Semester 1 Flashcards
Canadian Dyers Association LTD. v. Burton (Offer is contextual)
F: Plaintiffs wrote to Burton “with reference to purchasing Hanna Ave., kindly state your lowest price. We will give it our best consideration.” Burton says lowest price is $1650. Plaintiffs ask again for lowest price. Burton says it’s the lowest and if it were anyone else it would be higher. Plaintiff sent in a $500 deposit and ask for a deed. Burton’s solicitor sends a draft but then 1 month later says there’s no contract and returns the deed.
I: Is there an offer?
A: By saying “if it were anyone else it would be higher” it seems as though there is intent to honour the first price. Also saying “the lowest I’m prepared to accept” says he would accept. Dyers sent a cheque and asked for a deed and Burton sent a deed and kept the cheque showing he accepted.
C: There was an offer and an acceptance. Burton broke contract.
R: Look at the intention of the offeror: Language used matters most and after that you can look to the circumstances of the particular case (conduct, etc)
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd. (Invitation to treat)
F: Boots was a self-service pharmaceutical store.
I: Did the sale take place “by or under the supervision of a registered pharmacist”?
At what stage of a purchase in a self-serve store is there an acceptance of offer? acceptance is when one pays money to the cashier
Is the customer bound to a purchase once they place an item in their basket?
Are Boots liable for selling poisons without a pharmacist’s supervision?
A: Pharm says the offer was the display of goods for sale on the store shelf by boots and the acceptance was by the customer when she places the item in her shopping cart/basket (proving legislative non-compliance). Boots says the display of goods for sale in the store shelfs is an invitation to treat and the offer is at the cashier and the acceptance is when the cashier takes payment (proving legislative compliance). Reductio ad absurdum, if the conclusion is absurd don’t do it. It’s crazy to say that you can’t take something out of your cart before you check out.
C: Boots has complied with legislation
R: The displaying of goods in a store is an invitation to treat, not an offer.
Goods on a display are invitation not an offer; the customer makes an offer when they take the goods to the register.
The cashier is under the shopkeeper’s authority to make acceptance, hence a contract has not been made until the cashier accepts the purchase.
What is a Unilateral Contract?
“It is an offer made to the world… which is to ripen into a contract with anybody who comes forward and promises the condition (page 30).” EX) if you do X, I promise Y. So it’s not a promise for a promise. It’s an act for a promise. (ex, lost dog)
What’s an offer?
An expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed.
Language used matters most and after that you can look to the conduct of the defendant.
What is an Invitation to Treat?
An expression of willingness to do business. The party “does not make an offer but invites the other party to do so.
The display of goods for sale in the store shelfs is an invitation to treat and the offer is at the cashier
Carlill v Carbolic Smoke Ball Co (Formation of a Unilateral contract)
F: Carbolic advertised that they would pay $100 to someone if they use their product with instructions and still gets sick while using it. Carlill got sick.
I: Was there a contract? Was the contract too vague?
C: Carbolic liable.
R/A:
1) Carbolic says that the ad was too vague since there was no time limit after the use of the ball to get sick, influenza is a broad illness, don’t know who the contract was with. Judge says they made the ridiculous claim and he must read it as a reasonable person would.
2) Carbolic says that the ad was mere “puff” but the judge says that they stated they put 1000 in a bank so that shows it’s not just talk.
3) Carbolic says it is too extravagant of a promise but the judge says that carbolic profited off of the extravagance so it stands.
4) Carbolic says you can’t contract the whole world but the judge says it is only a contract with those who come forward and agree to it.
5) Carbolic says there was no notification of acceptance so there was no “meeting of the minds” but judge says there doesn’t need to be notice of acceptance for an advertisement. 6) Nudum pactum (no consideration) but the judge says that consideration is anything that is undertaken with some inconvenience.
Goldthorpe v Logan (Unilateral Contract)
F: Logan advertised laser hair removal that had a 100% guarantee for success. An employee Fitzpatrick did the hair removal. It didn’t work.
I: Is there a Contract? Breach?
A: The offer is in the advertisement. It’s considered a unilateral offer but it’s not nearly as descriptive as in Carbolic. In most cases advertisement is considered invitation to treat. The court wants to protect weaker parties. They say the defendant exposed themselves to this sort of claim. Consideration was the payment. The “results guaranteed” is binding.
C: Goldthorpe gets $100 for breach of contract from Logan (expectation damages). She also got $13.25 for the treatment she paid for (restitution). This was double counting, should have been one or the other.
R: Most ads are invitations to treat. If there is an extravagant promise, such as “results guaranteed,” it is a binding offer.
Damages: The plaintiff is entitled to be out in the position she would have been in had the contract been performed.
What is a Bilateral Contract?
1 contract and then a 2nd contract follows
R. v. Ron Engineering & Construction (Eastern) Ltd. (Contract A and Contract B-Bilateral)
F: Ron submitted a tender for $2,748,000 in response to the owners call. Ron provided a deposit in the amount of $150,000. If Ron is selected but chooses not to carry out the project, then Ontario/owner gets to keep the deposit. Ron realized that they genuinely forgot to include a $750,000 expense. They immediately informed the government of its error and initially asked to remove their tender. Government refused. Ron then says this tender is incapable of being accepted.
I: Is there a contract between the parties? Can Ron get its money back? C: Ron will not get the deposit back as they did not follow the proper steps in contract A.
R/A: The tendering process is governed by a contract to uphold the terms (unilateral), and there is a separate contract for the actual project (bilateral). Invitation to tender/tender call offer for contract “A.” The content of Contract A contains the rules governing the bidding process. Submission of tender acceptance of Contract A and an irrevocable offer to enter into Contract B. Contract B contains the terms of the main contract. Therefore Ron has accepted an offer rather than made one. They are bound by contract A. The mistake doesn’t arise, as it would only affect contract B.
MJB Enterprises Ltd v Defense (Bilateral contract each party has obligations)
F: MJB submitted a tender in the context of a privilege clause which stated: “the lowest or any tender shall not necessarily be accepted.” Defense awarded the tender to the lowest bid by Sorochan BUT Sorochan’s bid was a non-conforming bid (it was different than everyone else’s bid, they said it would be either one price or another but this is against the rules). MJB’s bid was the lowest conforming bid.
I: Can defense rely on its privilege clause as a defense to MJBs action?
A: They were only allowed to take compliant bids. But they don’t have to choose the lowest option. But since Sorochan not a compliant, contract was breached. Good faith isn’t a defense for contract breach.
C: Damages awarded to MJB.
R: There is an implied term in the contract of fair dealings. You cannot accept a non-compliant bid as it is unfair.
What is Acceptance?
An acceptance is a final and unqualified expression of assent to the terms of an offer.” (This is an objective test)
Unqualified: If a response attempts to vary the terms of the offer, it won’t be an acceptance
Counter-offer kills the original offer (Hyde v Wrench)
Mirror image rule- the acceptance must match the offer
Livingstone v Evans (Revive the Offer)
F: Livingston wanted to buy land from Evans. Livingstone asked for the lowest price ($1800 was the first offer), the defendant said he couldn’t go lower, then Livingstone wrote down a Cheque without responding to the defendant on the fax machine.
I: Is the acceptance effective? Did Evans response revive the first offer?
A: There was a counter offer which could reject the first offer but the defendant responded with “cannot reduce price” which brought the offer back again as he is still standing by it and it is open to accept.
C: The contract is binding.
R: If there is a counter offer, it is the rejection of the first offer (Hyde). You can revive the offer if you restate the original offer in response.
Butler Machine Tool Co v Ex Cell Co. (Battle of the Forms)
F: Ex-cell wanted to buy a tool from Butler. May 23 Butler says it will cost E75,000, with delivery in 10 months. There is a trumping clause and a price variation clause on the form. May 27, Ex-cell responds by placing a purchase order where they stipulate that the order is subject to the terms and conditions different from the sellers, there is no price variation clause and the buyers tear off order form invites sellers “to accept this offer” as per these terms and conditions. June 5, Butler return the completed slip with a letter stating that the buyer’s order was being entered in accordance with seller’s quotation of May 23. Butler says it’s owed more money than the initial price. Ex-Cell refuses.
I: Whose contract should be followed?
A: Lord Denning looked at 3 positions: 1) Last shot fired. 2) First blow (first parties terms prevail unless the other side makes material changes and brings them to the attention of the first party). 3) Shots fired on both sides (each parties are to be considered together). Lord denning decided on the Last shot fired approach because it had the same effect as his preferred position of shots fired both sides.
It is common for parties to enter agreements using standard form contracts and they might be different (“battle of the forms”). Since Ex-cell changed the terms, they sent back a counter-offer. Butler then filled out the new slip so they then accepted Ex-cells counter offer.
C: Ex-cell wins.
R: Mirror image rule: there is no meeting of the minds unless the acceptance is a mirror image of the offer (the terms must exactly match). There can be no consensus when forms go back and forth but if the last form is accepted by conduct by the other side which amounts to acceptance, there is a contract with the terms of which are contained on that last form (this is the “last shot rule” or “performance doctrine”).
Tywood Industries v St Anne Nackawic Pulp & Paper (Holistic approach/no party surprised)
F: Tywood (seller) is suing for contract price. St. Anne (purchaser) says the contract provides for arbitration as a means of dispute resolution and that the court action is premature. Sept 19, Anne sends out invitation to tender with no mention of arbitration. Sept 26: Tywood responds with a quote, no mention of arbitration but has a trumping clause. Nov 7: Tywood sends a revised proposal with no mention of arbitration but has a trumping clause. Jan 6 & July 3: Anne sends in purchase orders, inserts an arbitration clause and asks Tywood to sign form and return it. Tywood does not sign the form and return it. Goods were then delivered.
I: Does the arbitration clause go in the contract?
C: Anne’s application for stay is dismissed.
R/A: If there is a discrepancy look at the essence of the contract. You cannot sneak terms into contracts without proper notification. Look to the actual conduct of business (do people really read the terms). Court is moving away from classic to reasonable contracting.
ProCD v Matthew Zeidenberg and Silken Mountain Web Services Inc (offeror gets to make their own terms)
F: ProCD sells SelectPhone, an online phone directory. Package stated the software came with restrictions on use (under the shrink wrap not visible before purchase). It states that if you don’t agree to the terms, you can return it. There is two different prices, one for businesses and one for consumers. Zeidenberg buys the consumers priced one and then sells it. Zeidenberg says he can choose what terms apply to him.
I: Is Zeidenberg bound by terms of the license when the terms were not known at the time of contract?
A: Zeidenberg says package in shelf is an offer, paying the asking price and taking the goods is acceptance, cannot be bound by secret/hidden terms, no contract. ProCD says vendors gets to decide what constitutes an acceptance, acceptance occurs by the buyer using the software after having an opportunity to read the license, therefore the contract is formed when Zeidenberg did not return the package.
C: Appeal allowed. ProCD gets an injunction.
R: Judge looks at economic (its more valuable to companies so it is more expensive), practical (the customers cannot pay the company prices), fairness (there was a chance to return it), and legal (vendor is the master of the offer) arguments. You cannot manipulate what terms apply to you.
Dawson v Helicopter Exploration
prefer bilateral/subsidiary obligations
F: Dawson (Naval officer) previously discovered a mineral deposit, filed a claim on it which lapsed. Helicopter/Springer engaged Dawson to investigate the mineral deposit. March 1951 Springer wrote “If I can secure a pilot to take us in I hereby agree that if you take us in to the showings and we think they warrant staking, that we will stake the claims and give you a 10% non-assessable interest”. April Dawson says if they get a pilot to let him know and he will try to get leave. June Springer says he’s not going to make the effort. August Helicopter investigates Dawson’s showings without him. Dawson finds out. 1953 springer contracts a schedule to develop the claims. Dawson brought an action.
I: Is the contract unilateral or bilateral?
A: Springer says it’s unilateral because he could then revoke his offer. The offer is accepted by Dawson if he shows them the showings. Dawson says it’s bilateral. McCamus “until an offer has been accepted, it is open to the offeror to withdraw or revoke the offer, thereby precluding subsequent acceptance of the offer by the offense.” Flagpole Problem, since an offer can be withdrawn, this create the possibility of detrimental reliance by the offeree. Judge says that the unilateral contracts would not work as springer had to give Dawson information in order for Dawson to even be able to follow through.
C: Dawson succeeds.
R: 1) courts will endeavor to regard a contract as bilateral rather than unilateral in order to protect the offeree pending complete performance (even though there may not be a promise, “the whole writing may be ‘instinct with an obligation.’”). 2) In contracts subject to conditions subsequent or conditions precedent, courts will often imply subsidiary obligations
What is Communication?
To be effective, an offer must be communicated to the offeree.
Motive in accepting doesn’t matter but you do have to agree to it, which means you must know about it
We can presume in most cases that if you’ve seen the ad you acted in reliance on it. But that presumption can be rebutted (Clarke).
What is Communication of Acceptance?
General rule: acceptance has no effect (not complete) until it is communicated to the offeror.
The purpose of this rule is:
To protect the offeror- so that the offeror knows that she/he is in a contract
To protect the offeree- so that offeree does not have to take the trouble of rejecting every offer he/she receives.
Exception: offeror waiver of the communication requirement in the context of a unilateral contract (Carlill)
Felthouse v Bindley (no acceptance with silence- general rule)
F: Felthouse was buying a horse from his nephew. Confusion between guines and pounds. Uncle said if he didn’t hear anymore, he would pay 30 pound 15 for the horse. His nephew had an auction and told the auctioneer that the horse was sold. Bindley forgot and sold the horse. Felthouse sues Bindley.
I: Is there acceptance via silence?
A: There was no contract because you can’t make the other party take action to not accept. Felthouse argued there was a meeting of the minds, the uncle and nephew were on the same page. But there was no communication of the nephew’s intention, so no acceptance.
C: No contract. Bindley not liable.
Saint John Tug Boat Co v Irving Refinery Ltd (conduct through silence- exception)
F: Irving needed more tug boats. They lease for a flat rate each day from June to July. They extent the contract twice. The contract was not officially extended but the boats remained there. Saint John wants to be paid.
I: Did Irving’s conduct constitutes continued acceptance of the offer?
A: Irving requested the tug boats and had/took the benefit of having them stand-by. It is reasonable (objective test) to draw the conclusion based on Irving’s conduct that they were accepting the continuing special services on the terms of March’s letters. They must pay the stand-by fee.
C: Irving is liable.
R: If the offerees silence reasonably indicates acceptance to the offeror, we can find acceptance. The circumstance must be considered. Conditions that allow silence to constitute acceptance: 1) offeree receives benefit of service AND 2) Offeree has reasonable opportunity to reject AND 3) Offeree knows (or should have known) the provider of service expects to be paid.
Eliason v Henshaw (change of condition= no acceptance)
F: Feb 10 Henshaw offered to buy flour from Eliason in a letter. They said if Eliason accepted the offer, he needs to send the wagon back to Harpers Ferry. Feb 14 Eliason gets the letter. Feb 15 Eliason sent a letter to Georgetown (not Harpers Ferry) by mail without the wagon. Feb 25 Henshaw didn’t get a response he asked for so they bought flour elsewhere. Eliason sent the flour anyways.
I: Is there acceptance?
A: The wagon was not sent back as the letter specified, therefore there was not acceptance. C: Henshaw is not liable.
What is the Postal Acceptance Rule?
There is good acceptance when the letter is delivered to the post office.
Household Fire and Carriage Accident Insurance Co v Grant (Postal Acceptance Rule)
F: Sept 30 Grant applied for shares. He stated he would give 5 euros and wants 100 shares. Oct 20 Insurance sent a letter acceptance to Grant but it never made it to Grant. Insurance continued to pay Grant but then they went bankrupt and want to get paid there 5 euros from Grant.
I: Is there acceptance?
A: They cannot equally carry the burden of lost mail. But the parties agreed to take the risk of communicating through the post. Therefore when the acceptance letter is dropped off by Insurance, there was a contract formed. The offeror could have mailed and asked the offeree what’s happening. The offeror could say that the letter must actually reach them to constitute acceptance but that is not the case here.
C: Grant is liable.
R: Postal Acceptance Rule- There is good acceptance when the letter is delivered to the post office, if the parties decide the post is their (the parties) agent.
Holwell Securities Ltd v Hughes
Postal Acceptance Rule exception
F: Option contract, it’s an offer that is given for a certain period of time.
I: Has the option been exercised according to the terms of the option?
A: The option explicitly called for “notice in writing” and Holwell failed to give that notice because of the letter being lost. This option made it clear that the postal service was a conduit and not an agent.
C: The option was not exercised. Hughes not liable.
R: 1) The Postal Acceptance Rule can be excluded if the option agreement stipulated it in its terms. 2) The Postal Acceptance Rule does not apply if it would produce an inconvenience and absurdity (NOT used by the courts often, be hesitant).
What is Instantaneous Methods of Communication
The contract (if any) was made when and where the acceptance was received.
You could argue that a similar form of communication is the same as the stated form asked for.
Brinkibon Ltd v Stahag Stahl (Instantaneous communication rule)
F: Brinkibon wants the contract to have been formed in Britain (brink would win) instead of Vienna (Stahag would win). Acceptance was sent via a telex machine.
I: Where is the contract formed? When was it formed?
A: Brinkibon argues that if acceptance by postal rule, acceptance is communicated upon “posting.” This means that the contract is made in England and buyers will get there order. If acceptance by instantaneous communication rule, acceptance occurs when received in Vienna. This means that the contract is made in Vienna and the buyer will NOT get their order. The Telex is more like a phone call. This instantaneous communication rule will apply. It is reasonable to treat the telex offer as delivered to the principal offeror because it his responsibility to arrange for prompt handling of messages within his own office.
C: Brinkibon loses. Stahag not liable.
R: Instantaneous communication rule, the contract (if any) was made when and where the acceptance was received. Exception: the general instantaneous communications rule will normally apply unless the failure of the offeror to receive the communication of acceptance sent by the offeree results from the fault of the offeror or from a defect in the communication with respect to which the offeror should be deemed to have assumed the risk. (There is scope for argument)
Rudder v Microsoft Corp (Clicking is agreeing)
F: Rudder claims Microsoft breached MSN service agreement by taking unauthorized payments from subscribers. Plaintiff sues in Ontario. MSN says a click wrap agreement states contracts are governed by law of Washington and all disputes would be heard in that state’s courts.
I: Is the form selection clause part of the contract and therefore enforceable?
A: Contract was formed by clicking on the “I agree” icon. You cannot hold MSN to their agreement, and then not follow the agreement yourself. There was no fine print. The fact that Rudder did not read the contract all himself is his fault, all of the terms still apply.
C: Microsoft wins.
R: moral rules of contract formation are applicable to agreements in writing and in an electronic format. Acceptance can occur through touching or clicking an icon.
What is Termination?
An offer is terminated by withdrawal/revocation. It can be revoked at any time before it is accepted (Byrne)
As another general rule, revocation has to be communicated to offeree.
Communication of revocation doesn’t have to come from the offeror (Dickinson)
Dickinson v Dodds
indirect communication of revocation
F: Dickinson wanted to purchase Dodd’s property. June 10 Dodd makes written offer to sell property to Dickinson. Offer to stay open till 9 am June 12. June 11 Dickinson hears from Berry that Dodd’s had been offering/agreeing to sell the property to Allan. Later that night Dickinson delivers written acceptance to Mrs. Burgess (Dodd’s mother in law). This acceptance in never received as she forgot to give Dodds the acceptance. Friday at 7 am: Berry finds Dodds at the railway station and hands him a duplicate of Dickinson’s acceptance. Dickinson finds Dodds and hands him the same acceptance. Dodds responds: “You are too late. I have sold the property.”
I: Was Dodd’s required to hold the offer open? Has Dodd’s offer been revoked prior to acceptance?
A: The law says that although it is said that the offer is to be left open until Friday morning at 9 that did not bind Dodd’s. This PROMISE was not backed up by any consideration. You would need an option contract (You purchase the consideration that makes them hold it open for a certain period) to ensure the offer is held open. Dickinson did know about the contract made with Allan, revocation was known.
C: Dodd’s is not liable.
R: There cannot be a meeting of the minds if one party changes their mind prior. Therefore, he cannot be binded by an acceptance. Communication should be through a direct means, but learning of the revocation indirectly can still count as effective revocation (if it is a reliable source).
Bryne v Van Tienhoven
F: Oct 1 Van mail an offer to sell tin plates to Byrne. Oct 8 Van mail a revocation of this offer. Oct 11 Byrne receive the offer and immediately accept by telegram. They then contract to sell the tin plates to a third party. October 20 Van receive the letter of revocation from Oct 8. Van says fail to deliver. I: Does a withdrawals have any effect before it’s communicated? Is posting a letter of withdrawal a communication to the person?
A: Revocation only took place when it is actually communicated to Byrne. The letter wasn’t accepted th
until Oct 20 . Byrne had already accepted the offer before that. Therefore the withdrawal was inoperative. If they allowed Van to win the case then in the future, everyone who accepts an offer through the mail would have to wait for a long period after to see if anything comes in the mail revoking it (too much uncertainty for the buyer).
C: Van is liable.
Errington v Errington and Woods
Collateral agreement
F: A father bought a house for 750 pounds. He allowed his son/daughter in law to live there. The couple would make the mortgage payments and when the mortgage was paid off, the father would transfer the house to them. The father dies.
I: Can the deceased father’s estate renege on this arrangement?
C: The agreement the father made must continue.
R/A: The fathers promise was a unilateral contract- a promise of the house in return for their act of paying the instalments. It can’t be revoked once they perform the act, but it would cease to be binding it was not fully completed/performed (which they have not done). This is still the case after death. Flagpole Problem: In theory it would be possible to withdrawal the offer at the last minute, which would cause hardship. A bilateral contract could help resolve this (but not in this case) OR find an implicit collateral arrangement relating to the firmness of the offer (this puts an obligation on the father).
What is Lapse?
An offer is terminated via lapse.
An offer which states that it will expire at a certain time cannot be validly accepted after that time.
An offer which does not expressly provide for how long it is open it is said to automatically lapse after a reasonable time (implied term that looks at
the offeror)
When an offer is not accepted within a reasonable time, it has impliedly been rejected by offeror (this test looks at the offeree)
Barrick v Clarke (reasonable time)
F: Oct 30 Clark offers to buy the land for 14,500 with possession at any time between Jan 1 and Mar 1, asks for reply by telegram. Nov 15 Barrick replied by post, counters with 15,000 with transfer of clear title Jan 1. Nov. 20: Letter is delivered but Clark is absent. Mrs. Clark responds, asking Barrick to keep the offer open. No reply from Barrick. November 30: Hohmann (third party) enquires about land. December 3: Barrick and Hohmann enter into contract. Dec. 10: Clark returns and tries to accept Barrick’s offer. Dec. 11: Clark telegrams Barrick because he had heard of a third party purchase. Dec. 12: Barrick writes back that he had waited until Dec. 6 and when he didn’t hear from Clark he sold to someone else.
I: Has Barrick’s offer lapsed prior to acceptance? Was the acceptance within a reasonable time?
A: There is no rush to sell because the land cannot be used till spring anyways. So a longer time might be reasonable. But the wording uses “close the deal immediately” and “as soon as possible” which indicates a shorter time frame. They also contemplated a closing date of Jan 1, this means that the wait for acceptance as late as Dec 10 is not reasonable. The request to extend the date is not relevant since Barrick did not accept the request. Barrick can accept Hohmann’s offer if and only if a reasonable time has elapsed on an existing offer.
C: Barrick wins as he waited a reasonable time.
R: What will constitute a reasonable time depends on the nature and character and the normal or usual course of business in negotiations leading to a sale, as well as the circumstances of the offer including the conduct of the parties in the course of negotiations.
Certainty of Terms Vagueness
Contracts must be sufficiently certain if they are to be binding.
An agreement is not a binding contract if it lacks certainty, either because it is too vague or because it is obviously incomplete
Parties must actually reach a meeting of the minds: so we must be able to determine their obligations with certainty.
Determination of parties’ intentions regarding their obligations is approached objectively.
Tension: Courts are torn between 2 important guiding principals, what are they?
Courts should not impose an agreement on the parties AND If something can be made certain, it should be interpreted so that it is
What is Vagueness?
Where the courts cannot determine on what terms the parties have purportedly contracted, due to vagueness, the agreement is unenforceable.
That said, “courts do not expect commercial documents to be drafted with strict precision, and will, particularly if the parties have acted on an agreement, do their best to avoid striking it down on the ground that it is too vague.”
what is Incompleteness?
Where some term is left unspecified and the agreement is thus incomplete.
However, parties may have good reason to leave terms open: they may be reluctant to commit themselves to a rigid long-term arrangement, particularly when prices and other factors affecting performance are likely to fluctuate. They therefore attempt sometimes to introduce an element of flexibility into the agreement…. (Treitel)
R v CAE Industries Ltd (courts strive for certainty)
F: To incentivize CAE to purchase the aircraft maintenance base, they sent a letter to CAE Mar 26. The letter stated it agreed to provide a minimum amount of man-hours each year. CAE then purchased the base but within two years, maintenance base workload fell. CAE sued for breach of contract.
I: Is the contract vague and uncertain or incomplete?
A: There was an intention to create legal relations. Court says it is not incomplete as to be unenforceable. The need for further contract to be made subsequent to this one doesn’t make it incomplete. “It is in itself an entire contract capable of standing on its own feet.” There is a certain looseness of language. “Assurances”/”Guarantee”: they clearly view this as a binding commitment as stated elsewhere in the document. It is a binding commitment to “set-aside work.” “Set-Aside”: This was found to be work to be directed to the respondent without competition. “Best Efforts” ’: Government argues that it is “so lacking in precision as to render it incapable of creating legal rights and obligations”. Judge says it must be interpreted “in light of the contract itself, the parties to it and its overall purpose as reflected in the language it contains.”
C: The contract is not too vague or incomplete.
R: The court should make every effort to find a meaning in the words actually used by the parties in deciding whether an enforceable contract exists.
If parties have expressed themselves in language sufficiently clear so as to have created rights and obligations, the court will enforce the contract especially where the contract has been partly performed. Courts will strive to find certainty in a contract to ensure it is complete.
What are Incomplete Terms?
This is “shifting legal stands”
May & Butcher puts forward a very general principle:
“agreement to agree where some critical part of the bargain remains undetermined is not
contract.”
If there are criteria or a mechanism to determine the price, this can prevent the agreement from failing for incompleteness.
May & Butcher Ltd v R (agreement to agree is not a contract)
F: Agreement by letter for May to buy surplus tentage from the defendant in Dec 1921. Jan 1922 the agreement renewed to Mar 1923, on same terms. Later in the month, there was a dispute as to price.
I: Is the agreement void for uncertainty?
A: May says the parties have agreed that a reasonable price would be paid per the Sale of Goods Act and/or that the arbitration clause can be used to fix the price. The Court says an agreement to agree in the future is not a contract. The price of something is key to the contract, so since it was not fixed, it is not a contract. They did discuss price though so the Sale of Goods Act does not apply. The arbitration clause does not apply because there was no contract.
C: The agreement was uncertain.
R: an agreement between 2 parties to enter into an agreement in which some critical part of the contract matter is left undetermined is not contract at all.
Hilas & Co v Acros Ltd (Interpret clause as part of a whole)
R: You must interpret a clause as a part of the whole agreement. Courts duty is to construe documents “fairly and broadly” and not look too hard for defects. They should apply the maxim “verba ita sunt intelligenda ut res magis valeat quam pereat.” This means that words should be understood such that aim can actually be carried out and not frustrated. Court must on the other hand not “make a contract for the parties or go outside the words they have used.” Parties often desire to leave some things to be worked out later and the courts must leave scope for this.
F: Arcos enters a contract with Central Softwood Buying Corp to sell all of its timber for the 1931 season to them (not Hilas). Hilas tried to exercise the option from Clause 9 which allow them to purchase the timber on conditions and at reduced prices. Acros says this was cancelled and refused to deliver.
I: Is clause 9 enforceable or is it void for uncertainty?
A: Drafting here is inartistic but the parties intended to contract and thought they had done so. The contract here is not too uncertain. The parties did intent to enter a complete and binding agreement, not dependent on any future agreements. The Price has terms and a price list. Quality of Timber, “of fair specification” is not too vague as it was used in previous agreements and was understood obviously, “100,000 standards” must be looked at in the context. Timing for shipping/delivery, the nature of the contract is that some things need to be determined later. Option contracts can exist.
C: Hilas wins. There is a contract.
Foley v Classique Coaches (implied reasonableness makes it certain/cannot manipulate contract)
F: Foley was selling the land and Classique was buying. Agreement: Classique coaches had to buy all of their gas from Foley if they buy the land. The price of gas was unspecified, to be agreed by the parties from time to time. Classique started buying cheaper gas elsewhere. Foley sues and seeks an injunction.
I: Does the agreement fail for uncertainty?
A: Classique says the arbitration clause can operate to remove uncertainty and the parties intended that a reasonable price be paid for the gas. The judge agrees and says that Classique wants to keep the land but get out of the part of the contract that they don’t like. But the gas was factored in the price they got for the land. Since they both acted like they had a certain contract for years, there is not uncertainty.
C: Contract is certain, Foley wins.
R: If you follow the contract for years without uncertainty, the contract is not uncertain.
Agreements to Negotiate
Agreements to agree in the future on essential aspects of a bargain are not contracts
But parties might expect that even if they aren’t bound to sell or buy at an established price, they are committed to seriously engaging in
negotiation with the aim of reaching agreement.
Distinguish- agreement to preform where some terms unspecified vs agreement to negotiate with aim of establishing terms. Agreements to
negotiate is a “process.” Agreement as oppose to “substantive”.
Good Faith in General
A broad organizing principle that underpins contract law.
Good faith has multiple more specific manifestations, such as reasonableness and honesty.
It’s a relatively new development in the law, so there are differing interpretations of its role.
GF operates to make some agreements to negotiate enforceable. It is certain enough to give content to some agreements
Empress Towers Ltd v Bank of Nova Scotia
negotiate in good faith
F: Scotiabank rented from Empress Towers. There was a lease renewal clause. May 25, bank wants to use renewal clause to renew lease for 5 more years. June 23, bank proposed a rental rate of $5400/month (increased from $3097). July 26 & Aug 23, bank follows up and Empress says they are still thinking. Aug 31, deadline for the old term to expire, empress replies proposing month-to-month tenancy, at $5400 plus $15,000.
I: Is the renewal clause void for uncertainty?
A: The parties set market value and mutual agreement as the formula. This gives the landlord a lot of power over something parties seemed to treat as objective. The courts say there is an implied term here that the landlord has an obligation to negotiate in good faith with the aim of reaching agreement; and an implied term that agreement will not be unreasonably withheld. (Implied on the officious bystander and business efficacy principles). This prevents the clause from being uncertain. Requirements to negotiate in good faith and not withhold agreement unreasonable “carry the same degree of diligence as “best efforts””.
C: The clause is not uncertain. Landlord did not negotiate in good faith.
R: Courts should try to give effect to the agreement, as long as they are not constructing a contract. But if it’s just an agreement to enter a lease at a rate to be agreed, that is not contract. It may be an agreement to negotiate.
Brown recognizes three options: (1) where rent is “to be agreed”, clause is normally not enforceable. (2) Where rent is to be established by a formula (ex, market value) but no machinery for application of the formula is provided, courts will often supply the machinery. (3) Where formula set out but defective and machinery is provided for application of the formula, machinery may be used to cure defect in formula.
Mannpar Enterprises Ltd v Canada
Good Faith/distinguish Empress
F: Mannpar had been granted a permit by the Crown to remove/sell sand/gravel on the Skway Reserve. Mannpar wants to exercise a renewal clause 7: Mannpar has the right to renew for 5 more years subject to satisfactory performance and renegotiation of the rates that will not be lower than the previous year. The Department and the Skway representatives were unwilling to renew. Mannpar argues that the Department has breached contract by refusing to negotiate the renewal. Department has a fiduciary obligation to the Skway.
I: Is clause 7 uncertain? Should there be an implied term requiring the Department to negotiate in good faith for the renewal?
A: The terminology of the permit should not lead to the conclusion that a term or terms ought to be implied. Where a renewal clause is too broadly worded, it fails because there is no objective measure. All we have is an agreement to agree which is void. So: no implied term here. Renewal clause is too uncertain. In Empress there was a benchmark of a market rental. This case does not have that. Continuing leases are different from an “anticipation” that an arrangement may continue for a certain period. We should be attentive to the context- here there is a fiduciary obligation that affects how the government conducts itself. It can only renew if that is what the Skway people want.
C: Canada did not breach the contract.
R: There is not a duty to negotiate in good faith if: (1) There is a contract between the parties, (2) a duty to negotiate in good faith is consistent the with parties intent, AND (3) there is an objective benchmark against which the court can assess whether the party in question is in breach or not.
Bhasin v Hrynew (good faith as a standard capable of definition)
F: Bhasin was an enrollment director (ED) for Can-Am. Hrynew is another successful ED who merged with some other ED’s. He wanted to merge with or take over Bhasin’s business. Bhasin was not interested in
the merger. Hrynew asked Can-Am to make it happen and Can-Am appointed Hrynew to leadership role which allowed him to look at Bhasins confidential business records. Bhasin objected. Can-Am told Bhasin (falsely) that Hrynew’s work would be subject to a duty of confidentiality. Bhasin objected again and Can-Am exercised its right not to renew Bhasins Agreement.
I: Is there an implied duty of good faith?
A: Can-Am breached the duty of honesty. Had Can-Am been honest in contractual performance, Bhasin would have sought to sell or otherwise monetize his agency before Can-Am triggered its decision not to renew.
C: Breach of contract occurred.
R: The good faith principal is a standard which underpins contract law. Parties must generally preform there contracts honestly and reasonably and not capriciously or arbitrarily. Parties must have appropriate regard to the legitimate contractual interests of the contracting partner.
