CONTRACT LAW CLASS NOTES

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					                                CONTRACT LAW OUTLINE
INTRODUCTION

Instructor: Waldron - Office: rm 234
         721-8167 (w)
         598-6526 (home - 7am-10pm)
         mwaldron@uvic.ca

   Contract (K) is a promise for which if broken there is a legal remedy
    -questions:
        -what kinds of promises?
        -what kinds of remedies?
        -define broken?
    -debate over which question to ask first

   Remedy: focus on result (as courts will do)
       -ie: what will happen if. . . ?
       -should courts provide a remedy at all for situation X?

   promise as a start point for analysis

   why should some broken promises call for no remedy at all?
       -no damages
       -lack of formality of promise (expectations)
       -courts as innapproriate venue (cost)

   contract solidified with:
        -greater damages
        -greater formality
        -greater mutuality and extent of expectations
        -mutuality of benefit
        -risk and/or cost

   distinctions - ie- gift v. sale

   courts like to fit fact patterns to cases' details
    -if facts fit into 2 distinct patterns a hard case develops

   the 1/2 way up the flagpole problem: broken promise 1/2 way through performance
I: REMEDIES

A) Some Theoretical Issues:

    1) The Interests Protected

   remedies:
       1) specific performance (order party to act)
       2) assess damages
       3) both
       4) application of special term in K
       5) order court to pay $ is #1 option

   damages:
       1) $ lost
       2) loss of present / future income
       3) pain / suffering
       -this is generally the approach taken in most tort cases

   contract may differ from torts in general
        -after a question of the nature of the promise, question of was it broken, not why
        -some allowances for failure to perform exist

   a purchaser may be compensated for expected gains over actual loss
   damages may only be claimed on a loss incurred after contract ended, unless proprietary
        costs based on the K were incurred and these costs could have been reasonably
        expected by thye rescinding party to have been incurred by the other

   financial is most common
        1) damages
                                  nd
        2) specific performance (2 most common)

   how to measure financial damages for compensation?
       -primary principle: return to innocent party what they expected to gain
       -ie: a measure of expectancy
       -returns parties to position of "if the contract had been carried out"


Restitution: restores a transferred benefit

   example
       -A pays B $200 for a deposit on a $2000 fridge to be delivered in a week
       -1 week later, no delivery
       -A goes and gets same fridge elsewhere ($2000)
       -courts would order -restitution ($200 back)

   measurable by benefit gained vs. transfer lost
   if A paid no deposit but spent money renting a truck etc., not a matter of restitution, idea
    behind restitution is to prevent unjust enrichment of contract breaker
   in above situation, no unjust enrichment
   restitution may be chosen as a remedy, but normally one cannot use restitution to improve
    their situation beyond what would have been if K was performed
   restitution presents greatest claim (A lost and B gained)
Reliance: involves costs thrown away (plans made on basis of K are remedied)

   money spent on renting truck would be returned

Expectation Damages: remedies loss of gains to be made from K (SP often ordered)

   attempt to put parties in position they would have been in if K performed
   requires knowledge of value of potential gain
   example: table for sale for $500, grandmother once said she would pay $1000 for such a
    table
    -you pay nothing, but table does not get delivered as promised
    -no loss, no claim for restitution or reliance
    -but expected profit of $500 is no more, one can sue for lost (expected) profit
   often it helps to consider assets before and after contract performed
   based on general plan-making principles in a market economy
   mildly punitive

   reliance v. expectation?
         -expectation encompasses considerations of time / cash lost in efforts exerted
         in reliance on contract
         -fairly simple measure (reliance can get complex)
         -realistic / accurate reflection on loss
         -considers what you would have gotten (factors in market value hikes)
         -not necessarily about what you thought you'd get (unexpected value increase as well)
         -if market value dropped, no grounds for expectation, but reliance / restitution

   courts prefer compensation over punishment
   normally only one avenue can be pursued so no net resource value gains occur

Recission: involves taking the K apart and returning parties to starting position

   restitution is normally the remedy for a rescinded contract
   problems with recission:
         -what if benefit is gone and cannot be restored?
         -(Bollenback v. Continental Casualty Co.) benefit was "security" of having insurance

   NB: if a K is breached, innocent party may terminate or proceed with suit
       restitution may be added to termination

-Wertheim v. Chicoutimi Pulp Company (1911, PC)
-Lord Atkinson laid down principle that in giving damages (DMs) injured party should be placed in
position as if K had been performed

-Bollenback v. Continental Casualty Co. (1965, Oregon SC)
-Facts: in error. An insurer thought that premiums had stopped being paid in 1959
         -benefits were claimed on injury in 1963
         -P (insuree) asked that all premiums be returned (restitution)
-Issues: if a K was in effect for a period of time, then recinded upon, can DMs be sought for the
whole period or only for the period after which the K had expired (by recission)?
-Decision: P to receive all premiums paid after 1959 (value of all premiums less the value of
benefits actually received)
-Reasons: D carried risk until 1959 of having to pay P's claims (policy was alive to that date)
-RD: restitution can only be paid for losses incurred after K was breached
-Class Comments (CC): Note that only one remedy may be sought (recission and benefits paid
would result in a net gain for P; one or the other ok)
-Anglia Television Ltd. v. Reed (1972, CA)
-Facts: D Reed hired to play lead role in P's film, P hired staff, D broke K
        -P claimed reliance DMs, sues for pre and post K expenses
        -D claims P entered into K's before D accepted P's offer
        -expectancy not helpful, potential profits difficult to determine
-Dn: P can sue for DMs incurred before and after K concluded where expenses were reasonably
forseeable by both parties

-Hawkins v. McGee (1929)
-Facts: D doctor promised P patient 100% good hand after operation, doesn't receive
-Issues: K? Remedy?
-Dn: there was a K, a warranty of sorts
        -no DMs awarded for pain/suffering b/c that would be reliance costs
        -expectation DMs - we do not examine costs incurred as a result of K's performance
        -Measure of DMs = diff between value of 100% hand and actual current hand value

    2) Problems in Measuring Damages

   Difficulty in assessing DMs is no reason for refusal to award (Carson v. Willits)
   Normally, a compromise may be reached
   personal interest in a K vs. market values - example of K to build ugly fountain (reducing
    property value)
   in cases of construction, normal measure of Dms is cost to have work completed (Groves v.
    John Wunder Co.)
    -sometimes proper measure is held to be value of land w/ work complete vs. current value
    -economic waste however, will be avoided (Groves v. John Wunder Co.)
   focus should be on compensation, not punishment
   net gains for a party will not be provided by courts
   where one has no 'personal interest' in performance, property values may be measure of
    DMs
   to show a vendor has lost a sale, he must show supply > demand (Thompson (W.L.) Ltd. v.
    Robinson (gunmakers) Ltd.)
   where supply < demand, P has not lost a sale and cannot claim profit loss (Charter v.
    Sullivan)
   Sale of Goods Act (s.48(3)) - where an available market exists, measure of DMs is to be the
    diff between contract price and market price at time when goods ought to have been
    accepted

-Carson v. Willits (1930, Ont App. Div.)
-Facts: K entered for D to bore 3 wells, D bores 1
-Issues: can P recover for a loss which can only be valued as a chance / probability
-Decision: for P
-Reasons: difficult DMs assessment does not = impossible DMs assessment

-Groves v. John Wunder Co.
-Facts: D leased P's land, promised to return it in certain condition, condition not met, P sues
        -P awarded $15,000, appeals
-Issues: Measure of DMs:
        1) cost of work to return land to agreed condition = $60,000
        2) assessment of net value of land before and after K
-Decision: option 2) $15,000 awarded to P ($12,160 = value of the land if K performed + interest)
        idea is that a party can perform, or breach + pay DMs
-Dissent: (Olson) P will get a net gain, value of cost of performance over and above value of land
        -P intended to sell the land post K
        -Measure should be value of land now vs. value if K had been performed
-Thompson (W.L.) Ltd. v. Robinson (gunmakers) Ltd. (1955)
-Facts: D agreed to buy car from P dealers, D br'd K, P returned car to suppliers
        -P claimed loss of profit (expectancy DMs)
-Decision: for P
-Reasons: supply was greater than demand for that type of car at the time
-RD: to show that a P has lost a sale, supply of the good must be > demand

-Charter v. Sullivan (1957, CA)
-Facts: D entered K to buy car from P dealer, D br'd K, P sold car to another person w/o difficulty
-Decision: for D
-Reasons: where supply < demand, P has not lost a sale


B) Limiting Factors:

    1) Remoteness

   Some consequences are not compensated for
   Hadley v. Baxendale rules (judicial limitation on recoverable DMs):
    1) P can recover for consequences which arise naturally from breach, or which might
        reasonably be in contemplation of parties as arising from breach
    2) P can ONLY recover for "special circumstances" arising from breach where those special
        circumstances were communicated to D
   3 ways to interpret this rule:
    1) P must communicate special circs. to D (Victoria Laundry)
    2) P must communicate special circs. and other party must have opportunity to refuse /
        accept (Munroe)
    3) P must communicate special circs. and those must be accepted in a K
   Where special circ.s not communicated to D, D liable only for natural consequences of
    breach (Victoria Laundry Ltd. v. Newman Industries Ltd.)
   Generally, special circs. communicated to an employee held to be communicated to
    employer, but Ks involving special circs. are normally beyond the jurisdiction of employees
   Employee must be shown to have understood nature of special circs. (Purolator)


-Hadley v. Baxendale (1854, Exch.)
-Facts: P owned mill, a shaft broke, K w/ D to deliver new part
        -delivery was delayed for an unreasonable time, P sued for loss of profits
-Issues: to what extent is D liable for DMs to P where DMs were not reasonably forseeable by D?
-Decision: for D (new trial ordered)
-Reasons: special circumstances not reasonably forseeable
        -Rule laid out:
        1) DMs must reflect what consequences would reasonably be in contemplation by
             parties
        2) Special circumstances only compensated for where communicated to D
-CC: judge tried to limit what constitutes acceptable DMs

-Victoria Laundry Ltd. v. Newman Industries Ltd. (1949, CA)
-Facts: P entered K to buy boiler from D, P communicated need for boiler ASAP
        -delivery of a part delayed, P lost business and lucrative Ks, P sues for expectancy
-Decision: Ct. recommended P be awarded loss of normal business profits but not for loss of Ks
-Reasons: Hadley rule applied
        -general business losses were forseeable
        -loss of new Ks was too remote, special circs. not communicated to D
        -special circs. must be communicated so D can opt in / out
        -delay in delivery of part = delay in delivery of whole
-Munroe Equipment Sales Ltd. v. Canadian Forest Products Ltd. (1961, Man. CA)
-Facts: D rents tractor from P, tractor breaks down, D can't complete work, D sues P
        -judge awarded 1 month rent + freight
        -counter-claim for lost $ from potential use of tractor
-Decision: P not liable (D's original award reduced, counter-claim dismissed)
                                                      nd
-Reasons: profits too remote, not forseeable that a 2 hand tractor would be used for such work
        -unusual amount of work to be done by tractor
        -special circs. not communicated to P
        -K made casually w/o warranty
        -no mitigation by D

-Scyrup v. Economy Tractor Parts Ltd. (1963, Man. CA)
-Facts: P buys tractor part, it doesn't work, repairs made too late, P loses K
        -P had said the part was needed ASAP for "a job"
        -D had warranted part for P's intended use
        -P had communicated to D size of K he was using the tractor for
        -trial judge awarded $2000 to P, D appealed
-Decision: for P (appeal dismissed)(divided Ct.)
-Reasons: majority saw forseeability of P's need for part
                                                 nd
-Dissent: minority held loss was too remote, 2 hand parts not as reliable
        -communication of intended use was vague

-Horne v. The Midland Railway Company (1873, Eng, Exch. Chamber)
-NB: questionable case
-Facts: P hired a rail service to deliver boots by a certain date stipulated in K
        -P told station master of importance of timely delivery for a separate K
                                                   rd
        -train arrived one day late, P lost K w/ 3 party
                                                                   rd
        -P claims diff between market price and price in K w/ 3 party (above market value)
-Decision: for D, appeal dismissed
-Reasons: no K, normally information conveyed to employee = info conveyed to employer, but
lowly employee may not be entitled to make agreements to special circumstances
        -D must have option to refuse to enter K w/ special circumstances
        -here, a common carrier could not refuse service, no freedom to opt out of K
        -separate K stipulating special circs. is preferable (idea rejected soon after this case)
-CC: Blackburn didn't want to award DMs, no case at time had awarded DMs under special circs.

-Cornwall Gravel Co. Ltd. v. Purolator Courier Ltd. (1978, SCC)
-Facts: P gave D's employee a tender for delivery, delivered late, not accepted
         -possible profit of $70,000 rested on tender delivery
         -P told D nature / importance of delivery (DMs not too remote)
         -D testified he had knowledge of above
         -P proved tender would have been accepted if on time
         -P sues for expectancy DMs
-Decision: for P, appealed to SCC, dismissed, probably due to agreement w/ trial judge
-RD: where A is aware of potential for loss in breaching K w/ B, A liable for DMs which flow
naturally from the breach (forseeable consequences)

-BDC Ltd. v. Hoffstrand Farms (1986, SCC)
-Facts: P sued courier for failure to deliver a document to land registry office
        -no K, action in negligence
-Decision: for D
-Reasons: P's loss too remote
-CC: distinguishable from Cornwall in that special circumstances were communicated there
    2) Intangible Injuries

   K law developed out of business / $ transactions
   personal injuries were a tort matter, courts initially reluctant to address contractually
   over time, K's were less and less about business, dealt w/ intangible losses
     st
   1 area to develop outside of $ concerns was employment law
   emotional loss not recoverable unless breach was 'illegal'
   punitive DMs may be awarded if firing was malicious

   Test for DMs for mental suffering - did DMs flow naturally from the breach of K / were DMs
    reasonably forseeable as likely to be caused by breach? (Vorvis) (court failed to consider
    this in Addis v. Gramophone)
   Where intangible DMs were reasonably forseeable in breach, compensation will be awarded
    (Jarvis v. Swan Tours)
   Distinction between Aggravated and punitive DMs (Vorvis v. ICBC)
         -Aggravated DMs: compensatory, for intangible injuries
         -may be awarded to P for breach of K if independently actionable injuries occur (contra to
         Addis v. Gramophone) (difficult to quantify)

        -Punitive DMs: non-compensatory
        -Ct. punishes D for highly malicious acts (even if P is over-compensated)
        -may also be awarded against D for breach of K where an independent tort exists
        -generally require forseeable consequences

   Emotional DMs may be difficult to forsee b/c some suffering is likely even if termination was
    proper (ie- is there suffering beyond the breach?) (Vorvis)
   Representation: distinct from warranty in Canada


-Addis v. Gramophone Company Ltd. (1909, HL)
-Facts: D employed P
        -D breached K by hiring replacement w/in 6 months notice period required by K
        -P sues for loss including mental suffering
-Decision: for D
-Reasons: P cannot recover for mental suffering, punitive DMs not awarded for breach of K
-CC: Ct. focussed too much on issue of non-econ loss as actionable in K law
        -Ct. neglected the reasonable forseeability of the DMs / loss
        -Ct. viewed emotional DMs as a strictly punitive matter
        -failed to distinguish between punishment and compensation for loss

-Jarvis v. Swan Tours Ltd. (1973, CA)
-Facts: P bought Swiss ski holiday from D on basis of brochure info
        -P's holiday did not measure up as promised
        -P awarded diff between holiday received and holiday pormised (1/2 cost of holiday)
        -P appealed for emotional cost of loss of holiday
-Decision: for P, awarded (expectancy) emotional DMs
-Reasons: something promised was not delivered
        -loss of enjoyment reasonably forseeable
-Vorvis v. ICBC (1989, SCC)
-Facts: P fired by new supervisor (employed by D) w/o reason after some harassment
        -claims of termination for cause (w/ reason) unfounded, there was a breach
        -P sues for DMs for breach of K and:
        1) punitive DMs - K breached in an appalling manner
        2) aggravated DMs - for mental suffering
        -trial jusge found dismissal was wrongful
-Decision: against P (appeal allowed, original judgement restored)
-Reasons: DMs did not flow naturally from breach (reasonably forseeable)
        -P may be over-compensated if awarded DMs beyond comp. for breach of K
        -DMs from termination not forseeable as they are common to all termination
        -Intangible injuries require legal basis (independently actionable wrong) for comp.
        -a tortious wrong did not exist here independent of breach of K
        -causal connection vague, cause of mental suffering occurred before breach of K
-Dissent: independently actionable wrong is not req'd to recover aggravated DMs
        -tort and K breach are not as isolated as MacIntyre suggests


    3) Mitigation of Loss

   Innocent party cannot claim DMs which could have reasonably been avoided (through thri
    own actions)
   Historically:
    1) common law courts: financial awards only
    2) equity courts: awarded specific performance (SP)

   upon anticipatory breach (before performance is due) you can (White v. McGregor):
    1) accept this, mitigate, and sue for DMs
    2) reject this, hold K open (can't mitigate), sue for SP
    -NB: if you don't have a claim for SP, you will only be awarded $ above what loss could have
    been avoided (so you must mitigate)
   traditionally, courts only award SP where K is unique in such a way that $ does not
    adequately compensate and SP is likely to be possible
   unfavorable changes to terms of K should be accepted, sue later for DMs (Payzu v.
    Saunders)

   recission: cancelled K
   repudiation: breach of term(s)

-Payzu Ltd. v. Saunders (1919, CA)
-Facts: D agreed to sell P materials at 2.5% discount w/ 1 month credit
         -in error, D thought P was unable to pay and altered terms of K demanding $ up front
         -P refused to pay and incurred a loss (diff between market price and K price)
-Decision: for D
-Reasons: P did not mitigate losses
         -P could have continued K and claimed only loss = to 1 months' credit
-RD: after a breach of K, parties must make reasonable efforts to reduce their losses wherever
possible (D not liable for damages beyond what could have reasonably been avoided by innocent
party)
-CC: if breach was highly unreasonable or of a personal nature, parties may not be expected to
continue business
-White and Carter Councils Ltd. v. McGregor (1962, HL Sct.)
-NB: this case is normally distinguished, not applied
-Facts: K to advertise on rubbish bins ends, D's employee forms K to continue ads for 3 years
         -D does not want ads, calls to cancel, P refuses to cancel K, D refuses to pay
         -P sues for price of 3 year K
-Decision: for P
-Reasons: K was binding at time of D's attempt to cancel
         -anticipatory breach (before performance is due), P had 2 options
         1) accept repudiation, mitigate, sue for DMs
         2) reject repudiation, keep K open (mitigation not possible), demand SP
-RD: repudiation by one party of K does not preclude innocent party from carrying out K and
suing for the price where this can be done w/o the assent / cooperation of the breaching party
-Dissent: (correct law) SP is a rare remedy, up to the Ct. to decide, to be safe, one should
mitigate (in case SP not awarded)

-Finelli v. Dee (1968, Ont. CA)
-Facts: P entered K to pave D's driveway, D repudiated, P paved anyway
-Decision: against P
-Reasons: distinguished from White v. Carter Councils - P required D's assistance to perform K
(permission to enter land)
-RD: where a party repudiates or rescinds before K work has begun, P not entitled to recover cost
of performing K

-Asamera Oil Corp. v. Sea Oil (1979, SCC)
-Facts: P sold shared to D, D was supposed to return them
        -P delayed in demanding them after they were due
                                  rd
        -D had already sold to a 3 person (SP could not be carried out)
        -no more shares available by this time
        -P sued to have shares returned (SP)
-Decision: P gets value of shares at time when other replacement shares could have been bought
-Reasons: P never purchased other shares (no mitigation)
        -parties should mitigate where SP may not be available


C) Specific Performance:

   A "discretionary" remedy, only applied where DMs are held to be inappropriate
                                             rd
   Courts will not interfere w/ bona fide 3 party rights
   Ct. will rarely enforce K for personal services (forced SP akin to slavery)
   negative covenants will not be enforced if result is same as enforcement of positive
   covenants (force D to choose SP or starve to death)
   Undue delay in seeking remedy will lead to a refusal (laches)
   He who seeks equity must do equity (if P has acted unjustly, SP will be refused)
   Ks in "restraint of trade" will not be enforced
   Cts. will not enforce continuation of fiduciary relationships (or any rel. of trust and confidence)
    against wishes of either party (Page One Records Ltd. v. Britton)
   Only granted where it can be mutually granted
   Common in sales of land (uniqueness = specific goods) unless land was for $ investment
   DMs may be awarded in lieu of SP (Lord Cairns Act, 1858)
   Where P has a legitimate interest in pursuing SP, DMs caused by failure to mitigate can be
    charged to D (DMs will be assessed at possible date of P beginning mitigation)
-Stewart v. Kennedy (1890, HL Sctl.)
-Ks involving land may be enforced by SP unless that is impossible
-there is no right to SP even SP is possible, it is a legal remedy on equitable grounds

-Sky Petroleum v. VIP Petroleum (1974)
-Facts: P in K to buy fuel from D, D claims P demanding too much credit
        -D rescinds, refusing to sell except at unreasonable prices
        -P unable to locate alt. Supplier, sought interim injunction to force D to supply fuel
-Decision: for P
-Reasons: exception to the gen. rule that for sale of non-specific goods, DMs are the remedy
        -fuel was not available elsewhere, P would go out of business w/o fuel
        -nothing unique about product, but performance was unique
-RD: where an injunction ordering SP of K will avoid unique, detrimental results which would be
faced by a party if DMs are to be awarded, SP will be awarded

-Warner Bros. V. Nelson (1937, KB)
-Facts: D actress entered K to work for P and to not work for anyone else, D breached
         -P sued for SP
-Issues: are negative covenants in a K enforceable where the K involves personal services and
SP of the positive covenant is not an available remedy?
-Decision: for P (enforced negative covenants of K)
-Reasons: enforcement of neg. covenants here would not force D to choose SP or starvation
         -actress could find other work to earn a living (K was not 'in restraint of trade')
         -DMs too difficult to assess here
         -special harm P would suffer if K not enforced was considered here
         -relationship between studio + actress not fiduciary
-RD: courts will not enforce neg. covenants of Ks for personal services where that would force D
to face option of either starvation or SP by D
-CC: here, Ct. held it irrelevant if D would be tempted (but not forced) into SP

-Page One Records Ltd. v. Britton (1968)
-Facts: D 'band: Troggs' entered K w/ P agent / publisher, breached K to hire another
        -K had +ive and -ive covenants
-Decision: for D
-Reasons: if injunction was granted, a K for personal services by P would be enforced as D would
not be able to manage themselves and would be compelled to rehire P
        -enforcement of K would force a fiduciary relationship to continue against wishes of D
-CC: courts will not enforce K for personal services where P would thereby be induced into SP
        -Ct. asked whether D would be able continue as a musical group here if K enforced
        -Ct. held it relevant (contra to WB v. Nelson) that D may be tempted (not forced) to SP


-Semelhago v. Parmadevan (1996, SCC)
-Facts: D agreed to sell house to P, D rescinded, P demanded SP until trial, then DMs
        -D argued P would receive windfall b/c P's property had gained value (as did D's)
-Issue: when should DMs be assessed, date of breach or trial?
-Decision: for P
-Reasons: P had demanded SP up to trial keeping K open
        -as D had refused SP up to trial date, DMs assessed at trial date
D) Time of Measuring Damages:

-Wroth v. Tyler (1974)
-Facts: D sold house to P, D's wife invoked old law allowing her to stay in matrimonial home
        -value of home was $1500 higher at date of breach, $5500 at trial
-Decision: DMs awarded to P
-Reasons: judge refused to order SP and divide the family
        -inability to pursue SP was not the fault of P
        -date of DMs assessment moved from date of breach to date of trial
        -this was ok b/c P had a legitimate interest in seeking SP (and therefore not mitigating)
        -DMs at D.O. breach would not have place parties in same position as if K was performed
        -extra DMs can be charged to D

-Semelhago v. Parmadevan (1996 SCC)
-see SPECIFIC PERFOMANCE

II: The Kinds of Promises Legally Enforced

   No general rule exists as to which promises are enforceable or not
   History:
    1) covenant - promise under seal
    2) debt - $ owed
    3) detinue - debt of chattels
    4) assumpsit: old tort doctrine for services performed poorly
        -this was pressed to include services not done at all
   Agreement required - offer and acceptance
   Consideration - some element of exchange

A) Bargains:

    1) Offer and Acceptance

   Offer = a statement made by one party to another which contains all the essential terms of an
    agreement such that if the other party assents, a K is formed
   Party making offer may declare acceptable method of communicating acceptance
   Acceptance of unilateral offers may be performance of some kind (Denton v. GN Railway
    Co., Lefkowitz)
   If offer is rejected, offer is terminated (Harvey v. Facey)
   If offer is replied to by counter-offer, initial offer terminated, new offer exists
   Offer revocable at any time before acceptance
   Parties must freely decide to enter K
   Some details are required (3 P's - parties, property, price)
   others may be left out where custom of the trade will fill gaps (implied terms)
   if agreement is reached "subject to K" parties are not bound until formal agreements have
    been exchanged (Eccles v. Bryant)

-Denton v. GN Railway Co. (1856, Eng.)
-Facts: P organized a business trip based on a published rail schedule
        -schedule contained a disclaimer
        -a scheduled train did not exist, D knew this, continued to publish schedule
-Decision: for P on basis of fraudulent misrepresentation (whether K or not)
-Reasons: publication of schedule = offer, purchase = acceptance, P's efforts = consideration
-Dissent: no consideration = no K
-Johnston Bros. v. Rogers Bros. (1899, Div. Ct.)
-Facts: breach of K of sale, D quoted prices, P accepted, D sent new quote w/ higher prices
               st
        -D's 1 quote contained a warning that prices may rise before a letter could be sent
-Decision: for D
-Reasons: no K, quote is not an offer, but a statement of current price
        -if quote = offer, any # of parties may accept for a limited # of goods (binding? - no)
        -acceptance requires an order (as an offer to pay) to be accepted by vendor

-Harvey v. Facey (1893, Eng. P.C.)
-Facts: P sues D over sale of property
        -P says "will you sell" X?, "telegraph lowest price", D tells lowest price
        -D's price was no lower than what D had quoted on a previous occasion
-Decision: against P
-Reasons: only price was given, no answer as to whether D will sell
        -response by D was a quote, not an offer
        -once an offer is rejected, this terminates the offer

-Grainger and Sons v. Gough (1896, HL)
-an advertisement / quote was held not to be an offer

-Storer v. Manchester City Council (1974, CA)
-Facts: D offered to sell city council home to P, form sent, P filled out, only date of transfer of
property status was left out
        -D claimed D had not signed the form to finalize the deal
-Issues: was there a K? Was a final formal act completed
-Decision: for P
-Reasons: date was not a crucial term to K, parties were just seeking to avoid formalities
        -offer = clerk mailing agreement for sale, acceptance = P signing

-Lefkowitz v. Great Minneapolis Surplus Store (1957, Minn. SC)
-Facts: D placed 2 ads promising certain fur goods to be sold for 1$ to first to arrive at D's shop
        -P arrived at D's store, D told him offer was for women only (not specified in ad)
             st                    nd
-Decision: 1 ad not offer, no K, 2 ad = offer, K formed
             nd
-Reasons: 2 ad was offer (sufficient specificity of item and value)
          nd
        -2 arrival at store was acceptance (stipulated in ad)
                                    nd                                  nd
        -new term didn't apply to 2 offer b/c it was not mentioned in 2 ad
        -new term can't apply only to one person and not to others responding to ad

-Pharmaceutic Society of G.B. v. Boots Cash Chemists (Southern) Ltd. (1953, CA)
-Facts: sale of certain products had to be approved by pharmacist
         -D's store was self-serve
         -P claims display on shelf w/ price = offer, selection of goods = acceptance
         -P claims terms are implied that sale is not final until goods paid for
         -D claims bringing goods to till = offer to purchase, accepting $ = aceptance
         -are terms implied in the sale of regulated products?
-Decision: for D
-Reasons: P's argument would bind a shopper to buy anything taken off shelf
         -acceptance should be up to store owner, this can't be if store makes offer

-Fischer v. Bell
-window lure case
-switchblade knife on display in window, D argued it was not for sale (sale would be illegal)
-Bristol, Cardiff and Swansea Aerated Bread Co. v. Maggs (1890)
Facts: D offered to sell bakery to P, P added term to K of sale of bakery stipulating that D cannot
open another bakery w/in certain distance of D's old bakery for 5 years
        -P did not accept, changed terms again, D w/draws offer
Decision: for D
Reasons: no acceptance, whole K was still in negotiation
CC: later courts read this case to indicate that any new terms added = no finalized K
        -this interpretation incorrect
        -D's actions indicated that he thought he was bound to K and neg's were concluded


    2) Flexibility and Uncertainty


   No K exists where vital terms are left to be agreed upon by subsequent agreement
   Court may fill some (less essential) gaps in K based on
    1) Reasonableness - what an officious bystander might believe about parties' intentions
       (Moorcock)
    2) Business efficacy ppl. - implied terms to be read in to ease flow of business
    3) Past practice / custom of the trade


-May & Butcher v. The King (1929, KB)
-P agreed to buy surplus tentage from D, price and dates left to be agreed upon later
        -arbitration was stipulated as means of settling any disputes over this
        -D rescinds on K
-Decision: against P
-Reasons: no K vital ingredients are missing, arbitration clause applies only after a completed K
        -w/o K, parties are left merely w/ an agreement to agree (not binding)
                                                            rd                   rd
        -(Denedin) vital aspects of a K may be left for 3 party to settle, if 3 party fails, no K
        -Sale of Goods Act stipulates that a reasonable price will be paid where a K is silent
        -K was not silent on price, it referred to arbitration
-CC: odd case - lack of specificity of price, yet sufficient specificity on how to determine price

-W.N. Hillias v. Arcos (1932, HL)
-Facts: D offered to sell softwood goods to P w/ option of a later larger sale at 5% discount
          -P wanted to take option, but D claimed it was cancelled
-Decision: there was a K
-Reasons: parties intended to enter a K, some terms were specified (incl. price)
          -it was not stipulated that price / quantity would be agreed upon later
          -a price list was regularly issued by D, so price was not uncertain (past practice)
          -HL distinguished May & Butcher, where an arbitration clause existed
-RD: where a party stipulates some vital terms in a K and no clause specifies that other gaps are
to be filled later, there may be a K

-Foley v. Classique Coaches Ltd. (1934, CA)
-Facts: P fuel dealer agreed to sell land to D coach operator if D would buy all fuel from P
        -2 separate agreements, same date
        -price was "to be agreed upon from time to time" (agreement to agree)
        -arbitration clause was stipulated, K was acted on for 3 years
        -D found better deal, tried to opt out of K
-Decision: K valid
-Reasons: past practice - parties intended to enter K, acted on K for 3 years
        -no restraint of trade b/c K only applied to D while D occupied the land P sold D
-CC: Ct. will consider intention in an attempt to fill some gaps in a K
-Scammel v. Ouston (1941, HL)
-Facts: D to purchase van on hire-purchase terms over 2 years by trade-in (conditional sale)
        -P refused to sell, D's old van was not in good condition
-Decision: for P
-Reasons: no K, language of K too vague
        -parties never reached an agreement on financing options (ie- price)
        -gap in K was left to parties themselves to agree upon later

-Empress Towers v. B.N.S. (1990, BCCA)
-Facts: P was landlord to D, renewal period of tenancy stipulated in K, rental price was to be:
        1) market value, and
        2) agreed upon by both parties
        -if no agreement, either party could terminate K
        -P wanted $15,000 above D's offer
-Issues: validity of renewal clause and right to termination by one party?
-Decision: for D, claim dismissed
-Reasons: P acted in bad faith, implied term: where mutual agreement is specified as method of
determining market rates, agreement shall not be unreasonably w/held (officious bystander ppl.).
        -business efficacy ppl. - allows terms to be implied (to promote business ease)
-CC: Ct. did not handle matter of whether this good faith implication applies to all rental renewal
agreements (or other agreements to agree - generally, they are not binding)


    3) Firm Offers


   K requires
    1) Agreement (offer + acceptance)
    2) some element of exchange (consideration)

   to enforce an offer
    1) give consideration
    2) do something to put promise under seal
        -otherwise, offer is revocable at any time prior to acceptance (Dickinson v. Dodds)
        -this revocation must be communicated to the offeree at least indirectly

   consideration = something given in return for a promise


-Dickinson v. Dodds (1876, CA)
-NB: this case raised idea that no offer is firm w/o consideration
-Facts: D offered P property stipulating price and time of expiry of offer
                                                            rd
         -before offer expired, P heard D was selling to a 3 party
         -P attempted to make a formal acceptance, failed
-Issues: can a person w/draw an offer prior to acceptance where duration of offer was specified?
-Decision: for D
-Reasons: D is not bound by offer and can w/draw at any time prior to acceptance
         -no consideration
                                                                           rd
         -P was aware of D's w/drawl (rumor through P's agent of sale to 3 party)

-UCC s. 2-205
    3) Methods of Acceptance

   Offeror can stipulate acceptable method of acceptance
   Silence is normally not an acceptable method of acceptance
   Action / conduct may constitute acceptance
   Unsolicited goods allow no cause of action by sender unless receiver expresses acceptance
    in writing
   Normally a more efficient mode of acceptance than that stipulated is ok
   If mode is not specified in offer, the same or a more efficient means than method of offer is ok
   Acceptance by mail occurs at postage, not reception
   Offers by mail may be revoked by communication prior to offeree's receipt of offer
   Offeror bears risk of loss through mail if that mode is specified or the matter is left up to the
    offeree (b/c offeror may stipulate an alternate method of acceptance)
   Terms may be added by offeree unless offeror limits acceptance in some way
   Counter-offer / change in terms = rejection of original offer
   Objections to amendments must be made w/in a reasonable time
   Acceptance of an unclosed offer must be made w/in reasonable time

-Eliason v. Henshaw (1918, USSC)
-Facts: P offered to purchase flour from D, stipulated acceptance to be sent to by wagon to
location X
         -D sent acceptance by mail to another location
-Decision: for P
-Reasons: no K, offeror has right to stipulate method of acceptance
         -mode of acceptance not relevant here, but location is

-Manchester Dioscesan Council v. Commercial and General Investments (1969)
-where an offeror has specified an acceptable mode of acceptance, another equally efficient
method is ok

-UCC s. 2-207
-an American attempt to regulate counter-offers as acceptance
-largely ineffective / possibly self-contradictory

    4) Consideration: Hallmark of Bargain

-White v. Bluett (1853, Exch. Ct.)
-Facts: D owed his dad $, dad promised not to enforce promissory note if son would stop
complaining about unequal share in will
-Issue: was the father's gift valid?
-Decision:
-Reasons: no consideration in ceasing to complain about something D had no right to complain
about

-Hamer v. Sidway (1891, N.Y.CA)
-Facts: uncle promised P nephew $ if he stopped drinking, smoking, & gambling until he was 21
        -P complies, uncle promises to pay but dies
                                             rd
        -P sells value of promise to pay to 3 party
        -D claims no consideration
-Decision: for P
-Reasons: consideration = restriction on P's freedom
        -not relevant whether consideration actually benefited the promissor
-Thomas v. Thomas (1842, QB)
-Facts: dead husband wanted to give home to wife
        -executors agree to convey house to widow for life
        -P pays 1$ towards rent to D executors, one D dies, other D ejects P, P sues
        -P claimed moral obligation and burden of gift were consideration (maintenance of home)
-Reasons: motive is not consideration, burden of gift must be taken w/ gift
        -no consideration moved from P

        (Mutual Promises)

   Promise in return for a promise (a mutual promise) is good consideration
   Prior to performance, this = an executory K
   Both parties must incur obligations as a result of the K (Tobias v. Dick)
   Ct. can read an implied promise into the K to find consideration (Wood v. Lucy, Lady Duff-
    Gordon)
   Unilateral K = a K where an offer can only be accepted by performance (which constitutes
    both acceptance and consideration)
   1/2 way up the flagpole problem arises out of the fact that offer may be revoked before
    acceptance (and therefore before consideration given)

        (Illusory Obligations)

   illusory obligation defn: a K which obligates only one party to do something (Tobias v. Dick)

        (Agency)

   relationship where a “principal” employs an “agent” to make K’s on the principal’s behalf or to
    dispose of the principal’s property (Wood v. Lucy)

-Tobias v. Dick (1937, Man. KB)
-Facts: P entered K to buy D's crushers from D to later sell them to interested buyers
        -K granted P exclusive agency to sell them
                                                         rd
        -P was not selling crushers, so D entered K w/ 3 party to sell crushers
          rd
        -3 party sold crushers in same area as P
-Decision: for D
-Reasons: no consideration for promise that P would be exclusive seller
        -P did not have to do anything, agreement was one-sided
        -relationship was not one of agency, P bought each machine himself

-Wood v. Lucy, Lady Duff-Gordon (1917, N.Y.CA)
-Facts: P was agent for D, P had sole rights to put D's endorsements on products and distribute
         -profits were to be split
         -D placed endorsements on other products w/o telling P (D kept profits to herself)
-Decision: For P
-Reasons: there is consideration - "a promise may be lacking and yet the whole writing may be
instinct w/ an obligation imperfectly expressed"
         -Ct. implies term that P was to make reasonable efforts to find products for endorsement
         -parties would not have entered into the K for nothing
         -implied promise required to allow for transactions to have the business efficacy intended
         by both parties
         -officious bystander test applied (Moorcock)
-CC: different from Tobias b/c here there was a relationship of agency
         -what parties thought about K was evidenced by behavior
B) Problems in the Bargain Theory:

    1) Pre-existing Duty

   It is not consideration to do something you are already obliged to do (Stilk v. Myrick, Smith
    v. Dawson)
   Where party A cannot complete a K for party B, this may present some problems
    -how is A to provide consideration?
          -promise to complete original K is bad consideration
          -some form of new, nominal consideration
          -promise under seal
          -recission by both parties and replacement of the K is good consideration
                   -promissor promises not to sue for SP
                   -promissee promises not to sue for $$
   Giving up your right to breach a K is not good consideration (Smith v. Dawson)
   Where parties mutually agree to end a K and replace it with a new one, the pre-existing duty
    under the old K is terminated (Raggow v. Scougall)
   A change in a K price (a term) is not destruction + replacement

-Harris v. Watson (1791, Eng)
-Facts: D was promised extra $ for extra work on a ship
        -P proved that the ship was in danger at the time
-Decision: for D
-Reasons: D’s promise to pay is NOT enforceable
        -policy concern: such promises could lead to crew refusing to work in times of emergency
        unless paid more

-Stilk v. Myrick (1809, Eng)
-Facts: D promised to split the wages of two crew members (who abandoned ship) amongst the
remaining crew
-Decision: for D
-Reasons: no consideration, crew gave nothing more to captain as consideration
         -crew had been hired to do all that was required of them on the ship
         -promisee (crew) must give some consideration (something flowing from promisee to
         promisor)
         -here the transferred benefit / burden was something the sailors were already required to
         do
         - policy issue (as above) was raised, but not applies as basis for the decision
-CC: this case narrowed the doctrine of consideration

-Smith v. Dawson (1923, Ont.CA)
-Facts: P hired to build house for D, house burns down mid-construction
        -P agreed to complete K in exchange for the insurance $$
        -D wanted to keep the $$ for furniture lost in the fire
Decision: for D
Reasons: D argued that giving up the right to breach the K (by promising to complete the K) could
be consideration
        -Ct. rejected this (possibility of being sued is incidental to the K)
        -promise to perform an existing K is not good consideration
-Raggow v. Scougal (1915, Eng Div Ct)
-Facts: P hired by D under a K that allowed for business to shut down during the war
        -P later agreed to the option of continuing work for a decreased wage over 2 years during
        the war
        -P goes along w/ K but later sues for a higher wage
-Decision: for D
-Reasons: parties had formed a new K to accept decreased wages during the war
        -new terms indicated a new K (more new terms = more likely that a new K exists)
                                 nd
-NB: there was formality in the 2 K (in writing)
-CC: employer as promisee (of promise by employees to accept less $) gave up the right to close
down his business during the war (consideration)
        -this case could have been decided this way but was not

-Gilbert Steel v. University Construction (1976, Ont.CA)
-Facts: P Steel co. increased price to a D K’or ½ way through a project
        -D agreed to this, then paid only the originally agreed price
        -D argued no consideration to pay more
Decision: for D
Reasons: no consideration flowing from D
        -3 arguments suggest there was consideration
             1) increased credit rating to D for the period following the price increase (Ct. rejects)
                  st
             2) 1 agreement was rescinded and replaced (Ct. rejects, only a term was changed)
             3) promise for a good price on steel in the future (Ct. rejects - insubstantial)
-Ct. applied the principle from Stilk v. Myrick (performance of original K is bad consideration)

-Williams v. Roffey Bros. Ltd. (1991, Q.B.C.A.)
-Facts: P carpenter agreed to refurbish flats but ran out of $
         -asked D to pay more, D agrees to
-Decision: there was consideration
-promise to perform a task which a party is already obligated to perform = consideration if:
         1) P had reason to doubt that D would complete the K or there was a genuine likelihood
             that the K would not be completed
         2) The other party derived a practical benefit from the performance of the pre-existing
             duty
         3) There is no duress or fraud
-CC: this case represents an attempt to adapt the bargain theory problems to a modern context
-Doctrine of Economic Duress: defence to performance of K – if economic pressure was severe
and unreasonable, the K would not be enforced
-pressure must be outstanding and extreme
-this case was controversial