Contract LawFall – 12’James Wegener

General Contract Principles

a)Freedom of Contract

  1. The parties involved come to terms on their agreeable contract. [Bilateral]
  2. The offeror sets the conditions and both parties must meet them. [Unilateral]

b)Objective Reasonable Person

  1. Outward motives, not inward motives matter
  2. Look at whether there was intention and reliance

c)Strict Liability

Table of Contents

  1. Intention to Create Legal Obligations (ORP)p.2
  1. Was there intention to create legal obligations?
  2. Contracts Under Seal
  1. Offer and Acceptancep.3
  2. Was there an offer or an invitation to treat? Or a Puff?
  3. Is the offer valid for acceptance?
  4. Call for Tenders p.4
  5. Was the offer terminated?P.5
  6. Was the offer accepted?P.6
  7. Mailed Communication of Acceptancesp.7
  8. Instantaneous Communication of Acceptances
  9. Formation of a Valid Contractp.8
  1. When is a contract invalid due to vagueness or incomplete terms?
  2. Is there an Agreement to Agree or an Agreement to Negotiate?
  3. Requirements Under Writingp.10
  1. Enforcing Promisesp.11
  1. Was there mutual consideration?
  2. Is there consideration when past consideration is given?
  3. Is there consideration when a pre-existing duty is present?
  4. Is a promise to accept less consideration?P.12
  1. Promissory Estoppelp.13
  2. When can promissory estoppel be used?
  3. What kind of reliance is necessary?P.14
  4. Is promissory estoppel a sword or a shield?
  5. Privity of Contractp.15
  6. When does a third party have privity of a contract?
  7. Unilateral Waiver and Conditions Precedentp.16
  1. Intention to Create Legal Obligations
  2. Was there an Intention to Create Legal Obligations?

Always*GENERAL*

-Use ORP to determine if there was intention or not

-As in TD Bank, consider agreement/contract and background of parties

Family Relations

  1. Balfour v. Balfour (1919) – UK CA GENERAL

-When an agreement rises between family members there is a presumption of no legal intent  promise made through affection, not serious business (ORP)

-Onus on plaintiff to establish there was intent to enter a legal contract

  1. Family Relations Act (1996) – BC Legislation EXCEPTION

-Marriage agreements made before or during a marriage are legally binding

-It must be in writing and have a witness

Commercial Relations

  1. Rose and Frank Co. v. J.R. Compton and Bros Ltd. – UK CA GENERAL

-When an agreement rises between serious commercial parties there is a presumption of an intent to create legal relations, unless explicitly stated otherwise

  1. TD Bank v. Leigh Instruments Ltd. (1999) – Ont. CA EXCEPTION

-A comfort letter is not intended to create legal obligations

-To determine if there was serious intent consider (ORP)

  1. whole document
  2. background of parties
  3. wider commercial reality

Politics

  1. Canadian Taxpayers Federation v. Ontario (2004) – Ont. SC GENERAL

-Political promises are not legally binding

-There is no intent to have them legally binding

  1. Contracts Under Seal
  2. Royal Bank v. Kishka (1967) – Ont. CA SEAL

-A seal is sufficient to show there is consideration (no other consideration necessary)

-You need to physically stick something to the contract, with intent, for it to count as a seal; i.e. wax, sticker, gummed wafer; “seal” words written are not enough

  1. Offer and Acceptance
  2. Was there an offer or an invitation to treat? Or a Puff?
  3. Canadian Dyers Association v. Burton (1920) – Ont. HC GENERAL RULE

-An offer has an indication to sell

-Offer Test

  1. Look at language used
  2. Look at surrounding circumstances and actions

-A mere quotation of a price is an invitation to treat (usually)

-Here actions and plain wording of correspondence suggest a contract is in place

  1. Carlill v. Carbolic Smoke Ball Co. (1893) – UK CA GENERAL RULE

-Offer is to be construed how the recipient of offer would construe it (ORP)

-If no serious intent or too vague to accept it is likely a puff

  1. Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953) –UK CARETAIL

-Generally, the display of goods on shelves is an invitation to treat (ORP)

-Customers expected to browse and bring goods they want to cashier for purchase

-Customers can put an item back before purchasing

  1. Goldthorpe v. Logan (1943) – Ont. CAAD

-In general, an advertisement is an invitation to treat

-An ad is an offer when it is an inducement to buy, an offer to all who accept it

-TheHeread is meant to obtain clients through offer of guaranteed results to clients

-Businesses must uphold promises to those who meet conditions

  1. Is the offer valid for acceptance? – Communicated, Conditions, Intent and Reliance
  2. Blair v. Western Mutual Benefit Assn. (1972) – BC CA REQ:CLEARLYCOMMUNICATED

-For offer to be valid it must be clearly communicated to the person(s) it is intended

-Must be communicated for the purpose of giving an offer *intention*

  1. Williams v. Cowardine (1833) – UK KB REQ: INTENTIONTO ACCEPT

-For offer and acceptance, inner motive does not matter, only outward motive

-Here the unilateral contract was fulfilled as offeror received what they asked for and the woman knew of the offered award, despite having other inner motives

  1. R. v. Clarke (1927) – Aust. HC REQ: INTENTION TO ACCEPT

-In order to accept you must have knowledge of offer, you must intend to accept

-If offer is not communicated to the person or known, it cannot be accepted

-Here evidence showed Clarke didn’t intend to accept the offer and did not rely on it

  1. Carlill v. Carbolic Smoke Ball Co. (1893) – UK CAREQ: RELIANCE

-Offeree must rely upon offer in subsequent actions

  1. Eliason v. Henshaw (1819) – US REQ: MEET TERMS OF OFFER

-An acceptance which does not conform to conditions of the offer is not acceptance

-Here the mode of acceptance was specified and not met

-No obligation is imposed on offerer unless there is acquiescence

  1. Call for Tenders – What kind of bid process is it? What are the obligations on a party?
  2. Harvella Investments Ltd. V. Royal Trust Co…. Ltd (1986) – UK HL BID PROCESS

-In highest bidder sales, owner sets type of sale (freedom of contract)

-Once set the owner and tenderers are bound by it

-A bidder only chooses whether to partake with a bid or not

-Auction: each bidder may adjust his bid with reference to rival bid

-Fixed Bidding: a bidder may not adjust his bid or give referential bid

  1. R. v. Ron Engineering & Construction (Eastern) Ltd. (1981) – SCC CONTRACT A & B

-Invitation to Tender can be viewed as Contract A and Contract B

-Contract A: Unilateral contract, fulfilled by submitting a valid tender

-Call for Tenders is the offer, submission of a tender is acceptance of Contract A

-The terms and conditions of contract A are binding once tender submit

-Submitting a valid tender is an offer for Contract B

-If valid tender chosen, this bilateral Contract B may be entered into, though terms from Contract A can be amended when creating Contract B, if both parties agree

  1. MJB Enterprises Ltd. v. Defence Construction Ltd. (1951) – SCCOBLIGATIONS

-Obligations of parties in Contract A determined by examining the terms and conditions set forth in the invitation to tender (ORP)

-Test for implied terms

  1. Custom and usage in the industry
  2. Presumed intention

-Common implied terms:

  1. Only valid bids are acceptable
  2. Treat all tenders fairly

-Privilege clause can negate implied duty (must be specific)EXCEPTION

-The privilege clause does not override the obligation to only accept compliant bids

-Here there was no contractual obligation to award contract to lowest bidder

  1. Was the offer terminated?

REVOCATION

  1. Dickinson v. Dobbs (1876) – UK CAGENERAL RULE

-Offerer can revoke his offer at any time prior to acceptance

-Revocation must be communicated to offeree upon which the offer is terminated

-Communication need not come directly from offerer

-Communication can be implied, by doing an act inconsistent with the offer

  1. Bryne v. Van Tienhoven (1880) – UK EXCEPTION

-No communication to offeree means that it has not been revoked and is acceptable

-A person who accepts an offer not known to him to have been revoked shall safely assume there is a binding contract

  1. Dawson v. Helicopter Exploration Co. (1955) – SCC EXCEPTION (BC)

-Bilateral contract is accepted once mutual promises are accepted by both parties

-Courts will prefer to find a bilateral contract as it provides greater protection for both parties – not revocable

  1. Errington v. Errington and Woods (1952) – UK CA EXCEPTION (UC)

-Once the act of a unilateral contract has started, the act must be allowed to continue and given the chance to complete

-If the performance of acts has not started it is revocable

REJECTION

  1. Livingston and Evans (1925) – AB GENERAL RULE

-Once an offer is rejected it cannot be accepted; a counter-offer is a rejection

-A new proposal is a counter-offer; an inquiry is not a rejection

LAPSE OF TIME

  1. Barrick v. Clark (1951) – SCCGENERAL RULE

-An offer remains open for the period of time specified by offerer

-If not time specified we turn to a reasonable period of time (ORP)

  1. General Factors: volatility of goods on market, perishability, etc…
  2. Specific Factors: what was stated/intended, offer conditions, etc…
  1. Manchester Diocesan Case (1969) – UK THEORY

-Offer must be accepted in a reasonable time if no fixed time

-Two alternatives for consideration (theory)

  1. Offerer implicitly revokes after LOT (implied term in offer)
  2. Offeree implicitly rejects after LOT (drawn from conduct of offeree)

-Revocation: reasonable LOT when offer given –subjective/uncertain party views

-Rejection: determined by objective assessment of facts – ORP UK preferred fairness

  1. Was the offer accepted?
  2. Butler Machine Tool Co. v. Ex-Cell-O Corp (1979) – UK CA BATTLE OF FORMS

-Battle of the Forms:parties act as if there is a contract,but continuously try to negotiate background terms without formally acknowledging they are doing this

-If parties act as if there is an agreeable contract, the courts will try to find one

-Usually, this negotiation would count as a counter-offer and nullify previous offer including any pre-emptive strike clauses or such

-This results in a Last Shot Wins Approach: last form sent w/o rejection wins

-Sometimes First Shot Wins: when accepting new material terms is unfair (rare)

-Denning takes a different approach, All Shots Count

  1. All terms and conditions from both parties construed together
  2. Agreeable terms and conditions are kept
  3. Irreconcilable differences scrapped & replaced by reasonable implication
  1. Tywood Industries v. St. Anne… Pulp & Paper Co. (1979) – Ont. HC EXCEPTION

-Important clauses must be made apparent to other party and not just stuck in with terms and conditions without notification

-If the points are trivial and hidden then they will not be construed as accepted

-Court prefers Lord Denning Approach; uphold fairness and look at intention

  1. ProCD v. Matthew Zeidenberg… (1996) – US CA SHRINK-WRAP CONTRACTS

-Court rules in favour of market fairness between seller of goods and consumers

-It is common practice to have the contract in the shrink-wrap package or digital when program is installed, even though purchase is already made

-If one does not agree to the terms of the contract they can return the product

-It is a matter of commercial reality

  1. Carbolic Smoke Ball (1893) – UK CA UNILATERAL CONTRACT

-Offeror has a passive role after offer is made  consideration is performance

-Acceptance occurs upon performance of act, no notification needed

  1. Dawson v. Helicopter Exploration (1955) – SCCBILATERAL CONTRACT

-Offeror has an active role after offer is made  mutual promises

-Acceptance occurs when the offeree accepts

  1. Felthouse v. Bindley (1862) - UK REQ: POSITIVE ACT

-Mere silence is not acceptance in bilateral contracts; must be positive act

  1. Saint John Tug Boat Co. v. Irving Refinery Ltd. (1964) – SCC EXCEPTION:AQCUIESCENCE

-positive acts indicating acceptance will be considered acceptance, even with silence

-Acquiescence can suggest acceptance iff it is so deceptive as to imply acceptance

-Hereservices were known to have been made and other party expects to get paid

-Obligation not to remain silent unless you want to be bound

-Pure Acquiescence (no action); court not likely to punish someone who omits an act

  1. Mailed Communication of Acceptances
  2. Household… Insurance Co. v. Grant (1879) – UK CA POST BOX RULE

-Acceptance by mail occurs when it is sent in the mail

-The post office is considered an agent of the parties, such that giving acceptance to the post office is giving acceptance to the offeror

-Here acceptance was lost in post but defendant was bound by it nonetheless

  1. Holwell Securities v. Hughes (1974) – UK CA EXCEPTION

-Does not apply when offerer expressly states that it must reach the offerer first

-Does not apply if it would “produce manifest inconvenience and absurdity,” meaning when the parties cannot have intended that it should be binding (ORP)

  1. Instantaneous Communication of Acceptances
  2. Brinkibon Ltd. v. Stahag Stahl… (1982) – UK HLGENERAL RULE

-Acceptance occurs when and where it is communicated & during reasonable hours

-What counts as communicated is determined by

  1. intention of the parties
  2. sound business practice and
  3. fairness in where the risk should lie

-Here telex Acceptor is in better position to know the message is received (properly sent), so once it is sent it is considered communicated

  1. Rudder v. Microsoft Corp. (1999) – Ont. SCCOMMERCIAL REALITY

-Digital Terms of Agreement are binding when you click “I agree”

-It does not matter whether you read the terms and conditions or not

  1. Kanitz v. Rogers Cable Inc. (2002) – Ont. SCCOMMERCIAL REALITY

-Onus is on user to accept and use the service or to not accept and don’t use it

-Here it was in the terms that customers are responsible for checking for term changes on the website and accept/decline them –acquiescence is acceptance

  1. Electronic Transaction Act (2001) – BC Leg.COMMERCIAL REALITY

-S.11 “electronic signatures count as real signatures” (clicking I agree)

-S.15 “electronic contracts are as valid as real ones”

  1. Business Practices and Consumer Act (2004) – BC Leg. EXCEPTION

-Covers transactions between business enterprises and members of the public

-Unsolicited goods are not accepted by consumers unless expressly stated in writing

-Acquiescence is not acceptance for unsolicited goods

-"unsolicited goods or services" means goods or services that are supplied to a consumer who did not request them

  1. Formation of a Valid Contract
  2. When is a contract invalid due to vagueness orincomplete terms?
  3. R. v. Cae Industries (1985) – CAVAGUENESS

-If language is so vague a meaning cannot be reasonably applied to the material term (Price, Nature of Goods, Time/Manner of Delivery), then contract is invalid (ORP)

-Courts motivated to overcome vagueness with strong intention to form a contract

-Here “best efforts” means using best endeavors or leaving no stone unturned, but as it is the federal gov’t it cannot go against public interest (reasonable limit)

  1. Hillas &Co. v. Arcos Ltd. (1932) – UK HL INCOMPLETE TERMS

-If a material term is missing then the contract is invalid

-Contextual intent of terms and meanings is taken into account *subject matter*

-If an unspecified term may be found through contextual examination then the contract is binding

-Here standards referred to Russian standard trees, reasonable time referred to a time over the 1930 season, and the price list is given by Russia every year

  1. Is there an Agreement to Agree or an Agreement to Negotiate?
  2. May & Butcher Ltd. v. R. (1936) – UK HL AGREEMENTS TO AGREE

-An agreement to agree on essential terms is not agreement

-You cannot bind yourself to agree later

-Here there was an agreement to agree on the price, and an arbitration clause that spoke to disputes of the agreement, but clause was not functional as no contract

  1. Foley v. Classical Coaches (1934) – UK CAEXCEPTION

-If there is an objective formula to determine price later, agreement to agree is valid

-Herean agreement to agree is really an agreement to a reasonable price

-the arbitration clause applies because there is a contract as there are certain terms

-Parties acted as if there is a contract for 3 years prior *intention*

  1. Sales of Goods Act – BC Leg.BC EXCEPTION

-Applies to new and used goods; does not apply to sale of land or services

-Agreements to agree are valid

-The price may be determined later by parties or taken as reasonable price

-If there is an arbitration clause, the arbitrator can decide the price, unless he can’t decide due to uncertainty (then contract void) or due to interference by one of the contract parties (then not void but other party can take to court)

-Courts will only decide a contract if the contract does not set the price or have agreements to agree (freedom of contract)

  1. Empress Towers Ltd. v. Bank of Nova Scotia –BC CA AGREEMENTS TO NEGOTIATE

-Here the parties are ‘sophisticated commercial parties’ *serious intent*

-The parties agreed that there should be a right to renewal (previous relations) and at market rate (objective)

-The agreement to agree in the renewal clause was really an agreement to negotiate

-This was an agreement to negotiate in good faith and this should be upheld

-To withhold reasonable negotiations would be to violate the contract

  1. Mannpar Enterprises Ltd. v. Canada (1999) – BC CAEXCEPTION

-Not all agreements to negotiate are enforceable; need objective benchmark

-The parties agreed that there should be a general right to renewal

-Here the general right was too vague and not enforceable; no objective benchmark

-Here it was just an agreement to agree, so no contractual obligations

-Herethere was also no intention of good faith, so no good faith could be enforced

-Herethere was intention by Gov’t of Canada to leave considerable options open on how to proceed as they had a fiduciary duty to the Indian Band

  1. Wellington City Council v. Body Corporate (2002) – NZ CA EXCEPTION

-If a contract is objectively specific on the way in which negotiations are to proceed than this can be enforced

-A failure to try and negotiate is a breach, but not a failure to agree

-Here negotiating in good faith was essentially subjective and not enforceable as it blurred the lines between trying to negotiate and trying to agree

  1. Requirements Under Writing
  1. Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978) – SCC STATUTE OF FRAUDS

-the description of an object must be precise enough to identify it

-contracts for the sale of land must be in writing or some reference to the contract must be made in writing (memorandum)

-parol evidence may be used to bring clarity and precision to a description (ORP)

-Signature in writing required; initials sufficient (either must be placed with intent)

-Joined documents can be used; must be obvious connection or reference to each other in the documents either implicitly or explicitly (parol evidence not sufficient)

  1. Deglman v. Guaranty Trust Co. (1954) – SCCSTATUTE OF FRAUDS

-Performance must be connect to the contract unequivocally

-Acting like there is a contract isn’t enough to show a contract exists, if there is nothing in writing that mentions or confirms the contract