1. Restitution Interest: The prevention of unjust enrichment
You‟re entitled to your $ back if a promise is abandoned
Easy to calculate
2. Reliance Interest: Put the plaintiff in as good a position he would have been in before the
promise was made
Entitled to all costs incurred in anticipation of the broken promise
Can be tricky to calculate if we consider opportunity cost.
3. Expectation Interest: Put the plaintiff in as good a position he would have been in had the
contract been performed
Entitled to the promise being fulfilled, either through specific performance
(action) or usually damages (lost profits).
Law gives protection to expectancy to encourage K to be performed, to
encourage reliance on the K. The stricter the penalty, the more confidence
people will have in Ks.
Bollenbach (27)- restitution
Insurance company did not want to pay claimed benefit. They claimed he missed a
payment 2 yrs ago. They repudiate the K.
Bollenbach wants restitution, his $ back. Once they repudiate, he can rescind, gets his
money back as of the day they claim he did not pay (2 yrs.)
Anglia TV v Reed (34) – sue for pre-contract expenditure (reliance)
Anglia was going to shoot a movie, hired Reed at last second to be the lead, and he
Could not demonstrate expectancy. Onus on P to prove profit, shifts to D to prove loss. If
neither can prove, then expectancy is assumed to be ZERO.
Sued instead for reliance, including pre-contract expenditure (costs incurred before he
Ogus – in the US (and Canada), must show causation, did his breach cause the loss? This
case may have been decided differently.
Bowlay Logging (35) – D demonstrates a loss
P is losing $ on K. D breaches K with P. P sues for damages.
No cause of action because D can demonstrate expectancy loss, P profited from breach.
Pitcher v. Shoebottom (35) – calculation of damages
A K to sell land with a down payment. Breach by D, sold land to someone else. P sues for
Judge awards damages for breach, but wrong calculation. 2 methods:
a. Lost profit (current price of land – original price) + reliance loss (costs incurred
before and after K, ex: land survey); or
b. Gross profit (current land price including surveys, those add to value) – avoided
expenses (paying rest of the pymts.)
Hawkins v McGee (37) – Calculation of damages.
Doctor operated on Ps hand. Promised his a hand as good as new. Hand was worse than
Damages for expectancy, difference between current hand and a new hand.
Ex: Law of chattels, If you sell me a broken machine, exp. is dif between the broken
machine and a working one.
Not difference between old hand and new hand. Torts looks to make the person whole
again, reliance (i.e. restore to original, broken hand). Contracts looks to fulfilling the
Groves v John Wunder (40) – Damages = Economic or Performance Value
Lease contract to use land. D would had to level ground after use. Breached k. P
sued for performance value, i.e. cost to level the land, even though the land itself
was worth much less (economic value).
Court found for performance expectancy.
D‟s breach was willful, unjust enrichment, surely D should not benefit
Law aims to give P what he was promised, i.e. performance.
P has a right to improve his property even if it is not worth much
Strong Dissent for economic expectancy
Damages should not be punitive in nature
Contrary to economics to pay so much to revive a property
Damages should be limited to the actual value of the property
The problem is that it amounts to overcompensation to P or to D.
Easier to decide for P if he actually does, or will do the work, ex: repair his old but
Decide for D if it would be unreasonable to do the work, ex: rebuild a pool with a slight
defect; rebuild a house because a slightly different material was used in construction.
Thompson v Robinson (46) – Lost Volume
Contract to buy a car. D breached contract. P sent car back to manufacturer, but sues for lost
profit on the sale
The price of the car is set by the market. Damages depend on demand
If demand is high, seller can sell the car to someone else at the same price, therefore no
damages. (Charter v. Sullivan – 47)
If demand is low then effectively the sale is lost, and he can sue for the lost profits.
(Thompson v. Robinson)
Chaplain v Hicks (49) – Lost Chance (beauty pageant)
P was wrongfully excluded from a beauty pageant, where she had a 1/5 chance of winning. She
was awarded 20% of the value of the damages.
MultiMall v. TexMall (49-50) – Lost chance
D sold property to P, who was going to lobby the city to rezone so that they could build a mall. D
then built their own mall, making it impossible for P to get rezoning.
Can sue for loss of chance if:
Causation: but-for D‟s breach, P would have had an opportunity
P must demonstrate chance is material
Chance relied on an external force, not P
Chance must have some practical value?
No downside risk, i.e. no chance of losing!
o Ex McCrae the boat salvager, had a 1/5 chance of profit, 4/5 chance of a loss.
Can not sue for loss of chance.
Found that there was 1/5 chance of rezoning, X expectancy = damages
Remoteness - Reasons why a courier should not be held responsible for lost profits due to breach
Hadley v Baxendale (51) – Remoteness
A mill shaft broker. Coy sent it by courier to be fixed. The courier was late, causing the mill to be
idle. Mill sued for damages.
Damages considered too remote. Only damages for
1. Fairly and reasonably result naturally from the breach, or
2. May reasonably be supposed to have been in the contemplation of both parties (details of
These special circumstances were not communicated, therefore not reasonable to hold D liable for
Horne v. Midland R.R. (55)
Courier was late delivering shoes, which resulted in a loss of profit for P.
Details of sale were communicated to D. P sues for loss of profit.
Held that even though special circumstances were communicated, there is no precedent that states
this must result in special damages
Courier not liable unless expressly mentioned in the contract.
There is no second contract, courier contemplates his own performance. (Hydraulic
Carrier has no discretion to decline a contract (Rivers)
Too large a liability for too small a remuneration (Kinghorne).
Victoria Laundry (57) – Late delivery will result in damages for lost profit
D delivered a boiler late
Victoria laundry sued for lost profits of regular business, and an especially lucrative contract.
- Although the specific use of the boiler or contracts were not communicated, D did know that the
principle business of Vic laundry was the dying business.
- Further, D were engineers and knew the uses for boilers (their own knowledge)
Held that they are liable for regular lost profits, because they were foreseeable, especially given
the knowledge of the engineers about boilers and the business of Vic Laundry
- Not awarded damages for lucrative contract because this was not foreseeable.
Hadley v Baxendale occurred when corporations (Ltd Liability) was less common, and
there was less insurance
Victoria Laundry happened later, and the standard for foreseeablity was lessened
Reasonable foreseeability test
1. Knowledge of contract breaker
Their own knowledge on the subject (engineers)
Special circumstances (dying business, but not the lucrative K)
2. Whatever is in the contemplation of both parties when forming the contract
Ex: Sell Cow Feed, which is poisoned
Farmer eats feed
It is foreseeable only that cows would eat feed, so the damages are one cow
Not foreseeable that a human would eat it, so damages are not one person
Munroe Equipment v. Canada forest Products (61) – type of work not specified
An old tractor was rented by D to be used for snow removal for a logging operation
Tractor broke down, and the operation was compromised.
D refused to pay for tractor, is sued rental, and counter-sues for lost profits.
P knew the tractor was to be used for snow removal, but did not know it was the only tractor to be
used, or the extent of the logging to be done.
Held the type of damages do not ordinarily flow from the tractor breaking down. Further, if they
knew the entire operation hinged on an old tractor, surely they would have contracted out of
liability, or refused to rent.
Scyrup v. Economy tractor (63) – type of work specified
D sold a malfunctioning tractor to P.
P made it clear that he needed the tractor quickly, in working condition, for a contract that he
Majority found that enough special circumstances had been communicated. The knowledge of D
was enough to foresee the type of lost profit, even though the specific price of the contract was
Dissent found that not enough special circumstances had been communicated. They didn‟t know
the price of the contract.
Further, it is not reasonable for D to assume that P would hold him liable for lost profits, only for
the malfunctioning machine.
Koufos v. Czarnikow (68) – revisit Hadley, Vic Laundry
What does reasonable foreseeability mean?
Hadley v Baxendale = Very likely, probable to happen
Vic Laundry = Possible to foresee, not unlikely, not necessarily probable
Tort = remote but still foreseeable
o In K, it has to be more that a possibility, „or on the cards‟
Cornwall v. Purolator (1978) (75) – modern law for couriers
Puro was late delivering a tender. They were informed it was a tender and of deadline to submit.
Found liable for damages of lost profits from not receiving the construction contract. Puro knew
enough about the package, that it was a tender, so the types of damages flowing from the breach
were foreseeable, even thought the specific amount was not specified
This has changed the courier industry, were now they would stipulate a max am‟t of liability, and
offer insurance for a premium as well.
Restitution – against unjust enrichment in the case where there is no K, or it is unenforceable
Deglman v. Guarantee Trust (153) – recover unjust enrichment when K is unenforceable
Nephew provided services for aunt in return for consideration in her will (house)
She died intestate, and according to the statute of frauds, land transfer must be made in writing.
Because it was not in writing he has no legal claim for the land.
Instead he was granted restitution, a money amount for the services rendered because the verbal
K could not be enforced and thus the estate was unjustly enriched.
Did not receive expectancy, which would have been the house or the value of the house.
Boone v. Coe (155) – can‟t recover expenses to a 3 rd party, no unjust enrichment
Family sold house, traveled to Texas in anticipation of a farming contract. The contract was not
enforceable due to that statute of frauds.
They were not entitled to recover expenses because they were spent on 3 rd parties, and P was not
unjustly enriched by them traveling to Texas.
Hunt v. Silk (158) – contract can not be partially rescinded (i.e. no partial restitution)
P signed lease for flat, which included a deposit of 10$, and some repairs to be performed by
P moved in for a few weeks, but repairs were never made.
He moved out, and wanted the K rescinded and deposit back (restitution)
Held because he used the flat for a few days he received some benefit, so K could not be
rescinded. He could not recover deposit, because there is not a total failure of consideration.
However, it is commented that this rule is harsh and archaic.
Partial restitution could be possible (refund some of the deposit)
The benefit conferred could be considered negligible, thus full recovery would be
Attorney General v. Blake (159) – Unjust enrichment to disgorge profits.
Blake was a spy who defected.
Contrary to a confidentiality agreement, he wrote a book about the secret service.
British gov‟t sues for disgorgement of profits.
1. Not really a breach of contract, more like a breach of trust.
2. Not really an argument that all profits made due to a breach are recoverable
Ex: efficient breach were one breaches a contract and sells to someone else for
a better price. Can pay damages to the first party and still make and keep
profits from second contract.
3. Is an argument of unjust enrichment, because he is making profits by breaching a
contract, but the state is not really losing money (no detriment)
4. However, the state does have a legitimate interest in preventing the publication. If they
were able to act sooner, they would have received an injunction.
5. Because at this point an injunction is not possible (the book is already published) coupled
with unjust enrichment, the state is able to disgorge profits as a remedy.
An act or forebearance, or the promise thereof, is the price for which the other is bought, and the
promise thus given for value is enforceable. (Dunlop v. Selfridge)
1. What is the promise I am trying to enforce?
2. Is there any restriction of freedom, either by act or by $ in exchange?
White v. Bluett (257) - no consideration
Son complained to his father that he treats him unfairly. The father then promised “if you will
stop complaining then I will cancel your debt”
Son sues for performance
Held that the promise is not enforceable, the son gave no consideration. Refraining from
complaining is not a „real‟ forbearance because he had not „right‟ to complain to the father in the
Hamer v. Sidway (259) – marginal consideration
Uncle promised nephew “if you give up drinking and smoking I will pay you 5000$
Nephew gave up drinking and smoking and sues for the promise to pay.
Held that he did have a legal right to drink and smoke, and giving that up was a real forbearance.
This is consideration and thus the promise is enforceable.
Distinguish from White
1. In White son was complaining to father, so removing the complaint is trivial
2. Courts have difficulty with close family relationships. Ex: A broken promise relating to
doing the dishes (domestic work) is hardly grounds to sue.)
Thomas v. Thomas (260) – Consideration is independent of motive
Late husband wanted his wife taken care of, but did not mention this in his will.
Executors arranged for her to have a house, as long as she paid 1$/yr towards the ground rent.
They eventually broke this contract, and Widow sues.
Held that there was consideration, even though very small, flowing from the widow to the
For the same reason, the house was not considered a gift, which is a voluntary giving in the
absence of consideration, and thus is revocable.
Contract existed even thought the motivation for entering into the contract on the part of the
executors was not their own intention, but that of the late husband.
Motive is irrelevant.
Mutual Promise – where doing a thing is good consideration, a promise to do so is also good
consideration. (unilateral contracts)
“If you do X, I promise Y”
Witham (262) – promise to supply goods
Witham submitted a tender to sell as much steel as needed to a RY coy at a certain price.
After an order was received he refused to supply it. RY coy sues.
D claims that there is no consideration from RY coy, no guarantee to buy any steel, no guarantee
to only buy steel from Witham.
Held that once they place an order, they do promise to pay $ for steel, this is good consideration
once an order is placed. (I placed an order, therefore you must fulfill order)
Between orders, there is no contract to maintain the price list.
Tobias V. Dick (265) – Exclusive purchaser
Contract to be sole purchaser and distributor of machines from manufacturer.
Manufacturer then sold his own machines himself
Held not a valid contract because there was no consideration from the distributor. He did not limit
his own freedom by promising to buy (and sell) a given number of machines, or any machines at
In the absence of an order there is no contract, and the manufacturer can sell to whomever he
Further, P was a bad salesman, and effectively would control the entire output of machines
Lady Duff Gordon (266) Exclusive distributor with implied promise to distribute
Lady Duff Gordon granted exclusive licensing of her brand for 50% of all profits.
She then sold some of her merchandise herself.
P sued for damages, D argued no consideration from licensing agent.
Held that there was an implied promise that he would license the merchandise effectively
Without such a promise there would be no business efficacy, and the K would make no sense.
Further, the terms of the contract, 50% of profits , accounting practices, obtaining trademarks, all
point to the intention that P was to be the licensed distributor, as said in the contract.
The implied promise to sell is good consideration, therefore Lady duff is liable for damages.
Pre-Existing Duty – a promise to perform a pre-existing duty is not good consideration
Harris v. Watson (267) – pre-existing duty is not good consideration, it is extortion
A ship was in danger, captain offered a raise to motivate workers to do extra work
Held contract is not enforceable because seamen were already under a duty to do all work
necessary to ensure the safety of the ship. No consideration for more wages.
Otherwise they could hold the captain at ransom anytime the ship was in danger.
Stilk v Myrick (268) - pre-existing duty is not good consideration, it is extortion
2 seamen deserted, captain promised to pay extra wages for the remaining seamen.
Held contract is not enforceable because seamen were already under a duty to do all work
necessary to ensure the safety of the ship. No consideration for more wages.
Hartley v. Ponsonby (269) if duty is materially altered, then it is good consideration
The crew was so reduced in number that it was life threatening to work on the ship. Then a
promise to work is good consideration for extra wages.
Holmes, The Common law (USA, 269)
Idea that entering a contract is an agreement to perform, or abandon and pay damages.
If the party agrees to not to abandon, then he is giving up a right and this is good consideration.
Not adopted in Canada of the UK
Circular argument, and opens the door to extortion
Smith v. Dawson (270) – promise not to abandon is not good consideration
Builders were to build a house for a price.
Halfway through the house burned down, and they had no insurance.
Owner insisted on the house being built, and they asked for more money or they would not do it.
Not an enforceable contract. The had a pre-existing duty to build the house for a price. No
consideration given for extra money (unilateral variation on a contract)
Raggow v. Scouggall (272) – agree to abandon old contract, use a new contract
Due to the war a design company asked its employees if they would take a pay cut. Employees
agreed to take less money. Later sued for full wages.
Court considered it a temporary suspension of the contract, a mutual agreement to abandon the
contract in favor of a new one, to be reviewed after the war, not a unilateral variation on a
contract which would be unenforceable.
Done for a specific reason (the war) for a specific amount of time (until it ends).
Gilbert Steel v. University Construction (273) – same steel for more money is not good
Gilbert steel wanted to renegotiate the price of steel supplied to University. The price was agreed
to in principle, but never accepted in writing. Gilbert steel sues for increased price
Tried to demonstrate consideration in three ways, each failed
1. Offered a „good price‟ in the future. This is too vague to be considered real consideration
2. Increased credit as a result of increased price, poor argument, the increase of credit is a
function of higher billing, not more leniency
3. They Mutually agreed to abandon the initial contract (Raggow V Scougall). That is not
the case as is evidenced by the refusal of University to assent to new contract.
Court interprets Raggow v. Scouggall narrowly, even though the consideration rule here seems a
bit stupid, because in the business world people renegotiate contracts all the time (unilateral
variations), and technically they are not binding, even though they intend them to be binding.
Williams v. Roffey (276) – same product, more money, offered freely by owner is binding.
Sub-contractor (P) is loosing money. Contractor (D) realizes this, and of his own will to ensure
the project continues smoothly, offers more money for the same job.
Contrary to Gilbert steel, court enforces More $ for the same job.
It is considered a benefit to “obviate a disbenefit”, essentially, continuing to work is good
Foakes v. Beer (280) – less money is no substitute for more money.
Agreement to pay back money with no interest. P then sues D for the interest.
Held, paying less money is not good consideration, therefore the new contract is not enforceable,
P is entitle to the interest.
1. P accepted that it would be satisfactory to receive payment now, that it was as valuable as
more money but later. Courts disagree, you can‟t substitute less money for more money.
2. D also argued Accord and satisfaction. Court held that this does not circumvent pre-
This is again stupid law because it happens all the time in commerce, but is not legally binding.
Mercantile Law (284) statutory provision, only applies in narrow situations
If a creditor agrees to a lesser sum, and that sum is delivered, then the initial obligation is
Only applies if the full sum is paid. If not, then creditor has the right to sue for the initial amount.
Doesn‟t cover partial payment, or revocation. Doesn‟t cover Gilbert steel where the price is
Compromise – contracts made with to avoid a lawsuit are enforceable. Good for the court system
to encourage dispute resolution outside of court.
1. Not bringing a claim is only good consideration, but only when it is reasonable that they
would intend to bring a lawsuit
2. Doesn‟t necessarily have to be a winning claim, only a reasonable one
Cook v. Wright (285)
D occupied a house. Told he would be sued for taxes. Even thought he expected that he could not
be sued, he decided to pay in exchange for not being sued. He defaulted on his 2nc and 3 rd
installment, and the city works sued.
Held that the contract was binding, not suing was good consideration for the payments, even
though they did not have a right of action because he was not the homeowner. However, the
public works did intend to sue, thinking they had a claim.
Fairgrief v. Ellis (288)
Fairgrief did work for Ellis in return for his house upon death.
Ellis changed his mind and asked her to leave. He offered her 1000$ to leave.
Even though the 1st contract for the house was not enforceable (anti-trust), the second contract is
enforceable. Leaving the house was good consideration for the $$.
Charitable Subscriptions – in general gifts are not binding, there is no consideration given for
them so they can be revoked. Only if they are given for a specific purpose, ex donating money to
build a wing named after themselves, is a pledge binding.
Dalhousie College v. Boutilier Estate (290) – charitable gift not binding.
D made a charitable subscription, but did not pay. School sued for payment
1. claim that his money was already spent
2. Other donors give on the premise that he would give. In essence he enters into a K with
all donors is good consideration.
Held this is not a bargain. The school did not perform an act or forebearance in exchange for his
promise to donate. This would be different is they built a structure specifically on reliance of his
There is no other contact with the other donors.
It is a gift and not enforceable contract.
Intention – Do the parties intend to enter into a legal contract. Not a subjective, but objective
reasonableness standard of intention.
Balfour v. Balfour (294) – social/domestic cases are usual not contractual
Husband promised to pay wife 30$/month while he was away. She sues for damages.
Held that the two parties did not intend to enter into legal obligations.
Further, there is no consideration flowing from the wife to enforce the promise.
Courts view love as the consideration for cohabitation contracts, to enforce them would be
Simpkin v. Pays (297) – lottery ticket, intention established
Granddaughter/mother bought a lottery ticket together every week. Grandmother claimed the
Court held that it is an enforceable contract to split the winnings, as they both contributed equally
every week for the purchase. Intention is established.
Merritt v. Merritt (297) – contract out of wedlock, intention established
While separated, husband agreed to pay wife a certain amount if she would continue paying the
mortgage on the house and raise the children. When fully paid he would transfer the house to her
name. He did not transfer the house and she sued.
Court held that the contract was intended to be legally binding, as it was made regarding the
separation of their assets.
Wife paid off the mortgage and this was good consideration on her part.
Jones v. Padavatton (299) – seriousness of reliance supercedes intention
Mother persuaded daughter to leave her job in the US, come to England and study for the bar. In
exchange, she would support her and her child.
The daughter did so, but was slow progressing through school and the mother cut her off.
Daughter sues for damages.
Clearly they are family and usually domestic contract are not enforced, intention not established
However, there is a great deal of forebearance by the daughter.
Court held the contract is binding despite intentional difficulties.
Rose + Frank v. Crompton (304) Intent expressly denied in the contract
Two parties drew up a very formal agreement with all the aspects of a K, but with the words this
is not intended to be a legally binding K, only an expression of intention to pursue business given
TJ held it was a contract. Why would they go through such lengths to draw up an agreement if
they didn‟t want it to be binding?
C.A. held not contract, although it has all the hallmarks, it expressly denies intention for legal
The SEAL – formal legal seal has many implications
1. Evidentiary function – evidence that it is a contract and legally binding, even in the
absence of consideration.
2. Cautionary function – that it is not to be entered into lightly because it is legally binding.
3. Channeling function – external test for enforceability.
4. Extension of the statute of limitations
5. can only sue parties named on the sealed document, not 3 rd parties, silent investors
What is the meaning of the modern seal?
1. Historically it was a seal with wax, equivalent to a royal signature.
2. Is a corporate seal a SEAL? Corporations put their seal on everything, it doesn‟t mean
they intend them to be contracts.
3. If we must consider when a seal is intended to be a seal then the objectivity aspect is lost.
4. Financial institutions still use the seal for loans, to ensure that the contract is valid even
Past Consideration – Usually past consideration is no consideration. An act or forebearance
must be done in exchange for a promise, they must be linked, it must be a bargain.
However, if an act or forebearance is done at the request of the other party, then
it can be considered good consideration.
Lampleigh v. Brathwait (313) an act done by request can be past consideration for a promise in
D killed a man, and asked P to petition the king for a pardon.
P did so, and D was pardoned. Grateful, he promised to give money. P sues for the money.
Act was done at the request of D. It is therefore good consideration for a promise made in the
future. The promise, though it follow, is not naked, but couples itself to the act performed before.
Kennedy v. Brown (313)
an act done in the past is consideration to pay what it is objectively worth.
Could be more than the subsequent promise to pay.
Could exist even if there was no promise to pay. Based on unjust enrichment of
Webb v. McGowin (314) an act not done by request is not good consideration
P saved D‟s life, and while doing so was seriously injured.
In gratitude, D promised to pay him for the rest of his life. After a while he stopped paying and P
sues for payment
Held saving the life is not good past consideration because D did not request that it be done, not
an act done in exchange for the promise.
Restatement of Contracts (US only, 316)
Past consideration is binding unless:
1. it is a gift, but D above would argue gift and P would argue not, so not much help
2. Promisor is not unjustly enriched
Ex: call the plumber, don‟t discuss price. His work is good consideration to demand
payment because you have been unjustly enriched by his services
Ex: If you call the neighbor, who usually is not paid for plumbing, then you haven‟t
been unjustly enriched, only helped.
Subsequent Reliance – Gratuitous Undertakings
Failure of consideration. People rely on the word of someone like a contracts when in fact there is
none. They then try and cook up consideration when there is none. Sometimes these cases would
be better suited for torts, because the person has been wronged, not breached.
Baxter v. Jones (318) – tort not contract
D was to get insurance for P, then abandoned this task. When a fire broke out P
was not covered.
Sued D in contract, when really it would be better for tort
Estoppel – by law one can not deny existence
Estoppel by representation
If A represents to B that something is a fact, and B acts on it, then A is bound by that fact
and can not later deny it.
Hughes v. Metropolitan Rail (321) – Doctrine of waiver wave insistence on strict rights
Tennant was to fix up property within 6 months. However, the tenant and owner entered into
negotiations during this time. Negotiations eventually failed, and owner demanded tried to eject
tenant on the grounds that he did not do the repairs within 6 months.
Courts relied on equitable doctrine of waiver.
Upon entering negotiation one waives the right to insist on strict enforcement.
Insisting on strict rights would amount to eviction. This is an example of detrimental reliance by
P on the implied promise that he would not insist on strict rights while bargaining.
Central London Property v. High Trees (321) – Promissory estopel
Original leased amount for X$.
Landlord agreed to accept less during the war, and/or until business improved (Foakes v. Beer,
less money for same product, unilateral variation, no consideration).
Usually not binding for want of consideration. However:
1. If the person making the promise intends it to be legal.
2. The person expects it to be acted on
3. It is acted on
Then the promise is binding on the party giving it.
No cause of action for breach, promise can‟t sue for performance. Example can‟t recover
profits based on lower rent, only on higher rent.
Promise can be rescinded once conditions change or upon notice.
More consistent with law reform, and overrules Foakes v. Beer.
Different from waiver because P is not in a terrible position, they are enjoying the
advantage of lower rent.
o No detrimental reliance, just a general reliance.
Combe v. Combe (323) promissory estopel does not overrule consideration
Husband and wife are divorced. Husband promises to pay an amount and doesn‟t.
Wife sues for performance of the promise.
No consideration flowing from the wife. No contract.
Even if she relied on the promise, promissory estopel is a shield, not a sword, and is not a cause
of action in itself. To do so would be to overrule consideration entirely.
John Burrows v. Subsurface Surveys. (328) laxness or indulgence is not estopel
Promissory note between two mutual businesses. Payments often paid late, but allowed because
they were on good terms. They had a falling out.
Upon further late payment, the note was recalled, as was the right of the party upon late payment.
D claims promissory estoppel implied by actions.
SCC held that estopel must be the result of some negotiation
Strictly speaking this is wrong, estopel can arise from conduct which gives rise to a belief
of D that strict rights will not be enforced.
Intent to waive legal rights was not inferred on the part of P.
Laxness or indulgence in accepting late payments is not grounds for estoppel.
Owen Sound Public Library v. Mial Developments (330) estoppel used by P as a shield, objective
test used to infer intention.
Contract to build a library, with a clause to break K if payments not received on time.
A bill was issued, but library asked Mial to get a corporate seal on it.
Mial agreed, but was late getting it done.
Mial then claimed pymt wasn‟t received on time and broke the K.
Library sued for performance, used estoped against D insisting on strict rights.
Held, it is reasonable that the Library would not believe they would have to pay the bill until the
seal was affixed and it was re-issued.
By accepting to get this done, Mial actions can be inferred as intending to give the Library that
luxury. (intent inferred from actions, not negotiations)
Mial contends they did not intend to extent this privilege
Objective test used to infer intention from Mial‟s actions
o Knowledge that other party is likely to perceive it as a binding promise
D.C. Builders v. Rees (338) no estoppel when there is coercion, not equitable.
DC builders (P) performed some renovations. Rees (D)refused to pay. Knowing they were on the
verge of bankruptcy, Rees offered half the money. DC grudgingly accepted and then sought legal
council and sued for the rest.
Usually less $ is not a substitute for more money (Foakes and Beer)
However, if estoppel applies the lesser sum would stand
However, no reliance on the part of Rees
Further, it was made under duress, therefore it is not inequitable to insist on the full
Proprietary Estoppel – can be used as a sword
Crabb v. Arun District Council (343).
D agreed to let P use his road to access his land. In reliance on that promise, P disposed of other
means of accessing the land. D then revoked the right and demanded significant payment for the
right, rendering P‟s land useless.
Although there is no agreement, although P was open to paying a reasonable price, there was as
yet no consideration.
However, D acted as though they had an agreement, and P relied on it
Insisting on strict rights would amount to detrimental reliance by P, and this would be
Proprietary estoppel – can be used as a cause of action.
Injunction against D, ordered to restore access rights.
In such a case, P would have been ordered to pay a fair price for such access, but as a punitive
measure to D for acting highhanded, such a measure was not invoked.
Walton (350) – damages for proprietary estoppel are reliance, not expectancy
Promise to enter into a K. Relying on that promise the man destroyed his building in preparation
for a new building. Finally the contract was not completed and he sues in proprietary estoppel.
Damages awarded = re-building the demolished store, not lost profits from the expected Contract.
Privity: 3rd Party beneficiary problem
3rd party sues to obtain benefits provided for in K (obtain a benefit)
3rd party relies on K not to be sued, as provided for in contract (obviate disbenefit)
Tweddle v. Atkinson (373) 3rd party beneficiaries can‟t sue for performance of the K.
Contract entered into by A + B. They both agree to give money to C (the son/son-in-law). B does
not perform the contract and C sues for performance.
C is not a party to the contract. There is no consideration coming from C
He therefore can not sue for damages. In turn, he can not be sued for a breach of K either.
Beswick v. Beswick (374) – Can‟t bring a joint claim of 1 st and 3rd party to solve the problem.
Nephew promised an uncle he would take care of his aunt. Aunt dies and the nephew does not
take care of the aunt. Aunt sues as for damages
Denning: 2 problems overcome by allowing a joint claim. (not good law, overruled)
1. A 3rd party can‟t sue: considers this a mere procedural problem. He allows the aunt to
bring a claim in the name of the husband.
2. The damages to the husband are zero, he has suffered no loss. He allows her to claim her
Lord Reid (HOL): One can not bring a claim in the name of the 1st party.
However, in his case she can sue as administratrix of his estate.
The claim for specific performance is good, so she can recover damages even
though the estate has suffered no loss.
Dunlop v. Selfridge (383) 3rd parties can‟t sue for performance.
Dunlop entered into a K with Dew, a wholesaler. A clause in the K was that when selling tires to
a dealer, Dew must make them sign a K to sell tires at a minimum price set by Dunlop. Dew sells
tires to a retailer, with the stipulation. Retailer sells tires at a low price, breaking K with Dew, and
Dunlop sues for performance.
Held the 3rd party can‟t enforce the K because they gave no consideration.
Agency argument, that Dew was an agent of Dunlop, fails.
Clearly Dew acted independently and not as an agent.
Second, there still is no consideration from Dunlop to retailer.
Consideration is given in exchange for a promise, once exchanged the bargain is a legal
Once legal, why should it matter from whom the consideration came from, as long as
there is consideration?
Courts don‟t agree.
The Santanita (385) – Agency
Boat race organized by a yacht club. One stipulation was that any damage to a boat during the
race would be paid for by the boat at fault. There was an accident and a boat sank. Owner sues for
3rd party problem, the owner was not party to K between yacht club and other owner.
However the court held that by entering the race, they each entered an agreement with each other
to abide by the rules of the race.
In effect the yacht club was acting as an agent for all the boat owners. They were all in one big K
together, thus getting around 3rd party rule.
Even though this was not mentioned in the K, the court read it in.
Trusts – law of equity, circumvents the 3 rd party rule.
Trustee enters into an agreement with the Settlor. Trustee is to manage assets on behalf of a 3rd
Under Equity, the 3rd party beneficiaries can sue the trustee for non-performance of the
Mulholland v. Merriam (387) trust circumvent the 3 rd party rule.
Mullholland transferred his assets to Merriam to control. Merriam was to pay him a certain amt
per week, and after he died was to distribute it among his survivors. Upon death Merriam refused
to distribute the money. Beneficiaries sued.
Court found that the agreement resembled a trust agreement, and therefore the 3 rd party
beneficiaries are allowed to sue for performance of the K.
Jackson v. Horizon holidays (391) 1st party can sue to recover damages of a 3 rd party
Jackson planned a family vacation. He was very specific about his requests. Once he arrived at
the destination the accommodation were quite unsatisfactory. He sued for damages.
Problem, most of the damages ( lack of comfort) were incurred by the rest of his family, who
were not privy to the contract.
Denning allows 1st party to sue and to personally recover damages of 3rd parties.
London Drugs v. Kuehne (401)
London drugs buys a transformer, and signs an agreement that it won‟t hold company or its
employees responsible if it gets damaged in transit. The transformer is damaged and they sue the
London Drugs claims that the employees are not privy to the contract, and thus are not entitled to
benefits of the contract and can be sued.
SCC makes an exception to the rule. #rd party benefits extent to employees if
1. A clause in the contract explicitly of implicitly extends to employees
2. The employees were acting in the course of employment and providing the very services
provided for in the contract.
This relaxes privity law, but is necessary to maintain justice in an evolving marketplace.
Midland Silicones v. Scruttons (394) – privity not relaxed where carrier is not expressly
mentioned as an agent for employees.
Shipper ships goods through a carrier. Carrier employs stevedores at port to unload cargo.
Stevedores cause damage, and the shipper sues them directly.
Even thought they were mentioned I the K to be protected from liability, they are not privy to the
contract and thus are not entitled to its protection. They can be sued
New Zealand Shipping v. Satterthwaite (396) – privity is extended when contract expressly
mentions that employer is acting as agent for employees
Same facts as above, except the contract contained the terms that the employer is acting also as an
agent for all employees and subcontractors.
Lord Reid suggests agency argument can succeed if
1. Bill of lading (k) makes it clear stevedores are intended to be protected
2. Bill of lading makes it clear that the carrier is contracting on behalf of stevedores
3. Carrier has the authority of stevedores
4. There is consideration for the agreement.
The K had all of these aspects. Further, unloading the goods is good consideration flowing from
stevedore to carrier, despite a pre-existing duty to unload arising from K between stevedores and
carrier (Pao On).
Fraser River Pile v. Can Dive (410) – privity relaxed for all K‟s intending to protect 3 rd parties
Insurance co waived right to sue boat charterers in ins K.
Insurance co then sued chatterers, claiming they are 3 rd party beneficiaries, not entitled to the
protection of the K.
SCC expanded thinking in London Drugs. 3rd parties are protected under K if:
1. The contract intended to cover 3 rd parties
2. Activities engaged in by the 3 rd parties are the very ones envisaged when drawing up the
3rd parties are now covered “wherever commercial common sense requires”
Thus privity is no longer an issue when the issue is being protected by clauses in a contract to not
be sued, a shield.
However one can still not sue as a third party to enforce a benefit conferred by a contract, a
sword, Greenwood v. Beatie is not yet over ruled (try to sue ins company to pay for damages
caused by fire).
Formalization and Certainty
Offer and Acceptance – when does an agreement exist?
Offer must contain all of the terms, and a willingness to enter into the agreement
Acceptance must be made to the offer with all terms
Any variation on terms is a counteroffer, and nullifies the original offer
Denton v. Great Northern Railway (174) debate what is the offer + acceptance
Railway advertised a train, but is had been discontinued for a month.
P tried to buy a ticket, and sued for breach of contract.
Court held that the advertisement was an offer, and by him presenting himself wit money he is
accepting the offer. Presenting himself is good consideration.
Dissent, that the advertisement is a price list only. Going to the station is the offer, and the train
station declined to accept it. They can decline for a number of reasons, ex, all full, weather delay,
etc. Therefore there is no K.
Johnston bros v. Rogers Bros. (177) – Price list: offer must include willingness to sell.
D quoted a price for a certain good. P answered back by saying I‟ll take 2. D never delivered and
P sues for damages.
Held that a price list is not a K, there is no indication of a willingness to sell.
Once P offers to take a quantity at the price, D must accept this offer to create a K.
Limited Supply problem: why a price list is not a K
What if they don‟t have enough in stock? What if it‟s a rare collector‟s item, there is only
1 to sell
If every acceptance would be a K the supplier would be overwhelmed.
Harvey v. Facey (180) – willingness to sell
P asks 2 questions: are you willing to sell? How much would you sell for?
D answers back: $700.
Not a contract, there is no indication of willingness to sell on the part of D.
Answering a question about price, or providing a price list is not a contract
Ex: How much would you sell your house for? $300 000. I‟ll take it! Wait a minute, I have to talk
to my wife, make arrangements, I don‟t even know if I want to sell it…
Boyer & Co. (181) – limited supply.
A quote for manufacturing is not binding once accepted by purchaser. A manufacturer gives out
several quotes, most of which are not taken up. Once one is taken, he must make sure that he can
handle the volume before accepting it. What if everyone spontaneously agreed to his quote, he
would be overwhelmed with work.
Similarly a catalogue with 1 rare book for sale. The price is advertised, but it is impossible to
accept every offer to purchase the book.
Lefkowitz v. Great Minneapolis Surplus (182) – advertisement with clear performance
Advertisement for a fur coat for 1$, first come, first served.
P was the first one there, but D did not want to sell.
Held that P is entitled to damages. The advertisement contained sufficient conditions to make it
an offer. Once fulfilled P has performed the terms of acceptance and there is a K.
Pharmacy v. Boots (184) Items on display at a store are price lists
Govt claims an item on display at a store is an offer, the person putting it in a receptacle is an
acceptance. This overcomes the limited supply problem.
Pharmacy claimed a sale was only made once the cashier accepts money. Thus the person
presenting an item at the cash with money is the offer, and acceptance is made by the cashier.
Storer v. Macnchester city (186) – formality not required.
City offered to sell some property to Storer. They sent an agreement to Storer, which he signed
and sent back to them. They were to sign it and return it. However, they changed their minds and
didn‟t sign the contract.
1. Offer was sending the agreement to Storer. By signing it he accepted the offer
2. The offer is Storer sending the city a signed contract. By them countersigning that is the
acceptance. Contract must be formally ratified.
Denning found held #1, there was a contract. Even though the agreement was informal and did
not have the signatures of both parties.
Shatford v. BC Wine Grower (190) – acceptance must be within a reasonable time
Offer to buy grapes accepted after a few weeks.
Although no deadline was stipulated in the K, it was not reasonable to infer such an extended
offer given the nature of the goods
Grapes are perishable and must be sold promptly
A strict timeline may not apply to other goods, but must always be reasonable.
Larkin v Gardiner (191) – Must communicate acceptance to offeror.
Acceptance of an offer to purchase land was communicated to the offeree‟s agent only.
Held there is no contract because acceptance was not communicated to offeror.
Dominion building v. the King (193) – exception to communicating acceptance.
Offer from the King to enter a K. Must be decided upon by Parliament. The terms specified “if
accepted by the governor general”, waived the right to have acceptance communicated directly.
Held the K was binding because P had fulfilled the terms of acceptance, and D had waived the
right to be notified of acceptance.
Dickson v. Dodds (194) – Notice of Retraction is valid notice, even if delivered by a 3 rd party.
There was a firm offer to sell land, open until Friday.
When P submitted an acceptance, he was informed by the agent of the offeror that he was too
late, the land was sold. The offeror himself later affirmed the land was sold.
Held that the offer was withdrawn prior to acceptance. Prior to acceptance there is no
consideration, therefore the offer can be withdrawn.
Held that notice of withdrawal was sufficient, even though communicated minimally by a 3rd
Statues – (195) US statutes holding that an offer is not revocable by offeror.
Felthouse v. Bindley (196) – Silence is not acceptance (one must communicate acceptance).
Uncle told Nephew “if I don‟t hear from you, I consider the horse sold to me”.
Nephew never replied, although he intended that the horse be sold to his uncle.
Held that this is not a good K. In general Silence is not acceptance. One can not impose the
condition that silence is acceptance. However, one can waive the right to receive notice of
acceptance (Dominion Bldg v. The King).
Wheeler v. Klaholt (USA, 198) – Silence coupled to refusing to send back goods is acceptance
Agreement in principle between P and D. Shoes sent to D.
Eventually they could not agree on the terms of he contract.
After a long time, D finally sent back the shoes in bad condition.
Held that D had two options, either to assent to the K or the send back the shoes.
Because they kept the shoes and used them, silence on the part of D concerning acceptance of the
offer is held to be agreement.
Therefore they are responsible for the shoes.
Statutes (199) US statute indicate that where the offeror stipulates that remaining silent will be
taken as accepted, and the offeree by remaining silent intends acceptance there is a K, contrary to
In Canada regarding unsolicited goods, where the recipient is not bound by any contract,
effectively eliminating fraud where companies send things and force people to pay for them.
Eliason v. Henshaw (201) – the offeror is master of the offer
P stipulated in the offer that acceptance must be received in Herper‟s Ferry.
D communicated acceptance to Georgetown.
Held the offeror is master of the terms of the contract and can specify how acceptance is to be
delivered. By delivering to the wrong place (although to the same company), the acceptance is no
good. No K.
Hyde v. Wrench (202) – in general a counter offer extinguishes the initial offer
Cowan v. Boyd (202) – Initial offer is not extinguished if something keeps the offer open.
No substantial counteroffer
Initial refusal of the offer, but it is left open and still being considered
Bitler v. Ex-Cell-O (203)– Battle of the forms
An agreement is reached in principle between two parties, with the major terms of the K, (price,
Quantity, delivery) agreed to. However there is disagreement on more specific terms (usually
liability) with buyer sending a contract insisting on liability for defective product, and seller
countering with no liability for defect.
Denning states 3 approaches to the problem:
1. Last blow: whomever send the last form wins, because each form represents a counter-
offer, and extinguishes the original. The one who sent the last form has listed all the
conditions of the K.
2. First blow: The first document prevails, subsequent offers are mere proposals to amend
the initial offer which was accepted. If the difference were so important then they would
change the price and be specifically brought to the attention of the other. If they are not
so material, then the first agreement is accepted.
3. Combined the two contracts, which is usually not possible because the types of terms not
agreed on are exact opposites.
Problems: most contracts are drafted to state that it is an offer, and not an acceptance with
suggested proposals. They state clearly that in order to contract it must be accepted by the other
Bristoll v. Maggs (207) – major amendment to the K amounts to a counteroffer
Bristoll and Maggs agreed to a K in principle regarding the lease of his store. However, when
sent the K for signing, Bristol inserted a no-competition clause. Maggs declined the counteroffer,
and Bristol sues for damages.
Held that they were clearly still in a state of negotiation, the clause was a major alteration to the
Policy decision, courts are less likely to find a K given that it was Bristol who wanted to insert the
clause, and it is also Bristol who wants to enforce the contract.
The Tendering Process –
Common in the public sector
Protection against government fraud, awarding lucrative contracts to buddies
MJB v. Defence Construction (211) – Tender is actually 2 contracts. Breach by offeror =
expectancy damages for tenderer.
Call for tenders for a construction contract. One of the tenders was non-compliant (a small
oversight), however, that was the tender that was selected. P sues for damages, claiming that had
the offeror abided by the rules it would have been awarded the contract.
SCC held that in tendering there are two contracts.
1. Regarding the tendering process there is a K where tenderers submit a tender, as well as a
deposit in exchange for the offeror reviewing the tenders in accordance with the rules.
a. Although one of the rules is that the offeror need not select the lowest bid, it must
reject non-compliant bids in return for consideration of tenderers. This term is
implied by the fact that there are rules at all.
2. Once a company is selected there is a second contract, the actual construction contract.
Held that the offeror breached K1 by selecting an incompliant tender.
Demonstrated on a balance of probabilities that P would have been awarded the contract is D did
not breach. P is awarded expectancy damages for lost profits.
Ron Engineering (212) – Breach by tenderer = loss of deposit.
Ron engineering provided a tender, and was selected to do the work. However, they misquoted
their price and defaulted, and requested the deposit back because they withdraw.
Held that by submitting an uncompliant offer they breached the 1 st K, and are liable for damages
(loss of deposit).
Formalization and Certainty - Enough terms must be included
British American Timber v. Elk River (216) – contract w/o formal agreement
Agreement stated terms and conditions (Quantity, price, delivery)
Clause that once a survey was completed a formal agreement would be drawn up. After the
survey the agreement was not executed, and P sues for enforcement of the K.
Held that the agreement contained enough provisions and was a K even thought formal agreement
was not executed.
A formal contract would just be a written record of an agreement already reached.
May and Butcher V. The King ( 220) – contract with a vague reference to price is no K.
Agreement to buy entire output of tents. Price to be agreed upon in the future, as tents become
available for sale.
Held this is not a contract. For Sale of goods price is an essential aspect of the contract. Court
refused to infer a reasonable price. Only infer a price when the K is silent on the issue, but here
the K is not silent.
Hillas v. Arcos (223) – More uncertainty permitted in resource contracts
Contract to buy timber for one year, renewable the second year.
No specific quantity agreed to, but a rough idea is available. Price not set, but specified as the
market price, as it varies considerably.
Held that a contract did exist. Distinguished from Butcher for a number of reasons.
1. socially useful contract, compared to Butcher where P was trying to enforce a monopoly
2. Uncertainty is standard in the natural resources industry, contracts would never be
completed if terms had to be so certain. Thus the contract is enforceable because there is
no other way to conduct business
3. The contract terms of the contract worked for the first year, so why claim they are too
vague for the second year?
Foley v. Classique (224) Uncertainty overcome when D is enjoying benefits of the K.
Contract to sell land to D. One of the clauses was that D would buy all of his petrol from P‟s gas
station, located adjacent to the land. D breached K and purchased elsewhere.
D argued that the terms of the contract were too uncertain, thus unenforceable.
Policy decision: Court held that D is enjoying the benefit of the land. Buying the petrol was a part
of the purchase price. Injunction against D, forced to purchase the petrol. Reasonable purchase
price inferred by court.
Scammel v. Ouston (228) – For sale of goods with specific stipulations, these and price must be
Ouston agreed to buy a car subject to a hire-purchase agreement (lease?). However the terms of
this agreement were never agreed upon (incl price, repairs, insurance, time).
Held, even though the parties agreed that a hire-purchase agreement would be used, the terms of
the agreement were not specified. The terms were too vague for the court to infer them, as
opposed to Foley, thus there is no contract.
Contracts by Correspondence – used when there is „distance‟ between parties
Postal acceptance rule – Acceptance is binding once mailed, withdrawal is binding only when
Household Insurance v. Grant (236) Acceptance lost in the mail is still acceptance, binding once
it is sent in the mail.
D offered to buy some shares by mail. Acceptance of the offer, and the shares were sent by mail.
D never received them.
Held: Postal acceptance rule applies, once posted the acceptance is binding.
1. Post can be considered an agent of the offerror. By implying mail is an adequate form of
delivery, the offeror authorizes the post as an agent, thus delivery to the post is delivery
to the offeror.
This is a poor argument because there is really no indication that the post is acting as
2. Offeror is the „Master of the K‟ and sets the terms of acceptance. If he implies delivery
by post is acceptable, then he assumes the risk that acceptance may be lost in the mail.
3. Offeror knows that he hasn‟t heard back, thus it is incumbent on him to inquire about the
acceptance if it is late.
4. Postal acceptance rule offers peace of mind to the offeree, and he may begin to rely on
the K immediately. W/o it, he would have to wait to confirm that the offeror has received
5. Discourages fraudulent behavior where the offeror may claim to have not received the
acceptance if he changes his mind.
Henthorn v. Fraser (241) – postal acceptance rule does not apply to a withdrawal of offer
Offer sent by post, and is received by B. Meanwhile, decides to withdraw the offer, and sends
another letter. While in the post, B accepts and posts the acceptance. After posting, B then
receives the withdrawal.
Held the acceptance is binding because B did not receive notice of withdrawal before accepting..
Withdrawal is only effective upon delivery.
Agent: B did not authorize post to be an agent for him, thus delivery to the post is not
regarded as delivery to offeree.
Again, this would discourage reliance by B, because he would have to wait to make
sure that the offer wasn‟t withdrawn, even after he accepted it.
An Offer is continuous until withdrawn, this implies notice of withdrawal
Offeror creates the risk of detrimental reliance, therefore the onus is on him to
Byrne 7 co. v. Leon Van Tienhoven (243) – Notification of withdrawal is required
P bought plates though offer was revoked by mail. Has already resold plates when D refused to
A state of mind not notified can not be construed as a meeting of minds.
Encourage reliance on K by offerees
Restatement of K (245, US) A rejection is not binding upon mailing
A rejection or counter-offer by mail does not terminate the power of acceptance.
Ex: if I post a letter saying I reject, and then change my mind and call quickly to say accept, the
acceptance is still binding regardless of the fact a rejection has been posted
Holwell Securities v. Hughes (246) K emphasizing „notice to be received in writing‟ shift onus on
offeree to ensure delivery of acceptance.
Acceptance was posted, however not delivered.
Clause stating „Notice of acceptance must be received in writing‟
Held offeror is master of the terms of the contract, and has expressly mentioned that he must
receive acceptance for it to be binding.
Onus on Offeree to ensure delivery of acceptance.
Entores v. Miles (247) – Onus one the one trying to communicate to do so effectively
In the case of instantaneous communication (i.e. not by mail, not „at a distance‟), ex: by phone.
1. Onus on offeree to effectively communicate acceptance.
2. Once communicated, if Offeror is unsure of what was said the onus is on him to clarify.
If he later denied being communicated the acceptance, he would be estopped from doing
Where is the contract formed?
Eastern Power v. Azienda (249) – For instantaneous communication, postal acceptance rule does
not apply. Regular rule is that acceptance is delivered to Offeror, thus the K is formed in his
Eastern Power faxed an acceptance to Azienda. Deemed to be an instantaneous form of
communication, akin to delivery, not akin to mail.
Held, the contract was formed in Italy and subject to Italian jurisdiction.
Electronic Commerce Act (253) definitions, still no clarity on offer and acceptance.
Defines sent as when the acceptance enters an information system outside the sender‟s control,
ex: e-mail server.
Defines receipt as when information enters addressee‟s information system and becomes capable
of being received.
Does not solve the problem of lost mail.
Unilateral Contracts – Reward contracts: The flagpole problem: If you climb the flagpole (X), I
promise 100$ (Y). However, one is free to withdraw the offer any time before X is completed, ex.
When someone is already halfway up the pole.
The act is the consideration and the acceptance at the same time!
Carlill v. Carbolic Smoke Ball(358) Acceptance need not be delivered before performance,
performance is acceptance
Carlill bought a Carbolic Smoke ball and smoked herself for two weeks. Afterwards she still got
the flu. Coy offered a reward for consumers if they used the smoke ball and still got the flu, they
would be entitled to 100$. Carlill sues for the 100$.
Coy claims no K on two grounds
1. An offer can not be made to the whole world. It is not an offer in the contractual sense,
but a policy
Dismissed because clearly it is an offer by the wording. Further, there exists no
problem of Limited supply because they control the number of smoke balls sold,
therefore the number of potential awards
2. there was no acceptance by Carlill
Court held that the form of acceptance is stipulated by the terms of the offer, and it is clear that in
this case performance is acceptance. Acceptance need not precede performance
Two views on when the contract is formed:
1. Once you buy the smoke ball there is a K to extend the guarantee. Therefore the
guarantee can not be withdrawn once the smoke ball is bought .
2. There is a unilateral K to offer the reward. Once all aspects of the K are performed it
is accepted. Offer is able to be withdrawn prior to performance of acceptance.
Williams v. Carwardine (355) – Must be aware of the reward, not necessarily motivated by the
P had information regarding the murder of D‟s brother. D posted a reward for information, and P
knew about the reward. However, out of fear for her own safety, not motivated by the award, she
gave information leading to the arrest of the murderer. She then claimed the reward.
Held: she is entitled to the reward, even though she did was not motivated by the reward, because
she was within the terms of the K.
Crown v. Clarke (355) – not entitled to reward if one didn‟t know about it.
Clark was a co-conspirator, and gave information to police regarding arrest of a criminal to clear
his own name of the murder charge.
Held, a person must exercise acceptance and performance on the offer. If one is unaware it is
impossible to be party to the contract and to act on it.
Errigngton v. Errington (367) Implied K, promise to keep the offer open for performance.
Father promised daughter that if he makes the rest of the payments on the house, the father will
give him the house. Father dies with payments left.
Lord Denning held that there is an implied 2 nd contract. The second contract is to keep open the
1st K once the daughter starts giving payments (climbing the pole). If they quit, then there is no
obligation to give them the house. However, until they quit the offer is to remain open.
To allow the father‟s estate to withdraw the promise would be inequitable because
they relied on the promise
Dawson v. Helicopter (368) – Infer a bilateral contract instead of a unilateral K
P and D were involved in negotiations concerning mining claims. D offered, If you help us stake
the claim, we will give you 10%. P replied when you get a helicopter, I will help you stake the
claim. D then abandoned the contract
D claims it is a unilateral contract, and that it is enforceable only upon the action of P, which
SCC held that there is actually a bilateral K, a promise for a promise. It was then implied that D
would participate and provide the helicopter. This is required for business efficacy.
Protection of Weaker Parties
1. Duress – Common Law concept. A little harsh and unforgiving, expectation and
restitution as damages
2. Undue influence – Equitable doctrine relating to reliance relationships, of threats of
adverse consequences in the absence of violence
3. Unconscionability – Equitable protection of weak, old, sick, etc. –
Remedies for equity include rescission, injunction, specific performance.
Duress – K is not entered into of a free will, unenforceable
1. Duress to the person – physical threats to the person
2. Duress of goods – threaten to withhold goods from original owner, or someone in
desperate need, a means of extorting a better price.
Undue Influence – K has been entered into in a situation of unfair pressure
Remedy is to rescind the contract, only when possible to actually put the parties into
the same position they would have been in
Special equitable defenses:
1. Undue delay – one can‟t wait too long before bringing such a claim
2. Actual restitution is impossible because the product is gone, or consumed
3. Intervention of a 3rd party, ex: its already sold and shipped to a 3 rd party, it is not
possible to return it.
Actual undue influence: threats of adverse consequences that do not amount to common
Ex: threat of you‟re wife leaving you, not a threat of violence.
Often occurs with weak or dependent parties, where P is sick and dependent
on D for care, and D threatens to leave.
Economic Duress: threat to breach a K (Pao On). Grows out of equity, but developed under the
common law doctrine.
Lord Scarmon in Pao On: Duress, whatever form it takes, is coercion which vitiates
consent to enter into the contract, making it not enforceable.
Suggests a four point test for economic duress:
1. Did the party protest?
2. Were there any alternatives open? Ex court, which is usually open…
3. was he independently advised?
4. Did he take steps to avoid the contract after entering into it?
Concludes that pre-existing duty is good consideration unless there is duress (at least for a 3 rd
party, later extended to 1st party)
Relationship Undue Influence – result from a relationship of trust and confidence, where
following advice leads to a bad K. It is not the will of the party entering the K.
Etrige (612) – Relationship Undue Influence, 3 rd party‟s Constructive Notice
Undue influence is shown by
1. Proof that the complainant was in a relationship of trust
2. An unequal, unfair or suspicious transaction
Relationship of trust:
A relationship of trust is presumed irrebuttably from recognized categories of
relationships (615): Doctor-Patient, Client-Solicitor, Parent-Child
A relationship of trust can also be presumed, however rebuttable, from the nature
of the particular relationship, or the actual circumstances. (Byrch, Lloyds Bank).
Ex: relationship with a bank manager where one trusts and accepts his advice
Burden then shifts to D to either rebut the relationship of trust when possible, or to show that
influence was not abused to obtain the deal
Importance of 3rd party advice, usually from a lawyer.
In cases of direct undue influence, a letter from a lawyer is used only as evidence, but
does not automatically absolve to influencer.
In the case of a 3rd party, ex: a loan agreement with bank, however the undue influence is
exerted by the husband to the wife, the bank is entitled to rely on the lawyer‟s statement.
Constructive Notice of Undue Influence – where a 3rd party should suspect undue influence
The bank, or any other 3rd party, has constructive notice whenever there is a non-
commercial transaction, ex: whenever a wife guarantees a husband‟s loan.
o Bank has a duty to inquire about undue influence
o Duty to make sure that they receive independent advice, usually legal
o They then have a right to rely on this advice, it should be enough for them to
discharge their duty.
As opposed to situations where the K is entered into with the influencer
A third type of undue influence is also mentioned, where neither a trust relationship nor an unfair
bargain must be shown.
Instead must demonstrate undue pressure to contract
Burch (609) – undue influence of employer
Employer suggested an employee personally guarantee a loan for the bank.
Burden of constructive notice placed on bank. They did not enquire as to the nature of the
relationship between the parties or if Burch had received legal advice.
Held the agreement is not enforceable
Lloyds bank v. Bundy (604) – Undue influence through relationship with the bank.
Bundy mortgaged his house against a line of credit for his son‟s business. At the request of the
bank he increased to mortgage to the point of foreclosure, even though the bank knew it was his
only asset and the business was not doing well.
Denning tried to unite all aspects of inequality of bargaining power, aspects of
1. duress of goods
2. unconscionable transactions
3. Undue influence between a stronger and weaker party
4. Undue pressure to accept an agreement
Also found that the case falls within the established 2nd category of Relationship undue influence.
This view was accepted by the court, his theory of unification was dismissed.
Unconscionability – usually to protect physically weaker parties (sick, uneducated, old)
No previous relationship of trust required
A little like undue influence #3, because no relationship is required, however it requires
more proof of an unfair deal.
Marshall (596) – rescission for weaker party
Young Mr. Marshall made a deal to by land from Walsh, an elderly man in a nursing home, under
Entitled to rescission if:
1. Walsh was incapable of protecting his interests
2. It was an unfair (improvident) transaction for Walsh
Held the contract is to be rescinded
Usually unconscionability claims are made by physically weak parties, elderly, sick.
This is a source of criticism because it assumes these parties can‟t defend themselves, and
doesn‟t protect other types of parties. Could be discriminatory if it decided a particular
minority group, or race, or immigrants can‟t protect their interest.
Usually requires some proof of taking advantage of the weakness by the stronger party. However,
in this case, Marshall did not know he had had a stroke, but he did know he was in a nursing
Mundinger v. Mundinger – stronger party knowingly took advantage of weaker party.