uviclss.cauviclss.ca/outlines/343-final_outline.docx  · web viewthe mistake is known to the...

34
STEP 1: IS THERE A CONTRACT? Q1: Are we dealing with a mistake as to term of the K or mistake as to underlying fact? BUT FIRST: Does the K allocate the risk of the particular mistake? Can’t find no K for uncertainty or through doctrines or equity (i.e. mutual release for payment in miller Paving) (can look at language and practices for allocation) (knowledge disparity with vendor allocated risk? – MCrae) (Japanese Bank – can be implied who bears the risk) Do you think this allocation was written down/ RECORDED WRONG? GO TO RECTIFICATION IF NO K THEN RESTITUTION BENEFITS (I.E DEPOSIT) UNLESS EQUITABLE MISTAKE: court has broad remedial discretion – set aside the contract of terms IT’S A TERM! UNCERTAIN K 1. FIRST try to apply rules of K formation: - were the parties not even on the same page? Is it so uncertain that we can find no K? Was it a condition or a warranty ? Because if so then it is a term 1. Try and apply an Apply an objective reasonable person test: would someone else have made same mistake as to terms? Court can impute a definite agreement (Smith v Hughes) - SUBJECTIVE motives and intentions are irrelevant Mutual mistake if parties were at cross-purposes (2 ships in the night): this is a mutual mistake and rules of contract formation apply where we find there was no meeting of the minds and so contract is void. (this is not under doctrine of mistake just K formation and applies to mutual mistake only) (Q: mistake as to term only) I.e. would not be able to apply objective test because no evidence/reason/ factors to cause a RP to prefer one party’s understanding over another’s THEN there will be automatically a TRUE AMBIGUITY = no true agreement = no contract (only when SO ambiguous)(Raffles) Staiman (all the steel in the yard): can ONLY decide that there is NO CONTRACT due to a MUTUAL MISTAKE when circumstances are so ambigious that a RP test would not work such as in the case of Raffles Unilateral mistake usally not enough to break K on mistake (Smith v Hughes) UNLESS : (1) the mistake is as to the terms of the contract (as opposed to motivation) AND (2) the mistake is known to the offeree at the time of purported acceptance (1P knows ‘snapping’) (3) Hartog: don’t apply the objective formation principle (subjective – knowing other party has a mistake in their as to terms) (where the offeree knows that the offeror has made a mistake in their offer IF CAN’T FIND MISTAKE TO BREAK K MAY BE ABLE TO USE EQUITABLE MISTAKE LATER 1

Upload: phamdieu

Post on 30-Jan-2018

216 views

Category:

Documents


1 download

TRANSCRIPT

Page 1: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

STEP 1: IS THERE A CONTRACT? Q1: Are we dealing with a mistake as to term of the K or mistake as to underlying fact?BUT FIRST: Does the K allocate the risk of the particular mistake? Can’t find no K for uncertainty or through doctrines or equity (i.e. mutual release for payment in miller Paving) (can look at language and practices for allocation) (knowledge disparity with vendor allocated risk? – MCrae) (Japanese Bank – can be implied who bears the risk) Do you think this allocation was written down/ RECORDED WRONG? GO TO RECTIFICATIONIF NO K THEN RESTITUTION BENEFITS (I.E DEPOSIT) UNLESS EQUITABLE MISTAKE: court has broad remedial discretion – set aside the contract of terms

IT’S A TERM! UNCERTAIN K1. FIRST try to apply rules of K formation: - were the parties not even on the same page?Is it so uncertain that we can find no K?Was it a condition or a warranty ? Because if so then it is a term

1. Try and apply an Apply an objective reasonable person test: would someone else have made same mistake as to terms? Court can impute a definite agreement (Smith v Hughes) - SUBJECTIVE motives and intentions are irrelevant

Mutual mistake if parties were at cross-purposes (2 ships in the night): this is a mutual mistake and rules of contract formation apply where we find there was no meeting of the minds and so contract is void. (this is not under doctrine of mistake just K formation and applies to mutual mistake only) (Q: mistake as to term only)

I.e. would not be able to apply objective test because no evidence/reason/ factors to cause a RP to prefer one party’s understanding over another’s THEN there will be automatically a TRUE AMBIGUITY = no true agreement = no contract (only when SO ambiguous)(Raffles)

Staiman (all the steel in the yard): can ONLY decide that there is NO CONTRACT due to a MUTUAL MISTAKE when circumstances are so ambigious that a RP test would not work such as in the case of Raffles

Unilateral mistake usally not enough to break K on mistake (Smith v Hughes) UNLESS : (1) the mistake is as to the terms of the contract (as opposed to motivation) AND(2) the mistake is known to the offeree at the time of purported acceptance (1P knows ‘snapping’)(3) Hartog: don’t apply the objective formation principle (subjective – knowing other party has a mistake in

their as to terms) (where the offeree knows that the offeror has made a mistake in their offerIF CAN’T FIND MISTAKE TO BREAK K MAY BE ABLE TO USE EQUITABLE MISTAKE LATERIT’S THE DEED ITSELF! Mistake as to nature of documentNON EST FACTUM? (need no negligence + it to be fundamentally different)A kind of mistake that involves a party who mistakes the kind of contract being signed. Because this type of "mistake" could be abused, it is severely limited by the common law

cannot be relied upon if the party could have easily have read the contract or if the party had a general idea as to the nature and purpose of the contract

Must prove they believed that the document they thought they were signing was fundamentally different from the one they actually signed

NEGLIGENCE is relevant in the inquiry (Saunders overruling Carlisle) Carelessness: would have deceived anyone with ordinary amount of intelleigence and caution

1. Disentitled from non est facum plea if signing due to own negligence2. Was it fundamentally or radically different

When there is a signature given by a person with capacity - non est factum very difficultNo man may take advantage of his own wrong: signs a document because he negligently failed to read it, he is precluded from relying on his own negligent act for the purpose of escaping from the ordinary consequences of his signature

IT’S A MISTAKE AS TO UNDERLYING FACT!

1

Page 2: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

COMMON LAW MISTAKE DOCTRINE: NARROW DEPENDS on a common mistake (both parties made the same mistake about an essential aspect) = void a contract based on a common, mistaken assumption of material fact.Usually won’t find a mistake to find K void Caveat emptor

3 types of operative mistake mistake assumptions where could find void (Bell v Lever)(insider trading)1. Mistake of identity of individual contracting with2. mistake that subject matter exists or buying something you already own3. Quality of subject matter

1. Mistake of identity of individual contracting with Courts can apply different doctrinal analyses to get different resultscase law is inconsistent – focus on who should bear the risk

These cases are always dealing with the innocent victims, NOT the rogue themselves and the court must decide which party losing out would be more just

Must ask question: Who was in the best position to have discovered that the party was a rogue?Written Dealings – and mixed agreements of phone/writing/fax:

- Where an offer is not intended to be made to the rogue, but rather to the party being impersonated, no K. (Cundy v. Lindsay) How decided: ABC (A retains title to property because no original K was formed between A&B therefore could not pass to C) (B never had it. K between A + B never legitimate. (Looking at intentions of parties on the face of the K) - Shogun: Here K concluded in writing and intention of parties depends on construction of written termsNOTE DISSENT: should be a presumption for all mediums that K is concluded when 2 parties deal with each other BUT then let K be voidable because of fraud (so can get back if haven’t sold to 3P yet – overturn Cundy)

Face to Face Dealings – don’t find void for mistake in Common Law (short voidable time frame though): Vs your intention is to contract with the person physically in front of you (not void for mistake) (whether a different label unfamiliar (just lable) or familiar name (i.e. B says “I am 3P” that A knows of) (Phillips v Brooks) (Lewis v Avery) (policy: A in better position to figure out a con than party C who gives consideration for the good)

BUT K can be voidable before it is sold to a 3P who in good faith acquired it (Lewis v Avery) Sale of Goods Act 26 (1) Subject to this Act, if goods are sold by a person who is not the owner of them, and who

does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner's conduct precludes the owner from denying the seller's authority to sell

2. Mistake that subject matter exists or (buying something you already own) Sale of Goods Act: contract for sale of specific goods is void if they have perished at time contract is made MCRAE Court draws a distinction between 2 scenarios for NON EXISTENT SUBJECT MATTER( salvage ship): 1. whether a contract is subject to a true condition precedent (the existence of the subject matter of the contract –

i.e. a common assumption that the goods exist)o NO CONTRACT

2. a situation where the vendor promises the goods are in existence (even though they are not). The mistake that the commission made is not excusable because reckless and unreasonable

Contract will be found -> risk on vendor (K exists and will be able to find a breach)Mcrae: There WAS a K and the Commission contracted that a tanker existed there – since there was not a tanker there was a BREACH of contract -> and the plaintiff’s are entitled to damages for the breach

2

Page 3: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

1. QUALITY of subject matter In order for the contract to be void by common mistake the mistake must: Bell v Lever:1. Involve the actual subject-matter of the agreement AND2. Be of such a "fundamental character as to constitute an underlying assumption without which the parties would not

have entered into the agreements" Still want to find a K caveat emptor If you have complied with the terms and essential subject matter, even if the K is unfair, still void. If you had wanted to protect against insider trading could have stipulated it expressly in K Remember K drafting class here

Policy: certainty and predictability, Examples of where subject matter not entirely different from what thought to be: No Fundamental mistake in Bell the insider trading during employment did not render the severance agreement entirely different. No mistake re substance (both agreed to severance on same terms).Solle: mistake about the rent not fundamental (a lease is a lease)Miller: how much charging person in contract not essentially different getting what you contracted for (signing case)Cannot rely on mistake when you are responsible for the mistake (McRae) (person bringing must be clean)The mistake that the commission made is not excusable because reckless and unreasonable (look for where the risk was assigned, who is in the best position to know). EQUITABLE MISTAKE: VERY BROADDespite the English CA disapproval of equitable mistake in the Great Peace, Canadian courts have approved of the doctrine and the remedial flexibility it provides (Miller Paving)Need not relate to the essential substance of the contract (which is why didn’t work under CL doctrine BUT does still need to be a fundamental apprehension about an importanr aspect of the contract here) AND looking for an equitable case (fairness, clean hands etc.) to justify setting aside the contractWhen mistake operative at law – apply when unfair, unjust, or unconscionable not to correct it.

Any type of mistake (common, mutual or unilateral) can give rise to relief under equitable mistake provided that there is mistake as to the promise or as to some material term of the contract (fact or term! stronger case where you have a unilateral situation and one person is taking advantage of another’s mistake

(Hartog, snapping up)If there was a common, mutual or unilateral mistake then we can try apply the broader equity doctrine. (Unilateral only falls under this category because usually there is a caveat emptor principle?). You have already worked through the Bell test: Apply only when unfair, unjust or unconscionable not to find void for mistake AND can’t hurt 3P to find thisSolle : lower threshold than common law

provided that the common misapprehension was fundamental and that the party seeking to set it aside was not himself at fault (as applied in Miller – even if other party profits from their fault and knows)

Equity will relieve a party from the consequences of a mistake where contract entered into:1. UNILATERAL: One party has been induced by a material misrespresentation (even if not fraudulent or fundamental)

OR one party, knowing that the other is mistaken about the terms of the offer or the identity of the person by whom it is made, lets him remain under his delusion and conclude a contract on the mistaken terms instead of pointing out the mistake (only one party has clean hands)

2. COMMON: If the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental (but doesn’t have to be essential substance) and that the party seeking to set it aside was not himself at fault.

Example: entering into lease with one party telling the other that NO RENT CEILING (not fraudulently) VOID FOR ILLEGALITY AT TIME OF FORMATION?Does statute say that you cannot have this type of K? = VOID

3

Page 4: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

STEP 2: THERE IS A K! SO WHAT ARE THE TERMS OF THE K?CONTRACT INTERPRETATION Use interpretative principles, in particular contra proferentum for standard form contracts:

1. Look for intentions of parties AT TIME contract signed (objectively – all context – ATCO – what a reasonable person would think agreeing to from all surrounding circumstances)

2. Don’t just rely on literal written terms if does not lead to sensible commercial result, consistent with objective (Bathurst)

3. Two meanings that equal – apply one that leads to fair result (Eli Lily – only if ambiguity)4. Harmonious interpretations – give effect to all parts – no redundant provisions(BG Checo)5. Can look at post formation conduct ONLY when ambiguity and long history of contracting (see how interpreted

previously)6. Look to related agreements if part of one large transaction7. Terminology (ordinary meaning unless evidence of technical meaning)8. Construction Contra Proferentem = if ambiguous construed against interest of person who drafter that ambiguity

(Wawanesa)9. When no ambiguity – no need for extrinsic (parol evidence) (but will basically always be ambiguity)Sattava (2014 – most recent word on interpretation): look at all context, purpose, relationships, BUT NEVER overrides words of agreement A) WHAT CAN EXTRINSIC EVIDENCE TELL US ABOUT THE TERMS? PAROL EVIDENCE RULE Is there inconsistency between parol statements and the written contract?

OLD general rule: parol evidence rule does not allow extrinsic evidence admitted/invoked that would alter the terms – add or subtract from the written agreement (applied in Canada in Bauer– BUT didn’t believe P so probably more going on and Hawrish (only submit as oral collateral K when intended binding + not inconsistent)

BUT we know that strict rule that no extrinsic evidence allowed leads to injustices (Zell) The problems with letting in extrinsic evidence are overstates, when good external evidence then should be allowed

(want to get at intentions of parties, sometimes objective view of K as is not whole story) Had some cases tell us that even if directly contradictory of written agreement (Zell, (Evans: when K is made up

more than just written) but now a middle ground approach in Canada not a strict application of parol evidence rules, will allow extrinsic evidence, but only to help interpret words better/won’t overrule

NEW RULE: We allow extrinsic evidence Gallen and Sattava ((overrules Evans in Canada) What types? “absolutely anything which would have affected the way in which the language of the document would

have been understood by a reasonable man” (Investors Compensation Scheme cited in Sattava: look at all context, purpose, relationships, BUT NEVER “overwhelms” words of agreement

Gallen: oral assurances can be admitted BUT there is a strong presumption the written agreement trumps FIRST look for a reading that allows admissibility of oral assurance looking for harmonious construction over contradictory statement (not inconsistent = collateral K)(i.e. smother weeds oral + not responsible for crop)BUT courts will not allow a general written agreement to override a clear, specific representation on which there has been significant reliance (fairness consideration)

(Zippy: A general exclusion clause will not override a specific representation on a point of substance which was intended to induce the making of the agreement UNLESS exclusion clause had attention drawn)

Factors influencing application of rule:1. General: Intent, reliance, reasonable expectations, unfair surprise2. Nature of change/conflict (specific v. general) how serious is the conflict/contradiction3. Type of contract (strong presumption no E.E for negotiated K, less strong standard form4. How clear is the wording? Does it need extra interpretive help5. Bargaining Relationship (in situations where you have agreement between 2 sophisticated contracting parties will be

difficult to show that there were extrinsic evidence that contradicts the agreement) Using a standard form contract? Past relations/experience?

4

Page 5: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

Evidence of sharp practice? i.e. Zell evidence of sham agreement/ poor dealings 6. Nature of Representation: Quality and credibility of evidence, clarity and specificity, significance

Exceptions to this presumption for the written contract and allowing parol evidence:1. The written agreement is not the whole K (Evans) 2. IS THIS A consumer transaction for goods or services?

Business Practices and Consumer Protection Act: BC consumer protection legislation has dealt with the parol evidence rule – cannot use rule to exclude evidence relating to the understanding of the parties when dealing with consumer transactions

3. Interpretation: Extrinsic evidence can be introduced to clear up an ambiguity in the K.4. Invalidity: Extrinsic evidence can be introduced to show that the K is invalid because of lack of intention,

consideration or capacity5. Misrepresentation: Extrinsic evidence can be introduced to show there was a misrepresentation that was either

innocent, negligent or fraudulent.6. Mistake: Extrinsic evidence can be introduced to show that there was some mistake as to the nature or effect of

the agreement.7. Rectification – most readily accepted: Extrinsic evidence can be introduced to correct an error/mistake in putting

the agreement in writing.8. Condition precedent: Extrinsic evidence can be introduced to show that there was a condition precedent to the

agreement taking effect.9. Collateral K/Warranty/Agreement: Extrinsic evidence can be introduced to show that there was a separate

agreement along with the written agreement.10. Unconscionability: Extrinsic evidence can be introduced to show that the transaction was brought about through

unconscionable means.11. Modifications and discharge: Extrinsic evidence can be introduced to show that the K has been modified or

terminated.12. Equitable remedy: Extrinsic evidence can be introduced in support of a claim for an equitable remedy.B) RECTIFICATION WAS THERE A MISTAKE AS TO RECORDING OF TERMS OF K? not void, will fix

Exception to rule that written contract reigns supreme. Where extrinsic evidence admitted most often. When mistake in how the agreement is recorded court MAY order rectification to correct the error (high threshold

for what counts AN ODOR OF FRAUD) Not only show wrong b/c have E.E BUT also show how it could be fixed Sylvan: Mistake as to feet instead of yards in sale of land agreement. The defendant insisted on the written terms

despite knowing that the terms did not accurately reflect the prior oral option agreement.

The Supreme Court granted rectification and set out the following four part test for rectification:1. The plaintiff must prove the existence and content of the prior oral agreement (admit E.E)2. There must be “convincing proof” of the oral agreement (beyond a balance of probabilities but less than beyond a

reasonable doubt).Note: One concern that underlies rectification is caveat emptor. The presumption of caveat emptor is very strong in the case of written documents setting out the terms of a contract. The court is concerned that to allow rectification would promote lack of due diligence (i.e. people will be sloppy and then seek rectification).

3. The plaintiff must provide the precise wording for the rectification (ambiguity not enough, visible error) Shafron: must show “the precise form” in which the written instrument can be made to express the prior intention: requirement closes the “floodgates” to those who would invite the court to speculate about the parties’ unexpressed intentions. Court’s equitable jurisdiction is limited to putting into words that that

which the parties had already orally agreed to (“Metropolitan City of Vancouver,”- ambiguous4. The plaintiff must show that defendant knew or ought to have known of the mistake in written document. plaintiff

must prove that to refuse rectification would be inequitable and unconscionable (An odor of fraud)

5

Page 6: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

C) SIGNED K SO HAD REASONABLE NOTICE? DID THE PARTY HAVE NOTICE OF ONEROUS PROVISIONS?General rule: L’Estrange: deference to the written agreement – will be bound to terms even if did not read them(exceptions: non est factum (not actually what signed), active misrepresentation, OR RP would have known test:)Karrol – keep L’estrange and Tilden- new objectivity test: if you know you’re signing a legal document you are bound – as long as no fraud BUT gives us rule that won’t enforce signature if reasonable person could tell looking at the circumstances that the signer didn’t intend to agree.

Circumstances looked at: (hasty, informal, clause inconsistent, no chance to read, no chance to read, length size print) (L’estrange is the rule but is qualified by a limited Tilden) (not required to expressly bring to their attention – but if did notify them that would change circumstances, RP would definitely think assented to K)

Other input - Tilden (not applied broadly) BUT if onerous clause that RP would not be aware of must have their attention drawn to it. Can’t rely on signature alone where party seeking to rely on the contract knows that the signature of the other party might not reflect their true intention (speed, length, fine print, whole purpose of document). Qualified - Ochoa: K must be understood by audience that reads it (language barriers or technical terms used)

D) WERE TERMS ADDED AFTER CONTRACT CONCLUDED? Use offer, acceptance and consideration doctrines to argue that contract already formed? Loychuk v. Cougar MountainLoychuk: Don’t need consideration at moment of signing waiver if already paid for/ entered into contract in ahead of time (waiver = contract modification situation NOW allowed by NAV Canada) OR consideration was being allowed to participate in the activity right then and there

STEP 3: CAN THERE BE AN EXCLUSION OF LIMITATION OF LIABILITY CLAUSE? Use this test when there’s been a breach to see whether breaching party can rely on the exclusion clause or not to limit their liability for their breach

Historically DOCTRINE OF FUNDAMENTAL BREACH NOW Tercon analysis + added unconscionability tests: Historically had to find a fundamental breach, which was a breach that goes to the root of the K? (Karsales (birth)) to say that the other party cannot rely on the exemption clause to excuse liability.

NOW: Tercon picks up on Hunter to introduce the principle of Unconscionability to REPLACE rule of breach “going to the root of the K (asking different questions) (Apply Tercon test with hunter principle in mind - that the we want to protect the weak from the overreaching of the strong)

No concrete rule for exclusion clauses (no longer has to be to the root of the K) BUT now looking at the conduct of parties Loychuk: Waiver are generally binding even when admitted negligence on part of the company, had a pretty clear

specific waiverTERCON: Threshold hard to meet to show fundamental breach due to policy reasons relating to freedom of contract.

1. Does the written exclusion clause even apply to the circumstances? (look at language of the K)2. Was it unconscionable at time K was made? (post formation conduct irrelevant.)

a) inequality in the position of the parties arising from the ignorance, need or distress of the weaker, which left him in the power of the stronger; and (b) proof of substantial unfairness in the bargain (Morrison test)

proof of these circumstances creates a presumption of fraud which the stronger must repel by proving the bargain was fair, just and reasonable

can’t see anything in the nature of the Release Agreement or in the circumstances in which it was signed divergent from community standards of commercial morality-(Kretziger)

know that unconscionability not in statute: BPCPA s.8 (goods + services) BUT essential elements are the same Consider should drafter have made it clearer (contra proferentum, contect of honesty/ transparency. Nothing that

was said or done could have led anyone to believe the waiver would not apply3. OK FIND VALID BUT STILL ASK Is there an overriding policy to not enforce the clause?

- onus on party seeking avoid enforcement, ask does this outweigh the strong interest in enforcement K:(high standard/ examples of PP overriding: food suppliers + selling toxic products; Plas tex: supplying defective resin to pipeline; criminality, fraud)(why not found in Loychuk

6

Page 7: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

NOTE ON SIGNING WAIVERS: Don’t need consideration at moment of signing waiver if already paid for/ entered into contract in ahead of time (waiver = contract modification situation NOW allowed by NAV Canada) OR consideration was being allowed to participate in the activity right then and there LoychukREMEDY: If you find conduct of contracting party results in a fundamental breach, and thus not being permitted to on their exclusion clause to limit liability, the other party CAN repudiate the K and is entitled to compensation for breach of past obligations and is no longer bound for future obligations. (BUT if find release then complete defence)

STEP 4: HAS THE K BEEN FRUSTRATED? – relieved from future obligations, losses apportioned, Event occurring after formation? Mistake/assumptions regarding future events vs (doctrine of mistake existing/past)

Does the event destroy the commercial purpose of the contract? Not self-induced. Not foreseeable. Policy: protecting certainty/ sanctity (economic organization of K vs impossible/ extremely onerous to do if have allocated all the risks between the parties won’t go to frustration because won’t likely create any imbalance

in the obligations – needing a presumptively fair allocation of the burdens of unforeseen eventualities The unexpected event must be so far beyond the range of risks that the contract allocates that it constitutes a

fundamental change in the bargain: “a radical change in circumstances” Approach Frustration with purposes in mind: Which of the parties may be the cheaper insurer? Who was in a better

position to take on the risk (the construction company who builds lots of houses and one house burns down)To be able to rely on frustration to be relieved of future performance obligationsthe risk must be

a) no allocation of risk in the K either expressly or implicitly: (i.e. in Victoria Wood: allocation of risk based on nature of the K/business dealings where usually risk of zoning designation on buyer thus mere knowledge of development intention is not a sufficient ground for frustration in case of subsequent rezoning)

b) No fault – the event must be beyond control of parties (not self-induced)Test for frustration:

1. What is the foundation of the contract, having regard to all of the circumstances? Is there a Basic Underlying Assumption that has been taken away : The disruption/change must be

fundamental/foundational such that it would be impliedly assumed by the parties to be a pre-condition to performance (i.e. coronation: Purpose is not lease of room, but a lease of a room to view the procession Krell)

i.e. contract subject to an implied condition of the continued existence of the subject matter of the contract (Caldwell – music hall essential to the fulfilment contract)

underlying assumption can also include a commercial purpose of the contract not just the destruction of the physical subject matter (KBK: more than mere knowledge: intention to develop in contract itself, zoning designation in ad, pricing based on this zoning - re-zoning radically altered the contract)

2. Was performance of the contract prevented - Substantial Hardship? major impact on economics of transaction; must be more than mere increase in expense that makes the

contract less profitable; change is permanent; must deprive one of the parties of the substantial intended benefit of the transaction

National Carriers Ltd. held that the change must be so significant that it would be “unjust to hold [the party] to the literal sense of its stipulation in the new circumstances”

3. Was the event that prevented the performance of the contract of such a character that it cannot reasonably be said to have been in the contemplation of the parties at the date of the contract? An unanticipated risk

Occurs after formation, not foreseen, not addressed by partiesIF frustrated then remedy (not found void): parties relieved of future performance obligations, restitution of past benefits, sharing of costs go to statute: Frustrated contracts Act: s.5 entitled to restitution for performance or part performance of K. You can get deposit back (restitution) BUT ALSO reliance damages for party that has to make restitution (i.e. return deposit) but if already spent some money performing obligations then that loss will be apportioned equally (history: loss lies where it falls (Applebee) but this is unfair, leaves to chance of whether paid nothing, full or deposit. Introduced idea of restitution but this could leave the vendor/provider out to dry if started performance (reliance -> statute)

STEP 5: IS THE K UNFAIR? CONTROL OF CONTRACTUAL POWER

7

Page 8: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

Is this a commercial relationship with no alternatives – focuses on consent? GO TO DURESS Is there a special relationship of trust and confidence presence/ recognized special relationship

and QUESTIONABLE transaction – doesn’t require manifest disadvantage? GO TO UNDUE INFLUCE Is there visibly poor and unfair dealings but no recognized relationship (could be a stranger!)?

UNCONSCIONABILITY (equity + UI Duress is common law)Contract voidable, set aside on terms, order restitution of benefits/damages

A) DURESS IN CONTRACT FORMATION OR MODIFICATION - CL (need illegitimate pressure vs don’t need)Focuses on consent historically only physical threats now economic duress will be recognized if meets high threshold

At what point will economic pressure give rise to such a degree of unfairness that the court will relieve the party? (consider nature of commercial bargaining, a hard bargain does not = a bargain made under duress)

Cases in past that have found duress have used terms such as “extortionate,” “held to ransom,” Classic formulation focuses on voluntariness of consent- the will actually has to be overborn. Commercial pressure or lack of alternative options not enough (Pao on)

I. Modern test: Duress in contract Formation ( Tankships ) (ship blocked from leaving harbor, had to pay to leave) NOT limited to threshold of coercion/ involuntary act: intentional act because no other practical choice

open to them (lowering Pao ON threshold)1. Pressure amounting to compulsion (dropped overborne) of the will of the victim.

Relevant factors for finding duress include: 1) whether the coerced party protested; 2) the availability of alternative courses of action;

3) the existence of independent legal advice; 4) whether coerced party took steps to avoid K2. The illegitimacy of the pressure exerted in light of the nature of the pressure (i.e. was there a threat of

unlawful action?) and the nature of the demand (what was being demanded?). this step is unclear - word illegitimate, contentious (I.E. threat of breach isn’t illegal) Threat (most of time) illegitimate where it involves a tort or breach of a statutory duty

3. If a court finds that the victim expressly or implicitly approved the contract after the pressure ceased to exist, the victim will be denied relief.

NOTE: Fairness of bargain is doctrinally irrelevant. The issue is one of consent. However, almost all cases of duress involve bargains that the coerced party claims are unfair.

II. Duress in K MODIFICATION OBJECTIVE: determine whether the variation was the product of an agreement – needs to be a consensual bargain FACTORS1. cornerstone of the doctrine is still lack of “consent” – AA never consented to variation as evident by their letter

agreeing to payment under protect2. Don’t need to show “illegitimate pressure” to find ED (THE DIFFERENCE)

at least not in cases involving variations to existing contracts (leaves open application to contract formation)

not the legitimacy of the pressure that is important but impact on victim (changes focus to impact rather than just the pressure)

criminal always illegitimate but just not good test for telling other grey area/ what else falls in this category that probably should lead to a finding of ED 3. have to show either NOT procured under economic duress OR that other party precluded from using doctrine because subsequently affirmed the variationTEST (1) Promise (the contract variation) extracted as a result of “pressure” (I.E. threat of non performance) (2) Coerced party had no practical alternative but to agree to the coercer’s demand to vary the terms of the underlying contract;

(could they have got performance from a 3rd party and sue the coercer for damages for breach of contract? Here Only company who could provide aviation equipment)

NPA is evidence of ED not conclusive proofIF 1+ 2 MET ASK (3) Did the coerced party NONETHELESS content to the variation? Evidence/factors

8

Page 9: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

i) was the promise supported by consideration? (unsupported bolsters finding of ED) ii) whether the coerced party made the promise “under protest” (most convincing way) iii) disaffirmed the promise as soon as practicable? (plea may become unavailable over

time time is of the essence OTHER CONSIDERATIONS: 1) victim’s access to Independent Legal Advice (not enough to show no ED) 2) good faith -> good faith of coercer should not impact on the victim’s contractual right to receive performance of original terms of contractNOTE: sometime just good business to modify a contract most contractual variations will be classified as having been procured through the exercise of legitimate commercial pressure. BUT ED not there for commercial parties who just make deliberate decisions that they later regret. In most cases pressure for the contract variation will come from the promisee by withholding future performance can have implied threats too (i.e. withholding good or services until promisor agrees to demand)

B) UNDUE INFLUENCEThe unconscientious use by one person of power possessed over another (wileding the type of relationship that they have) in order to induce the other to enter a transaction equity and wider jurisdiction for granting relief. Objective of Undue Influence doctrine is to ensure that the influence of one person over another is not abused – equities supplement to duress doctrine (extended the reach of the law to other unacceptable forms of persuasion – not just threats) A claim of undue influence can be established in either of 2 ways - Geffen:1. Pre Q: SHOW Actual undue influence: Claimant must prove the wrongdoer exerted undue influence. Here you prove/

show the actual operating influence on the choice that was made.2. SHOW relationship was there a relationship that gives rise to a presumption of undue influence This Proof of

relationship stage can also be split up into 2 catergories:A) Was there a de jure relationship? Fiduciary, trustee/beneficiary, solicitor/client, doctor/patient,

priest/worshipper B) Open catergories of trust or confidence (could be spousal, professor/student)(considered on own facts)

(Geffen) 3. Show a transaction that calls for an explanation What is the nature of the transaction? Find manifest disadvantage as evidence of UI

a) a commercial transaction? Plaintiff obliged to show that the contract disadvantaged them or D was unduly benefited (BUT mere fact that P seems to be giving more than getting is insufficient to trigger the presumption)

Note: La Forest does not think that undue influence must always involve undue disadvantage or benefit – should just be taken as some evidence

b) gift or bequest? Do not need to show undue disadvantage or benefit – it is enough to establish the presence of a dominant relationship (a gift is inherently disadvantageous requirement unnecessary)

c) a necessary limitation upon width of first prerequisite -> otherwise absurd for the law to presume that every gift by a child to a parent or every transaction between client-solicitor, patient-doctor was brought about by undue influence

4. UI Established now allows for rebuttal the onus moves to the “influencer”- must show that the transaction was entered into as a result of P’s own “full, free and informed thought”

Consideration for own thought/no UI- show no actual influence was deployed in the transaction- independent legal advice obtained- the magnitude of the disadvantage or benefit is cogent evidence going to the issue of whether influence was

exercisedApplication in Geffen: (sister + brothers) relationship between brothers and sister had potential for UI BUT very little contact between them AND had ILA.3P TRANSACTIONS AND UNDUE INFLUENCE

9

Page 10: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

1. A bank will be held responsible for taking any steps to ensure that the person who is taking on a financial liability is aware of the scope of his or her potential liability? Royal Bank

OBJECTIVE: Married relationship not a relationship that raises the presumption of undue influence somewhat automatically BUT Need to prevent abuse of influence in these relationship cases despite the absence of evidence of overt acts of persuasive conductSo when a bank is going to profit from having guarantors sign for a debt at their business they should be making sure that there is no duress involved.Principle applied to banks and when they will be put on inquiry:

- a bank is put on inquiry whenever a wife stands as surety for her husband’s debts – it is sufficient that the bank knows of the husband-wife relationship. Bank must take reasonable steps to make absolutely clear to the wife the risks involved. Knowledge of the particular relationship only needed– not some further emotional inquiry/investigation or knowledge of the level of trust placed (doesn’t matter). I.e. also applies to father and daughter.

NOTE: judge says that disadvantage is not a necessary ingredient of the cause of action– not essential that the transaction should be disadvantageous to the pressured person (financially or other) BUT unlikely that undue influence would be found in this situation/ rare (and guarantor for husband COULD potentially be disadvantageous) Response: Banks should – if they have constructive notice of a type of relationship between the surety and the debtor is non-commercial:

(i) meet with spouse privately;(ii) explain extent of liability;(iii) warn of the risk; and(iv) urge the person to obtain ILA

The bank must always take reasonable steps to bring home to the individual guarantor the risks he is running by standing as surety.

Banks must ensure full consent and voluntariness:If you are a lawyer and you are being asked to prove ILA for whether undue influence: ILA Checklist• language – do you speak client’s language?• Enquire into state of marriage – domestic violence? emotional and sexual ties between the parties.• Must satisfy yourself that no undue influence and that client is signing voluntarily.

What do you do if client still wants to go ahead with it because they are afraid for their marriage? probably should not issue the Certificate of Independent Legal Advice

C) UNCONSCIONABILITY (for sale of goods or services go to statute)Fraud cases + visibly poor/unfair dealings no longer reuire special relationship to be presentBC courts will usually use the 2 step Morrison test but ALSO ask the merged Kreutziger question (also in BCPA):GENERAL REQUIREMENTS: Equity principle – Morrison gives us a 2 step test:

(a) inequality in bargaining power (procedural Unconscionability) OR Need legal incapacity - out of the ignorance, need or distress of the weaker (not fixed categories like UI)(b) substantial unfairness in the resulting contract (substantive Unconscionability)WHEN A + B SHOWN: creates a presumption of fraud which the stronger must rebut by proving

that the bargain was fair, just and reasonable or that no advantage was in fact taken.Kreutziger 1Q: Transactions that are sufficiently divergent from community standards of commercial morality should be rescinded. (shorthand for Morrison)3. Idea that 1 Q prevents the real issue from being obscured by an isolated consideration of a number of separate

questions (irony that we now use 3)4. How to answer whether divergent or not? Precedent AND Seek guidance as to community standards of commercial

morality from legislation that embodies those standards in law (i.e Trade Practices Act BC + Consumer Protection Act)5. Criticisms: risk that this test may induce a subjective view of the morality of the case as a substitute for the Morrison

10

Page 11: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

factual tests i.e. these tests won’t get at the same thingLyods Bank: Dennings tries to squish all into 1 ‘unfairness’ doctrine from CL + Equity together. Gives us new considerations to look at for unconscionability but ultimately will be keeping these catergories separate – Canade uses Morrison, Kreutziger. Godd case for showing that there is clearly overlap between these catergories.

Factors from Lyods: grossly inadequate consideration, trust failings (more like UI), conflict of interest when profit, absence of ILA, undue pressure or influence was used, (consciously or unconsciously), bargaining power impaired by (necessity, ignorance or infirmity)

Unconscionability and Statute: Business Practices and Consumer Protection Act: (IS this for goods or services)S.8: unconscionable act by supplier can be before, during or after consumer transaction

(2)to determine if UNC. look to surrounding circumstances which seller ought to know- statute gives us factors to consider: (undue pressure to enter transaction? Inability to protect own interest (any incapacity, language, age, mental) ask whether the price was way above what similar products would be available for, harsh terms, no ability to pay.

S. 9: BURDEN: of proof is on the seller to prove that they did not engage in an unconscionable practice (this is a significant protection for consumers!) S. 10: REMEDY: unconscionable situation would not be binding on the consumer

STEP 6: DOES THE K VIOLATE THE LAW OR PUBLIC POLICY?A) AN OVERLY BROAD RESTRICTIVE COVENANT?

Is there an overly broad restrictive covenant? Restrictive covenants are prima facie unenforceable; Falls under category of common law illegality: restrictive covenants: there is a public interest in every person carrying on his or her trade freely (common law illegality category) Start with assumption that will be un-enforceable; UNLESS/EXCEPTIONS restrictions are shown to be reasonable: 1) activity (scope) AND 2) time and geographyA tension in the common law between the concept of freedom to contract and public policy considerations for free tradeKRG –TEST FOR TRYING TO SEE IF A RESTRICTIVE COVENANT IN ENFORCEABLE:

1. ask if RC in an employment K (more rigorous scrutiny) or a contract for the sale of a business 2. Is this too ambiguous? (IF no ambiguity then just go straight to scope, time, geography and see if

overbroad for policy reasons if NOT overbroad then ok– then if overbroad go to severance. BUT if ambiguous we ask this first because we know if it is clear enough for us to be able to proceed to SEVERANCE

a) An ambiguous restrictive covenant can only be enforced if the ambiguity can be resolved. i.e. Term “Metropolitan City of Vancouver” was ambiguous and there was no context or

other evidence demonstrating the mutual understanding of the parties at the time they entered into the contract as to what geographic area it covered. It was inappropriate for the Court of Appeal to rewrite the geographic scope in the restrictive covenant to what it thought was reasonable.

3. TRY TO FIND REASONABLE - Nordenfelt: A restrictive covenant is prima facie unenforceable unless it is shown to be reasonable with respect to the parties and reasonable with respect to the interests of the public.

b) Reasonableness factors: Scope, time and geography4. IF UNREASONABLE – TRY TO SAVE BY DOCTRINE OF SEVERANCE:

try give effect intent of parties by limiting scope of contractual provisions(A) notional = reading it down to no longer be illegal (read it down to % level) BUT Notional severance

has no place in the construction of restrictive covenants in employment contracts (invites employer/writer to make as wide as possible and see what is allowed)

(B) blue pencil = remove illegal portion ONLY and can’t if impacts the meaning of K or essential.

11

Page 12: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

bluepencil severance may be resorted to sparingly and only in cases where the part being removed is clearly severable, trivial and not part of the main purport of the restrictive covenant. 

B) STATUTORY ILLEGALITY?Is the formation or performance of contract illegal in some way? Can be expressly or impliedly prohibited by statuteEasy cases when criminal law or statute specifically states that “no contract shall be entered into…” i.e. when there are express statutory rules to draw upon regarding whether there was a contract or whether a person can maintain an actionHard cases: where the statute does not address how the effect of non-compliance. (regulatory regime does not address specifically what the effect in contract of the non-compliance i.e. there is an offence, fine or prohibition against certain types of conduct but that does not mean necessarily that the contract involving such matters would be unenforceable)Classical/ rigid approach (contrary to statute therefore no enforcement.) Modern approach: contextual view of what is the purpose of the legislation in question - Still v. MNR:Unless there is overriding public policy, sometimes illegality overlooked:Where, a party acting in good faith is entitled to relief notwithstanding the statutory breach

1. Ask whether the statutory prohibition goes to the performance of a contract and not its formation2. Ask were the individuals actions in good faith?3. ASK would holding it unenforceable be consistent with the purpose of the legislation?

Factors: the serious consequences of invalidating the contract, the social utility of those consequences and a determination of the class of persons for whom the prohibition was enacted, are all factors which the Modern approach rejects the understanding that simply because a contract is prohibited by statute it is illegal and, therefore, void (focusing on performance).

C) CONSUMER PROTECTIONDoes the contract violate consumer protection legislation? Provides really important protectionSales of Good Act: (JUST GOODS services go to BCCPA does not apply to sale to other business dealers or used goods)s. 20 NO WAIVER of warranties and conditions: IF Sale to individual consumer for personal use not business have an express statutory warranty whether provided for in K or not (if turns out not fit for intended purpose or does not last got reasonable duration does not matter what the K says) If K tries to diminish the conditions or warranties this statute provides then: (2) (a) if a term, severable from the contract and void (RECTIFICATION to read down to correct the intentions of the parties) (b) if a collateral or contemporaneous contract or agreement, void.Another operating principle here is fixing ambiguity (interpret the ambiguity against the drafter because it is a standard form contract written by one party offered to the consumer) seller beware (i.e)BPCPA:

WIDE application (consumer in BC or not, get protection when buying from BC business) (here consumer transaction = goods AND services BUT primarily for household/personal (not between businesses (also applies to pre-sale stuff (solicitation, offer, advertisement, promotion)

Can’t waiver any of this Consumers right to cancel protected in statute you have to have an option to cancel (for more

than $50)Seidl v Telus : Can challenge these practices of a seller WHETHER OR NOT PRIVITY OF CONTRACT EXISTS BETWEEN THE PERSON AND THE CONSUMER (all they have to do is participate in a consumer transaction, which would include an advertisement)

[Section 5 of the BPCPA] DECEPTIVE ACTS AND PRACTICESSuppliers involved in the defined transactions must refrain from any sort of potentially misleading statement, including honestly-held opinions given in circumstances in which the supplier knows that giving the opinion without appropriate

12

Page 13: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

qualification may mislead. MODERN PUFFERY = not excuse for unqualified opinion (Rushak) (specific factual knowledge not shared by the potential buyer)BURDEN: On supplier to prove the [alleged] deceptive act or practice was not committed (BPCPA 5(ii))Rushak: deceptive act does not need deliberate intention to deceive Q is whether it it led astray the purchaser. MUST show the purchaser relied upon the misrepresentation

Q: Whether seller exercised, according to the standard of his peers, a reasonable and proper care, skill and judgment?

imposes a high standard of candour, especially on suppliers who choose to commend their wares In suggesting that the respondent have the vehicle looked at by others, without saying what sort of examination

was needed and when he knew that ordinary visual examination would not be helpful DID NOT render the giving of his unqualified opinion no longer misleading

NOTE: Didn’t really express an opinion on what the consequences woulf be were a completely honestly-held but erroneous opinion given by a supplier who was not aware of any actual evidence suggesting that it might be wrongAPPLICATION OF BCPCAA consumer cannot allege that a statement was deceptive without establishing that he or she relied on it in entering into an agreement (cannot be used in the abstract) (Rushak + Loychuk zip-lining website)

STEP 7: HAS THERE BEEN DISHONEST PERFORMACE? ALSO IS IT A GOOD FAITH CATERGORY OF EMPLYMENT, ISURANCE, FRANCHISES. Recognized instances where goof faith

1. Has a party undertaken something? Must act in good faith to achieve objectives use best efforts Dynamic Transport

2. Does party have discretionary powers? Must act in good faith McKinlay Motors3. Can’t use loophols/ try to evade K obligations by being sneaky MDS

GOOD FAITH: Canada does not have an overriding principle that in making and carrying our contracts parties should act in good faith BUT we do have developed piecemeal solutions in response to demonstrated problems of Canadian law reform bodies have recommended that Canada jurisdictions adopt the principle (expectations of

contracting parties elsewhere) BUT against: CL we have discrete rules to address particular forms of bad faith. A piecemeal approach is better suited

to the common law and is preferable to a vague general standard (above)Categories of contractual relationships where good faith requirements are actually recognized (insurance, franchise, employment)

It is appropriate to recognize a new common law duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.

Bhasin v. Hrynew (SCC, 2014): Canada recognizes the duty of honest performance:general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance.

It is appropriate to recognize a new common law duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.

Can’t contract out of this look at facts of case to decide whether breach or not “not an implied term” but a general doctrine of contract law that imposes as a contractual duty a minimum

standard of honest performance3 principles: (1) There is a general organizing principle of good faith that underlies many facets of K law.(2) Implications of this broad principle of honest performance by looking more closely at specific situations/relationships.(3) Common law duty of good faith applies to all contracts : requires honesty.*Case emphasizes the benefit of an incremental approach building upon what is already known.àYou can’t exclude liability

13

Page 14: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

for dishonest performance because it is a general doctrine of contract law now.

STEP 8: WHAT IS THE REMEDY BREACH OR VOIDABLE/FRUSTRATED? FIRST: Has this already been provided for in the K

TRY THESE FIRST TO AVOID EXPECTATION DAMAGES (usually get lower restitution + sometimes reliance)No contract: if there is no contract (step 1), then restitution of benefits (i.e. deposit).Equitable mistake: court has broad remedial discretion – set aside the contract of terms.Contract frustrated: parties relieved of future performance obligations, restitution of past benefits, sharing of costs.Unconscionability, undue influence, duress: contract voidable, set aside on terms, order restitution of benefits/damagesBREACH OF CONTRACT: REMEDIESObjective: incentive to fulfill his promise unless the result would be an inefficient use of resourcesPromisor has the choice of whether to perform or pay (efficiency) Different measures of damages protect different interests: no distinction is made in awarding damages based on the manner of the breach (morally neutral) Policy: Balancing reasonable expectations of plaintiff without unfairly surprising defendantSometimes best interest of the party to avoid damages altogether by arguing no contract existsEXPECTATION DAMAGES: USUAL MEASURE + DISTRIBUTIVEThis measure aims to put the innocent party in the position she would have been in had the contract been fulfilled- forward looking (what if it had happened) (used to secure benefit to promisee) Expected benefit of the party WertheimAlso helps protect the future value of goods (recognizes that all present goods have a future value – such as oil): IF sale of goods case = would be the difference between the contract price and its market value + any incidental costs

or losses (BUT If buyer can purchase substitute goods on the market at the same price as the contract then no damages)

IF faulty performance: expectation damages are measured by comparing the difference in value between what was contracted for and what was received. (healthy hand – hair hand) Hawkins v. McGee.

3 approaches that may be used for awarding expectancy damages:Cost of completion + Difference in Value (middle ground = Consumer surplus) + Loss of chanceLIMITING factors for ED: 1) mitigation and 2) remoteness (more discretionary)Expectation inappropriate when Profit is unascertainable Mcrae:If ED too uncertain then turn to Reliance (salvaging - no market price – but just b/c difficult to calculate doesn’t mean you get nothing

Different than loss of chance case because here no chance of success because no ship/ beauty contestPlaintiff can elect between expectation damages AND reliance damages Anglia (lost profits – too unsure here – how much does a movie make?) and reliance damages (wasted expenditures)Case authority for fact that can only pick one reliance or ED ( Sunshine Vacation ) Case where business could not show that its profits (ED) would exceed the amount of expenditure (reliance)Ruled that it is wrong in principle to make an award based on a mixture of approaches -> reliance losses only available as an alternative to loss of profitIf D could show that P would have incurred a loss had it completed the contract, only nominal damages would be awarded. Decision: get reliance damages, wasted expenditures of line of creditRELIANCE MEASURES purpose RESTORATIVE Used when expectation damages too speculative or uncertain (Mcrae) This measure aims to put the innocent party in the position she would have been in had she not entered into the

contract – backwards looking (what if it never happened) Relying on contract to be seen through and so act upon it -> i.e. buying car partsUsed when/why:

A) USED WHEN: Expectancy is impossible to prove (Chaplin=impossible, not difficult) AND spent LESS money

14

Page 15: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

relying on K completion than would have made in profits if had gone through smoothly.B) The impossibility of proof that would have profited results from the defendant’s breach.

THINK: (Sunshine – gave reliance as unprofitable measure of contract completed, unknown expectation)

TEST FOR GETTING RELIANCE1. STEP ONE (Mcrae):

a) show this expense was incurred; b) it was incurred because of your promisec) the fact that promise was broken - made it certain that this expense would be wasted.

2. Burden shifts to defendant to show a) that these expenses would have been MADE in any case (for example would have outfitted ship anyways with

light) b) Can also ask whether expenses incurred in reliance of the contract were reasonable and actions which the

promisor would naturally expect them to take (Mcrae) c) OR EVEN MORE Show expenditures exceed expectation damages so can’t claim (Bowlay):

Reliance measure cannot exceed expectation damages ( Bowlay ) TEST: Where it can be proven that even if the contract had been performed, the plaintiff would have

lost money, then no recovery for what would have been lost. (SURE can elect but If you can show that the breach did not contribute to the loss then no damages expenditures made with a view to a series of contracts were rendered futile by the breach of the first

contract way too uncertain and remote (Appellant was losing heavily, not because of the respondent's breach but because of an improvident contract and grossly inefficient work practices)

WHAT types of reliance damages can you claim?Wasted expenditures in performance of contract + other potential opportunities - Mcrae

MUST be costs incurred that directly relate to performance under this Q (ships consumables Does not include capital costs that would have needed to be incurred regardless of under this contract or other not

accepted – Aim for reliance is expenditures lost but if you want to be more aggressive then you can argue for lost opportunity

to do something else (meaning lost profit from OTHER Ks – not expectation: I want profit from THIS K vs I want loss profits from missing out on other Ks I could have entered into) as a reliance claim (this approaches expectation damages quite a bit/ seems to blur the line)

Can get reliance damages for money spent before K was even formed - Anglia You can get reliance damages for expenditures incurred both pre AND post contractual expenditures Plaintiff can claim “expenditures incurred before the contract, provided that it was such as would reasonably be in

the contemplation of the parties as likely to be wasted if the contract was broken” Actor backs out of movie, claiming reliance

RESTITUTION measures: this measure aims to give back what the innocent party transferred to the contract breaker. Prevent unjust enrichment (corrective) (deposit on item that never received) MEASURING EXPECTATION DAMAGESLoss of Chance: (Chaplin)The degree of certainty for damages does not have to be perfect. P met the standard by showing the probability of her chances of winning. P was deprived of something which had a monetary value (had personal monetary value, yes not transferable but if it

were people would probably pay for it). So we should compendate for the loss Probability X winnings type of analysis: discounting b/c you know the chance of getting the $ is not 100%Modern application:Land development projects (+ Res. Exploration) often uncertainty about obtaining rezoning or permission to build

15

Page 16: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

D contractually required to make best efforts at obtaining approval BUT no 100% guarantee because of regulatory discretion if fails to make best effort P will claim its lost profits

BUT damages must be discounted by the probability of success. This is a factual determinationModern natural resources case - Folland: 4-requirements for obtaining damages for loss of a chance:

1. the plaintiff must show that it lost a chance due to the defendant’s conduct;2. the chance must be sufficiently real and significant to rise above mere speculation; (cannot be too remote)3. the outcome did not depend on the plaintiff’s own conduct; 4. the loss of the chance must have some practical value

COST OF COMPLETION/PERFORMANCE VS ARGUE FOR DIFFERENCE IN VALUE the cost of buying substitute performance from another + undoing any defective perf OR taking away what you have

already done from costFactors for picking between the 2:

1. Look for whether the specific perfomance is incidental to K or not (Peevyhouse) i.e. Radford: Cost of performance awarded for building fence (privacy, sold land for less on promise,

essential part of K)2. How big of a surprise will this be

Groves and Peevyhouse is a great case to cite showing the tension between awarding expectation damages for cost of performance vs. difference in market value as per the feisty differences between the majority and the dissent.Arguments for going with cost of COMPLETION – Majority ( GROVES - (Cost of performance (returning to uniform grade for gravel) is five times the market value of the property)

WHY performance: Damage is the cost of accomplishment/promise/completion NOT the value of land change (you own property can do whatever you want – argument that doesn’t increase value doesn’t stick)

Really going to cost that much? Still not unjust enrichment and not unconscionable BECAUSE the owner is entitled to compensation for was promised (giving only what is promised so not unconscionable, not unjust enrichment

If, in order to complete the K, you do not have to destroy something, then they should complete.MAJORITY: AND Construction contracts: general rule is contractor must remedy the default

economic waste rule does not apply here; only for large waste from having to wreck a completed/nearly structure. (i.e. if fixing it to what you wanted would require destroying large amounts of structure/work – then not efficient and will probably do different in value over completion)

breach was wilful, not in good faith, no attempt made to perform. Don’t want decisions that reward bad faith/ deliberate breach

DIFFERENCE IN MARKET VALUE – Groves Dissent: Damages recoverable for breach of contract to construct is the difference between the market value of the property

delivered to P and what its MV would have been if D had fully complied with the terms (Difference in value analysis). (recovery should be based upon P’s loss NOT what it would cost D)

Protects interests of property that’s unique, special, for personal use, has special value to location, future use different from other property surrounding (dissent)

Compensation or punishment/deterrence? (dissent) Windfall (dissent)

Alternative solution from Posner - SPECIFIC PERFORMANCE:majority result questionable. If the plaintiff had wanted it done could have brought an action in SP rather than $60,000 damages. P getting windfall not intended by parties.EXAMPLE WHERE: Difference in value expectancy damages awarded ($300) PeevyhouseFacts: right to engage in strip-mining on P’s property the mining company failed to do the reclamation required under the lease and owners sought damages. If the mining company restored land value up $300Cost of restoration 100x (VS 5X MORE in Groves) cost of performance out of proportion to value gained, windfall

16

Page 17: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

will not remediate, reclamation clause incidental (despite the fact that he turned down more money to keep this)Minority: sanctity of contract, reclamation clause essential (took less money to make sure this would happen!!) unjust enrichment (fair: not a surprise)(follow contracts at all cost, intent of parties, clear and unambiguous)

WHAT ABOUT A MIDDLE GROUND APPROACH – Consumer Surplus - Ruxle: Swimming pool not built to depth wanted 2 extreme positions:

1) award nothing because no diminution in value2) award cost of performance to rebuild whole pool (economic waste)

No direct financial effect BUT bargained for more than financial considerations: to make house more comfortable, more convenient and more comfortable (this is the consumer surplus) Personal/subjective value a person places on something over and above market value. (go to intangible harms for how to quantify)(Go to step 11)

STEP 9: YOU’VE FOUND DAMAGES CAN THEY BE LIMITED

17

Page 18: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

REMOTENESSA limit on compensation that can be claimed by D asking Q should the D pay for this type of claimed damages? Can we even say they really caused the loss? where to stop the ripple?Policy: allocation of risk, a test/principle for standardization/certainty, flood gates, expectations of the parties (unexpected liability) At the end of the day we have a test BUT a very broad reasonable contemplation test it’s going to be about allocation of risk, who should bear the loss of these damages (issues of insurance, who is the least cost insurer, who is in the best position)

Take into account the level of knowledge of parties/expertise? Length of relationship (transitory vs. established relationship then defendant’s knowledge of plaintiff’s business is

likely to be greater) Was there an assumption of responsibility? (Tenders and Cornwall Gravel) where consumer expectations are reasonable and created by the D liability might result even where the relationship is

transitory Nature of the product or service (second hand or the top of the line) Ordinary allocation of risk (basic principal, should only be found liable for losses awar of, Proportionality: comparison of contract price and nature of the service with risk (ultimate loss claimed).

Hadley : Damages need be reasonably foreseeable (remoteness) from D’s breech to be awarded to P. Remoteness: don’t look back in action Would not have known that Mill was losing profit/ shut down waiting for the shaft to be fixed. Not foreseeable. Too

remote. Consequential damages are linked to knowledge and foreseeability at the time of contracting and deal with the recovery

of damages for loss other than those arising naturally. (gives us 2 rules)1. FIRST RULE: Assumed knowledge is that which the reasonable person is taken to know in the "ordinary course of things."

Normal damages for breach.Victoria Laundry : ( knowledge can be imputed to the parties from customary trade practice and other sources (expanding what can be considered to fall within reasonable contemplation at the time of contracting) limitation of this expansion of knowledge: Cory v Thomas used good for an obscure purpose and make more money from it only award money for loss of profits from a reasonably foreseeable use of the product

Koufous: The general type of the loss must be foreseeable, don’t need full extent: On information available to the defendant when the K was made, the reasonable person would have realized that such loss was sufficiently likely to result from the breach of K to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation (says Laundry set too low standard)

BUT Laundry : sure said results that were “liable to result” But also said that Risk of loss profit/ harm/ damage does not need to be certain Damages are recoverable if “the loss is a “serious possibility” or a “real danger” or always with defendant’s knowledge. Choice of language doesn’t really clear anything up (vague terminology leaves a lot of room for judicial discretion most likely to come down to policy considerations (“is it just to hold this person liable?”)

See how profits are being sliced up: these profits were in contemplation, these profits not (prof says this is interesting)

2. SECOND RULE: (Actual knowledge) Additional loss recoverable if there is actual knowledge possessed outside of ordinary course (special circumstances) (or communication/ notice) had they known of the special circumstances they could have specifically provided for the breach by special terms as to damages (would be unjust to deprive them of this advantage)

Scyrup: clarifies that you don’t need to know the full extent of the special circumstances Dissent: plaintiff did not communicate sufficient information to the defendant regarding the scope of the

contract (could have been a $100 contract $10,000) (Because the did not know the specific details of 3P K: doubtful that knew the responsibilities to be assumed by the second-hand equipment; no opportunity to

18

Page 19: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

MITIGATION REASONABLE STEPS TO TO MINIMIZE YOUR DAMAGES (FACT BASED INQUIRY) Fact based inquiry: party seeking damages has to take reasonable steps to avoid losses. Cannot recover for losses that it could reasonably have avoided.Reasonable steps: What is reasonable (not extraordinary) for claimant to do and the time within the claimant must do it are questions of fact dependent on the circumstances of the case. (that means that if someone breaches the contract you go out and find a substitute performance)1. Onus on Defendant (breacher): to prove that P ought to have taken steps to avoid losses2. Court will ask what a reasonable person would have done to mitigate in the circumstance

Low standard of reasonable steps: low since it is understood that the plaintiff is responding to an unexpected event (breach of contract) and may be facing difficult circumstances; as a general rule, courts are reluctant to second guess efforts to avoid loss.

3. Plaintiff may recover additional costs reasonably incurred in taking steps to avoid a loss (don’t have to be successful) (BUT if unreasonable then no)

What is reasonable?:Payzu silk: In commercial context, often reasonable to require continued dealings with K breaker (not personal services – an emotional harm concern) (specific fact based inquiry)

have to take reasonable steps to mitigate your loss this may require you to contract with the person who broke the contract with you and then go back and sue them (if only supplier in town)

Asamera: Claimant is required to mitigate within reasonable time of breach (courts have the discretion to take account of special circumstances for when damages measured – and look at relationship between parties) (for sale of goods expected to go into the market and make a substitute contract at the time of the breach)

There is often a long delay between the time of breach and the resolution courts may award pre-judgment AND will take into account inflation

Policy: avoid economic waste/promote economic efficiencyDamages are not a punishment which is where mitigation comes in, and ED can usually be high, unfair to hold liable for avoidable requirement to mitigate provides a fair way to allocate post-breach risks, required to try and salvage the transaction,i.e. mitigation requires the vendor to take reasonable steps to resell the oranges in the market place

vendor will only be able to recover damages for the difference between the contract price and the market price, plus any additional costs the vendor may have incurred to resell the oranges.

After the breach, the defendant is generally powerless to reduce the plaintiff’s lossesPezzente v. McClain: unhealthy contrary to initial representations made by seller (warranty here) court finds that should have mitigated and put the dog down/ not opted to have all the expensive surgeries not reasonably foreseeable (remoteness) extereme measures require to maintain the dog (court using discretion with regards to mitigation)

STEP 10: WERE THE DAMAGES PROVIDED FOR IN THE K ITSELF? WERE THEY FAIR + REASONABLPre- Determined Liquidated Damages, Deposits and Forfeitures: Most of the time you have pre-decided damages amount agreed to in K. Court are generally reluctant to interfere with such agreements based on fairness considerations.

penalty: Sum stipulated is extravagant/unconscionable in comparison to the loss Liquidated Damages: Fair/genuine pre-estimate of damages

Law and Equity Act (BC) S. 24: provides the court wide discretion to relieve against penalties and forfeitures.(Needs to to be correlation between what is being claimed and what the breach has actually cost them) Entitled to damages just must be appropriate)WHAT MIGHT THAT DISCRETION LOOK LIKE?Supersave - engages 2 competing objectives: 1) freedom of contract 2) right of the courts to intervene to relieve against oppressive/unconscionable result from enforcement of a liquidated damages term.

Enforceability of term turns on whether it is a genuine pre-estimate of the expected loss

19

Page 20: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

“so oppressive or unreasonable that equitable intervention is justified to prevent an injustice.” onus on person who agreed to contract and whose being asked for the damages to prove not fair LD but actually a

penalty (good evidence about what is common in the business) Your LD can be the most you could expect to make and still be genuine and not unreasonable/extravagant

Non-exhaustive – Factor (discretionary inquiry): relationship (here commercial entities, equal sophistication and bargaining power) type of contract (i.e. custom made sign where cannot possible sell to anyone else), length of the term remaining (are you going to be stuck paying for 20+ years, failure to give notice during automatic renewal period?)

STEP 11: WAS THERE SOME INTANGIBLE HARM THAT SHOULD ALSO BE AWARDED? FIRST BREACHMight come here from Consumer surplus approach middle ground from Cost of performance v. change in market value – RuxleALSO was there bad enough behavior to award PUNITIVE DAMAGES – make claim on top of other damages (Whitten)

NON-PECUNIARY DAMAGES INTANGIBLE HARM/Loss of enjoyment + mental distressHistorically stiff upper lip (Addis) moving towards development of more categories where MD damages granted (K’s for pleasure/P.O.M):(Holidays, weddings, Employment (Vorvis – boss shitty to emplyee), Pets (Newell dog in air hold, Ferguson Kennel looses dog)( Physical inconvenience and discomfort caused by a sensory experience – Wharton and high pitched noises) Can be awarded normal form of K damages (i.e. reliance) and then on top intangible harms) (Weinberg, D leaves with dog, spends money searching, BUT NOW also recognize potential for POM to cover psychological benefit (i.e. dealing with privacy and security) (Fidler) Non-Pecuniary damages: award aimed at compensating intangible aspects of a contract. (compensatory) Punitive damages: are vindictive, penal, and retributory where conduct merits punishment (ask was in GF? Fidler case)

(rare, exception, imposed when malicious highly reprehensible conduct that departs to marked degree from ordinary standards of decent behavior AND must be independently action Whitten)

Entertainment + pleasure1. Ask question, is this a K for pleasure/enjoyment/peace of mind? Jarvis (Holidays)

Any contract that deals with “peace of mind” for enjoyment and entertainment contains an intangible component that need to be remedied through aggravated contractual damages

Statements in the brochure were representations or warranties (the breach that gives rise to damages). BUT difficulty in calculating: Damages can be given for disappointment, distress, frustration caused by the breach.

(gets 2X, but is this enough?too much?) (Denning says sure, difficult to assess but we do it in other areas of law)2. Entertainment/pleasure need not be ‘essence of contact’, sufficient if it is a ‘major or important part of contract’

(Farley)Fidler : Expansion of POM category to mental distress that can be reasonably contemplated (extension of Hadley):

Mental distress compensation (aggravated): -> (use Hadley BUT used to limit damages but here for new $)Denial of long-term disability benefits. Expansion of POM category1. That an object of the contract was to secure a psychological benefit that brings mental distress upon breach within the

reasonable contemplation of the parties (Hadley)2. That the degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation (Need not

be the dominant purpose or essence of the contract)Measure of expectation damages: The parties are to put into the position that they contracted for whether tangible or intangible if reasonably contemplated by the parties at the time the contract was madeHere not enough for punitive damages (mishandling but not the bad faith element).PUNITIVE DAMAGES: Apply Whitten WAS THIS SO BAD THAT SHOULD AWARD Punitive Damages? + MENTAL DISTRESS EMPLOYMENT MENTAL DISTRESS/ EMPLOYERS - Honda General rule, no MD damages merely for being fired: MD not ordinarily in the contemplation of parties as employer has the

20

Page 21: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

right to terminate. Aggravated damages: However, in cases where parties have contemplated at the time of the contract that a breach in certain circumstances would cause the plaintiff mental distress, the plaintiff is entitled to recover (applying Hadley as comes through Fidler) Punitive Damages: Namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.”

Punitive damages are restricted to wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own. Conduct is worthy of punishment.

There is a duty of good faith and fair dealing in the manner of termination, breach of which is compensable under damages principles

There is also a separate underlying term in Employment contracts (see good faith section): There is a duty of good faith and fair dealing in the manner of termination, breach of which is compensable under damages principles (Hadley)Punitive Damages – Whitten – ONLY MAKING PUNITITVE ON TOP OF OTHER CLAIMS – go to for punitive claimsNot a fraudulent fire claim on evidence but denying insurance claim, continued knowing extreme hardship on Psdon’t make punitive damages claims in every remedy claims only extreme bad faith AND everyone in company knew (extreme egregious conduct) If you find punitive damages will get lots of money + claim made on top of other $$2 basic requirements: 1. the misconduct must be found to be highly reprehensible 2. the misconduct must be an independent actionable wrong aside from the main cause of action (BECAUSE insurance company BREACH of GF = ACTIONABLE wrong in Canada).

This IAW may be founded in a breach of a term of the contract and need not necessarily be a tort (SO MUST HAVE 2 breaches).

In Whiten, the IAW was anchored in Pilot’s breach of the implied contractual duty owed by all insurers to act in good faith.

IAW: could you argue duty of performance? BhasenOnly make a punitive damages claim in circumstances where CLEARLY awful behavior: for example in Whitens: Family homeless and not given anything. Moreover, the Court found that Pilot’s behaviour was planned and deliberate even in the awareness of the hardship it was inflicting upon the Whitens

People enter these so as not to have to worry about being in the kind of situation that Pilot essentially forced the Policy: Key features are exceptionality (driven by the highly reprehensible behaviour of the defendant, compensatory should be enough) rationality (must be linked to one 3 goals of punishment, deterrence, and denunciation), and proportionality (proportionate to the degree of misconduct exhibited and no more)( Proportionate to the blameworthiness of the D’s conduct, to the degree of vulnerability of the plaintiff). Punitive damages should not be awarded if compensatory damages and criminal penalties are adequate to meet the policy objectives. Also take into account what has been previously awarded for same misconduct.

STEP 12: EQUITABLE REMEDIES CAN YOU APPLY SPECFIC PERFORMANCE OR INJUCTION TO ENFORCE A NEGATIVE COVENANT?

SPECIFIC PERFORMANCE (compelling party in breach to perform contract) Beswick v Beswick : specific performance should be ordered if it would do more perfect and complete justice than an award of damages (only awarded when damages in adequate)

ex: unique goods, long-term supply contracts were plaintiff may go out of business (because good might run out) unique land: is a substitute readily available? NOW a standard inquiry (Semelhago (SCC, 1996)) previously available

automatically for interests in land but now with cookie cutter apartments this is being revisited BUT courts are pretty reuluctant to apply! economic efficiency: presumptive right to SP would mean no requirement to mitigate (no mitigation available and then the

21

Page 22: uviclss.cauviclss.ca/outlines/343-FINAL_OUTLINE.docx  · Web viewthe mistake is known to the offeree at the time of purported ... The court is concerned that to allow rectification

cost to D could increase) (risk of rising prices in meantime of SP – risk on vendor and buyer won’t have duty to mitigate – i.e. real estate ) (mitigation generally seen as a good thing) (Cause less disruption go straight to market good instead of suing)administrative: courts reluctant to supervise ongoing compliance;

Sales of Goods Act say courts MAY order SP for contracts of goods (not ever used just preserved discretion and treated as generally unavailable when damages are an adequate remedy)

Absolute rule: never for personal services improper as matter of public policy Defences to SP:

1. Mutuality of remedy: would the other party also be able to get SP damages if you had been the one breaching 2. Misrepresentation and Mistake: if you mislead someone P has engaged in dubious performance even if might

meet the test otherwise have to come to equity with clean hands (any sort of fault) ( where hasn’t been grounds for recision but still haven’t acted fairly)

3. Conduct of the Plaintiff (same as above)4. Hardship: Where decree would cause sever and unnecessary hardship (or to a 3P) (circumstances giving rise to

hardship must exist at the time the contract was formed) Specific Performance for land (Dodge Holdings ) show that the premises have a quality that makes them especially suitable for the use (not that nothing like it anywhere else) (Semelhago) (determination of uniqueness at time of actionable act). Examples of unsubstitutable qualities: superior access to an attraction/commercial area, traffic patternsINJUNCTION: an order not to do something—ORDER not to breach contract or not to do something that would prevent the contract from being performed (prohibiting or mandatory) Time frame of injunction important: perpetual and interim(usually only in emergency situations)Can a P obtain an injunction to enforce a contractual obligation where specific performance is not ordered? (making something mandatory – can be short period of time if emergency) (prevent any further injury before the result)

Warner Brothers + Betty Davis : Injunction to get at personal services (as specific performance banned) IDEA: You cannot force someone to DO something BUT CAN force them to NOT DO SOMETHING

CAN Enforcing a negative covenant through INJUNCTION (prohibiting conduct that would breach K) Can’t order a POSTIVE COVENANT because forcing SPECIFIC PERFORMANCE for A K of personal services which is not allowed But if negative covenant saying you CAN’T do this (because you CAN do other things).

Where a contract for personal service contains negative covenants (a term of the K that says - DON’T act in other films – but wouldn’t prevent her from having any other jobs) then courts will allow an injunction ONLY IF enforcement will NOT:

1. amount to a decree of specific performance of positive covenants (can only act in my films)2. a decree requiring the defendant to remain idle have other options to work in this case

The Court will not grant specific performance of a contract when it is for personal service, nor will it grant an injunction when it is the basis of someone’s livelihood.

22