Requirements for the formation of a : 1. offer 2. acceptance of offer 3. acceptance of the certainty of terms, communication of the acceptance → if one of these is missing, there is no contract. → Other elements may be required depending on the judge: a. Intention to create legal relations b. (sufficiency of what is exchanged, adequacy is not relevant) c. Consensus (required in civil , but not in )

OFFER and ACCEPTANCE (CH. 2) whether in the negotiations which have taken place has there been a definite offer by one party, and an equally definite acceptance of that offer by another.

→ This can be inferred from conduct of each of the parties → These can also be inferred from inactivity 1. OFFER: = an intimation, by words or conduct, of a willingness to enter into a legally binding contract, and indicates that it is to become binding on the offeror as soon as it has been accepted by an act, forbearance, or return promise on the part of the person to whom it is addressed. → All terms of the contract are in the offer.

Test for offer = INTENTION → Usually subjective rather than objective ( the person’s conduct bears more weight than that which was in the persons mind) → This can be determined by: i. (witnesses or subsequent actions) ii. Test (what would a reasonable person say about the intention) 2. : an invitation to a party to make an offer (eg Price quotation, self-service store) Offer v Invitation to Treat: - distinguished by an intention to be bound or create legal relations - can be distinguished from an offer by certainty of terms Offer and Invitation to Treat Invitation to treat- inviting and offer, expression of willingness to negotiate (not a contract) Consensus ad idem: : Parties must be in agreement on all terms at time entering contract

Baston v. Toronto Fruit Vinegar Co., 1902,

Facts written exchange of interest and complex contract previous year Issue Was there an offer (and acceptance)? Reason (for) Letter offer, postcard acceptance, or postcard offer and delivery of some cucumbers acceptance and there was a contract previous year Reason (against) letter and postcard only showed general enquiry but never became offer “final arrangements made at a later date” – tip that something further needs to be done to Ratio Look at sequence of events and intention of offeror - when you make an offer, it has to be substantial enough in order for someone to say OK… the first communication often isnt enough. If it is not really just a YES answer… then it probably wasn’t an offer Held/Decision No clear offer open for acceptance Fisher v. Bell (1961) *** Facts Illegal to sell “flick knives” and store had them in display window Issue Was store guilty of “offer to sell” flick knives by having them so displayed? ** but no sign to sell 1 Reason (for) clear defendant has intention to sell Reason (against) Displaying something doesn’t mean that going to sell them Ratio “offer for sale” connotes more than simple display of item, only showed readiness to go into agreement. Display simply an invitation to treat, to elicit offers to purchase. Held/Decision Display in shop window did not constitute an offer, only an exposure to sell or invitation to treat, so defendant not guilty Comments Look at the word “intention”- was it was clear that he had intention to sell Harvey v. Facey, [1893]

Facts A to B – “telegraph your lowest price offered “ B to A – “£900” A to B - “We accept” Issue Did B’s response constitute an offer? Reason (for) Unconditional offer satisfies test – all B had to say was “yes” Reason (against) Just an inquiry as to price. Ratio Mere statement of price contains no implied contract [offer] to sell,just invitation to treat Held/Decision No offer only invitation to treat Comments Look at the word “intention”- Canadian Dyers Association Ltd. v. Burton(1920), On

Facts π said “state your lowest price for house” Δ responded “ lowest price that I would sell is $1650” π asked to lower price further, Δrepeated that was his best price π treated it as offer and accepted by sending a cheque Parties proceeded toward closing, but Δ called it off alleging no contract Issue Was there an offer? Reason (for) like Harvey v. Facie only price quotation Reason (against) Just an inquiry as to price. Ratio Court looks at subsequent conduct of Δ, Δ acts like there is a contract and never disavows that there was a contract Held/Decision Δs actions show he regarded his letter as an offer so binding contract Comments Different approach here – using subsequent conduct and “objective” approach rather than searching for intention as in Harvey v. Facie Hong Kong Bank (now HSBC) v. Richardson Greenshields [1989] Canada

Facts Huge bond purchase in declining market done by employees on the phone, price was quoted, and Δ’s employee said “That’s done” Issue Was there ? Held/Decision Was offer and acceptance, so size of deal mattered not

Pharmaceutical Society v. Boots Cash Chemists, 1953, UK Must have offer and acceptance for a k A display of price or goods is an invitation to treat Facts Boots had a self-serve store and cash desk under pharmacist’s supervision. Issue was store display an offer or invitation to treat? Reason (for) Sale occurs when customer puts “poison" in basket, so display is offer and choosing is acceptance Reason (against) display only invitation to treat Ratio a display of goods is a mere invitation to treat and not an offer to sell Held/Decision Boots not guilty, display only invitation to treat as sale took place under the watchful eye of the pharmacist at the cash desk 2 Comments Contract takes place at cash desk, with customer offering to buy, and clerk accepting by taking money, otherwise customer can never decide to purchase another and put it back Christie v. York Corporation, [1940] S.C.R

Facts Black man refused service at a bar at the Montreal Forum Issue How far does freedom of contract go in a claim in ? (Court did not consider , so this decision is not part of the law of Contract) Reason (for) Reason (against) Ratio Complete freedom of commerce – any merchant is free to deal as he may choose with a member of the public. Held/Decision Comments Under the law of contract, you could technically refuse service (even racially etc.) Carlill v. Carbolic Smoke Ball Co. [1893] UK. birth of modern consumer law Ads are generally an invitation to treat, unless language interpreted as offer by reasonable person Facts Newspaper ad £100 to person who catches flu if use ball filled with Carbolic acid for 2 weeks, placed £1000 bank to show the money was there, then π uses ball and catches flu Issue Is there an offer? Reason (for) Unilateral contract – offer made to whole world, to accept only need to try Ball and get flu Reason (against) 1. No way of knowing that π complied with the instructions – dismissed by the Court 2. Cannot contract with the whole world - Court said offer to whole world was 3. To have acceptance must be communicated intention before tried ball 4. No intention to contract, mere “puff” – but money was deposited to the bank 5. No consideration – 6. Wager only and unenforceable – court notes that it is not a wager 7. Too vague –when could contract – 2 years later? 8. Insurance contract – 1 line -“no” Ratio Offer to all world but K only w/those who accept and perform conditions. Acceptance is conveyed by performance Held/Decision If make this kind of unilateral offer to the world, expectation is that someone will take up challenge without notice to offeror and if gets flu, that is acceptance and company is bound to pay Comments With unilateral, how could you tell the whole world that you are withdrawing?

ADVERTISEMENTS – not an offer unless interpreted as so by reasonable person Advertisements, catalogues, price lists, window displays – strictly speaking are NOT offers because otherwise the shopkeeper would be obliged to sell to every person that accepted, even when supplies ran out. TRANSACTIONS BY MACHINE – are offers, the product cannot be easily retrieved from the buyer’s property. AUCTION – sale is complete with the fall of the hammer, until then a bidder may retract a bid. “without reserve” = invitation to treat, bid is offer, hammer is acceptance, auctioneer free to accept/reject bids. but auctioneer can withdraw goods before auction commenced CARRIAGE OF PERSONS – a schedule saying that a certain train will run at a certain time has been said to be an offer, although regulations in effect provide no contractual liability. Goldthorpe v. Logan, 1943 ON CA Unilateral are accepted into Canadian law and are binding to whomever accepts them unilateral contract acceptance occurs in the form of the performance of the act requested in the offer Facts Δ published ad in local newspaper – “hairs removed …permanently by ELECTROLISIS … results guaranteed”. Π given the same in the office. treatment did not work Issue was there an offer (and acceptance) in this unilateral contract? Reason (for) Ad constituted an offer like Carlill and accept by performing Reason (against) Ad not an offer – only an invitation to treat 3 Ratio Ads are an invitation to treat, unless language interpreted as offer by reasonable person. Look at offeror’s intention; Δ’s intention to make offer to whole world to have treatment, pay, and results guaranteed, like Carlill, just had to submit (and pay) to accept. Court warns: not going to let business get away with “reckless and rash” offer Held/Decision The ad constituted the offer and submitting to procedure the acceptance. McManus v. Nova Scotia Auction Facts Auction advertised as “without reserve” but in card handed out to participants, they were told that auctioneer could refuse the bid. auctioneer told everyone that all bids were subject to the approval of the receiver (train cars) π was only bidder, accepted by auctioneer subject to receiver’s approval, receiver refused to sell, then sold to 3rd party Issue 1.Did the Defendants breach a contract with the Plaintiff by not approving his bid. 2.If there was a breach of contract, what amount of damages is the Plaintiff entitled? Reason (for) For: 1. the Receiver extended a 'unilateral contract offer' to all in the auction brochure and newspaper ad of its intention to conduct an unreserved auction. The terms of the Receiver's unilateral contract offer including the printed conditions of sale, but not the Auctioneer's verbal announcement to the bidders.” For: 2. The Plaintiff accepted the Receiver's offer by placing the highest /only bid. The bid was accepted when he closed the by stating 'sold, subject to the Receiver's approval'. “The Plaintiff claims the Receiver /Auctioneer had no authority to amend the terms of the written K by verbally saying all bids were subject to Receiver's approval. The condition on acceptance of bids on the railroads was contrary to the written terms of the Receiver's unilateral contract offer.” Reason (against) No unilateral contract to the world, Auctioneer can change the rules as circumstances change, each item auctioned separate contract, decided on the fall of the hammer. Ratio an auction does not constitute an offer to the whole world which is accepted by customers showing up for the auction. offer is made at that moment, and the hammer falling accepts, which may be a conditional acceptance. Held/Decision “the bid by the Plaintiff was the "offer" and was conditionally accepted by the Auctioneer. The bid was not approved by the Receiver and accordingly there was no .” TENDER: owner/tenderer - The invitation to tender can be an offer which becomes a binding contract upon submission of a tender. This contract is called Contract A. Contract B results from the submission of tenders. TWO CONTRACT ANALYSIS - The tenderer may not withdraw his tender. The owner must treat all bidders fairly. - privilege clause: owner may not accept the lowest tender received and need not accept any for the project. - the submission of the tender is good consideration for the owner’s promise, as the tender is a benefit to the owner, prepared at costs to the tenderer. Harvela Investments Ltd. v. Royal trust Co. of Canada (C.I.) Ltd., 1986, UK A vendor is obligated to specify the type of offers, or bids, he/she/it is willing to accept in a sale Facts Sealed tender bidding process, would accept highest offer. π offered $2,175,000 and Sir Leonard offered “$2,100,000 or $101,000 more than any other offer” Issue Was the bid the offer in a tender sale? Reason (for) unlike auction sale, bidder, Sir L, cannot adjust his bid Reason (against) he was entitled to submit a referential bid Ratio A referential bid is not valid unless it is clearly and unambiguously authorized in the invitation to treat Held/Decision No The invitation to tender specified that only fixed bids would be accepted R. v. Ron Engineering , 1981 SCC A tender invitation/bid is a unilateral contract that is being brought into effect by the submission of the bid *** significantly reformed tendering Facts Company tried to withdraw construction tender after time for withdrawal ended Issue Can company do this in face of stipulation in tender rules that it cannot withdraw? 4 Reason (for) Law says that offer is always revocable before acceptance. Reason (against) Rules were clear and that tenderer bound by them. Ratio Court held company bound by rules as there was a “contract A” separate from the construction “contract B”, and contract A was a unilateral contract like Carlill, and offer for contract A was the invitation for tenders and the tender itself was the acceptance binding the tenderer to comply with the rules. Held/Decision Tenderer who tried to withdraw tender late breached contract A and lost his deposit Comments This case suggests a new tendering process involving two contracts: Contract A, invitation to tender constitutes an offer capable of acceptance by submission of a tender bid (unilateral contract governing the tendering process) Contract B, a bilateral contract, being the construction contract (bilateral contract awarded to the winner of the tender) The tendering process will constitute a contract where the call for tenders - now an offer - contains sufficient detail to indicate that the person who has called for intends to be bound by the process they have established. M.J.B. Enterprises Ltd. v. Defence Construction, SCC , 1999 Only a compliant bid may be accepted Facts π tried to force defendant to accept its lowest bid rather than accepted tender by a different company that π alleged had a deficient tender. Owner did have a privilege clause that stated it would not necessarily take the lowest bid, but then it did. Implied term of Contract A that lowest compliant bid must be accepted Issue Is a privilege clause enforceable? Reason (for) Terms of tendering Contract A based on business efficacy necessitates accepting lowest bid that is compliant. they are not bound to accept the lowest bid (MJB), but they are bound to reject the non- compliant bid Reason (against) Privilege clause was part of Contract A. Ratio The privilege cause does not override the obligation to accept only a compliant bid. The privilege clause does not require the person calling for tenders to accept the lowest compliant bid Held/Decision Owner could only accept compliant bid that was the lowest and to do otherwise he was breaching contract A

COMMUNICATION OF OFFER

→ An offer is not effective until it is communicated to the offeree. → There can be no acceptance in ignorance of the offer → There does not have to be an intention to accept the offer, just knowledge of the offer at the time of accept. 2 Step Test: 1. Is there knowledge? No= end of inquiry. 2. Yes= Is there intention? No= end of inquiry. Yes= entitled to reward. Blair v. Western Mutual Benefit Association, 1972, BCCA a communicated offer to one person cannot necessarily be an offer to another Facts Secretary transcribed company memo that she be given two years retirement pay. Secretary then retired and was denied this pay Issue Was the offer communicated to her? Reason (for) Memo constituted an offer to pay on retirement and act of retirement constituted acceptance. Promise had been made to her and she acted on it. Reason (against) She was a stenographer, offer was not communicated to her as employee Ratio There must be an intention to make an offer and to communicate the offer. Held/Decision No, Offer never communicated and no promise was made that was relied on by π Williams v. Carwardine, 1833, UK Knowledge of the offer is required in order to accept. Intention of acceptance is not required. Facts Def. posted reward for info leading to conviction of murderer of bro, π changed her story on her 5 deathbed and told the truth as to what she saw after being beaten by murderer. Issue Is she entitled to the reward, if the reward was NOT her motive? Reason (for) This was a unilateral contract and she performed what was needed (give info about murd) Reason (against) Not communicated and not induced by offer Ratio Motive for acceptance is irrelevant (must have knowledge of offer though) Held/Decision Communication of offer was all over town and she must have known of it. R. v. Clarke, 1927, Australia must have knowledge of existence of offer at the time of performing the conditions of the offer. Facts reward case – Clarke gave false info on June 6, then gave correct info on June 10, to save his own neck Issue unilateral offer to be accepted, does the act need to be on faith of or in reliance of offer? Reason (for) Performing act is sufficient Reason (against) Act of acceptance needs to be in reliance of offer Ratio Offeree must have knowledge of the offer in order to accept Held/Decision act must not only be act stipulated by offer, but must be done in reliance of on faith of offer. The motives are not relevant, but act must be done with intention of accepting the offer and only knowingly not sufficient. Comments There has to be some connection between the offer and the motive. The actual REASON doesn’t matter (this justifies how the previous case ratio seems different)

ACCEPTANC E

-an offer can be accepted once notice of acceptance has been given properly even if notice of acceptance has not reached offeror - all of the terms of the offer must be accepted as is – if not, a counter offer is made - If a counter offer is made then the original offer is no longer available to be accepted - if reply from offeree is only an inquiry, the original offer is still valid (look to the language to determine) OR original offeror rejects the counter-offer and shows interest in reviving/standing-by the original offer Stevenson v. McLean (1861), Accepting and revoking and offer, timing Facts Offer made September 21, then communication was: A. π to Δ 9:42am – will you accept 40 B. π to Δ 1:34pm – accepting previous offer C. Δ to π 1:46pm –”have sold all” but Δ had sold all before acceptance came through Issue Was the correspondence a contract and was B acceptance in time before C? Reason (for) A an inquiry rather than a counter-offer and accepted original offer before revocation Reason (against) letter came too late and A. constituted a counter-offer which would ends the original offer Before π accepted offer withdrawn by B Pothier’s authority , no meeting of the minds here Ratio an offer can be accepted once notice of acceptance has been given properly even if notice of acceptance has not reached offeror Court read A as an inquiry only and original offer accepted in B before offer withdrawn Held/Decision B offer can be accepted once notice of acceptance has been communicated to offeror but revocation must have reached offeree, acceptance occurred before revocation – actual meeting of the minds not really necessary – it is a timing issue only Comments Look at the wording to decide if it is a counter offer or an inquiry. Livingstone v. Evans, 1925, AB SC Counter-offer kills original offer An inquiry about the offer does not kill it Facts D. offer land for 1800. P. counteroffer 1600. D. said “cannot reduce price.” P. sends 1800. D. refuses to sell. Issue Did the contract end with the intervening counteroffer? Reason (for) No intervening acts

6 Reason (against) Was intervening acts Ratio The making of a counter-offer is a rejection of the original offer. The original offer cannot afterwards be accepted without the consent of the original offeror. A statement that the offer cannot be reduced resurrects the original offer. Held/Decision No, the contract was still valid. D. reply to P. counter-offer , revived the original offer. Comments Look at the language and circumstances to see if there is a contract. SILENCE by offeror indicates that even if the offeree has rejected the original offer, if the offeror remains silent on the rejection, then the original offer still stands.

Battle of the Forms • Which offer is being accepted? • Which terms are being accepted? • Must have a meeting of the minds. – consensus ad idem • If they cannot be reconciled then the K is concluded three approaches: 1. “Last Shot”/Performance Doctrine – the last uncontested offer is the one which dictates the terms of the contract. Offer + conduct = contract 2. First Blow – the original offer determines the terms of the agreement 3. Other – putting the terms and conditions of both forms together; resolve conflict by reasonable implication, “shots fired from both sides”(Butler Machine) Butler Machine Tool Co. V. Ex-cell-o Corp., 1979, UK Battle of the Forms – terms should be taken as a whole and reconciled when possible Facts P. quoted cost of machinery on a form that contained the term that the P. could charge the cost of the machinery at the time of delivery. D. accepted the offer on paper with different terms. P. wants higher price to be paid. Issue What was the last thing agreed to? When were the two parties last at consensus ad idem? Reason (for) all orders subject to terms and conditions and buyer could not change this Reason (against) there was counter-offer, and it was accepted Ratio Contracts need consensus ad idem Held/Decision considering documents as a whole, decisive document is B, where buyer made clear purchase on buyer’s terms and not seller’s terms, which did not include a price variation Comments If conflicting terms, the purchase order that was last agreed to will be the one that prevails Parkette Apartments Ltd. V. Masternak [1965], ON

Facts purchaser offered 60,000 on Dec 24 and presented to vendor vendor waited a bit, then amended offer (offer B?) at $64,000 with other changes Purchaser: initialled changes to offer B, but made one more change (offer C?)– tenants must go, but this never got to vendors Vendor received offer from different person for more money and accepted Purchaser: sued for Issue 1. is communication to the purchaser’s real agent sufficient? 2. is there any authority to waive requirement of acceptance in these circumstances? 3. requirement of the -for the sale of land to be in writing Reason (for) 1. Real estate agents are agents for the deal and communication to either of them sufficient as that was the stipulated method. 2. As the main terms have been agreed to (not a big deal to vendor about tenants being there… should not affect vendor), acceptance of final change unnecessary

7 3. Sufficiently in writing and final acceptance does not have to be Reason (against) 1. Comm. was to P`s agent not comm. to vendor’s agent; this was not method agreed to 2. The final change in offer C was a signif change and was never communicated to vendor; 3. there was no communication of acceptance in writing to the vendor as required Ratio Offer C was counter-offer, the requirement for vacating was an important required communication of acceptance so offer C was a counter-offer and not an acceptance Any verbal communication offended the Statute of Frauds Held/Decision No unequivocal acceptance was communicated to the V so he was at liberty to accept another offer – claim for specific performance dismissed If the parties disagree on the terms of the contract then the “other approach” is used to decide on the terms and conditions based on Industry standards (Tywood) Tywood Industries Ltd. V. St Anne-Nackawic Pulp and Paper Co. Ltd., 1979, ONT Conduct of the parties indicated that neither party considered any terms important other than the ones found on the face of the documents (being the specifications and the price) Facts Buyer Tywood made a request for a quote with terms that did not contain an arbitration before lawsuit clause-invitation to treat Vendor offered to sell subject to terms and conditions one of which was: No modification allowed and no arbitration before lawsuit clause Buyer used a PO that had an arbitration before lawsuit clause on reverse (counter offer), which also asked the seller to sign and return accept, which sellor did not ever do. Goods were delivered=acceptance Seller tried to enforce contract and buyer said have to go to arbitration first Issue Is the valid? Was it agreed to? Reason (for) This was the last shot, and goods were delivered =acceptance, arbitration clause included. Reason (against) Original paperwork did not include an arbitration clause, said can’t modify= first blow wins Ratio Lord Denning’s “last shot” rule. When was the last time the two parties agreed? P at no time acknowledged the supremacy of D’s terms. If there are terms and both parties ignore it by their conduct, then there is no intention to be bound by those terms. P did not put his mind to the arbitration term and the conduct of both parties indicates that neither one of them considered the terms on the back. Held/Decision No, no clear acknowledgement by the seller of the buyer’s terms at the end. Judge was looking for a meeting of the minds on the part of “arbitration” couldn’t see this Internet e-commerce law no different from how we’ve always done business • Apply the same principles • Accepting an offer by email is no different than accepting by letter • Offer is in terms of licence Three types of contract on Internet 1) Shrink wrap – accept by opening the package (package states terms inside) 2) Click wrap – must click to accept. Can’t move on without accepting. 3) Browse wrap – hyperlink to another page to read terms o Can proceed w/o agreeing to terms o the terms prevail only if you must perform action to agree to them and cant proceed w/o acceptance o browse wrap not really allowed b/c you cannot bind to terms of a contract if haven’t seen the terms ProCD v. Zeidenberg, 1996 USA The buyer can prevent the contract by later returning the product. Facts P software terms & conditions inside shrink-wrap D ind’l user licence, used it commercially. D admits that P’s terms appeared in flash screen D claims accepted the absence of terms when bought software from the store (terms not on outside). D says t & c given after bought it. P is imposing terms he couldn’t reject. Issue Has the buyer accepted the license as part of the purchase? Reason (for) the terms are part of the contract of sale and the buyer could have rejected the goods once he learns of the license, but once he uses them, he has accepted the terms as well Reason (against) software on the shelf is an offer that the buyer accepts by paying and leaving the store. the license 8 has not been agreed to at the time contract has been made. Hidden contract? Ratio customers can reject the terms & conditions by return the software for refund. When D didn’t return the software, it is held to be acceptance of P’s terms by conduct. Held/Decision NO, he can return it to the store. Century 21 Canada Ltd. Partnership v. Rogers Communications Zoocasa

Facts Rogers used part of C21 webpage on site where prospective house buyers could search real estate listings by area. Website fine print clear terms forbidding w/o C21 consent Issue did the Δ accept the π’s offer that it could use the info on the webpage only according to its stated terms of use and has a contract been formed that includes the terms of use? Reason (for) The law of contract is adaptable to internet contracts and this case is much like the parking lot ticket cases when the terms on the back of the ticket are binding Reason (against) Terms of Use on C 21 Website did not create an enforceable agreement under which Zoocasa was contractually bound not to index the Century 21 Website. Ratio where notice of the Terms of Use is est along with the knowledge that using the Website will be agreement to the Terms of Use, then agreement is proven. the act of proceeding further into the website is sufficient to communicate agreement. Zoocasa's conduct formed a contract. It is not a case of a contract being imposed without their assent Dawson v. Helicopter Exploration Co., 1955, SCC First case to introduce acceptance through conduct. Facts discussions took place for π to show a location of mineral deposit and to help Δ stake it culminating in letter of March 5, 1951 with detail, then a positive response by π, then a resiling from any contract by Δ and exploiting site with someone else Issue Was there offer and acceptance? Reason (for) the letter of march 5, was an offer and the response an acceptance in a bilateral contract Reason (against) to accept the offer March 5 letter, performance of an act was required which the π never did (unilateral contract) Ratio 1. Acceptance must be clear but need not to be expressed, rather it can be implied from the language and conduct of the parties. Silence ≠ abandonment of contract 2. tendency of the court to treat offers calling for bilateral contract rather than unilateral 3. In a business relationship the Court will strive to find a bilateral contract Held/Decision binding bilateral contract, clearly accepted. Felthouse v. Bindley, 1862,UK There must be more than failure to reject an offer to have a contract. Conduct can communicate acceptance Facts Exchange of Letters, Nephew offered 30 guineas to sell his horse to uncle, Uncle offered 30 pounds. Uncle offered to split difference and said if hear no more, horse is mine. Nephew wanted to take the deal but Uncle heard no more. Auctioneer contrary to nephew’s instructions sold horse at auction. Nephew confirms that agreement should have been completed; “The horse (meaning the one I sold you) is sold” Issue Did the uncle have a contract for the horse? Did the nephew silence mean acceptance? Reason (for) Auctioneer is interfering with uncle’s ownership rights Reason (against) No contract was formed as no acceptance of offer to split the difference and not in writing so does not comply with the then Statute of Frauds which required such contracts to be in writing, so uncle has no title to the horse Ratio offeror cannot use silence as a method of acceptance and simply an intention to accept on the part of the offeree is not enough, later letter too late to constitute acceptance. Silence cannot signify acceptance, it is too vague. Acceptance must be explicit Held/Decision no contract, no title passed to uncle and no tort committed Comments In situations where a company makes an offer asking respondent to reply if they do not accept – silence will generally not constitute acceptance since there is too much uncertainty (Felthouse) St. John Tugboat Co. V. Irving Refinery Ltd, 1964, SCC

9 Acceptance by continuing conduct Facts In a series of letters, D. agreed to rent tug and have it on call for a period – relationship continued past the period, agreement never formally extended, then D. refused to pay Issue Did continued use beyond contract period impose same conditions as before? Reason (for) The respondent conduct constituted a continuing acceptance. Reason (against) the original contract was over and respondent had not agreed to the extra charges Ratio Silence ≠ acceptance BUT conduct can Held/Decision D must have known tug was still “standing by” so liable for extra charges by conduct Comments Distinguished from Felthouse as here there was CONDUCT Eliason v. Henshaw, 1819, USA Acceptance must be made in the mode stipulated by the offeror, otherwise it’s not valid acceptance Facts Offer to buy flour made and offeror stipulated that acceptance should be sent “by return of wagon”. Sellor accepted by mail, but before acceptance arrived, offeror cancelled deal Issue Can offeror impose method of acceptance? Reason (for) Acceptance was dispatched prior to withdrawal of offer Reason (against) Offeror knew and relied on exactly the amount of time that a return by wagon should take so this constituted an essential part of offer Ratio Have the right to determine how the offer is to be accepted. Held/Decision Yes, no obligation on offeror to complete contract until acceptance received as required Comments Q1 What if rider arrived before wagon? NO… bound by the original offer.

COMMUNICATION OF ACCEPTANCE

• acceptance occurs at the time and place the offer was accepted • The acceptance must be communicated. Prior to acceptance, an offer may be withdrawn. If the offer was made to the entire world, such as in Carlill's case, the revocation must take a form that is similar • An exception exists in the case of unilateral contracts, in which the offeror makes an offer to the world which can be accepted by some act. A classic instance of this is the case of Carlill v Her actions accepted the offer - there was no need to communicate acceptance. • An offer can only be accepted by the offeree, that is, the person to whom the offer is made. • An offeree is not usually bound if another person accepts the offer on his behalf without his authorisation, the exceptions to which are found in the • It may be implied from the construction of the contract that the offeror has dispensed with the requirement of communication of acceptance (waiver of communication - generally implied in unilateral) • If the offer specifies a method of acceptance (such as by post or fax), acceptance must be made by this. • However, acceptance may be inferred from conduct • "" if you are to accept an offer, you must accept an offer exactly; if you change the offer, this is a counter-offer that kills the original offer. A request for information is not a counter-offer. Postal Acceptance Rule: If acceptance is to be made by post (as specified by the offeror), then the post office acts as an agent for both parties and the contract is formed when the acceptance is posted, not when the offeror receives it (unless he expressly stated that he must receive it) o usually if offeror requested “Notice in writing”, PAR doesn’t apply o PAR applies if the offeror doesn’t prescribe particular mode of acceptance or the mode is the mail > “acceptance in writing” o PAR applies when letter of acceptance is properly stamped and has the right address o PAR does NOT apply if it leads to absurd/inconvenient result Household Fire Insurance v. Grant, 1879, UK Mailed acceptance Facts Grant wants to buy shares. Household accepted his offer and mailed his confirmation which Grant never received. Grant doesn’t get the letter and thus doesn’t know he owns shares. He also didn’t pay for them. Liquidation company sues for the share money. he denied being a shareholder Issue Was the acceptance communicated to the offeror? 10 Reason (for) There was a meeting of the minds at the time of posting and the post office is the “agent” of both parties, so offeree can assume that it reached its target Reason (against) No mutual communication – offeror had no knowledge that his offer had been accepted Ratio Postal Rule: If both parties agree, the post office is a common agent for both of them. If it is not explicit, it must seem reasonable to send it by mail. Postal rule only applies to acceptance. A contract is concluded where and when the letter of acceptance is posted. Held/Decision Yes, Grant is liable. Comments This is a strict application of the postal rule. Acceptance is still valid regardless of whether it’s received by offeror. Posting a letter does not differ from other attempts at communication in any of its consequences EXCEPT it is irrevocable once it goes in the mail. Postal rule not always applicable 1. Postal rule only applies when offeror does not prescribe a particular mode of communication 2. Where application of rule would lead to an absurdity or manifest inconvenience it will not apply 3. Applies only when the letter of acceptance is properly stamped and addressed WAYS TO GET AROUND THE RULE: → state in the offer that the offer cannot be accepted through the post office → show that the application of the rule would be absurd. (ex: Holwell Securities v. Hughes) Henthorn v. Fraser society, [1892]

Facts Series of offers signed by the π at the office of the society, which were all refused Secretary of the society then offered to sell at £750 which was put in writing and signed in her office in presence of the π Next morning 3P called and offered £760 which was accepted subject to the condition that the original offer could be withdrawn Sec’y of the society posted a letter between 12-1pm July 8 to the π withdrawing offer, which was delivered between 5-6pm and received 8pm On same day the π’s agent wrote accepting the offer and it was posted at 3:50pm which was delivered at 8:30pm and opened the following morning (July 9) Π brought action Issue Was acceptance communicated before offer was withdrawn? Reason (for) Postal acceptance rule, so offer was accepted at 3:50pm when it was posted and withdrawal of offer was received the next day Reason (against) There was no authority to accept by post and Dickenson v. Dodds held that an offeree can make a binding offer to sell while an offer is pending and that will be a withdrawal of original offer Ratio Offeror makes offer. If withdrawal is posted before acceptance posted, doesn’t matter. The withdrawal has to get to the offeree first. Offeree if he posts and acceptance before the withdraw (revocation) then there is a K Held/Decision Postal rule applies and acceptance made before received notice of revocation, so binding Holwell Securities v. Hughes , 1974 Mailed acceptance Facts Hughes issued a grant to sell a property. Contained a clause stipulating that there must be notice in writing directly to offeror within six months in order to exercise the option. Holwell sent a letter exercising the option; it was lost in the mail and was never received by the defendant. Holwell tries to invoke the Postal Rule. Issue Does the Postal Rule apply here? Reason (for) The postal acceptance rule applies to all contracts, as it is a mutual agent of both parties Reason (against) Postal Rule does not apply because both parties did not agree to use post office as common agent. Rule doesn’t apply when notice is requested by the offeree. Ratio the postal acceptance rule cannot apply when there are express terms in the offer specifying that acceptance must reach the offeror. Charlebois v. Baril, [1928] S.C.R 11 Many say SCC messed up in this case and should have followed Henthorne Facts A. August 14 offer to purchase property by Δ given personally to π B. August 15, π accepts by mailing letter to Δ, never received by Δ C. September 5, Δ mails withdrawal of offer, received September 6 by π Issue Was it necessary for acceptance to be received by offeror and what was the effect of the subsequent withdrawal of the offer? Reason (for) Postal acceptance rule so not necessary for it to be received only posted Reason (against) Original offer delivered in person, so rule should not apply Ratio The rule has no applicability to a case where the original offer was delivered not mailed, so postal service was not the offeror’s agent Held/Decision Postal acceptance rule did not apply and acceptance was never received, so withdrawal was communicated and no contract. Comments How to differentiate with Henthorne? Previous cases said that as long as postal rule was within contemplation of both parties… why is this different? Don’t have to agree on the method … just has to show that it had been contemplated. Instantaneous Communication: Acceptance is communicated when it is received. K is made where and when the acceptance was received. Postal Rule does not apply to instantaneous communication . Canada- receipt when addressee aware of electronic doc in system and is able of being received and processed Brinkibon v. Stahag Stahl, 1983, UK “no universal rule can all such cases” so need to look at intention of the parties Facts Brinkibon that purchased steel from Stahag, based in Austria. Brinkibon sent their accept to a Stahag by Telex. Only be able sue if the contract had been formed in England. Issue Where was the acceptance? Was the K made in UK? Reason (for) 1.The contract was accepted by the telex from England and a telex is like the post, so postal acceptance rule says acceptance is complete on mailing, so contract made in UK 2. if it was the conduct that was the acceptance, then the conduct occurred in London Reason (against) The telex acceptance was not like the post at all – it is an instantaneous communication so it must actually be communicated to the offeror- follows the general rules of acceptance. Ratio Contract is formed at the place where the acceptance is received by the offeror. Held/Decision The acceptance by conduct took place when the letter was credit was opened in Vienna Comments once received in offeror’s telex machine (fax machine) should treat it as delivered even if not seen by offeror but because offeree will know if it arrived “transmission OK”,

TERMINATION OF OFFER 1. Refusal/rejection (can be done with counter-offer) 2. Revocation 3. Non-occurrence of Condition 4. Death 5. Lapse of Time Revocation: before offer is accepted an offeror can revoke the offer It must be done in such a way as to destroy any thought of being bound Knowledge of the revocation nulls offer – no meeting of the minds --- you cannot make acceptance on an offer you know has been revoked An offer is made irrevocable by acceptance. Exception – postal rule – if you use the post as your agent, you’re taking the risk. The moment it’s posted, it’s accepted and t/4 can’t be revoked unless revocation gets to offeree before acceptance gets back to you. Dickenson v. Dodds, 1876, UK Revocation can be communicated through a reliable third party Facts Dodds offered to sell property to Dickenson and said that the offer was open for acceptance until Friday at 9am. Dickenson learned that Dodds was negotiating with Allen, so Dickenson (all before 9am Friday) tried to accept via Dodds’ landlady (never reached Dodds), Then Dickinson’s agent tried 12 to give acceptance to Dodds at the train station, but Dodds refused the offer and said that he had sold to Allen. Issue 1. Was Offeror obligated to keep offer open to 9am Friday as promised? 2. Does knowledge that Offeror has sold the property amount to a withdrawal of offer? Reason (for) 1.Promise is binding 2.No true revocation – only knowledge of sale Reason (against) 1. No consideration for the promise to keep open until 9am – 2. revocation was communicated – Dickenson knew of sale to 3P Ratio If offeree pays nothing to keep the offer open (“bind the offer”) then it is a Nudum Pactum and unenforceable as no consideration Not appropriate to allow people who know that property has been sold to 3P to try to accept anyway Held/Decision No contract as offer had been legally withdrawn Comments promise to hold open the offer for period of time doesn’t bind seller, free to withdraw

If want to keep the offer open for acceptance, give “consideration” (deposit) or have option clause in offer. Byrne v. Van Tienhoven, 1880, UK Revocation must be made in the same manner the offer was made Facts Δs mailed offer to sell tin plates on October 1, then revoked by mail October 8, received by offeree October 20 Meanwhile π received offer October 11, accepted by telegram same day Issue Does a withdrawal of offer have any effect until it is communicated and does postal acceptance rule apply for revocations as well? Reason (for) Revocation never communicated and accepted before it was, postal acceptance rule only applies to acceptances as it is based on mutual agency reasoning Reason (against) Need consent, meeting of the minds to form a contract and none here, and postal acceptance exception should apply here to revocations as well. Ratio Revocation of an offer must be actually communicated before it effectively revokes an offer. Held/Decision revocation communicated after acceptance comm so there was a binding contract. Errington v. Errington and Woods, 1952, UK

Facts Father bought house for son and daughter –in-law to live in, told them if you pay the loan, the house is yours, and as long as you pay, you can live in the house, Father died and estate tried to evict them Issue If you have made partial performance and acceptance is underway, can you revoke the offer (already in process)? Reason (for) They had a license, which is a contractual right to possess, short of a tenancy and short of an interest in land , but enforceable and they were in process of accepting unilateral offer Reason (against) Bare licensee and terminable on reasonable notice and not a contract and offeror can withdraw unilateral offer Ratio unilateral offer cannot be withdrawn while offeree is performing Held/Decision clear unilateral offer which cannot be withdrawn while they continued to accept by paying the loan. Cannot be evicted and presumably entitled to a transfer of the house when loan paid in full. Lapse o If there’s a specified time for acceptance, then offer expires ON the specified time o If not, the court will determine whether a reasonable amount of time has passed so that the offer had expired (look at the commodity itself, circumstances, nature, character, and usual course of business) o Did the offeree state that they were still thinking about the offer? If they did, then the offer remains open but the offeror still has the opportunity to revoke it o Perishable goods would have a shorter period than non-perishable goods such as land Barrick v. Clark, 1951, SCR Look at contract’s nature, circumstances, character…to determine reasonable time Facts Clark offers to buy house for $15G. On Nov. 20 Barrick counter-offers $14,500: “let’s settle this immediately”. – Time factor, BUT Clark is on 10-day hunting trip when letter arrives. Mrs. Clark calls

13 Barrick and tells him that Clark will reply when he comes back. Clark responds on Dec 10. Barrick says he sold house to someone else on Dec. 3 Issue Did Barrick keep the offer open for a reasonable amount of time? Reason (for) Clark never received revocation of offer, so still in existence when accepted and not like Dickenson v. Dodds where Clark learned of sale to 3P Reason (against) the offer had lapsed as it was not accepted within a reasonable time Ratio Offers can lapse after a reasonable period of time & will no longer be able to be accepted…if no time is mentioned Held/Decision Yes, both parties had agreed that time was of the essence (magic words)

CERTAINTY OF TERMS (CH. 3)-formation of the agreement • Beyond offer and acceptance… now deciding “what is it that they agreed to” • Court will strain to find a contract if there is evidence to show the parties intended to create a contract TOOL 1. Did the parties intend to contract? (subjectively) 2. What is the intention of the parties as to the wording used? (objectively- performance, past) • A contract is an agreement of reciprocal obligations • contracts will not uphold an agreement to agree • The question is: “Are the essential (material) terms settled? • Things don’t have to be fully agreed, but there must be sufficient certainty, a gap-filler – i.e. a price formula.

VAGUENESS o If a contract hasn’t formed due to failure to agree/ascertain, then can’t sue for damage because no breach o If a contract has been formed but unenforceable, then some damages might still be claimed Objectivity in analyzing intention raises the matter above simply deciding which party’s version or intention should be enforced – It is imposes a standard upon which a court can “fill in the blanks” if it feels that the parties intended to contract, but the words are unclear, but courts are always wary of going too far, and in that way “impose a contractual liability to which one or both of the parties had no intention of being exposed R. v. Cae Industries, 1986, SCC a court will strive to find a contract if the terms (vague or incomplete) can be meaningfully construed. Facts Cae Industries agrees to take over operation of military base. Gov’t letter states it will give “best efforts” to provide a 40 000 man hours of work. Workload dries up. Govt argues no K Issue 1. Was the document an intended to become a binding contract? 2. If so, then is the contract too vague or uncertain? Reason (for) 1. the proof of the assertion that there was no intention that the letter be binding is on the person who asserts no legal effect and the onus is a heavy one, and since the terms were being performed there was clear evidence of intention here; and 2. that the wording although having somewhat unusual style is sufficiently clear to have created rights and obligations Reason (against) 1. the letter was an arrangement and does not show intention to enter into a contract 2. The language used by the parties is so vague and uncertain, the document so incomplete as to render contract unenforceable Ratio When Ks are too vague, two steps for courts exist: 1. Determine if there was intent 2. Determine if K is sufficiently clear for parties to perform their duties Held/Decision The heavy onus and part performance shows that the letter was intended to be binding and The wording used even though loose wording can be interpreted to find obligatory language, and court should make every effort to find a meaning Comments Since the terms were being performed… there was clear evidence of intention. Hobbs v. Esquimault and Nanaimo Railway (1899), SCR

14 Ratio Court will not apply esoteric meaning held by one of the parties – can’t attach private meaning to words . Raffles v. Wichelhaus (1864), UK

Ratio if a court can’t decide which of two meanings is the correct one, (two ships both named Peerless) then no binding contract, CONTRACT FAILS!!! Staiman Steel Ltd v. Commercial & Home Builders Ltd (1976, ON CA

Ratio issue was whether a pile of steel beams that had been previously sold to 3P were included in a bulk sale contract “all steel in yard except mechanical items”. The court looked at the reasonable meaning of the words, the conduct and the circumstances (objective test) and determined that the contract was ambiguous about the steel beams, so contract did not include these – followed Raffles Modern trend : courts will pick out terms that they think are vague and throw out rest of K

INCOMPLETE TERMS • Parties must reach agreement essential terms; will depend on the commercial text • certain terms open for future negotiation if done so in the past (past conduct) (Hillas) • already started performance, then the court will likely to find a binding contract (Classique Coach) • Other things the courts take into account are: A) Has one party invested time and money? (equitable consideration) –court will try “flesh out” a contract B) Why is one party arguing that there is no contract? Why has there been a breach of contract? • When looking at an option clause in a contract, you must ask: A) How does the language of the option clause fit into the context of the whole contract B) What are the reasonable practices of the industry (assessments based on industry standards – Hillias) • What is it that is missing – if it is a detail (Hillias) then the court should be able to resolve it – if it is an essential term (May and Butcher) there will generally be no contract • Sales of Good Act: if no price has been determined, court will give a reasonable price to be fixed • note that duration of a contract has not been regarded as an essential term the lack of which could void a contract – this is just a matter of interpretation: Rapatax. Injunction – a court order that stops someone from doing something Repudiation – declaration that one is not going to perform a contract May & Butcher v. R, 1929/1934, UK An agreement to agree is NOT a contract Facts sale of surplus tents in the future with price to be paid left open “shall be agreed upon from time to time” with all disputes to be referred to arbitration. Gov’t said that they were no longer bound by the arrangement as the price had never been agreed. Parties failed to reach agreement on price, time of payment, quantity, dates of delivery. Issue Whether the terms of the contract are certain enough to constitute a contract? Reason (for) 1. was a contract which contained clauses for agreement on price and if no agreement should be a reasonable price – relied on the Sale of Goods Act: 2. Even if no price agreed, arbitration could determine it; 3. To end the whole contract was wrong, because there might be more tents to be sold Reason (against) Contract incomplete as to an essential term missing (no price) and therefore no contract Ratio Agreement to agree is not a contract. Held/Decision then no contract – can’t agree to agree in the future. If there is no contract. Sale of Goods Act nor arbitration can impose reasonable price. If no “agree in future” then SOGA applies Hillas v. Arcos, 1932, UK Past performance will aid in court determining if terms are incomplete

15 Facts H bought woods from A under an agreement that stipulates there’d be another purchase next year, price to be 5% less than present (1931) A refuses to carry out this option to renew and sold to 3P, H sued for anticipatory breach of contract

Issue Was the 1931 wording a binding contract? Reason (for) Both parties intended to make a contract and even with unarticulated language duty of Courts to construe broadly – (Latin maxim), and it is normal that contracts which are to take place in the future may well be slightly uncertain as to prices and delivery times Reason (against) agreement to agree, parties did not intend it be binding. Words are too uncertain Court would have to make a contract for the parties subbing its judgment for intention of parties Ratio courts find enforceable contract if that is what the parties intended. A court will look at prior acts of performance between the parties and local customs in the trade Held/Decision Past prices/performance used by courts to with as standard of reasonableness. Foley v. Classique Coaches Ltd. [1934] (C.A.) Incomplete terms can be enforceable if there is a prior legal obligation – business efficacy Facts F sold land to C on condition that C buy all petrol from F at price to be agreed upon in writing from time to time. After some time C wants to buy from others and claim no contract formed.

Issue Is the agreement binding despite incomplete terms? Reason (for) Hillas v. Arcos – this case is “on all fours”- (facts of one case are the same as another c… decision needs to be the same)Parties intended to enter into a contract, the contract is for the future, we have previous years’ conduct . Reason (against) May and Butcher - cannot agree to agree in the future. Ratio If the agreement has been substantially executed and intended to be binding, then the court will treat this agreement as a binding K. Held/Decision there was a contract, and the injunction against the Δ is granted. Nicolene Ltd. V. Simmonds, [1953], UK

Facts Words added to acceptance –“I assume that the usual conditions of acceptance apply” Ratio a meaningless condition i a contract which is the maker’s favour which the other side agrees to, the whole contract is not a nullity and the meaningless clause can be removed unless such removal would render the entire contract meaningless (same as staiman steel) AGREEMENT TO NEGOTIATE obligation is not an agreement of sorts with an uncertain significant term such as price, but an agreement to simply negotiate a contract –parties do not want to commit themselves on prices, delivery dates, etc. Key here is a problem with the process of the future negotiations – they have usually broken down for some reason. Agreements to negotiate may be enforced although damages may be nominal (very low) “Option to renew” doesn’t necessarily mean agreement to negotiate > words will be more specific for agreement to negotiate Empress Towers v. Bank of NS, 1991, SCC an objective benchmark that imposes an obligation to negotiate in on the landlord

Facts The D. was the tenant of the P.,Lease had renewal clause at “market rent ...as mutually agreed...If...do not agree...agreement may be terminated. They failed to agree before the lease expired and then the P. offered a non market value price. Issue Does the renewal clause “market rental rate as mutually agreed” sufficient to determine price w/ certainty? Reason (for) there is an obligation to negotiate and Landlord did not – treated process where they could impose terms such as price – court can imply term that the landlord will negotiate in good faith, as parties have agreed would be a renewal at market rent for 5 years Reason (against) Can’t agree to agree (May and Butcher), and there was a clause that dealt with what would happen if the parties did not agree – termination. Ratio “Market rate” introduces a mechanism to determine price. This clause requires more than the two

16 agreeing. It implies the LL will negotiate in good faith and agreement will not be unreasonably withheld. Held/Decision Contract required good faith and landlord had not done this, so tenant could not be evicted and presumably court imposed market rent Lease Agreements: Agreement to negotiate is enforceable > subject matter is the process of arriving at a successful transaction. But this doesn’t necessarily lead to agreement on contractual terms Objections to agreement to negotiate 1. Impossible to determine the content of duty to negotiate. 2. No basis for damages for breach of duty TEST to determine if there has been an enforceable lease obligation Least Enforceable 1. Option to renew, at rental rate T.B.A. > agreement to agree 2. Option to renew, at market prevailing rate TBA > agreement to agree, obligation to negotiate in good faith 3. Option to renew, at market prevailing rate > binding contract in and of itself Most Enforceable 4. Option to renew, at rental rate TBA; failing which rental rate to be determined in accordance Arbitration Act Has the landlord exercised “good faith” – if not the court will try to find in favour of the tenant Mannpar v. Canada, 1999, BCCA court will not imply term to a contract merely because the court may think such term would be reasonable Facts Mannpar entered into contract with Crown. Clause 7: Permittee will have the option to renew for another 5 years “subject to satisfactory performance” and rates will be renegotiated (renewal clause). Crown refuses to negotiate. Issue 1. Was the renewal clause uncertain? 2. Ought the court to imply a term to negotiate in good faith? Reason (for) Relying on Empress, must act in good faith. Reason (against) there is no benchmark for a court to set rate such as “market rent” Ratio Duty to negotiate is unworkable in the absence of an objective benchmark to measure duty. Held/Decision NO, The term “renegotiate” implies starting from scratch and “royalty rates not less than” is just a minimum and not a real effort to determine price. courts must be careful not to imply different words that were not words in the contract previous cases are distinguishable ,this is not a continuing lease, but business arrangement Comments Limits the idea of “good faith” Wellington City Council v. Body Corporate, 2002, (NZCA) agreement to negotiate in good faith was NOT enforceable for lack of certainty.GF is NOT a principle of law Facts Council said in writing that it will negotiate in good faith sales for existing lessees at not less than current market value, which they called the process contract Issue was this an enforceable contract? Reason (for) This was a unilateral offer to all lessees and acceptance was entering into negotiations, so had to do so in good faith Reason (against) agreeing to negotiate not a binding contract and no benchmark or mechanism for court Ratio Consensus on all essential terms is necessary for an enforceable contract > good faith alone is not sufficient Held/Decision court lacks objective criteria to decide if a party is acting in good faith. some “process contracts” are enforceable such as the tender cases where a court can reasonably determine what the parties are required to do Comments Most Canadian courts RESIST using “negotiate in good faith”. Can be used for “performance in good faith” with existing contracts. ANTICIPATION OF FORMALIZATION (Intention to Create Legal Relations) parties negotiate complex agreements in stages. Preliminary negotiations conclude with a letter of intent or a memo of agreement, but there will be additional terms in complex document to be negotiated and signed .

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Bawitko v. Kernels Popcorn, 1991, ON CA

Facts Complicated long-term Franchise agreement concluded with 4 terms, a handshake and the words: “You’ve got a deal” Issue Did the verbal agreement rise to a K? Reason (for) the essential terms were negotiated and decided upon and the formal contract to be signed was simply a standard form and a contract already agreed upon Reason (against) the parties clearly contemplated signing a formal agreement and cannot make a contract to make a contract Ratio This verbal agreement was missing essential terms such as price. A verbal agreement that has all of the material terms is enforceable. Held/Decision post-agreement conduct demonstrated parties were not in agreement on the essential terms. need to conclude parties had entered into a complete contract on that day. MAGIC WORDS: subject to contract- means that there is no contract yet.

THE ENFORCEMENT OF PROMISES (CH. 4) not all promises are enforced 3 ways a promise to be enforced: 1.Contract 2. Deed 3. Consideration: Currie v. Misa (1875) UK def: a consist of some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other party, Canada by Spruce Grove v. Yellowhead Consideration can be a “” Nudum pactum – bare pact – no consideration Without consideration, it would just be a gratuitous promise = a gift There must be consideration for each promise within a k Consideration must be present at the time of acceptance What can be consideration? 1. A promise 2. An act other than a promise (ex: swimming the English Channel) 3. The creation, modification, or destruction of a legal relationship 4. A forbearance = not doing something Consideration must be distinguished from: 1. Motive (ex: Thomas v Thomas) – the reason why someone enters into the k is not consideration 2. Adequacy of consideration 3. Failure of Consideration (one of the parties failed to perform any of what he promised to do – ie: Reliance – the legal system might choose to enforce certain promises because of reliance on the part of the promisee - a person who has actually relied on a promise has a particularly pressing claim for relief

Contracts: must have offer/acceptance/certainty of terms/completeness. Promise is part but not binding. Promise must have: 1. Promise must be supported by consideration( tit for tat,courts look for is consideration flowing from all sides to enforce) 2. Promisor must intend to create legal relations 3. Agreement must be in writing (applies in certain cases) Deed: written instrument, “signed, sealed, and delivered”, grantor, conveys title to the grantee, similar to K Minute you see under seal… no need for consideration. if there denotes a seal… need to have the red sticker. Estoppel – the law has in a limited range of cases. rewarding the promisee even if there was no deed (seal) or consideration designed to protect harm from befalling the reliant offeree – equitable in origin

18 Recital: A formal statement appearing in a legal document such as a deed that is preliminary in nature and provides an explanation of the reasons for the transaction : one individual takes on obligation to pay for loss or damage incurred by another individual. Prima Facie: [Latin, On the first appearance.] A fact presumed to be true unless it is disproved. Governors of Dalhousie College v. Estate of Boutilier SCC! (1934) Exchanges and Bargains, A bare promise by way of donation cannot be converted into a binding legal obligation unless there is some form of consideration attached. Facts Mr. B pledged a donation of $5000 to Dalhousie College but he had financial difficulties, so he never paid. Mr. B died and Dalhousie College tried to collect money from the estate Issue was there any consideration (as this is a gift) or simply had a contract to pay been formed? Reason (for) Consideration on face of the pledge: “in consideration of subscription of others”. Others signed subscription when saw Mr. B’s subscription. College’s obligation to use money for purpose (building) “doctrine of mutual promises” You promise $$, we promise to build. Reason (against) This is bare promise – no consideration from the promisee – nudem pactum Ratio Promisee is NOT getting anything in return Held/Decision consideration that others have signed not good consideration. and Mr. B certainly never relied on such implied promise to build buildings, etc. with the money (no wing named after) Comments Consideration has to be in the K. If given later then it was NOT part of that transaction Brantford General Hospital v. Marquis Estate (2003) (OSC) Exchanges and Bargains Facts Mrs. Marquis pledged $1m to the Hospital and died. Hospital wanted remaining $600,000. Issue Was there consideration for the pledge of the deceased to have a K? Reason (for) The Hospital agreed to name wing after her. US Courts will enforce promise to pay based on implied benefit of hospital works supported by fundraising Reason (against) Naming of the wing was Hospital’s idea and never sought by Mrs. Marquis and was not a sure thing, as it needed Board approval. English cases and Dalhousie held to the contrary Ratio consideration must have been agreed upon by the promisor Held/Decision Mrs. Marquis never sought naming so cannot be consideration Comments Pledge can become a K if you get something out of it. Wood v. Lucy, Lady Duff-Gordon (1917 US) Exchange and Bargains Facts Wood enters into a contract to market Lady D’s designs but she also endorses other brand. Wood refuses to fulfil contract. Issue Was there consideration? Reason (for) Words of contract did not obligate her to do anything. Reason (against) words of the contract are not determinative, and π could prove that he marketed Δs goods Ratio Implied promise of one party can be sufficient to constitute consideration for contract and to support a cause of action against the other party for breach of contract. Held/Decision whole writing was “instinct with an obligation” and an actual promise to market can be implied. was consideration here and enforceable contract PAST CONSIDERATION • NOT enforceable if a promise is made afterwards because 1. You don’t want to bind people involuntarily 2. There was no bargain for the promise at the time Promise will only be enforceable if new consideration is added. Eastwood v. Kenyon, 1840, UK Past Consideration is no good consideration Facts P was Sarah’s guardian after she was orphaned as a child. P takes out a loan to finance her education. Sarah offers to repay and makes good on promise for a year. D, Sarah’s husband, promises to take over payments after he marries Sarah but reneges. Issue Is there consideration by P. for such promise so that it can be enforced?

19 Reason (for) Sarah received benefit and she can be sued when she came of age so now since Sarah’s husband has promised, consideration carries over Reason (against) Sarah’s husband has received no benefit and any benefit to Sarah was given in the past. Ratio A moral obligation does not constitute good consideration Held/Decision NO contract. Court accepts that Sarah could be sued on her coming of age, but her husband cannot as any consideration for his recent promise to pay was given in the past – Δ husband was in no way connected to Sarah at the time of the benefit to her Lampleigh v. Brathwait, 1615, UK Requested past consideration is good Facts After committing a murder, D asked P to petition King for pardon. D promised to pay ₤100 to P, but reneged. P tries to obtain pardon but doesn’t get it. Issue Can this promise be enforced as a K? Reason (for) π did work for Δ even if promise came after the work was done Reason (against) πs work came before the promise and was independent of it Ratio An act done before a promise is made can be good consideration where the act was requested by the promisor and it was understood that payment would be made. Expectation of payment is good consideration. Held/Decision Yes it is a K as P did work for D. Comments This case is an exception to Eastwood CONSIDERATION MUST BE OF VALUE IN THE EYES OF THE LAW Peppercorn rule Thomas (executors) v. Thomas, 1842, UK Consideration must be of value Facts Husband promised wife a house. After his death this was done and she paid a yearly rent of $1 and remained unmarried. Later, executor refused to honor promise. Issue Was there consideration for this agreement? Reason (for) documents clearly calls for benefit to the promisor from the promisee (rent and promise to keep in good repair) Reason (against) Executors were motivated to carry out old Mr. Thomas’ wishes, and were not motivated by £1 per year ground rent or to keep in repair, and if motive did not constitute onsideration, then no consideration Ratio must find something of value that moves from the promisee, and here – peppercorn rule of $1. Court does not concern itself with adequacy of the consideration. Held/Decision Yes a K. Comments Saying Mr. T did not care about the $1 and cant be used as consideration. Performance is an issue. Evidence to prove there was a good contract.

Loranger v. Haines, [1921], ON CA

Facts Δ decided to give π some land, because he liked him, so π could build a house on it. Π hesitated, then agreed, and an agreement was drawn up and recited “for consideration hereinafter mentioned” π had to pay for services which benefitted both parties. π built a house on land Δ refused to convey when relationship waned Issue Was there consideration? Reason (for) money was spent by promisee on faith of a promise so consideration here Reason (against) no real consideration – Δ only gained pleasure which was gone

20 Ratio Courts cannot be concerned with the adequacy of the consideration; it is commonly repeated in the Courts that it is enough that the defendant got all he contracted for Held/Decision there was consideration here and specific performance, although not directly bestowed upon promisor: given up desires to remain in Detroit, induce π to move, improve land, help pay for services and gave Δ first option . π clearly performed his part of the bargain, and Δ gained by having his land improved, so strong case for the π Comments Do not confuse motive with consideration. BONA FIDE COMPROMISES OF DISPUTED CLAIMS (Forbearance= not suing) Forbearance comes up in two situations o When someone delays their legal rights of action (usually to sue) o When someone promises not to pursue their legal rights in return for some consideration Compromise agreement – if both parties believe the claim is valid, it is a bona fide contract even if it is not legally enforceable Callisher v. Bischoffsheim, 1870, UK Forbearance can be consideration. Facts Π alleged that certain moneys were due to him from Honduras government and threatened to take legal action. In consideration of π not suing, Δ promised to deliver some bonds to π. No real claim by π, Δ didn’t deliver the bonds. π sued for bonds Issue Was there consideration? Reason (for) Agreements made to compromise has good consideration ; no real claim does not vitiate the consideration Reason (against) No real consideration as no moneys were actually due to the π by the Honduras Gov’t Ratio Forbearance of a disputed claim can be valid consideration if o The claim is reasonable in itself, and not vexatious or frivolous o The claimant has an honest belief in the chances of success o The claimant has not concealed from the other party any fact, which to the claimant’s knowledge, might have affected the validity of the claim o Claimant has a serious intent to pursue the claim Held/Decision contract enforceable as forbearance of prosecution of claim good consideration Comments agreement not to sue someone can be valid consideration for a contract PRE-EXISTING LEGAL DUTY If promisee only promises to do that what he is obligated to do (duty), there is no consideration. This is consistent with the past “spent” consideration idea The common law, like equity takes that to be done what ought to be done Public duty: Traditional view – if promise already public duty, no consideration, but if promisee provided something extra, there was consideration: Glasbrook v. Glamorgan Duty owed to a 3P: This is generally good consideration. In Shadwell v. Shadwell nephew promised to marry which was a legal obligation and then uncle promised to give him £150 a year if he carried through with it – majority of Court felt legally binding promise. (mostly seen in family situations) Pao On v. Lau Yiu Long, 1980, UK pre-existing legal duty owing to a 3P may be valid consideration Facts PO owns share in SO, LYL owns shares in FC; LYL wants to acquire a building B from SO Agreement 1: b/w PO & FC > exchange of shares of SO and FC Agreement 2: guarantee of share price by LYL to PO PO sought of a new guarantee before closing of agreement #1 because of defect in first guarantee; YLY reluctantly agreed After closing, price fell, PO brought claimed based on guarantee, LYL refused to pay Issue Can the earlier promise be valid consideration for a second (later) agreement w/ a 3P

21 A pre-existing duty to a third party can be valid consideration in a contract with another second party. Ratio The same promise to two different parties in two different contracts can be valid condition in both. But, a pre-existing duty to the same party is not consideration Held/Decision Yes. good consideration as a promise to perform or the performance of a pre-existing contractual obligation to a 3P can be valid consideration Comments Past consideration is normally no consideration unless: 1. The act or promise was done or made at the promisor’s request; 2. The parties must have understood that the act or promise was to be remunerated either by the payment or conferment of some other benefit; 3. The payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance. VOCAB: Force majure - "chance occurrence, unavoidable accident", is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term act of God Promissory Note one party makes an unconditional promise in writing to pay a determinate sum of money to the payee, either at a fixed or determinable future time or on demand of the payee, under specific terms. Not an IOU. Don’t need to look for consideration. Tripartite contract - 3 way contract, no privity between 1,3 (eg owner, contractor, electrician) DUTY OWED TO THE PROMISOR Promises to pay or provide more Stilk v. Myrick (1809) Eng Consideration: Contractual Duty Owed to Promisor Facts Captain agreed to pay each sailor $5; during trip some sailors deserted and the rest asked for more $. Captain agreed to pay, but when trip over he refused to pay more Issue Was there consideration for the promisee to pay more for what sailor obliged to do?

Reason (for) the ship was not in peril on the seas, this was offered to the crew The crew agreed to do the work of the two deserting crew so there was consideration Reason (against) No new consideration as they agreed before to all emergencies no “fresh” consideration Ratio A promise to perform a pre-existing contractual duty already owed by the contractual promisee does not constitute good consideration to support another promise to the same promisee. Held/Decision No, no economic duress Gilbert Steel v. University Construction (1976) OCA Consideration: Contractual Duty Owed to Promisor Facts P promises to deliver steel at an agreed price, but after enters K, steel prices skyrocket and P would lose money. P and D enter into an oral agreement for higher prices. D accepts steel, but refuses to pay new prices. Issue D argues oral agreement is not enforceable b/c there is no new consideration. Reason (for) 1. Consideration was found in π’s promise to give the Δ a good price for steel in future 2. Consideration was found in the mutual abandonment of the old contract – implied rescission of the old contract. A subsequent agreement impliedly rescinded the old one, especially since price was an essential term 3. Consideration was found in the increased credit allowed the Δ in allowing a higher amount to be paid in 60 days 4. Δ had acquiesced in the increase because it did not object to the increased invoices Reason (against) 1. This was too vague 2. Not a mutual abandonment as only one term was changed 3. Increasing credit is really not new consideration! 4. To say this estoppel is being used as a sword not a shield and you cant do this, and further there was no reliance on Δs acquiescence by the π to its detriment Ratio When varying a contract there must be new consideration

22 Held/Decision Not a new K, all terms same except price, if old K still there then need fresh consideration. Comments Parties did not rescind old K. Should economic duress be an issue here? Williams v. Roffey Brothers (EngCA) 1990 Consideration: Contractual Duty Owed to Promisor Facts Tripartite contract. Owners are 3P. Contractor is Δ and sub-contractor is π Δ and π entered into a contract for π to do carpentry work for £20,000 to build 27 flats π encountered financial difficulties and Δ concerned that πs might not finish on time, and Δ defendants were under financial penalty with the owner if late Δ offered π new deal to build for an extra premium of £575 per flat. Π then completed the flats, but Δ only made part payment. Issue Was there consideration for the 2nd contract? Reason (for) Δ received benefit beyond the completion of the flats which were the subject of the first contract, which were that the π did not stop working, saving the penalty for delay and avoiding the trouble and expense of hiring a new contractor to finish Reason (against) π agreed to do no more that he had agreed to do in the first contract so no new consideration, so Stilk v. Myrick applied, and also there was economic duress brought about by the π to get the Δ to agree to a new contract Ratio (conflicts with Gilbert) where additional consideration can be found, such as a practical benefit, a court may hold that a valid contract exists, as long as there are no other vitiating conditions present, i.e. fraud or economic duress. Held/Decision as long as Δ doubts that π will complete first contract on time, and without being subjected to duress by the π, Δ agrees to a new higher price, there is consideration. Comments Stilk v. Myrick principle is still good law, but distinguishes as Δ gained an advantage, the rigid approach to consideration as in Stilk is not appropriate any more General Notes: Courts have developed techniques to avoid the pre-existing duty rule 1. finding consideration, albeit nominal 2. finding that circumstances have changed enough that P’s later promise is to do what he was supposed to do before, but it is still consideration because it would reduce hardship from the D 3. Enforcing a modification of the contract if the parties have rescinded original agreement and Greater Fredericton Airport v. NAV Canada (NBCA) 2008 Consideration: Contractual Duty Owed to Promisor. BAD case for ex Facts NC installed a DME and wanted GFA to pay for it. GFA did not want to but, GFA signed letter under protest to pay for DME to make sure the runway would be operational. After NC installed DME, GFA but wanted money back. Issue Was there consideration on the part of GFA to pay for the DME? Reason (for) Relies on Williams v. Roffey and said that here were benefits to GFAA to pay. Reason (against) No new consideration and Stilk, Gilbert Steel apply Ratio No economic duress = enforceable K. A promise of a post-contractual modification, even though not supported by consideration, may still be enforceable so long as the promise was not procured under economic duress. Held/Decision Court adopts reasoning in Roffey and says that all that is necessary is to find some benefit or advantage going the promisor in making the second contract – says that this is only an incremental change in the law from the Rule in Stilk Comments even though no fresh consideration, the modernization of the rule in Stilk allows a court to still enforce a contract if there is no economic duress PROMISE TO ACCEPT LESS : Accord is to agree to accept some other promised performance than what has been agreed upon. Pinnel’s rule Payment of a lesser sum in satisfaction of the greater, cannot be any satisfaction for the whole o Unless couples with a gift and accepted o Unless accepted through a negotiable instrument (cheques) o Unless accepted prior to the due date

23 o Unless accepted at a different location Statute: The Judicature Act (law of equity) has effectively abrogated the rule in Pinnel and overturns Foakes v. Beer o Part performance of an obligation either before/after a breach shall be held to extinguish the obligation a. when expressly accepted by a creditor in satisfaction, or b. when rendered pursuant to an agreement for that purpose though without any new consideration Foakes v. Beer (UK) 1884 Promise to Accept Less, Accord and Satisfaction Facts Folkes owes Beer, Folkes paid £150 per month until judgment fully paid and during payments, Beer agreed not to take any proceedings on the judgment. Beer claimed interest. Interest was not term of secondary agreement, but it was in the original contract. Issue Does Beer have a right to sue for the interest? Reason (for) This is a waiver of interest. There was accord and satisfaction. Pinnel’s Case (from 1600’s)should be overruled Reason (against) 1. What Folkes received in exchange for payments was Beer not suing on the judgment, and there obligation to pay the whole debt which could not be extinguished 2. There was no accord and satisfaction payments on account cannot act as a satisfaction 3. Pinnel’s Case still good law Ratio Payment of a lesser sum in satisfaction of greater, cannot be any satisfaction for the whole Held/Decision Part payment when entire sum was due could not be in itself good consideration as entire sum was all due. No satisfaction as just payment on account and as long as final payment still due no satisfaction

4 ways around Foakes v Beer: A. Put the agreement under seal B. Statute –ex:Law and Equity Act C. Structure the new arrangement so that not only are the parties paying less but something else is different D. Estoppel –certain circumstances you cannot go back on your word- estoppel can enforce a promise Re Selectmove Ltd. (EngCA) 1995 Promise to Accept Less, Accord and Satisfaction Facts Gov’t official agreed to accept payment of tax arrears in instalments from Selectmove because cash flow problems – Gov’t official said that would check with his superiors and get back to company if problems with the arrangement. Never did that. Before first payment due, Gov’t demanded full payment, but Selectmove made instalment payments which were accepted and by Gov’t – not sent back Issue If there was acceptance by the Gov’t of the settlement then was there good consideration? Reason (for) Gov’t derived benefits from installment arrangement, accepted the payments which was easier than demanding all and relied on the principle in Williams v. Roffey Reason (against) Case directly on point with Foakes v. Beer and Williams v. Roffey was a case concerning building contracts not debts Ratio must be a ‘practical’ benefit to the promisor to reduce repayment for it to be valid consideration Held/Decision settlement agreement unenforceable as no consideration and follows Foakes Comments Some consideration in other cases has been: that practical reality of getting money now and saving of time, effort and expense was the consideration. Foot v. Rawlings (SCC) 1963 Promise to Accept Less, Accord and Satisfaction, Judicature Act overrules Pinnel Facts Δ gave some promissory notes to the π, then π offered that he would reduce interest rate if Δ followed a payment schedule with a series of 6 post-dated cheques, saying that he was doing it to help Δ carry on and also allowed Δ privilege of paying it all off at anytime Δ complied with terms, after cashing one of the cheques, π sued for the remaining debt. Issue Is there consideration for the agreement to forebear proceeding on the notes? Reason (for) Cheques given constituted a “thing” and more than the less money which would be paid, Promissory 24 Notes seen as different than cash, so post-dated cheques were different as well Reason (against) option that it could be paid in full at any time negated consideration as full payment was reserved, and only was agreement to accept instalments so, no consideration Ratio the acceptance of a negotiable instrument may be a satisfaction of a debt of a greater amount Held/Decision cheques in exchange for agreement not to sue if not in default good consideration –cheque (something more: peppercorn) –Court not look at the adequacy of consideration Comments Uk- cheque the same as cash, CANADA cheque is worth more. PROMISSORY ESTOPPEL . Test-High Trees Estoppel –Law is stopping you from saying something. If there is a promise, you can’t lead evidence to say there is no consideration. You will be estopped from trying to get out of this promise that you made. Before a promise is binding there must be consideration. YOU CAN ONLY FIND ESTOPPEL IF THERE IS NO CONSIDERATION Strict criteria to the use : 1. Has to be an existing legal relationship between the parties 2. One of the parties promises to reduce the obligation that is already owed to them 3. The other parties (who receives the promise/benefit) relies on that promise to their detriment 4. The promise must have been made in good faith and acted upon. 5. plaintiff cannot use estoppel only the defendant A shield and not a sword --- it is a defence WAIVER: a change for the benefit of one party and involves the voluntary relinquishment of a contractual right. The party making the waiver will not be able to insist on those strict legal rights where the other party has acted upon the waiver. A waiver is unsupported by consideration and can be retracted by giving reasonable notice test o 1. Full knowledge of their right o 2. Unequivocal intention to waive those rights Who Benefits • Promissory estoppel, typically both parties are getting a benefit – i.e. High Trees – company getting some rent rather than no rent • Waiver is a change in the contract that is for the benefit of one party only Hughes v. Metropolitan Railway (UK) 1877 Waiver Facts Lease between Landlord (Hughes) and Tenant (Metropolitan Railway) October, landlord gave notice for tenant to repair within 6 months. Tenant replied November suggesting to defer repairs while discussing buy-out lease. Landlord never responded to request. April 19, 3 days before 6 months ended, tenant said they would now do repairs. April 28, landlord served writ of ejectment. In June, tenant still there and completed the repairs. Landlord still tried to enforce ejectment Issue Could landlord enforce lease using the notice to repair and the fact that repairs were not complete by the end of the 6 months? Reason (for) (kicking them out and enforcing lease) The lease is clear, and no promise made to defer Reason (against) The letter of November offering to suspend repair and engage in negotiations was accepted by the landlord’s conduct . Right to enforce repair clause was waived until negotiations were either completed or broken, so tenant had until end of June to complete Ratio if parties in contract decide mutually (by act or express consent) to negotiate leading one of the parties to suppose that a deadline won’t be enforced, then the party who would enforce those rights can not Held/Decision Landlord taking advantage of tenant. Agrees with the tenant that the actions of the landlord amounted to a waiver that could be enforced by a Court of Equity. Equitable terms, they waived their rights to enforce the lease strictly because of their behaviour Central London Property Trust v. High Trees House (EngKB) 1947 Promissory Estoppel- estoppel def created here. (reliance an issue) Facts Because of low vacancy due to poor economic conditions war in 1940, P reduced rents from ₤2,500 to ₤1,250 annually. In early 1945, the flats were all leased, and the P(now receiver)sought recovery last 2 25 years of rent. lease was under seal Issue Variation of a deed must be done with a deed (another sealed document); under equity it is OK to vary an agreement (oral or written) as long as there is new consideration. Here w/o seal or consideration. Is the P entitled to rent given was no consideration? Reason (for) Equity allows lease under seal to be varied. There was an agreement with consideration to accept less for both the past and the future and variation had changed entire agreement Reason (against) Lease under seal cannot be varied under the common law (but yes it could: equity act) Foakes - cannot agree to accept a smaller sum when owe a larger unless fresh consideration, not here. It is not estoppel as it is not a of existing fact Ratio Yes, promissory estoppel ceases when the conditions for the estoppel came to an end Held/Decision landlord made a promise which was intended to be acted upon and was acted upon, so the landlord will be estopped (even with NO consideration) from enforcing its legal rights. Comments When the circumstances that give rise to the estoppel end, so does the estoppel John Burrows v. Subsurface Surveys (SCC) 1967 Promissory Estoppel (indulgence is not a promise) Facts Purchase and sale agreements secured by promissory notes. Clause: if payments are more than 10 days late creditor can go after the full amount. For 18 months payments were consistently 18 months late, but nevermore than 35 days. After a disagreement, the creditor went after the full amount. Issue Would the π be estopped from relying on his strict legal rights to invoke the ? (because they seemed to not care for 19x) Reason (for) The π’s acquiescence was an amount to a representation that the Δ was NOT able to rely Reason (against) The pattern of behaviour amounted to a representation which was relied on and acted upon, and it would be inequitable to allow the π to enforce his strict legal rights Ratio Friendly indulgences are not promises to which the doctrine of promissory estoppel would apply. For promissory estoppel to apply, there must be a promise by either words or conduct, and its effect must be clear and unambiguous. Held/Decision No intention was there to create a NEW legal relationship. D & C Builders v. Rees (EngCA) 1966 Promissory Estoppel (equities) Facts πs are a little contracting company and Δ was a customer. Work was done, £480 overdue, demand letters written, no response, the Δs wife, made complaints about the company’s work, and offered them £300 in cash or by cheque. Mrs. Rees knew πs were in dire straits, made πs add words to receipt “in completion of account”. Πs then sued for the balance Issue 1. Was the offer of the cheque which is different than cash sufficient consideration 2. Is the P estopped from collecting the full amount? 3. Was there accord and satisfaction? Reason (for) The actions of the πs fit within the broad principles of estoppel, that their act lead the Δ to believe that the πs strict legal rights would not be enforced Reason (against) but principle also requires that it be inequitable to allow him to enforce those rights, and here the Δs wife held the π to ransom Ratio If there is intimidation/duress then you cant use promissory estoppel. Rees is intimidating. Promissory estoppel is not applicable where the promise has been extracted by intimidation. Held/Decision was not inequitable to allow the πs to enforce their strict legal rights, and says that the defence of accord and satisfaction has not been made out as there was no true accord - “no person can insist upon a settlement procured by intimidation” Difference Between Promissory Estoppel and Waiver o Promissory estoppel is that one party makes a promise and then reneged on it, party will state they will accept certain things temporarily- it’s a suspension of rights rather than a full of rights . Promissory estoppel is usually done by words of promisor o Generally, you have a waiver when one party is in breach of the contract and the other party does not object, did their actions constitute waiver – will just accept certain things – i.e. lower rent. Waiver is usually done by action of promisor 26 Variation - a change made by mutual agreement for the benefit of both parties to the original agreement and must be supported by new consideration

MAGIC WORDS: “TIME IS OF THE ESSENCE”, “SUBJECT TO CONTRACT”

Saskatchewan River Bungalows v. Maritime Life (SCC) 1994 Retraction of Waiver Facts Insurance terms state that if premium paid late then policy lapses · Aug: partial payment by SRB · Nov: demand of payment by MLI (waiver) · Feb: policy lapse sent by MLI · Apr: SRB learns of lapse · July: SRB sends payment Issue Was there a waiver? If so was it retracted later? Reason (for) Insurer had waived its right to compel timely payment under the contract and wording of November letter clear – policy still “technically not in force, but still require payment” and that waiver was never retracted as never received reasonable notice of such retraction Reason (against) No waiver took place as insurer made it clear that reserved the right to enforce the lapse provisions. If waiver did take place it was clearly retracted in February letter. Ratio Test: Waiver is only found when the party waiving has 1) the knowledge and 2) intention to waive their rights. A waiver can be retracted by the waiving party if the party gives reasonable notice No notice is required where there has been no reliance on the waiver Held/Decision waiver took place, but was effectively retracted, so policy lapsed Comments Waiver must be analyzed narrowly as there is NO consideration Landbank Minerals Ltd. v. Wesgeo Enterprises

Facts sale of natural gas interests, clause “time was to be of the essence”. The purchaser agreed to postpone closing to a specified date, but the vendors failed to satisfy the purchaser's title requirements by that time. The purchaser then gave notice to the vendors that it was terminating the sale agreement. The vendors refused, saying that time had ceased to be of the essence when the time for closing was extended. purchaser sued to recover deposit Issue Did the extension of closing constitute a waiver of the” time is of the essence” provision? Reason (for) Once extended this was a clear waiver, and to retract, must give reasonable notice Reason (against) Not a true waiver as no intention to waive, only a substitution of new closing date Ratio an extension of closing is not a waiver of time being of the essence Held/Decision no waiver, not unfair or inequitable for the plaintiff purchaser to insist that time was of the essence, so the purchaser was entitled to terminate the agreement and recover its deposit Comments If time is an essence, what do you do? Note that it is NOT a waiver or IS a waiver but time is still important. DON’T just be silent. W. J. Alan & Co. V. El Nasr Export and Import Co. (EngCA) 1972 Waiver, detriment not required Facts Contract in Kenyan shilling, dealings were paid in Sterling. At the time, parity of value. Sterling later devalued and the P brought action for the difference in value in shillings. Issue Has the P waived his strict legal right to collect in Kenyan shilling? Reason (for) There was no agreement to a new contract in English currency The non-confirming letter of credit was like delivery of goods where one lot falls short or required quality – purchaser can still insist upon prescribed quality for shipments Reason (against) Sellers accepted offer of new currency by accepting and making use of letter of credit Ratio This is a waiver. No need to look for detrimental reliance Held/Decision If one party conduct leads another to believe that the strict rights will not be insisted on, intending that the other should act on that belief and he DOES act on it, then the first party will not be allowed

27 to insist on the strict legal right Societe Italo-Beige v. Palm and Vegetable Oils The Post Chaser (Eng Q.B.) 1982 Detriment required for waiver, no PE either Facts Sellers were to send declaration ASAP. Declarations were a month late and on receipt of the declaration the buyers made no protest to the lateness, but the sub-buyers did. The Buyers sent a message requesting that the seller hand over the docs about the consignment to the sub-buyers. The sub-buyers rejected the documents. 2 days later the buyers also rejected the doc and informed the sellers. The sellers claimed damages. Issue Can the buyers insist on enforcing their strict rights? Ratio you do not have to show detrimental reliance. You just have to show some reliance and an inconvenience. Held/Decision P’s communication to S constituted waiver of his right to reject > but there must be such reliance by S on this waiver to render it inequitable for P to enforce his right to reject (equitable estoppel). S only didn’t suffer any detriment > thus there’s nothing that render it inequitable for P to enforce its legal right Comments MUST find some form of unfairness in order to find promissory estoppel-while Denning said only action by the promisee is required, and not detriment; Goff opined that some prejudice is required, while Lord Hodgson in Ajayi required an alteration of position Ryan v. Moore, SCC said that in Canada, need both reliance and detriment

Combe v. Combe (EngCA) 1951 Promissory Estoppel as defence (shield) ONLY and not cause of action Facts Husband promised he would pay Wife support annually after divorce · H didn’t pay for 7 years, then W brought action to recover all the arrears · W had more $$ than H Issue Can PE be used as a sword to enforce a promise? Ratio Estoppel may be part of a cause of action, but not the cause of the action itself (sword/shield) Held/Decision No, husband’s promise w/o consideration= not enforceable. Petridis v Shabinsky (ONHC) 1982 PE cannot be used as a sword Facts P’s lease expires on June 30, 1981 with option to renew to be exercised by Dec. 31, 1980. In response to advances by P, D says they would get together wrt the renewal clause after the holidays. They negotiated in writing and in person for a period of time. On June 2, 1981, the D gave abrupt eviction notice to vacate by July 1, 1981. Tenant spent $ on business and couldn’t relocate on short notice, so sued and declaration lease renewed Issue Was landlord estopped from relying on his strict legal rights to terminate the tenancy? Did landlord waive its strict legal rights to adhere to the time limits? Reason (for) Estoppel: Fits within the principle, promise made to continue to negotiate, intention to affect legal relations, relied on, used as a shield stop eviction (also a sword to get renewal) waiver: landlord had by its actions waived its strict adherence to time limit Reason (against) does not fit principle as promise must be made when legal relationship exists (optionor/ee) and here that relationship had lapsed. waiver: Never said this specifically so can’t infer a waiver, need written letter etc Ratio Promissory estoppel is dependent upon subsistence of legal rights, Waiver- if there is reliance it is inequitable to retract waiver without reasonable notice Held/Decision Not Promissory estoppel as NO legal relationship of optionee/or. Waiver applicable as entering into negotiations clear evidence that landlord’s strict legal rights were suspended, to be restored on reasonable notice (not reasonable here) Guarantor - The guarantor is bound to pay the debt, provided the debtor does not. He is bound only to the extent that the debtor is, and any payment made by the latter, or release of him by the creditor, will operate as a release of the guarantor. If the creditor should substitute a new agreement, or do any other act by which the guarantor's situation would be worse,

28 the obligation of the guarantor would be discharged. A guarantor differs from a surety. Guarantor cannot be sued until a failure on the part of the principal, when sued; while the surety may be sued at the same time with the principal. Testimonium: Latin: the authenticating clause of an instrument (as a deed) that typically begins “In witness whereof the parties have set their hands and seals” and signed and before what witnesses. Found in contracts. Attestation: witnesses certify that the instrument has been executed before them. Found in Wills. Robichaud c. Caisse Populaire (NBCA) 1990 PE used as a sword where equity demands it. Facts R owed C $ in debt consolidation. C agreed to accept less $ initially, but C’s board of governors rejected it. R sued C for not accepting less $ using P/E Issue can estoppel be used by the plaintiff, or is it only a defence to a lawsuit? Reason (for) As long as principle adhered to, whether being used by π or Δ is irrelevant Reason (against) can only be used as a defence by defendant – shield not a sword Ratio A debtor can use PE as a sword as if he were sued by the creditor for the same reason, he could then just use PE as a shield which is the same thing. Held/Decision since π could use it if sued by the Caisse, then can use it to enforce the same agreement as π – this is only obiter as majority held that there was consideration Canadian Court has extended promissory estoppel to say that silence (acquiescence or encouragement) rather than words or positive conduct could constitute an estoppel: Zelmer v. Victor Projects (BCCA) M. (N.) v. A. (A.T.) (BCCA) 2003 No legal relationship= no PE Facts Relying on M’s promise to pay her mortgage, A moved to Canada from UK M lent A $ to pay off house, relationship broke down, A got evicted, can’t find job Issue Can equitable estoppel stretch to include promises where there was no preceding contractual relationship between the parties? Reason (for) There was reliance on the promise Reason (against) These types of relationships are not meant to be legal Ratio min element required to give rise to an estoppel includes assumption of legal relationship. Held/Decision Promises made in romantic relationships do not generally suggest that parties intend a legally binding contract sufficient to found an equitable estoppel Comments If the court held M kept to his promise, then A would be forced to stay with him Intention to Create Legal Relations Liability in contract must be voluntarily created by the parties themselves > must have intention to be liable. Animus contrahendi (intention to contract)4th criteria of enforceability w offer, acceptance, and consideration. objective test: reasonable person would consider there was an intention to make a legally binding k Situations where there is no intention to create legal relations: ex: Social engagements and family arrangements cannot be k’s because there is no intention to create legal - Business transactions where the parties explicitly state that they do not intend to enter into legal obligations (ex: Rose & Frank v. JR Crompton & Bros) To find a contract we need to make sure that they REALLY WANTED a contract and wanted the courts to enforce the contract. “arms length” . EG not just dad promises $5 to son to mow the lawn. Not truly domestic issues that should be decided out of a court.

Balfour v. Balfour (EngCA) 1919 Intention to create legal relations: family relationships Facts English couple. Husband returning to Ceylon b/c of bad arthritis. Wife stays behind for a time. Upon departure, husband promises that until she returns to Ceylon, he’ll give her ₤30 a month. They later agree to a divorce. Issue Was there an intent to create legal relations? Reason (for) there was clear oral and written evidence of the promise and consideration was the wife looking after the home with the money, so should enforce it Reason (against) Married parties living in amity do not intend to create contracts that could be sued upon 29 Ratio There is no intention to create a legal relation between spouses – no intent to be able to be sued upon it. Love is not consideration. Held/Decision Law does not want to regulate these types of relationships as contracts, family law yes Caution with legal separations and agreements made within them. Will be upheld.

Osorio v. Cardona (1984) CarswellBC Friendly relations becomes legal Facts Parties made deal at the horse races that if Δ’s horses won, he would share 20% with the π, and if π’s horses won π would share 30% of winnings with Δ. Δ’s horse won, but Δ refused to pay 20%. Discussed settlement, Δ pressure put on π to accept less by cheque Issue was there an intention to create legal relations? Yes. Was there a binding agreement to take less? Reason (for) Parties clearly intended for arrangement to be binding and no consideration to take less – was intimidation present? Reason (against) Δ never intended agreement to be binding and if there was a contract there was a clear new agreement to take less – accord and satisfaction Ratio The parties’ behaviour looked at objectively showed a clear intention to be bound by the original agreement Held/Decision the agreement to take less is not binding as it fit within the test in D & C Builders v. Rees that intimidation and unfairness of the negotiations negates the existence of an accord Rose and Frank v. JR Crompton (EngCA) 1923 Commercial arrangement Facts agreement b/w parties expressly set out intention not to be legally bound by “honorable pledge”. JR defaulted, and RF sued Issue Can parties to a business contract create non legally binding obligations if that contract expressly says that it does not give rise to legal relations? Reason (against) this statement is repugnant to the rest of the agreement and against public policy (we don’t want people to do this and end up on the “duelling fields” we want the courts to be open. Otherwise, who knows what people will do. Ratio If intention not to be legally bound is expressly set out in agreement, then such intention should be honored and given effect Held/Decision parties can expressly say that they are not intending to create legal relations, so Courts will follow the parties’ wishes and will not enforce such a contract. TD Bank v. Leigh Instruments A letter of comfort is not a guarantee but it does have more weight than a “motherhood” statement. A letter of comfort is intended to give some reassurance to the creditor without the parent company having to be legally bound to its reassurance

Formality: Promise Under Seal · Promise under seal is known as deed > enforceable even without consideration · Presence of seal provides clear evidence that the promisor intended to create a legal obligation · Whether a promise is under seal or not is a question of fact > look to the evidence of formality Royal Bank v. Kiska (OCA) 1967 Intention to create legal relations: commercial Facts ∏ bank sued Δ who was a guarantor. (because of seal issue, no need to find consideration) BUT No wafer seal was attached, but the word “seal” was printed on the document, next to space where Δ signed and above the signature was recited the words: “Given under seal at…” and Signed, Sealed and Delivered in the presence of…” Issue Was the guarantee enforceable as it was under seal and consideration not required? Reason (for) Words above signature show intent and existence of printed word “seal” was sufficient Reason (against) Historically formal deeds required actual wax seal and some continued formality is necessary to ensure that parties put their minds to the formal sealing process of the binding nature of the promise

30 which would be enforced without consideration Ratio The presence of words such as “given under seal” are merely anticipatory of formality, which must be observed and not substitutive for a formal seal · Signature alone is not sufficient > must be under formal seal to be enforceable. Held/Decision They did find consideration thus awarded the contract. But not on issue of seal. Formality: The Requirement of Writing (Statute of Fraud) On top of consideration, some contracts need to be in writing: o conveyance of land o guarantor/co-signors for loans. o Contracts that last more than a year • Statute of Frauds 1677 was enacted to require documentation for major transactions b/c the courts didn’t trust witnesses to be reliable or honest • In transactions to conveyance land look for three Ps (parties, property, price- or mechanism): • exceptions to the writing requirement – go to fairness (exceptions in equity) o Part performance that is unequivocally tied to existence of the contract o buyer has taken possession and paid the full purchase price o buyer has accepted a deed (under seal) from seller o the aggrieved party relied on the contract to its detriment – altered their position some how o the party against whom enforcement is being sought admits that such a contract was made. • To satisfy the Statute of Frauds, the court looks for: 1) A memorandum in writing that has 2) a signature of party against whom enforcement is being sought 3) (3 P’s)  Can join different documents to constitute one memo o there must be some evidence they were connected at the time of signing o there is an expressly or implicitly reference to the existence of other document o explicit or implicit reference in a signed document to a transaction (ie, the memo on a cheque) o (or) the original memo has been lost or destroyed • Signature Requirement – only need one– usually the signature of the person trying to deny the contract is good evidence. The signature has to have been placed there with the intent to authenticate the contents • Three requirements regarding signature: o memo (has all the essential terms) needs to have been signed by the party in defence o The signature must have been for the intention of authenticating the entire document – i.e you couldn’t ask the other party to sign a blank sheet to paper after which you fill in the details. • Sale of Goods Act o If you sell anything for more than $50 you need a contract – generally (eg a receipt will suffice) o Exception: if the buyer has already taken possession or put down a down payment Specific performance: instead of getting money to satisfy in lieu of the breach of contract, one’s asking for the performance of the breached contract > en equitable remedy o There is consideration > without consideration the issue would be Promissory Estoppel o Acts that increase the value of property will be more likely to be considered for part performance Was the defendant enriched at the expense of the plaintiff. No compensation for services by the plaintiff Doctrine of Specific Performance: instead of damage, the court will order completion of contract instead

“No action can be brought” means that the contract is not void, but it cannot be sued upon – this is seen as procedural only, which renders a contract unenforceable Can use non written contract as a defence, as you would not be bringing an action, so for example in an action by a purchaser to recover a deposit in an oral agreement of purchase and sale of land, Δ could rely on . An oral amendment to a land contract could also be relied on by a defendant, but not a plaintiff 31 Dynamic Transport v. O.K. Detailing (SCC) 1978 Statute of Frauds Facts Vendor wanted to sell a property excluding the buildings on it. What was problematic was what areas around the land and rights of way to the buildings was provided Issue Did the K satisfy the statute of frauds? Ratio Where the vendor’s intention are ill-motivated, the court will look favourably upon the purchaser trying to enforce the bargain Held/Decision Court said description was too vague to be enforceable and to identify exactly what land that vendor was to retain and purchaser was to buy Mooljelsky v. Rexnord Canada (AltaQB) 1989, court held that an officer of a company’s tendering department who did not have signing authority, made an internal memo - this was sufficient for the Statute of Frauds Rigidity overcome by equity – doctrine of part performance Spectrum part performance (strictest to least strict): Delgman, Thompson   Lensen   Steadman Deglman v. Guarantee Trust (SCC) 1954 Statute of Frauds Facts Nephew claims aunt promised to leave him house if he was good to her during her life. Promise was made while he lived with his aunt. He did chores around the houses while living there. drove her around. Aunt died intestate -- no transfer of land in writing. Issue Was there part performance? Reason (for) Nephew performed services fully and unequivocally = part performance Reason (against) exactly the kind of case that the Statute wants to protect against. Loose arrangement. Ratio The acts must be unequivocally tied to the land. Held/Decision Acts could have been done as a good nephew. No proof they weren’t done gratuitously. Comments – recovery compensation for services rendered. Received essentially pay for his time, even though there was no enforceable contract. Established a restitution remedy in Canada – compensation for services based not on contract but on restitution or . Couldn’t use PE as statute trumps. PE would have been a sword. Thompson v. Guarantee Trust (SCC) 1974 Statute of Frauds Facts Gus worked for Dick as for about 50 years. At the end of his life, in front of witnesses, Dick says he’ll give everything to Gus. similar to Deglman, but here there enhancement of the lands, Dick obtained a lawyer and had it not been for an inept Notary who drafted a Power of Attorney rather than a will Issue Has there been part performance to enforce oral contract to transfer estate of land, to take the case out of the Statute of Frauds? Reason (for) all acts of the claimant clear and unequivocal reference to contract to transfer estate at death – very strong case here and much stronger than Deglman facts Reason (against) case like Deglman and cannot say that acts unequivocal – did receive some payment over the years, only fixed existing structures. Ratio acts of part performance that’s unequivocally referable to some interest/contract in land render the contract enforceable despite the SoF Held/Decision Yes to K, due to part performance. Lensen v. Lensen, 11984, Sask Statute of Frauds Facts Father and son had a farm. Son worked the farm for seven years with the understanding it would go to him. He forgoes opportunities to buy other farms. There is nothing in writing and the son gets nothing. Issue Does part performance take the case out of SoF? Ratio The acts relied upon must be unequivocally referable in their nature to some dealing with the land. The son satisfied the doctrine of past performance Held/Decision Yes, part performance On exam try to meet the test in Deglman and Thompson --- but then note that Lenson says there may be a more relaxed test where written requirement is not necessary where actions are consistent with verbal 32

PRIVITY OF CONTRACT CH. 5 Basic premise – only parties to a contract can enforce it. a third party beneficiary cannot sue on the contract – they are barred by the doctrine of privity EX a manufacturer sells a product to a distributor, the distributor sells the product to a retailer. The retailer then sells the product to a consumer. No b/w manufacturer and consumer. 3rd party beneficiary - “the person identified and intended by the promisor and promisee to receive all or part of the benefit of the agreed upon performance” CANNOT enforce any part of the contract Rationale – 1. contracts are “private” arrangements and only those who have signed and given consideration should be able to take advantage of them 2. Lack of reciprocity – if 3P beneficiary cannot be sued on contract because he is not a party, then she should not be able to sue on it 3. Parties could vary or rescind it at will some exceptions o Trust - estates o Agency * o Employment * * Better to think of agency and employment as consistent with doctrine of privity because they are standing in the persons shoes • Statutory exceptions are insurance and consumer protection nominal damages: breach of contract but cannot find any damages or loss of money. Court will award nominal damages (actual zero dollars) when they find a breach of contract, but no actual loss to π. Subrogation: Used in a credit/insurance situation. Legal right to collect debt/damage. The assumption by a third party (insurance company) of another's legal right to collect a debt or damages. EX: Insurance co. pays you for the fallen tree from the neighbour’s property. Then insurance co sues neighbour on your behalf. They get the $ as they already paid you out. Dunlop Tyre v. Selfridge (EngHL) 1915 Privity, history of doctrine of privity Facts Dunlop manufacturer sells to wholesalers, Dew, but tells them they must insist retailers sell according to price list. Dew sells to Selfridge who then sold the tires at a price under list price to its customers. Dunlop tried to enforce is contract with Dew against Selfridge by getting an injunction against them. Issue Can person who is not a contracting party in a second contract enforce its first contract with one of the parties to that second contract? Reason (for) As Dunlop supplied the tyres, they should be able to insist that Dew followed its rules. Reason (against) Dunlop is not a party to contract between Dew and Selfridge’s and there was no consideration flowing from Dunlop in the second contract. Ratio only a party to contract who has given consideration can sue on it, so Dunlop a stranger to second contract. How can a 3P acquire a benefit? By Statute –beneficiaries under life insurance policies can enforce insurance contract when beneficiary is not a party, Ontario Insurance Act, Privity can also be avoided if the promisee is able and willing to bring an action for specific performance of the promise Beswick v. Beswick, 1966, UK Privity, Specific performance Facts Nephew promises uncle he would pay a weekly sum for business to him till death then a smaller sum to his widow when he dies . Nephew doesn’t pay the widow. Widow sues in 2 capacities: personal and as administrator of the estate Issue Could widow who was 3P to contract enforce contract as administratrix or as beneficiary Reason (for) As administratrix she can enforce as party and can use equitable remedy of specific performance to ensure widow in personal receives benefit.

33 Reason (against) administratrix’ claim limited to damages which would be nominal and can’t sue in own right as no consideration, no privity. Estate isnt out any $. Ratio Where a third party can show a sufficient interest in the contract (such as being the executor), then the 3P can sue in that capacity for specific performance of the contract. Held/Decision the remedy of specific performance may be useful or circumventing the doctrine of privity where a 3rd party can show sufficient interest in the contract, such as the administrator, then that person can sue in that capacity and seek remedy of specific performance House of Lords: not allowed to sue as a personal third party because lack of consideration But does allow her to sue as administrator of the estate (administratrix) – stands in the shoes of the husband Comments When a contract is made for the benefit of a 3P who has a legitimate interest to enforce it, it can be enforced by the 3P in the name of the contracting party or jointly with him or, if he refuses to join, by adding him as a defendant

London Drugs v. Kuene & Nagel (SCC) 1992 Privity: Employment Facts Kuehne enter into a contract w/ London drugs. London Drugs delivering a large machine for storage. Limited liability clause = $40. Kuene employees break the machine – use forklift w/o proper brackets causing $33G in damage --- clearly negligent . Issue Can the employees rely on the limitation of liability clause? Reason (for) This is 3P beneficiary and they are not parties - need to find trust or agency relationship, which is not present here (relationship of employee/er, not principal/agent in performing services – no authority given by employees to employer to contract in their name Reason (against) Relax the doctrine of privity in cases such as these where employees are being sued, as it is radically out of step with commercial reality Ratio TEST if employee may obtain benefit of limitation liability clause: 1. Limitation of liability clause must either extend its benefit to the employees 2. Employee clause must have acted in the course of their employment Held/Decision Yes, Employees were 3rd parties to the contract BUT commercial reality suggest employees be included --- doctrine of privity is relaxed Edgeworth Construction v. N.D. Lea & Associates (SCC) 1993 Privity: Employment Facts after tendering, π entered into contract with Province of BC to build a section of Highway Alleged that it lost money because of poor drawings made by consulting engineers hired by BC, so sued those engineers. Sued for a tort called neg. misrepresentation. Issue Could engineers take advantage of the limitation of liability (lol) clause? Reason (for) engineers getting benefit of lol clause: Although they were not privy to tendering contract, they were employees, so fit within the exception Reason (against) engineers were not true employees as defined in London Drugs Ratio 1) The employment exception created in London Drugs is dependent on the actual intention of the parties, not simply on the status of a worker. 2) It will be more difficult to extend benefits of a limitation of liability clause to an independent contractor, as it would be more difficult to establish the necessary intention. Held/Decision engineers were not employees as in London Drugs, who were powerless, and could have taken steps to protect themselves with disclaimer clauses in reports, special insurance, and clause itself must either expressly or by implication suggest that engineers were exempt Fraser River Pile v. Can-Drive (SCC) 1999 Privity: Subrogation- 2 parties cant change a contract in the middle if a 3rd party relies upon the original K Facts Fraser River’s barge sunk, while Can-Dive had chartered it out from them. Fraser River made insurance claim, and insurance policy had clause that disallowed the insurer to subrogate against the at fault party. Fraser River waived clause, insurers sued Can-Dive Issue can CD claim the protection of the subrogation clause even if it was not privy to the contract, based

34 on the reasoning of London Drugs Reason (for) Fits within the London Drugs principle as it was the intention of the parties, the 3P beneficiary was performing the essential activities in the contract, and is an exception Reason (against) Parties can always change contract, not employer/ee situation Ratio Are the activities performed by the 3P seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract in general, or the provision in particular, again as determined by reference to the intentions of the parties? Held/Decision Applies London Drugs principles and finds both the intention and that 3P beneficiary was performing essential activities, even though not directly as in London Drugs

To prove economic duress 4 Criteria: o did the parties under economic duress protest, o was there any other course of action that the party under duress could have taken, o did they have legal advice when they made the decision to sign off, (if no then leans towards E.D) o after the fact did they take timely legal action

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