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Contracts Outline Part II

Third Party Beneficiary Contracts
Doctrine of Privity only a party to K can sue upon it. No 3rd party rights. (can be seen as aspect of consideration or as its own doctrine) Established in Tweddle v. Atkinson, and restated in Dunlop Pneumatic: our law knows nothing of a jus quaesitum tertio (right of 3rd party to claim against promisor) arising by way of contract Stated very uncompromisingly in Scruttons v. Midland Silicones (H.L) and followed by SCC in Canadian General Electric v. Pickford and Black [1971]

Exceptions to the doctrine of privity:

1.

2.

3. 4. 5.

Agency say that party to K was acting as agent for the 3rd party. Very flexible. A K can be made between principal and other party even though other party not aware of Ps existence when he dealt with the agent. If A had no authority to act for P can still have agency if P subsequent to the K ratifies the K and approves was A purported to do on his behalf. [this was argued but lost in Vandepitte] Assignment Party to a K can assign it to a 3rd party, who then takes the place of P and can sue upon the K as assignee. A debtor cannot be prejudiced by an assignment and may have the right to require that any action to recover debt be brought in name of P (assignor). Trust when one party of K is trustee for 3 rd party. A holds property in trust for C, A and B are in K. C can sue upon the K. Implied K between 3rd party and one party to K. Employee exception (London Drugs). Employee seeking to benefit must have been acting in the course of their employment and doing the very things in the K when loss occurred.

[courts are less likely to find assignment or trust] New Zealand Shipping Co. v. A.M. Satterthwaite [1975] (Privy Council) F: bill of lading limited liability of shipping co AND stevedore. Stevedores neg. damages drill. ISSUE: can the stevedore take advantage of limitation provision? (3 rd party to K) Found 2 ways around privity: 1. agency when carrier entered into K, it was acting as agent for stevedore. 2. Implied K between consignee and stevedore. In exchange for offloading goods, consignee would adhere to bill of lading. Sensitive to the commercial realities of stevedoring. They contract with carrier who Ks on their behalf. Greenwood Shopping Plaza Ltd. v. Beattie [1980] Disturbingly insenstive to commercial realities of stevedoring. F: lease b/w and Buchanan. Insurance coverage in it. Employees of B neg. start fire. Insurance Co. paid Greenwood but then went after employees.

ISSUE: can employees take advantage of clause re: fire insurance in lease even though werent party to it? HELD: SCC finds no agency, assignment, trust or even implied K here. Very rigid and narrow. Would not carve out an employee protection. So now how to protect employees? Ignores commercial reality. London Drugs v. Keuhne & Nagel [1992] delivered transformer to , refused extra coverage above $40 liability limit. It gets dropped, sues employees (who were negligent) in tort. HELD: (see para 18 p. 361-2 for critique of privity) The doctrine frustrates sound commercial practice and justice. Ignores practical realities and is uncertain. So court goes for incremental changes to the doctrine. Like the sword/shield distinction in estoppel, they allow the employees to be protected by the liability limitation clause. Not suing upon the K, just allowing them to rely on its clause. Employees reasonable to rely on the K. To have this, need: implied K that limitation extends to employees. Employee seeking to benefit must have been acting in the course of their employment and doing the very things in the K when loss occurred. Dependant on intention of parties and involves similar benchmarks to accepted agency exception, incremental change. Edgeworth Construction v. N.D. Lea [1993] Hedley Byrne (proximity and detrimental reliance) HELD: independent contractor cant take advantage of limitation per London Drugs because not employee. Could have taken steps to protect themselves. Tony and Jims Holdings Ltd. v. Silva (1999) Fire occurred and paid money for fire insurance. Can be protected by tenants (companys) protection? This case is not exactly employer/employee but closer to that than indep. contractor, so protection for as officer of company.

Chapter 3 The Formation of Contracts The rules of O and A

Bargain model of contract formation. If accept the offer then contract if reject the terms then no K. If make modifications, the offeree becomes the offeror. Must accept within a reasonable time (determined by the circumstances) unless no limits placed on acceptance. Even in cases of firm offers, can revoke before acceptance unless consideration given to keep offer open for fixed period of time. Need consensus ad idem, cant accept before offer made; have to have minds together. LOOK to the words and deeds of the parties: objective test. Invitations to treat: invitation to make an offer. Ex. Ads. Are ads offers or invitations to make an offer to buy? If it is really an offer and once accepted, the offeror is bound to perform and has to once accepted because K made.

Pharmaceuticals Society of Great Britian v. Boots Cash Chemicals [1952] Self service of drugs (pick from display) is that an offer to sell or an invitation to treat? If is O and A (by taking from shelf) then both parties are bound. Only when bring to counter is it O and A. Fisher v. Bell [1961] (Q.B.) display of knife in window not O, but invitation to treat. R. v. Dawood [1976] (Alta C.A) price tag switching. Taking switched item to counter was only offer, which cashier accepted by taking the money proffered. Voidable b/c fraud, but not theft. Smith v. Hughes words and deeds of the parties point to whether there has been offer and acceptance. It is an objective test. Contracts Made by Mail Instantaneous Rule: A contract is made once offeror receives notice of acceptance (in cases of instant transfer, like fax or telex). Offeror bears the risk if acceptance lost in mail or delayed (Household Fire and Carriage Accident Insurance Co v. Grant (1879)). Mail Rule: Ks negotiated by post (and meant to be) are accepted when the acceptance is posted, so offeror bears risk of the acceptance going astray. Telephones are assumed to be like face to face and the instantaneous rule applies. Schiller v. Fisher [1981] (SCC) F: purchase and sale of 23 building lots. Action by buyer was for return of dep. because no K existed. If instantaneous rule applied, needed notice of acceptance on Sept 1 (last day to accept), if mail rule, then needed to be posted on Sept 1, but not posed until 3 rd. SCC: looked at language of parties, not either rule. Decided that method of acceptance was initialling document and that was done on Sept 1, so that is on time. Mailing on Sept 3 was asap per the letter, not entitled to deposit back. Contracts by Fax Rolling v. Willann Investments (1989) (Ont. C.A) HELD: manner in which delivery is to be made in order to place in receipt of the document is of no real importance. Fax is a valid method of delivery of an option to purchase land.

Eastern Power Ltd. v. Azienda Communale Energeria (1999) (Ont) Instantaneous communication rule. If fax malfunctions they will know right away. While there are risks, fax is more akin to instantaneous than delayed.
Revocation of the Offer To revoke must communicate revocation before the acceptance is posted or given. Prove it if sent by certified mail. Mail rule doesnt apply for revocation. Tinn v. Hoffman Both parties made the same offer, but no acceptance by either, so no K.

Silence can be acceptance in some circumstances. (If already in relationship and reasonable to expect acceptance.)

Unsolicited goods legislation deals with this. But if engaged in a contract, then you have agreed to that method (like Columbia House)

Walk to York problem though. Unilateral contract where full performance as acceptance (GNR v. Witham) Can revoke right up until ALMOST at York. In an attempt to address unfairness, the rule remains but it is bypassed or ignored when applying it would violate some concern that is more important than doctrinal purity. Errington v. Errington [1952] (C.A. Denning L.J.) Not a commercial case Father made down payment and then son and his wife made monthly payments. Father said they would get house once mortgage is paid. He dies. Unilateral K? Denning said: 1. Cant revoke once performance commenced (i.e. during payments) in a unilateral agreement. 2. Akin to license to land. The down payment was a gift. Proprietary interest vested in the property so cant revoke. Dawson v. Helicopter Exploration [1955] (SCC) Courts get around unilateral K by finding mutual promises. Here the promises were 1. Promise to call 2. Promise to go in with or be available for it. There is a basis for enforcing the K and then. The whole writing may be instinct with obligation Northern Construction Co. v. Gloge Heating and Plumbing [1986] (Alta C.A.) tendered bid but then discovered miscalc. Called to amend or let them out, refused, then refused to perform. HELD: Acceptance of the tendering agreement (contract A) brought about contract B upon acceptance of the tender. agreed to be bound by the tendering agreement (that tenders are irrevocable). Integrity of the tender system must be protected, so firm offers must be held firm. Payment of commission to real estate agents Deal has to close before commission is paid. Commission may payable w/o a completed sale if those words are specifically pointed out to the vendor by the agent and the vendor understands. Have to look to the reasonable expectations of the parties so long as it is compatible with their written K. (i.e. it is doubtful a vendor would enter into a K with a vendor and agree to pay $$ even if the purchaser was not ready to buy, so unenforceable.) Liebig & Co. v. Leading Investments. Raffles v. Wichelhaus (1864) that the moment that there are two ships set to sail called the Peerless then there is an ambiguity and no binding contract. If the buyer knew there were two ships and didnt bother to inquire which his shipment was arriving upon then we have a contract

on the sellers terms. No consensus ad idem b/c thought it was ship A and thought it was B, so no K. (Latent ambiguity, no offer accepted in its terms. This problem was approach through O and A, thought could have also done it via mistake. A third option might have been interpretation, what Peerless meant). Henkel v. Pape (1870) telegraph error. One thought 3 and one thought 50. HELD: No consensus ad idem (O and A problem). - If argued as interpretation, would talk about what the means (in the message), referable to 50 more than anything else, so might have found K this way. (Can also argue mistake, but whose mistake?) Hobbs v. Esquimalt & Nanaimo Railway Co (1899) (SCC) mineral rights included or not? SCC took an ad idem approach, but looked at it objectively. Granted specific performance (conveyance of mineral rights) because in other conveyances took great care to not include mineral rights, which they didnt do here, so give the rights to . - If viewed as O&A and subjective is right approach AND believe , then will win. If objective, then wins. - If used the intepretation approach (of the word land) would probably lead to decision for because they do reserve the mineral rights. Staiman Steel Ltd. v. Commercial & Home Builders Ltd. (1976) (Ont. HC) auction. Dispute about what was included in sale. then refused to delivery any steel. (Smith v. Hughes followed). Cant use Raffles b/c here it is pretty clear that sale didnt include the new steel. Reasonable person would inter the K to buy used steel only. likely argued no K at all since no consensus ad idem (objective test), but court used mutual mistake more than O&A (still an objective test). Damages awarded: used steel plus damages for no delivery (since that not even delivered). Indefiniteness and the Process of Contract Negotiation Exchange of documents as a means of bargaining and negotiations. Standard Form agreements often cause problems because not discrete exchange like 3 or 4 communications back and forth. Standard form agreements popular in: real estate, franchise agreements, long term supply of goods, rental. Agreements in principle where have general agreement but details and terms of K to be worked out. Problematic for courts when negotiations break down, especially when things done in anticipation or prep for completed K. Who bears the risk? Hope the courts find a K? Indefiniteness Terms in agreement are vague or misunderstood as to what they mean or one term not deal with under contract. Ask courts to interpret the vague term or fill in the blank. Problems of indefiniteness can be categorised as problems of interpretation and courts have generally been willing to interpret. When is indefiniteness NOT a K? - When parties have not been specified (personal, corporation or partnership?) - Price omitted - Terms not specific enough - Goods are unspecified or vague The Sale of Goods Act provides for some answers to these questions (price, terms, etc.) p. 430.

Agreements to agree are not enforceable (May & Butcher) If have K already and there is a subsequent option agreement, that can be seen as a K because terms specific enough when taken with the previous K. (Hillas v Arcos)

Foley v. Classique Coaches Ltd. [1934] (UK) agreement to buy gas and land. Worked for 3.5 years, but now didnt want to buy gas anymore from Language in the agreement said price was to be agreed and if no agreement, then goes to arbitration. said was agreement to agree, so no K and not enforceable. HELD: looking at language parties used, they had a method for resolution (specific enough terms) that it is enough to hold parties together. Lake Ontario Cement (1974) no formal K signed, but all terms negotiated. Intent of parties was to enter into a firm K, supported by the communications and draft agreements. No matters left in either mind requiring further clarification. Brown v. Gould [1972] Since had formula for fixing the price if K renewed, despite having no reference to who would do it, it was enough for the courts to follow (the formula) without them actually making the K for the parties, so agreement not too uncertain.

Popular to fix rental price according to consumer price index. Arbitration: Sometimes classified as interest arbitration. Must shape a future relationship or an aspect of it. Grievance arbitration: resolving a retrospective dispute.

Courtney & Fairbairn Ltd. v. Tolaini Bros.(Hotels) is an agreement to negotiate enforceable? Denning rejected the Hillas v. Arcos argument and said agreement to negotiate NOT enforceable. was seeking expectation interest damages. Had he sought restitution or lesser interest, might have got it. Walford v. Miles [1992] (H.L) issue: agreement to negotiate in good faith HELD: refused to enforce an agreement to negotiate in good faith because how do you determine what is good faith and what is a bona fide reason to stop? Inconsistent with adversarial system. N length of time put on the negotiation time, so since DID negotiate, they didnt breach the lockout agreeement to negotiate before selling shares to 3 rd party. If it was relational K, courts more likely to get involved in the good faith debate. tried to use the Lady Duff Gordon case and say that if reasonable best efforts are contractable, so should good faith be. Letters of Intent Used in cases involving long and complicated transactions. Are these agreements in principle or just preliminary issue agreement? Maybe an offer? They should make the existence or non-existence of an agreement. These letters can also make it clear that though there is no K, there is a relation that imposes obligations on each of them.

Cedar Group Inc. v. Stelco Inc. [1995] (Ont. Ct.) ISSUE: whether the letter of intent either by itself or in combination with subsequent agreements, constituted an enforceable agreement for the sale by to of shares. HELD: Agreements to agree are not enforceable. Look at facts to see if there is enough there to enforce an agreement and how to settle remaining terms. Language here points toward a future arrangement rather than a contract. Many matters left to be done, so courts decided these were substantial matters, not just matters of form. The difference between a letter of intent and a contract is the number of things left to be decided. Bahamaconsult Ltd. v. Kellogg Salada Canada Ltd. (1976) Letter of intent with many terms set out, but absent a provision re: security of balance to be paid. HELD: this is not an enforceable K because too much left to be done (important provision missing). Canada Square Corp. Ltd. v. Versafood Services Ltd. (1981) date and size of lease not specified. Building not complete, wants to repudiate. asks the courts to determine size of the property, which they did, and decided that there was an agreement as to the main terms an they could fill in the last missing term. Reasonable to determine this last term. Used US precedents to arrive at this decision. A minor possible ground of disagreement will not render an otherwise complete uncertain (US case of Wong v. DiGrazin). L.C.D.H Audio Visual Ltd. v. I.S.T.S Verbatim Ltd. (1988) and agreed to tender together for govt K. got it, but then didnt give the piece promised to Did the parties negotiate in good . faith? HELD:Only had agreement to agree. Terms too vague, so no K. Didnt put their minds to the particularities of the agreement and if they had, they would have better case for enforcement. Courts are reluctant to make an agreement for the parties. What they did fell short of a joint agreement since no terms as to what happens if/when negotiations fail, so no promissory estoppel. HAD sought to enforce the grade B (negotiation) K rather than the grade A K, then might have got restitutionary interest. Pennzoil v. Texaco agreement in principle with Getty for sale of shares. No formal agreement. Getty sells to another , sues in tort for inducing breach of K, and WINS. Can avoid these problems if you specify whether to reserve the right to be bound by only a written K.

The Protection of Expectations Arising from Negotiations

Cant protect expectation interest if all you have is grade B K. Can get reliance or restitution interest. How to protect interests: 1. Find an implied K that deals with negotiated stage only or implied term that protects info exchanged. 2. Reach into equity area of unjust enrichment, restitution interest. Especially if one side benefitted from some negotiation performance on other partys part. This is quasi-contract. Quantum meruit claim.

3. Tort law. No contract but what goes on between them may be a tort. [either: (1) finding implied agreement re: negotiation state or (2) unjust enrichment or (3) an established tort may have been committed. Brewer St. Investments v. Barclay Woollen Co. [1954] (QB) prior to lease/during negotiations, said some renovations need to be made. started them and stopped when negotiations broke down. The reno.s were of no benefit to b/c they were to s special needs/request. sought to protect its reliance interest. DENNING: No K, cant imply K. If asked if he should start renos then could have had decided whether to bear the risk. NO quantum meruit because no request by for landlord that they pay for part completion. Their request, if any, was payment for full completion of work. He then turns to fault, and finds none on either party so then have to ask on whom does the risk lay? Almost arbitrarily says it is on the prospective tenants. Finds for since renos of no benefit to them. (Its a new peg.) Brewer v. Chrysler Canada Ltd. [1977] wants dealership, and waits for the deal negotiations to be complete. At their encouragement, he goes out and lines up financing and finds personnel to work, etc. Delays occur, he has to use some of the money to live, and then says no deal, not enough $$ The court found under the circumstances that when there is no contract, there are four options open to the court; 1. Enforce the deal. 2. Do nothing. 3. Give reliance. 4. Give restitution. starts with reliance argument, and also says promissory estoppel but to allow reliance and estoppel would be using it as a sword, totally going against Combe v. Combe. HELD: quantum meruit. (restitution, like Delgman).

When distinguishing normal business expenditures from acts deserving restitution, courts look to what extra work, beyond what is normally done, and if there is some, they are more prepared to compensate (William Lacey v. Davis). If asks for work to be done before formal K, can seek compensation on basis of quantum meruit. (British Steel v. Cleveland Bridge) If extra work and plans at request of one party, notwithstanding why the negotiations broke down, recovery should be available. (especially where mutual understanding that work not being done gratuitiously.) (Magical Water Fountains v. Sarnia)

Duty of Confidentiality It can be expressed at the negotiation stage explicitly. The courts can also do it impliedly, recognizing the uniqueness of the relationship and impose duty. Ex. fiduciary duty. Lac Minerals v. International Corona Resources [1989] In joint venture negotiations, Corona told Lac sensitive info. Broke down, and Lac used the info to make better offer to owner of land. Corona alleges breach of fiduciary duty (power imbalance) and confidentiality. REMEDY: return of the mine. Ruled that Lac was holding it in trust (constructive trust) for Corona who would pay for the improvements made to the mine. LaForests finding that it was a breach of fid. duty (others found on confidentiality) was very radical for commercial negotiations.

Chapter Four Excuses for Non-performance

Law of Excuses: performance by one or both parties (normally strict or absolute) may be excused because an event has occurred which (in the context of the particular K) provides an excuse, or even when there is no express reference to the event, it is so serious courts may excuse non-performance. Non-promissory Conditions Can have excuses stipulated in the K. Non-promissory terms classified as conditions subsequent and conditions precedent. Promissory Conditions Difference relates to sig. of term to agreement as a whole. - If condition breached, then innocent party entitled to stop performing and seek damages. - If warranty, then remedy is damages, not excused from performing. Implied Conditions Moorcock: reasonable person test as to intention of parties Trollope: look at circumstances and decide their subjective intent re: what is necessary for efficacy of business transactions. Findings of conditions over warranties give the innocent party more choices on what to do. Warranties only allow claim for damages. (So courts will often find conditions). Hongkong Fir Shipping v. Kawasaki Kisen Kaisha Ltd. [1962] chartered ship was more in port for repairs than at sea. says breach of term (so needed determination of whether C or W). Also pleaded the doctrine of frustration. Either of these would excuse performance (unless warranty found.) The court differentiates between substantial deprivation that excused performance and not. They use collateral (warranty) and mutually dependent (condition precedent). The test is whether the breakdown substantially deprived the of the whole benefit of the K. HELD: the ship was still there and still available for sea, so breach of warranty. entitled to damages, but still have to perform. What would it have taken to find breach of condition? MORE days in port? The court measures the level of performance promised and that performed. Jacobs & Young v. Kent installed wrong pipe so refused to pay last 5%. Doctrine of substantial performance. The pipes that were put in were as good as ones contracted for, so not a condition. IF caught by Peevyhouse, then may not even allow damages! Right of the Party Who Has Not Performed to Sue The Law of Excuses suggests that the right of one party to sue for damages for breach may be affected by the fact that that party has not performed its obligations under the K

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Cort v. Ambergate Railway Co. (1851) (Q.B.) repudiates on order for chairs, so stops manufacturing and then sues for damages. argues it cant sue b/c since didnt keep manufacturing, prepared to perform their part. not HELD (this is the test): entitled to cease performing b/c it was sequential obligation. It was a breach by the that excuses performance. was prepared to make the chairs, just didnt because wouldnt pay for them. entitled to damages (but what? Lost profit likely) Hochster v. De La Tour (1853) anticipatory breach. announced he would breach before start of K. Can bring action before the start of performance date? said too premature. HELD: duty to mitigate. Can accept repudiation, mitigate damages and bring action. can also wait until actual breach rather than accept repudiation in anticipation. Anticipatory breach gives lots of flexibility. Can start the action so long as judgement is after the date of performance. Frost v. Knight (1872) (Excheq.) followed Hochster. Can sue for anticipatory breach before performance date. Damages will be subject to mitigation. Right of a Party in Breach to Claim Restitution can sue when: 1. Advance payments (deposits, installments). Most often no description is made about what the money is for. (save sometimes part payment deposit or installment) 2. hasnt made payment, but partially performed (goods or services) and then failed to complete delivery. Then they want compensation for its value. Unjust enrichment argument, and notwithstanding their breach, want restitution. Howe v. Smith (1884) money paid. Described as part payment and deposit. (the parties may negotiate what will happen if contract breached (with the money) but often dont) HELD: if no express stipulation, then payer forfeits the money if he/she breaches. If contract is performed, then the money is credited. Damages? If loss is not great as the deposit, then return the excess to payer. But if it is a true deposit then damages on top of deposit, if greater. If it is part payment, then measured against damages. OBITER: if keeps K open, he can resell and claim deficiency with dep. as credit. If doesnt and resells land, keep deposit, but no claim for deficiency. Dies v. British & International Mining & Finance Corp. Ltd. [1939] money paid, then defaulted. kept money as deposit. HELD: not deposit, but part payment. No deposit language in agreement. So entitled to recover the money minus damages. (Undoubtedly the large sum of money was a factor in decision). Lozcal Holdings Ltd. v. Brassos Developments Ltd. (1980) $2500 paid as deposit and liquidated damages. Purchaser then repudiates. Vendor resells and wants the different between the two prices as damages. ( claiming greater loss based on Howe v. Smith obiter) HELD: cant ask for more than agreed upon damages for breach if it is a genuine pre-estimate of liquidated damages. In this case, they didnt decide that (called it deposit) and allowed claim s for more damages.

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Stockloser v. Johnson [1954] (Denning) installment payment plan. K provided that if buyer defaulted, then seller gets to keep the equipment and the installments. (buyer) is in breach, but lays a claim for return of installments subject to damages. (paid $3000 in dep and 3500 in install) DENNING: deposit = forfeit clause, but he qualifies the absoluteness of the Howe v. Smith rule with equity and says the courts can soften the forfeiture. Equity will resolve if: (1) the forfeiture is penal and (2) if it is unconscionable for the seller to retain the money. - Look to the size of the payment in relation to the agreement as whole (here it was nearly half paid). - Look to agreement and its language. Any express words/terms re: what the money is for. Hopefully more than just use of the terms (without substance). Decided that forfeiture clause was penal in nature but not unconscionable, so can keep the money.

Recovery for the Supply of Goods or Services

Cutter v. Powell (1795) entire contract rule. No entitlement without completion of the entire contract. No obligation if the contract provides that no payment until completion. Blake v. Shaw (1853) Employment K for 2yrs. quit before end of term and brought action for wages earned. (in negotiation of K, can construct one that doesnt have lumpsum payment at end. Can negotiate periodic payments.) HELD: for policy reasons have to hold employees to their obligations. Why not unjust enrichment? b/c it conflicts with terms of the K (and wasnt a very developed doctrine then) Must abide by the term agreement. Sumpter v. Hedges [1898] contract for lump sum payment when work done. Work partially done but then out of money and didnt complete work. He left some of his materials there, ran had work finished by someone else and used materials. s HELD: No compensation for work partially done, but are prepared to allow for the materials incorporated based on quantum meruit. BUT: The English courts have scrapped the entire contract rule and now look to substantial performance (sufficiency of the degree of performance). If substantial, may order payment subject to damages. (Dakin & Co. v. Lee)

Chapter Five Contractual Undertakings: Their Determination, Range, and Remedies for Breach
Two discrete types of interpretation courts engage in: 1. What do the terms actually mean? What type of terms and what remedy flows? 2. What was the negotiation stage? What was the type of term at negotiation and what remedy? Promissory and Non-promissory Terms was the term a statement of fact (non-promissory) or a promise? If lawyers are involved, can discuss what that term is about and whether to include it. Gives parties a chance to clarify what they mean.

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Also have to determine where the K is to be found what about if only part of it is written down.

The Parol Evidence Rule

Agreement reduced to writing but something happens where one party wants to rely on something not contained in the K. Oral and written exchanges outside the agreement. THE RULE: If the language of the written contract is clear and unambiguous, then no extrinsic parol evidence may be admitted to alter, vary or interpret [this is somewhat relaxed now] in any way the words used in writing. 1. Did the parties end up making a contract? 2. Did they assent to a particular writing as a complete and accurate representation of their desires? 3. Is the contract affected by any mistake, error or illegality, frustration or fraud? If the courts have not decided that the language of the K is clear, unambiguous and complete, then parol evidence MUST be irrelevant as far as past understandings or events. Bauer v. Bank of Montreal [1980] (SCC) was guarantor of loan to company (that he was part of). He had sold the business, but still looked to him when the business failed. Principle of law of guarantees: - If you have a guarantee situation, then any security has to be turned over to the guarantor. Basically, should have turned over the account to so he can try to recoup the money he pays on guarantee. BUT in the standard form agreement, said that reserved that right, however an employee told that wouldnt happen. Written agreement inconsistent with oral. Contra proferentem: all else =, a K will be interpreted against its maker. argued the written wasnt the whole K, and if not, then there was misrep. in the K. HELD: not allowed to admit the collateral agreement because in direct contradiction to written and the written is clear. Gallen v. Allstate Grain Co. (1984) Oral discussion re weed content in buckwheat seed. BUT clause in agreement absolving of any responsibility with regard to the crop. HELD: the parol rule is subject to some exceptions. Oral agreement can be entered as evidence if it can be shown that the written contract does not contain the full agreement. Oral evidence can be brought in also where there is (a) the contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration (b) to dispel ambiguities, to establish a term implied by custom, or to demonstrate the factual matrix of the document (c) in support of a claim for rectification (d) to establish a condition precedent to the agreement (e) to establish a collateral agreement (f) in support of an allegation that the document itself was not inteded by the parties to constitute the whole agreement (g) in support of a claim for an equitable remedy, such as specific performance or rescission (h) in support of a claim in tort that the oral statement was in breach of a duty of care. Further to this, the court says that the oral and written contracts do not contradict, and that Allstate Grain is liable to the plaintiffs (two contract/collateral K theory since they found that

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written was WHOLE K, but these factors work with two K theory too). In addition, if they do contradict, the oral representation was intended to affect the contractual relationships as a warranty, and the oral warranty should prevail. The rule can be avoided by appropriately drafted pleadings and a sympathetic judge. In Gallen was commented that parol rule has no use when trial by judge alone. Corporation make contracts through agents. If are making K with agent, it is as your peril that they have authority to enter into K. Risks are limited by rule that can rely on: i. principles representation that agent has authority ii. fact that agent has usual authority of a person in his/her position iii. that agent has been held out by principle as having authority sufficient to conclude the K The agent is said to then have ostensible authority (even if lacks actual authority)
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Evidence of the course of negotiations between the parties is generally not to be admitted or considered by a court when interpreting a contract. Issues of admissibility of this evidence are those that relate to the relevance of it, and are distinct from the issues of the weight given to admitted evidence. (it may not be admitted, and if admitted, it may not be believed, or if believed, may not convince the court.)

Misrepresentations and Warranties

Puffs not promises or statements of fact. Just comments. Not intended to have any legal consequences. 2. Non-promissory representations statements. Made during course of negotiations. Not meant to be part of K. But their significance is in the remedy for breach. Statements of fact.
1. (a) Innocent misrepresentations remedy is recission. Equitable. Only available in cases

where the parties can be put back in their former position. If impossible to do this, then no remedy is available. Have to seek it before K executed. (this is a bit flexible, see Ennis v. Klassen)
(b) Negligent misrepresentation Usual tort remedies. Reliance (can almost be close to

expectation, b/c do also get lost opportunity costs.) and restitution (halfway between fraud and innocent misrep.) NO RECISSION b/c not as wrongful as fraud. MAY be a in CONTRACTUAL situation (often pre-contractual) but also any other situation where a person with skill makes statement reasonably relied upon by another, even if no contract or consideration (e.g. lawyer giving advice at a party).
(c) Fraudulent misrepresentation tort. Not contract law remedy. Recission + reliance

damages (even after performance). Need to prove knowledge of person making it that statement wrong, or reckless as to truth (quantum of damages might be more.) Has to be made knowingly, or without belief in its truth or recklessly, careless whether it is true or false (Derry v. Peek).
3.

Promissory terms statement made is more than statement of fact.

14 (a) Warranties remedy is damages. Full range of contract damages, including

expectation interest, recission, excuse from further performance and damages. Term that doesnt go to root of agreement. NO RECISSION. A warranty is a term in a K which doesn't go to the root of the agreement between the parties but simply expresses some lesser obligation, the failure to perform which can give rise to an action for damages, but never to the right to rescind or repudiate the K.
(b) Conditions full range of damages, PLUS recission. (which can be seen as excuse

for further performance: Hongkong Fir) Heilbut, Symons & Co. v. Buckleton [1913] shares worth a lot less than led to believe. Claim for fraudulent misrep or breach of warranty. Too late for recission (so no point in going for breach of condition). HELD: the statements were fact, not collateral warranty. In order to find warranty, have to look at circumstances and see if it was intended to be a warranty. This was only a response to an inquiry for info, ie. innocent misrep and too late for recission, so no remedy. Dick Bentley Productions v. Harold Smith Motors [1965] clarifying the test for a warranty, Denning imposes an objective test: If an innocent bystander would reasonably infer that a warranty was intended, that will suffice. **If the representation is made in the course of dealings for a contract for the very puprose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract, that is prima facie ground for inferring that the representation was intended as a warranty. (can rebut with evidence that it was innocent misrep., and unreasonable to be bound by it) Fraser-Reid v. Droumtsekas [1980] (SCC) house bought, basement leaked. Caveat emptor (a completed house had no warranty, whereas a 99% completed does). Implied or express warranty? HELD: Express warranty. The assertion by the vendor of a fact of which the buyer is ignorant is a criterion of value in determining whether a warranty was intended. The obligation to report infractions is a concrete one; that the vendor didnt know about them is immaterial. The words constitute a warranty, not a representation; suggests that a representation is that which precedes and induces the contract, whereas a warranty is embodies in and is given contemporaneously with the contract. It does not go to the root of the contract here, but is collateral to the main purpose of the contract. Murray v. Sperry Rand Corp. (1979) plaintiff bought the harvester through oral representations made by the dealers and through the brochure, machine inadequate. HELD: The manufacturer made the sales brochures, the representations in which amounted to collateral warranties and that the disclaimer was ineffective under the Sale of Goods Act. The distributor was liable in the same way the manufacturer was liable. Damages; loss of resale, also the loss of the value of crops and extra expenses. (vertical privity problem circumvented with the use of warranty). A person may be liable for breach of a warranty notwithstanding that he has no contractual relationship with a person to whom the warranty is given, where the court finds an implied contract. the court found the manufacturer's sales brochure to constitute an implied, unilateral contract.

Note on Discrete and Relational Contracts

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Discrete K tend to see buyers insisting on rights to take steps before they enter final agreement to protect themselves. May be condition of entering (ex. investigation) Investigation Clause: - The cost for environmental audit or accounting audit often put into negotiations. - If agreement doesnt go through and one party has lots of confidential info, these clauses are usually accompanied by a confidentiality clause.

Warranties and the Doctrine of Privity

Intervention of legislation: Sale of Goods Act, Consumer Protection Act SGA (Ontario) s. 12: distinguishes between conditions and warranties 12(2): remedy for breach of condition and warranty. Have to look to terms of K first. Just because use a term, does mean it is that thing. Words not binding. 12(3): parties can stipulate otherwise, but w/o it, even though breach of condition, if K executed, then no repudiation remedy, only damages (treated like warranty) 13: the parties can negotiate otherwise, but w/o it: a) implied condition that seller has right to sell b) implied warranty that buyer gets quiet possession c) implied warranty that goods free from 3rd party burden 14: particular types of transactions 15: no implied warranty or condition except (see list on p. 614) CPA narrower than SGA s.34: Only for purchaser who buys for self. No protection for resale, or in course of carrying on business. Doesnt apply to anyone but human consumer (no corp). No sale by trustee or bankruptcy or liquidator, etc. 34(2): cant contract out of SAG. There is a privity problem (what if buyer not equal to user) Family member uses = horozontal privity Vertical privity = line of buyers (down from manufacturer) McMorran v. Dominion Stores Ltd. (1977) bought soda, opened, it exploded. Implied K? named 2 s. Dominion (privity of K. Sued in K based on SGA) and Crush (manufacturer. No privity, so in tort). then started 3rd party action against Crush (s.15 of SGA). HELD: responsible, no liability. Also found that crush was negligent, res ipsa loquitur. Damages were physical injury. Recoverable in tort and flowed naturally from breach, also in K. could recover from either , (but only one) and ultimately Crush pays b/c of third party proceedings. Sigurdson v. Hillcrest Services Ltd. [1977] brake failure due to either fault hose or installation. (family injured). Mr. S has claim against in contract (s. 15 of SGA). Rest of family have no privity, so brought action against service station for faulty installation (negligence). HELD: no neg, so Mrs. S and sons claim dismissed. Supplier of hose sued by service station (3 rd party).

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Winnipeg Condo Corp. no.36 v. Bird Construction (1995) condo corp suing for negligence on construction of condos they bought (but werent party who contracted for building). Tort or K? Absent agency or assignment, there is no K, and only neg. in tort. HELD: no recovery in negligence on successor to contractor in absence of special relationship. The exception is where the defects are dangerous to occupants and others. (Thats why can sue in tort). **If failure to take reasonable care creates dangerous defects, duty owed in tort by contractor or subcontractor to correct the dangerous defect. Not beyond dangerous situations. The rest of the liability should be settled in the contract negotiations. (caveat emptor rejected here because even original architects couldnt detect the defect.) Rule extended for policy reasons.

Negligent Misrepresentation
Tort law deals with area of liability with negligent misrepresentation to deal with remedy for party misled into entering into K. The doctrine of consideration limits contract liability. Esso Petroleum Co. v. Mardon [1976] (Denning) failed to take into consideration planning changes in e.a.c. Severe financial burden in meeting Essos guidelines. Business flounders. Mardon sues on 2 heads: 1. collateral warranty (of e.a.c.) 2. neg misrep (of e.a.c.) DENNING: Heilbut didnt allow damages for innocent misrep, so often elevated to collateral warranty. Re Dick Bentley, Esso says e.a.c. no warranty, and trial agreed, and Denning said he wouldnt interfere with this finding. ON #2: under doctrine of Hedley Byrne (where liability was in tort), can use this in contract or tort. Mardon entitled to capital losses and loss of earnings. Tort has different damages than K. Capital and Eastern Trust Co v. Rayfuse [1986] IF chose to go after professional in K, cause of action starts on date of breach. If in torts, then when damages are suffered. (so limitations act would bar K if too long ago). Client can chose either. V.K. Mason Construction Ltd. v. Scotia Bank et al. [1985] (SCC) wanted guarantee that had enough funding to go ahead, got comfort letter instead. Relies on this, goes ahead, and developer runs out of money (letter was wrong). Bank refused to pay, brings action in tort and K. Argued negligent misrep on basis that Bank's rep'n to Mason was false: -Hedley Byrne 4 req'ts for liability: (a) there must be an untrue statement (b) it must have been made neg'tly (c) there must be a special rel'ship giving rise to duty of care & (d) there must be reliance which is forseeable; (trial J found vs. bank on each) HELD: No K (too much to imply for it.) Used the Hedley Byrne factors, all 4 found (as fact) at trial. Clear from the context of the events that there was negligent misrep. J. Nunes Diamonds Ltd. v. Dominion Electric [1972] security system limited liability to $50; robbery in area; told by rep of co. that he was fine relies on Hedley Byrne -liability for neg misrep; doesn't really apply here though; no special relationship, disclaimers of responsibility, etc.

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basis of tort liability considered in Hedley Byrne inapplicable to any case where relationship b/w parties is governed by K, unless negligence relied on can properly be considered an "an independent tort" unconnected w/ the performance of the K. Here to make liable would be to fundamentally change the K. representations relied on by can't be considered acts independent of contractual relationship b/w the parties; ask: "would these representations have been made if the parties had not been in the contractual relationship in which they stood?" Queen v. Cognos Inc.[1993] -lured away from job; - tort of neg misrep 1st recognised by H.L. in Hedley Byrne not established principle of Cdn. tort law -5 general requirements: (1) must be duty of care based on "special relationship" b/w representor & representee (2) the rep must be untrue, inaccurate, or misleading (3) the representor must have acted negligently in making misrep (4) representee must have relied, in a reas'ble manner, on said neg misrep (5) reliance must have been detrimental to representee in the sense that damages resulted HELD: silence on an important matter collateral to but highly influential in the making of the contract can amount to a negligent misstatement.
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If tort is not barred by the contract, duty and liability may be limited by a subsequent term in the contract. The question here is if the pre-contractual representation relied upon became an express term in the subsequent contract. If so, the plaintiff cannot bring a concurrent action in tort (BG Checo) and is limited to what they can get through contract remedies. Have to ask: whether there is a specific contractual duty created by an express term of the K which is co-extensive w/ CL duty of care which representee alleges representor has breached; did pre-contractual rep. relied on by become an express term of the subsequent K? if yes, absent any overriding considerations arising from context, can't bring concurrent action in tort for neg misrep & is confined to whatever remedies are avail under law of K.

Mistake
A residual category. Person mistaken about some state of affairs or facts at the time of entering into the K. Havent taken time to allocate the risk. Two different ways of categorising: Mistake in assumption. Incorrect assumption and then complains because in error. Judges weigh the substantive weight of the mistake. Does it go to the heart of the matter? Or is it a side issue? What was other (non-mistaken) partys role in the mistake? Voidable or void ab initio? I. (old approach) 1) Common mistake. Both parties make same mistake. Subject of K has perished (ex. house burned down). Fundamental problem of contract creation. 2) Mutual mistake. Parties at cross purposes. Both mistaken, but in different way. Error is different. Also a fundamental mistake.

18 3) Unilateral mistake. Only one party is mistaken. Other knows or must be taken to

know of his mistake. Greater apprehension for relief (b/c no statements, no warranties, no allocation of risk. That is what negotiation is all about. Barring fraud, it is caveat emptor unless other party induced the mistake. II. (modern approach) 1) Mistakes as to terms . They have negotiated, reduced to writing and now disagree about what the terms mean. (ex. Henkel v. Pape type problem). Another way to look at it is that it is a problem as to interpretation and the final way is to look at mistake as to mean. Also can see as offer and acceptance problem (Hobbes v. Equimalt type) Consider approaching the problem under all 3 heads, and whether the result would be the same (it should be but often isnt). Some arguments are stronger and better than others, so go that way. 2) Mistakes as to performance. Writing doesnt accurately reflect the agreement that was reached. They may not agree as to what oral agreement was. May think it does or see it as a chance to get out oral agreement. Remedy is rectification (amendment of K), rectification can get around the parol evidence rule (if the written record doesnt correctly record the actual agreement, the oral evidence to show what the actual agreement was must be admissible.) It is narrow, and not a substitute for interpretation. Meant to deal with the problem of typos. 3) Mistakes as to assumptions. Ex. Raffles v. Wichelhaus, Staiman Steel, Henkel v. Pape. (Can see these as interpretation or pure mistake). If serious enough, an error in assumption may give rise to a remedy.

United States of America v. Motor Trucks Ltd. (1924 A.C.) A land was missing form a deal. USA sued to get it back. They both meant it to be in the contract, so it should be in the contract. K rectified.
Mistaken Payments An example of mistake in performance. Money paid when not owed. In what circumstances should the $ not be returned? If unjust enrichment, then the law could order $ repayed (Air Canada v. BC). Sometimes can deal with issues of mistaken payments under reliance interests. Sherwood v. Walker (1887) Rose 2nd of Aberlone (thought she was a barren purebred cow). Buyer thought he could make her breed (didnt tell seller) and seller thought she was barren for sure. Turns out she was pregnant. No full discussion about her attributes, and no terms negotiated. HELD: mutual mistake. What remedy? No mistake as to subject matter if you defend it as cow but if you defend as barren cow then different thing. Verdict in favour of because she was a different animal than was subject of K. Substance of subject matter entirely different. (substance/attributes distinction. Former will go for , latter for in this case). Bell v. Lever Brothers Ltd. [1932] Paid severance after discovered didnt have to b/c violated employment K. If have mistake as to identity, or mistake as to existence of the subject matter (or title) will nullify K (void ab initio). Mistake as to quality (like in Rose II) will not affect unless it is mutual and common (unless it goes to substance). These are voidable. HELD: just because could have achieved same result better, doesnt mean the K is bad. (see this as mistake as to quality, and decide not substance).

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**If fundamental error, void ab initio. Magee v. Pennine Insurance Co [1969] Insurance K. Found out son driving, so refused to pay. Denning said: both parties under common mistake that policy was binding. But in truth, the K was voidable (not void ab initio). Common mistake makes it voidable at equity, not void at law. Look at all circumstances and find that all wrong doing done by no problem setting K aside. so **Different from Bell because even if fundamental and both mistaken, still only voidable. Equity gloss, allows courts more flexibility. TD Bank v. Fortin (no. 2) (1979) sale of company, but seller not authorized to sell, so when buyer repudiates, can he get $10K in compromise of claim back? Mistake was (allocation of s risk). HELD: K was void ab initio and since it is the basis for the compromise agreement, that agreement is voidable at equity (which they decide) **Canadian courts adopt Magee. Holmes v. Walker [1997] agreement for purchase and sale of cottage. Deal closed. 4yr later found out vendor didnt own land cottage was situated on (was townships). How could seller not have known that? What about the buyer? Obligation to check title? Buyer had decided not to get survey done. arguments: s 1. implied covenant that s title good. 2. Mutual mistake (but really common mistake) 3. error in substantialibus (an error of real substance) If void ab initio, then court has no choice but to say that vendor return $$ and buyer return cottage. If voidable, then recission. - There was substantial passage of time, was it too late? What about vendor who believed for 4yrs it was a closed deal to suddenly be visited with the risk the assumed? 1. If dont intervene and unscramble then unjust enrichment for vendor. 2. From purchasers POV, was it too late to fix and what did buyer fail to do (get survey) and what was effect of that? Recission not granted b/c of #2. The township was willing to give license on yearly basis. Error in substantialibus is a matter of judicial discretion. Amalgamated Investment Property Co. v. John Walker & Sons Ltd. [1976] (buyer) inteded to redevelop land. After the agreement was entered into, made requisition to as to land including any heritage designations. said he was not aware. (true and proper answer at the time). But after close date (one day), it did get designation. Dropped value of property by 1.5M pounds. Buyer refused. HELD: all risk on buyer because they were in position to make investigation into any designations on the land. The vendor made proper answer to the requisitions, the risk was not allocated and courts not prepared to put whole risk on .

Mistake in the Formation of Contracts

Smith v. Hughes (1871) new oats vs. old oats. Issue was characterised as allocation of risk not mistake. The jury had to objectively decide what the ought to have known was in the mind of the (that he wanted old oats). If, whatever a mans real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and the other party upon that belief enters into a K with him, the man thus conducting himself would be bound as if he had intended to agree to other partys terms.

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McMaster Uni v. Wilchar trying to hold to K where page (about escalation clause) missing. Since knew it was missing, even though not fundamental (to substance) sill cant hold to it. (unconscionable to let hide behind the law since knew of missing page). Stepps Invest v. Security Capital term changed in final agreement without notice to . Now trying to hold to K. But knew this clause was missing, so court refused to enforce. Can be seen as a case that enforces an obligation to bargain in good faith. R v. Ron Engineering & Construction [1981] calculation error in tender. Alerted owner before tenders chosen. Owner held tenderer bound, said had to perform or forfeit deposit. IF void deposit returned. IF voidable court decides risk allocation. HELD: no mistake. Rs employee intended to submit the very tender submitted. No principle in law under which the tender was rendered incapable of acceptance by the appellant. R tried to forward McMaster, but error there was prima facie, not a complete tender. [This distinction ignores the substance of the mistake argument.] **A LOW POINT in the area of mistake. If follow Esteys intent argument, then can NEVER find mistake. The owner could have avoided the loss entirely, but the sanctity of the tender system prevails above all else. ***Clause (n) of the CCDC (p. 705) expressly says can withdraw bids unaccepted as of yet and demonstrably serious mistake (normally can). Designed to get around Ron Engineering blunder.

Frustration
Distinguished from mistake b/c of timing. Mistake is at time contract entered into. So we think about whether they could have avoided it if put mind to it. Error exists in relation to something that happens AFTER the K is entered into. Mistake as to future events = FRUSTRATION Ex. Hongkong Fir. The test there is equally applicable to area of frustration. Does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit that it was the intention of the parties as expressed in the K that he should obtain as the consideration for performing those undertakings. Frustrating event doesnt kill everything, just some aspects. So who should bear the risk of this event having occurred? Often not fault of either party. If one did, then they are responsible. Dont see risk allocation by the parties b/c cant contemplate EVERY bad thing that happens/could happen. They have their minds on good things. Paradine v. Jane (1647) law used to be that frustration only applied when subject matter of the K had disappeared (which is hard with land). Here, land was lost due to war, couldnt enjoy it anymore so stopped paying rent. Absolute RULE: since land still there, no frustration, has to pay. Taylor v. Caldwell (1863) Departure from the absolute rule of Paradine. Can be seen as the destruction of the subject matter (performance hall burned down no ones fault). RULE: where,

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from the nature of the K, it appears that the parties must (from the beginning) have known that K couldn't be fulfilled unless some specified thing continued to exist, the K is subject to implied condition that parties shall be excused in case performance becomes impossible from the perishing of the thing w/o default of the contractor. Both parties excused from performance. Krell v. Henry [1903] Rented premises to overlook coronation, but King got sick. suing for remainder of rend owning (dep paid). Was there frustration? RULE: frustration limited to cases where the event causing the impossibility of performance is the destruction of some thing which is the subject matter of the K or of some condition or state of things expressly specified as a condition of it. If parties have provided for eventualities, then go to that, but if not, have to determine if subject matter of agreement has been interfered with to a sufficient degree. Doesnt necessarily have to destruction of subject matter. FRUSTRATION TEST: 1. What was foundation of K (with regard to all circumstances)? 2. Was the performance of the K prevented? 3. Was the event which prevented the performance of the K of such a character that it cannot reasonably be said to have been in contemplation of the parties at the date of the K?
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Just because things dont turn out as you want, doesnt mean you will get frustration (Herne Bay Steamboat) Often a case of interpretation (Atlantic Paper Stock) [p. 715]

Force Majeure An event which is beyond the reasonable control of a party hereto including an act of God, act or failure to act of any govt or govt board, commission, dept, bureau, authorityetc [p. 716]. - Common in many commercial agreements to provide for the allocation of the risk of frustration or impossibility. Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975) before closing date of sale of 26 building lots it became subject to land use control under Planning Act. Argued frustration. ISSUE: Frustration have any application in sale of land cases? And if yes, what results flow? Test is from Davis Contractors = just and reasonable test. when a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the K HELD: common interest of both parties frustrated. Applying Frustrated Contracts Act can return deposit (because vendor incurred no expenses in connection with performance of K prior to frustration.) Frustration can apply in leases of land (Cricklewood). Fibrosa Spolka v. Fairbairn Lawson [1943] quantum meruit. Deposit paid for machinery, but before delivery, war broke out, became illegal to trade with enemy. Since there is frustration, the K is voided and THEN unjust enrichment comes into fix it. Claim for repayment not based on K because K is dissolved on frustration, but on basis of unjust enrichment. (overruled Appleby v. Myers).

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Chapter 6 The Control of Contract Power

Standard form agreements. Unbalanced, favour the K maker. To get around this, courts have developed several techniques and rules: 1. Can excuse a party from an onerous provision by interpreting the K in favour of the lesser party. 2. Use O&A not sufficiently in minds of parties Straight contract formation 3. Straight questions of unconscionability and unfairness (close to fraud and misrep.) 4. Doctrine of fundamental breach Techniques of control (getting around exemption clauses) 1. Contra proferentem if ambiguity, resolved against party relying on it. 2. Remedy choice. 3. Fundamental breach. The Ticket Cases Unsigned contracts. The terms of the K are the ones it has imposed on the other party by posting them or by printing them on a ticket or invoice. Can differentiate between damage to property and personal injury loss. Heffron v. Imperial Parking Co. Ltd. (1973) car parked, stolen. Determination of K: bailment or license? Bailment because gave up keys, there was attendant, nature of K, etc. [factors on p. 773]. HELD: there was fundamental breach. Whole essence of K was safe keeping of the car and redelivery, which they failed in, so cant rely on limitation of liability (though had taken all reasonable measures to communicate conditions of parking to ). Thornton v. Shoelane Parking [1972] suffered personal injury on lot. all cars parked at owners risk Does that cover personal injury? Attempt to tie the ticket and the signs together. K formed at gate, but everything that happens after (what signs inside) not applicable (because after K formed). Cant add terms later on. (or maybe you can if sign big enough. Offer being made with new terms). Denning is finessing the facts of the case to make the offer and acceptance NOT the delivery of the ticket, but the act of driving up to the gate and being permitted inside. The more stringent the term, the more care the parking lot must take. Tougher the provision, more notice required. Signed Contracts Original rule: IF signed K, deemed to have acquiesced to the terms, are bound by it (whether read it or not). This stringent rule has become less so and more flexible in the 20 th century. Canadian-Dominion Leasing v. Suburban Superdrug (1966) lessor as intermediary between lessee and manufacturer. Buy it from manuf. to lease to lessee because he/she chose it. Any problems = look to manuf. Turned on the provisions of the agreement. Karsales: doctrine of fundamental breach. Written exemption clause do not avail him when he is guilty of a breach which goes to the root of the K. So cant rely on exemption clause. But this case collapses the distinction between manuf. and intermediary lessor.

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Canadian-Dominion Leasing v. Welch (1981) photocopier didnt work, but lease had exemption clause that stated had to pay rent regardless of equipments performance. (allocation of risk, even in fundamental breach). RULE from Chomedey: rule of construction. 1. Look at the wording of the K 2. The nature of the relationship 3. Conduct of the parties 4. Whether it would be fair and reasonable. Hunter Engineering v. Syncrude Canada Ltd. [1989] (SCC) greater emphasis on 4th step (fair and reasonable). Two sophisticated commercial parties. Gears on conveyor belts not working right. HELD: not fundamental breach. Gears worked, but not as well as they could. They allocated risk, it was past the warranty period, so not liable. Dickson replaces fundamental breach (4th step) with unconscionability. BUT if it is straight unconscionability, we are looking each partys position (even bargaining? One-sided deal?) **Look at the K and if clause applies, then it applies unless find unconscionability (unevenness of bargaining power). [Wilson expresses the test as deprivation of substantially the whole benefit of the K. Her view is that Q of unconscionability should be narrow] Tilden Rent-A-Car v. Clendenning (1978) DWI clause in agreement (if do it, no coverage). Harsh provision, no notice. HELD: the clause was unreasonable, but courts found away around it in the same way as unsigned ticket cases (no consensus ad idem). Reasonable expectation approach (replaced old one.) Case by case. RULE AS IN SMITH v. HUGHES (see above) affords defence to . He didnt read the K, and employee knew it, so cant be reasonably held to it. s