suit to enforce the agreement, to
substitute money damages for the performance under the agreement. There may be
other parts of the contract that still has value or that the damages under expectatoin or
reliance damages greater than rescission. It may also be easier under contractual term
as it is the intention of the parties to make a term in contrast to elements of materiality
and reliance in operative.

b. NO, SET ASIDE: Suit for rescission determines that the contract ought not to be
performed, thus is put aside. The object is restoring the parties to their pre-contract
positions.

The difference between the two is that for misrepresentation as contractual term
(MACT) requires the intent of the parties to include it in the contract and fix liability
onto it.

Both types of misrepresentation prevents those who fradulently or recklessly makes a

statement to the other party from benefiting from that transaction. Both are concerned
with false information, or information that is incomplete, inaccurate, making it
inequitable for the courts to enforce such a contract. The element of proof is only
differentinthat MACT requires intention of both parties to make the statement a term
while Operative misrepresentation only looks to the reliance of the innocent party on
the statement. Other elements are similar suchas knowledge of the parties, materiality
of the statement, the time the representation was made.

A word must also be had on the limits of this doctrine – not everything a party say to the
other can be fixed with obligation under contractual law. Salespeople may exaggerate
and businesspeople may find their memories fuzzy.The law should protect innocent
 misrepresentation such as puffery and provision of information with good faith and
equity in the back of the mind.

For equity to operate, the party seeking equitable remedies cannot come forth in bad
faith. For example if one indeed acts on the inducement of a misrepresentation, but
does not mind it. This affirmation cannot later be rescinded when advantageous to do
so.

RedGrave: This case is about an equitable remedy outside of contract and tort. lawyer buys home to
share practice with another but finds that it is worthless. Refuses to complete the transaction and P sues
for specific perforamnce. Judge ruled that the lawyer was induced to enter the contract by a
misrepresentation. Judgment for Defednant but no fees because be neglected to examine the
documents. The plaintiff could argue that the person had knowledge of the facts contrary to the
misrepresentation or that he did not rely on it.

Heilbut symons v Buckleton: Share purchase based on the representation that the company was a
“rubber company’ when it was actually not so. The share price crashed and Buckleton sued for fradulent
misrepresentation. Question was whether the appellant’s actinos and words constitute representation.
> Establish that innocent misrepresentations are not liable for damages, as the representation has to be
fradulent or made recklessly. Innocent representation are only referred to as warranties if they have
clearly been intended to be so by the parties.

Smith v Land and House Property: Gives a bit more context on when a statement constitutes
reprsentation. The case is a seller of a house telling the buyer that the tenant is excellent, but turns out
the tenant is late on rent and the seller is anxious to get rid of the property (and presumably the tenant)
Smith sued for specific performance (for the hotel and the “desirable tenant”) Bowen J ruled that
statements of opinion can be represetnation if it is from one knowledgeable party to another. One can
imagine in situations where the seller has more information than the buyer, or when information is
unilaterally available to the seller.

Dick Bentley – Denning judgement – representation as warranty – objective test if statement is intented
to be acted upon and was acted upon, then it is a warranty. Representation made in course of dealings
for the purpose or inducing another party to neter into contract is prima facie warrnty of that contract –
leading to damages even if innocently made. It is false and the intent is irrelevant. Car travelled 20k
miles but engine broke down later. Sales person should have done due diligence on how far the car
went even though he was lied to when he bought the car. Representation is not fradulent, but stated as
a fact and was a warranty in contract. There is also an element of the relationship – salesperson
expected to be expert and possess the knowledge of the car’s mileage.

CONTRACTUAL TERMS
Terms are significant because it stems from the idea of the freedom to contract. The freedom includes
whom, where, what to contract, as well as the terms of the contract. The policy for having terms is to
protect the reliance interest o fthe parties who acted based on the specific terms agreed to. The
interaction of all the terms reflects the bargining interest of the parties. Whether there is contractual
terms and what it means depends on the intention of the parties as expressed in the agreement.

SOURCES OF TERMS

There are several things to study about terms: whether they are formed, performed and breached and
what are the otucomes.

Terms can include promises with respect to future conduct or represetantions as to facts. (Dick Bentley)
– promises of the parties to exchange ownership of the car to Bentley for consideration. Represetnation
is that the car has not been driven more than 20k miles.

i. Express terms – ink on paper (contract)

a. Test of intention: consistent with the freedom of contract idea, depends on the shared
intention of the parties (heilbut Symons Co) (Dick Bentley)
b. Objective theory of intention
ii. Implied terms
a. Implied in Fact
i. The fact is based on the presumed intention of the parties and is needed to
give business efficacy to the contract, or more broadly, obvious to the parties:
if reasonable parties asked at the time contract was made, each would agree
that it was “obviously” included.
ii. Lastly, it must be clearly expressed and does not contradict express term that
does not offend equity.
1. NOT std of reasonableness
E.g. MJB – not implied that the owner must accept lowest bid, but only
ones that are compliant
E.g. Wood v Lucy – implied that reasonable efforts taken by Wood to
bring profits and revenues

Policy justification: intention of the parties to enter into contract not an

exercise of futility. Plain and obvious from actions that parties intended
to give efficacy to the agreement. A missing fact that is crucial to the
contract then can be found to be implied to give efficacy.
b. Implied by custom or usage
i. PROOF: It must be uniform, certain, notorious, and recognized as binding.
1. Uniform:that it is indeed a custom &no-conflict w express terms
2. Certain:clear expression with no technical expertise needed
3. Notorious:well-known and not just obscure agreement
 4. Binding: Parties have to understand that custom or usage is applicable.
Can also look to the presumed intention of the parties to conform to
customs, or the implied fact that customs govern the contract

ii. Looking for customs: based on location, historical usage of a trade

iii. Exclusion or variation clauses on customs allowed
iv. Possible equitable & reasonable issues
E.g. “Fair” specification of timber in (Hillas& Co) means distribution of
different kinds, qualities, size and type
E.g. customary terms in international sales transactions – letters of
credit for payment, terms of carriage and bill of lading in shipments by
sea
c. Implied in law (no intention required)– Machtinger v HOJ
EXPRESS INTENTION BY THE PARTIES TO EXCLUDE TERMS IMPLIED BY LAW?
i. To imply in law is to imply a term out of a practical view ofnecessity(liverpool
city council). Not necessity for contract’s existence but necessity to be fair.
ii. Look for certain kinds of standardized contractual relatoinships: e.g.
employment, sale of goods, insurance, tenancy
1. Employment: employee obligation to keep confidentiality, duty of
loyalty. Employer obligation to give reasonable notice of termination
2. Sale of goods Act s. 13 – implied condition of seller right to sell goods,
implied warranty of quiet possession, implied warranty free from
charge/encumberance in favour of 3P s.14 condition that goods
correspond to description s. 15.1 implied condition as to fitness of
purposes. 15.2 implied condition as to avg. quality or for purpose of
goods of descriptionREMEDY: 12(1) breach of condition gives option for
innocent party to terminate or treat as breach of warranty. S. 51 Breach
of warranty gives claim for damages.
3. customs or tradition not dependent, but may be element in determining
nature and scope of legal duty imposed (Machtinger) – character of
employment, service length, age, availability of similar employment…

Interpretation of Contractual terms

Policy: freedom of contract and intention of the parties. The approach is an

objective one that looks to the intention of the parties – language conduct
circumstnaces (Eli Lilly)

iii. Policy concerned with “fairness” and the relation of the parties (Machtinger v
HOJ) – “necessary in practical sense to the fair functioning of the agreement,
given relationship of the parties” The focus then moves away from the intention
of the parties and onto the legal incident that is attached to certain classes of
 contracts on the grounds of necessity and fairness. Law may intervene and
impose obligations contrary to the parties’ intent and wishes.
iv. Statute: Sale of Goods Act, Consumer Protection Act

(Machtinger v HOJ) (MJB Enterprise) (Cdn Pacific Hotels cited by both cases)
NOTE: both implied in fact and implied by custom can also be thought of as implied
intentio

Policy of implied terms: McL J said terms implied by law just like imposing a duty –
imposing a duty on the employers to give reasonable notice for termiantion.

INTEPRETATION OF TERMS
a. Contracts should be interpreted in their plain and ordinary meaning (Eli Lily v Novopharm) and do
not introduce evidence from previous or subsequent actions, words, written documents - courts
only turn to extrinsic evidence when ambiguities arise.IF NO AMBIGUITY EXISTS, DON’T LOOK OUTSIDE THE
CONTRACT
a. Within the document
i. Context -the meaning of a particular term is understood in the context of the
contract as a whole (CAE industries – give meaning to vague terms,)
ii. Redundant terms (BG Checo) interpretation should make reasonable attepmt to
give meaning than make redundant the terms.
b. Words
i. “Of the same kind” - ejusdem generiswhere meaning of general words narrowed by
the specific examples provided. (Atlantic Paper Stock v St Anne Pulp and Paper)
ii. Contra proferentem – ambiguities intepreted against the party who drafted the
document (Scott v Wawanesa per La Forest J)
c. Standard forms
i. Contra-proferentum rule: Standard forms should be read against the drafter in
cases of vaguess and ambiguity, especially when the drafter is an experienced
business party (Stevenson v Colonial homes, Scott v Wawanessa per La Forest J)
ii. Heightened concern when drafter of substantially greater power inserts clauses
that deprives a significant proportion of the bargain’s benefits.
a. Examples include
i. Exclusionary clauses – where the clause is highly
destructive of rights in disproportionate to the notice
given (Thornton)
ii. Forum selection clause – in a similar fashion, very
destructive of consumer rights, but Douez v Facebook
attacks it on unreasonableness.
iii. Policy: Thoughts on std forms –there’s nothing inherently wrong with standard
forms. There are many benefits such as ease and lowered cost of transaction,
predictability and consistency for ongoing relationships…etc. However, the concern
 with std. forms comes in when one party was not fully aware of the terms on the
form – thus creating a situation where there was “paper agreement” but no
meeting of the minds. This concern is heightened in situations of unequal power
such as parties of concentrated market power and consumer with no other option.
Treblock dismissed the market power as a yardstick for measuring the inequity
casued by std forms, but the fact remains that std. forms should be subject to
greater scrutiny when there is imbalance of powers. Personally I think these
situations should be resolved through statutory regimes such as the conusmer
protection act and sales of goods Act, and business transactions can rely on equity
doctrines such as duress, undue influence or unconscionability to address grossly
inequitable situations.
d. Extrinsic evidence (trying hard to bring it in)
v. Courts have conceded that contracts are not made in a vacuum and are willing
to consider evidence as to background circumstnaces surrounding the making of
the contract (Lord Wilburforce in Reardon Smith)
vi. CONCERN: main concern about bringing evidence in is preserving the
predictability and finality of agreements as close as to the true intention of the
parties at the time it is formed (assuming that true intention are clearly
identified and put down as terms). SO TO GET OVER THIS BURDEN, the court
must show that giving contracts business efficacy does not come at a cost to the
predictability and betray the intial intent of the parties.
vii. Lambert J in Cdn National Railway and Canadian Pacific Ltd – modern canadian
position is more flexible and in favour of admitting such evidence if weighed
carefully. Must have two or more reasonable interpretations of the contract in
question.
1. What is Background Circumstance? “absolutely anything which would
have affected the way in which the language of the document would
have been understood by a reasonable man” (Investors compensation
scheme v West bromwich building society)
2. Extrinsic evidence:Intention/aim/purpose
a. Intention is assessed on an objective standard – what is the
intention of reasonable persons in place of the parties – same
with aim, object, purpose (Wilburforce in Reardon Smith line)
3. Hand written Notes on typed form
a. Resolved in favour of hand written stuff over typed in that the
former better represnts the intention of the parties
viii.

CLASSIFICATION OF TERMS
 1. A Condition forms the terms of the agreement. Look to condition precedent and condition
subsequent (event happening that triggers contractual obligations/ event happening that
eliminates obligation to perform) – breach results in damages and option to terminate
2. A warranty is a guarrantee that establishes a fact – think operative misrepresentation unless
fact imported into contract as a condition. Breach results in damages only.
3. For innominate terms (intermediate terms), availability of option of termination depends on
seriousness of the breach – absent clear intention from the parties
i. Test: (HKFir test) Does the breach deprive the party not in default of
substantially the whole benefit which it was intended that she should obtain in
the contract. (Seaworthiness of the vessel can be trivial or severe depending on
the breach – which in HKF’s case, having 80% of benefit was not sufficiently
grave allowing repudiation)

Conditions precedent & subsequent (dawson helicopter)

- contractual parties can agree to establish certain terms as condition precedent and condition
subsequent
o helps parties plan a required order of performance.
o The condition may depend on neither parties (regulatory approval) or one of the parties
(satisfactory inspection, financing Dawson Helicopter- don't find pilot or thinks its not
worth staking)
o Condition precedent must occur prior to perforamnce required
o Condition subsequent means that should the event happen, performance is no longer
enforceable
o Parties may waive condition for its benefits

Performance & Breach

- Discharge can come from performance only, thus the only other possibility is breach
- Keeping in mind freedom of contract, contract can specify standard of perforamnce (best effort,
reasonable effort, reaosnable care, due diligence) otherwise, the general rule is that performance
has to be precise and exact

Consequences of Breach

a. If a contractual term is not otherwise discharged, the party may be in breach of contract
a. May lead to innocent party claiming contractual damages based on expectation or
reliance measure
b. May give innocent party option to termination contract
i. If termination the innocent party can still seek damages needed to put it in as
good position as if the contract had been performed

c. For Conditions, breach always lead to option of termination. (HK Fir)

i. By Law: Sale of Goods Act classifies implied terms in 15(1) and 15(2)
 ii. By Express wording: breach of clause 3 lead to option to terminate

d. For Warranty, breach only leads to damages

i. Sale of Goods s. 13(b)
ii. By express wording: shall not lead to termination of contract

e. For innominate terms (intermediate terms), availability of option of termination

depends on seriousness of the breach– absent clear intention from the parties
i. Test: (HKFir test) Does the breach deprive the party not in default of
substantially the whole benefit which it was intended that she should obtain in
the contract. (Seaworthiness of the vessel can be trivial or severe depending on
the breach – which in HKF’s case, having 80% of benefit was not sufficiently
grave allowing repudiation)

1. Factors to consider incldue: ratio of the party’s obligation performed vs.

whole obligations (17/24 mths in HKFir)
2. Likelihood of repetition of the breach (repairs made and efficient &
adequate staff provided)
3. Seriousness of the consequences of the breach to innocent party
4. Relationship of the part of the obligation performed to the whole
obligation
b. If innocent party elects to terminate, what happens?
If a party not in default is entitled to and elects to terminate the contract, the party in default may have some limited
claims.
a. Recovering the cost of services rendered - Restitution based on quantum meriut for
services provided or quantum valebat for goods provided (Sumpter v Hedges)
b. Part paymentsreturned by party in default (Stevenson v Colonial homes ltd)
i. Deposits are forfeited by defaulting party as it is treated as an earnest (Howe v
Smith)

Mactinger v HOJ – notice for termination not included as clause in employment contract – McL tries to
impose it by law –Court of appeals thought it was implied in fact thus found that there was no terms for
want of intention of the parties. McL said this is implied in law, thus the intention of the parties are
irrelevant. The nature of terms implied in law means that it is imposed out of necessity, or specifically
necessity for fairness in context of the relationship of the parties. IN thise case, the relationship of
employer and employee imposes a term onto the employer to give reasonable notice. MCL also allowed
for parties to expressly exclude terms implied by law.

Scott v Wawanessa Mutual insurance co – courts look to clear and unambiguous meaning of contracts &
contra proferentum rule –exclusion clause clear and obvious. Courts should not give meaning outside of
what was intended –FACTS:Scott’s home set on fire by son. Insurance policy included exclusion clause
when damage caused by “the insured” – Dissent by La Forest disagreed with the clarity of the term, thus
the contra proferentum rule apply. La Forest thinks although the protection is extended over everyone,
but the exclusionary clause only excludes damages caused by the parents, since they are the ones
bringing the claim.

HongKong Fir – Consequences of Breach, “Substantially the whole benefit” test –Ship owners claim
against charterers after charterers break contract citing owner’s breach. Owners undertookto maintain
vessel in seaworthiness but knowingly understaffedengine crew leading to delays of 5 weeks and repair
time of 15 weeks (17/24 mths left). Charterers argue that Owner’s breach of terms entitled them to
repudiation of charter. – RULED that “seaworthiness” is an inordinate term that is neither condition nor
warranty.

RIGHTS OF PARTIES IN BREACH

1. PART PERFORMANCE

Sumpter v Hedges_Part payment by new contract: Two parties contracted to build a house, but
Sumpter the builder abandoned the work. Hedges was left with no choice but to finish the house (i.e.
accepting Sumpter’s half completed work and receiving the benefit) RULED Hedges need ot pay for
building materials, but not the labour cost. IN CONTRACT law, satisfiaction is only achieved when
performance is in full. Claiming that one cannot “go on” with the contract indicates abandonment. The
part performance does not entitle the party in breach to recover on the original contract.

Under Sumpter v Hedges, the APPROACH is therefore to conduct an inquiry into whether there was a
“fresh contract” between the parties to pay for the work already done. Plaintiff entitled to recover for
work completed on quantum meruit, or “what one has earned”. Quantum Meruit in the common
application prevents unjust outcomes.One such situation is when the party in breach performed in part,
and the perforamnce is accepted and benefits received by the innocent party. Recovery for the party in
breach on work done prevents the innocnent party from taking advantage of the half completed work.
IN SUMPTER v H however, the judge acknowledged that there was “no choice” by Mr. Hedge to accept,
since half-built houses need to be completed.

- to recover partly completed work, one should look for an inference of a new contract
o There needs to be a choice by the innocnent party to accept or reject benefits
o Innocnent party must accept the benefits, implied or otherwise. Intention to keep for self
the benefit of the work. Intention of the parties evaluated on an objective standard to see if
there was meeting of the minds.
 Breacher Offer: partly-completed work in exchange for part payment
 Innocent accept: if there’s clear a choice whether to accept andthe innocent party
choose to keep the benefit, then consideration of part payment can be implied.

the innocent party elected to receive benefits, whether there was choice, and
2. DEPOSIT& PART PAYMENT

In ordinary circumstances, unless contract states otherwise, the seller on the buyer’s
default becomes liable to repay the part of the price paid (Benjamin on Sale in
Stevenson Colonial homes)
 However, if it is intended to be a deposit, or both deposit and part payment, then it is
forfeited by the payer upon default. (Howe v Smith)
 Deposits are defined by the express or implied conditions of the contractual terms, which
serves as an “earnest to bind the bargain”, often as an act of giving something to be repaid
redelivered upon completion of the contract.(Howe v Smith, Stevenson)

i. EXPRESS - LOOK TO THE CONTRACT

ii. IMPLIED - LOOK TO INTENT OF THE PARTIES
MAD DASH FOR DEPOSIT: WHEN DRAFTER IS INNOCENT,
 Contradiction/vagueness - contra proferentum rule states that any ambiguity
must be resolved against the drafter, especially when he is an experienced
party.
 Not obvious - Did not draw attention to the deposit clause. (stevenson – for
office use only box)
LAST DITCH: argue deposit is out of proportion with the losses suffered
by recepient (Stockloser v Johnson)
Remember the original rule: In ordinary circumstances, unless contract
states otherwise, the seller on the buyer’s default becomes liable to
repay the part of the price paid (Benjamin on Sale in Stevenson
Colonial homes)

Howe v Smith: Plaintiff Howe puts down deposit of 500 to reserve right to purcahse home by certain
date. Date came and passed and defendant sold the home. Howe sued for the return of the 500.
RULING: “as a deposit and in part payment” meant the money was for gurrantee of performance, which
is forfeited by the purchasor when the deadline passed. RATIO: depends on the circumstance “question
as to the right of the purchaser to the return of the deposit…” is a “question of the conditions of the
contract” Looked to express terms, and then implied.

IN cases of deposit, look for an “earnest to bind the bargain” – manifested as act of giving something to
be repaid or redelivered on completion of the contract. If so, then breach of the contract will lead to
forfeiture of the deposit.

Money as part payment does not bar it from being a deposit.

Compare with Sumpter v Hedges – Claim in Howe v Smith was dismissed on the grounds that one who
breaches the contract ought to lose the deposit that binds the bargain. Sumpter v H was dismissed on
the basis that the innocent party had no choice but to accept the benefit.
Stevenson v Colonial Homes: Stevenson puts 1000 down payment on cottage but refuses to go through
with transaction. Vendor claims default by Stevenson & wants to keep the money. Stevenson sued.
RULING: did not draw attention to place in contract that says this is deposit. Was in a box entitled “for
office use only”, proportionality- downpayment is half the purchase price, standard form contract- not
negotiated thus confra proferentum rule holds ambiguity and contradiction against person who made
the standard form.

Policy for std forms: (Trebilcock)

1. My view on std forms

a. There’s nothing inherently wrong with standard forms. There are many benefits such as
ease and lowered cost of transaction, predictability and consistency for ongoing
relationships…etc. However, the concern with std. forms comes in when one party was
not fully aware of the terms on the form – thus creating a situation where there was
“paper agreement” but no meeting of the minds. This concern is heightened in
situations of unequal power such as parties of concentrated market power and
consumer with no other option. Treblock dismissed the market power as a yardstick for
measuring the inequity casued by std forms, but the fact remains that std. forms should
be subject to greater scrutiny when there is imbalance of powers. Personally I think
these situations should be resolved through statutory regimes such as the conusmer
protection act and sales of goods Act, and business transactions can rely on equity
doctrines such as duress, undue influence or unconscionability to address grossly
inequitable situations.

2. Origin of standard forms (Lord Diplock in Schroeder)–terms of merchantile origin. These are very
old and examples includee bills of lading, charter paries, insurance policies, contracts of sale in
commodity. Modern contract is different where one party says “If you want these goods or
services at all, these are the only terms on which they are obtainable. Take it or leave it.”
3. Standard forms have many benefits
a. Speed up transactions, which can replicate the same transaction again and again
b. Predictability of the contractual terms and obligations created, meeting of the minds
simplified by only having one party read the contract
c. Ease of use for entrepreneurs, busienss people
d. Closely adhere to the course of business – ppl in repeat relationships don't stop to craft
identical terms and conditions every single time
e. Cost savings for not requiring lawyers and saved time
f. Insertion of an exclusionary clause
g. Enable the buyer or offeree a basis of comparison for shopping around
h. Encourage written terms that form basis of the agreement. Courtsscrutinize it if dispute
arises (reduce court’s time spent untangling the intention of the parties from
conversations and actions)
 4. (caveat)Standard forms are good as long as they…are not used for oppressionin cases where the
party in dominant position dictates the terms to the other contracting party
5. (I agree) Trebilcock argues that there’s nothing inherently wrong with standard form contracts,
as they are not decided by the drafter of the contract and even in market power concentration
cases, the terms are not automatically deemed “undue pressure” based on the possibility of
pressure.
6. (Own analysis) –Std form concerned with no meeting of the minds
the concern with std. forms comes in when one party was not fully aware of the terms on the
form – thus creating a situation where there was “paper agreement” but no meeting of the
minds. This concern is heightened in situations of unequal power such as parties of
concentrated market power and consumer with no other option.
1. Marshall test is suitable to remedy this issue
THUS THE SOLUTION is that market power concentration creates an heightened concern that there
is undue pressure on the parties, which invites court scrutiny. However, for the court to unravel the
bargain, they will have to find both undue pressure and a bad bargain. I find the marshal test for
unconscionability to be suited for this analysis – both substantial improvident bargain and
substantially unequal bargaining power must be present. Trebilcock finds support from a standard
of reasonableness, such as limitation of damages to $50 for postal companies.
2. Clauses on Std Forms to be evaluated on proportionality
I believe proportionality incorporates standard is a better alternative. The evidence will be
evaluated on the pricniple of proportionality between the liability excluded to the drafter and the
potential of harm to the draftee. On the totality of circumstances, if at the time of the contract the
exclusionary clause was unconscionable, it shall be struck from the contract with the remaining
clauses operating as if the exclusionary clause was never drafted into the contract.
3. Unacceptable terms (examples)

 NOT acceptable: exclusion of liaibility clauses that exclude ALL liability “they could throw
my car in the sea for all they cared”
 Clause in Insurance contract that eordes the cover provided, so seriously as to make the
policy deceptive.
 Clause that excludes liability even when vendor knowingly sold junk.
 COMMONALITY: insertion of exclusion clause that rises to the level of deception, fraud.
Possibly pair with analysis of misrepresentation.

7. Std form is to reduce transaction costs

a. Trebilcock rejects the idea that standard form came from market power concentration.
Suggested that its use come from business people and customers not wanting to incur
the cost associated with drawing up new contracts each time a transaction occurs.
8. Implication for unacceptable terms
a. Trouble with standard forms thus doesn’t come from uniform terms in the industry –
you have to look at the nature of the competition. Perfect competition forces firms to
adhere to one standard, but so does cartels and oligopoly in which participants collude
 on the terms of sale. The problematic behaviour comes from anti-competitive
behaviour.
b. The terms of standard forms on an industry level is not dictated by the business, but
rather Competition.
c. Even monopolies have to give customers the terms they want, just at higher prices. (Not
true, just look at social media networks and forum selection clauses – SCC had to
intervene in Douez v Facebook. Forum selection clause clearly benefits the drafter of the
clause to preempt actions arising from interactions between consumer and business.
Such terms are not what the consumers want – assuming that they want to hold
businesses accountable for any harm caused, but not what is offered.)
9. Distinguish pressure and possibility of it
a. Trebilcock offered that “possibility of pressure” does not equate “actual pressure of
negotiation” or else music industry companies can do nothing right, even with “good
song-writers” who command premiums on their contracts.

Exclusion Clause

Main line of attack is there’s no meeting of the minds – clause not present at formation, clause
unnoticed because not given adequate notice. (Thornton, Tilden) Secondary attack is strict
construction – contra proferentum (Scott v Wawanessa). Then Fundamental breach or
unconscionability. (tercon)

Meeting of the minds

1. FORMATION - 1) Terms of a contract are the ones agreed to at the time of the
formation of the contract (Ticket first, conditions later in Thornton)
2. NOTICE - 2) Drafter of exclusionary clause must draw attention to it. The burden of
this obligation must be proportionate to the scope of the liability excluded and
(although not mentioned in Thornton) the sophistication of the partiesand type of
document (bill of lading clause if unread still binds the parties - in notes)– and in
thorton the exclusion of liability for harm caused to the person must be “in red ink
with a red hand pointing to it – or something equally startling”
i. Signature on the contract often signal meeting of the minds, but in a
consumer sphere sufficiency of ntoice and proportionality are required
for that signature to be binding. (Tilden) – also talks about presumption
of signatures in business and consumer sphere.
<Can be countered by notice and proportionality> if so continue down.
4) Strict construction (Scott v Wawanessa) – find the term vague and ambiguous, then
interpret against the drafter.
5) Fundamental Breach (Tercon) – 3 step test by Binnie in dissent approved by Majority.
Some considerations: at this stage, the clause must be clear and unambiguous, and that
the court must recognize that there is nothing inherently wrong with exclusionary clauses.
Even when there was unconsc
 1) does the exclusion clause apply
a. (yes in tercon because exclusion clause applies to everything that arise form “participation” in
the process, and the bid considered)
2) was there unconscionabiltiy at the formation of the contract
a. Substantially improvident bargain AND substantially unequal powers
i. Heightened concerns with non business aprties
ii. Heightened when person was imparied in some way
b. (not in tercon, because tercon was knowledgeable business with choice to not bid. low
equality concern because practice was common, only matter of degree – “using more or less #
of teams & subcontractors”)
--------DEFAULT IS STILL TO APPLY THE EXCLUSION CLAUSE-------
- unconscionability leads to equitable
damages, and not witholding the enforcement of a clause. Wilson J’s comments in Hunter v
Syncrude quoted in Binne’s dissent in Tercon states that after finding a fundamental breach,
the general rule is still for courts to give effect to exclusion clauses.
3) should the court still refuse to enforce the law based on overriding public policy?
a. Plaintiff with burden to point out policy.
b. Binnie thought exclusion clause was clear, thus for knowledgeable business parties like Tercon
with clear choice of not to participate, he says: caveat emptor.
c. Binnie J. emphasizes that public policy reasons of this kind will be rare: Para 117, SUPP 74:
“The residual power of a court to decline enforcement exists but, in the
interest of certainty and stability of contractual relations, it will rarely be
exercised.”

Analysis of Tercon unconscionability doctrine & key features

The tercon test is one that assesses when should a court enforce an exclusionary clause. The default
position is that the courts will enforce it, with the exception if the claim passes all three steps of the test.
The three steps are: does the exclusion clause apply to the issue at hand, was there uncionscability at
the formation of the contrat, and should the court still refuse to enforce the law based on one or more
overrding public policies. (Tercon)

The key point of departure between Cromwell J and Binnie’s analysis is whether or not the clause was
clear and unambiguous. Cromwell thought it was – which allowed the contra proferentum rule to easily
defeat the province’s claim. Binnie thought otherwise, which means the exclusionary clause in business
contexts are very hard to defeat, especially with his presumption of enforcing it.

The Tercon test is significant because the test’s focus turns away from the breach, and towards
contractual formation. Binne J’s reason is that the inequity was formed when the contract was formed –
the reasons for not enforcing the clause lies in the clause, with is in the contract at the time of
formation. Assesssing the clause by its breach transforms the analysis into a categorization exercise –
wholly ignorant of the intent of the parties. Generally speaking, to uphold contractual freedom, a court
should uphold any clause mutually agreed upon by the parties, unless it offends criminal law and or
invokes very signficant opposing public policy.
It’s also significant because it recognizes and incorporates the unconscionability doctrine and gives a
clear nod to the court’s consideration of public policy.Unconscionabiltiy is built on clear and substantial
improvident bargain with significant unequal balance in power. The shift in analysis also acknowledges
that the ultimate reason for refusal of enforcement is that of equity. The “residual powers” to be used
against “fundamental breach” invokes the same equity principles, but leaves much to be desired in
transparency, consistency, and predicatbility. The “foundation” of a contract may be elusive and the
extent of the “bargain not provided for” are overly vague standards difficult for courts to apply ina
consistent manner. The hunter analysis will also inevitably draw on equitable principles of
unconscionabiltiy and policy analysis – so why not call the spade a spade?

The importance of freedom to contract was not a point of controversy in Hunter or Tercon, no matter in
the majority or dissent opinion. Wilson J’s comments in Hunter v Syncrude was quoted in Binne’s dissent
in Tercon. He states that after finding a fundamental breach, the general rule is still for courts to give
effect to exclusion clauses. In Binnie J’s 3 step test, the party seeking not to enforce the clause msut
prove there is a policy concern greater than the freedom to contract(step 3). This view is is further
supported by the understanding that unconscionability in contract formation leads to equitable
damages, and not witholding the legal enforcement of a specific clause.Thus we can see that Freedom
to contract is a policy concern that can only be defeated by a even greater policy concern. Some
examples were given – toxic baby formula and cooking oils created for purposes of profit and personal
gain. Thus we see that Binnie J is serious when he says :“The residual power of a court to decline
enforcement exists but, in the interest of certainty and stability of contractual relations, it will rarely be
exercised.”

Thornton v Shoe Lane Parking: 1) Terms of a contract are the ones agreed to at the time of the
formation of the contract (Ticket first, conditions later in Thornton) 2) Drafter of exclusionary clause
must draw attention to it. The burden of this obligation must be proportionate to the scope of the
liability excluded – and in thorton the exclusion of liability for harm caused to the person must be “in
red ink with a red hand pointing to it –or something equally startling”

FACTS” Driver parked car and picked up ticket saying “subject to conditions posted”. Ticket must be paid
before exiting, but the conditions poster is not very prominent. Exclusion clause exempts all liability
cause to customer and Driver Thornton was seriously injured. RULING Denning – conditions on the wall
(exclusion clause) was not part of the contract. It was not visible at the time the contract was formed,
which was when the ticket was intially issued. Thus the conditions are presented later and does not
form part of the contract. Also did not reasonably give notice to the conditions.

Tilden-Rent-A-Car: Car renter asks about rental contract – learned about “full non deductable coverage.
Contract also contains clause that fully excludes liability if driver drank. Driver proceeds to drink and
drive, crashing the car, admiting to DUI and then claims insurance.

RULING: Dubin J emphasizes the difference between commercial and consumer agreements. Implied
consent by business parties to exclusionary clauses does not exist for consumer agreements, where
creation of the agreement was often informal and hurried, with a take it or leave it offer by the
business. OVERCOMING this burden will require sufficiency of notice and proportionality. Dissent by
Lacourciere stated that the contract was not difficult to read (knowledge of the reasonable consumer)
and it was commonplace in insurance industry based on risk (customs and usage).

ESSAY TOPIC: exclusionary clauses

- Explore the difference between commercial parties and consumer parties

o What happens: when there’s a contract, there is implied consent to the exclusionary clause
from commercial parties (unread = still binding) and it can be argued that there’s implied
lack of consent from consumer even when there is a signature. Clear example in Thornton –
got ticket and contract formed but exclusionary clause scrubbed from the contract. Tilden –
signed

Tercon: Doctrine of fundamental breach or unconscionability – Binnie J’s approach agreed by majority –
whether to enforce exclusion clause look at clarity of term, if clear then proceed to 3 step test where

1) does the exclusion clause apply

(yes because bid considered)
2) was there unconscionabiltiy at the formation of the contract
(no, because tercon was knowledgeable business with choice to not bid.low equality concern because practice was
common, only matter of degree – “using more or less # of teams& subcontractors”)
3) should the court still refuse to enforce the law based on overriding public policy?

Cromwell J. said that the term was unclear thus contra proferentum rule will interpret the contract
against the Province.

 More specifically, the “participation” of tercon was of one that does not include
“unqualified” bids. Thus without including the unqualified party, the exclusion clause does
not apply to the situation at hand.
 COMMENT: I Agree with Binnie in that this interpretation was contrived. Binne J states that
participation begins when Tercon submitted the bid – whether or not the process includes
unqualified parties, Tercon’s bid was considered. This constitutes participation.

REMEDIES

The normal remedies for breach of contract is award of money damages.(posner) The plaintiff has the burden to
prove the losses (McRae v Commonwealth)
Does Sale of Goods Act Apply?
 Normal measure of damages in sale of goods context is damages, estimated direct loss and
naturally resulting losses, assessed on market price where a market for these goods is availble.
(Sale of Goods Act Ontario s. 47-48)
  Breaches of warranty or conditions elected or compelled to be warranties by the buyer will give
buyer the right to 1) reject the goods 2) set up warranty in diminution or extinction of price 3)
maintain action. (s. 51)
1. Expectation damages– are the normal measure for money damages in contract law. The aim is to
put the plaintiff in as good a position as she would have been in if the contract had been performed
(Hawkins v McGee, Sally Wetheim) The formula for calculation is
a. (direct losses)directly caused by breach - promised lease payments in Keneric Tractor
b. +(incidental losses)loss incidental to breach - lost profits from late crankshaftHadley v Baxendale
c. – (avoided and avoidable losses)Renting to another people in Keneric
2. Reliance damages–(McRae v CDC – tanker) damages difficult to quantify, measure, uncertain, or just
more advantageous. Aim to put the plaintiff in as good a position as she was before the contract was
made. Purpose to protect the reliance interest of the party who acted upon and incurred costs because of
the contract.Focus on causation &foreseeability
a. LIMITS ON RECOVERY: would part or all of the cost be undertaken anyways(reliance)? Does it
have residual value? Are the plaintiffs also double counting or double claiming?
b. Damages uncertain or difficult to measure (value of oil in tankship uncertain in McRae)
Categories include: direct loss (wasted expenses, restitution of value conferred on defendant)
and loss of opportunities.
3. Restitution damages – USED in situations of part performance/part payment where party in breach
enjoyed the benefits. Prevention of unjust enrichment means that no valid contract is needed to enforce
restitution damages(Deglman)
a. TEST: There must be 1) detrimental relianceby plaintiff 2) resulting benefit to defendant 3) the
benefit consitutes unjust enrichment – cannot be justified under the law.Measure is to restore
the value of the benefit to the defendant, inlcuding:
i. Quantum Meriut: fair value of services and goods provided(Deglman)
ii. Return of partpayment (Redgrave v Hurd, Stevenson) – but not deposit – a binding of
the parties to the bargain
iii. NO reliance damages
4. Coercive Remedies: Equitable
i. Specific Performance
1. Specific performance is an exceptional and discretionaryremedy only available when the
object of the contract is unique and damages would not be an adequate remedy. (ming
vases in Falcke v Gray)
2. DISCRETION:It is at the court’s discretion –refused SP in Falcke v Gray’s case
due to the hard bargain – 40L selling price for 200L actual price. Unfairness
would result to the unknowledgeable seller.
3. UNIQUE: Ming Vase is unique, but landnot assumed to be unique. Needs proof
that substitute not readily available (Semelhago) (John E Dodge Holdings –
location good for business, not replicable elsewhere)
4. REMEDY: Courts will order the performance of the contract
a. Damages In lieu of SP – assessed at time of trial to factor in increases in real estate
prices (Semelhago)
LIMITS ON EQUITABLE REMEDIES /Defenses to action for SP
1. General equity – “he who seeks equity must do equity” any inequitable conduct by the party
seeking SP will be a good defence. (Falcke v Gray – price & knowledge)
 Misrepresentation & mistakes can be a factoreven when not independently
actionable – so long as party seeking SP has fault.
2. Hardship – SP will cause severe and unncessary hardship at contract formation, to party
against which SP sought, or 3rd Party
3. Mutuality – infant hockey player’s claim to void the contract due to underage status struck
out for lack of mutuality. If it’s available to one party, it must be available for the other.
ii. Injunctions
Extraordinary reliefs provided by courts to prevent irreparable &irreversible harm
(assuming harm has already occurred)Temporary (ex parte) injunctions provided where
emergency can be proven.
iii. Contracts of Personal Service
a. Courts will issue injunctions to enforce negative stipulation if that was what the parties
agreed to in the contract. (Warner Bro v Nelson)
1. LIMIT – when the effects of the injunction will drive the defendant to 1) starvation
elimination of one’s livelihood or 2) to the specific performance of positive
covenants.
b. REMEMBER that injunction is an equitable remedy issued at the
discretion of the courts. Negative language does not automatically
equate a negative convenant enforceable by courts
LIMITS ON RECOVERY
a. Certainty (Chaplin v Hicks)
When the damages are uncertain, an estimate on the loss of chance based on 1) magnitude of potential
gain 2) probability of that gain may be assessed for damages.
b. Causation & Remoteness
The damage must be directly caused by (but for) the breach of contract. (Hodgkinson v Simms).
Two rules by Hadley v Baxendale: Remoteness demands that the damages be 1 )reasonably
forseeableat the time of contract formation(time - Victoria Laundry v Newman)(objective std). 2)The
breaching party may be liable when he has knowledge of special circumstances that may result to
greater damages.
 Time - RF of damages must be at time of contract formation (Victoria Laundry)
RF – it should be the damages are RF and not the breach (RBC dominion)
 Fuzzy – generally sufficient for the defendant to foresee the type or kind of damage, even if
the quantum of damages are unforesseen. (H Parsons v Uttley Ingham –defective bin cause
damage to pigs, even if not known that it will cause mouldy nuts causing pig death)
 Factors for consideration:knowledge – quality and specificity (Scyrup v Economy, Victoria
Laundry)Parties and relationship – engineering defendant vs layment in Victoria Laundry,
supplier of goods vs carrier of goods in Hadley Baxendale, Type of Contract – 2nd hand
equipment in Scyrup v Economy Tractors, carrier contract v supply contract (Hadley
Baxendale), proportionality of claimed loss vs anticipated benefits
c. Mitigation
ii. Damages reduced by the amount that can be reasonably avoided resulting from the
breach (Payzu Limited, Asamera Oil) The burden is on the party in breach.
1. Reasonableness:
 a. ACTION - innocent party is not required to take ALL possible steps, especially
when mitigation involves significant cost, effort or risk – assess on nature of
contract and subject matter (risky and volatile market in Asamera oil)
b. TIMELINESS TO LITIGATE–reasonable effort to mitigate includes litigating
promptly (Asamera Oil)
c. TIME – damages assessed as of date of breach, unless substnatial and
legitimate circumstances justify waiting for a later date.
i. DEFENSE –desire for specific action may justify not taking steps to
mitigate, but only if there are fair, real, and substantial justification for
the claim (Asamera)
1. Where Damages provided in lieu of specific performance,
assessment of damages occur at date of the trial (Semelhago)
2. Continuation of contract by the innocent party – if that is the best way to mitigate
(Payzu v Sauders, Evans v Teamsters)
iii. Costs to mitigate - actions taken or ought to mitigate be taken must be subtracted from the
reduction (or added back to the total damages) Asamera Oil. The actions must be truly incidental
to mitigating the damages. (commission on fees on the sale of shares)
d. Loss of Enjoyment and other tangile interests
iv. Generally contract law does not allow for loss of enjoyment interests, but modern courts have
allowed it as long as intangile interests is the primary or major purpose.(Jarvis v Swan Tours)
v. Includes 1) loss of enjoyment or amenity 2) loss of reputation 3) mental distress, pain, suffering
1. Sometimes used “aggravated damages” to take into full account of intangile interests of
a separate actionable wrong usually a tort (Fidler v Sunlife)
e. Aggravated and Punitive Damages
vi. punitive awards given in “exceptional cases for ‘malicious, oppressive and high-handed’
misconduct that ‘offends the court’s sense of decency’.”Justice Binnie accepted std in Hill v
Church of Scientology
vii. Usually given in cases where fines & penalties inadequate to acehive objectives of
retribution(primary purpose of punitive damages not to compensate), deterrance and
denunciations(Community collective condemnation)
viii. Factors to consider: 1) harm caused 2) degree of misconduct 3) relative vulnerability 4)
advantage gained
f. Liquidated Damages and Penalty clauses
ix. Courts generally reluctant to vary the clauses of an otherwise valid contract. Will enforce
liquidated damages clause, but NOT penality clauses (Shatilla v Feinstein). The assessment of
liquitated damages or penalty turns on proportionality and reasonabless (Thermidaire) Grossly
excessive and punitive responses to breach will not be enforced.
1. Fixed sum on Single breach
a. TEST: is the clause a genuine pre-estimate at the time of the formation of the
contract of the potential damage of the breach?Does it exceed actual damage?
b. Factors: language and labels – important not determinative, damages
otherwise difficult to calculate, (Shatilla)
c. Proportionality & reasonabless in Thermidaire (but it was not a fixed sum)
2. Fixed sum given on multiple breaches – presumption that it is a penalty. (Shatilla)
 a. Rebutted if sum is carefully thought out provided it is not extravagent or
unreasonable. Taken at the weakest link. If loss in one particular breach never
amount to the sum stated, then conclusion that sum is penality is reached.
3. Formula determination
a. Assess whether it was reasonable, or grossly excessive and punitive given the
circumstances (ruled excessive in Thermidare)
b. NOTE: voiding of clause comes from a power in equity and does not relieve
liability from normal damages.

Sally Wertheim v Chicoutimi Pulp –expectation damages as normal measure of contractual damages
general operating principle in 1911 by judicial committee council fo the privy council in appeal from Canada – Ruling
principle applied in awarding damages for breach of contract wa sto place plaintiff in as good a position as they would
occupied “if the contract had been performed”

Carlil v Carbolic Smoke Ball – Carlil receives 100 exepctation damages which will be her poisiiton if the contract was
performed. Same thing in Hawkins & McGee – expectation damages compensates Hawkins of the difference between
a hairy hand and a perfect hand. The pain and suffering would have happened with the procedure anyways, thus
cannot be recovered.

RELIANCE: McRae v Commonwealth Disposals commission: CDC invited McRae to go search for a tanker with oil, which
MCRae did but failed to find. Turns out there was no tanker and CDC knew beforehand. McRae claim damages for
breach of contract – also wants to be paid for loss opportunities, cost of incursion. RELIANCE damages allowed –
Court endorsed the reliance measure because expectation measure was too difficult to assess. APPROVED REMEDIES:
1) restitution for the return of the ship purchase price, 2) recovery for expenditures involved with acquiring the ship
to get to the tanker 3) loss of revenue/opportunity cost if ship not used for the trip
NOT RECOVERABLE: 1) equipment purchased to retain tanker – 2 questions – would part or all of the cost be undertaken
anyways? Does it have residual value?

RESTITUTION: Deglman – nephew performs house chores for aunt, who promised the nephew the house at death in
exchange for the services. Estate refused to transfer the land and the nephew sued for specific performance. No valid
contract, but prevention of unjust enrichment conferred restitution interest to the nephew – appeal allowed and
house granted to nephew.

Sale of Goods Act Ontario,

47.(1) Seller maintains action for when buyer neglects/refuses to pay after receving goods
47.(2) Seller maintains action for when buyer neglects/refuses to pay after payable date.
48.(1) Seller maintains action for damages when buyer wrongfully neglects/refuses to accept & pay.
48.(2) Measure of damages is diret estimated loss and losses naturally resulting form buyer breach, ascertained by market
price where available market for goods
 Expectation and reliance damages (market price)
49 (1) Buyer maintain action when seller breaches contract by not delivering the product (2) measure of damages is
estimated losses and naturally resulting in ordinary course of events of seller breach
50. Specific performance can be ordered as the courts deemed just.
51. (1) Breach of warranty – when there is a express breach of warranty or treats a breach of condition as breach of
warranty – she can reject the goods and also pay reduced or no price, OR maintain action for damages for the breach
of warranty. (2) Measure of damages – same as above (3) in warranty as to quality cases, damage is for difference in
value (4) reduced price or no price does not bar action if further damage suffered
52. Act does not bar buyer’s rights to recover interest or special damages. Also recovery of payment when consideration
for payment failed.

Chaplin v Hicks – Loss of chance – Chaplin invited for beauty contest but letter reached too late, sued for loss of chance –
100 for the chance to winning the contest

Semelhago v Paramadevan – time value of damages – where item is unique, assess damages based on date of judgement
to account for potential change in asset prices -
- P agree to buy house and then D reneged. House price increased by 50% at time of trial.