OntarioTech BUSI 3705 Lecture Notes Fall 2024 PDF

Welcome to BUSI 3705, Legal Environment of Business, Lecture 3, Fall 2024 Common Law and the system of precedent COMMON LAW – Judge-made law; the body of judicially-made law. Common law is created when judges make decisions. The decisions become precedents, and they are cumulatively refer...

Welcome to BUSI 3705, Legal Environment of Business, Lecture 3, Fall 2024 Common Law and the system of precedent COMMON LAW – Judge-made law; the body of judicially-made law. Common law is created when judges make decisions. The decisions become precedents, and they are cumulatively referred to as the common law. Most of Ontario’s tort and contract law is found in the common law. There are no general statutes for tort and contract! The Doctrine of Precedent Doctrine of Precedent: a lower court must follow a relevant precedent created by a higher court within the same jurisdiction. Not all precedents are of equal value – the higher the court that created the precedent, the more valued the decision is. The Supreme Court of Canada – the highest court in Canada. Its decisions are binding on all lower courts. How the Common Law System Works Doctrine of Precedent: a lower court must follow a relevant precedent created by a higher court within the same jurisdiction. Not all precedents are of equal value – the higher the court that created the precedent, the more valued the decision is. The Supreme Court of Canada – the highest court in Canada. Its decisions are binding on all lower courts. Court Hierarchy Supreme Court of Canada Ontario CA Sask CA Federal CA Ontario Sask. Federal Tax Superior Superior Court Court Court Dispute Resolution Four broad approaches: 1.Negotiation 2.Mediation 3.Arbitration 4.Litigation 7 Civil Litigation Average Minimum Maximum Civil action up to trial 49,605 16,033 88,600 (2 day trial) Civil action up to trial 78,235 32,462 136,769 (5 day trial) Civil action up to trial 118,333 51,833 277,923 (7 day trial) Civil action, appeal 31,115 18,500 39,000 only ADR, including 30,711 10,309 40,769 mediation (3 days) Source: Michael McKiernan, “The Going Rate” Canadian Lawyer Magazine (2015), online: 8 https://www.canadianlawyermag.com/staticcontent/images/canadianlawyermag/images/stories/pdfs/Surveys/2015/CL_June_15_GoingRate.pdf  Negotiation Mediation Arbitration Litigation What is it? Parties try to resolve 3rd party (mediator) 3rd party (arbitrator) Bring law suit in dispute directly with assists the parties to hears submissions, court; judge decides each other through resolve dispute evidence, then gives discussion a decision Who is involved? Parties Parties and mediator Parties, their reps., Parties, lawyers, arbitrator judge (jury) When does it If successful, with a If successful, with a Usually with a Judge gives binding end? settlement settlement binding decision decision Advantages Quick, cheap, private, Quicker, cheaper*, Faster, cheaper than Can initiate w/o lots of room to private, lots of room litigation; can cooperation of other customize, can to customize, can choose process & side. Get final preserve relationships preserve arbitrator; can be decision (but after relationships private; can get trial and appeals) binding decision Disadvantages Both sides must agree Both sides must More acrimonious; Slow, costly, to use it; might not agree to use it; can be slow & stressful, public, result in settlement might not result in costly; parties destroys rel’nship, settlement usually must agree loss of control 9 to it Considerations for Dispute Resolution Can I afford…. The cost of taking this to court? The time it will take to resolve? The psychological toll a prolonged battle will have? The loss in staff productivity dealing with the dispute? The loss of this business relationship? The weight of uncertainty waiting for a resolution? The cost to my reputation and my business’s good will? 10  Supplementary Slides These slides were not used in the lecture, but you might find them helpful as you review the materials. 11 Managing Legal Risks Four step process: 1. Identify legal risks 2. Evaluate the risks (likelihood/probability & seriousness/magnitude of harm) 3.Develop a risk mgmt plan 4. Implement the plan Four Risk Management Strategies 1.Avoid the risk 2.Reduce the risk 3.Transfer the risk 4.Accept the risk CONTRACTS 14 CONTRACTS A contract is a legally enforceable agreement. The Importance of Contracts Increased certainty: Permits both parties to rely on the terms they have negotiated and plan their business affairs accordingly Creates legally-enforceable obligations If someone doesn’t keep their word, you have a legal remedy But if you don’t keep your word, you could be sued If a dispute arises between the two parties, there are various options for dispute resolution, and parties can agree in advance about how they will address disputes 16 A Business Risk Perspective Contracts create legally-enforceable obligations. From a business perspective…. ❖ What are some of the advantages of creating legally- enforceable obligations? ❖ What are some of the risks & potential disadvantages of creating legally-enforceable obligations? 17 Five Underlying Principles and Ideas 1. Legal consequences 2.Objective test – contracts protect the parties’ reasonable expectations; “what would a reasonable person think in this situation?” 3.“Bargain Theory”: contracts must be a bargain, i.e., an exchange: something for something 4.Respect for Autonomy: Respect and give legal force to people’s choices, even if they are bad decisions 5. Law generally assumes that the parties are negotiating on a level playing field, with relatively equal bargaining power The Law of Contract Formation “ A contract is formed where there is “an offer by one party accepted by the other with the intention of creating a legal relationship, and supported by consideration”: Scotsburn Co-operative Services Ltd. v. W. T. Goodwin Ltd., 1985 CanLII 57 (SCC), 1 S.C.R. 54, at p. 63. The common law holds to an objective theory of contract formation. This means that, in determining whether the parties’ conduct met the conditions for contract formation, the court is to examine “how each party’s conduct would appear to a reasonable person in the position of the other party”: Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, at para. 33.” Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga, 2021 SCC 22 (CanLII) at 35 per Rowe J for the court. 19 Contract formation: 3 elements Basic legal requirements: 1. Intention to form a legally binding agreement; 2. “Meeting of the minds” (offer & acceptance); and 3. Consideration (the Beyonce principle) Implicit: agreement is voluntary & all parties to the contract are legally competent*** ***If not true, there’s a contractual defect Intention Rule: Parties must be serious about creating an agreement with legal consequences Objective Test: The reasonable person test: would a reasonable person think that the parties really meant to create something enforceable by a court??? Note rebuttable presumptions: Courts generally assume that: Businesses intend to form legally binding agreements; Family members and friends do not intend to form a legally binding agreement. “Meeting of the Minds” Test: OFFER + ACCEPTANCE Important Implications for managing risks inherent in negotiations and forming contracts Offers & Acceptances What are the courts looking for? Offer: a promise to enter into a Acceptance: occurs when the legally binding agreement, right here offeree indicates an unqualified and now, on a set of specified terms willingness to enter into a contract* Must have serious intent* – willing to on the terms in the offer be legally bound as soon as proposal is accepted Mirror Image Rule: Terms must be sufficiently defined Terms of the acceptance must match and certain exactly (mirror) the terms of the offer Must be communicated to the Offeree Any change means there is no acceptance (counteroffer) *Note how intent gets bound up in what an offer is and what acceptance is: a reasonable person must think that the party is willing to be legally bound by the 23 deal on the table! Consideration & the Enforceability of Promises Consideration must flow from both parties (though not necessarily to the other party) to form a contract. Each party must either: Confer a benefit, OR Suffer a detriment (give up something you have a legal right to do) Key principle: The law does not enforce gratuitous promises (i.e., promises given for free)! There must be an exchange: something for something (often the exchange of promises). 24 Consideration = The Beyonce Principle Madam Justice Beyonce of the High Court of Hip Hop: “If you liked it, you shoulda put a ring on it”. In other words, if you want to be able to legally rely on a promise, you have to pay for that promise – give something in exchange for it. This Photo by Unknown Author is licensed under CC BY-NC 25 WHEN is a Contract Assuming that there is intention & consideration (which can be met by the exchange of promises rather than the actual things): A Contract comes into existence when the offeror receives notification of acceptance. 26 Business Risk Implications If you want a promise to be legally enforceable, it has to be part of a bargain → “put a ring on it”, pay for it, offer consideration. Once the contract comes into existence, the parties are locked in: the legal obligations come into existence & neither party can change their minds or walk away or change the terms of the contract unless they create a new contract (a contract to change a contract or a contract to terminate an existing contract) At this point, if a promise is not in the contract, that promise is not legally binding! 27  Contractual Vignettes Act One: Offers & Acceptances Scene One: “What was that?” 28 Bigg v. Boyd Gibbins Correspondence re: proposed sale of Shortgrove Hall b/w Plaintiff (P, the owner) and Defendant (D, the purchaser): P: Got your offer of £20K; would prefer £26K. D: Got your letter, “would advise you that I accept your offer” P: Yay! The missus and I are glad that you are purchasing the property. D: Wait. No. No contract. We just agreed on the price. 29 Bigg v. Boyd Gibbins, con’t The dispute: The Plaintiff said there was a contract. The Defendant said no, the parties were still negotiating and the contract had not yet been formed. How can we state the “issue” or legal problem here? And once we have identified that issue, what is the legal rule/principle that applies? 30  Did the Plaintiff & the Defendant form a contract? Intention Meeting of the Minds Consideration What would a Was there an offer? Was there an exchange reasonable What that offer or mutual promises to person think? accepted? exchange somethings? Two unrelated parties Plaintiff: Defendant: Money for property. negotiating for sale of YES! NO! Each party is promising property? What would to confer a benefit to the a reasonable person What is an offer? other. think? What is acceptance? 31 Bigg v. Boyd Gibbins: Application Looking at the facts, the Court concluded: “The impression conveyed to my mind by these letters, and indeed the plain impression, is that the language used was intended to and did achieve the formation of …. [a] contract” Is the court trying to determine what the Defendant actually, subjectively meant? Why does “the plain impression” matter? 32  Contractual Vignettes Act One: Offers & Acceptances Scene Two: “But what about…” 33 The Backstory South West Terminal Ltd. v. Achter Land & Cattle Ltd., 2023 SKKB 116 Plaintiff was in the business of buying grain and other crops. Defendant was a farming corporation. The Plaintiff & Defendant had been working together since 2012: typically, plaintiff’s rep would have in-person or telephone conversations with the Defendant’s rep about the volume of grain and the price for the grain that the Defendant would supply to the Plaintiff. Once they had an understanding, the Plaintiff’s Rep would draft up a contract & send it over to the Defendant’s rep. Then the pandemic hit, and the in-person meetings stopped. The parties continued to work together. The parties would agree to contracts over text or by email. 34  The Plot Thickens March 2021: Plaintiff sent a text to Defendant, saying that the Plaintiff was looking to buy flax, with delivery in the Fall of 2021. The representatives then had a telephone conversation, as per their usual practice. Following the call, the Plaintiff had a contract written up, which provided that the Plaintiff would purchase 87 tonnes of flax from the Defendant at $17/bushel ($669.26/tonne), with delivery period listed as “Nov”. Plaintiff signed the drafted contract, took a photo of it, and texted the photo of the contract to the Defendant with a message: “Please confirm flax contract”. The defendant responded to this text with: 35  The Dispute In the past, the Plaintiff had sent photos of signed contracts via text and asked the Defendant to confirm the contract. The Defendant had replied with: “Looks good”; “Yup”; and “Okay”. In those cases, the Defendant delivered the grains in question. But this time, in November…no flax. The Plaintiff said, “hey, we have a contract!” The Defendant said, “Go Flax Yourself” (or words to that effect). The Plaintiff sued for $82,200.21 Fun Fact: the terms of the contract stipulated a price A field o’ flax. of $17/bushel. By November 2021, the price of flax was….$41/bushel. 36 (Law-)Suit-Up! Make the Case. Was there consensus ad idem (the fancy Latin term for “meeting of the minds”)? Make the case! What do you argue if you are the Plaintiff? How do you respond if you are the Defendant? Who do you think has the stronger argument and why? 37 The Court’s Decision The Summary of the Law re: consensus ad idem: “The parties disagree as to whether there was a meeting of minds which is the basis of a contractual obligation. A contract is only formed where there is an offer by one party that is accepted by the other with the intention of creating a legal relationship and supported by consideration (Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v Aga, 2021 SCC 22 at para 35, 459 DLR (4th) 425 [Aga]). Whether this has happened is to be viewed in accordance with an objective theory of contract formation. The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37). The courts when considering this question are not restricted to the four corners of the purported agreement, but can consider the surrounding circumstances (Aga at para 37). The nature and relationship of the parties and the interests at stake help inform the question of an intention to create a legal contractual relationship (Aga at para 38).” South West Terminal Ltd. v. Achter Land & Cattle Ltd., 2023 SKKB 116 at 18 per Keene J, emphasis added.38 Findings of Fact “ So in short, what we have is an uncontested pattern of entering into what both parties knew and accepted to be valid and binding deferred delivery purchase contracts on a number of occasions. It is important to note that each time Kent (Plaintiff’s rep) added to the offered contract “Please confirm terms of durum contract” and Chris (Defendant’s Rep) did so by succinctly texting “looks good”, “ok” or “yup”. The parties clearly understood these curt words were meant to be confirmation of the contract and not a mere acknowledgement of the receipt of the contract by Chris. There can be no other logical or creditable explanation because the proof is in the pudding. Chris delivered the grain as contracted and got paid. There was no evidence he was merely confirming the receipt of a contract and was left just wondering about a contract.” Para 21 Note: the Reasonable bystander is allowed to consider the past history of dealings between the parties in their assessment of what the parties reasonably thought was happening. 39 Findings of Fact, con’t The Court acknowledged the Defendant’s argument that the thumbs-up was meant to signal that the Defendant’s Rep had received the contract – to acknowledge its receipt – but NOT to convey acceptance of the terms. The Court was skeptical. The Court made notes about the past conduct of the Defendant’s representative and the conduct of the Defendant’s Rep with respect to this particular flax contract. The Court noted, for example, that for the most part, the parties were transacting the way they usually transacted. The Court also noted that the Defendant never bothered to call the Plaintiff to follow up about the flax contract, even when they were well into the growing season. That’s an odd sort of thing not to do if you are hoping to sell your flax and if you believe that there isn’t yet a contract in place with a buyer with whom you have worked for the past ten years or so. The Court also took note of popular understandings of what a thumbs-up emoji means. 40 Findings of Fact, con’t The moment when you know that things are not going to end well for the Defendant: “ In my opinion this paragraph [from the affidavit of the Defendant’s representative, Chris, in which Chris swore under oath that his thumbs-up emoji “simply confirmed that I received the Flax contract…I… merely wanted to indicate that I did receive his text message”] appears to be carefully crafted to state that there was a confirmation of the receipt of the contract (seemingly denoting a form of acknowledgement) which I took to mean that Chris understood a emoji means “ok” or something affirmative. This ends up being a bit of a cake and eat it too situation – Chris wants the court to accept the emoji meant only he got the contract but not that he approved the contract. This is of course somewhat self- serving.” 41 Game, Set, Match: The Application & Conclusion “…. However, it is not what Chris may or may not think a emoji means. It is what the informed objective bystander would understand. … “ I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions.” 42 The Application Legal Issue: Did the Plaintiff & the Issue tells us of the Facts to Defendant form a contract? what Legal the law answers Specifically, did the parties ever reach principles are our initial “consensus ad idem” – the meeting of relevant questions. the minds? The Law: Contracts require Application: A reasonably Bystander knowing (among other things) a “meeting that parties’ past history of commercial dealings of the minds”/consensus ad would interpret the thumbs-up emoji to be idem. This means that there another short, to the point way to communicate must be an offer and “I accept” to the terms sent over. Therefore, acceptance – both of which there is acceptance of a valid offer. must convey a legal willingness Therefore, there is consensus ad idem. to be bound in a legal agreement. We assess if there is an offer and acceptance Factual determinations: using the perspective of the The parties had a lengthy commercial relationship informed reasonably bystander. involving the formation of several contracts in the past using the same pattern of activity as in this Law tells us what Relevant facts flax contract, except that instead of the usual curt kind of facts we allow us to “okay” or “yup”, the defendant used a thumbs-up need to consider. 43 apply the law. emoji. Quick Questions… This case was decided by the Saskatchewan Court of the King’s Bench, which is a Superior Court. To which court would the defendant apply for leave if the defendant wants to appeal this decision? Is the Ontario Superior Court required to follow this decision? If not, can the Ontario Superior Court take it into consideration? 44 Business Strategy & Risk Management The terms of the contract stipulated that the Plaintiff would pay the price of $17/bushel for the flax. But the time November rolled around, the price of flax had jumped to $41/bushel. Does this information help us understand why the Defendant argued that the thumbs-up meant “I confirm receipt of the terms you sent me”? What do you think might have been really going on? What kind of risk management strategy did the Defendant use? 45 Choices and Consequences As the price for flax continued to increase in the fall, what choices did the Defendant have with respect to how it managed potential contractual liability with the plaintiff? Were there other options? Did the Defendant act ethically? What could the Defendant had done differently? Was the Defendant’s decision short-sighted? Consider how the Plaintiff might respond to this whole thing. 46  Contractual Vignettes Act One: Offers & Acceptances Scene Three: “Yeah, but there’s this other weird thing…” 47 What is the legal status of a “For Sale” sign outside of a house? Think through it logically. 48 What would a reasonable person think? 49 Invitations to Treat Invitation to Treat: “Make me an offer!” Responses to Invitation = Offers (which signify willingness to be legally bound by terms and conditions right away, if accepted) Generally, goods on display in a store, advertisements, catalogues, ads on Kijiji, Craigslist, LetItGo, etc are Invitations to Treat  Contractual Vignettes Act Two: Negotiations Scene One: “Consensus ad idem…but on whose terms?!” 51 Managing Risk During Contract Formation Creating contracts can potentially involve protracted and complex negotiations. Moment of contract formation is important: Terms are locked in and cannot be changed without a new contract. Neither party can walk away. Liability now attaches. 52  Ramsay v. Bell The Ramsay v. Bell case. Summary: Ramsay calls Bell to inquire about service bundles and pricing. He decides on a two year, fixed price contract. He is transferred to an agent who confirms the services he is purchasing, the duration of the contract, and the price. Ramsay is asked if he agrees to those terms and he says “yes”. Two days later, a written copy of the agreement is emailed to Ramsay. This particular document includes a clause that appears to give Bell the right to make arbitrary changes to the price. Three months later, Bell purports to change the terms of its agreement with Ramsay. Ramsay says, “no, that’s not our deal.” Who is right? Why? 53 The “Frozen” Principle 54 Freezing the Bell & Ramsay Contract When did the terms of the Ramsay-Bell contract become “frozen”? How do you know? So is the term about the arbitrary right to increase prices part of the contract or not? What are the implications for enforceability? 55 Is Bell Stupid? Case revolved on an elementary principle in contract law. Bell has lots of lawyers – smart lawyers. So was Bell’s entire legal department really confused about what is happening when a customer says “I accept” on the phone with a sales rep? What do you think is really going on from Bell’s perspective? What kind of risk management approach do you think that Bell has adopted here? Why? What is Bell’s calculus? Is it ethical? 56  Contractual Vignettes Act Two: Negotiations Scene Two: “The Dance of Contractual Negotiations” 57 The Dance of Contractual Negotiations Negotiations are rarely cut and dried. They are often protracted, which creates some risks. Think about what happens when there are a series of offers and counter-offers, back and forth. Offer Counter-offer Counter-counter offer “We’re close, but…” 58 The Life of an Offer Offers do not last forever. They can be killed by: Revocation (so long as notice is actually provided to the offeree) A rejection A counter-offer (which implies rejection) Lapse or termination Death or insanity 59 Understanding the Risk Landscape Offeror: The person who makes the offer: Master of the Offer Offeree: the person who receives the offer: Power of Acceptance What risks exist for each parties? How can they manage that risk? Identify & Manage those Risks! Why is it important to know who is the offeror and who is the offeree at a particular moment in a negotiation? What can the Offeror What can the do? What can the Offeree do? What Offeror control? can’t the Offeree What can’t the do? Offeror control? 61 Consider & Advise Efrem is pretty sure that he wants to sell his bike. He says to Mariana, “I’ll sell it to you for $50.” Mariana immediately agrees. But now Efrem is having second thoughts. What can Efrem do? Juan offers to sell his boat to Lucien for $8000. Lucien is definitely interested but he wonders if Lucien will sell it to him for $7500. What can Lucien do here and what are the legal consequences? 62 The Battle of the Forms Suppose Hogtown Corp sends Evyl Inc a purchase order for widgets. Hogtown’s purchase order sets out Hogtown’s standard terms and conditions for purchasing widgets. Evyl receives the purchase order and processes it. Evyl sends Hogtown an invoice for the widgets; the invoice sets out Evyl’s standard terms and conditions for selling widgets. Evyl then processes the order. The widgets are ready for delivery, but now Evyl and Hogtown disagree about who is responsible for insuring the widgets while in transit. Their terms and conditions are different. Which terms govern the contract? Is there a contract? 63 Risks involved in “the Battle of the Form” Complex business negotiations: multiple iterations of the agreement may be exchanged What happens if you know there is an agreement, but you are not sure when, exactly, it came into existence? Why does it matter? How do the courts approach this sort of thing? How can I manage the risk? 64  Contractual Vignettes Act Two: Negotiations Scene Three: “Why is there a crane in our yard? And other contractual misadventures” 65 Lowe v. Upper Clements Family Theme Park Upper Clements Family Theme Park wanted to rent a crane from Lowe Company to do construction. Lowe offered a crane for 2 months, fixed term, @$10K/month. Upper Clements Manager wrote back: “OK, BUT no fixed term, payment to be pro-rated, AND you pay fuel and maintenance. If agreed, sign and return this letter.” Lowe delivers the crane to the park, but letter NOT signed. Lowe objected to terms in letter. Offered lower monthly price. UC Manager refused and returned the crane. What is going on in this case?! Break it down Did Lowe and Upper Clements ever form a binding agreement? How do you know? Make the case. What, if any, legal significance did the delivery of the crane to Upper Clements carry? Was it enough to trigger the formation of a contract? Why do you think Lowe delivered the crane? Was this is a good decision from a legal perspective? What kinds of risks are involved? 67  Heads-Up! A big part of risk management for contracts is front-ended loaded: once a contract is formed, you are stuck with its terms and legally obligated to perform. So… Make sure that the agreement contains all the terms you want and need: it isn’t always easy to change a contract once it is created. Communication of acceptance of an offer is the Point of No Return: both parties are locked in. You cannot change your mind. The best risk management strategies for responding to potential contract defects have to be implemented before the contract is formed to be effective. 68 Legal principle Risk Possible Response Offer & Acceptance are How do I know if I am actually Offerors: set clear parameters determined using an objective in a legally-binding agreement for what is effective analysis. It does not matter or not?! acceptance. what the parties are actually thinking. How to deal with ambiguous Offerees: be mindful of your communications? words & actions A contract comes into I can become locked into a Be mindful about existence as soon as the contract under terms I don’t communications! offeror receives notification of want if I am sloppy in how I acceptance. communicate. (True for both offerors and offerees) Unless the offeree has The offeree may lose out on a Act in a timely way, purchase purchased an option, the desired opportunity. an option, or use a condition offeror can revoke the offer at precedent. any time with notice. 69  Supplementary Slides These slides were not used in the lecture, but you might find them helpful as you review the materials. 70 Objective Theory of Contract Formation Contracts protect reasonable expectations: “The principal purpose of the law of contracts is to protect reasonable expectations engendered by promises….” S. Waddams, The Law of Contracts, 3rd ed. (Toronto: Canada Law Book, 1993) at para 137, citations omitted. Reasonable Expectations about what? About whether there was an offer and an acceptance About what you have bargained for Implication: In contracts, except for a few very limited instances, the court will ask, “what would a reasonable person in this situation think?” 71 The Bargain Theory Contracts must be bargains, that is, an exchange: something for something. The law does not enforce gratuitous promises Each party must either confer a benefit or suffer a detriment (“consideration”) Make sure each party is promising to give something or give something up. Intention: Word from the Supreme Court of Canada The law concerning the formation of contractual relations embodies practical wisdom. Many informal agreements that people undertake do not result in a contract. There are, for example, mutual undertakings between friends (“in the new year, we’ll go to the gym together three times a week”) or between members of a household (“you do the groceries, I’ll clean the kitchen”). Without more, neither of these agreements creates a contract. What is missing is an objective intention to create legal relations. In neither of these examples do the parties (reasonably understood) intend to be subject to adjudication as to the performance of their commitments or to the imposition of remedies such as damages or specific performance. … The practical wisdom embodied in the common law is that much of what we agree to in our day- to-day lives does not result in a contract. Where there is no contract, or other obligation known to law, there is no justiciable interest and no cause of action Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga, 2021 SCC 22 (CanLII) at 21-24 per Rowe J for the court (emphasis added). 73 Intent & Rebuttable Presumptions Rebuttable Assumptions: Courts begin with the following presumptions, and parties can bring evidence to “rebut” (or disprove) the presumption: (1) Family & Friends do NOT intend their agreements to carry legal consequences. (2) Business DO intend their agreements to have legal consequences. Offers & Acceptances Courts are looking for substance, not form. An offer has to meet the legal definition of “offer” An acceptance has to meet the legal definition of “acceptance” It does not matter what is going on in your head. Just saying “I accept” is not magic. On the other hand, if you say to the other person, “I accept” without more…they can take you at your word. 75 OFFER Offer = a promise to enter into a legally binding agreement, right here and now, on a set of specified terms Must have serious intent – willing to be legally bound as soon as proposal is accepted Terms must be sufficiently defined and certain Must be communicated to the Offeree Acceptance ACCEPTANCE ▪ Occurs when the offeree indicates an unqualified willingness to enter into a contract on the terms in the offer Mirror Image Rule Terms of the acceptance must match exactly (mirror) the terms of the offer Any change means there is no acceptance (counteroffer) 77 Consideration & the Enforceability of Promises Legal Principle: The law does not enforce gratuitous* promises. There must be an exchange – a promise for a promise/something for something – for any promise to be legally enforceable. *Gratuitous = “for free” So, the law does not enforce promises that were given for free. You have to pay for them if you want them to be legally enforceable. In other words: IF YOU LIKED IT, YOU SHOULDA PUT A RING ON IT 78 Consideration – Making Promises Enforceable Consideration = the exchange element, the “payment” so that a promise is not gratuitous. Consideration exists when each party either confers a benefit or suffers a detriment. Confers a benefit example: _____________________ Suffers a detriment example: ____________________ 79