Page 1 of 89
Remedies for Breach of Contract 8
Damages 8
The Three Categories of Damages 8
The Compensation Principle 8
Peevyhouse v. Garland (diminution in value, essential vs. incidental, deterrence against “windfalls”) 9
Radford v. De Froberville (essential vs. incidental, damages vs. equitable remedies, unjust enrichment) 9
Ruxley Electronics and Construction Ltd. v. Forsyth (economic waste, introduction of non-pecuniary damages, consumer surplus) 10
Victory Motors Ltd. v. Bayda (supply and demand and entitlement to expectation damages, precursor to mitigation) 10
Contract Law and Social Ordering 11
LAW AND ECONOMICS 11
Other Aspects of the Compensation Principle 11
Anglia Television Ltd. v. Reed (pre-contract expenditures, uncertain expectation damages) 12
Bowlay Logging v. Domtar Ltd. (reliance damages exceeding expectation damages) 12
Chaplin v. Hicks and Kinkel v. Hyman (chance of a profit is compensable) 12
Limits on the Award of Damages: Remoteness 13
Hadley v. Baxendale (reasonable foreseeability of loss) 13
Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. (application of reasonable foreseeability concept) 13
Implied Acceptance of Special Circumstances 14
General factors to consider in deciding whether damages are too remote 14
General purpose of limiting damages through remoteness 15
Special Problems and Circumstances 15
Jarvis v. Swan’s Tours Ltd (Contracts for pleasure, non-pecuniary damages) 15
Wilson v. Sooter Studios Ltd. (non-pecuniary damages for a peace of mind K) 16
Wharton v. Tom Harris Chevrolet Oldsmobile Ltd. (non-pecuniary damages, requirement of “sensory experience” discomfort) 16
Warrington v. Great-West Life Assurance Co. (contracts promising peace of mind, aggravated damages) 17
The Test to Employ to Find Non-Pecuniary Damages 18
Aggravated Damages (don’t use this term) and Employment Contracts 18
Punitive Damages 19
Limits of the Award of Damages: Mitigation 19
General Notes on Mitigation 20
Doctrine of Election: 21
Date of Assessment of Damages 21
Equitable Remedies 22
General Comment on Equitable Remedies 22
Requirements for an order of specific performance 22
Injunctions and undue restraint on trade 23
Formation of Contract 23
Offer and Acceptance 23
Test Applied 23
Termination of Offers 23
Acceptance of offer 24
Communication of acceptance 24
Contracts made by mail (Postal Acceptance Rule) 24
Where is a contract made? (Jurisdictional issues) 24
Email contracts 25
Uncertainty in Formation of Contract (unenforceability of agreements to agree, incomplete agreements, or contracts with ambiguous or missing essential terms) 25
Foley v. Classique Coaches (vagueness in price, arbitration clause, ongoing relationship) 25
Courtney and Fairbairn Ltd. v. Tolaini Brothers (Hotels) Ltd. (unenforceability of “agreement to agree”, one time (not ongoing) relationship) 26
Empress Towers Ltd. v. Bank of Nova Scotia (good faith) 26
Other notes on good faith: 27
Policy Rationale for Legal formalities (e.g., consideration) 27
Legal formalities 27
Statute of Frauds 27
Consideration 27
General Comments on Consideration 28
Consideration and gifts 28
Past Consideration 28
Mutual Promises (i.e., Consideration continued) 29
Great Northern Railway Company v. Witham (Mutual promises, framework agreements) 29
Wood v. Lucy, Lady Duff-Gordon (implied obligations) 29
Firm Offers and Unilateral Contracts 30
Introductory Comments (Read!) 30
Dawson v. Helicopter Exploration Co Ltd (unilateral vs bilateral contract) 31
Can offer be revoked when performance on a unilateral contract has commenced? 31
Going Transaction Adjustments (GTAs) 32
Policy considerations justifying GTA’s: 32
Harris v. Watson (old case. either an unreasonable application of the doctrine of consideration or a holding that legal GTA not found if modification made under duress) 32
Stilk v. Myrick (old case. strict application of the doctrine of consideration, concerns about duress found in a GTA) 32
Raggow v. Scougall (Rescission and creation of new contract to validate a GTA. finding of a GTA by holding that old contract was voided by the mutual acceptance of the GTA. New contract is in place with new terms. This gets around the problem of fresh consideration, one way of doing it) 33
Stott v. Merit Investment Corporation (Finding of a valid GTA when there is forbearance on the right to sue) 33
DCB v. Zellers (cases without any legal merit cannot rely on forbearance) 34
Gilbert Steel Ltd. v. University Construction Ltd. (estoppel cannot be used as a sword, only as shield) 34
Williams v. Roffey Bros and Nicholls (Contractors) Ltd. (UK Case: GTA may be found when a practical advantage is found to be the consideration) 35
Pao On v. Lau Yiu Long (Economic duress or fraud, if found, GTA will be unenforceable) 35
Foakes v Beer (Debt settlement. Payment of a lesser sum for a greater sum is not good consideration [but there is an exception]) 35
NAV Canada v. Greater Fredericton Airport Authority (NBCA finds that K modification unsupported by consideration is binding provided there is no economic duress. IMPORTANT case because it will be found in counter arguments) 36
Step by step – how to approach a GTA issue: 36
Reliance as a basis for the enforcement of promises (Promissory Estoppel) 36
Difference between estoppel and promissory estoppel 37
Elements of promissory estoppel 37
Central London Property Trust Ltd v. High Trees House Ltd (application of promissory estoppel as a shield) 37
Combe v Combe (gratuitous promise means no consideration and no contract even if relied upon) 38
Criticisms of the sword/shield distinction in estoppel 38
United States 38
Arbitrariness of the sword/shield distinction 38
What is reasonable reliance? 38
Third Party Beneficiaries and Privity of Contract 39
Background 39
Avoidance of contractual “box” 39
The Problem with Privity of K as applied to insurance contracts and the resultant case law 40
London Drugs v. Kuehne & Nagel (employees may benefit from exclusion clause in lease btwn Landlord and Tenant business) 40
Laing Property Corp v. All Seasons Display (application and development of London Drugs) 41
Remaining problems: Fate of employees 41
Fraser River Pile & Dredge v. Can-Dive Services (3P insurance benefits aren’t just for K’s of service) 41
But note: this concept doesn’t just apply to insurance contracts. It could apply to any case where there is indemnity, exclusion of liability, etc. 42
Horizontal and Vertical Privity 42
Representations and Warranties 42
Representations and Warranties table and definitions 42
Policy considerations: 45
So if you found a misrepresentation? Head over to the parol evidence rule and discuss that 45
Concurrent Liability in Contract and Tort: Negligent Misrepresentation 45
Esso Petroleum Co v. Mardon (concurrent liability in K and tort) 45
Other essential comments about concurrent liability in K and Tort 46
Concurrency (pros/cons of suing in tort/contract) 46
Mistake 47
Categories of Mistake 47
Mistake in Formation 48
Intro with test and policy factor comments 48
Raffles v. Wichelhaus (mistake. Outdated concept of consensus ad idem) 48
Hobbs v. Esquimalt and Nanaimo Railway co (objective reasonable person test for finding of mistake in formation) 49
Rectification (the test) 49
Mistaken Payments 50
Budai v. Ontario Lottery Corp (reliance on mistaken payment) 50
Mistaken Assumptions 50
Introduction 51
Sherwood v. Walker (mistaken assumption regarding nature of subject matter) 51
Bell v. Lever Brothers Ltd (Mistaken assumption regarding essential quality) 51
Solle v. Butcher (Equitable jurisdiction/relief of mistaken assumption. Read this as it might be applicable whenever mistaken assumption is found) 52
Examples where equitable jurisdiction might be used: 53
Frustration 53
Krell v. Henry (frustration of commercial purpose of contract, test for frustration) 54
ALCOA (Magnitude of risk unforeseen, reformation) 54
Re Westinghouse Electric Corp (Mere fact that K becomes expensive is not sufficient) 54
Amalgamated Investment v. John Walker (difficulty of finding frustration in land contract) 55
KBK No. 138 Ventures Ltd. v. Canada Safeway Ltd (Canadian case, finding frustration in land contract when unforeseen fundamental change in land occurs. Use this case as the test for frustration) 55
Remedies for frustration and the Frustrated Contract Act 56
Control of Contract Power 56
Mensch 57
The chain of gifts 57
Contract Interpretation 58
Renner, The Institutions of Private Law 59
Federal Commerce & Navigation Co. v. Tradax Export SA (the importance of consistency in standard form contracts) 59
Scott v. Wawanesa (the problem with strict enforcement of standard form contracts) 60
Techniques of Control – SEE THIS IF NEGLIGENCE ISSUE 61
The Parol Evidence Rule 61
Bauer v. Bank of Montreal (SCC) -- collateral agreement that contradicts the written agreement is inadmissible due to the parol evidence rule. 63
The way courts get around Bauer: 63
Gallen v. Allstate Grain Co. – This will occur when the contradictory oral evidence is unequivocal. The court may state that reliance on the oral representation was reasonable, and that the oral representation did not contradict the contract, but merely added or varied the written terms. 63
Zippy Print Enterprises v. Pawliuk (an example of somewhat sophisticated commercial parties not having to rely on the strict wording of the contract, parol evidence rule not applying to a specific representation) 63
Bank of Nova Scotia v. Zackheim (Ontario case, unlike the others) – PER excluded evidence of oral innocent misrepresentations that contradicted the written terms of a guarantee. 63
Factors Influencing Application of PER (read this for the test): 64
Standard Form Contracts 64
Advantages 64
Disadvantages 65
The Ticket Cases 65
Parker v. South Eastern Railway (party is bound to unsigned agreement with reasonable notice, test to employ) 66
J Spurling v. Bradshaw (Lord Denning, the more unreasonable the clause, the greater the notice required. The “red hand” rule) 67
Thornton v. Shoe Lane Parking (application of Lord Denning’s “red hand” rule, unreasonable condition in a ticket) 67
Interfoto (Thornton/reasonable notice doctrine applies to clauses generally, not just exemption clauses) 68
Signed Contracts and Fundamental Breach 68
Canadian Approach to Fundamental Breach 69
Hunter Engineering Co. Inv v. Syncrude Canada Ltd. (doctrine of fundamental breach is a rule of construction only, better to use unconscionability, sophisticated commercial parties aren’t subject to it, perhaps consumers though) 69
A Possible Exception – Exclusion Clauses Continued 70
Tilden v. Clendenning (application of Llewellyn’s Solution? Signature rule no longer in effect? The importance of taking reasonable steps to bring unusual terms to consumer’s attention) 71
With signed waivers for risky activities: in the absence of unconscionability, fraud, misrepresentation, the traditional rule I that signature is a manifestation of assent: Delaney v. Cascade River Holidays (BCCA, 1981) 73
Ochoa v. Canadian Mountain Holidays 73
Karroll v. Silver Star (circumstance when a waiver of liability is accepted [use this case for the relevant law], agency exception to privity rule) 73
Note: Where signature rule has been overruled tends to usually be, common thread of inequality of bargaining power, particular in consumer context and particularly with standard form contracts 75
Ecommerce and control of contractual power 75
Econtract enforceability 75
General rules of contract law apply to ecommerce 75
Shrink wrap contracts 75
Click-wrap contracts 76
Browse-wrap 76
Kantiz v. Rogers Cable Inc (enforceability of arbitration clause where notice of contract changes given on a website) 76
Comments on arbitration clauses: 77
Introduction to three contractual doctrines that regard fairness of bargain 77
If you talk about any one of these in exam, you must discuss all three 77
Duress 78
Economic duress 78
Pao On (the test for economic duress, accepted by Canadian courts) 78
Gotaverken Energy Systems (Canadian example of the Pao On case) 79
Stott v. Merit Investments (a contract made under duress can be ratified and made enforceable) 79
Undue Influence 80
Categories of undue influence: 80
Bank of Montreal v. Duguid (ONCA. Constructive notice of undue influence. The duty of a bank to find and avoid undue influence) 81
Unconscionability 82
The basic test per Morrison v. Coast Finance (BCCA, 1965) with factors applied from other cases: 82
Unconscionability – Private versus Public grounds 83
Henningsen v. Bloomfield Motors (American case. Contextual analysis to finding inequality of bargaining power) 83
Consumer Protection Legislation (IMPORTANT if a question regards a consumer transaction) 84
Business Practices and Consumer Protection Act 84
Rushak v. Henneken (BCCA: Duty for suppliers to disclose when they have specific negative information that may or may not be accurate about the product) 85
Illegality 85
Quick note on penalties and forfeitures 85
Illegality 86
Common law illegality: 86
Statutory Illegality: 87
Framework/strategies for certain question types (START HERE): 87
Employment law, wrongful dismissal, constructive or direct 87
Injunctions in employment contracts 88
Breach of contract resulting in a potential damage claim (including non-pecuniary damages) 89
Is there a binding contract (focus on relational contracts)? 91
Is there a binding contract (focus on gifts)? 92
Is there a binding contract? 93
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Remedies for Breach of Contract
Damages
The Three Categories of Damages
Courts primarily award damages, but may award equitable remedies such as specific performance or an injunction
Restitution: “corrective justice”, prevents unjust enrichment to def., i.e., prevention of gain to def., (if I agree to buy something for $80 and def. gives me nothing, def. was unjustly enriched by $80 and I could receive that in restitution)
Reliance: “restorative justice”, prevent harm to victim, recovery of costs plaintiff might have incurred as a result of relying on the contract (cost of title search for instance, etc). judge would award restitution damages + reliance damages = good a position as before the contract was entered
Expectation: “distributive justice”, secure benefit of contract to victim, either award specific performance, or the monetary value of the specific performance (e.g., amount of profit that would have been earned after buying a house that increased in value). In this case, expectation (expected profit) + reliance damages = making the plaintiff whole
Reasons for Expectation Damages:
a) Psychological expectation: sense of moral injury if someone breaks a promise
b) Will theory: consent to contract creates some sort of private law btw the parties – K creates a law btw the 2 parties, it is for the courts to enforce that law
c) Economic explanation: K is property; once K is made, there is a proprietary/econ int in the promise w/respect to future entitlements; K w/respect to future entitlements has some sort of present value