CHAPTER 5

Contract Law Making a Valid Contract

Weir/Smyth 6th

CONTRACT is a voluntary (not forced) agreement between two or more parties to perform certain
obligations (Each party must receive something of value Consideration) that is enforceable by a court
Courts wont enforce a contract for an illegal act or a contract thats against public policy
7 Elements for a Valid Contract
1. Written Requirements most contracts never have to be in writing, however it is a very good idea to
write it down so there can be no future fights over what you had agreed to p. 167 Chamberland group
lottery & man wins fight to be included - Miller case court doesnt believe him
- The Statute of Frauds sets out the ones that must be in writing to be valid the main ones are:
sale or mortgage of real estate, leases over three years, marriage or cohabitation agreements and a third party
guarantee on a loan
- If A borrows money from a bank and B guarantees to pay the bank if A cant pay - the guarantee B made
must be written & sealed (stickers or circles by the signatures) & B needs ILA (Independent Legal Advice)
-some insurance contracts must be in writing and some contracts the Consumer Protection Act lists also
2. Capacity people must have the legal and mental capacity (children, drunk, crazy) to form a contract
- contracts made with children (under age 18 in Ont.), intoxicated people (from drugs or alcohol) or the
mentally disabled are void because these people lack the capacity to form a contract
a) Children - most contracts made by children are void as they lack the legal capacity to contract
- children can get out of (repudiate)most contracts they make Cininni -p. 170 Tonelli hockey contract
- but if they have used or damaged the goods then they must pay for this reduced value
- contracts for the necessities of life (food, shelter, clothing) can be enforced against children sometimes but
child only pays a reasonable price for necessities child can be liable if fraud involved p. 171 Holbroff
- Other contracts kids can get out of but kid may be liable for the damages or reduced value of the goods
- parents are not liable for kids contract unless the parents agreed or cosigned
b) Intoxicated people people intoxicated on drugs (legal/illegal) or alcohol can get out of contracts but
only if they prove 3 things: 1) they were intoxicated (proof) when they made the contract 2) the other side
knew or should have known they were intoxicated and they took advantage of them 3) as soon as they were
sober they try to repudiate the contract (wait too long, cant get out of the deal)
p. 171 Delores Horton in 1975 she sold half of Tim Hortons franchise for $1 million but in 1995 she claims
she was finally sober & wanted half of the franchise then worth $350 million she lost as it was a fair deal
c) Mentally disabled - often due to brain injury, brain defect or disease - any contracts they make can be
void, but if they get independent professional advice and were not taken advantage of, it may be legal.
3. Legality - Contacts for illegal purposes or against public policy are void
- contracts for criminal offences are void and the courts wont enforce them, if it is a violation of a statute it
may be valid if no intention to violate and it is cured later on
- gambling is illegal except where the govn. allows it (lottery, race track, casino etc.)
- it is illegal to charge an interest rate over 60% under the Criminal Code (the judges CANNOT rewrite
contracts, they can either enforce it or throw it out)
- but p.174 Transport N.A. Express case -SCC surprisingly allowed notional severance and changed a clause
that was over 60% to 60% interest rather than just blue penciling it and striking it down
-Pay Day Loans small loans (e.g. $300 for 2 weeks) the law lets these lenders charge interest of up to
546% in Ontario a $2 billion industry, 750,000 loans/ year, often very vulnerable people take these loans &
govn. legalized these outrageous interest rates in U.S. some states control these rates with low max. rates

-2Ch. 5
- Contracts against public policy (too restrictive), often the policy the court is concerned with the right of exemployee or the seller of a business to work after they leave or sell a co. - courts only let companies use
restrictions on key workers and it must be a minimum amount of restriction and courts now usually prefer
non-solicitation clauses ( dont contact your old clients) instead
- if the company gets greedy and makes the non-competition clause too big, court will void the clause and
company will be left with no protection at all, court will not re-write the contract
-p. 177 Payette v. Guay 5 year non-compete valid as sale of a business p. 178 Mason a 1 year worldwide
was too excessive Lyons v.Multari - 5 mi. 3years invalid on dentist, Stewart 1 year 50 mi. invalid on CA
4. Valid offer - there must be a serious intention to form a contract and the offer must be specific, detailed,
precise, complete and clearly communicated p. 182 UBS Securities had agreed to sell shares over the
phone and a valid contract was formed as all key terms discussed p. 183 Hoban and Oliveri cases also
valid contract as key terms in the agreements - the objective bystander test would they think a contract
had been formed
- ads by cos. are not offers, just an invitation to treat an attempt to start bargaining and induce offers
- putting a house up for sale or a store selling goods at a certain price is not an offer, its an invitation to treat
- Termination of the offer: the offeror can withdraw the offer at anytime, so long as nobody has accepted or
nobody has paid for an option or sealed it to keep the offer open until a certain date
- stock option money paid to buy stocks at a set price for a set time period, if you decide not to buy the
stocks then the option $ is not returned
- irrevocable offers can be revoked or withdrawn if there is no consideration (an option paid for or it was not
sealed)
- offers are terminated if the offeror dies, goes bankrupt, becomes mentally impaired, or the subject matter is
destroyed or it becomes illegal
- if an offer is rejected then the offer is terminated
- an offer expires if a time limit has been set and the time has passed and if no time limit has been set, then
the offer expires within a reasonable amount of time
- if a counter offer is made (the other side changes any term), the original offer is terminated, so beware
when bargaining a counter offer automatically ends the original offer
- if a new counteroffer is made it can be revoked too unless paid to keep it open p. 185 Rei-Mar second
extension not paid for, so seller could sell property to a different buyer
Conditional offer - the offer depends on a certain condition being fulfilled, and if not met, no contract
- a conditional offer that is accepted creates a conditional contract
Ex: A will buy Bs house, on the condition A can arrange a mortgage, or A can sell their own house first
-must take reasonable and honest steps to fulfil the condition
- p.189 Marshall buyer agreed to buy house on the condition the inspectors report was to their sole
satisfaction inspector found a few minor problems and buyer refused to buy seller sued, but ct. said that
condition clearly stated it was the buyers right so even if a minor deficiency, the buyer gets out of the deal
5. Valid acceptance - to be a valid acceptance it must be on the exact same terms as the offer, no changes
or it is a counter offer
- acceptance can be done orally, written, fax, clicking an icon or even by conduct
- silence is not acceptance but if you accept unsolicited goods and use them, that use is an acceptance
acceptance must be done the way that the contract stipulated e.g. p. 190 Gretzky lost out on cottage as the
contract said acceptance had to be in writing and he had done it by conduct
- Lindros- acceptance was done by conduct so contract had been formed
-acceptance by mail is when it is posted, but for fax and email it is when it arrives electronically to other side

-3-

Ch. 5

6. Cooling-Off period & Serious Intention

- normally once you make a contract you CANNOT get out of the deal or you can be sued for breach of
contract a deal is a deal - however in certain areas the government has passed laws to let people out of
contracts due to high pressure sales tactics by very aggressive companies
- for fitness, karate, dance, modeling, pre-paid funerals, time-share (?) or brand new condos and door-todoor sales contracts there is a 10 day cooling off period to get out of the deal, even if you paid and used the
services, but co. must be notified within 10 days in writing using registered mail or a courier that you are
cancelling
- 20 day cooling off period for gas water heaters and 2 day cooling off period for pay day loans (these guys
are scary and horrible)
- both sides must have a serious intention to create a contract
- often companies have ads but they are just puff and not a serious contract e.g. whiter, brighter etc. You
cannot sue them if they are not like ads, because they dont have a serious intention (not a contract). If
they do promise $ back if not satisfied, thats serious
- often courts think agreements between family members are not serious so not a contract
- memorandum of understanding (letter of intent) is often prepared when negotiating a contract but it is not a
contract
7. Consideration- each party must receive something of value for it to be a valid contract (money, objects,
services)
- courts do NOT require it to be equal or fair amounts for each side
- e.g. the sale of a $100,000 ring for $1 is legal people can make bad deals so long as not fraud or duress
- past consideration is not valid consideration
- future consideration is valid consideration (promises to do things in the future are valid)
- if a contract is in writing, and there is a seal (stickers or circle by the signatures), the court will say the seal
means the party intended to be legally bound and the document will be enforced even with no consideration
valid consideration in the contract, even if there was none
- beware of asking for a price increase, get it in writing and sealed so no problems or else the price increase
may be invalid as no consideration was given for the extra money - p. 197 Gilbert Steel
- promissory estoppel is an exception to the consideration rule, if A made a promise to B, but there was no
consideration given, but B relied on that promise to Bs detriment, then A cannot later say there was no
valid contract - p. 199 Adamoski Canada Student Loans told him he no longer owed money and then 4
years later tried to collect so he claimed promissory estoppel & didnt have to pay

CHAPTER 6

Contract Terms & Contract Interpretation

Weir/Smyth 6th

-basic contract law says, if you make a contract thats it, youre stuck with the deal, courts wont rewrite it
- people have the freedom to contract and to set and create their own agreement and rules
- we need this certainty in business, but this sometimes this was too strict a rule and resulted in unfairness so
courts made up ways to get around this rule
Court WANTS TO ENFORCE CONTRACT, NOT REWRITE IT
1) Standard form contracts - are necessary for the ease and speed of business deals and are used very
frequently but they are written by big company lawyers to benefit their company, not the other side
- individual consumers often dont read them and even if they did read it, they would not fully understand it
due to the legalese (big difficult legal terms) - so courts say if there is any unfair surprise in the contract the
courts wont enforce it against the consumer unless the company clearly brought it to the attention of the
consumer at the time the contract was made p. 212 Tilden case
- if a term is unclear the court will interpret the term the way a reasonable person would or by the standards
used in that industry, or a dictionary definition (IN FAVOR OF THE WEAKER PARTY)
- if a term is unclear, the court will interpret it to the benefit of the other side who did not write the contract
p. 214 Shafron insurance agent cant compete for 3 years in Metropolitan City of Vancouver not clear
if that includes Burnaby, so SCC ruled it was uncertain so it was unenforceable
-p.214 Baughan driver had insurance for the U.S. & then disagreement over whether U.S. Virgin Islands
was included when accident there interpreted against the insurance co.
2) Parol (Oral) evidence rule- it is a strict old rule that states if a contract is in writing & clear, the court
does not want to hear any of the oral/spoken discussions that went on when it was being formed, only the
written terms count
- but often sales people make claims/promises that induced the contract (e.g. we have a 3 year guarantee), but
then the contract says that nothing is guaranteed - so to avoid this unfairness, courts came up with ways
around the parol evidence rule
- courts would say the contract was partly oral and partly written, so oral terms count too, and sometimes
the court said the other statements were a collateral contract that gets added on to the written one
p. 216 Gallen salesman tells farmer plant controls weeds but written contract says no guarantee weeds
destroy his crop ct. ruled oral statement is part of the contract so company is liable for farmers loss
-p.216 King written contract but ct. allowed in other evidence to support claims pay was clear of taxes
- also if the court found that the sales persons remarks were misrepresentations (lies about major terms that
induced the person to make the contract) the written contract is void and the co. would be liable
3) Entire Agreement Clause - in some written contracts theres a clause that says the written contract is the
entire agreement - its done to exclude any other statements or promises also made it reinforces the parol
evidence rule that only the written terms should count normally the clause works, but in some exceptional
circumstances, external evidence works.
- problems occur when there are other key statements made that differ from the written contract
- cts. can go either way, it depends on who the court believes and how much evidence you have to back it up
- if court believes there were other oral statements, the entire agreement clause may be ineffective, if the
court does not believe the other statements were made, the entire agreement clause can work & exclude them
- p.218 BMO v. Bal Bal claimed he was only liable on a guarantee for 6 months due to an oral promise and
an email, but BMO denied it and relied on the written guarantee and its entire agreement clause -the court
ruled in favour of BMO & did not believe Bals evidence and did not insert this inconsistent term
- but in p.218 Corey 1997 (Lots of proofs) the entire agreement clause does not work and court lets in oral
statements that the developer personally guaranteed the deposit, as court felt hed never have entered the deal
without that oral guarantee & he had reliable evidence to prove it ct. said that Hawrish case cant be used

as a tool by the unscrupulous to dupe the unwary and court said in exceptional circumstances eternal
evidence can be introduced to vary the written terms
2
Ch. 6
4) Implied terms express terms are ones that are actual stated terms, but sometimes court will imply a
term or write in an extra term if the court feels the term was so obvious that both parties never even felt it
necessary to write it down, but if theyd been asked at the time the contract was made, both parties would
have easily agreed to the term - TD case if rent bldg. & parking spaces it is an implied term you can use the
laneway to access the parking spots
- p.221 - Safeway case- there is an implied term they would run it as a grocery store and not just pay rent
and leave it empty
- there is an implied term that a party will act in good faith to co-operate in carrying out a contract (though
not in contract negotiations) e.g. seller of export business had implied term to assist buyer in the license
transfer
5) Exemption, disclaimer and limitation clauses often cos. have a clause that say if there is a breach of
contract it is not liable, or it limits their liability to a small amount these clauses can be fair if there is
equal bargaining power and both sides understand and agree to allocate the risk that way - but that is often
not the case especially if it is a contract between a company and an individual consumer
Exemption or disclaimer clause company says I am not liable for anything
Courts will enforce the clause if its brought to the persons attention
Limitation clause company says I limit my liability to $x (a small amount)
- Whether the clause works or not it is hard to predict, it can go either way
p. 222 Trigg a company and an individual consumer a shipping co. limited its liability to a small amt.
($940) when the individuals cars were shipped cars then badly damaged ($54,082) by shipping co. and it
only wanted to pay $940 - but the clause had to be drawn to the persons attention and the co. had not, (and
there was misrepresentation by the co.s agent) so the limitation clause did not work and co. was fully liable
-p.223 Solway moving co. limited its liability to 60 cents/lb. ($7,000), but since co. had left a trailer on the
street with no surveillance so such a serious breach, movers were fully liable for loss.
p.223 - Fraser Jewelers - 2 companies - a security co. had a clause that limited its liability to $890 to the
jewelry store security co. was late calling the police and thieves stole $50,000
limitation clause worked and all security co. paid was $890 - court felt its a fair result as the cos. had
agreed to this and the security co. isnt a cheap form of insurance for the jeweler and jeweler read or should
have read the contract (equal bargaining power, persons attention is assured)
- but sometimes courts do not want disclaimers to work, (even though they have followed the rules) - so it if
it a really bad breach, the court may say it is a fundamental breach - a huge breach that goes to the heart of
the deal it destroys the entire contract including the disclaimer, so the injured party can sue for all its losses
- e.g.p.224 Plas-Tex Dow sold resin for plastic pipes that carried natural gas, and Dow knew the resin
would fail and the pipes would crack and leak & endanger the public, but relied on its disclaimer clause ct.
said it was a fundamental breach and would not let it use on the clause ($3 million damages)
- p. 225 in Tercon 2010 SCC tried to end the use of fundamental breach because it had caused great
uncertainty instead the SCC said 3 factors should be considered: a) does the exclusion clause apply to the
specific situation b) was it unconscionable when made (due to unequal bargaining power) c) are there public
policy reasons not to enforce it (such as fraud or criminal behavior)
6) Liquidated Damages - contracts sometimes have a predetermined and set amount for damages if a breach
occurs this is legal if it is a fair genuine pre-estimate of damages
4 types of liquidated damages
a) Penalty - if the court feels the pre-set amount is too big and unfair, court calls it a penalty and that amount
is not paid, but a new fair amount will be set by the court

b) Cancellation Charges - they can be put into a contract and court will enforce them, but if it is too much
and unfair, the court will call it a penalty and then the cancellation charge is void and court sets a fair amount
3
Ch.
c) Deposit - is money paid at the beginning of the contract as a sign of good faith the contract can state
what happens to the deposit if the buyer breaches, but if nothing is stated, common law rules apply and the
seller keeps the deposit, but seller cant sue for any other losses (except in real estate deals they can also sue
for extra losses) - A wants to buy Bs car and pays $500 deposit - A changes mind and breaks the contract
the $500 is a deposit so B keeps it- but B cant sue for other losses no matter what the car resells for
d) Down Payment - is considered part of the purchase price and the buyer who breaks the deal doesnt
necessarily lose all their money seller has to refund the down payment minus any losses they have
Ex: A agrees to buy Bs car for $5,000 and A makes a $500 down payment A changes mind and wants out
of the deal since its a down payment B must return the $500 to A minus any losses or expenses B had
- so if B resells the car to someone else for $5,000 or more A gets their full down payment back
- if B resells the car for $4,100 then B keeps the down payment and can sue A for an extra $400
- Note: if a deposit or down payment is considered to be too big, it is a penalty, and court sets a fair amount
-Note: if the seller breaches, buyer must mitigate (buy a replacement) & sue for a refund & other damages
Interest Rates it is illegal to charge an interest rate over 60% - all interest rates must be stated as annual
rates or the maximum rate that can be charged is 5% per year
- beware of Pay Day loan cos. that charge horribly high rates (some over 1,000%) more laws are needed to
regulate them 546% interest is legal in Ontario for pay day loans
7) Venue Clause -(or forum selection clause) a venue clause in a contract states in which place a trial
would occur if there is a contract dispute a governing law clause just means what laws apply but it can
still be tried in a foreign jurisdiction
p.232 Z.I.Pompey contract said Belgium law & court damage done in Canada & witnesses in Canada &
U.S. but SCC said case had to be held in Belgium as contract stated - no strong cause to hear it in Can.
-p.232 Dell Computer wrong sale price on website, but had to be heard in the forum stated on the online
contract
- Lowen Groupin 1996 Canadian funeral co. sued in U.S. and crazy Mississippi jury awarded $675 million
and it settled for $242 million, but if contract had stated disputes could only be tried in Canada it would have
been about an $8-10 million case
8) Privity and Assignment of a contract - the privity rule is an old strict rule that stated that only the parties
who made the contract can enforce the contract
this caused a problem if a person was a beneficiary under an insurance policy or will or trust and they
were not paid the money they were owed they couldnt sue as they didnt make the contract but the court
made exceptions to the privity rule so they could sue if they were not paid
- SCC also allows consumers an exception to privity rule to sue manufacturers for price fixing even though
no contract with them, several class actions have cost the cos. millions
-an assignment of a contract is an exception to the privity rule also in an assignment the creditor in a
contract assigns (or transfers) their legal rights to a third party the debtor must be told but their consent is
not needed - creditor transfers its benefits to a third party
- Leons furniture sells furniture to Ben and Ben is paying over time $110 per month for 4 years Leons
often assigns (sells) the contract with Ben over to a third party finance company C - Ben must be told of the
assignment, but Bens permission is not needed Ben then has to pay the finance company C
- Ben (the debtor) CANNOT assign his duty to pay over to a third party though - a new contract (a
novation) would have to be created and it can only be done if the creditor C consents to do it
only benefits can be assigned, duties cannot be assigned

CHAPTER 7

7 Contract Defects and Breach of Contract

Weir/Smyth 6th

- Courts do not like to let parties out of contracts but they will in certain circumstances
1) Misrepresentation - a LIE about a major term that induced the contract - 3 types of misrepresentation:
a) Innocent misrepresentation - honestly thought it was the truth, contract is void, money refunded, no
other damages e.g. sold mums wedding ring and honestly believed it was a diamond
b) Negligent misrepresentation - careless lie (didnt really know), contract ends, damages awarded e.g. nice
ring in a fancy box so thought it was a diamond but never bothered to find out for sure
- p.247 Cognos, p.248 Ault people told they could quit and transfer their pensions but it was not true - the
govn. and pension advisors were liable for negligent misrep. p. 251 Oz Optics co. told it was the only
competitor and this was a negligent misrep.
c) Fraudulent misrepresentation - intentional lie, contracts rescinded (ends), money refunded and special
and punitive damages, tort of deceit, possible criminal fraud charges e.g. said its a diamond, knew its glass
-p. 249 Schoff woman lied to insurance co. said no previous accidents and no children driving her cars so
she had no insurance coverage when son had an accident in her car
-often you sue for negligent not fraudulent misrep. as its hard to prove fraudulent and if you lose you may
have to pay some of the defendants legal fees e.g. p. 252 Pizza Pizza won $2.7 million for negligence but
had claimed fraud too and couldnt prove it so had to pay $500,000 in legal fees for defendant
-silence is NOT misrepresentation so caveat emptor - buyer beware seller does not have to reveal info.
unless buyer asks, so buyer should ask lots of questions, the sellers silence is not a misrepresentation
- there is only a duty on the seller in real estate deals to reveal latent defects & health hazards (toxic land or
toxic insulation) -p.249 Krawchuk seller didnt disclose major structural defects
- people when making insurance contracts must disclose all important info. even if not asked for the info.
-p. 250 Dofasco co. officers misled bank about the steel co.s financial situation & withheld info. so
personally liable for negligent misrep.
2) Mistake misunderstanding about the subject matter hard to define precisely though
- in most mistakes you do not get out of the contract, the court says too bad stupid you are stuck with it
- some mistakes are due to typing or clerical errors and if it is a huge, obvious error then you can ask the
court for a rectification order and the court will rectify or correct the mistake. e.g. A agrees to buy Bs boat
for $200,000, contract says $20,000 B asks court to rectify, court will change it and add the missing zero
- lot sold was 100 X 200 and when typed it said 10 X 200 the contract was rectified to 100
-p. 257 Ron Engineering - $750,000 mistake not rectified as not obvious miscalculation on $2,748,000 bid
-p. 257 McLean court rectified a farm sale price from $222,444 to be $337,444
-in other cases where there is a common mistake the court often feels the contract should be enforced and a
party cant get out of the deal because they are stupid and didnt read or research it, they made a careless
mistake so too bad
- A agrees to sell B a chair for $100, but before B takes delivery A is told it is really worth $10,000 A can
not get out of the deal with B for $100
- if it is a mistake made by one person, such as they didnt read the contract properly and didnt realize what
they had to pay the courts rarely let them out of the contract for this unilateral mistake - in Lee he had not
asked if the zoning still allowed that type of business but contract valid so read contract carefully
- p. 259 AMJ Campbell comma in the wrong place (freight, rebates) and it cost them an extra $1 million
- if you can prove the other side knew of the mistake and tried to take advantage of you then the contract
may be void, but it is often very difficult to prove e.g. p. 259 Sylvan Lake case

2
Ch. 7
-Errors and Omission clause - some contracts have an E&O clause that says that if I make an error or
mistake or omission I can get out of the contract later because I made a mistake the E&O clause would not
be valid in court, but cos. put them in hoping people will believe it works and co. can get out of the deal
3) Duress there are 2 types: a) threats of physical violence or blackmail (revealing secrets) or threatening
criminal charges that are made to force one party into contract are duress and make the contract void
-p. 260 Byle son threatened to kill brother unless parents gave him land, transfer void due to duress
b) Economic duress - one party A knows the other party B is in a desperate financial situation, so A forces B
to change the contract term to Bs disadvantage p. 261 NAV Canada- Fredericton had no other practical
alternative except to agree to pay for a navigation system or its airport would be delayed ct. ruled it didnt
have to pay though as it was economic duress
Ex: A owes B $10,000 B almost bankrupt A says take $ 9,000 and say debt is paid or I wont pay you and
can sue and it will take forever to get to court and B is desperate so B accepts the $9,000
4) Undue (unfair)Influence - occurs when one weaker party A trusts the strong party B, and B unfairly
influences A to do something that will hurt A - it can be actual or presumed undue influence
e.g.: a little old lady told to leave her money in her will to her lawyer
-courts will presume there is undue influence in some relationships - husband/wife (if you love me please
guarantee my loan) e.g. husband wants wife to guarantee his loan - wife needs ILA (Independent Legal
Advice) to prove there was no undue influence sometimes an exception can be made though- p. 264 BMO
v. Courtney wife had guaranteed 3 loans her husband got and when he couldnt repay and BMO wanted her
to pay - she refused as she had no ILA ct. ruled she had the intellect and ability to understand so no
ILA needed, so she had to pay
5) Unconscionable Transaction if court thinks that a contract is so grossly unfair because of unequal
bargaining power, one much stronger side quickly took advantage of a poor, dumb desperate person and
enforcing this contract would shock the conscience of the court so it is void as an unconscionable transaction
e.g. p. 265 Morrison and Burkhardt cases and p.266 Lydian Properties grossly unfair financing agreement
was unconscionable as it deprived woman of her house
6) Non est factum it is not my deed - if a person is illiterate or the contract was in a foreign language so
they did not understand what they signed, then the contract is void due to non est factum- e.g. p.267 Judson
father couldnt really read and thought he had signed something else, so it was void for non est factum
7) Frustration - occurs when outside events that are beyond the control of the parties makes it impossible to
complete the deal the contract is void. e.g. A agrees to sell B a boat but boat gets stolen or destroyed in a
storm before delivery, or A cant paint Bs house as A gets sick or hurt, or the basis for the event is cancelled
(e.g. security guards hired but concert is cancelled when singer is sick)- contract void & money is returned
-p. 269 KBK contract for sale of land to build condo, but before deal closed, land was rezoned and only a
building 80% smaller would be allowed ct. ruled contract was frustrated so deposit had to be returned

Breach of Contract occurs because a party refuses to perform the contract or there is incomplete
or improper performance of the contract
-most common types of breach are; buyer does not pay, or seller is late or delivers wrong amount, or the
goods not what was ordered or goods are of bad quality

3
Ch. 7
2 types of Breach:
a) Minor breach (breach of warranty)- a minor term is not met injured party must continue the contract
and cant get out of the deal, but they can sue for damages
b) Major breach - (breach of condition) a major term of the contract is not fulfilled the injured party has
2 options (1) they can end the contract, return goods, ask for a refund and sue for other damages
OR (2) they can accept the major breach, and keep the contract going but still sue for damages but
accepting the major breach turns it into a minor breach
Ex: A orders 100 computers from B, but B only delivers 60, A can reject the 60 OR A can accept 60 and then
if A buys 40 from C, if C charges $1,000 more for 40 than Bs price , A can sue B for the extra $1,000
- Time is not a major term unless the contract says it is
-Anticipatory breach one party tells the other before the completion date that they will not perform the
contract so they can treat it is a breach and sue at that time, or else wait until the completion date and
perform their obligations and then sue
Remedies for breach of contract:
1)Monetary damages - award injured party with money to put them in same position as if deal was
completed properly you are only liable for damages that are reasonably foreseeable
- p. 271 Hadley v. Baxendale 1854 co. took 1 month to deliver a part and it shouldve taken 3 days, but
delivery co. not liable for 1 month lost profits as it wasnt told whole factory was shut waiting on the part
Mitigation there is a duty on the injured part to reduce their losses and if you dont, the court can deduct
money you must take reasonable steps to minimize your losses e.g. fired worker must look for a new job
that is appropriate for their skills
Types of monetary damages:
a) pecuniary damages - financial losses up until the time of the trial and future financial losses
b) non-pecuniary damages for pain and suffering, loss of enjoyment of life, reduced life expectancy (a
maximum limit was set in 1978 and now is up to about $380,000) not common in breach of contract cases
c) aggravated damages for mental stress are rare, but can occur in nasty job firing or horrible vacations,
but you need medical proof
d) punitive damages to punish very intentionally bad behaviour and to deter others from this behaviour
p.274 Whitten v. Pilot Insurance SCC 2002- $1 million punitive when insurance co. would not pay when fire
destroyed the house
e) nominal damages no real financial losses but a small (nominal) amount is awarded to recognize your
legal rights were violated
Non monetary Remedies:
2) Order for specific performance - court says perform the contract ONLY done if it is a contract for
the sale of something unique. Ex: real estate or rare antique, personal service contracts are not forced to
be performed though
3) Injunction a STOP order Ex: stop competing, stop selling fake goods, stop stealing clients
4) Mareva Injunction - stop taking money out of the jurisdiction e.g. freeze bank accounts
5) Anton Piller order - surprise search warrant to search defendants property e.g. search for stolen info
and money
6) An Accounting - defendant must give books, records, information to an expert 3rd party for
evaluation of profits made or money stolen
7) Rectification Order - fix huge clerical errors when there is a very big obvious mistake

CHAPTER 8

Special Business Contracts & Consumer Protection

Weir/Smyth 6th

Bailments giving up temporary possession of your goods for a reason (e.g. repair, delivery, storage)
-bailor owner of the goods
- bailee keeper of goods for a purpose who then returns or delivers the goods as the bailor instructs
- warehouse, hotels, repair shops, transportation companies are all common bailment situations
- duty on the bailee to take reasonable care of the goods when they have them
- p.292 Hogarth warehouse had no fire protection so liable when goods damaged in big fire
-p. 292 Ferguson (dog kennel), Reyes (car repair), Foord (airline), all cases of bailments & damages
occurring
-bailees often have limitation or disclaimer clauses limiting their liability and they work especially for
storage and transportation cos. the co. must draw it to your attention and then it will probably work
- trans. cos. use a bill of lading as their receipt and customer should sign it for the limitation clause to work
but courts will still let it work if not signed as in p.294 CPR v. Jacob, Mitsubishi v. CN cases
- hotels allowed to limit their liability by law to $50 if goods stolen from your room
Lien Right some bailees (car repair, storage cos., trans. cos.) who dont get paid have a lien right so they
can sell the bailors property to get their money after 10 days notice is given
if sold any extra money goes back to the bailor, bailee only keeps $ he is owed - bailee can refuse to give
back goods if you dont pay if you have taken the goods away and hadnt paid some bailees (car repairs)
can even go and seize the goods so long as goods not locked up and force is not required to get them must
have proof in writing there was a debt to do this though p.296 Dean Capital valid lien on car for repair
Sale of Goods Act - Ontario law (every province has one)
- applies to the sale of goods, NOT services or real estate or intangible property (stocks, patents)
- p. 272 ter Neuzen artifical insemination with HIV sperm is a service so this law does not apply
Sale of Goods Act puts 5 Implied Terms into contracts: There is an implied term :
1) that the seller had the legal right to sell the goods, they were the owner and the goods are
free from any claims (loans, mortgages, liens)
2) that goods sold will match the sample shown or the description given in a catalogue or
online
3) that the goods will be merchantable (low/adequate level) for a short period of time
p. 306 Muskoka Fuels fuel storage tank leaked after 22 mo. not merchantable
4) that goods will work for a specific purpose, if seller had expertise and buyer asked
p. 307 Rov v. 2G Robotics scanner was fit for the purpose
5) that the seller cant use a disclaimer clause to avoid these first 4 implied terms
- p. 307 Hunter Engineering in Alberta you can use a disclaimer and the co. that did
avoided liability for poor gear boxes, other co. with no disclaimer liable for its bad ones

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Chapter 8

- Sale of Goods Act sets out the buyers and sellers rights if there is a breach (basic contract law)
Buyers rights: major breach - get out of the deal and sue for damages or accept goods and sue also
Minor breach - keep goods, sue for damages
Sellers rights: sue for non payment, keep a deposit, keep goods till fully paid, reclaim goods in transit if
not paid for previous shipments and resell goods if not paid
Sale of Goods Act states when legal title passes from seller to buyer if contract the contract doesnt state it:
- if goods need a repair or alteration, or have to be separated from a larger lot, the title passes when this
work is done and the buyer is told it is ready
Consumer Protection Legislation many different laws in different provinces to protect individuals from
bad actions by companies not just the Sale of Goods Act p. 314- 315 lists many of the different protections
for certain transactions - e.g. repair estimates must be within 10% of final price, full disclosure of credit
terms
- if goods 30 days late you can cancel the contract
-cooling off periods for different contracts - 10 days for direct sales, time share agreements, new condos,
personal development contracts (fitness, modelling, dance lessons), 20 days door-to-door water heater sales
or rentals, 2 days pay day loan
-protection from unfair business practices such as false or misleading ads, unconscionable transactions
- fines of up to $250,000 and up to 2 years jail if break some of these laws
COMPETITION ACT
- federal law to maintain and encourage competition, create fair opportunities to help small and medium
sized businesses and give consumers competitive prices and products
- divided into 3 categories:
1) Criminal Matters- conspiracy offences, price fixing, market allocation, bid rigging and false advertising
with penalties of up to 14 years jail, $25 million fines, criminal burden of proof used e.g. p. 316 Drug cos.
fixed world prices of certain vitamins fined over $1 billion, LCD screens world price fixing scheme,
chocolate cos. in Canada settled for $23.3 million for price fixing & faced fines
-immunity can be granted if you are first to confess to illegal actions
2) Civil Reviewable Matters offences such as false/misleading advertising, price maintenance, bait and
switch, refusal to deal, tied selling, exclusive dealing, mergers with penalties of AMPs (administrative
monetary penalty) up to $10 million and it uses the civil burden of proof
3) Dual Track Matters Director of Competition can decide with track to use for certain offences such as
false/misleading advertising usually go civil reviewable as easier to get a conviction
Criminal Matters:
Conspiracy- it is illegal for cos. to conspire to fix prices, allocate sales or markets, fix the supply of a product
e.g. p. 319 furniture foam, airline cargo surcharges, refrigerator compressors,
Bid-rigging 2 or more fix their bids on contracts e.g. flour cos., car parts
False or Misleading advertising e.g. false sale prices, not wholesale or bankruptcy sale price, double
ticketing (2 prices on 1 item), bait & switch (not enough of a sale item but tries to get you to purchase a
costlier item) e.g p. 321 Richard v. Time, Bell, Yellow Pages cases, falsely inflate the original price to make
it look like a sale price p. 324 Forzani, Suzy Shier, Go Travel, p. 325 Sears case
- if a price scanner has wrong price it is free if under $10 or you get $10 off if costlier but it is a voluntary
policy, most major retailers adopted it

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Ch. 8

Civil Reviewable Matters:

- false advertising falls under this section as well
-Abuse of Dominant Position includes several reviewable practices such as: Price Maintenance
(manufacturer tells retailer to sell at certain price or it wont supply them) -p. 327 VISA and MasterCard case
- Predatory pricing drop price to put a competitor out of business then raise it once gone p. 327 Valium
- Exclusive Dealing supplier tells buyer they can only buy from them NutraSweet case
- Tied Selling supplier ties the supply of one product to the purchase of another Microsoft
- Market Restriction supplier restricts who its customer can re-sell its products to or in what area
- Refusal to deal when supplier refuses to supply even though buyer meets terms & it hurts competition
- Mergers- the Competition Bureau can review proposed mergers and prevent them or require changes so that
competition is not substantially lessened e.g. Loblaws & Shoppers Drug Mart
PIPEDA - Personal Info Protection & Electronic Documents Act
- law came in Jan.1, 2004 in Ont. - the purpose of the law is to protect peoples confidential information
- companies collect a lot of personal information on their customers and they cannot give or sell that
information without the customers consent nor can they accidentally leak it out
- if they do the company could be fined up to $100,000 plus damages e.g . Winners in 2007 it had bad
security and hackers got info. on 45.7 million customers and had to pay millions to settle class actions
-p. 330 Chitrakar and Nammo cases cos. liable for unauthorized or inaccurate credit check info.
- social networking sites like Facebook have major privacy concerns Canadas privacy commissioner
recently got Facebook to change some of its practices but beware most of the info. posted on Facebook is
public not private there is poor privacy protection and many get into it that you may not want
e.g. criminals, employers and insurance cos. often get into your site and Facebook is not liable
Canadas Anti-Spam Legislation (CASL)
-on July 1 2014 Canadas anti-spam law (CASL) came into effect it applies to any person or company that
sends a CEM (Commercial Electronic Message) via email, text, (cell) phone or social network site for
commercial marketing purposes without the consent of the recipient its target is mass spam junk emails as
a form of electronic marketing, but it also can include a personal email to another to encourage participation
in a commercial activity if there is an existing bus. relationship consent is presumed there must be clear
contact information and an opt out or unsubscribe option in the sent messages
- if these messages are sent without consent the penalties are up to $1,000,000 fine for a person and $10
million for a company if CASL is violated