K Is for Kontreezy Checklist

K is for Kontreezy Checklist

QUESTION ONE: IS THERE A K? 2

Mistake as to Fact 2

Mistake as to Terms 2

Mistake as to ID 2

Mistake as to Subject Matter 3

Mistake as to Quality 3

Equitable Mistake 3

Mistake Factors to Consider 4

QUESTION TWO: THERE IS A K! WHAT ARE THE TERMS? 5

Principles of Contract Interpretation 5

Mistake as to Recording 5

Signed K 5

Unsigned K 6

QUESTION THREE: IS THERE AN EXCLUSION CLAUSE OF LIABILITY? 7

QUESTION FOUR: HAS THE K BEEN FRUSTERATED? 8

QUESTION FIVE: IS THE K UNFAIR? 9

Unconscionability 9

Undue Influence 10

Duress 11

A. POST CONTRACT MODIFICATION DURESS (Nav Canada) 11

B. DURESS TEST (Universe Tankships) 11

QUESTION SIX: DOES THE K VIOLATE PUBLIC POLICY? 12

Common Law Illegality 12

Illegal-Illegal 12

Restrictive Covenants 12

QUESTION SEVEN: HAS THERE BEEN DISHONEST PERFORMANCE? 13

Good Faith 13

QUESTION EIGHT: WHAT IS THE REMEDY? DAMAGES! 14

Damges v Reliance 14

How Much Should you Get? 15

Mitigation 16

Loss of Enjoyment 17

Punitive Damages 17

COMMERCIAL PRACTICE AND EFFECTIVE K DRAFTING 18

COMMON MISTAKES TO LOOK OUT FOR 20

QUESTION ONE: IS THERE A K?

Mistake as to Fact

¨  Step 1: Is it a mistake to fact? (Smith & Hughes)

·  Where the buyer though it should have been higher quality, better, etc

·  “thought the car was good and its not”

·  Does consumer protection apply? See s. 3(deceptive acts) and s. 5(onus on supplier)

¨  Yes: Caveat emptor applies

¨  Unless seller mislead you/deceived you

¨  No: move on

Mistake as to Terms

¨  Step 2: Is it a mistake as to terms of the K (Staiman and Raffles)

·  Mistake as to terms if it is fundamental to K and a unilateral mistake then the K is void because you know what I was getting K’d for and so no agreement

·  Party cannot rely on a mistake in a situation where the “mistake” was created by one party’s negligence or unreasonable assumption and the other party relied on that information (McRae)

¨  A. Fundamental Uncertainty

·  Add odds over what is being K’d for. “Two ships passing in the night”

¨  Apply What would a third person think? (Staimain)

§  Policy Considerations

¨  Price/Risk allocation

¨  Knowledge and skills of the parties

¨  Ease of avoidance

¨  Common usage of the trade

¨  Still unsure - VOID for ambiguity (Raffles)

§  Policy Considerations

¨  Price/Risk allocation

¨  Ease of avoidance

¨  Seller’s position

¨  B. Snapping up Mistake (Hartog)

¨  VOID if about a fundamental offer

¨  Knew someone made a mistake and took advantage of it

¨  K is VOID

¨  Yes: to any of the above – apply appropriate remedy

¨  No: move on

Mistake as to ID

¨  Step 3: Is it a mistake as to the ID of the Parties? (Cundy, Lewis, Shogun)

·  Must matter who you K’d with

·  First: apply normal rules of K formation: intention of the parties in words and conduct. There is a strong presumption that you intend to K w/ the person you are in face-face contact with

¨  Step 3A: Written Contract with No Offer (Cundy)

·  If K was written, the ID was important and the offeror took steps to confirm the ID, then the offer is VOID for impersonation by the rogue, you did not mean to K with that person

¨  No K

¨  3P Does not Hold Title

¨  Nemo Dat: Can’t transfer something you don’t own.

¨  Step 3B: Face to Face Commnunction/Written (Shogun)

·  When there is no face to ace communication, but the ID has been confirmed, courts will likely hold VOID for mistaken ID

¨  Opinion 1: Written document and so No K and Does not hold title: 3 P holds title

¨  Opinion 2: No special rule for written document. If you create a K it’s concluded: 3 P holds title

¨  Opinion 3: Depends on the intentions of the party : No Contract

¨  Step 3C: Face to Face (Lewis)

·  There is a K but may go to Equity to have K set aside

¨  If sold to a third party then 3P holds title

¨  Assumption you mean tot K with that person

¨  Ask: Does consumer protection/sale of goods act apply?

·  S. 26(1): Nemo Date

·  S. 28: But if sale under voidable title has not been rescinded then buyer acquires good title to the good it bough in good fiath and without notice of defect in title

·  Policy: Nemo Dat at common law vs protection of innocent parties when sller is in best performance ti mitigate risks

Mistake as to Subject Matter

¨  Step 4: Is it a Common Law mistake to the subject matter?

¨  Res Extinctia: Object does not exist – before/at the time of K

¨  K is VOID

¨  Res Sua: You own the object, idiot

¨  K is VOID

¨  Ask: Did the seller promise they owned the thing in question

·  Party cannot rely on a mistake in a situation where the “mistake” was created by one party’s negligence or unreasonable assumption and the other party relied on that information (McRae)

Mistake as to Quality

¨  Step 5: Is it a Common Law mistake to the existence of some quality? (Bell)

¨  BOTH parties are mistaken about ONE thing related to a quality of the K

¨  Essential Quality

§  Makes the K fundamentally different

¨  Policy Considerations

¨  Certainty and predictability v unfair/surprise and unjust unrichment

¨  Risk allocation v fairness

¨  Caveat vendetor

Equitable Mistake

¨  Step 6 – Equitable Mistake (Solle) (Miller Paving) (NO Great Peace)

·  Can apply equitable mistake because Canada has not adopted Great Peace

·  Equity will relieve a party from the consequence to a mistake under a common mistake or unilateral mistake.

·  Result K is VOIDABLE – court has more discretion about how to alter the K and make it fair. Common Law is a “switch” VOID or NOT VOID

·  Doctrine of Equitable Mistake is Applicable in Canada – Miller Paving

·  State Solle v Butcher as a Leading Case

·  Courts will only relieve a party of their own mistake if it does not injustice to a third party

¨  Step 6A – What Type of Mistake Is It? (a) Unilateral Mistake or (b) Common Mistake

¨  Unilateral (Solle): snapping up, where one party takes advantage of another and it doesn’t amount to fraud then at the common law Caveat Emptor applies

¨  Knowledge: If the party knew about the mistake and let the other party remain under the delusion and concluded the K then Equity may VOID the K.

¨  3rd Parties: Would it be unfair

¨  Common (Solle)

¨  Fundamental and

¨  Party seeking to put it aside not at fault

¨  Policy Considerations

¨  Fairness between all parties.

Mistake Factors to Consider

¨  Knowledge of Parties – Courts are less likely to protect a mistake made by a person who possesses knowledge of the skill/K at hand

¨  Ease of Avoidance – Courts will consider who is in the best position to avoid the mistake

¨  Usage of the Trade – Courts will examine what the protocol is of the trade and where the risk is usually allocated

¨  Knowledge of Ambiguity – Snapping Up – Courts of Equity will often look at “snapping up” in order to avoid taking an advantage of a person and leading to inequitable results

¨  Contra Proferentem - Ambiguity will be construed against the interest of the person who drafted or proffered the ambiguous provisions

¨  Policy Considerations, Fairness and all that Lovey-Dovey Shit

Result: Now assume there is a K – K may be voidable or void on a number of doctrines

QUESTION TWO: THERE IS A K! WHAT ARE THE TERMS?

Principles of Contract Interpretation

¨  Intentions of party – whole of K, reasonable interpretation, written word usually best indication, context, it is presumed the parties intend the legal consequences of their words, but don’t give a literal interpretation if unreasonable.

¨  Objective approach to determination of intentions at the time of the K – terms of the K, the relationship, relevant facts in an objective manner. Protect reasonable expectations. Read terms as a whole. No subjective intentions

o  The ‘commercial context’ or surrounding circumstances are always important – know the purpose of the K, market, genesis of transaction

o  Where there is no ambiguity in the written agmt there is no need to extrinsic evidence

¨  General rule is that evidence of prior negotiations is inadmissible for the purpose of construing the final agmt – subjective line though, hard to draw. Only admitted when “relevant to show the aim and genesis of the transaction”

¨  Interpretations must give effect to all parts of the agmt – no term is meaningless, but can be duplicative sometimes. Where there are apparent inconsistencies b/w different terms of a K the court should attempt to fina na interpretation which can reasonably give meaning to each of the terms in question

¨  Subsequent conduct: where there are two reasonable interpretations of a provision then evidence of subsequent conduct “may be admitted and taken to have legal relevance if that additional evidence will help to determine which of the two reasonable interpretations is the correct one”. Especially in a long term r/ship where interpreted one way for a long time

¨  Related agmts. – taken into account where the agmts are components of one large transaction

¨  Meaning of words – natural and ordinary, evidence for technical

¨  Construction Contra proferentum – ambiguity works against the drafter

Mistake as to Recording

¨  Step 1 – Mistake as to the recording of the terms of the K (Performance Industries)

¨  Step 1 – Rectification Analysis: A Determinative test for mistakes in Recording

¨  Step 1.1 – P Must Prove the Existence and Content Prior to Oral Agreement

¨  Step 1.2 – Must be Convincing Proof of the Oral Agreement – must prove on a balance of probabilities, less than beyond a reasonable doubt.

¨  Step 1.3 – P Must Provide the Precise Wording for the Rectification

¨  Step 1.4 – P Must Show the D Knew or Ought to Have Known Of the Mistake – for the to refuse rectification would be inequitable and unconscionable

Signed K

¨  Step 2 – Was the K signed?

¨  A. Signed

¨  1. General Rule: A party signing a written K is bound by its terms regardless of whether read or aware of Terms (L’Estrange)

¨  2. General rule, the Doctrine of Reasonable Notice, states that if there was no knowledge of the conditions then a person is still bound if there was reasonable notice that the ticket contained conditions

¨  3. Narrow Exception for Tilden: where a party seeking to rely on K knows the signature of the other party does not reflect the true intention of the signed, and the other party is unaware of the stringent/onerous provisions, then the party seeking to rely on the terms must first taken reasonable measure to give notice of the terms of the party (Tilden)

¨  hasty – speed of transaction

¨  informal

¨  clause inconsistent with the rest of k

¨  absence of opportunity to read

¨  length and amount of small print in the K

¨  is it unconscionable

¨  4. Karroll Rebuttal: Tilden is a limited principle. It is only applicable in a narrow set of circumstances when one party knew or had reason to know of the signing party’s mistake as to terms (didn’t read it, etc). It is not a general duty in a usual setting to make sure the exclusion clause is brought to the attention of the consumer (Karroll)

¨  signed a document knowing it affects legal rights

¨  consistent with the purpose of the K

¨  hazardous activity

¨  short and easy to read

¨  signed familiar release before

¨  5. Non Est Factum: Not available where the person is (Saunders

¨  of full age and understanding

¨  careless/negligent

¨  did not take all reasonable precautions

¨  relied on a trusted advisor/friend

It is available where a person is:

¨  not capable of reading or understanding the document

¨  document was fundamentally different than what was believed ot be signed

¨  mistaken person must prove that he took all reasonable precautions before signing

Unsigned K

¨  B. Unsigned K’s

¨  1. If the P does not see the writing that contains “conditions” of the K and no reasonable effort as taken to make him aware of it then he is not bound by the terms. Being bound by the terms requires: (Parker) You Need:’

¨  actual knowledge that the document contains conditions OR

¨  reasonable steps were taken to provide notice that the document contained conditions

¨  2. When the clause is an unusual or onerous one the P has to know of actual exemption condition rather than just that there was one (Thornton)