CONTRACTS. Fall 2015 JENNA DAVIS THOMPSON RIVERS UNIVERSITY LAW 3030

Transcription

1 CONTRACTS Fall 2015 JENNA DAVIS THOMPSON RIVERS UNIVERSITY LAW 3030

2 1 1 Is there an intention to create legal obligations? 2 Is there communication of an offer? 3 Is there acceptance of the offer? 4 Is there certainty of terms? Unclear intent? Family relationship? Commercial relationship? Not 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 Has it been revoked, rejected, or has there been a significant lapse of time?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? Acquiescence? Was it through mail or an instantaneous mode? Any vague terms? An agreement to agree? An agreement to negotiate? Anticipation of formalization? 5 Is there consideration? If not, is there a seal or a chance for promissory estoppel? Is it past consideration? Is the consideration simply based on pre-existing duties? Is it an agreement to accept less? 6 Are the parties privy to the contract? If not, is there another way they could be privy (executor, employee, etc)?

3 2 Contents Introduction to Contracts... 6 Offer... 6 Offer Offer and Invitations to Treat... 6 Canadian Dyers Association Ltd. v Burton, (1920) 47 OLR Pharmaceutical Society of Great Britain v Boots Court of Appeal [1953] 1 QB Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.)... 7 Goldthorpe v Logan, [1943] 2 DLR Offers - Tenders:... 7 Tenders - Contract A and Contract B:... 8 Privilege Clause:... 8 Harvela Investments Ltd v Royal Trust Co. of Canada (C.I.) Ltd (1985) HL... 8 R. (Ont.) v. Ron Engineering, [1981] 1 S.C.R. 111, SCC... 8 M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R Double N Earthmovers Ltd. v. Edmonton (City), [2007] 1 S.C.R. 116, 2007 SCC Canadian Pacific Hotels Ltd. v. Bank of Montréal, [1987] 1 S.C.R Communication of an Offer: Blair v Western Mutual Benefit Association, [1972] 4 WWR Williams v Carwardine [1833] EWHC KB J R v Clarke (1927) 40 CLR Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.) Termination of an Offer: Revocation Dickinson v Dodds (1876) 2 Ch D Byrne v. Van Tienhoven (1880) C.P.D Errington v Errington Woods [1952] 1 KB Dawson v. Helicopter Exploration, [1955] S.C.R Termination of Offer: Rejection Livingstone v Evans (1925) Alberta SC Termination of an Offer: Expiration of Offer Barrick v. Clark (1951) SCR Manchester Diocesan Council of Education v. Commercial & General Investments LTD (1969)... 14

4 3 Acceptance Livingstone v Evans (1925) Alberta SC Battle of Forms Butler Machine Tool Co. v. Ex-Cell-O Corp [1979] 1 W.L.R Tywood Industries LTD. v. St. Anne-Nackawic Pulp and Paper Co. LTD. (1979), 100 D.L.R.: Shrink Wraps ProCD v. Matthew Zeidenberg and Silken Mountain Web Services Inc. 86 F.3d 1447 (US CA 7 th Cir., 1996): Acceptance through Positive Conduct and Acquiescence: Acceptance through Silence Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.) Dawson v. Helicopter Exploration, [1955] S.C.R Felthouse v Bindley (1862), 11 CB (NS) 869, 142 ER 1037 (Ex. Ch.) Saint John Tug Boat Co. v. Irving Refinery LTD [1964] Acceptance - Offeror s Control Eliason v Henshaw (1819) US Communication of Acceptance: Mail and Instantaneous Modes Household Fire and Carriage Accident Insurance Co v Grant (1879) Holwell Securities v. Hughes [1974] England Brinkibon LTD v Stahag Stahl Und Stahlwarenhandelsgesellschaft mbh [1983] (England) Certainty of Terms no Vagueness R v CAE Industries Ltd., [1985] 5 WWR 481, 20 DLR (4th) Incompleteness and Agreements to Agree May & Butcher Ltd. v R, [1934] 2 KB Hillas & Co., Ltd. v Arcos, Ltd. (1932) Foley v Classique Coaches Ltd. [1934] 2 KB Sale of Goods Act-Ascertainment of Price, ss. 12, Certainty of Terms no Agreements to Negotiate Bhasin v. Hyrnew, 2014 SCC 71: Empress Towers Ltd. v. Bank of Nova Scotia [1991] BCCA **Most recent and prominent Mannpar Enterprises Ltd. v. Canada (1999) BCCA... 21

5 4 Wellington City Council v. Body Corporate (2002 NZ CA) Anticipation of Formalization Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991 Ont CA) Intention to Create Legal Obligation Balfour v. Balfour [1919] ENG CA Rose and Frank v. JR Crompton Bros. (1923) England CA TD Bank v. Leigh Instruments Ltd. (1999 On CA) Canadian Taxpayers Federation v. Ontario (Minister of Finance) (2004) (Ont Sup. Court) Family Law Act SBC Formality (Seal and Requirement of Writing) Royal Bank v. Kiska (1967 Ont CA) Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978 SCC) Law and Equity Act (B.C.) s. 59 (*) Enforcing Promises Doctrine of Consideration Nature of Consideration Thomas v. Thomas (1842) 2 QB Governors of Dalhousie College at Halifax v. The Estate of Arthur Boutilier (1934, SCC) Wood v. Lucy, Lady Duff Gordon (1917) New York Past Consideration Eastwood v. Kenyon (1840 QB) Lampleigh v. Brathwait (1615) K.B Forbearance of Suit D.C.B. v. Zellers Inc. (1996) 138 D.L.R. (4th) Pre-existing Duties Pao On v. Lau Yiu Long (1980, PC) Stilk v. Myrick (1809) (Eng K.B.) Gilbert Steel v. University Construction Ltd. (1976) Ont CA Williams v. Roffey Bros. (1990) Eng CA Greater Fredericton Airport Authority Inc. v. Nav Canada (2008) NB CA Promises to Accept Less Foakes v. Beer (1884) Eng HL Re Selectmove Ltd [1995] Eng CA:... 28

6 5 Foot v. Rawlings [1963] SCR Law and Equity Act (R.S.B.C. 1996, c. 253) s Process Automation Inc. v. Norstream Intertec Inc. & Arroyave, 2010 ONSC Promissory Estoppel General Principles Hughes v. Metropolitan Railway Company (1877) 2 AC 439 (Eng HL) Central London Property v. High Trees House (209) Explanation of Principles of Estoppel John Burrows v. Subsurface Surveys [1968] SCR D & C Builders v. Rees [1966] 2 QB Giving Notice: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. [1994] 2 S.C.R W.J. Alan & Co. v. EL Nasr Export and Import Co. [1972] QB The Post Chaser [1982] QB Shield or Sword Combe v. Combe [1951] Eng KB Walton Stores (Interstate) Pty. Ltd. v. Maher (1988) ALJR (Australia) M. (N.) v. A. (T.A.) (2003) BC CA Privity of Contract Basics Tweddle v Atkinson [1861] EWHC QB J57 (ENGLAND) Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1 (ENGLAND HL) Beswick v Beswick, [1968] AC 58 (ENGLAND) Exceptions to Privity of Contract London Drugs Ltd. v Kuehne & Nagel International Ltd., [1992] 2 SCR 299, 97 DLR (4th) Edgeworth Construction Ltd. V. N.D. Lea & Associates Ltd (1993) SCC Fraser River Pile & Dredge Ltd v Can-Dive Services Ltd, [1999] 3 S.C.R. 108: Conditions Precedent BC Law and Equity Act Turney v Zhilka, [1959] SCR Beauchamp v. Beauchamp [1973] 2 OR 43 (Ont CA) Barnett v. Harrison, [1976] 2 SCR

7 6 Introduction to Contracts -contract: an agreement to do something (or not do something) in exchange for someone else doing or not doing something -the agreement is the basis for judicial intervention (you agreed to, so the court can force you to) -goal: to put you in the position that you would be in if the contract was fulfilled -3 underpinnings: -freedom of contract (can make any contract you want does not need to be fair or wise) -objective reasonable person (what would they think the deal was about?) -contracts generate strict liability (faultless no one has to act wrongly) -essential elements: offer, acceptance, certainty, consideration Offer Offer Offer and Invitations to Treat -offer: formal offer to enter a contract -objective reasonable person will look at facts (from recipient s POV) to determine if it was an offer -what words were used? -did they act like they were bound afterwards? -look at previous dealings -invitation to treat: invitation for someone to make an offer or negotiate -quotation of price is usually just an invitation to treat -hallmark of determining if offer was made: -readiness to sell -puff: throwaway statement, sales talk no intention to be bound -two types: -bilateral (exchange of promises): both sides must accept -unilateral (exchange of an act for something else): performing act is usually acceptance Canadian Dyers Association Ltd. v Burton, (1920) 47 OLR 259 Facts: Defendant gave a price to Canadian Dyers; they wired $500 deposit; Burton s lawyer prepared a deed and gave closing date; later, Burton s lawyer returned the deposit and said there was no actual contract because there was no offer. Issue: Was there an offer? Decision: There was an offer. Defendant s wording indicated a readiness to sell he said he was prepared to accept an amount and that if it were anyone else he would charge more. The actions afterwards (lawyer preparing deed) indicated that defendant knew he had entered a contract. Pharmaceutical Society of Great Britain v Boots Court of Appeal [1953] 1 QB 401 History: Trial court said pharmacy was within guidelines. Pharmaceutical Society appealed.

8 7 Facts: Boots was a self-serve pharmacy. Customers took the item off the shelf, then purchased them at cashier under the supervision of registered pharmacist. Pharmaceutical Society claimed the customers needed to be supervised when they took item off shelf. Issue: Does the display on the shelf constitute an offer? If so, is the contract completed when the item is placed in the basket? Or when purchased at till? Decision: Appeal dismissed. Pharmacy acting within guidelines. Display of items on shelf is not an offer. The contract is completed when purchased. If placing item in basket was an indication of offer, then customer could not change their mind after selecting an item and shop keep could not negotiate or refuse to sell an item to a customer if the item was already in their basket. Ratio: Goods on display are an invitation to treat (not an offer). Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.). Facts: Carbolic placed ad that anyone who used the Smoke Ball properly and still got sick would be given 100 pounds. They mentioned that money was in the bank for this purpose. Carlill bought one, used it, and got sick. She sued to receive 100 pounds. Issue: Was this an offer? Or a puff? Can an offer be communicated to everyone? Decision: An objective reasonable person would see this as an offer. The statement about the money in the bank indicated seriousness and readiness. The offer can be interpreted as being an offer to anyone in that area of London during that year. If the offeror wants it to be more narrow, they need to narrow the conditions. Goldthorpe v Logan, [1943] 2 DLR 519 History: Goldthorpe made claim for negligence and failed. She appealed. Facts: Logan placed ad guaranteeing facial hair removal. Goldthorpe responded to ad and met with nurse practitioner. She was told again that the results were guaranteed. Her results were unsatisfactory. Issues: Was their negligence on the part of Logan that caused loss/damage? Was there a contract between Logan and Goldthorpe? Decision: No evidence of negligence. No evidence of stimulation of hair growth either. Yes, there was a contract. The nurse reiterated the guarantee. The ad contained no caveats. A guarantee is considered to be a serious promise. She should be refunded and given $100 damages. Offers - Tenders: -owner: person who owns the project being built -tenderers: person submitting bids

9 8 -tenders are complex documents (putting together and evaluating costs a lot of money) -discusses materials, who will do it, how it will be done, quality control, engineering, etc -owner asks tenderers submit their offer -owner accepts 1 offer, then they move to Contract B -tenderers sometimes have to submit a deposit -they have to be ready and willing to do the work, and if it turns out they weren t, the owner can keep the deposit (because evaluating the bid would have cost the owner money) -there is an implied obligation to only accept bids that comply with the terms of the call for tender Tenders - Contract A and Contract B: -submitting a bid is accepting unilateral Contract A, and making an offer to bilateral Contract B -so the owner has 10 Contract A s and 10 offers for Contract B -contract A is unilateral: I promise to fairly assess your tender if you submit one -submitting a tender creates a contractual agreement (to protect fairness of bidding process) -contract B: construction contract Privilege Clause: -clause that allows owner to do what they want there are many different types of clauses -gives the owner the right to accept a bid other than the lowest -example/ you can take a higher bid simply because they have a better reputation -privilege clause does not allow owner to take non-compliant bids -protects them from being sued on breach of Contract A if they accept a bid that is not the lowest Harvela Investments Ltd v Royal Trust Co. of Canada (C.I.) Ltd (1985) HL -claimed a call for tender is an invitation to treat which was removed from Canadian law after the Ron Engineering case R. (Ont.) v. Ron Engineering, [1981] 1 S.C.R. 111, SCC History: Ron sued to have deposit returned. Company was allowed to keep deposit. Ron appealed.

10 9 Facts: Ron submitted a tender to build a project. He realized he miscalculated and asked to change his offer. Company refused, took another bid, and refused to pay deposit back. Ron sued for return of deposit. Issues: 1. Was the contractor entitled to keep the deposit? 2. Is there a contract completed during the tendering process? Decision: 1. Yes. 2. Yes. Contract A forms when tender is submitted. By submitting a tender, the tenderer is accepting Contract A and making an offer to enter into Contract B. When a Contract B is chosen, all other Contract As are extinguished. Ratio: Introduced Contract A and Contract B M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 History: In SCC, on appeal from Alberta Court of Appeal. Facts: Defence invited tenders. MJB was the lowest valid bid (lowest was non-compliant). They were not chosen. The chosen bid (Sorochan) was technically non-compliant. The Tenderers document contained a privilege clause stating they did not have to choose lowest bid. MJB brought action saying they should have received the job. Issues: 1. Does a privilege clause allow the owner to disregard the lowest bid? 2. Can only complying bids be accepted? 3. Is there an implied obligation to only accept compliant bids? Decision: 1. Yes. 2. Yes. Accepting a non-compliant bid is a breach of contract A with all other tenderers. 3. Yes. The owner would not include the requirements if they did not care if the bids met those requirements. Holding: Because of the privilege clause, they did not need to give MJB the job. However, on a balance of probabilities, they probably would have. Award MJB $398, Ratio: There is an implied obligation to not accept non-compliant bids. A privilege clause does not allow the owner to accept non-compliant bids.

11 10 Double N Earthmovers Ltd. v. Edmonton (City), [2007] 1 S.C.R. 116, 2007 SCC 3 History: Facts: Edmonton put out call for tenders. Had complex requirements on age of equipment and requirement to provide serial numbers. The accepted bid had equipment that was not Double N sued saying the bid was not compliant, therefore their bid should have been accepted. Issues: 1. Can they waive non-compliance for not supplying matching licences? 2. Can they waive non-compliance for having 1979 equipment, not 1980? 3. Does the owner have an implied obligation to investigate whether bids are in fact compliant? 4. Do obligations under Contract A survive after Contract B is started with another party? Decision: 1. Yes. The lack of matching licenses was trivial non-compliance (wouldn t affect ability of bidder to perform contract B; doesn t affect fairness to other people does not give a competitive advantage; there is no fundamental difference between 1979 equipment and 1980 they cost the same and run the same) 2. The bid appeared to be compliant on its face (they promised to rent 1980 equipment). -even though the tenderer was lying, the promise made it so that the bid was technically compliant (but owner could sue for breach if desired) 3. No, there is no duty to investigate compliance (it is impractical, and bidder is legally obliged to fulfill the promise) 4. No, contract A is fully performed when Contract B starts. -Contract A is extinguished at this point. -an unsuccessful builder is not privy to Contract B -this is necessary to protect freedom of contract need to be able to negotiate contract and change things throughout Canadian Pacific Hotels Ltd. v. Bank of Montréal, [1987] 1 S.C.R test for implying obligation into a contract -based on an industry custom -based on the nature of a specific contract -based on intentions of the parties (from the POV of the reasonable objective person) -is it obvious to the parties that something was part of the deal, even if it was not mentioned? (what would a reasonable person think?) -does the deal make business efficacy? Sometimes this can be a basis to imply obligation. Communication of an Offer: Blair v Western Mutual Benefit Association, [1972] 4 WWR 284 Facts: Blair worked there for 30 years. She was asked to transcribe the minutes of a meeting and it said that she would receive $8000 retirement pay. This information was not given to her as a promise. They refused to give it to her when she retired. She sued. Issues: Was the offer communicated to Blair? Decision: No, it was not communicated to her, therefore the company does not have to pay. When it was communicated to her, it was not intended to be an offer, therefore not capable of being accepted. There is no evidence she resigned because of the belief she would be paid. There was no change in existing legal relationships. Ratio: For an offer to be valid, it must be communicated to the person in a way that would suggest the communicated offer is capable of being accepted.

12 11 Williams v Carwardine [1833] EWHC KB J44 Facts: Carwardine was murdered and it was determined that Williams was at his home the evening he died. A handbill was publishing offering a reward in exchange for information. Mary was beaten and thought she would die, so to ease her conscience, she made a statement which led to the conviction of the murderer. Issue: Was she induced by the handbill to provide the information? And therefore forming a contract? Decision: Her ulterior motives were irrelevant. The offer was communicated to her as an offeree; she did the act, therefore she was completing the unilateral contract. This was a valid contract; she should be rewarded. R v Clarke (1927) 40 CLR 227 Facts: Clarke was put on trial as an accessory to murder. Clarke gave essential information to the Crown that allowed them to prosecute 2 criminals. After giving the information, someone told him to obtain a reward for giving information. Issues: Was there a contract between Clarke and the Crown? Decision: There was no contract because there was no consensus of mind because Clarke did not mentally agree to the offer. He did not give the information in order to receive the reward, he was protecting himself from a murder charge. Ratio: In order to accept a contract through performance, you must intend to accept the offer (and must know it exists) Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.). Facts: Carbolic placed ad that anyone who used the Smoke Ball properly and still got sick would be given 100 pounds. They mentioned that money was in the bank for this purpose. Carlill bought one, used it, and got sick. She sued to receive 100 pounds. Issue: Was this an offer? Or a puff? Can an offer be communicated to everyone? Decision: An objective reasonable person would see this as an offer. The statement about the money in the bank indicated seriousness and readiness. The offer can be interpreted as being an offer to anyone in that area of London during that year. If the offeror wants it to be more narrow, they need to narrow the conditions. Example: If you were out of the country when the ads were posted and they were removed before you returned, you cannot be accepting the contract. You have to be aware of the offer and done an act in response to the offer.

13 12 Termination of an Offer: Revocation -there is no binding promise to keep an offer open (unless there is a deposit) -you are allowed to revoke it at any time (expressly or impliedly) -revocation MUST be COMMUNICATED Dickinson v Dodds (1876) 2 Ch D 463 Facts: Dodds made offer to Dickinson and promised to keep it open until Friday; before Friday, Dodds sold to Alan; Dickinson found out about the sale, and tried to then accept the offer. Issues: Was Dodds obligated to keep the offer open? Decision: The promise to keep the offer open was non-binding. He was allowed to revoke. He impliedly revoked the offer by selling it, and the revocation was indirectly communicated to Dickinson through a 3 rd party. Ratio: Offers can be revoked, as long as they are communicated. Byrne v. Van Tienhoven (1880) C.P.D. 344 Facts: Tienhoven mailed offer to sell boxes of plates; Byrne accepted immediately Oct 11; Tienhoven sent revocation on Oct 8, which was not received until Oct 20; Byrne brought action for breach of contract for failure to deliver. Issues: 1. Does the withdrawal of an offer have any effect until it is communicated? 2. Is mailing the withdrawal considered communication? Or only when it is received? Decision: Judgement in favour of Byrne. There is a binding contract. 1. Uncommunicated revocation is not considered a revocation. 2. There is no indication that the parties agreed that mailing revocation would be sufficient. Therefore, a binding agreement was entered into on October 11 and revocation was too late. Ratio: In order for mailing a revocation to be considered legally acceptable, there must be express of implied agreement that it is sufficient. Errington v Errington Woods [1952] 1 KB 290 Facts: Father offers to purchase house on the condition that daughter/son-in-law pay off the mortgage, then he would transfer the house to them. Couple made payments; father dies; his widow wants possession of the house (tries to revoke the offer). Issues: Can the widow revoke the offer even though steps have been taken towards acceptance? Decision: Contract is valid and cannot be disregarded. This is a unilateral offer with multiple steps of performance. As long as they have started performing, and continue to perform reasonably, it cannot be revoked. Ratio: Once you enter into multi-step performance, you must be given time to get to the acceptance stage. Revocation cannot occur if performance is being performed.

14 13 Dawson v. Helicopter Exploration, [1955] S.C.R. 868 Problem: Dawson wanted to accept, but couldn t without their cooperation. Facts: Heli Exploration contacts Dawson and wants him to take them to his land and if they like it, they will develop it and give him 10%. Dawson says to tell him when they find a pilot, and he will leave work. Dawson finds out they got someone else to take them there and are developing. Issues: 1. Was it a bilateral or unilateral contract? 2. Was there a valid offer and acceptance? Decision: Judgement in favour of Dawson 1. Could be interpreted as bilateral (to benefit Dawson) or unilateral (to benefit Heli). If it was bilateral, acceptance would be when Dawson promised to go whenever they were ready this would mean it had been accepted, and revocation was too late. If it was unilateral, acceptance would be when Dawson went with them this would mean there was no acceptance, and the revocation would be valid. In this case, it is bilateral. 2. It was bilateral, therefore the acceptance occurred when Dawson agreed to go with them. There was valid offer and acceptance, so revocation was too late. Termination of Offer: Rejection -Counter offer: type of rejection -Mere inquiry: asking a question about or discussing the offer not a rejection -hallmark of a counter-offer: making a new proposal Livingstone v Evans (1925) Alberta SC Facts: Evans agent wrote to Livingstone offering to sell land for $1800. Livingstone wrote back saying Send lowest cash price. Will give $1600 cash. Evans agent responded saying he would not reduce price. Livingstone immediately accepted $1800 offer. Issues: Was the plaintiff s counter-offer a rejection of the defendants offer? Decision: There was a binding contract to sell. Specific performance ordered. Livingstone s telegram was a counter-offer. BUT the defendant s response that he would not reduce the price meant he was still standing by [his original price] and, therefore, still open to accept it. The refusal to lower price was an implied new offer from Evans. Termination of an Offer: Expiration of Offer -offeror can stipulate how long offer is open for -if this is not specified, the offer is open for a reasonable about of time -context; nature of goods; market volatility (fluctuation of product value); words and conduct of parties (indicators of if they want deal made quickly or slowly)

15 14 Barrick v. Clark (1951) SCR 177 History: Clark wanted specific performance; trial: dismissed; Sask C of A: reversed decision; Barrick appealed to SCC. Facts: -Barrick is executor of EJ Barrick estate. -Oct 30: Clark offered to purchase for $14,500 -Nov 15: Barrick said we will accept 15,000 cash. If you agree send $2000 deposit -Nov 20: letter was delivered, but he was out of town for 10 days and wife asked them to keep deal open until they heard from him -Dec 10: Clark agrees to pay 15,000 and sends $2000 -But on Nov 30 th Hohmann offered $15,000 cash -Dec 3: Barrick accepted -when Clark wrote to Barrick on Dec 11, barrack responded on the 12 th agreeing to return $2000 -Clark wanted specific performance Issues: Did Clark communicate acceptance within a reasonable amount of time? Decision: Time limit was not specified. Have to look at individual circumstances farm land does not fluctuate in price, and the letters indicated a desire to close quickly. Therefore, the acceptance was not sent in a reasonable amount of time. Judgement for Barrick. Ratio: To determine how long offer should remain open: context; nature of goods; market volatility (fluctuation of product value); words and conduct of parties (indicators of if they want deal made quickly or slowly). Manchester Diocesan Council of Education v. Commercial & General Investments LTD (1969) Ratio: If you don t accept it within a certain amount of time, the court will imply that you rejected it. Every offer has an implied term that it will not remain open forever. Unilateral contract: accepted through an act Bilateral contract: accepted through a promise Acceptance Livingstone v Evans (1925) Alberta SC Facts: Evans agent wrote to Livingstone offering to sell land for $1800. Livingstone wrote back saying Send lowest cash price. Will give $1600 cash. Evans agent responded saying he would not reduce price. Livingstone immediately accepted $1800 offer. Issues: Was the plaintiff s counter-offer a rejection of the defendants offer? Decision: There was a binding contract to sell. Specific performance ordered. Livingstone s telegram was a counter-offer. BUT the defendant s response that he would not reduce the price meant he was still standing by [his original price] and, therefore, still open to accept it. The refusal to lower price was an implied new offer from Evans.

16 15 Battle of Forms If multiple forms are exchanged during negotiations, which form is supreme? Global approach: if you want an unusual, important clause to be part of the deal, you must bring it to the other party s attention. Butler Machine Tool Co. v. Ex-Cell-O Corp [1979] 1 W.L.R. 401 Procedural History: Butler sued to receive extra money. Butler won. Ex-Cell-O appealed. Facts: Butler offers to sell machinery, and includes a price escalator clause in the document. Ex-Cell-O accepts, but says they will buy on their own terms. Butler signs contract (without price clause), then attaches a letter saying they are doing the deal based on the terms they already mentioned. When machinery is delivered, Butler asks for additional money according to price variation clause. Ex-Cell-O refuses to pay and sues. Issue: On whose terms was the contract made? Decision (Denning): Appeal allowed. Judgement for Ex-Cell-O. Sometimes the first shot wins, when the seller sends an offer with specific terms and conditions, BUT usually the last shot wins. Sometimes neither shot wins all the shots need to be considered. In this case, we need to look at all shots. Says the act of attaching the letter did not adequately bring that clause to their attention and therefore there was no meeting of the minds on that clause. Ratio: In a battle of the forms situation, the Denning approach (look at all shots) is usually taken. Any clear changes need to be brought to the other party s attention. Clauses will not be considered part of the deal if they were not brought to the attention of the other party. Tywood Industries LTD. v. St. Anne-Nackawic Pulp and Paper Co. LTD. (1979), 100 D.L.R.: Issue: Under whose conditions was the contract formed? Ratio: You cannot sneak terms into a contract with notifying other party. Shrink Wraps ProCD v. Matthew Zeidenberg and Silken Mountain Web Services Inc. 86 F.3d 1447 (US CA 7 th Cir., 1996): Facts: ProCD sells SelectPhone database. They sell to private customers for $150, and commercial users for more. Every consumer copy has a license agreement inside shrink-wrap and an on-sceen license agreement when program is loaded says it can only be used for non-commercial purposes. Zeidenberg bought consumer copy and used for commercial re-sale. Issues: Do buyers of software have to obey the terms of shrink-wrap licenses? Decision: terms were binding. Injunction ordered. Two parties cannot agree to something that one party is unaware of, but one of the terms Zeidenberg agreed to upon purchase was that the transaction was subject to a licence. He is not bound by purchasing the software, but they are bound when they click I agree when loading software. If he didn t like the terms, he could return product.

17 16 Acceptance through Positive Conduct and Acquiescence: -acquiesce: allowing conduct to occur without protesting -example/ allowing the boats to continue to be on standby without protesting -positive conduct: using something supplied to you -example/ using the boats -easier to prove with positive conduct -trying to prove acceptance through acquiescence is much more difficult -deceptive acquiescence: deceived the other party into thinking contract was accepted -proving that someone doing nothing constitutes acceptance -generally speaking, silence doesn t constitute an offer (Felthouse), but there are so exceptions (Saint John Tug Boat) Acceptance through Silence Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.). Facts: Carbolic placed ad that anyone who used the Smoke Ball properly and still got sick would be given 100 pounds. They mentioned that money was in the bank for this purpose. Carlill bought one, used it, and got sick. She sued to receive 100 pounds. Issue: Was this an offer? Or a puff? Can an offer be communicated to everyone? Decision: An objective reasonable person would see this as an offer. The statement about the money in the bank indicated seriousness and readiness. The offer can be interpreted as being an offer to anyone in that area of London during that year. If the offeror wants it to be more narrow, they need to narrow the conditions. Dawson v. Helicopter Exploration, [1955] S.C.R. 868 Problem: Dawson wanted to accept, but couldn t without their cooperation. Facts: Heli Exploration contacts Dawson and wants him to take them to his land and if they like it, they will develop it and give him 10%. Dawson says to tell him when they find a pilot, and he will leave work. Dawson finds out they got someone else to take them there and are developing. Issues: 3. Was it a bilateral or unilateral contract? 4. Was there a valid offer and acceptance? Decision: Judgement in favour of Dawson 3. Could be interpreted as bilateral (to benefit Dawson) or unilateral (to benefit Heli). If it was bilateral, acceptance would be when Dawson promised to go whenever they were ready this would mean it had been accepted, and revocation was too late. If it was unilateral, acceptance would be when Dawson went with them this would mean there was no acceptance, and the revocation would be valid. In this case, it is bilateral. 4. It was bilateral, therefore the acceptance occurred when Dawson agreed to go with them. There was valid offer and acceptance, so revocation was too late.

18 17 Felthouse v Bindley (1862), 11 CB (NS) 869, 142 ER 1037 (Ex. Ch.) Facts: Uncle Felthouse discussed buying Nephew Felthouse s horse; there was a miscommunication about currency; Uncle sent counter-offer letter Jan 2 offering to split the difference and said if he agreed that he did not need to respond and should just send the horse; Nephew did not respond; Feb 25 Nephew had auction and told auctioneer to hold the horse; Auctioneer (Bindley) forgot and sold the horse anyway; Feb 27 Nephew wrote uncle and said horse was sold by Bindley; Uncle sued Bindley Issue: Can you accept an offer by silence? Decision: Nephew had not accepted the offer (counter-offer offering to split difference); Bindley cannot be held accountable for selling the horse because it was still the nephew s property; Silence is not acceptance. Ratio: Silence is not acceptance. Saint John Tug Boat Co. v. Irving Refinery LTD [1964] Facts: Irving contracted Saint John to supply 2 smaller tug boats and to keep 1 larger (Rockswift) on standby; they would pay $450/day even if they didn t use Rockswift; both parties agree there was verbal agreement to start on June for 1 month; Rockswift was on standy and they were billed monthly until February 1962; Irving refused to pay from July onwards because they said they never agreed to extend the contract. Issues: Did Irving s conduct constitute a continuing acceptance of an offer? Decision: Damages awarded to Saint John. Iriving must have known the boat was on standby, so they must have known Saint John expected to be paid. Positive conduct: they used boat occasionally; they protested the 10% tariff in contract, but didn t protest the entire contract Ratio: Conduct can prove acceptance through silence. Conduct must be fairly significant they protested an aspect of the contract. Acceptance - Offeror s Control Eliason v Henshaw (1819) US Facts: Eliason asked acceptance to be sent by wagon to Harper s Ferry. Henshaw sent acceptance by mail carrier to Georgetown. Henshaw sued for non-performance. Issues: Was the offer accepted in the right time, place, and manner? Decision: Appeal rejected. There was no acceptance not accepted within proper time, not accepted at right place, and not accepted in correct manner. Ratio: Offeree must follow the terms of the offeror in order for the acceptance to be valid and binding. Communication of Acceptance: Mail and Instantaneous Modes Household Fire and Carriage Accident Insurance Co v Grant (1879) Facts: Grant offers to buy shares; Household Fire sent notice of allotment of shares in the mail; Grant never received it; Household Fire went into liquidation and liquidators came after Grant for money; Grant refused to pay and said that he was not a shareholder. Issues: Was the mailing of the letter of allotment enough to constitute acceptance? Decision: The contract was binding. Grant was a shareholder. Acceptance is effective when put in the mail because the post office is an agent for both sides (so you are providing their agent with acceptance when you bring it to the post office). Ratio: Acceptance can be sent the same way the offer was sent (if offer is sent by mail, acceptance can be sent by mail).

19 18 Holwell Securities v. Hughes [1974] England Facts: Hughes issued a grant to sell a property; it contained a clause saying there must be notice in writing within 6 months to exercise the option; Holwell sent a letter exercising the option, but it was lost in the mail. Issue: Was the option to purchase exercised when Holwell sent the letter (even though Hughes did not receive it)? Decision: Usually the post-box rule applies, but in this case it can be overridden because the seller wanted notice in writing. Notice means knowing in Latin so they had to make it known in order for the option to be properly exercised. Rule can also be overridden in the application would be absurd or grossly inconvenient (example/ if you stipulated you wanted it to be sold within 12 hours, it would be obvious that you did not want the postbox rule to apply). Ratio: Post-box rule can be overridden in some circumstances. Option: the right by the potential buyer to have the offer remain open for a period of time -If the option is exercised according to its terms and conditions, a binding contract is created. -The seller must sell and the buyer must buy. Brinkibon LTD v Stahag Stahl Und Stahlwarenhandelsgesellschaft mbh [1983] (England) Issues: What does receive mean when it comes to instantaneous acceptance ( , etc)? When the computer gets the message? Or when the offeror reads it? Decision: Contract is complete when acceptance is received. Need to look at 3 criteria to determine what received means: intentions of the parties; business practices; fairness of where the risks should lie. Certainty of Terms no. 1 Certainty: -we need to know what the parties are agreeing to -necessary to adjudicate and to determine remedies -3 elements that require certainty: -subject matter -price -date of performance -types of uncertainty: vagueness and incompleteness Vagueness Vagueness: -courts need to detmine if they can give the word meaning, or if it needs to be thrown out -need to find definite meaning -test for finding definite meaning: -look at contract wording; look at industry custom; look at whether parties intended to be bound

20 19 R v CAE Industries Ltd., [1985] 5 WWR 481, 20 DLR (4th) 347 Facts: CAE is contemplating buying gov t base; they need 700,000 hours or more to make money; gov t promises them 50,000 hours and says they will use best efforts to find the extra hours; CAE sues stating gov t didn t use best efforts; gov t says best efforts is too vague Issues: Did they breach contract by failing to use their best efforts to find the 700,000 hours? What is best efforts? Decision: Best efforts clause is not too vague given the circumstances (serious matter, serious parties, intention), and is upheld. Best efforts means: best endeavors; leaving no stone unturned. Must be able to find a definite meaning : -meaning from the objective reasonable persons standpoint -look at: wording, industry customs, parties intentions to be bound Incompleteness and Agreements to Agree Incompleteness: there are missing terms Agreements to agree: contract is made based on the idea that they will determine an aspect of it later Giving meaning to reasonable price: court has to be able to give meaning to what a reasonable price is if they want to save the contract subject matter matters (May: surplus army tents are hard to put a price on; Foley v Classique: reasonable gas prices can be determined) In BC, agreements to agree are not binding but this is different if it falls under the Sale of Goods Act May & Butcher Ltd. v R, [1934] 2 KB 17 Facts: Buying used surplus army tents; agreed on everything except for price; contract includes an agreement to agree on price and contains an arbitration clause Issues: Is an agreement to agree acceptance? Decision: Price is an essential element of contract, so there needs to be a clear expression of price for contract to be valid. Ratio: Agreement to agree generally not valid. Main elements of a contract cannot be left uncertain (based on agreement to agree) price, subject matter, and date of performance. Hillas & Co., Ltd. v Arcos, Ltd. (1932) Facts: Contract included 3 aspects of alleged uncertainty there was no date of delivery; said they will purchase 100,000 standards ; said they will pay 5% lower than price list. Issues: Is this contract certain and valid? Decision: Contract valid. There was clear intention to be bound, and all terms could be given a definite meaning. -Delivery date: Not uncertain time frame can be implied. Parties obviously intended a reasonable time. There is custom standard that indicates it would be received in timber season. -100,000 standards: Not uncertain. It is obvious it would be Russian standards (particular class of wood). -Price list: Not uncertain. Russian gov t has a price list for timber, so it has a definite meaning. Ratio: In order to be a certain and valid contract, the date, price, and subject matter must be specified.

21 20 Foley v Classique Coaches Ltd. [1934] 2 KB 1 *(opposite conclusion to May v Butcher so had to distinguish the case) Facts: Classique agrees to sell Foley petrol station if Foley will keep buying gas from them for 3 years; the price is to be agreed upon from time to time ; there is an arbitration clause if disagreement arises about price. Issues: Does the absence of an exact price invalidate the contract? Decision: Agreement is valid. Arbitration clause is valid. -Case should be decided like Hillos (not May) because there is a clear intention to contract. -In this case, the price of gas was certain it can be compared to other gas stations. -Business efficacy: they sold the station cheaper based on agreement to buy gas for 3 years if the courts removed the selling gas aspect of the contract, then it would be imposing an unfair contract on seller (make it so they sold gas station for cheaper for no reason). Ratio: Sometimes essential terms can be left up to an agreement to agree if there is an external market measure; if it is fair; if intention is clear. Sale of Goods Act-Ascertainment of Price, ss. 12, 13 **** SUPREMACY OVER COMMON LAW -applies to goods sold in BC (not services or land) -deals only with the assessment of price -section 12: -agreements to agree are not void 1. price may be set by: a) contract; b) left to be set as agreed; c) determined by course of dealing 2. if price is not determined, buyer must pay reasonable price 3. reasonable price is dependent on circumstances -section 13: 1. can agree to sell on the terms set by third party, but if the 3d party doesn t, the agreement is voided 2. the agreement is not voided under s 1 if the goods have been delivered 3. if the 3 rd party is prevented by either party from making a valuation, the party not in fault may bring action for damages against party in fault Certainty of Terms no. 2 Agreements to Negotiate If court decides an agreement to negotiate is binding, all they can do is tell the parties to sit down and negotiate in good faith o If the negotiations are unsuccessful, they have discharged their duty and the contract is done Bhasin v. Hyrnew, 2014 SCC 71: Facts: Bhasin sold investment products for Can-Am. They had agreement that auto-renewed for 3 year terms unless either party gave notice to the contrary. Can-Am started restricting plan to merge Bhasin s agency with Hyrnew s agency (without Bhasin s knowledge). Hynrew was selected to audit Bhasin s records and Bhasin refused to let him. Can-Am gave notice of non-renewal and Bhasin sued. Issues: Did Can-Am breach their agreement when they failed to perform honestly? Ratio: There is an implied obligation to perform all obligations in good faith (this means absence of bad faith can t lie/deceive).

22 21 Empress Towers Ltd. v. Bank of Nova Scotia [1991] BCCA **Most recent and prominent Facts: Bank of NS rented from Empress. If tenant wished to renew lease, they could do so at the market rental prevailing as mutually agreed by both parties. Bank proposed a new price ($5400) and Empress did not accept/reject under the day before the lease expired said $5400 was acceptance but they wanted $15,000 outright and to switch to month-to-month lease. Issues: Did Empress have the duty to negotiate in good faith? Did they fulfil this duty? Analysis: There is an implied obligation to negotiate in good faith (especially in the case of renewal clauses because you usually pay slightly more for the right to renew). Empress did not negotiate in good faith. If it simple renewal at market rate, the court can usually put a price on it but as mutually agreed upon changes it. Decision: Empress did not negotiate in good faith. Judgement for Bank. Ratio: 1. Courts will strive to uphold agreements to negotiate if there appears to be a strong intent to contract. 2. When sophisticated commercial parties are involved, courts are inclined to believe serious intent is present. 3. In agreements to negotiate between commercial actors, there are two implied obligations: to negotiate in good faith; agreement with not be unreasonably withheld. (However, there is no obligation to agree.) Mannpar Enterprises Ltd. v. Canada (1999) BCCA Facts: Crown gave Mannpar permit to remove and sell sand/gravel on Indian Reserve. Clause 7 said contract would run for 5 years, then could be renewed if performance was satisfactory and royalty/rental rates did not decrease. Both parties knew it would take 10+ years. Crown refused to negotiate and contract expired. Mannpar sued for damages. Issues: Was there an implied term to negotiate in good faith? Decision: Duty to negotiate in good faith cannot be implied the language in the contract showed Crown had intention of ensuring scope was broad enough to refuse to renew due to requirement to maintain a fiduciary duty with Band. Ratio: If there is reference to a market measure, duty to negotiate is sometimes enforceable. If not, it isn t. Wellington City Council v. Body Corporate (2002 NZ CA) Ratio: There is a lack of certainty in agreements to negotiate in good faith because good faith is subjective and cannot be measured. Anticipation of Formalization Anticipation of formalization: agreeing on things with the intention of formally writing contract later Can be binding if all the essential terms have been settled on. Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991 Ont CA) Facts: they had discussed elements of a contract and intended to formalize it in writing; before that was done, one party decided not to go through with it. Decision: There wasn t agreement on all important elements therefore it was not binding. You can only contract now to contract later if all elements are decided and the later events are simply reducing the agreements to writing.

23 22 Intention to Create Legal Obligation **this is the first thing to consider on an exam Hallmark: Would an objective reasonable person think they could sue if the other party did not follow through with their promise? Spouses: If there is a signed, written, and witnessed agreement between spouses/former spouses to divide property under s 92 of the Family Law Act, then the courts do not look at intentions. o If it is missing one of the elements (written, signed, witnessed), then you move to the precedent set in Balfour Balfour v. Balfour [1919] ENG CA Facts: Agreement was made in non-turbulent times to give the wife an allowance while husband was at sea. Several months later, husband asked for divorce. She wants the money. Issues: Is an agreement between a husband and a wife a contract? Analysis: Decision: No contract. No intention to create legal obligation. Ratio: In family relations, there is a presumption against serious intention to create legal obligation (usually motivated by affection, not intention to create binding deal). Therefore, the wife would need to prove the husband had intention. Rose and Frank v. JR Crompton Bros. (1923) England CA Facts: both parties signed contract saying the arrangement was not a legal agreement, subject to legal jurisdiction in court Decision: The lack of intention was explicitly stated, therefore it is not binding. Ratio: In commercial relationships, there is a presumption that this is an intention to create legal relations (unless it is explicitly stated otherwise). TD Bank v. Leigh Instruments Ltd. (1999 On CA) Facts: Leigh is owned by Plessey. TD is lending money to Leigh (which is financially struggling) and asks Plessey for assurance that they will pay them back if Leigh goes under. Plessey gives comfort letter saying Leigh will be managed in such a way as to meet their financial obligation. Leigh went bankrupt and TD wants to go after Plessey for money. Issues: Is a comfort letter binding? Did Plessey intend to create legal obligation with TD? Analysis: Decision: Not binding. No intention they did not say they would pay it back and both companies are commercial entities which should be familiar with comfort letters. Ratio: Comfort letters are usually deliberately designed with the intention NOT to create an enforceable contract. Canadian Taxpayers Federation v. Ontario (Minister of Finance) (2004) (Ont Sup. Court) Facts: Mr McGuinty said during an electoral campaign that he would not raise the taxes. He then raised the taxes and the Taxpayers Federation sued. Issue: Did he intend to be bound? Was it binding? Decision: No. A reasonable person would know that he was not intending to create a binding contract.

24 23 Family Law Act SBC 2011 Section 3(1): person is a spouse if they are married (or formerly married); or have been living in a marriage-like relationship for 2 years or [except for parts 5 and 6] has a child with the person Section 3(2): includes former spouse Section 3(3): starts on date they began living together or date they got married (whichever is earlier) Section 92: spouses can make an agreement respecting the division of property and debt Formality (Seal and Requirement of Writing) Seals are no longer necessary. If there is a seal, then consideration is not a requirement. Contracts do not need to be written (except for land and guarantees Law and Equity Act) Royal Bank v. Kiska (1967 Ont CA) Facts: There was no gummed wafer on the guarantee, but they printed seal and Kiska signed beside it. Document also said signed, sealed, and delivered and make other references to seal. Issues: Was this a proper seal? If not, was there consideration? Decision: This is not a proper seal. But there was consideration. Ratio: Seal must be a gummed wafer (something stuck on). Dynamic Transport Ltd. v. O.K. Detailing Ltd. (1978 SCC) Discusses when contract does not describe the property involved Bleakly and Smith: House number was not included, but he only owned 1 property on that street so it was obvious what he was talking about. Tourney and Zaihla: Description of property involved confusion over whether it was 60 acres (minus 2) or 65 (minus 2). Not clear enough. Law and Equity Act (B.C.) s. 59 (*) **just for sale of land ***just because you satisfy the Law of Equity Act, this does not mean you have a contract (it is necessary, but not sufficient) A contract for sale of land is not enforceable unless 1 of these things happens: 59(3) (a) contract must be in writing, signed and have a reasonable description of the subject matter (b) person denying contract did something that indicates a contract, or they acquiesced OR (c) reliance would lead to inequitable result 59(4) payment counts as positive evidence that contract exists Guarantee: promise to be liable if another defaults or does not perform 59(6) a guarantee is not enforceable unless: (a) Signed by guarantor or indemnitor (or their agent) (b) Guarantor or indemnitor has performed act that indicates guarantee exists