Content of the Contract

Question 1

Misrepresentation, Recission and bars

Redgrave v Hard

Answer 1

1. Must show that the representation induced the party to enter the contract
2. the statement was false in fact
   - If a representation is an objectively material statement, it can be presumed to have induced the innocent party into a contract and the onus is on the speaker to show that the innocent party was not in fact induced
   - if it is not objectively material than the innocent party must prove inducement
   - Can show the innocent party was not induced by: showing that they knew the representation was false, showing that the innocent party simply did not care about the representation
   - Lack of diligence in checking by the innocent party is of no value in misrepresentation (just because they didn’t double check the facts doesn’t mean they cant claim misrepresentation)

Question 2

Misrepresentation, Recission and bars

Bars to Recission

Answer 2

1) Restituto: Restitution is impossible - cannot practically set aside contract
2) Latches: Too much time has passed before complaining
3) Affirmation: If a party is aware of the misrepresentation, but chooses to proceed anyways.

In the case of fraud, if recission is barred, then courts will award damages

Question 3

Misrepresentation, Recission and bars

Smith v Land and House Property Corp

Answer 3

Opinions are not actionable but what looks like an opinion can be treated like a fact in some circumstances if:
- Informational imbalance: the facts are not equally known to both parties
- Opinion is formed in a way that implies that there are facts underlying the opinion

Question 4

Misrepresentation, Recission and bars

Bank of British Columba v Wren Developments

Answer 4

• Failures or omissions can qualify as a misrepresentation
• If one makes a representation but learns it to be false in fact, one has a duty to correct the error
• The onus is on the purchaser to make relevant inquiries – there is not duty for the seller to volunteer information

Question 5

Misrepresentation, Recission and bars

Kupchak v Dayson Holdings

Answer 5

Bars to Recission:
1. Restitutio in integrum is impossible: The facts of the case make it, so it is impossible to restore the defendant to the position he or she was in before the contract was made
2 ways this can occur:
1. Intervention of third-party rights into the subject matter to any degree (cannot return subject matter to the party when a third party has interest) or
2. substantial change in subject matter (will be slower to allow this to take effect if it was fraudulent misrepresentation because the court wants to grant recission)
2. Affirmation or Election: NO DAMAGES IN LIEU - once the innocent party has discovered defect – they can either elect to affirm the contract notwithstanding (then it becomes irrevocable) or
Express affirmation: usually written
Implied affirmation: elected to affirm the contract through conduct which is clear and unambiguous (can be a great delay – no protest)
3. Delay: if after discovering the defect you delay for an unreasonable time
Can occur when the innocent party don’t protest/complain and the other party relies on the failure to complain and changes their position in someway in such a way that it would be unfair to rescind the contract now

Question 6

Representations and Terms

Heilbut, Symons & Co v Buckleton

Answer 6

• 1) Every case turns on its own facts and must be assessed contextually at the time of contractual formation through the objective lens (in light of everything that was said and done)
• 2) Pre-contractual representation about the contract does NOT automatically become a term.
• 3) Something is not a term when the parties did not intend for such a component to be a part of that deal (must look at the parties’ intentions)
• 4) A short off the record statement is not good evidence to suggest that it was intended to be part of the term, when there is a subsequent written contract that does not include the statement
  Whether a statement is a contractual promise, or a representation can be assessed based on the intentions of the parties

Question 7

Representations and Terms

Dick Bentley Productions Ltd v Harold Smith

Answer 7

Would an ORP given the facts and circumstances say that it was intended to be part of the deal ie a contractual promise

Question 8

Representation and Terms

Leaf v International Galleries

Answer 8

• If the representation was written into the deal its clearly a term
• Once its established to a term – the party can’t then argue it to be a representation because they want a different remedy

Question 9

Concurrent Liability in Contract and Tort

BG Checo International v BC Hydro

Answer 9

• A plaintiff is allowed to sue in both tort and contract – different remedies should be allowed since law should allow wronged parties to recover in any way possible
• Very often tort liability is excluded by the contract – private ordering of liability (contracting away tort via exclusion clause)
• Can impliedly exclude tort

Question 10

Parole Evidence Rule

Definition
(Spoken Evidence Rule)

Answer 10

when there is a written contract, an allegation of an oral promise made prior to or contemporaneous with the written contract, and the oral promise contradicts the written contract, then the oral promise is inadmissible as evidence and the written contract stays

Question 11

Parole Evidence Rule

Exception to PER

Answer 11

If there was a prior statement made that induced a party into the contract, and it is allegedly either innocent misrepresentation or fraudulent misrepresentation, then the parole evidence rule does not apply and the statement is therefore admissible as evidence to support that claim

Question 12

Parole Evidence Rule

Hawrish v Bank of Montreal

Answer 12

• Oral statements made prior to or contemporaneous with a written contract are not admissible as terms if they contradict the terms of the written contract
• PER doesn’t cover misrepresentation of facts

Question 13

Parole Evidence Rule

Bauer v Bank of Montreal

Answer 13

when there is a written contract, an allegation of an oral promise made prior to or contemporaneous with the written contract, and the oral promise contradicts the written contract, then the oral promise is inadmissible as evidence and the written contract stays

Question 14

Parole Evidence Rule

Gallen v Allstate Grain co

Answer 14

1. whether you do a two-contract or one-contract theory, the PER applies equally. You cannot get around the PER by saying that the oral statement goes to establish a collateral contract (a second or secret oral contract) instead of contradicting the written contract
2. misrepresentations: if you are pointing to a prior oral statement to support a claim for a misrepresentation, either innocent or fraudulent, that is not captured by the PER
3. introducing statements that vary, subtract, or contradict
   - The PER is narrow in the sense that oral statements (prior to or contemporaneous with a written contract) are inadmissible if they contradict a written contract.
   - Exception: you can introduce statements made before that add to the written contract without contradicting.
   - If the prior oral statement varies the written statement or subtracts from the written statement that is a contradiction and it is inadmissible.
   - Only cases where you can somehow find a way to add an additional obligation, that non-contradictory that sometimes the court will allow it to be admissible without violating the PER.

Question 15

Parole Evidence Rule

Two Additional Exceptions

Answer 15

Ambiguity: you may turn to oral evidence to clarify the meaning of a vague term. Cannot be used if the oral evidence contradicts the written then it cannot be applied.
Business protection act: Parole evidence can be applied to clarify in the case of a consumer transaction. Applied more generously than the above exception

Question 16

Classification of Terms

Three Types of Terms and Their Remedies

Answer 16

1. Conditions: most important terms of a contract. If a condition is breached, the innocent party is substantially deprived of the entire benefit of the contract. Also known as a repudiatory breach.
   Remedy: a repudiatory breach generates a right of the innocent party to repudiate the contract. This means that the innocent party is allowed to walk away from the contract, and no longer has to perform their obligations
2. Warranties: least important terms of contract. If a warranty is breached, there is still a substantial residue of the contract left
   Remedy: the innocent party can sue for breach of contract but the remedy will only bring damages to restore the innocent party to their original position
3. Innominate Terms: unnamed terms that defy classification at the time of formation for being either a condition or a warranty – no identity until the breach
   - Term was created in order to reflect freedom of contract
   - In some circumstances, the term could be breached in circumstances that are simple, or ways that are extremely grave
   - Must wait and see in light of the actual breach how bad the breach was and consider they were substantially deprived of the entire benefit
   - It would not respect freedom of contract if there was no shared intent on the effect that the breach would have

Question 17

Classification of Terms

Hong Kong Fir Shipping Co. Ltd. v. Kawasacki Kisen Kaisha Ltd

Answer 17

• Created third category of terms – innominate terms
• Works when a breach could be made in a variety of ways
• After the breach then ask - In light of what actually happened, was the party deprived of the entire benefit of the contract?
• If the parties contemplate the breach and do or don’t mention repudiation it is good evidence that they do or don’t intend the breach to generate the right to repudiate (words of the parties matter)

Question 18

Classificationof Terms

Wickman Machine Tool Sales v L. Schuler

Answer 18

• The use of the word “condition” or “warranty” in the contract is a good indication of the intentions of the parties, however, it is not completely determinative
• Must not look at what word did they use but how did they treat the term and did the parties intend for a breach of this term to give the right to repudiate

Question 19

Discharge By Performance or Breach

Sumpter v Hedges

Answer 19

• Under a contract of work for a lump sum payment, the contractual price cannot be recovered, neither in whole nor in part, until the contractual work is complete.
• If the work is completed, yet with certain omissions or defects, then the employee would be entitled to payment of the contract price with deductions

Question 20

Discharge by Performance or Breach

Fairbanks Soap Co v Sheppard

Answer 20

• the starting point is that it is an entire contract, however, if the defendant can avail themself of the substantial completion doctrine, then the innocent party still has to pay a pro rata amount for the work already done.
  The doctrine of substantial completion has a two phased approach:
• the breacher of the contract can avail themself of the substantial completion doctrine, which prevents the innocent party from invoking the entire contract rule if the breacher of the contract can show that:
• the job was substantially completed (empirical matter - this has to do with the purpose of the project); and
• the breacher abandoned the project for a reason beyond their control

Question 21

Discharge by Performance or Breach

Howe v. Smith

Answer 21

• In order to determine whether a payment is a deposit or a down payment, we must objectively look at the intentions of the parties.
  o If the contract used the words “down payment” then it would be treated as a down payment. The industry understands that it is a partial payment and you should get the partial payment back.
   Generally, down payments are refunded
  o If the contract uses the word deposit, then it is a deposit because parties in the industry understand that a deposit means it is to incentivize and ensure that you actually purchase the thing and if not, then you forfeit the money.
   However, if the parties state in the contract that the party would get their deposit back, then they will get it back even if they don’t perform
   Generally, deposits are forfeited

Question 22

Standard Form Contracts

How to invalidate an exclusion clause?

Answer 22

o 1) Incorporation: is the exclusion clause incorporated into the contract?
 The EC has to be incorporated in the contract in order to be enforceable. If it is not incorporated, the EC is of no force and effect, but the contract remains enforceable.
 Dealing with notice- does the other party know of its existence?
 Signed vs. unsigned
* Unsigned (ticket cases)- Thornton v. Shoe Lane Parking Ltd
o 2) Coverage: does the exclusion clause cover the breach in issue?
 If it does not cover the breach in issue, then it is of no use to absolve the party of that particular breach
 The courts take a very narrow interpretation here, drawing on the principle of contra proferentem — the court reads the clause against the drafter who controlled the language, liberally in favour of the customer.
o 3) Are there any overriding explicit policy considerations?
 — the court invalidates a clause, even though the EC was incorporated and covers the breach
 Tercon framework:
* (1) doctrine of unconscionability
* (2) explicit reference to public policy

Question 23

Standard Form Contracts

Thorton v. Shoe Lane Parking

Answer 23

• In order for an exclusion clause to be incorporated in a standard form contract, the exclusion clause has to have clear language of the nature of the clause, brought to your attention in the most explicit way possible prior to formation of the contract.
  o If the party who created the standard form contract has done what a reasonable person should do to explicitly bring to the customer’s attention the limitation of liability before the formation of the contract, then the exclusion clause will be incorporated.
  o If not -> unincorporated

Question 24

Standard Form Contracts

McCutcheon v. David MacBrayene

Answer 24

• An exclusion clause will be implied in the contract in fact: would a reasonable objective person at the time the contract was formed believe that the parties intended this particular clause to be a part of the deal?
  o To meet this standard, there must be consistent past practice where the service is provided with a written contract that contains the exclusion clause, and that the time with incident was just an oversight.
  o A mixed past practice does not support oversight and the inference that a reasonable objective person would believe the exclusion clause was part of the contract.

Question 25

Standard Form Contracts

Tilden Rent A Car v Clendenning

Answer 25

• An exclusion clause must be incorporated into the document for it to be binding.
• Factors to consider that would make the EC not binding:
  o The party was rushed to sign the document
  o The exclusion clause is not something that an ordinary person would expect to be in the contract.
  o The exclusion clause was not explicitly brought to the attention of the other party.
  o The exclusion clause was inconsistent with the purpose of the contract.

Question 26

Standard Form Contracts

Karoll v Silver Star Mountain Resorts

Answer 26

• The only way to rebut the presumption from Tilden Rent A Car and make an exclusion clause non-binding would be to show that:
  o 1) the party who created the standard form contract knew or ought to have known that the signatory was unaware of the clause (or its extent/nature) when they signed the contract
   a) look at the actual effect of the clause in relation to the contemplated activity.
  o if it was a very odd clause that wouldn’t be consistent with the activity, then that would suggest that the company should have made this clause explicitly clear to the customer.
   b) circumstances of the time the party signed the contract
  o Was it a dense and long contract?
  o Was it a hurried signing or an opportunity to read it?
  o 2) If yes -> the party who created the contract therefore had an obligation to bring the exclusion clause explicitly to the attention of the other party before signing it, and that they took reasonable steps to do so.

Question 27

Striking Out

Tercon Contractors v British Columbia

Answer 27

The court can expressly invalidate an EC based on either
1. Interpretation: does the EC capture the type of breach complained of?
(Contra Proferentum)
2. Doctrine of unconscionability at the time the contract was formed – 2 requirements
1. inequality of bargaining power
2. the contract is substantively unfair
3. Explicit reference to public policy measured at the time of the actual breach
- Incorporates the fundamental breach but is different
- Public policy is about a combination of deliberate bad behaviour in breach the contract, and a subsequent threat to health and safety – refers to serious criminality and egregious fraud

Question 28

Striking Out

Loychuk v Cougar Mountain Adventures

Answer 28

• Example of unconscionability and public policy being applied from Tercon.

Question 29

Striking Out

Niedermeyer v Charleton

Answer 29

• Public policy does not simply mean egregious criminality and fraud coupled with risk to the public
• Public policy consideration also includes striking out EC that conflicts with or attempts to contract out of social policy type legislation that citizens are entitled to