Contracts Case Guide Fall 2016

Topic

Case

Compensation
principle

Wertheim v
Chicoutimi Pump

Facts

Rule

Damages: cost of
performance v
diminution value

Peevyhouse v
Garland Coal

P, farmer, leased part of farm to D, coal mining co. for 5 yrs for
strip mining; D specifically agreed to restore land when done,
never did.
-P sues for $25k (29k for restoration) even though diminution
value=$300; I: cost of performance v diminution value

Damages: noneconomic interest

Radford v De
Froberville

P sold part of his land to D on the condition that D would build a

stone wall btw the properties; D failed to do this. P sued for cost
of building it; undertook promise to build if $ awarded

Damages:
unnecessary/wast
eful
Damages: loss of
amenity; noneconomic
Damages: supply
> demand

Jacob and Youngs v

Kent

House built w/ wrong pipe of equivalent value to contractually

specific

Ruxley Electronics v
Forsyth

D K with P (builder) to have P build swimming pool for 70k. D

didnt want to pay and P didnt make pool deep enough.

Victory Motors v
Bayda

D goes to P car dealership and negotiates K for mustang. D

refuses delivery. P re-sells car to another. P dealer sues for
damages issue of QUANTUM damages; D argues damages
nominal b/c car sold to another anyway i.e. no real loss from
breach

Damages:
remuneration to
liability ratio;
increase risk must
be paid for

Horne v Midland
Railway

P boot manufacturer under K to deliver army boots for French

army. delivery to be by Feb. 3, or buyer has right to reject boots
of P; P contracts with D RR to deliver boots to the buyer, who has
K to sell to the French army; When K to ship was made (late
January), plaintiff informed D that if no delivery by Feb. 3, 1871,
boots to be "thrown on ps hands," but D NOT told of
exceptionally lucrative K requiring delivery by Feb. 3
- D does not deliver until Feb. 4, and buyer rejects; boots sold by
P on market at 2s 9d per pair (large price drop because war
ended)

Remuneration to liability ratio: have to pay more in order for

the other party to assume increased risk/liability. So added
assumption of risk must be paid for. Mere communication of
importance is not enough (consistent with Hadley), and must
create a second contract to assume increased liability.

Damages:
damages
reasonably
contemplatable;
special
circumstances
communicated

Cornwall Gravel Co.

Ltd v. Purolator
Courier Ltd
NEGATIVELY
REVIEWED

P had to deliver a tender document (a bid for a govt K) to Ontario

by certain time or no deal. They signed a bill of lading. Delivery
on time would give them a commission of 70,000$ - so that
timely deliver was important. P contracted D to deliver, and D
delivered late. Ds exemption clause did not protect them as the
value of the document was not more than 250$. (Ds K wasnt
exclusive expression unius est exclusiio alterius expression of
1 thing is the exclusion of the other and delay is mentioned in A
but not future clauses which means it was intentional). P had
told D that timely shipment of document was extremely
important. P sues D for 70,000$

If special circumstances are communicated, and the

damages flowing from the breach are reasonably
contemplatable, (and obviously dont go against terms in
contract), then D is liable for damages.
Highly contended decision because there was no second
contract to compensate for increased liability BUT can still
cite it as it hasnt been overturned

In giving compensation for breach of K, the party

complaining should so far as it can be done by $, be placed
in the same position as he wouldve been in had the K not
been performed
Measure of damages is ordinarily the reasonable cost of
performance, but:
(1) Where the provision breached was merely incidental
to the main purpose of the K, and
(2) Economic benefit which would result is grossly
disproportionate to cost of performance
THEN court will only award diminution value
DISSENT: No, they should have to pay the cost of
performance; ct. is remaking K
P gets the cost of performance; genuine intent to have the
work done AND bona fide aesthetic reason to do the workreasonable for this particular P even though cost was not
reflected in market value
Courts will NOT award $ to P to allow him to hire someone
else to do work if IMPOSSIBLE for work to be done or
WASTEFUL/UNNECESSARY ACTIVITY
Good reason for cost of performance is aesthetic or personal
preference, even if not reflected in market; LOSS OF
AMENITY DAMAGES
Court will award the loss naturally resulting in the ordinary
course of events form the breach i.e. where SUPPLY
EXCEEDS DEMAND (common w/ manufactured goods),
retailer seller gets loss of profits if buyer breaches k b/c 1
less commission BUT where demand>supply, damagesnominal b/c no real loss

Damages: future
profits

Canlin Ltd. Thiokol

Fibres pool mesh
covers

P contracted D to supply material for pool mesh covers. Material

was disaster and all customers complained and P had to withdraw
from the market. P sues for losses suffered and future loss of
profit

Damages:
remoteness;
reasonably
foreseen

Transfield Shipping
Inc. v. Mercator
Shipping Inc

P owned ship and charted to D who returned it late so another

customer left late and P had to decrease their price. P claims
damages for loss of difference between original and new
decreased rate (loss of future profit). The new contract was
meant to be 39,000$ a day but because of late deliver it went to
32,000$ (still for 6 months). So P wants the 7000$/day difference
for the full 6 months. D wants to only pay for days were late.

Damages:
expectation
damages;
reasonable
contemplation

Anglia Television Ltd.

v. Reed actor
quits play;
expanded rule on
expectation based
damages;
reasonable
contemplation

P planned a show, paid for set/employees etc then signed D to

play main lead. A week before his contract began, he cancelled it
(claiming a mix up). P couldnt find new lead so had to cancel
show. P sues D for all expenditure (all $ wasted b/c D didnt fulfill
K).

Damages:
inefficient K

Bowlay Logging Ltd.

v. Domtar Ltd

P logged timber on Ds land and D was to provide the trucks to

move it. Partway through Ks performance D stopped providing
trucks. P sued D for damages of breach and claimed wasted
expenditure. Judge = Berger. K was unprofitable for P

Damages: mental
distress; K for
entertainment and
enjoyment

Jarvis v Swans Tours

Ltd

Jarvis took a two week trip which was his only vacation for the
year, with Swans tours. He was very disappointed with
everything they told him would be there (amenities). He still had
a hotel/meals but thats not what he went for he wanted
entertainment

Loss of future profits are not too remote because of nature

of contract; esp., commercial contracts which look at future
profits so should have been in contemplation of defendants
Contemplation of future profits is limited to the reasonable
person in the situation at time of contract
If a party cannot have reasonably foreseen a risk, then
they cannot be held liable for that risk. The TYPE or KIND of
loss that the K-breaker ought fairly to have accepted
responsibility should be looked to
If dont assume risk then not liable for it anyone who
assumes risk will need a premium in exchange otherwise the
other party gets something for nothing. So the liability would
have been much bigger than though was undertaking which
is UNREASONABLE -> all contractual liability should be
voluntarily undertaken; Breach has to be within their
contemplation not pass remoteness test
If a party cant demonstrate lost profits, both expenditure
incurred before + after K concluded will be part of the
damages awarded IF those expenditures would reasonably
be in the contemplation of the parties as likely to be wasted
if breach of K
he can either claim for his loss of expenditure or his loss of
profits, but he cannot claim both. If he has not suffered any
loss of profits or if he cannot prove what his loss of profits
would have been, he can claim in the alternative the
expenditure he has wasted."
When claiming "wasted expenditure", not limited to
expenses incurred after contract formed, but also precontractual expenses (but they must have been reasonably
contemplated)
Law of Ks does NOT compensate a P for damages
resulting from his entering into an inefficient K
To do this would run contrary to the normal expectations of
the world of commerce
-Restitutio in integrum: restitution to original condition
primary guide behind awarding damages;
P can get: lost expenditure MINUS loss to performance (what
P saved from Ds breach)
DEFENDANT HAS ONUS OF PROVING ITS AN UNPROFTABLE K
Damages allowed for loss of enjoyment as there was special
circumstances making this distress a reasonably
foreseeable consequence of the contractual breach
Hadley v Baxendale

Law limits measure of damages to those that can be

reasonably foreseeable
MUST BE K FOR ENJOYMENT/ENTERTAINMENT
In appropriate cases, can award damages for mental distress
particularly contracts for entertainment & enjoyment

Damages: pain
and
suffering/mental
distress

Ferguson v
Birchmott

Woman drops off dog so she can go on vacation and comes back
and dogs missing. She gets nightmares. Dog is worth 300$ but
sues for 1400$. She gets value of her dog plus pain and suffering
arising from breach.

Court will award damages for pain and suffering.

Pezzente v McClain

-Buys dog for 350$ and is assured that its healthy. End up
needing 10000$ for surgery. She does it and sues for 10000 but is
only awarded 350$ (value of dog) because SHE made the
decision for the surgery.

So would only award $$ to get new one (dont spend more to

fix something that its actual cost).

Damages: mental
distress; no think
skull rule in K law

Turczinski Estate v
Dupon Heating & Air
conditioning Ltd

-Wants heating fixed. Contractor doesnt do good job. They have

to move into hotel while its being fixed. She suffers from Bipolar
and OCD.
-Court gives her all economic loss new contractor, hotel. BUT
NOT distress damages

Thin skull rule does not apply in contract law (unlike

torts where pay more depending on person).

Damages: narrows
approach to
mental distress

Vorvis v Insurance
Corp of British
Columbia not rule
in Canada
anymore

-Vorvis was lawyer with insurance corporation. He was fired

brutally and wasnt treated well.
-Did not award aggravated (compensation for mental loss) nor
punitive damages even though they cited Jarvis.
-Was a 3-2 split

-Narrow approach to mental distress/damages

-No damage for distress unless can only get aggravated
damages if theres an independent actionable wrong.

***Puns can be given for harsh/reprehensible

conduct

Damages: Wallace
damages

Wallace v United
Gran Gravers Ltd
not law in Canada
anymore

-This is 8 years after Vorvis, goes to SCC and get different

outcome. Was told we could work with them until he retires. Got
fired at 59 and cant get other work. Worked there for 14 years.
-SCC majority (Iacobucci) reverses Vorvis.
-Majority says will not get aggravated damages, and can only get
when:
o
Enjoyment/entertainment
o
Remoteness is irrelevant here (foreseeability
doesnt matter here)
-BUT still gave 24 months notice and made up for it by giving
extra notice months 24 included extra period for harsh dismissal

-Iacobucci: Insensitive form of dismissal, you can get

Wallace damages: longer notice period
o
Not a question about reasonable
contemplation and foreseeability must
be an independently actionable wrong
o
Narrow approach
o
Strong dissent in Wallace persuasive to
the future

Damages: Mental
distress; Test for
damages for
mental distress
are compensatory
and are based on
foreseeability

Keays v Honda
Canada Inc sick
leave from work;
wrongful dismissal;
Aggravated damages
+ *NO MORE
WALLACE DAMAGES*

WALLACE DAMAGES

-After working for Honda for 11 years P was diagnosed with CFS.
He stopped working and got disability payments. Insurance and
Honda physicians said he was ready to work again but his own
doctor said no. Honda said if he did not submit to an exam by
Hondas physician he would be terminated. They urged him to
comply but didnt so he was terminated for insubordination. P
sues for wrongful dismissal.

No Wallace damages ever! BUT can still get

aggravated damages if it is through unfair damages,
bad faith, and foreseeable. Mental suffering needs to
test for remoteness. AND no longer need independent
actionable wrong
-If employee can prove that manner of dismissal caused
mental distress that was in contemplation of both parties
those damages will be awarded not though arbitrary
extension of notice period (Wallace) but through an award
that reflects the actual damages (aggravated damages)

Damages: mental
distress;
FORESEEABILITY
is now primary
test

Damages:
punitive

Damages:
punitive for
corporation
Damages:
punitive

***LEADING
CASE

Damages:
punitive damages;
narrows test

Fidler v Sun Life

Assurance Co of
Canada sick leave
from work; Test for
recovery of
aggravated
damages is
REASONABLE
FORESEEABILITY MOST CURRENT
RULE IN CANADA
Boucher v Walmart

Got v. Royal Bank

(1999)

P worked at a bank, developed CFS and fibromyalgia and so

received long term benefits of disability insurance. After 2 yr. she
was only entitled to benefits if couldnt do ANY job. P hired PI to
see if Fidler was actually sick and caught her on camera doing
stuff and said she was ready to work. They denied her more
benefits. P said could still not work (and her doc verified it) but D
relied on experts. Concern was that D was playing hard bal. One
week before action started D offered to reinstate benefits with
interest so she only followed on with suit in pursuit of punitive
and aggravated damages (like Warrington)

Foreseeability is now a primary test for determining

whether should be liable for mental distress arising
from breach / AGGRAVATED DAMAGES CAN BE
RECOVERED EITHER THROUGH SEPARATE ACTIONABLE
WRONG OR IN NON-ECONOMIC LOSS THAT WAS
REASONABLY FORESEEABLE.

P works for Walmart for 10 years, doing great job. One day she
refuses to falsify the fridge data and supervisor gets mad at her
and starts treating her awfully making fun of her in front of
colleagues she quits in face of abusive conduct and sues for
wrongful dismissal. This was constructive dismissal employer
breaches fundamental herm so can quit and its considered
wrongful dismissal. She gets trouble sleeping, becomes
depressed and unable to find work
-Jury trial: wrongful dismissal; Agg damages 200k; pun dam $1
mill. (trial)
-Walmart vicariously liable in tort for Pinnocks mess up
-Court of Appeal cut pun dam back to $100k
Corporate plaintiffs not entitled to aggravated damages because
they don't suffer emotional harm.

Punitive damages must be proportional salary and other

damages to the rest of the damages

Whiten v Pilot
Insurance Co.
LEADING
CANADIAN CASE
FOR PUNITIVE
DAMAGES

-Ps house caught fire and was destroyed. Ps family moved into
new place and D paid little insurance then stopped. D claimed it
was arson (even though all sources said it wasnt), suggested
family did it on purpose & tried to manufacture evidence. Ds
lawyer knew P had limited financial resources and used this info
to force them to settle (dragged trial on)
-Jury awarded $345,000 in compensatory damages and $1
million in punitive damages; trial judge also awarded solicitor
and client costs, which were fixed at $317,000
-Majority in ONCA allowed the appeal in part, reduced punitive
damages to $100,000
Whitens appealed, seeking to restore the 1 million in punitive
damages award, while the insurer cross-appealed, arguing that
there should be no punitive damages

Fidler v Sun Life

NARROWS
PUNITIVE
DAMAGES

(see above: bank receptionist w/ CFS; insurer terminated

payments)
-Fidler also seeks punitive damages
-Trial judge declined to award punitive damages, awarded $20k in
aggravated damages for mental distress concluded insurer had
not acted in bad faith + dismissed claim for pun. Damages
-BCCA upheld award for damages mental distress, also awarded
$100k in punitive damages
SCC allowed appeal in part, restored decision of trial judge

Defendants conduct must be harsh, vindictive,

independently actionable wrong (breach of duty of good
faith).

This case provides precedent for punitive damages for

corporate Ps (10% of the compensatory economical damages
as punitive damages.)
Puns should serve retribution, deterrence, and denunciation
when conduct is oppressive, malicious and high-handed.
Denunciation

Conduct should be marked departure of ordinary

standards of behavior

Must be an independent actionable wrong Does

not mean separate tort; breach of duty of good faith (all
Ks have implied duty of good faith=breach of implied
duty) not to exploit the vulnerable

Damages must be reasonably proportionate to harm

to P although NOT compensatory no double recover
(in aggravated and punitive)
Twofold test for punitive damages:
1. Actionable wrong (breach of duty of good faith)
imposed by court; marked departure from ordinary
behaviour cannot exploit vulnerable
2. D acted in a malicious, reprehensible way,
vulnerability of should be taken into account (Abuse
of power)
Unsuccessful defence of insurance company to a claim is not
sufficient to ground for punitive damages, even if abandoned
defence before trial; NO BAD FAITH=NO PUNITIVE DAMAGES

Damages:
punitive damages;
narrows Whiten

Keays v Honda
Punitive damages
+ narrows scope
of Whiten

-Trial judge found egregious behaviour of Honda and awarded 24

mo. notice period + pun damages of $500k
-ONCA dismissed Hondas appeal, but reduced pun dam. To $100k
SCC: no more Wallace damages; Rejected pun damages

Interim injunction

Sky petroleum Ltd v

VIP Petroleum Ltd
interim injunction

P had 10 yr. requirements contract when agreed to buy all its

gas supplies from D at determined prices. After 3 yr. price of gas
increased, so supply decreased making them more pricey - so
no longer a monetarily beneficial contract for D. D was looking for
excuse to cancel K, claimed P was in breach and stopped giving
supplies.
D entered into contract agreeing to only work for P. D decided
wanted to increase money, broke K and entered into new K with a
3rd party. P said K is valid and binding and wanted injunction and
damages

Injunction
Warner Bros v Nelson
actress breaks K

Damages:
restitutionary

Attorney General v
Blake spy
publishes book;
restitutionary
damages (good
law in Canada)

D was an Englishman employed as a double spy who was a

double agent and gave information to Soviet Union. He was
caught, put in jail, escaped to Russia and years later (when the
mission information became public) signed a book deal of his
memoirs. P wants injunction to stop D getting his 90,000$

Damages:
mitigation

Evans v Teamsters
Local Union No. 3
(example of first
principle)
constructively
dismissed
employee

-Evans employed by Teamsters for 23 yrs. and 58 when dismissed

-Union elected a new exec. Evans backed the losing candidate
+ new president faxed termination letter
-Union continued paying Ps salary and benefits. Evans stopped
working but entitled to 24 mo. notice. After 5 mo., employer
wanted him to work for the remaining 19 mo. (to mitigate
damages) and if he didnt return to work would be dismissed for
cause (insubordination)= no more pay. P said only world work if
permanently reinstated. They said no.
-Trial: Union did not satisfy the relatively high standard of proof
required to show that Evans failed to mitigate damages
-Court of Appeal: evidence did not support the conclusion that
Evans circumstances justified his refusal to resume employment
w/ union; Evans failed to act reasonably w/ respect to the job offer
made to him by the union and this constituted a failure to
mitigate his damages
-Appealed to SCC; appeal dismissed
Evan argued: cases requiring an employee mitigate damages by
returning to the same employer deal primarily w/ ppl who have
been constructively dismissed; distinguishable from cases dealing
w/ wrongful dismissal; unreasonable to expect mitigation

-Says Hondas conduct was wrong/aggressive/harsh/illadvised Narrows scope of Whitten

PUNITIVES MUST BE OPPRESSIVE/MALICIOUS NOT
ENOUGH TO BE HARSH OR ILL ADVISED; EXCEPTIONAL
CASES ONLY
When P has no likely prospect of finding any
alternative source of supply at a commercially viable
price, an interim injunction is in order to help P settle
into new situation
-Court preventing sudden breach + keeping parties in
commercial K parties usually work something out
Where a contract of personal service contains
negative covenants the reinforcement of which will
not amount either to decree of specific performance
or a decree requiring them to remain idle (or perform
the positive covenants), the courts will enforce those
negative covenants by injunction
In rare circumstances, the plaintiff does not need to
have suffered a monetary loss in order to receive
restitutionary damages

Need to look at relationship between employer and

employee: ITS A REASONABLE PERSON TEST (its
objective not subjective not them personally)

Would they suffer humiliation? Loss of dignity?

Is there respect? (Farquhar)

Would they put each others interests in jeopardy?

(Farquhar)
-So just ask: would reasonable person work in these
circumstances?
-Onus is on the employer that a reasonable person would go
to work

Damages:
wrongful dismissal

IBM Canada Ltd. v.

Waterman

-IBM dismissed W w/o cause on 2 months notice

-W 65 y/o had 42 y. of service and had a vested interest in IBMs
defined benefit pension plan
-Under plan, IBM contributed a % of Ws salary to the plan on his
behalf
-Under terms of pension, upon termination, employee w/ Ws
age/years of service=entitled to full pension; termination had no
impact on pension benefits
-W sued to enforce contractual right to only be dismissed on
reasonable notice
Trial: judge set the appropriate period @ 20 mo.
Court of Appeal dismissed appeal
IBM appealed to SCC
P signed with D for sale of land. P wanted it for investment. D
breached K and no sale. P didnt buy new property (didnt
mitigate damages) and sues for specific performance. P wants
expectation (equitable) damages because didnt have money to
mitigate (like Roth and Tyler British homeowners; dont have to
mitigate if you cant afford to)
-Trial: held that P was not entitled to specific performanc; no
opportunity to mitigate missed by P b/c D failed to show
alternative pieces of land available on the market
-Court of Appeal: awarded nominal damages of $1.00
-SCC dismissed appeal. focus on mitigation, problems of
specific performance, and principle of avoidable harms
Master of The Caledonia noticed his ship was going to crash
into another so called for a tug. Value of tug was 100$ but tug
owner would only do for 1000$ so he had to comply otherwise
would ruin other ship. Tug owner now sues for 1000$ on basis of
promise because didnt get paid

Employee pension payments fall within the private insurance

exception and should therefore not reduce the damages
otherwise payable for wrongful dismissal compensation
principle does not apply

Specific
performance

Southcott Estates Inc

v Toronto Catholic
School District
(corporate
existencecorporati
on is a legal person)
property for
investment

Consideration:
extortion=unfair
bargain=unenforc
eable

The Port Caledonia

Consideration:
nominal is
sufficient to
enforce K
($1=similar to a
seal)

Thomas v Thomas

before death, dying man decided he wanted his wife to have his
house. Later agreement said she would have house as long as
pay $1/yr. this lasted until 1 executory died and then the other
one evicted her; executors=nephews
-bad nephew said gift-like transaction no legally sufficient
consideration

-Consideration doesnt need to be equal courts dont look

at quality of exchange
*consideration must have value in eyes of law
*motive is not consideration
-Adequacy of consideration is irrelevant if theres a real
bargain between parties
-Nominal consideration makes contract enforceable
$1=similar to a SEAL therefore enforceable

Consideration:
need reciprocal
exchange

White v Bluett

Father lent $ to son and later died. Executor sues son for the
debt. Son claims that he had complained to his dad that he got
less $ than his siblings so dad said would forgive debt if he
stopped complaining. Son says he held up his end of bargain.

Reciprocal exchange is necessary for contract

No consideration when you give up something you are not
legally entitled to (BUT if you give up freedom you have then
it counts as consideration)

Consideration

Hamer v Sidway

Uncle promised nephew that if didnt drink/smoke until 21 then

would pay $5000. Nephew obliged and wrote uncle when turned
21, uncle said was earning interest and put $ aside for him when
older. Uncle dies P sues executor. D argument= K was w/o
consideration and therefore invalid

Waiver of any legal right at request of another party is

sufficient consideration for a promise
Promisee need not give benefit to promisor
Doesnt matter if the consideration you give up doesnt
disadvantage P consid. Not measured as benefit to promise
Abstinence from interests is consideration

Cannot get specific performance unless property has

peculiar and special value and money remedy wouldnt be
complete
P must show some fair and substantial justification for
inaction (failure to mitigate)

When contract made under extortion/exploitation and

is so unreasonable/unjust and arise from
economic/physical distress, the court has power not
to enforce contract
If one party is clearly more vulnerable than the other, and
the other party takes advantage of that, the contract is too
reprehensible for the court to enforce it
UNCONSCIONABILITY grossly unfair; court is
encouraging FAIR BARGAINS

Consideration:
past
consideration=no
consideration

Eastwood v Kenyon

Consideration:
There is
consideration in
unilateral
contracts.
Mutuality is
essential to
consideration.
Mutuality
something of
value being given
in exchange

Great Northern
Railway Co v Witham

Consideration

John Sutcliffe died and left Eastwood as the guardian to his infant
daughter, Sarah. Eastwood borrowed money to pay for Sarah's
house (140 pounds) and Sarah promised to pay him back when
she came of age (21) and paid one year's interest to him. Sarah
then married Kenyon who also promised to pay Eastwood back.
Kenyon failed to do so and Eastwood sued. Kenyon said that he
will pay the money after he got a child from Sarah.
D made a tender (A request for tenders (RFT) is a formal,
structured invitation to suppliers to submit a bid) for Ps business
that they would be supplier for orders. D did not complete an
order and said didnt have to because contract was unilateral as
the company was not bound to give an order. AKA D claims was
no consideration for D to supply as no obligation for P to make
order; D was winning tender. P gave orders for steel and D would
supply. D refused to supply. D says it wasnt mutual (P didnt bind
themselves to anything to D shouldnt be bound to supply)

Past consideration = no consideration.

Promises are not sufficient to form contract
ASK: did P expend at request of D.
Past consideration would NOT prejudice real creditors

Wiebe v Bobsien
buy house subject to
sale of own house lopsidedness (all risk
in one party)

K said P agreed to buy Ds house subject sale of own house. D

later terminated contract but P still sold own home. P sues D for
specific performance of sale of house

K is either binding on both parties or neither

Have to look at if both parties actually INTENDED to
be bound at time contract was made; Reliance is
important here

Wood (the employee)

v Lucy Lady DuffGordon (stylist)

D is a stylist and people by products she endorses. She hires P t o

sell her stuff license her products, endorse others and they
share 50% of profits. She then endorsed other products on her
own and kept all the profit. D sues P.

Mutuality/return of promise may be implied from

circumstances of contract (its name); it must be
obvious, and although promise is lacking, might be
expressed instinct & obligation
Common law of contract extends beyond formalism
Follow up: contracts now add that parties must make
reasonable best efforts
Contracts can depend on implied intention to employ best
efforts and this will amount to consideration

Stott v Merit
Investment Group
P has to pay for
clients default on
loans
forebearance of
claim

P worked for D. one of Ps clients was going to default on his loan

so P sold some of the clients contracts. The client complained to
Ps supervisor who restored the contracts. The client later
couldnt repay and as per Ps employment contract, P would have
to pay it off (although he didnt think it was his fault as the
supervisor was the one who did it but P still signed contract that
would pay it off). P later quit and sues for money deducted from
his commissions.

If give up cause of action, provided acting in good faith, even

if cause of action would have lost, it is still legally sufficient
consideration
By accepting responsibility (or settling) , one is excluded
from making later claims

There is consideration in unilateral contracts and mutuality

(something of value given in exchange) is essential to
consideration; Once first order is made in a framework K,
both parties are bound for the specific order
-There is consideration in unilateral contracts and mutuality
(something of value given in exchange) is essential to
consideration
-In regard to the specific order that was made, there was an
exchange of promises, and hence a binding K: Called
unilateral contract because one side bound if other fully
performs in manner stipulated, BUT the other side not
obliged to do anything, and no liability for trying but not
succeeding.

Consideration

Foakes v Beer
cannot accept less
in replacement of
bigger sum
LATER REVERSES
RULE***

D owed money to P. they agreed to a timeline of installments (5)

that if D followed, would not need to pay interest. D follows
timeline, but after, P sues for interest

Payment of lesser sum cannot satisfy (a larger sum of

money) as consideration (unless put under seal) DENNING
REVERSES THIS IN D&C BUILDERS (AND UNDER MERCANTILE
ACT)

Greater Fredericton
Airport Authority v
NAV Canada
economic duress
RULE IN NEW
BRUNSWICK
(GILBERT IS RULE IN
ONTARIO)

P (also known as ASF) and NAV have K to pay different costs for
the airport. NAV wants ASF to pay for new equipment (and vice
versa) so NAV withholds provision in fiscal budget for ASF unless
ASF agrees to pay, but ASF had already invested 6 million so
couldnt really not follow through. ASF wrote NAV saying your
deadline has forced us to make funds available so NAV on
basis of letter, installs equipment, but then ASF refuses to pay.

Promissory
Estoppel

Central London
Property Trust Ltd v
High Trees House Ltd

P leased apartments to D. During war was low occupancy so

agreed in writing that P would take half. At end of war, when flats
became full again, P demanded full rent (from that point on not
beginning) but D doesnt pay. P sues.

Promissory
Estoppel

Combe v Combe
wife wants
alimony rules for
estoppel

Wife gets divorce and husband agrees to pay 100$/year in

maintenance to wife but he never paid for 6 years. She sues on
promise for $600.

Court doesnt like sturdiness of Stilk rule, so instead court

accepts post-contractual modifications, unsupported by new
consideration as enforceable as long as establish that
modifications arent result of economic duress (partly
because can still gain something from new contract even if
other party didnt give something up)

so no longer need exchange promises/detriment as

long as promisor gains something
To establish coercion/economic distress need:
-Promise must be extracted as result of exercise/pressure
(demand of threat)
-Exercise of pressure must be such that coerced party had no
practical alternative but to agree
-If meet these first 2 then look at whether the coerced party
consented to the variation:
o
Was promise supported by consideration?
o
Was promise made under protest or
without prejudice?
If not, did coerced party take reasonable steps to disaffirm
promise as soon as practical?
A promise intended to be binding, intended to be acted
upon, and in fact acted upon, is binding so far as its terms
properly apply
If promise is made and only intended to apply under certain
conditions, once conditions no longer exist then promise is
no longer binding.
In order to enforce promissory estoppel need:

Promise intended to enforce legal relations

Promisor intends and expects reliance on the

promise
There is detrimental reliance on the promise
1. Estoppel is only defense not cause of action (where
one didnt exist before) later changed
2. Forbearance can be consideration as long as done on
faith of promise and by request of promisor (express or
implied)
3. Consideration is still cardinal necessity of the
formation of contract BUT NOT OF ITS
MODICATION/discharge.
4. Combe limits doctrine of estoppel; doesnt absolve
necessity of consideration- its about reliance and
fairness. Cannot enforce gratuitous promise even if
relied on K
Cannot enforce gratuitous promises even if relied on it

Promissory
Estoppel

Tudale Explorations
Ltd. v Bruce

Bruce asked Tudale for an extension, which, although disputed,

Tudale consented to over the phone (no consideration for it).
Bruce then, within the extension applied for something to be
done through an escrow agent (escrow agent: person or entity
that holds property in trust for 3rd parties while a transaction is
finalized or a disagreement is resolved. Tudale said it was too late
because the extension period wasnt binding because got no
consideration.

Shield/sword distinction not as strong anymore?

Broadens definition of modification; and modifications allow
estoppel to be used (because not a new K)
Courts will use estoppel to protect reliance So doesn't
matter that promise was oral, that it lacked consideration, or
that was related to a future event. all that matters was that
intended (and was) acted upon.

Promissory
Estoppel

Waltons Stores
(Interstate Ltd) v
Maher

Maher owned land and negotiated lease with Waltons. where

Maher would erect building on land in accordance with Waltons
specifications. Mahers needed urgent approval for demolition and
erection of new building. Walton lawyer received their proposal
and replied that would let Maher know by tomorrow if any
amendments not agreed to and that expected approval would be
forthcoming. 4 days later Maher began the construction, & 4
months later got notice that amendments were not approved and
no longer intended to enter lease agreement. M sues for spec.
perform or damages.

Estoppel can be used to enforce voluntary promises

that lead to detriment BUT has to be result of
something unconscionable - mere reliance that later
acts to the plaintiffs detriment is not enough to
evoke estoppel.

Promissory
Estoppel: dont
invoke
consideration
when theres
estoppel

Skidmore v Bradford
warehouse for
nephew

Jacob Bradford wanted to buy warehouse for nephew. At time of

sale he put his nephews name on receipt, put down 1/5 th of
payment & said Ive bought this for my nephew Jacob later paid
another sum but died before could pay rest.

In cases where P becomes legally liable for an incomplete

gift made under his name, a remedy must be enforced

Dalhousie College v
Boutilier Estate
grat promises
arent sufficient to
form binding
contracts

D agreed to pay P $5000. They later asked him for the payment
and he told them he had fallen on hard financial times but he
intended to still pay later. He died. P sues his estate for gift
money

Jones v Padavatton

-P=mother; D=daughter
-Parties originally came from Trinidad; daughter lived in
Washington w/ young son and had job at Indian Embassy; Mother
very anxious for daughter to get called to English bar, which
would have also qualified her to practice law in Trinidad; Told
daughter she would support her while she studied for the bar $200/mo; Mothers solicitor in Trinidad acted as agent and paid
the daughters fees to study for the bar and wrote letter informing
her of the mothers undertaking of $200/mo
-1967: daughter not made good progress in studies; in 5 yrs. she
had passed exams normally completed in 3; had not completed
all her studies
-Mother came to England to try to recover possession of the
house daughter was living in; Eventually commenced proceedings
to recover possession
-Trial judge dismissed mothers claim for possession; on
daughters counter-claim, awarded her the value of repairs to the
house made by her; Mother appealed

Gratuitous promise (promise to make gift) dont have

sufficient consideration not be considered a binding contract
(are not enforceable) unless money was given for specific
purpose (benefit to promisor)

AND reliance (through estoppel) is not enough to

enforce it
For estoppel to apply, promise must rely on actual actions of
promisor not merely their statement to do something (need
at least partial performance.
Test of intention has 2 Questions:
1. Did parties intend contract to be legally binding (or
were they simply on good faith/trust)
2. Were arrangements sufficiently certain (not
obscure), that even if intended to be binding, not
enforceable?

TD Bank v Leigh
Instruments Ltd.
(Trustee Of) letter
of comfort is NOT a
binding promise

Statute of frauds:
*When statute of
frauds renders
promise
unenforceable but
party to whom it
was made already
gave value for it

Unjust enrichment

Appeal from judgment dismissing appellants claims

Claims based on five letters of comfort provided to the
appellant (TD Bank) by the Plessey Company in connection
w/ a series of loans made at the time of and following
Plesseys overtake of Leigh Instruments
Respondent, General Electric Company was in effective
control of Plessey when the fifth letter of comfort was
provided (Dec 19, 1989) and the claims against it arise out of
that letter
Court dismissed appeal:

GEC bought out Plessey who owned Leigh and had given the
TD Bank a series of comfort letters that carried a paragraph
that said:
It is our policy that our wholly owned subsidiaries, including Leigh
Instruments Limited, be managed in such a way as to be always
in a position to meet their financial obligations including
repayment of all amounts due under the above facility.
In the 5th letter Plessey indicated that the letter does not
constitute a legally binding commitment.
TD accepted there was no contract claim to enforce this, but
thought there was a tort claim in negligence. TD claims the
paragraph means GEC would manage Leigh in such a way that
Leigh would be guaranteed to pay its debts.
GEC claims it just meant that they had a policy that Leigh should
manage itself that way, but thats not to say Leigh would
necessarily be able to meet the policy.
Seres agreed to sell land to P, subject to right of 1st refusal to TriB. P sent offer and cheque for purchase price to D and D sent it to
Erie Sand and Gravel
Tri-B. D ended up accepting Tri-Bs offer even though was below
LTD v Seres Farms
Ps and contrary to agreement.
LTD right of first
refusal on house unjust
enrichment/Narrow
s effect of Statute of
Frauds through
doctrine of part
performance

Deglman v Guaranty
Trust Co of Canada
and Constantineau
random jobs in
exchange for aunts
house

Aunt of P promises to give him her house when she dies if he

takes care of her/does odd jobs when she asks. He does and when
she dies she doesnt leave him her house. Statute of frauds says
land transfers require writing. P sues estate.

Even if letter contains misrepresentation of fact, the

letter cannot be relied on (theyre not enforceable).
To interpret the words, use this principle from Eli Lily and
Co. v. Novapharm Ltd., [1998] (SCC):
Bearing in mind the relevant background, the purpose of
the document, and considering the entirety of the
document, what would the parties to the document
reasonably have understood the contested words to
mean?
The phrase be managed does not suggest that Plessey
itself would manage the affairs of Leigh.

If a party to an otherwise unenforceable

contract/agreement stands by (makes it unequitable
to rely on statute to be relieved of obligation to
perform) while the other party acts to its detriment
by performance of its contractual obligations, the first
party will be precluded from relying on requirements
of statute of frauds to excuse its own performance.
If contract has been partly performed (even if only
oral) courts can enforce contract (ie., specific
performance)

there is a low threshold for determining part

performance
Equity does not allow statute of frauds to be used as an
engine of fraud.
If K is unenforceable, but one side has already done
something such that the other side has benefited, can sue in
unjust enrichment. (i.e., b/c doesnt fulfill statute of frauds)
Quasi contracts: can only sue for unjust enrichment one
party must gain not enough for the other party to have lost
because of breach
Unjust enrichment needs 3 things:
1. Deprivation
2. Enrichment
3. Absence of juristic reason

Doctrine of Privity
**DEVELOPED A
FURTHER
EXCEPTION TO
THE DOCTRINE OF
PRIVITY**

London Drugs Ltd v

Kuehne & Nagel
International Ltd
negligence causing
damage - changes
rule for 3rd party
beneficiaries

Employees of D were moving Ps transformer and in their

negligence caused 300000$ damages. P sues D but they have a
contract limiting liability to 40$ - P says can still sue the negligent
employees. Employees say that were privy/3 rd party beneficiaries
to contract.

Orange Julius v
Surrey (Aka Laing
Property Corp v All
Seasons Display Inc)
Christmas display
causes fire

Fire in mall caused 8 million damages. Owner of mall (Lain) sues

those who set up display. They also tried to impose liability on the
employees of All seasons)

In the following circumstances employees should be entitled

to limited liability from clause between their employer and
another party
1. The limitation of liability clause must, explicitly or
implicitly, extend its benefit to employees seeking to
rely on it its about intent
2. Employees seeking the benefit of the clause, must have
been acting in the course of their employment and have
been performing the very services provided in the
contract between employer and other parties
Exception to privity is dependent on intention of contracting
parties
***can only be used as shield
so no longer need Himalaya clause
To determine if 3rd party will be protected, have to look at
Identity of interest. Test:
1. Insurance is there insurance?
2. Control does employer have control over actions of
employees
Action can action of employer be done through employees?