CONTRACTS OUTLINE

IS THERE A CONTRACT?: OFFER AND ACCEPTANCE

CONTRACT = OFFER + ACCEPTANCE OF TERMS TO BE BOUND LEGALLY + CERTAINTY OF TERMS + CONSIDERATION + ABSENCE OF VITIATING FACTORS

FORMATION OF AGREEMENT: Did the actions of the parties exhibit a mutual intention to create legally enforceable promises?
 Look at language used, conduct (offer made specifically or generally?), surrounding context and circumstances (pre-existing relationship, like
in Canadian Dyers?)

1. OFFER?
 Mere quotation of price does not constitute an offer to sell, but if the language used makes specific reference to the deal at hand, it
could suggest an intention to be an offer (Canadian Dyers)
 Display of goods does not constitute an offer (Boots Cash Chemists)
 The nature or extravagance of a promise is no reason why one should not be bound by it (Carbolic Smoke Ball)

1A) COMMUNICATION OF OFFER – Evidence of intention to create legal obligation requires communication of offer.
 Knowledge of offer does not, on its own, constitute communication. (Blair v Western)

UNILATERAL CONTRACT: One accepted without corresponding promise, but by performing the requested action.

 If an offer is made to be bound, then it is a contract the moment the offeree fulfils the condition. The mode of acceptance is dictated by the
offer.
 If someone making an offer dispenses with notice to himself, then the performance of the condition of acceptance is a sufficient acceptance
without notification. (Carbolic Smoke Ball)
 Accepts by performing condition strictly in accordance with terms prescribed in offer, unless this is waived by the offeror

2. ACCEPTANCE?
 Motive is irrelevant in accepting offer, but to accept it you must have an awareness of the offer. Knowledge may be presumed where
the offer is widely publicized and this presumption is not rebutted on the facts. (Williams v Carwadine)
 One cannot accept an offer one doesn’t know exists, or that one has forgotten exists. You need to have an expectation or reliance
interest in the reward in order for that reward to be recoverable. (R v Clarke)
 The making of a counter offer is a rejection of the original offer. However, an offer can be renewed after a counter offer, through
ambiguous language. (Livingstone v Evans – Evans referred to original price in his reply, stating ‘cannot reduce price’, thus renewing the
offer).
 But, inquiry to modify contract won’t terminate offer if it’s clear the offeree is still open to accepting the offer either way.
 Contracts formed electronically can be valid contracts. HOWEVER, an electronic transaction between an individual and another person’s
electronic agent is not enforceable by the other person if:
o The individual makes a material error in electronic information or in an electronic document used in the transaction;
o The electronic agent does not give the individual the opportunity to prevent or correct the error;
o On becoming aware of the error, the individual promptly notifies the other person; and
o In a case where consideration is received as a result of the error, the individual returns or destroys the consideration in
accordance with instructions or according to reason. (Ontario Electronic Commerce Act)
 You can’t agree to terms or parts of contracts of which you are unaware. However, clickwrap licenses constitute a reasonable offer and
confirming such a license constitutes acceptance. (ProCD – Zeidenberg accepted through use, in the same way there are sometimes
terms on plane tickets or concert tickets – there are fine terms which you can accept or reject by actually using the ticket)

2 A) ACCEPTANCE BY SILENCE OR CONDUCT – For a contract to be formed, there must be notification of acceptance
  Acceptance cannot be assumed if there is no notification of acceptance, or implied acceptance through action present. You cannot
impose obligations on an unknowing or unwilling party. (Felthouse v Bindley)
 Silence is not an acceptance when it comes to unsolicited services, like opt-out cable channels. Even if you invite acceptance by silence,
it will not create a contract. (Felthouse v Bindley)
 Silence CAN imply acceptance when combined with conduct (St John Tug Boat)

Conduct, unaccompanied by verbal or written undertaking, can constitute an acceptance of an offer so as to bind the acceptor to the fulfilment of
the contract. (St John Tug Boat)

1. The intention which the law will attribute the man is always that which his conduct bears when reasonably construed, and not what was
present in his own mind.
2. If A allows B to do work for him under such circumstances that no reasonable man would expect B supposed to do the work for nothing, A
will be liable to pay for it.
3. The doing of the work is the offer, the permission to do it, or the acquiescence in its being done, constitutes the acceptance.

2 B) CORRECT MODE OF ACCEPTANCE? – Contract is formed when acceptance is COMMUNICATED to the offeror. BUT, the offeror dictates
the mode of acceptance.
 The offeree must follow the terms of the offeror, to accept the offer (time/place/manner) (Eliason v Henshaw)

POSTAL ACCEPTANCE RULE: The offer is accepted when acceptance is placed in the mail (posted), not when the offeror receives the acceptance.
(Household Fire & Carriage Accident Insurance v Grant)
 Can IMPLY you agreed the acceptance would be sent by mail, party because that’s how you sent them the offer.
 Puts the onus on the offeror because they initiated the interaction. The offeror is entering into this with the intention to be bound, they
were the ones who dictated the mode of acceptance by putting in the mail. He put his trust in the mail to communicate his offer, so he must
know that he should also trust the mail to get his acceptance back to him. Construes the post office as an agent of the offeror. Once you
place acceptance in the hands of an offeror’s agent, you’re good.
DOES NOT APPLY when the express terms of the offer specify that the acceptance must reach the offeror (Holwell Securities v Hughes)
 Rule does not apply if, having regard to all the circumstances, including the nature of the subject matter under consideration, the
negotiating parties cannot have intended that there should be a binding agreement until the party accepting an offer or exercising an option
had in fact communicated the acceptance or exercise to the other.

2 C) INSTANTANEOUS METHODS OF COMMUNICATION

 Postal acceptance rule is not applicable to instantaneous methods of communicated. Once the telex/email comes through and is
timestamped by the receiver’s server, acceptance is received and it is the responsibility of the receiver to view it promptly.
(Brinkibon, Electronics Commerce Act)
 Contract is formed when acceptance is communicated to offeror – so it is also formed where acceptance is communicated to offeror.
(Brinkibon)
 Forum selection clauses are similar to arbitration agreements and are valid parts of the contracts. They can prevent parties from
bringing suits under the laws of other countries. (Rudder v Microsoft Corp) UNLESS there is legislation that permits otherwise (Seidel v
TELUS)

3. TERMINATION OF OFFER – Offer can be revoked at any time before acceptance. Offeror is not obliged to keep the offer open, even if the
offer states it will remain open for a specified time period. However, in order for the revocation to be effective, you should communicate it.
 An offeror is free to withdraw their offer at any point until the offeree has accepted it, so long as the offeree has not provided any
sort of consideration. (Dickinson v Dodds)
 Revocation must be communicated to the offeree so that the offeree has knowledge of the revocation. (Byrne v Van Tienhoven)
 An offeree must have knowledge of a revocation, but explicit communication is not required (Dickinson v Dodds)
 Mere posting of a revocation is not sufficient communication. No postal rule applies. (Byrne v Van Tienhoven)
 POSSIBLE EXCEPTION - UNILATERAL CONTRACT: An offeror can only revoke a unilateral contract if the offeree did not live up to their
side of the contract. Once performance has started, the offeror cannot revoke the offer. (Errington v Errington and Woods – couple
had continued to make payments so were in the process of fulfilling unilateral condition)

3 A) LAPSE – Viewed as there is an implied term of offer that is deemed revoked by the offeror after a reasonable time, or failure to accept
within reasonable time deemed rejection by offeree, offer thereby terminated.
 The reasonable time to accept an offer can be determined from the conduct and language of the two parties, as well as the nature
of the goods and other reasonable indications. (Barrick v Clarke)
 Ex. Farm lands are not subject to sudden or frequent changes, fluctuations in price so the reasonable time might be longer.
 Statements made outside of a contract have no bearing in deciding whether there was an agreement.

OFFER AND ACCEPTANCE IN THE LAW OF TENDERING

CONTRACT A AND CONTRACT B

The information for tenderers is an OFFER, not an invitation to treat. It’s an offer that’s accepted on submission of the bid.

CONTRACT A is the contract that arises upon the submission of a tender between the contractor and the owner whereby the tenderer cannot withdraw
their tender over a certain period of time. Contract A binds the contractor to enter into Contract B. In contrast to the unilateral contract analysis of
Contract A in R v Ron Engineering, subsequent cases have found that Contract A is a bilateral contract involving immediate contractual obligations on
both the bidder and the owner. By this mechanism, the rules set out in the invitation to tender can also become contractual obligations which bind the
owner.

However, owners can limit their obligations though use of a privilege clause, which essentially states that the owner may not accept the lowest tender
received and need not accept any tender for the project.

CONTRACT B is formed upon the acceptance of the tender. Contract A comes to an end once Contract B is formed. (Double N Earthmovers)

 Bids at once become irrevocable if filed in conformity with the terms and conditions under which the call for tenders was made, if such terms
provide. (R v Ron Engineering)
 A privilege clause is only compatible with accepting, compliance bids. In the absence of a privilege clause, it is most likely you are bound to
accept the lowest offer. (MJB Enterprises)
 Contract A can include implied terms - A term to be fair and consistent in the assessment of the tender bids is justified based on the presumed
intentions of the parties. Such an implication is necessary to give business efficacy to the tendering process. (Martel Building Ltd v R)

DID DEFENDANT AGREE TO THIS CONTRACT? : CERTAINTY OF TERMS

What were the objective intentions of the parties? Did they INTEND to make a contract, or enter into something less than that, and subsequently,
did they succeed? Court must be careful it is not imposing a contract ON the parties. Must look at the objective intention of the parties to create
contractual relations.

IS THE CONTRACT TOO VAGUE?

 In business relationships, the courts will make every effort to apply definite meaning to vague terms in a contract so as not to render it
unenforceable; this is especially true if it is obvious that the parties intended to enter into a binding relationship, or if there was part
performance. (R v CAE Industries)
 The court will find meaning in terms like ‘assurances, can guarantee’ and ‘best efforts’. (R v CAE Industries)
 Lack of precision in language used can imply that a party does not intend a letter to have contractual effect. (VK Mason Construction Ltd v
Bank of NS)

IS THE CONTRACT INCOMPLETE? – An agreement to agree is not a contract.

 Critical terms cannot be left undetermined – you cannot leave all important terms of the contract to arbitration. (May v Butcher)
 What can be made certain, will be made certain – if there is an objective standard by which courts can infer a price, etc. then the agreement
will be held to be complete. Look at incomplete terms in the context of the whole contract. If “machinery for fixing” essential term is there,
courts will find a contract. (Hillas & Co v Arcos – it was possible to infer price from a price list that was published annually, contract was thus
not uncertain)
 An implied term of reasonable price and reasonable quality will save a contract that is for want of some objective standard vis a vis price.
(Foley v Classique Coaches Ltd)
 In practice, people often wish to create binding agreements without fixing in advance all of the details of the performance, including material
aspects such as price to be paid. One way to allow this is to incorporate a reference to an objective standard, such as a ‘reasonable price’ or
‘market price’. Another is the use of external valuers or arbitrators, who are empowered to determine price or other matters upon which the
parties are unable to reach agreement at the time contemplated.
 And, “every effort should be made by a Court to find meaning… difficulties in interpretation do not make a clause bad as not being capable of
interpretation, so long as definite meaning can properly be extracted. (Marquest Industries)
 An oral contract MAY be a binding contract if both parties orally agree on all of the ESSENTIAL provisions to be incorporated in a formal
document with the intention that their agreement shall thereupon become binding. (Bawitko)

AGREEMENTS TO NEGOTIATE IN GOOD FAITH – IS IT A VALID AGREEMENT?

 A contract to negotiate is too uncertain to have binding force.
 An agreement to negotiate in good faith can be unenforceable for uncertainty. (Wellington City Council)
o For there to be an enforceable contract, the parties must have reached consensus on all essential terms, or at least upon objective
means of sufficient certainty by which those terms may be determined.
o Those objective means may be expressly agreed, or they may be implicit in what has been expressly agreed.
 Effect of requirement for mutual agreement has an implied term that the parties will negotiate in good faith with the tenant with the
objective of reaching an agreement on the market rental rate, and that agreement will not be unreasonably upheld. (Empress Towers Ltd
– there was an objective general market rate standard here, that allowed to courts to find the landlord was asking for unreasonable prices)
  Absent these specifications, however, there is no common law obligation to negotiate in good faith. It must be in the contract, either
expressly or impliedly. (Mannpar Enterprises – specifically could not imply a duty to negotiate in good faith here, because that would have
hindered the Crown’s ability to act on behalf of the Skyway Band)
 Good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the
various rules in common law. There is a common law duty which applies to all contracts to act honestly in the performance of contractual
obligations: Parties should not lie, and should act honestly. (Bhasin v Hrynew)
o Difference between duty to act honestly and duty of good faith is that duty to act honestly applies to all contracts, is an organizing
principle that underpins the duty of good faith.
o Organizing principle of good faith is not a freestanding rule, it is just manifested in certain specific legal doctrines, one of which is
the duty of honest performance.

Good faith, according to Black’s Law Dictionary, is ‘a state of mind consisting in:

1. Honesty in belief or purpose

2. Faithfulness to one’s duty or obligation
3. Observance of reasonable commercial standards of fair dealing in a given trade of business, or
4. Absence of intent to defraud or to seek unconscionable advantage.’

An agreement to negotiate in good faith is a contract to try to agree. A breach is a failure to try, not a failure to agree.

Where is there a duty of good faith performance? (Bhasin v Hrynew)

1. Where parties must cooperate in order to achieve the objects of the contract
2. Where one party exercises a discretionary power under the contract (in the absence of a reasonableness requirement, the option would be a
mere agreement and would thus be unenforceable. This means implication of the term is necessary to give business efficacy to the agreement).
3. Where one party seeks to evade contractual duties.

What classes of relationship call for a duty of good faith?

1. Employment context: The employer should not engage in conduct that is ‘unfair or is in bad faith by being, for example, untruthful, misleading or
unduly insensitive’ when dismissing an employee.
2. Insurers dealing with insured claims: The duty of good faith here is reciprocal: the insurer must not act in bad faith when dealing with a claim,
which is typically made by someone in a vulnerable situation and the insured must act in good faith by disclosing facts material to the insurance
policy.
3. Tendering context

DID PLAINTIFF GIVE CONSIDERATION FOR THIS CONTRACT?: CONSIDERATION

Consideration can be:

1. An act;
2. A forbearance (refraining from enforcing existing debt, right, or obligation)
3. A promise to act or forbear from action

which is given in exchange for the promise of another party.

- Must flow from the promise to the promisor.

- Consideration which flows to a third party is still valid consideration.
- Does not have to match up in terms of value, with the exception of when the courts are concerned about a power imbalance.

GIFTS AND BARGAINS

 For a pledge to be a contract, there must be consideration shown. A promise to subscribe to a charity is not enforceable in the absence of a
bargain. (Brantford General Hospital, Dalhousie)
 Unless the money was given for a specific purpose which can be seen as of some benefit to the promisor, like a request. (Dalhousie)
 Promises can be implied for business efficacy if something is closer to a bargain than a gift (Wood v Lucy, Lady Duff Gordon)

PAST CONSIDERATION
 Past consideration is not good consideration. (Eastwood v Kenyon – consideration for Sarah’s promise were acts done to raise her in the past)
  HOWEVER, a promise made after performance can be enforced, only if it was understood by the parties that there would be some kind of
reward, prior to performance. (Lampleigh v Brathwait, Earn v Kohut)

An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for that promise:

1. The act must have been done at the promisor’s request;

2. The parties must have understood that the act was to be remunerated either by a payment or the conferment of some other legal benefit
3. Payment, or conferment of the benefit must have been legally enforceable had it been promised in advance.

You must be able to connect the past consideration to the promise, and whatever was subsequently promised must be legally enforceable. (Pao On)

FORBEARANCE TO SUE
 A promise is not binding if the sole consideration for it is a forbearance to enforce a claim which is invalid and is either known by the party
forbearing to be invalid, or believed by him to be invalid. If, however, the validity of the claim is doubtful, forbearance to enforce it can be
good consideration. (DC v Arkin)
o Forbearer must not deliberately conceal from other party facts which, if known to the latter, would enable him to defeat the claim.
o Forbearer must show he seriously intended to pursue the claim.
 ‘If a man bona fide believes he has a fair chance of success, he has a reasonable ground for suing, and his forbearance to sue will constitute
good consideration.’ (Callisher v Bischoffen)
 Forbearance to breach a contract is not good consideration. (GFAA)

PRE-EXISTING LEGAL DUTY

Generally, if in exchange for a promise, the promisee agrees to perform, or actually performs, a public duty, there is no consideration. However, if it
can be shown the promisee provided something extra beyond the requirements of the public duty, this could constitute consideration.

Ex. Ward v Byham, a mother was already legally bound to care for a child, so it was argued she deserved no money from the father paying her to do so.
However, because she was also required to show the child was cared for and happy and had a choice to live with the mother, this amounted to the
consideration.

 Performance of a pre-existing legal duty is not good consideration (An agreement made onshore between captain and crewmates meant
that the crewmates had already undertaken to do all that they could under the emergencies of the voyage, so they had given no
consideration for the agreement) (Stilk v Myrick)
 Duty owed to a third party has been traditionally viewed as good consideration. (Ex. in Pao On the defendants got the promise that the
plaintiffs will actually follow through – they were already obligated to Fu Chip, but now they have a direct obligation to the shareholders for
the subsequent guarantee, because SOMETHING ELSE was gained – they made a double promise, to two different parties.
 The promise of a ‘good price’ is not good consideration because it is too vague. Performance of a pre-existing duty is not legally sufficient
consideration. (Gilbert Steel)
 HOWEVER a pre-existing legal duty to the promisor can be legally sufficient consideration if there is a practical benefit or obviating
detriment to the promisor (Williams v Roffey) that was not procured under economic duress or fraud. ONLY APPLIES in cases where the
existing obligation which is pre-prommised is to supply one with goods or services, not where it is an obligation to pay money. (Re
Selectmove Ltd)
 A post contractual modification, unsupported by consideration, MAY be enforceable so long as it is established that the variation was not
procured by economic duress. Must be an incremental change (GFAA v NAV Canada)

PROMISES TO ACCEPT LESS

 The payment of a smaller sum of money for a larger sum is not consideration, because paying less is not whole satisfaction. (Foakes v Beer)
 Even in a case where there may be a practical benefit to accepting a lesser amount in payment of a debt, this is not sufficient consideration to
find a binding contract. (Re Selectmove Ltd) (although it appears this was overruled in Robichaud, which differentiated F v B as a UK decision)
 If for money you give a negotiable security (like cheques or any other collateral), you’re paying in a different way. The security may be worth
more or less, it is of uncertain value. Giving of securities can constitute good consideration for a promise to forbear on action on a debt. (Foot
JUDICATURE ACT

(1) Part performance of an obligation either before or after a breach thereof shall be held to extinguish the obligation
a. When expressly accepted by a creditor in satisfaction, or
b. When rendered pursuant to an agreement for that purpose though without any new consideration.
 ‘rendered pursuant to’ means you’re DONE making the payments. So the judicature act doesn’t kick in until you’re finished payments.
 Mercantile Act says ‘rendered in pursuance OF’, more room for a court to say if you’re making those payments then maybe the court is more
likely to say that’s enforceable so long as the payment is being made.

MERCANTILE ACT

(16) Part performance of an obligation either before or after a breach thereof when expressly accepted by the creditor in satisfaction or rendered in
pursuance of an agreement for that purpose, though without any new consideration, shall be held to extinguish the obligation.
 v Rawlings - So long as the defendant continued to perform his obligations under the agreement, the respondent’s right to sue was
suspended)

PROMISSORY ESTOPPEL?
“If parties to a contract afterwards, by their own act enter upon a course of negotiations which has the effect of leading one of the parties to
suppose that the strict rights of the contract will not be enforced, or will be kept in suspense, or held in abeyance, and one party relies on what they
were led to believe, then it would be inequitable to allow the other party to act as though the promise did not exist.” – (Hughes v Metropolitan
Railway Company)

Three essential factors giving rise to an estoppel: (Canadian Superior Oil Ltd v Paddon Hughes Development Co)
1. A representation or conduct amounting to an intention to induce a course of conduct on the part of the person whom the representation is
made. (Intention is important – ask, did plaintiff intend to alter legal relations? (John Burrows) )
2. An act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made.
3. Detriment to such a person as a consequence of the act or omission.
WHERE CAN I USE THIS?
 Promissory estoppel is NOT a cause of action, but only a defense for a promise that does not have consideration. Promissory estoppel is a
waiver to an existing contractual right. It may be a part of the cause of action, but not the cause of action itself. (Combe v Combe)
 If one party has made a commitment to modify legal relations, and the other party relied on it, the initial party can’t revert to the initial legal
relations, even if there isn’t any consideration. However, the defendant can’t be sued on the promise, assurance or assertion as a cause of
action in itself – he can only be sued for some other cause, and the promise, assurance or assertion plays a supplementary role. (Combe v
Combe)
 Where all you have is a gratuitous promise, you can’t use promissory estoppel to enforce it. Promissory estoppel only applies where there has
been a modification to an existing legal relationship. IT CANNOT CREATE NEW RIGHTS WHERE THERE WERE NONE! (Combe v Combe)
 While estoppel can only be used as a shield, it can be used by either defendant or plaintiff. (Robichaud c Caisse Populaire)
 A necessary element for PE is the promisee’s assumption or expectation of a legal relationship. (MN v AT, was a romantic relationship so no
legal relations established.)

TEST FOR PROMISSORY ESTOPPEL:

STEP ONE – PROMISE IS INTENDED TO BE BINDING = INTENDED TO BE ACTED UPON/ALTER LEGAL RELATIONS?
 Distinguish between active conduct (suggests intention) and passive conduct (suggests no intention).
 A promise is binding as long as its terms apply and the person making the promise knew the promisee would act on that promise (Central
London Property Trust v High Trees)
 A NECESSARY ELEMENT OF PE IS THE PROMISEE’S ASSUMPTION OR EXPECTATION OF A LEGAL RELATIONSHIP! (MV v AT)
 A representation to the future cannot give rise to estoppel because a representation to the future must be embodied as a contract or be
nothing. Cannot use estoppel to create a legal obligation that isn’t otherwise binding. (High Trees)
 Must be an unequivocal representation that promisee does not intend to enforce their strict legal rights arising from the contract (Post-
Chaser)
 Promise/assurance that one would not collect payments sooner was not intended to alter legal relations – was just a friendly gesture and
should not have been interpreted as a reliable promise that you’d never sue for late payments. No promise, a mere indulgence. (John
Burrows v Subsurface Surveys Ltd)
 HOWEVER, you can GO BACK on a promise with good notice. (Saskatchewan River Bungalows)
 Generally, WAIVER occurs where one party to a contract takes steps which amount to foregoing reliance on some known right or defect in
the performance of the other party. It involves:
o Full knowledge of the deficiency/rights which might be relied upon;
o Unequivocal conscious intention to relinquish the right to rely on it.
 But, waiver can be retracted if reasonable notice is given to a party in whose favour it operates, and a notice requirement is not imposed
where reliance is not an issue. (SRB)

An agreement obtained by duress can never constitute true accord. Generally, though, you can accept lesser payment and then be blocked from suing
for the remainder. This is a substitute agreement, and substitute agreements require consideration to be binding at common law. Substitute
agreements may be acceptable in equity if:
1. It would be inequitable to force to debtor to pay more;
2. There was an agreement between the two parties that the new sum would settle the debt;
3. And this agreement was relied upon by the debtor.

A creditor is not bound by a settlement without consideration to accept less, and could the next day sue the debtor for the full amount. However, if a
creditor and a debtor enter on a course of negotiation which leads the debtor to think that, on the payment of the lesser sum, the creditor will not
enforce the payment of the balance, and acts in faith of that in paying the lesser sum which the creditor then accepts as satisfaction, then the creditor
will not be allowed to enforce payment of the balance where it would be inequitable to do so. However, the creditor is not bound unless there has
truly been an accord between them. (D&C Builders Ltd v Rees)

Where there is truly an accord, and where a debtor acts on that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the
creditor to then afterwards insist on the balance. (Collier v P&M J Wright (Holdings) Ltd
STEP TWO – PROMISE IS ACTUALLY ACTED UPON (*DETRIMENTAL* RELIANCE)?
 Ex. Defendants did not complete repairs because they thought their time period to do so was suspended because landlord had entered into
negotiations with them (Hughes v Metropolitan Railway Company)
 Ex. Promissory estoppel did not work because there was no reliance on the waiver (SRB)

STEP THREE: IT WOULD BE INEQUITABLE TO LET THE FIRST PARTY GO BACK ON ITS PROMISE OF WAIVER
 What attracts estoppel is inequity, not detriment, and where a debtor acts on an accord by paying the lesser sum and the creditor accepts it,
then it is inequitable for the creditor afterwards to insist on the balance. (Collier v P&M J Wright (Holdings) Ltd)
 Estoppel takes place only where equity demands. You don’t need to show detriment; you just need to show prejudice. You need to have
relied, but not necessarily to your detriment (although detriment will strengthen your PE claim). Ultimate question is whether it is equitable
to force their contractual legal rights. (Post-Chaser)
 There must be such action or inaction by the representee on the faith of his representation as will render it inequitable to permit the
representor to enforce his strict legal rights. It might be sufficient for that purpose that the representee had conducted his affairs on the
basis of that representation, and it is immaterial whether he had suffered any detriment while doing so (Post-Chaser)
 The failure to fulfil a voluntary promise does not amount to unconscionable conduct. The plaintiff must assume that particular legal
relationship existed between the plaintiff and defendant such that the defendant would not be free to withdraw from the legal
relationship. The defendant must have induced the plaintiff to adopt that assumption or expectation. (MN v AT)
o Ex. Not inequitable in Post-Chaser because of the short time period, wasn’t seen as inequitable.
o Not inequitable in D&C because of surrounding circumstances (she had forced them to accept less under duress, equity only
defends those with clean hands)

DID DEFENDANT TRULY CONSENT TO BE LEGALLY BOUND?: INTENTION TO CREATE LEGAL RELATIONS
Generally, the presumption is that when the general elements of contract are met, we don’t need to go on and ask if there is also an intention to create
legal relations. In most cases, this is presumed. However, in a family or social context, the opposite presumption applies. In that case, you need
evidence of intention to create legal relations.

FAMILY CONTEXT
 The law does not intervene in private relationships/marriage. An agreement between a married couple will not be considered contracts
where the parties did not intent they should be attended by legal consequences. (Balfour v Balfour)
 However, where courts are already separated, courts assume they bargain keenly. Separation agreements may be recognized by statute.
(Merrit v Merrit)

COMMERCIAL CONTEXT
 If parties put into place an agreement that their contracts are not legally binding, then they are not legally binding. Their intentions are clearly
expressed, and they are allowed to do that. (Rose and Frank Co v JR Compton and Bros Ltd – usually in business relations contracts are
intended to be legally binding, but here the agreement is clearly channeled towards friendship – so it does not bind)
 Letters of comfort are not legally binding (depending on the relevant factual background – if both companies know what letters of comfort
are and that they aren’t security) (Toronto Dominion Bank v Leigh Instruments Ltd)

MISTAKE
UNCONSCIONABIILTY
UNDUE INFLUENCE
DURESS

IS THERE ANOTHER REASON COURT SHOULD NOT ENFORCE?: FORMALITIES

PROMISES UNDER SEAL

 When you have a promise that is not given for consideration, a seal can make it binding. Nowadays, a seal is no longer a necessary condition
of enforceability, but it remains sufficient. The presence of a seal provides clear evidence that the promisor intended to create a legal
obligation; and the act of sealing a promise serves to encourage the promisor to carefully contemplate the legal consequences of his
actions.
 The words “signed, sealed, and delivered” are not enough to denote a seal; some form of physical seal must be present and acknowledged by
the signatory. (Royal Bank v Kiska)

WHAT TYPES OF AGREEMENTS MUST BE IN WRITING?

Set out by the Statute of Frauds:

1. Contracts to Charge an Executor or Administrator on a Special Promise to Answer Damages Out of His Own Estate - Contracts in this category
are subject to a writing requirement in Ontario.
2. Contracts Made upon Consideration of Marriage - Does not include exchanges of promises to marry; rather it covers contracts wherein a party
promises to settle property upon another in consideration of marriage. Repealed in ON!
3. Contracts to Answer for the Debt, Default or Miscarriage of Another Person - Refers to guarantees and not indemnities. An indemnity is an
undertaking to be liable regardless of whether another person be in default; a guarantee is an undertaking which is conditional on the default or
 non-performance of someone else. In other words, liability under an indemnity is primary or original whereas liability under a guarantee is
secondary. Often, and especially in consumer guarantees, no DIRECT benefit flows to the guarantor; rather, the consideration for the promise of
guarantee is either the granting of a loan to, or the forbearing to sue a third party. Because of this, and because guarantees are often given by
private individuals without the benefit of legal advice, a special cautionary device is useful. The requirement of writing serves that purpose.
4. Contracts Not to be Performed Within a Year - The limitation on contract actions is typically at least 2 years following breach, so even an action
on a contract to be performed in LESS than a year might be brought long after the contract was formed. But an action may be brought on a
contract not to be performed within a year, even very shortly after cases where it is repudiated very early on. Repealed in ON!
5. Contracts for the Sale or an Interest in Land - The Statute applies to any contract FOR the sale of lands or any interest in or concerning them.

Set out by the Sale of Goods Act:

 A contract for anything $50 or above is not enforceable without consideration or some not and memorandum in writing of the contract is
made and signed by the party to be charged or his agent on that behalf.
 In Ontario, contracts over a certain value that are partly are wholly executory when formed, and contracts made outside the supplier’s
ordinary place of business, must be in writing to be enforceable against the consumer.

Set out by the Ontario Consumer Protection Act

 Statute of Frauds
 Every future performance agreement shall be in writing, shall be delivered to the consumer and shall be made in accordance with the
prescribed requirements.

The effect of the Statute of Frauds is not to call the contract void – it just cannot be enforced by legal action. This is a distinction between formation
and enforceability. When it’s labelled unenforceable, then if any subsequent information comes to light you can change things up, whereas if it’s
declared void then you’re screwed if anything comes up later.

An unenforceable but valid contract may have legal significance in the following ways:
1. While a party to a non-conforming contract may not bring an action on it, they may rely on it in defence of a claim. Ex. if a purchaser pays a
deposit on an oral contract for the sale of land and then wrongfully refuses to close, the vendor can raise the contract in defence to an action
by the purchaser to recover the money paid.
2. The validity of an unenforceable contract means that evidence sufficient for a court of common law or equity to permit enforcement may
arise subsequent to the formation of the contract. At common law this evidence need only be a sufficient note or memorandum; in equity
this evidence must satisfy the doctrine of part performance. If failure to comply with the statute had been interpreted as rendering the
contract VOID, subsequent evidence would be relevant only to the extent that it proved the elements of a new valid agreement, including
new offer and acceptance, intent to create legal relations, etc.
3. A non-conforming contract can be consideration for a new contract or negotiable instrument.

THE REQUIREMENT OF SUFFICIENT NOTE OR MEMORANDUM

1. Essential terms: Must contain all essential terms. Purpose of creating the note or memorandum is generally irrelevant to its admissibility.
o Suggestion that agreement of payment is not an essential term. (Stochinsky v Chetner)
o The description of an object must be precise enough to identify it. Parol evidence which is ambiguous in itself will not suffice to
clarify an agreement. (Dynamic Transport Ltd v OK Detailing)
2. Signatures: Mere initialing can be sufficient, and doesn’t have to be at the end of the document as long as it purports to govern all of it. The
statute doesn’t require the signature of BOTH parties, just ‘the party to be charged’, the defendant. A document authenticating a contract for
purely internal purposes will suffice.
3. Joinder of Documents: In certain circumstances, where all the material terms do not appear in one document, it may be possible to ‘join’ two
documents together, even where one of the documents is not signed, for the purposes of producing a sufficient memorandum. There must,
however, be some connection between the two documents for this to be permissible. Either the connection must be obvious, or there
must be a reference, express or implied, in the signed document to the unsigned document. If the only connection that can be made
between the two documents is by virtue of parol evidence, the joinder will not be permitted.
4. Electronic Documents: A memorandum in email can satisfy the writing requirement. The provincial electronic commerce statutes provide that
a legal writing requirement is satisfied electronically if the electronic record endures and remains accessible. The requirement in the Statute
of Frauds that there be a memorandum in writing of an agreement can therefore be satisfied by a suitably enduring and accessible.
5. HOWEVER, electronic commerce legislation in most of the common law provinces excludes agreements that create or transfer interests in
land. Many provinces have passed legislation so as NOT to exclude land transfer agreements from their electronic transactions statutes; and
Ontario has passed legislation that will remove this exclusion from the Electronic Commerce Act on a date to be proclaimed.

Electronic Commerce Act SO 2000 c 17

Section 5: “A legal requirement that information or a document be in writing is satisfied by information or a document that is in electronic form if it is
accessible so as to be usable for subsequent reference.”
Section 31.1: Exceptions include wills, powers of attorney, and “negotiable instruments”.
Section 11: Electronic signatures satisfies the legal requirement that the record be signed. Case law tells us that typing your name at the bottom of an
email is a signature. What about automatic signatures?

PART PERFORMANCE
 Where one party partially fulfils obligations under oral agreement, or completely fulfils their obligations when the other side refuses to do so, the oral
agreement may be enforced to avoid injustice.

1. Must be a contractual relationship in place.

2. Part performance was performed, and the party who got something out of the performance did not do their bit.
3. Acts relied upon to make up the claim must be unequivocally and in their own nature, referable to some such agreement as that alleged
(Deglman) or are unequivocally referable to a contract in reference to the very lands in question (Thompson – less strict test is the one we
go with).
a. Unequivocal = as could be done with no other view or design than to perform that agreement. (Deglman)
b. It is only after such acts unequivocally referable in their own nature to some dealing with the land which is alleged to have been the
subject matter of the agreement sued upon have been proved that evidence of the oral agreement becomes admissible for
explaining those acts. (Deglman)
c. A demonstrated connection between the acts of performance and a dealing with the land before evidence of the terms of any
agreement is admissible.
d. Payments of purchase money alone is not a sufficient act of performance within this rule (Deglman)

Unequivocal Not unequivocal

 Acting as owner and operator of farm in dispute (Thomson v
Guaranty Trust Co)
 Pl worked for employer faithfully and with very little financial
reward for considerable number of years. When pl thought of
leaving employer, was dissuaded by the latter’s promised
assurance that on the employer’s demise, he would give the pl
the farm. Built house on property at owner’s urging.
(Brownsecombe v Pub Trustee of Alta)
 Preparation of signed, shelving units specific to site (Starlite)
 Plaintiff, giving up all other prospects of any other course of life,
spent 20 years as a housekeeper of the intestate until his death
without wages on the strength of his promise to leave her the
manor on which they live. Defectively executed will made her
beneficiary. House of Lords said no such part performance as
would answer the law. (Maddison v Alderson)
 Nephew was promised a house as long as he took care of his
aunt. Never did any acts referable to the house, never lived
there. (Deglman)

PRIVITY OF CONTRACT
A person who is a complete stranger to the contract has no legal right to enforce the promise of any party to that contract. A third party beneficiary to
the contract (identified and intended by the promisor and promisee to receive all or part of the benefit of the agreement upon performance) can also
not enforce the contract. (Tweddle v Atkinson) This was not always the case! (Provender v Wood)

EXCEPTIONS
STATUTE

Insurance Act, RSO 1990

195 – A beneficiary may enforce for the beneficiary’s own benefit, and a trustee appointed pursuant to section 193 may enforce as trustee, the payment of
insurance money made payable to him, her or it in the contract by a declaration and in accordance with the provisions thereof, but the insurer may set up
any defense that it could have set up against the insured or the insured’s personal representative.

258 – Any person who has a claim against an insured for which indemnity is provided by a contract evidenced by a motor vehicle liability is provided by a
contract evidenced by a motor vehicle liability policy, even if such a person is not party to the contract, may, upon recovering a judgement therefor in any
province or territory of Canada against the insured, have the insurance money payable under the contract applied or in towards satisfaction of the person’s
judgement and of any other judgements or claims against the insured covered by the contract and may, on the person’s own behalf and on behalf of all
persons having such judgements or claims, maintain an action against the insurer to have the insurance money so applied.

AGENCY
If the promisee is actually a contracting agent on behalf of the third party, the doctrine of privity has no application. The promisor and third party are
the contracting parties. They are in a direct and contractual relationship. (McCammell v Mabee MacLaren Motors Ltd)

Test for Agency: (McCammell v Mabee MacLaren Motors Ltd)

1. Agent brings parties together.
2. The parties recognize that agency has been created, a formal designation is not necessary.
3. Each of them agreeing to abide by this promise is sufficient consideration for a contract to be bound.

Example: New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd

1. Bill of lading makes it clear that the stevedore is intended to be protected by the provisions in it which limit liability.
2. The bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent
for the stevedore that these provisions should apply to the stevedore.
3. The carrier has authority from the stevedore to do that, or perhaps later ratification of the stevedore would suffice.
4. Any difficulties about consideration moving from the stevedore are overcome (stevedore obviously wasn’t planning on doing this for
nothing).
EMPLOYMENT
Employees will be entitled to benefit from a limitation of liability clause found in a contract between their employer and plaintiff customer if the
following requirements are satisfied: (London Drugs v Kuehne & Nagel International Ltd)
1. The limitation of liability clause must, either expressly or impliedly, extend its benefit to the employees seeking to rely on it;
2. The employees seeking the benefit of the limitation of liability clause must have been acting in the course of their employment AND have
been performing the very services provided for in the contract between their employer and the plaintiff customer when the loss occurred.
Very LIMITED and SPECIFIC exception. Used only as a SHIELD.

SUBROGATION
Subrogation is the substitution of one person in place of another with respect to rights or claims. It is an intention based exception. Ex. in Fraser River
Pile, they were not allowed to revoke unilaterally the protection they had offered Can-Dive once it had developed into an actual benefit (the moment
the rights “crystallized.” Any subsequent alteration of the waiver provision is subject to further negotiation and agreement of all parties involved,
including Can-Dive. Once the loss occurs, the right is crystallized.

Test for relaxing the doctrine of privity:

1. Is it the intention to extend to the third party?
2. Third party beneficiary is performing the activities contemplated in the contract.
3. Policy reasons in favour of an exception in these circumstances.

ALSO limited. Only used as a SHIELD!

CONTINGENT AGREEMENTS
Condition precedent: A contract formed, subject to some condition. Describes a state of affairs that neither party to a contract has promised will come
about, but the occurrence of which is a prerequisite of their obligation to perform the contract. Since a contingent condition like this does not embody
an obligation undertaken by either party, it cannot be breached. Unless the parties have stipulated otherwise, the failure of the condition simply
brings the contract to an end. It is a term of an existing contract, as opposed to a term of an offer to contract.

Condition subsequent: A provision that the fulfilment of a condition or the occurrence of an event shall discharge either one of them or both from
further liabilities under the contract.

Conditional Offer: When a condition precedent is unclear. If one of the parties does not intend to enter into a contract at all unless and until a
contingency is satisfied, communications embodying the terms of a proposed agreement can be no more than an offer, which may be accepted upon
satisfaction of the contingency.

Conditional Contract: Condition precedent is objectively clear. On the other hand, if both parties to an agreement intend to conclude an immediately
binding contract, a “subject to” provision does not qualify the creation of a contract but only the parties’ obligation to perform the obligations arising
under it. If the stated condition is not satisfied, the contract is terminated and neither party is obliged to proceed. However, before failure of the
condition, withdrawal from the agreement by either party will constitute a breach of contract. There is truly a ‘conditional contract’, since there IS a
contract, the full performance of which is conditional on fulfilment of the stipulated condition.

FACTORS TO CONSIDER FOR DETERMINING CONDITIONAL OFFER OR CONDITIONAL CONTRACT

1. Parties’ intentions.
o In some cases, a condition may prevent the formation of a contract if the agreement itself and the surrounding events indicate it
was never the intention of the parties to bind themselves to a contract of sale and purchase. (Wiebe v Bobsien, (SC))
2. Words of agreement.
3. If it is uncertain when/how the condition will/won’t be met, particularly if it is at the discretion of the party (if they LIKE it or not), then we
don’t have certainty of contract and there is no contract. (Wiebe v Bobsien (SC))
o Each condition precedent case must be considered on its own facts. (Wiebe v Bobsien, (CA), Lambert in dissent)
o Where a condition is subject to one party’s fancy or taste, no certainty. “I will buy this unless I have changed my mind” – no
consideration being given from buyer to purchaser. If the seller can elect not to perform the condition, no binding contract.
(Aberfoyle)
o In a real estate transaction, a condition precedent which must be performed by purchaser (I need to sell my house before I buy
another one) will not usually prevent the formation of a contract, but will simply suspend the covenant of the vendor to complete
until the condition precedent is met by the purchaser. (Wiebe v Bobsien (SC))
o A real estate contract containing a condition precedent will usually result in a binding agreement of sale and purchase. The
obligation to complete the contract is merely in suspense pending the occurrence of the event constituting the condition
precedent. (Wiebe v Bobsien (SC))
4. However, if you can read in an implied term requiring that ‘the purchaser will act in good faith and take all reasonable steps to bring about
the condition precedent (selling his home), then you’re good. (Wiebe v Bobsien (CA))

RECIPROCAL SUBSIDIARY OBLIGATIONS

Contractual obligations that fall to be performed only upon satisfaction of a condition precedent may be described as the parties’ PRIMARY obligations.
However, the conclusion that a contract exists before the primary obligations become operative suggests that parties are subject to other obligations in
the meantime, subsidiary obligations.
 In most conditional contracts, the condition precedent contemplates an event or state of affairs that will not occur unless action is taken. In such cases,
courts are inclined to the view that one of the parties has an IMPLIED SUBSIDIARY OBLIGATION to take reasonable steps to bring about the state of
affairs constituting fulfilment of this condition. “The common intention of entering into a contract which is made subject to a condition precedent
requiring the approval of a third party must be taken to include an agreement that one of the parties to the contract will be under an obligation to
act in good faith and to use best efforts to seek satisfaction of the condition precedent. (Dynamic Transport Ltd v OK Detailing)
o Vendor is under a duty to act in good faith and take all reasonable steps to complete the sale. Failure to do so can be construed as breach of
contract! (Dynamic Transport Ltd v OK Detailing)

REPRESENTATIONS AND TERMS: CLASSIFICATIONS AND CONSEQUENCES

Parol evidence rule: No extrinsic evidence is admissible for the purposes of adding to, varying, contradicting or subtracting from a contract which has
been reduced to writing.

CLASSIFICATION: CONDITION V WARRANTY

Conditions: More important term. Breach of condition deprives the wronged party who has further undertakings of substantially the whole benefit
which it was the intention of the parties that were expressed in the contract that he should obtain for performing his obligations. Breach of condition
relieves the party of any further obligations and they have a range of remedies available to them. (Hong Kong Fir Shipping Co)
o Ex. In Leaf, if the fact the picture was a condition, then buyer could reject picture for breach of condition any time before he accepted it or
was deemed to have accepted it. However, once he has accepted or is deemed to have accepted the goods, he cannot thereafter reject but
is relegated to his claim for damages.
o If it was a warranty, he could not reject the picture but only claim damages.

Warranties: Less important term. Does not take away the whole benefit. Must carry out your contractual liabilities and then later sue for damages.
Made out on an intention to be bound. (Heilbut, Symons & Co)

“A contractual term would be a condition if every breach of it MIGHT deprive the innocent party of substantially the whole benefit of the contract; a
right to repudiate the contract would be available whatever the actual effects of the breach. A contractual term would be an innominate clause if
some, but not necessarily EVERY breach might deprive the innocent party of substantially the whole benefit of the contract; a right to repudiate the
contract would only be available if the breach did in fact result in the innocent party being deprived of substantially the whole benefit of the
contract. A contractual term would be a warranty if its breach would NEVER deprive the innocent party of substantially the whole benefit of the
contract, a right to repudiate the contract would never arise.”

o At the end of the day, barring statutory considerations, comes down the intention of the parties. The fact that a particular construction leads
to a very unreasonable result is a relevant consideration. The more unreasonable a result, the more unlikely it is that parties can have
intended it. (Wickman)
o TEST: Does the event deprive the party who has further undertakings till to perform of substantially the whole benefit which it was the
intention of the parties that were expressed in the contract that he should obtain for performing his obligations? The proper way to
categorize a breach is to concentrate on its practical effect. (Hong Kong Fir)
o Gravity of consequences of breach should be looked at to determine if the innocent party can repudiate the contract. If it is not
possible to determine beforehand whether a breach of the term would deprive the other party of the whole benefit, we have to
look at the events that followed the breach.
o More detailed test from (Ontario Ltd v Vernon):
 The ratio of the party’s obligation not performed to the obligation as a whole.
 The seriousness of the breach to the innocent party.
 The likelihood of repetition of the breach.
 The seriousness of the consequences of the breach and relationship on the part of the obligation performed to the whole.

The Ontario Sale of Goods Act

12(1) Where a contract of sale is subject to a condition to be fulfilled by the seller, the buyer may waive the condition or may elect to treat the breach of
condition as a breach of warranty as not as a ground for treating the contract as repudiated.

12(2) Whether a stipulation in the contract of sale is a condition the breach of which may give rise to a right to treat the contract as repudiated or a
warranty the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated depends in
each case on the construction of the contract, and a stipulation may be a condition, though called a warranty in the contract.

12(3) Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, or where the contract is for specific goods the
property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a
ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

12(4) Nothing in this section affects the case of a condition or warranty, fulfilment of which is excused by law by reason of impossibility or otherwise.

27 Unless otherwise agreed, delivery of goods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to
give possession of the goods to the buyer in exchange for the price and the buyer shall be ready and willing to pay the price in exchange for the possession
of the goods.
 MISREPRESENTATION AND RESCISSION
Rescission is commonly used to denote the setting aside of a contract because of some defect affecting its formation, such as misrepresentation,
duress or undue influence. It is also used to describe the discharge of an existing contract by subsequent arrangement of the parties.

DIFFERENCE BETWEEN DAMAGES AND RESCISSION

o Damages and rescission are NOT alternative remedies. You apply them in different circumstances.
o The action for damages is to enforce an agreement and thus has as its object the substitution of money damages for the performance which
should have been rendered under the binding agreement between parties.
o The effect of a suit for rescission, on the other hand, is to determine that the contract is one that ought not to be enforced. Hence, any
monetary award or other order made upon rescission should have as its object the restoration of the parties to their pre-contract positions.
o In other words, damages for breach of contract puts the parties in the position they would have been in had the other party performed the
contract. Rescission puts the party in the position they would have been in had the contract never been made.

MISREPRESENTATION
o A representation is a significant statement of fact made in the lead-up to the contract, on which a reasonable person might rely in entering
the contract.
o A misrepresentation occurs where the statement is untrue.
o Fraudulent misrep renders an agreement voidable at common law – so you can get rescission or damages.
o Innocent misrep is voidable only in equity. You can’t get damages, only rescission.

TEST (Redgrave v Hurd)

“The rule of equity states that a man should not be allowed to get a benefit from a statement he now admits to be false. He Is not allowed to say, for the
purpose of civil jurisdiction, that when he made it he did not know it to be false. He ought to have found that out before he made it. No man ought to
take advantage of his own false statements.”

1. A person makes a material representation to another that is untrue.

a. It must be material – i.e. important, not marginal or peripheral.
b. Statement could be made recklessly and without care, and not with the belief they were true.
c. Must be a statement of fact – not silence or opinion.
2. For the purposes of inducing him to enter into a contract.
3. The other enters into the contract.
a. Those who accept the false statements are true are not deprived of their remedy merely because they neglected to investigate the
truth of the representation. The onus is on the representor to make truthful statements.
4. Presumption is that the defendant seeking rescission relied on the statement
5. Presumption can be rebutted by showing:
a. The defendant had knowledge that the representation was not true.
b. The defendant did not rely on the representation.

If innocent misrepresentation, rescission is the only remedy. (Heilbut). If fraudulent misrep, then damages in tort are available.

BARS TO RESCISSION
o Where it is impossible to restore both parties to their pre-contractual positions. It may be impossible to return the same goods to a seller, as
they might be slightly used.
o If the contract is affirmed, or there is a third party intervener, that might make it difficult to undo the agreement.
o Laches – too much time having passed.
o If the contract has already been fully executed.
o If a claim to reject for breach of condition is barred, a claim to rescission on the grounds of innocent misrep is also barred. Assuming that a
contract for the sale of goods may be rescinded in a proper case of innocent misrep, nevertheless, once the buyer has accepted the goods,
the claim is barred. (Leaf)

MISREP OR WARRANTY?
o A representation made in the course of dealings for a contract for the very purpose of inducing another party to enter into the contract, and
actually induces him to act on it by entering into the contract, is prima facie presumed to be a warranty of that contract and therefore a
breach of it will lead to a cause of actions for damages – even if it is innocently made. (Dick Bentley)
o If it was intended to be acted upon, and was acted upon, then it is a warranty. If an intelligent bystander would reasonably infer that a
warranty was intended, that will suffice. (Dick Bentley)
o The maker of this representation can rebut this presumption if he can show that it really was an innocent misrep, that he was in fact
innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it. (Dick Bentley)

ONTARIO CONSUMER PROTECTION ACT

Is this a consumer transaction? Has there been an unfair practice under the Consumer Protection Act?
Making a “false, misleading or deceptive representation” is an “unfair practice” (s 14(1)). Unfair practice is prohibited by s 17(1).

Examples of false, misleading or deceptive representations s 14(2):

 Representation that goods or services are of a particular grade, standard, quality, style or model if they are not.
 Representation that the supplier of the goods has qualifications they do not.
 Representation that goods have been used to an extent materially different from the fact.
 Representations using exaggeration, innuendo or ambiguity as to material fact or failing to state a material fact if such use or failure deceives or
tends to deceive.

Remedy if rescission not possible s 18(2)

 The parties are entitled to recover the amount by which the consumer’s payment under the agreement exceeds the value that the goods or
services have to the consumer to recover damages.

Must give Notice s 18(3)

 A consumer must give notice within one year of entering the contract if they seek to rescind the agreement or seeks recovery if rescission is not
possible.

CONCURRENT LIABILITY IN CONTRACT AND TORT

Must give Parties
Notice swho are guilty of tortious misconduct when breaching a contract will be liable concurrently in contract and in tort, unless the
18(3)
 Aagreement
consumer between
must givethe partywithin
notice stipulates to the
one year of contrary.”
entering the contract if they seek to rescind the agreement or seeks recovery if rescission is not
 possible.
A plaintiff will always be allowed to sue in both tort and contract, if they both apply, so long as the relevant duty necessary for the tort action
is not explicitly negated in the contract. Watch out though! Parties are free to contract to limit tort liability.

THE PAROLE EVIDENCE RULE AND COLLATERAL AGREEMENTS

 There must be clear intent that the parties are creating a separate agreement. A collateral agreement cannot be established where it is
inconsistent or contradicts the written agreement. (Hawrish v Bank of Montreal)
 Where there is parol evidence of a distinct collateral agreement which does not contradict nor is inconsistent with the written instrument, it
is admissible. (Hawrish v Bank of Montreal)
 A collateral agreement cannot be established where it is inconsistent with or contradicts the written agreement. While we must always be
wary that the written contract might not be the WHOLE agreement, it is unreasonable to contemplate that at the same time and between the
same parties, two contracts will be made dealing with the same subject matter, one of which contradicts the other. (Gallen v Allstate Grain)
 The court must always strive to meet the intention of the parties, guided, in the cases of contradiction, by the strong presumption in favour of
the document. The oral warranty and document must be interpreted together and if possible harmoniously to attach contractual effects to
each. If there is a contradiction, there is a strong presumption in favour of the written document but the rule is not absolute and if on the
evidence it is clear the oral warranty was intended to prevail, so it shall. (Gallen v Allstate Grain)

SUMMARY OF THE RULE

 The law presumes that when parties intend the written contract to be the complete agreement between them, and language of the written
contract is clear and unambiguous, no parole evidence will be admitted to alter the contract in any way, if inconsistent with the written
agreement. It is all about the objective intention of the parties.
 Exceptions:
o Collateral contracts that are not inconsistent with the written agreement (difficult to establish if you have a complete agreement in
writing. In that case, probably a no go).
o If it helps in interpreting the contract, it will be ok. Parol evidence rule doesn’t prevent extrinsic evidence to determine if the
written agreement was intended to be the whole agreement (McRoberts v Whissell)
 This rule DOES NOT APPLY TO
o Interpretation of a contract
o Whether there was a misrepresentation
o Whether an agreement contains implied terms
o Whether the written document is incorrect or mistaken
o Fraud or undue influence
o Promissory estoppel
Always ask: Is it the intention of the parties to encompass the whole of their agreement in writing? The presumption about this rule is strongest
when there is a contradiction between the written document and other evidence. The mere existence of a written contract creates a strong rebuttable
presumption that the written agreement is intended to represent the whole agreement. (Seaton J, dissent in Gallen)

STATUTORY EXCEPTION: CONSUMER PROTECTION ACT – In the trial of an issue under this section, oral evidence respecting an unfair practice is
admissible despite the existence of a written agreement and despite the fact that the evidence pertains to a representation in respect of a term,
condition or undertaking that is or is not provided for in the agreement.

STANDARD FORM AGREEMENTS AND EXCLUSION CLAUSES

1. Has the clause been effectively included as a term of the contract?
 a. Notice of the clause has been given to the party who challenges it?
i. General Principle: Broad exclusion clauses that appear to exclude all liability for performing a contract, or defeat the very
purpose of entering the contract, will have to be drawn to the other party’s intention.
ii. Unsigned Contracts: The customer is bound by the exempting condition if he knows that the ticket is issued subject to it,
or the company did what was reasonably sufficient to give him notice of it. (Thornton v Shoe Lane)
o Ex. Thornton, the contract was concluded when the ticket was issued, and could not be altered by words printed
on the ticket itself. It could not be altered so as to exempt the company from liability for personal injury due to
their negligence.
iii. Signed Contracts: A party proffering for signature an exclusion of liability clause must take reasonable steps to bring it to
the other party’s attention. It is applicable only in special circumstances. (Tilden Rent-A-Car)
o An essential part of the contract is whether the other party entered into the contract assenting to all terms.
(Tilden)
o A signature in the commercial sphere creates the presumption of an agreement, whereas the reality in the
consumer sphere is not that of consensus. (Tilden Rent-A-Car)
o In the usual commercial sphere, there is no need for the party presenting the document to bring exclusions of
liability or other onerous terms to the attention of the signing party, nor need he advise him to read the
document. It is only where the circumstances are such that a reasonable person should have known that the
party signing was not consenting to the terms in question that such an obligation arises. (Karroll v Silver Star
Mountain Resorts)
o To find there is a duty to draw attention, look at:
a. Is the agreement easy to read and relatively short?
b. Was a party rushed in signing it?
c. Was it in any way fraudulent? Misrep?
d. Were any of the conditions onerous or unusual?
e. Did the other party know that there was actually no assent by the signing party (did they know that
the party did not read/understand the words)?
2. What does the clause mean?
a. Strict reading of the clause to narrow its effect – may be justified on the ground that the tendency of such a clause is to subtract
from the benefit the contract would otherwise extend to the party who now challenges the clause.
3. Did parties INTEND at the time of contract formation that the exclusion or limitation clause would apply “in circumstances of contractual
breach, whether fundamental or otherwise?” (Tercon)
4. Is there some reason why we will simply refuse to apply the clause to a particular set of facts?
a. Does the clause apply to the circumstances established? (Tercon)
b. Was it UNCONSCIONABLE at the time of contract formation? (Tercon)
c. Would enforcement violate public policy? (Tercon)
i. Court has no discretion to refuse to enforce a valid and applicable contractual exclusion clause unless the plaintiff can
point to some paramount consideration of public policy sufficient to override the public interest in freedom of contract
and defeat what would otherwise be the contractual rights of the parties. (Tercon)
ii. Ex. Plastex: The defendant Dow was so contemptuous of its contractual obligations and reckless to the consequences of
the breach as to forfeit the assistance of the court. The public policy that favours freedom of contract was outweighed by
the public policy that seeks to curb its abuse.

MISTAKE AND FRUSTRATION

o Use as a last resort. Usually cases are resolved on the law of misrepresentation (Dick Bentley, Leaf) without resort to the law of mistake.
o Must have a mistaken assumption or belief of present fact that induces a contract to be formed. Cases involving mistakes as to terms raise
the question whether a contract was concluded between the parties, not whether the contract should be avoided due to the effects of the
mistake.
o Look for:
o Mistakes as to the terms of the contract.
 Objective test: Is the effect of the mistake that parties were never ad idem?
o Mistake as to factual assumptions underlying the contract.

Three Types of Mistake

1. Common – Both parties make the same mistake. One party contracts to sell a vase to another, when, unbeknownst to both of them, the vase
has been destroyed (like McRae)
2. Mutual – Both parties are mistaken, but their mistakes are different. They are ‘not on the same page’. A believes he has agreed with B on
terms X, and B believes he has agreed with A on terms Y, and both err in thinking they have come to an agreement.
3. Unilateral – One of the parties is operating under a mistake, and the other party knows it.

ESTABLISHING MISTAKE
1. The court must decide what the reasonable third person (officious bystander?) would assume the words and conduct of the parties
determine about the nature of the agreement.
a. Ex. Staiman Steel: A reasonable man would infer that the auctioneer, despite his words, was manifesting an intention to offer for
sale the bulk lot of used steel. By making the highest bid, the plaintiff so conducted himself that a reasonable man would believe
that he was assenting to the purchase of that lot. A contract for the sale of that lot thus came into existence.
 2. Mutual mistakes as to terms will not always result in a voided contract, only when the terms are truly ambiguous and cannot be determined
according to the reasonable person standard. In that case, contract is void.
a. Unilateral – “Snapping up” – where an offeree realizes an offeror has made a mistake in his offer, and then tries to ‘snap up’ before
the offeror notices the mistake. An offeree cannot accept an offer which he knows has been made by mistake and which affects a
fundamental term of the contract, because there is no assent, intent or agreement. (Hartog v Colin & Shields, Bell River)
3. A party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any
reasonable ground, and on the other hand, deliberately induced by him in the mind of the other party. (McRae)

RECTIFICATION
Rectification is an equitable remedy applied when mistake in reducing the agreement to writing. It is an exception to the parol evidence rule, because
the only way you can prove an agreement was recorded incorrectly is to bring in contradicting evidence.
o If, by mistake, a legal instrument does not accord with the true agreement it was intended to record, because a term has been omitted, an
unwanted term included, or a term incorrectly expresses the parties’ agreement, a court may exercise its equitable jurisdiction to rectify the
instrument so as to make it accord with the parties’ true agreement. (Canada (AG) v Fairmont Hotels Inc)
o When the error is said to result from a mistake common to both or all parties to the agreement, rectification of the instruments is available
upon the court being satisfied that there was a prior agreement whose terms are definite and ascertainable. (Canada (AG) v Fairmont
Hotels Inc)
o It is designed to correct errors in the recording of terms in written legal instruments. It is limited to cases where a written instrument has
incorrectly recorded the parties antecedent. It does not undo unanticipated effects of that agreement (Canada (AG) v Fairmont Hotels Inc)
o Used with great caution: A relaxed view of rectification as a substitute for due diligence at the time a document is signed would undermine
the confidence of the commercial world in written contracts. It is unavailable where one or both of the parties wish to amend not the
instrument recording their agreement, but the agreement itself.

TEST FOR RECTIFICATION

“Rectification is concerned with contracts and documents, not with intentions. In order to get rectification, it is necessary to show that the parties
were in complete agreement to the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the
terms of their contract, you do not look into the inner minds of the parties – into their intentions – any more than you do in the formation of any
other contract.”

1. Cases of common mistake: Show that

a. Parties had reached a prior agreement whose terms are definite and ascertainable.
i. The inclusion of imprecise terms in an instrument is, on its own, not enough to obtain rectification; absent evidence of
what the parties had specifically agreed to do, rectification is not available. While imprecision may justify setting aside an
instrument, it cannot invite courts to find an agreement where none is present.
b. Agreement was still effective when the instrument was executed.
c. Instrument fails to record accurately that prior agreement. Must show an inconsistency with the antecedent agreement with
respect to that term. Intentions re not enough, must show erroneously recorded TERMS.
d. If rectified as proposed, the instrument would carry out the agreement.
e. Argument that prior agreement is not necessary, should rather show “Common, continuing intention” – rejected.
f. But according to course notes – generally, requires proof of common continuing intention that is not reflected in the written
agreement, I think that intention just wasn’t sufficient in (Fairmont)
2. Cases of unilateral mistake
a. The instrument formalizes a unilateral act, or instrument was intended to record an agreement between parties, and one party says
that the instrument does not accurately do so, while the other says it does.
b. The party resisting rectification must know or ought to have known about the mistake, and permitting that party to take
advantage of the mistake would amount to fraud or the equivalent of fraud.
3. Standard of proof:
a. “Convincing proof” – must prove on a balance of probability.
b. A party seeking rectification faces a difficult task in meeting this standard because the evidence must satisfy a court that the true
substance of its unilateral intention or agreement with another party was not accurately recorded in the instrument to which it
nonetheless subscribed.
c. Absent evidence of what the parties had specifically agreed to do, rectification is not available. While imprecision may justify setting
aside an instrument, it cannot invite courts to find an agreement where none is present.

FRUSTRATION AND FORCE MAJEURE

Mistake, and mistaken assumptions concern a mistake about an existing fact prior to, and frustration is something that happens after contract
formation.

A contract is “frustrated” when a subsequent, unforeseen even changes the very nature of the promised performance. As a result, both parties are
discharged from further performance. This constitutes an exception to the absolutely liability for breach of contract principle. Ex. a contract to rent a
concert hall might be frustrated when a contract hall is burned down. Force Majeure clauses, which attempt to specify what constitutes a frustrating
event that will release people from their obligations under the contract tend to be construed very strictly by the courts.
o The effect of frustration is both parties are release from their obligations under the contract.
o Force majeure clauses generally operate to discharge the contracting party when a supernatural event, beyond the control of either party,
makes performance impossible. Look for an external, supervening, supernatural event, in order to frustrate a contract. A party will not be
 able to rely on its own poor due diligence to argue that the agreement has been frustrated and it is not liable for damages. (Atlantic Paper
Stock)
o Breaching party will have to demonstrate that it could not mitigate the effects of the reduction by other means, provided those means were
concordant with reasonable injury practice. (Atcor v Continental Energy Marketing Ltd)

PROTECTION OF WEAKER PARTIES

DURESS
Economic Duress: The Analytic Framework (Greater Fredericton Airport Authority)
* This framework applies only to variations on existing contracts, not in regards to the formation of the underlying contract. The critical factor is
whether or not the victim had any practical alternative but to capitulate to the demand for contract change.

1. Determine whether the variation was the product of the agreement.

a. A gratuitous promise may still be enforceable, if it is the product of a consensual agreement.
2. Finding of economic duress is dependent, initially, on two conditions precedent.
a. The promise must be extracted as a result of the exercise of ‘pressure’, whether characterized as a ‘demand’ or a ‘threat’, express
or implied.
i. If the variance came from the promisor, it cannot credibly be argued that the variation was coerced.
b. The exercise of that pressure must have been such that the coerced party had no practical alternative but to agree to the coercer’s
demand to vary the terms of the underlying contract.
i. A plea of economic duress will fail unless it is established that the promisor (victim) had no practical alternative but to
agree. This constitutes evidence of a lack of consent, but is not conclusive on the issue.
c. Even if both conditions are met, duress is not yet found.
3. Final question: Whether the coerced party ‘consented’ to the variation. ** these are indicia, NOT a test!
a. Whether the promise was supported by consideration.
i. If not, the court may be more sympathetic to a plea of economic duress.
ii. Consideration itself doesn’t answer this question though, consideration doesn’t imply consent.
b. Whether the coerced party made the promise ‘under protest’ or without prejudice.
i. If variation is supported by fresh consideration, in the classical sense, the court may be more sympathetic to a plea of
economic duress.
c. If not, whether the coerced party took reasonable to disaffirm the promise as soon as practicable.
i. A failure to object is not necessarily fatal to a plea of economic duress – but the failure of the promisor to voice any
objection at the time that a contractual variation was extracted may ultimately prove fatal to the plea of economic duress.
ii. The law insists that the victim take reasonable steps to repudiate or disaffirm the process ASAP. Generally, this would
occur after the pressure dissipates, which is usually once the threat of breach of the contract has lost its persuasive force.
iii. A promisor who sits back and waits years before challenging the enforceability will fail.
iv. Parties who voluntarily negotiate agreements that they believe to be advantageous cannot subsequently rely on
economic duress to avoid those agreements. Economic duress does not function to relieve parties from commercial
bargains subsequently perceived to be burdensome.
v. Access to legal advice on the part of the victim is not sufficient to overcome the finding that he or she had no alternative
but to submit to the contractual variation demanded by the coercer.
UNDUE INFLUENCE
The unconscientious use by one person of power possessed by him over another in order to induce the other to enter into a contract. It is found where
there is an ability to exercise exceptional power in relation to another person’s choices. It is a power of persuasion that arises out of a confidential or
other special relationship that arises between the parties.

1 Show actual operating influence on the choice that was made. (Geffen)
a. Nature of the relationship – there must be dominance, manipulation and coercive abuse of power. First look to see if the
relationship is already categorized or if it is a relationship of dependency.
b. Complainant reposed trust and confidence in the other party, or the other party acquired ascendancy over the complainant. (Royal
Bank of Scotland)
c. Parent-child, beneficiary and trustee, doctor-patient, etc.
d. Each relationship must be looked at individually.
2 Showing a special relationship between the parties (i.e. an advisory relationship). Proof of the required relationship raises the presumption
that undue influence was exercised. (Geffen)
3 A disadvantageous bargain. Must be a hard and inequitable agreement, or a transaction immoderate and irrational or unconscionable.
Must show a disadvantage sufficiently serious to require evidence to rebut the presumption that in the circumstances it was procured by
undue influence (Nat Westminster Bank v Morgan, Royal Bank of Scotland)
a. A gift ipso facto is disadvantageous and only a dominant relationship must be shown.
b. “If the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary
motives on which ordinary men act, the burden is upon the donee to support the gift.” (Royal Bank of Scotland)
c. We treat commercial relationships differently because the court must accord some degree of deference to the principle of freedom
of contract and inviolability of bargains.
d. Transaction was not ‘readily explicable’ by the relationship of the parties.
4 Then, the onus moves to the defendant to rebut this presumption.
 a. Show the plaintiff entered into the transaction as a result of his own ‘full, free and informed thought’.
b. Court will take into account proof that the party received advice from an independent third party – depends on the circumstances
what meaning this will carry. A person may fully understand the implications of what they’re agreeing to and still be acting under
the influence of someone else. Proof of outside advice does not, in itself, necessarily show the subsequent completion of the
transaction was free from the exercise of undue influence. (Royal Bank of Scotland)
c. Show no actual influence, independent advice, etc.
d. Magnitude of disadvantage or benefit is cogent evidence going to the issue of whether influence was exercised.

UNCONSCIONABIILTY
With undue influence, we were concerned with an abuse of trust. Prior to formation of the contract, one party placed trust in another and as a result
did not bargain hard in their own interests. Unconscionability is concerned with the circumstances in which the contract arose, circumstances
tantamount to fraud. A plea of undue influence attacks the sufficiency of consent. A plea that a bargain is unconscionable invokes relief against an
unfair advantage gained by an unconscientious use of power by a stronger party against a weaker party.

“If two persons, no matter whether a confidential relationship exists between them or not, stand in such relation to each other than one can take
undue advantage over the other, whether by reason of distress, recklessness or wildness, or want of care, and when the facts show that one party
has taken undue advantage of another by reason of the circumstances I have mentioned, a transaction resting upon such unconscionable dealing
will not be allowed to stand.”
1. Duress of goods – one party is in urgent need of goods and is forced to pay more than is right. This is voidable.
2. Unconscionable transaction – a man is so placed as to be in need of special care and protection and yet his weakness is exploited by another
far stronger than himself so as to get his property at a gross undervalue. Extends to all cases where an unfair advantage has been gained by
an unconscientious use of power by a stronger against a weaker.
3. Undue influence – where the stronger has been guilty of some fraud or wrongful act, expressly so as to gain some gift or advantage from the
weaker.
4. Undue pressure – where one party stipulates for an unfair advantage to which the other has no option but to submit. Ex. employer hires
builder to do work, when the builder asks for payment of the sums properly due, the employer refuses to pay unless he is given some added
advantage.

General principles – Inequality of bargaining power. English law gives relief to one who, without independent advice, enters into a contract upon
terms which are very unfair, or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired
by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influence or pressures brought to bear on him by or
for the benefit of another.

There are two different approaches to a test for unconscionability:

1. Inequality (of both the circumstances and process) + substantial unfairness = presumption of unconscionability which the stronger party must
rebut. (Morrison test)
2. Community standards of commercial morality (simplified Lloyd’s test)
3. (Lambert J in Kreutziger: Whether the transaction, seen as a whole, is sufficiently divergent from community standards of commercial
morality that it should be rescinded).

AVAILABLE WHERE:

1. There is an improvident bargain (the terms were very unfair, or consideration was inadequate) (Lloyd’s Bank v Bundy).
a. Was the transaction SO UNFAIR that it created a presumption of overreaching?
i. Look at the deal as a whole. In Morrison, the mortgage terms themselves were not unconscionable, but the respondent
companies KNEW it was disadvantageous to her and she was ignorance. For them to take advantage of her obvious
ignorance and inexperience raised a presumption of fraud.
2. An inequality in the position of the parties. Bargaining power was impaired by necessity, ignorance or infirmity. (Harry v Kreutziger, Lloyd’s
Bank v Bundy) (note: inequality in terms of financial resources alone is not enough).
a. An unfair deal with unequal power between parties gives rise to a presumption of unconscionability; once this is raised the
stronger party must rebut the presumption. (Morrison v Coast Finance, Harry v Kreutziger)
b. Must have proof of inequality in the position of the parties arising out of ignorance, need or distress, and proof of substantial
unfairness of the bargain obtained by the stronger. (Morrison v Coast Finance)
c. Inequality of bargaining power alone will not cause the common law to set aside a transaction. What we look for is where one
party uses that inequality of power to push people as far as they will go. “No bargain will be upset which is the result of the ordinary
interplay of forces. (Lloyd’s Bank v Bundy)
3. Undue pressure or influence was used, not necessarily consciously.
a. “It is not right that the strong should be allowed to push the weak into a wall.” (Lloyd’s Bank v Bundy)
4. There was an absence of independent advice. (Lloyd’s Bank v Bundy)

REMEDIES
The current Canadian law on contractual remedies may be broken down into four general key concepts:
1. There is no compulsion to perform. The variety of remedies available to the innocent party for breach of contract may be broadly classified
as either compensatory (substitutional) or coercive (specific). The compensatory remedy, which provides normal relief in actions for breach of
contract, is action for damages.
 a. “The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it, and nothing
else.” (Holmes)
b. It is uneconomical to induce completion of performance of a contract after it is broken. To give a supplier a remedy that induces
him to complete the contract after breach would waste resources. Under the doctrine of mitigation of damages, the law would not
give the supplier damages for any costs he incurred in continuing production after a notice of termination – doesn’t want to
encourage wasteful behaviour. (Posner)
2. Compensation for loss suffered by the non-breaching party is provided in the form of money. The non-breaching party may obtain a
substitute with this money.
a. Usually the objective of giving the promisor an incentive to fulfill his promises unless the result would be inefficient use of
resources can be achieved by giving the promisee his expected profit of the transaction. (Posner)
3. No distinction is made in awarding damages based on manner of breach.
4. The goal for contractual remedies is compensation rather than punishment.

THREE TYPES OF DAMAGE (Fuller & Purdue)

1. Expectation: This measure aims to put the innocent party in the position she would have been in had the contract been fulfilled. There is a
requirement for the wronged party to take steps to mitigate damages. This is the default rule. F&P comment that it is a strange type of
compensation, as it gives the plaintiff something he never had. When the law gauges damages by value of the promised performance, it is not
merely measuring a quantum, but is seeking an end, however vaguely connected this end might be.
2. Reliance: This measure aims to put the innocent party in the position she would have been in had she not entered into the contract. Ex.
Redgrave v Hurd, costs incurred in moving his family from one place to the other. Might come to lost opportunity. What did you lose by
relying on this promise?
3. Restitution: This measure aims to give back what the innocent party transferred to the contract breaker. Prevents unjust gain by defaulting
promisor at the expense of the promisee.

WHY DOES THE LAW PROTECT THE EXPECTATION INTEREST?

1. Attitude of expectancy: The breach of promise arouses in the promisee a sense of injury. This feeling is not confined to cases where the
promisee has relied on the promise. Whether or not he has actually changed his position because of the promise, the promisee has formed
an attitude of expectancy such that a breach of promise causes him to feel that he has been deprived of something that was ‘his’.
2. Private legislative power: Another theory is that contracting parties exercise legislative power between themselves – so that the legal
enforcement of a contract becomes merely an implementing by the state of a kind of private law already established by the parties. If A has
made a promise to pay B one thousand dollars, we compel A to pay this sum simply because the rule of law set up by these parties calls for
payment.
3. Economic or institutional approach: Expectation of future values become, for the purposes of trade, present values. Where the expectancy is
limited, the recovery is reduced accordingly. A promise has present value because the law enforces it. This view sees the law not as the
creature but as the creator of social institutions. The protection of the expectation interest is hence protected because of:
a. The need for curing and preventing the harms occasioned by reliance;
b. The need for facilitating reliance on business agreements.
The law measures damages by expectancy in part because society views the expectancy as present value. Society views the expectancy as
present value in part because the law protects expectancy.

COST OF COMPLETION V DIFFERENCE IN VALUE

o If no economic waste, the cost of remedying the defect is the amount awarded as compensation for failure to render the promised
performance. If you contract for work to be done, that’s what you were promised and as such expectation damages have to be the cost of
completing the work. (Groves v John Wunder Co)
o Value of the land (as distinguished from value of the intended product of the contract, which ordinarily will be equivalent to its
reasonable cost) is no proper part of any measure of damages for wilful breach of a building contract. (Groves v John Wunder Co)
o But, contrasting case: Peevyhouse v Garland Coal Mining Co, owners of a farm leased it for strip mining, the mining company failed
to do the reclamation required under the lease and the owner sought damages. If the mining company restored the land, the value
of the farm would have increased by $300, while the cost of restoration would have been approximately $29 000. On appeal, the
owners were held to be entitled to damages of $300.
o In reckoning damages, such as for breach of a building contract, the law aims to give the disappointed promisee, so far as money will do it,
what he was promised. (Groves v John Wunder Co)
o Groves was criticized by Posner, who questioned why Groves didn’t bring an action for specific performance, if it was the work, and not the
improved value of the land, that he was looking for. He argues that the measure of damages was incorrect from an economic standpoint
because had it had been known to the defendant from the start, it would have made him indifferent to breaking his promise or levelling the
land. Here, efficiency should have dictated the breach – pay $12 000 in damage to breach, or pay $60 000 to perform. Cheaper to breach!

REMOTENESS
What type of damages are you liable for?

1. Damages should be within the realm of what would have arisen naturally or what was reasonably contemplated by the parties. (Hadley v
Baxendale, Victoria Laundry)
a. “Reasonably foreseeable” depends on the knowledge possessed by the parties or, at all events, by the party who later commits the
breach. Knowledge can be imputed or actual. Everyone is taken to know the ordinary course of things, and thus what is likely to
 result from the breach of contract in the ordinary course, subject to exceptions for special circumstances. It suffices that the
contract breaker, had he considered what losses were to result from his act, would as a reasonable man concluded that the loss
in question was liable to result. (Victoria Laundry)
b. Ex. Hadley deliverers didn’t know their delay in delivery would completely shut down the mill, were not responsible for lost profits.
2. Special circumstances should have been made known to the party at the time that the contract was formed. (Hadley v Baxendale)
a. Ex in Cory v Thomas Ironworks Company, a plaintiff awaited for the delivery of a hull, planning to use it for an unusual purpose. In
such a case, no loss was recoverable beyond what would have resulted if the use had been that reasonably within the
contemplation of the defendants, which in that case was the ‘obvious use’.

LOSS OF ENJOYMENT AND OTHER INTANGIBLE INTERESTS

 Where you have contracted for entertainment or enjoyment, you can obtain compensation for disappointment and mental distress. (Jarvis v
Swan Tours)
 You can recover damages for mental distress if the object of the contract was to secure psychological benefit, it brought you mental distress,
and it was in the contemplation of the parties, and then only if the degree of suffering is sufficient to warrant damages. (Fidler v Sun Life)

TEST (Sunlife)
Ask: What did the contract promise? Provide compensation for THOSE promises.
The court must be satisfied:
1 That an object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable
contemplation of the parties.
2 The degree of mental suffering caused by the breach was within the reasonable contemplation of the parties.
3 The degree of mental suffering caused by the breach was of the degree sufficient to warrant compensation.
a. It is not unusual that a breach of contract will leave the wronged party feeling frustrated or angry. The law does not award damages
for such incidental frustration.

 Generally, damages for mental distress resulting from a breach of contract are not recoverable unless it is a peace of mind contract (Fidler v
Sun Life)
 Damages must be such as may fairly and reasonably be supposed to have been in the contemplation of both parties. (Hadley v Baxendale)
 Damages for mental distress from breach of contract may, in the appropriate cases, be awarded as an application of the principle in Hadley v
Baxendale. The courts should ask “what did the contract promise?” and provide compensation for those promises. Where such mental
distress was within the reasonable contemplation of the parties at the time the contract was made, damages will be awarded. (Fidler v Sun
Life) “The basic principle of contract damages do not cease to operate merely because what is promised is an intangible, such as mental
security.”

AGGRAVATED vs PUNITIVE DAMAGES

Aggravated damages describe an award that aims at compensation, but takes full account of the intangible injuries, such as distress and humiliation,
that may have been caused by the defendant’s insulting behaviour.
 “True” aggravated damages arise out of a separate cause of action – usually in tort. If a plaintiff can establish distress as the result of the
breach of independent cause of action, then he or she can recover. The award of damages in such a case arises from the separate cause of
action. It does not arise out of the contract itself, and has nothing to do with the Hadley rule. (Fidler)
 An independent actionable wrong is not necessary to recover those damages which arise out of the breach itself. Those exist independent of
any actionable wrong, and are awarded under the Hadley rule. Because Hadley is the only test, an independent actionable wrong is NOT a
prerequisite for the recovery of mental distress damages. (Fidler)
Punitive damages are designed to address the purpose of retribution, deterrence and denunciation. Compensatory damages are awarded primarily for
the purpose of compensating a plaintiff for pecuniary and non-pecuniary losses as suffered as a result of the defendant’s conduct.
 In breach of contract cases, in addition to the requirement that the conduct constitute a marked departure from ordinary standards of
decency, it must be independently actionable.
 Where the breach in question is a denial of insurance benefits, a breach by the insurer of contractual duty to act in good faith will meet this
requirement.
 An insurer will not necessarily be in breach of the duty of good faith by incorrectly denying a claim that is eventually conceded, or judicially
determined to be legit. The question instead is whether the denial was the result of overwhelmingly inadequate handling of the claim, or
the introduction of improper considerations into the claims process.

MITIGATION
The boundary of recovery lies in unavoidable losses. The general principle is that the non-breaching party is obligated to take all reasonable steps to
limit losses flowing from the breach. Ask yourself: has the party taken all reasonable steps to limit losses arising naturally from the breach?

THE RELIANCE MEASURE OF DAMAGES

 What happens when expectation damages cannot be assessed? We turn to RELIANCE DAMAGES. The fact that damages cannot be assessed
with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract. (McRae v Commonwealth)
 You only get to claim expenses specifically attributed to wasted venture.
 The measure of damages for non-delivery of goods by a seller is set out in s 55(2) of the Goods Act as being “the estimated loss directly and
naturally resulting in the ordinary course of events from the seller’s breach of contract.” This is the ordinary rule.
o Ex. In McRae, the commission was promising the element of a CHANCE. The plaintiffs were entitled to rely on their representations,
and undertook expenses to access this chance. The expense was incurred because of the defendant’s promise, and the fact there
was no tanker made it certain the expense would be wasted. The plaintiffs were entitled to recover damages in this case for
 breach of contract and their damages were measured by reference to expenditure incurred and wasted in reliance of the
Commission’s promise that the tanker existed at the place specified.
o Only allowed to recover loss of revenue, which represents the profit which they expected to make if they had not been devoted to
the futile tanker enterprise.
 Can’t claim reliance damages as a way around a bad bargain. (Bowlay Logging). A plaintiff is not entitled to damages on a basis which would
leave him better off than he would have been in had the contract been performed. In this case, the plaintiff would have made a loss on the
contract as a whole.
 If the loss was greater by breach than it would have been by contract, the increase in the loss is the amount necessary to put the plaintiff in
the position it would have been had there been no breach. (Bowlay Logging)

SPECIFIC PERFORMANCE
What must the plaintiff show to obtain specific performance?
1 What you’re purchasing is UNIQUE
2 Must have a quality ‘not readily duplicated elsewhere’.
3 Quality must be related to what the purchase wants to use the land for.

1. Where commercial and other land is purchased for development and resale, the trend in the case law is to deny specific performance.
However, there have been obiter to the effect that, among the considerations that might lead to an order of specific performance in cases
such as this is whether the calculation of damages would be ‘extremely difficult’.
2. In the context of residential property, the courts seem to have been looking for something about the property that makes it particularly
desirable, a consideration to this point that has been favoring the wealthy.
3. All Canadian Sale of Goods Acts provide that purchasers of “specific or ascertained goods” may seek specific performance of such contracts.
However, the courts have never interpreted this provision, from the original English legislation, as extending their jurisdiction over the award
of specific relief in goods contracts. Rather, the courts have treated the statement in that section as meaning specific performance “may” be
ordered, preserving the discretionary nature of such relief, and its general unavailability when damages are an adequate remedy.
4. In Beswick v Beswick, no other substantial remedy was available and so the House of Lords ordered specific performance as a just result.
5. Contracts for personal service are not typically enforced because it is thought improper as a matter of public policy to compel a person to
maintain certain personal relationships against their wills.
6. The courts will also not enforce contracts requiring continuous successive acts because this would require constant supervision. (Ryan v
Mutual Tontine Westminster Chambers Assn)
7. The limits on specific performance in contracts for personal services are limited to services that are personal in nature. For example, specific
performance has been ordered in building contracts and repairing covenants where the contractual requirements are sufficiently well-
defined.
8. Contracts to keep a business open have never been enforced with SP.

Defenses to Action for Specific Performance

1. Mutuality
a. Remedy is available to those against whom it would be available if they were in breach.
b. Example, in Gretzky v Ont. Minor Hockey Assn, Southey J refused an application for an injunction by infant hockey players in which
they were seeking to restrain the defendant from preventing them from playing in a particular league. The contract was not
enforceable against the boys as they were minors, so it would be unfair to allow them to use it against the other party.
2. Misrepresentation or Mistake
a. Specific performance has been refused in the case of mistake that was not sufficiently serious to impair the validity of the contract,
at least where there is an element of fault on the part of the plaintiff.
3. Unfairness
a. Clean hands doctrine – he who seeks equity must come with clean hands.
4. Hardship
a. Where a decree of specific performance would cause severe and unnecessary hardship to parties, or to a third party, SP may be
refused, leaving the plaintiff to the remedy in damages. Before the defense will affect the exercise of the court’s discretion,
however, the circumstances giving rise to the hardship must exist at the time the contract was formed, unless the plaintiff’s conduct
has caused a change in the circumstances resulting in hardship.
5. Delay