Model exam IRAC method of exam technique Issues Outline the issues that you are going to discuss Rules Define the legal rules that are relevant to the question Application Apply the legal rules to the facts of the question (this is the hard part!) Conclusion Usually in the form of an advice to your hypothetical client. Always use your reading time wisely to PLAN YOUR ANSWER before writing. This is of upmost importance as it will help you clarify your thoughts and ensure that you avoid following exam strategies that students commonly resign themselves to: i) the kitchen sink i.e spilling all of your knowledge that is vaguely related to the topic onto the exam paper and hope for the best. ii) the garden path i.e going off on an irrelevant tangent Remember that the APPLICATION IS THE MOST IMPORTANT SECTION of your answer and should take up the bulk of your time. The actual conclusions you reach are often superflous. Rather your marker will be most interested in how you arrived at your conclusion.
Each answer should include: An Introduction - Flag the issues that will arise in your answer. A Body - This should contain your answer to the issues flagged in the introduction. A Conclusion - A concise answer to the question based on what you have argued in the body of the essay. For example - Tim will not be able to lawfully terminate the contract. However, he will be able to successfully argue that he was induced into the contract as a result of unconscionable conduct. When considering any possible actions in the answer, first look to see if there is anything explicit in the contract that you can rely on (e.g. written and oral terms). If there is nothing explicit in the contract, consider whether you can rely on any implied or incorporated terms. If you cannot rely on these, then examine whether you can use anything outside of the actual contract (e.g. promissory estoppel, part performance, undue influence, misrepresentation, misleading conduct). Use headings frequently to structure an answer. Use the language of the question. Be as comprehensive as possible when answering a question - canvas all possible answers. An example of this is stating that Although a Court would likely find that termination was justified because of breach of an essential term, it is also necessary to consider whether termination was justified because of repudiatory conduct. Don t merely give an answer for whatever cause of action will be most likely to succeed.
SAMPLE QUESTION: Here is a distinction-level model answer for a Contracts problem. Contracts is a subject typically taught in the first or second year of a law degree. This exam answer is an excellent example of the IRAC method, an exam technique which is espoused by law lecturers around the country. Try to answer the question yourself first before looking at the answer. Don t worry if you didn t come up with the same amount of text as is in the answer below. The student who wrote this answer had a considerable amount of time in which to write. Good luck! Sam, a self-taught wiz-kid, recently started a small business selling natural health products in Canada. Having witnessed the start of the popular obsession with organic and natural products, he decided to tap into this market. He had convinced his father to lend him $10,000 to start up his business. Knowing that his business idea was sure to be a success, Sam looked into possible suppliers for his natural health products. He contacted Mike who is a salesman for NaturalWays, a specialist supplier of all things natural and organic, including food and health products. Sam asked Mike whether he would be able to fill an order for a regular supply of PP22, a highly sought after brand of tea. Sam emphasized to Mike that this brand of tea needed to be 100% organic and individually packaged and suggested that $400 for 200 cartons would be something he would accept. He also noted that shipment must be sent out every Monday unless otherwise indicated by Sam. Mike, interested in Sam s endeavor, told Sam that he had to do some inventory checks and so forth and would get back to him as soon as possible. Three weeks passed without a word from Mike. Eager to get his business up and running, Sam gave Mike a call to inquire into whether Mike could supply him with
the requested goods. Oh ya silly me it completely slipped my mind said Mike, responding to Sam s inquiry. Sure no problem, I can supply what you need said Mike. However, we are closed on Mondays so the goods would have to be shipped out on Tuesdays. How does $500 per 100 cartons of PP22 sound? asked Mike. Ummm.geee..I don t know. That might throw off my entire business scheme I guess it could work, answered Sam. Mike then suggested to Sam that they both agree to do this but decide on the exact terms when Sam had worked out the precise details of his business plan, since he had sounded a bit confused, uncertain and overwhelmed on the phone. Sam agreed. Over the next several days, Sam s friend Helen gave Sam some inside info about a really cheap supplier of bulk natural health products located in Mexico. Eager to get a good deal, he called up the supplier, Ben at HHP, and asked if him if he could provide him with regular supplies of PP22 for 12 months. Ben accepted without hesitation, offering a price of $200 per 100 cartons and promising that our PP22 products are made with 100% organic substances. Sweet deal Sam replied, that is exactly what I need. Both parties agreed that 100 cartoons of PP22 would be shipped out every week on Monday for a period of 12 months. Over the next several months, Sam had been receiving a regular supply of PP22 from Ben and was generally satisfied with everything. He had also hired a fulltime secretary and customer service employee, Tom, who was responsible for filling customer orders. Business was thriving for Sam (although competitors were starting to pop up in the area) and he needed to hire a full-time staff. He was really impressed with Tom s work and offered him the position of Vice- President of Sam s company for a period of 4 years with renewal possible on the expiration of the contract. However, one of the conditions noted in the contract was that if Tom ever left Sam s company he would not work for any of the company s competitors in Canada for 10 years following his exit from Sam s company. Hesitant at first, Tom accepted the offer, knowing what position of Vice-President would do for his resume!
Over the last couple of months, Sam had been receiving complaints from his customers as to the quality of the PP22 tea. Sam soon found out that HHP had been shipping copy-cat brands of PP22 (which are not 100% organic) to Ben all along in order to provide for its other, more prestigious and loyal customers with the top notch stuff and at a higher profit. In addition, HHP has been sloppy on the shipping arrangements they agreed to, shipping only 50 cartons of PP22 and every other week on Thursdays rather than every week on Mondays. To top off Sam s problems, his company has started operating at a loss. He is losing customers to competitor companies and the decreasing quality of his products have really decreased customer purchases. Stubborn as Sam is, he is determined to keep his business up. Sam visits his local bank to inquire into the possibility of mortgaging his house to the bank in order to obtain money to keep his business going. The bank manager, whom Sam knows quite well and with whom he has been doing his day to day banking with for the past 10 years, proposes to loan Sam the money he needs if Sam gives a guarantee of $100,000 which is more than the value of his house. Being obsessed with ensuring his business stays afloat and not thinking of anything else, Sam accepts, saying I trust you and signs the required documents without any independent advice. Sam recently received a phone call from Mike at NaturalWays. Mike is looking to conclude the terms to their agreement, as they had agreed to enter into a contract several months ago. Sam, knowing now he cannot afford to order regular supplies from Mike, tells Mike that he has changed his mind and no longer wishes to retain Mike s services. Mike is furious! We had a deal, he says. Sam is also caught up in the problems associated with his supply contract with Ben in Mexico. He thinks Ben is in breach of their agreement and wants to terminate their contract. Further, Ben had promised him that the PP22 was made of 100% all natural products, which in fact were not. Sam believes that this fact,
along with Ben s tardy shipping habits have contributed to the decrease in customer demand. Finally, Sam s father s estate is looking to collect the $10,000 Sam s father had loaned Sam. However Sam does not believe he owes them anything. A few weeks after Sam s father had lent him the money, he had promised to forgive the debt as long as Sam stopped complaining and nagging to him about how he had distributed his estate in his will. Sam believes he has kept up his end of the bargain and consequently believes the debt must be forgiven. The bank manager is also looking to recall the $100,000 loan. Sam s newly promoted Vice- President, Tom, is also fed up with all the drama surrounding the business. Tom has told Sam that he has been offered a position of President at NatureVilla one of Sam s major competitors for more money and less drama. He quits, leaving Sam furious. Sam asks for your advice regarding the issues noted above. Specifically, he is looking to determine: (1) Whether he will be required by law to re-pay, to his father s estate, the $10,000 his father loaned him but subsequently forgave? (2) Whether he will be required by law to enter into a contract with Mike in regards to supplies of PP22 for his business? (3) Whether he can obtain any recourse against Ben for what he believes to be a breach of their contract? (4) The legality of the $100,000 loan from the bank to Sam? (5) Whether Sam can enforce the employment contract against Tom?
Issues At issue are a number of relationships so it is best to deal with each relationship separately. It is very important that the first thing to do in responding to an exam question is to spot the issues and organize the information accordingly. Below is a list of issues that should be dealt with in this fact pattern: (1) Sam vs. his father s estate (i) Is there a valid contract? Potential issues: o Offer & Acceptance o Consideration (2) Sam vs. Mike (i) Is there a valid contract in regards to the terms of the agreement? Potential issues: o Offer & Acceptance Intention to be legally bound Lapsed Offer Meeting of the minds on material terms Acceptance of counter-offer o Enforceability of Agreement to Agree (3) Sam vs. Ben (i) Is there a valid contract? Potential issues: o Offer & Acceptance
Intention to be legally bound Meeting of the minds on material terms Misrepresentation (ii) If so, was there a breach? (iii) If so, was the breach fundamental? (iv) Remedies Termination of the contract Damages (4) Sam vs. the bank manager (i) Is there a valid contract? Duress Undue Influence (5) Sam vs. Tom (i) Is the employment contract valid? Against public policy Rules and Application
A. Sam vs. his father s estate At issue here is whether the second agreement between Sam and his father is a valid contract. If so, Sam will not have to re-pay the $10,000 originally loaned to him by his father. The subsequent agreement between Sam and his father was that his father would forgive Sam s $10,000 debt as long as Sam stopped complaining and nagging at him about the particulars in his will. Since there are no suspicious facts that suggest problems with the formation of the contract (i.e. offer and acceptance, consent, intention to be legally bound) we can move on to what seems to be the main issue in this alleged contractual relationship: consideration. In order for a contract to be valid, there must be sufficient consideration given for the promise. Consideration has been defined as factors which the promisor considered when he promised and which motivated his promising. The idea is that a promise which lacks any adequate motive cannot have been serious and therefore should not be taken seriously by the law. Therefore, we must determine whether Sam s promise not to complain or nag his father about his father s distribution of his estate in his will constituted sufficient consideration for the father s promise to forgive the debt. This is a possibility given the fact that the courts have held valuable consideration to consist of some forbearance suffered or undertaken by one of the parties (Hamer v. Sidway; Dahl v. Hem Pharmaceuticals Corp) in addition to benefits and profits. For example, in Hamer v. Sidway, the promisor promised the promisee to pay him $5000 if the promisee refrained from smoking and drinking until his 21 st birthday. As the promisee had carried out his promise, the court found that because the promisee had a legal right to smoke and drink, the restriction of this right in order to complete the promise constituted a forbearance suffered and therefore was sufficient consideration in order to give legal effect to the contract. Therefore, in Sam s case, it could be argued that because Sam suffered a forbearance, as he refrained from complaining to his Make sure to bring up counterarguments
father about what he thought to be an injustice in his father s estate distribution, sufficient consideration existed so as to give legal effect to the agreement. Make frequent use of case law as legal authority. However, this is not likely to be the case. While a forbearance suffered may constitute sufficient consideration, the forbearance from doing something must be something that the promisee had a right to do in the first place (White v. Bluett). It cannot be said that Sam had a right to complain and nag his father about the distribution of his father s estate. In White v. Bluett the court recognized that a person does not have a right to complain about the distribution of another s person s estate in the first place, therefore a forbearance from doing so does not constitute sufficient consideration for the promise. Further, it could also be argued that Sam s complaining and nagging to his father constituted a form of duress so as to vitiate the father s consent in promising to forgive Sam s debt. In this case, the agreement would be considered void. While this is a weaker argument than the one discussed above, it is always a good idea to mention the possibility of such an argument, no matter how unlikely it seems. B. Sam vs. Mike There are two main issues here: (i) Whether there is a valid contract between Sam and Mike with regards to the shipments of PP22? (ii) Whether the agreement between Mike and Sam to enter into a contract but agree on the terms of that contract at a later date is valid and can therefore be enforced by Mike? (i) Whether there is a valid contract btwn Sam and Mike with regards to the shipments of PP22?
Separate sub-issues with distinct headings There is clearly an offer by Sam, the offeror, to pay Mike for a given amount of PP22. There is however an issue in regards to whether that offer by Sam lapsed, since it took Mike three weeks before giving Sam an acceptance to his offer. An offer lapses when the offeree has not accepted the offer within a reasonable amount of time (Shatford v. BC Wine Growers Ltd). In Shatford v. BC Wine Growers Ltd., a company made an offer to the offeree to purchase berries but the offeree did not accept until 6 days later. The Court held that given the nature of the product, the time of year and the necessity of prompt decision for the offeror, 6 days did not constitute a reasonable amount of time and therefore the contract is void on the basis that the offer lapsed. However, it us unlikely that Sam s offer will be found to have lapsed, given that it can be distinguished on the facts from Shatford. The PP22 was not a perishable product and furthermore, Sam did not suggest to Mike any kind of urgency of a decision. Clear statement of the law There also seems to be a problem in regards to Mike s acceptance of Sam s offer. Mike s response to Sam s offer seems to take the form of an enquiry into whether better terms might be available. If this is the case, then the power of the original offer by Sam will have been destroyed because Mike s response would take the form of a counter-offer (and a rejection of Sam s offer). This is likely to be the case because even though Mike responded to Sam s offer in a sense that suggests acceptance (i.e. sure, no problem I can supply what you need), he clearly inquired into whether Sam would accept different terms--$500 per 100 cartons shipped on Tuesdays rather than $400 per 200 cartons shipped on Mondays. Given that Mike s response to Sam s offer is likely to be characterized as a counter-offer, we must assess the validity of Sam s acceptance/response. One of the heralding principles of contract formation is that the parties must show a willingness to be legally bound (Klienwort Benson). This is clearly lacking in Sam s response to Mike s counter-offer. It is likely that a court will characterize
Sam s response ummm geee I don t know. That might throw off my entire business I guess it could work as lacking a clear intention to be legally bound. The fact that Sam later accepted Mike s offer to decide on the terms of the agreement later in the future is further evidence of Sam s unwillingness to be bound and a lack of meeting of the minds of both parties. (ii) Whether the agreement between Mike and Sam to enter into a contract but agree on the terms of that contract at a later date is valid and can therefore be enforced by Mike? There is also the issue of whether the agreement between Mike and Sam to enter into a contract but decide on its terms at a later date can be held to be legally valid. Agreements to agree in the common law can be enforced. However there is a distinction to be made between agreements to enter into a contract later and agreements to enter into a contract on terms that will be determined later. The former can be enforced while the later cannot. Parties cannot agree at one point in time to enter into a contract on terms to be decided later cannot have an enforceable agreement to negotiate (Empress Towers Ltd. V. Bank of Nova Scotia). Given this, it is likely that the agreement between Sam and Mike to negotiate the terms later will not be enforced. However, courts will try to give legal effect to any clause or contract that the parties understood and intended to have legal effect (Empress Towers Ltd. V. Bank of Nova Scotia). In Empress Towers Ltd., even though some of the terms of the contract are left open (rental rate) and were to be decided on at a later date, the Court enforced the contract given that the parties clearly intended to form a contract and did not just mean to set out the rule for the negotiation stage. This was not the case with Sam and Mike. Given the fact that this was the first time Mike and Sam were attempting to negotiate a contract, had no prior business history with each other and that Sam
seemed to be confused, uncertain and overwhelmed in responding to Mike s offer to agree to contract but decide terms later all suggest that the parties did not clearly intend to form a contract. It seems more likely that they intended to continue negotiations at a later stage. C. Sam vs. Ben There are several general issues with respect to the contractual relationship between Sam and Ben: (i) Was the contract validly formed? (ii) If so, did Ben breach that contract? Tells the marker where you are headed in your answer (i) Was the contract validly formed? The main problem with respect to the validly of the contract formation between Sam and Ben is that Sam s consent to the terms proposed by Ben may have been vitiated thereby making the entire contract void. The facts suggest that Ben s misrepresentation of the PP22 product may have misled Sam into giving his acceptance to the contract. Misrepresentation affects the intellectual formation of a party s decision whether to willingly be legally bound to the agreement consent must be reasonably informed and free. If Sam can prove his consent was vitiated by Ben s fraudulent misrepresentation, then not only will the contract be voided but he will also be able to claim damages in tort due to Ben s wrongdoing (Hedley Byrne; Esso Petroleum Co. Ltd v. Mardon). Ben clearly promised Sam that his PP22 products are made with 100% organic substances. This was a fraudulent material statement of fact that was false, as the facts suggest that Ben knew his products were not 100% organic. In order for a court to void a contract based on misrepresentation, the statement must be of a fact and not opinion and the misrepresentation must relate to a matter that a reasonable person would consider relevant his decision to enter
into the agreement (Sarvis v. Vermont State College). In other words, Ben s statement that his PP22 products are 100% organic must be not be Ben s opinion, but rather a fact and further, the statement must have mattered somehow for Sam s decision to enter into the contract. The former cannot be reasonably disputed. Ben clearly made a statement of fact and did not use language indicative of an opinion. Also, it is likely that a court will find Ben s statement to have induced Sam into agreeing to the contract. Given the nature of Sam s business (organic/natural health products) and the fact that he had mentioned in his negotiations with Mike (before he was negotiating with Ben) that the PP22 tea must be 100% organic both prove that this fact was absolutely necessary to his decision to enter into a contract for the purchase of PP22 products from Ben. (ii) Did Ben breach the contract? Even though it seems likely that the contract was not validly formed, if the facts suggest further issues, you should always continue the analysis and note your assumptions. In this case, while the contract between Sam and Ben is likely to be held invalid, the facts suggest a potential issue with breach of contract. Therefore, it is best to continue the analysis assuming that the contract has been validly formed. Assuming that the contract with Ben was validly formed, the issue becomes whether Ben can be held to be in breach of that contract by virtue of his sloppy shipping habits. Both Sam and Ben had initially agreed that 100 cartons of PP22 would be shipped out every week on Monday for 12 months. While Ben did abide by these terms for the first couple of weeks, he eventually started shipping only 50 cartons of PP22 every other week and on Thursdays (instead of Mondays as agreed). There is clearly a breach of contract here as Ben did not carry out his obligation 100% as stipulated. However, this only entitles Sam to damages and
not to a termination of the contract. In order for Sam to be able to terminate the contract with Ben, the breach must be found to be fundamental to the contract. In other words, the breach must be of a condition and it must be serious and goes to the heart of the contract (Cehaave VV c. Bremer Handelgesellschaft). Can it be said that Ben s breach of the terms of shipping and quantity of PP22 went to the heart of their contract and deprived Sam of the entire benefit of the contract (Hong Long Fir v. Kawasaki Kisen Kaisha)? It seems more likely than not that a court would find the breach not to be serious and substantial. This is because of the fact that while Sam was not receiving the total amount of cartons he had ordered for each shipment, he was receiving some products. Therefore, it cannot be said that Sam was being deprived of the entire benefit of the contract. As a result, the breach is not fundamental and Sam will only be entitled to damages for breach of contract and not termination of the contract. Clear application of rules to the facts D. Sam vs. the Bank Manager The main issue in this situation is whether a valid contract was formed between Sam and the bank manager. The facts suggest that there may be a deficiency in Sam s consent to undertake the loan in exchange for the guarantee. If the contract is found to be invalidly formed, it will be declared void and rescission will be the remedy (i.e. the parties will be placed in the position they were in before the contract was formed). (i) Is the contract valid?
The facts suggest that the bank manager may have influenced or taken advantage of Sam s confusion, inexperience and obsession with his failing business so as to get Sam to agree to give a guarantee that was worth more than his house. There are two factors by which Sam s consent may have been vitiated in this situation: (a) Duress (b) Undue Influence (a) Duress: Contracts formed under duress are voidable. Duress may take the form of actual or threatened violence, duress of goods, or economic duress. In determining whether there was a coercion of will, we must enquire into whether the party alleged to have been coerced did or did not protest, whether he had an alternative course of action open to him, whether he was independently advised or told to seek it or whether he took steps to avoid the contract after entering into it (Atlas Express Ltd. v. Kafko Ltd.). It must be shown that the party did not act voluntarily in entering into the contract. This is unlikely to be found in Sam s case. The facts do not suggest that he was coerced, against his will, into entering into the agreement with the bank manager. While it is true that Sam did not seek independent advice nor told to seek it, there were no positive actions on behalf of the bank manager that suggest he coerced Sam. He did not attempt to convince Sam that no other options were open to him nor that his offer was a good deal. Neither did Sam protest or question the offer. Concisely tells the marker the possibilities you are going to be dealing with regarding this issue (b) Undue Influence: The facts are much more akin to a situation of undue influence here. Undue influence involves unequal bargaining power and abuse of trust. In these situations, one party is in the position to dominate the will of another and therefore the person is unable to act independently. Specifically, it involves a relationship of trust and confidence that has been abused (Lloyds Bank Ltd. v. Bundy). It seems that the bank manager took advantage of Sam s inexperience in business and banking and desperation for funding to save his business. Consideration from the bank manager was grossly inadequate and the bank manager used his position of power and relationship of trust to secure the grossly unfair agreement. As the fact pattern notes, Sam had been doing his day
to day banking with that particular bank manager for the past 10 years. This suggests that a relationship of trust and confidence had developed between Sam and the bank manager which consequently gave the bank manager much influence over Sam. In Lloyds Bank Ltd. v. Bundy, the court held that a relationship of trust and confidence gives rise to a presumption of undue influence unless the creditor has taken reasonable steps to satisfy himself that the party entered into the obligation freely and in knowledge of the facts (Lloyds Bank Ltd. v. Bundy). Since Sam did not seek any independent advice and the bank manager did not even suggest that Sam should seek such independent advice, it is likely that the court will void this agreement on the basis that Sam s consent was vitiated by undue influence exercised by the bank manager. E. Sam vs. Tom The main issue with the employment contract between Sam and Tom is public policy. The state will not enforce contracts that run against its own public policy and community values. Issues of public policy are concerned with the content of the contract and not the will of the parties. Therefore, if it is found that the contract between Sam and Tom is contrary to public policy, it will be declared illegal and thus invalid. The main problem with Tom s employment contract is the provision that seems to restrain his freedom of employment. According to the employment contract, Tom is prohibited from working for any one of Sam s company s competitors in Canada for 10 years if he ever left Sam s company. Employee restraint contracts may be held invalid because of their unreasonable duration or because of their unreasonable territorial ambit (Cameron v. Canadian Factors Corporation). Whether the contract is against public policy in the sense that it unreasonably restricts Tom s freedom of employment will depend on whether the limitations in terms of time and space are excessive. Reasonableness is determined by
balancing the employer s interest in protecting his business with the employee s interest in the protection of economic mobility/employment opportunity (Cameron v. Canadian Factors Corporation). It seems likely that a court would find this restriction contrary to public policy. The 10 year time period and territorial ambit which it attempts to regulate is unreasonable given the size and nature of Sam s business. The restrictions go beyond what is necessary to protect Sam s company s business interests. The restrictions could have been limited to a particular town, municipality or even province. Further, the time period is too long considering the state s interest in ensuring and promoting economic mobility. While the restraint provision seems to go against public policy, the question then arises as to whether the entire employment contract between Sam and Tom is invalid. If only a clause is found to be against public policy and not the entire contract, the clause may be severable so as to allow for the validity and enforcement of the entire contract. This would be in Sam s interest given that the employment contract stipulated that Tom must hold the position as Vice- President for at least 4 years (renewable thereafter). Sam may be able to keep Tom from working for his competitors for at least a few more years by enforcing the employment contract (since the term has not expired). This is likely to be the case since the common law presumes that a clause which is null and void does not necessarily render the entire contract invalid unless it appears that the contract is an indivisible whole. In other words, because the employment contract between Sam and Tom is coherent and sensible with the employee restraint provision stuck out, the rest of the contract is valid and therefore enforceable. Conclusion Summarizes the answers of each main issue
Conclusion It is likely that Sam will be legally required to re-pay the $10,000 loan to his father s estate. This is because the subsequent agreement between Sam and his father that his father would forgive the debt if Sam stopped complaining to him about his estate distribution is void. It lacks sufficient consideration in order for the contract to be valid. Further, there was no initial contract validly concluded between Mike and Sam. While it is likely that Sam s initial offer did not lapse, Sam s acceptance of Mike s counter-offer is likely to be found insufficient. His reaction to Mike s counter-offer did not espouse a clear and concise intention to be willingly and legally bound in contract. Also, Mike and Sam s subsequent agreement to agree later is likely not to be found valid and therefore will not be enforced. The common law does not enforce contracts in which parties agree to enter into a contract now but decide on the terms of that contract later. Furthermore, Mike and Sam neither clearly intended to form a contract but merely intended to continue negotiations at a later stage. The contract between Ben and Sam is likely to be voided given that Ben s statement that his PP22 products are 100% organic was a statement of fact and not opinion and clearly induced Sam into agreeing to enter into the contract with Ben. The statement was necessary to his decision to be legally bound. This entitles Sam to the voiding of the contract and damages in tort for Ben s fraudulent misrepresentation. However, even if a court did find the contract between Ben and Sam to be valid, it is clear that Ben breached the terms of that contract given that he did not carry out his obligations 100% as stipulated. This entitles Sam to damages, however,
because the breach is not fundamental to the contract Sam was not deprived of the entire benefit of the contract he is not entitled to terminate the contract. In relation to the agreement between the bank manager and Sam, it is likely that a court will find this agreement to be void on the basis of vitiated consent. The facts suggest that the bank manager gave consideration that was grossly inadequate for the promise and used his position of power and relationship of trust to secure the agreement. He took advantage of Sam s inexperience in business and banking, his frustration and desperation to keep his business going. Further, he took advantage of their long relationship in the banking domain which clearly manifested attributed of trust and confidence which the bank manager abused. Finally, it is likely that Sam will be able to enforce the employment contract with Tom but without the employee restraint provision. Prohibiting Tom from working for any of Sam s competitors in Canada for 10 years after he leaves Sam s company is unreasonable given what is necessary to protect Sam s company s business interests and the state s interest in protecting and promoting economic mobility and freedom of employment. The prohibition is too restrictive and consequently against public policy.
However, given that this provision can be severed from the contract itself, the rest of the contract will likely be enforced and held to be valid. Therefore, Sam will be able to keep Tom from working for his competitors by requiring him to fulfil the 4 year time period at his company as stipulated in the contract. lawskool hopes that you have enjoyed this comprehensive case note. We welcome your feedback, please email info@lawskool.ca with your suggestions.