Contracts (Biukovic)
Dec 2008
Introduction to Contracts 2
Formation of the Contract 2
Offer 2
Offer and Invitation to Treat 2
Canadian Dyers Association Ltd. v. Burton, 1920 3
Pharmaceutical Society of GB v. Boots, 1953 CA Eng 3
Goldthorpe v. Logan: 1943 ENG CA 3
Consumer Protection Act 3
Carlill v. Carbolic Smoke Ball Co: 1893 ENG 4
Harvela Investments v. Royal Trust: 1985 HL 4
R. v. Ron Engineering and Construction (Eastern) Ltd.: 1981 SCC 4
MJB Enterprises Ltd. v. Defence Construction Ltd.: 1999 SCC 4
Double N Earthmovers Ltd v. City of Edmonton 2007 SCC 3 4
Communication of Offer 4
Williams v. Carwardine: 1833 5
R. v. Clarke: 1927 Australian H.C. 5
Acceptance 5
General 5
Livingstone v. Evans: 1925 Alberta S.C. 5
Butler Machine Tools v. Ex-cell-o Corp: 1979 Eng CA 5
Communication of Acceptance 6
Felthouse v. Bindley: 1862 NSCA 6
Brinkbon v. Stahag Stahl: 1983 Eng 6
Household Fire & Carriage Accident Insurance v. Grant: 1879 ENG CA 6
Holwell Securities v. Hughes: 1974 Eng CA 6
Electronic contract formation and related problems 7
ProCD v. Mathew Zeidenberg and Silken Mountain Web Services: 1996 US CA 7
Rudder v. Microsoft Corp, Ont. S. C. (1999) 7
Kanitz v. Rogers Cable Inc. 7
Electronic Transaction Act, 2001 7
Termination of Offer 7
Revocation 7
Unilateral Contracts 8
Rejection and Counter Offer 8
Byrne v. Van Tienhoven: 1880 CPD 8
Dickinson v. Dodds: 1876 CA [indirect revocation] 8
Errington v. Errington and Woods: 1952 KB [unilateral revocation] 8
Lapse of Time 8
Barrick v. Clark (1951) SCC 8
Manchester Diocesan Council v. Commercial Investments Ltd: 1970 9
Certainty of Terms 9
May & Butcher v. R.: 1929 KB 9
Hillas and Co. Ltd. v. Arcos Ltd.: 1932 HL 9
Foley v. Classique Coaches Ltd: 1934 CA Eng 10
Empress Towers Ltd. v. Bank of Nova Scotia: 1991 BCCA 10
Mannpar Enterprises Ltd. v. Canada: 1999 BCCA 10
Wellington City Council v. Body Corporate, 2002, N.Z. C.A. 10
Bawitko Investments Ltd. v. Kernels Popcorn Ltd, 1991, Ontario C.A. 10
Intention to create legal relations 10
Balfour v. Balfour: 1919 Eng CA 11
Rose and Frank Co. v. JR Crompton and Bros. Ltd.: 1923 Eng CA 11
Toronto-Dominion Bank v. Leigh Instruments Ltd, 1999, Ontario CA 11
Consideration 11
6.1 Nature of Consideration 11
Thomas v. Thomas: 1842 Eng QB 12
Jones v. Padavatton, 1969, All ER 12
6.2 Past Consideration 12
Eastwood v. Kenyon: 1840 QB 12
Lampleigh v. Braithwait: 1615, Eng. K.B. 13
6.3 Forbearance 13
B. (D.C.) v. Arkin: 1996 Man QB 13
6.4 Pre-existing Legal Duty 13
Duty imposed by legal/public duty 13
Duty owed to a third party 13
Pao On v. Lau Yiu Long: 1980, PC 13
Duty owed to promisor 14
Gilbert Steel Ltd. v. University Construction Ltd.: 1976 Ont CA 14
Williams v. Roffey Bros & Nicholls (Contractors Ltd.): 1990 Eng CA 14
Foakes v. Beer (1884) – Eng. HL 14
Re Selectmove Ltd. [1995] English CA 15
Foot v. Rawlings [1963] SCC 15
Waiver and Promissory Estoppel 15
Central London Property v. High Trees House Ltd.: 1947 16
John Burrows Ltd. v. Subsurface Surveys Ltd.: 1968 SCC 16
D & C Builders Ltd. v. Rees: 1966 England CA 16
Combe v. Combe: 1951, England KB CA 16
Walton Stores v. Maher: 1988 Aus HC 16
M. (N.) v. A.(A.T.), 2003, BC CA 17
Privity of Contract 17
Tweedle v. Atkinson, 1861 B&S 17
Dunlop PneumaticTyre Co. v. Selfridge & Co. Ltd., 1915 AC HL 18
Beswick v. Beswick, 1966 Eng CA 18
Beswick v. Beswick, 1968 Eng HL 18
London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 SCC 18
Fraser River Pile & Dredge Ltd. v. Can-Dive Services, 1999 SCC 18
Introduction to Contracts
Elements of a K (common law):
· Consensual Agreement
o Offer
o Acceptance
· Consideration (something of value to law exchanged for promise)
· Intention to create legal relations (enter freely)
· Requirements of form (legality). More important in civil law.
· Maturity (age), Capacity (mental health), and Consent
Formation of the Contract
Offer
Offer and Invitation to Treat
Invitation to treat:
· A statement of willingness to entertain an offer; invitation to others to make an offer; terms can still be determined; often a prelude to a K.
Offer:
· A promise to do or refrain from doing some specified thing in the future
· A final and definite willingness to enter into a K and be bound by its terms; not much negotiation, other side will just accept
General Rule:
· Giving a mere price quote or placing goods on shelf for sale or publishing advertisement is not an offer but an invitation to treat: Pharmaceutical Society v. Boots
Exceptions:
· Need to consider: intention, conduct, surrounding circumstances to determine whether price quote or ad is offer instead of invitation to treat: Canadian Dyers Association Ltd. v. Burton, Goldthorpe v. Logan
· "Promise to world at large" to give something in return for performance of some action is not invitation to treat but a unilateral offer: Carlill v. Carbolic Smoke Ball Co
Tenders / Bids / Auctions:
· Invitation to treat can specify the type of offer (bid) required; e.g. whether fixed price or auction bids: Harvela Investments v. Royal Trust
· In a formal tendering process, call for tenders is not just an invitation to treat but an offer (to accept tenders); submission of valid tender is acceptance of this offer (contract A); the tender that is chosen is then basis for forming actual contract to do work (contract B); R. v. Ron Engineering, MJB Enterprises Ltd. v. Defence Construction Ltd.
· If submitted tender is not valid (i.e. it does meet terms stated or implied in call for tenders) then it does not result in a contract (contract A): MJB Enterprises Ltd. v. Defence Construction Ltd.
· In auction, auctioneer is making invitation to treat; those who are bidding are making offer; invitation or offer can be revoked before hammer is hit.
Canadian Dyers Association Ltd. v. Burton, 1920
FACTS: Burton selling house, quotes price to P who sends deposit; Burton accepts deposit and sends deed but later refuses to acknowledge contract.
ISSUE: Was there an offer? Yes, because of conduct of D.
RATIO: a mere price quote is usually only an invitation to treat but to decide if there was an offer, need to look into the intention and conduct of the parties and the surrounding circumstances.
Pharmaceutical Society of GB v. Boots, 1953 CA Eng
FACTS: Boots is a self-service pharmacist; P charges Boots with selling without supervision;
ISSUE: is displaying goods in a store an offer to sell? No, only an invitation.
RATIO: merchandise display = invitation to treat; offer = at cash register; acceptance = taking customer's money
Goldthorpe v. Logan: 1943 ENG CA
FACTS: P sees newspaper ad for hair removal with guaranteed results; goes thru with the procedure but it was unsuccessful
ISSUE: Was there a K based on the ad? Yes, ad was an offer because it made explicit promises (guaranteed success) based on consumer’s performance.
RATIO: general principle is that ads are invitations to treat but that depends on the language used and the conduct of the parties – can be an offer.
Consumer Protection Act
· Allows people to get out of certain K’s
· Stemmed from the misuse of standard form K’s
Carlill v. Carbolic Smoke Ball Co: 1893 ENG
FACTS: D advertised that their smoke ball, if used properly, would prevent the user from contracting the flu; offered money if didn’t work; P used it as directed and still got the flu
ISSUE: Was there an offer? Yes, it was a unilateral offer, not an invitation to treat, because of guarantee and reward.
RATIO: if an ad promises something in return for performing certain actions then it is a unilateral offer made to the public, not an invitation, a K is only concluded with those that fulfill the conditions on the faith of the ad. No written notification of acceptance is required – performance is sufficient. "Plain meaning" interpretation; unrealistic, vague, non-intentional K can still be upheld.
Harvela Investments v. Royal Trust: 1985 HL
FACTS: the R sent an invitation to the A and to Sir Leonard to bid on shares; the A offered $2,175,000 and Leonard offered $2,100,00 or $101,000 higher than the next bidder; R gave it to Leonard
ISSUE: was the sale a fixed bid or an auction? It was fixed, based on intention of seller.
RATIO: the seller controls the type of bidding and the intention of the seller can be deduced through reading the provisions set out in the invitation to treat.
R. v. Ron Engineering and Construction (Eastern) Ltd.: 1981 SCC
FACTS: contractor D wanted to withdraw bid after deadline because of mistake in costs;
ISSUE: Is the D entitled to recover his tender deposit? No, he breached contract.
RATIO: the tender process is a 2 contract process (A and B); the call for tenders is the offer and the bid submission is the acceptance; this leads to the formation of KA; entering into KA leads to the contractual obligation that if bid is accepted will enter into KB which is the construction K.
MJB Enterprises Ltd. v. Defence Construction Ltd.: 1999 SCC
FACTS: the lowest bidder was non-compliant but was chosen anyway; the A says that privilege clause allows it to choose whomever they please.
ISSUE: Does privilege clause allow them to accept a non-compliant bid? No, only allows them to choose between valid tenders.
RATIO: two key points to remember: 1) notion of implied term of contract, in this case, that contract A must be a valid contract to be considered, 2) decision that privilege clause does not override the need to consider only valid contracts (implied terms of contract override explicit terms of contract).
Double N Earthmovers Ltd v. City of Edmonton 2007 SCC 3
FACTS: City awarded contract to rival company despite non-compliant bid
ISSUE: By making KB with rival bidder's non-compliant bid, did City breach KA with P and breach obligation to treat all bidders with fairness? No, KA does not survive creation of KB so City has no contract or obligation to P
RATIO: Not every failure to comply with tender requirements invalidates bid; not obligated to investigate bids
Communication of Offer
General rule:
· An offer must be explicitly and intentionally communicated in order to be valid
Rewards:
· Notices for rewards constitute a unilateral offer. Whoever has knowledge of the offer and fulfills the stated requirements gets the reward regardless of motive: Williams v. Carwardine
· Exception: if don’t act on reliance of offer (are not aware of offer or give no regard to offer) then not entitled to reward: R. v. Clarke
Williams v. Carwardine: 1833
FACTS: the D offered reward for information regarding brother’s murderer; on deathbed, the P gave a statement that led to the conviction of the murderer; asked for reward and was denied
ISSUE: Is P entitled to the reward? Yes, b/c was aware of offer although had ulterior motive for accepting
RATIO: acceptance of offer is legally binding agreement, regardless of the motives of acceptance
R. v. Clarke: 1927 Australian H.C.
FACTS: reward offered for info regarding murderer; D snitched to save own skin; says that he was aware of the reward but forgot when he gave the information
ISSUE: should the D get the reward even though he was not induced by the reward? No, must have some reliance on offer to get reward.
RATIO: a person is not entitled to a reward if they did not act in any reliance on the offer; must be aware of the offer to get the reward; in general, acceptance has to be in response to an offer.
Acceptance
General
Counter-offers / Battle of forms:
· replying to offer with modified terms is a counter-offer (not acceptance); a counter-offer is a rejection of the original offer (a mere inquiry is not a counter-offer or rejection); the original offeror accept counter-offer, make new offer or revive the original offer; an offer that has been rejected cannot later be accepted except with the consent of the offeror: Livingstone v. Evans
· in battle of forms general rule is ‘last shot’ rule: there is a contract as soon as the last form is sent and accepted without objection; however, in cases of dispute over terms must reconcile totality of correspondence (look at all shots not just first shot or last shot): Denning in Butler Machine Tools v. Ex-cell-o Corp
Livingstone v. Evans: 1925 Alberta S.C.
FACTS: D offers to sell P land for $1800; P counter-offers lower price; D replies that he cannot reduce the price; P writes accepting the offer but D sells to someone else.
ISSUE: Was reply “can’t reduce price” a renewal of original offer? Yes, because reiterates original price.
RATIO: a counter-offer is a rejection of the original offer but it is possible to revive an original offer by replying back to a counter-offer, depending on the surrounding circumstances. An offer that has been rejected cannot later be accepted except with the consent of the offeror; (note that a mere inquiry is not a rejection).
Butler Machine Tools v. Ex-cell-o Corp: 1979 Eng CA
FACTS: buyer and seller send forms back and forth regarding price of a machine; when delivery comes the seller has increased the price and there is a dispute about it.