cans.allardlss.comcans.allardlss.com/application/media/cans/ADJUNCT... · Web view1. QUESTIONS TO ASK: Is there consideration? If no can you argue reliance and use promissory estoppel?

Professor Aloni – December 2017

CONTRACTS CAN

Invalid: contract was never valid missing a major requirement such as consideration or mutual assent

Unenforceable: missing a certain thing/one aspect – not enforceable but contract did exist

Default rules: apply unless parties decide otherwise parties can modify default rules – must specify

Mandatory rules: parties cannot contract around these rules

TABLE OF CONTENTSThe Sources of and Functions of Contract Law (incl. types of remedies) 2Consideration as a Basis for Enforcement 3Past consideration 5Consideration Must be of Value in the Eyes of the Law 6Bona Fide Compromises of Disputed Claims 7The Requirement of Bargain (illusory promises) 7Pre-Existing Legal Duty 8Promises to Accept Less 10Accord and Satisfaction 10Promissory estoppel and waiver 11Mutual Assent 13Offer and Invitation to Treat 13Communication of Offer 14Acceptance 15Communication of Acceptance 16Revocation and lapse of Offers 18Certainty and Incomplete Terms 19Agreements to Negotiate 21Intention to Create Legal Relations 23Formality: The Requirement of Writing 24

QUESTIONS TO ASK:1. Is there consideration?

a. If no can you argue reliance and use promissory estoppel? (Need legal relationship)

2. Is there an intention to be legally bound?a. Courts reluctant to enforce familial contracts

3. Is the offer valid?a. Illusory promise? (Lucy, Lady Duff-Gordon)

4. Was there acceptance?a. Mirror image ruleb. Offer revoked/lapsed/counter-offer?

5. Is the contract certain/specific enough?

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THE SOURCES OF AND FUNCTIONS OF CONTRACT LAW

Sources of Contract Law:- Common law main source

o Contract law = provincial precedents from other jurisdictions persuasive NOT binding- Sale of Goods Act- Treaties and law review articles (not binding)- International sources

o United Nations Convention on Contracts for the International Sale of Goods (CISG)o International Institute for the Unification of Private Law (UNIDROIT), Principles of

International Commercial Contracts

Functions of Contract Law:1. Identifying the criteria for determining the enforceability of promises

a. Which promises entitle another to remedies?2. Serving a gap-filling function (default rules)

a. Parties can contract around default rules3. Defining which rules should be treated as default rules and which should be mandatory (policy)

a. Breaking mandatory rules makes contract unenforceable or invalid4. Providing rules for determining the meaning of the promises parties have made to each other

Why are default rules used primarily in Contract Law (as opposed to mandatory rules)?- Both parties are identified in advance and have direct access to and contact with each other- The parties know their own needs- The parties are directly affected by the contract

Regulation on Freedom of Contract:- Doctrine of unconscionability: response to avoid taking advantage of inequality- Doctrine of good faith: still evolving

Hawkins v McGee: hairy hand case; boy got skin graft on hand which was new procedure; Dr. committed to “perfect” or “good” hand after surgery; surgery not successful – grafted from chest and led to unusable hairy hand; was the Dr.’s promise legally binding? YES – Dr.’s use of “guarantee” was absolute AND there was inducement – Dr. solicited boy to have surgery by promising 100%; likely didn’t sue in tort because it was a new surgery therefore wouldn’t be able to prove negligence; recovery time was also promised but this was not found binding because doctor said it in predictive/opinion language “could” vs. “guarantee”; RATIO: contract does not need to be in writing and does not need to include the word guarantee, but this is a strong indication of binding contract; inducement and guarantee = binding promise

Types of Remedies (using Hawkins v McGee):- Compensatory remedies:

o Injunctive remedies: make the breaching party perform the promise OR stop them from doing something

Specific performance: compel the original party to perform the promise (rare) Make Dr. actually perform surgery

o Substitutional remedies: monetary damages expectation, reliance or restitution

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Expectation damages: giving the injured party the benefit of the bargain; making the injured party whole; putting the injured party in the position they would have been if the contract had been performed (ex-post position)

Reliance damages: put in the position you were in before you entered the contract (ex-ante position)

Restitution damages: comes from unjust enrichment – ensures that the breaching party brings back what they got from the bargain/what they gained

- Punitive remedies:o RARE in contractso Ethical consequences, suspending license, imprisonment, etc.o Monetary damages

- Agreed damages:o Determined in the contract to pay X amount if they breach the contract

Ways to Enforce a Promise:1. As a contract requires 1) that promise is supported by consideration and 2) that the promisor

intends to create legal relations (mutual assent)2. As a deed signed, sealed and delivered promise is binding as a deed 3. By way of estoppel

a. Promissory estoppel: in limited cases this prevents party from breaching a promise to the extend required to avoid injurious reliance

CONSIDERATION AS A BASIS FOR ENFORCEMENT

Restatement (Second) of Contracts:

§ 17. Requirement of a Bargain (1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration

§ 71. Requirement of Exchange; Types of Exchange(1) To constitute consideration, a performance or a return promise must be bargained for.(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.(3) The performance may consist of

(a) an act other than a promise, or(b) a forbearance, or (Hamer v Sidway)(c) the creation, modification, or destruction of a legal relation.

Bargained-for exchange = legally enforceable (gift is not enforceable); sought by the promissor and given by the promisee in exchange for that promise

Consideration:- Consideration for a promise is the thing or action that the promisor wants in exchange for his

willingness to make the promise - AKA quid pro quo this for that- Benefit/detriment theory of consideration: consideration is a detriment incurred by the

promisee in return for the promisor’s promise, or a benefit conferred by the promisee on the

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promisor in return for the promise consideration exists when the transaction involves a benefit to the promisor OR a detriment to the promisee

- Consideration is not the same as motive the law does not look at what the parties thought in their own minds (motive) but at what was bargained for from an outside perspective

- Personal satisfaction is NOT sufficient consideration

Functions of Consideration:- Evidentiary- Cautionary- Channeling path to create legally binding contract

Bilateral Contract:- Mutual exchange of promises for performances that will occur in the future

Unilateral Contract:- Where the offeree accepts an offer by performance of the specified acts (instead of with a

promise to commit to perform in future)- No contract is formed until the offeree undertakes to complete the performance offeree not

bound unless they perform- Only one party makes a promise (the offeror) and both parties eventually perform but at

different times

Hamer v Sidway: uncle promised nephew 5k to not drink or smoke until he was 21; when he turned 21 uncle told nephew he would hold onto money while nephew was young/irresponsible but would pay out with interest; uncle died without paying and nephew’s assignee (Hamer) sued the executor of the uncle’s will (Sidway); was there valid consideration? YES – consideration can include one party giving up a legal right for another party AKA forbearance; personal satisfaction not enough (ex: uncle happy that he didn’t drink) and protected reputation may have occurred but was not bargained for; the

INVALID CONSIDERATION

Gift promises

But sealed promises are valid

And nominal consideration is

sufficient

Illusory promises

But court can imply

consideration

Past consideration

unless one exceptions apply

(Lampleigh)

Pre existing duty

But factual benefit to the promisor can be exception

And duty owns to third party also

But promise to accept less nonbinding (unless financial

instrument or statute)

Settlement agreement

without good faith

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consideration was the nephew’s forbearance; unilateral contract; RATIO: forbearing a legal right = good considerationSeal:

- Contract under seal = legally binding does not need consideration- Instrument executed under seal = deed- Most commonly used where there is doubt about consideration and to ensure the promisor is

aware that the promise is binding ex: guarantors, large gifts- A seal does NOT prevent illegal contracts from being void

The Governors of Dalhousie College at Halifax v the Estate of Arthur Boutilier, Deceased: B doated 5k to Dalhousie, could not meet pledge in 1920 but wrote letter in 1926 indicating he planned to when he could; B died – did the subscription and spending pledged by B amount to consideration? NO – no consideration; Dalhousie argued reliance BUT shouldn’t have relied on promise without consideration; Dalhousie argued that there was consideration because the estate made a particular promise (5k) ins exchange for college undertaking particular expenditures court said NOT ENOUGH because it was not specific enough and didn’t request anything particular; Dalhousie argued that B’s subscription was to encourage others to donate Court: no facts to indicate any donations related; RATIO: gift without specific request for how money is to be spent is not valid consideration – use seal for such gifts

Charity Subscriptions: (from Dalhousie)1. In absence of a bargain, promise to subscribe is not enforceable2. Reliance on a promise not supported by consideration is not sufficient for enforcement 3. Connection required between privity and consideration

PAST CONSIDERATION

Past consideration = no consideration (generally)- Benefit does not qualify as something given in exchange for the promise because the promise is

given after the benefit is conferred rather than as a pre-condition of receiving the benefit - Must be mutual inducement/fresh consideration to be enforceable - Mills v Wyman = classic case of past consideration

Exceptions to Past Consideration:- Act done before the giving of a promise to make a payment or to confer some other benefit can

sometimes be consideration the act must have been done at the promisor’s request AND the parties must have understood that the act was to be remunerated either by a payment or conferment of some other benefit; payment or conferment of a benefit must have been legally enforceable and promised in advance (Pao On v Lau Yiu Long) #4 on list below

1) Debts barred by the statute of limitations2) A promise to pay debt discharged by bankruptcy3) Subsequent promise made by the minor after reaching the age of majority4) Past promise given at the promisor’s request

a. Act done at promisor’s requestb. Parties understood that the act was to be remunerated either by payment or

conferment of another benefitc. Promise must have been legally enforceable had it been promised in advance

Promises Made in Recognition of Past Benefit:

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- Courts have developed doctrine that legally enforces a subset of promises given in recognition of previously conferred benefits

Promise Not Enforced:

Eastwood v Kenyon: Eastwood borrowed money from Blackburn for Sarah, whose estate he was managing, to pay for her education (gave lender promissory note); Sarah promised to pay Blackburn back (which would be the money owed to Eastwood); Sarah paid Blackburn one year’s interest on the note; Sarah married Kenyon who also promised Eastwood he would pay off the amount of the note; Kenyon didn’t pay Eastwood sued (couldn’t sue Sarah because she was married and couldn’t own assets); was Kenyon’s promise legally binding (was past benefit of Sarah’s education valid consideration)? NO – Kenyon did not ask for the education $, merely gratuitous promise; Kenyon’s promise only created a moral obligation because the consideration was past and executed long before and he didn’t request it; RATIO: merely a gratuitous promise neither the defendant nor Sarah asked for the $$ therefore NOT an act done at promisor’s request

Mills v Wyman: M took in W’s adult son who fell ill after a sea voyage; in gratitude, W promised to pay any costs incurred to M; W didn’t pay; sufficient consideration to enforce W’s promise? NO – W promised to pay after the benefit was conferred – no mutual inducement at the time benefit was given; W’s son was an adult, did not ask him to be taken care of; policy argument: this would deter people from these types of offers to pay if they knew they would be liable; RATIO: moral obligations not enforced; there was no inducement – act NOT done at promisor’s request

Promise Enforced:

Lamleigh v Brathwait: B requested L to go to the king to obtain a pardon for his crime; L successfully obtained pardon and worked hard to do so; after pardon obtained, B promised to pay L 100 pounds; B did not pay, L sued; is B obligated to pay L? YES – L’s actions would be reasonably expected to result in payment AND he did so at B’s request; first promise (go seek pardon) coupled with promise to pay as one unit implied when pardon was requested that it would be paid, the subsequent promise to pay was part of initial request; RATIO: promise enforced, viewed as one transaction where the request would be expected to be paid

CONSIDERATION MUST BE OF VALUE IN THE EYES OF THE LAW

Consideration must be of value in the eyes of the law- Could be a mere peppercorn peppercorn serves as a formality in fulfilling the evidentiary and

cautionary functions of consideration - Nominal consideration is adequate courts do not look into adequacy of consideration

provided it is of value in the eyes of the law

Thomas v Thomas: John Thomas made verbal declaration before death that he wanted to leave the house he lived in to his wife OR 100 pounds; after John’s death, executors of his estate (Samuel and Benjamin Thomas) executed written agreement to allow John’s wife to have possession of the house and take care of it for one pound yearly until her death or remarriage; after Samuel died, Benjamin (defendant) refused to continue executing agreement so John’s wife brought an action (plaintiff); was this a voluntary gift OR valid binding promise? VALID PROMISE – B argued it was a sham transaction, not enforceable; wife argued $1 rent is consideration; motive of respecting the wishes of the deceased is irrelevant WRT consideration; $1 rent was binding consideration – court requires consideration that is of

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value but doesn’t care how valuable – nominal consideration was sufficient; RATIO: nominal consideration is sufficient BONA FIDE COMPROMISES OF DISPUTED CLAIMS

Compromise and Forbearance to Sue:- Forbearance to sue = valid consideration to enforce an agreed monetary compromise where:

o It is made in good faith with a serious intent to pursue the claim (party has honest belief that they have a valid claim)

o The forbearing party is not concealing anything from the other party- Courts have strong interest in people entering into settlement agreements

B (DC) v Arkin: plaintiff’s son stole from Zellers; Zellers had civil loss recovery program where they worked with third party organization (Aclaim) to review incident reports and engage lawyers to prosecute various claims; Acliam sent letter on behalf of Zellers to plaintiff advising they would refrain from civil action on the shoplifting if the plaintiff paid $225 by a deadline; plaintiff paid as she wasn’t aware this claim was invalid – later sued once she learned she was NOT responsible for her son’s tort; was Zellers’ forbearance to sue valid consideration and was their claim valid? FORBEARANCE TO SUE IS VALID BUT CLAIM WAS INVALID – forbearance to sue must be made in good faith – serious intent to pursue and not concealing anything from the other party; defendant’s cliam was invalid and there was no way their lawyer thought the claim would succeed or would pursue it – NO GOOD FAITH; RATIO: forbearance to sue was invalid consideration because it lacked good faith

THE REQUIREMENT OF BARGAIN (ILLUSORY PROMISES)

A promise = illusory if a person who makes the promise retains complete discretion over the promise- Ex: person promises to do something if they “want to”- Courts may remedy illusoriness by finding an implicit promise in the arrangement on the part of

the promisee

Illusory Promises:

Strong v Sheffield: Strong sold business to Sheffield’s husband on credit – debt formalized in promissory note payable on demand; Sheffield endorsed the note, requiring to pay if her husband did not in return, Strong promises to forbear; when Sheffield didn’t pay, Strong brought an action against her; was there valid consideration to make Sheffield’s endorsement an enforceable promise? NO – strong consideration for first promise (husband obligated by law to pay Strong) BUT Strong’s promise to forbear to sue in exchange for Sheffield’s endorsement was illusory because it was only a promise to forbear until he wanted to collect his money – no time period was set; Strong did forbear for two years BUT this was not bargained for at the time they made the exchange therefore not enforceable (judge the ex ante not the ex post) at the time the promise was made, Strong did not make valid promise to forbear; RATIO: promise to forbear was illusory because there was no specified time period therefore Strong could have sued whenever

- Note: formulistic decision followed specific rule of consideration that it must be bargained for, although two years forbearance would be sufficient if bargained for at time of exchange

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Implied Consideration:

Wood v Lucy, Lady Duff-Gordon: Lucy gave exclusive right to place her endorsements on designs of others to Wood – in return Lucy was to receive one-half of all profits; Lucy placed her endorsements on fabrics without Wood and withheld profits – Wood sued; is a promise that doesn’t expressly state the required performance enforceable? YES – promise was implied, law doesn’t require such formalism; Lucy argued it was illusory because there was nothing in the contract specifying that Wood had to go out and seek deals for her endorsement, therefore Wood could do whatever he wanted; Wood argued he made an implied promise to use reasonable effort; context suggests that Wood commits himself to seeking deals and guaranteeing effort; RATIO: promise upheld on basis that Wood made implied promise to make reasonable best effort

PRE-EXISTING LEGAL DUTY

If a duty already existed, modification of this duty does not constitute consideration must have fresh consideration to modify a contract

- Promise to perform an act that one is already obligated to perform is not valid consideration- Duress = common issue here modifying promise based on undue pressure from other party- Pre-existing duty rule based on public policy considerations

o Ex: police officer cannot claim reward for finding a criminal if he found him while on duty already obligated to do this and being paid to do so (pre-existing public duty)

Avoiding the Pre-Existing Duty Rule:1. Rescind the first contract before entering into the second, revised contract

a. Mutual agreement is required and the recession must be specific 2. Practical benefit to the promisee in a promise to perform a pre-existing legal duty can constitute

consideration in certain factual circumstances (Williams v Roffey Bros)3. Doctrinal change “there are valid policy reasons for refining the consideration doctrine to the

extent that the law will recognize that a variation to an existing contract, unsupported by consideration, is enforceable if not procured under economic duress” (GFAA v NAV Canada)

4. “A promise to perform, or the performance of, a pre-existing contractual obligation to a third party can be valid consideration” (Pao On v Lau Yiu Long) (PRIVY COUNCIL)

Duty Owed to the Promisor Traditional Approach:

Stilk v Myrick: S was seaman promised 5 pounds/month for a voyage; during the voyage two seamen deserted so the captain (Myrick) promised to split their wages among the crew if he was unable to find two new seamen; captain didn’t find seamen; Myrick bound by promise to pay extra wages? NO – modification not supported by consideration is invalid; defendant argued Harris v Watson for public policy issues there should be no action for a sailor whose captain promises to pay extra in consideration for doing more than ordinary share of duty in navigating a ship because could lead to extravagant demands; plaintiff argues they took on more work therefore not a pre-existing duty; court held that there was no fresh consideration; RATIO: need fresh consideration

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Gilbert Steel Ltd. v University Construction: contracted for G to sell steel for three buildings at a fixed price – last building was University, which had two towers; before starting tower 1, G raised prices and had U sign contract for new prices; G raised prices again before starting tower 2 via oral agreement; G sued U to enforce the modification; was the agreement to pay more binding? NO – promise to pay more is not valid consideration; G argued that the promise of a good price on the second building was consideration the defendant received for agreeing to pay an increased price on the third – court says this is too vague; court said defendant never signed new contract so recession process was not followed; plaintiff not allowed to find claim in estoppel (this was wrong – courts used shield/sword incorrectly – could have used it where there is pre-existing legal obligation); RATIO: strict use of pre-existing legal duty rule – need fresh consideration (CANADA)

- Followed Stilk v Myrick strictly- Used a very narrow view of promissory estoppel more accepted version in Canada is that it

could be used here provided there is a pre-existing legal duty

Duty Owed to the Promisor Factual Benefit to the Promisor:

Williams v. Roffey Bros. & Nicholls (Contractors) Ltd: W subcontracted to do carpentry for R; W had financial troubles and was at risk for not finishing on time; R offered to pay W more for each apartment he finished (out of concern for having to pay a penalty for being late AND because he knew the rate agreed for W was too low); R paid some of additionally promised sum but not all; was R’s promise to pay more binding? YES – distinguished from Stilk v Myrick because it was in R’s best interest that W keep working and R got benefit of the payment schedule; taken together the benefits received by R were sufficient; additionally there was no economic duress; RATIO: where there are practical benefits secured by the defendant that were not achieved by threat or arising under economic duress, the modification is valid consideration (UK)

Duty Owed to the Promisor Doctrinal Change:

Greater Fredericton Airport Authority Inc.: Nav had contract with airport which required them to pay certain relevant costs; airport requested Nav move certain equipment – Nav said it would be easier to purchase a new part and tried to make airport pay; airport protested saying this fell under Nav’s contract but eventually signed agreement to pay because Nav wouldn’t gget the part unless they signed; airport didn’t pay and Nav sued; was the agreement to pay enforceable? NO – found valid consideration BUT Nav used duress which invalidates the modification; RATIO: doctrine of duress protects a defendant from an unfair modification based on a threat to breach a contract

Duty Owed to a Third Party:

Pao On v Lau Yiu Long: defendants argued past consideration; court said exception to past consideration is promissory restitution here the benefit was given at the promisor’s request, understood that it would be for some compensation; pre-existing duty argument works if defendant is treated as a third party consideration given by third party was given in return for a pre-existing duty BUT court says a promise to perform a pre-existing contractual obligation to a third party can be good consideration the fact that the new consideration comes from a third party dismisses the argument of a pre-existing duty; RATIO: WRT consideration, when a third party appears and gives a new promise in exchange for what looks like a pre-existing duty, the modification is VALID (court will still look for unfairness WRT

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duress, etc.)

PROMISES TO ACCEPT LESS

ACCORD AND SATISFACTION

Duty to perform may be discharged by accord and satisfaction- Variation on the pre-existing legal duty rule- Accord = agreement- Satisfaction = consideration- An accord = a contract under which an oblige promises to accept a substituted performance in

future satisfaction of the obligor’s duty- A creditor’s promise to waive the residue of a liquidated debt in exchange for part payment by

accord and satisfaction is void for lack of consideration (Foakes v Beer)o Agreement to pay less NOT valid consideration

Foakes v Beer: F owed B 2k from previous judgment; entered into agreement on Dec. 21, 2816 that F would pay $500 immediately and $150 every 6 months until the debt was paid off in exchange for B not taking any action; by June 1882 F had paid off principal and wanted to not pay interest; B claimed she was entitled to interest because the debt wasn’t paid off immediately; F claimed there was a contract with no mention of interest B claimed it was invalid for lack of consideration; is partial payment sufficient consideration for the original contract between F and B? NO – payment of a smaller sum for a larger sum not consideration because paying less is not whole satisfaction; F argued that he did everything he said he would and paid on time BUT doctrine of accord and satisfaction does not create an exception for the requirement of consideration entering into a contract where someone’s consideration is less than before is not valid; RATIO: strict application – agreement to accept less is not valid consideration

- Note: essentially overruled by the Law and Equity Act

Party Payment by Negotiable Instrument:- A valid accord and satisfaction may be constituted by the partial payment of a debt, so long as

the mode of payment is by cheque or some other negotiable instrument (Foot v Rawlings)- Change in the mode of payment = good consideration

Foot v Rawlings: R owed F money; F sent agreement to R for repayment of debt which allowed R to pay F back at lower interest rate – R signed agreement in 1958; after four months of payments, F sued for balance of debt; did F receive consideration for the 1958 agreement making it enforceable? YES - valid accord and satisfaction may be constituted by partial payment of debt as long as it is by cheque or other negotiable instrument; F’s right to sue suspended as long as R makes payments as per the agreement; RATIO: a change in the mode of payment = good consideration

Law and Equity Act Rule 43:- Extinguished the common law rule that a debt that is a liquidated claim cannot be discharged by

payment of less despite agreement- Still need part performance of the debtor

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PROMISSORY ESTOPPEL AND WAIVER

**Always argue based on consideration before going to promissory estoppel**

Estoppel:- Party A will be estopped/precluded from a particular course of action when they have

represented that they will not do so and Party B has relied upon that representation- Most commonly arises when A has certain legal rights vis-à-vis B but A indicates to B that they

will not enforce those legal rights and B relies on this statement

Waiver = similar to promissory estoppel; from the Courts of Equity

Hughes v Metropolitan Railway Company: H served notice to M on October 22, 1874 demanding it repair property within six months as per terms of lease agreement; M replied on November 28 th suggesting the landlord by the tenant’s leasehold and proposed to defer commencing repairs until he heard from H; negotiations occurred but broke down by the end of December; landlord never responded to proposal to defer repairs; three days before repair notice was to expire, tenant wrote to H saying they would undertake repairs in light of breakdown of negotiations; H served writ of ejectment on April 28; was there an implied promise that the six-month term would be suspended during the negotiations? YES – first argue consideration: there was an implied promise from H to forbear from using legal right to evict in exchange for repairs – repairs were done – M benefited from extension of these repairs because they had opportunity to buy the lease; next argue waiver: terms of repairs were suspended because parties had entered into negotiations – would be unjust because M relied on the suspension; H never promised to suspend but there is an implied promise evident in H participating in negotiations; H waived right to strict enforcement of the contract and tenant relied on the assertion to suspend to their detriment enforcement would be unjust; RATIO: a promise that is not supported by consideration can be treated as binding where there is a waiver and reliance (UK)- Note: this case uses waiver NOT promissory estoppel

Promissory estoppel = where a promise, intended to be binding (although gratuitous), and intended to be acted upon, has been acted upon, then the promisor will not be allowed to go back on that promise THE LAW IS NOT THIS SIMPLE IN CANADA

Central London Property Trust Ltd. v High Trees House Ltd.: defendant rented tenancy block of flats from plaintiff for 99 years at ground rate of $2,500 via lease under seal in 1937; in January 1940 plaintiffs wrote defendants agreeing to arrangement to reduce ground rent to $1,250 because of prevailing war conditions – many unoccupied flats; defendants paid reduced rent from 1941 to 1945 where all flats occupied; plaintiff sued for payment of full rental costs from June 1945 onwards; were plaintiffs estopped from alleging rent exceeded $1,250? NO – although under Hughes the plaintiff is estopped from insisting on the original price, court reasoned rent waiver was only meant to cover wartime period; RATIO: a party who waives a part of the performance of a contract may later re-instate that portion if it would not be unjust or violate the reliance of the other party (UK)

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Limitations on Promissory Estoppel:1) The promise or representation must be clear or unequivocal (2) Must be an existing legal relationship and can only be used as a shield not a sword (shield vs.

sword means it is not the sole cause of the action existing relationship in place but plaintiff can still use promissory estoppel used for modifications of a pre-existing legal relationship)

a. More commonly used by defendants BUT not limited to defendants (Gilbert Steel interpreted shield not sword INCORRECTLY)

3) There must have been reliance on the promisea. Need inducement promise influenced conduct of the promisee b. Generally courts in Canada require the promise to be detrimental (Lord Denning said

reliance = change in position, Canada requires more than that)4) It must be inequitable for the promisor to go back on the promise

a. Person asking for equitable remedy must come with clean hands5) The doctrine is suspensory in its effect

Waiver by election = abandonment of a right which arises by virtue of a party making an election- Waiver by election is relevant when one is entitled by the contract to alternative rights

inconsistent with one another and that person acts in a manner which is consistent only with his having chosen to rely on one of them

Dunn v Vicars: D and V agreed to co-finance building of new house, put up 100k; V was to build the house; two plans for how it would work A) each own half the house, V gets management fee, sell house, pay back D what they paid out, divide profits/losses, or B) if they couldn’t’ find buyer, D gets possession of the house, pays back V his 100k and higher management fee D must denounce in writing if they want to enact B; couldn’t find buyer so D moved to enact B – discussed this with V but did not denounce in writing; should V be estopped from strict enforcement of the contract? YES (Dunn won) – D argued V should be estopped from strict insistence – succeeded; where a contract provides two options, when one party acts in a way that shows he affirmatively elected to go a certain way, they clearly waived the right to go the other way – failed; BUT here the waiver is focused on the respondents and estoppel with the appellants Vicars induced Dunn into following plan B and they relied RATIO: in order to show that there is a waiver, must show 1) full knowledge of rights and 2) unequivocal and conscious intention to abandon them

Walton Stores (Interstate) Pty. Ltd. v Maher: W agreed to lease M’s land if M demolished and replaced building on land – W had a target date for occupation that created sense of urgency; M undertook demolition on info that W’s solicitor had verbal instructions to accept the lease; weeks later W’s solicitor returned unsigned lease saying W didn’t intend to proceed – W knew building was demolished; is W estopped from denying existence of a binding contract? YES – element of urgency pervaded negitioation of terms and there was a long time between the new terms and the update of W not intending to proceed; M relied on W’s presentation to his detriment; M trying to use promissory estoppel to create a legal relationship (not a modification); Australian high court allowed promissory estoppel as a cause of action; RATIO: in Australia, promissory estoppel can be used where there is no pre-existing legal relationship if the promisee can establish 1) inducement by the promisor, 2) reliance on the promise to their detriment, and 3) it would be unconscionable for promisor not to put promisee back in pre-reliance position (AUSTRALIA)

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M. (N.) v (A.T.): M promised to pay off A’s mortgage if she moved to Canada to live with him and plan to marry; A resigned from job and moved; M never paid off mortgage but loaned A $100,000; after note, M evicted A from his home; M never found permanent employment in England or Vancouver; can A enforce M’s promise on promissory estoppel? NO – no pre-existing legal relationship therefore cannot use estoppel; A argued there was clear quid pro quo because she moved to Canada for M BUT courts do not enforce such promises; A argued promissory estoppel based on Australian model – court said no because no pre-existing legal relationship and also no bad faith; RATIO: in Canada promissory estoppel requires a pre-existing legal relationship

MUTUAL ASSENT

If mutual assent is found, parties will be held to have reached a binding contract- Modern contact law relies on objective test for mutual assent outward manifestation of the

parties (what would a reasonable person understand the intent to be)

OFFER AND INVITATION TO TREAT

Offer = manifestation of willingness to enter bargain that justifies offeree in understanding his assent to that bargain is invited

- Act that leads offeree reasonably to believe that power to create contract is conferred upon him- Price quotations generally NOT an offer “invitation to treat”

To find a valid offer, ask:1) Is there an isolated statement that makes the offer?2) Has the offeror given the offeree power to close the deal by accepting?

Invitations to Treat:

Harvey v Facey: mere statement of lowest price at which a vendor would sell contains no implied contract to sell at that price to those inquiring; “will you sell us? Telegraph lowest price” F only provided lowest price, did not say whether they would sell mere quotation of price

Johnston v Rogers: “we quote you” not an offer to sell

Valid Offers:

Harty v Gooderham: quotation followed by “shall be happy to have an order from you, to which we will give prompt attention” = offer instructions on how to accept AND specified order from “you”

Canadian Dyers Association Ltd. v Burton: May 1918 C wrote “state your lowest price will then give the same our best consideration”; June 6 B answered “lowest price to sell $1650”; October 16, 1919 C asked for lower price; October 21, 1919 B acknowledged and restated June 6 price; C treated October 21 letter as offer and accepted – asked B to prepare deed; draft sent but later B said no contract; was there a valid offer by B? YES – “the last price I gave you is the lowest price I am prepared to accept” more than a mere quotation – statement of readiness to sell; “if it were any other party I would ask for more” indicates offer is just for C; different from Harvey v Facey because negotiated with one person and

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prepared to accept; RATIO: courts consider the language used, context, subsequent actions of parties to determine if offer was made this offer was specific to C, B indicated readiness to sell and accept Display of Goods for Sale:

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd.: Boots had pharmacist station near poisons section to oversee all transactions (required by Pharmacy and Poisons Act); society alleged display of goods constituted an offer and upon choosing the product off shelf the customer had accepted, violating the act because pharmacist had to oversee before acceptance; at what stage of purchase does acceptance occur in a self-service store? ACCEPTANCE OCCURS AT TIME OF PAYMENT; customer still browsing while putting items in their basket, would be illogical otherwise; RATIO: in a self-serve store, acceptance = moment of purchase concurrent sale where offer is given and accepted at the same time; display of goods in a shop window/self-service store merely an invitation to treat

Advertisements and Unilateral Contracts:- Advertisements can be unilateral contracts where they are specific enough

Carlil v Carbolic Smoke Company: Carbolic made “smoke ball” and claimed it cured influenza – offered $100 to anyone who used it for a certain time and still got sick; Carlil bought smoke ball and used it for more than two months and got the flu – claimed the $100 and Carbolic said not a serious contract; was Carbolic’s advertisement an offer? YES – unilateral offer; carbolic argued it was too vague and had no time limit for claiming – court gets around this by saying she was “using” it the whole time; offer is specific enough because under reasonable construction of time limit plaintiff can state a breach; Carbolic argued invalid because open to the entire world court says no, only addressed to those who bought it and used it properly; Carbolic says no way to prove proper use court said could have witnesses, etc.; Carbolic argues mere puffery court says they outwardly manifested intent by depositing money into bank; consideration was Carlil’s detriment buying it and using it daily; RATIO: notice of acceptance need not precede performance for unilateral contracts; advertisement of unilateral contract that seeks performance commonly held to be valid

Goldthorpe v Logan: L advertised hair removal treatments with guaranteed results; G went to have facial hari removed and was assured of guarantee; treatments didn’t work – G claimed negligence and then claimed that L was under contract to safely and permanently remove hair; was there a contract between L and G? YES – advertisement was an offer and included a guarantee; G accepted the offer and communicated acceptance by conduct; offer not mere puffery; RATIO: the offeror bears the risk of extravagant promises; valid offer where advertisement specific enough

Puff: statements that are nonspecific and vague, used to induce a party but not binding sales tactic

COMMUNICATION OF OFFER

Communication of the Offer:- Publication of a reward = unilateral offer BUT if you fulfill the terms of the reward and didn’t

know the offer existed you cannot accept you have not fulfilled the contract- Motives for accepting are usually irrelevant- Acceptance occurs by fulfillment of conditions in the offer- Fulfillment of conditions raises a rebuttable presumption that there was an intention to accept- Presumption can be rebutted if there is evidence to the contrary

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Williams v Carwardine: Carwardine offered a reward for info leading to a conviction for Walter’s murder; Williams made a statement which led to conviction for Walter’s murderer because she thought she was going to be killed by her husband; Williams was not motivated by the reward but was aware of it and intended to give info; did Williams form a contract with Carwardine despite not being motivated for the reward? YES – motive is immaterial because she still had an intention to fulfill the offer and accept the reward; RATIO: the motive of an individual accepting a contract offered is irrelevant WRT right to recover under the contract; motive is not equivalent to intention

R v Clarke: Clarke gave info on a case to clear himself of murder charge; detective on case suggested he collect the reward for giving info; Clarke was not induced by the offer of the reward when he gave info but later tried to claim; did Clarke accept the offer to give info? NO – no meeting of the mind – he forgot the reward existed when he gave the reward, didn’t intent to accept the reward; could also be seen as past consideration because Clarke was not induced by promise; Clarke actually stated he wasn’t induced by the offer and didn’t intent to accept (otherwise presumption is that you have accepted); RATIO: one cannot accept an offer they don’t know exists or have forgotten exists

ACCEPTANCE

Acceptance = final and unqualified expression of assent to the terms of the offer

The offeror is the master of the offer:- They offeror may set the terms of the proposed contract and the requirements for acceptance- To make effective acceptance, offeree must manifest assent to the terms of the offer in a

manner invited or required by the offer- Offeror determines who can accept the offer

o Most rules WRT whether an utterance or act = acceptance are default rules offeror can unilaterally avoid default rules by being explicit about what they want offeree to do in order to form a contract

The Mirror Image Rule:- In order to accept the offer and form a contract, the offeree must agree to the terms stated by

the offer offeree’s acceptance must “mirror” the terms stated by the offeror in the offer- Offeree who responds to an offer by varying the terms of the offer has not accepted- Variance in the offeror’s terms constitutes a counter offer, which is a rejection of original offer- Rejection terminates an offer, and ordinarily the offeree cannot revive the offer and accept it

after rejecting the offer

Livingstone v Evans: E proposed to sell land for $1,800 to L; L replied, “send lowest cash price. Will give $1,600 cash”; E replied “cannot reduce price”; L wrote to accept original offer of $1,800 but E no longer wanted to sell; L’s first telegram a counter-offer, if so was it a rejection freeing E? NO – L’s telegram was a counter-offer BUT E’s second telegram “cannot reduce price” constitutes a renewal of the original offer implies it is still for sale at original price; L can accept the renewed offer; RATIO: a counter-offer constitutes a rejection of the original offer BUT the original offer can be revived by the offerorNote: where acceptance asks for some indulgence from the offeree, it is still binding as long as the offeree is clear they will take the deal regardless (ex: offeror asks for cash payment, offeree says “would credit work? Otherwise will pay cash” not a counter-offer can still accept)

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Global Tenkers: test to determine if the response terminates the offer = whether offeror reasonably regarded the purported acceptance as introducing a new term into the bargain and not as a clear acceptance of the offer

OFFER + ACCEPTANCE = CONTRACT + REJECTION = ORIGINAL OFFER TERMINATED + COUNTER OFFER = ORIGINAL OFFER TERMINATED

– Mere inquiry does NOT terminate offer (although offeror can still revoke until acceptance) –

COMMUNICATION OF ACCEPTANCE

General rule: acceptance has no legal effect until it is communicated to the offeror - For acceptance to be communicated, typically must be brought to notice of offeror- Offeree who does nothing in response to offer not bound by terms silence is NOT acceptance- Offeree should notify the offeror within a reasonable time after acceptance- In unilateral contracts, requirement of communication of acceptance usually waived

Silence is Not Acceptance:

Felthouse v Bindley: F negotiated to purchase horse from his nephew; mix up of price led uncle to give definite offer to split the difference – uncle said he would assume acceptance if he heard nothing; no response given and no actions performed – horse remained with nephew; nephew’s auctioneer B accidentally sold the horse (was instructed not to); F sued B in conversion to recover horse; did nephew accept F’s offer? NO – silence is not acceptance; nephew’s instruction to B not to sell horse wasn’t acceptance because it wasn’t communicated to F; RATIO: silence is not acceptance – party must make a positive act to constitute acceptance

Bilateral contracts:- Offeree must exercise reasonable diligence to notify the offeror of acceptance (default rule)- Bilateral contract can also be accepted by conduct

Unilateral contracts:- No requirement to notify of acceptance- Acceptance is a physical manifestation supports efficiency and minimizes transaction costs

Dawson v Helicopter Exploration Co.: D staked mineral claim and knew its location, which was valuable to H; D agreed to give H info on where claim was in exchange for a percentage of H’s earnings if they mined it – H would see if the area was worth mining; agreed that H would notify D when they obtained a pilot for their helicopter so that D could get leave from the military and show the area; H notified D when pilot became available but told D that based on other advice they probably wouldn’t explore the area (therefore no earnings for D); D didn’t reply; without notifying D, H explored the region and contracted with another party for development; was there a valid offer and acceptance? Was this a unilateral or bilateral contract? YES contract formed – BILATERAL; if taken as unilateral, acceptance would be by performance and as D didn’t perform he hasn’t accepted; if bilateral, acceptance was the exchange of promises where D accepted by letter it was then up to H to notify D when a pilot was

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ready; D uses language to accept; valid contract formed after D wrote back; RATIO: where offers could be construed as bilateral or unilateral, the courts will construe it as bilateralThe Postal Acceptance Rule:

- Offer is accepted when offeree puts notice of acceptance in mail (not when received by offeror)- Default rule if contract requires notification, doesn’t apply- If there is any mistake/fault in the dispatch such as a wrong address, rule doesn’t apply- Doesn’t apply in cases of manifest inconvenience and absurdity- Doesn’t apply to instantaneous communications (such as email)

Household Fire & Carriage Accident Insurance Co. v Grant: G applied for shares in H; H allotted shares to G and sent a correctly addressed letter containing notice of allotment; letter lost and G never received acceptance; H went bankrupt and asked G for outstanding payment on shares – G refused; was the letter of allotment sent by H acceptance? YES – valid contract found; G argued no meeting of the minds but postal rule applies here – it is a default rule so they could have contracted around it; RATIO: postal acceptance rule applies – can contract around it if you want notification

Holwell Securities v Hughes: Hughes granted call option for property and gave Howell irrevocable right to purchase during option period; contract required notice in writing within six months; Holwell sent letter to exercise option which was never received; Hughes refused to complete purchase; does postal rule apply? NO – postal rule doesn’t apply when express terms of the offer specify acceptance must reach offeror; offer says “by notice in writing to the defendant”; RATIO: postal rule doesn’t apply where notification of acceptance is specified or where it would produce manifest inconvenience or absurdity

Instantaneous Communications:- Where means of communication of acceptance are virtually instantaneous (phone, email, fax),

the regular rule that acceptance must be communicated to the offeror applies- Note: no universal rule – question often determined based on risk allocation- Understood generally that if you send an email to a business during their normal business hours,

acceptance was upon receipt (not when they opened/read the email)o BUT if you sent an email by email on a Friday night, acceptance likely wouldn’t be

received until business hours began on Monday

Brinkibon Ltd. v Stahag Stahl Und Stahlwarenhandelsgesellschaft mbH: B (in London) bought steel from S (in Austria); B sent acceptance to S by telegram; S claimed acceptance occurred in Austria, B claimed it occurred in London (for B to succeed in their action had to be formed in England); where was the contract formed? VIENNA – could either see acceptance by telegram or acceptance by conduct but either way it occurred in Vienna; RATIO: in instantaneous communications, contract complete when acceptance is received by offeror

Rudder v Microsoft Corp: plaintiffs wanted to bring action against Microsoft claiming member agreement was breached; plaintiffs rely on contract for their cause of action but want to ignore jurisdiction clause which requires disputes to be dealt with in Washington; is there jurisdiction to consider this case in light of the forum selection clause? NO – jurisdiction is Washington, by clicking “I agree” plaintiffs agreed; duty to read the contract – the agreement was in plain language, requirement for scrolling was the same as turning a multi-page document; typically clicking “I agree” would constitute acceptance in the location where it was done but this contract had a forum selection clause; RATIO: the normal rules of acceptance apply to electronic agreements but can be contracted around

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REVOCATION AND LAPSE OF OFFERS

Termination of the Power of Acceptance:- Once an offer is made it generally remains open a reasonable time so the offeree has an

opportunity to respond- Revocation: as long as the offer is open it can be revoked by the offeror until acceptance- Lapse of time: an offer lapses after a reasonable time – reasonable time will be determined on a

case by case basis (shorter WRT perishable goods or volatile markets, longer WRT non-perishable goods and stable markets)

o Reasonable time = default rule otherwise offer lapses after expiration of the time stipulated in the offer or upon occurrence of a stipulated event

o Late acceptance = considered as a counter-offer

Offer-Terminators:1) Lapse of time2) Revocation (can be indirect if it comes from a reliable source Dickenson v Dodds)3) Death of an offeror

a. Offeree’s power of acceptance is terminated upon death or incapacity of either the offeror or offeree

b. Only applies WRT creation of a contract if there was already acceptance pre-death the estate will be bound by the contract

c. Death doesn’t terminate the offer if there was an option contract4) The offeree’s rejection (includes counter-offer)

Option Contract:- If there is consideration given for holding an offer open for a stipulated time, it is irrevocable

during that specified time- If breached, remedy = 1) specific performance or damages OR 2) get something back such as

consideration for the option

Revocation:

Dickenson v Dodds: Dodds delivered offer to sell a house and land to Dickenson on Wednesday and said the offer would be open until 9am Friday; offer had two parts 1) sell the property for 800 pounds, 2) keep open until 9am Friday; Dickenson decided to accept on Thursday but did not communicate to Dodds because he thought he had until Friday; Dickenson informed Dodds had sold to someone else on Thursday evening – tried to reach Dodds and left letter with his mother-in-law; Dickenson’s agent found Dodds at 7am Friday morning but was informed the property had been sold (sent agent because if Dickenson went Dodds could revoke when he saw him); Dickenson then goes to Dodds and is told it is sold; was Dodd’s offer to sell irrevocable before Friday? NO – offeror is free to withdraw their offer at any point until offeree has accepted provided the offeree has not given consideration; was not an option contract; RATIO: an offer not supported by consideration is revocable until acceptance even if offeror states it will be open for a certain time “certain time” just lays out what a reasonable time to accept is; offer can be revoked indirectly (i.e. via Dickenson’s agent) if it comes from reliable source

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Byrne v Tienhoven: V mailed B proposal to sell on October 1; B received offer on October 11 and immediately accepted by telegram and sent letter of acceptance on October 15; in interim on October 8, V mailed revocation which was received on October 20; B relied on acceptance; is there a binding contract? YES – postal acceptance rule doesn’t apply to revocation, offer was accepted either on October 8 or 15 and revocation was after, on October 20; mailbox rule doesn’t apply to revocation because it protects the reliance interests of the offeree; RATIO: revocation must be communicated to the offeree (mailbox rule DOESN’T apply)

Revocation in a Unilateral Offer:

Errington v Errington and Woods: father bought house for son and daughter in law (Wood) to live in – said down payment was a gift and they were expected to pay mortgage – “house will be yours when mortgage paid”; father said he would put it in their names upon retirement; Wood paid mortgage installments for some time but became a burden and father agreed to pay; father died and left estate to plaintiff; after death Wood split from son; Errington sued for possession; can a unilateral contract be revoked after death of the offeror? NO IF PARTY BEGINS PERFORMANCE – plaintiff argued that it was a unilateral contract that had not been fully performed so she could revoke court says no because they have undertaken performance and made some payments; not bilateral because no binding promise to pay installments; as long as they keep making payments they have right to live in house; RATIO: unilateral contract cannot be revoked once the other party entered on performance of the act BUT contract would cease to be binding if left incomplete (s45 of the restatement)

Restatement (Second) of Contracts:§ 45. Option Contract Created by Part Performance or Tender

(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance (b/c court looks for bilateral first), an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.(2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer

Lapse:

Barrick v Clark: B owned farmland that C wanted to by; C made offer of $14,500; B wrote back stating price was $15,000 cash and if satisfactory deal could be closed immediately with payment of $2,000 immediately to accept; C was away – his wife received the letter and asked B to hold offer open until her husband returned in 10 days – B didn’t reply; 13 days later B sold property to someone else; C returned 20 days after his wife received letter and sought specific performance; did the offer lapse? YES – B didn’t respond to Mrs. C’s letter therefore not bound; B left offer open for reasonable time; B made intent to sell ASAP clear to C; RATIO: reasonable time to accept offer can be determined from the conduct and language of the parties, the nature of the goods, etc.

CERTAINTY AND INCOMPLETE TERMS

Court must be able to determine the terms of the contract in order to enforce- Generally courts will not enforce an agreement that has gaps or is missing essential terms

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Indefinite Terms Affecting Enforcement:- Terms of the agreement must be reasonably definite for agreement to be enforced- Terms that are generally necessary:

o Partieso Priceo Subject matter of the agreemento Details about time/place/manner of performance

Categories of Uncertainty: 1. Uncertain commitment to the deal: preliminary agreement, such as a “letter of intent” or MOU

may reflect parties’ commitment to a deal that they will define further later. Sometimes preliminary agreement reflects that one or both parties intend only to set up a framework for further negotiations, to enhance chance of obtaining financing or discourage competitors

2. Vague Terms: the parties want to do business but they have a difficult time bridging the gap between their views on one or more terms. Sometimes try to solve the problem by drafting a clause that is intentionally vague. Sometimes vagueness is unintentional as a result of inattention or sloppy drafting.

3. Missing Terms: parties might agree to a set of basic terms or some other preliminary agreement, but never come to agreement on additional terms of the contract, or the terms are missing because of the parties’ haste or because they didn’t foresee an issue arising. How much will the court fill in?

4. Terms left for future resolution: parties need to agree on every aspect of their relationship. Some terms may be assigned to one party to resolve or they can be left for future determination by both parties. Some terms can be filled in by default rules; others can be filled in by the court based on the context of the transaction. Some terms are so important and undefinable that lack of assent means the contract was not formed.

Rule of Thumb WRT Missing Terms:- People who are the parties to the contract- Property property must be specifically mentioned or understood as a subject of the contract

to be valid- Price

Incompleteness:

May and Butcher Ltd. v The Kings: M wanted to buy surplus tentage from defendant (the board); terms of agreement set by board in June 1921 which said price and time of delivery was to be agreed on by the parties as tents became available; M made deposit of $1,000 as security; January 1922 verbally negotiated for extension of agreement to March 1923; board breached; were the terms of the contract sufficiently defined to constitute binding contract? NO – contract missing price and time of delivery; too uncertain; price = key issue (timing can be presumed as tentage is related to war – will be at end of war); court cannot determine price because it would be imposing something parties didn’t agree on; arbitration clause in contract useless because there was no valid contract; RATIO: courts will not fill in so many gaps when it seems parties haven’t reached meeting of the minds; agreement to enter into agreement with critical part of contract missing is NOT a contract

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Sale of Goods Act:Section 12 : Ascertainment of price (1) The price in a contract of sale may be

(a) set by the contract,(b) left to be set as agreed in the contract, or(c) determined by the course of dealing between the parties.

(2) If the price is not determined in accordance with subsection (1), the buyer must pay a reasonable price.(3) What is a reasonable price is a question of fact dependent on the circumstances of each case.

Foley v Classique Coaches Ltd.: F had agreement to sell C land if C entered subsequent agreement to purchase all petrol required for their business from F “at price to be agreed upon by parties in writing from time to time”; C purchased all petrol from F for 3 years then breached and tried to repudiate supplemental agreement; was the supplemental agreement binding? YES – there was a pre-existing relationship and parties have been performing for 3 years; price is missing but they have been coming to an agreement successfully for 3 years; would also be unjust enrichment for C; arbitration clause relevant because it was a valid contract (unlike May and Butcher); RATIO: an incomplete contract may be rendered enforceable based on context such as reasonable expectations, reliance of seller, existing valid contract, etc.

Vagueness and Incompleteness:

Hillas and Co. Ltd. v Arcos Ltd.: H reached agreement in 1930 to purchase timber from A under condition hat they would also have option to enter into contract with A to purchase more the next year at 5% reduction; A refused to sell more the following year; was the option in the 1930 agreement binding? YES – valid consideration for the option H entered into the first contract which was consideration for A, and gets reduced price which is consideration for H; missing price and date – date not an issue because couldn’t ship all timber at once so would be in instalments – imply reasonable time; price can be determined by the previous years price and industry standards; RATIO: judges may imply terms into a contract based on past dealings of the parties rather than void the agreement for vagueness or incompletenessNote: differs from May and Butcher because here the parties had been performing for one year before which indicates Arcos saw it as a valid contract (like Foley) AND there were industry standards to rely on

Tailored vs. untailored default rules:- Tailored reasonableness tailored to the parties and the context- Untailored those that try to determine what majority would have wanted “four times a

year

AGREEMENTS TO NEGOTIATE

Agreement to Agree:- Agreement to agree or agreement to negotiate = promise to enter into a future contract

generally unenforceable because too uncertain- An agreement which leaves price to be negotiated can create an obligation to negotiate in good

faith and not withhold the agreement unreasonably

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Duty of Good Faith During Negotiations:- Default rule = no implied duty to negotiate in good faith good faith only required after

contract formed- Until a contract is formed, both parties rely on the deal at their own risk

o Unjust enrichment = exception where you rely on a contract and the other party benefits

- Parties may agree in advance to “negotiate in good faith” and that obligation of “good faith” may be included in a framework agreement that governs overall relationship

- Agreement to negotiate in good faith is not the same as an agreement to agreeo Agreement to negotiate in good faith = enforceable

Does not require successful conclusion of a contract, just requires honest, good faith negotiations

o Agreement to agree = unenforceable- Good faith bargaining = objective standard courts will not intervene without some

objective element that can be used to reasonably determine what parties are required to do

Precontractual Obligations: - Generally parties have freedom to negotiate without risk of precontractual liability - Party to precontractual negotiations may break off negotiations without liability at any time and

for any reason – only cost is loss of the party’s own investment WRT time, effort, expense

Empress Towers Ltd. v Bank of Nova Scotia (Scotiabank): S leased property from E in 1972, lease expired in 1984; in 1984 parties entered into new lease which contained clause that S could renew for 2 successive periods of 5 years if they gave 3 months written notice and the rental rate will be the market rate and agreed upon; May 1989 S exercised option to renew; June 1989 S proposed rate of $5,400/month (more than old lease) but received no reply; August 1989 E said S could stay if they made payment of 15k (were trying to recover for 30k that had been robbed) before September 15 and then the rent of $5,400 thereafter; E sought possession when S didn’t agree; was renewal clause void because of uncertainty or because it was an agreement to agree? NO – E using bad faith to get compensated for loss unrelated to S; renewal was to be based on objective measure and agreement by the parties the term “mutual agreement” implies an agreement to negotiate in good faith (note: negotiating in good faith doesn’t impose duty to reach final agreement); RATIO: if there is an objective standard combined with a subjective standard for an agreement to agree, the court may impose an obligation to negotiate in good faith

Mannpar Enterprises Ltd. v Canada: parties entered into contract for sand and gravel from a reserve – permit effective for 5 years but understood that the work would take approx. 10 years; M paid modest rental under permit as well as royalty on materials removed and was required to do reclamation work; permit provided right to renew for further 5 years subject to satisfactory performance and renegotiation of royalty and rental rates; M gave notice of intention to renew but defendant less satisfied and wasn’t prepared to renegotiate – failed to renew; was there a requirement to negotiate in good faith? NO – no objective element to rely on, only commitment was a minimum price and no indication of measurement (ex: market rate); agreement to agree unenforceable; RATIO: for an agreement to agree to be enforceable, the parties must have determined some objective standard

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Wellington City Council v Body Corporate: parties had an agreement to negotiate in good faith; negotiations broke down; is agreement to negotiate in good faith enforceable? NO – parties must reach consensus on all essential terms or at least upon objective means of sufficient certainty by which the terms can be determined; contract didn’t lay out any specific obligations of the parties and there was no consideration for negotiations; RATIO: agreement to negotiate is unenforceable for uncertainty

INTENTION TO CREATE LEGAL RELATIONS

Intention of Creating Legal Relations:- A concluded agreement is only enforceable if the parties intend their agreement to be legally

binding and enforceable- Test for intention to create legal relations = objective- Presumption against creating legal relations for social and domestic relations- Presumption for intention to be legally bound in commercial agreement

4 Elements of Valid Contracts:1) Offer, 2) Acceptance, 3) Consideration, 4) Intention to be legally bound

Domestic Agreements: Balfour v Balfour: plaintiff and defendant were wife and husband; defendant was civil engineer and lived with him where he worked in Sri Lanka; in 1915 both came to England during defendant’s leave and plaintiff was advised by doctor to stay in England for health; defendant promised plaintiff $30/month until she came back to Sri Lanka; couple drifted apart and defendant wrote to say they should remain apart; March 1918 plaintiff sued defendant to keep up with $30 payments; was defendant’s offer legally binding? NO – no intention to be bound; consideration not really an issue because in marriage there is a requirement to provide for essentials, so wife taking 30 pounds and forbearing to sue for the amount husband owes her is good consideration; courts presume familial agreements not intended to be legally binding; RATIO: rebuttable presumption against an intention to create a legally enforceable agreement in a domestic agreementNote: separation agreements have always been considered valid contracts – presumption that domestic agreements are not legally binding refers to families that are intact

Commercial Agreements:- Presumption of intention to be legally bound- Sometimes try to argue honorable agreement – intended to be bound by honor alone- Honorable pledge clause: bound in honor not in law explicit intention not to be bound

Rose and Frank Company v J.R. Crompton and Brothers: P was sole distributor of D’s products; parties signed a document in 1913 which stated it was not written as a formal or legal agreement and not subject to legal jurisdiction but was for record of purpose and intention of the parties to honorably pledge themselves; relationship between the parties broke down and P sued on enforcement of agreement; can a clause stating it is not legally binding be put into a contract? Is there a contract? NO CONTRACT – generally assumed contract intended to be legally binding but they used a specific clause to contract around it; intention of the parties is key and the intentions were clearly stated; parties didn’t intend to be legally bound; RATIO: if parties expressly state that they do not wish to be bound, courts

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will respect their actual intentions

FORMALITY: THE REQUIREMENT OF WRITING

Writing Requirements:- Differ depending on jurisdiction look at legislation

Statutes of Frauds Problems Raise 3 Potential Issues:1) Is the contract subject to the statute of frauds? If it falls within SoF, writing is required! 2) Does the contract comply with the writing requirement of the applicable statute of frauds?3) Is the contract enforceable notwithstanding its failure to comply with the writing requirement of

the applicable statute of frauds?a. Are there any exceptions

- If the writing requirement is missing and was required, the contract is not void but it is unenforceable

- Signature only required by the party against whom enforcement is sought the “party to be charged”

- Generally oral contracts are fully enforceable but writing is a good business practice; SoF requires certain types of contracts to be in writing

Functions of the Writing Requirement:1) Evidentiary

a. Helps with interpretationb. Certainty of termsc. Solves issue of not remembering parts of the contracts, reduces costs of disputesd. Helps prevent fraud

2) Cautionarya. Where contract would otherwise not be bindingb. Helps where the undertaking is suspicious (ex: guarantor, pre-nup)

3) Channeling a. Can serve as a clear point that negotiations have reached the point of a binding contract

Statutes Covered by the SoF:1) Promises to answer for the debt, default, or miscarriages of another person2) Promise by an executor or administrator to answer damages out of her own estate: refers to

promises made by the executor or administrator of an estate personally (out of personal, not estate funds) pay creditors sums owed by the decedent (person who died) at the time of death

3) Contracts made upon consideration of marriage a. Doesn’t include exchanges of promises to marry – covers contracts where party

promises to settle property upon another in consideration of marriage4) Contracts not to be performed within one year

a. The one-year provision requirement of writing for a contract not to be performed within one year from the making thereof. The time is to be measured from the day after the contract is entered (not the date of when the contract or performance begins)

5) Contracts for the sale of any interest in landa. Usually interpreted broadly to apply to transactions transferring any interest in land

including contracts involving mortgages, easements, mineral rights and options to

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purchase land. Most jurisdictions only require long-term leases (more than a year) to be in writing

The Nature of the Writing:- Basic rule is that a contract complies with the statute of frauds if:

o The contract is evidenced by writing that: A) Identifies the subject of the contract, B) Is sufficient to indicate a contract has been made, C) Includes the essential terms, and It is signed by the party against whom enforcement is sought

o SoF doesn’t require a written contract – note or memorandum subscribed by the party to be charged is adequate

o Memorandum adequate if it identifies the subject of the parties’ agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty

- Procedural requirement doesn’t go to validity; presumes contract is validLaw and Equity Act Rule 59:S. 59 Enforceability of contracts(2) This section does not apply to

(a) a contract to grant a lease of land for a term of 3 years or less,(b) a grant of a lease of land for a term of 3 years or less, or(c) a guarantee or indemnity arising by operation of law or imposed by statute.

(3) A contract respecting land or a disposition of land is not enforceable unless(a) there is, in a writing signed by the party to be charged or by that party's agent, both an indication that it has been made and a reasonable indication of the subject matter,(b) the party to be charged has done an act, or acquiesced in an act of the party alleging the contract or disposition, that indicates that a contract or disposition not inconsistent with that alleged has been made, or(c) the person alleging the contract or disposition has, in reasonable reliance on it, so changed the person's position that an inequitable result, having regard to both parties' interests, can be avoided only by enforcing the contract or disposition.

(5) If a court decides that an alleged gift or contract cannot be enforced, it may order either or both of(a) restitution of a benefit received, and(b) compensation for money spent in reliance on the gift or contract.

(6) A guarantee or indemnity is not enforceable unless(a) it is evidenced by writing signed by, or by the agent of, the guarantor or indemnitor, or(b) the alleged guarantor or indemnitor has done an act indicating that a guarantee or indemnity consistent with that alleged has been made.

(7) A writing can be sufficient for the purpose of this section even though a term is left out or is wrongly stated.

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Documents

cans.allardlss.comcans.allardlss.com/application/media/cans/ADJUNCT... · Web view1. QUESTIONS TO ASK: Is there consideration? If no can you argue reliance and use promissory estoppel?