Contracts Johnson 2009 2

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Contracts – Johnson/09
Case Facts Ratio and key points

Part I – Contract Formation I. Offer and Acceptance 1. The Traditional Rules of Offer and Acceptance Smith v. Hughes (UK QB, 1871; p. 417) Sale of oats; buyer (D) wanted  Consensus ad idem is tested objectively: ―reasonable old, bought new, despite person‖ seeing sample from P. P sues to bind D. P provided room, board and care for a horse that had been dropped off by an agent of D, but of which D disavowed ownership all along.  The 'essential elements of contracts ―implied in fact‖ are mutual agreement and intent to promise, but the agreement and the promise have not been made in words and are implied from the facts', p. 5.  'the plaintiff was a mere volunteer who [worked] at his own risk and with full knowledge that he might not be reimbursed', p. 6.  'If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind.', p. 5.

Bailey v. West (US, 1969; Assign. 1)

Lucy v. Zehmer (US, 1954; Assign. 2)

Property sale without consideration based on contract on napkin at bar. D pleads drunkenness.

Ball v. Hardy (Ont CA, 2006; Small Group)

Ottawa River-side house,  Written agreement was a manifestation of mutual Mississauga couple. Ps sue for assent for the sale of the property. specific performance on  No defence, e.g., mistake, applies. D did not property transaction, the D communicate reservation or misunderstanding that trying to renege on written she may have had to the purchasers and it appears document. that she simply changed her mind after the execution of a valid and enforceable agreement of purchase and sale.

A. Offer Mirror Image Rule  There exists a contract when both parties agree on the terms.  Offeror extends terms to an offeree who can accept or extend back a counter-offer and thus (traditionally) becomes an offeror in her own right. The formulation of counter-offer terminates the initial offer. Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd. (UK QB, 1953; p. 417) Lefkowitz v. Great Minneapolis Super Store (Minn, US, 1957; p. 416) Display of goods in a selfservices store  Display of goods is an invitation to treat and not an offer

99% discount offered on sale of first three coats; seller unwilling to honour advert

 Advertiser (as master of offer) can modify offer only until is is accepted;  Where an offer is definite and clear, it can be accepted, e.g., an advertisement; this is a unilateral contract

B. Acceptance  Offeror is master of acceptance Tinn v. Hoffman & Co. (UK, 1873; p. 419)  Where negotiated by post, there is no binding contract unless one party sends acceptance.

1 of Error! Reference source not found.

 A bilateral contract is formed by an exchange of promises. Dickinson v. Dodds (UK, 1876; p. 419) Felthouse v. Brindley (UK, 1862; p. 419) Saint John Tug Boat Co. v. Irving Refining Ltd (SCC, 1964; p. 419) Written offer to sell house if  Common law rule is that in the absence of accepted within 48 h, but offer consideration, a promise to keep an offer open is not waved off before acceptance enforceable.  Acceptance cannot be based on 'negative option' from offeror (e.g., 'if I don't hear from you this week we have a deal') P, D agreed to stand-by fee for  Where one party continues to make use of a six weeks; after seven months, consideration beyond the time frame of the original D said fee was applicable only contract, it may still be in force. for the first six weeks.

Postal Rule Location where the acceptance is received is the location of the formation of the contract (i.e., default venue for dispute resolution). Adams v. Lindsell (UK KB, 1818; p. 422)  Consensus ad idem occurs / acceptance is valid when the response to an offer is posted.  Because the offeror is master of acceptance, unless chooses to specify otherwise, the acceptor can use the same medium as did the offeror  Risk of loss is assigned to offeror.  If offeror wants to avoid risk of loss of acceptance, can set other terms of acceptance. Letters re: land deal going back and forth, acceptance made on specified day, but letter not received until later  Acceptance must be made, communicated to offeror, until then, no acceptance.  Postal Rule applies by default in postal arrangements, but may be set aside via terms.  Fax is valid for offer and acceptance; differs from postal rule—accepted as and where offeror receives it Ontario company (P) working with Italian company (D) faxed acceptance to Italy, seeks remedy in Ontario  Fax is valid for offer and acceptance under general rule.  Contract is formed at location of acceptance.  Instantaneous transmission rule: faxes (not yet found for email) are instantaneous, so follow general rule, not postal rule.  Multi-screen EULA is like a multi-page paper contract, not like obscure fine-print.

Household Fire & Carriage Accident Ins. Co Ltd. v. Grant (UK CA, 1879; p. 422) Schiller v. Fisher (SCC, 1981; p. 423)

Rolling v. Willann Investments (Ont CA, 1989; p. 426) Eastern Power Ltd. v. Azienda Communale Energia and Ambiente (Ont CA, 1999; p. 427)

Rudder v. Microsoft (Ont SCJ, 1999; p. 435)

P didn't scroll through EULA, seeks local forum instead of one specified in EULA

Consumer Protection Act,  13(1): 'Except as provided in this section, a recipient of unsolicited goods or 2002, S.O. 2002, c. 30, Sched. services has no legal obligation in respect of their use or disposal.' A § 13(1), 68  68: 'Despite section 13, a consumer who applies for a credit card without signing an application form or who receives a credit card from a credit card issuer without applying for it shall be deemed to have entered into a credit agreement with the issuer with respect to the card on first using the card.'  Rationale for credit card exception is policy: tender type, not mere product C. Revocation

2 of Error! Reference source not found.

 Generally, an offer can be revoked at any time before acceptance. Henthorn v. Fraser (UK, 1892; p. 440) Byrne v. Van Tienhoven (UK, 1880; p. 440) Dickinson v. Dodds (UK, 1876; p. 419) Great Northern Railway Co. v. Witham (UK, 1873; p. 440)  Where postal rule applies, revocation must reach offeree before acceptance is posted.  Where postal rule does not apply, revocation is possible before acceptance reaches the offeror. Written offer to sell house if  A promise to keep a firm offer open (without accepted within 48 h, but offer consideration) can be revoked at any time before waved off before acceptance being accepted. D made open offer (of  Offer to supply at a specified price could be unilateral contract) to supply withdrawn at any time because GNR had not paid for good to GNR at specific prices Witham to stand ready at the particular prices: within a year, sought to Witham can change the prices at any time, but must withdraw after getting an honour prices already ordered. order.  Offer and acceptance exists for each order.  To keep single offer open 12 months, consideration (or seal) would be needed.  Offer is unilateral, made to the world, but contract forms only with those to take it up (¶ 6)  Offer was accepted in this case by performance

D. Unilateral Contracts and Revocation Carlill v. Carbolic Smoke Ball Carbolic offers to pay ₤100 to Co. anyone who contracts (UK CA, 1893; p. 442) influenza while using their smoke ball, reneges claiming offer was puffery. Dawson v. Helicopter Exploration Co. Ltd. (SCC, 1955; p. 447) P has a line on a prospecting find and agrees with D to check it out; D goes with someone else.

 When terms require complementary offer that's binding on each party is bilateral, where express promises may be absent, may still be ―instinct with obligation‖ (i.e., though not expressly stated, implicit that the point of the contract was that D would take P)  Courts prefer to see a bilateral contract if it fits the facts, rather than unilateral.

Errington v. Errington (UK CA, 1952; p. 449)

Father bought house for son  Denning L.J.: Once performance has commenced, and daughter-in-law to live in, unilateral contracts cannot be revoked. said it would be theirs when he  Doctrine of part performance. retired if they paid mortgage (they did, though didn't finish before death of father). Father's widow sought the property.

E. Tender Contracts  Established in Ron Engineering, below.  Contract A:  The request of tender constitutes an offer to the prospective bidders in a unilateral contract  The contractor's submission of a sealed irrevocable bid to the offeror constitutes the acceptance  Contract B:  The actual contract to do the work is bilateral: the work for the payment  Tendering and related issues tends to be decide on the basis that is good policy to have a fair bidding process for open competition toward the objective of economic certainty. Ron Engineering & Construction (Eastern) v. P responded to D's request for tenders on a construction  The tender of the contractor is binding even if there was a mistake by the bidder in maintaining its price

3 of Error! Reference source not found.

Ontario (SCC, 1981; p. 454; p. 781)

contract with a tender that was unless there is a mistake so big that it is apparent on (accidentally) unprofitable for the face of the tender. (SCC) P, refused to follow through  Estey J.: finding ―the integrity of the bidding system when selected by D. must be protected‖ Sub-contractors (D) sought to escape loss-making work on P's construction contract on basis that its sub-contract bid was in error.  Ct followed analysis in Ron Engineering, seeing contracts A and B binding general contractor and sub-contractor.  Consideration for B is 'we promise to give you the job' in exchange for 'our offer is irrevocable'. Therefore A keeps the offer open without allowing the tenderer to revoke their offer.  Subcontractor is free to withdraw the bid until tendering closed, but until P accepted an offer, the subbie is stuck.

Northern Construction Co. Ltd. v. Gloge Heating and Plumbing Ltd. (AB CA, 1986; p. 455)

Naylor Group v. Ellis-Don Construction (SCC, 2001; p. 458)

Appellant used respondent's  When the appellant chose to submit tender using the low bid to get the contract, subbie, they are stuck with them. then shopped the work around to do the actual work.

M.J.B. Enterprises v. Defense Four tender offers, awarded to  Did parties behave properly? Contruction (1951) Co. Ltd. lowest, notwithstanding the  Privilege clause is only one clause of Contract A and (SCC, 1999; p. 468) fact that the lowest did not must be read in harmony with the other clauses. comply with the original  Privilege clause does not override the obligation to specifications Tender doc accept only a compliant bid. included a privilege clause that allowed owner to reject all bids or not select the smallest. Martel Building v. Canada (SCC, 2000; p. 470) Four bidders on leasing to federal government (D). After submitting, D added 'fit up' costs to modify buildings to suit D's needs. Lowest 'raw' bid became second-lowest after fit-up costs.  Reasonable for buyer to apply fit-up costs applied in same standard to all bidders, so that's allowed.

2. Limits of Traditional Rules A. Consensus ad idem and mistake Raffles v. Wichelhaus (UK Exch, 1864; p. 474) P agreed to sell cotton to D ―to  Note: heard in Equity arrive ex Peerless from  Consensus ad idem not reached and thus no contract. Bombay‖, but two ships named Peerless; D thought October Peerless, and P December; in December P tried to deliver and D refused. P sued to bind D. Sale of oats; buyer (D) wanted  Consensus ad idem is tested objectively: old, bought new, despite “reasonable person” seeing sample from P. P sues  Buyer saw the goods and thus should have known to bind D. better than to enter into contract... but did enter into the contract; sale by sample.  Caveat emptor.

Smith v. Hughes (UK QB, 1871; p. 477)

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 ―The Devil alone knoweth the mind of man.‖ I.e., can't read the minds of the parties. Hobbs v. Esquimalt and Nanaimo Railway Co. (SCC, 1899; p. 482) Hobbs (P) seeks to hold D to agreement entered by P and Trutch, an agent of D to sell land in fee simple. D claims reserve of mineral rights on grounds that Trutch had no authority to deal.  If the principal allows the agent to represent to third parties that they have the authority of the principal, then the principal is bound.  Although the parties may not be ad idem, A is bound in spite of their mistake, if A‘s words or conduct are such as to induce B to reasonably believe that A was assenting to the terms proposed by B.  Note two forms available, agent chose.

Staiman Steel Ltd. v. Commercial & Home Builders Ltd. (Ont HCJ, 1976; p. 485)

Auction: steel at auction in  Ct: P is disingenuous in claim, parties were ad idem, lots, then in bulk at request of ―reasonable person‖ test for terms applies, and bidding parties. Nominal reasonable person at auction understood that pre-sold ―misunderstanding‖ as to steel was excluded. which steel was included in the auction. Some steel had previously been sold. P bids on ―remaining steel‖ and claims pre-sold lot.  Where an important term is omitted from a contract, it will not be supplied by the court and the contract is void (e.g., price) Hillas (UK) agreed to import  Ct upheld contract between P and D despite that cheap lumber from Arcos important terms like sizes and proportions of sizes (Russian) in light of boycott on were not specified for the new year. Russian lumber with an option  Distinguished from May & Butcher because parties for 10 times as much cheap got through first year on vague terms, so why not lumber the next year on same second year also? terms. Boycott ended, Arcos wanted out of deal, claiming it was insufficiently definite. P dealt in petrol, D in coaches.  Parties behaved as though they had an agreement, P sold land to D with and have an arbitration clause, so should have used supplemental terms that D that to settle disputed pricing. would buy petrol from P. Price not defined in contract, but it does have arbitration clause.

B. Indefiniteness and Contract Negotiation: Agreements to Agree May & Butcher v. The King (UK HL, 1929; p. 492..) Hillas v. Arcos (UK HL, 1932; p. 493)

Foley v. Classique Coaches (UK KB, 1934; p. 493)

Courtney & Fairbain v.Tolaini P was going to contract to  Denning M.R.: if can't have a contract to contract, build for D, on net + 5% terms Brothers can't have a contract to negotiate. (UK CA, 1975; p. 498) to be negotiated, in exchange for providing a person to finance the work. The person was provided, but the D went with another builder in the end. Empress Towers Ltd. v. Bank of Nova Scotia (BC CA, 1990; p. 500) Rental agreement with renewal  Landlord must agree to accept the new rate as the that stated market rates at market rental; this carries implied terms that: agreement of parties, but with  Landlord will bargain in good faith to reach unclear terms. Parties don't agreement on market rental; and agree at renewal and landlord  Agreement on market rental will not be

5 of Error! Reference source not found.

(P) seeks ―writ of possession‖.

unreasonably withheld.  No duty to negotiate in good faith in Canada, so first fails but second stands.  Can't have a contract to negotiate.  A duty to negotiate in good faith is unworkable in practice as inherently inconsistent with the position of the negotiating party.  ―Lock out‖ agreement to prevent negotiations with other parties may be enforceable.

Walford v. Miles (UK HL, 1992; p. 505)

D to sell photographic processing business has two offers, including one from P. Agreed in principle with warranty of trading profits, ―subject to contract‖.

C. Letters of Intent Canada Square Corp. v. Versafood Services Ltd. (Ont CA, 1981; p. 514) Did the parties have an  Ct: distinction between enforcement where condition enforceable contract for a roofis uncertain, versus enforcement where a minor term top restaurant to be operated is uncertain. by the D as tenant of P? Parties  Agreement is enforceable: each spent significant money  in part because the term in question is not on developing project. Written essential to the overall agreement, and agreement from P on letter of  in part because both parties appeared to act as intent from D, but no formal though they had reached an agreement lease. Ottawa invited firms to bid on  Found: essentially a contract to contract, and thus an audio-visual services. Based unenforceable. Actions of the defendant as shocking on qualifying parties, winning and disappointing to the plaintiffs but not binding. bidder (5 a term) was expected Dismissed with costs. to subcontract to one of two  Distinguishable from Versafood because the parties firms. The remaining never proceeded as though they had reached an subcontractor, the plaintiff, agreement, had never stated that they had reached an was offered only a one-year agreement subcontract, less than they expected (5 a). Coming out of a board  Oral agreement may be binding if sufficiently clear meeting, Getty Oil president as an outward expression of intent, even when said orally ―you've got a deal‖ written documents are planned. to P with transaction agreement to be drafted, but Getty Oil later sold to Texaco.

LCDH Audio Visual Ltd. v. ISTS Verbatim Ltd. (Ont HCJ, 1988; p. 516)

D. Oral Agreements Pennzoil v. Texaco (US, 1987; p. 519)

3. Protection of Expectations Arising from Negotiations A. Duty to Bargain in Good Faith Martel Building Ltd. v. Canada (SCC, 2000; p. 521) Martel was negotiating to lease  SCC: there is no tort liability for negligence in space to an agency of the commercial negotiations. government. Terms were not  Per policy rationale, courts don't want to set up tort settled on the quick time line law (e.g., negligence) as a de facto insurance system requested by D and thus the for contract disputes. item went to tender and Martel  Hard bargaining is okay, but soft around the edges. lost out.

Big Quill Resources v. Potash Removal of word ―sales‖ in the  Court found a way to relieve buyer of this more Corp of Saskatchewan phrase ―sales tax‖ – not onerous burden – unilateral mistake on part of P was (Sask CA, 2001; p. 524) brought to attention of the induced by D other side, increasing supplier‘s costs, buyer's price

6 of Error! Reference source not found.

was cost+, insulating supplier from higher price. 978011 Ontario Ltd. v. Cornell Standard form modified and submitted to other side. Other Engineering (Ont CA, 2001; p. 525) side signed without reading it.  Party has an obligation to read documents and will be assumed to have done so.  This was not a situation where documents were going back and forth between the parties, and there was a surreptitious change.  Grange J.A.: ―Vendors and purchasers owe a duty to each other honestly to perform a contract honestly made.‖  Ct frowned upon attempt of D-purchaser to leverage a peculiarly technical reading of a contract term. 'Cute' attempt to avoid restrictions in a shareholders' agreement.  Blair J.: makes reference to ―the good faith doctrine of contractual performance, which in my view is part of the law of Ontario.‖

Le Mesurier v. Andrus (Ont CA, 1986; p. 525)

GATX Corp v. Hawker Siddelely Canada Inc. (ON Gen Div, 1996; p. 526) B. Restitution and Reliance Brewer Street Investment v. Barclays Woollen Co. (UK CA, 1954; p. 527)

Parties negotiating a lease.  Denning L.J.: no contract to enforce, tenant's offer Would-be tenant asks for work was conditional upon lease and upon completion of to be done on the property and the work—who should pay for partial work? Who offers to pay; landlord get it was responsible for breakdown in lease negotiations? started, but the lease is not  In this case neither is clearly at fault. executed and the work not  Construction was clearly intended to be to the completed. benefit of the tenant and not the landlord, so risk and thus cost to the tenant in this case.  Landlord relied on promise of tenant. P undertook to meet conditions  P awarded reliance damages. to set up car dealership, and  P had made an investment toward the business based in part on assurance of arrangement, had been induced by other party. D, knew himself to be en route  Court did not find a contract between the parties, but to having dealership. Over awarded plaintiff damages for his services. time, P spent down required start capital and D waved off agreement since term no longer met (and contract not yet executed).

Brewer v. Chrysler Canada (AB SC, 1977; p. 529)

C. Duty of Confidentiality  Some duties statutory (fiduciary duties of corporate directors, conflict of interest of public officials), some are doctrines of common law  Duties vary with context, may change upon completion of contract  Fiduciary obligations, examples:  Teacher / Student • Parent / Child  Trustee / Beneficiary • Director / Corporation Lac Minerals Ltd. v. International Corona Resources Ltd. (SCC, 1989; p. 534) Corona (P) is junior miner with  (Trial judge awarded the Lac mine, less development property believed to have large costs, to Corona on Lac's violation of fiduciary duty deposits of gold. Lac as and confidence owed Corona as a partner in courted senior miner learned of negotiations.) gold potential in neighbouring  SCC: divided on whether Lac had owed Corona a land. Corona developed their duty of confidentiality vs. fiduciary and on own mine with another senior remediation: some saying Lac should hold mine in

7 of Error! Reference source not found.

and Lac acquired and developed the adjoining property.

trust for Corona, some wanting damages.

D. Battle of the Forms  When using forms designed to give the using party an advantage (e.g., a purchase order form being used by a buyer), differs from a form being used for a similar purpose by the other party (e.g., an order form with terms printed on the back) and both sides use the forms paying attention only to the 'filled-in terms' (e.g., the items being ordered, delivery details and prices) it can become uncertain whose terms apply to any particular transaction: this is the battle of the forms.  ―In some cases the battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions; and, if not objected to be the other party, he may be taken to have agreed to them.‖  ―First blow‖ concept would be where some term is described at the onset as overriding and inviolable. E.g., if later adjustments are so substantial that they would reasonably have altered the core (previously understood to have been agreed) terms but the attention of the first party is not drawn to them.  ―Knock out rule‖ would strike out conflicting terms and see what remains: sufficient for contract formation? Are critical elements (price, quality of goods, delivery) there? Then fill in the gaps.  ―Last shot‖ tends to dominate in Canada, but not strictly and solely Butler Machine Tool Co. Ltd v. Ex-Cell-O Corp (England) Ltd (UK CA, 1979; p. 541) Butler (seller) quoted a price  Denning M.R.: ―This case is a ―battle of the on an item for delivery on a forms‖.‖ form with a price-variation  Delay is caused by seller, so would seem inequitable clause. By delivery time, price to allow their price escalation clause to function. had increased, so seller  Here, found for buyer, i.e. receipt of goods was not charged more than quoted. acceptance in this case. Buyer rejected excess charge on basis that their own form did not have any price variation clause. Tywood (P) invited to tender  Parties are forum shopping: for sale of storage tanks. Ontario (Vendor)(Court) vs. Agreement on specifications New Brunswick (Buyer)(Arbitration) and price reached, and 3 tanks  Grange J.: ―neither party turned their attention to delivered. Invitation to tender terms‖, and decides on policy basis: preference of from D didn't make mention of the courts to avoid replacing court's determination of arbitration, nor did quotation issues with arbitration. from P. Purchase orders were  (Decision was almost 30 a ago; more recently, issued by D that had arbitration arbitration has become more accepted.) clause. Purchase orders were not signed by plaintiff or returned to defendant, but delivery of goods was made. ~(1) Expression of acceptance sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise

Tywood Industries Ltd. v. St. Anne-Nackawic Pulp & Paper Co. (Ont HCJ, 1979; p. 545)

Uniform Commercial Code § 2-207 (p. )

8 of Error! Reference source not found.

establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. II. THE KINDS OF PROMISES THE LAW WILL ENFORCE 1. Legal Formalities A. The Writing Requirement Three functions of the seal: (i) Evidentiary - formality provides evidence that contract exists (ii) Cautionary - formality forces parties to slow down and think about what they are doing (iii) Channelling - formality is a cheap test of enforceability - a signal to courts and laypersons that they need not enquire further - the contract is good and enforceable Statute of Frauds, R.S.O. 1990, c. S.19, as amended, §§ 4, 6, 7 (p. 233) 4. Writing required for certain contracts: (i) promise to answer damages out of executor's or administrator's own estate; (ii) promise to answer for the debt, default or miscarriage of any other person (suretyship); (iii) any agreement made upon consideration of marriage; (iv) sale of lands, tenements or hereditaments, or any interest in or concerning them 6. Consideration for promise to answer for another (indemnity) need not be in writing 7. Ratification of promise made during minority to be made in writing  Suretyship (e.g., acting as a guarantor for a line of credit) vs. Indemnity  Surety: ―Please supply goods to debtor, and if debtor does not pay (fails to meet the primary obligation), then I will (secondary obligation).‖ = contract of suretyship, read very strictly, tends to be interpreted against the creditor. Creditor ends up with a primary party to hold liable and a backup in the event the primary fails out.  Indemnity: ―Please supply goods to debtor and I will see you paid.‖ ≠ contract of suretyship. Creditor ends up with two parties to hold jointly liable.  If debtor defaults and guarantor/indemnifier pays out to creditor (in full) then the obligation of the debtor is subrogated (from creditor) to the guarantor/indemnifier.  So when standing in for someone's debt, the backup payer will prefer to be seen as a guarantor and the creditor will prefer to see that person as an indemnifier. Lakeman (D) offered ―to see  Triangular relationship did not exist; straight [that P would be] paid‖ by contract between P (Contractor / Creditor) and D community board if P did (Board Chair / Debtor) construction job, but the board  Because it was not therefore a contract of suretyship, would not pay. Statute of Frauds did not apply, and thus Lakeman‘s promise was enforceable Nephew of deceased stayed  Found that the services were not directly in relation with her during a certain to the property at question and thus the oral nature of period, and in return for the contract was insufficient. services there was a promise to  Nephew awarded cash payment for services provided convey the house to him upon per court's assessment of value; otherwise, the Aunt her death. Promise is not in and thus estate would have been unduly enriched writing.

Sureties vs. Indemnities

Mountstephen v. Lakeman (UK HL, 1871; p. 233)

B. Unjust Enrichment and the Doctrine of Part Performance Deglman v. Guarantee Trust Co. of Canada and Constantineau (SCC, 1954; p. 238)

2. Promises That Will Be Denied A. Unfairness The Port Caledonia (UK, 1903; p. 247) Port Caledonia tug boat: ―I‘ll  Found not enforceable; ―inequitable, extortionate, only rescue you if you pay me and unreasonable‖ agreement—unjust. ₤1000‖ where the job is worth  Doctrine of unconscionability or duress ₤200 at most

9 of Error! Reference source not found.

3. Formal Contracts A. Promises Under Seal Re/Max Garden City Realty v. No consideration, simply a 828294 Ontario Ltd promise to pay the real estate (ON Gen Div, 1992; p. 251) agent – but would be enforceable if under seal  Was the promise made under seal?  Held: Yes, parties intention that it be under seal is determining factor: wax not necessary.  Note: this was an equitable assignment

4. Consideration A. The Basic Concept Three methods of transferring property inter vivos: (i) gift (will theory foundation) (ii) contract (bargaining theory, need to show that the promise was bought), (iii) deed (formality makes the promise binding). Consideration  something of value in the eyes of the law, moving from the plaintiff… (p. 258)  traditional definitions looked benefit to promisor, or detriment to promisee (p. 258)  Note concern with consideration for a promise, rather than consideration for a contract, thus, analysed as though we are trying to enforce the particular promise at issue “Peppercorn theory”  courts will not inquire into the adequacy of consideration (e.g., a peppercorn in return for something valuable); to do so would be to buy into 'just value' theory attaching inherent value to goods and services.  Some instances where value is considered, e.g., under statute esp. where a fraction of the gross transaction value goes to the Crown: taxation often considers (three separate items like) 'fair market value', 'market value', 'fair value'. Also shows up in common law under doctrine of unconscionability. Thomas v. Thomas (UK QB, 1842; p. 259) Testator wants to add to legacy  ―Rent is not incidental‖, contract found. that he has left his wife (note  Ct unwilling to consider the merit of the the that he holds house on long consideration: not going to ask whether the payment lease, likely 99 years). is fair or market value or reasonable: consistent with Executors make the deal, after laissez-faire policy direction. his death. Executor seeking to evict: no consideration for promise that she could remain in house for life. Executor sues son on a  No right to complain, therefore no consideration promissory note that the son  Ct concerned about commercial integrity of claims is void because he made promissory notes and duress. an agreement with his father that if he stopped complaining the debt was waived. P has obtained by assignment  ―it is of no moment whether such performance an interest against the estate actually proved of benefit to the promisor.‖ being executed by the D for $5000, seeks that money. Claim founded on forbearance of original creditor (giving up smoking, drinking) at behest of testator.  ―the law will not enter into an inquiry as the adequacy [i.e., amount] of the consideration‖  it matters only that the consideration is in amount sufficient to meet the terms of the agreed contract  ―A valuable consideration in the sense of the law

White v. Bluett (UK, 1853; p. 260)

Hamer v. Sidway (NY CA, 1891; p. 261)

Westlake v. Adams (UK, 1858; p. 264)

Currie v. Misa

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(UK, 1875; p. 258, 261)

may consist either in (i) some right, interest, profit, or benefit accruing to one party, (ii) or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.... [it need not] in fact benefit the promisee or a third party‖

B. Past Consideration  ―Past consideration is no consideration‖: logical outcome of the ―bargain theory‖, or ―mutuality‖ Eastwood v. Kenyon (UK QB, 1840; p. 265) Child (Sarah) raised by guardian; guardian borrowed money for Sarah‘s expenses; when she came of age, Sarah promised to pay debt; Sarah married, and husband promised to pay debt; husband did not pay, guardian sued on the debt.  Found: no cause of action.  Denman J.: alludes to ―mischievous consequences‖ if this action allowed: would include a vast uncertainty in the buying and selling of debt.  Ct comment on ―foreseeable detrimental impact on society of permitting a proliferation of preferences‖ seems like a foundation of current accounting.  Transaction requires unity of time.  A voluntary performance will not give rise to a contract, unless that act is in response to a request by the other party, even where there is no contemplation of consideration at the time of that initial request.  The subsequent promise is quantification of the original obligation, not a new one. P contracted to buy a horse  Claim for subsequent warranty as to quality of horse from D. D subsequently said is declined: the term should have been included in the horse was in good the contract if it had been intended. condition.  Note: other ways to deal with untrue representations, Horse upon delivery was not in e.g., criminal fraud per se good condition. P sues for breach of warranty.

Lampleigh v. Braithwait (UK, 1615; p. 267)

Roscorla v. Thomas (UK QB 1842; p. 269)

C. Mutuality  Wholly executory: exchange of future performances, each promise is consideration for the other.  Mutuality (more Canadian and UK concept, like bargaining in US parlance): either both parties are bound or neither Great Northern Railway Co. v. Witham (UK, 1873; p. 273) D made open offer (of  Witham can change the prices at any time, but must unilateral contract) to supply honour prices already ordered (mutuality achieved good to GNR at specific prices for these). within a year, sought to  Offer and acceptance exists for each order. withdraw after getting an order. Action to recover damages for  Term allowing 'subject to a limit of credit and alleged breach of contract determination at any time' lets D out. which P claims resulted from  Delivery of and payment for samples was not partial an order that the D admits it performance or consideration, so because this term placed with the P for delivery voids mutuality, found for D of certain goods. Wood is a manufacturer and Lady Duff-Gordon a fashion  ¶ 2: ―A promise may be lacking, and yet the whole writing may be ―instinct with an obligation,‖

Bernstein v. WB Mfg. Co. (US MA, 1921; p. 276)

Wood v. Lucy, Lady DuffGordon

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(NY CA, 1917; p. 277)

trend-setter whose ―favor helps a sale‖. P claims D has violated agreement by endorsing other products. D responds that the agreement is void as it does not bind P to anything.

imperfectly expressed... If that is so, there is a contract.‖

D. Going-Transaction Adjustments  Adjustments to transactions that modify the terms of an existing contract.  By doctrine, such adjustments are not binding unless they themselves encompass an exchange of promises.  The traditional rule is that without ―fresh consideration‖ a promise to modify a contract is unenforceable. Harris v. Watson (UK, 1791; p. 284) P is a seaman on ship of D. D offered extra pay for extra work on the voyage, when the P noted that the ship was in danger. Similar facts to Harris v. Watson  This might open up potential extortion on the part of sailors, since they hold ships at their mercy—i.e., policy consideration.

Stilk v. Myrick (UK, 1809; p. 285)

 Seamen should stick to the contract they entered into before departing.  Policy still relevant but decision framed as contractual certainty.  Found: P is dishonest (i.e., voluntary agreement had been reached), and so non-suited.  The original contract is actually rescinded and replaced; this is not an amendment to the original contract.

Raggow v. Scougall (UK, 1915; p. 286)

D offers reduced pay to employees as an alternative to closing during war. D to restore original contract upon peace. P and D agreed, executed new contract. P sues for old rate and claims new contract is like old with no new consideration.

Stott v. Merit Investment (Ont CA, 1988; p. 288)

Stott's client loses on gold  Majority finds that Stott got to keep his job and this futures trading and Stott was consideration for his acceptance of debt assumes liability upon client's  Dissent [and TJ] would prefer to rely on Douglas's default. But Douglas (at Merit) assumption of risk on behalf of the company voids intervened in action and Merit's claim and means no consideration: created such loss. forbearance of a non-existing claim is not valid consideration. P's action for damages for breach of oral contract for the supply of steel bars to be incorporated into apartment buildings of D. Supplier is trying to get a positive benefit in this promise.  Wilson J. concerned with economic duress:  Gilbert should have used a price escalation clause rather than leveraging a de facto local monopoly.  'A plaintiff cannot found his claim in estoppel.'

Gilbert Steel v. University Construction (Ont CA, 1976; p. 293)

Williams v. Roffey Bros and Nicholls (Contractors), (UK CA, 1990; p. 301)

Carpenter can't afford to finish  Difference from Gilbert Steel: in this case, both the job for the agreed price, parties saw that the job ended up being more than gets extra money from buyer initially anticipated, where in Gilbert Steel, the who later (after reliance) supplier tried to take advantage of position. reneges on payment of extra  The offer for price increase came from the other side money. in the transaction. P awarded an amount from D,  Found: retain doctrine from Pinnel's Case: ―payment

Foakes v. Beer,

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(UK HL, 1884; p. 308)

agreed she would accept some of a lesser sum on the day cannot be satisfaction for now then payments until all the whole‖ paid; arguably implicitly  Payment of a lesser sum in satisfaction of a whole is waives interest by omission not sufficient, unless there is consideration for the from contract. D paid principal new promise; none in this case. in full, action to recover interest.  The year after Foakes v. Beer was decided, enacted in ON  Other jurisdictions did similarly around same time (e.g., BC, AB, SK, MA)  ―Part performance of an obligation either before or after a breach thereof when expressly accepted by the creditor or rendered in pursuance of an agreement for that express purpose, though without any new consideration, shall be held to extinguish the obligation.‖

Mercantile Law Amendment Act, R.S.O. 1990, c. M.10, §16

E. Contracts with a Third Party Scotson v. Pegg (UK Exch, 1861; p. 312) 5. Reliance as the Basis for the Enforcement of Promises A. Reliance in the Commercial Context Central London Property Trust WWII: low tenancy, so  Landlord awarded back rent to time when property v. High Trees House landlord proposes new lower fully rented out (since that was logical end of new (UK KB, 1947; p. 315) rental rate; following war, promise). landlord goes broke and rights  In obiter, Denning indicates that the P would not and obligations pass to have been successful claiming back rent to start of bankruptcy receiver. P sues for new promise—D had relied on the promise by full rent, D points out that staying in the house. This is the foundation of lower rate had been acted promissory estoppel: thereupon. P argues no Where a promise is offered and another party relies consideration for lower rent. upon it, the offeror is estopped from claiming a lack New promise not supported by of consideration. consideration. A shield not a sword, used in defence only. Hughes v. Metropolitan Railway (UK HL, 1877 ; p. 316) P, landlord of D, was entitled  Found that the subsequent expectation created by the to compel repairs within six P's negotiation interrupted the six months' notice, months of notice. After such granting D additional time to repair. notice, P and D negotiated but  First case of promissory estoppel in that the promise failed to agree to a sale of the implied in negotiation could not be undone by the P. property. When six months passed, P sued for breach and to evict D. Wife sues for arrears in amounts husband agreed to pay (not supported by consideration). Decree nisi (divorce) – then contemplation of maintenanace, then husband promises to pay ₤100, but never does.  Denning backs off broad statement of promissory estoppel, limiting it with the sword / shield distinction  Wife's nominal forbearance to sue in divorce court cannot be consideration because it is a right she cannot waive, thus there's no consideration for the husband's promise and it is not binding—no reliance, since he never paid.  Person A, having made a contract with B to perform, may also use that performance as consideration in another contract with C.

Combe v. Combe (UK CA, 1951, p. 318)

High Trees, as re-interpreted, 'shield':

13 of Error! Reference source not found.

(1)[First Party] ← (Promises && Consideration) → [Second Party] (2)[First Party] – (New promises, no consideration) → [Second Party] = Reliance (3)[First Party] – (Attempt to enforce (1)) → [Second Party] = Promissory estoppel Combe v. Combe, being would-be 'sword': (1)[Promisee / Plaintiff] ← (New promises, no consideration) – [Promisor / Defendant] This doctrine would be a sword in the hand of the plaintiff: attempt to use promissory estoppel in the absence of consideration, where there is no pre-existing agreement. D & C Builders Ltd. v. Rees (UK QB, 1966; p. 323) P do work for D, who doesn't pay in full. Upon trying to collect when in dire financial straits, D offers partial payment in satisfaction of the whole. P sues for whole now. Tudale terminated agreement to extend time for mining rights negotiations, despite verbal agreement for 30 day extension.  Denning J. indicates that partial satisfaction may suffice only where there is true accord, and that isn't found here, sue to economic duress, so  Concurring, Danckwerts J. finds for P, citing Foakes v. Beer  Grange J. follows Hughes v. Metropolitan Railway, and Denning's concept of promissory estoppel, or classic doctrine of waiver.  Brings promissory estoppel to Canada  Note importance of 'true accord'

Tudale Explorations v. Bruce (ON DC, 1979; p. 328)

Walton Stores (Interstate) v. Maher (Aus. HCA, 1988; p. 332)

D demolishes building and  Ct finds that P knew or ought to have known that D builds to P's specs, thinking understood agreement, sees detrimental reliance on a that WS will rent the new promise to enter into a lease. building. WS had never  To depart ―from the basic assumptions underlying responded to agreement (so no the transaction between the parties must be preexisting contract and so unconscionable.‖ (¶ 34) promissory estoppel cannot be  So promissory estoppel allowed as a sword in used as a shield). Australia, though not in Canada, essentially allowing the formation of legal relations. P believes he has increased  Liability for D found because he had started the insurance coverage via agent process of insuring the P but failed to follow through (D) but the agent did not notify with the notifications. the insurers and so the increase is void.

Baxter v. Jones (ON CA, 1903; p. 341)

Sloan v. Union Oil of Canada P offered generous termination  Ct finds that employee can take advantage of early (BC SC, 1955, p. 343) benefit which evaporate when retirement package under terms offered by original D is acquired by another employer. company. Sues for benefit.  An equitable finding of detrimental reliance. McCunn Estate v. CIBC (ON CA, 2001; p. 346) Insurance terminated upon  Majority see this as a mistake on the part of the bank reaching age 70. Premiums (analogy of depositing 1 M$ by accident). continue to be paid beyond  Minority prefers to apply objective test of Smith v. that, since bank didn't notify of Hughes, noting that appeared to be a continuation of cancellation. the bank's offer, since they continued to accept payments. Uncle buys warehouse in  Reliance on Uncle‘s promise is sufficient to enforce nephew‘s name, dies and seller the promise; uncle's estate must pay down the debt. sues nephew for the unpaid portion of the cost of the building. D pledged donation to  Not enforceable – not supported by consideration

B. Reliance in the Non-commercial Context Skidmore v. Bradford (UK Chanc., 1869, p. 355)

Dalhousie v. Boutilier

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(SCC, 1934; p. 356)

university, but did not follow through

 Ct found that the P did not substantially rely on D's pledge

6. Intention to Create Legal Relations A. The Non-commercial Context Balfour v. Balfour (UK CA, 1919; p. 361) Husband promised to support wife while overseas.  Promises between spouses presumed to be unenforceable.  To make an intrafamilial promise binding, put it under seal.

Jones v. Padavatton (UK CA, 1969; p. 363)

Mother-daughter dispute:  Danckwerts: no intention to form legal relations; studying at the bar but not could have used a sealed instrument. making progress per terms of  Salmon LJ.: If there was intention, it was limited to a agreement for daughter's use of ‗reasonable time‘ which had passed. mother's house in London.  In transaction with non-family members, presumption is for legal relations to be formed;  In familial transactions, presumed intention to create no legal relations. Bank is owed money, gets a  A Letter of Comfort is not intended to create a legal Letter of Comfort (LoC) from obligation to repay a debt; the parent company. The bank i.e., it is less than a guarantee then tries to sue on the LoC.  Was not a misrepresentation by Leigh because the Under LoC, bank charges letters said only that Leigh would ensure that the the higher interest than under company would be managed to meet debts, not guarantee, due to higher risk – guaranteeing that it would do so. the bank knows this.  Policy: if court found letter of comfort binding, this eliminates that business tool.

B. The Commercial Context: Letters of Comfort TD Bank v. Leigh Instruments (ON CA, 1990; p. 368)

7. Third-party Beneficiaries and Privity of Contract A. Doctrine of Privity  Only a party to a contract can sue or be sued on a contract. Others are ―strangers‖ to the contract.  Contracts over non-land deal with ―personal rights‖; contracts over land deal with ―real rights‖.  Personal oblig. stick to the people (incl. corporations) whereas real oblig. can follow the title of the land.  There may be an implied collateral contract extending from the manufacturer to the consumer,  especially where a retailer is relies on representations from the manufacturer in selling;  or where the manufacturer has provided information directly to the consumer (e.g., pamphlets).  Where a contract is not found, it may be reasonable for a consumer someone to sue the manufacturer in tort. Dunlop Pneumatic Tyre v. Selfridge (UK HL, 1915; p. 377) P tries to sue D based on the  Only a party to a contract can sue on it agreement between P and a (consideration must be given for the promise) wholesaler (who had agreed on a price for retailers), a party dealing commercially with each of the P and D.  Lord Haldane: ―My lords, in the law of England, certain principles are fundamental. One is that only a person who a party to a contract can sue upon it. Our law [contrast with Scots law or Civil law jurisdictions] knows nothing of a jus quaestitum tertio arising by way of contract.‖  Also: in order to enforce a contract, consideration must have been given by the promisor.

Tweddle v. Atkinson (UK QB, 1861; p. 377)

15 of Error! Reference source not found.

Scruttons v. Midland Silicones Consignor (shipper) → Carrier  Court finds strictly in privity that stevedores are not (UK AC, 1962; p. 378) (transpo company; hires party to the contract and their liability is not limited. stevedores) → Consignee  Policy: effect was to encourage double insurance, (buyer). where most efficient would have been for shipper to Bill of lading, as a contract, insure, knowing the value best. excluded liability for the  Led to use of Himalaya clauses = a term on a bill of carrier, but didn't mention lading to expressly extend a limitation of liability to stevedores, who end up third parties [employees], such as stevedores damaging the product. (from Alder v. Dickson, The Himalaya) Stevedores claimed exemption in Bill of Lading. B. Exceptions to the Doctrine of Privity (i) Agency (agent acting for principle, even where undisclosed) (ii) Assignment (debt is re-assigned across parties) (iii) Trust (a Trustee agrees to hold assets in trust for another) (iv) Employees (subject to 'London Drugs Test') (v) Collateral Contract (Collateral contract between A and C, consideration for which was the instruction to B, given in reliance on representation by C) New Zealand Shipping v. A.M. Stevedore damaged a drill, is  Carrier is agent in communicating unilateral offer to Satterthwaite sued by consignee. Which of stevedores, who accept by performance. (UK PC, 1975; p. 381) two insurers will bear the loss?  Held that the stevedores had provided consideration Shipper or stevedores? for the benefit of the exclusion clause by the discharge of goods from the ship.  The stevedores also do that as a part of their employment, but one performance can satisfy promises to more than one party (employer, consignee) Greenwood Shopping Plaza v. Two welders working on  Court finds privity in Can Tire's agreement with Beattie contract for Canadian Tire landlord, finds full liability for welders. (SCC, 1980; p. 384) torched the place. Can Tire‘s  At odds with New Zealand Shipping, since welders landlord sued the welders. Can seem just as much agents as stevedores. Tire covered by insurance, but welders not covered. London Drugs v. Kuehne & Nagel (SCC, 1992; p. 385) P stored a transformer with D,  Policy: don't want to encourage parties to sue two employees of which minions and employees directly in commerce. caused great damage to it.  Employees can fit within (relaxed) privity due to identity of interest with the employer (explicit party to the contract)  Enables employees to enjoy limitation of liability where: (i) such a clause is explicit or implicit in the governing contract; (ii) the employees were working in the course of employment.  Tenant's employees are found to be covered by the limitation that the employer agreed in contract with the landlord.  Note: leave declined on appeal to SCC.

Laing Property v. All Seasons Christmas display in mall Display catches fire; landlord is (BC CA, 2000; p. 399) covered by insurance, which extends to the employees responsible for the fire

16 of Error! Reference source not found.

8. Excuses for Non-performance A. Express Conditions and the Waiver Thereof Dynamic Transport v. OK P (buyer) of land from D Detailing (SCC, 1978; p. 556) claims specific performance after D doesn't transfer land.  Found for P, seeing condition precedent that the D would subdivide the land, since only a seller can do so (there, then).  D under duty to perform toward that end in good faith, to complete the sale

Turney v. Zhilka (SCC, 1959; p. 563)

D agreed to buy land from P  Where a third party has the discretion in the with a condition precedent that condition precedent, it cannot be waived even when the land would be annexed to a it is solely to the benefit of one party. nearby town, a matter in the  A future uncertainty makes this a 'true condition town's hands. precedent' which neither party may waive. P agreed to buy land from D  Found for P; the mortgaging term is for the P (if any) for 15.5 k$ with condition to waive and they may do so. precedent that P be able to find  Not a pure externality intruding on contractual mortgage of 10 k$ + second of situation as in Turney. 2.5 k$; P actually secured mortgage of 12 k$; D cites condition, stops sale. P agrees to purchase land from  This is, like Turney, a situation of a 'true condition D, term stipulates condition precedent' and thus it may not be waived. precedent that involves effort  So Turney remains 'good' law, with some statutory by P but decision by overrides (e.g., in BC). municipality.

Beauchamp v. Beauchamp (ON CA, 1973; p. 564)

Barnett v. Harrison (SCC, 1975; p. 565)

B. Implied Conditions Ontario Sale of Goods Act, R.S.O. 1990, S1, § 12-15

12. (1) Where seller fails on a condition, buyer can choose to waive the condition,
to see it as a breach of warranty or to see it as a repudiation. (2) Whether a term is a core condition or a warranty is determined by construction, whatever it might be labelled in the contract. (3) By default, an unseverable contract wholly or partially filled, or a contract for a specific good or property filled, breach of a condition by the seller is treated as a breach of warranty. (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. 13. By default in contract of sale: (a) an implied condition on the part of the seller that in the case of a sale the seller has a right to sell the goods, and that in the case of an agreement to sell the seller will have a right to sell the goods at the time when the property is to pass; (b) an implied warranty that the buyer will have and enjoy quiet possession of the goods; and (c) an implied warranty that the goods will be free from any charge or encumbrance in favour of any third party, not declared or known to the buyer before or at the time when the contract is made. 14. Upon sale by description, there is an implied condition that the goods will correspond with the description. If there is also a sample, still must meet description, not merely match sample. 15. No implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except: 1. Where buyer makes known particular purpose and the buyer relies on the

17 of Error! Reference source not found.

seller‘s skill or judgement, and the goods match the seller‘s business (whether seller is the manufacturer or not). 2. Where bought by description from a seller who deals in such goods (whether the seller is the manufacturer or not), there is an implied condition that the goods will be of merchantable quality, but if the buyer has examined the goods, there is no implied condition as regards defects that such examination ought to have revealed. 3. An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. 4. An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. Hongkong Fir Shipping v. Kawasaki Kisen Kaisha (UK CA, 1962; p. 575) Charterparty for 5 a, to take  HL says innominate term: was not or could not be ore to JP, takes 6 months settled to be condition or warranty at formation, and instead of 6 weeks to arrive on so await damage, and then determine an appropriate a trip. Upon arrival, owner remedy. (Intermediate between condition and patches up and re-staffs vessel, warranty.) lessor said that the  Here see damages to date, and warranty onwards. seaworthiness of the vessel  Policy: don't want to allow easy out from contract to was a condition, the owner match market vagaries, so stuck. said warranty. D hired P to auction off assets.  Found: several factors guide determination of if P failed to deposit initial breach is substantial enough to void contract: proceeds (100 k$) to a joint (a) ratio of obligation not performed to total; account as agreed and pursued (b) seriousness of breach to innocent party; actions in breach of fiduciary (c) likelihood of repetition of the breach; duties. Is Vernon entitled to (d) seriousness of the consequences of breach; have repudiated remaining (e) relationship of part performed to the whole. elements of contract?  Here, the missing funds are big enough in context of whole contract to excuse D.  If a party is found untrustworthy, termination on grounds of repudiatory breach is likely justified. Bank error caused the final payment for the purchase of a boat to be late. Seller claimed this as repudiation on the part of the buyer and thus claimed termination of the contract. Buyer sued for specific performance.  Found: this was not a substantial breach since the timing of one payment is not the core of the contract.

968703 Ontario v. Vernon (ON CA, 1999; p. 581)

Sail Labrador v. “Challenge One” (The) (SCC, 1999; p. 583)

C. Anticipatory Repudiation Hochster v. De La Tour (UK QB, 1853; p. 588) D agrees to engage P as  Found: If it is clear that the other party will not be courier in specific future work, able to comply, then can sue now for nonbut then says in advance that compliance. will not need agreed services. Parties agreed to marry after death of P's father; before her father dies, D repudiates agreement.  Found: Anticipatory breach works in favour of innocent party by creating an option of which they need not avail themselves.  In this case, claiming sooner decreases damages because the sooner P claims, the more marriageable she remains (thus less damage to her interests).

Frost v. Knight (UK Exch, 1872; p. 590)

18 of Error! Reference source not found.

Part II – Interpretation of Contracts I. The Basic Rules Federal Commerce & Navigation v. Tradax Export SA (The “Martha Envoy”) (UK HL, 1977; p. 619) Ship owner lets a ship to a  Found: the market is competitive and thus expects to charterer in a charterparty. see that the cost of the risk is built into the pricing of Demurrage are days beyond the contract implicitly (i.e., charterer pays shipowner ―lay‖ days (the usual days to more if shipowner bears risk, to be assessed against unload a ship). Traffic market pricing) congestion in shipping is a common ―misfortune risk‖. In this case, who bears the cost of demurrage? Child burns insured house  Majority sees a clear exclusion of the acts and thus down. Insurance won't pay out the damage in this case, so no insurance payout. because (i) the terms of Strong policy-brought exclusion of benefits from insurance contract exclude ones own wrongdoing. damage that results from  Minority looks to the overall intent of the parties in illegal actions on the part of the insurance contract, seeing several coverage (each the insured and (ii) the terms insured is barred from profiting from their own define the insured to include wrongdoing, but the other co-insured can benefit) dependents under the age of instead of joint coverage (all insured parties treated 21. as a unified whole).  Minority quotes Estey J. from another case: 'normal rules of construction lead a court to search for an interpretation which would appear to promote or advance the true intent of the parties at the time of entry into the contract'  Note contra proferentum: where the wording is ambiguous it will typically be construed strictly against the party who drafted it and who seeks now to rely upon it.

Scott v. Wawanesa Mutual Insurance (SCC, 1989; p. 620)

II. The Parol Evidence Rule  'can't bring in external evidence' to seek intention of the parties where a written document is evidence of the contract (i.e., the document, by definition, specifies the intent of the parties).  Often these days, a term will be included in the contract that the written document is the whole contract. Lampson v. City of Quebec (CA PC, 1920; p. 629) Eli Lilly v. Novopharm (SCC, 1998; p. 629)  Lord Atkinson: 'that intention by which the deed is to be construed is that of the parties as revealed by the language they have chosen to use in the deed itself'  Strictly put, per Iacobucci, because of the parol evidence rule, it is 'unnecessary to consider any extrinsic evidence at all when the document is clear and unambiguous on its face'  He notes that it would be absurd to ignore the commercial interests of the parties, but expects that the meaning should be readable from the text, if the parties intended their words' legal consequences Creditor (D) failed to perfect, thereby increasing debt owed by guarantor. Anything that a creditor does to increase the risk on the guarantee of the  Found for BMO: strict adherence to construction of the contract: despite that BMO intended to perfect their interest in the debt, that they didn't does not void their claim to Bauer because their contract with

Bauer v. BMO (SCC, 1980; p. 631)

19 of Error! Reference source not found.

guarantor will release the guarantor from their obligations, but BMO claims benefit of term in contract. Gallen v. Allstate Grain (BC CA, 1984; p. 635)

the guarantor explicitly permitted them to fail to perfect the debt.

P bought grain seed from D  Court notes exceptions to strict application of parole after receiving oral assurance evidence rule, offers a list of situations in which that the product would smother extrinsic evidence should be admitted (e.g., to weeds, which did not occur. support a collateral agreement, to dispel ambiguities) The contract specified that D  Parol evidence rule thus amounts to a presumption in did not warrant the crop. favour of the written agreement, nothing more.  Here court find oral assertion was a warranty. Difference of opinion about  Where the document is ambiguous, the courts will when the contract for look to the surrounding circumstances. management of the 'Mature  Lord Wilberforce quoted: 'no contracts are made in a Outlook' programme could be vacuum' (contrasted with omission of evidence from terminated: P: with 120 days beyond the contract). notice before the end of any 1a term; D: with 120 days notice.

Hi-Tech Group v. Sears Canada (ON CA, 2001; p. 646)

III. Misrepresentations and Warranties 1. Representations, Conditions and Warranties  (mere) puff: sales talk—typically not actionable, i.e., no remedy;  representations: statement of fact—party receiving this should be able to rely on it, but it's not typically a part of the contract, not a statement of future performance; when wrong:  innocent (remedy: rescission of the contract),  fraudulent (remedy: termination and can sue for tort of deceit with likely significant damages (in tort)),  negligent in the middle but relatively new (remedy: tort);  opinion: no particular expertise—reasonable person would not rely on this—typically not actionable;  [expert opinion: professionals are more likely to be 'on the hook' for their utterances;]  warranty: a representation that something will occur in the future—thus, a promise of future performance; not a term, or may be collateral (an 'independent promise')—breach one one side will not absolve the other side of their commitments, although that side can sue for damages;  condition: an essential term, at the root of the contract, was bargained for in essence (a 'dependent promise', tied to the promise(s) going the other direction in the contract); a breach of such a term means that the other party isn't getting that for which they bargained, which might be termed a fundamental breach—party suffering from the breach doesn't need to perform and can sue for damages (after taking mitigating steps). A. Innocent Hongkong Fir Shipping v. Kawasaki Kisen Kaisha (UK CA, 1962; p. 575) Charterparty for 5 a, to take  HL says innominate term: was not or could not be ore to JP, takes 6 months settled to be condition or warranty at formation, and instead of 6 weeks to arrive on so await damage, and then determine an appropriate a trip. Upon arrival, owner remedy. (Intermediate between condition and patches up and re-staffs vessel, warranty.) lessor said that the  Here see damages to date, and warranty onwards. seaworthiness of the vessel  Policy: don't want to allow easy out from contract to was a condition, the owner match market vagaries, so stuck. said warranty. As above. 7.

Ontario Sale of Goods Act, R.S.O. 1990, S1, § 12-15 Consumer Protection Act,

20 of Error! Reference source not found.

2002, S.O. 2002, c. Sched. A., § 7, 9

     9.

No waiver of substantive and procedural rights, despite any such agreement Limitation on effect of term requiring arbitration: must allow court action Procedure to resolve dispute: may use any procedure available in law Settlements or decisions: as binding as if this statute were not involved Non-application of Arbitration Act, 1991

 Quality of services: supplied deemed to warrant reasonably acceptable quality  Quality of goods: implied conditions and warranties from Sale of Goods Act are deemed to apply  Cannot void the Sale of Goods Act in a consumer transaction  If a term specifies contravention of Sale of Goods Act, it is severed and void

2. Misrepresentations A. Innocent Redgrave v. Hurd (UK Chanc, 1881; pp. 658) In P's sale of his solicitor's  Court finds innocent misrepresentation: rescission. business, asserts it brings in  Note that only options then were fraud and innocent 200 £ per year, but upon taking misrepresentation: would have been difficult for D to possession and partial ascertain truth of the matter, so would likely have payment, D finds it does not been difficult to prove fraud, but action doesn't seem and refuses to complete. P sues so innocent for specific performance.  Rescission gets D his payment back, but not reliance.  Fraud: 'false representation must have been made knowingly, or without belief in its truth, or recklessly, careless whether is be true or false'

B. Fraudulent Derry v. Peek (UK HL, 1889; p. 659)

3. Collateral Contracts  A contract between two parties may be accompanied by a collateral contract between one of them and a third person relating to the same subject-matter. Heilbut, Symons v. Buckleton, 'I understand you are bringing (UK HL, 1913; p. 661) out a rubber company.' Dick Bentley Productions v. Harold Smith Motors (UK CA, 1965; p. 666)  Court finds no collateral contract: high hurdle.  Note that there was no negligent misrepresentation then, so court was forced into innocent or fraudulent

Dealer (D) sells car saying that  A statement intended to induce another party into a it has only 20 k miles on it, but contract with the party making the statement, that in reality it has 100 k. does so will be considered a warranty.  Need to look beyond the written instrument and work around the parol evidence rule.  Again, before advent of negligent misrepresentation. P bought harvester, relying on manufacturer's promotional brochure. Harvester underperforms.  Privity of contract is relevant here. No problem to find dealer liable, but manufacturer tougher.  Finds warranty: a collateral contract that induced P into contract with dealership: affirmations of future performance instead of just facts  Implied term that goods will conform to their description

Murray v. Sperry Rand (ON HC, 1979; p. 673)

Shanklin Pier v. Detel Products (UK KB, 1951; p. 676)

P employed contractors to  Found: P can sue D on a collateral contract, having paint a pier, told them to buy provided consideration for the D's promise via paint made by D, who had said agreement with the contractors, entailing purchase of that paint would last for 7 a. It the D's paint lasted only three months.  Must be an intention to create a collateral contract

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before that contract can be formed. Fraser-Reid v. Droumtsekas (SCC, 1980; p. 668) P bought a completed house from D, a builder. Sale document stated that house met municipal rules, but it did not, and it flooded.  Express warranty is found here against the construction company.  Warranty must be a collateral undertaking forming part of the contract by agreement of the parties, express or implied, and must be given during the course of the dealing which leads to the bargain and should then enter into the bargain as part of it  Contract is invoked to find manufacturer (co-D, in this case) liable by vertical privity due to a latent defect in the product.

4. Warranties and the Doctrine of Privity McMorran v. Dominion Stores Carbonated drink bottle (ON HC, 1977; p. 683) exploded, injuring P's eye.

Sigurdson v. Hillcrest Service Defect of brake hose could not  No negligence (of installation) because of latent (SK QB, 1976; p. 684) be seen by mechanic (D) upon defect (by definition, latent defect cannot be seen installation, caused accident upon reasonable inspection), so no tort. and injury (to Ps).  Contract liability limited to the one of the three Ps that actually purchased the goods: breach implied by Sale of Goods Act§ 15(1) [fitness for purpose], so manufacturer liable to defendant ('vertical privity') Winnipeg Condominium v. Bird Construction (SCC, 1995; p. 685) Cladding falls off building,  Held: liability extends beyond the first purchaser— second purchaser sues danger of the defect is highlighted in this case, so construction company, despite would it extend to non-dangerous defects? that the contract was between  In this case, pure economic loss claimed in tort is the builder and the initial limited, but allowed: tort as an alternative where owner only. strict privity would be unjust? Parent companies own a joint subsidiary, which contracts with a maintenance company. The subsidiary burns down using a supplier's product and the parent companies want to recover from the maintenance company, but are barred by privity. Sue maintenance company and supplier in tort.  Majority: exclusionary clause covered duty to warn (can contract out of tort liability)  Minority: exclusionary clause should be conveyed strictly; did not include duty to warn; Bermuda was contributorily negligent (60%)  Principle of avoidance of ―liability in an indeterminate amount for an indeterminate time to an indeterminate class‖ per Cardozo C.J. is invoked as a policy argument to void liability to parent companies in 'contractual relational economic loss', so:  Economic loss of third parties that contracted with an innocent party that was negligently harmed by the party it had a contractual relationship with will not be compensated.

5. Boundaries of Tort and Contract: Contractual Relational Economic Loss Bow Valley Husky (Bermuda) v. Saint John Shipbuilding (SCC, 1997; p. 687)

6. Negligent Misrepresentation Esso Petroleum v. Mardon (UK CA, 1976; p. 709) Representation made by expert  Majority found: would find breach of warranty, trial provided by P prior to contract judge did not, so: formation about how much  Negligent misrepresentation: petrol would be sold induced D ~If one has or professes special knowledge or skill to enter into the contested and makes a representation by virtue thereof to contract. another with the intention of inducing that party to enter into a contract, one is under a duty to use reasonable care that the representation is correct.

22 of Error! Reference source not found.

VK Mason v. Bank of NS (SCC, 1985; p. 715)

D assures P that if they invest  Brings negligent misrepresentation to Canada in third party, they will be paid  Test for negligent misrepresentation: through third party's loan with (i) there must be an untrue statement, the bank. Third party goes (ii) it must have been made negligently, bankrupt; the bank won‘t (iii) there must be a special relationship giving rise to release money. No contract, so a duty of care, and P sues in tort on their (iiii) there must be reliance which is foreseeable. negligently-made assurance. Bank falsely, carelessly  Despite that the bank's letter had specifically misrepresented the finances of disclaimed the problem that arose, from the point of D, and relying on that, P lent view of the P, only the bank had information about money. the financing situation, so finds negligent misrep. P installed burglar alarm,  Limitation on negligent misrepresentation: where getting inexpensive insurance. risks are allocated in the contract, the tort claim of Like alarm circumvented at negligent misrepresentation is barred another business; P was  The assurance was given negligently, but must be assured by D that alarm okay. independent of the contract to fuel tort liability P induced to move to Ottawa for employment by D along with oral assurance of at least two years' work. One month in, D terminates, following written contract terms. So breach seems a stretch; maybe use oral statement.  Exculpatory clause cannot be used for precontractual representations and will not protect D from negligent misrepresentation .  Independence arises in one of two ways: (i) made to person who is not a party to the contract (may be negligent misrepresentation), or (ii) duty owed by D is independent of the contract  Where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negate the right to sue in tort.  Adopts rule of Rafuse, above, to Canada.  I.e., concurrent liability allowed.  Test for duty in negligent misrepresentation: (i) is there a duty of care, (ii) if so, should the scope of that duty be limited by policy concerns? [Anns/Kamloops Test]  Again, Cardozo's expression of the concerns about indeterminacy of liability in: amount, time, class.  Here, policy concerns void liability of auditor (D).

Keith Plumbing & Heating v. New Port City Club (BC CA, 2000; p. 723)

7. Negligent Misrepresentation and Concurrent Liability J. Nunes Diamonds v. Dominion Electric Protection (SCC, 1972; p.725)

Queen v. Cognos (SCC, 1993; p. 726)

Central Trust v. Rafuse (SCC, 1986; p. 728)

BG Checo v. BC Hydro & Power Authority (SCC, 1993; p. 729) Hercules Management v. Ernst Auditors (D) negligently & Young misrepresented status of third (SCC, 1997; p. 731) parties with whom it had contracts. P relied on these auditing reports to its detriment. IV. Techniques of Control 1. Contracts of Adhesion and Inequality of Bargaining Power Parker v. South Eastern Railway, (UK CA, 1877; p. 847)

Action against the D for the  Exculpatory clause will be incorporated iff: value of a bag and its contents (i) party knew or ought reasonably to have known (24 £) lost by the negligence of that the clause would likely be there, the D's employees. Back of (ii) or if reasonable notice of the clause is given ticket from D said 'no claims  Reasonability of notice depends on greater than 10 £'. (a) the nature of the clause (more unusual requires

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Not a signed contract.

more, clearer notice), and (b) the degree of notice (is the exempting condition set out prominently on the face of the ticket, or referred to prominently? unlikely to be incorporated if there are no such words)

Heffron v. Imperial Parking (ON CA, 1973; p. 853)

Parked car, paid rate, left keys  D cannot rely on exemption clause because this is a a in car as told. Ticket said 'no fundamental breach, so normal bailment rules apply liability for theft or damage'.  Burden of proof: insufficient to claim ignorance of what happened. Must show loss (i) not the fault of the bailee, and (ii) not due to negligence  D prefers to see license to park over bailment  Bailment: owner retains legal title of goods but hands over possession either gratuitously or for value; if goods cannot be returned at end of bailment the bailee is assumed to be liable unless shows that took all reasonable steps/due care to return goods in same form.  Licence: not a contractual relationship; permission to do something which would otherwise constitute a trespass; no liability

Thornton v. Shoe Lane, (UK QB, 1971; p. 857)

P parked in lot operated by D with sign 'All cars parked at owner's risk,' ticket refers reader to terms posted on premises. P injured in elevator, sues.

 P had insufficient notice of the D's intention for P to waive rights in contract to park—terms would have needed to be made clear upon getting the ticket, not later.  Red hand pointing toward exemption clause needed

2. Signed Contracts and the Doctrine of Fundamental Breach (1) Rule of law: operates regardless of the intention of the parties – if there has been a fundamental breach, the exculpatory clause dissolves (2) Rule of construction: Ct must examine the contract as a whole to see whether, on its true construction, an exculpatory clause applies to the instant case, fundamental breach or not (3) Wilson J. in Hunter: substantive test of reasonableness L'Estrange v. Graucob (UK CA, 1934; p. 860)  A person who signs a contract will be bound by its terms even if they did not read them.  (For commercial contracts only, where the parties had the time to read the contract.) Cheap, negligent security  Rejected: Rule of Law approach would be that the guard set fire to premises being contract dissolved and the clause with it and that guarded. Securicor's contract Securicor is liable. had an exculpatory clause.  Rule of Construction approach: parties bargained for this position, so stuck: D charged less for security had exculpatory clause, so P should have bought insurance  Canadian adoption of Rule of Law approach to doctrine of fundamental breach, despite noting Rule of Construction approach in decision.  Fundamental breach is a rule of construction and not a rule of law, as adopted in Canada.

Photo Productions v. Securicor Transport (UK HL, 1980; p. 864)

Beaufort Realties v. Chomedy Despite agreement to not do Aluminum so, D filed a mechanics lien (SCC, 1980; p. 868) against the P's property. Hunter Engineering v. Syncrude Canada (SCC, 1989; p. 871) Plas-Tex v. Dow Chemicals (p. 702) Machine broke down after warranty expired: supplier not liable, because of exclusion warranties. D manufactured resin used by P in pipe-manufacture for use

 Found: improper to add a term to cover a major defect that is known to the inserting party.

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by P and others in P's group.  Strikes out limitation of liability clause on policy Resin had a defect which grounds: the unconscionability of the D's actions rendered pipes hazardous. D warrants a removal of limitation of liability was aware of defect at time of  D's actions amount to a breach of fundamental terms contracting, P was not. D of the contract. inserted limited liability clause to protect against defect. 3. Signed Form Contracts and Inequality of Bargaining Power McCutcheon v. David Macbrayne (UK HL, 1964; p. 889) Farmer takes ferry a number of  Burden on the ferry to show that P did understand times, never reading ―three or the contract. four thousand words‖ terms  The pattern of the transaction creates a situation in and conditions. which is it reasonable that the contract has not been read or understood (would create a huge queue for the ferry as people read the contract before signing it each time). D may even expect no one reads it. D took extra insurance, exclusion clause on back of rental insurance contract excluded driving when intoxicated, accident occurred when he was intoxicated. D had relied on an oral assertion from P that there were no terms that he needed to know.  Found for P on weight of oral assurance.  In commercial context, harsh rule of L’Estrange may be fine, but not in consumer context  P should draw these terms to the attention of the other party (red hand)

Tilden Rent-a-Car v. Clendenning (ON CA, 1978; p. 895)

978011 Ontario Ltd. v. Cornell Commercial context; signed document without reading it. Engineering (ON CA, 2001; p. 903)

 Termination provision was clear and visible, and it was only P's precipitous act in signing without reading that gave rise to his mistake  Five factors might justify reliance (might need more than one): (i) past dealings in which reliance was accepted, (ii) explicit assumption of advisory responsibilities, (iii) relative positions of the parties in understanding, (iiii) manner in which parties were brought together, the expectation that could create in the relying party; (v) whether 'trust and confidence' has expressly been placed by one party in the other.

Part III – Remedies I. Damages Three heads of damages: (a) punitive (rarely awarded in contract law), (b) expectation (to take P to position as if the contract had been performed), (c) restitutionary / reliance (generally to take P to position as if the contract had not been entered). Also note specific performance, not a type of damage per se. Expectation in contract law relates to the expectations that were voluntarily created through the contract; in tort law, expectation arises, but is not interfered with in a voluntary manner (e.g., expectation of wages). To sustain expectation damages, injured party typically must (i) prove existence of contract, (ii) assert that breach has occurred, (iii) prove the injury as a direct result of the breach, and (iiii) value the expectations with proof. 1. The Compensation Principle Wertheim v. Chicoutimi Pulp  Complainant should, so far as can be done by

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(CA PC, 1911; p. 5)

money, be placed in the same position as he would have been in if the contract had been performed.

2. Quantification of Value Expectation: Two bases of assessment: (a) difference in value, (b) cost of performance / cost of cure. To an extent, depends on nature of property at issue: goods (prima facie difference in value) vs. building/land (prima facie cost of the cure). (loss of bargain) = (gains prevented) + (losses suffered) – (costs avoided) – (gains made possible) Peevyhouse v. Garland Coal (Okla SC, 1963; p. 6) D strip mines the land; clause  Damages are to be measured by the cost of in contract that they would put completing performance, unless that cost is vastly the P's property back as they disproportionate to the value to be derived there found it. from (unjust enrichment).  Policy: cost of specific performance is greater than the value of the award, and so choose damage instead of specific performance  Minority holds that the D acted wilfully and not in good faith and the cost of performance was factored into the contract, and courts should not rewrite the contract and the contract is clear and unambiguous and thus should be upheld. [prefer this]  Measure of damages here was the cost of performance (minority view from Peevyhouse) D (owner) contracted with P  Introduces loss of amenity: paying a reasonable sum (builder) for a pool in his back for the loss suffered the other party. garden. Built too shallow.  Damages are designed to compensate a loss not to provide a gratuitous benefit to an aggrieved party or punish the D for breach.  If the cost of reinstatement outweighs the need to reinstate, it is unreasonable to award the cost of reinstatement. D contracted with P to buy a  Court relies market conditions to assess damages: car and then reneged. P sues analysis of supply and demand as evidence to assess for commission on lost sale, D whether or not the P would have sold two cars in claims that since P sold the car reality or not: per court, if demand exceeds supply, to another, no damages are then P could not have found a second vehicle from warranted. P claims that could manufacturer to sell... if demand is met with supply have sold two. to spare, then P could have found and sold a second car given the second customer. Carrier delayed in taking shaft  Special circumstances: ―where two parties have from Mill for repair. Mill sues made a contract which one of them has broken, the for lost profits as result of damages ... should be such as may fairly and shutting down mill for days. reasonably be considered [limitations on damages]: (i) arising naturally in the course of things; (ii) such as may be reasonably have been supposed by the parties (i.e., special circumstances will need evidence of communication so that the

Groves v. John Wunder Co. (US-Minn, 1939, p. 7 at ¶ 11) Ruxley Electronics and Constr. v. Forsyth (UK HL, 1996; p.20)

Victory Motors v. Bayda (Sask DC, 1973; p. 25)

3. The Scope of a Damages Award: Reasonable Contemplation Hadley v. Baxendale (UK Exch, 1854; p. 49)

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party bearing the risk can be shown to have agreed to bear it. Victoria Laundry v. Newman (UK CA, 1949; p. 55) P getting boiler replaced; told  D liable for only loss of profits as might reasonably D that boiler required ASAP; have been expected to be earned in the normal boiler damaged before course of their laundry business delivery, took 20 weeks to get  Here, this includes laundry and dying business that it in place; P lost very lucrative could be reasonably expected, but not the missed dyeing contracts as well as the lucrative dyeing contract normal business, so sues for loss of profits during delay P contracted with D for shipment of sugar. Delay in delivery, meanwhile market does down; shipper sued for lost profit.  Found: loss of profit claimed in this case was not too remote to be recoverable as damages  Overrules Victoria Laundry, allowing claims for things that might happen (real chance), not requiring strict probability.  Policy: argument for different standards in contract vs. tort: contracting parties may direct attention of other party to unusual risk, before the contract is made. Voluntariness supports argument for higher threshold

Koufos v. Czarnikow (The Heron II) (UK HL, 1969; p. 57)

3. The Appropriate Measure of Damages Anglia Television v. Reed (UK QB, 1972; p. 68) Preparatory outlay by film  Innocent party must elect between: company. Lead actor, D, after (i) costs incurred (reliance damages) or signing, repudiated. (ii) loss of profits (expectation damages). P could not prove the potential  Reliance damages more typically awarded where gains (the actual amount damages are speculative prevented by the breach) but can claim reliance losses that occurred before the contract because it was in the reasonable contemplation of the parties when signing. Tender delivered late by D, despite that special circumstances (deadline) communicated by P to D. P would have been awarded contract and made material profit. P's fortnight-long jaunt to Switzerland was not fun as expected based on brochure from D. P sues for insufficient notice on dismissal.  Purolator is liable.  Response of courier companies is to start limiting liability more directly in contracts.

Cornwall Gravel v. Purolator Courier (ON HCJ, 1978; p. 78)

4. Lost Enjoyment and Non-economic Interests Jarvis v. Swan's Tours (UK CA, 1973; p. 92)  Compensated for his loss of enjoyment, beyond strict cost of the tour.

5. Employment Contracts and Aggravated Damages Bardal v. Globe and Mail (ON HCJ, 1960; p. 99)  Length of notice must be decided case by case on basis of:  Character of employment  Length of service

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 Age of employee  Availability of similar employment  Experience training and qualifications of employment Vorvis v. Insurance Corporation of BC (SCC, 1989; p. 99) Solicitor dismissed, following period of harassment and humiliation by senior.  Note difference between aggravated damages (essentially compensatory and non-economic on top of expectation damages, e.g., for mental distress) vs. punitive damages (court denounces, essentially 'fining' the claimant).  Majority: need independent ―actionable wrong‖ for aggravated damages or punitive damages (may be possible in contract, but rare); court seeks to keep distinction between contracts and torts

Wallace v. United Grain Growers (SCC, 1997; p. 102)

P left previous job because told  Noting the common power imbalance between this one would last until employers and employees, ct moves to protect retirement; abruptly dismissed. vulnerable employees  Company acted in bad faith and unreasonably during the dismissal, so courts awarded additional aggravated damages based on mental anguish suffered. House catches fire, family  Falsity and extremity of insurer's actions lead court escapes but pets killed. invite court to denounce actions. Insurance company refused to  Punitive damages contrast with unconscionability. pay out, claiming (falsely) that Latter usually arises in business to consumer insured set fire to house situation, typically when P has engaged in the herself. impugned behaviour, and so is raised as a defence (typically to explain why the D did not perform). Punitive damages would be more likely invoked where the D is doing sketchy stuff, not the P. 

6. Punitive Damages Whiten v. Pilot Insurance (SCC, 2002; p. 123)

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