Contracts Summary

Ex:
Price 800
Market Value 1500
Rental van 90
Deposit 200

Restitution: amount you’ve already paid: 200 (to prevent the unjust enrichment of the
store)
Reliance: money you’ve spend in reliance on the deal: 290
Expectancy: 990 (to put you in as good a position as you would have been in had the
contract been performed)
I pay 290… they say for me to fuck off…
I was gonna pay 890 for a 1500 value: I would have made 610.
Now I need that 610, but they’ve already taken 290… so they gotta give me 900… but if
I want to buy the thing again, I gotta pay ANOTHER 90 to re-rent the rental can… thus
they owe me 990

(Net Profits) + (out of pocket expenses)

= (Gross revenue profits) - (avoided costs)
One way of calculating plaintiff’s losses: Net profits + out of pocket expenses.
Or Gross revenues – Avoided expenses (cuz they didn’t have to pay some of the costs of
going through with the project)
We’d have to say, on an exam (hint hint): “there are two ways of calculating
expectancy”.

DAMAGES: EXPECTANCY, RESTITUTION, RELIANCE

Wertheim v. Chicoutimi Pulp Company

Rule: Expectancy: this is the Expectancy case
- forward looking (‘the performance interest’)…so it’s expectancy interest (p. 27)

Lease Contracts
Laskin says: just cuz its land doesn’t make it special: recover as landlord the ‘loss of
bargain’ (net profits you would have had if the tenant had continued with the lease)

Bollenback v. Continental Casualty Company, 1965

Reliance: asks for restitution cuz its more than expectancy in this case.
Rule: Can REQUEST restitution if it is greater than expectancy (and more appropriate).
May or may not be granted.
Plaintiff can recover restitution minus benefit received (coverage for some time).
- 1st issue: he’s asking for all the premiums he’s paid  restitution (more than
expectancy measure which was $107.33 (the claim for his hospitalization in
question))
- but expectancy is the general rule … applied always in breach of contract
Anglia Television Ltd. v. Reed
Rule: Suggests that you CAN recover pre-contractual and post-contractual expenditures.
Rule: If you cant prove you would have made money with the contract, you will at least
get reliance expenditures.
Note: If plaintiff can’t prove there would have been loss of profits, the burden then shifts
to the defendant to show that no profits wouldn’t have been made.

Bowlay Logging Ltd. v. Domtar Ltd (1978).

Entered a losing contract…was losing money. Then was canned ½ way. Claims reliance
damages… They get nothing. Bad bargain is the plaintiff’s problem.

Boomer v. Muir p. 32
Guy undercharges for a contract; gets fires and sues for damages.
His expectancy is nil, since he was losing money on the contract, but he claimed that
because of his own stupidity, he had unjustly enriched the person who he had been
building for, and wants restitution. He gets the damages for the VALUE of what he did,
which was more than he was entitled to and more he was charging.
NOT COMMON

What if in Bowlay you could show that losses were made worse by the breach?
- if they lost 100 000, but bc of the breach they lost 200 000…
can they recover in this case? Yes, bc you can be put in same position you were in
originally (100 000 down only, not 200 000). So you can get the difference.

Pitcher v. Shoebottom, p35

Rule: value of contract when it was breached is value you can recover.
Date of breach; that’s when you assess the value of the land for the purposes of damage
calculation.
Land has since appreciated… but judge says he gets back the money he paid plus the
value of the land when the deal was set to close.
But since he never got the land, he didn’t get a survey, so you don’t need compensation
for it.
(Net Profits) + (out of pocket expenses)
= (Gross revenue profits) - (avoided costs)

Hawkins v. McGee
Screwed up hand; doctor said he’ll fix it; botches the operation.
What would a fixed hand have been worth?; That puts you in as good a position that you
would have been in had the contract been performed.
Tort applicable… tort is closer to reliance than expectancy.

Groves v. Wunder
Rule: Expectancy: 2 types: diminution of value or cost of performance? Cost of
performance here…
Specific Performance: Doesn’t want value of the completed contract; wants the value of
performing the services contracted.
Here, he asks for land to be in position in condition it would have been in if you fulfilled
contract  forward looking (expectancy)
Diminution of Value- If sold property- put in position before if contract was not
breached, in this case land is virtually worthless without grading.

Opposite of Groves & Wunder:

Peeveyhouse (in Notes after Groves)
- comes to opposite conclusion of Groves.
- Not really persuaded here whereas in gravel case you really want to get it leveled.
Ugly fountain you’ll get cost of performance, may be leeway for eccentric tastes.

Carson v. Willits, p39

FACTS: contract to bore 3 oil wells. Defendant bored one well and then breached
contract.
Held - Plaintiff lost a gambling chance that valuable oil would be found - difficulty in
assessing quantity is no reason to refuse damages.
Reasons - Plaintiff may have lost something of great value or nothing.
-A distinction must be made b/w cases where (1) absence of evidence makes it
impossible to assess damages and cases where (2)the assessment is difficult b/c of the
damages proved. In (1) only nominal damages can be recovered. In (2) the difficulty of
assessment is no ground for refusing substantial damages

Generally speaking:
What did majority in Groves think the right argument was?
cost of performance: if we don’t allow this cost of performance in cases of this kind
(building an ugly poor or fountain even if it reduces value of land), eccentric taste can
never be enforced.
Diminution of value… economic waste, etc…

Tito v. Waddell
- indigenous people and phosphate company; island is ravaged; company supposed
to replant trees but all the people have left.
- Cost of specific performance is stupid here.

Cost of performance::
- willful
- true expectancy
- eccentric taste
- economic waste
- cost of per is overcompensation
- cost of performance can be unjust enrichment if it the action is not actually
undertaken.
Cheap antique car needs fixing case: cost-of-performance; sentimental value.
Sale of Goods Act.

Car Dealers: Expectancy: Thompson v. Robinson

Lets say price is fixed, and the Dealer has excess supply of cars. If you cost the dealer a
sale, you owe him the value of the profit he would have made on that car (IE the markup)
If he cant get enough cars; IE if he has more demand from car buyers than he can
accommodate, then returning the car costs him nothing cuz he can sell it again right
away, and has lost nothing.

LOSS OF CHANCE

Chaplin v Hicks (‘the beauty contest case’ important):

Woman loses out on a acting contract cuz she was denied the fair opportunity to compete
in the contest. She sues for the value of the acting contract… she cant prove that she
would have won… but surely she’s entitled to something. They don’t do the math, but
they give her something substantial (200 versus 900). Because, if she could have SOLD
HER CHANCES, someone would have paid for it.

PAGE 49 LOSS OF CHANCE

Amount of profit x probability of making profit = value of chance.
Rules
1) Must be substantial.
2) Must be a ‘real’ chance, not a 1-in-a-million lottery ticket. Must be beyond
speculation.
3) Must depend on outcome…
Lets say that McCamus is a stupid developer who usually loses money… should this
negate the damages? Lets say he usually loses money. Does that change/ anything’? You
could place a value on the opportunity.
4) plaintiff must show that the loss must have some value. (similar to 1)
Loss of chance must be shown on a balance of probabilities.

Multi-Malls v. Tex-Mall Properties

Same thing… if contract had been performed, there was a 1/5 chance they would have
been able to build the mall; so get 1/5 of the mall’s expected profit; Use Chaplain v.
Hicks.

McRae
Vessel Salvaging in Australia; commonwealth commission could authorize people to
search for sunk ships. McRae wants a specific location; goes to the jourmand(sp) reef.
McRae hires a crew and buys a boat. He goes there and there’s no boat. Australian High
Court is pissed; they say if you issue a license you are promising him a sunk boat! He
asks for his reliance losses; how can he know what the nonexistent boat have been worth;
cant prove that there would have been a profit. It MIGHT have been worth something,
but we don’t know. Cant get expectancy unless you can PROVE that you lost money. In
the McRae case, the Aussie High Court says that in this type of situation, is the defendant
who must PROVE that the plaintiff would have lost money. When it’s the defendant who
has caused the difficulty in proving loss. The defendant has created the situation that we
don’t know if there would have been a loss. Otherwise, we assume its break-even and
simply grant reliance. Usually, the plaintiff has the burden of proving that they would
have made money had the contract been fulfilled.
If you subscribe to Bowlay Logging, which most Canadian and US courts do,
EXPECTANCY TRUMPS/GOVERNS RELIANCE.
In causation terms. You must absorb the losses incurred from your poor estimation.

REMOTENESS & FORESEEABILITY

Hadley v. Baxendale
(a question of remoteness rather than causation)
Plaintiff took a broken millshaft to defendant, a carrier, and asked that it be sent to the
manufacturer ASAP. Defendant’s clerk guaranteed a time. By some mishap the millshaft
was late and the plant, which had stopped operation, was closed longer than necessary.
Plaintiff sues for loss of profit. Defendant argues damages too remote. Some question of
whether the fact that the plant was closed until return of the millshaft was communicated
so decision is based on no communication of special circumstance.
-Issue: Can a defendant be held liable for losses that were not apparent at the time the
contract was entered into?
-Held: A defendant cannot be held liable where the losses are the result of special
circumstances and those circumstances aren’t communicated at the time the contract is
entered into.
The remoteness/reasonable foreseeability test (2 points):
-Damages which result from a breach are those that may be reasonably and fairly
considered to have arisen naturally from the breach OR those that may reasonably be
supposed too have been in the contemplation of both parties at the time the contract was
made
-If special circumstances and they are communicated, damages are those that with
naturally from a breach under a contract with such special circumstances
-by requiring notification of special circumstances it allows the other party to
accommodate the other risk through higher price, insurance, contracting out of liability,
choosing not to take the contract
Hadley & Baxendale Demonstrates that expectancy rule isn’t applied beyond reason or
limitlessly.

Victoria Laundry v. Newman Industries:

Laundry company had some specially lucrative contracts which they were gonna enter
into: needed a new boiler. Boiler was broken when delivered. Sued for the lost profits
which were higher than the normal lost profits:
Held: can only recover regular profits; not reasonably foreseeable for the deliverymen to
have known about special lucrative contracts.
-reasonably foreseeable:
-knowledge has to be communicated
The amount of damages that can be claimed by the plaintiff is what is
REASONABLY FORESEEABLE for the person who the contract was with.
Anything that was liable (not necessarily ‘absolutely likely’, ‘probably’, etc…) to
occur is claimable as damages. Watered it down… But by this time there were more
corporations.

Horne v. Midland Railway Company p55

Shoes – delivery arrives late. Special circumstances weren’t contracted for. Can’t recover
exceptional damages. (sometimes it happens, but not actually).
You’d need to have had a 2nd contract that states what damages would be. Otherwise, you
cant sue for special damages. You’d have to say in the second contract “if the contract is
breached, you must pay X in damages”.

Example-- Cows: cattle food is poisoned. Farmer eats cow’s food and dies. How much do
you get? Value of a cow….but no cow died. The unforeseeable loss shouldn’t be
compensable.
Can you recover for ordinary losses (ie, the loss of the cow)? If you say you can only
receive for foreseeable loss, then there’s no recovery because ordinary loss didn’t occur.
Other alternative is that they aren’t liable at all. Responsible for UP TO foreseeable loss.

Munroe Equipment v. Canadian Forest Products

-You have to foresee the nature (type) of the loss (but not the extent of the loss).
-They foresaw type of loss here, but not the extent.
-Miller, to deprive claim for lucrative losses: says the extent of the work done by the
tractor wasn’t anticipated  didn’t tell them enough. If there are special circumstances,
they should be communicated (like Victoria Laundry)

Scyrup v. Economy Tractor Parts Ltd.

Rented defective tractor:
-Issue: Was loss of profit something that naturally flowed from the breach? If not, was it
a result of special circumstances and were those special circumstances adequately
communicated such that the loss was Reasonably foreseeable?
-Victoria says knowledge can be imputed and it would seem here that loss of profit from
breach here is Reasonably foreseeable.
At any rate, even if special circumstances, they were communicated.
-Second contract theory doesn’t apply in Canada today.

Cornwall Gravel Co. Ltd v Purolator Courier Ltd: p 75, 1978

Guy contracts Purolator to deliver a notice of contract/tender which would have gained
him a 700K contract with 70K profit (didn’t mention the price to Purolator though). Says
he NEEDS it in by 3. It doesn’t get there.
Purolator must pay; getting things to places is what they’re in the goddamn business of
doing.
- If you were advising the plaintiff, you’d ask the client to sign 2 contracts…

Taxi Driver; doesn’t matter if he knows how outrageous your circumstances are: a 10-
dollar fare cannot justify a 10-million dollar damage claim.
Koufos c. C. Czarniko
Hired to transport sugar; it arrives late; price of sugar has gone down and is sold for less.
Can plaintiff recover profit? YES; price can go up or down, 50/50; that’s reasonably
foreseeable.
3 reasonable foreseeability tests:
-Very likely/probable (Hadley v. Baxendale – great multitude of cases, etc)
-Possible to foresee – easily; not unlikely to occur but not probable in the mathematical
sense (Victoria Laundry)
-Remote but still foreseeable (tort law). Reid says difference between tort law and
contract law.

RESTITUTION
p151 – A separate theory of liability under the concept of law. QUASI-
CONTRACTUAL
Restitution deals with unjust enrichment: a person who has been unjustly enriched at the
expense of another is required to make restitution to the other.
Includes benefits conferred by (1) Mistake, (2) under duress of forms of coercion, (3)
under ineffective transactions, (4) to preserve the life, health, or property of another, or
(5) to discharge a duty to another.

Deglman v Guaranty Trust Co.

Nephew said that while he lived with, and cared for, his aunt, she had promised him the
house they lived in. Upon her death, the court rejected his claim because there was no
written document as required under the Statute of Frauds for contracts concerning land
(IE NO CONTRACT). The court stated that to succeed in a case of this nature, the acts
relied upon as part performance must be "as could be done with no other view or design
than to perform that agreement."
- The law requires that such promises be in writing – wasn’t in writing, so law of
contracts falls off table – no damages for breach of contract
- But it seems unfair that people who will inherit the estate will get the increased
value
The estate is increased by value of services rendered – people from the estate are getting
richer or have to pay less for upkeep.
Rule: He is entitled to the value of his contributions.

Hunt v Silk
Guy moves in to house; its supposed to be repaired, but isn’t. Owner wont repair. Guy
wants money back; judge says no; you already moved in.
RULE: You can only recover if there has been a TOTAL FAILURE OF
CONSIDERATION.
RULE: You can only recover if you do not use the good/service which has been
conferred. You received something already, so you can’t get your damages.
*NOTE: this is stupid, they should just deduct for benefits already conferred. But they
don’t.

When do you get restitution?

 - when there’s contract that unenforceable, you can bring restitution claim
- alternative theory of liability

Attorney General v. Blake p159

No expectancy: There is no transfer of anything (any money or anything of value) from
the plaintiff to the defendant. Blake sold out his other secret service agents, and the
Russkies killed them all. He was sent to jail and escaped. Now lives in Russia and writes
his memoirs and makes tons of cash. No expectancy.
If Blake had NOT written a book, the crown would get $0. Thus, expectancy is $0. They
want him to disgorge profits.
PROs: On the plus side, profit-recovery (the rule that you should not benefit from a
breach of contract) provides an incentive to perform (EG build an ugly fountain with no
economic value)
CONS: Problem with disgorgement is that it is a disincentive to undertaking ‘efficient
breaches’. Punitive in nature. Can overcompensate plaintiff.
Rule: no rule; disgorgement is an exception… maybe public interest can justify it? No
rule in Canada.

CONSIDERATION
(1)An act or forebearance or the promise thereof (2)given in exchange (3)for the act
requested/agreed upon
- Pollock’s definition – promise is binding
- Thomas v. Thomas: promise to make a gift is unenforceable
- Promise to make a gift gratuitously – not enforceable
-A contract is an easy consideration case; of course its enforceable; the bargain theory;
there is an exchange. I promise to PAY MONEY and you promise to BRING ME SOME
GOODS. Given in return for a promise to pay money; that confers VALUE upon the
other person.
-Is it enforceable if I say “I’ll pay the Red Cross for every X you give me”. I’m still
suffering (IE I have to give money to someone/do something), thus there is consideration.
Called the peppercorn theory; Can I agree to buy a peppercorn for 10,000 dollars? Yep.
- I promise to pay you $50 for the rest of your life but stops
- Consideration? No, bc orthodox consideration says according to Thomas v.
Thomas, motive is not good consideration. We need to find an exchange or
bargain around that promise.

White v. Bluett:
Son promises not to complain if dad gives money...
Is forebearing from complaining good consideration?
No: the promise was not his to give; he had no right to complain in the first place!

Hamer v. Sidway
Uncle says: don’t drink, smoke, or carouse, and you’ll get 5000. Uncle dies and nephew
wants his money from the estate; is the fact that he forebeared from drinking, smoking
and fucking good consideration? Yes.
Thomas v Thomas
Wife gets to keep house for super cheap; even the homeowners tax would be more. But
she has to pay a pittance to the executor of her dead husband’s estate to keep it. Is it good
consideration? YES (although it shouldn’t be cuz its basically a gift).

Is motive good consideration? NO!

If I save someone’s life and become a quadriplegic and the guy saved says he’s gonna
give me $50 per week for the rest of my life… and then -at some point stops- is that good
consideration? Can he enforce it? NO! Motive/good intention of making the promise IS
NOT CONSIDERATION.

Barter is not enforceable… if you’re gonna trade a cup of coffee for a pen, THERE IS
NO PROMISE
Bilateral (a promise for a promise) v. Unilateral (exchanging act for a promise)
Way to recognize unilateral contract: if you do X, I promise Y

Great Northern Railway Company v. Witham, p262

-unilateral contract: if you place orders then we’ll pay you for it
-we promise that if you deliver goods, we’ll pay the price.
-Once an order is placed, a contract is formed. Making an order (and thus agreeing to
pay) is good consideration, and then the other guy must deliver.

Tobias v. Dick and T. Eaton Co., p265, 1937

Dick received no consideration… no obligation to do anything… has not limited his
freedom in ANY WAY. Sure he placed some orders, but he was not BOUND to. Those
ORDERS made binding contracts, but the umbrella contract set out in the ‘agreement’
looks like a contract but is in fact, not a commitment, no restraint on his freedom and it is
thus not binding.

Wood v. Lady Duff-Gordon (1917, N.Y.), p266 (Instinct with an obligation)

-Defendant granted plaintiff exclusive right to use her endorsement on clothing in
exchange for half of all profits. Defendant broke her promise, giving her endorsement to
others. Plaintiff sues for breach. She says “there was no formal CONTRACT, because the
plaintiff does not bind himself to anything (IE he doesn’t HAVE to sell her clothes if he
doesn’t want to. Yes… if he DECIDES to sell ‘lady duff-gordon’ clothes, then he can
give her some money from the profits…but he’s under no obligation.
“Instinct with an obligation”. Without an implied promise this would have nasty
implications on the business world.

PRE-EXISTING DUTY
Already had an existing contractual obligation!
A promise to perform pre-existing duty IS NOT GOOD CONSIDERATION; no new
constraints/restraints on your freedom.
Does this person already have legal obligation to perform the duty anyways?
Consideration rule: they’re already OBLIGED to do what said they’re were gonna do
(now for more money), no consideration.

Stilk v Myrick
RULE: Consideration is required for contractual variations.
Some crew deserted, so the rest refused to work. Captain promised them more money to
keep working. On safe return of the ship captain refused to pay the extra money. The
HoL upheld this on the basis that the men were contractually bound to work the ship
home, and there was, therefore, no consideration for the promise of more money.

NO pre-existing duty:
There is a riot: We ask for 60 cops. Cops send 30; we ask for more; they say; we can send
more, but you gotta pay for the extra 30… THAT’S fair; they didn’t need to send as
many cops as YOU think you need.

England v Davidson (1840) – reward for info leading to arrest. A cop gives this info. He
refuses to pay cuz the cop was obligated to give him that info anyways; says there is no
consideration cuz cop had pre-existing duty. NO; there were SOME services which the
cop was not bound to render which he did anyhow for the money. (Bad public policy
though)
Still, for the guy: a good argument and fair to say “he was just doing his duty, folks…and
further, its bad public policy to let cops collect rewards, cuz it would distort the priorities
of the police force”.

Reif v. Page: Fireman saved a guys wife for a reward. He was held to be able to claim it
cuz he had not been legally bound to risk his life to save her. They often DO, but they’re
not OBLIGED to.

Basically, if the act is OVER AND ABOVE the usual call of duty of someone who’s
job it is to perform that type of act, you then there is consideration.

Raggow v Scougall and Co. 1915 p272

Wartime; guy accepts lower wages. Then he wants full wages and claims full wages for
whole time. Says there was a prep-existing duty to pay him that. No! They tore up the old
contract and he then voluntarily agreed to accept less and signed a new contract.
Rule: Mutual agreement to ABANDON the 1st contract is a promise of forbearance (IE I
will not enforce the 1st agreement if you promise not to enforce the 1st promise and is
consideration)

Gilbert Steel Ltd. v. University Construction Ltd. (p. 273)

“Same Old Steel…”
Gilbert Steel: More money for the same old steel.
Basically, Contract to sell steel… seller keeps jacking up the price.
-supplying steel for building projects, agreed on prices, prices went up twice; 1st written
agreement no problem, 2nd agreement for increased prices never signed; Plaintiff
thought they had agreement, sent invoices, Defendant paid portions, Plaintiff sues to
collect balance.
-at trial: no new consideration, no new contract
-Was the oral promise to pay more for the steel binding?
-Held:
-1.No implied rescission/renegotiation of contract (not enough facts, would rescind other
rights too)
-2.Promise for further deals not good consideration (no evidence, illusory promise)
-3.Increased credit not good consideration (circular argument, credit is the flip side of
debt)
-4.Defendant did not accept prices by rejecting invoices (estoppel doesn’t work as a
sword, only a defence; didn’t agree to higher price by seeing the invoice; no detrimental
reliance because didn’t change course of conduct)
There was no consideration given for the price-raise; no act or forebearance on the part of

Pre-existing duty is a solution to the coercion rule; but it captures too much… it
DOES help in situations with coercion, but it also makes all changed (but not
officially renegotiated) contracts useless/unenforceable for want of consideration…
see Pao On.

Williams v. Roffey Bros. & Nicholls (Contractors) Ltd. (p. 276)

Developer is building a building for real estate investors…
Developer contracts work to a builder. Builder is slow. Developer offers builder more to
build faster (if not done on time, Developer will face the wrath of the investors).
Developer then refuses to pay extra that was promised; says there was no consideration,
and builder had a pre-existing duty.
BUT; he was obviating a disbenefit! There was no coercion, and he offered the extra
bling to make sure the investors didn’t flay him. So because he was getting off the hook
elsewhere, it IS enforceable and he has to pay what he promised.
-Not binding in Ontario

Pao On v. Lau Yiu LongPrivy Council (p. 198)

Pre-existing duty to a third party: did you already have a pre-existing duty to someone
ELSE to do what you’re doing?
If A & B have a contract, B has a contract with C & C performs something for A it is OK
to perform that action as consideration for the contract with C. After Pao On, PROMISE
TO 3rd PARTY IS CONSIDERATION, unless under duress.

Past consideration can be good consideration if:

(1)The act must have been done at the promisor’s request
(2)The parties must have understood that the act was to be remunerated by a payment or
the conferment of some other benefit (not a gift)
(3)Payment, or the conferment of a benefit, must have been legally enforceable had it
been promised in advance
So, in Stilk v. Myrick, if the captain had OFFERED to pay the remaining crew more and
they had not placed him under any duress to do so, performing their pre-existing duty
would have been OK; it would have been GOOD CONSIDERATION.
In situations where “benefits derived by each party to a contract of variation even
though one party did not suffer a detriment”, consideration can be found

1) past consideration, Lord Scarman applies Lampleigh v. Braithwait and notes that
for past consideration is good consideration if 1) there is an express request; 2) there
is expectation of some kind of compensation and 3) and #2), if explicit must be
legally enforceable (i.e. can not be an illegal request).

Pre-Existing Duty to third parrty

-John, a wealthy US businessman, offers a prize of $10,000 to any footballer who scores
3 goals in any match in the competition. In the 2003 Super Challenger final game,
Ronaldo scored 3 goals. However, John now refuses to pay the prize to Ronaldo saying
that he was already being paid for playing and was, therefore, not entitle to any extra
money because he had a pre existing duty to play.
-Toward John, except "unilateral" contract, as he have make extra condition 'footballer
who scores 3 goals in any match in the competition' not just winning the game. The issue
here appears to involve whether a promise is supported by consideration if the promissee
(Ronaldo) has a pre-existing duty to perform to a third party.
Thus, applying your facts to this analysis, while Ronaldo had a pre-existing duty to
perform and was compensated for his performance, John is still obligated to pay Ronaldo
the $10,000.

For example, if A, a racecar driver, enters into a bilateral contract with B, the owner of a
racecar, to ride in a race for $1,000 and the contract is modified by the parties to provide
for compensation of $1,500, under the majority view, the promise to pay more is not
supported by consideration because A will only be doing what A is legally obligated to
do. But if C, an outsider, who does not have right to performance under the contract, but
owns the garage that B’s car uses and would receive a prize if B's car wins, promises to
pay a bonus of $500 to A if A rides, there are conflicting views as to whether Cs promise
is supported by consideration. Most say yes.

Foakes v. Beer:
Guy owes money to lady. He cannot pay it all and she says that he can discharge his debt
by just paying whatever he has. She then sues for the remainder; can she collect? YES.
Its like saying: “You owe me $500… but you cant pay… just give me $400 right now,
and we’ll call it even”. Is that good consideration? NO WAY! Its like agreeing to LESS
than a pre-existing duty. This is a pre-existing duty problem, cuz you’re agreeing to pay
less then you owe…
-What about doctrine of accord and satisfaction? An accord is an agreement and
satisfaction is doing what you were asked to do – satisfying the obligation
F says he should be let off the hook – he performed the agreement! There was an
agreement that if I paid certain money I’d be discharged. Nope.
Canada: Mercantile Act:
The Mercantile Law Amendment Act has overturned this. Now the rule is: Past
performance of an obligation either before or after a breach thereof when expressly
accepted by the creditor or rendered in pursuance of an agreement for that purpose,
though without any new consideration, shall be held to extinguish the obligation.
-If you agree to accept less than the principle in return (and there is no duress), but lay
out a schedule of payments (to less agree amount), and this schedule is followed, the debt
is considered discharged (arguably changing the stuff around makes a new agreement for
which following the new rules will be consideration).
-whatever the new payback scheme is, you must follow it; this allows part-performance
to be accepted as the fulfilling of a contract
-If creditor says: “Its ok, you just don’t have to pay me back at all” is that OK? NO; no
consideration.
Does this statute solve the stupid Gilbert Steel rule?....no because Gilbert Steel is not
a case of partial performance being accepted…does NOT apply to Gilbert Steel

Doctrine of Accord and Satisfaction:

Accord(agreement) and Satisfaction(satisfying the obligation)
Accord and Satisfaction – a method of discharging a claim where parties agree to give
and accept something in settlement of the claim and perform the agreement (*the accord
is the agreement, the satisfaction is performance of the agreement)
An agreement to settle a contract dispute by accepting less than what's due. This
procedure is often used by creditors who want to cut their losses by collecting as much
money as they can from debtors who cannot pay the full amount

COMPROMISES

The Zellers Case (Consideration)

Shoplifter – caught on his way out. The store recovers its stuff: damages = $0.
Security calls kids parent and threatens civil suit (which has no merit because store
recovered its goods), unless parent pays money (more than the value of the good that the
kid didn’t even steal).
No consideration, cuz their promise to forebear from launching a lawsuit if she paid was
worthless, since they had no action!
(Note: moreover, the lady is not even LIABLE for her son’s actions unless she failed to
take reasonable care for her son!)
Court says you can’t do this.
You don’t have to expect to win, but you must have a good faith claim.

Fairgrief v. Ellis, p288 (1935)

Man lives on an island; his wife is away. He hires these 2 ladies (plaintiffs) to keep his
house clean until he dies and then they will get to keep it. They come, but then the man’s
wife comes and wants them out. Man feels bad and makes a compromise cuz he feels that
he has a moral obligation:
He says he’ll pay them $1000 instead if they leave by a certain day. They do that. But he
doesn’t pay.
Can they recover? Yes. Some say it “can’t be recovered cuz its an ‘interest in land’”.
Second contract binding, not first.
Still, moral obligation  not good consideration, as stated in Thomas v. Thomas.
Could this be a restitution case? They could ask for the value of their work minus the
benefits conferred by being allowed to live there? Yes; see Deglman.

Dalhousie College v. Boutilier

Promise to make a charitable donations: are they contractually binding? No; they’re gifts;
no consideration was given for them.
What if university was going to use your money to buy specific books/do something
special? Maybe if they communicated that and it was part of the agreement…
But in general, charity = charity, NOT contract.
In this case, Dalhousie didn’t even do anything with the money they were supposed to get
(IE no detrimental reliance).
The bargain theory – promises which are gratuitous are not enforceable

Anheuser Busch School

Once you pay your donation and they build it, putting their name on it is enforceable.

Brampton General Hospital

Lady plans to donates money; hospital names wing after her. Then she dies; hospital
wants to collect. They say they even named a wing after her. Well, yes, but she never
ASKED them to; she never said “name it after me or I wont donate”.

INTENTION:

Social and Domestic Cases

presumption that in a family arrangements, contracts are not enforceable

Balfour v. Balfour
-Husband promised to pay wife allowance; he does for a while then stops; she tried to
recover.
RULE: presumption that in a family arrangements, contracts are not enforceable, even if
you have a written contract
-Court thinks families don’t intend to enter into a binding legal arrangement
-Does not apply to feuding/divorcing couples.

Family Law Act: Statute overrules Balfour.

Domestic contracts and agreements to modify or rescind them are not enforceable unless
written, signed and witnessed.

Simpkins v. Pays – 1955, p297

3 people living together entered competitions and would split pot if one of them won.
This is how it always had been. One won, wanted to keep all the dough. No way; not fair.
It was an arrangement that was “contemplated to have legal consequences”.
Merritt and Merritt
Separated couple; guy has a contract to give his wife stipend and she has to pay off
mortgage with stipend and her own money, then she gets the house. Then he won’t give
her the house.
Despite Balfour, contract is binding because couple was not living in amity.

Jones v. Padavatton
Complicated move/pay/leave job arrangement.
-Family arrangements not meant to be binding
-Counter argument – detrimental reliance (quit a good job and relocated)
-Line of arguments were Balfour in this case – expectation that it was binding
-Majority – not binding; dissent – binding
-Rule – must be an intention to create legal relations (difficult to prove in family and
other informal settings)

Jones v. Vernon’s Pools, Ltd

Is someone who buys a lottery ticket from OLGC entering into a contract with them?
Yes. It’s a publicly regulated company, it better be accountable.

Commercial Cases
In commercial settings, the presumptions get flipped around relative to the family
presumptions.

Rose and Frank

Contract says: not intended to be legally binding. Some debate at court; trial judge says
its binding.
But appeal court finally said that the companies have a right to make it not binding, if
they want.

Intention
Intention is not the same as consideration
Lets say a developer builds a building such that a restauranteur can have a restaurant on
the top floor. They record their understanding in writing. Binding contract or not?
Did they intend it to be a binding contractual contract?
Commitment or comfort letters – not really intended to be binding commitments

Enforcing Promises Under Seal

1st recognition rule: doctrine of consideration
2nd recognition rule: the seal

Lets say you hire/incorporate an agent to enter into transaction with a third party seller…
You don’t want any liability, that’s why you make a corporate agent to act on your
behalf. The agent acts on your behalf; does not disclose on whose behalf it acting.
Agent goes bankrupt, the third-party will want to get recovery from the undisclosed party
(YOU)… they might or might not be able to recover.
But, IF THE CONTRACT was UNDER SEAL between the agent and the third-party, the
contract is strictly between the two. Protects third party.
You can enforce a promise made under seal, even a gratuitous (no consideration) one for
20 years

Freedman Equity Developments:

There must be an intention to create a formal sealed instrument
The words ‘signed, sealed and delivered’ do not establish the intention to create a seal
The real test is if the company intended it to be a sealed instrument when they added the
seal/

Royal Bank v. Kiska

-Guy eats seal. Signs it a second time, they forgot to put the seal on it – binding? Not
sealed and not binding! It will be a sealed instrument if the corporation intended that it be
a sealed instrument – a subjective test, though.

Linten: objective – you signed it and bank manager added seal – it’s sealed.
Freedman Equity Developments: No; its subjective; did they INTEND it to be a seal?
Says SCC.

Seal/Formality Functions:
Evidentiary Function: Way of creating a record useful when you try to enforce it. Gives
you clear evidence of the undertaking.
Cautionary Function: Signals that it is a legal significance
Channeling Function: Makes firm offers binding: If formalized, it becomes binding.
Lawyers use the seal for this. They rely on seals to make the transaction enforceable,
which I think is stupid.

Important:
Undertakings under seal are enforceable even with no consideration.
Seals can make firm offers binding
A seal would have resolved Gilbert Steel.
2 conflicting tests; objective and subjective. In Canada, we use subjective.

PAST CONSIDERATION (AKA no consideration)

Thomas and Thomas: Moral consideration is no consideration.

Lampleigh v. Braithwait
If I need something of value that I would expect to have to paid for, and I say to you
“hey, can you get that for me?” and you do so, I have IMPLIED that I will pay. Thus, I
cannot then say “I’m not gonna pay; there was no consideration”.
Implied promises to pay are good consideration.
If the past consideration (IE the act or forebearance/procurement of good or services) was
given at the request of the person (whose promise we wish now to enforce), now
promising to pay for it is there good consideration – initial request is coupled with
subsequent promise to pay, the subsequent promise is binding.
-Otherwise, UNJUST ENRICHMENT

Roscorla v Thomas 1842

Facts: Thomas sold a horse to Roscorla and, after the sale, guaranteed that the horse was
"sound and free from vice". The horse turned out to be "vicious, restive, ungovernable
and ferocious".
It was held that Roscorla could not recover damages from Thomas, because the warranty
given did not form part of the contract, having been given after the sale was completed.
There was no consideration for the guarantee; the consideration (the price paid for the
horse) was past.
Issue/Point of Law: Past consideration is no consideration.

Kennedy v. Braun
If there exists an initial obligation to pay something, the subsequent promise to pay a
specified amount that fills in the blank for that initial implied obligation.

Rule from Pao On

- a) act must be done at promisor’s request
- b) it must be understood that conferment of payment exists
- c) if subsequent payment to pay, there’s an in L v. B.
-  initial obligation of some kind made more explicit in a subsequent promise –
makes concrete the initial obligation (restitution)
- Or positive bargain – there is a legitimate bargain and the subsequent promise
becomes binding
- Scarman: likes positive bargain theory: L v. B: subsequent promise is binding, not
just evidence for jury of what the service was worth, bc initial request couples
itself with promise and you’ve got a bargain – past consideration rule. Subsequent
promise given for good consideration is now binding.

2 explanations for getting 2nd promise

- 1. asking someone to provide services, you have obligation to pay – enforced in
restitution claim
- 2. promise to pay: problem: bc of past consideration happened a while ago. Subsequent
promise to pay

Webb v. McGowin (Alabama SC)

Man is crippled saving someone who THEN says “I’ll support you for the rest of your
life”. The he doesn’t. Can he recover? NO! Past consideration; no one asked him to hurt
himself saving the guy.

Life-Saving
If I hear someone screaming help in the lake, and I save them and ruin my suit… can I be
remunerated? NO! WTF? Not a good restitution claim…
As per Pao On and Lampley v Braithwaite
Only if you’re in the business of saving people who are drowning in a lake and expecting
to be paid could you be able to claim recompensement for this… as a restitutionary
claim!

Restatement (2nd), 1981, p316 USA – Ontario should do this too

86(1) A promise made in recognition of a benefit previously received by the promisor
from the promise is binding to the extent necessary to prevent injustice.
(2) A promise is not binding under subsection (1)
(a) if the promise conferred the benefit as a gift or for other reasons the promisor has not
been unjustly enriched; or
(b) the extent that its value is disproportionate to the benefit. (IE if you save someone and
they promise you something extravagant and ridiculous, THAT’S not binding)

Manufacturer’s Guarantees: You buy Dell and it explodes. You paid Compucentre –
not contract with Dell but with Compucenter, but there’s guarantee card in the box. Is
there consideration? No! What if you send in the card; iffy, probably not.
Usually statutory enforcement though. Especially in most US states.
If YOU go to futureshop and buy our Dell PC, then we promise it will work! Well,
maybe the reason you bought it was because you wanted the guarantee. THAT is a
contract!

No Consideration in: unilateral variation of contract, manufacturer’s guarantee, firm

offers, pre-existing duty. Subsequently relying on promise is not good consideration. But
wait… there’s a little exception I like to call ESTOPPEL.

ESTOPPEL
-The basic concept of an estoppel is that a person is precluded from retracting a statement
upon which another relied- this would lead to injustice because it would cause an
absolute refusal to recognize gratuitous promises
-If a promise is made without consideration, it CAN be enforceable if the person to whom
you MADE the ostensibly unenforceable promise relied on that promise to do or finish
something that they had already undertaken in expectation of that promise being valid.
-If you make a statement of fact intending that the other person rely on that statement,
and the other person relies on it to his detriment, you cannot in court claim that the fact
you expressed is untrue.

Estoppel by representation (not promissory estoppel): if you make a statement of

FACT, and that other person DOES rely on that fact.
Widow goes to the car dealership and the dealer says “I’m sorry Harvey died; good thing
that the debt on the car was life-insured” says the car salesman. She says, “OK, I’ll by a
new one.” Turns out he’s wrong about the insurance… he then sues her cuz she can’t pay
for the new car.
She says “you made a statement that he had life insurance on his car and that’s why you
got me to buy the new car” ESTOPPED.
Jorden v. Money
Bill Money owes cash to lady because his father, who just died, had owed her money.
She says: I won’t make you pay. Later, she tries to collect anyways
He says: “Hey, you’re estopped – you told me otherwise.” WRONG: Estoppel applies to
a statement of fact – this is a promise, and when are promises enforceable? When they
are made for good consideration!
But if you went to a car salesman and he lied about the car and you bought it and sued,

Waiver/Promissory Estoppel
-cannot withdraw a promise (or implied promise) if someone has relied on it
Hughes v. Metropolitan Railway Co. (1877)
Tenant rents railways; obliged to keep them in good condition. Landlord can demand
repairs to the railway on 6 months notice. Landlord wants to buy back the property and
use it. Landlord and tenant are in process of renegotiation; tenant holds off on repairs
because the landlord is planning to get the railway back. Negotiations fail… then landlord
says “hey, you had 6 months to fix the railway and you didn’t do it; get off my property”.
NOPE: Estopped. The landlord (impliedly) waived his right to timely repairs by entering
negotiations to buy it back.
Why can Tenant claim waiver? Because there was detrimental reliance; by relying on the
landlords implied promise, the tenant got evicted. That is unfair.

Can this solve Foakes v. Beer? No. Foakes had no detrimental reliance; there was nothing
bad that happened as a result of relying on the lady’s statement that he did not have to
pay back the whole sum of money, except that he benefited.

Central London Property Trust Ltd. v. High Trees House Ltd.

“oh… well I’ve already paid you only half-rent”
Plaintiffs leased a block of flats to the defendants at an annual rent of £2500 - but,
because the defendants were unable to find enough tenants while London was being
bombed during WWII, they agreed to accept a reduction in rent to £1250. There was no
consideration for this promise to accept a lower rent. At the end of the war the flats were
again fully leased, and the plaintiffs claimed the full rent, plus arrears for the period
during the war. Denning held that, in good conscience, they were only entitled to the full
rent from the end of the war and that they were estopped from going back on their
promise in claiming the arrears for the whole wartime.
Waiver defined: “A promise intended to be legally binding, intended to be acted upon
and indeed acted upon, is binding if allowing enforcement of strict rights would be
inequitable” – DENNING in Central Property Trust Ltd.
-Can retract a waiver IF YOU GIVE REASONABLE NOTICE
-When you enter course of conduct that makes someone reasonably believe it’s
suspended, it’s suspended. Objective test.
Promise applied only when the flats were not completely let. So no promissory
estoppel… it WOULD have applied to the earlier period. But they never asked that.
Some say: reliance must be detrimental; others say -> post chaser: 2 schools: reliance
must be detrimental -> Denning: something that changes legal relations/expectations
must change… something must happen that makes it inequitable.

Rickards v. Oppenheim:
The plaintiff can rely on promissory estoppel to negate an argument? YES. I say you can
deliver stuff late, you deliver late, and I say “too late; I’m not accepting the goods”. You
sue to enforce price term… THAT’S OK. I promised you I wouldn’t say that you were
too late; you have your estoppel shield up. CAN sue to re-enforce the promise to accept
late delivery of goods.

Estoppel is a shield, not a sword.

Combe v. Combe- Estoppel is a defence for breach of contract.
Wife claims $ in areas after seven years on maintenance, using Estoppel as sword.
-gratuitous promise followed by detrimental reliance
-Denning: can’t bring an action to enforce the promise (P says I want damages for your
breach of that promise to pay support). As opposed to High Trees – promissory estoppel.
It’s a waiver case, like Rickards v. Oppenheim
Can use as a Shield/Defense – “you promised not to do this – High Trees”. This kind of
concession creates defense where Promisor is trying to enforce the original contract.
-No action for damages for breach of promise – here.

Burrows v. Subsurface
Defendant always paid lease payments late. Plaintiff always accepted. Then they had a
fight. Lease terminated. Defendant claims Hughes v. Metropolitan Railway. NO! This
was just a friendly indulgence; occasional acceptance of late payment does not permit the
claim of an implied promise. There must be course of negotiation
-SCC says: In general, indulgence does not equal entitlement to pay late, unless always
granted or communicated to be OK. For PE, must show, a promise was made by words or
conduct that the promisor meant to alter the legal relations between the parties.
-Would a reasonable person have expected in that situation? That’s probably best.
-HUGHES USES AN OBJECTIVE TEST: (NOT “what did the landlord intend?” but
rather “What did his conduct reasonably seem to indicate?” Subjective intent of the
landlord is irrelevant.)

Owen Sound v. Mial Developments

Need to get corporate seal of subcontractor. Subcontractor doubts he’ll make money from
project, but says he’ll do it, but then doesn’t do it. Since there hasn’t been timely
payment, he seizes on this to get out of the contract. Municipality’s argument –
promissory estoppel: we relied on fact that you were going to get seal on document that’s
why we didn’t pay.
IMPLIED: time doesn’t run while you’re going to get the seal: municipality relies on it.
Contractor: “But I never said you don’t have to pay on time”.
Burrows Test: What did you reasonably communicate?
RULE: Anything that reasonably induces reliance might give rise to estoppel. Intention
to alter legal relations by the promisor can be inferred by the promisee's reliance.
*NOTE: Cant say “basis of suit is promissory estoppel”. Must sue to enforce original
promise to build building.

D&C Builders v. Rees

Builders, who need SOME money, promise to discharge the debt obligation to Mrs. Rees
for partial payment… (the builders think they can just sue her for the whole amount
anyways).
-Cant use estoppel: “Mrs. Rees had no gun”. No, but she coerced them because she knew
that by not paying anything right away she’s put them out of business…COERCION.
-What did she do in reliance on the promise? She paid SOME of what she owed? That’s
not detrimental reliance! No consider of reduced payment as made under duress.

The Post Chaser, p341: middle ground for High Trees

Like High Trees: Robert Goff says: you cannot enforce your full rights where it
would be inequitable to do so. Must show detrimental reliance.

Proprietary Estoppel
Crabb v. Arun District Council, p343
Plaintiff wants to sell land but is worried about road access. Defendant leads him to believe there
will be no worries so Plaintiff sells land. Defendant than prevents plaintiff from accessing road.
Plaintiff is now landlocked. Plaintiff sues on the basis of the promise although it is gratuitous
arguing promissory Estoppel.
He is SUING to enforce a GRATUITOUS PROMISE: That’s using estoppel as a SWORD.
Held: This is an enforceable promise
Clearly a gratuitous promise with no consideration so Combe would seem to apply
Proprietary estoppels (that is estoppels relating to use of land) give rise to a cause of action and
are a general exception to the PE rule that it can’t be a sword.
If you make a gratuitous promise about LAND… Also, its EXTREMELY detrimental
reliance.

Waltons Stores (Interstate) Pty. Ltd. v. Maher (Australian Law. H.C., 1988)
Usable in Canada?
Sure I'll tear down my building before we confirm a contract. The other party backs out
of contract. “fuck you, I'll estop your ass”
Promissory Estoppeel was used to create a cause of action. Promissory Estoppel will one
day be able to give rise to a cause of action but you would have to show substantial
detriment.

M.(N.) v. A.(A.T.) (2003, B.C.C.A)

Canadian case trying to use Walton but fails, probably because there was no intention to create
legal relations on account of social relationship.
PRIVITY

Privity – The relationship that exists between two or more contracting parties
Privity problems:
TYPE 1: Beswick:
A and B have a contract: C, the beneficiary, wants to sue A when A doesn’t perform
his part of the bargain. Privity says no. Denning says yes. C is suing to enforce the
contract for his/her benefit.
Exceptions to type 1: Agency, Trust, Legislation
TYPE 2:
A has contract with B to NOT to sue C… but does anyways.

Tweddle v. Atkinson (p. 373), 1861

Facts: Dad and Dad-in-law both promise one another that they’re gonna give junior some
money…
Plaintiff son-in-law brings action against defendant father-in-law to enforce defendant’s
promise to pay plaintiff sum of money.
Ratio: Third party beneficiary has no standing to enforce promise here: plaintiff is a
“stranger to the consideration”. No consideration flows from the third party.
*Note: Plaintiff’s dad also did not pay his share. Both fathers died and the son could not
sue himself for his father’s failure to pay HIS part, so he could also not sue the father-in-
law for HIS part of the money either. Had the plaintiffs father paid, the son could then
have sued for the father-in-law’s portion.

Beswick v. Beswick
nephew promises to look after aunt after uncle dies. He doesn’t. she sues. Privity says she
cant sue, cuz his contract was with uncle. She’s mentioned in the contract, but that
doesn’t matter.
Denning: She can sue if she brings claim in the name of the husband, since she has a
legitimate interest. Sue for performance, not damages, since damages to husband are
nominal (HE doesn’t lose out directly by nephew not paying his wife).
HoL says no: she can only sue as executor of Husband’s estate. Sue for specific
performance.

Dunlop Pneumatic Tyre v. Selfridge

Dunlop has contract to sell tire to Dew; Dew must sell tires at Dunlop’s requested price.
Dew sells tires to Selfridge and says Selfridge must sell them at requested price. Selfridge
does not honour this, but Dunlop can’t sue, because they’re not a party to the contract;
Dunlop gave nothing in the way of consideration to Selfridge, past consideration.

Santanita
Privity problem. Each contestant entered into running and say we’ll follow regatta rules.
If we do damage, we’ll pay for damages sustained by 3rd parties. This is a privity
problem. Can it be turned into a big contract? Is his implied contract with the other
yacht-owner valid? YES! Those were the condition upon which he was allowed to enter
the competition. There’s an overarching agreement between all the entrants.
Trusts: exception to privity
A Trust is a contract between the Settlor(trustmaker) and the Trustee for the benefit of the
Beneficiary.
A trust is a separation between legal and beneficial ownership: legal title is vested in the
trustee, and beneficial interest is vested in the beneficiary.
Trust is an exception to privity rule, because in trust, third party beneficiaries have rights.
In a trust, you have to have assets passed from one party to another subject to certain
obligations.
In that case, we have made special rules that the beneficiary can sue.
So if the kids wanna go to camp and the trustee says NO! The kids can goddamn well go
to camp. Its not a mere contract; it’s a trust.
A has a contract with B, but C is expressly allowed to sue. The trustee is subject to the
rules of the settlor…
Beneficiary can avoid third-party beneficiary privity stuff and enforce

Mulholland v. Merriam, 1872, Ont, P387

Guy makes covenant with son-in-law that upon his death, money will go to son-in-law
who will distribute it around as ordered to kids. Guy doesn’t do it and kids sue. When
Guy transferred assets to son-in-law, he did so with the understanding that you would
distribute it to the kids; that’s a trust, bitch! Kids CAN sue, and CAN recover.
-Even if there’s only contractual relationship, and you know it’s for the kids, then kids
may be able to enforce it.

Jackson v. Horizon Holidays, 1975, Court of Appeal, England:, P391:

Guy buys good trip for him and his family; instead he gets a shitty trip. He sues to
recover from the travel agency. He can recover damages for HIMSELF… can he recover
for the lost enjoyment of the other family members too? Privity says no… but this case
says YES! He was NOT an agent for the rest of the family, he just bought the trip
unilaterally, but Denning said it was OK. Even though its not a trust.

New Zealand Shipping v. A. M. Satterthwaite & Co. (1975)

No consideration between stevedore & Shipping company, only with carrier. Unloaders
were held NOT to be liable, because the contract SAID:
(1)Unloaders not liable (2) carrier is contracting agent for unloader (3) carrier must have
authority from unloader to act as agent.
-Basically: explicitly written-in exceptions to privity will be held to be acceptable.

London Drugs v. Kuehne & Nagel, 1992, SCC, p401

Owner of goods and Warehouse have contract. The contract says that warehouse not
liable for damages. Warehouse employees damage goods. Owner of good sues.
Employees who qualify as third-party beneficiaries can make use of their employers’
limited liability if these employees are in the course of doing work for the employer.
Rule: Employees are entitled to benefit from a limitation of liability clause found in a
contract between their employer and a plaintiff (customer) when:
(1) the limitation of liability clause must, either expressly or impliedly, extend its benefit
to the employees (or employee) seeking to rely on it; and
(2) the employees (or employee) seeking the benefit of the limitation of liability clause
must have been acting in the course of their employment and must have been performing
the very services provided for in the contract between their employer and the plaintiff
(customer) when the loss occurred.

Fraser River Pile and Dredge Ltd v. Can-Dive Services LTD, SCR, 1999, p410
Fraser River is a company that rents out boats.
Insurance company says: OK, Fraser River; you’re covered. I’m not going to sue you.
Can-Dive rents boat and sinks it.
Insurance company says: “well, I know we said we wouldn’t sue… but we will.” They
gave us no consideration so they can’t make use of our promise not to sue.
Court says: Nice try: Two factors to consider in deciding whether you may use someone
else's contract for your benefit:
1. The parties to the contract must intend to extend the benefit of the contract to you; and
2. Your activities must come within the scope of activities contemplated by the contract.
Of course they rented boats out to customers; it’s what they DO.
Much broader than London Drugs.

OFFER AND ACCEPTANCE:

When has a contractual relationship actually been created?

(1)There must be an offer
(2)There must be an acceptance
If you have an offer with a matching acceptance, that’s a contract! Meeting of the minds:
mirror-image doctrine (IE you both agree to the same thing).
Why is a price list not an offer? The problem of limited supply:
“here is the price I’m willing to sell at…. But I don’t have unlimited amounts…”
What is an offer? Two branch test: Offer must communicate terms of contract, AND it
must communicate a willingness to enter.
Counter-offer negates the first offer; it cannot constitute an acceptance.

Denton v. Great Northern Railway, 1856, p174

FACTS: Train advertised timetables for trains, but said that if the trains did not run at
those times the railway company was not liable… Guy buys a ticket and expects to get
from point A to point B. Turns out, not only is the train late/does not show up, but that it
has been discontinued for some time!
Ratio: If you make a knowingly untrue statement expecting others to rely on it, and then
they do so, YOU are liable.
-Court says train schedule is offer, acceptance is going to station with your money
USUALLY: PAYING(willingness to pay)/giving the money to the clerk is the OFFER,
TAKING the money and giving you a ticket is the ACCEPTANCE.

Johnson Bros v. Rogers Bros

Defendant sent price list for flour with discount, plaintiff orders and defendant doesn’t
deliver.
Two-branch test:
-offer must communicate the terms of the agreement
-willingness to enter into contract on those terms
Quotation of price is not sufficient

Price Lists
Is a price list an offer? No!
Did they indicate terms and conditions?
Did they have willingness to deal? No: limited supply problem

Harvey v Facey:
Facts: Defendant had made offer to sell building for $900, Plaintiff deferred
consideration. Later Plaintiff wired "Will you sell? Telegraph lowest cash price.
Defendant: "Lowest cash price $900" (but did not say “yes, I’m willing to sell it”).
Plaintiff: “We agree to buy for $900 asked by you. Please send us your title deed in order
that we may get early possession". Defendant didn’t sell. Plaintiff sued for breach of
contract. Issue - Was Defendant’s response a quote or an offer?
Held - No contract; only quote - Defendant would have had to accepted the plaintiff’s
offer. Reasons - There were 2 questions in 1st telegram (1)Will you sell? (2) what’s the
lowest price? D answer was only to 2nd ? - lowest price. Did not say that he would sell
just quoted price.

Grainger & Son v. Gough, p181

-Wine merchant circulates price list: since stock of wine is limited, that means it wasn’t
an offer!

Lefkowitz v. Great Minneapolis Surplus

Facts: Advertisements are not usually offers (limited supply problem…but not HERE).
This is an offer cuz of specifies conditions of acceptance, first come first serve for
specified supply of fur coats at discounted price. Guys has to be first one there. Guy met
conditions both times. Store arbitrarily changed rules.
Issue - If it is contract can new term be part of contract?
Held - Yes, binding contract. In this case, the advertisement WAS the offer, -showing up
first was the acceptance.
Reasons: Ad communicates terms and willingness to be bound (by the offferer). Offerer
has right at any time BEFORE acceptance of contract to modify offer, he does not have a
right after acceptance to impose new or arbitrary conditions. Mode of acceptance (based
on Denton v. GN Railway) is in power of offerer - defendant stated that mode of
acceptance was to be 1st in line on Monday and then contract was made - cannot add new
house rule after contract is made.

Pharmaceutical v. Boots
Here: offer is when you bring goods and place them on the conveyor belt, and acceptance
is when the cashier accepts your money. Pharmacist is near and supervises.

Fisher v. Bell- Price tags are items in stores are merely “invitation to treat”
Storer v. Manchester City Council
Permits renters to buy council houses. The offer is letter of March 9th. Signing and
sending it back to P is acceptance. Council changes rule. But too late, says Denning; they
must allow the person to buy the house.
-If they said the agreement is ‘subject to contract’, then the outcome would be different.
If you use this phrase, then there’s no contract until the formal agreement is signed.

ACCEPTANCES:
The Mirror Image Doctrine/Mirror Image Rule; a response that is NOT a mirror
image is NOT an acceptance but a counteroffer
1) acceptance must mirror the offer and must agree with same terms and conditions of the
offer.
2) Acceptances must be made within a reasonable time if not precise time is stipulated
Offeror can stipulate conditions of acceptance, otherwise reasonable methods will be
expected.
An acceptance must:
(1) AGREE with all terms of the offer and (2) be COMMUNICATED

Shatford v. BC winegrowers:
Offered to sell berries, plaintiff didn’t respond for many days.
Must accept offer in a reasonable period of time!
Can you stipulate time in which you would like it to be responded? YES! Of course!
Offeror is the master of the acceptance:
What’s reasonable? Depends… does it depend on the fact that these are perishable? Yes!
Do the market conditions matter? Yes! Time of year? Yes!

Larkin v. Gardiner, p191

Facts: Guy made an offer to buy lady’s house to her agent. Agent goes to lady and she
says “OK, I accept” and signs the offer. Guy goes to agent and withdraws the offer before
agent tells him it has been accepted.
Held: In favour of guy because there was no contract. Lady didn’t tell or otherwise
communicate to guy that she had accepted. Rule: Acceptance must be communicated to
offeror.

EXCEPTION:
Dominion Building Corp v. The King, p193
Opposite of Larkin v. Gardiner, you don’t need to communicate acceptance because
this is stipulated in the contract – ie, in the contract you say you don’t need to get back to
me. Does silence constitute acceptance of contract? Generally NO, but here YES

Dickinson v. Dodds
Guy intends to accept a firm offer. Before he can do so, he hears from a third-party that
the offer has been withdrawn.
Since it is a firm offer, there was no consideration, and thus the offer can be withdrawn
whenever.
If offer is accepted prior to being withdrawn, it is a contract.
-Rule: you must notify the persons of a withdrawal of an offer
-(exception)BUT, if you obtain indirectly that the offer is withdrawn, that is sufficient to
terminate the offer.

Felthouse v. Bindley
Guy sells horse; misunderstanding, one thinks it’s £30 and the other thinks it’s guineas.
Other guy says: OK, we’ll split the difference; if I don’t hear from you I’ll assume you’re
OK with that.
NO: SILENCE does not equal acceptance. You cannot impose silence as acceptance in
this case

Wheeler v. Klaholt (1901) P198:

Party 1 sends shoes to party 2 thinking they had a contract… turns out, NO CONTRACT.
So party 1 says “OK, send them back or pay for them; if you don’t send them back we
assume you want them”. Party 2 does not return them for a very long time… and when
they eventually DO, the shoes are wrecked.
-prospective purchaser had a DUTY to pay for them or return them.
-The Felthouse problem (an offeror offensively imposing a contract via silence) is NOT
applicable here… in the circumstances HERE, the prospective purchaser has a duty since
they were not STRANGERS to the potential contract.

P199 Second Restatement of Contracts (USA) 1981

(1)Silence if only acceptance if they take the benefit of the services(doesn’t say GOODS;
says SERVICES) with reasonable opportunity to reject them and reasonably expect to
have to pay.
(2)If both understand that silence= assent, and if the silent one intends to accept the offer.
(3) if previous dealings have set the tone whereby someone must say if they do NOT
accept.AND
-In reasonable situations… the offeree had really ought to communicate if he or she does
not accept…

Eliason v. Henshaw (1918, USSC) Offeror is master of offer

-Facts: P offered to purchase flour from D, stipulated acceptance to be sent to by wagon
to location X. -D sent acceptance by mail to another location of the plaintiff’s business.
-Decision: for P -Reasons: no K, offeror has right to stipulate method of acceptance.
-mode of acceptance not relevant here, but location is. -and it must return to the PLACE
specified; not another location
The offeror is the MASTER of the OFFER, Offeree must comply with the terms set by
the offeror.
-As long as it gets there FASTER or AS FAST, its OK
-Any mode that is no less advantageous than the one stipulated
-Unless it is EXPLICITLY stipulated that the stated way is the ONLY way to do it.

Manchester Dioscesan Council v. Commercial and General Investments (1969)

-where an offeror has specified an acceptable mode of acceptance, another equally
efficient method is ok
-An offer will remain open for a reasonable time in the absence of an expiration date.

Hyde v. Wrench
Counteroffer kills offer. Non-mirror-image offer is counteroffer. Unless offeror says
something to revive initial offer.
The owner of an estate offered to sell for £1000. The buyer made a counter-offer of £950.
The seller did not accept this offer. The buyer then offered the original £1000, but the
seller did not accept. The court ruled that there was no contract in any of this; neither
party had made an offer that the other accepted.

Butler Machine Tool v. Ex-Cell-O Corp

The battle of forms:
-I send you MY form in which I offer to sell you goods on certain terms and conditions,
You respond with YOUR form that has YOUR terms of agreement and stuff.
Last shot Rule:
Consider: Offer (I am not liable for defects), Counteroffer (you are liable if there is a
defect), … eventually, someone caves and delivers.
Good are eventually delivered and paid for. Then they blow up.
The last blow is the last piece of paper to be sent…
Thus that last offer which is not objected to are held to be the terms of the contract.
Rule: Acceptance is PERFORMANCE: IE the seller SENDS the goods and that amounts
to an acceptance of that offer. There IS a contract.
Conduct = contract. This gets around the fact that there is kinda NO CONTRACT.
-Contract is held to be on the terms of the person who sent the last terms (usually the
BUYER)
First Shot Rule: Denning
-first offer sent to buyer; the rest are just suggestions.
-So its like the buyer agreed, but gave some suggestions. Unless the changes requested
are ‘material’ IE substantial.
-you want to BRING TO THE ATTENTION of the seller that you -the buyer- are not
accepting the seller’s terms; THAT makes it a counteroffer.
Denning says: Court can use either first shot or last shot rule… Depending on which
one is more fair. Basically it leaves it up to the discretion of the judges
A THIRD option:
To the extent that the forms are CONSISTENT, that stuff is OK (IE if they agree to the
price, location of delivery, etc). The stuff that they DON’T agree to (usually guarantees,
warrantees, etc).
-Lets say the buyer wants an arbitration term, and seller says no… lets the Judge
decide! See what’s reasonable.
Bristol, Cardiff and Swansea (BGS) Aerated Bread Co. v. Maggs (1890) - p207
Someone wants to sell business to a company – the company says he accepts the offer.
Then contract document contains a ‘non competition clause’  new and important
provision
These people LOOK like they have a contract; one guy says he’s offering something for a
price; the other guy says “ok”. THEN, the accepting party sends back the acceptance with
another important clause.
Says they’ll call back regarding it. So no contract. It was still in negotiation. Trying to
change the terms
-Is a contract completed? Continued negotiation  non competition clause
-Unless, proposal to change is held to be merely a request to renegotiate existing contract.

TENDERING:
These days, most tender calls will say: we reserve the right to refuse any bid.
Tender calls imply promise of a fair process.
(BEFORE RON ENGINEERING) Contract formed when tender is selected. In the
UK, USA, etc, this is the acceptance. Submitting tender is the offer.

Ron Engineering
Wanted to prevent bid-shopping; IE where you get a bid, then call someone else and tell
the bid price to try to get a lower offer.
In Ron engineering; missed calculation leads to a mistaken tender… the bidder realize
this and try to pull out… and the bidder tries to recover the deposit which was given by
the mistaken bid. Held: Cannot recover deposit.
Court says: we think there’s an initial contract from when you send out a bid: the bidding
process itself contains a contractual relationship; its Contract A:
Tender call is an offer, when you submit a bid, that’s an acceptance of ‘contract A’
(which is about the bidding process, usually found in terms of bidding call)
-if they offer you the contract based on your bid, that’s contract B, which you are
obligated to enter into.
-so when you’d submitted a bid, and you lose the contract, then you are NOT entitled to
get back your deposit (?).
- Thus, when you enter into a bid-war/tendering process (and submit a deposit), and you
are THEN selected, and you then REFUSE to carry out the contract… you are NOT
ENTITLED to get your deposit back.

MJB Enterprises
Only compliant bids acceptable, says tender call.
Government accepted lowest bid, which didn’t follow rules. If they only accepted
compliant bids -which they promised to do- they would have accepted the second lowest
bid. If contract were performed, I would have gotten $2 million profit…
But, unless you can prove you would have been given the contract, you can recover only
for loss of chance. Chaplin v. Hicks; beauty contest case.
Rule: must agree to all essential terms of an agreement; failing this, there is no
agreement.
-Within the world of tenders, the owners can only consider the compliant ones and within
the compliant ones they are free to choose the highest or the lowest….they are free to
contract with whomever they want (privilege clause).

Formalization & Uncertainty

You have to agree to all essential terms of an agreement… or there is no agreement.
What if you agreed to the contract but there is no price… well… court would say… you
must have meant ‘a reasonable price’
What if you agreed to the contract but there is no delivery date… well… court would
say… you must have meant ‘a reasonable delivery date’

May and Butcher v. The King: (Rule)

English Case: Rule: You cannot agree to agree
Here there was no agreement on price or delivery dates, although there was a term that an
arbitrator would be used to settle disagreements on. The problem was that there was no
agreement even on what the arbitrator would have to settle. The contract was therefore
struck down.
Essential elements must be present, or cannot agree to agree/arbitrate.

Foley v. Classique Coaches

Contract for the sale of land… guy says “ok, you sell me the land and I’ll buy all my gas
from you” no terms, prices, etc agreed upon…
Well… Now they’ve already got the land and now they say “we don’t wanna buy any gas
from you… go fuck yourself”
We already got the land but now we don’t wanna do the other part of the contract about
the gas…
There IS A CONTRACT HERE as they wouldn’t have agreed to sell land without buying
their gas.

G. Scammell & Nephew Limited v Ouston [1941] p228

Offered to buy truck; when buying trucks, it is expected that you will determine hire
purchase terms. In this case… impossible to determine exactly what terms were offered
and accepted. So; profound uncertainty = no contract.
In this situation, parties NORMALLY agree upon these conditions at the time of contract,
so the fact that you didn’t means NO CONTRACT.

Empress Towers Ltd. v. Bank of Nova Scotia, B.C. Court of Appeal, p232
This is the ONLY case, pretty much, that discusses agreements to agree, in Canada.
Sometimes an agreement to agree in good faith IS binding
IN THE ABSENCE OF TERMS ON WHICH TO AGREE ON, AN AGREEMENT TO
AGREE IS WORTH NOTHING (except in England)
-Lease renewal – until then they’ve gotten along. Rate will be market rental prevailing at
the commencement of the renewal term (as mutually agreed between tenant and
landlord).
-Court says “can’t just say it’s market rate – it’s market rate they agreed to.” Is this a
binding obligation? He says (this is only case that says so) there is such a duty to bargain
in good faith – can’t turn down reasonable offer, and if you do so, you don’t have the
power to eject tenant from the building.
-Court may look for fair or implied terms though; things that look like they were agreed
upon. May look for indication of good faith.
If there is a standard set out in the provision which the court can apply, court will make it
binding even though it says it has to be agreed on by the parties.
Agreements to agree can’t solve uncertainty of terms – except in Empress Towers.

British-American Timber Problem:

-Parties enter into agreement: agreement is subject to further investigation (there will be a
survey, etc) and there will also be a written contract:
-Will this be a record of a contract that is already there? Or will it be the contract that will
be the contract, upon signing? Negotiation or contract? Is written doc just a formality?
Issue: are negotiations/preliminary agreements binding contracts?
Depends: Was the preliminary discussions INTENDED to be a contract? Did they
INTEND that the writing up would be merely a formalization of a contract that had
already been reached? (of course they’ll say no, but court has to see what they think)
In this case “We think that already agreed on that”
At eglinton+young (eglinton square), they build mall to accomodate restaurant…
Unless it SAYS: agreement subject to contract. Some say… that’s an indication… but not
definitive.
-Not always easy to determine if there has been an offer and acceptance

CORRESPONDENCE:

Postal Acceptance Rule: Acceptance effective when mailed.

Nov 1: offer is mailed
Nov 2: offer arrives
Nov 4: withdrawal of offer is mailed
Nov 5, acceptance is mailed (contract is formed)
Nov 6: Withdrawal arrives
Nov 7: Acceptance Arrives
No real meeting of minds, but TS; still a contract.

Household Fire Insurance Co v Grant 1879 p236

Rule: Where the usual means of communication between the parties is the post, an offer
is accepted when the letter of acceptance is posted. This is generally known as the postal
rule.

Some say: When you send this offer, you’re giving the post-office agency to receive an
acceptance on your behalf… Post office is acting as the recipient; then you have a
meeting of the mind at that moment in time…
But others say: well… the offeror doesn’t think that!
-Offeror is the master of the offer; he can say “don’t use the mail”… thus he’s stuck with
whatever risks are associated with mail. It’s the offeror who gets to choose the method of
having acceptances dealt with –they may demand it by phone or in person.
When acceptance is lost, the offeror knows he hasn’t heard back, cuz he has mailed an
offer and hasn’t received response… The offerree thinks everything is fine.
If you don’t have the postal acceptance rule, you’re really saying to the offeree; don’t
start to rely on this contract, etc until you’ve phoned or received confirmation.
Postal acceptance rule encourages the oferree to engage things in reliance on the offer…
apparently a good thing…
Postal acceptance rule applies to acceptance only; does NOT apply to revocation.

Civil Code of Quebec p241:

Contract is NOT formed via letter being posted; contract is only formed when the
acceptance is received by the offeror, regardless of the method of communication used.

Henthorn v. Fraser p241

Henthorn v Fraser (1892): If acceptance is by post, it may be deemed not to occur on
posting if postal acceptance was not contemplated by the offeror
RULE: If the offeror SAYS you should use mail… he’s stuck with the postal acceptance
rule
-if the offeror communicates by mail and says nothing to the contrary… he’s stuck with
the postal acceptance rule…
-If the offeror sends an offer where is can reasonably be expected that the response would
be by mail… then he’s stuck with the postal acceptance rule…

If you know there’s a problem; if the line goes dead; you gotta call him back.
-if you don’t read your faxes/emails… to the extent that YOU’VE created the problem,
you’re responsible; if you have no ink in your machine; its YOUR goddamn fault!
-If fax is sent at night… Denning would probably say: “its your fault… you cant expect
them to read it till 9AM the next day”

Byrne & Co. v. Leon Van Tienhoven & Co. p243

Withdrawal not effective till communicated; can’t ‘postal acceptance rule’ it.

Second Restatement USA 1981, p243

Rejection or counter-offer sent by letter does not terminate the power of acceptance until
received by offeror, but limits the power so that the acceptance started being sent AFTER
the sending of an otherwise effective rejection/counteroffer is only a counteroffer unless
the acceptance is received by the offeror before he receives the rejection or counter-offer.

If you phone to accept the offer before the withdrawal gets to you… that’s a
contract.
Rule: Postal acceptance rule does not apply to cases where it would lead to an
outrageous result.
Holwell Securities Ltd. V. Hughes
The contract said “by notice” such that this took us out of the postal acceptance rule and
didn’t allow for acceptance merely by putting in the mail- notice is not helpful to anyone
if it does not reach their mind

Eastern Power Ltd. v. Azienda Comunale Energia & Ambiente, p249

Fax is NOT like mail; the contract is not formed till the offeror receives the acceptance; if
the oferee merely sends the fax this is NOT good enough. Applies to MAIL and
TELEGRAMS; if the offeror has said or implied that it can arrive by mail or telegram,
you’re bound t postal acceptance rule.
No literature as yet to determine when it is accepted; when fax leaves machine or when
other person is supposed to get it.

Electronic Commerce Act 2000, p253.

kinda a big nothing… s20: what happens when 2 computers are talking…can offers be
made by electronic agents? Yes.
-When is an email sent? S22sub1; when it enters an infosystem outside the senders
control. When is it received: when it enters the other person’s information system.
Does NOT say: receipt amounts to acceptance… that’s for judges to figure out.
-Is clicking on a computer screen an acceptance? Yes.
Doesn’t answer the question of whether there is a contract as soon as the email hit Italy
from the previous case…

Unilateral Contracts- Act for a promise- if you do y, I’ll do x.

Bilateral Contracts- Promise for a promise- for x, I’ll give y.

Williams v. Carwardine (1833)

Knowledge not intent matters.
She was not intending to accept the reward, but she KNEW about the reward. Thus she
can claim the reward…

R. v. Clarke (1927, Aus. H.C.)

-to save his neck, this guy confesses…
-guy didn’t even KNOW about the reward/offer; he can’t accept it.
Clark didn’t KNOW about the offer. Thus he can’t claim.

FLAGPOLE PROBLEM
I say “if you climb the flagpole I’ll give you $500”.
When you’re ½ way up the flagpole, I say “offer rescinded”.
Unilateral Contract: An ACT in return for a PROMISE: If you do X, I promise Y.
(Bilateral contract: a PROMISE for a PROMISE)
Why can I withdraw the offer when you’re ½ way up the flagpole? Yes.
Doing X is not only the consideration for the promise… its ALSO the acceptance of the
offer…Consideration…Acceptance
Denning would say: Once you START to climb flagpole, offer must remain open.
Carlill v. Carbolic Smoke Ball
Lady buys magic ball to prevent her from getting sick. Company offers reward if you use
it and still get sick. She uses it and gets sick anyways,
In unilateral offer no notification of acceptance is necessary. Performance of the
condition is adequate acceptance.
We need to find the last point at which Smoke Ball can withdraw the offer…

Grant v. New Brunswick

Facts- Government sponsored program to buy excess potatoes, guy fills out all necessary
docs and is compliant, eligible under rules.
Rule- If compliant with rules, that is acceptance and offer can not be rescinded if only
condition is to be within rules.

Errington v. Errington and Woods

Facts: Defendant promised to give house to plaintiff if monthly payments made.
Unilateral Contract (s)
-If you make all the payments I will transfer the house, defendant doesn’t comply, house
does not need to be transferred, offer rescinded.

Dawson v. Helicopter Exploration Co

Facts- Defendant had land that plaintiff had found mineral deposits on. They agreed that he
would receive profits from the mineral deposits once financed & sold. After plaintiff had been
delayed and notified defendant, defendant used another person to locate deposits & went ahead
with sale.
Ratio- Letter from defendant showed a promise of performance of an act to plaintiff, to show
location of mineral claims, Bilateral contract. The offer from defendant was conditional on
finding a pilot which he did, so offer should have extended to Dawson which he had accepted.
Full breach of contract. Helicopter co. argues unilateral contract- flag pole situation.