2 Contracts: Intentions Flashcards
Commercial
Contract rules were made with commercial, business people in mind
Each side needs consideration etc for full-filling expectations in business
Intention overview
Cant have legal contract without the intention to create legal of relations
Intention: This is a question of fact NOT law
Have to draw between a question of fact and law (everything in a court room is either a question of fact and law)
This is important, jury- ? of fact; Judge- ?of law
Jury is rare in contract cases- but possible
Judge in a usual contract wears two hats (facts and law)
Cant appeal matters of fact, just matters of law
Intention to create legal relations.
Question of fact: fact reckonned objectively
not what went on in the parties minds but what the reasonable person would have thought (objectively)
Reasonable person to decide intention or no intention: not perfect, but an aspirational standard, smarter, perceptive etc in theory
in practice: gives judges wiggle room
Reasonable person with potential results
ex:
Person 1: I’ll sell my car to you for 5000
Person 2: I’ll buy your car for 5000
-looks like a contract but…
reasonable would say…potential for legal relations but both parites are acting as offerors there is no acceptance
ex:
Scratches nose at auction; reasonable person thought it was an offer, it is a legally binding offer
We want business ppl to be able to go confidently on in the future, so thus objective test of reasonable person. We say it doesn’t matter what went on in your mind as long as you would have conveyed to the reasonable person your intention to be legally bound by that promise, then you’re bound by i
proof in court
beyond a reasonable doubt: crown. has to prove in criminal matter. Standard is extraordinary high
Civil matter: proof is just on a balance of probabilities. Plaintiff has to show that their side is at least 51% or hight probably true. Have to make it more likely than not that the plaintiff’s side is true
vast majority is judged based on evidence
Plaintiff has the burden of proof
Sometimes a case is equally plausible; Ex of both killed, but my expensive watch on your body. It is anyone’s guess on the circumstances. There is no evidence whatsoever. In these cases we need some presumption and default rule: is the plaintiff wins only if they prove their elements on a balance of probabilities. They have to prove consideration, offer and acceptance and have to prove intention to create legal relations.
Normally the law presumes nothing on the plaintiff’s behalf
There are some exceptions.
Rose and Frank
Default rule that favours the plaintiff
The plaintiff buys paper products and the defendant sells paper products.
So many times in the past, the plaintiff had contacted the defendant and said, we need a certain type of paper product.
The defendant would say, yes, we’ll enter into that contract.
We’ll send a paper product and then the plaintiff would pay the price.
And then there came a point, and this is the important one in the relationship, where the defendant, seller, sent a document to the plaintiff buyer, and the document looked exactly like a contract.
It had all the causes in that you would expect of the contract, but it had these strange passages.
So in a document that looks exactly like a contract, we have a document that says, This arrangement is not entered into as a formal or legal agreement.
And also, this document is not subject to legal jurisdiction.
And so at the beginning, the parties have done business habitually on a number of times, then comes about this document.
This document looks exactly like a contract, but it has these two odd passages, which seem to indicate this isn’t a contract.
And then once both parties have signed that document, for the first little while, they continue on as business in the past.
So even after both parties had signed that document, the plaintiff would contact the defendant and say, we need these sorts of paper products, and the defendant would say yes, and they would send it to them.
And then the fateful day comes, and the plaintiff contacts the defendant and says, and we want this type of paper product now, and the defendant says, no, we’re not sending you any more paper product.
And the plaintiff says, well, you have to. We signed that document and that committed you to selling me paper products in the future.
The defendant says, well, we signed a document, and that document looked like a contract, but it had those two odd causes that said, effectively, this is not a contract.
And so in that case, do you have a contract? More to the point, in that case, do you have an intention to create legal relations?
Case closed, first of all, to a trial judge, and the trial judge says this is ridiculous.
He says the plaintiff obviously wins. This is obviously a contract that requires the defendant to sell paper to the plaintiff well into the future.
The trial judge says you can’t have a document that looks exactly like a contract.
And then stick in this repugnant clause, this clause that flies in the face of everything else that says even though this looks like a contract and even though we’ve done business contractually in the past, this isn’t a contract now.
Effectively, The trial judge says, once you set up a document that looks like a contract, it is a contract, and you can’t simply stick in one odd phrase that says this is not a contract.
So that’s the trial decision. The defendant’s obviously not happy with that decision.
So he appeals it to the court of appeal. And the case comes before the great Lord Justice Scrotten, who is one of the great commercial lawyers and judges.
In the 20th century, Eddie says, well, even though the contract might look like, even though, excuse me, the document might look like a contract, and even though most of the language in the document is contractual, parties have freedom of contract.
And they also have freedom not to contract. So Scranton says two important things. The first important thing he says is that you’re never bound to enter into a contract.
If you enter into an agreement, it’s always because you chose to do so.
And the mere fact that you created a document that looks a whole lot like a contract doesn’t necessarily mean it’s a contract.
Scranton says emphasizing those two odd clauses.
Even if you have a document that otherwise looks exactly like a contract, if you include two clauses that would make it clear to the reasonable person on an objective standard, this is not a contract.
If you have a document that looks exactly contractual, but you say explicitly in it, this is not a contract, or this is not subject to the court’s jurisdiction, then The court will go on that basis.
Just as we have freedom of contract, we also have freedom not to contract.
Point number one. But the second point is much more important for study purposes.
The second point is the ratio of the case. The ratio is that small nugget you take away for study purposes.
And Scretton says, if you want a contract, you have to have intention, offer an acceptance, and consideration.
But he says, even though the plaintiff normally has to prove all three elements on a balance of probabilities, this is the rule, if you’re operating in a commercial context, if you have two business people doing what appears to be business together, then we have a rebuttable presumption that there’s an intention to create legal relations.
So there’s the ratio of Rose and Frank. If you’re operating in a commercial context, then there’s a rebuttable presumption that the party’s had an intention to create legal relations, which means, oddly, even though normally the plaintiff has to prove all of the elements of her cause of action, if you’re suing for breach of contract, then we’ll simply assume the first element on your behalf.
So normally, you have to prove all of the elements you cause of action, but if you’re assumed for breach of contract and if you were operating in a commercial context then we’ll rebuttably presume that you intended to create legal relations.
But he said, even though it’s a presumption, even though we’ll assume that on the plaintiff’s behalf, it can be rebutted by evidence to the contrary.
And in fact, Scretton said, even though the will assume that the party’s had any attention to great legal relations in this case, the evidence indicates otherwise.
Even though we’ll presume, simply from the mere fact that they were operating in a commercial context, that they intended to be legally bound by that document, you can always rebut the presumption with evidence to the contrary.
And the evidence to the contrary here again is those two strange passages, which even though they’re somewhat anomalous and even though they’re inconsistent with the tone with the rest of the document, they clearly indicated to the reasonable person that the defendant, Venter, wasn’t willing to be bound by this.
Even though they’re willing to sign the document, the document looks contractual, that impact of those two clauses would have made it clear to the reasonable person that there in fact is no intention of Great League Relations.
So for the ratio, study purposes, Rosen Frank says if you’re in a business context, we’ll assume that the parties had an intention of Great League Relations.
We won’t even ask the plaintiff to prove that, but it’s a rebuttable presumption.
And if one of the parties can come forward and prove that even though it’s a commercial context, they didn’t intend to create legal relations, then there can’t be any hope of a contract.
And we know that notwithstanding the fact that the parties had signed that document, there was no way for the plaintiff to compel the defendant to continue selling paper products into the future.
But there was another interesting aspect of the case, because if we accepted that document wasn’t a contract, we still have to make sense of what actually went on after the parties had signed.
At one point, the defendant vendor says we’re not going to do business with you anymore.
But after the parties had signed that document, which turns out not to be a contract, on a few instances the plaintiff had asked and the defendant had delivered.
And if the big document isn’t a contract, then what’s the legal explanation for the fact that the plaintiff was paying money to the defendant and the defendant was shipping paper products up to the plaintiff?
And Scretton says, well, we have to find some explanation for that.
And perhaps the explanation, he says, is unjust enrichment.
We saw in the introductory lecture that if you go into court as a lawyer, arguing the case on your client’s behalf, you want to have as many shots as possible.
If you can only come up with an argument, then sometimes you just can’t do any better.
But if you can, you want to have as many different causes of action and as many different remedies as possible.
So in this case, we know that the parties didn’t have a big contract.
There was no way for the plaintiff to compel the defendant to continue selling paper products into the future.
But Scrotten says, even though that document wasn’t itself a contract, there’s no way to bind the parties going into the future.
We still have to make sense of the fact that after they signed it, they continued to do what looked like business.
How do you explain that? If the document wasn’t a contract, what were the parties doing there?
And Scretton says, well, maybe what they were doing was simply using a different cause of action.
One cause of action that will come across quite a few times in this course is the cause of action called unjust enrichment.
So just as you have cause of action breach of contract, just as you have a cause of action in a lot of torts, negligence, defamation, battery, trespass, so on and so forth.
So too, there’s a cause of action called unjust enrichment.
Unjust Enrichment
And just as a bit of a digression, most Canadian lawyers, unfortunately most Canadian professors, think unjust enrichment is an equitable cause of action.
That is to say, going back to something you might have learned in foundations about the difference between law and equity, most Canadian lawyers seem to think that unjust enrichment is a cause of action that came out of the courts of chanceery, or the courts of equity, rather than the courts of law.
That’s simply not true. In 95 cases out of 100, unjust enrichment is a legal cause of action.
For the most part, it’s me that cared not there whether it came out of equity or whether it came out of law, because in any event, unjust from enrichment is another cause of action, another way in which you might get the right result for your client.
And the beauty of unjust from enrichment, as with contract, is that it always requires the same elements.
Regardless of the context, if you want to prove the action of unjust from enrichment, you always show enrichment to the defendant.
Secondly, you have to show a corresponding deprivation to the plaintiff.
And finally, the plaintiff has to show what’s called an absence of juristic reason.
So again, we have this other cause of action, not breach of contract.
That’s nothing to do with contract. It’s caused by a action called unjust enrichment.
To prove unjust enrichment, I always prove the same three things.
I prove there’s an enrichment to the defendant, I prove there’s a corresponding deprivation to the plaintiff, and I prove that there’s an absence of juristic reason.
Or get it away from the jargon. Unjust enrichment requires proof that something moved from me to you without any good legal explanation.
So I have to show that you were enriched because you got something of value.
Unjust Enrichment in Rose and Frank
In Rose and Frank, Scretton says, unjust enrichment appears to be what’s going on here.
Even after the party signed the document that looked like a contract, but we now know it wasn’t a contract, they continued to do business.
Plaintiff would send money to the defendant, defendant would send paper products to the plaintiff.
And maybe what was going on there, Lord Scrotten, said is it was simply unjust enrichment.
So it’s simply a case where the defendant was sending paper products to the plaintiff, the buyer, in which case that would be a transfer and a corresponding deprivation.
The buyer would be enriched by the receipt of the paper products.
The seller would be suffering the corresponding deprivation because the paper products came out of its warehouse.
And we would say that there’s an absence of juristic reason if there wasn’t a contract there.
And there’s no contract because there was that strange clause within the document they signed.
unjust enrichment, then the remedy is always the same.
You get what’s called restitution. Every time the plaintiff proves the cause of action and unjust enrichment against the defendant, every time the plaintiff says, you got something, it came from me, and there’s no good reason why that should happen.
Then the court turns to the defendant at the end of the case and says you have to make restitution.
And restitution simply means to give back. You don’t give back the paper products, you don’t give back the exact thing, but you have to give back the value of the enrichment that you got from the plaintiff for which there was no legal explanation.
So again, Screcken would say the unjust enrichment was the transfer of the paper products.
Enrichment being paper products for the buyer, deprivation being the fact that it came out of the seller’s warehouse, and the absence of juristic reason because if there’s no contract, there’s no other obvious explanation.
And so the court would turn to the buyer and say, ah, you have to make restitution.
There’s no contract here. You don’t have to pay the price. But what you do have to do is to get back the value that you get for which there was no legal explanation.
We’ll see unjust enrichment quite a few times during this year.
You’ll also see it almost certainly in property, possibly also in tort.
unjust enrichment =It’s a cause of action that runs through a lot of different areas of private law
Unjust enrichment is a potential explanation for the transactions that occurred after the parties had signed a document at Rose and Frank.
At that point, the buyer wasn’t happy with the result that was obtained in the court of appeals.
They appealed further to the House of Lords, and the House of Lords comes to the same conclusion as the Court of Appeal and says, that’s right.
There was no contract here. There’s no contract because even though they signed a document, you’re not compelled to enter into an agreement.
And if you make it clear through those couple of phrases, that you didn’t want to be bound by a court, then there’s no intention to create legal relations.
But the House of Lords said, we don’t actually need undressed enrichment in this case.
We can use contract, but with a subtle difference.
If the big document that the party signed had been a contract, then it would have meant that the plaintiff could compel the defendant into the foreseeable future to provide paper products whenever asked.
o Again, if that document had been a contract, it would have not only provided an explanation for the transactions that did occur, it would have allowed the plaintiff to compel the defendant to continue doing business into the future.
And we said, turns out that’s not a contract. But the host of Lord said, after the party said sign that, when they continue to do transactions, When the plaintiff continued to call for paper and paper whenever arrived, the court said those were small contracts.
So the important difference is that the big contract, the document, would have allowed the plaintiff to compel the defendant to continue doing business.
And we said that’s not true. There was no intention to create legal relations in that case.
But after they signed the document, when they actually did enter into transactions, each of those small transactions was a one-off contract.
So even though neither party could compel the other one to enter into a new transaction, if they both decided to go along with it, and the plaintiff, buyer contacted the defendant vendor and said, we would like this sort of paper, and the defendant said yes, then that’s a small contract.
That doesn’t allow either party to compel complaints in the future, but it does explain that particular instance.
So Rose and Frank seems like a fairly simple case on the face of it, but for study purposes we come away, I think, with three important propositions.
The ratio, The nugget of the case, the most important bit, is that if you’re operating in a commercial context, that even though normally the plaintiff would have to prove intention to create legal relations, we’ll simply presume that on your behalf.
We’ll assume, if it looks very business-like, we’ll assume that you intend to enter into enforceable contracts.
But we said it’s a rebuttable presumption. So even though we’ll assume you intend contracts, you can prove otherwise on the facts by means of evidence.
Secondly, we said, even if you can’t prove a contract in a particular case, you might have another cause of action that you can fall back on.
And in this case, we said that’s unjust enrichment.
And we’ll see a number of times during the year when even if you can’t get to where you want to go by means of contract, maybe you can get at least most of the way there by way of unjust enrichment.
And then third, right at the very end of the lecture, we saw that contracts have to be considered at different levels, simply because you didn’t have the big contract that allowed both parties to compel the other to continue transacting in the future.
Didn’t indicate the possibility that every time they actually did get together, they had a small contract.
So whereas Screton would have said those small transactions have to be explained by way of unjust enrichment, or to Adkin in the House of Lords says, well, you don’t need to go into unjust enrichment there.
There’s contracts, but there’s small one-off contracts.
There are contracts just for that particular transaction.
They’re not the big contract that would allow either side to compel the other one to continue doing business in the future.
