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  • pg 1

     When is an offer no longer an offer? See Scanlon v.
Standish, an unreported 2002 decision of the Ontario Court of
Appeal, for the answer.

No Action

     Two individuals were engaged in settlement discussions
after a dispute arose. Even though no action had been commenced,
the solicitor of the ultimate plaintiff wrote to the solicitor
of the ultimate defendant with a settlement proposal and stated:
"You may take this correspondence as a formal offer of
settlement pursuant to Rule 49 of the Rules ... in the matter of
contemplated litigation between the parties."

     The defendant did not accept the offer and submitted a
counter-offer that the plaintiff did not accept. The defendant
then purported to accept the plaintiff's offer. The plaintiff
commenced an action and the defendant brought a motion to
enforce the alleged settlement.


     Had the plaintiff already commenced the action, the
defendant could have relied on Rule 49.07 that allows an offer
to be accepted at any time before it is withdrawn, whether it
was rejected previously or not. However, under common law, once
an offer is rejected, either explicitly or by way of a counter-
offer, the offer dies and cannot subsequently be accepted.

     The motions judge (Langdon J.) held that an offer made
before an action is commenced is not an offer under Rule 49.
Rule 49 only affects parties to an action and no action had been

     The judge then held that reference to Rule 49      did not
create a separate option contract because there         was no
consideration for it.


     The Court of Appeal agreed that the Rules did not apply
because an action had not yet been commenced. However, rather
than use the option analysis regarding the reference to Rule 49,
the Court noted that the remainder of the letter made it
apparent that the reference to Rule 49 was not a reference to

the entire Rule. Rather, it was a reference only to the costs
consequences of it. Accordingly, the plaintiff never made a
promise to hold the offer open and did not intend to reverse the
effect of the common law.


     If you make an offer before the action is commenced, the
offer is not a Rule 49 offer. However, it may still be
considered when the judge exercises discretion in an award of
costs. We were before Langdon J. in exactly this situation. He
held that the offer was not a Rule 49 offer but awarded
solicitor-client costs anyway in the exercise of his discretion
because the award at trial beat the offer.

     We suggest that if you make a pre-litigation offer, follow
it up with an immediate post-litigation offer, with the proviso
in the second offer that it does not withdraw the first.

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