Table of Contents
CHAPTER II. FORMATION OF THE AGREEMENT: OFFER AND ACCEPTANCE 15
1.Introduction 15
2.Offer and Invitation to Treat 18
3. Communication of Offer 45
4.Acceptance 52
5.Communication of Acceptance 79
6.Termination of Offer 95
(a)Revocation 95
(b)Lapse 102
CHAPTER III. FORMATION OF THE AGREEMENT: CERTAINTY OF TERMS
1.Introduction 109
2.Vagueness 112
3.Incomplete Terms 117
5. Anticipation of Formalization 149
2.Exchange and Bargains 160
1.Introduction 157
2.Exchange and Bargains 160
3.Past Consideration 170
4.Consideration Must be of Value in the Eyes of the Law 173
5.Bona Fide Compromises of Disputed Claims 175
6.Pre Existing Legal Duty 178
(a) Introduction178
(b) Public Duty178
(c) Duty Owed to a Third Party179
(d) Duty Owed to the Promisor182
(i) Promises to Pay or Provide More182
7. Promises to Accept Less 198
(a) Accord and Satisfaction 198
(b) Statute206
8. Promissory Estoppel and Waiver 207
(a) The Nature of the Representation211
(b) The Equities214
(c) The Notice 217
(d) The Reliance223
(e) Sword or Shield?
9. Intention to Create Legal Relations249
(a) Introduction249
(b) Family Arrangements250
(c) Commercial Arrangements
10. Formality: Promises under Seal 258
11. Formality: The Requirement of Writing261
A.Why do certain kinds of contracts have to be reduced to writing or evidenced by writing?
B. Rationales for the writing requirement
C. What kinds of contracts have to be reduced to writing or evidenced by writing?
D. What counts as "some memorandum or note
E. What is the effect of non-compliance with the S/F?
F.What is Part Performance?
CHAPTER V. PRIVITY OF CONTRACT
1.Introduction
2.The History of the Doctrine of Privity and Third Party Beneficiaries 287
3. Ways in Which a Third Party May Acquire the Benefit 293
(a)Statute 293
(b)Specific Performance 295
(c) Trust
(d) Agency302
(e) Employment 310
(f)Subrogation 322
CHAPTER VI. CONTINGENT AGREEMENTS329
1.Introduction 329
2.Intention, Certainty, and Consideration 332
3.Reciprocal Subsidiary Obligations 343
(a)Remedies for Breach of Subsidiary Obligation 347
4.Unilateral Waiver 351
Chapter VII. Representations and Terms: Classifications and Consequences
2. Misrepresentation and Rescission
3. Representations and Terms
3.Statutory Reform
5. Concurrent Liability in Contract and Tort
6. Parol Evidence (no cases)
7. Classification of Terms (right side of board)
8. The Principle of Good Faith and the Duty of Honest Performance
CHAPTER VIII. STANDARD FORM CONTRACTS AND EXCLUSION CLAUSES 467
1. Introduction467
2. Implied Terms468
3. Judicial Control of Standard Form Contracts and Exclusion Clauses
(a) Introduction
(b)Incorporation 484
(i) Unsigned Document 484
(ii)Signed Documents 498
(c) Strict Construction509
(d) Fundamental Breach512
(e) Fundamental Breach/Unconscionability Post-Hunter531
Damages
Terms:
Acceptance a final and unqualified expression of assent to the terms of an offer (per Treitel).
In unilateral contracts: acceptance is achieved by fully performing the required act or forbearance. There is generally no need for the offeree to give advance notice of acceptance to offeror.
Bilateral contract a bilateral contract is an agreement constituted by an exchange of promises.
When the contracting parties are bound to fulfil obligations reciprocally toward the other. The contract is formed by the exchange of promises in which the promise of one party is consideration supporting the promise of the other
Contract a promise that is enforceable in the courtroom; Courts enforce mutual agreement freely consented to by each party of the contract
Consensus ad idem An agreement of parties to the same thing; a meeting of minds.
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” (per Treitel). (Leading case Boots)
Mirror Image Rule The acceptance must precisely match the terms of the offer
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” (per Treitel). McCamus: quotation of price doesn't constitute offer. Actions following offer can indicate acceptance (Canadian Dyers Association Ltd v Burton)
Unilateral contract "one in which one party makes an express engagement or undertakes a performance, without receiving in return any express engagement or promise of performance from the other. Neither party is bound until the promisee accepts the offer by performing the proposed act. It consists of a promise for an act, the acceptance consisting of the performance of the act requested, rather than the promise to perform it.” Unilateral contracts are very rare. McMacmus: a promise in exchange for an act; that the offeror is prepared to be bound by certain promises if the offeree performs a stipulated act and performance will stipulate acceptance (Leading case Carlill v Carbolic Smoke Ball Co)
CHAPTER II. FORMATION OF THE AGREEMENT: OFFER AND ACCEPTANCE 15
Offer; Acceptance; Unilateral contract; bilateral contract; Nudum partum; Mirror Image Rule; Invitation to treat; Consensus ad idem; Consideration;
1.Introduction 15
Components of Contract
· Agreement: composed of offer to enter into contract and acceptance of that offer
o Offer: expression of willingness to contract on certain terms made with intention that shall be binding as soon as accepted by person whom is addressed
o Acceptance: is final and unqualified expression of assent to the terms of offer
· Promises - contained in agreement are known as terms. The informing idea behind a contract is that there has been a meeting of minds.
· Mutual Consideration - makes a promise enforceable. If someone promises to give you a $100 GC this is an unsupported promise-> no mutual consideration, thus not enforceable.
Ex: Cause of Action: -> Breach of Contract (Entered into contract to buy a $10 textbook from 3rd year then 3rd year said he got a better offer and wants more money) – ask for damages
Contracts Must be:
- Deliberate: both parties must want to enter into a contractual relationship. “Intention to create legal relations”
- Voluntary: entered into of their own volition, willing and not forced
- Between 2 or more competent persons: Note: Oral Contract enforceable (with exceptions like Land)
2.Offer and Invitation to Treat 18
INTENTION IS OBJECTIVELY ASSESSED (TEST)
Would a reasonable person, in analyzing the words and actions of the parties, conclude that on balance of probabilities a contract was made, that there was an intention to be bound by the terms of the offer?
Canadian Dyers Association Ltd v Burton (Invitation to Treat) **Intention & Subsequent Conduct important.Facts: PL: Canadian Dryers (offeree) purchaser DF: Burton (offeror) vendor
●PL wrote to DF “With reference to purchasing property (25 Hanna Ave) kindly state your lowest price. Invitation to Treat – PL inviting DF to make an offer
●DF: “Re house 25 Hanna. The lowest cash price I would care to sell is $1650…I would have sold before…but did not for obvious reasons.”Quotation of a price and a manifestation to sell at that price through wording of “I would have sold before.”
●PL: We would be pleased to have your Very lowest price for 25 Hanna Ave. Perhaps we could get closer together than before. Rejection of offer, rejection of offer kills the offer & can no longer be accepted unless revived.
●DF wrote: Last price was the lowest price willing to accept, and if it were to any buyer the price would be higher.Critical moment in case – Looks like renewal of offer, readiness to sell.
●PL sent cheque for $500. (Offered treated as accepted). Asked for draft of deed to be prepared.
●Solicitor sent draft of deed and said would be ready to close on Nov 1st.
●DF solicitor wrote that there was no contract and returned cheque for $500.
Issue:Is there offer and acceptance resulting in a contract? (Revival of counter-offer by DF?)
Results: Judge looked at Subsequent conduct of DF – Accepting $500 cheque, preparing draft deed, and expressing interest to close on Nov 1st. The conduct of DF gives support that the DF intended to enter into a contract for sale.
●If Language ambiguous turn to conduct of DF. Correspondences viewed as an offer and subsequent acceptance by preparing draft deed and expressing interest to close on 1st.
Comments: Stronger view is that courts should not consider subsequent behaviour.
Encourages a rule that someone through mischief could reconstitute what happened in past to their benefit.
PL wants equitable remedy of “specific performance” - fulfillment of the property. Must prove to the court that damages would not be adequate. If you can show that the property is unique, difficult to replicate in the market specific performance could be awarded.
Retail Sales: The Display of Goods (Boots)
Boots establishes: General rule that a display of price-marked goods in a store window/on a store shelf is not an offer to sell at that price but an invitation to treat.
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) LTD (Offer to treat, retail display of products)Facts: PL: Pharmaceutical Society of Great Britain and DF: Boots
Boots runs a self-service pharmacy .Two customers purchased drugs under the Poisons Act, 1922 from Pharmaceutical Society of Great Britain. In every sale the pharmacist supervised and scrutinized the transaction at the cash desk and has the authority to decline a transaction. The customers were not aware of this.
Issue Is self-serve pharmacy acceptable under the supervision of a registered pharmacist, in accordance with 18(1)a)(iii) of the Pharmacy and Poisons Act 1933. (If the contract is made before reaching the till then we have breach of legislation)
Results: The contract is not completed at the shelf (invitation to treat) but at the cash desk where the pharmacist has final authority. Given that the pharmacist has final say and is able to deny the “poison” to any person for any reason then yes, it is in accordance with Pharm. & Poison Act. Appeal Dismissed.
Comments:
In Alberta we have the Human Rights Act and s4 stipulates private vendors cannot deny or discriminate with regards to goods or services customarily available to the public.
Counter example: Women takes matched clothes and removes tags from pants. Cashier presumes clothes are set and charges only for top but sells top/pant set. ABCA held that defendant was not guilty of theft but fraud based on Boots since the cashier accepted the offer.
An advertisement can constitute a unilateral contract, which can be accepted by fulfilling the conditions of the contract; no formal acceptance required. Advertisements of bilateral contracts are typically not held to be offers since further bargaining is contemplated.
Carlill v Carbolic Smoke Ball Co (Unilateral & Bilateral Contracts)Facts: PL: Carlill (Purchaser,Resp.,Offeree) DF: Carbolic (Seller, Appel.,Offeror)
DF advertised in newspaper that 100L will be given to someone who uses the product and contracts a disease. PL bought product (used based on instructions) and contracted a disease. PL was granted the 100L, but D appealed.
Issues: Does the Ad constitute a unilateral contract (with who)? How does one interpret vague terms?
Results: Appeal dismissed. The contract was valid, and P is entitled to 100L.
●Vagueness to persons intended with whom to contract, only apply to those people who use smoke ball after Ad issued.
●Vagueness as to how long immunity: Immunity is to last during use of ball – not unlimited period of time. PL caught flu during flu season (reasonable period of time)
●Ad states that 1000L is lodged in bank for purpose of pay out. Intention is that if conditions were satisfied, since it would be understood by the public as an offer to be acted upon. If one makes extravagant promises, there is no reason why he should not be bound by them.
●DF claims cannot contract with world. Judge says it is an offer to become liable once conditions are met. Contract may be with world, but DF liable only to limited portion of pop who follows conditions. Says this is not like an invitation to treat like stating you have books to sell (where both sides can negotiate)
●Unilateral contracts - don’t have to communicate acceptance to offeror. Acceptance occurs at time performance of the condition occurs. Do not necessarily require notice.
●Consideration – the mere inconvenience of PL using smoke ball counts as consideration
Comments: During time of “Fraudster” making extravagant claims to public so court wanted to hold them accountable.
Consider the Pepsi Co. action. PL claims that ad is an offer for a unilateral contract and relies on the Carbonic Smoke Ball Case. The court held that a reasonable person would not have construed the ad as a reality
Goldthorpe v Logan 30
Goldthorpe v Logan (Court deemed “Contract” Unilateral; AD=Invitation to Treat; Bilateral)Facts: Goldthorpe: PL (appellant) Logan: DF (respondent)
- Goldthorpe got Electrolysis hair removal of face relying on Ad by Logan. Ad stated “results were guaranteed”. Goldthorpe submitted to number of treatments but results unsatisfactory. Hairs continued to grow & DF did not remedy condition.
Issues: Is there a contract btw Goldthorpe & Logan?
Results: Goldthorpe accepted “unilateral” contract by undergoing treatment. O’Byrne “Bilateral” Getting treatment and “paying for services” = acceptance & consideration.
Goldthorpe was persuaded by AD, guaranteed results and DF did not make any stipulations or exemptions to exclude anyone and as such is bound by that offer. Unlimited/absolute promises deemed as an enforceable promise.
Comments: Damages $113.25:The $100(expectation damages) + $13.25(restitution) is double compensation The $13.25 would have already been included in the $100, essentially rec’d the $13.25 twice.
R v Ron Engineering & Construction (Eastern) Ltd.33
R v Ron Engineering & Construction Ltd (Contract A/Contract B)Facts: - DF submit tender & gave $150K deposit. Tenders closed at 3:00pm. Employee who filed tender notice that tender was $632K lower than next closest tender. DF sent Telex (after bid submitted) saying submitted tender with error of $750,058 b/c forgot to include labour force amount. So bid should have actually been $3.5M. Due to error they want to withdraw tender.” Contract A – acceptance occurs when submitted and closing date surpasses. No acceptance at this point of Contract B, Contract B has to be signed and agreed to after acceptance of bid.
- In subsequent correspondence and proceedings contractor maintain that it had not withdrawn its tender, but that it was incapable of being accepted. Law of mistake and enrolment.
Issues: Whether a binding contract had been entered into by way of unilateral contract; would the contractor be entitled to withdraw the tender?
Results: “Unilateral” contract formed by submitting tender – thus bid irrevocable outside T&C’s. Both parties thus obligated to perform in contract. Wrong Contract A=bilateral.
- Deposit is clear – required to ensure performance of contract. Only recoverable under certain conditions not met & was subject to forfeiture under another term of contract.
Comments: OLD LAW:A promise is enforceable if it is paid for… A promise not to revoke before closing=Gratuitous, owner not giving anything return for consideration (only to consider offer).If wanted to make “firm offer” binding – then it would mean every single offer that says “I won’t revoke” is technically binding. There would be not difference btw revocable and irrevocable offers. NEW LAW: Invitation to tender/tenderer call=offer of Contract A. The Contract A contains rule governing the bidding process. Typically Contract A provides for irrevocability of bids and forfeiture of deposit should selected tendered not proceed with Contract B.Submission of tender = acceptance of Contract A and as irrevocable offer to enter into Contract B. Contract B contains the terms of the main contract.
R v Ron Engineering & Construction (Eastern) Ltd.561 - Law of mistake doesn’t really exist.
MJB Enterprises Ltd v Defence Construction (1951) Ltd.36
Ratio: Court will imply terms when necessary. Privilege clauses won’t overrule implied terms. If the privilege clause is so extensive contract A becomes void.
MJB Enterprises Ltd v Defence Construction (Implied Terms & Privilege Clause)Facts: 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 compliant bid. MJB’s bid was the lowest compliant bid.
Issue: Can Defense rely on its privilege clause as a defence to MJB’s action?
Results: Presumed intentions that court implied “that bids submitted would comply” although yes owner does not have to take any bid but if they are going to take a bid it must comply. **Implied terms must have a certain aspect of obviousness to it.
Comments:Breach Contract A = expectation damages, MJB wants the profit they expected to make on the bid had the contract have been performed.Court – on “balance of probabilities” court sure that Owner was going award bid and choose a tender, therefore DON’T discount for contingency b/c had they not have chosen SORO’s bid, they would have “Likely” chosen the next best bid, MJB.
3. Communication of Offer45
4.Acceptance52
Livingstone v Evans (reviving initial offer)Facts: Evans, DF, offer to sell land for $1800. Livingstone replied “Send lowest cash price. Will give 1600 cash.”. DF replied “Cannot reduce price” revival of offer. PL immediately after wrote accepting for $1800.
Issue: Is there a contract? Is the DF’s statement “Cannot reduce price” a revival of the first offer or an implicit rejection
Results: Binding contract for the sale of the land to which PL is entitled to specific performance.
Comments: Notwithstanding the rejection of the $1600 counteroffer, the initial offeror signals an interest in continuing the negotiations with the offeree, it may be held that the offer’s conduct has the effect of reviving the initial offer by stating cannot reduce price.
Battle of the Forms
Last shot/performance doctrine:Every new form, with new terms, is a counteroffer (“mirror image” rule). When conduct follows that can be considered to constitute acceptance an agreement is formed based on the terms of the last form utilized. The terms of the party who “fires” the last document before performance prevails.
Cons:
- Last shot ignores Mirror-image rule (forms exactly match = contract) the parties don’t have an agreement until performance yet parties might construe that they have a binding agreement (i.e. buyer awaits his purchase unaware the seller is not performing)
- It is arbitrary that the terms of the last form stands
- The virtue of certainty is “attained by ignoring reality and mechanically rendering formalistic decisions.” Among other matters, the rule also promotes what he calls silly gamesmanship (where people just send forms back and forth and back and forth).
Butler Machine Tool Co v Ex Cell O Corp. (1979) Court of Appeal London Wales (Battle of the forms
Facts: Seller (Butler Machine) provided quotation for machine with terms (including price variation clause & “terms prevail over any terms and conditions in the buyer’s order”) (offer). Buyer submits order form with own terms (excluding a price variation clause) with a tear-off form that invites sellers “to accept this offer” as per new terms and condition which cannot be “unqualified assent” therefore counter offer. Seller's return the slip with a cover letter stating acceptance “in accordance with seller’s quotation”
Issue: Which terms are included in the contract?
In this case First Blow = sellers favor; Last Shot = buyers favor
Results: The documents must be considered as a whole “terms constructed together”. Together, it is clear the contract was formed on the on the buyer’s terms and the cover-letter reference to “quotation” was referencing the quoted price not the quoted terms from the seller’s quotation.
Comments: -Criticism – the judge should interpret based upon what the parties intended not what judge thinks should have happened. Another result is determining contract is “ad idom” – not in agreement or do not have consensus – and as result there is not contract.
Lord Denning proposes the Last Shottest is out-of-date and proposes new tests:
1. First blow: party who offers terms first prevails unless the other side draws material changes in their terms to the attention of that first party.
2. Shots fired on both sides:
“The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If the differences are irreconcilable, so that they are mutually contradictory, then the conflicting terms may have to be scrapped and replaced by a reasonable implication.”
Cited in Tywood but not fully adopted by Canadian Courts.
Tywood Industries Ltd v St Anne Nackawic Pulp & Paper Co Ltd56
Facts: DF (St Anne-Nackawick, buyer); PL (Tywood Industries, seller)
1. DF send a "A Request for Quotation" to PL listing the T&C’s (none of which dealt with arbitration)
2. PL replied with a quote containing 12 T&C’s incl. "No modification of the above Conditions of Sale shall be effected by our receipt or acknowledgment of a PO containing additional or different conditions.”
3. Revised proposal was submitted by plaintiff with 12 terms
4. Two purchase orders from DF (rec’d separately) with T&C’s
Term: 19. This contract shall be governed by the construed according to the laws of the Province of New Brunsuwick. Any controversy arising out of or relating to this Order, or the breach thereof, shall be settled by arbitration in Fredericton in accordance with the Arbitration Act of the Province of new Brunsuwick
5. Tywood did not sign order but goods were delivered.
Issue: Is the arbitration clause contained in two purchase orders issued by the DF buyer enforceable?
Decision: Arbitration clause is not enforceable as the judge does NOT rely on the last shot test. DF did not bring the new arbitration clause to the attention of the PL and it seems neither party considered any terms other than those found on the face of both documents.
Comments: Themes of Denning’s third theory from Butler are expressed. Case does not follow the mirror image & last shot fired tests. Court considers the reasonable implications of the terms.
ProCD v Matthew Zeidenberg and Silken Mountain Web Services Inc
Facts: ProCD (PL) and Zeidenbergy (DF).
PL has compiled information from >3000 telephone directories into a computer database and sells software product with shrinkwrap software with terms inside. DF has made money by disregarding the license and selling the database online at a lower cost than the CD/disk.
Issue: Are the terms of the license binding which are not known at time of purchase? (i.e. when contract is formed).
Ratio: Shrinkwrap terms binding b/c unreasonable to put infinite text on box, also electronic purchases makes boxes irrelevant.
Clickwrap licences are reasonable offer and clicking “I accept” constitutes acceptance.
Reasons: Injunction in favor ProCD granted.
Shrinkwrap: Many examples of binding contracts where the terms aren’t fully disclosed at time of contract formation (i.e. warranty, ticket sales).
Clickwrap: The terms within the licensing agreement are reasonable and DF agreed to these terms every time software utilized (appeared on screen every time software used).
Acceptance is “a final and unqualified expression of assent to the terms of an offer.”