lsacans.s3.ca-central-1.amazonaws.com(… · Web viewContracts (Dr. Nye) Fall 2019. Chapter 1: Introduction2. Introduction to the Study of the Law of Contracts2. Contract is any

Contracts (Dr. Nye) Fall 2019

Chapter 1: Introduction2

Introduction to the Study of the Law of Contracts2

Contract is any enforceable promise.2

Introduction of the Law of Damages2

Chapter 2: Formation of the Agreement: Offer and Acceptance3

Two fundamental elements of valid contract: Offer and Acceptance3

Offer and Invitation to Treat3

Harvey v Facey [1893] JCPC (telegraph case) – quotation is not an offer3

Canadian Dyers Association Ltd v. Burton (property case) – offer is contextual3

Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd (pharmacy case) – invitation to treat 1953 Queen’s Bench4

Unilateral Contract:4

Carlill v. Carbolic Smoke Ball Co. - 1893 Queen’s Bench (CREATED unilateral contract - ad as an offer, not an invitation to treat)4

Goldthorpe v. Logan - SCC 1943 (unilateral contract - ad as an offer, not an invitation to treat)5

Bilateral Contract6

R. v. Ron Engineering & Construction (Eastern) LTD. - SCC 1981 (bilateral contract – obligations and promises on both sides – tenderer’s side)6

Mistake in Relation to the Law of Tenders7

Mistake7

Smith v Hughes LR 6 QB 5977

Belle River Community Arena Inc. v. W.J.C. Kaufmann Co. (Pre Ron Eng. Tender Case)7

Implied Terms8

Officious Bystander test:8

MJB Enterprises Ltd v Defence Construction (1951) Ltd (bilateral contract – each party has obligation – owner’s side)8

Communication of Offer8

Acceptance9

Livingstone v Evans (1925 Alberta S.C.) ⇒ important/foundation case9

Battle of the Forms9

Denning’s Tree Positions9

Butler Machine Tool Co. v Ex-Cell-O Corp. (1979 C.A.) –( battle of forms)10

Tywood Industries LTD. v St. Anne-Nackawic Pulp & Paper Co. LTD. (1979 Ontario H.C.) (Holistic approach/no party surprised) Battle of the Forms10

Tekdata v Amphenol (UK case - persuasive)11

Boilerplate Contracts11

ProCD v Matthew Zeidenberg and Silken Mountain Web Services - 1996 US (offeror is the master of her offer)11

Revocation12

Flagpole Problem12

Contingent agreement:13

Dawson v Helicopter Exploration - 1955 SCC (acceptance by performance & contingent agreement)13

Communication Of Acceptance14

Felthouse v Bindley - 1862 NS14

Saint John Tug Boat Co v Irving Refinery LTD - 1964 SCC (silence as acceptance – exception to the general rule)15

O'Neill v Kings County Construction, 2019 PECA 13 (modern tag boat case)15

Eliason v Henshaw - 1819 US - what kind of things can count as acceptance – offeror is the master of his own offer – change of a term – no acceptance16

Mailed Acceptance16

Postal Acceptance Rule- There is good acceptance when the letter is delivered to the post office.16

Household Fire & Carriage Accident Insurance Co v Grant (Postal Acceptance Rule)17

Option Contract17

Does the Postal Acceptance Rue Apply?17

Holwell Securities Ltd. v Hughes (Postal Acceptance Rule exception)18

Instantaneous Methods of Communication18

Brinkibon Ltd. v. Stahag Stahl und Stahlwarenhandelsgesellschaft mbH18

Pro Transport Inc. v ABB Inc., 2017 NBQB 24119

Rudder v Microsoft Corp19

Termination of Offer19

Revocation19

Dickson v Dodds20

Byrne v Van Tienhoven20

Errington v Errington & Woods20

Implicit Collateral Arrangement21

Lapse21

Barrick v Clark (lapse & reasonable time)21

Chapter 1: IntroductionIntroduction to the Study of the Law of ContractsContract is any enforceable promise.

· Contract enforceability depends on a background set of norms and rules that determine people’s obligations

· Elements of a Contract

· Agreement/promise/undertaking – two parties decided to agree on something

· Two competent parties (legal ager, mental capacity)

· Consideration (Exchange of Value)

· Deliberateness (Intention to create legal relations)

· Certainty (terms that are enforceable and mutually agreed on)

· Voluntariness (exercise of will)

· (Sometimes in writing)

all these elements are required for the contract to be legally enforceable

· Public v. Private Law

· Private: two private individuals engaging in a private exchange (horizontal relationship)

· Public: an exchange between a state and a private individual (vertical relationship)

· Even though we often think of contracts as private agreements between people, they require our whole system of public regulation to function.

· Value judgement -which contracts are enforceable and which are not. The role of the state is party is to define the contractual obligations and set of rules (ex. employment law). Therefore, the state does not only enforce the contract but also defines the rules.

· Freedom of Contract (pursuit of self-interest)

· Relies on the assumption of equality between parties

· Leave ppl alone, so they can pursue self-interest. Therefore, the bargain will be struck by arguing and the truth will be reached.

· Contract Law and Discrimination (self-interest vs. limitations)

· The Charter & AB Employment Act – statutory frameworks constrain what is legal.

· Common Law rules – ex. Fiduciary duty

Introduction of the Law of Damages

· Remedies – after we establish that there is a valid and enforceable contract, it was breached, then find appropriate remedies.

· Damages

· Primary: Monetary compensation

· Less common: Specific Performance (order from the court to carry out the obligation that they promised to carry out in the 1st place when the contact was made)

· Less common: Injunction (court order to make ppl stop doing something)

· Calculating Damages (*punitive damages are rare)

· Expectation (the most common type/ forward looking)

· The plaintiff is entitled to be put in the position she would have been in had the contract been performed.

· Reliance (what did plaintiff do in reliance of contract?)

· “this measure aims to put the innocent party in the position she would have been in had she not entered into the contract.” (ie: to permit recovery of losses incurred due to reliance on the contract.)

· Restitution (give back $)

· “this measure aims to give back what the innocent party transferred to the contract breaker….”

· Duty to Mitigate

· The law imposes a duty on the plaintiff to mitigate loss.

· A plaintiff can only recover for unavoidable losses. “A plaintiff will not be able to recover to the extent that she has failed to act reasonably to limit or reduce her loss caused by the defendant’s breach.”

Chapter 2: Formation of the Agreement: Offer and AcceptanceTwo fundamental elements of valid contract: Offer and Acceptance

· Parties have to reach an agreement for a contract to exist

· Agreement is connected to the idea of free and voluntary exchange

· This requires an offer + acceptance of that offer

· Must be understood contextually. There are some technical rules, but context provides some flexibility.

Offer and Invitation to Treat

· Offer: “an expression of willingness to contract on specified (clear and knowable) terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed” (per Treitel)

· Offeror - who makes the offer.

· Offeree - the one to whom the offer is made.

· Invitation to treat: an expression of willingness to do business. The party “does not make an offer but invites the other party to do so” (per Treitel)

Invitation to Treat v. Offer: An invitation to make an offer vs. a willingness to contract on specified terms

· Background idea in contracts: Meeting of the Minds (Consensus ad idem)

· “The basic idea running through the law of offer and acceptance is that the parties will be held to have reached an agreement when they have formed a mutual intention to enter into a bargain with each other and, further, are in agreement as to the terms of that bargain.”

· Objective test of Intention = circumstances + language + action

· did their conduct manifest as a part of their intention so other ppl perceive is as such

· fact will matter here

Harvey v Facey [1893] JCPC (telegraph case) – quotation is not an offer

F

Would-be purchasers (the plaintiffs, Harvey) sent a telegram asking the would-be vendors (the defendant, Facey)two questions: “Will you sell us B.H.P. [the name of the property]? Telegraph lowest cash price.”

The defendants responded by saying: “Lowest cash price for B.H.P. £900.”

I

What does this case stand for?

H

no offer not a contract

R

the mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at that price to the persons making the inquiry”. A mere quotation of price is not an offer.

Canadian Dyers Association Ltd v. Burton (property case) – offer is contextual

F

Defendant: Burton (offeror & the would-be seller)

Plaintiff: Canadian Dyers (offeree & the would-be purchaser)

May 1918: Plaintiffs wrote to the defendant: “With reference to purchasing this property (25 Hanna avenue), kindly state your lowest price. We will then give the same our best consideration.”

inquiry/ invitation to treat

· May 1918: Plaintiffs wrote to the defendant: “With reference to purchasing this property (25 Hanna avenue), kindly state your lowest price. We will then give the same our best consideration.” inquiry/ invitation to treat

· June 6, 1918: Defendant responds: “Re house 25 Hanna. The lowest price I would care to sell at for cash would be $1,650…I would have sold before…but…did not, for obvious reasons.”

· October 16, 1919: Plaintiffs respond: “We would be pleased to have your very lowest price for 25 Hanna avenue. Perhaps we could get closer together than the last figure given us.”

· October 21, 1919: Defendant responds: “the last price I gave you is the lowest I am prepared to accept... [I]f it were to any other party I would ask more.”

· October 23, 1919: Plaintiffs send $500 deposit and ask for the deed of title to be prepared.--> P treated the last communication from Oct. 21 as an offer.

· October 27, 1919: Defendant’s solicitor sends over a draft deed and proposes closing on the 1st.

· November 5, 1919: Defendant’s solicitor says that there is no contract and returns the deposit. they are not admitting that they are breaching, they say there is no contract to begin with.

I

Is there an offer (do we have a contract)? Or was the communication merely an invitation to treat (we do not have a contract)?

A

Objective Legal Test for distinguishing Offer and Invitation to Treat

1. Language used: what did Burton say?

prepared to accept”

if anyone else, I would ask for more - very specific (there is a general willingness to sell)

2. Circumstances: what did Burton do? What was the context?

keeping cheque, drafting the deed, and setting closing date → willing to sell

H

There is an offer; therefore there is a contract between the two. Contract is breached.

R

A mere quotation of price is not enough (Harvey v Facey). But looking at language and circumstances, we may find an offer (objective legal test). Offer can be contextual.

In contrast with Harvey v Face: “there was here far more (it’s different circumstance) than a mere quotation of price…the reply of the 21st …was a statement of readiness to sell to the plaintiffs at the price already named.”


· inquiry/ invitation to treat























Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd (pharmacy case) – invitation to treat 1953 Queen’s Bench

F

Pharmaceutical Society of GB - Plaintiff and now appellant – i.e., they lost at trial

Boots Cash Chemists - Defendant and now respondent – i.e., they won at trial

Boots was (and is) a pharmacy in the U.K. It was ‘self-service’ – meaning customers could obtain items directly from the shelves.There was a ‘Chemists’ Department’ which sold controlled substances – ones listed in the Pharmacy & Poisons Act 1933. That act required that those controlled substances be sold only ‘by or under the supervision of a registered pharmacist’. To purchase an item, customers would approach the cash desk which was attended by a cashier (not a pharmacist). However, the pharmacist supervised transactions involving controlled drugs and had the right to refuse the sale.

I

1. Whether or not sale took place “by or under the supervision of a registered pharmacist” (in accordance with the legislation).

2. This depends on where and when the contract was formed (WHY?)

A

Theory #1: if the plaintiffs are right, once an article has been placed in the receptacle the customer himself is bound and would have no right (acceptance), without paying for the first article, to substitute an article which he saw later of a similar kind and which he perhaps preferred.” sale(exchange of money) was a performance that was administered after the contract was made. No supervision either – breach of the Act.

OR

Theory #2:

Invitation to treat: Display of goods for sale on the store shelf by Boots

Offer: By customer when she presents items for purchase to the cashier at the till

Acceptance: When cashier takes payment

→ it is supervised purchase (it complies with the Act) because the cashier may not accept the purchase.

If we take the view that a display is an offer, “then the shopkeeper might be forced to contract with his worst enemy, his greatest trade rival, a reeling drunkard, or a ragged and verminous tramp.

H

Appealed is dismissed. The required supervision by the Act was there.

R

Item on displayed are invitations to treat, the contract is formed at till when payment is accepted.

⇒ invitation to treat (display of goods) → customer makes an offer to the cashier/pharmacist (offer) → cashier/pharmacist accepts or denies the offer (acceptance)

Unilateral Contract:

· “It is an offer made to all the world…which is to ripen into a contract with anybody who comes forward and performs the condition.” Form: “if you do X, I promise Y” “A promise for an act, the acceptance consisting of the performance of the act requested, rather than the promise to perform it.” (Black’s Law Dictionary)

· It’s not a promise for a promise (i promise to buy a house and you promise to give me money for it). It’s an act for a promise. Only one person is making a promise and one person is doing an act.

· performance = acceptance

Carlill v. Carbolic Smoke Ball Co. - 1893 Queen’s Bench (CREATED unilateral contract - ad as an offer, not an invitation to treat)

F

It was marketed as a preventative against influenza, colds, etc.

· Based on the advertisement (smoke ball preventative powers against any cold, if get sick - company will reimburse you with $100 - promise) plaintiff bought the ball and used it as directed 3 times a day for 2 weeks (starting Nov. 20, 1891).

· January 17, 1892, plaintiff caught influenza. She was using the smoke ball when she got sick

· Judge ruled for the plaintiff. Def. appealed.

· Plaintiff wants to say there is a contract. Defendant wants to say there is not.

I

Is there a contract here?

More specifically: was the ad an offer, and did Mrs. Carlill validly accept it by conforming to the required procedures for using the smoke ball?

A

The way the judge reached that conclusion was by considering the defendant’s arguments and knocking them down one by one.

1. Vagueness: not a contract, but an offer to the public. Terms are too vague to be treated as definite. No mention of specific ppl who they contract with & the length of treatment and protection. BUT Judge: there was one none vague reading of contract - by using common sense - so decided to go with that interpretation of the contract (Objective test of Intention – put money is the bank – words + actions)

2. Mere ‘puff’ or mere puffery - They are claims that no reasonable person would take seriously. BUT Judge: sometimes it is not very clear when it is mere puff or a real thing (ex. money have been deposited→ demonstration of being serious and commitment + the claims are more specific - take this medicine 3 times a day to cure + it is a medicine, not ad of a food item (eat rice live forever))

3. Extravagance of promises - Does the fact that the promise was so extravagant mean that it was obviously not meant to be serious? Advertiser in the right mind would not make this claim seriously. BUT Judge: the court is concerned with the background value - person chooses to make extravagant promises because they have a lot to win from them. The big benefit comes with a risk of being hold to it.

4. No notification of acceptance. So no ‘meeting of the minds’ BUT Judge: unilateral contract the person making the offer can put the offer out in a way that it does not need acceptance notification ex. Lost dog offer to the whole world; only respondents the to offer have a contact with offeror.

5. Nudum pactum (No consideration – no exchange of value between both parties). BUT Judge: The use of the carbolic is that what the def. wanted from the plaintiff. Plaintiff wanted the health and if not then $100. consideration is anything that is undertaken with some inconvenience

6. Can’t contract with the whole world. BUT Judge: it is not a contract with the whole word, but it is an offer to the whole world (Unilateral Contract). It is not infinite number of ppl, it is limited by the amount smoke ball and further by the amount of ppl who chose to buy carbolic. Performance might be only possible by small number of ppl. Ads are typically an invitation to treat, but by reading the context - it is more of an offer (many details)

Objective Test: offer vs invitation to treat. + Context (more specified terms compared to the Pharmacy case.)

· Action: C.S. put money in bank ⇒ commitment to contract

· Language: “paid to any person who contracts the increasing … disease … after having used the ball … according to the printed directions …” ⇒ commitment to contract

H

Appeal dismissed. Ms. Carlill was able to recover the money.

R

If the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.

Goldthorpe v. Logan - SCC 1943 (unilateral contract - ad as an offer, not an invitation to treat)

F

· Plaintiff: Mrs. Goldthorpe (had electrolysis treatment performed on her)

· Defendant: Logan (ran electrolysis clinic; advertised guaranteed result)

· [Also: Fitzpatrick (employee/defendant); Mr. Goldthorpe (husband)]

In a newspaper, Logan advertised laser hair removal that had a 100% guarantee for success. An employee Fitzpatrick did the hair removal. It didn’t work. Claims in tort and contract (she sued on both accounts). Contract - if def. failed to fulfill the promise.

I

Was there offer and acceptance? When did each take place? Does the ad constitute an offer or an invitation to treat?

A

What was the advertiser’s intention in publishing it and in using the wording she chose? (Remember: test for offer is based on intention extracted from words and circumstances (actions))

· Wording at issue: ‘Results guaranteed’

Judges analyze this unilateral offer

“if you do X, I promise Y” “If you submit to treatments and pay … I will remove hair safely and permanently and promise a satisfactory result”

· On this view: What is the offer? What kind of offer? When is acceptance?

· offer→ ad (unilateral)

· Acceptance → coming to the office and undergoing the treatment

Reference to Carlill: If a seller makes a promise, they should not be surprised if they are occasionally held to it!

· The court wants to protect weaker parties.

· These parties had a common intention, and there was good consideration present.

· It was constituted by the detriment or inconvenience sustained by the female plaintiff.

H

The agreement was made between plaintiff and def and there was a breach of that agreement by the def. Logan. Goldthorpe gets $100 for breach of contract from Logan (expectation damages). She also got $13.25 for the treatment she paid for (restitution).

R

Most ads are invitations to treat. If there is an extravagant promise, such as “results guaranteed,” it is a binding offer. Damages: The plaintiff is entitled to be out in the position she would have been in had the contract been performed.

Bilateral Contract

· “Contract formed by the exchange of promises in which the promise of one party is consideration supporting the promise of the other.” (Black’s Law Dictionary)

· Bilateral contracts are the overwhelming majority of what we will deal with. It is rare to see a case like Goldthorpe analysed as unilateral.

· Put another way, in a unilateral contract only one party (the promisor) is bound to perform because only one party has made a promise; in a bilateral contract, both parties are bound to perform as both have made promises.

· 2 promises = acceptance→ binding obligations

Tendering Process (Pre Ron Engineering):

· Invitation to tender/tender call = invitation to treat

· Submission of bids = offer

· Choosing the ‘best’ bid = acceptance

· In traditional contracts party submitting tender entitled to revoke prior to acceptance, party call for tenders entitled to accept or reject each or all tenders

Tendering Process (After Ron Engineering changed it):

· Invitation to tender/tender call

· offer of Contract ‘A’. The content of Contract ‘A’ contains the rules governing the bidding process.

· contract A has the same rules of tendering (mentioned before)

· Submission of tender

· acceptance of Contract ‘A’ and an irrevocable offer to enter into Contract ‘B’. Contract ‘B’(actual construction contract) contains the terms of the main contract.

Tendering Process

Ron Engineering’s Argument

SCC new argument

Call for Tenders

Invitation to treat

Offer of Contract A

Submission of Bids

Offer (mistake is allowable here)

Acceptance of Contract A

Choice of Bids

Acceptance

Acceptance of contract B (cannot have mistake as bound by contract A)

SCC wants more rules governing tendering process

R. v. Ron Engineering & Construction (Eastern) LTD. - SCC 1981 (bilateral contract – obligations and promises on both sides – tenderer’s side)

F

Government call for tender. Terms: bid in by deadline, submit with cheque for $150,000, once submit cannot revoke offer. Once closed, Govt has 7 days to choose. If breach in any way, forfeit the deposit. Initial call must be an invitation to treat because lacking information and certainty of terms necessary for an offer.

Ron Engineering Ltd (the “Contractor”) Plaintiff/Respondent (SCC)

Government of Ontario (the “Owner”) Defendant/Appellant (SCC)

Ron submitted a tender for $2,748,000 in response to the owners call. Ron provided a deposit in the amount of $150,000. If Ron is selected but chooses not to carry out the project, then Ontario/owner gets to keep the deposit. Ron realized that they genuinely forgot to include a $750,000 expense. They immediately informed the government of its error and initially asked to remove their tender. Government refused. Ron then says this tender is incapable of being accepted.

When Ron Engineering wouldn’t do the job at the lower price, so we do not want to do it. Ontario tried to take their deposit, in accordance with the rules of the tender process.

· Ontario treats it as the Ron got the contract and now does not want to do it.

· Ron says that they are not refusing the contract, they want to withdraw the wrong bid.

Trial judge said Ron Engineering forfeits their deposit.

Court of Appeal said no – sided with Ron Engineering, saying that you can’t accept an offer made by mistake. The offer is incapable of being accepted.

I

Is there a contract between the parties? Can Ron get its deposit back?

A

Looking at the new tendering framework:

· On this view, Ron Engineering has accepted an offer, rather than made one. bound by Contract A. (unilateral)

· The mistake issue doesn’t arise, because it would only affect Contract B if/when selected for the job.

· Ron does not have to enter a contract B (bilateral), but they have to follow the terms in the contract A, which says by not wanting the contract B you have to forfeit the deposit

Estey J: “I share the view expressed by the Court of Appeal that integrity of the bidding system must be protected where under the law of contracts it is possible to do so.” (CB 563) There has to be fairness in the tendering process, both parties need to conduct their business in the fair process.

McCamus: “The consequence of [the old framework]… was that there was no contract of any kind relating to the tendering process.” p45

· So – no rights if the owner failed to follow rules or treat all tenderers fairly.

‘Integrity’ of the bidding system?

→ yes, predictability matters. But this new framework is not the best solution to the problem. Ppl start working around this rule.

Reliance is one of the main background values in contract law. We enforce contracts in part because we are worried about unfairness to parties who have detrimentally relied on the promise of another.

→ it does not look unilateral, there are obligations and promises on both sides, which makes it bilateral. Even though, an act (submission of the bid) on the promise seems unilateral, but that act has a promise attached to it.

Mistake

Mistake as to terms occurs when the mistake isn’t about the subject matter, but about what the other party is promising about the subject matter.

Mistake here is not apparent on the face of the documents. There are some circumstances where a tender cannot be accepted: where it does not even constitute a tender. Then Contract A cannot even come into being. (example: one page missing). But that’s not the case here. Here, contract A comes into being, and at that point the rights have ‘crystallized’ Here, no mistake because there is no mistake in Contract A. They intended to submit that tender, including that price. ⇒ there is some place for mistake, but only where tender places is not meeting the requirements.

H

Contractor (Ron Engineering) cannot get his deposit back SCC rewrote the law in this case

R

In a tendering context, there is an underlying contract which creates an obligation to enter Contract B if chosen.

Mistake in Relation to the Law of TendersMistake

· The law of mistake deals with the circumstances under which a contracting party can avoid liability because they entered the contract on the basis of a mistake (false information).

· The worry is that certain mistakes make it impossible for there to be a true meeting of the minds. Therefore there is no agreement and no contract.

· Types of mistakes:

1. Both parties mistakenly believe they are in agreement. But they have different mistaken views about what the agreement contains.

· each party made a separate mistake

2. Unilateral mistakes as to terms: Only one party is mistaken and the other knows about it. (Distinguish from unilateral mistakes about external facts)

· mistake about the terms of the contract

3. Agreements made under mistaken assumptions: also called common mistake. Parties have reached agreement but both have made the same mistake about a central matter.

· the existence of the product (ex. vase). But vase did not exist.

4. Mistakes about the identity of a contracting party

· fraud

5. Documents mistakenly signed: non est factum (in certain special circumstances)

6. [Mistakes in reducing the terms to writing: can be rectified] - drafting error - this can be easily rectified - both parties agreed on terms but mistakenly wrote wrong.

Smith v Hughes LR 6 QB 597

· Plaintiff seller wanted to sell oats to defendant buyer.P had new oats; D wanted only old oats.

· If D thought the oats were old and P thought the oats were new, that would be a mistake of fact (belief about the fact)

· But in this case, D thought P was promising the oats were old. This means the mistake goes to terms and the contract can be set aside. There is no meeting of the minds.

Belle River Community Arena Inc. v. W.J.C. Kaufmann Co. (Pre Ron Eng. Tender Case)

· Similar facts: a mistake was discovered after the bid had been submitted.

· Court held that “an offeree cannot accept an offer which he knows has been made by mistake and which affects a fundamental term of the contract” (CB 560) mistake is about what is being promised (not about the fact). The mistaken promise was not intended to be fulfilled.

· tender placement is an offer here. This meant the tender could not be accepted.

· This was the framework Ron Engineering relied on to argue that the tender could not be accepted.

Implied Terms

Canadian Pacific Hotels Ltd. v. Bank of Montreal tells us that we can imply terms in three situations:

1. Based on custom or usage (within the industry)

2. As the legal incidents of a particular class or kind of contract (highly regulated industries – ex. insurance)

3. Based on the presumed intentions of the parties, where necessary to give business efficacy to the contract, or as meets the officious bystander test.

Officious Bystander test:

· Imagine the parties were interrupted by an officious bystander who asked them ‘Excuse me, but did you mean to include this term?’

· Would the parties would respond ‘Of course!’?

· If that test is met, the term may be implied.

· It must be so obvious to both parties that they would respond in this way.

· It is the intentions of the actual parties, not reasonable parties.

Business Efficacy Test – the whole contract would not perform the function of it. So term is needed for the contract to make sense. Sending ice-cream (it is assumed it is refrigerated)

MJB Enterprises Ltd v Defence Construction (1951) Ltd (bilateral contract – each party has obligation – owner’s side)

F

· MJB Enterprises Ltd: Appellant / Tenderer / Contractor

· Defense Construction Ltd: Respondent / Invited Tenders / Owner

· Sorochan Enterprises: Other Tenderer / Not a party to the suit but an important player

· MJB expected as part of legal obligation for DF to accept the lowest tender. DF says that the privilege clause precludes (prevent) the finding of such obligation.

MJB submitted a tender in the context of a privilege clause which stated: “the lowest or any tender shall not necessarily be accepted.” D they can withdraw the whole project if did not like any tenders.

· Defense awarded the tender to the lowest bid by Sorochan BUT Sorochan’s bid was a non-conforming bid (it was different than everyone else’s bid, they said it would be either one price or another but this is against the rules). MJB’s bid was the lowest conforming bid.

· The documents specified that the bidder needed to decide in advance which kind of material would be used. They could not provide ‘contingent prices’ (do not give comparative prices for each material). The bidders need to decide which material they going to use. Use expensive - higher bid. Use less expensive material - incur extra cost if decide to use a better material.

· Sorochan disregarded this requirement and submitted a bid using one kind of material, with a note that if a different material were needed, the price would change.

I

Can Defense Construction rely on its privilege clause as a defence to MJB’s action?

Did Contract A arise, and if so, what obligations does it impose on the Owner?

defense construction could give the bid anyone or did contract A imposes obligation on defense to accept the lowest bid.

A

· Privilege is meant to give flexibility to the owner - it allows you to tender with someone who is more reputable even though the price might be higher. But here, they are accepting a non-confirming bid.

· MJB basically confirms the supreme court’s approach in Ron Engineering

· Contract A can come into being and can impose obligations on both parties.

· does not have to accept the lowest bid, but it is implied that they have accept a conforming bid (Officious Bystander Test).

· They construe the invitation to tender as “an offer to consider a tender if that tender is valid.”

· The discretion the PC gives the owner is just a discretion to take a more nuanced view of costs, timing, etc. It is not a discretion to accept a non-compliant bid. So, the two terms can be made compatible.

H

Sorochan’s bid was non-compliant. Therefore the implied obligation to accept only compliant bids is breached. We know they would have awarded the contract to someone. On the balance of probabilities, they would have awarded it to MJB. So: $387,121.27 damages.

R

There is an implied term in the contract of fair dealings. You cannot accept a non-compliant bid as it is unfair.

Communication of Offer

“To be effective, an offer must be communicated to the offeree. This much, at least, seems to follow from the basic requirement that there must be a consensus ad idem between the parties.”

· Meeting of the minds principle

· Motive does not matter

· R v Clarke: Offeree must be aware of the offer at time of acceptance. Do not need to motivated by desire to accept offer. He turned a prisoner to clear his name (presumption is rebutted), not to get a reward (presumed) – No reward.

· We can presume in most cases that if you’ve seen the ad you acted in reliance on it. But that presumption can be rebutted

Acceptance

An acceptance is a final and unqualified expression of assent to the terms of an offer.” (Treitel, p17)

· this is an objective test; trying to find what parties intended through objective test by looking at their actions

· Basic Principles:

· Unqualified

· If a response attempts to vary the terms of the offer, it won’t be an acceptance. (I will accept the price IF you give me 10% discount - qualified offer)

· It will then be a counter-offer.

· Counter-offer kills the original offer (Hyde v Wrench)

· Mirror image rule- the acceptance must match the offer

Livingstone v Evans (1925 Alberta S.C.) ⇒ important/foundation case

F

Evans – D & selling the land

Livingstone – P & wants to buy the land

Defendant (Evans) offered to sell the land to Plaintiff (Livingstone) for $1800

Plaintiff responded: “Send lowest cash price. Will give $1600 cash. Wire.” (counter offer)

Defendant responded: “Cannot reduce price.”

Plaintiff purported to accept the original offer of $1800.

I

Is this acceptance effective? Is there a contract?

Sub-questions:

1. Is the Plaintiff’s response to the offer a request for information or a counter-offer?

2. Is the Defendant’s response to the Plaintiff a revival of the first offer or an implicit rejection?

A

His statement that he could not reduce that price strikes me as having but one meaning, namely, that he was still standing by it and, therefore, still open to accept it renewal of the offer (Objective test language + actions)

H

Therefore the acceptance is valid.

They order specific performance: the land must be transferred to the plaintiff, Livingstone.

R

A counter-offer kills the original offer per Hyde v Wrench, cited with approval in Livingstone v Evans.

An offeror can revive the rejected offer, including by implication, such that it can be accepted. See Livingstone v Evans.

A simple request for information is not a rejection. See Livingstone v Evans.

· it is subject to interpretation: language matter → ex. I am wondering, just curious. etc.

Battle of the Forms (* Exam Start with common law analysis (mirror image) then you can examine Dennings view.

It is common for parties to enter agreements using standard form contracts. Parties may have different forms of this sort setting out different terms.

· Classic View: a reply constituted by a form putting forward different terms and conditions from those in the offer would be a counter-offer, not an acceptance.

· This may mean that no consensus is ever reached if only forms have been exchanged.

· it is counter offer followed by another counter offer - this is not ideal view

· we cannot just say that there is no contract, to address this last shot rule was developed

· Conclusion that no contract has been formed is problematic if the parties regard themselves as having been bound at the time.

Denning’s Three Positions (go through every)

· Last Shot Rule/ Performance Doctrine: Party prevails who puts forth the latest terms; if no objection by the other side, those latest terms prevail. If the last form is followed by conduct by the other side which amounts to acceptance, we can argue that there is a contract the terms of which are contained on that last form.

· When there has been delivery, the last shot rule can produce arbitrary results. (i.e. it tends to favour the seller as the deliverer of goods. Is there any reason for this?) favouring the last shot is arbitrary.

· It seems to favour certainty of result but provides mechanical and formalistic decisions just for the sake of certainty.

· First blow: Party prevails who offers terms first unless the other side draws material changes in their terms to the attention of that first party.

· worry: what counts as material change.

· Shots fired on both sides: both parties should put forward what they want to happen. “The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If the differences are irreconcilable, so that they are mutually contradictory, then the conflicting terms may have to be scrapped and replaced by a reasonable implication.

· Denning does not make it clear how his ”shots fired on both sides” differs from “last shot fired”

· sometimes choosing last shot, sometimes first shot ⇒ different cases demand different approaches (contextual)

· in Canada, we see “neither simple acceptance nor rejection of Lord Denning’s contextual approach… Canadian courts… engage in relatively minute examination of the exchanges and conduct of the parties on the basis of the traditional offer and acceptance approach.

· what is the most reasonable thing for the court to impose based on their interactions and the industry standard etc.

· Look for acceptance by conduct.

Butler Machine Tool Co. v Ex-Cell-O Corp. (1979 C.A.) –( battle of forms)

F

Butler: Seller and Plaintiff & Machine tool maker - specialized machine maker

Ex-Cell-O Corp: Purchaser and Defendant

No date: inquiry by buyers (Ex Cell )

May 23, 1969: Seller’s response. Quotes the price for a tool at £75,535, with delivery in 10 months. On back of form was a:

· trumping clause: their terms are going to prevail over other company’s terms

· price variation clause: price during delivery can be applied instead of the price agreed in during purchase

Right after: Buyers reply by placing a purchase order. Their document:

· Stipulates that the order is subject to terms and conditions different from the sellers’ terms.

· Has no price variation clause

· Includes a tear-off order form inviting sellers to accept the order “on the terms and conditions stated thereon.” (agree on our terms instead of your terms)

June 5: Sellers return the completed slip with a letter stating that the buyer’s order was being entered in accordance with seller’s quotation of May 23. Aka referred back to their original terms

Conflict: When the machine is delivered, Butler (the seller and plaintiff) says it is owed more money (£2892) via the price escalation clause. & Ex-Cell O Corp. (the purchaser and defendant) says that no further money is owed because the price escalation clause is NOT part of their contract of purchase and sale.

I

Who’s contract takes primacy?

A

1. Buyers’ inquiry → Invitation to treat

2. Seller’s quotation of price (w/ price variation) → Offer containing the terms on the back of the form.

3. Buyers’ response purchase order (w/o price variation and w/ tear-off form) → Varies the terms too much to count as an acceptance; therefore a counter offer.

4. Sellers return of the tear-off form (w/ letter restating seller’s original terms) → No contract completed because terms are again varied? Or: last shot: acceptance by seller of the buyers’ offer, on their terms? The fact that Seller returned tear off form and started performing without receiving acknowledgement -- therefore, last shot was with the buyer bc seller did not care for confirmation of the terms and started making the machine.

image rule vs. last shot

· image rule is unsatisfactory result bc they both intended to sell/buy machine

· court ruled in favour for last shot rule.

In Butler, Lord Denning laid out three positions.

· Last shot fired (traditional view)

· First Blow

· Shots fired on both sides

H

Appeal is allowed and buyers won

R

Various means of resolving battle of forms. Point in time there’s an agreement. – Denning’s Three Approaches.

Tywood Industries LTD. v St. Anne-Nackawic Pulp & Paper Co. LTD. (1979 Ontario H.C.) (Holistic approach/no party surprised) Battle of the Forms

F

Tywood (the seller and plaintiff) is suing for contract price.

St. Anne (the purchaser and defendant) says the contract provides for arbitration as a means of dispute resolution and that the court action is premature.

September 19, 1977: Defendant sends out invitation to tender:

· no mention of arbitration

September 26, 1977: Plaintiff responds with a quote:


· has a trumping clause

November 7, 1977: Plaintiff sends a revised proposal:


· has a trumping clause

January 6, 1978 & July 3, 1978: Defendant sends in purchase orders

· Inserts an arbitration clause

· Asks P to sign form and return it

· P does not sign the form and return it

P delivers goods. Now Tywood is suing for the whole cost bc St Anne stopped paying for the goods.

I

Is the arbitration clause part of the contract?

A

[T]he conduct of both parties seems to me to indicate that neither party considered any terms other than those found on the face of the documents (i.e., the specifications and the price) important. the core of the agreement - does not seem that arbitration was big part of the agreement that was even considered. It does not look like the plaintiff was aware of the arbitration clause

What approach? Shots fired on both sides?

1. last shot fired does not represent their agreement, judges are inclined to take a look at Shots on both sides and first blow.

2. Judges put emphasize on that the arbitration clause was not pointed out to the plaintiff → so first blow reasoning - it was not part of the contract for majority of negotiations, only slipped in the end

3. Shots fired on both sides: If we were considering the contact as whole, it does not look like ST Anne placed importance on arbitration clause (it was never part of it)-- shot fired on both sides. Arbitration clause → this shot does not get in at all - it does not seem to count. So to interpret this contract fairly and wholly, the best way it to eliminate arbitration clause.

While making a judgement, the court should look at the points of contract that the parties agreed on and that were discussed primarily as those were considered as very important to both parties. If there is nothing else indicates that there might be arbitration clause - like industry standard, a mention, previous interaction re arbitration between parties - the court might put less emphasis on the slipped in clause.

H

Defendant’s application for stay dismissed (arbitration clause is not part of the contract).

R

If there is a discrepancy look at the essence of the contract. You cannot sneak terms into contracts without proper notification. Look to the actual conduct of business (do people really read the terms). While making a judgement, the court should look at the points of contract that the parties agreed on and that were discussed primarily as those were considered as very important to both parties. If there is nothing else indicates that there might be arbitration clause - like industry standard, a mention, previous interaction re arbitration between parties - the court might put less emphasis on the slipped in clause.

Court is moving away from classic to reasonable contracting.

Tekdata v Amphenol (UK case - persuasive)

· Traditional offer and acceptance (offer & counter offer approach) rules will apply. Denning’s approach is a rare exception.

· this case is not decisive, but can be used to persuade a court

· “Without relying on Lord Denning’s better way, the English courts have been sensitive to the actual communications between the parties on a case-by-case basis and have relied on a traditional offer and acceptance analysis to find that sometimes a contract is made on the basis of the first form exchanged, sometimes on basis of the last form exchanged and sometimes on the basis of an exchange of forms and conduct by the parties or on the basis of a previous course of dealing.” Ogilvie, ‘Surely the Next to Last Shot in the Battle of the Forms’ flexible approach

Boilerplate Contracts

· Recall that a central justification of contract is that it is the manifestation of the will of both parties; both sides have freely consented to the terms.

· Boilerplate or shrink-wrap contracts seem to undermine this ideal.

· Margaret Radin suggests that this can pose a problem for the rule of law: “we risk losing our claim to being a society observant of the rule of law when our courts permit too free a rein to boilerplate.” (Boilerplate, p 15)

· On the other hand, boilerplate does lead to a number of benefits for smooth commercial practice (no neeed to negotiate contracts for every individual).

· Radin also suggests a number of reasons why we fail to read boilerplate when agreeing to a contract:

· We wouldn't understand the terms anyway, so it's not worth it.

· We need the product and there is only one supplier, so we are stuck with the terms they choose.

· We don't even know we are subject to the terms.

· We trust the company not to insert anything problematic.

· We assume if it's too problematic it will be unenforceable.

· We think the company has the power to do this and we have no power to resist.

· We don't think we will need to exercise these rights anyway.

ProCD v Matthew Zeidenberg and Silken Mountain Web Services - 1996 US (offeror is the master of her offer)

F

Zeidenberg bought a cheaper consumer (not more expensive commercial) disk with ProCD data and publish it online for consumers to access it at a lower price (contrary to the license). Every package stated that the software came with restrictions on use as contained in an enclosed license. (Shrinkwrap license) Later, Zeidenberg purchased consumer updates too. ProCD is looking for an injunction against further data spread that exceeds the rights specified in the licenses. District court that the licenses were ineffectual because they are not placed on the outside of the packages - the buyer cannot agree to terms that are secret at the time of purchase.

I

Is Zeidenberg bound by terms of the license when the terms were not known at the time of contract? Are the license presented to Z too late in the contract? When does the offer takes place and when the acceptance takes place?

R

Shrink-wrap license - some vendors have written licenses on top of plastic that covers retail software packages - the licenses become effective as soon as the customer tears the wrapping from the package.

· Zeinberg says that putting the product on the shelf = offer

· Customer purchasing it = acceptance

· ⇒ one cannot agree to hidden terms

BUT

ProCD's view (and court's view)

· Vendor is the master of the offer so may stipulate what constitutes acceptance

· so paying the asking price is not the acceptance. It is not at the moment of payment

· Acceptance occurs by the buyer using the software after having an opportunity to read the license

· Therefore contract formed when Z did not return the package

· To use the software/product that is subject to license is to accept the terms.

· This way any buyer that is subject to unacceptable terms can prevent formation of the contract by returning the package

It looks like there are 2 contracts operating. One is with Best Buy (the acceptance did take at the cash reg). Best Buy is not involved with the contract between the purchaser of the software and the provider. So here we are talking about the second contract.

We see a number of threads in the decision (pay attention on the kinds of arguments that the court uses to argue against black and white legal argument that is used by Z):

· Economic arguments

ProCD ‘needs’ to be able to charge different customers differently – or else the prices would go up and this would harm some subset of consumers

· Practical arguments

You can’t really expect people to put the whole terms of the contract on the outside of the box. It’s common to have the exchange of money precede the communication of detailed terms. Insurance, airline and concert tickets, etc.

· Fairness arguments

There seems to be an argument that Zeidenberg was given a fair chance to return the software if he didn’t want to agree to the terms.

· ‘Legal’ arguments

Vendor may specify limits on what constitutes acceptance. i.e.: offeror is the master of his or her offer.

H

ProCD wins – they get their injunction

R

· Notice of terms existence is sufficient: shrink-wrap contracts are enforceable.

· offeror is the master of her offer

· To use the software/product that is subject to license is to accept the terms.

· This way any buyer that is subject to unacceptable terms can prevent formation of the contract by returning the package

Revocation

· Until an offer has been accepted, it is open to the offeror to withdraw or revoke the offer, thereby precluding subsequent acceptance of the offer by the offeree.

Flagpole Problem

· Since an offer can be withdrawn, this creates the possibility of detrimental reliance by the offeree.

· An offer in the form “I will pay you $500 if you climb to the top of the flagpole” can, in theory at least, be withdrawn at any point during the offeree’s attempt to climb the pole. Call this the “flagpole problem.” up to until the performance is done, the offer can be revoked.

Contingent agreement:

· Some contracts can be contingent on other things happening

· ex. I promise to buy your house subject to inspection.

· 2 types: conditions precedent and conditions subsequent

· Conditions Precedent: things before agreement in order for performance to happen

· Conditions Subsequent: things that happen afterwards that stop agreement

· Within/Without Control: conditions under our control have more obligations to happen

Example #1: I promise to sell you my car if my uncle dies. You agree subject to financing.

· Binding from the start (not binding to performance, but to steps to performance)

· Bind “I” to hold onto car

· You bound to take bona fide steps to get financing

Contingent agreement: both subject to implied subsidiary obligations to make best efforts to bring about the condition

Example #2: If you get an A, I promise to transfer you my car.

· Not bound to do anything

· I am bound to give you my car if you complete the act

· I might be bound to hold onto my car and give you a chance to try to get the A before revoking, if the courts find an implied subsidiary obligation.

· It gives the offeree the choice to pursue or not.

Dawson v Helicopter Exploration - 1955 SCC (acceptance by performance & contingent agreement)

F

· Dawson (Naval officer) previously discovered a mineral deposit, filed a claim on it which lapsed. Helicopter/Springer engaged Dawson to investigate the mineral deposit.

· Jan 1951 - Springer’s proposal to finance Dawson’s staking claims

· Jan 1951 - Dawson - agrees to show the site

· Feb 1951 - Dawson is relocated bc of military. Asking to make concrete arrangements with S

· March 1951 - S says It depends if I got a pilot. If I find pilot → “I hereby agree that, if you take us to the showings and we think they warrant staking, that we will stake the claims and give you a 10% non-assesable interest.”

· April 1951 - Dawson “If you inform me if and when you obtain the pilot, I will take a leave”

· June 7, 1951 - S says bad weather, we should not go. Make other arrangements

· August Helicopter investigates Dawson’s showings without him. Dawson finds out. 1953 springer contracts a schedule to develop the claims.

· Nov. 1953 - Dawson brought an action without responding to the last S letter

if there is a contract - Springer would be liable for breach of contract by backing out of it (We have to see if March 6 communication was a contract - unilateral)

Unilateral: Did Springer needed to try to find a pilot? Did he try hard enough? Dawson needs to come (act) for us to go for exploration. if it is a unilateral contract: springer is not bound to see the deposits with Dawson.

· Revocation resulting in Flagpole problem – unfair

· It’s just like the flagpole offer: If Dawson comes and shows them the minerals, then they will be bound to stake them and pay him his cut.

· But until he does that, Helicopter Exploration has no obligations. And Dawson never did that. The offer was never accepted by the necessary performance, so they argue that they have no obligations.

if there is no contract - Springer can pull out.

I

Is the contract unilateral or bilateral? Why does this matter? Because of the revocation problem

A

Springer/Helicopter Exploration argued that this is an offer of a unilateral contract. On their view, they were taking on no obligations: only making an offer that Dawson could accept by coming and locating the showings.

Courts have ‘balked’ at the idea that unilateral contracts ‘can be revoked up to the last moment before complete performance.’ (CB 69)

So we try to interpret it as involving promises on both sides, if reasonably possible. The contract is instinct with obligation.

Dawson was bound to remain ready during a reasonable time to obtain a leave of absence. (CB 69)

And Springer has implicitly agreed not to prevent performance.

There is a bilateral contract.

· Rather, Dawson and Springer both had obligations.

· Springer made an implied promise to do something. Springer had control of getting a helicopter, so it is pretty unfair to demand from Dawson to come and show the land without a helicopter being available. There is an implicit promise for the company to provide a helicopter.

· It was the clear implication that Springer, controlling the means of making the trip, should fix the time and should notify Dawson accordingly.”

· “Springer impliedly agreed that the company would not, by its own act, prevent the complementary performance by Dawson.

· Estey also notes that if we read their correspondence, it is reasonable to interpret it as containing a contract. The parties seem to be under the impression that they have an agreement.

· If no pilot could be obtained, the contract would be at an end (CB p 70) They call this a condition subsequent. Bring liability to an end.

At that point they had a duty to take Dawson in, and not doing so was a breach.

H

Appeal allowed. Dawson succeeds. The court did not accept the unilateral construction of the contract

R

Principles:

1. Courts will endeavour to regard contracts as bilateral rather than unilateral to protect offeree pending complete performance. Even though there may not be an explicit promise, the whole writing may be instinct with an obligation

2. Courts will look for implied subsidiary obligations

Find obligations in various contexts: in unilateral contracts to make them more difficult to revoke; in contingent agreements to ensure parties try to bring about the condition.

· condition subsequent: the fulfillment of a condition or the occurrence of an event shall discharge either one or both parties from further liabilities under the contract.

Errington: can find obligations on unilateral contracts to make more difficult to revoke

Note: The dissent, by contrast – not in the CB extract – finds no contract because they were just negotiating without actually agreeing on contract - too vague and too inconcrete for the communication to be considered to be a contract

Communication Of Acceptance

General rule (per Treitel): acceptance has no effect (ie: is not complete) until it is communicated to the offeror. Purpose of the communication rule:

· To protect offeror – so that offeror knows that they are in a contract

· To protect offeree – so that offeree does not have to take the trouble of rejecting every offer they receive.

Exceptions to General Rule:

1. Offeror waiver of the communication requirement in the context of a unilateral contract

a. Acceptance = performance aka silence (Carbolic smoke ball)

2. Offeror waiver of the communication requirement in the context of a bilateral contract: is silence acceptance?

Felthouse v Bindley - 1862 NS

F

Paul Felthouse: Plaintiff, uncle, wanted to purchase the horse

John Felthouse: Nephew, had the horse for sale

Bindley: Defendant, auctioneer, mistakenly sold the horse

January 2 communication from uncle to nephew: “If I hear no more about him, I consider the horse mine at 30 pounds and 15 shillings.”

No reply from nephew.

February 25: nephew tells auctioneer not to sell the horse as it had already been sold [to the uncle]. The auctioneer forgot these instructions and did sell the horse at auction to someone else.

February 27: nephew writes the uncle that he had informed the auctioneer “That horse (meaning the one I sold to you) is sold.” i.e. he considered it sold to the uncle and was informing the auctioneer not to sell it. Auctioneer also writes to uncle, admitting the error.

The uncle brought an action against the auctioneer for conversion (tort of taking someone else’s chattel and dealing with it in a way inconsistent with the owner’s rights).

Defendant says that the uncle can’t sue him for this because the uncle didn’t have property rights in the horse at the time the defendant made the sale. There is no contract – because the Nephew did not send his acceptance of the offer.

I

Is there acceptance via silence? Under these circumstances, is there acceptance?

R

There was no contract because you can’t make the other party take action to not accept. Felthouse argued there was a meeting of the minds, the uncle and nephew were on the same page. But there was no communication of the nephew’s intention, so no acceptance.

The rule is : communicate acceptance. Even though this rule was meant to capture the intention. The rule in this case does not seem to capture the intention. But now the rules tramps the intention if there is not communicated acceptance.

Rule of law: rules set out clear framework, so we have some predictability as to what our legal duties and consequences are.

Acceptance by action (nephew saying to auctioneer not to sell the horse) here does not count here because the action was not directed to towards the uncle. Acceptance by action or oral must be directed towards to the offerror.

H

No contract. Bindley not liable.

R

Acceptance via silence cannot occur – no exception to the general rule.

Saint John Tug Boat Co v Irving Refinery LTD - 1964 SCC (silence as acceptance – exception to the general rule)

Facts

Irving needed more tug boats. They lease for a flat rate each day from June to July as per verbal arrangement that is not contested here. They extent the contract twice til end of Aug. After Aug,The contract was not officially extended but the boats remained there until Feb. Saint John wants to be paid. Respondent denies boats “stand by services ” after Aug becuase there were no formal extension.

Aug. 1961: defendant corporation is headed by a new president. No formal extension of contract period is approved.

Mid-August 1961 to late Feb. 1962: plaintiff supplies the service; invoices the defendant; these invoices were never paid.

Issue

Can conduct without verbal or written acceptance count as valid legal acceptance?

Reasoning

The test is again an objective one: the law attributes to a person the intention that her conduct bears when reasonably construed. Not what is actually in her mind.

· If A allows B to work for A under circumstances when no reasonable person would suppose B intended to work for free, A will be liable to pay. Doing the work is the offer, acquiescence in its being done is the acceptance.

· there are some certain expectations in commercial relationships

· Irwing had time to not agree with the renewing of the contract

Irving requested the tug boats and had/took the benefit of having them stand-by. It is reasonable (objective test - Irving knew that Plaintiff was expecting payment for keeping his boat on stand by) to draw the conclusion based on Irving’s conduct that they were accepting the continuing special services on the terms of March’s letters. They must pay the stand-by fee.

1. If the offeree’s silence reasonably indicates acceptance to the offeror, we can find acceptance.

· it is not just silence, the company used a tagboat. Silence + Action - there is more certainty. + Circumstances: Prior commercial relationship & Informal communication history & continued use of tagboats.

· this is an exception to the general rule that acceptance needs to be communicated. But this has very limited use

. However, note that simply failing to disown responsibility to pay isn’t enough. “The circumstances must be such as to give rise to an inference that the alleged acceptor has consented to the work being done on the terms upon which it was offered before a binding contract will be implied.” CB 79

2.“Silence may be so deceptive that it may become necessary for one who receives beneficial services to speak in order to escape the inference of a promise to pay for them…[T]he ordinary implication is that the services are to be paid for at their fair value, or at the offered price, if that is known to the offeree before he accepts them.”

Holding

Irving is liable. Has to pay for the stand by services

Ratio

St. John Tugboat tells us about an exception to the general rule about communication of acceptance. If the offerees silence reasonably indicates acceptance to the offeror, we can find acceptance. The circumstance must be considered. Conditions that allow silence to constitute acceptance: 1) offeree receives benefit of service AND 2) Offeree has reasonable opportunity to reject AND 3) Offeree knows (or should have known) the provider of service expects to be paid.

it is not just silence, the company used a tagboat. Silence + Action - there is more certainty. + Circumstances: Prior commercial relationship & Informal communication history & continued use of tagboats. Silence with something else, action/context, can be construed as acceptance (objective test).

O'Neill v Kings County Construction, 2019 PECA 13 (modern tag boat case)

F

Parties entered into an arrangement: plaintiffs develop defendant's land for commercial blueberry production.

The plaintiffs would incur the expenses of developing the land, and defendant would then pay back when farm began to yield blueberries.

Some of these harvests occurred, and some payments were made, but then defendant sells the property. Now plaintiff can’t get back its expenses.

plaintiffs failed to establish verbal contract because key terms were unclear. So: went the route of implied contract instead.

I

Can conduct without verbal or written acceptance count as valid legal acceptance?

A

St. John Tugboat is still good law (para 6). the scope for finding an implied contract is limited

Before a binding contract will be implied, the circumstances must be such to give rise to an inference that the alleged acceptor has consented to the work being done on the terms upon which it was offered.The test from tugboat applied: If someone knows the thing is done for their benefit with an expectation of payment, then accepting the act and taking its benefit will implicitly count as requesting that it be done, and that will be seen as a promise to pay. Also, circumstances: this is a very clear commercial relationship; no verbal proof as it is not clear enough to amount to an actual contract- action of developing the land counts as acceptance.

H

Held ONeil who developed the land.

R

Conditions that allow silence to constitute acceptance: 1) offeree receives benefit of service AND 2) Offeree has reasonable opportunity to reject AND 3) Offeree knows (or should have known) the provider of service expects to be paid. Silence with something else, action/context, can be construed as acceptance (objective test).

Eliason v Henshaw - 1819 US - what kind of things can count as acceptance – offeror is the master of his own offer – change of a term – no acceptance

F

February 10, 1813: Buyer Henshaw (defendant) contacted sellers - Eliason (plaintiff) by mail, offering to purchase flour from them. Letter stipulated that acceptance was to be made on the ‘return wagon’ to Harper’s Ferry (ie: the next day).

February 14, 1813: Sellers received the letter.

February 15, 1813: Sellers wrote a letter purporting to accept the offer but sent acceptance to Georgetown by mail on February 19th instead of by return wagon to Harper’s Ferry. The buyer did not follow the terms of acceptance.

February 25: Letter from buyer to seller, acknowledging seller’s letter of February 15 and adding: “Not having heard from you before, had quite given over the expectation of getting your flour, more particularly as we requested an answer by return of wagon the next day, and as we did not get it, had bought all we wanted.”

Seller delivers flour anyway and the buyers refused delivery, alleging no contract.

I

Can an action that does not comply with the terms of the offer constitute a valid acceptance?

R

The wagon was not sent back as the letter specified, therefore there was not acceptance.

Any qualification of, or departure from, those terms, invalidates the offer/acceptance, unless the same be agreed to by the person who made it.

Acceptance has to be completed according to the terms of the offer. It depends on what is seen as ‘essential’ to the offer. Here, they found that the location was essential, but the method was not, as long as the method was comparable.

H

Henshaw is not liable. No acceptance! - no contract

R

The offeror is the master of his/her own offer. Acceptance must be complaint with any mandatory method of acceptance specified. Any changes to the offer invalidate it unless both parties agree to the changes. The acceptance must be clear. There are mandatory elements that are essential for acceptance and for it to be valid. Acceptance has to be completed according to the terms of the offer. There is a little bit of indication that you can obey close enough to fulfill the terms, but it is at your own risk and you can argue that the you performed the term in an equivalent manner

Mailed AcceptancePostal Acceptance Rule- There is good acceptance when the letter is delivered to the post office.

· This rule is about acceptance, does not apply to offers

· Applies if it is appropriate or contemplated for the offeree to communicate acceptance via mail

· It may be appropriate if the offer came by mail or offeree said mail is okay, or when the offeree is far away and post is the only method

· Waives the ordinary communication rule (acceptance must be communicated) and says acceptance is effective upon posting the letter, not upon receipt

· Acceptance must mirror offer unless specified otherwise

· Very criticized rule: Per Treitel: “The rule is in truth an arbitrary one, little better or worse than its competitors. When negotiations are conducted by post, one of the parties may be prejudiced if a posted acceptance is lost or delayed; for the offeree may believe that there is a contract and the offeror that there is none, and each may act in reliance on his belief. The posting rule favours the offeree….”

Household Fire & Carriage Accident Insurance Co v Grant (Postal Acceptance Rule created)

F

Grant: Defendant. Applied to buy shares in the plaintiff co, Household Fire.

Plaintiff: Household Fire & Carriage Accident Insurance co

30th September 1874: Grant applied for shares in Household Fire co., and stated that he had paid a £5 deposit, requested an allotment of 100 shares, and agreed to pay the remainder within 12 months of the date of allotment. offer

20th October 1874: Kendrick (agent for Household Fire) forwarded this application to Household Fire, who made out the letter of allotment, posted it to Grant, and added him to shareholder register. Acceptance?

The letter of allotment never reached Grant!

Grant didn’t pay the £5, but since HF&CA owed him £5, they credited his account for the payment.

July 1875 & Feb 1876: Dividends declared on the shares. (Grant’s account credited).

Household Fire goes into liquidation.

December 7th, 1877: liquidator applied for the balance of the purchase price of the shares from Grant. Grant declined to pay and is now being sued for the balance.

I

Even if defendant did not receive the letter of acceptance, is there are an acceptance of contract? Does posting count as communication?

A

Acceptance is a crucial aspect of contract law. But there must be communication.

“Postal Acceptance Rule” created and applies.

They cannot equally carry the burden of lost mail. But the parties agreed to take the risk of communicating through the post. Therefore when the acceptance letter is dropped off by Insurance, there was a contract formed. The offeror could have mailed and asked the offeree what’s happening. Offeror is the master of the offer, so they can draft the offer in the way that ensures their knowledge of acceptance. The offeror could say that the letter must actually reach them to constitute acceptance but that is not the case here.

H

Grant is liable.

R

“Postal Acceptance Rule” - the invention of the postal rule - the acceptance can be valid upon the mailing the letter as long as it was mailed as agreed by both parties who agreed that mail is the means of communication. K created where and when acceptance is sent, regardless of receipt (Offeror can specify otherwise).

D

· Communication of acceptance is necessary as a rule.

· It is inconsistent to take the view that you can bind someone via one method but not another. (If the same acceptance was sent by hand and not delivered, they would not be bound.) This would be an arbitrary view.

· Majority says not adopting the postal acceptance rule would be hard on the purported acceptor. But: this view is just as hard on the offeror.

· Majority’s view requires parsing words in arbitrary ways: “unless I hear from you by return of post” would require actually receiving the letter, but “let me know by return of post” would not!

· The end result we have to parse the words carefully, the language for terms must be very clear.

· People who are aware of the postal rule will contract around it, people who are not aware of it have to be bound by it - seems like not a good rule.

· Why should we see the post office as the agent for both parties? - it is not simply conduit - we are treating it as someone who can accept an offer on behalf of the party.

Option Contract

“Contract made for consideration to keep an offer open for a prescribed period….An option is an agreement which gives the optionee the power to accept an offer for a limited time…An option to purchase or to sell is not a contract to purchase or sell, as optionee has the right to accept or to reject the offer, in accordance with its terms, and is not bound.”

· I want to buy your house - but I need one months to consider -so I want buy an option of a month to think - holding the offer as is for specified amount of money - so the offer cannot be reverted.

· Optionee/Grantee is like an offeree. Optioner is like an offeror.

· “Grantee must comply strictly with the conditions stipulated for exercise.”

Does the Postal Acceptance Rule Apply?

1. The postal rule can be excluded by terms of the offer

a. Holwell – Postal Acceptance Rule exception - it was specified that acceptance must reach the offeror

2. The rule does not apply if it would produce an inconvenience and absurdity

a. A large scope to argue

· This is the rule about communication of acceptance, not the correct mode of acceptance

· Eliason case is about whether the method (mode) of acceptance properly confirmed to the terms of the offer and not when the acceptance took place.

· There are essentially 2 questions to be asked:

· 1. Is post an accepted method according to the terms of the offer (Eliason) – method of acceptance, whether the acceptance is effective)?

· 2. Does the postal acceptance rule apply such that communication is not necessary and offer is accepted when letter is mailed? (when (time) the acceptance is effective)

· Holwell – postal acceptance rule exception – send by post – but acceptance is when I receive it.

Holwell Securities Ltd. v Hughes (Postal Acceptance Rule exception)

F

Howell Securities Ltd: Plaintiff and Optionee. Held and option for the purchase of real estate. Posted a letter to exercise the Option, but it was never delivered.

Hughes: Defendant and Optioner. Says the Option has not been properly exercised. Option says it shall be exercisable “by notice in writing” crucial phrase in this case

I

Has the Option been exercised according to the terms of the Option? Did the acceptance take place?

A

No acceptance: the option explicitly called for ‘notice in writing’ (actually give a notice in person in a written form) and the plaintiffs failed to give that notice because of the letter being lost.

⇒ Here, they say that “the parties cannot have intended that the posting of a letter should constitute the exercise of the option.”

In Household Fire, the offer was made in circumstances which implied that Grant authorized the offeree to send acceptance by post. That is, the offeror contemplated that the post office would be the agent to receive the offer versus merely being a conduit to carry acceptance. In Howell, notice in writing to the Optioner was mandatory.

H

No contract. Said “notice in writing”, shows necessary to receive acceptance.

R

The Postal Acceptance Rule can be excluded if - Does the postal rule apply?

· The postal rule can be excluded by the terms of the offer. (E.g. by specifying that acceptance must ‘reach’ the offeror.) – like it is done here. Created its own terms.

· The rule does not apply if it would produce an inconvenience and absurdity.

Offeror is the master of the offer – acceptance terms were essential to the offer – must have complied.

Instantaneous Methods of CommunicationBrinkibon Ltd. v. Stahag Stahl und Stahlwarenhandelsgesellschaft mbH

F

Brinkibon – appellants & Buyers in UK

· Suing sellers for breach of contract to supply steel

· Seeking for a specific resolution available in UK – but only can be done if the contract is done in UK

Stahag: respondents & Sellers in Austria

· Sent the offer

· Acceptance was sent through telex from buyers in London to Vienna

I

When is the contract formed at the moment of being sent or received? Which kind of communication is a telex more like a letter (postal rule) or a call (standard communication rule)?

A

What is more alike should be treated the same.

1. Brinkibon argues that if acceptance by postal rule, acceptance is communicated upon “posting.” This means that the contract is made in England and buyers will get there order. If acceptance by instantaneous communication rule, acceptance occurs when received in Vienna. This means that the contract is made in Vienna and the buyer will NOT get their order.

2. Acceptance by conduct of opening credit line in Londo following the counter-offer received from Vienna – is not valid. The communication requires to be between the two parties, not between one party and their bank/agent.

H

Telex classified as instantaneous and thus contract in Vienna, Austria. Brinkibon loses. Stahag not liable.

R

· Instantaneous communication between principals, and, in accordance with the general communication rule, involves that the contract was made when and where the acceptance was received.

- The person who receives acceptance needs to put reasonable effort in checking inbox or voicemail

· Once the message has been received on the offeror’s telex, it is reasonable to treat is at delivered to the offeror because it is his responsibility to arrange for prompt handling of messages within his office.

· The rule does not apply (valid acceptance does not have be necessarily received, so just sending it counts) when:

1. Offeror did not receive communication of acceptance due to his own fault (ex. Not checking messages)

2. There is a defect in the communication for which offeror is held responsible.

Statutes:

· There is statutory provision that defines what counts as sending a document: ‘a document is sent when it enters an information system outside the sender’s control.’ Electronic Commerce Act, 2000, s 22(1)

· Deemed to be received ‘when it enters the addressee’s information system and is capable of being retrieved by the addressee.’ (ECA s22(3))

· Deemed to be sent from sender’s location of business and received at receiver’s business location (ECA s22(4))

But establishing rules of when and where something is sent an received does not settle whether the ordinary or postal rule applies –for that we still look to Brinkibon.

Pro Transport Inc. v ABB Inc., 2017 NBQB 241

· [60] It seems to be well-established in Ontario that when acceptance of a contract is transmitted electronically and instantaneously, the general rule applies and the contract is considered to be made in the jurisdiction where the acceptance is received ….

· [62] When dealing with instantaneous communication such as an email, I find that the general rule (acceptance is valid upon receipt) should apply unless there is a very good reason for doing otherwise. This promotes certainty by premising the determination of when a contract will be “made” in a given jurisdiction on the traditional rules of contract formation.

Rudder v Microsoft Corp

F

Rudder: Class action plaintiff (and law school grad)

Microsoft Corp (MSN): Defendant

Users of MSN were required to sign a member agreement electronically.

Plaintiff claims that the defendant breached MSN Service Agreements by, inter alia, taking unauthorized payments from subscribers.

Plaintiff sues in Ontario. (we focus on whether PL can sue in Ontario)

MSN seeks a permanent stay based on a click wrap agreement that such contracts are governed by law of Washington and all disputes arising out of the agreement would be heard in that state’s courts.

I

Is the forum selection clause part of the contract and therefore enforceable?

A

Contract was formed by clicking on the “I agree” icon.

electronic contracts can be signed electronically.

This acceptance applied to all the terms in the agreement, including those the offeree didn’t read (so, including the forum selection clause).

It wasn’t really fine print. It was all legible.

He could have just scrolled (it is like turning the page of the contract). Also, he’s a law graduate and computer savvy (not like an elderly person).

Finally, there is nothing so unusual or out of the ordinary about the form of this contract to justify not applying the ordinary signing rule to this context.

H

Microsoft wins. “the forum selection clause is dispositive” (it applies and settles the question - no sueing in ON, can sue in W but under W law).

R

Electronic contracts can be signed electronically. This acceptance applied to all the terms in the agreement, including those the offeree didn’t read (so, including the forum selection clause). McCamus says that the court here is simply “apply[ing] the normal rules of contract formation applicable to agreements in writing to an agreement created in an electronic format.” But there is also legislation to deal with contracts in electronic form that says the same thing: acceptance can occur through touching or clicking an icon (unless the parties agree otherwise).

· Mail – postal rule if an agent

· Telephone – traditional/instantaneous rule

· Telex - traditional/instantaneous rule

· Fax - traditional/instantaneous rule

· Email - traditional/instantaneous rule

Termination of OfferRevocation

· An offer is terminated by withdrawal/revocation. It can be revoked at any time before it is accepted.

· As another general rule, revocation has to be communicated to offeree (Byrne)

· Communication of revocation doesn’t have to come from the offeror (Dickinson)

Dickson v Dodds (indirect communication of revocation)

F

Dickinson wanted to purchase Dodd’s property. June 10 Dodd makes written offer to sell property to Dickinson. Offer to stay open till 9 am June 12. June 11 Dickinson hears from Berry that Dodd’s had been offering/agreeing to sell the property to Allan. Later that night Dickinson delivers written acceptance to Mrs. Burgess (Dodd’s mother in law). This acceptance in never received as she forgot to give Dodds the acceptance. Friday at 7 am: Berry finds Dodds at the railway station and hands him a duplicate of Dickinson’s acceptance. Dickinson finds Dodds and hands him the same acceptance. Dodds responds: “You are too late. I have sold the property.”

I

Was Dodd’s required to hold the offer open? Has Dodd’s offer been revoked prior to acceptance?

A

The law says that although it is said that the offer is to be left open until Friday morning at 9 that did not bind Dodd’s. This PROMISE was not backed up by any consideration. You would need an option contract (You purchase the consideration that makes them hold it open for a certain period) to ensure the offer is held op