Contracts Final Exam Outline

Contracts Final Exam Outline

Law 108A

ZS

2013

With Professor Mary Anne Waldron

Table of Contents

Offer and Acceptance

Battle of the Forms

Formalization and Certainty

Correspondence

Consideration: benefit to the promisor or detriment to the promisee

Post-Contractual Modifications

Other Issues With Consideration

Intentions

Non Bargain Promises

Past Consideration

Reliance and Estoppel

Unilateral Contracts

Revocation of Unilateral Contracts

Third Party Beneficiaries

Mistaken Identity and Non est Factum – Void and Voidable Contracts

Chart of Void/Voidable

Mistaken Identity

Non est Factum

Contract Interpretation

The Parol Evidence Rule

Clauses Excluding Liability

Misrepresentation

The Relationship between Torts and K – Negligent Misrepresentation

Residual Powers of the Court in Contract Enforcement

Unconscionability, Undue Influence and Duress

Unconscionability

Undue Influence

Penalties and Forfeitures

Common Law Illegality

Statutory Illegality

Mitigating the Consequences of Illegality

Mistakes

Mistakes About Contractual Terms

Mistake in Assumptions

Rectification of Documents

Frustration = mistake as to what will happen in the future.

Remedies

Specific Performance

Remoteness

Intangible Injuries and Punitive Damages

Mitigation

Offer and Acceptance

A contract is a promise that is legally enforceable.
An offer should contain all the terms that the parties will agree upon.
1)timetable: offer is timetable and acceptance is showing up

1. an example of unilateral K

2)offeree can bind the offeror to K because offeree has power of acceptance / Denton v. Great Northern Railway Company
(1856)
3)no offer if terms not agreed

1. invitation to treat: there is room for discussion and negotiation, and thus not an offer
2. quotation of prices is not an offer to sell

4)terms of offer can change before acceptance
5)test whether a binding obligation may originate in ad addressed to general public is “whether the facts show that some performance was promised in positive terms in return for something requested” (Williston, Contracts)

1. sometimes if terms of ad clear enough, can be seen as offer – but ambiguous

/ Johnston Brothers v. Rogers Brothers (1899)
Lefkowitz v. Great Minneapolis Surplus Store
(1957) / D promised low price for flour. P orders next day. D replies saying price gone up. P sues for promise of low price.
D refused to sell P a certain fur piece which it had offered for sale in a newspaper ad. Ad contained price, mode of acceptance, and product.
6)policy considerations can guide court determination of what is offer and acceptance

1. ex. if taking the product off the shelf constitutes acceptance, this would be absurd because then customer will not be able to put product back

/ Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953) / Boots operated shop where substances were displayed in self-service area and customer could only escape by passing area under supervision of pharmacist.
7)where an offer is made in terms which fix no time limit for acceptance, the offer must be accepted within a reasonable time to make K
8)2 possible views if over reasonable time

1. withdrawn
2. refused – this is preferred because less ambiguous

/ Manchester Diocesan Council for Education v Commercial & General Investments Ltd
(1969)
9)until offer has been accepted, open to the offeror at any time to withdraw or put limit on time for acceptance
10)acceptance needs to be communicated to the buyer

1. when you have an agent, they are acting on your behalf, and communicating something to the agent is like communicating to the principle

/ Larkin v. Gardiner
(1895)
Held: merely signing document not enough, acceptance is when offeror knows of the signature.
11)Canadian law does not recognize a firm offer – need consideration

1. a promise that you will leave the offer open is not an enforceable promise

/ Dickinson v. Dodds
(1876)
12)acceptance has to be on the terms of the offer – means offeror can dictate place, time, mode of acceptance etc.
13)otherwise, it becomes a counter-offer / Eliason v. Henshaw
(US 1819)
14)offeror cannot impose silence as a mode of acceptance

1. Consumer Protection Act states do not have to buy unsolicited goods  this shows legislation not allowing offeror to impose silence

Battle of the Forms

1)usually winner is the one who gets the last word, and must use offer/counter-offer analysis
2)or, the terms on both sides are to be construed together, and “conflicting terms may have to be scrapped and replaced by a reasonable implication”
3)additional terms in an acceptance are to be considered as suggestions for additions to K, not a counter-offer as long as they don’t materially alter the K / Butler Machine Tool Co Ltd v. Ex-Cell-O Corporation (England) Ltd
(1979)
Uniform Commercial Code (US)
4)terms and conditions of K A are dependent upon tender call, including implied irrevocability of a bid in return for fair shot at being selected
5)cannot make a K to agree in the future, but you can make a K that delineates the 2nd K specifically enough so that the terms of the 2nd K cannot be renegotiated after the making of the 1st (which is the case in K A and K B)
6)note that in most jurisdictions statutes regulate the tendering process to ensure efficiency and fairness in allocating government contracts, but not in Canada / MJB Enterprises v. Defence Construction
(1999)

Formalization and Certainty

1)if an essential matter in the K is left undetermined, there is no K  price is an ex. of essential matter
2)no agreement to agree
3)note that May and Butcher is an unusual case – usually, you do not have to fill out all the details for there to be a K / May and Butcher, Limited v. The King
(1929) / Terms of agreement between supplier and purchaser uncertain – price, place of delivery, etc. to be determined in future. D refuses to sell because P offering price that D finds insufficient.
4)court will imply term if possible

1. infer parties’ intentions by looking at past dealings
2. standard of the trade

/ Hillas v. Arcos (1932)

1. if one party benefitted with condition that they would abide by K, this points towards enforceability of K
2. does not matter that parties said they would agree from time to time because there was arbitration clause (third party would intervene) – so not an agreement to agree
3. market standards

note that:Classique Coaches was seeking to get an unfair advantage (i.e. paying less for the land)  this probably influenced court’s reasoning / Foley v. Classique Coaches, Limited (1934) / P sells gas; D owner of motor coaches. Agreement for D to buy land beside P for $1100; agreement contingent on D agreeing to purchase all gas from P. After 3 years, arguments about price and quality of gas. D decided that since price was not part of the agreement (agreement said parties would agree to price from time to time), K was insufficiently clear, so unenforceable. D refused to buy any more gas but wished to keep land.
Courts will try, wherever possible, to give legal effect to any clause that the parties clearly understood and intended was to have legal effect.

1. a K demands a degree of diligence; it must be negotiated in good faith and the agreements that constitute it cannot be unreasonably withheld
2. officious bystander test: imagine a nosey, officious bystander walking past two K’ing parties and asking them, whether they would want to put some express term into the agreement; if the parties would instantly reply “of course” the term is apt for implication
3. business efficacy test: assuming things to give the deal business efficacy, a term may be implied; must ask “would the K make business sense without the term?”

This case really pushes court’s gap filling abilities to the limit. / Empress Towers v. Bank of Nova Scotia (1990) / Did not fix rent into K on renewal because it was recognized that markets should change – it was stated that the new rent would be that of market price agreed upon by both parties. Negotiations went on. Empress Towers finally responded with a huge rent to be paid and a subsequent rent $5400/month.
Bank refuses. Empress Towers says Bank must move.

Correspondence

1)post-box rule: acceptance being placed in the mail established a K (but this is no longer the automatic rule – must show that it was reasonable to expect acceptance through mail)
2)where it must have been within contemplation of the parties that post might be used as means of communicating acceptance, the acceptance is complete when it is posted
3)revocation has to be communicated (offeree protected because they are not the party who has control of the mode of acceptance)
4)civilian rule – must have a moment where both minds were one, so the communication is less important; if cannot find moment were both parties were of same mind – no K, and communication was not an issue / Henthorn v. Fraser
(1892)
Byrne v. Leon Van Tienhoven
(1880)
5)ifoffer explicitly states that notice is required in order for it to be valid then the postbox rule is overridden, even if both parties contemplated that post might be used for sending acceptance / Holwell Securities Ltd v. Hughes
(1974)
6)where the transmission isinstantaneous, like a fax or telephone, the postal rule does not apply

1. but while telephones are instantaneous, modes like email or fax are more difficult because they may not go through  look to provincial statute to see how this is dealt with

7)K is under the jurisdiction where the acceptance is received / Eastern Power Ltd v. Azienda
(1999)

Consideration: benefit to the promisor or detriment to the promisee

1)need consideration for enforceability of leaving a promise/offer open

1. marks the transaction legally as a K
2. evidence that parties themselves treated this agreement as intending to be legally binding
3. protects reliance

2)a promise in return for a promise is good consideration / Dickinson v. Dodds (1876)
3)abstaining from complaining is not adequate consideration – no right to complain, not a real detriment to promissee / White (Executor) v. William Bluett (1853)
4)someone legally entitled to drink, smoke, play cards etc. and giving them up is good consideration (more specific than just “not complaining” in White v. Bluett, and he actually had a legal right to do these things) / Hamer v. Sidway
(1891)
5)agreement to pay rent, keep up repairs is consideration

1. some of the reasons for this is due to availability of documentary evidence, and that the rent was payable directly to executors, not landlords (so executor, the promissor, benefited)

note that: respect for wishes of testator while a factor in the decision was not considered good consideration, b/c doesn’t move from plaintiff / Eleanor Thomas v. Benjamin Thomas
(1842)
6)mutuality: there must be something given in exchange for a promise; no contract if one party gets absolutely no benefit

1. the arrangement is an offer to allow Tobias to purchase the machines, and as Tobias takes each machine, there is a little K formed
2. but at this point all we have is an outstanding offer to sell the machines, and the little separate Ks

/ Tobias v Dick and T Eaton Co
(1937) / Dick has promised to give Tobias exclusive selling agency. Tobias used trickery to get Dick to sign the agreement. Tobias made no promise to buy any machines at all. Tobias not agent for Dick since he is not under any obligation to sell.
7)“A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed”
8)courts may imply a promise to use reasonable efforts on behalf of the defendant to find a K

1. implied promise to use best efforts in K performance can be considered good consideration
2. distinguished from Tobias v. Dick because Lucy is not making Wood buy anything; Wood was giving monthly reports to her (highlights the intention behind the K); and because agreement was much more detailed

/ Wood v. Lucy, Lady Duff-Gordon
(1917) / D is a fashionista. Entered into contract with Wood to turn her “vogue into money,” P gets exclusive right, subject to approval, to place her name endorsements on designs of others; in return he gave her half of all profit made. D breached by endorsing clothes made by other manufacturers, kept profit.

Post-Contractual Modifications

1)K modifications can be rejected for public policy reasons – ex. in this case, if agreement were enforceable it would enable sailors to act opportunistically while at sea / Harris v. Watson
(1791)
2)a promise to do what you are already obliged to do is not good consideration / Stilk v. Myrick
(1908)
3)subsequent modification in K needs fresh consideration / Gilbert Steel Ltd v. University Construction Ltd
(1976) / University and Gilbert had written K for purchase of steel. Price of steel goes up and Gilbert announced an increase in price which was agreed to.
4)relaxed modern approach to K modification:

1. IF A is in a K with B to do work/service for B in exchange for payment from Band if
2. when A has not yet completed the work and B has reason to doubt A will or will be able to complete his side of the bargain, and
3. B promises A an additional payment in return for A’s promise to finish his side of the K (the work) on time, and
4. as a result of this new promise B receives, IN PRACTICE, a benefit, or avoids a disbenefit, and
5. B’s promise is not given as a result of economic duress or fraud on the part of A

THEN the benefit to B can be taken as consideration for B’s promise; promise can then be legally binding / Williams v. Roffey
(1991) / Roffey Bros subcontracted some roof work to a group of carpenters, Williams. Roffey Bros were worried Williams would not complete the work on time – there are penalty clauses in the main contract for Roffey Bros. Roffey Bros promised to pay Williams a further £10,000 when the work was completed.
Job gets done, but no payment.
5)change in law: variation to an existing K, unsupported by consideration, is enforceable so long as it is not procured under economic duress(in this case,court says the GFAA had no alternative – NAV by statute was required to do this and paid under protest)
6)differences with Williams v. Roffey

1. NAV probably could have paid – not a case that they were not able to pay – or they could have just moved the old equipment
2. there wasn’t really a promise to do more – GFAA was dragged into doing this
3. no doubt on one party not being able to perform
4. GFAA got NAV agreeing to complete K, but there was no practical benefit

/ Greater Fredericton Airport Authority v. NAV
(2008)
7)absence of economic duress not only essential element (disagrees with GFAA v. NAV) / River Wind Ventures Ltd (2009)

Other Issues With Consideration

8)basic rule = partial-payment of a sum is not good consideration
9)part-payment can extinguish the whole debt if agreed / Foakes v. Beer
(1884)
Law Equity Act
10)general rule: if you have genuine belief that you have good legal claim, then promise to give that claim up is good consideration for another agreement / Fairgrief v. Ellis
(1935)
11)detriment to promisee can constitute good consideration only if it is at request of promisor
12)generally promises to give to charity are not legally enforceable

1. a gratuitous promise does not have sufficient consideration to be considered a binding contract unless the money was given for a specific purpose which can be seen as of some benefit to the promisor

13)for estoppel to apply, the promisee must rely on actual actions of the promisor, not merely a statement that they will do something / Dalhousie College v. Boutilier Estate
(1934) / Boutilier pledged a sum to Dalhousie prior to his death, which he never actually paid despite being reminded of his pledge. Dalhousie sued.
Estate argues there was no consideration given for Boutilier’s pledge.

Intentions

1)presumption that in family and purely social relationships there is no intention to create a legally binding relationship

1. was the K adapted at some point?  flexibility of the agreement shows it is a pure family arrangement

/ Jones v. Padavatton
(1969)
2)presumption that agreement is legally binding if business relationship
3)presumption may be rebutted by clear expression of intent not to K / Rose v. J.R. Crompton
(1923)

Non Bargain Promises

Today, promises under seal (without consideration) are still enforced because it gives evidence of legality, and intention to make K – modern ex. is promise to give to charity.

Past Consideration

1)if you ask someone to do something where there is assumption that there must be payment, then that is sufficient consideration – implied promise to pay

1. may use officious bystander test

/ Lampleigh v. Brathwait
(1615)
2)if cannot imply promise for payment, then past consideration that is executed is not sufficient for future promise / Roscorla v. Thomas
(1842)

Reliance and Estoppel

Estoppels stop someone from doing something.
1)if A leads B to suppose that A’s strict rights will not be enforced, A who might have otherwise been able to rely on those rights is estopped from doing so

1. in this case, landlord could probably have reinstituted his right by giving another notice

/ Hughes v. Metropolitan Railway Co
(1877) / Landlord by conduct led tenant to believe strict 6-months deadline for repairs would not be enforced. Tenant relied on this.
2)doctrine of promissory estoppel – if a party makes a promise and the other party relies upon the promise, the original promisor cannot take back the promise at a later stage (does not matter that there is no consideration for the modified K)
3)promises made do not last forever

1. promise in this case was made in context of war – so reasonable that rent would increase once war ended estoppel not applied

4)the difference between High TreesandHughesis that a term is changing, and parties are enforcing a new promise (not the same as the rely/do not rely situation in previous case)
5)problem with High Trees: if no consideration – how would we then tell the difference between a binding promise and a non-binding promise? / Central London Property Trust Ltd. v. High Trees House Ltd
(1947) / 1937 High Trees leased a block of flats for a rate £2,500/year from Central London Property Trust. Due to the war occupancy rates were drastically lower. Parties made agreement in writing to reduce rent. Neither party stipulated the period. Over the next 5 years, High Trees paid the reduced rate while the flats began to fill. Central London sued for payment of the full rental costs from June 1945 onwards.
6)estoppel is only a defence, not a cause of action where one did not exist before (i.e. promissory estoppel is not a replacement for consideration)

1. cannot stretch High Trees this far
2. if one of the parties to a K changes the terms and the change is relied upon, even in the absence of consideration, he cannot revert back to the previous legal relations as if the promise to alter the relations had not been made by him
3. thus, consideration remains a necessity for K formation, although not for its modification or discharge

/ Combe v. Combe