contracts can

8/13/2019 Contracts Can

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1. Offer vs Invitation to treat2. Knowledge of offer vs response to an offer3. Acceptance vs communication of acceptance4. Requirements of termination of an offer

a. Revocationb. Reasonable timec. Rejection v counter offerd. Conditional offer

5. Bilateral vs unilateral offer6. Certainty of terms

a. Indefinitenessb. Incompletenessc. Agreement to negotiate

7. Clausesa. Subject to contractb. Conditional contracts

i. Conditions precedent to formation vs conditions precedent to performanceii.

Waiver of conditions8. Enforceability of agreements

a. Intention to create a legal relationshipi. Family, domestic + social agreements

ii. Commercial agreementsb. Consideration

i. Bargain vs gratuitous promiseii. Past consideration is no consideration

iii. Pre-existing legal duty vs pre-existing practical dutyiv. Promise to pay more than is duev. Promise to accept less than is due

vi.

Modernization of the doctrine of considerationc. Promissory estoppeld. Privity

ELEMENTS OF A CONTRACT

General Notes

1. Implied v express terms2. When can we use the reasonableness standard?3. Nature of consideration4. The courts are slow to invalidate a contract for uncertainty where the parties have agreed workablecriteria (a formula, objective standard or machinery e.g. arbitration) for resolving the matter leftunresolved. If the parties fail to agree or if their designated machinery for ascertainment breaks down,the court may be able to step in and apply the formula/standard. They can do so unless the designatedmachinery is essential (i.e. they werent content to leave the task to the court or another 3rdparty anddont intend to be bound unless the gap is filled by their stipulated machinery)5. Terms: ad idem (meeting of the minds), quantum meruit (as much as it is worth), non est factum (aplea used, when a party mistakes the terms of the contract), res ipsa loquitur6. Offers dont last forever. If they arent accepted, they cease to exist through: revocation, lapse of time(offers stand for a reasonable time. Courts determine this by looking at market volatility, industrystandard etc), death/insanity, rejection, counter off


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7. Option: a contract in which the offeror is paid in exchange for a binding promise to hold an offer openfor acceptance for a specific period8. Firm offers can be revoked at any time (because there is no contract yet and nothing is legallyenforceable). However, a firm offer cant be revoked if the promise was placed under seal or if it was anoption.9. Tenders: offer to undertake a project on particular terms.10. Battle of the forms: when each party claims to have entered into a contract on the basis of its ownstandard form document.

11. Executed (already performed) vs executory (not yet performed)12. Bilateral contract (when a promise is exchanged for a promise) vs unilateral contract (whenan actisexchanged for a promise)13. Unilateral contracts:a. no contract exists until the offeree fully performs (and an offeror can revoke at any timethis createspotential problems)b. Offeree must have intention of accepting the offer (cant gain the benefit simply be fulfilling thecontract by accident)

1. Offer versus Invitation to Treat

Notes:i. Invitation to treat: not an offer but an indication of a willingness to receive an offer. Distinction

between an invitation to treat and an offer = an objective test (reasonable person).

ITT OfferGrantCanadian Dyers

CarlillGibson

Lefkowitz

Goods on display Giving it to cashierBoots v Pharm ITT OfferR v Dawood ITT Offer

Sanchez Lopez Offer Acceptance

Grant v Province of New Brunswick

Offer vs invitation to treatPotato farmer

Grant responds to a govt scheme for the purchase from farmers of excess potatoes, which set out certainterms and conditions for qualification. Grant followed all terms and conditions and his potatoes weredestroyed but the govt refused to pay him on the ground that there was some question as to whether thepotatoes were truly his. To avoid the contract, the govt claimed that the application to be filed out by thefarmers was not an offer to purchase, but rather an invitation to treat. Grant argued to the contrary,positing that the application was an offer, and his subsequent conduct was its acceptance. He alsostressed that apparent intent is what counts in the formation of a contract.

For Contract: Against Contract:


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1. Offer = govt form, acceptance = Grantsconduct2. Grant had detrimental reliance3. Reasonable person test wouldvebelieved it was an offer4. It was a unilateral offer to a specificgroup

1. Grant filling out form was an offer tosell (Govt)

Court: Test of offer vs invitation to treat = a reasonable person test, not a subjective one (what the offeror

intended it to mean) No waiver limiting acceptance of potatoes in the application

Canadian Dyers Association v Burton C price quote by itself = invitation to treatDyers association wants lowest price

Purchaser: wrote to the seller, asking for a price quote for a property. Seller replied with thelowest price. P wrote backfor a better price.

Seller replied, the last price I gave you is the lowest I am prepared to accept. If it were any otherparty I would ask for more.

This was treated as an offer by P, and they sent a cheque as deposit, asking for a deed to beprepared. Sellers lawyersent a draft deed, saying hed be ready to close shortly after.

Seller wrote again, claiming that as there was no binding contract, he was no longer prepared tosell.

P took action, claiming that Ps words (being more than a simple quotation of price the second price

quote was a statement of readiness to sell to the P at the price already named) and actions (lack ofresponding with theres no contract) went further than an invitation to treat and expressed intent tocreate a binding contract.

For Contract:1. Ds actions + words went beyond aninvitation to treat. Key words (The priceI quoted is the lowest Im prepared toaccept.) If it were any other party, Iwould ask for more. Without this, itwas not an offer.

Against Contract:

Court:

Mere quotation of price = invitation to treat; Courts will look at it in the language + context used +subsequent actions, whether its part of an offer:

o If this were any other party, I would ask for moreo Retention of the cheque, sending the draft deed

Acceptance: P sending the deposit cheque Alternative viewpoint: cheque = offer, sending of draft deed = acceptance Certainty: dont have to be 100% sure, just believe what the reasonable person would believe


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Carlill v Carbolic Some Ball Co, 1893 (Unilateral Contracts)

F: Carbolic Smoke Ball published an advertisement, offering to pay 100 pounds to any person whocontracted influenza while using the Carbolic Smoke Ball. Mrs. Carlill saw the ad, bought the product andused it as directed. When she later came down with the flu, she claimed to be entitled to 100 pounds butthe company refused to pay, saying there was no contract because she hadnt told them that she hadaccepted their offer and was using their product.For Contract:

1. To bypass unfairness of a unilateralcontract (where is Mrs. Carlill couldperform the contract to 99% and be toldthe offer was revoked), the judge couldstate that the advertisement containedoffers for 2 unilateral contracts:a. 1 contract: 100 pounds to anyone whofalls sick despite using the ballb. 1 contract: companys promise not torevoke its offer once a customer beginsusing the ball.

Against Contract:

J:1. contract was unilateral: the company, as offeror, had implicitly dispensed with the usual need for

the communication of acceptance.2. In order to amount to an offer, must be shown that the offeror had the intention to be bound.3. Advertisements are generally invitations to treat, but in some cases as here, they can amount to an

offer4. Offer was to the whole world, anyone who performs conditions is accepting

Gibson v Manchester City Council XC

Tenant wants to buy council house

Gibson was a tenant of a house owned by Manchester. G completed a form on purchasing the house andreturned it, requesting price information. Manchester wrote G of the price, This letter shouldnt beregarded as firm offer of a mortgage. If you would like to make a formal application to buy your houseplease complete the enclosed application form and return it.Gibson complete the form (relying on it as an unconditional acceptance of Ms offer to sell), except for thepurchase price and sent it to M. The Labor party came back to power and halted house sales. Gibson wastold he couldnt complete the purchase. He claimed he relied on the offer and renovated the house.For Contract:1. Complex discussion of price +numerous memos2. Price listed in letter

3. conduct = both parties operated onbelief that P bought the house4. agreement on all material terms +intention for them to be binding =contract

Against Contract:1. Language of the form clearlyexpressed that it wasnt an offer (thisletter shouldnt be regarded as a firm

offer of a mortgage.

Court: No offer = no acceptance. Ms words were invitations to treat

o May sello Application


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o Not a firm offerRetail goods on display : when does ITT become offer?

Lefkowitz v Great Minneapolis Surplus Store C Ad thats clear + no room for negotiation = offer

Sale on fur clothes

D placed 2 ads, one selling fur coats worth to $100 and the second for scarves selling for $89.50 +another item, all for $1 each, and all first come, first served. P was the first to come, and he sued because

D refused to sell the furs to him for the quoted price. D argued that the ads constituted unilateral offersand thus they could be revoked any time before acceptance was made.

For Contract:1. Acceptance by conduct: P showed upat the store2. D cant add new arbitrary conditionsnot contained in the ad

Against Contract:

Court: No award for the fur coat because the value was too nebulous and indefinite Awarded the value of scarf he attempted to buy because the price was clear, explicit, left nothing

open for negotiation Test of whether public ad can be binding offer = when it shows that some performance is

promised in positive terms in return for something requested

R v Dawood

Thief switches price tags

Dawood went to a department store, took a blouse, changed the price of the goods for a lower price tag.She went to the cashier, paid for the goods and left. She was caught and charged with theft.Her defense: at the minimum she could be charged with false pretenses, not theft since the cashier consented

not only to the transfer of possession but also the transfer of property, and formed a valid contract of sale.


Court: Price tag = invitation to treat Dawood presenting goods + price tag to cashier = offer Cashier accepting = acceptancecashier has general authority to accept the offer as agent for *Follows Boots Cash Chemists: goods on display in shops are generally not offers but an invitation to

treat. The customer makes an offer to purchase the goods, the trader decides to accept or not.

Dissent: Price tag is an offer to sell, acceptance = payment. Dissent = how things are nowadays Customers shouldnt be allowed to change the price Cashiers shouldnt be able to acceptcounter offers

Sanchez-Lopez v Fedco Food Corp (American case)

Exploding pepsi bottle

Man takes bottle of Pepsi from the counter, puts it in cart, brings it to the cashier. As he removed thebottle from the cart to hand it to the cashier, it exploded in his hand, injuring him.For Contract: Against Contract:Court:

By presenting the goods to the cashier to pay for them, the P indicated a definition intention toaccept the offer of the seller. Breach of contractbottle exploded


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Test of acceptance = customer has clear intent to purchase that item (pushing cart to cashier withgoods in it)argument, then customer cant change his mind?

Privity of contract: Man cant sue manufacturer because they had no contractual relationship

Electronic Commerce & Information, Consumer Protection

2. Knowledge of (and Response to) An Offer

R v Clarke You need to have knowledge of the offer to accept a unilateral contract

Criminal spills info to clear a charge

A criminal, while under arrest for murder, gave info to the police about the whereabouts of a criminal.There was a monetary reward (unilateral contract) for info about the criminal. Clark knew about thereward at one point, but subsequently forgot about it. Though unaware of the reward when he gave theinfo to the police, Clark took action against the crown.For Contract: Against Contract:

Court: When Clark gave the info, his intention was to dissolve his charge cant have performance if

you dont know youre performing Potential problems:

o unjust enrichment of offeroro court analyzed intent of offereeshould only be using objective test

3. Acceptance & Communication of Acceptance

Notes:1. Although contract depends upon the acceptance of an offer, sometimes theres clearly an agreementthat cant be readily analyzed into an offer and acceptance

2.X. Acceptance can be silence/conduct if theres a prior contractual relationship (renewal contracts): St.John Tug Boat (silence + actions OK) , Felthouse v Bindley (no prior contractual relationshipsilence notvalid acceptance)

a. Acceptance

St John Tug Boat v Irving Refining (silence can be acceptance)

Tugboats rented past agreed date

F: St John had a deal with Irving Refining to provide them w tugboats for assisting incoming oil tankers totheir shipyard. W no firm arrangement in place, St John said theyd only have 2 boats to assist them,unless special arrangements were made. St John ended up having 2 more tug boats available, and toldIrving they could use them if they paid $450/day to have them on call until a certain date. This datepassed and St John continued to keep theFor Contract:1. Silence can constitute acceptancewhen combined with conduct

Against Contract:

b. Communication of Acceptance


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Manchester Diocesan Council for Education v Commercial & General Investments

Selling old school by tender

F: P (MD) wanted to sell an old school by a tender (this is an invitation to treat) which set out certainrequirements, such as sending tenders to the Ps surveyor on/before August 27. On Aug 25, the Dcompleted the tender (held to be the offer), imposing requirements of their wrt the mode of acceptance(had to be sent to their offices). P sent a letter of acceptance, but sent it to Ds surveyors rather than theiroffices. D later reneged on its offer to buy, claiming they werent bound because their requirements for

acceptance werent strictly adhered to. P argued that strict compliance isnt require, but that any form ofcommunication which isnt detrimental to the offeror is acceptable.requested tenders. Condition #4 set out the manner of acceptance. Nature of non-compliance: lettersupposed to be sent to 15 Berkley St & was sent to a different address. P claims insufficient compliance.I: Is partially compliant acceptance good enough?For Contract:1. Method of acceptance prescribed for atender isnt mandatory; if an offerorwishes it to be mandatory this needs tobe made explicit2. The condition doesnt say that themethod of acceptance prescribed is thesole method of acceptance3. The method of acceptance wasntdetrimental to the offeror4. Those who introduce strict modes ofacceptance for their own benefit canwaive them if they dont disadvantagethe other party

Against Contract:

Carmichael v Bank of Montreal


Three theories of communication of acceptance in long-distance contracts. Contract made when:

1. Rule of expedition (offeree): acceptance is dispatcheda. Position of offeror compromised

2. Rule of reception (offeror): offeror receives acceptancea. Position of offeree compromisedb. Instantaneous method of communication e.g. phone, fax, telex

3. Rule of information (offeror): when info imprints itself in the mind of the offeror. Strict than therule of reception

Postal rule: rule of expedition The offeror is free to specify terms of acceptance and can choose whichever rule he wants


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Re Modern Fashions Instantaneous communication methods = reception rule contract created where

offeror receives acceptance

Battle of jurisdictions: Quebec v Manitoba

Phone use

Manitoba buyer makes offer to Quebec seller; Quebec seller accepts in Quebec. However, because

instantaneous method of communication (phone) was used, contract is deemed to have been formed inManitoba (where the offeror was)The Quebec company is the offeror and either:

a) the Manitoba company accepted and the offer was communicated in Quebec thus Quebec lawapplies

b) acceptance was deemed to be communicated in ManitobaFor Contract in Manitoba1. Phone is the medium:

Contract in Quebec:

Court:

if contract is formed inclusive of the invoice in any way, Quebec law applies

Brinkibon v Stahag Stahl

London v Vienna

Telex

Brinkibon in London telexed their acceptance of a contract offer to purchase steel from Stahag Stahl inVienna. Brinkibon, alleging breach, wanted to serve the respondent with a writ claiming damages forbreach of contract in England but Stahag Stahl claimed they were not under British jurisdiction but

Austrias.For Contract: Against Contract:

Eastern Power v Azienda Communale Energia


Henthorn v Fraser


Charlebois v Baril


Holwell Securities v Hughes


4. Termination of an Offer

Notes:1. Revocation has to be communicated to the offeree2. Communication of revocation need not come from the offeror


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3. Offeror may revoke an offer at any time before its accepted (Dickinson v Dodds) but this may not applyin unilateral offers where acceptance requires full performance (Errington v Errington Wood, Dahlia vFour Millbank)4.

a. Revocation

Dickinson v Dodds, 1876 (revocation through conduct) (when an offer becomes impossible toaccept) (option is itself a contract which needs consideration)

Facts:

Wed, June 10: Dodds (D) makes firm, written offer to sell property to Dickinson (P). Offer open untilFriday, June 12 (this is an option)Thurs June 11: Dickinson (P) hears from Mr. Berry (Ps agent) that Dodds had been offering to sell theproperty to AllanLater that night: Dickinson delivers written acceptance to Dodds relative, as he was staying with her.This acceptance is never received as the relative forgot to give Dodds the acceptance.Friday June 12: Ps agent (Barry) finds Dodds at the railway station and hands him a duplicate ofDickinsons acceptance. Dodds responds: You are too late. Ive sold the property.Issue:was the revocation inadequate (3rdparty informant)?For Contract:1. Document of June 10 = a firm offer;not an option because it wasnt supportby consideration2. A direct communication from the Dwas necessary

Against Contract:1. Objective test on meeting of the minds: a reasonableperson would have realized that the offer was revoked whenhis agent told him of the sale2. The writing wasnt an agreement to sell, but an offer (bothparties hadnt agreed to go through w the deal yet)3. Although Dodds offered an option, there was noconsideration for the option and therefore it wasnt binding4. No detrimental reliance on the part of the offeree

J: For D (offeror). An offer may be w/drawn by an indirect revocation where the offeree receives reliableinfo from a 3rdparty that the offeror has engaged in conduct indicativeto a reasonable man that theoffer was withdrawn.

1. Revocation need not be formal (hearing through an agent OK)2. There must be a meeting of the minds to bind a contract and a withdrawal (or the acceptance of

another partys offer) makes that impossible to the original offeree, no matter what, unlessconsideration is given by the offeror (e.g. deposit)

3. Offer expires when theres no longer a meeting of the minds4. General principle: if offeror dies, offer becomes impossible to be accepted (offer thus cant be

accepted). Court extends principle here: once offer becomes impossible to be accepted, the offer isrevoked.

Petterson v Pattberg, 1928 (NY) (follows Dodds) (in a unilateral contract where acceptance is

consideration, until consideration/performance happens, revocation is possible anytime)

F: Plaintiff, the executrive of Pettersons estate. D = owner of a bond executed by Petterson. D wrote the Pa unilateral contract stating I agree to accept cash for the mortgage which I hold against the presmis. Iwill allow you $780 providing said mortgage is paid or on before May 31, 1924 (there was an unpaidprincipal of $5,450 on the bond and the D promised to give the P a $780 discount should he pay the D bythe specified date, May 31). On April 25, P went to Ds home, knocked on door and said hed come to pay


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off the mortgage. D responded that hed sold off the mortgage and the P couldnt recover the discount. Psued for damages.

Issue: whether the offeror can withdraw a unilateral contract offer before consideration is accepted butafter the offeree approaches the offeror w the intention of proffering performance .For Contract:1. If the condition precedent hasnt beenperformed, its because the D made it

impossible by refusing to acceptpayment when the P came w an offer ofimmediate performance (dissent)a. However, it all depends on theinterpretation of Pattbergs actions:whether he made it impossible toperform or simply revoked the offer

Against Contract:1. Ds offer withdrawn before it became a bindingpromise

2. Dodds: offer to sell property may be withdrawnbefore acceptancewo formal notice to the person towhom the offer is made

J: For Pattberg (D): a unilateral offeris revocable until the precise act required is performed.

Errington v Errington & Woods, 1962 CA (unilateral contracts cant be terminated if performancehas started)

F: A father bought a house of 750 pounds of which he borrowed 500 pounds. He allowed his son anddaughter in law to live there. The arrangement was that they would make the mortgage payments and,when the mortgage was paid off, he would transfer the house to them. Father dies and the widow suesthe couple for the house.

For Contract:1. Unjust enrichment for widow2. Once the performance has begun, the

parties are bound and no revocation ispossible.3. The offer must be held open onceperformance begins4. Could be either a unilateral or bilateralcontract:a. Unilateral: couple starts performanceby payments; cant be legally removedunless they miss a paymentb. Bilateral: house for payments; cant belegally removed unless they miss a

payment

Against Contract:1. Legal consequences of familyarrangements are difficult to ascertain

J: Contract: for offeree. Once performance of the requested act in a unilateral contract has begun,revocation isnt possible1. Generally, offers for unilateral contracts can be revoked at any time prior to complete fulfillment by theofferee, but once the promise starts performance, promisor cant revoke offer. However, if performance isleft incomplete, promisor can revoke offer.

b. Reasonable Time


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Barrick v Clark, 1950 SCC

F: Barrick wrote a letter to Clark, offering to sell him his property but Clark was away on a hunting trip.Clarks wife wrote a letter to Barrick requesting that the offer be held open for 10 days, when Clark wasto return. The moment Clark returned, he sent his acceptance of the offer (this is 20 days after letter bywife). Clark was informed that Barrick had already sold the property. Clark argued that he had respondedas quickly as he could, and Barrick hadnt given him a reasonable amount of time to respond.Oct 30: Clark offers $14.5k for Sasketchawan farmNov 15: Barrick replies, offering instead $15,000

Nov 20: Clarks wife writes to Barrick while Clarks hunting, asking him to hold the offer open till ClarkreturnsDec 3: Barrick sells land to someone elseDec 11: Clark writers that hes heard Barrick sold land to 3rdparty; that Clark already accepted offer onDec 10For Contract: Against Contract:J:

1. Offer can lapse after a) time limit determined by offeror b) if unspecified, a reasonable amount of time2. Court will use an objective test to determine a reasonable amount of time: depends on

i. nature of item soldii. conduct of partiesiii. usual practice of negotiations

Manchester Diocesan Council for Education v Commercial & General Investments, 1970

F: P (MD) wanted to sell an old school by a tender (this is an invitation ot treat) which set out certainrequirements, such as sending tenders to the Ps surveyor on/before August 27. On Aug 25, the Dcompleted the tender (held to be the offer), imposing requirements of their wrt the mode of acceptance(had to be sent to their offices). P sent a letter of acceptance, but sent it to Ds surveyors rather than theiroffices. D later reneged on its offer to buy, claiming they werent bound because their requirements foracceptance werent strictly adhered to. P argued that strict compliance isnt require, but that any form ofcommunication which isnt detrimental to the offeror is acceptable.

requested tenders. Condition #4 set out the manner of acceptance. Nature of non-compliance: lettersupposed to be sent to 15 Berkley St & was sent to a different address. P claims insufficient compliance.

For Contract: Against Contract:1. Because the tender stipulated no timelimit, it was an implied term of the offerthat it must be accepted within areasonable time (Defendant)

J: For P (Offeree)1. Where contracting parties dont expressly establish a time frame to be applied to the negotiations, thecourt applies the test of reasonable time


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c. Rejection and Counter Offer

Livingston v Evans, 1925 ALTA SC (counter-offer kills offer but mere inquiry doesnt)F:

Evans: offered property to Livingstone, for $1,800Livingstone: counter-offers $1,600Evans: cant reduce priceLivingstone: $1,800 OK

For Contract:1. Cannot reduce price as a rejection ofsecond offer also indicates intent to bebound by original offer

Against Contract:1. Counter-offer plus inquiry = still arejection of offer

J: Contract: cannot reduce price indicates renewal of original offer1. Counter-offer voids previous offer unless language and/or circumstances warrant interpretation thatofferor is still willing to bound by previous offer.2. Counter-offer = new offer which the original offeror (now the offeree) can either accept or reject.3. Mirror-image rule (terms of acceptance must be identical to terms of offer): courts aresometimes lenient with this rule e.g. I accept but would like payment to be due 30 days after deliverycourts will think this is unequivocal acceptance of the offer with a request for the addition of anotherterm.

Butler Machine Tool v Ex-Cell-O Corp (Battle of forms) (final shot rule: last terms win)

F: Butler sends offer to sell machine tool to Ex-Cell, with specific terms (including price variation clause).Ex-cell responds with different form (which includes right to cancel). Butler accepts. Machine delivered18 months later. Butler claims on the strength of the price variation clause an extra $3,000 for increasedcost of materials over 18 months. Ex-cells response: Butlers acceptance was on a form disallowing pricevariation + with a term saying in a conflict, Ex-cells terms would prevail. *Butlers form also said their

terms would prevail in a conflict.For Contract: Against Contract:J: The battle is won by the man who fires the last shot.

1. Denning offered 3 potential interpretations in the battle of forms:a. First shot: contract concluded on the terms of first documentb. Last shot: the last accepted form is the prevailing contractc. All shots count & court must use objective basisto discover terms (look at all documents for

harmonious result OR decide theres no contract because of irreconcilable differences)

International Sale of Goods Act

d. Conditional Offer

Financings v Stimson


5. Bilateral & Unilateral Contracts


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Bilateral contract is accepted by:o Communication to the offeroro Extraneous act

Courts try to interpret contracts as bilateral, because both parties are protected from the minutethey make mutual promises, before beginning of performance (Dawson v Helicopter Exploration)

Unilateral:o In a unilateral context, acceptance is achieved by beginning or completing the required act

or forbearance (no need to give notice of acceptance).o Since notification of acceptance is for the benefit of the offeror, he may waive this benefit. If

the offeror indicates in his offer that its sufficient to act on the offer withoutcommunicating acceptance of it to himself, performance suffices.

o Offeror remains passive until act is doneo Offeree can never breach a unilateral contract because they are under no obligation

(however, they could potential get screwed over by performing the act as acceptance)o Its unclear when a unilateral offer can be revoked

Dawson v Helicopter Exploration Co

F: Dawson finds and files a claim over a mineral deposit in BC. His claim lapses. Springer/HelicopterExploration proposes to finance the development of Dawsons claim. Dawson agrees: both agree thatDawson will show HE the deposits once they find a pilot to access the site. Several months later, HEinforms Dawson that although theyve found a pilot, they arent interested anymore. Dawson doesntreply. Later, HE sends an exploration party to the land and arranges to develop it. Dawson sues, claims itwas a bilateral contract. The offeror must be passive in a unilateral contract but here HE would providethe helicopter, Dawson would show the site. Because the contract is bilateral, HE cant revoke nor makeperformance impossible.For Contract: Against Contract:J:

Court: Bilateral contract. Implies a term in the contract that Spring was supposed to make reasonable efforts to find a pilot

and bring Dawson into the area

Springer was in anticipatory breach of the contract by his letter. Dawson + Springer were in acontract where their primary obligations were predicated on binding subsidiary obligations(Dawson, reasonable effort to secure leave and Springer, reasonable effort to secure a pilot). Thesubsidiary obligations (conditions) are precedent to performance of a contract

This is different to conditions precedent to the formation of a contract, where contract isnt madeuntil conditions are met


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TERMS OF THE AGREEMENT

Relational Cases Transactional cases

Tugboat

Dawson

Errington

R v CAE

Scammell

All of the classical contract laws accommodate easily transactional agreements e.g. sale of land. Wecan demand a high degree of certainty in these cases.

Perhaps relational agreements shouldnt be subject to these precise + exacting standards Marketplace now dominated by relational agreementscourts must be careful in applying

contractual rulesRelational cases:

Courts have problem coming up with a judgment. Dawson: they made it up. Errington: Denningprotected the long-term relation. CAE: they gave meaning to imprecise terms

Express stipulation that parties will agree in the

future

No express stipulation for future agreement

(silence)

Scammell

May & Butcher

Hillas v Arcos

Montana Mustard Seed

Relational/Transactional

Machinery Formula Contract Expressstipulation

Follows

Scammell T - - - +

May &Butcher

- + *Osborne thinksdecided wrongly

Friesen - - McSorleyCourtney +Tolani Bros

- Walford v Miles

Barker Bros R Arb clause - ScammellFoley

Foley R SpecialAC: abt

price

+ +

Hillas vArcos

-

Sudbrook R 2 valuers + +Empress vBank of NS

R +

Klein


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1. Certainty of Terms Uncertainty divided into:

o Indefiniteness (equivocal language, open to interpretation)o Incompleteness (an essential element is missing)

Uncertainty can be cured if machinery (means)or formula (standard) can be found Must be clear that the parties intended to enter into a contract, not simply wanted to negotiate

one Determine whats fatal to a contract:

o Failure of machinery isnt one, especially when its due to the conduct of one party(Sudbrook)

How the courts fill in the gaps:o Courts can imply terms, but this is mostly for commercial/relational agreementso clear terms can be implied by statute/common lawo minor uncertain terms can be deleted (if it can be deleted & still be a perfectly workable

contract, the courts will ignore it) If machinery is provided, contract may be regarded as complete:

o Price: courts will be prepared to assume reasonable priceis impliedo Courts will enforce agreement where property is to be valued by an independent valuero

Price is to be determined by reference to the prevailing market price

a. Indefiniteness

Scammell v Ouston

Indefiniteness + incompleteness

Van purchase

Ouston agreed to buy a van from Scammell, providing his lorry as part of the exchange, and the rest of the

payment would be done onhire purchase terms. Scammell pulled out of the deal, claiming there was nocontract due to uncertainty.For Contract: Against Contract:

1. HoL: terms too vague. The term hire-purchase didntspecify whether the payment would be on a weekly,monthly or yearly basis, whether there would be an initialdeposit and what the interest rate would be.

HoL: not sufficiently certain agreement (whos to say one party wanted weekly/monthly payments?) transactional agreement: courts more demanding

R v CAE Industries

Govt sells air base

CAE purchases airfield no longer needed by Air Canada/Canadian govt. Agreement contained many vagueterms, essential stating that although the base usually generated 700 thousand man-hours per annum,the govt couldnt commit to guaranteeing more than 40-50 thousand, although they would use their bestefforts to increase this number. When the hours fell below 40 thousand, CAE sued for breach of contract


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Were the terms in the contract so vague (best efforts to provide promised man hours) that the

contract is unenforceable?

For Contract:1. Some performance/reliance i.e. theytransferred the base2. an authoritative figure (cabinetminister) approached themeasy totrust what he says

3. the govt was the initiator in creatingthe agreement4. if CAE only gets the base but pays foreverything, its unfair

Against Contract:1. Looseness of language; lawyers for thecrown wouldnt have stood for that2. The agreement = a policy/politicaldocument (signed by 3 cabinetministers), not a commercial document.

Court:

D wins: there was a contract betw govt + them, govt breached, damages Ultimate defense to a breach of contract charge is that there was no contract at all

o Difficult to persuade court there wasnt a contract in commercial agreements.o The onus is on the party claiming no contract to prove it

b. Incompleteness

Where certain details may fluctuate (e.g. price) and parties are reluctant to set it in stone, they canhave vague terms but insert machinery (e.g. independent arbitration). Where theres a machineryto finalize the details, an agreement to agree can constitute a binding contract

Formula (e.g. reasonable price) + Machinery (3rdparty e.g. arbitration clause)o Formula + machinery: awesome contracto No formula, no machinery (e.g. friesen v braun) : hard to find a contract; simply an

agreement to agreeo Formula but no machinery: as long as theres a reasonable standard, courts can enforceo Machinery but no formula (e.g. Barker Bros): if its not impossible for the arbitrator todeal with, the contract should be enforced. Start with the previous agreement. Have there

been problems? If so, find a compromise.

Montana Mustard Seed v Gates (silence w respect to price, should contract be otherwise complete, mayimply reasonable price)Montana provides Gates with seeds, for Gates to sell back to at a fixed price (as it was common practice todo so). However, the price of mustard shoots up and Gates says his contract is for only grade #1 (hisseeds are of a lower grade) and believes he can escape the contract and sell his seeds on the open market.


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Clause 6 promised to pay grower for Dockage free Number one seeds only. Price wasnt specified forseeds below grade 1.

For Contract:1. Valid contract because everything that is essential hasbeen agreed upon. However there are 2 possible results:a. no contract exists for anything other than #1 seeds (nocontract)b. valid contract for entire crop, with price deter

2. Court: Sale of Goods Act provides framework fordetermining a reasonable price if a valid contract exists andprice is undetermined/silent (rather than we agree to agreeon a price)3. Price is an essential term, cannot be left undetermined:

however, the contract is silent on it

Against Contract:1. Court: courts cant impose reasonableprice if the price isnt set but only agreedto be set at a future date since thatdoesnt represent the agreement onprice.

J: There is a contractprice fixed at 2.5 cents a pound, same as #1.Court distinguishes May & Butcher (where there was an agreement to agree). In this case, theres silenceand thus the court can import a reasonable price

May and Butcher v the King (uncertainty of essential terms)(arbitration clause not

comprehensive)(strict upholding of contractual rules) XC

Facts:May + Butcher wanted to buy tentage from the Disposals Board. The Board defined the terms ofagreement:

1. price, dates of payment will be agreed upon by the parties as the tents become available2. Delivery shall be taken as agreed upon by the parties3. All disputes will be submitted to arbitration

May & Butcher made a deposit of 1,000 pounds as security.

Previously, the seller insp. The seller (govt/Disposals Board) was putting warranties on the tentages,which could come back to bite them if the buyer sued. So, New Management on the Sellers part discardsthe practice and now the buyer must do their own inspection.

For Contract: Against Contract:1. HoL: Had the agreement simply beensilent on these points, they couldperhaps have been settled in accordancew the provisions of the Sale of Goods Act1979; or by the standard ofreasonableness; but the parties showed

that this wasnt their intention byproviding that such points were to besettled by further agreement betweenthem.2. Agreement wasnt a contract but aseries of clauses for adoption if/whencontracts were made because price,date of payment + period of delivery

had yet to be agreed upon3. The arbitration clause only fordisputes, not for determining basic


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obligations

1. If the parties intended the contract to be binding they would have included the missing terms2. Arbitration clause dont save the contract if there is no machinery to guide arbitrators3. Incomplete in contract only OK (if its on an essential term) if the determination of it doesnt

depend upon the agreement between the parties.4. The contract wouldve been saved, if it had declared:

a. A reasonable priceb. The market pricec. The market price +/- some %d. The price was to be decided by arbitratione. The price was to be decided by a 3rdparty

5. If contract didnt have express stipulation to agree, HoL wouldve used Sale of Good Act todetermine a reasonable price

6. Consider in tandem w Foley (agreement to agree yet enforced)

Friesen v Braun (cant leave essential terms out for future agreement)Friesen leased land from D for one year with a purchase option. The contract stated that purchase moneyshall be paid on terms to be discussed and decided upon by the parties at the date of acceptance(agreement to agree). Friesen served proper notice of intention to buy. Braun denied it was bound tosell to P; held no enforceable contract b/c parties d/n intend contract to be binding until the price wasagreed upon.

For Contract:1. The price of purchase was clear: therent paid would be deducted from thepurchase price2. When options are contained in a

clause of lease, no further considerationis needed: its binding because itscontained in the contract

Against Contract:1. D: its an agreement to agree,not a contract.2. In a mortgage/property purchase, terms of payment are anessential term3. Looking at the option as an offer, the court couldnt find a

complete contract as the terms of payment werent properly sout (terms of payment = essential)4. This is a transactional agreement. Court: land agreementsshould be certain and very clear as to their terms + conditions

Courts couldnt distinguish this case from the authoritiesreluctant (The SCC case of McSorley vMurphy involved the same situation and they deemed the contract void for incompleteness)

With more facts the court couldve distinguished mcsorley: there just werent enough facts No arbitration clause means no machineryno contract

McSorley v Murphy

An option to purchase land at price of $45000 with a cash payment of $15,000 and balance to bearranged.SCC:

Too uncertain to be enforced #mirrors May & Butchers reasoning (strict enforcement of contract law)


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Hillas v Arcos

Timber contract

Merchants purchasing timber. Agreement: purchase certain amount with condition that they would alsohave the option of entering into a different contract to purchase more timber the next year with areduction in price. The sellers refused to sell them.For Contract: Against Contract:

Foley v Classique Coaches (agreements to agree sometimes enforceable.. if include arbitration clause)Sale of gas station

Foley owned a gas station. He sold a piece of land attached to the station to Coaches to use for theirbusiness. The terms were that Coaches would buy petrol from them price to be agreed by parties inwriting and from time to time and that they wouldnt purchase petrol from anyone else. Disputesoccurred as to price/quality of petrol and Coach began purchasing gas from other suppliers.For Contract: Against Contract:

1. May & ButcherCourt:

a. Judge distinguishes May + Butcher. Here, theres An unusual arbitration clause which was construed to apply to any failure to agree as to the price It formed part of a larger bargain under which the Ds had acquired the special price because they

had agreed to purchase all their petrol from the P Parties had a good & fair contract except the term to negotiate price of gas from time to time. Believed by both parties to be binding and had been acted upon for years Ds thought they could wriggle out bc of a better deal, cts so no way, C is good May & Butcher didnt law down universal principles

Followed DistinguishedMay & Butcher (no machinery,express agreement to agree)

Friesen v Braun (agreement toagree clause), mirrors McSorley

Foley (machinery i.e. arbitrationclause) CMontana Mustard Seed (noagreement to agree i.e. silence) C

AG v Barker Bros C

Govt wants to renew airstrip contract

The govt wanted to renew its lease on an airstrip owned by Barker Bros. Barker Bros demanded twice

the rent, when govt refused, they wanted to get out of the contract, in which a clause stated that theterms and conditions of any such renewed lease shall be as agreed upon by the parties at the time, but therent shall not be less than the amount payable hereunder.Barker Bros argued that while there was no formula for resolving disagreement between the parties,there was machinery i.e. an arbitration clause.For Contract: Against Contract:Court:

Even though the price wasnt expressly stated, any disputes could be resolved by way of thearbitration clause


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Even though both machinery + formula are usually needed, if the machinery is there but not theformula, the court will look to the intent of the parties to get a sense of what the formula wouldvebeen and form a binding contract

Sudbrook Trading Estate v Eggleton (if machinery provision breaks down, court can step in with its ownmachinery)2 valuers to decide purchase price C

F: A lease granted the lessees an option to buy the premises at a price to be fixed by 2 valuers, onenominated by the lessors and the other by the lessees and, in the absence of agreement, by an umpire tobe appointed by the valuers. When the lessees sought to exercise the option, the lessors refused toappoint a valuer and claimed that the option clause was void for uncertainty.For Contract:1. HoL: the machinery for appointing thevaluers is subsidiary (not essential) tothe main purpose of ascertaining a fairand reasonable price. Its failure doesntprevent the existence of abindingcontract because its only a means offixing a fair price. The court cansubstitute its own machinery byordering an inquiry into the fair value ofthe premises.

i. The option clause shouldnt beflouted by the lessor at his own sweet

will. It hadinduced the lesseesreliance(in entering the lease) and wascontained in a long lease that had beenperformed for many years

Against Contract:

1. Appropriately worded arbitration clauses with machinery are evidence of parties intent tocontractthe machinery itself isnt the essential part: what is essential is the intent of theparties to form a binding contract, which the machinery attests to (the intent here is to

abide by a reasonable pricedetermining a reasonable price is easy for the courtthe hardpart is knowing whether the parties wanted to be bound by it)

Re Empress Towers v Bank of Nova Scotia C #an exception

Leasing building from bankLessor entered into a 5-year lease with lessee. Lessee had option to renew at a rent which was subject toarbitration. The lease was renewed more than once and in 84 there wasagain an option to renew, butthis time at a rent of the market value prevailing at the commencement of that renewal term as mutuallyagreed between the landlord and the tenant. If the parties couldnt agree, either could terminate theagreement. Before the lease was up in 89, the lessee proposed a new rent, but the lessor didnt respond,until the very last day of the lease it expressed its willingness to renew on a month-to-month basis if thelessee paid a good sum up front. When the lessee failed to do so, the lessor brought an application for awrit of possession to terminate the lease.



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1. Court may imply terms to keep a party from ducking out of a contract both parties intended to bebindingduty to negotiate in good faith

Lessee wins, landlord cant impose arbitrary terms like $15k paymentfor robbedemployee.

Landlord tries to dispose of renewal clause in contract, renewal clause not void foruncertainty

Bad faith was evinced here by the bank:o Refusal to negotiateo Introducing unreasonable termso Undoing things already agreed upono Negotiating with third parties

c. Agreement to Negotiate (enforceability of agreement to negotiate in good faith: too vague)

i. Agreement to negotiate + agreement to agree = unenforceable. Rationale: too uncertain: factualmatrix might be too extreme to support a contract.

ii. EX: could imply an obligation to use reasonable/best endeavours + apply reasonablenessstandard for terms.

iii. could succeed if all the essential terms (esp. price) are agreed upon?iv. could succeed if can be shown parties intended to be bound: uncertainty could be curedv. lockout period (A, for consideration, agrees to not negotiate with anyone but B for a period of

time)= a negative agreement (according to the court) which doesnt lock one party into negotiationswith the other,but makes commercial sense

vi. lockout = legally enforceable if theres consideration and an end date Walford v Miles

Courtney v Tolaini Bros law doesnt recognize a contract to negotiate essential terms of a contract

Financing in exchange for being hired as contractor

D needed financing for a hotel, went to P who had many contacts. P said he would provide the investors

on the condition that D would employ him as a contractor, with a promise by both to negotiate betweenthem to agree on a price for construction. P found the investors, but in the end (after D negotiated butdidnt agree on the terms), D employed other contractors although they used Ps investors. P claimedbreach of contract, or void for uncertainty.Was the contract to enter into a contract valid?

For Contract: Against Contract:1. Damages for breach would beimpossible to quantify:a. Lord Denning: no court could estimatethe damages because no one can tellwhether the negotiations would be

successful or would fall through: or ifsuccessful, what the result would be.2. Courts concerned with whether theparties were ad idem and reached anenforceable binding contract (ie itinvolved a bare agreement to negotiate)

Court: Not binding : no contract here

A contract to negotiate is unenforceable from uncertainty: cant calculate damages based on whatif, cant predict what wouldve happened if negotiations had gone on


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No agreement on price, no machinery to determine the price (3rdparty) and thus the decisionwas left to the 2 parties, making it too vague to be determined by the court

A contract to negotiate isnt a contract (differentiated from Hillas v Arcos, which is stated to be badlaw).

Price = essential term that was left undecided Similar to Dawson: unjust enrichment

Walford v Miles lockout agreement OK if theres consideration + end date

an agreement to negotiate is not a contract

photographic business

Collateral contract separate from contract of sale: seller promises potential buyer to not entertain otheroffers until a certain date in exchange for buyer getting letter of comfort from bank. Miles & Walfordverbally agree on their lockout clause. Sellers get cold feet, sell to someone else.

Used the term subject to contract (nothing binding until formal contract finalized)What is this collateral agreement? Is it enforceable by law?

Court:

The of negotiating in good faith is contradictory because negotiating is inherentlyadversarial

Lock-out agreement: valid IF it has:o Considerationo Specific duration (otherwise, both parties would be obliged to come to an

agreement) Lockout clause has a time limit, lock in clause has no time limit. This clause had no time

limitneeded to have one to be enforceable A lockout clause isnt a lock-in clause as the party can still sell to someone else

Commertec Capital Corp v Stabler XC courts extremely lax about negotiations

#agreement to agree unenforceable from uncertainty

The P made an offer to purchase the Ds property, subject to rezoning conditions. The offer provided that

the D was to have an option to purchase a unit in the property at his choice. The offer was subject to afurther agreement between the parties. The parties agreed on the price, but the D had reservationsregarding her proposed new unit of choice. D wants to back out but gets letter from P confirmingagreement. D claims no agreement, rezoning condition was unfulfilled.

Contract contains purchase option: subject to further agreement between parties. Contract talks breakdown.


Court:

For Contract:1. Could enforce an obligation to makebest endeavours + employ

reasonableness standard

Against Contract:1. Agreement to negotiate too uncertain2. The agreement to negotiate isnt even

in a binding document: theres noconcluded agreement at all, everythingis subject to contract3. Good faith duty is contrary to theadversarial nature of negotiationsb. Even good faith undertakings whichhave good consideration need a timelimit


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Will enforce a contract with 1-2 elements left to be decided but not whole agreements that need to

be negotiated

Parties intended it to be not binding until further terms were agreed upon; the essential termswerent in place

No formula, machinery or performance/reliance # didnt need to negotiate in good faith: distinguishedEmpress Towers (only one element

undecided. ET should be read narrowly: its an exception)here, whole contract had holes # harsh line drawn between negotiations and contracts # courts dont want to interfere in negotiations except in cases of fraud/misrepresentation.

Freedom is maximized in negotiations

CONDITIONAL CONTRACTS

1. Subject to Contract

Masters v Cameron XC

P agreed in writing to sell farming property to subject to the preparation of a formal contract of salewhile shall be acceptable to my solicitors on the above terms and conditions. D agreed to purchase theproperty on the above terms and conditions.For Contract: Against Contract:Court:

subject to means no valid contract until subject to term is met subject to case are all unique and very: look at language 3 possibilities of subject to:

o intent to be bound immediately, but plan to draw a formal agreement later #bindingo CPP: performance of agreed-upon terms subject to drawing up of formal contract #bindingo CPF: no contract until the formal document is made #not binding

Megill-Stevenson v Woo


CONDITIONS PRECEDENT TO FORMATION AND PERFORMANCE

2. Conditional Contracts

a. Conditions Precedent to Formation & Performance

Wiebe v BobsienFor Contract: Against Contract:

Pietrobon v McIntyre


Griffin v Martens


Marshall v Bernard Place Corp


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Dynamic Transport v OK Detailing


Eastwalsh Homes v Anatal Developments


b. Waiver of Conditions

Turney v Zhilka


Barnet v Harrison


ENFORCEABILITY OF AGREEMENTS1. Intention to Create a Legal Relationship

Notes:i. Courts use reasonable person test in determining whether there was intent to create legal relations,because this is an objective testand the law of contracts aims to protect reasonable expectations.

a. Family, Domestic & Social Agreements (rebuttable presumptionthat theres no intention tocreate a contract)

Balfour v Balfour, 1919

Husband returns to Ceylon, promises wife monthly allowance

Mr. Balfour + wife went to England for vacation. Mrs. Balfour being sick, she stayed in England for

medical treatment and Mr. Balfour returned to Ceylon, promising 30 pounds/month allowance to her(this was made while their relationship was fine). They were having marital difficulties, he decides not toreturn. Mrs.Balfour sues for restitution for conjugal rights. 2 years later Mrs. Balfour gets order foralimony.For Contract:1. Lower court found that there wassufficient consideration (wife consentedto forego her right to pledge herhusbands credit)

Against Contract:1. Contract needs intent to create legalrelations. Here: no intention to createlegal relations therefore no contract2. Atkin: law of contracts isnt made forpersonal family relationships, even whentheres consideration

3. Not enough resemblance of abargainbut spouses making mutualpromises4. Purely domestic arrangement5. Promise suffers from indefiniteness(not bargain-like)

J:i. Must demonstrate intention to be bound.ii. Agreements between spouses living in amity are unenforceable


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iii. It is only when spouses are not in amity/living apart that the court tends to finding intention tocreate legal relations. When spouses are living together, the default assumption is that they area unit and that theyre not bargaining on opposing sides (for their personal benefit)when inamity, its assumed its for their mutual benefit

Merritt v Merritt, 1970

Husband leaves wife, promises to give her house if she pays balanceMr. Merritt + wife jointly owned a house. Mr. Merritt left to live with another woman. They agreed (wifeinsisted upon putting agreement in writing) that Mr.Merritt would pay Mrs.Merritt 40 pounds/month,and if the wife kept up monthly mortgage payments (180 pounds outstanding) he would transfer thehouses title to her. When the mortgage was fully paid, Mr.Merritt refused to transfer the house.For Contract:1. Evidence of intention to create legalrelations:a. in writing (keen bargaining)b. spouses separated2. Consideration: wifes monthlypayments

Against Contract:

i. Agreements between spouses NOT living in amity can be enforced

Jones v Padavatton, 1969

Daughter studies law because mom promises monthly allowance

Mrs. Jones promised her daughter to pay her maintenance if she gave up her cushy job in Washington DCand trained to be a barrister in London. The fixed sum wasnt enough, so the mother bought ahousewhere the daughter could live for free and could give room to other people. They had a quarrel while thedaughter was still completing her bar exams. The mother brought an action for the possession fo thehouse.

For Contract:1. Detrimental reliance

Against Contract:1. Uncertainty

J: No binding contracti. With detrimental reliance, presumption of no legal intention between family members may be

rebutted; look at reasonable time thoughii. Although there would have been a contract if the parties werent domestically related, there

was insufficient evidence to rebut the presumption against domestic arrangements

Fobasco v Cogan (business people in legal relations) (exception to commercial rule)Season tickets to baseball shared among friends

Facts: Cogan bought 8 season tickets in a prime location. At the time, he agreed to sell four of his tickets toFobasco (company owned by his friend David). David gave those tickets away to Fobascos prospectivecustomers in an effort to drum up business. Cogan wanted those tickets back, told his friend that thearrangement was at an end. David was upset because he couldnt otherwise get good seats to the games.


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He sued for breach of contract, claiming that Eddie had contractually agreed to sell tickets to Fobasco onan annual basis.

For Contract: Against Contract:1. Sophisticated businessmenshouldhave the contract put in writing2. Terms are vague: for how long shouldEddie have been required to give tickets

to Fobasco?J:i. Presumption: when friends who are business people dont outline respective rights and leave thearrangement vague, theres no intention

b. Commercial Agreements (rebuttable presumptionthat theres an intention to createcontracts)

Rose & Frank v JR Crompton & Rose

F: Rose & Frank was the sole US distributor of JR Cromptons products. After dealing w each other for anumber of years, they entered into a written agreement which said: this agreement is not a formal or legalagreement. It wont be subject to the jurisdiction of either the British or American courts. Its a record of the

intention of the parties to which they honorably pledge themselves and is to be carried out with mutual

loyalty and friendly co-operation.

The relationship between the 2 parties broke down as JR Crompton refused to supply some of the ordersof the plaintiff. Rose & Frank sued to enforce the agreement.For Contract:1. Once P actually ordered goods from D,then there would be a contract of sale inregard to that transaction. It could beargued then that this makes the

agreement here rather like a tender tosupply which doesnt have anycontractual effect until an order is

actually placed

Against Contract:1. Clause is binding: indicates mutualintention to not be legally bound

HOL: no contract. All previous agreements were determined by mutual consent, but the orders

given + accepted constituted enforceable contracts of sale.

Edwards v Skyways

Ex gratia payments on pension payment

F: The Company and Association reps met and agreed that payment would be made of an ex gratiaamount w regard to the pension payment, and a refund of contributions. The decision was published in

the newsletter. One redundant pilot was told what his payment and refund would be. He received therefund, but then the company rescinded its decision to make the ex gratia payments. When he sought torecover it, he was told that there was no obligation to pay it.For Contract: Against Contract:

1. Company: the promise + agreementhas no legal effect because there was nointention to enter legal relations becauseex gratia means not binding and thebackground knowledge of the partiesunderstood it as such. Ex gratia may


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mean wo admission of liability, orwithout there being any pre-existinglegal right (may be to avoid setting anawkward precedent).2. It was understood at the meeting thatif the payments were made wo legalobligation on the part of the company,then it wouldnt be taxable. So the

agreement was intended to exclude legalsanctions.

J: Plaintiffi. Presumption: in business matters, presumed that agreements will give rise to legal

relationships (its tough to break this presumption)ii. British Steel Corp: Letter of intent not binding, nor letter of comfort

Kleinwort Benson v Malaysian Mining Berhad

Letter of comfort by company

F: A bank (Kleinward) making a loan to MMC Metals. They were worried about the creditworthiness ofMMC Metals and whether they would be repaid. MMC = subsidiary of a bigger company called MMC (inlaw they're separate in terms of assets + liabilities). Bank asked MMC, if MMC Metals defaults, will youpay on their behalf? MMC: nope, but we'll give you a letter of comfort. Critical part of the letter: It's ourpolicyto ensure that the business of MMC Metals Ltd is in a position to meet its liabilities to you underthe above arrangements.Issue:Letter of comfort, presumption of intention to create legal relations in commercial contracts

For Contract:1. The wording of the letter wasunambiguous and crystal clear

2. the undertaking was of crucialimportance the P had acted in relianceby advancing the loan3. the presumption of intention to createlegal relations which applies tocommercial contracts hadnt beenrebutted by the Ds

Against Contract:1. Neither party intended for the letter tobe contractually binding

Court: The wording of the undertaking didnt amount to a contractual promise, thus there was no

presumption of intention to create legal relations

The statement of the letter of comfort regarding malaysias policy applied to its present intention,and the policy could change in the future

2. Consideration

a. Introduction: Bargain and Gratuitous Promise

Re Boutilier Estates(consideration must flow from the promisee) (3rdparty consideration is noconsideration)Boutilier promised to donate money to Dalhousie

Boutilier promised to pay Dalhousie $5,000 in a campaign run by the university to raise funds to improvethe efficiency of the teaching, to construct new buildings and to keep pace with the growing need of theconstituency, with terms of payment as per letter from Mr.Boutilier. No letter followed from Boutilier


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and Boutilier fell on hard times and couldnt pay. He said he still intended to pay, and would do so whenhe could afford to. He died and Dalhousie claimed against his estate for the money.

For Contract:1. Boutiliers subscription card suggested 2consideration arguments:a. consideration supplied by the subscription ofothers (3rdparty consideration is noconsideration)

b. consideration supplied by Dals impliedpromise to use the money for2. Third reason to enforce the promise: Dal reliedon the promise

Against Contract:1. Gratuitous subscription promise: promisorneeds a specific benefit (preferably something herequested expressly). If he had donated moneyspecifically e.g. for a certain new building this couldbe consideration but no such thing here.

2. no privity here: only argument for consideration= 3rdparty

SCC:1. No consideration supplied by Dals implied promise to use the money to generally improve

efficiency of university2. Reliance by Dal cannot make the promise enforceable (reliance by promise cant transform a

gratuitous promise into something binding)3. Consideration must flow from the promise4. 3rdparty consideration is no consideration

Combe v Combe(estoppel only as shield not sword) (consideration needs express request aka part ofbargainone cannot given an unasked for consideration)Husband doesnt give rich wife maintenance

Husband + wife getting divorced. Husband agreed to pay wife 100 pounds per year. Husband never paid,after seven years the ex-wife sued for the money.

For Contract: Against Contract:1. No request from Mr. Combie that his wife abstain fromapplying for maintenance: thus no bargain.

2. Denning: Much as I am inclined to favor the principle ofthe High Trees case its important it shouldnt be stretchedtoo far lest it should be endangered. Doesnt care a cause ofactiononly prevents a party from insisting on his strictlegal rights when it would be inequitable.

Royal Bank of Canada v Kiska(promise under seal doesnt need consideration)Guy eats seal

D wanted to guarantee bros loan with the P, the bank. On the guarantee was a space in which a seal wasto be affixed. The purpose of the seal was explained by the P to the D who then ripped the seaFor Contract: Against Contract:

1. Laskin: formality of sealing hadntbeen carried out (mere writing of theword seal)therefore no contract.a. Formality serves a purpose, and somesemblance should be preserved. Seal =signal that youre making a seriouslyintended promise + intend to be boundby it.

b. Past Consideration


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Earn v Kohut, 2005 (past consideration OK if 3 requirements met)Guy shot, doesnt sue because he was promised money. 18 years later he wants the money.

Outside a bar, one shoots the other, 18 years ago, negotiated a civil claim for 35k of which settlement wasconsidered by the Crown in recommending sentencing (because the shootee didnt sue in return for themoney) but conditions of the settlement never satisfied to transition into a contract although they wereorally agreed to

For Contract:1. Consideration =

Against Contract:1. Limitation period: no more

consideration because the shootee couldno longer sue. Shooters argument: whenthere was consideration (withholding oflawsuit) there was no acceptance

Past consideration is no consideration unless:a. act was done at the promisors requestb. act was for a benefit (e.g. payment)c. benefit understood by both as legally enforceable when the promise was made

Limitations of Actions Act

Lampleigh v BrathwaitF: Braithwait killed a man, asked Lampleigh to obtain a pardon for him. Lampleigh did. Braithwaitpromises to pay Lampleigh 100 pounds. He then doesnt, claims that past consideration is noconsideration.For Contract: Against Contract:J: Theres a contractthere was an implied promise to pay an amount reasonable for his labor

d. Compromise/Settlement AgreementsB (DC) v Arkin & Zellers (dishonesty invalidates promise not to sue as consideration)

Boys steal from store. Mom pays up.3 teenagers steal goods from Zellers. Goods are recovered undamaged & fit for sale. Zellers lawyer, Arkinsend a letter to DB, JBs mother, offering to settle and not pursue civil action against boy in return for$225 (parents are generally not liable in torts for actions of their children). The claim by Zellers wasinvalid but DB already paid so the court was reluctant to unravel a contract

For Contract:1. Courts encourage settlements; dontlike to unravel settlements

Against Contract:1. Promise not to sue is goodconsideration unless:a. You know your claim isinvalid/conceal info that would defeatyour claim

1. money can be recovered under mistake of law

d. Pre-existing Legal Duty

Ward v Byham, 1956(legal duty as opposed to contractual duty)For Contract:1.

Against Contract:1. Mothers duty wasnt to the father butto the national assistance board/govtpursuant to the legislation under which


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she was bound (similar to Shadwell)consideration didnt move to thepromisor

J:1. Significance of Ward: not that a clear principle emerged (none did) but the ambiguity it created.2. Other judges would distinguish Ward v Byham by saying that the principle stemming from Ward

(that a preexisting duty = OK consideration) applied only to non-contractual duties or duties to a3rdparty.

a. However, important: the consideration that upheld the transaction in these cases wasntbargained for but merely detected by the judges:consideration ceases to play acautionary role and becomes a motive. This means that the courts role has changed.

3. Stilk v Merrick, 1809

For Contract:1. If the seamen had been capable ofquitting the ship, there would beconsideration

Against Contract:1. Before they sailed, the sailors hadundertaken to do all they could under allthe emergencies of the voyage.2. Public policy: protect from potentialextortion of the captain at his mostvulnerable

J: agreement void for want of consideration

Shadwell v Shadwell


Pree. Promise to Pay More Than is Due

Gilbert v Steel v University Construction


J:1. Promissory estoppel can only be used as a shield, not a sword (estoppel cant give rise to a cause

of action so as to do away with the necessity of consideration but can only be used as a defense toprevent a party from insisting on his strict legal rights when it would be unjustto allow him to doso (cant rid the requirement of consideration but can help against unjust enrichment). In thiscase, cant be used in place of consideration to make a new contract (with a higher price)enforceable.a. Second requirement of PE: the promise mustve relied upon the promise to his detriment.(Hughes v Metropolitan Railway)

2.Williams v Roffey BrosFor Contract:1. Its open to the parties to expresslysay that full completion is a condition ofpayment (Denning)

Against Contract:

f. Promise to Accept Less Than is Due

Foakes v Beer

Creditor waives interest if debtor pays by deadline. Creditor later wants the interest.


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Foakes owed Beer a sum awarded by judgment. He asked her for some time to pay it off + a payment planwas agreed to by the parties. She said she wouldnt sue if he followed the plan.


Mercantile Law Amendment Actg. Modernization of the Doctrine of Consideration

Greater Fredericton Airport Authority v NAV Canada new term wo consideration OK if theres no

duressReverses Stilk v Myrick, new approach different from Gilbert Steel

NAV entered into contract with airport for certain duties. Airport extended runway, had to relocatebeacon, NAV suggested alternative. Airport said OK, NAV insisted airport pay $230k upfront for theprocedure and refused to do the job until they did. Airport finally agreed to pay under protestin writingas they needed the procedure done urgently. After NAV did the work, airport refused to pay.

Did the parties enter into an enforceable agreement when airport promised to pay?

For contract:1. Arbitrator: new correspondence gaverise to a separate contract that wassupported by consideration, and thatNAV Canada can recover costs throughthat

Against Contract:1. contract modification was undereconomic duress2. no consideration given for payment

Court:

Two conditions to establish economic duress:o Promise was made under pressure of the other partyo The pressured party had no choice but to agree

Once conditions met, 3 further factors are analyzed:o Was the promise supported by consideration?o Was the promise made under protest?o Were steps taken to disaffirm the promise?

Post-contractual modification without consideration OK if there wasnt any economic duress Courts dont like Stilk v Myrick, made small changes culminating in Williams v Roffey as the

authority, thus reversing Stilk.

Rule in Pinnels case: part payment of debt isnt good consideration to forgo the balance. Exceptions:a. composite agreementb. payment of debt by a 3rdpartyc. promissory estoppal

3. Promissory Estoppel (modification of a contract wo consideration but upheld by equity)

Doctrine of waiver: representer waives strict performance of something and the representeerelies on this representation. The representer cant then argue breach of contract because ofequitable ideals.

Difference between common law estoppel (promise of existing fact) & promissory estoppel (futurepromise)

Promissory estoppel 5 requirements:o Pre-existing legal relationship (no relationship in Combe v Combe)o Reliance: detrimental reliance by the promisee acting on the promise


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o Promise: clear promise/representation made by the promisor, establishing an intention tobe bound

o Would be inequitable to allow promisor to go back and assert strict rights + debtor cannotuse as a shield if there was inequity e.g. duress (D&C Builders)

o Only as a shield not sword: Waltons Stores v MaherExam notes

1. Promissory estoppel: strikes at the heart of consideration. Espouses a reliance-based theory forenforceability of contracts instead of a consideration-based theory of contract enforcing contracts.

2. Classical doctrine of consideration: requires eithera. Provided a benefitb. Detriment suffered at promisors request

3. Promissory estoppel (according to Denning) is: a promise intended to be acted upon, is acted upon,is binding.

4. The broad formulation of PE by Denning in High Trees has been restricted by subsequentdecisions.

5. Waltons v Maher: 2 approaches to non-bargain promises:a. Narrow view of consideration but supplements it w the doctrine of PE which enforced non-

bargain promises which seek to vary/discharge bargained-for-promisesb. Modern day consideration = too narrow. Non-bargain promises should be enforceable.

Problem = normal contractual rules of O+A+C may conflict w non-bargain promises (whichare only enforceable because they have been relied upon).

Hughes v. Metropolitan Railway Co. [1877] (common law estoppel)Tenant late on repairing propertyF: Landlord gave tenant 6 months to repair property else risk forfeiture. Within the 6 months, negotiation forthe sale of the lease was opened between landlord & tenant. The negotiation failed after 6 months + tenantfailed to repair. Landlord sought to enforce forfeiture. It was held that the landlord had led the tenant by hisconduct to believe that the landlord wouldnt enforce forfeiture.


Central London Property Trust Ltd. v. High Trees House Ltd [1956] (promissory estoppel) (overruling

of Foakes v Beer)

Landlord allowed discount to tenants because war = partial occupancyF: Landlord + tenant have close ties (landlord owns all shares in tenant, but later on has a receivership).Landlord (CLP) lets flats to tenant (HTH) in 1937 for 2,500 pounds/yr. Due to the war, the complex wasbarely let so the landlord allowed a rent reduction of 50% (no duration specified, no consideration forreduction). By early 1945, the complex was fully let and the landlord asked that full rent be paid. Lanlordasked for arrears amounting to 8000 pounds (due for 2 last quarters, which was when the building was fullyrented).

For Contract:

1. Recent law has tended to honoragreements that have been acted upon(but not legally binding)

Against Contract:

1. No consideration for variation2. common law estoppel cant apply here3. No specified ending date to variation(change in rent)

J: Landlord will get arrears (CLP wins). A promise, intended to be binding, intended to be acted upon andactually acted on, is enforceable by law, even if there hasnt been consideration (combo of common law+ equity)binding so far as terms properly apply (in the case at hand, till complex was fully let)

1. Birth of promissory estoppel (future promises)2. In common law, leases cant be varied orally or by writing, only by deed. Equity can step in and

give variation to writing. But the problem here is the lack of consideration.


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3. Lord Denning does away w consideration here by using promissory estoppel, but later has tobacktrack (in Gilbert Steel) and say that it can only be used as a shield, not as sword, as in thiscase (High Trees here uses it as a shield, to protect against CLP going back on its promise to acceptless)

4. The HOL narrowed Jordan v Money down (The HOL in Jordan said that estoppel can only workwhen the statement is about an existing fact, not a promise. As soon as it becomes a promise, it

crosses into the territory of contract law). They said that if you can demonstrate detrimentalreliance, a person can be estopped on the basis of a promise, if the promise is not to enforce a pre-

existing legal right. However, estoppel only applies for so long as the detriment runs. Theremedies will only reverse the detriment, so the representation of intention is not a permanentchange to the contractual relationship.

a. Jordan v Money distinguished. Jordan made clear she didnt intend to be legally bound.Hughes: promisor intended to be bound.

5.

John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] PE needs promise + intent to be bound: cant be mere

indulgences

Friend late on debt paymentsA debtor was consistently late on his payments even though the contract allowed the creditor to sue for theentire amount if payments were late. When the friendship between the 2 soured, the creditor sued. Thedebtor argued promissory estoppel.

For Contract: Against Contract:1. PE only enforceable if one partyentered into negotiations/bargaining

that led the other to think strictcontractual rights wouldnt be enforced

(need evidence that legal relations wereintended to be modified in someirrevocable way, not just leniency)

Combe v. Combe, [1951] Promissory estoppel applies only to modification not creation of contractual

relationship (requirement 1)

Husband doesnt give rich wife maintenance

Husband + wife getting divorced. Husband agreed to pay wife 100 pounds per year. Husband never paid,after seven years the ex-wife sued for the money.

For Contract:1. High trees: promissory estoppel

Against Contract:1. No consideration

Walton's Stores Ltd. v. Maher(1988) PE as sword OK (to enforce) when doing otherwise would be unfairNo legal relationship. Claim = to enforce the contract (sword), not p

One party demolished a building on the strength of the non-contractM owned property + W was negotiating a lease of it, granted that M would demolish a building on theproperty and erect a new one for W. Some time later, W started to have some reservations and (having beeninformed it wasnt bound by the agreement yet), instructed its solicitorsto go slow, but did not inform M ofhis stance. W soon became aware that the demolition was proceeding. When the building was 40% complete,W informed M (months later) it didnt wish to proceed. M sought to enforce the agreement.


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For Contract: Against Contract:1. Inaction/silence by D created apromise. This inaction = encouragementfor P to continue act based on theirassumption. It was unconscionable forthem, knowing the Ds were doingsomething to their detriment.a. Mere failure to fulfill a promise =/=

unconscionability. You must participatein the creation of the assumption, whichthe other party relies upon to theirdetriment.

4. Privity

Beswick v Beswick


Jackson v Horizon Holidays


Hallmark Pool Corp v Storey


Notes

1. De minimis non curat lex: the law doesnt concern itself with trifles2. Consensus ad idem: meeting of the minds

contracts can

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