BUSINESS LAW

Course ID: LAW 122 Instructor: Peter Wilson Office: TRS 3-039 Office Hours: Tues. 1:30 5:00 pm; Wed. 12:00 2:00 pm Email: peter1.wilson@ryerson.ca

COURSE SCHEDULE
Class Date Oct. 11/12 Oct. 18/19 Oct. 25/26 Topics Nature and Creation of Contracts Consideration and Privity of Contracts Representations and Terms Readings Chapter 7 Chapter 8 Chapter 9

NATURE AND CREATION OF CONTRACTS

Chapter 7

COURSE PROGRESSION

Nature and Sources of Law; Court System and Legal Process

Review of the Law of Torts

Review of the Law of Contracts

TOPICS
Introduction Tort vs. Contract Mutual Intention to Create a Contract Offer
Offer vs. Invitation to Treat

Acceptance

INTRODUCTION
A contract is an agreement between two or more parties creating legally enforceable rights and obligations. Virtually everyone enters into one or more contracts every day.

INTRODUCTION
The contract is at the heart of the commercial world and of human interaction generally.
It is how business is conducted. To a significant extent it governs noncommercial personal interaction as well.

INTRODUCTION
A contract can be:
Verbal or written; Long or short; Simple or complex; Standard-form or negotiated; One-sided or balanced; Fair or unfair; Immediate or long-term.
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INTRODUCTION
A contract is not simply a promise by one party to another. There are certain necessary elements for a contract:
Mutual intention to create a contract; A meeting of the minds as to the terms of the contract through offer and acceptance ; Consideration (exchange of value) from each party to the other(s).
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INTRODUCTION
Today s presentation will focus on the first two ingredients of a contract: Mutual intention to create a contract; Agreement as to the terms of the contract through offer and acceptance.

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TORT VS. CONTRACT

A tort is a private duty imposed by the common law. A contract is an express duty, voluntarily entered into by two or more parties.

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TORT VS. CONTRACT

Tortious duties apply generally and do not require a special or obvious relationship between parties. Contractual duties arise only from a special relationship between the parties to a contract.
The legal term for this special relationship is privity.

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TORT VS. CONTRACT

Damages awarded for the commission of a tort are intended to put the injured parties back into the position they occupied before the tort occurred ( look backward assessment). Damages for a breach of contract are intended to place the breached parties in the position they would have occupied if the contract had been fulfilled ( look forward assessment).
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WHAT DO YOU THINK?

You Be the Judge 3.1, p. 70

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WHAT DO YOU THINK?

Goldstar Management Ltd. v. Varvis, 1995 (AB QB) Contract Damages: The amount of damages required to place Pippa in the place expected if the contract had been fulfilled as required:
$5,000
 $7,000 (expected value of item) minus  $2,000 (current value of item)
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WHAT DO YOU THINK?

Tort Damages: The amount of damages required to place Pippa in the place she enjoyed prior to entering the contract:
$3,000  $5,000 (price paid for the item) minus  $2,000 (current value of the item)

What damages will Pippa receive? (She can choose either but not both.)
$5,000
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TORT VS. CONTRACT

Source of Obligation Tort Imposed by law Privity No privity required. Enforceable against strangers Damages Designed to return the victim to the position before the tort occurred Designed to provide the contracted-for benefit
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Contract

Voluntarily entered Enforceable into by the parties only against to a contract the parties to the contract

MUTUAL INTENTION TO CREATE A CONTRACT

This arises if a reasonable person would believe that the parties intended to create a legally enforceable agreement.
The reasonable-person standard is objective. It is not concerned with what the parties actually may have intended.

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MUTUAL INTENTION TO CREATE A CONTRACT

In a commercial context, the rebuttable presumption is that the parties intended for an agreement to exist. In a family context, the rebuttable presumption is that no legally enforceable agreement was intended. Note for both that the presumptions are rebuttable; e.g., you can have a binding agreement between family members.
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WHAT DO YOU THINK?

You Be the Judge 7.1, p. 157

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WHAT DO YOU THINK?

Fobasco Ltd. v. Cogan, 1990 (ON SC) The court determined this to be a mere social arrangement, not a binding contract.

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WHAT DO YOU THINK?

First question:
There was no proof that Cogan intended to relinquish ownership of the tickets by transferring them to Fingold s name. There was no clear statement of each party s rights and obligations.

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WHAT DO YOU THINK?

Second question:
The lack of writing may suggest the arrangement was not intended to be contractual. If business people normally contract in writing, this arrangement, if written, may suggest that it was intended to be contractual. Even if it was contractual, the lack of writing made it more difficult to determine the precise terms.
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WHAT DO YOU THINK?

Third question:
Although the arrangement was intended to last for more than one year, it was difficult to conclude on the facts that it was intended to continue forever.

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OFFER
In tandem with the intention to create legal relations, parties must go through the process of offer and acceptance. Courts have developed criteria for determining what does or does not qualify as a contractual offer. Ref. Ethical Perspective 7.1, p. 160

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OFFER
The presence of offer and acceptance is a contextualized, factual determination. It may be formal and self-evident, or it may be determined from a review of all relevant facts and circumstances.
E.g., the past relationship between parties may result in a conclusion that their current behaviour constitutes offer and acceptance. In particular, the law distinguishes an offer from an invitation to treat.
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OFFER VS. INVITATION TO TREAT

An invitation to treat is not an offer.
It is an invitation to others to make an offer. The critical question:
 From the perspective of an objective, reasonable person, was the statement an offer or was it an invitation to others to make an offer?

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OFFER VS. INVITATION TO TREAT

Rebuttable Presumptions:
 Items in a store with a price are characterized as invitations to treat.  Advertisements in the media are characterized as invitations to treat.

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WHAT DO YOU THINK?

Class 5 Fact Scenario No. 1

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WHAT DO YOU THINK?

R. v. Ron Engineering & Construction (Eastern) Ltd., [1981] SCC Authority for the proposition that a call for tenders is both an offer and an invitation to treat.
Invitation to Treat
 An invitation to make an offer to provide the product or service under the prescribed terms and conditions; and
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WHAT DO YOU THINK?

An Offer
 An offer to enter into the irrevocable tendering process, the acceptance of which arises from the submission of the tender.

The attempt by the contractor to withdraw its tender would breach the contract for the tendering process.

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WHAT DO YOU THINK?

The acceptance by the contractor of the government s offer to enter into an irrevocable tendering process by submitting its tender is referred to as Contract A. The acceptance by the government of the contractor s tender to do the work is referred to as Contract B.

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TENDERING PROCESS
Stages Contract for the Process Contract To Provide the Product or Service or To Do the Work Invitation to treat Offer to provide the product or service or to perform the work Acceptance of the offer to provide the product or service or to perform the work
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Call for Tenders Submission of Tenders Contract Award

Offer to hold a fair tendering process Acceptance of the offer to hold a fair tendering process

WHAT DO YOU THINK?

Class 5 Fact Scenario No. 2

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WHAT DO YOU THINK?

Canadian Dyers Association Ltd. v. Burton, [1920] (H.C.) The letter of October 16, 1919, from the plaintiff was a request for a price at which the defendant was prepared to sell the house, i.e. an invitation to treat. The reply from the defendant of October 21, 1919, was an offer, i.e., the price at which the defendant was prepared to sell the house.
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WHAT DO YOU THINK?

The judge attached particular importance to the words: ... the price ... is the lowest I am prepared to accept.... If it were to any other party I would ask more.

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OFFER
Communication of an Offer
An offer must be communicated and received as an offer. No particular form of communication is indicated.

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OFFER
Revocation of an Offer
An offer may be withdrawn at any time prior to acceptance (revocation must be communicated effectively to potential offerees).

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OFFER
An offer is not revocable if it included a promise to remain open for a prescribed period of time, and either:
The promise was placed under seal (deemed consideration); or The offeree(s) paid for a commitment that it would remain open (e.g., purchased an option).
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OFFER
Lapse of Time
An offer may be expressly limited in time; otherwise, it will lapse after a reasonable period. What is reasonable varies with the nature of the industry, the subject matter of the proposed contract, etc.

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OFFER
Rejection of the Offer Counter-Offer
The offeree responds to the offer by offering to enter into a contract on different terms.

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OFFER
Battle of the Forms
Each party claims to have contracted under its own standard terms and conditions. A legal problem arises where the agreement has already been performed. (Ref. Business Decision 7.2, p. 164)

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WHAT DO YOU THINK?

Cases and Problems No. 2, p. 172 Do we have a mutual intention to create a contract and agreement on the terms of the contract by the process of offer and acceptance?

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WHAT DO YOU THINK?

Yes:
There was a clearly communicated offer for hair removal, including terms of the offer ($500) and success guaranteed. Carlill v. Carbolic Smoke Ball Co. (Case Brief 7.1, p. 170) is precedent for the advertisement being an offer, emphasized by the statement that results are guaranteed.

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WHAT DO YOU THINK?

No:
A reasonable person would not believe that Donna s offer to remove hair and guarantee success would include persons with Peter s condition. So there was no mutual intention to create a contract under these circumstances. The general rule is that advertisements are invitations to treat, not offers. Distinguishable from Carbolic Smoke Ball, as Peter did not in fact take the treatment; i.e., there was no detrimental reliance.
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WHAT DO YOU THINK?

Cases and Problems No. 3, p. 173

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WHAT DO YOU THINK?

The bid is irrevocable. (Ref. Ron Engineering)
The request for tenders represented an offer to enter a fair tendering process, which Ronaldo accepted by submitting his bid; and The request for tenders also represented an invitation to treat, to which Ronaldo responded by offering to build the recreation centre; and The request for tenders expressly stated that all tenders are irrevocable.
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WHAT DO YOU THINK?

Class 5 Fact Scenario No. 3

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WHAT DO YOU THINK?

Blair v. Western Mutual Benefit Assn., [1972] (B.C.C.A.) The court determined that Miss Blair was not legally entitled to the retirement pay. There was no evidence that the intention of the association to pay Miss Blair was communicated to her such that it would represent an offer capable of being accepted.
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ACCEPTANCE
Acceptance by Promise
Bilateral Contract: A promise is exchanged for a promise; i.e., a promise as an offer is exchanged for a promise as acceptance. The acceptance must be unequivocal, on the prescribed terms, and in response to the offer. The acceptance may be by words or conduct. Silence cannot constitute acceptance.
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WHAT DO YOU THINK?

Class 5 Fact Scenario No. 4

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WHAT DO YOU THINK?

Livingston v. Evans, [1925] (Alta. S.C.) The court determined, with some doubt, that the defendant was bound by the plaintiff s ultimate acceptance of its original offer.

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WHAT DO YOU THINK?

Although the plaintiff s original reply (to pay $1,600 in cash) was a counter-offer and thereby a rejection of the defendant s offer, the defendant s reply, Cannot reduce the price, was not merely a rejection of the counter-offer but a renewal of the original offer, which the defendant subsequently accepted.
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ACCEPTANCE
Acceptance by Conduct Saint John Tug Boat Co. Ltd. v. Irving Refining Ltd., [1964] SCC

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ACCEPTANCE
So if A allows B to work for him under such circumstances that no reasonable man would suppose that B meant to do the work for nothing, A will be liable to pay for it. The doing of the work is the offer; the permission to do it, or the acquiescence in its being done, constitutes the acceptance.

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ACCEPTANCE
Communication of Acceptance
General Rule: Acceptance by instantaneous communication is effective when and where it is received by the party making the offer. Postal Rule: For non-instantaneous communication, acceptance is effective when and from where the party accepting the offer sends it.

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ACCEPTANCE
Under the postal rule, risk resides with the party making the offer, as the contract comes into effect without their actual notice. The party making the offer may eliminate any risk by specifying in the offer that acceptance is effective only where and when it is received.

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INSTANTANEOUS COMMUNICATION RULES

Type of Communication Transmittal of Offer Revocation of Offer Rejection of Offer Counter-offer Acceptance of Offer Effective When and where the offer is received When and where the revocation is received When and where it is received by the party making the offer When and where the counter-offer is received When and where it is received by the party making the offer
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NON-INSTANTANEOUS COMMUNICATION RULES (POSTAL RULE)

Type of Communication Transmittal of Offer Revocation of Offer Rejection of Offer Counter-offer Acceptance of Offer Effective When and where the offer is received When and where the revocation is received When and where it is received by the party making the offer When and where the counter-offer is received When and where it is sent by the party accepting the offer
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WHAT DO YOU THINK?

Business Decision 7.3, p. 169

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WHAT DO YOU THINK?

There is an enforceable contract. Under non-instantaneous communication rules, the offer was accepted on June 5 when it was mailed, and this was prior to receipt of the revocation of the offer on June 7.

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ACCEPTANCE
Acceptance by Performance
Unilateral Contract: An act is exchanged for a promise. (Ref. Case Brief 7.1, p. 170 [Carlill v. Carbolic Smoke Ball]) The act must be in response to the offer.

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WHAT DO YOU THINK?

Cases and Problems No. 6, p. 173

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WHAT DO YOU THINK?

Argument for Felicity
This was a firm offer to her which she accepted without qualification. Ahmad promised not to make a similar offer to anyone else. At no time was the offer revoked prior to her acceptance.

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WHAT DO YOU THINK?

Argument for Ahmad
The promise not to offer the property to anyone else was gratuitous and without consideration. Therefore, it was not binding or enforceable. The offer contained a requirement that she accept it as soon as possible. Arguably, she did not do so.

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WHAT DO YOU THINK?

Alternatively, offers are open only for a reasonable period of time. In view of the volatile nature of the property market, it may be argued that the offer lapsed prior to her acceptance.

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WHAT DO YOU THINK?

Cases and Problems No. 8, p. 174

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WHAT DO YOU THINK?

Under the non-instantaneous communication rules, the offer was legally accepted when Simone mailed her acceptance on October 21. This pre-dated her receipt on October 22 of his letter revoking the offer.

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WHAT DO YOU THINK?

Cases and Problems No. 9, p. 174

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WHAT DO YOU THINK?

Was there a mutual intention to create a binding agreement?
An obstacle to finding a binding agreement here is the presumption that agreements between family members are not intended to be legally enforceable.

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WHAT DO YOU THINK?

It may be interpreted as a unilateral contract, i.e., Edgar s promise that they can live in the house and obtain title to it if they pay off the mortgage.
Acceptance of a unilateral contract requires completion of the stipulated act. As the mortgage is not paid off, you can argue that Edgar is entitled to withdraw his offer to transfer title.
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WHAT DO YOU THINK?

It also may be interpreted as a bilateral contract, i.e., a promise by Edgar to transfer title in return for a promise by Tina and Hussein to pay the mortgage.
In that instance we have offer and acceptance and there is no legal basis for the revocation of the offer by Edgar.

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NEXT CLASS
Read:
Chapter 8

Class Questions:
Class 6 Fact Scenarios (uploaded to Blackboard) You Be the Judge 8.1, p. 179 Business Decision 8.1, p. 190 Business Decision 8.2, p. 191 Cases and Problems 1, 2, 3, 6, 8, 9, pp. 197-8
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CONSIDERATION AND PRIVITY OF CONTRACT

Chapter 8

TOPICS
Consideration
Sufficiency and Adequacy of Consideration Past Consideration Pre-existing Public Duty as Consideration Consideration Provided from another Contract Seal as Consideration

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TOPICS
Enforceable Promises without Consideration
Seal Estoppel Enforcing a Promise To Forgive an Existing Debt

Privity of Contract
Assignment

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CONSIDERATION
The requirement for consideration is the distinguishing feature of the common law. Consideration is the exchange of value by the parties to a contract a necessary ingredient for contract formation. Consideration must be provided by all parties to the contract.

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CONSIDERATION
Consideration arises when a party gives, or promises to give, a benefit to the other party(s) (or to someone else). Consideration may also include incurring a loss or detriment, or promising the other party(s) to incur a loss or detriment.

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CONSIDERATION
Consideration must be sufficient (almost anything of value). Consideration does not have to be adequate.
Adequate consideration is interpreted as a thing having essentially the same value as the consideration for which it was exchanged.

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WHAT DO YOU THINK?

You Be the Judge 8.1, p. 179

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WHAT DO YOU THINK?

Was Igor s promise to pay $50,000 an enforceable contractual obligation; i.e., was there sufficient consideration provided by the company to hold Igor to his promise?
The company s promise not to sue him for $60,000 was sufficient consideration.

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WHAT DO YOU THINK?

However, as indicated by Case Brief 8.1, consideration may not have been provided if the company did not believe that it had a sustainable claim against Igor.

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CONSIDERATION
Past Consideration
Consideration already provided is not consideration.

Pre-existing Public Duty

The fulfilment of a public duty cannot be consideration for a new contract.

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CONSIDERATION
Can consideration flow from an existing contractual obligation owed to another party?
Yes, it can constitute consideration for a new contract.
 E.g., on p. 182: The quartet used the same consideration (performing a concert) for two separate contracts.

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CONSIDERATION
Can consideration flow from an existing contractual obligation owed to the same party?
No, it cannot constitute consideration for a new contract between the same parties.
 Ref. Case Brief 8.3, p. 183

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CONSIDERATION
Situation Past Consideration Pre-existing Public Duty Pre-existing Contractual Obligation to a Third Party Pre-existing Contractual Obligation to the Same Party Consideration? No No Yes No

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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

Arguably, all promises may be morally enforceable, but only some are legally enforceable. Canadian law recognizes three ways for a promise to be legally enforceable:
Promise by way of contract; Promise by way of a deed; and Promise by way of estoppel.
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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

Seal
A mark on a contract confirming the party s intention to be bound, notwithstanding that the other party may not have provided consideration.
 E.g., a guarantee of another party s debt under seal provides no benefit; i.e., no consideration flows to the guarantor.

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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

No particular form is required; however, the seal must be applied at the time the party signs the document.

Estoppel
The term estoppel refers to a rule preventing a party from retracting or disputing a statement previously made.

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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

Promissory Estoppel
This legal rule prevents a party from retracting a promise that the other party has relied upon. It is an exception to the general rule that a promise is not enforceable if there has been no exchange of consideration.

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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

 Classic common law precedent in Central London Property Trust Ltd. v. High Trees House Ltd., [1947] KB, ( High Trees ); Case Brief 8.4, p. 186

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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

Promissory estoppel requires:
A promise by the promisor; Reliance by the promisee on the promise such that it would be unfair if it were retracted; No evidence of inequitable behaviour engaged in by the promisee; An existing legal relationship between the parties within which the promise was made.
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ENFORCEABLE PROMISES WITHOUT CONSIDERATION

Provided these four requirements are present, the promisor cannot retract its promise in regard to past events. The promisor can retract the promise in regard to future events, provided it would not result in an unfair hardship to the promisee.

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ENFORCING A PROMISE TO FORGIVE A DEBT

Alternative Means Provide fresh consideration Grounds for Enforcement Promise to give something new Promise to pay a lesser sum early Promise to pay the same sum by cheque instead of cash Actual receipt of a lesser sum with the intention of discharging the entire debt Provides symbolic indication of the intention to create a gratuitous obligation.

Legislation (in some jurisdictions) Seal

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ENFORCING A PROMISE TO FORGIVE A DEBT

Alternative Means Promissory Estoppel Grounds For Enforcement A representation that the right to collect the debt will not be enforced The debtor reasonably relies on the representation. There has been no inequitable behaviour by the debtor. Undertaken in the context of an existing legal relationship between the parties.

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WHAT DO YOU THINK?

Class 6 Fact Scenario No. 1

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CONSIDERATION
The Governors of Dalhousie College, [1934] SCC The court concluded that the promised donations (later retracted) did not create an enforceable contract because of a lack of consideration provided by the recipients.

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CONSIDERATION
The expenditures by the college on the basis of funds pledged during the campaign were not clearly linked or dependent on the pledge made by Arthur Boutilier.

What about promissory estoppel?

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WHAT DO YOU THINK?

Cases and Problems No. 1, p. 197

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WHAT DO YOU THINK?

Maria can enforce the promise, as Uncle Juan wrote it down and applied his seal. The fact that Maria did not provide any consideration in return is not relevant.
Love and affection do not qualify as consideration.

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WHAT DO YOU THINK?

Cases and Problems No. 2, p. 197

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WHAT DO YOU THINK?

Argument in Sebastien s Favour
No consideration was provided by the conservatory. They have neither provided nor promised anything in return for his promised donation. In fact, they have indicated that they intended to have the organ built in any event.

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WHAT DO YOU THINK?

Argument in Favour of the Conservatory
Promissory Estoppel
 He gave his promise and it would be unfair for him to go back on it.

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WHAT DO YOU THINK?

Were the required ingredients present?
 A promise by the promisor;  The promisee s reliance on the promise;  Any inequitable behaviour by the promisee;  The promise made within an existing legal relationship.

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WHAT DO YOU THINK?

Cases and Problems No. 3, p. 198

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WHAT DO YOU THINK?

Argument in Favour of Hardy Construction
No consideration was provided by Laurel Electric for receipt of the additional $20,000. They neither provided nor promised anything in return.

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WHAT DO YOU THINK?

Argument in Favour of Laurel Electric
Promissory Estoppel? Are the necessary ingredients present?
 A promise by the promisor;  The promisee s reliance on the promise;  Any inequitable behaviour by the promisee;  The promise made within an existing legal relationship.
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WHAT DO YOU THINK?

Cases and Problems No. 6, p. 198

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WHAT DO YOU THINK?

Promissory estoppel?
A promise was made; There was reliance on the promise by Roark; There was no suggestion of inequitable behaviour by Roark. Was it made in the context of an existing legal relationship?

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PRIVITY OF CONTRACT
Contractual obligations cannot be imposed on anyone who is not a party to a contract. Contractual benefits cannot be received, with exceptions, by anyone not a party to a contract. In general, with exceptions, only someone who has provided consideration can sue or be sued on a contract.
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WHAT DO YOU THINK?

Class 6 Fact Scenario No. 2

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WHAT DO YOU THINK?

Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] UKHL Dunlop cannot sustain their legal action against Selfridge & Co. Because they are not a party to the contract.
The contract in question is between Dew & Company and Selfridge & Co.

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PRIVITY OF CONTRACT
Assignment
Modification or exception to the privity of contract rule A contractual party (assignor) assigns its rights to another party (assignee). The assignee steps into the shoes of the assignor and can enforce all contractual rights against the other party (debtor).
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PRIVITY OF CONTRACT
The assignee takes the assignment subject to the equities ; i.e., the debtor can generally use the same defences and claims against the assignee arising out of the same contract that were available to it against the assignor. The contractual position of the debtor should be no worse than it was with the assignor.

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PRIVITY OF CONTRACT
The debtor can rely on any defences and counterclaims it has against the assignor in another transaction against the assignee, if the debtor s transaction with the assignor occurred prior to receiving notice from the assignee of the assignment.

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WHAT DO YOU THINK?

Business Decision 8.1, p. 190

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WHAT DO YOU THINK?

If there had been no assignment, Ahmad s liability to Stetson would have been $20,000 ($60,000 [original contract price] minus $40,000 [to rectify Stetson s use of faulty materials]). As Ahmed s claim of $40,000 for Stetson s shoddy work arose out of the same contract that was assigned, Ahmed can maintain this claim against the assignee; i.e., Ahmed owes the assignee only $20,000.
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WHAT DO YOU THINK?

Business Decision, 8.2, p. 191

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WHAT DO YOU THINK?

If the White-Citron contract had not been assigned, White could have offset his liability to Citron of $7,000 for purchase of the car with the $5,000 Citron owed to White for the purchase of paper products under a separate contract.

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WHAT DO YOU THINK?

Assuming the assignee gave notice of the assignment to White before the purchase of paper products transaction, then White cannot offset the debt owed to the assignee with the $5,000 owed to White by Citron; i.e., White owes the assignee the full $7,000.

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WHAT DO YOU THINK?

If notice of the assignment was given to White after the purchase of paper products transaction, White can offset the $7,000 owed to the assignee with the $5,000 debt owed to White by Citron; i.e., he owes the assignee only $2,000.

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WHAT DO YOU THINK?

Cases and Problems No. 8, pp. 198-9

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WHAT DO YOU THINK?

Everlast cannot claim $1,000 from AJ s. There is no privity of contract between Everlast and AJ s. (Ref. Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd.) Could Automotive Wholesaler claim the $1,000 from Everlast for breach of contract?

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WHAT DO YOU THINK?

Cases and Problems No. 9, p. 199

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WHAT DO YOU THINK?

There is no privity of contract between Bruno and Claire, so Claire has no right to sue Bruno. Ann s problem is that, although there is privity of contract between her and Bruno, she has not sustained any loss and may be limited to only nominal damages.

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PRIVITY OF CONTRACT
Statutory Assignments
Assignments that conform to a statutory requirement.

Requirements for a Statutory Assignment

It must be in writing. Written notice of the assignment must be given to the debtor.

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PRIVITY OF CONTRACT
The assignment must be absolute at the time of its creation.
 It cannot be conditional or incomplete.

Assignments by Operation of Law

Prime examples:
 The transfer of a bankrupt s assets to a trustee in bankruptcy;  The transfer of the administration of a deceased s estate to a personal representative.
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PRIVITY OF CONTRACT
Vicarious Performance
A party may perform duties on behalf of another party. That is not a form of assignment, as the legal liability for the performance of the duties remains with the other party.
 E.g., employees, subcontracting

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PRIVITY OF CONTRACT
Trusts
Refers to the administration of property by one party (trustee) on behalf of another party (beneficiary). Exception to the privity of contract requirement

Statute
A number of statutory trusts have been created to permit beneficiaries to enforce contractual obligations (e.g., insurance policies).
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PRIVITY OF CONTRACT
Employment
Ref. Case Brief 8.6, p. 195 The Supreme Court of Canada established bases for employees coverage by a limitation clause in a contract between the employer and a third party.
 Employees were expressly or implicitly included within the provision; and  Employees were performing work required by the contract.
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PRIVITY OF CONTRACT
Himalaya Clause
A contractual provision protecting a thirdparty beneficiary from liability It arose out of provisions included in maritime shipping agreements that extended the limitation-of-liability provisions to stevedores and others who handled the goods.

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NEXT CLASS
Read:
Chapter 9

Class Questions:
Class 7 Fact Scenarios (uploaded to Blackboard) Business Decision 9.1, p. 204 Ethical Perspective 9.1, p. 206

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