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161 Cards in this Set
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Denton v Great Northern Railway Company (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations)
"train timetable found to be an offer" |
[Public / Conditional offers are possible] Railway time tables cannot be treated as mere wastepaper. The timetables represent a unilateral offer by the company, available to anyone who accepted by fulfilled the condition of coming to the station (and paying the fare). The consideration is Denton’s effort in fulfilling the condition and coming to the station. Thus the company had made an offer to Denton, who accepted it by performing the condition and coming to the train station, and they cannot revoke the offer after his acceptance. The fine print in the offer protected the railroad in cases of delay by accident, but not in a situation such as this, where the train has been taken out of service entirely |
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Johnston Brothers v Rogers Brothers Kinds of Promises Legally Enforced: Offers and Prelim Negotiations)
"quote for flour found not to be an offer" |
[Unless its explicitly an offer, its probably an invitations to treat. QUOTE IS NOT OFFER]
The words ‘we quote you’ followed by a price do not represent an offer. Instead they are merely an offer to treat. When offered to the world at large, more likely to be an offer to treat rather than a specific party offer. Anyone receiving the invitation to treat to treat can reply with an offer, and the party who sent out the letter can accept, decline or make a counter-offer. No explicit offer can be in the defendants letter, which after all was a circular, and could have been answered by many people. The last line of the letter, which mentions that prices are rapidly advancing, is a further piece of evidence that this was not an offer but an invitation to treat. |
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Harvey v Facey (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations)
""lowest cash price" for Bumper Hall Pen not an offer" |
[Offers need to be extremely explicit - "lowest price" isn't offer]
An offer to sell has to be explicit. Facey was asked a double-barreled question, about his willingness to sell and the lowest price he would sell at. He responded to only the second question, stating the lowest price at which he would sell. This did not constitute an offer on his part to sell to the plaintiffs at that price. The plaintiffs misinterpreted his statement of this lowest price as an offer, which they thought they were accepting. Instead they were making an offer of their own (at his stated lowest price), which Facey had the power to accept, decline or counter-offer. |
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Grainger & Son v Gough (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations) NOT IN CASELIST |
A wine list is not an offer to supply an unlimited quantity of the wine described at the price named, so that as soon as an order is given there is a binding contract. Considering that wine supplies are necessarily limited, a wine list represents merely an invitation to treat. Anyone reading the list can make an offer for the wines on it, which the merchant can accept or decline. |
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Boyer and Co. v D. & R. Duke (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations) NOT IN CASELIST |
Quotations of price must be invitations to treat and not offers. They reach many individuals, but they might concern a singular items. Even wholesale dealers do not have unlimited supplies. ‘A merchant, dealer or manufacturer, by furnishing a quotation invites an offer which will be honored or not according to the exigencies of the business’. |
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Lefkowitz v Great Minneapolis Surplus Store (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations)
"newspaper ad for lapin stole is an offer, but not that for fur coat" |
[Ad can be offer if 100% explicit] Usually advertisements in the paper are invitations to treat, and not offers. However, they may be (unilateral) offers, depending on the legal intention of the parties and the surrounding circumstances. In this case the offer by Great Minneapolis Surplus Store to sell the lapin fur was clear, definite and explicit and left nothing open for negotiation. Lefkowitz having accepted the offer by successfully managing the condition of being the first one to appear at the store, and having offered the stated purchase price of $1, was entitled to the fur. The $1 is consideration, and shows to the world at large that this was intended to be a real contract. The offeror cannot revoke or modify his offer post-acceptance. Second time this happened (stole worth $139): doesn’t matter that Leftkowitz knew about the house rule, because there is no assumption that same conditions apply to different offers from a party. |
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Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd. (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations)
"items on display on store shelves not constituting an offer" |
[Retail context: customer bringing good to cashier is offer, price tags / displays are invitations to treat] When a customer at a store comes to the cashier, he becomes the offeror for the goods he wants to purchase, and the cashier/store becomes the offeree. 999 times out of the 1000 the store will accept the customer’s offer. However, the contract is not complete until the customers offer is accepted. If the relationship were reverse and the contract were good as soon as a customer took an item down from the shelf, it would be impossible for him to substitute items (pre-payment). This case refers to poisonous substances, but that is a public safety issue, which is governed by different authorities as it is statutory. Note: this is a case where it violates statutes: may not be applicable to contracts cases. |
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Fisher v Bell (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations) NOT ON CASELIST |
[Displays are invitations to treat] The display of an item in a store window, even with a price tag, is not an offer but an invitation to treat. A customer who wants to purchase said item still must come into the store and make an offer, which the store (as offeree) could accept or decline. Thus a store displaying a flick-knife in its window was held not to be violating a statute which banned the offering for sale of flick-knives. Note: this is a case where it violates statutes: may not be applicable to contracts cases. |
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Storer v Manchester City Council (Kinds of Promises Legally Enforced: Offers and Prelim Negotiations)
"tenant's correspondence with city clerk with view to purchasing premises" |
[The subjective intention of the offeror does not matter, only objective outward appearances]
Usually if contracts of sale are not formally exchanged, then the contract is not finalized. However, it was not necessary in this case, as this was an informal purchasing scheme ran by the government, whose very object was to dispense with legal formalities. Thus all that was required to finalize the contract was the offer and the acceptance. The town clerk may claim that he did not intend to make a binding offer. However, based on what the clerk said and did (letter saying: if you sign papers and sent them back, you’d receive agreement), it was reasonable to categorize him as having made an offer.
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Shatford v B.C. Wine Growers Ltd. (Kinds of Promises Legally Enforced: Power of Acceptance)
"six day delay for loganberries made acceptance ineffective (offer expired)" |
[Offers must be accepted within a reasonable time, or offerees lose the power of acceptance]
An offeree must accept an offer within a reasonable time, or he loses the power of acceptance. The causes of a delay are unimportant. In this case, the plaintiff/offeree waited 6 days to accept the offer. By that time the defendant/offeror had moved on. Having regards to the commodity being bargained for, the time of year of the offer, and the necessity for a prompt decision, 6 days was held to be more than a reasonable amount of time in which to accept the offer. |
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Larkin v Gardiner (Kinds of Promises Legally Enforced: Power of Acceptance)
"acceptance of offer to buy house ineffective if uncommunicated to offeror" |
[To be a binding, most of the time an acceptance will have to be communicated to the offeror (Meeting of the Minds), or at least irrevocable steps towards communication will be necessary]
An offeror has the right to withdraw his offer anytime before acceptance by the offeree. In most contracts it is implied that acceptance of the offer will be communicated (not in unilateral contracts, where performing the condition signifies acceptance and is binding). Thus in this case the mere fact that Larkin accepted the offer, uncommunicated to Gardiner, did not convert the offer into a binding contract. Until Larkin did something irrevocable towards communicating her acceptance to Gardiner, he was at liberty to revoke his offer. Thus if Larkin had taken an irrevocable step at communication (such as sending notice via the post), Gardiner would have been bound even if he had not yet received the notice of acceptance. However, Larkin merely delivered the signed contract to her agent. This does not count as irrevocable act, as she was free to retract her acceptance at any time (before the agent actually communicated it to Gardiner). The assumption is that most offerors require NOTIFICATION. |
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Dominion Building Corporation, Ltd. v The King (Kinds of Promises Legally Enforced: Power of Acceptance)
"passing of Order in Council is valid acceptance" |
[Communication must be unequivocal, silence can be acceptance if explicit waiver of need of communication] When the offer clearly states that the acceptance by the defendant through legislative deliberation and acceptance would constitute a binding contract, there is no requirement for notification. The offeror explicitly waived the need for communication by agreeing to the terms. Note: need unequivocal communication from offeree as well: can’t be something the offeror would have done anyway (if you brush your teeth, you accept.) |
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Dickinson v Dodds (Kinds of Promises Legally Enforced: Power of Acceptance)
"indirect knowledge of revocation prevents acceptance of offer" |
[Additional consideration is required for option to hold offer open]
Dodds made an offer to Dickson, and promised it would remain open for 2 days. However, (additional) consideration must be given for any option to hold an offer open. Thus despite their intentions about the option, in the absence of this consideration, Dodds was free at any time before acceptance by Dickinson to revoke his offer. Although Dodds did not explicitly communicate his revocation of the offer to Dickinson, Dickinson was aware that Dodds was no longer minded to sell the property to him, as plainly and clearly as if Dodds had told him in so many words that he was withdrawing his offer. Dickinson was aware of this fact before he made any attempt at acceptance, and thus there was clearly never a meeting of the minds or a valid contract. This is different from Storer: contracts are actually about meetings of the mind, it’s just hard to determine when a meeting of the minds has taken place. When there’s evidence of it and the offerree knew that the offer was off table, offeror is off the hook. THIS CASE IS GENERALLY CONSIDERED WRONGLY DECIDED AND BAD LAW. |
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Felthouse v Bindley (Kinds of Promises Legally Enforced: Power of Acceptance)
silence not enough to accept offer to buy horse from nephew |
[The Storer for Acceptance: objective test] Subjective intention of two parties is not enough to form a contract -> confirms the objective test. The nephew in this case had subjective intention to sell the horse for the price (30 guineas), but gave no clear indication of acceptance or did anything from which acceptance could be implied. |
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Tinn v Hoffman (Kinds of Promises Legally Enforced: Power of Acceptance)
two offers crossing do not form contract |
[Cross-offers are not acceptance] If parties are intending to sell and buy at the same time (ex. A sends B a letter offering to sell house for X and B sends A a letter offering to buy house of X) -> there is still no contract |
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Lucy v Mouflet (Kinds of Promises Legally Enforced: Power of Acceptance)
failure to reply not valid acceptance |
[While silence generally not enough for acceptance, can be if it can be implied on past dealings] If people are in regular dealings, failure to respond to a letter noting that they will send goods unless they hear back can be considered acceptance. This would not be the case with two regular individuals though. GENERALLY SPEAKING: silence is not enough to constitute valid acceptance, but in this case they’re in regular dealings. |
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Wheeler v Klaholt(Kinds of Promises Legally Enforced: Power of Acceptance)
failure to return shoes considered valid acceptance |
[Silence acceptance exception: reasonably understood as acceptance] While there was no contract, one of them still had the shoes in question. Refusing to return the shoes constitutes an unequivocal act of acceptance of the bargain, as not returning them would result in UE. There is a pre-existing duty to return based on previous business dealings between these two parties. |
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Eliason v Henshaw (Kinds of Promises Legally Enforced: Power of Acceptance)
acceptance sent to Georgetown instead of Harper's Ferry not valid |
[Method of acceptance does not have to be reasonable, but a reasonable person must understand the unreasonable mechanism represents acceptance] Offers must be accepted through the conditions listed in the offer. In this case, it was said that the acceptance should be returned “on the same wagon” which meant that it had to be within 24 hours (implicit), and that it had to be returned to the right place. Because the P did not follow these restrictions, there was no valid acceptance. The means of acceptance don’t have to be reasonable, but the reasonable person must understand that the unreasonable mechanism was representative of acceptance. |
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Manchester Diocesan Council for Education v Commercial & General Investments (Kinds of Promises Legally Enforced: Power of Acceptance)
NOT ON CASELIST |
[offerors are entitled to INSIST for specific methods of acceptance, if just asked, can be accepted in a different way as long as not less advantageous to offeror]: - If an offeror stipulates acceptance must be in a particular way (e.g. via fax), then he is entitled to it. - If the offeror asks for acceptance in a particular way, but doesn’t insist on it, and if the offeree accepts in a different way which is not less advantageous to the offeror, then it will conclude a contract - If an offeror wants only a specific method of acceptance then it is up to him to make that clear |
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Hyde v Wrench (Kinds of Promises Legally Enforced: Power of Acceptance)
£950 counteroffer kills £1000 offer |
[Acceptance cannot include new terms: Counter-offer or rejection cancels original offer] Once and offeree rejects an offer from an offeror (for example by making a counter-offer), he cannot then simply re-instate the first offer and accept it. A counter-offer cancels the original offer -> If the counteroffer isn’t accepted, and the original offer isn’t re-made, the original offer is not open for acceptance |
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Butler Machine Tool Co. Ltd. v Ex-Cell-O Corporation (Kinds of Promises Legally Enforced: Power of Acceptance)
seller signs buyer's tear-off slip -- price variation clause not part of the contract |
[Battle of Forms, last form tends to be accepted (at least in this case). If two possible interpretations of K, courts try to fit it as acceptance rather than counter-offer] |
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M.J.B. Enterprises v Defence Construction (1951 SCC) (Kinds of Promises Legally Enforced: Tendering Process)
privilege clause--"owner" forbidden from choosing non-compliant bid |
[Tenders create two K's: A when submitted, B when accepted. A can be excluded if explicitly says as such, but privilege clause here not enough] Ron Engineering, the main Canadian case about Tenders, states that the tendering process creates two contracts: Contract A (occurs when tender is submitted) and Contract B (occurs if tender is accepted). In this case, Contract A was found to NOT ALWAYS be formed and tender isn’t always irrevocable -> all depends on the terms of the tender call, in this case it did create contract A (why? Owner asked for tenders = offer, company submitted tender = acceptance.) If the Call for Tender explicitly states that there will be no Contract A until the formal contract is drawn up, that means that there is no contract A. Must explicitly state that it’s just an invitation to treat. The privilege clause in the case: “the lowest or any other tender shall not necessarily be accepted” does not allow them to choose a non-compliant tender, as was the one accepted. |
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British American Timber v Elk River Timber Co. (1933 BCCA) (Kinds of Promises Legally Enforced: Formalization and Certainty)
contract for purchase of timber limits formed despite "formal contract" provision |
[Contractual relationships do not require a formal contract. If the terms of the contract are precise and nothing is left for further negotiation in the pre-contract document, there is a contractual relationship.] Mutual assent to an informal agreement is sufficient if a formal agreement was contemplated. An agreement that states that "a formal agreement will be drawn up" is not a term of the contract unless explicitly stated as such: it’s just something that serves a practical purpose and doesn’t carry contractual liability. A contract does not have to be written, just the required characteristics. Can see statement “a formal contract will be drawn up” in two ways: 1. Create a contract. 2. Document an existing contract. |
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May and Butcher, Limited v The King (1929 K.B.) (Kinds of Promises Legally Enforced: Formalization and Certainty)
agreement to agree on price in the future not a valid contract |
[Terms of the contract does not necessarily have to be determined, but must be determinable.] A contract requires the settlement of all critical parts of the contract. It does not necessarily require full determination, but must be set up in such a way that they will certainly be decided. Subjective belief between the two parties that there is a contract does not make a contract. Price is not determinable in this case because there’s no clear mechanism in place to enforce. Agreement to agree is not a contract, doesn’t bind the parties to anything. Note: Hillas loosens standard. |
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W.N. Hillas and Co., Limited v Arcos, Limited. (1932 H.L.) (Kinds of Promises Legally Enforced: Formalization and Certainty)
"option of entering into contract" itself a contract |
[Loosening of “must be determinable” to align law with commercial reality -> look into subjective intent of parties] K for immediate sale of wood with option to purchase more in the future. This option for future purchase was consideration given by vendor to purchaser (similar reasoning to Foley). The insistence that all terms be determinable is out of touch with commercial reality, thus courts should pay greater attention to cases where business people believe they have contracts but don’t necessarily meet the test. Suggests that from 1932 onwards, there is a lower threshold for degree of certainty required to align the law more closely with commercial reality. Must take into account intent of the parties when they are clear. |
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Foley v Classique Coaches Ltd. (1934 C.A.) (Kinds of Promises Legally Enforced: Formalization and Certainty)
valid contract where gas is to be sold "at a price to be agreed" |
[Past adherence to an agreement can show that the K was binding -> note that disagreement would be submitted to arbitration = determined pricing] K in two documents: one of sale of land, and other of agreement to buy all gas from him. The parties acted as though there was an agreement for three years, but this does not determine K as subjective intent is not determinative of whether a K exists. However, this fact works to remove element of uncertainty. Buying of gas is meant to be part of consideration offered by D in order to purchase land from P, spirit of agreement was that second contract was a condition of the first. The arbitration clause makes the price be able to be determined, unlike in May & Butcher, thus not uncertain. |
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Scammell (G.) and Nephew, Limited v Ouston (1941 H.L.) (Kinds of Promises Legally Enforced: Formalization and Certainty)
agreement to enter "hire purchase contract" not a contract |
[No K when degree of uncertainty is too significant. Market benchmarks and past dealings can be used to determine K -> "standard terms for X", if there are clear standard terms for X in industry, not uncertain.] Two reasons: 1. Language was too obscure, no clear contractual intention, and not clear what the parties were actually committing to. No clear intention of contract. 2. No agreement actually reached, still in negotiation phase. No details of hire-purchase agreement worked out (it’s extremely complex arrangement) |
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Household Insurance Co v Grant (1879 C.A. Ex.) (Kinds of Promises Legally Enforced: Contracts by Correspondence)
shareholder despite notice of share allotment never received |
[The offeree’s posting of the letter of acceptance is the completion of the contract,] A contract formed by correspondence through the post is complete as soon as the offeree’s letter accepting an offer is put into the post, and is not invalidated in the event of the letter never reaching its destination (the offeror). This rule may at time lead to hardship for the offeror, but an offeror can always make the contract dependant on actual communication to himself of acceptance, or make further inquiries of the offeree. Conversely, without the mailbox rule commerce would be significantly depressed, as it would take much longer before an offeree could act on his acceptance. In effect, post office becomes agent of offeror: as soon as post office gets acceptance, equivalent to offeror getting acceptance. Note: does not stand for the fact that in all correspondence contexts that acceptance is effective upon dispatch: it only takes place at dispatch when it is reasonable to draw the inference that the parties had agreed that dispatch would be acceptance. |
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Henthorn v Fraser (1892 C.A.) (Kinds of Promises Legally Enforced: Contracts by Correspondence)
acceptance effective upon posting despite offer having been handed to offeree |
[Revocations don’t count under the mailbox rule, the mailbox rule can apply for acceptances even where the initial offer was not made via the post (must be implicitly/explicitly approved as means of acceptance)] The mailbox rule only applies for acceptances of offers, and not for revocations. Revocations are only valid when news of them actually reaches the offeree. In this case Henthorn sent his acceptance of the offer in the post before learning of the offeror’s revocation. The mailbox rule was held to apply in situations where ‘the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted’. Thus despite the offer being made not through the post but in person, the court ruled that since Henthorn lived in a different town than Fraser, his usage of the post for his acceptance met the standard. Therefore his acceptance was good as soon as he posted it, which was before he learned of the revocation, and there was a valid contract. |
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Byrne & Co. v Leon Van Tienhoven & Co (1880) (Kinds of Promises Legally Enforced: Contracts by Correspondence)
tin plates sold upon NY posting of acceptance despite subsequent withdrawal of offer |
[revocations don’t fall under the mailbox rules, but acceptances via telegram do] A revocation has no effect until it is communicated to the offeree (directly or via a third party). Since the mailbox rule does not hold for revocations, the defendant’s/offeror’s revocation of their offer was only valid when it reached the plaintiffs on October 20th, despite having been posted on October 8th. However, the plaintiff/offeree accepted the offer on October 11th by telegram, and then October 15th via the post. Thus even if the acceptance had not yet reached the defendant/offeror, it was binding as of October 11th. Therefore there was a valid contract |
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Holwell Securities Ltd. v Hughes (Kinds of Promises Legally Enforced: Contracts by Correspondence)
option exercised only upon reception of offeree's notice |
[Mailbox rule doesn’t apply when agreement explicitly (or implicitly) states that acceptance must reach the offeror] The use of the language “notice to” in offer means notice must actually reach offeror. The postal rule doesn’t apply when considering the circumstances, the parties would not have intended a binding agreement until agreement was actually communicated successfully. Both dispatch/reception rules have flaws, common law jurisdiction has opted for dispatch as it speeds up the process. |
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Eastern Power Ltd. v Azienda Comunale Energia & Ambiente (1999 ONCA) (Kinds of Promises Legally Enforced: Contracts by Correspondence)
faxed acceptance causes contract to be formed at place of reception - Italy |
[The mailbox rule does not apply to relatively instantaneous forms of communication (fax/email)] This case was a jurisdictional dispute. The general rule of contracts is that the contract is made in the location where the offeror receives notification of the offeree’s acceptance (which in this case would be Italy). However, if the acceptance is made via the mailbox rule, then the contract is made in the location where the offeree posts his acceptance (which would be in Ontario). In this case, EP’s acceptance of the offer was made via fax. A fax machine was held not to fall under the mailbox rule, because it is a relatively instantaneous form of communication. Thus the rationale of the mailbox rule, which is to encourage commerce by allowing the offeree to act on his acceptance rather than wait, was not applicable to the fax. Since the offeror received notification of the acceptance immediately, EP did not have to wait a long period before it could act on its acceptance. Thus the traditional rules of contracts apply, and the contract was made in Italy. |
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Westlake v Adams (1858) (Kinds of Promises Legally Enforced: Consideration: Bargain Theory)
no inquiry into adequacy of consideration |
[Law does not care about adequacy of consideration] It is an elementary principle, that the law will not enter into an inquiry as to the adequacy of the consideration - not court's place to judge if you're getting ripped off |
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White (Executor) v William Bluett (1853) (Kinds of Promises Legally Enforced: Consideration: Bargain Theory)
promise to forgive debt if son refrains from complaining -- unenforceable |
(A court can find or not find consideration depending on other aspects of the case) In return for his father cancelling a debt, a son promised to no longer complain. The court found that even if the father had made a valid offer to forgive the debt, and the son had accepted, there was no consideration, as the son had no legal right to complain. However, even if the son had no legal right to complain, he certainly had the right to complain verbally all he wanted. The court could have found giving up this right to be consideration if it wanted, but as the ‘contract’ lacked witnesses and was not in writing, there were doubts over whether the father really intended to make a legally binding offer. There was also no way to know if the son had breached the ‘contract’ by complaining, and the ‘contract’ was too open-ended and vague. Father likely would have forgiven debt even if son continued to complain. If a promise by Party A is not determinative of Party B’s decision to do something, then it is difficult to say that it was done “in exchange” for whatever party B did. |
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Hamer v Sidway (1891 NYCA) (Kinds of Promises Legally Enforced: Consideration: Bargain Theory)
promise of $5,000 if nephew stops drinking, swearing, etc. to 21 -- enforceable |
[Consideration does not need to explicitly benefit the offeror or detriment the offeree. the "reasonableness" of consideration is unimportant] An uncle promised his nephew money in return for him giving up drinking, tobacco, swearing or gambling until 21. Unlike White, this promise was made in front of witnesses, and later put in writing. The uncle’s estate later tried to argue that the uncle had not been benefited in any way by the consideration, and that since the nephew was benefited rather than harmed by giving up the vices there was no valid consideration. However, consideration does not have to be a detriment to the offeree, not a benefit to the offeror. It merely needs to be something promised, done, forborne or suffered by the offeree, as consideration for the promise made to him. The nephew abandoned his legal right to partake in these vices, on the strength of the promise that doing so would earn him $5000. Having fulfilled the conditions, it is irrelevant whether the performance actually proved a benefit to him. Thus there was a valid contract between them (which in the form of a promissory note had since circulated to 3rd parties). Distinguished from White in that the uncle would not have given 5000 dollars to the nephew unless the nephew gave up these vices, shows that the nephew’s actions have some value to the uncle. |
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Eleanor Thomas v Benjamin Thomas (1842 QB) (Kinds of Promises Legally Enforced: Consideration: Bargain Theory)
£1 rent and obligation to repair valid consideration for right to live in house |
[Motive is not sufficient consideration, and consideration must have value. 1 pound a year was enough value.] Motive to follow testator’s wishes is not consideration. The 1 pound a year rent meant that it was not a gift and it was valid consideration. The rent went directly to the executor, clearly between P and D. Valcke: Merely satisfying the “but for” test is not enough, amongst all the “but for”s, have to find the PRIMARY MOTIVATION and consider that answer. In this case, the house was not given to her because she agreed to maintain it, but it was a demand that she maintain the house in order for them to give her house. |
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The Great Northern Railway Company v Witham (1873)(Kinds of Promises Legally Enforced: Mutual Promises)
offer to supply iron over one year enforceable for each order once order is placed |
[Unilateral offers can be revoked any time, but once accepted consideration has been done (commitment to pay)] GNR accepted a tender offered by Witham, to supply them with iron for twelve months at a certain price. After filling several orders, Witham refused to fill any more, claiming that the contract was not valid, as there was no mutuality/consideration from GNR. All the obligations of the contract were on Witham, who was bound to fill all orders placed, while GNR was not actually bound to place any orders, and could even order iron from another supplier. Tenders were found to be unilateral offers. Thus any time GNR accepted Witham’s unilateral offer by placing an order, that was sufficient consideration to make a valid contract (i.e GNR fulfilled the condition of the unilateral offer). Witham is free to revoke its unilateral offer at any time, but not after GNR has accepted the offer and placed an order. Valcke: Year long commitment does not have valid consideration, but each individual offer does (commitment to pay for order). Thus, there is a valid contract for each order but no contract for the whole. |
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Tobias v Dick and T. Eaton Co. (1937)(Kinds of Promises Legally Enforced: Mutual Promises)
exclusive selling agency for John Dick Crushers -- unenforceable |
[Consideration must be mutual, K cannot be one sided] Unlike in Witham, there was held to be no valid contract because of a lack of mutuality. By the ‘contract’, Tobias was given the exclusive right to sell Dick’s machines (and thus by implication the exclusive right to buy), but was not required to actually buy any machines, nor to sell any of those he bought. The judge could have applied the Witham solution and conceptualized Dick as making an unilateral offer to sell to Tobias, but there is no reason to uphold this contract, as instead of a common commercial practice (like a tender), it is a fraudulent contract drawn up by Tobias himself. Dick made discrete offers to sell to Tobias, which were accepted by installments. Apart from the 2 partial acceptances made by Tobias, he had not requested any further machines, and Dick was perfectly entitled to sell his machines to other parties. Valcke: This promise to sell Dick’s machines was unilateral, thus no consideration from Tobias. |
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Wood v Lucy, Lady Duff-Gordon (NYCA 1917) (Kinds of Promises Legally Enforced: Mutual Promises)
exclusive right to place lingerie endorsements -- enforceable |
[Mutuality can be implicitly found in the K] LDG argued that there was no mutuality in the contract, as Wood was given the exclusive right to place her products, but was not actually bound to place any. However, it was found to be implied within the contract that Wood would give reasonable efforts to place products. Without such an implied clause, the contract would have lacked the business efficacy both parties must have wanted, as neither would have been able to make any money. Additionally, within the contract Wood promised to account for profits monthly, take out copyrights, and to pay LDG one-half of the profits. These could be meaningless promises, but they have value in determining the intention of the parties. Valcke: Distinguishable from Tobias due to the implicit promise by P to use reasonable efforts to sell the endorsements. This promise stems from the fact that D is paid a percentage of the sales aggregated monthly (contractual agreement for % monthly), whereas in Tobias Dick is only paid on a sale-by-sale basis (multiple individual contracts) |
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Dalhousie College v Boutilier Estate (1934 SCC) (Kinds of Promises Legally Enforced: Charitable Subscriptions)
$5000 pledge to college campaign -- unenforceable |
[Reliance is not grounds for consideration: reliance is a harm issue, and contract cause of action is not about harm.] D promises to donate 5000 to P, P’s intention to spend more money based on D’s statement is not consideration. P did not undertake any liability or work based on reliance of D’s donation. Generally, charitable promises/pledges not legally enforceable due to lack of consideration. D would need to get a specific benefit from P (such as building a new building with funds) for consideration. |
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Harris v Watson (1791) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
promise of extra wages because ship in danger -- unenforceable |
[Public policy argument of hardSHIP contract -> Changes to K must be mutual, but sometimes pre-existing duties make it so an apparent change is not actually] Promise of more wages has no consideration because if the ship is lost the crew lose their wages. Working extra hard due to “emergencies of the sea” = no consideration, but if they have to work extra hard because captain fired members of crew = consideration. Public policy argument here, if crew are allowed to renegotiate contracts any time a ship is in trouble, more ships would sink. |
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Stilk v Myrick (1809) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
promise of extra wages because 2 seamen deserted -- unenforceable |
[Consideration argument of hardSHIP contract] Twin case to Harris v Watson, similar fact scenarios, except court uses consideration argument instead of public policy. This argument listed in Harris. |
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Hartley v Ponsonby (1857) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
promise of extra wages in state of emergency -- enforceable |
[Example of mutual change in hardSHIP - would've been dangerous to life: new K as situation changed] When terms of the contract change, like here when crew was so reduced that going to sea would have been dangerous to life, consideration to extra pay is valid as a new promise: promise to work in dangerous situations, whereas the first contract was to work in normal situations. |
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Smith v Dawson (1923) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
promise to pay fire insurance money to contractor -- unenforceable |
[Performance of existing contract not consideration for new promise -> giving up option to breach K is not consideration] P building house for D, D has insurance, P does not. House burns, D asks P to rebuild, P refuses to complete contract unless D provides money. D says ok, but refuses payment. No consideration on D’s promise to pay for the work: performance of existing contract is not consideration for a new promise. Giving up option to breach contract has never been treated by Canadian courts as valid consideration. [Valcke: Argument ignored by court: implicit in contract that risk of fire to be borne by D as P doesn’t have insurance, if this is true there is consideration when P promised to continue working.] |
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England v. Davidson (1840) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
reward for info leading to conviction awarded to police officer |
[Police: going above and beyond pre-existing duty from statute is consideration] Man offered £50 for information leading to arrest of robbers. A police constable, on duty in the area, gave the information. D only paid 5 guineas. Judgement for P: Man must pay full £50. Police giving the info was above/outside his normal duty. Valcke: Pre-existing duty here doesn’t come from a pre-existing contract between these two parties, but rather from a statute -> court comes to the conclusion that it just doesn’t fall within the regular duties of a police office to do what he did -> if it isn’t covered by the statutory duties then he has promised something additional and there is valid consideration. |
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Reif v Page (1882) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
reward to rescue wife awarded to firefighter |
[Fireman: going above and beyond pre-existing duty from statute is consideration] Husband offered reward to anyone who would rescue his wife dead/alive, from a burning building. Fireman took out the dead body was held entitled to recover. Court found for fireman, said he was not legally bound by statutes describing his job description to bound to risk life for someone who may not even be alive. |
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Raggow v Scougall and Co. (1915) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
mantle designer's promise to accept lower wages during war -- enforceable |
[Mutual Rescission can occur when both parties give up their rights, new K] All employees agreed to lower wages during WWII to keep business solvent, after war employee sues to recover full wages. This constituted mutual rescission so offer of lower wages was made under new K. [Valcke: Argument could be made that employer gave up the option to breach the employment contract. (similar to ignored argument in Smith v Dawson) -> original contract explicitly provided for the employers right to terminate the mantle designer in certain circumstances (including wartime) if the business is closed down -> employer is therefore giving up a right indicated in their contract in exchange for lower wages] |
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Gilbert Steel Ltd. v University Construction Ltd. (1976) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
promise to pay higher price for steel -- unenforceable |
[Unilateral modification of existing contractual relationship won’t have consideration] New oral agreement on higher prices, no consideration as the only difference was price and the sum of commitments on both sides did not change, thus no new K. Distinguished from Raggow: in Raggow, employer gave up the right to fire employees in wartimes with new K, so sum of commitments on both sides changed. (money on employee side, right to fire on employer side). In this case, unilateral modification. Similar to Foley: two different documents but intended to agree on things in a related way, can be considered a single agreement. Arguments fail Estoppel Requirements: 1. Cannot be used a sword (plaintiff cannot found his claim in estoppel), 2. Plaintiff must show that defendant’s acts were clearly related to them giving up rights to claim original prices, but that the plaintiff relied on defendant’s conduct to detriment. |
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Williams v Roffey Bros. Ltd. (1991) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
contractor's promise of bonus to subcontractor -- enforceable |
[Unilateral post-contractual modification is permitted in certain circumstances – contradiction to Foakes and Beers] D subcontracted to P, unbalanced contract in favour of D. P asks for more money to finish job, D agrees (partly because non-completion on his part would have triggered penalty clause), D refuses to pay after. Consideration found because D obtained a practical benefit (avoiding non-complete), thus was mutually beneficial. 6 part test: In the following circumstances valid consideration found: - (1) A enters in K with B to do work for B, in exchange for payment, - (2) At some point before A finishes, B has reason to doubt A will be able to finish, - (3) B promises A additional payment so A will finish - , (4) As a result of this, B obtains a benefit or obviates a detriment - , (5) B’s promise not made in economic duress or due to fraud of A - , (6) if all these, then promise is legally binding. Valcke: This case cannot be applied broadly, only in specific circumstances of construction/long-term works projects. |
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Greater Fredericton Airport Authority Inc. v NAV Canada (2008) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
aviation equipment--additional costs of runway extension |
[Economic duress rules. Post-K modification not supported by consideration may be valid as long as it wasn’t reached under economic duress]: The airport wants to extend a runway, which requires moving a navigational device. NAV, which has a statutory monopoly, won’t move the old device unless the airport pays for an upgrade. Airport first said they would pay ‘under protest’, and then refused to pay. - The critical factor is whether the victim had any practical alternative but to capitulate - To access the doctrine of economic duress, the plaintiff must prove 2 conditions precedent: 1) the promise was extracted as a result of pressure (i.e a demand or a threat), 2) the coerced party must have had ‘no practical alternatives’ but to agree to the coercer’s demands. If these are established, then there are several consent factors to look at: 1) Was the promise supported by consideration, 2) Did the coerced party make the promise ‘under protest’, 3) did the coerced party take reasonable steps to disaffirm the promise as soon as practicable? Thus no reference to independent legal advice or good faith. - In this case, there was pressure, there was no practical alternative because NAV is a statutory monopoly, no fresh consideration, the airport made clear it was acting under pressure, and disaffirmed as soon as possible. Hence the doctrine of economic duress is applicable. Valcke: Validates Williams v Roffey as a break from Foakes and Stilk. |
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Foakes v Beer (1884) (Kinds of Promises Legally Enforced: Pre-Existing Duty)
promise to forego interest on debt -- unenforceable |
[Practical benefit does not matter, a new K must involve something new being given by both sides, with valid consideration on both sides.] Doctor owed money for judgment, patient agrees to not claim interest in exchange for payment of portion upfront and rest in installments. Later, patient sues for interest payments. No consideration found, Doctor must pay interest. Foregoing the part that should have gone to interest does not count as consideration. Practical benefit doesn’t matter. New commitment has to qualify as a new contract. Valcke: Strange case, likely limited by changes in Williams v Roffey and NAV Canada. Sets too tight of a standard which is loosened in those cases. |
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Cook v Wright (1861) (Kinds of Promises Legally Enforced: Compromises)
city officials' promise not to sue tenant over debt for public works -- enforceable |
[Other side agreeing to not pursue legal action can be consideration] D agreed to pay P 3 installments to not be sued. Was not legally liable to pay but contract was created as promise to not sue would save D the hassle and thus he gains a benefit = consideration. P gave up the legal right to sue (important that they genuinely thought they had a claim -> right only extends to claims you honestly believe to have). Primary motivation of D was avoid hassle of being sued. |
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Fairgrief v Ellis (1935) (Kinds of Promises Legally Enforced: Compromises)
$1000 promise to two maiden sisters upon wife's return -- enforceable |
[Even if there’s no legal contract, the belief that one is paying to relinquish their contractual rights can be consideration] D makes verbal agreement that upon death, house is P’s as long as they take care of him. D’s wife comes back, D asks P’s to leave after a month. Agrees to pay them 1k in exchange for their right to the home. Even though there was no contractual agreement (statutory restrictions on formalities in specific cases), since both parties thought they had a valid contract, similar idea as Cook applies. They give up their right to sue = valid consideration. |
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Balfour v Balfour (1919) (Kinds of Promises Legally Enforced: Intention)
husband's promise of support while away -- unenforceable |
[Agreements made in the familial context lack legal intent, thus not valid K] Husband moves for work, wife stays behind for medical reasons, husband says he’d give her 30 pounds a month, wife agrees to spend it a certain way. No contract here because it’s just a conditional gift, no real legal recognizable right she’s giving up: spending the money a certain way is not consideration because the primary motivation for him is not that she spend it a certain way. Family context is about throwing gifts back and forth, primary motivation is never for the return of another gift from the family member. Adversarial nature of contract not present in family context, which is a “community of interests” -> not suitable for contract law. |
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Merritt v Merritt (1970) (Kinds of Promises Legally Enforced: Intention)
husband's promise of support made in car -- enforceable |
[Agreements made in a divorce setting probably has legal intent, thus valid K] Husband and wife separate, agree to pay wife 40 pounds a month which would cover part of mortgage payment. Agree that when mortgage is paid off, wife would own house. Husband refuses to transfer deed. There is a valid contract, not a normal family condition. These parties do not rely on “honourable dealings” between family members. Distinguished from Balfour. Would reasonable people regard this agreement as intended to be binding? -> yes, they’re divorced and bargaining about property at this point. Her paying the mortgage out of the 40 dollars is consideration. Valcke: Could be an argument that there’s no consideration -> conditional gift (I give you 40 on condition that you pay mortgage). Hard to say that husband’s primary motivation of giving her 40 pounds is mortgage. |
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Jones v Padavatton (1969) (Kinds of Promises Legally Enforced: Intention)
mother's promise of support to law studying daughter -- unenforceable |
[Presumption against valid contracts in family circumstances can be rebutted, but once K is executed cannot hold onto terms] Daughter lived far from mother, mother offered 200 pounds if she quit job and studied law at home. Mom tries to kick daughter out. While there was a contract (presumption rebutted, primary motivation of mother was to spend time with grandchild, had to make a serious contractual promise to convince her to move back as daughter had solid career, son, was 34.), it had been fully executed. Enough time had elapsed for her to study law, thus she could no longer expect K to be in force. Valcke: Could argue for mother: Uncertainty (May & Butcher), lack of consideration from daughter, family circumstances intention. Daughter could argue against consideration (primary motivation was keeping grandchild close), uncertainty through remaining terms being able to be determined (Foley, Hillis), and rebut presumption through daughter not wanting to come home at all. This should be an OBJECTIVE test like in Merritt and Jones. |
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Rose and Frank Company v J.R. Crompton & Brothers, Ltd. (1923) (Kinds of Promises Legally Enforced: Intention)
"agreement binding in honour only" binding in honour only |
[In commercial settings, intent to K is the norm which must be rebutted] P and D worked together for 8 years, commercial relationship, made K to govern future dealings but implicit in K was statement that it wasn’t meant to be a “legal” relationship, just expression of intent. No contract found here, reasonable person would not find intention to be bound by K. |
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Lampleigh v Brathwait (1615) (Kinds of Promises Legally Enforced: Past Consideration)
promise of recompense subsequent to favour in obtaining King's pardon - enforceable |
[While a mere voluntary courtesy after the fact will not be considered consideration, if the courtesy was moved by a service/act/transfer, it will count.] Lampleigh got Brathwait a royal pardon, implicit agreement of compensation of going and getting the pardon (no details on how much). Promise of money wasn’t actually a new promise, just a clarification/reiteration of the existing promise. Valcke: If master offers 50 but expenses are only 20, what should be paid? -> if it’s clarification of original contract, what matters is original contract for expenses. Paying more = unilateral modification with no new consideration. If master wants to pay less, reasonable expenses still must be paid due to original contract. Could argue there was no contract due to uncertainty, no idea what was promised on top of the expenses. Court enforces promise -> if concern is UE, master has to compensate servant for servant’s services. If concern is misrepresentation, master led him to believe that servant would be compensated and he wasn’t, thus right amount of compensation is servant’s expenses. |
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Hughes v Metropolitan Railway Co (1877) (Kinds of Promises Legally Enforced: Estoppel)
tenant's failure to repair -- landlord estopped from exercising right to forfeit lease |
[Promissory Estoppel is idea of reasonable subsequent reliance: if negotiations by A makes B reasonably rely that A will not pursue their rights, A will be estopped] Landlord has right to demand repairs on 6 month notice, gives notice and then enters negotiation. 6 months passes in negotiation, landlord moves to seize land. If individuals holding a strict legal right enters into negotiations which leads another party to suppose that the strict legal right will not be insisted on, or will be held in abeyance, then the person who holds the strict legal right won’t be able to re-assert it in an inequitable way. This promise of not insisting on the legal right is enforceable where a promise is made, intended to create legal relations and which, to the knowledge of the promisor, was going to be acted on by the promise, and which was acted on. -> even without consideration… clearly no consideration here. While this seems to contradict Dalhousie, DR can be acted on in estoppel -> Estoppel is an issue of DECORUM, not an issue of the contractual relations between two people. The court will not listen to arguments from people who go back on their promises, “estop” them from making their case. |
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Central London Property Trust Ltd v. High Trees House Ltd. (1947) : (Kinds of Promises Legally Enforced: Estoppel)
rent reduction during wartime found to be fulfilled |
[3 requirements of when a promise is binding in PE] The plaintiff agreed to allow the defendant to pay a reduced rent on a block of flats while WW2 prevented them being fully filled, but later went bankrupt and were taken over by a receiver, who sued for the back rent. By strict law, the change in rent was never effective, as it would have to have been done under seal (as the original lease was done under seal), and perhaps more importantly there was no consideration given for the lower rent. However, this was held to be a situation where promissory estoppel held. The plaintiff promised to halve the rent, this was intended to be binding, intended to be acting on by the defendant, and was in fact acted on. However, the promise was understood by all parties only to apply under the prevailing conditions, and thus when the war no longer prevented the flats from being let, the rent returned to its original level. Valcke: Even without consideration, the promise must be honoured. Denning says it’s not a case of estoppel as it has to do with future action, whereas traditionally estoppel applies to statements about an existing fact. Future action is more like a breach of contract. This case is generally not followed other than to lay out promissory estoppel. |
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Combe v Combe (1951) (Kinds of Promises Legally Enforced: Estoppel)
wife denied estoppel in maintenance claim against husband |
[Promissory estoppel does not create new causes of action. There must be a good contract somewhere in the relation]
Promissory estoppel does not create new causes of action in cases where there was no initial contract to begin with. It only prevents the promisor from insisting on his strict legal rights as laid out in the initial contract when he has made a promise not to be (which was relied/acted on by the promisee). In this case, there was held to never be an initial contract between the wife and the husband, because of a lack of consideration. Thus it is distinguishable from High-Trees, where there was no question about the initial contract, and the consideration problem was only for the changes to the contract. Denning changes backpedals on High Trees: consideration is crucial to FORMATION of K. No consideration rule only applies when there is a pre-existing K that is being modified, as in High Trees. Estoppel cannot be used as a sword to create new causes of action. |
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John Burrows Ltd. v Subsurface Surveys Ltd. (Kinds of Promises Legally Enforced: Estoppel)
estoppel denied to debtor despite creditor's prior acceptance of 11 late payments |
[The subjective intention of the (putative) promissor matters] The defendant had been late in making interest payments to the plaintiff many times without the plaintiff invoking his strict legal right that upon any sufficiently late payment, the entire outstanding amount would become due immediately. Then without warning the plaintiff invoked the clause. The defendant claimed the plaintiff should be estopped from invoking the clause, because by its conduct it had represented to the defendant that late payments would be accepted without penalty. However, the court ruled that for promissory estoppel to be applicable, there must be evidence from which it can be inferred that the promissor actually subjectively intended that legal relations should be altered. It is not enough to show that the promisee has merely been taking advantages of indulgences granted to it by the promissor. In this case, the plaintiff had not entered into any communications or negotiations with the defendants which should reasonably have led them to infer that strict legal rights would not be insisted upon. Rather the plaintiff had simply been granting friendly indulgences. It is only fair to hold the promissor to have waived his strict legal rights if he really intended to do so. Valcke: Owen Sound and Burrows -> in OS, objective intent, in Burrows, subjective intent. Objective makes more sense in K, but since this is equity there’s more leeway. In Owen Sound, overlooking of deadline not a simple indulgence because there was a PROMISE of acceptance when it occurred in future cases. |
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Owen Sound Public Library Board v Mial Developments Ltd. (Kinds of Promises Legally Enforced: Estoppel)
estoppel granted against contractor who had agreed to provide architect's certificate |
[But sometimes its the objective appearences given off by the promisors conduct that matter] Although no one from Mial expressly agreed to the suspension of the payment date requirement while delivery of the sub-contractor’s seal was pending (and thus the Burrows standard was not met), the real question was held to be whether Mial’s statements and conduct could reasonably have been interpreted by the Board as an agreement to not insist on strict legal right. In this case, the Board’s understanding that Mial would not insist on its strict legal rights was reasonable. Any experienced contracter would interpret an agreement to a request for further documentation as a suspension of the clock. The predictable and reasonable interpretation of Mial’s promise to obtain the seal is sufficient to support a finding that it had the requisite intent to alter legal relations. Anything that reasonably induces reliance therefore gives rise to estoppel. If there is proper notice and thus no grounds for DR, no estoppel. Valcke: P is able to invoke estoppel because it’s not being used as the sword per se, as it’s not the cause of action. Cause of action is breach of contract, estoppel being used as a part of the case -> D promised not to invoke argument about deadlines, thus should be estopped from bringing up deadline argument at all. |
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D & C Builders, Ltd. v Rees (1965) (Kinds of Promises Legally Enforced: Estoppel)
estoppel denied against builder who had agreed to lesser sum |
[There must be true accord in an creditor/debtor agreement to accept lower balance, if there was intimidation there was no intention. Estoppel is not mechanical.] P did work for D, D only paid part of it. P asked for payment in full, D paid only partial (300), P needed money to avoid bankruptcy so accepted, D forced in clause saying payment “settled” the account. Not only is there no valid consideration for reduced payment, D cannot use estoppel because D manipulated situation: “We will pay you nothing unless you accept 300 in settlement”. Estoppel is equity, the three requirements are not mechanical, court ultimately decides if estoppel is equitable or not. Valcke: Argument that D actually does not meet one of the requirements of promissory estoppel: no actual reasonable reliance on part of D. She had reason to believe that there was no intention on the part of P that the promise is to be acted on, as she knew they didn’t want to take lower amount but was effectively forced to. Also, DR, even if you benefit from it, can be claimed if you use the money on something else and no longer have it = explains DR of tenant in High Trees and D of this case. |
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Crabb v Arun District Council (Kinds of Promises Legally Enforced: Estoppel)
estoppel used to compensate adjacent property owner for loss of road access |
[Proprietary estoppel can be used as a “sword”] D gives P right of way on private road, P tries to get another right of way in anticipation of subdividing property, they agree (although no consideration), and D even puts up gate for access. P subdivides, D blocks access. P granted easement because P relied on this agreement when selling land. Proprietary estoppel is different from promissory, when other party behaves in a way that leads you to believe you are getting property rights, “shield-only” requirements do not apply. Denning gives three ways to remove legal rights in a K: 1. Make binding K, 2. Promise not to insist on legal rights, and other party acts on it, 3. By words or conduct behaves to lead other to believe that they wont insist on rights, and other relies on that and acts. Obviously 3 here is what occurred. |
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N.M. v A.T.A (2003) (Kinds of Promises Legally Enforced: Estoppel)
relationship--move from England to Canada relying on promise to pay off mortgage |
[Expectation of legal relationship is necessary to estoppel] P promises D that if she came to live with him in Canada, P would pay D’s mortgage. D moved, relationship doesn’t work out, P states that he “loaned” her the money and demands repayment. No estoppel granted to D because expectation of legal relationship is necessary to estoppel, does not apply to personal relationship. Need a firm contractual commitment: romantic relationships are not clear legal promises, they fall apart all the time. |
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Williams v Carwardine (1833) (Kinds of Promises Legally Enforced: Unilateral Contracts)
reward granted to lady "easing her conscience" |
[Wrongly decided case: no meeting of minds but still rewarded] Brother of D murdered, P was with brother. D puts out reward for 20 pounds for information leading to arrest, P was beaten badly and on “deathbed” and to “ease conscience” gives info which leads to conviction. Act was not in response to promise but still rewarded 20, by performing the promise P still ets under terms. Valcke: problem with this, the acceptance must be in response to the offer -> “Meeting of minds” (as per Tinn v Hoffman). |
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The Crown v Clarke (1927) (Kinds of Promises Legally Enforced: Unilateral Contracts)
reward denied to murder suspect "clearing his name" |
[Fixes Carwadine: acceptance must be in response to offer] P promised 1000 pounds to anyone who gave info relating to death of 2 cops, D gave info only because he was arrested for murder, and needed to clear his name. No legal / moral claim to the reward: not acting for justice or for reward, but to clear name. The person must accept and perform ON THE OFFER to claim the prize. |
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Carlill v Carbolic Smoke Ball Company (1893) (Kinds of Promises Legally Enforced: Unilateral Contracts)
reward granted to smokeball user |
[Newspapers ads can be unilateral offers, acceptance comes with performance of the condition] The Smoke Ball company made an explicit promise to pay 100 pounds in certain situations (use ball for 3 weeks and still catch influenza) ‘Distinct promise, expressed in unmistakable language’. The fact that it advertised that 1000 pounds had been deposited in the bank was held to show that this was meant to be a real offer and not an invitation to treat. This was a unilateral offer, good to anyone who performed the condition, and performance of the condition is equivalent to acceptance. Consideration: company -> commitment to pay (1000 pounds in bank), user: buying and using smoke ball for 3 weeks. A person who makes an offer of this kind implies that he does not require notification of acceptance of the offer as it is sent to the public at large, which can be generally assumed to have had the notification requirement waived (distinct from notification of performance). However, if notice of acceptance is required, it arrives contemporaneously with notice of the performance of the condition. Contract is “unilateral” as when she accepts (use ball for 3 weeks), she has performed her end of the bargain and only the company has something to fulfil. No acceptance until full K is met (3 weeks). |
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Goldthorpe v Logan (1943) (Kinds of Promises Legally Enforced: Unilateral Contracts)
facial hair removal patient granted benefit of warranty |
[Extravagant promise is no defence for a unilateral K] D promised permanent facial hair removal, P paid for treatments but hair came back. P sued and won, D is held to “excessive, extravagant promise”. |
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Errington v Errington (1952) (Kinds of Promises Legally Enforced: Unilateral Contracts)
promise of mortgage payment to son and daughter-in-law |
[Implied promise not to revoke a unilateral K once performance is underway - but might not be unilateral according to Valcke] Dad buys house for son/daughter-in-law, pays down payment and puts house in his name. Says down payment is gift, and if they make the payments the house will be theirs. Son paid payments (most of the time, sometimes fell short and dad stepped in). Dad dies, widow sues to reclaim house. Promise by dad is valid, was a unilateral K wherein acceptance only takes place once the last payment is made (consideration + performance also done). Binding as soon as promise enters performance. Valcke: Sounds a lot like a bilateral contract. Could also be a conditional gift -> conditional upon them paying all the mortgage payments. Primary motivation is not to have them pay the payments, but to give them a house. Thus, no consideration from son/daughter-in-law. |
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Dawson v Helicopter Exploration Co. Ltd. (1955) (Kinds of Promises Legally Enforced: Unilateral Contracts)
contract to show site of mineral deposits in exchange for interest in claim |
[Courts err on side of bilateral if uncertain whether uni/bi] P knew of land with minerals, agreed in letters that D would give P a 10% stake of land. D explores, sends letter to P saying that it’s undevelopable due to ice and snow, P does not reply. Later, D develops area and sold claims. P sues. Court finds bilateral K: offer contemplated an act to be done by D, implied that P would participate, subject to performance condition that pilot be found. Having found a pilot, D had duty to take P to area to investigate. Valcke: Question of if this is bilateral or unilateral. If the offer was calling for acceptance through action, it’s unilateral (showing is acceptance, consideration, and performance). If it’s through words, bilateral K formed as soon as they agree through letters. When there’s uncertainty as to bilateral/unilateral, courts will err on the side of bilateral, as most reasonable people tend to view contracts as bilateral where commitments precede performance. |
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Wertheim v Chicoutimi Pulp Company (1911)(Remedies for Breach of Promise: The Interests Protected)
non-breaching party to be placed in same position as if contract performed (in money) |
[Expectation damages is the general rule]: The general rule is that, wherever practicable, the remedy for breach of contract is expectation damages -> pay money value. This is the first step to any remedies question. |
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Bollenback v. Continental Casualty Company (1965) (Remedies for Breach of Promise: The Interests Protected)
health insurance premiums returned to plaintiff when claim denied |
[Sometimes restitution damages are greater than expectation damages, and are allowed in cases material breach]: Shows that restitution damages can sometimes be greater than expectation damages. Guy is injured in 1963, tries to make an insurance claim for $107, but the company mistakenly claims that he had let the policy lapse in 1959. The expectation damages would be just $107. However, the insurance’s company’s refusal to pay claims (i.e repudiation of the contract) was held to be a substantial breach. The guy was awarded restitution damages for premiums paid in the period he was uncovered (and the company unjustly enriched), 1959-1963 - the right of rescission and restitution generally exists as an alternative remedy to an action for damages where there has been repudiation or a material or substantial breach of contract. Valcke: Value of contract derived by putting non-breaching party in position they would have been if contract was performed, with court costs. Value of premiums restitution paid to avoid UE, puts P in a better position than if K was met. Only happens when the breach is material (very serious) -> when breach is basically tantamount to saying there’s no contract, court can say sure whatever no K, give restitution. We cannot give non-breaching party choice between expectation/restitution, can’t just pick whichever is better. Some jurisdictions have even set a ceiling: can ask for restitution but caps at expectation. |
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Anglia Television Ltd. v Reed (Remedies for Breach of Promise: The Interests Protected)
actor has to pay studio's losses resulting from abandoned production |
[Sets out the rule for claiming pre-contract expenditure, i.e reliance interest]: Examples of reliance interests. After Reed repudiates, Anglia Television loses all the money it had spent prior to his signing the contract. Anglia is allowed to claim for this wasted (pre-contract) expenditure. The rule is that Plaintiffs can claim the expenditure incurred before the contract, provided that it was reasonably contemplated by the parties that the expenses would likely be wasted if the contract was broken. Here Reed must have contemplated – or, at any rate, it is reasonably to be imputed to him – that if he broke the contract, that expenditure would be wasted, whether it was incurred before or after the contract. Valcke: Can use past expenditures as proxy for future profit, as people don’t spend more expenses than they think they’ll make. Maybe there’s implicit agreement in contract that in case of breach, actor will pay for expenses (this is a stretch). Estoppel argument of DR: we don’t know what profit will be because of D’s breach, thus D cannot use argument that we don’t know what the profit will be. No SP because it’s a personal service contract. |
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Pitcher v Shoebottom (1971) (Remedies for Breach of Promise: The Interests Protected)
seller in breach must pay market value of land at closing date |
[look at the value at the time of breach, not at the time the suit is brought]: By the time the case got to trial, the value of the land at issue had greatly increased. The court says what we have to look at is the value of the item at the time the contract was breached, not at the time the suit is brought. The principle is that damages are being awarded to put the plaintiff in the same position he would have been in at the time the contract was breached by the vendor. D does not have to pay for expenses P would have incurred if the K went through. As no closing date was specified in the contract, a reasonable time for closing the contract is implied. Valcke: straightforward application of the Wertheim principle. |
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Hawkins v McGee (1929) (Remedies for Breach of Promise: The Interests Protected)
doctor must compensate patient for value of "perfectly good hand" |
[Expectation damages can be difficult to measure, but courts can try]: The Doctor guarantees the surgery will result in a hundred percent perfect hand, but the operation fails. Here, the measure of the plaintiff’s damage in the present case is the difference between the value to him of a perfect hand – as was promised to him – and the value of his hand in the present condition. Difficult to measure the value of a good hand, but the lower court can try. The patient’s pain and suffering doesn’t matter, because the patient would have had to endure such pain and suffering even had the surgery been successful. You must look at the difference between where you are now after breach and where you should have been after K (expectation interest) to determine remedy. |
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Carson v Willitts (1930) (Remedies for Breach of Promise: Problems in Measuring Damages)
difficulty of assessing value of lost chance of finding oil is no objection |
[Even when damages are extremely difficult to calculate, not a valid reason to not give damages.]: The defendant’s bored one oil well, and then refused to do the other two. Judge's theory: What the plaintiff lost by the refusal of the defendant to bore two more wells was a sporting or gambling chance that the valuable oil or gas would be found when the two further wells were bored - Difficulty in measuring value of wells is no reason not to give damages. |
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Groves v John Wunder Co. (1939) (Remedies for Breach of Promise: Problems in Measuring Damages)
cost of grading terrain is awarded, not the market value of performance |
[Sometimes courts will still award the cost replacement when it is a net loss for society - WRONGLY DECIDED]: P and D had K to move sand/gravel from P’s land to D’s. D breached K (took only best material, left land uneven), cost of making land level would be 60k, but land only worth 12k. P found to be entitled to 60k, as damages must be given according to action that would have been done if the K were not breached. Owner’s right to do whatever they want with the land, even if it’s a net loss. Valcke: Wrongly decided, thinks dissent was right. They should use the market value of the property in commercial relationships. If there is a personal/nostalgic circumstance, could argue for restoring land with 60k, but in commercial relationships doesn’t make any sense to reward them with 60k when they won’t spend the 60k to actually restore the land. |
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Thompson (W.L.) Ltd. v Robinson (Gunmakers) Ltd. (1955) (Remedies for Breach of Promise: Problems in Measuring Damages)
breaching party must pay profit lost to dealership on sale of automobile |
[Supply outpaced demand, thus the buyer must pay for the repudiated contract]: The buyer repudiated his contract to buy a car. The buyer argues that the seller has suffered no loss, because the price is fixed by the dealer. However, for such an argument to work, there would have to be demand for the car, in that particular time/place. The court here finds demand for this kind of car was low in this part of the U.K. Thus if the buyer defaults, the sale is lost, and therefore the seller can recover for the profit he would have made |
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Charter v Sullivan (1957) (Remedies for Breach of Promise: Problems in Measuring Damages)
no lost profit awarded because all available autos were sold by plaintiff |
[Demand outpaced supply, thus the seller has lost nothing from the repudiation]: Similar to Thompson, except here demand for the car exceeds supply. Although the buyer defaults, the seller has lost nothing. He still sells as many cars as he can get access to. Hence he is awarded only nominal damages. If demand exceeds supply, the default of one purchaser involves no loss, for he sells the same number of cars as he would have sold if that purchaser had not defaulted. Valcke: Difference between Charter and Thompson is economic circumstances, sale not truly lost here while it is in Thompson. |
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Hadley v Baxendale (1854) (Remedies for Breach of Promise: Remoteness - Foreseeability)
lost profits during delay in shipping broken mill shaft not recoverable |
[Sets up the 2 branches of the remoteness analysis, reasonable foreseeability]: P owns mill, shaft breaks. P uses D, a courier, to get shaft to engineer for a new one. P thinks D is taking way too long, sues for lost profits of mill. D not liable. Sets up the basic doctrine of remoteness. Prior to this, damages had been a question for the jury. Here the court puts limits on damages. - Damages which the other party ought to receive in respect of a breach of contract should be 1) such as may fairly and reasonably be considered either arising naturally, i.e according to the usual course of things from such breach of contract itself (general branch), or 2) such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it (special branch). - For the special branch, one must inquire whether special circumstances under which the contract was made were communicated by the plaintiff to the (breaching) defendant. - If yes, than the damages resulting from the breach would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated - If no, normal damages. - Applied to this case, special circumstances (that it was the mills only crank shaft) were not communicated. Therefore, the loss of profits (because the crank shaft took too long to arrive) cannot reasonably be considered such a consequence of the breach of contract as reasonably foreseen by both parties when they made this contract Valcke: This case qualifies Wertheim and imports the importance of reasonable foreseeability. |
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Horne v The Midland Railway Company (1873) (Remedies for Breach of Promise: Remoteness - Foreseeability)
incidental losses due to delay in delivering shoes recovered, not lucrative contracts |
[For the 2nd branch, the plaintiff must make it clear that the risk for extraordinary loss is being shifted, and the defendant must accept]: Plaintiff tells the railway that the shoes have to arrive by a certain date, but they arrive a day late, and the plaintiff loses lots of money. The plaintiff communicated the special circumstances, but the court holds that it is not enough to simply know about some particular consequence (i.e special circumstances) that might be associated with a breach of the contract. In order to hold the defendant liable for the consequential losses, the plaintiff must have made it clear that it is shifting the risk onto the other party. In order for the notice (of special circumstances) to have any effect, it must be given under such circumstances, as that an actual contract arises on the part of the defendant to bear the exceptional loss. Valcke: Slight difference with Hadley, states that special, second K is required. However, does not overrule it, as Hadley states that reasonable foreseeability is important, but not sufficient. |
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Victoria Laundry Ltd v Newman Industries Ltd (1949) (Remedies for Breach of Promise: Remoteness - Foreseeability)
normal profits lost due to delayed boiler delivery recovered, not lucrative contracts |
[A reasonable man need not know as a certainty that a loss would occur - likely to occur is enough]: Plaintiffs can only recover the loss that was reasonably foreseeable by the parties at the time of the contract. It suffices that a reasonable man would have concluded that the loss was likely to occur. [In this case, given P was a laundry, D should have known that P wanted the boiler for a business purpose, and delays would lose them business] It need not be proven that a reasonable man would foresee the loss must occur - likely to occur is enough. - In this case, although the defendants knew the plaintiffs would be unable to fulfil some contracts if the boiler wasn’t delivered on time, they did not know about the possibility of extremely lucrative contracts, and thus are not liable for them. They are only liable for loss of business in respect of dyeing contracts reasonably expected Valcke: Language used implies: breach must “necessarily result” rather than “probable”. “serious possibility”, “real danger”, etc. The reasonable foreseeability would have to be on both parties, as well as at the time of the K rather than the breach. First branch of Hadley only covers normal losses, not lucrative, special ones. |
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Munroe Equipment Sales Ltd. v Canadian Forest Products Ltd. (1961) (Remedies for Breach of Promise: Remoteness - Foreseeability)
seller of second-hand tractor not liable for profits lost due to lesser quantity of wood being removed |
[Application of Hadley test: Not reasonable foreseeable and Special circumstances not communicated ] D rents tractor from P, Tractor breaks down so D can’t clear the pulp for sale. D does not work to find replacement for tractor. D brings claim for lots of damages. P held not liable, application of Hadley test -> no reasonable person would contemplate that leasing a tractor was insuring removal of pulpwood. No one would take on that kind of liability. No reasonable person would be expected to believe that P was intending on compensate D for damages resulting from rental. |
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Scyrup v Economy Tractor Parts Ltd. (1963) (Remedies for Breach of Promise: Remoteness - Foreseeability)
seller of second-hand tractor attachment liable for lost contract |
[Loss of external K by P through D’s substandard tractor parts is “reasonably foreseeable” - Overturned by Achilles] P rents tractor parts from D, terrible parts, P loses K he had because tractor is substandard. P sues D for damages for lost profit from loss of K. Majority decides that this passes Hadley test, as they believe that P made D aware of K. Dissent doesn’t think it passes Hadley test, loss of K does not flow reasonably from broken parts (fails step 1) and D did not have sufficient info about P’s K (fails step 2). Overturned by Achilles |
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Koufos v C.Czarnikow, Ltd. (The Heron II) (1969) (Remedies for Breach of Promise: Remoteness - Foreseeability)
boat owner liable for loss of market value of sugar cargo |
[Reasonable Foreseeability as factual rather than legal. Achilles overturns this] The ship chartered by the plaintiff was nine days late, and the price of sugar had fallen. - Here, the shipowner knew that the charterers intended to sell sugar, but not the particulars of the market. Without relying on the language of Victoria Laundry in any way, the loss of profit in this case was not too remote (reasonably foreseeable) to be recoverable as damages. Valcke: Asymmetry in market value difference analysis from Wertheim: if price had gone up, P would not be required to give D the difference. Requiring D to pay the difference only when it goes down is effectively punishing the breaching party. This decision is considered bizarre, reasonable foreseeability should not be interpreted as applying to the factual consequences, but rather the legal liability ensuing from. Overturned by Achilles |
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Transfield Shipping Inc. v Mercator Shipping Inc (The Achilles) (Remedies for Breach of Promise: Remoteness - Foreseeability)
new charter lost due to ship being delayed |
[Liability needs to have been “bargained for”, reasonable foreseeability necessary but not sufficient] D charters ship from P, there’s a delay in getting ship back which hurts P’s next K significantly. P argues payment of entire difference in whole duration of new K, D argues only difference between market / charter rate, and only for the time deprived by delay. D wins. Hoffman: Commercial context must be taken into account, would be wrong to hold people liable for something they never intended to take responsibility for. ”Reasonable foreseeability is not a complete guide”. Need for more than just the Hadley test. Remedies are internal to the bargain, which is why the court insists on what is reasonably contemplated at the time of formation of K rather than breach. Valcke: People are often willing to take liability for things they’re not aware of (signing ToS, bank statements, etc), thus knowledge is neither necessary nor sufficient. |
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Cornwall Gravel Co. Ltd. v Purolator Courier Ltd (1978) (Remedies for Breach of Promise: Remoteness - Foreseeability)
lost profits of $70,000 on late delivery of tender package recovered |
[Shows a successful case of the 2nd branch. May conflict with Horne]: The court holds that Purolator knew that Cornwall Gravel’s document was a tender, and that it had to be delivered by a certain time, knew of the importance of the document, and must have realized that if delivered late the document would be worthless and the contract loss. Thus they are aware of the special circumstances, and liable for the loss under part 2 of Hadley test. [Can we really say the legal risk has been shifted here, as required in Horne?] |
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Addis v Gramophone Company Ltd. (1909) (Remedies for Breach of Promise: Intangible Injuries)
no recovery for mental distress due to humiliation from termination of employment |
[Baseline common law rule that damages for intangible injuries (i.e distress) are not allowed. Note: disregarded over time, not the law] If a plaintiff seeks redress under contract, he is to paid adequate compensation in money for the loss of that which he would have received under the contract and no more. Valcke: Before we apply test of reasonable foreseeability, check if the type of loss is something we award damages for at all. In this case, P would have had to claim a tort under a second independent actionable wrong that isn’t breach of K, such as defamation or something. Court saying not the realm of contract law to deal with mental distress, need tort. These suits can be brought together. |
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Kolan v Solicitor (1969) (Remedies for Breach of Promise: Intangible Injuries)
solicitor not liable for mental distress due to house under demolition order |
[Same rule as Addis, no damages for intangible injuries through contract law] D is lawyer for P. D breaches K by not noticing building bought by P is subject to demolition order. P sues D citing anxiety and mental health injury. No reasonable foreseeability = no liability. She was a highly sensitive non-breaching party. |
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Jarvis v Swans Tours Ltd (1973)(Remedies for Breach of Promise: Intangible Injuries)
recovery for intangibles from substandard Swiss skiing vacation |
[Damages for intangible injuries should be allowed in holiday cases]: ‘Holiday’ cases are one area where this baseline rule has been changed. Denning holds that in cases where contracts have been made for holidays/entertainment/enjoyment, and then breached, damages for intangible injuries should be awarded. Damages may be difficult to calculate, but courts can do it [in this case, 2x cost of holiday -> proxy of what he paid + more because people intend to make a profit from their K’s] In a proper case, damages for mental distress can be recovered in contract. These include contracts for holidays or for entertainment and enjoyment. Damages can be given for the disappointment, the distress, the upset and frustration. Valcke: Making a K for a vacation, one of the terms is peace of mind, thus you can recover for mental anguish. Similar to Anglia TV: what you spend as a proxy for what you reasonable expect to derive. |
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Heywood v Wellers (1976) (Remedies for Breach of Promise: Intangible Injuries)
recovery from solicitor for psychological harm from molestation |
[Damages for intangible injuries should be allowed where the contract was for peace of mind, as mental anguish as a result of breach is within the contemplation of the parties, as per Hadley]: Extends recovery for intangible injuries to types of cases beyond vacations. Heywood’s solicitors failed to get an injunction to restrain M. As a result she suffered molestation, leading to mental anguish. Denning holds that mental anguish as a result of a breach was within the contemplation of the parties as per Hadley, as this was a contract for peace of mind. The fact that the molestation might have occurred anyways was unimportant, because it was never put to the test, and it was the solicitor’s fault it was never put to the test. - ‘It must have been in their contemplation that if they failed in their duty she might be further molested and suffer much upset and distress. This damage she suffered was within their contemplation within the rule in Hadley’ Valcke: this is not restitution, it’s still expectation measures. Using the lawyer’s fees as a proxy for what she was expecting, similar to Anglia TV. This case stands for the fact that where the object of the contract is to prove enjoyment / remove mental anguish, it’s foreseeable that these intangible injuries could occur. |
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Vorvis v Insurance Corp of British Columbia (1989) (Remedies for Breach of Promise: Intangible Injuries)
no recovery for harsh employer treatment w/o actionable wrong |
[Lays out the distinction between aggravated and punitive damages]: Aggravated damages are compensatory. They take account of intangible injuries and augment damages awarded under the general rules of assessment of damages. These are distinct from punitive damages, which are punitive in nature and may only be employed in circumstances where conduct merits punishment. In this case aggravated damages are not appropriate, because while the conduct of the insurance company was offensive and unjustified, it preceded the breach of contract, and did not therefore aggravate the damages incurred as a result of the wrongful dismissal. Valcke: Punitive damages don’t REQUIRE aggravated damages, and punitive damages don’t have to be linked to an independent actionable wrong. Case is wrong about this. |
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Fidler v Sun Life Assurance Co of Canada (2006)(Remedies for Breach of Promise: Intangible Injuries)
recovery for mental distress upon breach of disability insurance contract |
[Lays out the Canadian rule for allowing mental anguish damages, based on the 2nd branch of Hadley]: P had claim against Sun Life, they didn’t pay. 20k for mental distress, no punitive damages. If a contract was for ‘peace of mind’, then plaintiffs can recover for intangible injuries, even if ‘peace of mind’ was not the very essence of the contract, but only an important part. The rule is that damages for mental distress for breach of contract may be awarded as an application of Hadley. The court must be satisfied that 1) the object of the contract was to secure a ‘psychological benefit’ that brings mental distress upon breach within reasonable contemplation of the parties (insurance Ks all fall into this) 2) the degree of mental suffering was ‘sufficient’. (in this case, trial evidence found significant mental anguish for 5 years she spent without disability insurance) Thus recovery for intangible injuries will rarely be applicable in commercial contexts. Case refutes Addis, Kolan, in that a “independent actionable wrong” is not required for aggravated damages. - In this case, the contract was explicitly to provide peace of mind, and thus mental distress upon breach was clear, and the degree of mental suffering was sufficient to allow recovery. Valcke: Should court costs be included in compensation? Valcke is not sure. Wertheim principle applied would state that if not for the breach of contract, they would not have been in court so it make sense, but in this case you’re not making them “whole”, but going beyond that through aggravated damages. |
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Whiten v Pilot Insurance Co (2002) (Remedies for Breach of Promise: Punitive Damages)
fire--refusal to pay home insurance proceeds |
[Punitive damages are available in Canada, but only in ‘exceptional cases’ where compensatory damages effectively act as license fee]: Pilot (an insurance company) acted reprehensibly, forced Whiten’s to spend large amounts of money on an arson trial for no reason. Binnie holds that punitive damages are ‘awarded in exceptional cases’, for ‘malicious, oppressive and high-handed misconduct that offends the court’s sense of decency’, and that punishment can be a ‘legitimate objective of the civil law’. In breach of contract cases, the defendant’s conduct has to be an independent, actionable wrong to allow for punitive damages. - Here Pilot was under an insurer’s duty of good faith and fair dealing. A breach of this duty is an independent actionable wrong. [Why don’t the plaintiffs just sue under this independent wrong? unclear]. - Punitive damages bear no relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate the plaintiff, but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the defendant’s egregious conduct. - Nobody else would pursue this claim -> over-compensation given (1 mil, when Whiten only spent 320k to get his 34k claim) for this socially useful service. General principles in determining punitive damages: 1. The exception, not the rule 2. Imposed only if high-handed, malicious, reprehensible conduct that departs from a marked degree from ordinary standards of decent behavior 3. Assessed in an amount reasonably proportionate to such factors as the harm caused/degree of misconduct/relative vulnerability of P/advantage or profit gained by D; 4. Have regard to other fines/penalties paid by D à about punishing, so take into account whatever other sanctions are applied 5. Only given where without them the conduct would be unpunished or where other penalties not adequate to cover retribution, deterrence, denunciation 6. Purpose is not to compensate P 7. Purposes are retribution, deterrence, denunciation 8. Awarded where compensatory damages cannot accomplish these objectives 9. Given in an amount no greater than rationally needed to accomplish the objective 10. Normally state would be recipient of fine, here its a windfall to P 11. Judges and juries have generally found moderate amounts to carry a stigma and be sufficient. ALSO: inequalities between parties is an important factor, in this case P was at the mercy of the insurer. |
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Payzu Limited v Saunders (1919) (Remedies for Breach of Promise: Mitigation of Loss)
damages reduced because losses on non-purchase of silk were avoidable |
[Shows duty to mitigate operates even if the innocent party has put a specific clause in the contract]: The seller breaches the contract in refusing to sell silk to the buyer on credit. The buyers were given the opportunity to buy in cash. Although the buyers had specifically put the right to purchase on credit into the contract, the court holds that in refusing the offer to pay in cash, the buyers had failed to act reasonably to mitigate losses, and had sustained a large loss which they could have avoided (prudent person would have reasonably acted to mitigate losses). Also, lack of consideration in the claim that only cash is acceptable, thus fails. - The fact that this was a business transaction meant the plaintiff’s were not justified in refusing the defaulting defendant’s offer, which they might have been in cases of personal service. - The plaintiffs still get damages, but instead of the difference between the contract-market price, they only get what they would have gotten if they had acted reasonably, i.e the loss of the period of credit. |
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Roth & Co v Taysen, Townsend Co (1896) (Remedies for Breach of Promise: Mitigation of Loss)
loss in market value of maize awarded to seller |
[Non-breaching party has obligations to mitigate as well, calculate damages at recognition time of K breach, not date of breach.] P and D have K for corn delivery, D breaches K in May, P sues on July 24th, but doesn’t sell until Sept 5. Gradual tanking of corn prices in this time. Damages calculated based on price when lawsuit happened -> unreasonable for P not to sell corn on July 24th when they knew price was going down. Valcke: Burden is on the non-breaching party to act REASONABLY, but that definition is difficult to predict. They say it was unreasonable to assume prices could rise, but markets fluctuate all the time. In Koufous, the court does not say you should’ve predicted prices would fall and sold, they just say you sold at the wrong time and suffered a loss. Principle should apply to non-breaching party here. This case is different than White & Carter, because that was an anticipatory breach. |
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White & Carter (Councils), Ltd v McGregor (1962) (Remedies for Breach of Promise: Mitigation of Loss)
recovery of price for garbage bin ads, permitted to not accept repudiation |
[Highly criticized judgement in which Lord Reid ignores the duty to mitigate]: The plaintiffs, knowing almost immediately that the defendants were planning to breach, still advertised for 3 years and did not bother to look for a replacement to take the space. Lord Reid basically ignores the duty to mitigate, and holds that in cases of anticipatory repudiation (where the plaintiff can perform the contract without any co-operation of the defendant), the innocent party can: 1) wait until the contract is breached and then sue, 2) not wait and sue immediately. In other words, the victim of an anticipatory breach need not accept the repudiation, but can perform the contract and sue for the full price. - Lord Morton in dissent focuses on the fact that plaintiffs knew right away that the defendants would breach, yet despite having incurred no expenses at the date of repudiation, they made no efforts to procure another advertiser and minimize the loss. Instead they deliberately performed unwanted services with the intention of creating debt. A reasonable person in their position would have tried to find another advertiser, and thus they cannot recover. The dissent better represents Canadian law. Valcke: Argument exists for P based on SP -> wants to build an advertising portfolio. If this is a special interest, non-breaching party should be able to say no, as no number would be adequate in that case. Burden is on D to prove no interest is present -> but this is opposite from the SP cases, why? Anticipatory breaches have an obligation of mitigation which kicks in at the time of the breach, if we move this obligation back to time of repudiation, we’re unilaterally modifying the duration of K. ??? |
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Finelli et al. v Dee et al (1968) (Remedies for Breach of Promise: Mitigation of Loss)
no recovery for cost of driveway paving after notice of repudiation given |
[Canadian application of duty to mitigate, focusing on the dissent from White & Carter]: The defendant called the plaintiff and repudiated a contract, but the plaintiff still shows up unannounced and paved the driveway. Laskin says he prefers the dissents in White & Carter. Repudiation is not something that calls for acceptance when the plaintiff is excused from performance. The injured party must act reasonably to prevent damages from being increased. If the injured party does not act reasonably, then recovery will be limited to the damages that would have been sustained if the injured party had acted reasonably in mitigating losses. Valcke: Court says major difference between this and White & Carter: ASSENT was required here, P did it through trespass. However, in White, they needed permission to use the name for ads. Court simply does not like majority decision in White, raises questions as to if it’s a part of Canadian Law. |
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Falcke v Gray (1859) (Remedies for Breach of Promise: Specific Performance)
specific performance possibly available for oriental jars |
[Specific performance allowed for unique chattel]: 2 large Chinese jars agreed for sale for 40 pounds, D sold for 200 to other. Court orders SP. Historically specific performance was only ordered for land, and not for chattels. However, the chancellor here holds that specific performance will be ordered for chattel that are unique. For ordinary chattel that can easily be bought on the market, damages are sufficient. But for ‘idiosyncratic chattel of unusual distinction and curiosity’ which are impossible or nearly impossible to buy on the market, specific performance will be ordered. Valcke: Same question as reasonable for non-breaching party to mitigate: if no need for mitigation, SP available. If P has duty and can buy an equivalent good, they must mitigate damages by doing so. Question re: damages because P intended to resell, but question of valuation -> because it’s unique, no market value available. Cannot accurately value until they are in the hands of the buyer and they resell it. |
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Cohen v Roche (1927) (Remedies for Breach of Promise: Specific Performance)
specific performance not available for Hepplewhite chairs |
(Specific performance ONLY for unique/special chattel. Damages otherwise) P buys chair at auction, D (auctioneer) refuses to provide. No SP, but damages for breach (diff btwn K and MV). Found to be normal chairs, P had bought them to sell as part of his regular stock. Cites Chinery v Viall: buyers/sellers cannot use tort claims to get more damages. Valcke: Issue of reasonable foreseeability: only get higher profit to the extent that it would have been foreseeable to breaching party. Without special info, no breaching party has reason to assume losses higher than MV. Remedies are treated like any other contract term, imposed by parties on themselves. if damages not contemplated in agreement then they are not available. -> akin to remoteness test, damages cannot be imposed by court if not reasonably foreseeable by parties. |
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Sky Petroleum Ltd. v V.I.P. Petroleum Ltd. (1974) (Remedies for Breach of Promise: Specific Performance)
specific performance available for petroleum in OPEC oil crisis |
[A very unique market can make a (regularly) ordinary chattel ‘unique’]: Contract to supply diesel/gas at a fixed price for ten years, but then oil crisis hits, and the price of oil goes way up. After the shortage hits, the defendants tried to claim the plaintiff had breached credit provisions. The plaintiffs seeks an interlocutory injunction, to force the defendant to keep supplying them while the question of the breach is being decided. Although there is nothing unique about oil as a chattel, supply was so unusually low that the plaintiffs could not go out and find another supplier. Thus for all practical purposes, the petroleum provided was unique to the plaintiffs. The judge orders the interlocutory injunction, but caps it, to prevent the plaintiff from taking advantage of the defendant. Valcke: This case is similar to Payzu, both offer second-best contracts, in Payzu court says accept mitigation, here they do not. Why? Breaching party knew non-breaching was in dire straits financially, would go out of business if second offer accepted. Thus, no obligation to mitigate, and SP available. Court uses double negative: “be restrained from withholding supply” -> courts reluctant to force things, more likely to stop things from happening. |
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Gilbert v Barron (1958) (Remedies for Breach of Promise: Specific Performance)
specific performance available for voting shares |
[Must consider circumstances around thing, not just the thing in abstract to determine unique/special nature] P, D, and another partner had agreement to jointly hold shares of company. K said if anyone bought shares, had to offer 1/3 to each other. D breaches K and takes control of company. Specific performance granted: voting shares are unique/special as they result in control of the company, they’re not just regular shares. |
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Warner Bros Pictures Incorporated v Nelson (1937) (Remedies for Breach of Promise: Specific Performance)
injunction granted to prevent Bette Davis from acting in UK for 3 years |
[Court will enforce negative covenants if they won’t make the defendant starve, or force her into a positive covenant with the plaintiff]: In her contract, Bette Davis agrees to a negative covenant to not act for anyone but Warner Brothers. She then runs away to U.K and tries to get out of the contract. - It is well settled that courts will not enforce a positive covenant of personal service. Courts will enforce negative covenants, but not if enforcing it will drive the defendant to starvation, or effectively force the defendant into specific performance of a position covenant. - The court here is willing to enforce the negative covenants, because Davis could do other work, and would not starve. She also would not be forced to work for Warner Brothers. She would perhaps be tempted to do so, but such is not the courts concern. The court concludes that because Davis represents a unique service, damages would not be an appropriate remedy Thus the court grants a limited injunction, prevented from acting (activity) for 3 years (time) in England (location). Valcke: Enforcing the negative covenant doesn’t amount to enforcing the positive as she has other employment options. |
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Page One Records Ltd. v Britton (1968) (Remedies for Breach of Promise: Specific Performance)
injunction not granted to prevent Troggs from hiring others as managers |
[Example of where enforcing a negative covenant would have the results feared in Warner Bros]: The Troggs want to change managers, and Page One seeks an injunction preventing them from doing so, based on a negative covenant in the contract to not employ another manager. The court distinguishes this from Warner Brothers, where the only obligation of the plaintiff was to pay remuneration. Here Page One have a relationship of trust and confidence with the Troggs, which the court is reluctant to enforce. The Troggs need a manager. If the negative covenant were enforced here, the Troggs would either starve, or more likely be forced into taking One Page Records back as manager. Thus enforcing the negative covenant would be tantamount to enforcing a positive covenant, with a manager they have lost faith in. Hence the negative covenant is not enforced. Valcke: SP has to be reciprocally available, SP is tied to the bargain that the parties enter into. Personal service = cannot SP the manager to manage, so we shouldn’t be able to force obligation to hire manager. Fiduciary relations are less amenable to SP as it requires trust/working together… how can court really enforce SP in this kind of relation? This is unclear, similar situation as Co-operative Insurance. Court refuses to order people to do things that are oppressive for public policy reasons, unless of course it was bargained for (exception of contempt of court issues, public law stuff). |
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- Detroit Football Co. v Dublinski (1957) (Remedies for Breach of Promise: Specific Performance)
damage award for harm caused by player playing for Toronto Argonauts |
[Distinguished from Warner: SP not necessary as two teams are in different leagues, where as UK / US movie markets not separable, so allowing D to work for UK would create damages for P.] D, football player, breached K to play with Toronto. P sought injunction, D claimed no other way to make a living. No SP: 1. P did not contest D could not make a living aside from playing football, 2. negative injunction would not prevent damage to P as they’re in different leagues. |
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Wroth v Tyler (1974) (Remedies for Breach of Promise: Time of Measuring Damages)
wife has right to stay in house, damages in lieu of specific perf. awarded |
[When damages are awarded in lieu in specific performance, court can allow damages that will put P into as good a position as if K had been performed (even if it means awarding damages based on time subsequent to breach)] Plaintiffs have an agreement to purchase the defendant’s home, but can’t get it (through no fault of their own), because the defendants (estranged wife) registered a charge against the title. The plaintiffs seek damages in lieu of specific performance. The contract price was 6000 pounds, the market value at date of conveyance was 7,500, value at date of trial was 11,500. The court acknowledges the Pitcher common law rule that we should only look at the difference between market and contract price at the time of breach, but hold that this case is different, as the plaintiffs are seeking an equitable remedy. - This the court holds the plaintiffs are entitled to more than the $1500 that is appropriate to the date of the breach, but rather to the $5,500 that is appropriate at the present day, when they are being awarded in substitution for specific performance - The defendant was aware that the price of the house might go up, but not that it could double. The court holds that a plaintiff invoking the so-called “second rule” of Hadley need only show a contemplation of circumstances which embrace the head or type of damage in question, and need not demonstrate a contemplation of the quantum of damages under that head or type. -> Court confirming Hadley test of undertaking liability regardless of magnitude Valcke: If breach date used, assumes a duty to mitigate on P. This assumes P had the means to reposition themselves to mitigate losses. However, in this case P could not purchase a comparable property at the time due to not having that 1.5k damages immediately. In order for them to be put in the same position, need the whole 5.5k to buy a house at current MV. Another reason why no duty to mitigate: not entirely certain if breach is definite in this case, as it was a statutory problem, not a contractual one. If breach is not definite, duty to mitigate is not definite. Note: court notes that P is fully blameless, it’s a statutory thing. Court doesn’t want to go against statute, so forces 5.5k payment which bankrupts D, which removes statutory lien from property. |
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Deglman v Guaranty Trust Co. and Constantineau (1954) (Remedies for Breach of Promise: Restitution)
nephew's contract claim denied under Statute of Fraud |
[A plantiff is entitled to recover the value of services rendered under a contract that is unenforceable -> UE recognized as law in this case. Restitution focuses on D’s gain rather than P’s loss]: Nephew of testator claims she agreed to leave him a house if he performed various services for her. The court holds that the Statute of Frauds states that contracts for estates must be evidenced in writing. Thus there is no enforceable contract. However, under a theory of Quantum Meruit (the value merited), a plaintiff is entitled to recover the (reasonable) value of services rendered under a contract that is not enforceable. Plaintiff is entitled to recover the value of his services and outlays to avoid unjust enrichment of the testator. Thus this is a restitution claim. Valcke: what if MV of services is higher than house? Cases state that K value should be used as a ceiling, but Valcke doesn’t think so. Look at MV of services and give them that, even if it’s higher value than K. |
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Attorney General v Blake (UK 2000) (Remedies for Breach of Promise: Restitution)
profits from book written in violation of secret services contract |
[in exceptional cases where injunctions, damages, SP won’t work, disgorgement can be ordered at breach of K] Blake (soviet spy) wrote a book, violating his employment contract with the British government (to keep information secret). British government demands an account of profits, because Blake should not be allowed to benefit from his breach of contract. If we went with expectation damages, the losses of the British government would perhaps be zero. Courts allow for an account of profits, but holds that it is is only to be used in Exceptional cases, just like punitive damages. The idea is that if you are a (significant) wrongdoer, you should not be allowed to profit from your wrong. - If the case is exceptional, the court should be allowed to grant a just relief requiring the defendant to account to the plaintiff for the benefits he has received from his breach of contract. Factors to be taken into account to see if it’s “exceptional”: 1. Subject of the K, 2. Purpose of provision in K breached, 3. Consequences of the breach, 4. Circumstances in which relief is sought. In this case: Whole point was secrecy, which imported a semi-fiduciary duty which he abused. Seeking relief in this circumstance is fine. Valcke: two ways of seeing this: either it was a fiduciary duty owed (entrusting someone with confidential information), in which case account for profits is standard remedy, or it was an ownership issue and thus there is an element of trespass. Problem with second: value added when he wrote the book. Court leans to first option but maintains that neither option is perfect, so only in EXCEPTIONAL circumstances. |
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Tweddle v Atkinson (1861) (Contracts and Third Parties: Third-Party Beneficiaries)
groom unable to sue on parents' marriage settlement |
[Strict brightline rule of privity]: Contract between fathers for the benefit of the groom. The groom, not being a party to the contract, is not allowed to sue to get the promised benefits. It must be noted that the Groom’s father also failed to perform his portion of the contract. This case represents the strict version of privity. Third party beneficiaries simply cannot sue to enforce contracts, no consideration given by Husband as he is not part of the K. Valcke: he could argue that he did provide consideration, marriage for money, or that he’s suing as a trust beneficiary. Is there even a K at all, considering it’s a familial relationship?
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Beswick v Beswick (1966) (Contracts and Third Parties: Third-Party Beneficiaries)
nephew promises maintenance to widow in exchange for uncle's coal business |
[Denning wants to get rid of privity, Reid won’t allow it]: P is widow: husband sold coal business to nephew, under K that upon P’s husband’s death D would pay P 5 pounds weekly. D refuses. This case can possibly be distinguished from Tweddle, in that Uncle Beswick actually performed his part of the contract. Thus Dennings says the the 3rd party beneficiary (the Aunt) should be able to sue Nephew Beswick to enforce the contract, as the administatrix of her dead husband’s estate, but he also believes she could also sue in her own right. Lord Reid overturns this 2nd statement, saying getting rid of the doctrine of privity is up to Parliament. However, as administratrix, the aunt can sue for the specific performance of the contract (as she is standing in the uncle’s shoes), and get the money to which she is owed. Valcke: May not have even needed to move to SP here, could’ve used the principle of expectation damages through the value of performance of K, as per Achilles. Focus on what the non-breaching party BARGAINED for, rather than the harm suffered. This was the first case in Canada where UE was recognized as a distinct claim. |
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Jackson v Horizon Holidays Ltd (1975) (Contracts and Third Parties: Third-Party Beneficiaries)
ruined family holiday--loss of enjoyment awarded for whole family |
[An individual who signs a contract on behalf of others should be able to recover damages for them]: The father/plaintiff made the contract (for a holiday) for the benefit of his family. HH breaches its contract by providing a very poor holiday. Based on Beswick, only the father can sue, however he is entitled to recover for the damages suffered by the third parties to the contract. The contracting individual is entitled to recover the expenses to which the third parties have been put, and pay it over to them. Valcke: Why is P able to sue for X? The K wasn’t entered by P on X’s behalf, but for the benefit of X. Father had to fix damages suffered by others as his own loss to be in line with the Wertheim principle. |
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Midland Silicones Ltd. v Scruttons Ltd. (1962) (Contracts and Third Parties: Third-Party Beneficiaries)
stevedores hired to unload drum of silicone |
[Privity is required for limiting liability] P had K with 3rd party to limit liability to 500 pounds. P hired D to handle drum of silicone, D drops drum does more damage than 500. Since D was not involved in K with liability limit, full damages granted. |
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New Zealand Shipping Co. Ltd. v A.M. Satterthwaite & Co. Ltd. (The Eurymedon) (1975) (Contracts and Third Parties: Third-Party Beneficiaries)
stevedores hired to unload drilling machine |
[Four requirements for agency exception. A bill of lading is a unilateral offer, which becomes a good contract with anyone who performs the condition of doing the carriage] Liability against the carrier of a good that was damaged was limited to $100 pounds by a bill of lading. The owner of the good tried to get around this by suing the stevedores. Even though stevedores are third parties, they benefit from provision because it passes the test: a. Say 3rd party is intended as beneficiary b. Say A is authorized by X to act as agent c. A has authority to act as agent d. Consideration moving from X to B. IN THIS CASE: 1. It was intended that there be limitations on liability for them as well 2. It is clear that the carrier is also contracting as agent for the dockworker that these provisions should apply to him 3. The carrier has the authority to do so 4. No problems about consideration moving from third party (Bill of ladings = unilateral contract on part of the owner of good, which becomes valid at the time a party fulfilled the conditions by performing services involving the good.) Basically aren’t a third party, because of unilateral contract. Key difference between this case and Midland is that K here explicitly mentions it’ll apply to X as well. |
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London Drugs Ltd. v Kuehne & Nagel International Ltd. (Contracts and Third Parties: Third-Party Beneficiaries)
damage to transformer by employees |
[Lays out new rule for when employees can benefit from a limitation of liability clause]: The question is whether the warehouse employees should be covered by the limitation of liability clause in the contract between their employer and the plaintiff/customer. The plaintiff knew what it was signing, and explicitly decided to waive liability and to not get insurance. Obviously no one could have done the actual work except for employees, and thus it would make no sense to not allow them to benefit from the clause. Iacobucci says this is a good situation in which to chip away at privity -> sees privity as a problem when it allows P to circumvent the clause they agreed to. He comes up with a new rule (which covered the workers): - Employees can benefit from a limitation of liability clause in a contract between their employers and the plaintiff/customer when: 1) the limitation of liability clause must, either expressly or impliedly, extend its benefits to the employee(s) seeking to rely on it, [covers first 2 parts of agency test] and 2) the employee(s) seeking the benefit of the clause must have been acting in the course of their employment, and must have been performing the very services provided for in the contract when the loss occurred -New rule is only a shield, can’t use it as an independent cause of action against B. When the insurance burden is allocated between A and B and falls on B, it’s clear that A or A’s employees shouldn’t have to purchase insurance -> parties had THOUGHT ABOUT RISK and bargained it in this specific way. Valcke: Two interpretations of this case: Narrow -> extends to employees when doing the very thing K specifies and agency is implied, and Broad -> Whenever risk allocation has been bargained for, disregard privity. Lines up with commercial reality, when they’ve bargained for benefit to flow to X then courts need to enforce that benefit. |
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Fraser River Pile and Dredge Ltd. v Can-Dive Services Ltd (1999) (Contracts and Third Parties: Third-Party Beneficiaries)
waiver of subrogation rights by insurance company |
[Extends London Drugs even further beyond employee/employer]: P waived subrogation rights against “any charterer”, vessel sank by D’s negligence. P tried to bring subrogated action in owner’s name. Held that D can rely on terms of K where P waived right of subrogation against D. Case extends the London Drugs exception further. Now the limitation of liability clauses are extended where: 1) The parties to the initial agreement intended to extend the benefit to the third party [explicitly stated in case, parties to a contract cannot unilaterally revoke rights of third parties once they’ve received a benefit] 2) the ‘very activities‘ of the third party must come within the scope of the contract or provisions. Public policy rationale: conforms to commercial realities. Valcke: Estoppel-based argument here, P said they won’t sue and D relied on it, but P changing mind and suing -> D using this as a shield. Also idea of “crystallization” -> A and B cannot change K that X has relied on. |
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Phillips v Brooks (1910) (Contracts and Third Parties: Mistake of Identity)
purchase of ring by "Sir George Bullough" (North) |
[Identity of the buyer did not matter, so contract not void]: P is jeweler, rogue comes in and takes ring on false pretense of identity and gives cheque. Cheque does not clear, rogue sells to D, pawnbroker. P sues D. Clearly is a mistake of identity, but mistake is not significant enough that we would conclude there was no offer/acceptance. The court held that the identity of the purchaser didn’t matter here. The seller intended to sell to the individual who was in front of him in the shop, even if he would not have sold without a fraudulent misrepresentation. K was made between P and rogue. Thus the contract is not void, only voidable, if it has not yet been sold to a BFPV |
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Ingram v Little (1961) (Contracts and Third Parties: Mistake of Identity)
purchase of car by "P.G.M. Hutchinson" (Hardy) |
[Identity of the buyer was essential, so the contract is void]: P are sisters who own car, rogue asks to buy car under false pretenses pretending to be different person. P makes it clear that it’s important to them that they’re K-ing with the different person. This case is distinguished from Phillips in that the identity of the buyer was crucial. Unlike in Phillips, the offer here was only accepted after the purported identity of the rogue was established. Hence the contract is void. Devlin in dissent thinks the loss should be divided between the two innocent parties, no evidence to rebut presumption of making K with person in front of you. While identity mattered to her, it’s not important what mattered to her, what matters is what is objectively important. Valcke: thinks case is wrongly decided -> test for determining what is essential to formation of K is objective and to be determined by court, identity clearly wasn’t essential to formation of K here because it was just about credit-worthiness. Even with credit-worthiness was the issue, wouldn’t matter. Otherwise, you could just claim every breach of K was due to mistake as to credit-worthiness. This is not the type of mistake that prevents the K being formed. |
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Lewis v Averay (1972) (Contracts and Third Parties: Mistake of Identity)
purchase of car by "Richard Greene |
[In mistaken identity cases, courts should be protecting BFPVs -> following Devlin’s dissent in Ingram]: P sells car to rogue who claims to be a famous actor with fake ID. Rogue then sells car to D. P sues D. Denning picks up on some of Devlin’s ideas, specifically that courts should be protecting third parties (the BFPV). Denning holds that the presumption in these ‘mistake of identity’ cases is that there is a contract made with the person present. The contract is voidable for fraud, but it is still a contract under which property passes (i.e to a BFPV) unless and until it is voided. In a situation where either the 3rd party or the original owner have to suffer a loss, it should be the original owner who bears it. He should suffer for having took the risk of letting his property out of his possession without first receiving payment. Valcke: how is the question of who is more responsible for the mishap relevant in determining the validity of the K? In most jurisdictions, statutes would take care of this and apportion the damages between D and X.
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Marvco Color Research Ltd. v Harris et al. (1982) (Contracts and Third Parties: Documents Mistakenly Signed)
second mortgage rather than date change |
[to claim non est factum, must show that they were not negligent.] D induced by fraud of 3rd party to sign mortgage without reading it. Case adopts the rule from Saunders in Canada. D cannot claim non est factum here, because she has been negligent (careless). She had the ability to examine the document she signed, and simply failed to do so. As per Foster, anyone claiming non est factum has to show they were not careless. - Non est factum originally applied to those who were unable to read, and therefore had to trust someone else to tell them what they were signing. Now it must also be applicable in favor of those who are permanently or temporarily unable, through no fault of their own, to have without explanation any real understanding of a document they are signing, whether it be due to defective education, illness or innate incapacity. However, there is no claim if the document is 1) signed negligently, or 2) if the document signed was not fundamentally different from the document the signer believed she was signing. D was literate, had 3 mortgages before, and thus careless in not reading the document. - The plea is not available to anyone who was content to sign without taking the trouble to try and find out at least the general effect of the document. The essence of non est factum is that the person signing believed that the document she signed had one character/effect, whereas its character/effect was quite different. Thus she could not have such a belief unless she had taken steps or been given information which gave her some grounds for such belief - NOTE: Court says carelessness cannot be relevant, because by definition that means there was a duty that was breached (there is no such duty). Court draws a distinction between CARELESSNESS (estoppel) / NEGLIGENCE. (directed at other party). Since non est factum is equitable, it’s at the court’s discretion. Valcke: Follows estoppel/equity: A is estopped from suing X because it was A’s carelessness that B was able to sell the good to X in the first place. Non est factum unavailable to those who are merely careless. Very important that these cases are utilized only in cases of innocent 3rd parties, relationship between A and B altered drastically when a third party is involved. |
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Parker v The South Eastern Railway Company (1877) (Written Documents: Unsigned Documents - Ticket Cases)
baggage lost by baggage check clerk |
[Defendant must be given reasonable notice that the writing on the back of his ticket contains conditions]: P deposits bag in D’s cloakroom, D loses bag. P received ticket limiting liability to 10, denies having read it and sues for 24. Parker knew that there was writing on the back of his ticket, but thought it was a receipt, not conditions. Thus it was distinguished from previous cases, in which the plaintiff knew there were conditions on the back but didn’t read them, or in which the plaintiff did not know there was anything on the back. The court holds that Parker would only be bound by the conditions if ‘he was given reasonable notice that the writing on the back of the ticket contained legally significant conditions’ Note: P could argue ticket was given after K was formed = no consideration for new condition, thus not a part of K. -> K formed when he gave them bag, can’t unilaterally change conditions. Valcke: Judge argues that how onerous a term is will determine what degree of notice is required -> Denning agrees in Spurling, but ignored in Harper by Melish. |
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Chapelton v Barry Urban District Council (1940) (Written Documents: Unsigned Documents - Ticket Cases)
broken deck chair |
[Chronology Argument: if it comes after K, not a part of K.] Tickets handed out as receipts for people using deck chairs. P injured while using deck chair, ticket had liability clause on it. It is wrong to look at the circumstance of the plaintiff obtaining his receipt at the same time as he took his chair as being in any way a modification of the contract. The ticket is no more than a receipt, K had already been concluded when customers take the chair. |
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J. Spurling Ltd. v Bradshaw (1956) (Written Documents: Unsigned Documents - Ticket Cases)
landing account for storage of orange juice |
[Sometimes previous course of dealings can suffice to establish actual knowledge of a limitation of liability clause]: D deposited goods (8 barrels of OJ) with P to warehouse, something they had done before. A few days later, P sent D a landing account, which included a limitation of liability on the back. D came to collect barrels, they were empty and refused to pay. P brings action. The court held the limitation clause to be reasonable, as it only applied when the warehousemen were carrying out their contract. It is true that the landing account was issued after the goods had been received, but the defendants admitted that he had received many landing accounts before, and were aware of what they represented. Thus by the course of conduct between the parties, actual knowledge of the limitation of liability could be construed. |
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McCutcheon v David MacBrayne Ltd. (1964) (Written Documents: Unsigned Documents - Ticket Cases)
shipment of calves by Ferry |
[Sometimes previous dealings cannot establish actual knowledge of terms on the defendants part, and thus in the absence of a signature there is no contract]: Usually the plaintiff gets people to sign a set of impossible to read condition, including a limitation of liability clause, before shipping their goods. This time he forgot to get the signature, and the boat sank. While McCutcheon admitted that he knew there were conditions, he did not know what they were. The court holds that previous dealings are only relevant if they prove actual knowledge of the terms. In this case, there was no contract and no knowledge of terms. It’s as if McCutcheon had been accepted as a passenger without being given a ticket at all. If there had been a signature, the defendant would have been bound, only fair for the defendant to take advantage of the lack of signature, even when he knew that there were terms and conditions. Valcke: Court says opposite of Spurling (when they say you can assume whatever was agreed on before stands). Explained through the fact that when a K needs to be signed, it suggests whatever happened before is irrelevant: you sign and agree to this K or you don’t sign and there’s no K. Note: Parker test doesn’t apply here, because documents meant to be signed at different. Offeror had made it clear it was necessary to sign the offer in order to accept. |
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Thornton v Shoe Lane Parking Ltd (1971) (Written Documents: Unsigned Documents - Ticket Cases)
bodily injury in parking lot |
[The more onerous a term, the more explicit notice required]: Thornton’s ticket said ‘subject to conditions displayed on premises’, including a limitation of liability for personal injury. Unlike in Parker, these conditions were very difficult to locate. The question to ask if: did the company do what was reasonably sufficient to give notice of the exempting condition? Lord Denning holds that Thornton was not given reasonable notice of the condition. The more onerous a term, the more notice required. In order for Thornton to be bound, he would have required extremely explicit notice of the clause, i.e red ink with a hand pointing to it. (as opposed to limitation of liability for injury to his car, which the court upheld). Contract is sealed when P puts money into slot, thus subsequent terms are invalid. Valcke: Chronology argument for P here: waiver he saw when driving in -> reasonable person would assume it meant exempted damages to car, not person. The subsequent sign laying out personal injury liability was hard to find. Whatever appears on the ticket is binding if there’s reasonable notice, as per Parker, but unreasonable terms must be a “red hand pointing it out” to be valid, thus even if it was a ticket case and not dismissed by chronology, fails Parker standard of notice. |
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British Crane Hire Corp. Ltd v. Ipswich Plant Hire Ltd. (1975) (Written Documents: Unsigned Documents - Ticket Cases)
crane hiring -- crane sinking |
[Despite the lack of signature, distinguished from McCutcheon because both parties are sophisticated/commercial]: B.C rents a crane to Ipswich. Both firms are in the same industry, and they had previous dealings, although not for a while. Ipswich needed the crane in a hurry, and had not yet signed the contract when the crane was injured (sank into marsh). Following McCutcheon, Ipswich would be free to ignore the limitation of liability clause, as there was no signature, and previous dealings were not sufficient to establish knowledge of all the terms. However, Denning holds this is distinct from McCutcheon, as the two parties are of the same industry, use the same kind of contracts, and are even in bargaining power. Also, not a case of a document that needed to be signed, K was made over the phone. Ipswich was (or should have been) aware that the contract was coming, and that it was responsible for the safety of the crane. The first mishap was P’s negligence (driver), thus P must pay for that, but second was D’s negligence for choosing a dangerous route. Valcke: Where there’s a written K, you assume it must be signed. However, this is different because the paperwork comes after the oral K (if written K was inconsistent to oral, oral would apply). It was a standard term, not onerous. Reasonable to assume industry standard liability was coming in the written form. If K was not concluded over the phone, industry knowledge / previous dealings wouldn’t matter in lieu of lack of signature. |
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Tilden Rent-A-Car Co. v. Clendenning (1978) (Written Documents:Parol Evidence Rule)
limitation of liability clause in car rental agreement |
[Since the plaintiff knew the defendant was unaware of the onerous exemption clause, it cannot rely upon it – overturns dominant rule from L’Estrange which states that a signed K = you take liability for K even if you didn’t read]: The plaintiff car company had the duty to draw onerous/unusual provisions to the defendant’s attention. Since the plaintiff knew the defendant was unaware of the (particularly onerous) exemption clause hidden in the contract, it could not rely upon it. Just because Clendenning signed the (almost impossible to read) contract does not mean he knew what he was signing -> clerk said that he clearly did not read the terms. The court thus reads out the exemption clause, because it’s not what Clendenning agreed to. - Modern Rule of Parol Evidence: one who signs a written document cannot complain if the other party reasonably relies on the signature as assent of the contents. Only a reasonable expectation, however, will be protected. If the plaintiff knew or had reason to know of the defendant’s mistake or misunderstanding (or lack of understanding) then the specific unreasonable terms in the document should not be enforced. The plaintiff must draw onerous and unusual provisions to the defendant’s attention and explain their effect. - Exception of strong presumption of signed K being conclusive: 1. Misrepresentation 2. Onerous clause 3. Standard Form K not meant to be read 4. Contradictory clauses - Canadian decisions – more concerned (than in the UK) with the effects of enabling companies to hold ignorant signatories to the letter of sweeping exclusion clauses in standard form contracts. - Rule: The signer is bound by the terms of the document if the other party believes on reasonable grounds that those terms truly express the signer’s intention. Valcke: Tilden seems to disavow McCutcheon and ticket cases, and says that an analysis of Canadian cases have not been as rigid as UK cases. Sanctity of the signed K is not as strong in Canada. -> but also cites Waddams, who seems to contradict this idea to some degree. |
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Gallen v Allstate Grain Co Ltd (1984) (Written Documents:Parol Evidence Rule)
buckwheat crop - weed problem |
[The parol evidence established a warranty by Allstate. There was no contradiction with the written contract, but even if there had been the oral warranty should prevail]: Allstate, which has far more information, assures Gallen that the buckwheat would not be smothered by the weeds. The contract itself stated that Allstate gave no warranty as to the productiveness of the crop. The weeds subsequently destroy the crop. Justice Lambert holds this fits into one of the situations where parol evidence is admissible: ‘where parol evidence supports the claim that the written document was not intended to be the whole agreement’. Lambert finds the oral statement was a warranty, as Gallen would not have entered into the contract without it. There was no contradiction between the specific oral warranty and the standard form contract, as productivity/smothering are two different things. However, even if there was a contradiction, the oral warranty should prevail, despite the strong presumption in favor of written contracts, because at the time of contracting both parties intended for the defendant to bear the risk of weeds smothering the buckwheat. Warranties and K’s should be read harmoniously if possible. - To find if something is a Warranty, The court should look at who was intended, by the words and actions of the parties, to bear the responsibility of the statement’s accuracy. Valcke: When oral representation is specific and written term is general, presumption can be rebutted -> question is what’s the reasonable intention that can be ascribed to the parties? Farmers relied in D’s oral representation to enter contract, reliance was reasonable as D has more expertise. Contractual claim is stronger than simple reliance. |
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Sylvan Lake Golf & Tennis Club Ltd. v Performance Industries Ltd (2002) (Written Documents: Rectification)
"110 yards" v. "110 feet" |
[Criteria for Rectification] P and D agreed orally to development on land of 110 yards. When they wrote K, was written as 110 feet. P signs without reading the K. P sues D, seeking rectification. Granted, oral agreement prevails. Rectification requirements (standard: CONVINCING PROOF) (1) A previous oral agreement with definite terms was made that (2) is inconsistent with the written document, and (3) the other party knew or ought to have known of the mistake and P did not, and (4) permitting the party to take advantage of the mistake would amount to unfair dealing or fraud. Court’s role in rectification is to restore parties to their original bargain. In this case, all factors present. Valcke: Court recognizes this is an equitable recourse only available when it’s clear that there was clear/complete agreement btwn parties not properly reflected in written doc, and where the other party knows of the mistake and tries to take advantage of it. Policy: If the parties agree to put an agreement in writing, the assumption is that everything is put into the written document. Rectification available only by a limited test. |
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Shatilla v Feinstein (1923)(Protection of Weaker Parties - Forfeitures and Penalty Clauses)
non-competition agreement in sale of wholesale dry goods business |
[Where “liquidated damages” are so expansive and disproportionate to breaches, considered penalty damages and thus void] D sold business to P with non-compete clause. Agreed to pay $10K on each and every breach as liquidated damages and not as a penalty. D later becomes a stakeholder in P's competitors, breaching non-compete. Held to be a penalty clause, and thus void. While the law allows liquidated damages (damages that relate to the monetary loss caused), a penalty fixed at 10k that covers a huge amount of behavior of differing damage values (some trivial -> out of proportion. “Strength of chain must be taken at its weakest link”) is clearly penalty, even if it’s stated as not in the K. Valcke: We don’t want to enforce penalty clauses because they reflect a punitive intention on the part of the parties. Elsley Estate shows us that Shatilla test is for when we think there is foul play: if we’re convinced that the “penalty clause” is not punitive on the facts, shouldn’t strike down penalty clauses because it’s a blatant interference with freedom of K. |
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Stockloser v. Johnson (1954) (Protection of Weaker Parties - Forfeitures and Penalty Clauses)
deposit on purchase of machinery |
[Forfeiture Test] P agreed to buy a product from D. The price was paid in instalments. K said that if P defaulted, D got his products back (forfeiture clause). P defaulted and D got his products back and sought to keep the money. Held that D kept this money as it was not unconscionable. Test: if forfeiture clause or payments structured as a deposit, buyer in default cannot recover money except through equity. Equity applies when: 1) forfeiture clause is of a penal nature (out of proportion) AND 2) unconscionable for seller to retain the money. Valcke: similar to penalty clauses with an additional step. 1 is ex-ante Shatilla, 2 is ex post and based on nature of breach / intentions of parties. Why is there the extra step? Denning views them as different, but doesn’t explain why. Mentions that a concern is RELIANCE. Detrimental reliance is a more reasonable issue with forfeiture clauses than with penalty clauses. |
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Hunter Engineering Co. Inc. et al. v Syncrude et al. (1989) (Protection of Weaker Parties - Clauses Excluding Liability)
sale of defective gearboxes |
[Dickson’s Change from Fundamental Breach Doctrine to Unconscionable Doctrine] D buys gearboxes from P and Allis-Chalmers. K’s include time-limited warranties. K with Allis contains warranty with exclusion clause: excludes any other warranties after base warranty expires. Products break after warranty period. Dickson moves away from doctrine of fundamental breach to “unconscionable rule”: hold parties to terms of their agreement as long as agreement, held to an objective construction, is not unconscionable (i.e. because of unequal bargaining power) -> was it bargained for?. In case, clause was conscionable thus valid. Wilson dissents: argues for rule of reasonableness ex-post, an estoppel based argument -> if malicious intent is found from breaching party, court retains power to hold them responsible. Valcke: Majority and dissent are arguing over rule of construction as an ex ante analysis vs rule of reasonableness as an ex post analysis. By calling it a rule of construction, it treats limitations to liability as something that has been bargained for, and thus valid unless it’s explicitly unconscionable. Definition of “unconscionable” unclear: only really says “unreasonableness” and “inequality of bargaining power” in case. |
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Tercon Contractors Ltd. v British Columbia (Minister of Transportation and Highways) (2010 SCC) (Protection of Weaker Parties - Clauses Excluding Liability)
construction contract awarded to non-compliant bidder |
[UNANIMOUS AGREEMENT WITH DICKSON IN HUNTER. Fundamental breach dead, unconscionable test set out. Sets out the rule for enforcing an exclusion clause. In this case, the closed list of bidders was the foundation of the entire process, and thus the exclusion clause can’t operate] : After six finalists for a tender are selected, one of Tercon’s competitors forms a joint venture with an outside company and wins the tender (breach of tendering process). Tercon claims that B.C has breached its contract, but the contract includes an exclusion clause. The question is, does the exclusion clause bar a claim for damages for breach of the tendering contract? - For the issue of enforcing an exclusion clause, the court must undertake a three-part inquiry, a pre-breach analysis of whether the contract was unconscionable at the time of contracting: 1) Does the clause apply?, 2) if it applies, was it unconscionable at the time the contract was made [because of imbalance in bargaining power]?, 3) If it applies and is valid, are there any other public policy reasons not to enforce it? - Cromwell for the majority says that the closed lists of bidders was the foundation of the tendering process. To allow the exclusion clause to operate in this situation would undermine the integrity and the business efficacy of the entire tendering process. [stepped outside of K, no LLC] Additionally, BC was under an implied duty to treat all bidders fairly and equally, and would need explicit language to exclude liability for this basic requirement. - Binnie in dissent says the exclusion clause should apply. Tercon was a sophisticated commercial party that was fully aware of what it was doing when it agreed to the exclusionary clause. Hence there are no issues of unconscionability or public policy. Valcke: Judges agree that whole exercise is looking at words of K, but disagree on meaning. (essentially a rule of construction issue) Binnie’s dissent brings Wilson’s dissent in Hunter (ex-post rule of law analysis) back as a public policy consideration. Following this case, LLC treated as any other clause, and then see if there’s reasons not to enforce it due to unconscionability and public policy. |
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Marshall v Canada Permanent Trust Co (1968) (Protection of Weaker Parties - Unconscionability and Undue Influence)
sale of land by old man |
[Sets out Marshall test for voiding K due to unconscionability] D was not of sound mind even if he seemed reasonable on the outside and agreed to sell land to P. Price was well under market value and seeks to rescind K under Mentally Incapacitated Persons Act. Held that deal was unconscionable and was rescinded. Marshall test: K is rescinded if: 1) Party was incapable of protecting interests (irrelevant if good faith by other party) and 2) Made a careless bargain (onus rests with P to show price was fair). Valcke: Obviously a valid K was formed here objectively, so we must move to equity. Valcke thinks some kind of exploitation is necessary here -> why estop buyer from profits if he did nothing wrong? Valcke also thinks unconscionability is linked directly to consent. An unconscionable act: “there is a K, but there’s a good reason not to enforce it” -> a good reason to not enforce is lack of consent in cases where subjectivity is required. Equity seems to require subjectivity in requiring mental capacity, but contracts has always been an OBJECTIVE standard. |
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Lloyds Bank Limited v Bundy (1975) (Protection of Weaker Parties - Unconscionability and Undue Influence)
mortgage on farm to secure son's debt |
[Explains what constitutes inequality of bargaining power leading to voiding] D mortgages house with P (bank) for son’s business, eventually agrees to mortgage valued at entirety of D’s assets without outside legal consult. The consideration moving to Herbert from the bank for this guarantee was grossly inadequate. Herbert had a relationship of trust and confidence in the bank (fiduciary relationship), and despite the bank’s conflict of interest with Herbert, it did not suggest that he get independent advice before signing the guarantee. Hence the doctrine of undue influence invalidates the guarantee. “Undue influence”: (a) where stronger guilty of fraud/wrongful act to gain a gift/advantage from weaker OR (b) no fraud, but rather abuse of relationship to gain advantage (ie parent/child, lawyer/client). Includes fiduciary relationships.
- The law will give relief to one who, without independent advice, enters into an unfair contract, when his bargaining power is previously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear upon him for the benefit of the other.
Valcke: ignore the specific categories listed here, that’s UK law. They specifically don’t use Marshall test saying that Canadian law is more broad while UK law is constrained by list of closed categories.
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Royal Bank of Scotland p.l.c. v Etridge (No. 2) and Other Appeals (2001) (Protection of Weaker Parties - Unconscionability and Undue Influence)
spousal consent to family home as security for debts |
[Undue influence in relationships without presumption of undue influence, but suspicion (husband/wife)] Eight appeals combined. Wives gave their home to the bank as security for husband's indebtedness. Bank sought to enforce the security. Held that K’s void. For couple relationships, no presumption of undue influence (unlike irrebutable assumption in parent/child, guardian/ward, trustee/beneficiary, solicitor/client, doctor/patient),, but if wife shows: 1) placed trust in other party AND 2) unfair transaction, burden shifts to other party to prove no undue influence (presumption of it). Bank must in these cases take steps to ensure that the wife understands the K -> knowledge that a lawyer is acting for HER will suffice (distinguish from Credit Lyonnais, less burden on banks). This type of transaction must put a bank on notice -> ensure expression of free will. Arrange a meeting with lawyer where husband is not present, etc. Valcke: ultimate question is did the bank act reasonably? In this case, the facts of undue influence much more apparent that banks needed to go further to ensure decision was made with proper consideration. |
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In the Matter of Baby “M” (1988) (Public Policy)
'surrogate motherhood' contract |
[No K’s allowed in surrogacy for PP reasons] Couple hire woman to be surrogate mother, agree to 10k payment. Surrogate refuses to surrender custody. Couple sues for SP. Held that K is void due to public policy reasons -> against principles of law -> guarantees separation of child from mother, looks to adoption regardless of suitability, totally ignores the child: takes child away from mother regardless of her wishes or maternal fitness… all for money -> some things that money CANNOT buy. Child still given to couple for best interest of child. Valcke: this case tests the limits of freedom of K. Since it’s not something people can K about, it’s void ab inicio. Is there a UE claim? -> just because a K is void doesn’t mean restitution becomes available, must look to statutory construction and apply what we find as to what makes the K void into restitution. |
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Ashmore, Benson, Pease & Co Ltd v A.V. Dawson Ltd. (1973) (Public Policy)
tube bank transported on undersized lorry |
[Illegality of K case. When both parties are equally in the wrong, equitable doctrine of pari delicto will side with D] P had K with D to deliver heavy equipment. Load was 25 Tons, truck was 10, maximum allowed by statute was 30. During shipping, tips over and causes damage. D argues load was illegally heavy and thus K was illegal. Held that D not liable due to equitable principle of pari delicto, wherein unless D’s behavior is worse, they win. In this case, both equally participated in the illegal performance of the K, thus they’re estopped from enforcing the K. In this case, P and D both were aware that D did not have any legally allowed vehicles, and the price of the K was low as to reflect this bargain due to illegal contract. (Denning’s argument that it should’ve been void ab inicio) Valcke: distinction between unenforceable v. void doesn’t matter because this isn’t a K suit, it’s a tort suit about negligence -> estoppel is much better argument. There is no restitution granted because D would get to keep money for illegal K. They’re both in the wrong and this is equity. Distinguished from Archbolds in that P actually participates in illegal performance here. |
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Oldsfield v Transamerica Life Insurance Co. of Canada (2002) (Public Policy)
husband dies while drug trafficking |
[PP doesn’t void insurance recovery for innocent beneficiary] P is ex-wife of deceased and beneficiary to life insurance policy. Deceased died while smuggling drugs. D refuses to pay on PP grounds. Held that K is valid: while PP prevents criminals/their estate from profiting off crime, P is neither of these, but an innocent beneficiary. Valcke: Not a void K, if anything just unenforceable. As beneficiary, not a part of the estate. If K included clause that was illegal, such as “even if death occurred illegally”, it would be void. |
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Still v The Minister of National Revenue (1998) (Public Policy)
invalid work permit -- unemployment benefits |
[Loosens the rule from Kingshot (classic illegality doctrine) The totality of the circumstances should be considered]: Still thought she had authorization to work in Canada, but in fact didn’t, and later is denied unemployment benefits, as she had been working illegally. The court holds that classic illegality doctrine is too severe. The totality of the circumstances should be considered. Still was not deceitful, had been acting in good faith, paying taxes and paying into the unemployment fund herself. Thus she should not be denied unemployment insurance simply due to the illegality of her actions - Modern principle of illegality: Where a contract is expressly or impliedly prohibited by statute, a court may refuse to grant relief to a party when, in all of the circumstances of the case including the objects and purposes of the statutory prohibition, it would be contrary to public policy, reflected in the relief claimed, to do so |
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Kiriri Cotton Co Ltd. v Rachhoddas Keshavji Dewani (1960) (Public Policy)
upfront premium on Kampala residential lease |
[Legislative intent should be used to see which party is “primarily responsible” for conflicting pari delicto cases] P moves to city and forced to pay 10k shilling upfront premium for residence. P claims payment was illegal as it contravenes rent laws. Held that P can recover, D was in the wrong thus pari delicto does not apply. While P and D were both parties to the illegal K, if P can show D was primarily responsible, no pari delicto. -> legislative intent of Rent Restriction Ordinance shows designed to protect tenants against these types of requests (only penalizes landlord), landlord is more to blame for taking advantage of the housing shortage. General rule is that courts won’t provide restitution for illegal K’s, but they do here because K has not been executed yet and P is at less fault than D. Valcke: Important to note that this was not a bad faith case, statute just unclear… but “bad faith” doesn’t matter here, legally both were equally “blameworthy” for the K, but landlord at greater fault due to legislative intent. |
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New Solutions Financial Corporation v Transport North American Express Inc. (2004) (Public Policy)
criminal interest rate -- severance |
[Notional severance: “blue-pencil” method. Excising provisions leading to illegality] P charged criminal rate of interest on loan to D. Notional severance use found valid as: 1) agreement only inadvertently violated law, 2) experienced commercial parties at arm’s length, 3) no evidence of unequal bargaining power, 4) each had independent legal advice. No punishment necessary, allow fixing of contract. Blue-pencil method involves excising provisions leading to illegality as long as essence of K is not disturbed. Valcke: law has moved away from notional severance -> logic of it is to stay as close to intention of parties… better to just re-write K if this is true. PP concern that parties won’t care as much about illegal K’s because courts will fix it for them. |
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Heilbut, Symons & Co. v Buckleton (1913) (Mistake: Misrepresentation)
sale of shares of 'rubber company' |
[Lays out the test for determining if a representation is a warranty. Here just a statement of fact]: The issue is whether Heilbut made a warranty that the company was a rubber company by making such a statement (it was not). Thus the inquiry is whether there was an intention to make the representation part of the contract. The question is whether the plaintiff, as a reasonable person, could conclude that the other party in fact promised the truth of the statement. Here there was no evidence to support any finding other than Halibut’s statement being a simple representation. It was not part of the contract itself. Simple reliance NOT ENOUGH, need some mutuality, and innocent representation does not involve any mutuality -> the fact that it’s a rubber company is merely incidental to the primary goal of profits. |
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Redgrave v Hurd (1881) (Mistake: Misrepresentation)
offer of partnership combined with sale of residential property |
[In equity, can’t benefit from a statement which you admit to be false, regardless of whether he knew it to be false upon utterance] P advertises for a partner for his law firm as well a purchaser for his house. D responds with query on worth of practice, P misrepresents income but does not do so maliciously. After signing, D finds out practice is “worthless” and doesn’t want to complete K. Held that P cannot enforce K. Having made the innocent misrepresentation, it would be unjust for him to insist on performance absent clear evidence that D knew this was a misrepresentation, or that he didn’t rely on this statement. Lack of due diligence is not sufficient. |
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Newbigging v Adam (1886) (Mistake: Misrepresentation)
dissolution of partnership |
[In equity, indemnification can be ordered when there has been an innocent misrepresentation inducing contract formation] P induced by misrep of D regarding adequacy of machinery to enter partnership, business tanked, P sues D to dissolve partnership and indemnify him for liabilities received through misrep. Indemnification held, while there is no action in K law for innocent misrep, equity will step in and rescind contract and reward indemnification (equity cannot award damages). |
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O’Flaherty v McKinley (1953) (Mistake: Misrepresentation)
1950 Hillman |
[If substantial aspect of K was subject of misrep, if item can be returned (no deterioration), rescission can be granted] P wanted 1950 car, D innocently misrepped that it was a 1950 car that had driven 4000 miles. P paid, drove 7000 miles, found out it was a 1949. P sues for rescission. Held rescission of K, representation of the year-model is an error to substantial matters. Gets purchase price back and must return car, but does not get other damages claimed as she would’ve had to pay them anyway (insurance, etc. think Hawkins v McGee). Note: if subject matter of K is gone or significantly changed, not entitled to rescission. |
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Murray v Sperry Rand Corporation (1979) (Mistake: Misrepresentation)
farm machinery "harvesting 45 tons of wheat per hour" |
[Here the representations were a warranty, based on the Helibut test, and thus the plaintiff could collect damages -> slightly looser, inducement is all that’s required]: Explicit assurances were given to Murray that the harvester he was buying would work on his farm and for the uses he intended to make of it. These assurances were fundamental to his decision to purchase the harvester, and Sperry Rand and its agent were aware of the significance of these assurances. Such representations made with the intention of inducing contractual relations (brochure) constitute a warranty (as in Gallen) and the failure of the machine was a clear breach of the warranty made. A reasonable person could conclude that they had promised the truth of the statements, as per Helibut. Hence Sperry Rand owe Murray damages for breach of warranty. |
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Hedley Byrne & Co. Ltd. v Heller & Partners Ltd. (1964) (Mistake: Relation Between Contract and Tort)
negligent misrepresentation of creditworthiness |
[Even if there’s no K, a party undertaking a voluntary act has a duty to take reasonable care in making representations to others that could induce reliance which results in economic loss] P asked D (banker) for credit report of third party, D replied with “use without responsibility on the part of this bank or its officials”, said third party had good credit. On reliance, P loaned third party money and loss a large sum when third party turned out not to be creditworthy. No remedy for this in K law due to statement by banker, but remedy found in tort of negligence. Party undertaking a voluntary act, they have a duty to perform it properly. In this case, the banker undertook this act and induced reliance on P which caused economic loss, thus P can recover in an action in tort -> negligent misrepresentation. |
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Esso Petroleum Co. Ltd. v Mardon (1976) (Mistake: Relation Between Contract and Tort)
lease of gasoline station - "200,000 gallons/year throughput" |
[Statements are more likely to be qualified as warranties when made by an expert] Mardon was induced by Esso’s estimates that the plot would have an estimated amount of consumption (EAC) of 200,000 litres to become a tenant. This was incorrect due to Esso’s fatal error of not reassessing EAC upon changes in their ability to build the station. Mardon wants damages for 4 years of failed economic endeavors to keep the shop profitable. Held that Esso negligently misrepped and allowed reliance damages (expectation dmgs). Since the rent amount of dependent on estimates of EAC, the EAC was an implied term of K – a collateral warranty. There will be a collateral warranty where it is reasonable for one party to rely on the misrepresentation of the other. If a man, who has or professes to have special knowledge or skill, makes a representation to another with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. The divide between a statement of opinion and fact becomes more factual if one holds himself out as having expert knowledge. |
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Hobbs v Esquimalt & Nanaimo Railway Company (1899) (Mistake: Mistake about Contractual Terms)
"land" includes mineral rights |
[(If you want to use a term in a specialized way in a contract, its your duty to make that clear -> always utilize an objective interpretation of K): Hobbs contracted to buy some ‘land’ from Esquimalt. The issue was whether ‘land’ came with mineral rights. The court finds that the contract here was in perfectly unambiguous language (i.e land includes minerals). The alleged difference is in a wholly esoteric/unreasonable/careless meaning which Esquimault gave to the word ‘land’. It is incredible that a company – who sells land – could reasonably suppose that the word “land” means land with the reservation of minerals. Other contracts by Esquimalt specifically had reserved mineral rights. If Esquimault wanted to use this specialized meaning of the word, it was its duty to make it clear. Allowing it to claim this after the fact opens the door to fraud. |
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Raffles v Wichelhaus (1864) (Mistake: Mistake about Contractual Terms)
the two ships "Peerless" |
[Mistake in terms meant no meeting of the minds and hence no contract - WRONGLY DECIDED for SUBJECTIVE standard[: Both parties had a different ship ‘Peerless’ in mind when they reached the contract. What the plaintiffs are upset about is not that it wasn’t the ship they were thinking of, but that the cotton arrived late. The court found there was no meeting of the mind and hence no contract. Courts strive to find a reasonable interpretation in order to preserve an agreement wherever possible. Here, that is not possible. The intention of the parties cannot be found by looking at the contract. The parties did not agree to the same thing. No contract has been formed. This is technically not a subjective analysis of intentions contrary to Hobbs, because it’s an objective analysis of the external manifestation of intentions -> one party saying Peerless (October), the other saying Peerless (December) -> no agreement here objectively. |
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Staiman Steel Ltd v Commercial & Home Building Ltd (1976) (Mistake: Mistake about Contractual Terms)
auction of "all the steel in the yard" |
[No meeting of the minds, but a reasonable man could still infer the existence of a contract]: Part of the steel Stainman thought he was buying had already been sold (the building steel), and thus was not intended by the defendants to be part of the contract for the bulk lot. The defendant then refused to allow Stainman to collect the remainder of the steel unless he surrendered his right to bring suit. The court holds that in cases of mutual mistake, the court must decide what reasonable third parties would infer to be the contract from the words and conduct of the parties who entered into it. It is only when circumstances are so ambiguous that a reasonable bystander could not infer a common intention that the court will find no contract was created. Here, a reasonable man would infer the existence of a contract to buy and sell the bulk lot without the building steel. This contract is binding on both parties, in spite of the mutual mistake. -> Commercial had breached this contract by refusing to deliver the remainder of the lot. Objective interpretation of the seller more believable in this case: seemed that Stainman knew prefabricated steel had been already sold and was trying to trap the auctioneer. NOTE: Court chooses not to rescind contract as it would not be a neutral solution, one side would be happier if contract was rescinded. |
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Henkel v Pape (1870) (Mistake: Mistake about Contractual Terms)
telegram sale of "fifty riffles" |
[No common agreement between parties = no K. # of rifles ESSENTIAL to K as it impacts price] D and P both involved in the gun business. D asks P for a sample gun of a specific pattern, implying that he may place an order for 50 rifles. P sends sample. D responds back “…Send the Snider rifles…” to which P sends 50. D meant to say “three” instead of “the” -> mistake of telegram office (not privy, just an agent, no suit against telegram office). Held that there was no K due to no common agreement, cannot find for either side as price would fluctuate heavily depending on quantity. |
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Smith v Hughes (1871) (Mistake: Mistake about Contractual Terms)
horse trainer buys oats |
[Seller has no duty to enlighten the buyer, as long as he does not mislead him. When the buyer has the chance to inspect the goods, caveat emptor applies]: D ordered oats from P, which he had the chance to inspect. When they arrived, they were not the oats he had thought they were. He wanted old oats, not new oats. However, D had 2 days to look at the sample, and thus the principle of buyer beware applied. There was no warranty by the seller, who had done nothing to contribute to the deception of the buyer. He may have known that the buyer was deceived, but did nothing to contribute to this deception. - Where a specific article is offered for sale – without warranty – and the buyer has full opportunity of inspecting and forming his own judgment, the rule of caveat emptor applies. - Smith was under no legal obligation to inform Hughes whether the oats were old or not. If Hughes had asked whether the oats were old oats or not, the question would be very different. But, here, the buyer acted entirely on his own judgment. - The buyer is bound, unless the seller was guilty of some fraud or deceit, and “mere abstinence from disabusing the purchaser of that impression is not fraud or deceit; for, whatever may be the case in a court of morals, there is no legal obligation on the seller to inform the buyer that he is under mistake, not induced by the seller.” - Important to distinguish mistakes in contractual terms and mistakes as to background assumptions -> was he mistaken to age of oats because of his mistake? Or was he mistaken because he thought the seller had guaranteed oats would be old? Former, no relief. Latter, potential relief. |
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Bell v Lever Brothers Ltd (1932) (Mistake: Mistake in Assumptions)
early termination of employment contract with employees who had misbehaved |
[The failure to disclose a fact that might influence the mind of a party to a contract does not void a contract, unless this leads to him being mistaken in a matter that goes to the heart of the subject matter of the agreement]: D paid out severance to P, but later discovered that he had been doing private dealings on the side. D sought to vitiate the severance contract, claiming P had attained the severance by fraudulent misrepresentation. The court holds that it would be wrong to terminate the severance contract simply because P had breached the prior employment contract. There was no contractual duty for him to disclose his past faults. D still got exactly what they thought they were getting with the severance contract. - In order for the contract to be void by common mistake of assumption, the mistake must go to the heart of the subject matter of the agreement -> must be ESSENTIAL - An agreement to terminate a contract that has been breached is the same as an agreement to terminate a contract that has not been breached. Thus not voided for mistake - the failure to disclose a material fact that might influence the mind of a prudent contractor does not give right to void the contract - Here, there is no mistake fundamental to the identity of the contract that would prevent the termination agreement from being enforceable. Valcke: Makes it theoretically possible to set aside a K for the sole reason of mistaken assumption, but in reality test is so stringent that it’s essentially impossible. |
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Solle v Butcher (1950) (Mistake: Mistake in Assumptions)
apartment thought to be free of rent control |
P rented apt from D for 250 pounds, both under assumption that there was no rent control. There was, maximum rent is 140 pounds. If D complied with certain formalities before lease, could have legally charged 250. Denning held P must decide to rescind or pay 250. If it was the same court as Bell, would not have set aside contract due to mistaken assumption not being fundamental -> Denning says Bell is solely about CL, this is equity. Court doesn’t like that P indicated to D that it wasn’t rent controlled but now wishes to benefit from this. Valcke: Denning could have given rescission through negligent/innocent misrep, but chooses not to. |
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Great Peace Shipping Ltd. v Tsavliris Salvage (International) Ltd. (2002) (Mistake: Mistake in Assumptions)
salvaging ship thought to be closer than it was |
[sets out the 5 required elements for a common mistake to void a contract -> ALTERS BELL. Something being less convenient does not make it fundamentally different]: P (Tsavliris) contracted with D (GP) to come salvage them on the understanding that they were 35 miles away, but they were in fact 410 miles away. Instead of invoking the 5 days cancellation fee, P found another ship to contract with, and then claimed there had been a fundamental mistake, which vitiated the contract. The court ruled that the fact P did not cancel the contract immediately, but instead first found a closer ship, showed that the services contracted for were not fundamentally different from what they received. The contractual purpose here was not defeated by the mistake. D could still have done what was contracted for, it just would have taken a little bit longer. - Case changes fundamental mistake test -> non-existence of the state of affairs that was the substance of the mistaken assumption must render fulfilment of contract impossible. The Test: 1. There must be a common assumption as to the existence of a state of affair 2. There must be no warranty by either party that this state of affairs exists 3. The non-existence of the state of affairs must not be attributable to the fault of either party 4. The non-existence of the state of affairs must render performance of the contract impossible 5. The state of affairs may be the existence of a vital attribute of the consideration to be provided or circumstances which must subsist if performance of the contractual venture is to be possible. |
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Miller Paving Limited v B. Gottardo Construction Ltd. (2007 ONCA)
sale of paving materials -- "Great Peace" in Canada |
[Canada’s response to “Great Peace” -> don’t adopt it, thus keep common mistake doctrine, but a lesson taken] Miller had K to supply aggregate materials to Gottardo who was building a highway. They sign an agreement in which Miller acknowledges full payments. Later, Miller sends another invoice realizing they did not bill Gottardo for a few deliveries. Gottardo resists claim on earlier agreement, even though they’ve received payment for it. Held that Miller responsible for risk of signing agreement -> In considering whether to apply doctrine of common mistake in CL or equity, court should look at K itself to see if parties have provided for who bears the risk of the mistake. Court reads K as importing risk to Miller (Miller acknowledged it was paid in FULL). |
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Sherwood v Walker (1887) (Mistake: Mistake in Assumptions)
barren cow--"Rose the 2d" |
[No meeting of the mind and hence no contract, as a barren cow is fundamentally different from a pregnant cow]: Sherwood bought a cow from Walker, despite warnings that it was probably barren. He bought it, it turned out the cow was pregnant, and thus worth ten times as much. There was no warranty that the cow would be ‘barren’. However, the majority holds that there was no meeting of the minds, as the parties would not have made the contract except upon the understanding that the cow was barren, and that a barren cow is fundamentally different from a pregnant cow. - In this case, the mistake or the misapprehension of the parties went to the whole substance of the agreement - There is no mistake as to the identity of the animal, but a barren cow is substantially different to a breeding one - Because both parties were mistaken and that mistake went to the whole substance of the agreement, Walker has a right to rescind the contract. Valcke: agrees with dissent, mistaken assumption was not fundamental enough to warrant rescission. Buyer took gamble that perhaps cow could breed… no mistaken assumption here at all. Seller just made a mistake that K would be good, but it wasn’t. |
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Krell v Henry (1903) (Frustration)
hotel room with view over coronation procession test |
[Lays out the rule for frustration -> Implicit terms of K can be used to rescind upon frustration]: Henry leased Krell’s flat to watch the King’s coronation, but then King falls ill and it’s postponed. Although the physical apartment was still there, the ‘foundation of the contract’ was the taking place of the procession. It was clear based on the parole evidence that the contract had an implied condition that the coronation would occur on the day the apartment was to be rented. The purpose of the contract being frustrated, Henry is not required to pay. - the principle of frustration applies not only to cases of impossibility, but also to cases where the event is the cessation or non-existence of an express condition going to the root of the contract and essential to performance. - Such conditions need not be expressly specified. It is sufficient if that condition clearly appears by extrinsic evidence to have been assumed by the parties. |
