1. 2. 3. 4.

5. 6.

7.

8.

Offer vs Invitation to treat Knowledge of offer vs response to an offer Acceptance vs communication of acceptance Requirements of termination of an offer a. Revocation b. Reasonable time c. Rejection v counter offer d. Conditional offer Bilateral vs unilateral offer Certainty of terms a. Indefiniteness b. Incompleteness c. Agreement to negotiate Clauses a. Subject to contract b. Conditional contracts i. Conditions precedent to formation vs conditions precedent to performance ii. Waiver of conditions Enforceability of agreements a. Intention to create a legal relationship i. Family, domestic + social agreements ii. Commercial agreements b. Consideration i. Bargain vs gratuitous promise ii. Past consideration is no consideration iii. Pre-existing legal duty vs pre-existing practical duty iv. Promise to pay more than is due v. Promise to accept less than is due vi. Modernization of the doctrine of consideration c. Promissory estoppel d. Privity

ELEMENTS OF A CONTRACT
General Notes 1. Implied v express terms 2. When can we use the reasonableness standard? 3. Nature of consideration 4. The courts are slow to invalidate a contract for uncertainty where the parties have agreed workable criteria (a formula, objective standard or machinery e.g. arbitration) for resolving the matter left unresolved. If the parties fail to agree or if their designated machinery for ascertainment breaks down, the court may be able to step in and apply the formula/standard. They can do so unless the designated machinery is essential (i.e. they werent content to leave the task to the court or another 3rd party and dont intend to be bound unless the gap is filled by their stipulated machinery) 5. Terms: ad idem (meeting of the minds), quantum meruit (as much as it is worth), non est factum (a plea used, when a party mistakes the terms of the contract), res ipsa loquitur 6. Offers dont last forever. If they arent accepted, they cease to exist through: revocation, lapse of time (offers stand for a reasonable time. Courts determine this by looking at market volatility, industry standard etc), death/insanity, rejection, counter off

7. Option: a contract in which the offeror is paid in exchange for a binding promise to hold an offer open for acceptance for a specific period 8. Firm offers can be revoked at any time (because there is no contract yet and nothing is legally enforceable). However, a firm offer cant be revoked if the promise was placed under seal or if it was an option. 9. Tenders: offer to undertake a project on particular terms. 10. Battle of the forms: when each party claims to have entered into a contract on the basis of its own standard form document. 11. Executed (already performed) vs executory (not yet performed) 12. Bilateral contract (when a promise is exchanged for a promise) vs unilateral contract (when an act is exchanged for a promise) 13. Unilateral contracts: a. no contract exists until the offeree fully performs (and an offeror can revoke at any timethis creates potential problems) b. Offeree must have intention of accepting the offer (cant gain the benefit simply be fulfilling the contract by accident) 1. Offer versus Invitation to Treat Notes: i. Invitation to treat: not an offer but an indication of a willingness to receive an offer. Distinction between an invitation to treat and an offer = an objective test (reasonable person). ITT Grant Canadian Dyers Carlill Gibson Lefkowitz Boots v Pharm R v Dawood Sanchez Lopez Goods on display ITT ITT Offer Giving it to cashier Offer Offer Acceptance Offer

Grant v Province of New Brunswick Offer vs invitation to treat Potato farmer Grant responds to a govt scheme for the purchase from farmers of excess potatoes, which set out certain terms and conditions for qualification. Grant followed all terms and conditions and his potatoes were destroyed but the govt refused to pay him on the ground that there was some question as to whether the potatoes were truly his. To avoid the contract, the govt claimed that the application to be filed out by the farmers was not an offer to purchase, but rather an invitation to treat. Grant argued to the contrary, positing that the application was an offer, and his subsequent conduct was its acceptance. He also stressed that apparent intent is what counts in the formation of a contract. For Contract: Against Contract:

1. Offer = govt form, acceptance = Grants 1. Grant filling out form was an offer to conduct sell (Govt) 2. Grant had detrimental reliance 3. Reasonable person test wouldve believed it was an offer 4. It was a unilateral offer to a specific group Court: Test of offer vs invitation to treat = a reasonable person test, not a subjective one (what the offeror intended it to mean) No waiver limiting acceptance of potatoes in the application

Canadian Dyers Association v Burton C price quote by itself = invitation to treat Dyers association wants lowest price Purchaser: wrote to the seller, asking for a price quote for a property. Seller replied with the lowest price. P wrote back for a better price. Seller replied, the last price I gave you is the lowest I am prepared to accept. If it were any other party I would ask for more. This was treated as an offer by P, and they sent a cheque as deposit, asking for a deed to be prepared. Sellers lawyer sent a draft deed, saying hed be ready to close shortly after. Seller wrote again, claiming that as there was no binding contract, he was no longer prepared to sell. P took action, claiming that Ps words (being more than a simple quotation of price the second price quote was a statement of readiness to sell to the P at the price already named) and actions (lack of responding with theres no contract) went further than an invitation to treat and expressed intent to create a binding contract. For Contract: 1. Ds actions + words went beyond an invitation to treat. Key words (The price I quoted is the lowest Im prepared to accept.) If it were any other party, I would ask for more. Without this, it was not an offer. Against Contract:

Court: Mere quotation of price = invitation to treat; Courts will look at it in the language + context used + subsequent actions, whether its part of an offer: o If this were any other party, I would ask for more o Retention of the cheque, sending the draft deed Acceptance: P sending the deposit cheque Alternative viewpoint: cheque = offer, sending of draft deed = acceptance Certainty: dont have to be 100% sure, just believe what the reasonable person would believe

Carlill v Carbolic Some Ball Co, 1893 (Unilateral Contracts) F: Carbolic Smoke Ball published an advertisement, offering to pay 100 pounds to any person who contracted influenza while using the Carbolic Smoke Ball. Mrs. Carlill saw the ad, bought the product and used it as directed. When she later came down with the flu, she claimed to be entitled to 100 pounds but the company refused to pay, saying there was no contract because she hadnt told them that she had accepted their offer and was using their product. For Contract: Against Contract: 1. To bypass unfairness of a unilateral contract (where is Mrs. Carlill could perform the contract to 99% and be told the offer was revoked), the judge could state that the advertisement contained offers for 2 unilateral contracts: a. 1 contract: 100 pounds to anyone who falls sick despite using the ball b. 1 contract: companys promise not to revoke its offer once a customer begins using the ball. J: 1. contract was unilateral: the company, as offeror, had implicitly dispensed with the usual need for the communication of acceptance. 2. In order to amount to an offer, must be shown that the offeror had the intention to be bound. 3. Advertisements are generally invitations to treat, but in some cases as here, they can amount to an offer 4. Offer was to the whole world, anyone who performs conditions is accepting Gibson v Manchester City Council XC Tenant wants to buy council house Gibson was a tenant of a house owned by Manchester. G completed a form on purchasing the house and returned it, requesting price information. Manchester wrote G of the price, This letter shouldnt be regarded as firm offer of a mortgage. If you would like to make a formal application to buy your house please complete the enclosed application form and return it. Gibson complete the form (relying on it as an unconditional acceptance of Ms offer to sell), except for the purchase price and sent it to M. The Labor party came back to power and halted house sales. Gibson was told he couldnt complete the purchase. He claimed he relied on the offer and renovated the house. For Contract: Against Contract: 1. Complex discussion of price + 1. Language of the form clearly numerous memos expressed that it wasnt an offer (this 2. Price listed in letter letter shouldnt be regarded as a firm 3. conduct = both parties operated on offer of a mortgage. belief that P bought the house 4. agreement on all material terms + intention for them to be binding = contract Court: No offer = no acceptance. Ms words were invitations to treat o May sell o Application

o Not a firm offer Retail goods on display : when does ITT become offer? Lefkowitz v Great Minneapolis Surplus Store C Ad thats clear + no room for negotiation = offer Sale on fur clothes D placed 2 ads, one selling fur coats worth to $100 and the second for scarves selling for $89.50 + another item, all for $1 each, and all first come, first served. P was the first to come, and he sued because D refused to sell the furs to him for the quoted price. D argued that the ads constituted unilateral offers and thus they could be revoked any time before acceptance was made. For Contract: Against Contract: 1. Acceptance by conduct: P showed up at the store 2. D cant add new arbitrary conditions not contained in the ad Court: No award for the fur coat because the value was too nebulous and indefinite Awarded the value of scarf he attempted to buy because the price was clear, explicit, left nothing open for negotiation Test of whether public ad can be binding offer = when it shows that some performance is promised in positive terms in return for something requested R v Dawood Thief switches price tags Dawood went to a department store, took a blouse, changed the price of the goods for a lower price tag. She went to the cashier, paid for the goods and left. She was caught and charged with theft. Her defense: at the minimum she could be charged with false pretenses, not theft since the cashier consented not only to the transfer of possession but also the transfer of property, and formed a valid contract of sale. For Contract: Against Contract: Court: Price tag = invitation to treat Dawood presenting goods + price tag to cashier = offer Cashier accepting = acceptance cashier has general authority to accept the offer as agent for *Follows Boots Cash Chemists: goods on display in shops are generally not offers but an invitation to treat. The customer makes an offer to purchase the goods, the trader decides to accept or not. Dissent: Price tag is an offer to sell, acceptance = payment. Dissent = how things are nowadays Customers shouldnt be allowed to change the price Cashiers shouldnt be able to accept counter offers Sanchez-Lopez v Fedco Food Corp (American case) Exploding pepsi bottle Man takes bottle of Pepsi from the counter, puts it in cart, brings it to the cashier. As he removed the bottle from the cart to hand it to the cashier, it exploded in his hand, injuring him. For Contract: Against Contract: Court: By presenting the goods to the cashier to pay for them, the P indicated a definition intention to accept the offer of the seller. Breach of contract bottle exploded

Test of acceptance = customer has clear intent to purchase that item (pushing cart to cashier with goods in it) argument, then customer cant change his mind? Privity of contract: Man cant sue manufacturer because they had no contractual relationship

Electronic Commerce & Information, Consumer Protection 2. Knowledge of (and Response to) An Offer R v Clarke You need to have knowledge of the offer to accept a unilateral contract Criminal spills info to clear a charge A criminal, while under arrest for murder, gave info to the police about the whereabouts of a criminal. There was a monetary reward (unilateral contract) for info about the criminal. Clark knew about the reward at one point, but subsequently forgot about it. Though unaware of the reward when he gave the info to the police, Clark took action against the crown. For Contract: Against Contract: Court: When Clark gave the info, his intention was to dissolve his charge cant have performance if you dont know youre performing Potential problems: o unjust enrichment of offeror o court analyzed intent of offeree should only be using objective test 3. Acceptance & Communication of Acceptance Notes: 1. Although contract depends upon the acceptance of an offer, sometimes theres clearly an agreement that cant be readily analyzed into an offer and acceptance 2. X. Acceptance can be silence/conduct if theres a prior contractual relationship (renewal contracts): St. John Tug Boat (silence + actions OK) , Felthouse v Bindley (no prior contractual relationshipsilence not valid acceptance)

a. Acceptance St John Tug Boat v Irving Refining (silence can be acceptance) Tugboats rented past agreed date F: St John had a deal with Irving Refining to provide them w tugboats for assisting incoming oil tankers to their shipyard. W no firm arrangement in place, St John said theyd only have 2 boats to assist them, unless special arrangements were made. St John ended up having 2 more tug boats available, and told Irving they could use them if they paid $450/day to have them on call until a certain date. This date passed and St John continued to keep the For Contract: Against Contract: 1. Silence can constitute acceptance when combined with conduct b. Communication of Acceptance

Manchester Diocesan Council for Education v Commercial & General Investments Selling old school by tender F: P (MD) wanted to sell an old school by a tender (this is an invitation to treat) which set out certain requirements, such as sending tenders to the Ps surveyor on/before August 27. On Aug 25, the D completed the tender (held to be the offer), imposing requirements of their wrt the mode of acceptance (had to be sent to their offices). P sent a letter of acceptance, but sent it to Ds surveyors rather than their offices. D later reneged on its offer to buy, claiming they werent bound because their requirements for acceptance werent strictly adhered to. P argued that strict compliance isnt require, but that any form of communication which isnt detrimental to the offeror is acceptable. requested tenders. Condition #4 set out the manner of acceptance. Nature of non-compliance: letter supposed to be sent to 15 Berkley St & was sent to a different address. P claims insufficient compliance. I: Is partially compliant acceptance good enough? For Contract: Against Contract: 1. Method of acceptance prescribed for a tender isnt mandatory; if an offeror wishes it to be mandatory this needs to be made explicit 2. The condition doesnt say that the method of acceptance prescribed is the sole method of acceptance 3. The method of acceptance wasnt detrimental to the offeror 4. Those who introduce strict modes of acceptance for their own benefit can waive them if they dont disadvantage the other party Carmichael v Bank of Montreal For Contract: Against Contract:

Three theories of communication of acceptance in long-distance contracts. Contract made when: 1. Rule of expedition (offeree): acceptance is dispatched a. Position of offeror compromised 2. Rule of reception (offeror): offeror receives acceptance a. Position of offeree compromised b. Instantaneous method of communication e.g. phone, fax, telex 3. Rule of information (offeror): when info imprints itself in the mind of the offeror. Strict than the rule of reception Postal rule: rule of expedition The offeror is free to specify terms of acceptance and can choose whichever rule he wants

Re Modern Fashions Instantaneous communication methods = reception rule contract created where offeror receives acceptance Battle of jurisdictions: Quebec v Manitoba Phone use Manitoba buyer makes offer to Quebec seller; Quebec seller accepts in Quebec. However, because instantaneous method of communication (phone) was used, contract is deemed to have been formed in Manitoba (where the offeror was) The Quebec company is the offeror and either: a) the Manitoba company accepted and the offer was communicated in Quebec thus Quebec law applies b) acceptance was deemed to be communicated in Manitoba For Contract in Manitoba Contract in Quebec: 1. Phone is the medium: Court: if contract is formed inclusive of the invoice in any way, Quebec law applies

Brinkibon v Stahag Stahl London v Vienna Telex Brinkibon in London telexed their acceptance of a contract offer to purchase steel from Stahag Stahl in Vienna. Brinkibon, alleging breach, wanted to serve the respondent with a writ claiming damages for breach of contract in England but Stahag Stahl claimed they were not under British jurisdiction but Austrias. For Contract: Against Contract: Eastern Power v Azienda Communale Energia For Contract: Against Contract: Henthorn v Fraser For Contract: Charlebois v Baril For Contract: Holwell Securities v Hughes For Contract: Against Contract: Against Contract: Against Contract:

4. Termination of an Offer Notes: 1. Revocation has to be communicated to the offeree 2. Communication of revocation need not come from the offeror

3. Offeror may revoke an offer at any time before its accepted (Dickinson v Dodds) but this may not apply in unilateral offers where acceptance requires full performance (Errington v Errington Wood, Dahlia v Four Millbank) 4. a. Revocation Dickinson v Dodds, 1876 (revocation through conduct) (when an offer becomes impossible to accept) (option is itself a contract which needs consideration) Facts: Wed, June 10: Dodds (D) makes firm, written offer to sell property to Dickinson (P). Offer open until Friday, June 12 (this is an option) Thurs June 11: Dickinson (P) hears from Mr. Berry (Ps agent) that Dodds had been offering to sell the property to Allan Later that night: Dickinson delivers written acceptance to Dodds relative, as he was staying with her. This acceptance is never received as the relative forgot to give Dodds the acceptance. Friday June 12: Ps agent (Barry) finds Dodds at the railway station and hands him a duplicate of Dickinsons acceptance. Dodds responds: You are too late. Ive sold the property. Issue: was the revocation inadequate (3rd party informant)? For Contract: Against Contract: 1. Document of June 10 = a firm offer; 1. Objective test on meeting of the minds: a reasonable not an option because it wasnt support person would have realized that the offer was revoked when by consideration his agent told him of the sale 2. A direct communication from the D 2. The writing wasnt an agreement to sell, but an offer (both was necessary parties hadnt agreed to go through w the deal yet) 3. Although Dodds offered an option, there was no consideration for the option and therefore it wasnt binding 4. No detrimental reliance on the part of the offeree J: For D (offeror). An offer may be w/drawn by an indirect revocation where the offeree receives reliable info from a 3rd party that the offeror has engaged in conduct indicative to a reasonable man that the offer was withdrawn. 1. Revocation need not be formal (hearing through an agent OK) 2. There must be a meeting of the minds to bind a contract and a withdrawal (or the acceptance of another partys offer) makes that impossible to the original offeree, no matter what, unless consideration is given by the offeror (e.g. deposit) 3. Offer expires when theres no longer a meeting of the minds 4. General principle: if offeror dies, offer becomes impossible to be accepted (offer thus cant be accepted). Court extends principle here: once offer becomes impossible to be accepted, the offer is revoked. Petterson v Pattberg, 1928 (NY) (follows Dodds) (in a unilateral contract where acceptance is consideration, until consideration/performance happens, revocation is possible anytime) F: Plaintiff, the executrive of Pettersons estate. D = owner of a bond executed by Petterson. D wrote the P a unilateral contract stating I agree to accept cash for the mortgage which I hold against the presmis. I will allow you $780 providing said mortgage is paid or on before May 31, 1924 (there was an unpaid principal of $5,450 on the bond and the D promised to give the P a $780 discount should he pay the D by the specified date, May 31). On April 25, P went to Ds home, knocked on door and said hed come to pay

off the mortgage. D responded that hed sold off the mortgage and the P couldnt recover the discount. P sued for damages. Issue: whether the offeror can withdraw a unilateral contract offer before consideration is accepted but after the offeree approaches the offeror w the intention of proffering performance . For Contract: Against Contract: 1. If the condition precedent hasnt been 1. Ds offer withdrawn before it became a binding performed, its because the D made it promise impossible by refusing to accept 2. Dodds: offer to sell property may be withdrawn payment when the P came w an offer of before acceptance wo formal notice to the person to immediate performance (dissent) whom the offer is made a. However, it all depends on the interpretation of Pattbergs actions: whether he made it impossible to perform or simply revoked the offer J: For Pattberg (D): a unilateral offer is revocable until the precise act required is performed.

Errington v Errington & Woods, 1962 CA (unilateral contracts cant be terminated if performance has started) F: A father bought a house of 750 pounds of which he borrowed 500 pounds. He allowed his son and daughter in law to live there. The arrangement was that they would make the mortgage payments and, when the mortgage was paid off, he would transfer the house to them. Father dies and the widow sues the couple for the house. For Contract: Against Contract: 1. Unjust enrichment for widow 1. Legal consequences of family 2. Once the performance has begun, the arrangements are difficult to ascertain parties are bound and no revocation is possible. 3. The offer must be held open once performance begins 4. Could be either a unilateral or bilateral contract: a. Unilateral: couple starts performance by payments; cant be legally removed unless they miss a payment b. Bilateral: house for payments; cant be legally removed unless they miss a payment J: Contract: for offeree. Once performance of the requested act in a unilateral contract has begun, revocation isnt possible 1. Generally, offers for unilateral contracts can be revoked at any time prior to complete fulfillment by the offeree, but once the promise starts performance, promisor cant revoke offer. However, if performance is left incomplete, promisor can revoke offer.

b. Reasonable Time

Barrick v Clark, 1950 SCC F: Barrick wrote a letter to Clark, offering to sell him his property but Clark was away on a hunting trip. Clarks wife wrote a letter to Barrick requesting that the offer be held open for 10 days, when Clark was to return. The moment Clark returned, he sent his acceptance of the offer (this is 20 days after letter by wife). Clark was informed that Barrick had already sold the property. Clark argued that he had responded as quickly as he could, and Barrick hadnt given him a reasonable amount of time to respond. Oct 30: Clark offers $14.5k for Sasketchawan farm Nov 15: Barrick replies, offering instead $15,000 Nov 20: Clarks wife writes to Barrick while Clarks hunting, asking him to hold the offer open till Clark returns Dec 3: Barrick sells land to someone else Dec 11: Clark writers that hes heard Barrick sold land to 3rd party; that Clark already accepted offer on Dec 10 For Contract: Against Contract: J: 1. Offer can lapse after a) time limit determined by offeror b) if unspecified, a reasonable amount of time 2. Court will use an objective test to determine a reasonable amount of time: depends on i. nature of item sold ii. conduct of parties iii. usual practice of negotiations Manchester Diocesan Council for Education v Commercial & General Investments, 1970 F: P (MD) wanted to sell an old school by a tender (this is an invitation ot treat) which set out certain requirements, such as sending tenders to the Ps surveyor on/before August 27. On Aug 25, the D completed the tender (held to be the offer), imposing requirements of their wrt the mode of acceptance (had to be sent to their offices). P sent a letter of acceptance, but sent it to Ds surveyors rather than their offices. D later reneged on its offer to buy, claiming they werent bound because their requirements for acceptance werent strictly adhered to. P argued that strict compliance isnt require, but that any form of communication which isnt detrimental to the offeror is acceptable. requested tenders. Condition #4 set out the manner of acceptance. Nature of non-compliance: letter supposed to be sent to 15 Berkley St & was sent to a different address. P claims insufficient compliance. For Contract: Against Contract: 1. Because the tender stipulated no time limit, it was an implied term of the offer that it must be accepted within a reasonable time (Defendant)

J: For P (Offeree) 1. Where contracting parties dont expressly establish a time frame to be applied to the negotiations, the court applies the test of reasonable time

c. Rejection and Counter Offer Livingston v Evans, 1925 ALTA SC (counter-offer kills offer but mere inquiry doesnt) F: Evans: offered property to Livingstone, for $1,800 Livingstone: counter-offers $1,600 Evans: cant reduce price Livingstone: $1,800 OK For Contract: Against Contract: 1. Cannot reduce price as a rejection of 1. Counter-offer plus inquiry = still a second offer also indicates intent to be rejection of offer bound by original offer J: Contract: cannot reduce price indicates renewal of original offer 1. Counter-offer voids previous offer unless language and/or circumstances warrant interpretation that offeror is still willing to bound by previous offer. 2. Counter-offer = new offer which the original offeror (now the offeree) can either accept or reject. 3. Mirror-image rule (terms of acceptance must be identical to terms of offer): courts are sometimes lenient with this rule e.g. I accept but would like payment to be due 30 days after delivery courts will think this is unequivocal acceptance of the offer with a request for the addition of another term. Butler Machine Tool v Ex-Cell-O Corp (Battle of forms) (final shot rule: last terms win) F: Butler sends offer to sell machine tool to Ex-Cell, with specific terms (including price variation clause). Ex-cell responds with different form (which includes right to cancel). Butler accepts. Machine delivered 18 months later. Butler claims on the strength of the price variation clause an extra $3,000 for increased cost of materials over 18 months. Ex-cells response: Butlers acceptance was on a form disallowing price variation + with a term saying in a conflict, Ex-cells terms would prevail. *Butlers form also said their terms would prevail in a conflict. For Contract: Against Contract: J: The battle is won by the man who fires the last shot. 1. Denning offered 3 potential interpretations in the battle of forms: a. First shot: contract concluded on the terms of first document b. Last shot: the last accepted form is the prevailing contract c. All shots count & court must use objective basis to discover terms (look at all documents for harmonious result OR decide theres no contract because of irreconcilable differences)

International Sale of Goods Act

d. Conditional Offer Financings v Stimson For Contract: 5. Bilateral & Unilateral Contracts

Against Contract:

Bilateral contract is accepted by: o Communication to the offeror o Extraneous act Courts try to interpret contracts as bilateral, because both parties are protected from the minute they make mutual promises, before beginning of performance (Dawson v Helicopter Exploration) Unilateral: o In a unilateral context, acceptance is achieved by beginning or completing the required act or forbearance (no need to give notice of acceptance). o Since notification of acceptance is for the benefit of the offeror, he may waive this benefit. If the offeror indicates in his offer that its sufficient to act on the offer without communicating acceptance of it to himself, performance suffices. o Offeror remains passive until act is done o Offeree can never breach a unilateral contract because they are under no obligation (however, they could potential get screwed over by performing the act as acceptance) o Its unclear when a unilateral offer can be revoked

Dawson v Helicopter Exploration Co F: Dawson finds and files a claim over a mineral deposit in BC. His claim lapses. Springer/Helicopter Exploration proposes to finance the development of Dawsons claim. Dawson agrees: both agree that Dawson will show HE the deposits once they find a pilot to access the site. Several months later, HE informs Dawson that although theyve found a pilot, they arent interested anymore. Dawson doesnt reply. Later, HE sends an exploration party to the land and arranges to develop it. Dawson sues, claims it was a bilateral contract. The offeror must be passive in a unilateral contract but here HE would provide the helicopter, Dawson would show the site. Because the contract is bilateral, HE cant revoke nor make performance impossible. For Contract: Against Contract: J: Court: Bilateral contract. Implies a term in the contract that Spring was supposed to make reasonable efforts to find a pilot and bring Dawson into the area Springer was in anticipatory breach of the contract by his letter. Dawson + Springer were in a contract where their primary obligations were predicated on binding subsidiary obligations (Dawson, reasonable effort to secure leave and Springer, reasonable effort to secure a pilot). The subsidiary obligations (conditions) are precedent to performance of a contract This is different to conditions precedent to the formation of a contract, where contract isnt made until conditions are met

TERMS OF THE AGREEMENT

Relational Cases Tugboat Dawson Errington R v CAE Transactional cases Scammell

All of the classical contract laws accommodate easily transactional agreements e.g. sale of land. We can demand a high degree of certainty in these cases. Perhaps relational agreements shouldnt be subject to these precise + exacting standards Marketplace now dominated by relational agreements courts must be careful in applying contractual rules Relational cases: Courts have problem coming up with a judgment. Dawson: they made it up. Errington: Denning protected the long-term relation. CAE: they gave meaning to imprecise terms Express stipulation that parties will agree in the future Scammell May & Butcher No express stipulation for future agreement (silence) Hillas v Arcos Montana Mustard Seed

Scammell May & Butcher Friesen Courtney + Tolani Bros Barker Bros Foley Hillas v Arcos Sudbrook Empress v Bank of NS Klein

Relational/ Transactional T

Machinery Formula Contract Express stipulation + + + + -

Follows *Osborne thinks decided wrongly McSorley Walford v Miles Scammell Foley

R R

Arb clause Special AC: abt price 2 valuers

R R

+ +

1. Certainty of Terms Uncertainty divided into: o Indefiniteness (equivocal language, open to interpretation) o Incompleteness (an essential element is missing) Uncertainty can be cured if machinery (means) or formula (standard) can be found Must be clear that the parties intended to enter into a contract, not simply wanted to negotiate one Determine whats fatal to a contract: o Failure of machinery isnt one, especially when its due to the conduct of one party (Sudbrook) How the courts fill in the gaps: o Courts can imply terms, but this is mostly for commercial/relational agreements o clear terms can be implied by statute/common law o minor uncertain terms can be deleted (if it can be deleted & still be a perfectly workable contract, the courts will ignore it) If machinery is provided, contract may be regarded as complete: o Price: courts will be prepared to assume reasonable price is implied o Courts will enforce agreement where property is to be valued by an independent valuer o Price is to be determined by reference to the prevailing market price

a. Indefiniteness Scammell v Ouston Indefiniteness + incompleteness Van purchase Ouston agreed to buy a van from Scammell, providing his lorry as part of the exchange, and the rest of the payment would be done on hire purchase terms. Scammell pulled out of the deal, claiming there was no contract due to uncertainty. For Contract: Against Contract: 1. HoL: terms too vague. The term hire-purchase didnt specify whether the payment would be on a weekly, monthly or yearly basis, whether there would be an initial deposit and what the interest rate would be. HoL: not sufficiently certain agreement (whos to say one party wanted weekly/monthly payments?) transactional agreement: courts more demanding

R v CAE Industries Govt sells air base CAE purchases airfield no longer needed by Air Canada/Canadian govt. Agreement contained many vague terms, essential stating that although the base usually generated 700 thousand man-hours per annum, the govt couldnt commit to guaranteeing more than 40-50 thousand, although they would use their best efforts to increase this number. When the hours fell below 40 thousand, CAE sued for breach of contract

Were the terms in the contract so vague (best efforts to provide promised man hours) that the contract is unenforceable? For Contract: Against Contract: 1. Some performance/reliance i.e. they 1. Looseness of language; lawyers for the transferred the base crown wouldnt have stood for that 2. an authoritative figure (cabinet 2. The agreement = a policy/political minister) approached them easy to document (signed by 3 cabinet trust what he says ministers), not a commercial document. 3. the govt was the initiator in creating the agreement 4. if CAE only gets the base but pays for everything, its unfair Court: D wins: there was a contract betw govt + them, govt breached, damages Ultimate defense to a breach of contract charge is that there was no contract at all o Difficult to persuade court there wasnt a contract in commercial agreements. o The onus is on the party claiming no contract to prove it

b. Incompleteness Where certain details may fluctuate (e.g. price) and parties are reluctant to set it in stone, they can have vague terms but insert machinery (e.g. independent arbitration). Where theres a machinery to finalize the details, an agreement to agree can constitute a binding contract Formula (e.g. reasonable price) + Machinery (3rd party e.g. arbitration clause) o Formula + machinery: awesome contract o No formula, no machinery (e.g. friesen v braun) : hard to find a contract; simply an agreement to agree o Formula but no machinery: as long as theres a reasonable standard, courts can enforce o Machinery but no formula (e.g. Barker Bros): if its not impossible for the arbitrator to deal with, the contract should be enforced. Start with the previous agreement. Have there been problems? If so, find a compromise. Montana Mustard Seed v Gates (silence w respect to price, should contract be otherwise complete, may imply reasonable price) Montana provides Gates with seeds, for Gates to sell back to at a fixed price (as it was common practice to do so). However, the price of mustard shoots up and Gates says his contract is for only grade #1 (his seeds are of a lower grade) and believes he can escape the contract and sell his seeds on the open market.

Clause 6 promised to pay grower for Dockage free Number one seeds only. Price wasnt specified for seeds below grade 1. For Contract: Against Contract: 1. Valid contract because everything that is essential has 1. Court: courts cant impose reasonable been agreed upon. However there are 2 possible results: price if the price isnt set but only agreed a. no contract exists for anything other than #1 seeds (no to be set at a future date since that contract) doesnt represent the agreement on b. valid contract for entire crop, with price deter price. 2. Court: Sale of Goods Act provides framework for determining a reasonable price if a valid contract exists and price is undetermined/silent (rather than we agree to agree on a price) 3. Price is an essential term, cannot be left undetermined: however, the contract is silent on it J: There is a contract price fixed at 2.5 cents a pound, same as #1. Court distinguishes May & Butcher (where there was an agreement to agree). In this case, theres silence and thus the court can import a reasonable price May and Butcher v the King (uncertainty of essential terms)(arbitration clause not comprehensive)(strict upholding of contractual rules) XC Facts: May + Butcher wanted to buy tentage from the Disposals Board. The Board defined the terms of agreement: 1. price, dates of payment will be agreed upon by the parties as the tents become available 2. Delivery shall be taken as agreed upon by the parties 3. All disputes will be submitted to arbitration May & Butcher made a deposit of 1,000 pounds as security. Previously, the seller insp. The seller (govt/Disposals Board) was putting warranties on the tentages, which could come back to bite them if the buyer sued. So, New Management on the Sellers part discards the practice and now the buyer must do their own inspection. For Contract: Against Contract: 1. HoL: Had the agreement simply been silent on these points, they could perhaps have been settled in accordance w the provisions of the Sale of Goods Act 1979; or by the standard of reasonableness; but the parties showed that this wasnt their intention by providing that such points were to be settled by further agreement between them. 2. Agreement wasnt a contract but a series of clauses for adoption if/when contracts were made because price, date of payment + period of delivery had yet to be agreed upon 3. The arbitration clause only for disputes, not for determining basic

1. 2. 3. 4.

5. 6.

obligations If the parties intended the contract to be binding they would have included the missing terms Arbitration clause dont save the contract if there is no machinery to guide arbitrators Incomplete in contract only OK (if its on an essential term) if the determination of it doesnt depend upon the agreement between the parties. The contract wouldve been saved, if it had declared: a. A reasonable price b. The market price c. The market price +/- some % d. The price was to be decided by arbitration e. The price was to be decided by a 3rd party If contract didnt have express stipulation to agree, HoL wouldve used Sale of Good Act to determine a reasonable price Consider in tandem w Foley (agreement to agree yet enforced)

Friesen v Braun (cant leave essential terms out for future agreement) Friesen leased land from D for one year with a purchase option. The contract stated that purchase money shall be paid on terms to be discussed and decided upon by the parties at the date of acceptance (agreement to agree). Friesen served proper notice of intention to buy. Braun denied it was bound to sell to P; held no enforceable contract b/c parties d/n intend contract to be binding until the price was agreed upon. For Contract: 1. The price of purchase was clear: the rent paid would be deducted from the purchase price 2. When options are contained in a clause of lease, no further consideration is needed: its binding because its contained in the contract Against Contract: 1. D: its an agreement to agree, not a contract. 2. In a mortgage/property purchase, terms of payment are an essential term 3. Looking at the option as an offer, the court couldnt find a complete contract as the terms of payment werent properly set out (terms of payment = essential) 4. This is a transactional agreement. Court: land agreements should be certain and very clear as to their terms + conditions Courts couldnt distinguish this case from the authoritiesreluctant (The SCC case of McSorley v Murphy involved the same situation and they deemed the contract void for incompleteness) With more facts the court couldve distinguished mcsorley: there just werent enough facts No arbitration clause means no machinery no contract

McSorley v Murphy An option to purchase land at price of $45000 with a cash payment of $15,000 and balance to be arranged. SCC: Too uncertain to be enforced #mirrors May & Butchers reasoning (strict enforcement of contract law)

Hillas v Arcos Timber contract Merchants purchasing timber. Agreement: purchase certain amount with condition that they would also have the option of entering into a different contract to purchase more timber the next year with a reduction in price. The sellers refused to sell them. For Contract: Against Contract: Foley v Classique Coaches (agreements to agree sometimes enforceable.. if include arbitration clause) Sale of gas station Foley owned a gas station. He sold a piece of land attached to the station to Coaches to use for their business. The terms were that Coaches would buy petrol from them price to be agreed by parties in writing and from time to time and that they wouldnt purchase petrol from anyone else. Disputes occurred as to price/quality of petrol and Coach began purchasing gas from other suppliers. For Contract: Against Contract: 1. May & Butcher Court: a. Judge distinguishes May + Butcher. Here, theres An unusual arbitration clause which was construed to apply to any failure to agree as to the price It formed part of a larger bargain under which the Ds had acquired the special price because they had agreed to purchase all their petrol from the P Parties had a good & fair contract except the term to negotiate price of gas from time to time. Believed by both parties to be binding and had been acted upon for years Ds thought they could wriggle out bc of a better deal, cts so no way, C is good May & Butcher didnt law down universal principles Followed Friesen v Braun (agreement to agree clause), mirrors McSorley Distinguished Foley (machinery i.e. arbitration clause) C Montana Mustard Seed (no agreement to agree i.e. silence) C

May & Butcher (no machinery, express agreement to agree)

AG v Barker Bros C Govt wants to renew airstrip contract The govt wanted to renew its lease on an airstrip owned by Barker Bros. Barker Bros demanded twice the rent, when govt refused, they wanted to get out of the contract, in which a clause stated that the terms and conditions of any such renewed lease shall be as agreed upon by the parties at the time, but the rent shall not be less than the amount payable hereunder. Barker Bros argued that while there was no formula for resolving disagreement between the parties, there was machinery i.e. an arbitration clause. For Contract: Against Contract: Court: Even though the price wasnt expressly stated, any disputes could be resolved by way of the arbitration clause

Even though both machinery + formula are usually needed, if the machinery is there but not the formula, the court will look to the intent of the parties to get a sense of what the formula wouldve been and form a binding contract

Sudbrook Trading Estate v Eggleton (if machinery provision breaks down, court can step in with its own machinery) 2 valuers to decide purchase price C F: A lease granted the lessees an option to buy the premises at a price to be fixed by 2 valuers, one nominated by the lessors and the other by the lessees and, in the absence of agreement, by an umpire to be appointed by the valuers. When the lessees sought to exercise the option, the lessors refused to appoint a valuer and claimed that the option clause was void for uncertainty. For Contract: Against Contract: 1. HoL: the machinery for appointing the valuers is subsidiary (not essential) to the main purpose of ascertaining a fair and reasonable price. Its failure doesnt prevent the existence of abinding contract because its only a means of fixing a fair price. The court can substitute its own machinery by ordering an inquiry into the fair value of the premises. i. The option clause shouldnt be flouted by the lessor at his own sweet will. It had induced the lessees reliance (in entering the lease) and was contained in a long lease that had been performed for many years 1. Appropriately worded arbitration clauses with machinery are evidence of parties intent to contract the machinery itself isnt the essential part: what is essential is the intent of the parties to form a binding contract, which the machinery attests to (the intent here is to abide by a reasonable pricedetermining a reasonable price is easy for the courtthe hard part is knowing whether the parties wanted to be bound by it) Re Empress Towers v Bank of Nova Scotia C #an exception Leasing building from bank Lessor entered into a 5-year lease with lessee. Lessee had option to renew at a rent which was subject to arbitration. The lease was renewed more than once and in 84 there was again an option to renew, but this time at a rent of the market value prevailing at the commencement of that renewal term as mutually agreed between the landlord and the tenant. If the parties couldnt agree, either could terminate the agreement. Before the lease was up in 89, the lessee proposed a new rent, but the lessor didnt respond, until the very last day of the lease it expressed its willingness to renew on a month-to-month basis if the lessee paid a good sum up front. When the lessee failed to do so, the lessor brought an application for a writ of possession to terminate the lease. For Contract: Against Contract:

1. Court may imply terms to keep a party from ducking out of a contract both parties intended to be binding duty to negotiate in good faith Lessee wins, landlord cant impose arbitrary terms like $15k payment for robbed employee. Landlord tries to dispose of renewal clause in contract, renewal clause not void for uncertainty Bad faith was evinced here by the bank: o Refusal to negotiate o Introducing unreasonable terms o Undoing things already agreed upon o Negotiating with third parties c. Agreement to Negotiate (enforceability of agreement to negotiate in good faith: too vague) i. Agreement to negotiate + agreement to agree = unenforceable. Rationale: too uncertain: factual matrix might be too extreme to support a contract. ii. EX: could imply an obligation to use reasonable/best endeavours + apply reasonableness standard for terms. iii. could succeed if all the essential terms (esp. price) are agreed upon? iv. could succeed if can be shown parties intended to be bound: uncertainty could be cured v. lockout period (A, for consideration, agrees to not negotiate with anyone but B for a period of time)= a negative agreement (according to the court) which doesnt lock one party into negotiations with the other, but makes commercial sense vi. lockout = legally enforceable if theres consideration and an end date Walford v Miles Courtney v Tolaini Bros law doesnt recognize a contract to negotiate essential terms of a contract Financing in exchange for being hired as contractor D needed financing for a hotel, went to P who had many contacts. P said he would provide the investors on the condition that D would employ him as a contractor, with a promise by both to negotiate between them to agree on a price for construction. P found the investors, but in the end (after D negotiated but didnt agree on the terms), D employed other contractors although they used Ps investors. P claimed breach of contract, or void for uncertainty. Was the contract to enter into a contract valid? For Contract: Against Contract: 1. Damages for breach would be impossible to quantify: a. Lord Denning: no court could estimate the damages because no one can tell whether the negotiations would be successful or would fall through: or if successful, what the result would be. 2. Courts concerned with whether the parties were ad idem and reached an enforceable binding contract (ie it involved a bare agreement to negotiate) Court: Not binding : no contract here A contract to negotiate is unenforceable from uncertainty: cant calculate damages based on what if, cant predict what wouldve happened if negotiations had gone on

No agreement on price, no machinery to determine the price (3rd party) and thus the decision was left to the 2 parties, making it too vague to be determined by the court A contract to negotiate isnt a contract (differentiated from Hillas v Arcos, which is stated to be bad law). Price = essential term that was left undecided Similar to Dawson: unjust enrichment

Walford v Miles lockout agreement OK if theres consideration + end date an agreement to negotiate is not a contract photographic business Collateral contract separate from contract of sale: seller promises potential buyer to not entertain other offers until a certain date in exchange for buyer getting letter of comfort from bank. Miles & Walford verbally agree on their lockout clause. Sellers get cold feet, sell to someone else. Used the term subject to contract (nothing binding until formal contract finalized) What is this collateral agreement? Is it enforceable by law? For Contract: Against Contract: 1. Could enforce an obligation to make 1. Agreement to negotiate too uncertain best endeavours + employ 2. The agreement to negotiate isnt even reasonableness standard in a binding document: theres no concluded agreement at all, everything is subject to contract 3. Good faith duty is contrary to the adversarial nature of negotiations b. Even good faith undertakings which have good consideration need a time limit Court: The of negotiating in good faith is contradictory because negotiating is inherently adversarial Lock-out agreement: valid IF it has: o Consideration o Specific duration (otherwise, both parties would be obliged to come to an agreement) Lockout clause has a time limit, lock in clause has no time limit. This clause had no time limit needed to have one to be enforceable A lockout clause isnt a lock-in clause as the party can still sell to someone else Commertec Capital Corp v Stabler XC courts extremely lax about negotiations #agreement to agree unenforceable from uncertainty The P made an offer to purchase the Ds property, subject to rezoning conditions. The offer provided that the D was to have an option to purchase a unit in the property at his choice. The offer was subject to a further agreement between the parties. The parties agreed on the price, but the D had reservations regarding her proposed new unit of choice. D wants to back out but gets letter from P confirming agreement. D claims no agreement, rezoning condition was unfulfilled. Contract contains purchase option: subject to further agreement between parties. Contract talks break down. For Contract: Against Contract: Court:

Will enforce a contract with 1-2 elements left to be decided but not whole agreements that need to be negotiated Parties intended it to be not binding until further terms were agreed upon; the essential terms werent in place No formula, machinery or performance/reliance # didnt need to negotiate in good faith: distinguished Empress Towers (only one element undecided. ET should be read narrowly: its an exception) here, whole contract had holes # harsh line drawn between negotiations and contracts # courts dont want to interfere in negotiations except in cases of fraud/misrepresentation. Freedom is maximized in negotiations
CONDITIONAL CONTRACTS

1. Subject to Contract Masters v Cameron XC P agreed in writing to sell farming property to subject to the preparation of a formal contract of sale while shall be acceptable to my solicitors on the above terms and conditions. D agreed to purchase the property on the above terms and conditions. For Contract: Against Contract: Court: subject to means no valid contract until subject to term is met subject to case are all unique and very: look at language 3 possibilities of subject to: o intent to be bound immediately, but plan to draw a formal agreement later #binding o CPP: performance of agreed-upon terms subject to drawing up of formal contract #binding o CPF: no contract until the formal document is made #not binding Megill-Stevenson v Woo For Contract:

Against Contract:

CONDITIONS PRECEDENT TO FORMATION AND PERFORMANCE

2. Conditional Contracts a. Conditions Precedent to Formation & Performance Wiebe v Bobsien For Contract: Against Contract: Pietrobon v McIntyre For Contract: Griffin v Martens For Contract: Marshall v Bernard Place Corp Against Contract: Against Contract:

For Contract: Dynamic Transport v OK Detailing For Contract:

Against Contract: Against Contract:

Eastwalsh Homes v Anatal Developments For Contract: Against Contract: b. Waiver of Conditions Turney v Zhilka For Contract: Barnet v Harrison For Contract:

Against Contract: Against Contract:

ENFORCEABILITY OF AGREEMENTS

1. Intention to Create a Legal Relationship Notes: i. Courts use reasonable person test in determining whether there was intent to create legal relations, because this is an objective test and the law of contracts aims to protect reasonable expectations. a. Family, Domestic & Social Agreements (rebuttable presumptionthat theres no intention to create a contract) Balfour v Balfour, 1919 Husband returns to Ceylon, promises wife monthly allowance Mr. Balfour + wife went to England for vacation. Mrs. Balfour being sick, she stayed in England for medical treatment and Mr. Balfour returned to Ceylon, promising 30 pounds/month allowance to her (this was made while their relationship was fine). They were having marital difficulties, he decides not to return. Mrs.Balfour sues for restitution for conjugal rights. 2 years later Mrs. Balfour gets order for alimony. For Contract: Against Contract: 1. Lower court found that there was 1. Contract needs intent to create legal sufficient consideration (wife consented relations. Here: no intention to create to forego her right to pledge her legal relations therefore no contract husbands credit) 2. Atkin: law of contracts isnt made for personal family relationships, even when theres consideration 3. Not enough resemblance of a bargainbut spouses making mutual promises 4. Purely domestic arrangement 5. Promise suffers from indefiniteness (not bargain-like) J: i. ii. Must demonstrate intention to be bound. Agreements between spouses living in amity are unenforceable

iii.

It is only when spouses are not in amity/living apart that the court tends to finding intention to create legal relations. When spouses are living together, the default assumption is that they are a unit and that theyre not bargaining on opposing sides (for their personal benefit) when in amity, its assumed its for their mutual benefit

Merritt v Merritt, 1970 Husband leaves wife, promises to give her house if she pays balance Mr. Merritt + wife jointly owned a house. Mr. Merritt left to live with another woman. They agreed (wife insisted upon putting agreement in writing) that Mr.Merritt would pay Mrs.Merritt 40 pounds/month, and if the wife kept up monthly mortgage payments (180 pounds outstanding) he would transfer the houses title to her. When the mortgage was fully paid, Mr.Merritt refused to transfer the house. For Contract: Against Contract: 1. Evidence of intention to create legal relations: a. in writing (keen bargaining) b. spouses separated 2. Consideration: wifes monthly payments i. Agreements between spouses NOT living in amity can be enforced

Jones v Padavatton, 1969 Daughter studies law because mom promises monthly allowance Mrs. Jones promised her daughter to pay her maintenance if she gave up her cushy job in Washington DC and trained to be a barrister in London. The fixed sum wasnt enough, so the mother bought ahouse where the daughter could live for free and could give room to other people. They had a quarrel while the daughter was still completing her bar exams. The mother brought an action for the possession fo the house. For Contract: Against Contract: 1. Detrimental reliance 1. Uncertainty J: No binding contract i. With detrimental reliance, presumption of no legal intention between family members may be rebutted; look at reasonable time though ii. Although there would have been a contract if the parties werent domestically related, there was insufficient evidence to rebut the presumption against domestic arrangements

Fobasco v Cogan (business people in legal relations) (exception to commercial rule) Season tickets to baseball shared among friends Facts: Cogan bought 8 season tickets in a prime location. At the time, he agreed to sell four of his tickets to Fobasco (company owned by his friend David). David gave those tickets away to Fobascos prospective customers in an effort to drum up business. Cogan wanted those tickets back, told his friend that the arrangement was at an end. David was upset because he couldnt otherwise get good seats to the games.

He sued for breach of contract, claiming that Eddie had contractually agreed to sell tickets to Fobasco on an annual basis. For Contract: Against Contract: 1. Sophisticated businessmenshould have the contract put in writing 2. Terms are vague: for how long should Eddie have been required to give tickets to Fobasco?

J: i. Presumption: when friends who are business people dont outline respective rights and leave the arrangement vague, theres no intention b. Commercial Agreements (rebuttable presumptionthat theres an intention to create contracts) Rose & Frank v JR Crompton & Rose F: Rose & Frank was the sole US distributor of JR Cromptons products. After dealing w each other for a number of years, they entered into a written agreement which said: this agreement is not a formal or legal agreement. It wont be subject to the jurisdiction of either the British or American courts. Its a record of the intention of the parties to which they honorably pledge themselves and is to be carried out with mutual loyalty and friendly co-operation. The relationship between the 2 parties broke down as JR Crompton refused to supply some of the orders of the plaintiff. Rose & Frank sued to enforce the agreement. For Contract: Against Contract: 1. Once P actually ordered goods from D, 1. Clause is binding: indicates mutual then there would be a contract of sale in intention to not be legally bound regard to that transaction. It could be argued then that this makes the agreement here rather like a tender to supply which doesnt have any contractual effect until an order is actually placed HOL: no contract. All previous agreements were determined by mutual consent, but the orders given + accepted constituted enforceable contracts of sale. Edwards v Skyways Ex gratia payments on pension payment F: The Company and Association reps met and agreed that payment would be made of an ex gratia amount w regard to the pension payment, and a refund of contributions. The decision was published in the newsletter. One redundant pilot was told what his payment and refund would be. He received the refund, but then the company rescinded its decision to make the ex gratia payments. When he sought to recover it, he was told that there was no obligation to pay it. For Contract: Against Contract: 1. Company: the promise + agreement has no legal effect because there was no intention to enter legal relations because ex gratia means not binding and the background knowledge of the parties understood it as such. Ex gratia may

mean wo admission of liability, or without there being any pre-existing legal right (may be to avoid setting an awkward precedent). 2. It was understood at the meeting that if the payments were made wo legal obligation on the part of the company, then it wouldnt be taxable. So the agreement was intended to exclude legal sanctions. J: Plaintiff i. Presumption: in business matters, presumed that agreements will give rise to legal relationships (its tough to break this presumption) ii. British Steel Corp: Letter of intent not binding, nor letter of comfort Kleinwort Benson v Malaysian Mining Berhad Letter of comfort by company F: A bank (Kleinward) making a loan to MMC Metals. They were worried about the creditworthiness of MMC Metals and whether they would be repaid. MMC = subsidiary of a bigger company called MMC (in law they're separate in terms of assets + liabilities). Bank asked MMC, if MMC Metals defaults, will you pay on their behalf? MMC: nope, but we'll give you a letter of comfort. Critical part of the letter: It's our policy to ensure that the business of MMC Metals Ltd is in a position to meet its liabilities to you under the above arrangements. Issue: Letter of comfort, presumption of intention to create legal relations in commercial contracts For Contract: Against Contract: 1. The wording of the letter was 1. Neither party intended for the letter to unambiguous and crystal clear be contractually binding 2. the undertaking was of crucial importance the P had acted in reliance by advancing the loan 3. the presumption of intention to create legal relations which applies to commercial contracts hadnt been rebutted by the Ds Court: The wording of the undertaking didnt amount to a contractual promise, thus there was no presumption of intention to create legal relations The statement of the letter of comfort regarding malaysias policy applied to its present intention, and the policy could change in the future 2. Consideration a. Introduction: Bargain and Gratuitous Promise Re Boutilier Estates (consideration must flow from the promisee) (3rd party consideration is no consideration) Boutilier promised to donate money to Dalhousie Boutilier promised to pay Dalhousie $5,000 in a campaign run by the university to raise funds to improve the efficiency of the teaching, to construct new buildings and to keep pace with the growing need of the constituency, with terms of payment as per letter from Mr.Boutilier. No letter followed from Boutilier

and Boutilier fell on hard times and couldnt pay. He said he still intended to pay, and would do so when he could afford to. He died and Dalhousie claimed against his estate for the money. For Contract: Against Contract: 1. Boutiliers subscription card suggested 2 1. Gratuitous subscription promise: promisor consideration arguments: needs a specific benefit (preferably something he a. consideration supplied by the subscription of requested expressly). If he had donated money rd others (3 party consideration is no specifically e.g. for a certain new building this could consideration) be consideration but no such thing here. b. consideration supplied by Dals implied 2. no privity here: only argument for consideration promise to use the money for = 3rd party 2. Third reason to enforce the promise: Dal relied on the promise SCC: 1. No consideration supplied by Dals implied promise to use the money to generally improve efficiency of university 2. Reliance by Dal cannot make the promise enforceable (reliance by promise cant transform a gratuitous promise into something binding) 3. Consideration must flow from the promise 4. 3rd party consideration is no consideration Combe v Combe (estoppel only as shield not sword) (consideration needs express request aka part of bargainone cannot given an unasked for consideration) Husband doesnt give rich wife maintenance Husband + wife getting divorced. Husband agreed to pay wife 100 pounds per year. Husband never paid, after seven years the ex-wife sued for the money. For Contract: Against Contract: 1. No request from Mr. Combie that his wife abstain from applying for maintenance: thus no bargain. 2. Denning: Much as I am inclined to favor the principle of the High Trees case its important it shouldnt be stretched too far lest it should be endangered. Doesnt care a cause of actiononly prevents a party from insisting on his strict legal rights when it would be inequitable.

Royal Bank of Canada v Kiska (promise under seal doesnt need consideration) Guy eats seal D wanted to guarantee bros loan with the P, the bank. On the guarantee was a space in which a seal was to be affixed. The purpose of the seal was explained by the P to the D who then ripped the sea For Contract: Against Contract: 1. Laskin: formality of sealing hadnt been carried out (mere writing of the word seal) therefore no contract. a. Formality serves a purpose, and some semblance should be preserved. Seal = signal that youre making a seriously intended promise + intend to be bound by it. b. Past Consideration

Earn v Kohut, 2005 (past consideration OK if 3 requirements met) Guy shot, doesnt sue because he was promised money. 18 years later he wants the money. Outside a bar, one shoots the other, 18 years ago, negotiated a civil claim for 35k of which settlement was considered by the Crown in recommending sentencing (because the shootee didnt sue in return for the money) but conditions of the settlement never satisfied to transition into a contract although they were orally agreed to For Contract: Against Contract: 1. Consideration = 1. Limitation period: no more consideration because the shootee could no longer sue. Shooters argument: when there was consideration (withholding of lawsuit) there was no acceptance Past consideration is no consideration unless: a. act was done at the promisors request b. act was for a benefit (e.g. payment) c. benefit understood by both as legally enforceable when the promise was made Limitations of Actions Act Lampleigh v Brathwait F: Braithwait killed a man, asked Lampleigh to obtain a pardon for him. Lampleigh did. Braithwait promises to pay Lampleigh 100 pounds. He then doesnt, claims that past consideration is no consideration. For Contract: Against Contract: J: Theres a contract there was an implied promise to pay an amount reasonable for his labor d. Compromise/Settlement Agreements B (DC) v Arkin & Zellers (dishonesty invalidates promise not to sue as consideration) Boys steal from store. Mom pays up. 3 teenagers steal goods from Zellers. Goods are recovered undamaged & fit for sale. Zellers lawyer, Arkin send a letter to DB, JBs mother, offering to settle and not pursue civil action against boy in return for $225 (parents are generally not liable in torts for actions of their children). The claim by Zellers was invalid but DB already paid so the court was reluctant to unravel a contract For Contract: Against Contract: 1. Courts encourage settlements; dont 1. Promise not to sue is good like to unravel settlements consideration unless: a. You know your claim is invalid/conceal info that would defeat your claim 1. money can be recovered under mistake of law

d. Pre-existing Legal Duty Ward v Byham, 1956 (legal duty as opposed to contractual duty) For Contract: Against Contract: 1. 1. Mothers duty wasnt to the father but to the national assistance board/govt pursuant to the legislation under which

she was bound (similar to Shadwell) consideration didnt move to the promisor J: 1. Significance of Ward: not that a clear principle emerged (none did) but the ambiguity it created. 2. Other judges would distinguish Ward v Byham by saying that the principle stemming from Ward (that a preexisting duty = OK consideration) applied only to non-contractual duties or duties to a 3rd party. a. However, important: the consideration that upheld the transaction in these cases wasnt bargained for but merely detected by the judges: consideration ceases to play a cautionary role and becomes a motive. This means that the courts role has changed. 3. Stilk v Merrick, 1809 For Contract: Against Contract: 1. If the seamen had been capable of 1. Before they sailed, the sailors had quitting the ship, there would be undertaken to do all they could under all consideration the emergencies of the voyage. 2. Public policy: protect from potential extortion of the captain at his most vulnerable J: agreement void for want of consideration Shadwell v Shadwell For Contract: Against Contract:

Pre e. Promise to Pay More Than is Due Gilbert v Steel v University Construction For Contract: Against Contract: J: 1. Promissory estoppel can only be used as a shield, not a sword (estoppel cant give rise to a cause of action so as to do away with the necessity of consideration but can only be used as a defense to prevent a party from insisting on his strict legal rights when it would be unjust to allow him to do so (cant rid the requirement of consideration but can help against unjust enrichment). In this case, cant be used in place of consideration to make a new contract (with a higher price) enforceable. a. Second requirement of PE: the promise mustve relied upon the promise to his detriment. (Hughes v Metropolitan Railway) 2. Williams v Roffey Bros For Contract: 1. Its open to the parties to expressly say that full completion is a condition of payment (Denning) Against Contract:

f. Promise to Accept Less Than is Due Foakes v Beer Creditor waives interest if debtor pays by deadline. Creditor later wants the interest.

Foakes owed Beer a sum awarded by judgment. He asked her for some time to pay it off + a payment plan was agreed to by the parties. She said she wouldnt sue if he followed the plan. For Contract: Against Contract: Mercantile Law Amendment Act g. Modernization of the Doctrine of Consideration Greater Fredericton Airport Authority v NAV Canada new term wo consideration OK if theres no duress Reverses Stilk v Myrick, new approach different from Gilbert Steel NAV entered into contract with airport for certain duties. Airport extended runway, had to relocate beacon, NAV suggested alternative. Airport said OK, NAV insisted airport pay $230k upfront for the procedure and refused to do the job until they did. Airport finally agreed to pay under protest in writing as they needed the procedure done urgently. After NAV did the work, airport refused to pay. Did the parties enter into an enforceable agreement when airport promised to pay? For contract: Against Contract: 1. Arbitrator: new correspondence gave 1. contract modification was under rise to a separate contract that was economic duress supported by consideration, and that 2. no consideration given for payment NAV Canada can recover costs through that Court: Two conditions to establish economic duress: o Promise was made under pressure of the other party o The pressured party had no choice but to agree Once conditions met, 3 further factors are analyzed: o Was the promise supported by consideration? o Was the promise made under protest? o Were steps taken to disaffirm the promise? Post-contractual modification without consideration OK if there wasnt any economic duress Courts dont like Stilk v Myrick, made small changes culminating in Williams v Roffey as the authority, thus reversing Stilk. Rule in Pinnels case: part payment of debt isnt good consideration to forgo the balance. Exceptions: a. composite agreement b. payment of debt by a 3rd party c. promissory estoppal 3. Promissory Estoppel (modification of a contract wo consideration but upheld by equity) Doctrine of waiver: representer waives strict performance of something and the representee relies on this representation. The representer cant then argue breach of contract because of equitable ideals. Difference between common law estoppel (promise of existing fact) & promissory estoppel (future promise) Promissory estoppel 5 requirements: o Pre-existing legal relationship (no relationship in Combe v Combe) o Reliance: detrimental reliance by the promisee acting on the promise

o Promise: clear promise/representation made by the promisor, establishing an intention to be bound o Would be inequitable to allow promisor to go back and assert strict rights + debtor cannot use as a shield if there was inequity e.g. duress (D&C Builders) o Only as a shield not sword: Waltons Stores v Maher Exam notes 1. Promissory estoppel: strikes at the heart of consideration. Espouses a reliance-based theory for enforceability of contracts instead of a consideration-based theory of contract enforcing contracts. 2. Classical doctrine of consideration: requires either a. Provided a benefit b. Detriment suffered at promisors request 3. Promissory estoppel (according to Denning) is: a promise intended to be acted upon, is acted upon, is binding. 4. The broad formulation of PE by Denning in High Trees has been restricted by subsequent decisions. 5. Waltons v Maher: 2 approaches to non-bargain promises: a. Narrow view of consideration but supplements it w the doctrine of PE which enforced nonbargain promises which seek to vary/discharge bargained-for-promises b. Modern day consideration = too narrow. Non-bargain promises should be enforceable. Problem = normal contractual rules of O+A+C may conflict w non-bargain promises (which are only enforceable because they have been relied upon).
Hughes v. Metropolitan Railway Co. [1877] (common law estoppel) Tenant late on repairing property F: Landlord gave tenant 6 months to repair property else risk forfeiture. Within the 6 months, negotiation for the sale of the lease was opened between landlord & tenant. The negotiation failed after 6 months + tenant failed to repair. Landlord sought to enforce forfeiture. It was held that the landlord had led the tenant by his conduct to believe that the landlord wouldnt enforce forfeiture. For Contract: Against Contract: Central London Property Trust Ltd. v. High Trees House Ltd [1956] (promissory estoppel) (overruling of Foakes v Beer) Landlord allowed discount to tenants because war = partial occupancy F: Landlord + tenant have close ties (landlord owns all shares in tenant, but later on has a receivership). Landlord (CLP) lets flats to tenant (HTH) in 1937 for 2,500 pounds/yr. Due to the war, the complex was barely let so the landlord allowed a rent reduction of 50% (no duration specified, no consideration for reduction). By early 1945, the complex was fully let and the landlord asked that full rent be paid. Lanlord asked for arrears amounting to 8000 pounds (due for 2 last quarters, which was when the building was fully rented). For Contract: Against Contract: 1. Recent law has tended to honor 1. No consideration for variation agreements that have been acted upon 2. common law estoppel cant apply here (but not legally binding) 3. No specified ending date to variation (change in rent) J: Landlord will get arrears (CLP wins). A promise, intended to be binding, intended to be acted upon and actually acted on, is enforceable by law, even if there hasnt been consideration (combo of common law + equity) binding so far as terms properly apply (in the case at hand, till complex was fully let) 1. Birth of promissory estoppel (future promises) 2. In common law, leases cant be varied orally or by writing, only by deed. Equity can step in and give variation to writing. But the problem here is the lack of consideration.

3. Lord Denning does away w consideration here by using promissory estoppel, but later has to backtrack (in Gilbert Steel) and say that it can only be used as a shield, not as sword, as in this case (High Trees here uses it as a shield, to protect against CLP going back on its promise to accept less) 4. The HOL narrowed Jordan v Money down (The HOL in Jordan said that estoppel can only work when the statement is about an existing fact, not a promise. As soon as it becomes a promise, it crosses into the territory of contract law). They said that if you can demonstrate detrimental reliance, a person can be estopped on the basis of a promise, if the promise is not to enforce a preexisting legal right. However, estoppel only applies for so long as the detriment runs. The remedies will only reverse the detriment, so the representation of intention is not a permanent change to the contractual relationship. a. Jordan v Money distinguished. Jordan made clear she didnt intend to be legally bound. Hughes: promisor intended to be bound. 5.

John Burrows Ltd. v. Subsurface Surveys Ltd., [1968] PE needs promise + intent to be bound: cant be mere indulgences Friend late on debt payments A debtor was consistently late on his payments even though the contract allowed the creditor to sue for the entire amount if payments were late. When the friendship between the 2 soured, the creditor sued. The debtor argued promissory estoppel.

For Contract:

Against Contract: 1. PE only enforceable if one party entered into negotiations/bargaining that led the other to think strict contractual rights wouldnt be enforced (need evidence that legal relations were intended to be modified in some irrevocable way, not just leniency)

Combe v. Combe, [1951] Promissory estoppel applies only to modification not creation of contractual relationship (requirement 1) Husband doesnt give rich wife maintenance Husband + wife getting divorced. Husband agreed to pay wife 100 pounds per year. Husband never paid, after seven years the ex-wife sued for the money.

For Contract: 1. High trees: promissory estoppel

Against Contract: 1. No consideration

Walton's Stores Ltd. v. Maher (1988) PE as sword OK (to enforce) when doing otherwise would be unfair No legal relationship. Claim = to enforce the contract (sword), not p One party demolished a building on the strength of the non-contract M owned property + W was negotiating a lease of it, granted that M would demolish a building on the property and erect a new one for W. Some time later, W started to have some reservations and (having been informed it wasnt bound by the agreement yet), instructed its solicitors to go slow, but did not inform M of his stance. W soon became aware that the demolition was proceeding. When the building was 40% complete, W informed M (months later) it didnt wish to proceed. M sought to enforce the agreement.

For Contract:

Against Contract: 1. Inaction/silence by D created a promise. This inaction = encouragement for P to continue act based on their assumption. It was unconscionable for them, knowing the Ds were doing something to their detriment. a. Mere failure to fulfill a promise =/= unconscionability. You must participate in the creation of the assumption, which the other party relies upon to their detriment.

4. Privity Beswick v Beswick For Contract: Jackson v Horizon Holidays For Contract: Against Contract:

Against Contract:

Hallmark Pool Corp v Storey For Contract:

Against Contract:

Notes 1. De minimis non curat lex: the law doesnt concern itself with trifles 2. Consensus ad idem: meeting of the minds