Contracts CANs (PDF)

Table of Contents Week 1: Introduction to Contract Law...............................................................................................................................................................4 What is contract law and what is this course...................................................................................................................................................................4 Chen- Wishart Chapter 1................................................................................................................................................................................................................................................................ 4 What is the purpose of contract law?....................................................................................................................................................................................................................................... 5 Contract Law’s Norms and Assumptions............................................................................................................................................................................................................................... 6 The Classical Law of Contract....................................................................................................................................................................................................................................................13 History of Contract Law................................................................................................................................................................................................................................................................16 Intro to Contract Law............................................................................................................................................................................................................. 18 Jurisdiction..........................................................................................................................................................................................................................................................................................18 Intro to Offer and Acceptance............................................................................................................................................................................................. 19 Canadian Dyers Assoc. Ltd v Burton.......................................................................................................................................................................................................................................21 Week 2: The Creation of a Contract- Offer and Acceptance...................................................................................................................... 23 The Doctrine of Offer and Acceptance............................................................................................................................................................................. 23 Carlil v Carbolic Smoke Ball (unilateral)..............................................................................................................................................................................................................................23 Counter- offers vs Inquiries vs Acceptance + Revival................................................................................................................................................ 27 Livingstone v Evan..........................................................................................................................................................................................................................................................................27 Unilateral vs Bilateral Offers............................................................................................................................................................................................... 29 Acceptance................................................................................................................................................................................................................................. 30 Timmy v Campbell...........................................................................................................................................................................................................................................................................30 Week 3: Acceptance............................................................................................................................................................................................... 33 Battle of the Forms.................................................................................................................................................................................................................. 34 Butler Machine Tool Co v Ex Cell- O Corp............................................................................................................................................................................................................................34 Acceptance of Unilateral Contract..................................................................................................................................................................................... 37 Williams v Carwardine..................................................................................................................................................................................................................................................................38 R v Clarke.............................................................................................................................................................................................................................................................................................39 Century 21 Canada Ltd. Partnership v Rogers Communications 2011.................................................................................................................................................................40 Pharmaceutical Society v Boots Cash Chemists Southern (Boots)..........................................................................................................................................................................43 York v Christie...................................................................................................................................................................................................................................................................................46 Acceptance of Bilateral Contracts...................................................................................................................................................................................... 46 Saint John Tug Boat Co v Irving Refinery Ltd.....................................................................................................................................................................................................................47 Holwell Securities v Hughes (1974).......................................................................................................................................................................................................................................49 Week 4: Acceptance of Bilateral Offers........................................................................................................................................................... 51 The Need to Communicate Acceptance of Bilateral Offer......................................................................................................................................... 52 Felthouse v Bindley.........................................................................................................................................................................................................................................................................52 St John Tugboat v Irving Refinery (1964)............................................................................................................................................................................................................................53 The General Rule and the Postal Rule.............................................................................................................................................................................. 54 Holwell Securities v Hughes (1964) (Postal rule exception)......................................................................................................................................................................................54 Technological methods of communication.................................................................................................................................................................... 55 Entores v Miles Far East (1955)...............................................................................................................................................................................................................................................55 Brinkibon v Sahag Und Stalwharenhandelsgelsellschaft mbH 1983......................................................................................................................................................................56 Inukshuk Wireless Partnership v 425311 Canada Inc (2013....................................................................................................................................................................................58 Electronics Commerce Act (2000) s. 19- 22.......................................................................................................................................................................................................................58 Week 5: Termination of Offer............................................................................................................................................................................. 60 Revocation of Unilateral Offers.......................................................................................................................................................................................... 60 Dawson v Helicopter Explorations excerpts.......................................................................................................................................................................................................................61 Errington v Errington and Woods...........................................................................................................................................................................................................................................61 Kornerup v Raytheon Canada Ltd............................................................................................................................................................................................................................................63 Revocation of Bilateral Offers............................................................................................................................................................................................. 65 Bryne v Van Tienhoven Eng Court of Common Pleas.....................................................................................................................................................................................................65 Dickinson v Dodds...........................................................................................................................................................................................................................................................................66 Week 6: Lapse.......................................................................................................................................................................................................... 67 Lapse............................................................................................................................................................................................................................................. 68 Barrick v Clark...................................................................................................................................................................................................................................................................................68 Week 7: The Doctrine of Certainty of Terms.................................................................................................................................................. 69 McKendrick Introduction.............................................................................................................................................................................................................................................................72 Incomplete Terms - p. 147 - 160..............................................................................................................................................................................................................................................72 Sale of Goods Act..............................................................................................................................................................................................................................................................................72 May and Butcher Ltd v The King..............................................................................................................................................................................................................................................73 Hillas & Co Ltd v Arcos Ltd..........................................................................................................................................................................................................................................................75 Foley v Classique Coaches Ltd...................................................................................................................................................................................................................................................78 Excerpts from case law.................................................................................................................................................................................................................................................................79 Mechanisms and Formulas..........................................................................................................................................................................................................................................................80 Sudbrook Trading Estate Ltd v Eggleton (not binding law in Ontario).................................................................................................................................................................81 Week 9: The Doctrine of Consideration........................................................................................................................................................... 84 What is Consideration?.......................................................................................................................................................................................................... 84 General..................................................................................................................................................................................................................................................................................................85 Illusory v Implied Consideration..............................................................................................................................................................................................................................................88 Past Consideration..........................................................................................................................................................................................................................................................................92 Consideration and Contractual Variations.................................................................................................................................................................... 98 Contractual Variations Through Promises to Pay or Provide More/ Pre-existing Contractual Duties..................................................................................................99 Week 8: Promises Continued............................................................................................................................................................................103 Contractual Variations Through Promises to Pay More/ Pre-existing Contractual Duties...................................................................... 104 Williams v Roffrey Bros- England (not binding)........................................................................................................................................................................................................... 104 Greater Fredricton Airport Authority Inc v NAV Canada.......................................................................................................................................................................................... 106 A note on Consideration and Mutual Rescission........................................................................................................................................................................................................... 111 Contractual Variations through Promise to Accept Less/ Accord and Satisfaction..................................................................................... 113 Foakes v Beer.................................................................................................................................................................................................................................................................................. 114 Accord and satisfaction: British Russian Gazette and Trade Outlook, Ltd. V. Associated Newspapers, Ltd., (binding).............................................. 115 Week 9: The Doctrine of Privity.......................................................................................................................................................................121 Illustration of the Parties of Third-Party Beneficiaries......................................................................................................................................... 122 Introduction.................................................................................................................................................................................................................................................................................... 122 Tweddle v Atkinson..................................................................................................................................................................................................................................................................... 123 Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd................................................................................................................................................................................................... 125 Ways in Which Third Party May Acquire Benefit..................................................................................................................................................... 128 (a) Employment and Subrogation........................................................................................................................................................................................................................................ 128 Week 1: Introduction to Contract Law What is contract law and what is this course Chen- Wishart Chapter 1 Textbook definition of a contact: an enforceable promise (or agreement) 3 elements: ○ Promise: focus on the voluntariness and seriousness of the undertaking given by the promiser ○ Agreement: the focus is bilateral or multi-lateral. Reaching a consensus with others ○ Recognition by the law: the state that gives the legal apparatus to enforce contracts Gives reliability or voluntary exchanges and bridges gaps in trust and sanctions Contract law as applied by the courts that determine: ○ Whether, when and what the parties have agreed ○ Whether one party can escape from the contract ○ How breach should be remedied ○ What happens when the contract is silent or uncertain on a disputed matter What is contract law? Promises and agreements are abstract concepts Contract law developed and applied by the courts that defines how the practice of making agreements should be conducted The outcome of cases depends on the process of judicial application of contract law rules or on the parties’ own bargaining in the shadow of the law A contract is “a legally recognized agreement between two or more persons, giving rise to obligation that may be enforced in the courts” – GHL Fridman, The Law of Contract in Canada 6 th Edition (Thompson Reuters Canada, 2011) at 5 Contract law is an area in which relatively few legal principles are used to assess vast swaths of personal and economic relations, with wholly different factual contexts: ○ Family law ○ Employment law ○ Shareholder agreements ○ Banking What is the purpose of contract law? Purpose 1: To allow parties to engage in the actions of buying and selling goods, services, employment, etc. o Contract is the legal vehicle by which parties trade rights to property and/or other entitlements/obligations. Purpose 2: Forward Planning o Contract allows us to create present legally enforceable obligations regarding future action, prior to the performance of those obligations. Purpose 3: Distributive power between market actors o It does so by deciding: ▪ what types of behavior are acceptable and what aren’t, ▪ what types of transactions will be enforced and which won’t, ▪ what types of remedies will be awarded, and which won’t. Purpose 4: Creating certainty for market actors o One of the primary justifications for the current form of contract law is that... o Contract law shouldn’t change much because people need the certainty and security of its available legal remedies for the market to function and for people to plan future transactions But, as many argue, the vast majority of contracts are never litigated, and the parties resolve the problems amongst themselves or through non-legal pressures. If the vast majority of cases are not litigated but resolved by other means, why then do we care about contract law? o Provides a vocabulary for negotiation (bargaining in the shadow of the law) o Creates incentives to resolve disputes outside the courts o Serves a normative function in setting norms for acceptable behaviour on the market The law becomes an essential ingredient in the market order, not because transactions could not take place without it, but because it supplies an authoritative determination of the standards to be observed in case of dispute, and supplies a discourse in which the detailed specification of standards can be articulated.” – Collins We’ve seen that contract law operates as a state-based institution facilitating transactions on the market More generally, we can also think of contract law as: o Social relationships o As a method of shifting risk between parties o As a problem-solving tool o And as an instantiation of certain ideas about the relationship between individuals, each other and the state Contract Law’s Norms and Assumptions Free Will Contract Norms A contract is A legally recognized agreement between 2 or more persons, giving rise to obligations that may be enforced in the courts- Fridman Definition encapsulates several norms from free will contracting about what contract law is/does Norm 1: Exchange o Parties exchange something with one another o In legal terms, we say there must be an exchange of promises/acts/forbearance from acting = consideration o A naked promise, a nudum pactum (an unreciprocated promise) is not enforceable as contract. o When each party promise to give, do, or to not do something for one another, they bind themselves to do something in the future Norm 2: Meeting of the minds (consensus ad idem) o Transaction is voluntary = product of party choice o Terms are negotiated = both parties equal before the law ▪ Parties negotiate at arm’s length in own self-interest ▪ Using market pressure is appropriate ▪ Caveat emptor – buyer beware ▪ Socioeconomic pressure is a normal part of the market’s operation Norm 3: The courts are not concerned with fairness of the exchange o Because the parties have entered into the agreement voluntarily; and o Because they’ve bargained and come to agreement – they have voluntarily CHOSEN the terms that bind them o The court’s only job is to interpret and apply the terms they’ve chosen. These norms provide a vision of how people should act on the market And what the goals of regulating social and economic life should be The questions which contract law addresses Contract formation: contract law determines the types of arrangements that will be recognized and supported as contracts. The courts first look for an agreement: ○ Objective tests to see parties’ intentions ○ Mirror image approach to finding an agreements One party’s offer must be mirrored by the other’s acceptance ○ Requires sufficient certainty ○ Commercial agreements have but not agreements made with family or friends have the necessary intention to create legal relations The claimant must satisfy one of the following tests of enforceability to be able to sue on a promise: ○ Consideration: The claimant has given or promised something in return for the defendant’s promise ○ Promissory estoppel: The claimant relied on the defendant’s promise and it is inequitable for the defendant to go back on it ○ Formalities: the defendant’s promise is compelled by formalities requirements (ex. Signed and witnesses) Privity Who can acquire rights or be subjected to liabilities by a properly made contact? Legal impact of contracts on the contract parties Contract parties can’t impose burdens on third parties ○ There are a few exceptions Vitiation When can a party be excused from a contract? Defeasibility rule: when arrangements don’t get the legal support ○ Usually when there is a misinterpretation, mistake frustration (change in circumstances), duress, undue influence, unconscionability, an improvident guarantee, incapacity or illegality or contravention of public policy Contents What are each parties’ rights and liability ○ What are the express terms ○ What do the terms mean ○ Any implied terms or collateral terms that should be added? ○ Are any of the terms invalid and so should be subtracted ○ Is the whole contract enforceable for being illegal or contrary to public policy Remedies for Breach Parties discussed what should happen on breach, contract law sees if the agreed remedy is enforceable If there are no remedies, contract law provides a menu of default remedies to the aggrieved claimant who satisfies their requirements as long as there is no double recovery ○ Termination: the claimant may be allowed to discontinue her own contractual performance ○ Damages: awarded a sum of money that will put the claimant in the position they would have been in if the contract was performed ○ Actual performance: the claimant may be able to compel the contract-breaker to perform the contract Sources of contract law Sources: ○ Common law and legislation Legislation: statutes and regulations made by the Parliament Common Law: judge made laws ○ Reasoning is inductive (from case to principle) ○ Bottom-up approach ○ Common law includes but can also be used to contrast with equity The Judicature Act 1875 fused the 2 courts so that a single court now administers both common law and equity Modern courts should use the power inherited from both courts to develop appropriate and flexible responses to contractual problems Legislation is the other source of contract law ○ Some statues are codifying: they collect together and restate the common law ○ Other statutes are reforming; they remedy deficiencies in the common law Free judges from adherence to previously decided cases Understanding legal reasoning Contract law is applied by the courts and courts have considerable latitude in determining the outcome of cases Judicial latitude resides in: ○ Determining the facts ○ Selecting which rule to apply ○ Determining the outcome Up to the court to determine how a reasonable person would interpret the relevant conduct Courts decide: ○ If both parties were mistaken about the matter ○ The matter was of fundamental importance and/or ○ The mistake doctrine applies or a related doctrine such as misinterpretation or undue influence The degree of flexibility or indeterminacy- the range of fact-finding is possible and a ranger of rules can be applied without the courts being demonstrably “wrong” Judicial discretion- when courts are required to apply broad standards Value judgements may affect the particular facts found, the selection of applicable rules and the way in which discretionary standards are applied by the courts Courts often engage in backward reasoning (desirable solution to the selection of the principle) ○ This justifies rather than explains the outcome The Critical Legal Studies (CLA) theorists point out the contradictory norms and the imprecision of doctrines that fail to dictate a result ○ Say that legal outcomes are predictable bc the outcomes lean toward reinforcing the existing power structures Values affect the decision-making process in courts Values reflected in contract law Contact is a mix of comepteing values or policies Makes contracts legally enforcebale to enhance individual freedom Contract law facilitates and regulates the practise of contracting= classical mode of contracting ○ Reflects the dominance of laissez- faire economic attitudes in the 19th century ○ Personal freedom and wealth go hand in hand The principles of this emphasis on freedom of contract are that: ○ Contract parties r sovereign ○ Law should impose menial restrictions- simply to effect to the parties’ agreement ○ Contract rules should be few, clear, consistent with commercial expectations and apply to all contracts ○ Contract should be interpreted within its four corners without reference to the external context These ideals are reninfroced by a particular paradigm of contracting in which: ○ Presumed equality between parties ○ Contract is negotiated, freely agreed and therefore fair ○ Contract is discrete- its boundaries are clear and performance are more or less instantaneous Contact parties act only out of self- interest and adopt an adversarial stance Forfeturfes could invalidate the whole contract or particular terms Neo- classical contract law: characterized by a move away from the classical values towards doctrines and statutory provisions that regulate the practise of contracting in the interest of fairness and flexibility This movement is masked bc: ○ Classical law still acts like a shadow - courts reinterpret established legal concepts rather than abandon them ○ Diff types of contract that need greater legal regulation are ignored in discussions on general law of contract ○ The majority of cases that reach the courts still mirror disputes in classical modes of contract law Freedoms and limits on freedom “Freedom of contract”: the parties are free to choose whether, when and to what they bind themselves via contracts ○ It helps people get a range of desired outcomes Minimal regulation of contracting The classical model- contract law as a non- interventionist role ○ Enforcing and identifying parties’ agreement ○ Procedural fairness Substantive fairness (outcome of negotiations)- justifies in making sure there is a range of welfare Procedural and substantive fairness overlap Equality and inequality Classical- ideology of equality ○ Everyone is free to chose to enter a transaction to improve their position in life ○ Depends on one’s merit Traditional social orders- which determines a person’s welfare by reference through social status Formal equality doesn't guarantee substantive equality negotiated/ standard form contracts Standard form contrat- pre- drafted by the stronger part to ○ Maximize protection of its own interests ○ Minimize its own liability ○ Avoid legal control Stronger party does a “take it or leave it” basis Mixed theory- criticism- it is unstable How far does contract law reach? 3 factors limit the impact of contract law: ○ Contract law’s reluctance to intervene in family or social arrangements ○ Specialist regimes that have replaced general contract law in many areas ○ Empirical studies which indicate that limited relevance of contract law in real life Family and social arrangements Economic exchange taking place in the market Reluctant to get involved in non- market transactions which take place in family or social context Specialist areas: law of contract or law of contracts We do not have a unified law of contract but a differentiated law of contracts Specialist regimes emphasize certain values and policies which retain the fundamental assumptions of classical contract law Empirical evidence: contract law in the real world People dont conform to the paradigm contract part Business people often do not: ○ Plan or draft agreements carefully ○ Consult lawyers ○ Think in terms of their legal rights ○ Understand the legal ramifications of their contracts or ○ Resort to the law when something goes wrong Relational contract theories argue that classical contract law is unstable for regulating most modern business arrangements as it ignores their relational dimension Contract law’s relationship to other branches of private law Contract law in the context of private law branch: ○ Another pov of contract law ○ When branches of private law can solve a problem Contract law’s place in private law Public law is conercened with the relation ship between the citizens and the state Private law is concerned with the rights and obligations between citizens generated by their interactions Contact law is a part of private law The orthodox view: ○ Contractual obligations are gerneated by voluntary undertaking obligations to another who gives a reciprocal voluntary undertaking or performance or by deed ○ Obligations in tort are made by other people’s right to be free from certain harms ○ Obligations in unjust enrichment- made by receipt of an unjust enrichment etc Contract duties are seen as self- imposed a) The Hisory and Norms of Contract Law The Classical Law of Contract the new law of contract in the nineteenth century possessed two striking features. It was simultaneously sparse in content and imperialist in its ambitions of interpretation a n d regulation. These features have subsequently earned it the title of the classical law of contract. e law then permitted its restatement in a few terse rules. A, second distinctive characteristic of the nineteenth-century conception of contract law was the extent ot which lawyers conceived so mamy different types of social relationships as falling within the conceptual framework of contracts Together with the law of private property, the law of contract supplied most of the key principles through which lawyers sought to interpret and thence regulate every aspect of economic social relations.. Obligations based upon status, trust, and economic dependence were reinterpreted as contractual arrangements to be governed by the new organizing classification of contract law. Carlill u Carbolic Smoke Bal Co ○ the defendant manufacturer of these carbolic smoke balls placed an advertisement in a number of magazines which claimed that the product would cure all sorts of ailments ○ The defendant added that it would pay £100 in compensation to anyone who contracted influenza despite using the smoke ball according to the printed directions supplied with the ball, and, to demonstrate its sincerity, the defendant deposited £1,000 in a bank. ○ A plantiff caught the disease ○ The Court of Appeal upheld the plaintifi's claim for £100, asserting that she had formed a The law of contract is used by the court as an instrument dfoer discouraging misleading and extravagant claims in advertising, and terring the marketing of unproven and perhaps dangerous pharmaceuticals. considerable analytical rigour based upon a terse set of rules. The court operates acheck-list for determining whether an enforceable contract has been made. The judges run through a shopping-list of questions. The latent social ideal of the nineteenth-century law of contract embodies a libertarian state, in which the law maximizes the liberty of individual citizens, encourages self-reliance, and adopts a n avowedly neutral stance with regard to permissible patterns of social life. The law of contract secures these goals perhaps more effectively than any other category of the law by facilitating the creation of legal obligations on any terms which individuals freely choose. The fundamental analytical framework of the law of contract became one which focused upon the voluntary choices of individuals. The role of the law ofcontract was conceived principally as the facilitation ofvoluntary choices by giving them legal effect 2. Towards a new conception If the case was today we would: ○ first note that legal regulation attempts to proscribe the marketing of dangerous or ineffective drugs through licensing systems and bans supported by criminal sanctions ○ Note the array of cirminal regulations which control marketing strategies sucj as false and misleading advertising ○ Economic relationship between manufacturer and consumer has become subject to mandatory laws which establish strict liability for defects resulting in personal in juries irrespective of the choice of the parties We need to construct a new conception of the law of contract. It should provide a system of thought that illuminates present concerns of government, and that helps to analyse issues within an intellectual framework which has a place for all the relevant rules and doctrines. By emphasizing how modern ideals of social justice channel market transactions into approved patterns, this conception of contract removes the assumption that the law provides an open-ended facility for making binding commitments. we should define the field of inquiry by considering al those rules which serve to mould the form and content of market transactions, whether they be criminal offences, civil obligations of compensation imposed by the law In one respect, however, this revised conception of contract law narrows the focus of study. 3. The market order Every society creates an order of wealth and power. It establishes rules and institutions which direct the means for the creation and distribution of wealth and allocate power to certain individuals to control others. Consequently, the law of contract, which regulates these transactions, plays a leading role in determining the order of wealth and power. Many market transactions comprise a fragment of the vertica integrated production scheme known as the firm. ○ The firm, acquires capital through a mixture contractswithshareholdersandloansfrombanks.Thefirmactingthrou its directors, who are its contractual agents, employs managers ot organ p r o d u c t i o n ○ E m p l o y e e s of t h e fi r m a c c e p t t h e m a n a g e r s ' c o n t r a c t u a l r i g to direct and control their efforts during working hours in return for t payment of wages. ○ The firms enter numerous agreements It is a mistake, therefore, to think that power relations are only established by long-term contractual relations such as employment and franchises, for the presence or absence of contractual rights and immunities after a discrete transaction such as a sale of goods also signifies a power relation. Market transactions regulated by law can never be free. An interpretation of the law of contract therefore becomes an interpretation of a particular distributive order contained in a legal system. ○ Distribute principles that govern the allocation of rights and duties in the marketplace 4. The constitution of the market On the one side, it is argued that without the secure, calculable framework provided by the law of contract, then a market order could n o t exist. This i s the Hobbesian presupposition that the indispensable function of the law of contract is to provide the necessary insurance against breach of promise, for without a legal sanction, each party might seek to cheat and renege on the transaction On the other side, however, it is observed that the vast majority of transactions are 'self-enforcing' in the sense that both parties will complete their side of the bargain out of self-interest. People do not think about the legal aspects, but simply get on with their business The truth lies between these positions The law of contract gives essential tools for the construction of private institutions of governance between the parties Norms govern any type of contact Norms are influenced in their content each other Laws represent these norms just in writing rather than word of mouth Law plays a supplementary role in constructing mechanisms for self- help ○ Supports alternate dispute resolutions mechanisms ○ Assist in constructing credible commitments ○ Allow parties to establish arrangements under which there is no need to rely upon judical sanctions ○ Provides authoritative point of reference History of Contract Law History: free will contract When Indigenpus lands were colonized, the English brought common law with them o Included the theory of free will contract which began in England at the turn of the 19th century Aka the Ideas of classical contract Remained binding in Canada until 1952 Industrial Revolution: in England starts in the second half of the 18th century accelerated in the 19th century Massive changes in methods and sites of production (from the house to the factory, mechanized) in transportation and communication technologies Growth of the middle class, explosion in waged labour, massive urbanization Rural to cities o Change in social changes and political ideas ▪ Common law took a different form At the same time liberal ideas of state, market and citizen took hold in England Contract law was reshaped in conjunction with the rise of liberal ideology and the emergence of a capitalist market system Capitalism emerged underlying the market Movement from status to contract - Henry Sumner Maine This process brought about a change from a system in which rights and obligations were determined by social status and property ownership To a system where everyone was theoretically equal before the law, because they had the same rights and entitlements. And by “everyone” they meant only white men (regardless of class) Laws and rights given based on social status and class o And property ownership The classical law of contract was designed to “maximize the liberty of individual choices, encourage self- reliance, (the state) adopted a neutral stance with regard to the permissible patterns of social life”- collins, classical contract at 6 Judges with new ideas and legal principles to match the legal philosophy around them Rights were theoretically universal- this was their goal o Encourage self-reliance etc State took themselves out of people’s transactions The new law of contract emerged as legal actors began to articulate general principles that would untie what previously had been different rules for different types of transactions The courts began to explain an increasing number of transactions as contracts, things like marriage, employment, consumer transactions etc all of which were going to be analyzed through a few general sets of contractual principles The contract was gonna rep those principles Before there were rules for different types of transactions that were detailed Over the 19th century- the legal community developed a small number of legal principles o Applying to all transactions o Imperialist in ambition bc of this The commodification of social life - facilitated by the principles of free will contracting Accuracy of Classical Contract’s Vision?: Voluntary transactions vs economic coercion In a capitalist society power is allocated through wealth. The market provides the principal method for the creation and distribution of wealth (along with inter-generational wealth and taxes). Contracts are the primary mechanism by which market exchanges occur Because the parties are equal in the law,...and the state doesn’t impose any official system of wealth distribution,...some believe that wealth is distributed primarily through individual choices on the market,... and as such the system is therefore fair Each person’s fate is determined by their own choices More competition= more choice Choice= freedom= fairness Substantive equality is not the goal, because if it were, we would need to look at the differences in market power between the parties. The goal of social life is freedom, and more choice equals more freedom Milton Friedman tells us that “[t]hose of us who believe in freedom must believe also in the freedom of individuals to make their own mistakes”. - Capitalism and Freedom, 1962 p 187. Others disagree: o They argue that idea of individual choice and voluntary transactions doesn’t account for the coercive effect of the market. o We often accept unfair deals because we need something o Critique 2: Contracts don't only include terms chosen by the parties: ▪ Many statutory terms read into contract ▪ Courts imply terms o Critique 3: the courts don’t only interpret and apply the terms chosen by the parties ▪ Judges make choices, fill gaps, discuss what a “reasonable person: would do/ think Intro to Contract Law Jurisdiction Canada is a federation, ie provinces and federal jurisdiction. Constitution apportions areas of jurisdiction between the provinces/territories and the federal government. Contracts fall under provincial jurisdiction, s.92(13) - Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c 11 Common Law The contract law is a species of common law. Three official sources of law in Canada o Constitution o Legislatures o Common Law/Civil Code in QC Although not officially acknowledged, Indigenous Legal Orders are also part of the law of this land. Constitution – created by agreement btw provinces o Highest law of the land o If it applies, it trumps any contradictions arising from statute or CL Legislatures – elected provincial government o Within each jurisdiction, statute trumps common law because enacted by policy choices of elected representatives Common Law o Common law can be slightly different per jurisdiction o Judge-made law - it gives way if its content contradicts statute or the constitution When judges are dealing with the constitution they are engaged in constitutional interpretation. o External source of law (constitution) – judges’ job is to interpret what the constitution requires When judges are engaged in interpreting a statute, the are engaged in statutory interpretation. o External source of law (statute) – judges’ job to interpreting what a statute requires When judges are making decisions about the common law, o they are MAKING law, or APPLYING judge-made law already determined Common law is judge-made law. Its content has been elaborated by judges over time. In many areas otherwise regulated by the common law, jurisdictions have enacted statutes that codify, amend or repeal common law principles The idea that there are two clearly separate areas - public vs private law - is heavily criticized but still used. Private law areas are legal regimes that regulate the relationship between people, and between people andthings. o This includes property, contract, and torts in upper year Contract law o Regulates “voluntarily assumed” obligations between legal persons. o Effectuates the transfer of property between parties. o In both ways, it plays a large role in regulating the market Intro to Offer and Acceptance For a contracts case to come before the courts, one party needs to start a claim. o One party, the plaintiff, files submissions with the Superior Court of Justice (in Ontario), explaining the basis of their claim (why they think their contract has been breached). o The party against whom they’ve brought the claim, the defendant, then makes written submissions about why there is no claim/they’re not liable Litigation is filed: o The parties’ lawyers negotiate a settlement o Or it proceeds to court, where the lawyers speak to the arguments they made in their submission and the court decides Generally, the party who brings the claim bears the onus (has the obligation)......to demonstrate the existence of all elements needed to prove a contract breach claim. o The person who claims must prove For a plaintiff to successfully demonstrate that the defendant breached their contract, they must show: o The existence of an enforceable contract o A breach of the defendant’s obligations under the contract o That no defense applies to render the defendant not liable for breach o That the defendant’s breach caused the plaintiff a compensable loss The doctrines that make up each step= contract law’s internal architecture To create an enforceable contract requires the presence of: o Offer and acceptance, properly communicated o Cerrtainity of terms o Consideration o In some cases, formalities Offer and Acceptance The purpose of the doctrine of offer + acceptance is to determine: o Agreement: That the parties have in fact come to a meeting of the minds on terms by which to be bound. o Where and When: The specific moment and location where a contract becomes binding and its obligations begin to run, and o Terms: The essential terms to which the parties have bound themselves (contained in the offer, properly accepted) The doctrine of offer and acceptance raises a few issues in law: o What is an offer? o What constitutes acceptance of an offer? o How must that acceptance be communicated? o When can an offer be terminated, revoked or lapse before its accepted? o What/ is there a difference in each of the above points is the offer is bilateral or unilateral? The first step to determine offer and acceptance is to determine whether there’s been an offer. If there’s no offer, there’s nothing to accept and therefore no contract. The Conceptual Foundation of the Doctrine The Conceptual Foundation of the Doctrine: Free will contracting presents contracts as the product of voluntary exchanges, where the parties choose to be bound to one another and choose the terms on which to do so. There must therefore be a ‘meeting of the minds’ between the parties, or consensus ad idem in Latin, a time where both parties are of one mind on the when and what of the terms that will bind them. The doctrine of offer and acceptance is one way in which the courts determine the presence of a meeting of the minds Canadian Dyers Assoc. Ltd v Burton Case Canadian Dyers Assoc Ltd v Burton 1920 ON HC Facts The house in question is next door to the factory of the plaintiffs, and the defendant had been a director of the company The plaintiff wrote to the defendant: "With reference to purchasing this property (25 Hanna avenue), kindly state your lowest price. We will then give the same of our best consideration." The defendant answered: "Re house 25 Hanna. The lowest price I would care to sell at cash would be $1,650, as anything less would not bring me in as good a return for my money as my present rental." The plaintiff responded a year and a half later: "We would be pleased to have your lowest price for 25 Hanna Avenue. Perhaps we could get closer together than the last figure given us." The defendant then responded that the last price they offered was the lowest they were prepared to accept, and in present conditions, they feel that it is exceptionally low and they would ask more from any other party This was treated as an offer and accepted A cheque for $500 was sent, and the defendant was asked to have a deed prepared The defendant's solicitor sent a draft deed and said he would be ready to close However, 4 days after the closing date, the defendant's solicitor wrote that there was no contract and returned the cheque Issue Was there a contract Legal Reasoning The court starts off by telling us that the elementary principle is that “there can be no contract unless there can be found an offer to sell or purchase, and an acceptance of the offer A mere quotation of price is not an offer The question is one of intention; and whether a proposal is to be construed as an invitation to deal or as an offer which can be turned into a binding agreement by acceptance depends on the language used and the circumstances of the particular case” Based on the previous exchange of letters, and those of the 1919, the court believes this is the sequence of events: o 1. the letter of the 16th, the 2nd request was a request for a price at which the D would be willing to sell, an invitation to treat o 2. the response of the deft seller on the 21st was more than a quotation of price, it was a statement of a readiness to sell at the price named which the plaintiffs accepted On behalf of the defendant, there was a statement of readiness to sell to the plaintiffs at the price already named and thus this is an offer In the other cases noted above, the conduct of the defendant had been consistent with the view that an offer has not been made (the idea of a contract was at once disavowed without further action on his part) When the plaintiff's cheque and letter reached the defendant asking to have a deed prepared, the defendant did not say "there is no contact"; instead, he submitted a deed and suggested an immediate search of his title, and names an early date for closing -- in the meantime retaining the cheque sent This exchange was more than a mere quotation of price -- it was an offer, or a statement of readiness to sell This constitutes a contract of sale as there was an offer to sell and an acceptance of the offer/ an offer to purchase and an acceptance of that offer Holding Yes, there was a contract In favour of the plantiff Ratio To determine what is an offer and an invitation to treat: The court says we look to the language used, in light of the circumstances in which it is used (the context), to see if what is said by the vendor is an offer to sell or a mere quotation of price To determine whether a proposal is an offer, we look to the language used, in light of the circumstances in which it is used (the context), to see if what is said by the vendor is an offer to sell or a mere quotation of price. – Cdn Dyers The question is one of intention; and whether a proposal is to be construed as an invitation to deal or as an offer which can be turned into a binding agreement by acceptance depends on the language used and the circumstances of the particular case A mere quotation of price, without more, is not enough to make an offer If one does not reject a letter of offer and/or some sort of deposit, a contract can be said to be made. Subsequent actions of a party can be helpful in determining if they intended to make an offer or an invitation to treat It is important to assess the intention of the person making the proposal, including objectively assessing whether a reasonable person would read it and would understand the offeror to be willing to be bound in the terms proposed, based on the language used, the context, and the circumstances If there is a readiness to sell, there is an offer Notes An offer is "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree".- Treitel, The Law of Contracts 10th Edition at 8, adopted in Kiyo Itakura Investments Ltd. v. Bentall Properties Ltd. 1993 CarswellBC 2015 Harvey v. Facey, A.C. 552 o A purchaser sent a telegram asking if they will sell them B.H.P. and what the lowest telegraph cash price was o The purchasers responded with what the lowest cash price was o The plaintiffs assumed this was an offer and wired acceptance o However, there was no contract as the defendant only replied to the second question -- stating what the lowest price was -- and did not confirm that they will them B.H.P. o An affirmative answer to the first question was not implied, and the defendant had made no offer to sell. But stated only his price Johnston v. Rogers (1899), 30 0.R. 150 o The vendors sent a circular letter quoting a specific price o This was not held to be an offer to sell, but a mere INVITATION to make an offer to purchase Harty v. Gooderhan (1871), 31 U.C.R. 18 o A quotation of prices, followed by the statement, "shall be happy to have an order from you, to which we will give prompt attention," was held to be an offer which became a contract upon the plaintiff's acceptance Week 2: The Creation of a Contract- Offer and Acceptance The Doctrine of Offer and Acceptance Carlil v Carbolic Smoke Ball (unilateral) Case Carlil v Carbolic Smoke Ball Co Issue Is there a contract between the plantiff and the defendant When is an advertisement capable of being an offer vs an invitation to treat? Can an offer be made to the entire world? Was this offer to the world capable of being accepted by anyone who performed it? How did Carbolic Smoke Ball Co. know who accepted the offer? How long was the offer to last? Statutory Provisions Facts The carbolic smoke ball (CSB) are the proprietors and vendors of a medical preparation They were in the Pall Mall Gazette Advertising their carbolic smoke balls as a remedy to influenza and giving a reward to those who still have influenza after using the ball 3 times daily for 2 weeks Carill was the plaintiff who caught influenza after taking it The trial judge was in favour of Carill The defendants appealed saying that the documents were a contract too vague to be enforced Saying it was just an offer made to the public Saying the intention was just to circulate the smoke ball No time limits Defendant’s argument: o Intent: ▪ Wording is too vague to indicate intent to be bound ▪ Cant be intended as an offer because unreasonable to make an offer when can’t check if the conditions are met o Cant make a contract with the world o Offer is puffery Ratio In continuing/unilateral offers, the performance of the offer is sufficient notice of acceptance. While one cannot contract with all of the world - one can make an offer to all the world which then becomes binding by those who perform the required conditions Whether or not an ad is intended as an offer or as an invitation to deal must be construed based on the way ordinary people would read it. Would the ordinary reader view it as an invitation to negotiate, or an offer demonstrating an intent to be bound by acceptance? While one cannot contract with all the world, one can make an offer to all the world which specifies the performance of an act as acceptance. Such an offer may thus impliedly or expressly dispense with the need to communicate acceptance, and the offer becomes binding by those who perform the required condition Legal Reasoning Although it is important to let the person know who made the offer that they accepted it, in this situation where it was implied, the person did not have to inform the offer person that they accepted that offer, only that they followed the conditions This offer was made with everyone so it would form a contract with anyone that fulfills the condition The offer is a continuing offer Bowen J. says that though this is not a contract made to the entire world, “this is an offer made to the entire world”. The acceptance/ formation of the contract is when the limited portion of the public comes forward and performs the conditions on the faith of the advertisement. The Court said that it can’t be a mere puff when Carbolic said it was going to deposit money. If you make extravagant promises, you must be held liable for them. The issue Carbolic raised was that there was no formal communication by Carlill of acceptance; the general law is that you must communicate acceptance. But, the court retorted, there was a unilateral contract (acceptance via performance), and as per offer, acceptance is only done in the matter in which it was advertised. So, unless you say how acceptance is to come about, then you must fulfill the reward. In other words, if there were other conditions required, they had to be communicated, which they weren’t. The offer was a continuing one, and it was never revoked. Consideration factored in for the defendant because it is an advantage to them to have the public buy the product. It’s also very inconvenient to fill out the daily use of the smoke ball, so it’s consideration through performance. Whether or not an ad is intended as an offer to be acted upon or as an invitation to deal must be construed based on the way ordinary people would read it. Would the ordinary reader view it as an invitation to negotiate, or an offer demonstrating an intent to be bound by acceptance The court says that the purpose of the ad was to make people use the smoke ball- not buy it but to use it The way the public would read the ad: if someone read the ad, then used the smoke ball as directed and then got the flu, they’d be entitled to the reward Conclusion The appeal is dismissed Appeal dismissed; in favour of the plaintiff (entitled to the 100 pounds) Notes Puffery is sales talke, hyperboke, which a reasonable person would not interpret literally This is a unilateral offer Synthesizing the Test for Offer Canadian Dyers: To determine whether a proposal is an offer, we look to the language used, in light of the circumstances in which it is used. The question is one of intention; and whether a proposal is to be construed as an invitation to deal or as an offer which can be turned into a binding agreement by acceptance depends on the language used and the circumstances of the particular case We determine whether a proposal is an offer by asking whether the person making it intended to be bound to the receiving party if they accept its terms This intent is determined based on whether, given the language used and the circumstances, an ordinary person would understand the proposal as one the person making it wanted to be bound to if accepted- in Carbolic as well Carbolic: Whether a proposal is to be construed as an invitation to deal or as an offer that can be turned into a binding agreement by acceptance is a matter of the intention of the person making the proposal. Offer Cdn Dyers v. Burton: The first thing that is needed to create a legally enforceable contract is offer and acceptance. An invitation is an invitation to negotiate. It is not an offer and not capable of acceptance. Whether a proposal is to be construed as an invitation to deal, an invitation to negotiate, or as an offer that can be turned into a binding agreement by acceptance is a matter of the intention of the person making the proposal. Whether that individual intended their proposal to be capable of acceptance (be an offer), will be discerned by looking at the language used and the circumstances of the particular case. The mere quotation of price does not, without more, imply an intent to sell Kiyo Itakura: An offer is "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree". Carlill vs Carbolic Smoke Ball: Whether or not an ad is intended as an offer or as an invitation to deal must be construed based on the way ordinary people would read it. Would the ordinary reader view it as an invitation to negotiate, or an offer demonstrating an intent to be bound by acceptance? Where an offer requests a promise as acceptance (rather than an act), the offeree must communicate acceptance to the offeror so that both the offeror and offeree know they have come to a meeting of the minds. While one cannot contract with all the world, one can make an offer to all the world which specifies the performance of an act as acceptance. Where such an offer occurs, known as a unilateral offer, it is the performance of the act that creates acceptance, not communication of acceptance. Indeed, communication of acceptance is not required for unilateral offers, because in choosing to make a unilateral offer, the offeror is also choosing to dispense with the need for the offeree to communicate acceptance. Puffery is ‘sales talk’, hyperbole that a reasonable person would not expect to be binding. The first thing needed for a validly binding contract is an offer that is accepted. – Canadian Dyers, Carbolic. This is needed to show that the parties have engaged in a meeting of the minds regarding all essential terms. This helps the courts to understand at what point and where the parties are bound, the obligations of the parties, what would constitute a breach, and how the damages are assessed. An offer is an expression of the willingness to be bound on certain terms, made with the intention that it shall become binding as soon as it is accepted - Canadian Dyers, Kiyo. Whether or not something is intended as an offer that can be turned into a binding agreement by acceptance must be determined based on assessing the intention of the person making the proposal, including objectively assessing whether a reasonable person would read it and would understand the offeror to be willing to be bound in the terms proposed, based on the language used, the context, and the circumstances - Canadian Dyers, Carbolic. Counter- offers vs Inquiries vs Acceptance + Revival As we know, for a valid contract to arise there first needs to be an offer and then acceptance. So, to find that a contract has been formed, you need to find the last offer that was properly accepted. You look through the communications between parties and try and determine what each party would argue about their legal status. You start with the first interaction Livingstone v Evan Case Livingstone v Evans (1925) Issue Whether the plaintiff’s counter-offer was in law a rejection of the defendant's offer freed from it Statutory Provisions Facts The defendant Evans, through the agent, wrote to the plaintiff offering to sell him the land for $1800 on terms The plaintiff messaged the agent saying to send the lowest price and would give $1600 cash o The agent said they couldn't reduce the price o The plaintiff accepted the offer o This made a contract Evans later refused to sell him the property as agreed and Livingstone sued him to force the sale Defendant, Evans, wrote to the plaintiff offering to sell him land for $1800 on terms Livingston responded to the offer: "Send lowest cash price. Will give $1600 cash. Wire." The agent responded saying "Cannot reduce price." Upon receipt of this telegram, Livingstone accepted the offer. Ratio A counteroffer is a rejection of the original offer However, in certain cases, on the basis of the language used and/or conduct, an original offer can be renewed after clarification of terms. A counter-offer constitutes a rejection. An offer can be renewed after a counter-offer through ambiguous language. Legal Reasoning The agent’s statement was a renewal of the original offer Plaintiff's telegram was undoubtedly a counter-offer and an inquiry and would have put an end to the defendant's liability under their offer The agent's response ("cannot reduce price") was a renewal of the original offer The statement that the agent of the defendant was not reducing the price insinuates that he was still standing by the initial offer and still open to accept it Livingstone's acceptance makes it a binding contract What facts in Cowan suggested to the court that the offer was revived Conclusion There was a binding contract for the sale of the land to the plaintiff of which he is entitled to specific performances There was a binding contract between the plaintiff and the defendant Notes Hyde v Wrench: firmly established as a part of the law of contracts that the making of a counter offer is a rejection of the original offer o Defendant offered to sell for 1000 euros o Plaintiff met that with an offer to pay 950 euros o Court declared that he rejected the offer previously made by the defendant Inquiry: Question seeking clarification on the proposed terms and/or the manner of their implementation. Counter-offer: a proposal that changes the terms of the initial offer. Synthesis for Counteroffers: A counteroffer is a response from the offeree which changes the terms of the initial offer, and this swaps the positions of the offeror and offeree– Livingstone. A counteroffer rejects the first offer, killing it (so that it can no longer be accepted) and creates a new offer. – Livingstone. On the other hand, an inquiry is simply a question seeking clarification on the proposed terms and/or the manner of their implementation. It does not propose any new terms and has no legal affect – Livingstone. The exception to the counteroffer being nullified is if the original offeror re-offers the initial terms or indicates a willingness to be bound by them again, the initial offer can then be revived, and be capable of acceptance once again. - Livingstone. Unilateral vs Bilateral Offers This distinction is significant because there are differences in how these two types of offers can be (a) accepted and (b) revoked We distinguish between two types based on what the offeror asks the offeree to do to accept the offer. Unilateral Offer A unilateral offer occurs when an offeror makes a promise which requests that the offeree perform a certain condition/act by way of acceptance It becomes binding once the offeree performs the act. According to Carbolic, unilateral offer becomes binding when the offeree performs the requested act. But sometimes the act will take some time to complete. Thus, in some cases, binding obligations will arise later in time with unilateral offers than with bilateral offers In other words, the offeror says I ONLY want to be bound to you if you do X. You’re not obliged to do X, but if you do, then I will promise to do Y in return Insurance contracts are often unilateral offers: o The policy promises to pay a certain amount of money or benefits IF a predefined event happens – a car accident, a house fire, etc Bonus payments schemes in emplyment contracts: o If the EE hits certain milestones, they’ll be entitled to payment, but not otherwise Terms and conditions of use on websites: o If you click this button you accept our terms Bilateral Offer A bilateral offer is one in which the offeror makes a promise and requests a promise in return – Carbolic; Ontario v Ron Engineering & Construction (Eastern) Ltd, 1 SCR 111. Parties exchange current obligation to do things in the future. Why does this distinction matter? Bilateral offers will sometimes become binding earlier than unilateral offers, if the acceptance act would take some time. Because unilateral offers sometimes become binding/are accepted later than bilateral offers, there is more time for the offer to be revoked or lapse. Acceptance Definition of Acceptance Cdn Dyers tells us that we need offer AND acceptance to create a validly binding contract. It is “a final and unqualified expression of assent to the terms of an offer” – Chitty on Contracts, that is “absolute and unequivocal” – Harvey v Perry; as cited in Timmy v Campbell I often explain it as ‘an unqualified assent on terms that mirror the offer’. Timmy v Campbell Case Timmy v Campbell Facts The plaintiff seeks general and special damages following a motor vehicle accident. Defense counsel arranged for an Independent Medical Examination (IME) of the plaintiff, scheduled for November 28, 2013, with a cancellation fee of $1,400 if canceled between November 15 and 21. The defense made an all-inclusive settlement offer on October 22, 2013, for $80,843.12, which remained open and was rejected by the plaintiff on November 4, 2013. On November 15, 2013, the plaintiff’s counsel confirmed the plaintiff’s availability for the IME but later that day withdrew the availability without explanation. On November 19, 2013, the plaintiff accepted the $80,843.12 offer but added a condition: they would not be responsible for the $1,400 IME cancellation fee. Defense counsel then modified their offer, making payment of the $1,400 fee a condition of the settlement. Issue Was a binding settlement contract formed on November 19, 2013, despite the plaintiff’s inclusion of a condition related to the cancellation fee? Legal Reasoning The defense’s original offer was clear, unambiguous, and open for acceptance on November 19, 2013. The inclusion of the condition regarding the cancellation fee by the plaintiff did not change the material terms of the offer. The defense was aware of the potential cancellation fee when the offer was made and did not stipulate that the offer would expire or reduce before the IME. The phrase “all-inclusive” in the defense’s offer implicitly included responsibility for any IME cancellation fees, and the plaintiff’s condition merely restated this implicit term. Therefore, the plaintiff's acceptance, despite the added condition, constituted valid acceptance of the defense's original offer. Holding A binding settlement was formed on November 19, 2013. The defense is responsible for the cancellation fee, and the settlement should be enforced as originally offered. Ratio To form a valid contract, there must be mutual agreement (offer and acceptance) on all essential terms without material variation (Olivieri v. Sherman, 2007 ONCA 491). If acceptance seeks to modify or impose new terms, it may be treated as a counter-offer rather than acceptance (Samek v. Black Trust Energy Inc., 2000 ABQB 684). Notes Definition of acceptance: unconditional assent on mirrored terms – Timmy v Campbell “Chitty on Contracts defines “acceptance” as “a final and unqualified expression of assent to the terms of an offer” (A.G. Guest, Chitty on Contracts, 27th ed. (UK: Sweet & Maxwell Ltd., 1994), at p. 100). In the Law of Contract in Canada, the author writes: “The response of the offeree must be a clear indication that the offer has been accepted. It must be unconditional, clear and absolute” (G.H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), at p. 46) (footnotes omitted). At p. 57 is the following passage: More than once it has been said that an acceptance must correspond precisely to the terms of the offer. In Harvey v. Perry, for example, Estey, J. in the Supreme Court of Canada referred to “...that absolute and unequivocal acceptance of terms required by the authorities to conclude a contract.” There must be an acceptance simpliciter of the offer. If the acts or language of the offeree do not amount to an absolute and unqualified assent to the material terms and conditions of the offer, there is no acceptance, hence no binding contract. [footnotes omitted] Acceptance in Bilateral Contracts Sometimes acceptance will simply constitute a statement by the offeree that says: “I accept your offer” or “I agree to your terms” or some other verbal, conduct or written statement that indicates unconditional assent to the terms of the offer. But sometimes things are a bit more complicated Felthouse v Bindley Case Felthouse v Bindley (1862) Issue Can the plaintiff sue the defendant for selling the horse? Was the defendant’s objection well- founded ? Can silence constitute acceptance to a bilateral offer? Must acceptance of a bilateral offer be communicated? Statutory Provisions Facts The plaintiff, felthouse wanted to buy a horse from his nephew The uncle thought he bought the horse for $30 whereas the nephew thought he bought it for over $1 The uncle sent the nephew a letter saying he could send the horse anywhere between now and March 25 and if he doesn’t hear anything else about the horse, he considers the horse his at $30.15 The nephew sent no reply There was an auction on Feb 25 and the nephew’s auctioneer (Bindley) accidentally sold the horse for $33 even though the nephew instructed him not to The uncle brought a case to the auctioneer o The defendant said at the time, the horse was not the plaintiff’s The verdict was found that the plaintiff’s damages were fixed at $33 but left room for the defiant to move to a nonsuit if the court should think the objection was well-founded Ratio An offeror cannot create an offer that stipulates an acceptance through silence - silence is not enough - does not create a valid contract Acceptance cannot be assumed if there is no notification of acceptance, or implied acceptance through action present. There must be more than failure to reject an offer to have a contract. Acceptance cannot be assumed if there is no notification of acceptance, or implied acceptance through action present You cannot impose obligations on an unwilling party Silence/a failure to reject an offer does not amount to acceptance Note that in some circumstances action/conduct (e.g., shipment of goods if there is a pattern of behaviour) can constitute acceptance Legal Reasoning There was no complete bargain on the 2nd Jan and the uncle had no right to impose a sale with the nephew It stood as an open offer Even if the nephew wanted his uncle to have the horse, his intention was not communicated since he never replied to him “It is clear that there was no complete bargain on the 2nd of January: and it is also clear that the uncle had no right to impose upon the nephew a sale of his horse for 30l. 15s. unless he chose to comply with the condition of writing to repudiate the offer. The nephew might, no doubt, have bound his uncle to the bargain by writing to him: the uncle might also have retracted his offer at any time before acceptance. It stood an open offer: and so things remained until the 25th of February, when the nephew was about to sell his farming stock by auction. ” Nothing has been done at the time of the auction to imply that the property had changes hands to the uncle, and the nephew had given no acceptance With no acceptance or implied acceptance through actions, the property remained that of the nephew at the time of the auction, and the uncle has no case against the auctioneer for selling goods that were not owned by him If the nephew wanted to enter into the contact he must have given clear indication of his acceptance, which he had failed to do – so he did not do anything to bind himself Conclusion The judges found that the rule to enter a nonsuit should be made absolute With the result that the defendant’s appeal was successful Notes An offeror cannot stipulate that silence constitutes acceptance. There must be more than failure to reject an offer to render a contract binding. It is not enough for the offeree to subjectively intend to accept, they must actually communicate that acceptance to the offeror for a contract to form. Consumer Protection Act, 2002, S.O. 2002, c, 30, Sched. A 13. (1) Except as provided in this section, a recipient of unsolicited goods or services has no legal obligation in respect of their use or disposal. If someone receives goods or services they didn't ask for, they are generally not required to: o Pay for them. o Use them. o Return them (unless stated otherwise under the Act). Week 3: Acceptance A final and unqualified expression of assent to the terms proposed in the offer – Timmy v Campbell An unqualifies assent that mirror the terms of the offer Battle of the Forms Parties may purport to agree to each other’s offers, but exchange terms and conditions of contract that don’t mirror each other. Standard form contracts: Mass produced contracts provided to anyone doing business with its drafter No negotiation over the terms – offeree is usually only a position to take the terms or leave them But also, often parties will go through a negotiation process, discuss terms, seem to agree, but exchange standard form terms of service to one another that don’t mirror their discussions. Butler Machine Tool Co v Ex Cell- O Corp Case Butler Machine Tool Co v Ex Cell- o Corp Facts Butler Machine Tool Co. made and sold machine tools. They sent a letter to Ex-Cell-O on May 23, 1969 offering Ex-Cell-O some new machinery for £75,535. With it, was Butler's standard contract terms which included a price variation clause, so if their manufacturing costs went up, that price rise would be passed on to Ex-Cell-O. Ex-Cell-O replied on May 27 and said they would order the machinery, but on Ex-Cell-O's own standard terms. Ex-Cell-O's standard terms did not have a price variation clause. On Ex-Cell-O's order form was a tear-off slip upon which Butler was invited to accept the order on the terms and conditions stated thereon. Butler completed and returned the slip to Ex-Cell-O with a letter stating that their order was being entered in accordance with the sellers' quotation on May 23, 1969. When Butler came to deliver the machine, they claimed that they were entitled to an addition £2,892, under the price formula of their original offer. Ex-Cell-O took the position that their order prevailed and that there was accordingly a fixed price contract. Butler's action for damages succeeded at trial on the ground that the price variation clause in Excello's offer term which was intended to prevail. Issue On what terms were the contract concluded? Ratio Battle of forms” - two contracts, which prevails? 2 options A) Apply the traditional rules of counteroffer B) Lord denning approach Communicated acceptance plays a big part in determining which set of terms will prevail in cases where no conclusion is reached on the final form of a contract. In cases of dispute over the terms and conditions of a contract, the court must reconcile them by considering the totality of circumstances.- look at the document as a whole to determine which party terms are accepted Legal Reasoning Traditional test in accordance with Hyde: the quotation of the price was an offer subject to terms and conditions and the order by Ex-Cell-O constituted a counter-offer which Butler accepted A "better way," however, to analyze such situations: the battle is won by the man who fires the last shot – the man who puts forward the latest term and conditions, and if they are not objected to by the other party, he may be taken to have agreed to them The tear away slip being returned as the offer being accepted from the buyer's and their terms, and the letter that accompanies this from the seller is a just reiteration of price Holding Allow the appeal and enter judgment for the buyers (Ex-Cell-O) The contract was on the buyers' terms and not on the sellers' terms – which did not include a price variation clause Notes Battle of the form: Last Shot Rule: the last party to impose new terms without being rejected prevails, their terms are the ones imposed on the parties in the agreement. If terms and conditions are not rejected by the other party, they are taken to be accepted. First Blow Rule: first party to submit terms is enforced. If he offers to sell at a named price, with attached terms and conditions, and the buyer orders the goods, he is purporting to accept the offer. Harmonious Approach: a compromising set of terms for both parties and impose them; considering the overall intention of the contract. Lord Laughton & Bridge discuss general principles of offer & acceptance and determine that generally in such situations the last of the forms (the "last shot") is the victor. They find the tear away slip being returned as the offer being accepted from the buyer's and their terms, and find the letter that accompanies this from the seller to be just reiteration of price. Judgement 1 Battle of Forms: The case revolves around a disagreement between Butler Machine Tool Co Ltd (the sellers) and Ex-Cell-O Corporation (the buyers) over which party’s terms and conditions apply to their contract. Sellers' Quotation (23rd May 1969): The sellers offered to supply a machine tool at £75,535 with a delivery period of 10 months. The sellers' terms included a price variation clause that allowed price increases if costs rose before delivery. Buyers' Response (27th May 1969): The buyers responded by ordering the same machine at the same price, but with their own terms, which did not include a price variation clause. Acknowledgment by Sellers (5th June 1969): The sellers acknowledged the buyers' orde

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