Contracts CAN PDF

Contracts CAN Type Status Not started Class 2: Intro to Contracts Basic Contract Concepts A contract is a legally binding promise between parties (usually people or companies) Th...

Contracts CAN Type Status Not started Class 2: Intro to Contracts Basic Contract Concepts A contract is a legally binding promise between parties (usually people or companies) The main goal of contract law is to make sure everyone knows their legal obligations and can get help from courts if needed Four Essential Parts of a Contract: 1. Both parties must intend to make a legal agreement 2. One party must make an offer and the other must accept it 3. Both sides must give something of value (i.e., “consideration”) — this could be money, items, or promises 4. The terms must be clear enough to understand what everyone agreed to Types of Contracts: Can be spoke, written, or implied through actions Can be bilateral (both sides make promises) or unilateral (one side promises something if the other does an action) Things That Can Make a Contract Invalid: Lying to get someone to sign (misrepresentation) Honest mistakes by both parties Events that make it impossible to complete the contract Illegal agreements Contracts CAN 1  Threats or pressure (duress) Taking advantage of someone’s trust Very unfair deals where one side has too much power What Happens if Someone Breaks the Contract: Courts can: Order payment of money to make up for losses (most common) Force someone to do what they promised Order someone to stop doing something Cancel the contract completely Class 3: Offer and Acceptance I Intro: For a contract to exist, one party must make an offer and the other must accept it Must have consensus ad idem (meeting of the minds) i.e., both parties must have the same understanding of what they’re agreeing to Courts evaluate if something is an offer objectively rather than subjectively “objective theory of contract formation” (Smith v Hughes, 1871) But, it’s still relevant whether they objectively intended to enter contract Also that offeror reasonably understood offeree’s communications constitued acceptance (UBC Securities Canada Inc v Sands Brothers Canada Ltd, 2007 ONCA) Offer: Offer: “communication by the offeror to the offeree indicating a willingness to enter into an agreement with the offeree on certain terms” (McCamus) Contracts CAN 2  “I want to enter this agreement with you on these terms” Threshold issue: whether communications is actual offer or something less, like preliminary negotiations (or ‘invitations to treat’) Is it is offer, law is also concerned with whether it’s necessary to communicate offer to the offeree and whether communications must occur in a certain way Preliminary negotiations vs offers: “Invitation to treat” is an invitation to bargain or make an offer (Roback v UBC, 2007 BCSC) Actual offer indicates that the person making the communication is prepared to bound by the next communication of the offeree Harvey v Facey (1893, UKHL) P sent note to D saying “Will you sell us Bumper Hall Pen? Telegraph lowest cash price — answer paid” D replied: lowest price $900; P replies agreeing to buy for $900 D didn’t sell and P sued them Ruling for D; simply stating lowest price contains no implied contract to sell at that price to the person inquiring, and doesn't constitute an offer Canadian Dyers Association Ltd v Burton (1920, Ont.) P asked D for “lowest price”. Owner replies with “lowest price I would care to sell at for cash would be $1650”. 1.5 years later, the purchaser contacts owner and asks for very lowest price. Owner replies with “the last price I gave you is the lowest I am prepared to accept’ Purchaser sent cheque sought to accept offer. Ruling for P; a statement indicating preparation of acceptance will constitute as an acceptance of an offer, subjective intention of parties does not matter. Therefore, courts have held that quotations of prices aren’t offers (Harvey); but a quotation followed by a signal that supplier wants to Contracts CAN 3  receive an order has been held to constitute an offer (Harty v Gooderham, 1871) (also Dyers kinda) Price lists and ads are invitations to treat Just because parties plan to formalize their agreement in writing later doesn't mean they haven't already formed a legally binding contract through their earlier communications and actions. Storer v Manchester City Council (1974): Municipality sent a letter to Mr. Storer about buying a property stating that if Storer signed and returned it, the Council would then execute the formal agreement Court held that a binding contract was formed when Storer signed and returned the letter; didn't matter that the formal property deed hadn't yet been executed Offers: Retail Sales Display of goods for sale isn’t an offer (R v Bermuda Holdings, 1970) Presentation of articles for purchase to customer is an offer (Pharamceutical Society of Great Britain v Boots Cash Chemists Southern Ltd, 1953) Boots appears to say acceptance occurs when cashier agrees to sell item for the price in question R v Dawood (1976): A customer removed a price tag to pay less for clothing. The majority ruled this was fraud but not theft, as a contract was formed when he presented the items for sale (following Boots). One judge dissented, saying it was theft because the store's price tag was the offer, and by not accepting that exact price, no contract was formed. Offers: Unilateral Contracts Offers can be made to the public at large, and when this happens the offer invites members of the public to perform a certain act in order to receive a Contracts CAN 4  reward So “unilateral” because only one person (to many people) Carlill v Carbolic Smoke Ball Co (1893) Company advertised a £100 reward if anyone got flu after using their product for 2 weeks as directed, proving their sincerity by depositing £1000 in a bank. Mrs. Carlill used it and got flu, but they refused to pay. Court ruled it was a valid offer (not just an invitation to treat) that she had accepted by following the instructions, so the company had to pay. Offers: Tenders and Auctions Traditionally, a call for tenders is a mere invitation (Spencer v Harding, 1870) But, if the call has terms and conditions (e.g., lowest bid will be accepted), the tender may be an offer (R v Ron Engineering & Construction Eastern Ltd, 1981 SCC) SCC said submission of a tender may create independent contract between bidder and seller Auctions: Generally the ad of a sale at an auction is a mere invitation that doesn't bind the seller to sell; the bid is the offer and no contract formed until seller accepts (BC Sale of Goods Act, s.72(b)) In common law though, an ad that an auction is held ‘without reserve’ has been held to be a genuine offer requiring auctioneer to accept highest bid (Warlow v Harrison, 1859) Communication of Offers Offer must be communicated to offeree (Blair v Western Mutual Benefit Association, 1972 BCCA) Blair v Western Mutual Benefit Association (1972 BCCA) Contracts CAN 5  A company resolved to give an employee 2 years' retirement pay, but she only learned about it by typing up meeting minutes as part of her secretarial duties (so they didn’t officially tell her). Court ruled this wasn't a valid offer since it wasn't properly communicated to her with intent to be bound - merely learning of a planned offer doesn't make it an actual offer. However, for reward cases, courts are more lenient and assume people knew of the offer if they performed the requested act (Williams v Carwardine, 1833) Class 4: Offer and Acceptance II Intro — Acceptance: When conduct of A constitutes offer, it grants B a power of acceptance B saying “I accept your offer” forms a contractual relationship between A & B Where B’s response qualifies or varies anything in A’s offer, this isn’t acceptance but a counteroffer (OTM Ltd v Hydranautics, 1981) Counteroffer generally deletes original offer (Trollope v Colls Ltd v Atomic Power Constructions Ltd, 1962) — presumed rejected (Hyde v Wrench, 1840) Depending on the reaction of A to a counteroffer by B, however, it might be found that the initial offer has been revived or preserved (Livingston v Evans, 1925) Acceptance or Ongoing Negotations?: Bristol, Cardiff and Swansea Aerated Bread Co v Maggs (1890): Maggs offered to sell his business for £450. Buyer said "I accept" but then sent a draft with a new non-compete clause. When Maggs tried to back out, the court ruled no contract had formed - by adding the significant new clause after saying "I accept," the buyer showed they Contracts CAN 6  were still negotiating rather than having formed a contract that they were trying to vary. Sending 2nd draft with different terms after accepting contract indicates a lack of ‘meeting of the minds’ and thus no contract (Harvey v Perry, 1953 SCC) Acceptance — Time and Manner: Acceptance must also comply with any instructions for acceptance given by the offeror e.g., if offer to sell goods includes provision that acceptance can only be made by cheque payment, failure to pay with cheque precludes acceptance (Baughman v Rampart Resources Ltd, 1995 BCCA) Same is true where A says B must communicate acceptance in a specified manner (e.g., in writing) (Financings Ltd v Stimson, 1962) Offeror can waive a deadline to still accept offer (Manchester Diocesan Council) When no expiry date, offer must must be accepted within reasonable time (Barrick Estate v Clark, 1951 SCC) Acceptance — Battle of the Forms: The "battle of the forms" occurs when parties exchange different standard forms with different terms. Traditionally, sending back a form with different terms is a counteroffer. Under the "performance doctrine” or “last shot rule” (Butler Machine Tool Co Ltd v Ex-Cell-O Corp England Ltd, 1979): if one party performs (like delivering goods) after receiving the other's form, and the other party accepts that performance (like accepting delivery), they're deemed to have accepted the terms of the last form sent before performance (Howard Marine & Dredging Co Ltd v A Ogden & Sons Excavations Ltd, 1978) British Roan Services Ltd v Arthur B Crtuchley and Co Ltd (1967): Contracts CAN 7  When carrier delivered goods, warehouseman stamped delivery note with different terms. When carrier then stored goods, this action accepted warehouseman's terms (last shot rule). Butler Machine Tool Co Ltd v Ex-Cell-O Corp England Ltd (1979): Initial Situation: Seller (Butler) offered to sell machinery with their own terms Buyer replied with a purchase order containing different terms; Seller signed and returned the purchase order BUT added a note saying it was accepted "in accordance with" their original terms Ruling for D (Ex-Cell); Court ruled that buyer’s purchase order was counteroffer that cancelled original terms, and P signing purchase order was acceptance of counteroffer Acceptance — Shrink Wrap Agreements: Some manufacturers try to communicate the terms and conditions of a contract with consumers after the consumer has received the item or taken it home A purchases a computer from B, and A discovers a document inside the packaging of the computer that describes certain terms and conditions concerning the computer… Has A accepted, in advance, these terms and conditions? ProCD v Matthew Zeidenberg and Silken Mountain Web Services Inc (1996) (US case): Zeidenberg bought a CD-ROM containing a phone number database; Terms, which were hidden under shrink-wrap and only visible after opening, restricted use to non-commercial purposes; Zeidenberg violated license by using it commercially Ruling for P; Terms were enforceable despite being discovered after purchase because: Box exterior warned that a license existed; impractical to print all terms on the box; Customers had the option to return for refund if Contracts CAN 8  they disagreed with terms; Terms also appeared on screen during use Class 5: Offer and Acceptance III Communication of Acceptance: Generally, you must tell someone if you accept their offer Larkin v Gardiner (1985, Ont) P placed property in hands of agent to sell; agent got draft written offer from D to buy property; agent presented draft to P which she signed and returned; D withdrew before receiving news of P’s acceptance Ruling for D: P didn’t communicate acceptance to D; requires notice, not just mere execution of agreement Silence usually isn’t enough, but there are two exceptions: 1. When silence would reasonably be understood as acceptance Saint John Tug Boat Co. v Irving Refinery Ltd (SCC, 1964) A refinery was using a tugboat company’s services; When their contract expired, they kept using the services without saying anything Ruling for P: By continuing to use the services, the refinery had accepted the contract, even without saying so; thus, silence after expiry date didn’t defeat acceptance 2. When the person making the offer says you don’t need to communicate acceptance (Carlill v Carbolic Smoke Ball Co, 1893) Nothing in principle bars the waiver principle from applying to bilateral contracts (Dominion Building Corp Ltd v The King , 1933) but courts are cautious around allowing offerors to dictate that silence on the part of the offeree will amount to acceptance Contracts CAN 9  (Felthouse v Bindley, 1862) Postal Acceptance Rule: Special rule: when you mail your acceptance, the contract is formed when you post the letter Works even if the letter gets lost (Household Fire & Carriage Accident Insurance Co v Grant, 1879) Only applies when it’s reasonable to use mail for acceptance Rule is also available where offer has been made by hand (Henthorn v Fraser, 1892) Instant Communications and E-Commerce: Where the communication can be considered “instantaneous”, courts have often applied the general rule that acceptance is effective once the offeror has been notified of the acceptance But complications can arise that require courts to attentive to the unique features of a given case Brinkibon Ltd v Stahag Stahl Und Stahlwarenhandelsgesellschaft mbH (1983, UKHL) Buyer in London sent telex to sellers in Vienna w/ offer to purchase goods… was contract formed in England or Austria? Ruling: Contract was formed when acceptance was received by offeror, so in Austria The postal rule (acceptance on sending) might apply instead if either: 1. The offeror is at fault for not receiving the acceptance, or 2. There's a communication defect that the offeror should be considered to have taken the risk for (McCamus) Example: if an offeror gives a broken fax number or their email server is down due to their poor maintenance, they can't claim no contract exists just because they didn't receive the acceptance. In such cases, acceptance might be valid when sent, not received. Contracts CAN 10  Cancelling (Revoking) Offers: You can cancel an offer anytime before it’s accepted (Dickinson v Dodds, 1876) Even if offer was originally presented with a timeline for acceptance (Dickinson) Revocation still valid if offeree learns of revocation from a credible 3rd party (Dickinson) Must tell the person you’re cancelling (Byrne v Van Tiengoven, 1880) Exception: if someone has started doing what you asked for in a unilateral contract (like searching for a lost dog), courts often won’t let you cancel Courts go about preventing revocation in these circumstances in 3 ways: 1. Where there is ambiguity on if the contract is unilateral or bilateral, courts may construe the contract as bilateral (Dawson v Helicopter Exploration Co, 1955 SCC) 2. Narrowly define what what counts as starting performance, making it harder for offeror to revoke (Carlill) 3. Find collateral arrangement (implied promise) relating to the firmness of the offer that is implicit in the relationship of the parties (Errington v Errington and Woods, 1952) Example: If a father promises to give his son's family a house if they pay the mortgage, and they start paying, courts find an implied collateral arrangement that the father couldn't revoke the offer while they kept paying - unfair to let him withdraw after they relied on his promise and started performance. Class 6: Certainty of Terms I Intro: Contracts CAN 11  For a contract to be valid, its important terms must be clear enough, or “can be determined with a reasonable degree of certainty” (Scammell and Nephew Ltd v Ouston, 1941) Courts will try to make contracts work when they can, but won’t create new agreements for people Courts look at whether the agreement is ‘complete’ enough to work “As long as an agreement is not being constructed by the court, to the surprise of the parties, or at least one of them, the courts should try to retain and give effect to the agreement that the parties have created for themselves” ( Griffin v Martens, 1988 BCCA) CoT gives rise to at least 3 issues: 1. Is the agreement complete? 2. Can ‘agreements to agree later’ be used to fill gaps? 3. Are any essential terms so vague the entire agreements falls apart? Completeness: Completeness looks at whether (in cases where terms are missing) the terms are important enough that the parties haven’t actually reached a “meeting of the minds” Only in contexts where it’s possible/expected to reach agreement on those matters at that time (so not certain commercial settings) May be relevant that parties have created similar contracts in past that worked If someone has acted in a way due to assumption the contract exists, this could influence court’s analysis on completeness of agreement Completeness — May and Butcher Ltd v The King (1929) P made agreement with the government to buy surplus army tents (tentage); Agreement required P to pay security deposit, and in return, D (government) would sell them tents as they became available Contracts CAN 12  Missing important details (intending to figure out at relevant time): price of tents, when payments would be made, how many tents would be sold, when they’d be delivered D refused to honour agreement due to uncertainty of terms Ruling for D: too many essential terms were missing, especially the price; presence of arbitration clause didn’t save the agreement in court’s view Completeness — WN Hillas WN Hillas (a British company) made a lumber deal with Arcos (a Russian government lumber supplier) Two-year deal where: Year 1: WN Hillas bought over 40K standards of lumber Year 2: WN Hillas had the option to buy 100K more standards Many undefined terms: no specific shipment dates; exact quanitites missing; prices to be set later based on seller's 1931 price list; lumber was just described as being of "fair specification" WN Hillas tried to exercise their option to buy the additional lumber in Year 2; Arcos refused (argued agreement was too uncertain), even though the parties successfully operated under this agreement the entire first year Ruling for WN Hillas: it’s normal in certain commercial settings for many details that form part of a business deal to be adjusted and ironed as the deal is being performed Completeness — Foley v Classique Coaches (1934) Foley (P) owned a gas station and sold some adjacent land to Classique Coaches (D) (bus company) As part of the land sale, Classique agreed to buy all their fuel from Foley's gas station; prices to be agreed "in writing and from time to time" D eventually wanted to buy fuel elsewhere and tried to get out of agreement, arguing uncertainty of terms because fuel prices not set (like May and Butcher) Contracts CAN 13  Ruling for P: contract didn’t fail for incompleteness because prices not set; emphasis on partial performance of the agreement and concerns relating to unjust enrichment (D didn’t want to return land, but wanted a portion of agreement they didn’t like voided) Completeness — Canadian Cases Principles from UK reflected in Canada Uncertainty that requires parties to work out further details doesn’t always defeat agreement (Canada Square Corp v Versafood Services Ltd, 1981 ONCA) But sometimes presence of price term is vital: Courtney and Fairbarn Ltd v Tolaini Brothers (Hotels) Ltd (1975) Developer and builder agreed to build substantial development project for a sum to be later determined; court ruled that agreement is incomplete If an agreement creates a workable mechanism for determining a price at a later date, the courts will generally uphold the agreement (Klemke Mining Corp v Shell Canada Ltd, 2007) If mechanism for ironing out certain terms in the future is to leave them at the discretion of a party, can be upheld but party must exercise discretion reasonably (First City Investments Ltd v Fraser Arms Hotel Ltd, 1979 BCCA) Class 7: Certainty of Terms II Agreements to Agree: Sometimes parties stipulate in agreement that certain absent terms will be agreed upon in future Traditionally, agreements to agree create no legal obligations, but WN Hillas challenges this Contracts CAN 14  Agreements to agree in the future to a particular set of terms might be enforceable, but differs from parties agreeing to conduct further bargaining in the future in hopes of agreeing on certain matters Based on traditional (and still prevailing) view of AtA, a contract with an option to buy land at a price to be agreed is unenforceable (Murphy v McSorley, 1929 SCC) Also true of agreement with option to lease land at a rent to be agreed Terms of the mortgage or similar arrangement are always essential terms of a real estate transaction (Re Calford Properties) Calvin Consolidated Oil and Gas v Manning (1945, SCC) Calvan and Manning made an agreement about oil and gas permits The agreement gave Calvan two options: sell Manning’s interest in a permit, or develop the property itself If Calvan chose to develop the property, the parties agreed to: (1) Make an operating agreement later; (2) Use an arbitrator to settle the terms if they couldn't agree This looked like an "agreement to agree" (which courts usually don't enforce) Court upheld agreement: in oil and gas business, parties often don’t know all their future intentions; arbitration clause provided way to resolve disagreements; impractical for parties to detail every possible future scenario Thus, "agreements to agree" can be valid if there's a clear mechanism (e.g., arbitration) to resolve future disagreements, especially in industries where future uncertainty is common. Canada Square Corp v Versafood Services Ltd (1981, ONCA) Developer was building a high-rise and wanted a restaurant on the top floor; made agreement with a restaurateur through a letter outlining their "verbal understanding" Contracts CAN 15  Agreement had 14 points, including minimum annual rent Both parties signed it as a "general principles" agreement, but many details still needed to be worked out later One unclear point was the exact location of the food stand in the lobby (this was the uncertain term in question) Question: Was this agreement too uncertain to be enforced? The Court's Decision: Court upheld the agreement: food stand location wasn’t so essential to make the whole agreement unworkable; core agreement clear enough to enforce Vagueness: If a term is so vague that courts can't give it an enforceable meaning, the agreement fails (McCamus) Hire-Purchase Terms: Scammell and Nephew Ltd v Ouston: D agreed to sell van to P for price coupled with trade in; D later arranged for hire-purchase financing (instalments) but withdrew from transaction, arguing agreement unenforceable for vagueness Judgement for D: if words are broad and untechnical/fial to create meaning, court renders it unenforceable Rule: a hire-purchase agreement will be upheld if the parties enter into such an agreement on the “usual terms” and the court is shown evidence on what the usual terms of a hire-purchase agreement might be "Usual Covenants": Buyers v Beggs (1952): contract for purchase of land with clause that parties would enter “an agreement for the sale containing the usual covenants (i.e., agreement)” Agreement failed because there was no evidence such a form of agreement (usual covenant) existed in BC Contracts CAN 16  "Best Efforts" Clauses: Clauses in which parties to agree to make “best efforts” to bring about as certain outcome; Generally enforceable These clauses impose a higher obligation than “reasonable effort”: Must take "all reasonable steps to achieve the objective” and "leave no stone unturned" (Atmospheric Diving Systems Inc v International Hard Suits Inc, 1994) Wiebe v Bobsien (1985): involved real estate transaction subject to buyer selling their existing property Upheld on the basis that the buyer was implicitly required to use best efforts to sell his own residence "Satisfactory Financing" Clauses: No uniform approach Griffin v Martens (1988): Court interpreted satisfactory financing as meaning: “Satisfactory to a reasonable person with all the subjective but reasonable standards of the particular purchaser” — Most accurate interpretation Court said there was implicit obligation on the purchaser not to “withhold his satisfaction unreasonably” Nominee Clauses: Agreements with "B or his nominee" are likely enforceable (Causeway Shopping Centre v Muise, 1969) Severance: If a vague term isn't essential, courts may remove it and save the rest of the agreement (Nicolene v Simmonds, 1953) Class 8: Intention to Create Legal Relations I Contracts CAN 17  Intro: For a contract to be valid, parties must intend to be legally bound Commercial deals are usually presumed to be legally binding (Dugas c Dugas Estate, 1978 NBCA) Social arrangements with promises are not legally binding — agreements to take a walk together or attend a dinner party will not be enforced (Balfour v Balfour, 1919) Promises made by politicians during campaigns not binding (Canadian Taxpayers Federation v Ontario (Minister of Finance), 2002) Courts look at what a reasonable person would think, not private/subjective thoughts Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v Aga, 2021 SCC): test for whether parties intended to create legal relations is objective A bargain can fail due to lack of intention even if there is consideration Commercial Arrangements: Two situations where presumption of intention to create legal relations is precluded in commercial contexts: 1. Parties stipulate (expressly or impliedly) an intention to be bound in honour only 2. Parties negotiating agreement produce a written draft agreement Rose and Frank Company v JR Crompton and Brothers Ltd (1923): What happened: Business agreement specifically said it wasn’t legally binding Said they would rely on “good faith and honour” instead Decision: Valid — businesses can choose not to be legally bound if they clearly say so Construction Tender Cases (Ron Engineering, etc.) Contracts CAN 18  Special rules for construction bids: usually create legal obligations unless clearly stated otherwise Courts look at: Cost of preparing bids; Value to the person requesting bids; Whether deposits were required MJB Enterprises Ltd v Defence Construction (1951) Ltd (1999, SCC) Issue: Is it ever possible to conclude that the issuer of the call and the submitter of the bid didn’t intend to create legal relations (i.e., contract A)? Dependent on whether parties intended to create contractual relations by the submission of a bid in response to invitation to tender Held: intention existed; bid had value to the person requesting it and bidders spent significant money preparing their bids + bidders had to provide a substantial deposit that they could may not get back “Comfort Letter” Cases Comfort letters are used in business loans when a subsidiary company wants to borrow money; the lender wants parent company to guarantee loan; parent company doesn’t want to give a full guarantee, so instead the parent provides a “comfort letter” with assurances about the subsidiary (Kleinwort Benson Ltd v Malaysia Mining Corp Bhd, 1989) What happened: Parent company wrote letter supporting subsidiary’s loan: “It is our policy to ensure our subsidiary can pay its loans” When the subsidiary defaulted, the lender tried to hold the parent company responsible Ruling for D (parent company): Not legally binding — just stating current policy, not promise for the future; parent already refused to Contracts CAN 19  give a guarantee so they should’ve known Therefore, comfort letters are not legally binding Preliminary Agreements: Like letters of intent or draft agreements Usually not binding if: Marked “subject to contract”; called a “letter of intent” Von Hatzfeldt-Wildenburg v Alexander (1993): When parties make an initial agreement but mention a future formal contract, courts must determine if that future contract is a required condition or just a preferred way to document an already binding deal. Generally, if the language suggests the formal contract is a condition (like saying "subject to contract"), the preliminary agreement isn't binding. Thus words like “subject to contract” in a preliminary agreement are ofted treated as evidence that the agreement is not binding (Winn v Bull, 1877) Letters of intent might be binding if: “Subject to contract” is present but there are features of a binding agreement (Alpensator Ltd v Regalian Properties Plc, 1985) In lending context (commitment letters) (First City Investments Ltd v Fraser Arms Hotel Ltd, 1979) Class 9: Intention to Create Legal Relations II Commercial Arrangements: Girard v Druet (2012, NBCA) What happened: Regular people negotiating house sale by email Contracts CAN 20  Seller seemed to accept, then backed out Decision: Not binding because: they weren’t industry professionals and buyer hadn’t seen property, thus failed the objective test (reasonable person) Also, a draft agreement was set to be produced, which is similar to a “subject to contract” clause Important point: where a real estate transaction is made between non-commercial actors (strangers who aren’t industry professionals), no presumption of intention to create legal relations Domestic and Social Arrangements: Balfour v Balfour (1919) — leading case for presumption against intention to create legal relations in social and family settings What happened: Husband promised wife monthly allowance because they wouldn’t be able to live in same country for a while Wife sued husband to enforce promise Decision: Not binding because: Family promises rely on trust, not law; wasn’t planning legal consequences Atkin LJ: “common law doesn’t regulate the form of agreements between spouses” Jones v Padavatton: What happened: Mother encouraged daughter to leave Washington to study law in London; Daughter was hesitant Mother made two promises to convince daughter: (1) Monthly allowance while studying (2) Later bought a house in London for daughter (daughter would rent rooms to cover expenses) Contracts CAN 21  Arrangement worked for about 5 years; Daughter took longer than usual to complete studies (5 years vs normal 3 years); Mother suddenly arrived in London and tried to end the arrangement/take back the house Decision: Ruling for D (mother): No intention to create legal relations, just a family arrangement based on "good faith" promises; not meant to be a "rigid, binding agreement" Separated Couples (or about to separate): Their agreements usually ARE binding: they’re negotiating formally, not relying on family trust (Merrirr v Merritt, 1970) Presumption of no legal intentions has also been applied to non-spousal family relations Rogalsky Estate v Rogalsky (1984): agreement among siblings that all of the income from their late father’s estate should be used to support their mother was deemed unenforceable Presumption can be rebutted when party seeking to enforce agreement has detrimentally relied on its assumed enforceability (Ostopowich v Crown Trust Co, 1959) Social settings: Usually not binding (like sharing sports tickets: Pobasco Ltd v Cogan, 1990) Exceptions: Lottery pools (pooled tickets) ARE binding (Taylor v Smith, 1995) Competition entry groups can be binding (Simpkins v Pays, 1955) Class 10: Bargaining in Good Faith I Contracts CAN 22  Intro: How does the law handle good faith in contractual bargaining? The duty to negotiate/bargain in good faith comes up in three main contexts: 1. Certainty of Terms Disputes: When essential terms are missing; Parties may have agreed to agree later Question: Can one party sue if the other won't negotiate? 2. Future Arrangement Provisions: Terms requiring future negotiations Example: Agreement to extend/renew at a price to be agreed later Question: Must parties negotiate the future price in good faith? 3. Tendering Processes: Well established in Canadian law; Issuers must treat all bidders "fairly and equally" Good Faith Bargaining + Certainty of Terms: Walford v Miles (1992) from UK Strongly rejected requiring good faith in negotiations Court ruled: Parties can pursue their own interests; Can withdraw from negotiations anytime, for any reason Only limitation: no false statements allowed Called good faith duty “inherently repugnant” to negotiation process Agreements to Negotiate in Good Faith (NGF) Canadian courts generally follow UK approach Contracts CAN 23  But recognize two exceptions where good faith negotiations might be enforced: 1. Agreements for future negotiations (contract renewal) when there’s an objective standard (e.g., “market rate”) Just saying “we’ll negotiate later” isn’t enough; but saying “we’ll negotiate based on market rate” might be enforceable 2. Courts might now enforce good faith negotiation promises even without an objective standard, as Bhasin v Hrynew (2014, SCC) established, good faith is a “fundamental organizing principle” in contracts a. McCamus notes: Bhasin provided clear rules about what good faith means, so courts can now enforce good faith negotiation promises without worrying that they're too vague to enforce. Agreements to NGF — Objective Standard Rule Sometimes support for contractual duty to negotiate in good faith in cases concerning options to renew leases when new rental rate is “to be agreed” by parties Empress Towers Ltd v Bank of Nova Scotia (1990) Involved lease renewal at “market rental rate” (stated in the contract) Decision: Landlord must negotiate in good faith to reach agreement on market rental rate Agreement on market rental cannot be unreasonably withheld Mannpar Enterprises (1999): Clarified that agreements without objective standards aren’t enforceable Example: when contract states renewal “at rate to be agreed” without reference to market rate — not enforceable Agreements to NGF — Bhasin v Hrynew Contracts CAN 24  Landmark case establishing fundamental good faith principle Set four specific rules: 1. Parties must cooperate to achieve contract objectives 2. Parties can’t misuse discretionary contract powers 3. Parties can’t try to evade contractual duties 4. Parties must perform the contract honestly (can’t lie or knowingly mislead the other) Impact: Didn’t directly address pre-contract negotiations But suggests rules apply when existing contract requires future negotiations Provides clearer definition of what “good faith” means 0856464 BC Ltd v TimberWest Forest Corp (2014) (Application of Bhasin v Hrynew) Facts: 5-year logging agreement: First year rates set, parties would "negotiate in good faith" for later years' rates Agreed on rates for year 2/3, but company changed mind on year 4, because: they decided they could get cheaper rates by hiring multiple smaller companies instead of one big one, so they deliberately made unreasonable offers for year 4 to get out of their existing agreement. Court decision: Ruling for P (Found violation of good faith obligations) Negotiations unreasonable given relationship history; Company wasn’t honest about intention to end agreement; Strategy undermined agreement’s purpose Summary of Class Contracts CAN 25  Canadian courts can now enforce promises to negotiate in good faith in two different ways. First, the traditional way still works: if there's an objective standard (like "market rate") to measure the negotiations against, courts will enforce it. Second, after the Bhasin decision, courts might enforce these promises even without an objective standard, as long as parties follow Bhasin's four rules of good faith: cooperating to achieve contract goals, not misusing powers, not trying to escape duties, and being honest with each other. This represents a significant change from the past, where you always needed an objective standard to enforce good faith negotiation. Class 11: Bargaining in Good Faith II Tendering and Bargaining in Good Faith Traditional approach changed by Ron Engineering case: Previously: Tender was just first step in negotiations New approach (after Ron): Creates initial “Contract A” when bid submitted; contract B goes to the winner of the tender “auction” Contract A contains terms of tendering process Key principles from cases: Healthcare Developers Inc v Newfoundland (1996): Issuer of the tender call must, under an implied term in Contract A, at a minimum, not act in bad faith It would be “bad faith to award something other than Contract B, to fail to reject tenders not in compliance with the call or to award Contract B on the basis of an undisclosed preference.” Martel Building Ltd v Canada (2000): SCC required “fair and equal treatment” in the tendering process Implied contractual duty (in contract A) of “fair and equal treatment” Contracts CAN 26  Examples of violations (usually breaches of implied terms of fair and equal treatment): Not disclosing preference for local contractors (which may result in unequal treatment of competing bidders) (Tarmac Canada Inc v Hamilton-Wentworth Regional Municipality, 1999) Allowing correction of invalid bid after deadline (Vachon Construction Ltd v Cariboo Regional District, 1996) Using arbitrary criteria to evaluate bids (Elite Bailiff Services Ltd v BC, 2003) Applying criteria unequally among bidders (Martel) MJB Enterprises (1999) Can’t accept “non-compliant” bids (bids that don’t comply with the rules?) — implied term in contract A “Give all fair and equal treatment” better describes implied term/duty than “act in good faith” Focus on fairness rather than intentions Pre-Contractual Duty to Bargain in Good Faith? Key question: can duty to bargain in good faith arise before contract formed (i.e., at the negotation stage)? The duty would need to be tort-based not contract-based Traditional view: No separate tort of bad-faith bargaining Westcom TV Group Ltd v CanWest Global Broadcasting Inc (1996): Facts: Two TV networks were negotiating over program sales Previous history: They had made several short-term agreements They negotiated a new 10-year agreement; Agreement needed approval from defendant's Board Chair Contracts CAN 27  Approval never came; P claims D never actually intended to make the agreement because they wanted their own broadcasting license in P’s area and used negotiations to “prove” to regulators they tried but couldn’t make a deal; Court decision: Ruling for D: Parties can conceal true intentions in negotiations Common to misrepresent positions for better bargain; Limited role for negligent misrepresentation Recent developments: Oz Optics Ltd v Timbercon, Inc (2011): Found negligent/almost fraudulent misrepresentation (TORT); But didn’t create pre-contractual good faith duty in contract law Martel Building (2000): SCC rejected negligence duty in “arms-length negotiations”: parties don’t have to be “mindful” of other parties interests But left door open for future good faith duty You can't sue someone for negligence just because they negotiated in bad faith and you lost money, but the law might eventually recognize some kind of duty to negotiate in good faith before a contract is formed. Class 12: Agreements in Writing I Intro: Originally, common law only enforced written promises under seal Today, common law enforces: Written agreements (with or without seal); Oral agreements; Hybrid agreements (part written, part unwritten) Raises 3 issues Contracts CAN 28  1. Legislation: Though common law doesn't require writing… Some laws still require certain agreements to be written 2. Incorporation: Disputes over which documents are part of the final agreement 3. Extrinsic Evidence: Are written documents the only source for determining parties' intentions? Can other sources be used? Agreements that must be in Writing: Statute of Frauds 1677: Purpose: Reduce perjured testimony (intentionally giving false testimony while under oath) Strategy: Require certain agreements in writing BC Situation: Originally had Statute of Frauds, then abolished it Now uses Law and Equity Act (largely confined to land transactions) Focus mainly on land transactions Law and Equity Act Section 59(3): Contracts regarding land not enforceable unless (only needs 1, not all 3): (a) Written and signed with clear subject matter (b) Party to be charged has acted indicating contract exists (c) Person alleging contract relied on contract and would face inequity otherwise Thus, written contract not required for enforceability of land contract Sections 59(3)(b) and (c) of the Law and Equity Act confirm that “a contract relating to land or a disposition thereof is no longer Contracts CAN 29  unenforceable simply because it does not exist in written form” (574409 B.C. Ltd. v. Spring Creek Aggregates Ltd., 2008) Doctrine of Part Performance: Allows enforcement of land contracts without writing if (test from Olsen): Party has done or acquiesced to an act This act indicates a contract was made This act is not inconsistent with the alleged contract Schild v BC (Official Administrator) (1993): Confirmed s.59(3)(b) codifies part performance Notes it's more liberal than common law version: common law required acts to be "unequivocally consistent" with the alleged contract Olsen v Gamache (1995, BCCA): BCCA clarified the test requires: Proof of acts indicating a contract was made Acts must not be inconsistent with alleged contract Party to be charged must have done or acquiesced to these acts Incorporation of Written Terms: Issue: When should written documents be considered part of the agreement? Courts generally reluctant to incorporate unfair/surprising terms Two categories: 1. Unsigned documents 2. Signed documents Unsigned documents (Parker v South Eastern Railway Co., 1877) (i.e., documents concerning the agreement that weren’t signed): Incorporated if recipient: Knows document contains conditions Contracts CAN 30  Should reasonably know conditions exist Essentially, they may not have signed the document, but they knew the terms in the document existed and if they didn’t want to adhere they should have said that Rules about notice: Hidden Terms (Spooner v Starkman, 1937): Very small print designed to conceal terms won't provide sufficient notice Timing of Signs (Mendelssohn v Normand, 1949): Signs must be visible when contract is made Signs posted after won't count Opportunity to Read (Parker): If person had chance to read and withdraw but didn't Terms may be incorporated Previous Dealings: Regular History (J Spurling v Bradshaw, 1956): If parties regularly used same terms before Terms can be incorporated even if provided late/not at all Inconsistent History (McCutcheon v MacBrayne, 1964): If previous dealings were inconsistent Court might refuse to incorporate terms Industry Understanding (British Crane Hire v Ipswich, 1975): If party reasonably understood terms would apply Terms can be incorporated even if provided late Signed documents: General rule: Binding whether read or not Contracts CAN 31  Exceptions: Fraud or misrepresentation Harsh/unfair provisions without notice Key cases: Tilden Rent-A-Car Company v Clendenning (1978): Car rental company couldn’t use liability clause even though document was signed Onerous terms with no adequate notice Delaney v Cascade River Holidays Ltd (1983): Person died while white water rafting, singed standard liability release before participating Liability release for water activity upheld Court split on whether release was obviously intended Canadian Indemnity Co v Okanagan Mainline Real Estate Board (1970): Signed documents invalid if obtained through misleading conduct Class 13: Agreements in Writing II Parol Evidence Rule (PER) A legal rule that prevents parties from using evidence outside of a written contract to contradict or change the terms of that contract. The rule applies when the parties to a contract intend the written document to be the complete and final agreement. Is the written contract the final agreement, or can you use outside “evidence” of different terms? Contracts CAN 32  Basic question: Once the documents forming part of the agreement are determined, should those documents be considered the exclusive source of the agreement? Clear cases: When parties explicitly agree document is exclusive — no other sources When ‘entire agreement’ clauses exist — no other sources When parties clearly agree to include both written and oral terms — can include other sources Main issue: Disputes over prior oral promises PER may prevent reliance on oral promises that: Supplement written agreement Contradict written agreement Key Points About PER PER in a nutshell: in certain circumstances, the party wishing to rely on the oral promise may be prevented from doing so if it supplements or is inconsistent with the written agreement Scope: Applies to all prior communication Includes written and oral Not just an evidence rule Is a substantive contract law rule Two versions: Traditional version: If agreement looks complete, no outside evidence In traditional version, no outside evidence allowed that would: Contracts CAN 33  Contradict Vary Add to Subtract from Must prove incompleteness first Modern version: Focuses on parties’ intentions All evidence is admissible to determine intention Growing acceptance in UK/US Canada moving toward this version Recent/Important Cases and Applications: Sattva Capital Corp v Creston Moly Corp (SCC, 2014): Basic Rule: You can't use outside evidence to add to, subtract from, change, or contradict what's in a written contract Can't Use: Evidence about what parties were privately thinking when they made the contract Main Goals: Make contracts final and prevent people from using fake evidence to attack written contracts Exception: You can look at "surrounding circumstances" (facts both parties knew or should have known when making the contract) — help interpret what the contract means without changing it, and they're reliable because both parties knew them at the time In simple terms: If it's written down in the contract, you generally can't bring in outside evidence to change it - but you can bring in evidence about the situation at the time to help understand what the written words meant. Hawrish v Bank of Montreal (1969): Facts: Contracts CAN 34  Hawrish (a solicitor) signed a bank's standard guarantee form; guaranteed debts of a new company he had interest in Bank allegedly made oral promise that Hawrish would be released once new directors signed their own guarantees When company went bankrupt, bank ignored oral promise and enforced the guarantee Decision: Ruling for D: oral promise contradicted the written term “continuing guarantee”; guarantee included a term saying no representations were made by the bank Thus, when a written contract directly contradicts an alleged oral promise, courts will typically enforce the written terms, especially with standard form bank guarantees. Fung v Decca Homes Limited (2019): Facts: Fung overpaid Decca Homes by $150,000 for a construction project Parties signed a demand promissory note for the full amount Decca's lawyers were given instructions to pay Fung, but only if certain properties sold When Fung demanded payment, lawyers didn't pay Decision: Ruling for P; even if oral agreement existed, it couldn’t contradict written agreement The written promissory note was enforceable as written; note "was contingent on nothing" Like in Hawrish, courts won't allow oral agreements to contradict clear written terms in a contract. Exception to PER (when you can use outside evidence) from Gallen v Butterley (1984): Contracts CAN 35  Contract Problems: Fraud, mistakes, false statements, no capacity to contract, no consideration, no intention Interpretation Help: Explain unclear terms, show business customs, show surrounding context Additional Agreements: Conditions that had to happen first, side agreements, prove document isn't complete Legal Claims: Fix document mistakes, get special remedies, show breach of duty General Defense: Prove the written document wasn't meant to be the entire agreement Class 14: Consideration and Form I Consideration and Form: Key question: Which promises should law enforce? Basic principle: Promises will only be enforced if they form part of a bargain Two ways to make promises enforceable: 1. Consideration (”purchased” promises) 2. Formal requirements (promises “under seal”) Consideration — Bargain Theory Definition: Act/forbearance or promise is price for other’s promise Contracts CAN 36  "What does each party receive by entering this contract?” ‘Forbearance’ meaning to refrain from doing x Types of agreements: Bilateral: promise for promise Unilateral: promise for act/forbearance Key principles: Can be any act valued by promisor Can benefit third party Must move from promisee Usually requires promisee detriment Hamer v Sidway Nephew promised not to drink/smoke for payment Court: limiting one’s own freedom is sufficient consideration Benefit to promisee not required Special Cases of Consideration: Requirements and limitations: Must be certain Promise to give “good price” not enough (Gilbert Steel v University Construction Ltd, 1976) Firm offers Need consideration to keep offer open If someone offers you $10k to buy your car and leaves the offer open to you for 30 days, you need to give consideration for that offer to remain open Illusory Consideration Must be real commitment Contracts CAN 37  Example: offer to purchase “subject to approval” of certain elements about the thing you’re purchasing Implied consideration Courts may find an implied promise to find proper consideration (Wood v Lucy, Lady Duff-Gordon) Peppercorn theory: Even trivial value is sufficient (even something as small as a peppercorn) Law won’t examine adequacy Nominal consideration $1 is usually enough Unless fraud/oppression Forbearance Refraining from action is valid consideration Charitable subscriptions Bare promise to donate unenforceable Need specific promise from charity to do certain acts in return for donation Manufacturer’s warranties A promise as to quality of a consumer product is not enforceable unless purchased directly from manufacturer So u can’t sue Walmart or whatever Past Consideration General rule: past benefits can’t be consideration Eastwood v Kenyon Promise to buy wife’s guardian’s debt Contracts CAN 38  Husband’s promise held unenforceable because “the consideration for it was past and executed long before” Exceptions: Service with reasonable expectation of payment is provided and promise of compensation is subsequently made Promises reviving prior obligations Example: promise to pay old debt Class 15: Consideration and Form II Consideration — Pre-Existing Duty Basic issue: can promising to do what you’re already required to do be consideration? General rule: no new commitment = no consideration Concern: people might exploit urgent needs for unfair advantage/additional fee Three types of pre-existing duties: 1. Public duties 2. Duties to third parties 3. Duties to original promisor Specific Types of Pre-Existing Duties Public duties Public duty does not constitute good consideration unless something additional is provided Glasbrook Bros v Glamorgan County Council (1925) Mine manager asked for more police protection during a strike Decision: extra police protection is proper consideration Contracts CAN 39  Lord Denning stated in Ward v Byham (1956) that public duties without something additional can be proper consideration (though he’s in the minority) Third Party Duties i.e., using a duty you already have to perform to someone else as consideration for a separate deal Generally enforceable Scotson v Pegg (1861) Scotson had deal with third party to deliver coal to whoever they wanted him to Scotson delivered coal to Pegg, and Pegg refused to pay claiming Scotson was just performing a pre-existing duty Court ruled that Scotson had provided consideration (from duty to third party) as the delivery of coal was beneficial to Pegg Thus, a pre-existing duty to a third party can still be valid consideration if it benefits the new promisee. Shadwell v Shadwell (1860) Uncle promised nephew to pay him once he married his fiance Upon marriage, Uncle’s estate refused to pay, claiming he was simply performing a pre-existing duty (to wife) Court ruled that uncle’s promise was binding due to potential detriment to nephew (may have only married due to promise of money) and advantage to uncle (who wanted nephew to marry) Duties to Original Promisor Traditional Rule (Stilk v Myrick) One-sided variations (i.e., someone changes their promise and other doesn’t) not valid Example: higher price for same work Recent changes: Contracts CAN 40  Nav Canada and Rosas cases Moving away from traditional rule Now allowing modifications without new consideration Subject to no duress/unconscionability Partial Payment of Debt Traditional rule (Pinnel’s Case) Promise to accept partial payment in exchange for partial payment does not constitute consideration Foakes v Beer (1884) Foakes owed Beer a debt; Beer got a court judgment for the debt They made an agreement: Foakes would pay £150 in regular installments until full debt paid Beer promised not to enforce the judgment once payments were made Foakes made all the payments; Beer sued for interest anyway Decision: Ruling for P because agreement lacked consideration Foakes only promised to pay what he already owed Paying part of an existing debt isn't consideration for a promise to forgive the rest Exceptions: Payment by negotiable instrument (cheque instead of cash) even if lesser than original debt Foot v Rawling (1963): promise to pay in cheque instead of cash + promise from credit to accept lower payment = good consideration Class 16: Waiver + Promissory Estoppel Contracts CAN 41  Intro: Issue: non-enforceable (gratuitous) promises Waiver and Promissory estoppel are remedies Current status: Anglo-Canadian law: Defensive use only (’shield’) US/Australia: Can be used offensively (’sword’) Waiver and Estoppel by Representation: Waiver: Doctrine of Waiver: If promise (to waive a term?) is implied in negotiations and one party relies on promise, inequitable to allow other party to act as though promise didn’t exist. Hughes v Metropolitan Rwy Co (1877) Landlord told a tenant to make repairs within 6 months. The tenant was willing but wanted to negotiate selling the property back to the landlord first, and said they wouldn't do repairs during negotiations. When talks fell through after a few months and the 6- month deadline passed, the landlord tried to evict the tenant for not doing repairs. Ruling for tenant: By negotiating about buying the property, the landlord had implied they wouldn't strictly enforce the repair deadline. They couldn't suddenly enforce it after leading the tenant to believe otherwise. This is called waiver - giving up a right through your conduct. Estoppel by representation: “If A induces B to act to his detriment on the faith of a statement of fact, A cannot during litigation deny the truth of the fact at issue (Jorden v Money, 1854)” Simple terms: Legal principle that stops someone from going back on their word when others have relied on it; like saying "you can't take back what you said if someone has already acted on it.” Contracts CAN 42  Promissory Estoppel More robust version of waiver Promissory estoppel is similar to estoppel by representation but focuses specifically on promises about future actions. Central London Property Trust Ltd v High Trees House Ltd (1947) P promised D they only had to pay half-rent during wartime (until end of 1945); P re-instated old price after war, and attempted to get last 2 quarters of 1945 in-full; def. refused to pay and plaintiff sued; Judgement for the D; held that P could not go back on promise to accept reduced rent for the period when the flats were not fully occupied. This was held as a clear case of CLPT making a promissory representation that they intended HTH to rely on and thus were estopped from reneging. Requirements 1. Must be used defensively (can’t start the lawsuit) Combe (Wife) v Combe (Husband) (1951) Husband stated he would pay wife $100/year during divorce process; wife initially declined, then claimed she was owed it years later; decision for D; held that the wife could only enforce her agreement for the payment which was promised by the husband if she had given consideration Thus, promissory estoppel can only be used defensively (not by plaintiff) 2. Intended to be acted upon/detrimental reliance Detriment is not required, only that the person has been “led to act differently from what he otherwise would have done” (WJ Alan & Co Ltd v El Nasr Export & Import Co, 1972) 3. Nature of the undertaking is voluntary (D & C Builders Ltd v Rees, 1986) Contracts CAN 43  But doesn’t have to be explicit — can be inferred by words, conduct, or silence (WJ Alan & Co Ltd v El Nasr Export & Import Co, 1972) Proprietary Estoppel Special case for land interests specifically Where owner of land promises to another that latter shall have an interest in the land in the expectation that promisee will rely on that promise Example: Your elderly neighbor tells you "If you help maintain my garden for the next 5 years, I'll give you my house when I pass away." You believe this promise and spend years taking care of their garden, investing your time and effort. But then they change their mind or leave the house to someone else in their will. Generally: reliance involved is that promisee will then construct a building/make improvements upon promisor’s land where they expect that they will be available for benefit/use of promisee Three elements of proprietary estoppel (Cowper-Smith v Morgan, 2017): 1. A representation or assurance was made to claimant on basis that claimant expects that they will enjoy some right or benefit over property 2. Claimant relies on expectation by doing or refraining from doing something and reliance is reasonable in all circumstances and; 3. Claimant suffers a detriment due to their reasonable reliance to extent that it would be unfair or unjust for party responsible for representation to go back on word Class 17: Privity of Contract I Intro: 3rd parties can’t sue because they are not parties to contract Contracts CAN 44  A and B can enter into contract where, in return for services provided to A by B, A promises to pay money to C Only parties to contract (A and B) can sue A: Promisor B: Promisee C: 3rd party beneficiary 3rd party is left without any opportunity for remedy (controversial) Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd (1915) Development and Rationale: Tweedle v Atkinson (1861) Bride’s father and Groom’s father agreed to pay agreed they would pay money to groom before a certain date; they didn’t; Groom sued; ruling for D; court said groom cannot sue because he is a “stranger to consideration” and not a party to contract Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd (1915) P made tires and wanted to control their selling price. They made their dealers agree not to sell below a certain price and required dealers to get the same promise from retailers (like Selfridge). When Selfridge (D) broke this promise by selling tires too cheaply, Dunlop tried to sue them for £5 per tire. However, Dunlop lost because they weren't directly part of the contract with Selfridge - that contract was between the dealer and Selfridge: court said you can't sue on a contract unless you're part of it and have given something in return ("consideration"). Criticism from McCamus: Unclear why third party beneficiary isn’t a party to the agreement Unclear why the concept of privity just inherently flows from the doctrine of consideration Beswick v Beswick (1996) Contracts CAN 45  Dead guy sold business to nephew, because nephew promised he would pay an annuity to dead guy’s wife (widow) when he died; upon his death, nephew refused to pay; widow sued; ruling for D; widow was 3rd party and thus not party to contract Lord Denning was dissent; would have allowed widow’s claim London Drugs Ltd v Kuehne & Nagel International Ltd (1992, SCC) [Iacobucci] – acknowledged strong reservation about rigid retention of doctrine but believed legislature is the solution, not courts. Limitations on and Exceptions to Privity Agency: When someone acts on behalf of someone else (like a real estate agent making deals for their client) McCannell v Mabee McLaren Motors Ltd (1926) Think of it like sending someone to act for you. If you authorize someone (the agent) to make deals on your behalf, any contracts they make are treated as if you made them directly. Trusts: When someone holds contract rights as a trustee for someone else's benefit Schebsman, In re (1944) Example: If your parents make a contract with someone saying "pay $1000 to whoever is holding this money for our child," and they make your uncle the trustee (holder) of that money for you, you could enforce that contract even though you weren't part of it. This works because your uncle is legally holding those contract rights for your benefit. Collateral Contracts: Side agreements between main parties and third parties (like manufacturer directly promising something to a consumer) Shanklin Pier Ltd v Detel Products Ltd (1951) Tort: When breaking a contract also creates a legal wrong against a third party Contracts CAN 46  Assignment: When contract rights are properly transferred to someone else Donoghue v Stevenson (1932) Statutory Exceptions: Laws that specifically allow third parties to enforce contracts (like in insurance and mortgages) Special Common Law Cases: Employees can use their employer's liability limitations London Drugs Ltd v Kuehne & Nagel International Ltd (1992, SCC) Insurance-related cases Commonwealth Construction Co v Imperial Oil Ltd (1978) When the original parties clearly intended to benefit a third party (the "principled exception") Fraser River Pile & Dredge Ltd v Can-Dive Services Ltd (1999, SCC) Class 19: Misrepresentation I Intro: When A has induced B to enter into an agreement by making a material statement of fact that is false Main remedy is rescission Rescission sets aside agreement Only available if parties to agreement can be restored to their original position (before contract was formed) Other remedy is compensation via tort Deceit (for fraud); Negligence (for careless misstatements) Elements of Misrepresentation: Contracts CAN 47  Alleged misrepresentation must be statement of present or past fact that is false. This statement: Must have induced you to enter the contract Must be material to the decision of the claimant Generally not misrepresentation: Sales talk: vague/imprecise statement that “puff up” qualities of product is not misrepresentation (unless seller has privileged information about product that statement can be construed as implicit statement of fact) (Andrews v Hopkinson, 1957) Opinion: statements of opinion are not misrepresentation unless person giving opinion has expertise on the matter (Smith v Land and House Property Corp, 1984) Intention: representation that something will occur in the future is not a statement of fact (unless purported present intention when giving the statement isn’t their actual present intention) (Edgington v Fitzmaurice, 1885) Statements of law: traditionally not considered statement of fact, but there is jurisprudential movement away from this approach (Canadian Pacific Airlines Ltd v British Columbia, 1989) Requirements for misrepresentation: Materiality: Misstatement of fact must relate to a matter that would be considered by a reasonable person to be relevant to decision to form contract (Redgrave v Hurd, 1881) Need not be the only reason though, but must be part of the reason Inducement: misrepresentation induced claimant to enter agreement If claimant conducts own separate investigation of the facts and subsequently relies on the results of the investigation will generally not be said to have relied on the misrepresentation (Attwood v Small, 1838) Contracts CAN 48  If misrepresentation is of such a nature that it’s prone to induce the claimant to form contract, it’s presumed that inducement actually occurred (Mathias v Yetts, 1882) Non-Disclosure as Misrepresentation Traditional doctrine: Party negotiating an agreement is not subject to duty to disclose material facts to other party (Smith v Hughes, 1881).