Law 108A | Contracts
Midterm OUtline – Short | 2013 | Newcombe

SandRa Town

Starting point – K formation through OFFER, ACCEPTANCE and CONSIDERATION

Was there an offer?
Do the details indicate an intent to be bound? / Ad as invitation to treat b/c still room to negotiate / Johnson
Was it specific and comprehensive? / Ad as invitation to treat b/c so many details still left to figure out / Lefkowitz (was an offer)
  • Wrt to stores
/ Display is invitation to treat
Offer is picking up the item
Acceptance is cashier taking the money / Boots
  • Wrt to trains
/ Timetable counts as offer – acceptance when arrive to take the train / Denton
POLICY – crts likely to uphold offer  truth in advertising; crts look at reliance placed on “offer” by Pl.; responsibility to public for offers put out there
Can an offer be withdrawn/revoked
  • Yes, IF no acceptance
/ Offer not binding until acceptance happens
  • Clear communication to Offeree
/ Dickinson

NOTE  enforcement about balancing reasonable expectations of parties against avoiding unfair surprise

Was there acceptance?
Was it within a reasonable amount of time? / If too long, the offer is seen as withdrawn or refused
  • Can’t accept if offer expired too
/ Manchester Diocesan Council
Was it communicated? / Silence is not acceptance, you have to communicate acceptance / Larkin
How can you accept? / Method can be dictated by Offeror
  • Verbal
  • Action
/ Eliason
Generally
Acceptance must be communicated AND received before there’s a K
Postal Acceptance Rule (letters, telegraph)
Acceptance at time the letter is POSTED
  • Must be contemplated method of communication
/ Henthorn
Revocation has to be received BEFORE posting letter for it to count / Byrne & Co.
Can stipulate in offer that K doesn’t form on instant of mailing  must be received (remember PAR is an EXCEPTION) / Holwell Securities
Where does the K form? / Generally – under jurisdiction of place it was received / Eastern Power
PAR – under jurisdiction of place it was sent
Was it actually a counter-offer? / C-O is rejection of original offer c/ significant differences to original offer / Bulter
  • Wrt to counter-offer
/ Last-shot rule – last offer agreed upon wins / Butler
What’s going on with tenders?
2 K policy – to keep all offers on the table and not be bound to all of them / K1 – offer is call for tenders, acceptance is submission, consideration is promise to treat all bids fairly
K2 – deals c/ actual provision of goods/services / MJB Enterprises
Can you accept non-compliant bid?
(content, submission) / No – privilege clause doesn’t include this right (breaches pple of treating bids fairly – has to meet criteria you set out) / MJB Enterprises
Formalizing the K  creating certainty (part of both O and A)
Price Mechanism – way for crt to find/reasonably infer the price
History
Course of dealings
Market Value / Was it an agreement to agree? / Crt will not enforce vague K missing essential terms / May & Butcher
But did you act upon that agreement? / On-going K require flexibility b/c market conditions change
Business efficacy  you intended the K to hold / Hillas (Russian tree sales)
Crt may look at your past actions to “fill in the gaps” / Foley
Did you act in good faith / Obligation not to withhold info, bargain c/out intent to form a K, reneging on a promise made in negotiations, force a decision / Empress Towers

Consideration – what’s flowing from each party (and it has to flow from BOTH SIDES)

What counts as consideration? / Giving up something you have a legal right to
POLICY – risk of exploitation / White
Can benefit the promisor OR be detriment to promisee at request of promisor
Restriction of freedom of action works / Hamer
Consideration doesn’t have to be adequate / It has to have value in the eyes of the law, but amount it irrelevant
PS. Motive behind the offer is irrelevant too / Thomas
Was it mutual? / Wrt to exclusive right to sell, there has to be a stipulation as to amount of sales to be good consideration / Tobias
It can be implied ”reasonable efforts” / Lady D-G
Did it happen in relation to the promise / Past consideration is not good consideration – it’s a GRATUITOUS GIFT (moral, rather than legal obligation)
  • Also applies to claims of quality (eg. horse - Roscorla
/ Lampleigh
EXCEPTION: if you request a service then promise to pay is binding  the service was not a gift / Lampleight
K Modification
Can’t change consideration for pre-existing K / Agreeing to do what you’ve already agreed to do not good consideration / Harris
Stilk
Can you enforce K variations
(GTAs) / Need fresh consideration to make K modification enforceable (Cnd leading law)
  • “mere” change in price may be viewed as variation BUT weigh against fact that some business K that’s all you can vary
POLICY – if no duress, there’s no good reason not to enforce K / Gilbert Steel
Other views on K modification not yet accepted in SCC decision yet
Consideration expanded to include practical benefit / Def. offered to pay more to obtain benefit for self – no concern of duress / Williams
Don’t need consideration at all for modification / Was consideration at the beginning and as long as there’s NO DURESS then why not enforce it? / NAV Cnda
Intent to be bound / If there’s evidence of reliance, the K modification should hold / River Wind
Other types of consideration situations
Debt settlement / Payment of a lesser sum for a greater one is not good consideration / Foakes
Legal Compromise / Forbearance on right to sue/make a claim is good consideration  even if you’re not likely to succeed with the initial claim / Fairgrief
Donations / Pledge to donate not good consideration  gift rather than K (lack of consideration – what’s coming back to you)
POLICY – crt reluctant to give pledge to donate same weight as debts / Dalhousie

Intention

Objective test to determine that parties had intent to be bound – conduct, words, actions
Presumption / Promises bt/ family members not binding / Jones
Promises bt/ businesses can explicitly state the K is not legally binding / Rose

Alternative Routes to enforce a Promise (When O/A/C falls through due to lack of C)

Seal
Form of agreement makes it enforceable  signed, sealed, delivered AND understood seals are binding
Estoppel
5 Elements /
  1. Legal relationship exists
  2. Clear promise exists
  3. Promise made c/ intention to be relied on
  4. A party relied on the promise
  5. No reason to excuse (eg. duress, coercion)

You can’t go back on your word if the other party relies/acts upon it
  • POLICY – not enforcing promise is unconscionable/unfair
/ Hughes
Can bind you to K modification (c/out consideration)  intent to create legal relations, acted upon it, and now held to it / Central London
Can only be used defensively (SHIELD)
  • Eg. you can’t sue me for going back on my word, but if I go back on my word you can defend your actions through PE
/ Combe
Intent means the Promisor is giving up his strict legal rights  indulgence doesn’t count / Burrows
Intent can be implied through course of conduct / Owen Sound
Coercion negates PE as safeguard / Rees

Unilateral K – acceptance through action (exception from starting point of Bilateral K)

Rewards
Entitled so long as you fulfilled terms of K / Motivation is irrelevant / Williams
Must be aware that K and reward exist / Can’t claim it after the fact if fulfilled terms by happy accident / Clarke
Can be offered to general public (“anyone”) / Enforceable offer can be made to “stranger” so long as the fulfill the K
  • Wasn’t invitation to treat b/c put $ in bank
/ Carbolic Smoke Ball
Revocation
When does acceptance happen? / When performance is complete
POLICY – can manipulate situation and revoke after most (but not all) performance occurs  crts try to stop this, bad faith / Dale
Interpretation of O/A is reasonable person / Wording is really important
  • Can make mention of performance completion here
/ Grant
Protect ongoing performance through
Implied 2K approach  K1 implies promise not to revoke K2 (eg. staying in the house while paying
  • Forbearance of right to c/draw is consideration for beginning performance
/ Errington
Finding a bilateral K through exchange of mutual promises / Dawson

3rd Party Beneficiaries

Privity of K denies 3rd party access to K / No consideration from 3rd party, not technically a part of it
  • Having another “in” will give you access (eg. executor of estate)
/ Atkinson
Beswick
Extends from ER to EE under certain circumstances  relax privity / Did the K intend to extend to sm/o else (3rd party/EE)
  • Express or implied
Was the EE acting c/in scope of employment & doing what was contractually obligated?
POLICY – EE those who actually perform the K action / London Drugs
Extends beyond ER/EE relationship  relax to include any commercial situation / Did the K intend benefit to 3rd party?
Was the activity performed by 3rd party required under the K?
POLICY – why shouldn’t a bargain entered into by 2 sophisticated commercial entities not hold? / Fraser River
Relaxing privity of K doesn’t yet apply to family members / Owner/operator of object is not the same as buyer – buyer entitled to benefits under Sale of Goods Act - / Resch

Mistaken Identity  RISK ALLOCATION (who’s best able to bear it?)

Who did you intend to make the K with – the person standing in front of you, or a specific person
Was it true mistaken identity / A intends to contract with a specific person NOT the person actually standing in front of them – identity is important to K formation / Phillips
Or was it fraudulent misrepresentation / A intends to contract with the person standing in front of them (anyone) – identity is not important to K formation (fake name doesn’t impact reality of K) / Ingram
Test: presumption that you intend to K with the person standing in front of you unless evidence provided to rebut
  • Nemo dat: no rights to transfer – protects A
  • POLICY – conflicts c/ protecting innocent purchasers who buy in good faith
/ Lewis
Result / Fraudulent Misrepresentation / VOIDABLE – have to prove before the rights are transferred to 3rd party who bought in good faith (rescind before transfer) / Ingram
Mistaken identity / VOID – property goes back to A b/c rogue had no rights to transfer property / Phillips

Non Est Factum – mistaken signature (c/out knowledge of the document’s meaning, but not done carelessly)

Generally / A person of full age and understanding is bound by their signature to a K / Saunders
Exception only if… /
  1. You were not negligent/careless
  2. Must prove they took all reasonable precautions – “I relied on a trusted person is not enough”
  3. The document signed was fundamentally different to what you thought you were signing
  4. Document must have legal effect
  5. If no fundamental difference, no reason not to hold signee to K as result would have been the same c/out the mistake
/ Marvco
Saunders
Result / If NEF applies / K is VOID from the get go  no acceptance/consent
If it fails the test, it’s fraudulent misrepresentation / K is VOIDABLE  option to rescind / Sunders

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