Was there a counter offer? Was there silence? Is it by mail or an instantaneous mode?

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1 FORMATION OF A VALID CONTRACT 1 Is there intent to create legal obligations? 2 Is there communication of the offer? 3 Is there acceptance of the offer? 4 Is there a certainty of terms? Is there a social or commercial presumption or is intent unclear? Is it actually an offer rather than a puff or invitation to treat? Has it been revoked, rejected, or has there been a significant lapse of time? Was there a counter offer? Was there silence? Is it by mail or an instantaneous mode? Are any of the terms vague? Is there incompleteness such as agreement to agree? Is there an agreement to negotiation? Is there anticipation of formalization? 5 Is there consideration? Is there a deed or a chance for promissory estoppel? (exceptions to consideration) Is there past consideration? Forbearance to sue? Pre-existing duties? Agreements to accept less? 6 Are the parties privy to the contract? Are they employees? Is there another way they can take privy to the contract? Offer and Invitations to Treat The hallmark of an offer is the readiness to sell. An offer is the prerequisite to having a valid contract. Invitations to treat and puffs cannot be accepted b/c they are mere sales talk (Carbolic). You can tell if something is an offer or an invitation to treat by the language and intention through the reasonably objective person in the place of the recipient (Canadian Dyers, Pharmaceutical Society). Post-contractual conduct can also be looked at (Canadian Dyers). Unilateral contracts create situations where communication of acceptance is not required (Carbolic). Furthermore, no audience of a unilateral contract is too large and the offeror bears the risk of extravagant promises (Goldthorpe). Tenders Historically, putting out a call for tenders was an invitation to treat and submission was an offer (Harvella). However, Ron v. Ron Engineering changed that: putting out a call for tenders is now an offer for unilateral contract A. The submission of a tender is considered acceptance of Contract A and a simultaneous offer for Contract B. Acceptance of contract B means A falls aside (Double N Earthmovers). There are policy reasons for doing this. The nature of tenders is that they take a lot of time and can cost a lot of money. Therefore, we imply duties to maintain the integrity of the bidding process (MJB Enterprises). Terms can be implied through the officious bystander test and whether the ORP would find it obvious that terms are intended (Canadian Pacific Hotels) The officious bystander uses business efficacy to see if it makes business sense; and if it does, it can be implied that offers must be treated fairly (MJB Enterprises) Furthermore, there is also an obligation to accept compliant bids or to not accept non-compliant bids (under contract A) (MJB Enterprises). Offeror s can take bids at face value and are not responsible for investigating compliance (Double Earth Movers) and in the same case there is no obligation to accept the lowest bid. Privilege clauses may be inserted by parties (freedom of contract) and if there is ambiguity it can be resolved through business efficacy (MJB Enterprises: parties are going to be presumed to make deals that make business sense) Finally, after contract B is formed, the contract As are gone and the offerer is entitled to dispose of all others. The offeror has no duty to the other tenderers and is free to renegotiate contract B under terms they would like even if not included in Contract A (MJB Enterprises ) Communication of Offer!1

2 Offers need to be effectively communicated in a way that the reasonable person would consider to be capable of acceptance and to the person who purports to accept it (Blair Mutual). Offers can be made to an individual or a class (it is not an objection to say that the group was too large: Carbolic). You must intend to accept an offer (Williams v. Cowardine) but you cannot intend to accept unless you are aware of the offer (R. v. Clarke). If the circumstances are such that you must of been aware of the offer, and you fulfilled the act set out in it, then it will be presumed that you intended to accept (Williams v. Cowardine). BUT if you say you have no knowledge of it or you explicitly communicate that you did not intend to accept, the court will not presume intention to accept (R. v. Clarke) Termination of Offer Revocation You can revoke your offer any time prior to acceptance through express or implied communication (Dickinson v. Dodds). Implied revocation can occur by performing an act inconsistent with the offer and does not have to come directly from the offeror (Dickinson v. Dodds). Revocation of an offer does not have effect until communication of the revocation is received by the offeree. (i.e. mailbox rule does not apply to revocation) (Byrne v. Tienhoven). An exception to revocation occurs when the offeree has entered into part performance (Errington v. Errington). When this occurs, the offeror must give a reasonable amount of time for the offeree to fulfill the performance requirements (Errington v. Errington). In cases instinct with obligation, Courts will distinguish contract as unilateral or bilateral; whichever will move the date of acceptance earlier thus removing the possibility of revocation (Dawson Helicopter) Rejection A counter-offer is a rejection of the original offer, a mere inquiry is not (Livingston v. Evans). A counter-offer is deciphered from an inquiry depending on the ORP, and counter-offers typically involve a material change such as in price (Livingston v. Evans). If an offer is not accepted within a reasonable amount of time then it can be considered refused/withdrawn (Manchester Diocesan Council). Lapse of Time An offer is open for a period of time specified, if nothing is specified, it is open for a reasonable amount of time (Barrick v. Clark). What constitutes a reasonable amount of time is assessed by the ORP and dependent on (1) industry custom (volatility of price of goods; perishability etc) and (2) circumstances of the case (language, conduct, etc)(barrick v. Clark). Acceptance Mere inquiries are not counter-offers and therefore constitute an offer still open to acceptance (Livingston v. Evans) Battle of Forms When there are a tonne of papers flying back and fourth and the Court is unaware as to what terms were agreed upon, they will use either a first shot or last shot analysis. When this does not yield a clear result, the documents will be looked at globally/holistically to determine the intentions of the parties (Butler Machine Tool). That being said, if you are attempting to make a material change and trying to sneak in a term, as Denning would call it, you must make the other party aware of it (Butler Machine Tool and Tywood Industries). Shrink Wraps There has never been a shrink wrap case in Canada. However, they are similar to the Contract A/Contract B analysis. The offeror makes an offer when the box is placed on the shelf. This is a proposed contract to the buyer which he would accept by using software after having read license at home. The buyer accepts the offer when after an opportunity to inspect, he fails to make an effective rejection (by returning) (ProCD v. Matthews). Transactions where exchange of money precedes communication of detailed terms are common (e.g. Insurance, airline tickets, radio with warranty inside). Silence In general, silence does not constitute acceptance and you cannot accept a bilateral contract as such (Dawson v. Helicopter, Felthouse v. Bindley). However, you can accept unilateral contracts through silence in the performance!2

3 of the conditions of the offer (Carbolic). Furthermore, acceptance can also be proven through positive conduct indicating as such as well as deceptive acquiescence (Saint John Tug Boat). The intention of the offeror is determined by which his conduct bears when reasonably construed (Saint John Tug Boat). Offeror s Control The offeror has the ability to stipulate the time and manner of the acceptance (Eliason v. Henshaw). Communication of Acceptance: Mail and Instantaneous Modes Whatever medium parties choose to communicate will be used to assess when acceptance occurs (Household Fire v. Grant). If the offer is sent in the post, then the acceptance can occur immediately as soon as the offeree puts the acceptance in the mailbox (Household Fire v. Grant). However, the post-box rule does not apply (1) if the requirement of notice of acceptance is expressly specified or (2) if its application would produce inconvenience and absurdity (Household Fire v. Grant). Furthermore, the post-box rule does not apply to instantaneous modes of communication (Brinkibon v. Stahag). While there is no universal rule for instantaneous modes, the receipt rule tells us that the contract is made where the acceptance is received (Brinkibon v. Stahag and Entores Ltd. v Miles Far East Corp.) Certainty of Terms no. 1 Terms which need to be certain are price, nature of goods, and manner of delivery. Vagueness Courts may ascribe meaning to words of an agreement where one or more terms are ambiguously expressed so long as a definite meaning can be properly extracted (R. v. CAE Industries). To determine a reasonable meaning the Court looks to parties objective intentions (plain words, outward actions show intentions both prior to and after contract formed, commercial reality)(r. v. CAE Industries). The more intention there is to create legal relations by the parties, the more the court will be motivated to uphold the contract (R. v. CAE Industries). Incompleteness and Agreements to Agree 1. Starting point: Are you dealing with goods? Does the uncertainty relate to price? Then the legislation can apply (section 12 & 13 of the Sale of Goods Act): agreements to agree on price are fine, and if you cannot agree then the court can apply a reasonable price. If you cannot apply a reasonable price then there can be arbitration (if he comes to a price there is an agreement, if not there isn t an agreement). 2. If it is not about goods then you turn to common law. When considering uncertainty, you cannot look at a passage or word in isolation, they must be read in context of the entire contract in the given circumstances (ex. where industry standards may imply reasonable prices or deliveries) (Hillas v. Acros). An agreement to enter into an agreement which a critical part of the contract is left undetermined is no contract at all (May v. Butcher). However, an agreement to agree on price can sometimes be valid such as when a reasonable price can overcome uncertainty (Foley). Clearly these are two conflicting cases. First you can say that Foley is completely wrong or you can say that it is not inconsistent with May v. Butcher b/c the seriousness of intent makes Foley different (performing contract for 3 years motivates court to uphold contract whereas May v. Butcher didn t have this intent and thus court didn t feel as motivated to uphold contract. A better way to reconcile might be that in May v. Butcher, court did not want to cure the uncertainty by saying if you can t agree then it is a reasonable price but in Foley they did. Why? Maybe because tentage (old army tent) is a different subject matter then petrol. In May & Butcher it was difficult to find a price because it was the first time tentage like this has ever been bought and sold before and therefore there is not a reasonable price. In Foley, you can find a price for gas based on the price of oil and therefore you can come up with a reasonable price (as it is an independent metric). So perhaps Foley stands for the agreement to agree does apply if a reasonable price can be implied Certainty of Terms no. 2!3

4 Agreements to Negotiate Bare agreements to negotiate are unenforceable (Manpar). There is no contractual duty to negotiate in the absence of a benchmark or standard (such as in Empress with market rate )(Manpar). However, Courts will strive to uphold agreements to negotiate if there is a strong intent to contract in the circumstances (Empress). When there is sophisticated commercial actors, the Courts will be inclined to believe there is serious intent to contract (Empress). Agreements to agree between sophisticated commercial actors implies two obligations: (a) to negotiate in good faith and (b) that agreement will not be unreasonably withheld (Empress). In New Zealand, agreements to negotiate fail for uncertainty and therefore are unenforceable (Wellington City Council). However this has all changed with the recent case of Bhasin v. Hyrnew. This decision determines that there is always a duty to negotiate in good faith which is implied by law. Now, where there is an agreement to agree on price in a renewal type situation, there is always going to be a duty to negotiate in good faith (Bhasin v. Hyrnew). The doubt that Manpar cast on Empress is now incorrect, and Wellington City Council s case that the entire idea of good faith is unworkable is now also wrong. Anticipation of Formalization You can have a contract to formulate a contract in an anticipation formalization scenario. If there is clear intent to be bound and be bound immediately but you agree to reduce it to writing later in the exact terms that have been discussed then there can be a contract. However you have to agree on all the important terms and you can not leave anything out to be dealt with later (Bawitko Investments v. Kernels Popcorn) Intention to Create Legal Obligation The ORP must be able to say that there is intent to create legal obligations. There are three presumptions: (1) social context presumption of no intent where parties are motivated by love and affection (Balfour v. Balfour), (2) commercial context presumption that there is intent unless explicitly stated otherwise (Rose and Frank v. Crompton), or (3) there is no presumptions and intent is unclear. An exception to the social context presumption however can be found in s.3 and s.92 of the BC Family Law Act which allows spouses wishing to divide assets in debts to do so and be legally binding (must be written, signed, and witnessed). Sophisticated commercial parties may also sometimes draft comfort letters which may indicate some obligations are being assumed however, these are not assumed to be legally binding (TD Bank v. Leigh). BUT this can also be rebutted if there is evidence to the contrary, or by looking at business relationship, wider commercial reality and a close reading of the words in the contract itself (TD Bank v. Leigh). Furthermore, promises made by politicians (even in writing) during political campaigns are not enforceable because it is unreasonable that there would be any intent to contract (Canadian Taxpayers Federation v. Ontario). Formality: Contracts Under Seal and the Requirement of Writing Historically, promises had to be sealed for contract to be valid. Today, a seal is not necessary but is still sufficiently binding if there is one (no consideration necessary). Though in Royal Bank v. Kiska, we know that the word seal is not sufficient to count as a seal; you need a seal in some form affixed to the document.!4

5 ENFORCING PROMISES Doctrine of Consideration Nature of Consideration Consideration is an independent prerequisite to the formation of a valid contract. However, as we know from above, consideration is not necessary when the contract is under seal. Furthermore, consideration is not necessary in order for promissory estoppel to operate. Consideration must flow from each party and must be something that has value in the eyes of the law (Thomas v. Thomas). Value does not mean economic value and it does not matter what is being exchanged (peppercorn theory) (Thomas v. Thomas). For there to be consideration, each party must be promising to do or not do something in exchange for the other party doing or not doing something; in other words, there must be mutuality (Governors of Dalhousie). However, consideration cannot be given independently from the other parties consideration; there must be reciprocity (Governors of Dalhousie). A promise may also be lacking but instinct with obligation. In these situations, it may be that the promise was implied rather than express (Lady Duff Gordon). A request can be implied as evaluated from the reasonable objective person, often drawn from the rules of business efficacy (Wood). Past Consideration Generally speaking, past consideration is no consideration because there is no mutuality/reciprocity and therefore the act was not done in light of the other promise (Eastwood v. Kenyon). However, sometimes past consideration IS consideration IF (1) the past act was done at the promisors request (explicitly or impliedly) and (2) the parties at the time understood there would be a conferrable benefit in the future. (Lampeigh v. Brathwait). You know if there is an expectation of a conferrable benefit in the future by whether or not the ORP would have expected it in that circumstance (Lampeigh). Forbearance of Suit Forbearance of suit can also be considered a form of consideration and means that you could potentially sue but the other party gives you a form of settlement instead. However, if the suit turns out to be bogus then it fails for consideration. BUT if the suit is invalid and yet the individual is unaware of this and (1) honest and in good faith to sue, (2) the claim is objectively reasonable, and (3) they actually intend to sue, then this does constitute consideration. Pre-existing Duties If I promise to do something for you, and then you say that you want more money, can promisor be held to that? The promise is that you are promising to do something which you already have to do making the promise valueless in the eyes of the law and therefore failing on consideration (Stilk v. Myrick). However, there is a three party situation whereby promising to do something that you already have to do can constitute consideration if the pre-existing duty is owed to a third party (Pao On). Stilk v. Myrick had serious consequences for the commercial reality. The business reality is such that people want to modify deals and that rule stands in the way of this (Gilbert Steel). It is at odds with the commercial reality that people want to modify a contract without having to rescind and re-write. In light of this, we look to Williams v. Roffey which tells us that promising to do something that you already have to do may be consideration if (1) there is no duress whereby you are forcing someone else to pay for something that they would already be getting or (2) if there is practical benefits (commercial advantage) flowing to each both party. This has been slightly been modified in Canada to drop the second requirement (practical benefit) of Rofey, and therefore all that is required is that there is some sort of mutuality and no duress (Greater Fredericton Airport v. Nav). The chances are if parties are promising something mutually then there will be no duress (Greater Fredericton Airport). Promises to Accept Less!5

6 Promises to accept less are pretty much the same as pre-existing duties, though the Courts have regarded them differently. The defective consideration is that you are already offering to do what you have to do anyways (by paying $50 less you still would had to do that in addition to another $50). The starting point is Foakes v. Beer where payment of a lesser sum cannot be satisfaction of a larger sum as it fails for consideration. You cannot hold someone to a gratuitous promise because they are retractable (Foakes v. Beer). Fakes v. Beer is clearly inconsistent with Williams v. Roffey and the Court recognizes this in Re Selectmove. However, they are bound by the House of Lords and therefore have to apply Foakes v. Beer. In Canada this is not the case. There could be potential for the harmonization of both areas of law whether it deals with goods and services or an obligation to pay money. The Law and Equity Act of BC tells us that where the accepting party has expressly agreed to receive less than satisfaction of the full amount, then that agreement is binding even though there is no consideration (undoes Foakes v. Beer). However, if this is not expressly agreed or there is undue pressure, then the Act does not apply since it is silent on the issue and therefore Foakes v. Beer prevails (Process Automation). If there is undue pressure, there is no way around this (since Williams v. Roffey, and Greater Fredericton provide that this must be absent or else it is not consideration). However, if there is no undue pressure but the agreement is not expressly stated, you can go to Foakes v. Beer if your client does not want the contract to be enforced, or this may be a time to try and harmonize the two areas and go to Williams v. Roffey or Greater Fredericton (if you cannot find a practical benefit). You may also consider whether or not the party is doing something that they did not already have to do such as in the cash/ cheque distinction in Foot v. Rawlings. Promissory Estoppel General Principles Promissory estoppel is an exception to consideration. It is an equitable doctrine that provides that if a party changes his or her position substantially either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise although the essential elements of a contract are not present. Therefore, a gratuitous promise can be held binding in certain circumstances. Lord Denning develops a four part test for promissory estoppel in the High Trees case: 1. There must be an existing relationship (contract between the parties) 2. Representation that you wont enforce the right (must be clear and unambiguous - does not have to be expresscan be implied) 3. Was it relied on (there must be reliance simplicitor which in a dictionary sense means you have relied upon the promise and acted upon it - but it is unclear whether we need detrimental reliance which means that you are worse off from relying on the promise) 4. Was it unfair (all things considered) to go back on the gratuitous promise ***As a matter of precedent, detriment is not required - however need to think why it is for an exam - in terms of equity, if there is no detriment than it does not seem unfair - but is it inherently inequitable to make a serious promise and to turn around and do it anyways even if you are not worse off? Hughes v. Metropolitan Railway, though it came before Denning s invention in high trees, can also be cited as an example of promissory estoppel (H impliedly told the MRC they were not going to enforce the six month term by entering into negotiations). Furthermore, High Trees has the potential of undoing Foakes v. Beer if you can prove that all four elements of estoppel are present. Elucidation of Principles Under part two of Denning s test for promissory estoppel, representation that you will no enforce the right must be clear and unambiguous. Friendly indulgences are one thing that cannot be classified as such (John Burrows v. Subsurface). In order to differentiate between a friendly indulgence and clear and unambiguous representation, the ORP must be able to look at it in context (what is the relationship, motivations)(john Burrows v. Subsurface).!6

7 Under the third part of the High Trees test, the representation to not enforce the right must be relied upon by the other party in order for promissory estoppel to operate. Jurisprudence is unclear as to whether this reliance has to be detrimental. Some cases have determined that detriment is necessary, whereas as others such as WJ Alan v. Nasr Export and Import has determined that it is not. The Court in this judgement, however, was a 3/2 split and therefore it may be possible to get around this by claiming a misinterpretation of the law. However in The Post Chaser case, the Court determined that it was necessary under part four of the High Trees test because it would not be inequitable to go back on a promise if the other party has not suffered a detriment. Either way, it may be possible that you have to prove detriment somewhere, it does make sense for promissory estoppel as an equitable doctrine. Why should the other party recover if they are not worse off because of it? Under the fourth part of the High Trees test, it must be unfair/inequitable, all things considered, to go back on a gratuitous promise. It is only inequitable where there has been true accord (agreement) and the creditor voluntarily accepts a lesser amount in sum (DC Builders v. Rees). A promise made under duress should not be estopped (DC Builders v. Rees). Estoppel: Giving Notice If I tell you I m not going to enforce my right and then I change my mind, can I go back to the original promise if I give you notice? (can X reinstate antecedent promise by giving notice to Y?) Generally the answer is yes, as long as it meets 2 requirements: (1) must let the other person know that you are going to enforce your right to take the promise back, and (2) you must give notice before the other party relies on it (Saskatchewan River Bungalows). Shield or Sword As a general principle, promissory estoppel can only be used as a shield and not a sword; If there is no pre-existing contractual relationship and X makes gratuitous promise to Y, Y cannot enforce that right against X by pointing to estoppel. Thus, Promissory estoppel cannot be used to create new actions; it can only be used as part of a cause of action, to prevent a party from insisting upon his legal rights when it would be unjust to allow him to enforce them (Combe v. Combe). In Australia, estoppel can be used as a sword in very narrow situations where someone makes a gratuitous promise, someone can see that you are making this promisee, and then relies on this promise, plus the parties expect that a legal relationship will arise (Walton Stores). However, as it stands today, this is untrue in BC (and in Canada until decided by the SCC) and was set in stone when M (N) v. A (TA) chose not to adopt the Australian principles. Privity of Contract Basics Generally, only those who are privy to a contract can sue on the contract. Privity is a doctrine that has historically been questioned as to its necessity. It follows the same path as consideration and generally there is not one without the other. There are two common rationales as to why we have this rule: (1)Consideration Rationale; only X and Y can sue each other and hence exclude Z because Z has not afforded any consideration and (2) Intent Based Rationale: It s none of Z s business because he s a random stranger to the contract. The reason Z cannot sue is because he has not rights to the contract, he has no rights to the contract because X and Y never intended to include strangers. In support of these two rationales, third parties to a contract cannot sue regardless of whether the entire point of the contract is to confer a benefit to them (Tweddle v. Atkinson). Dunlop Pneumatic further supports this principle in the commercial context. However, the first real exception we see is in Beswick v. Beswick when the widow was able to sue as the administratrix of the estate. For our purposes, this cannot truly constitute an exception because as the administratrix she steps into her husbands shoes. The first true exception to privity arises in London Drugs v. Kuehne & Nagel. In this case, a third party may have privy to a contract when (1) The limitation of liability clause expressly or impliedly (commercial reality/identity of interest) extends its benefit to the employee(s) seeking to rely on it; and (2) the employee(s) seeking the benefit of the limitation of liability clause have been acting in the course of their employment and must have been performing the very services provided for in the contract when the loss occurred (London Drugs). Test was applied in!7

8 Edgeworth Construction but failed at the first step. This case gives us important differences where independent parties (with less identity of interest) and industry custom (where engineers know the risks of their work and are more likely to arrange their own means of insurance) would lead to a result where it is clear that the intention of the parties was not to extend coverage to them. Up until this point it was unclear whether this test could be extended to incorporate third parties who are not employees. After Fraser River, when a subrogation clause was extended to include third party charterers, the answer to this question is yes. Furthermore, this case is important because it tells us that a clause protecting third parties may be deleted any time while the right is in cohate and up until the right crystallizes. Once the right has crystallized however, and a cause of action is born, the clause can no longer be deleted. Conditions Precedent A condition that must be satisfied in precedent of the contract. Until that condition is satisfied, the contract is held in abeyance (and self terminates if condition is not satisfied). What if the condition is not fulfilled but the party who the condition was to solely benefit, wants to go ahead with the contract anyway, can he waive the condition? Canada says it depends on whether it is a condition precedent or a true condition precedent. If it is a true condition precedent it cannot be waived. If it is an ordinary condition of precedent it may be waived (Beauchamp v. Beauchamp). In order to determine what a true condition precedent is it (1) must relate to a future and uncertain event, (2) condition depends entirely on the will of a third party (Turney v. Zahilka). However, in this case of Beauchamp the majority ruled that it was an ordinary condition precedent for him to get the two mortgages. The Court in Barnett v. Harrison disagreed, and said that Beauchamp was actually a true condition precedent because getting a mortgage was dependent entirely on the will of a third party, and the condition was in fact satisfied. The fact that he received the mortgage in one instalment instead of two is immaterial and therefore is sufficient to constitute fulfilment of the condition. BUT s.54 of the Law and Equity Act in BC lets us know that none of the common law matters because the legislation prescribes that all conditions precedent can be waived by the party who s the sole benefit is for; whether or not it is a true condition precedent is immaterial.!8