RATIOS FOR CONTRACTS FALL MIDTERM
To create a legally-binding contract, there must be:
1. Offer
2. Acceptance
3. Consideration
4. Intention to be bound
5. Privity
6. Certainty of terms
OFFER AND ACCEPTANCE
Offer vs Invitation to Treat
Canadian Dyers Assn. Ltd. v. Burton
(1920), H.C:
F Send lowest price / lowest price
prepared to accept
I Does the quotation of the price
constitute an offer? Look at language &
conduct
(Was an offer)
Pharmaceutical Society of GB v.
Boots Cash Chemists (1953), C.A:
F Self-service drug store, take items
from shelf & place in basket
I Is display of goods on shelf an offer
or invitation to treat?
Unilateral Offers (offers made to the public)
Carlill v. Carbolic Smoke Ball Co.
(1893, H.L) - UK
Ad in paper saying if use smoke ball will
not get influenza
Goldthorpe v Logan (1943) Eng. C.A.
- The mere quotation of the price does not constitute 1
an offer to sell, but is rather only an invitation to treat
- However, a quote plus an indication of willingness by
the parties to enter into a contract will be held to be
an offer.
- No contract unless there is offer to sell and
acceptance of that offer
- Whether or not there’s an offer (or intention) will
depend on the language used and the circumstances of
a particular case...courts can also look at subsequent
actions of the parties.
- Reasonable person (objective test)
- Articles on shelves are an invitation to treat 3
- The display of goods with price tags in a store is an
invitation to treat. When a customer brings an item
to the check-out and presents it for purchase, the
customer is offering to buy the good at the ticketed
price. Acceptance of that offer occurs when the
check-out person takes the purchase price money
- Offer takes place at the cash
- If there is an advertisement that is unilateral, one 4
does not need to notify acceptance of the offer,
performance of the offer is sufficient acceptance
- Accepted by an act carried out by offeree in mode
required by offeror
- Consideration is not a return promise, but the doing
of the act (performance)
- If you promise something in a contract unilaterally, 5
you will be held accountable
 - Logan’s ad guaranteed hair
removal, Goldthorpe received the
treatment, but it failed.
CANADIAN CASE APPLYING CARLIL
Tenders
R v Ron Engineering and
Construction (1981) SCC
- Ron Engineering made a mistake
in bid, too low
Contractor can retract tender, but not
regain deposit.
MJB Enterprises v Defense
Construction Ltd. (1999) SCC
- Non-compliant bid; privilege clause
- MJB suing for breach of contract,
saying theirs should have been
accepted
Rankin Construction Inc. v Ontario
(2014) ONCA
- Mistakenly thought certain kind of
steel was approved, incl. it. MTO
said didn’t comply so chose 2nd
lowest bidder
Communication of Offer
Blair v Western Mutual Benefit Assn
[1972] BC CA
- Asked to transcribe notes from
meeting. Said that if she retired, she
would get $. Took as offer even
though never communicated to her
Williams v Carwardine [1833] U.K.
KNOWLEDGE
- Specific advertisement guaranteeing results is an offer
and not an invitation to treat
- An advertisement to perform a service “results
guaranteed” is a unilateral contract – it constitutes an
offer made to the general public to perform the
service, guaranteeing satisfactory results, which any
member of the public may accept and so create a
binding contract between the parties
- Unilateral contract brought into being after submission 6
of bid (consideration)
- Offer is the call for tenders, acceptance is the submission
of the bid (Contract A)
- Bids become irrevocable if filed in conformity with the
terms and conditions under which the call for tenders
was made
- Contract B – if that bid is chosen, deals with the terms
and conditions of the building contract is entered into
subsequent to the formation of contract A
- A privilege clause is only compatible with accepting 8
compliant bids
- Doesn’t require person calling for tenders to accept only
the lowest compliant bid – however, still doesn’t allow
them to accept non-compliant ones
- In the absence of a privilege clause, most likely bound to
lowest bidder
9
- Party must intend to make an offer for it to be an offer 11
capable of acceptance, and it must be communicated to
the party to whom it is directed in order to prove that
the offeror intended to be legally bound
- Makes no difference if the offeree knows about the offer
by another means – it must be deliberately
communicated to them by the offeror
- When a person acts in response to the offer, doesn’t 12
matter what the motive was so long as the person knew
that there was an offer and responded to it
 - Williams gave evidence on two
murder suspects. Brother of
deceased offered reward on
conviction. On almost death bed,
gave more info; led to conviction
R. v. Clarke (1927) Australia H.C
- Wrongfully convicted, gave info
to clear his name. Forgot about
the reward
- Rewards are unilateral offers, which become contracts
upon successful performance
- Knowingly performing a condition of an offer is
acceptance
- Necessary to be sufficiently 'aware' of the reward 13
when giving the information to meet the condition of
the reward. If the purpose of giving the information is
for a purpose or goal that is not specifically to accept
the reward, no contract is made and the reward
cannot be claimed
- One cannot accept an offer one doesn't know exists,
or that one has forgotten exists

Acceptance

Livingstone v. Evans (1925) Alta S.C.
- Piece of land. “Send lowest cash
price”
- “Cannot reduce price” (rejected
counter offer – resurrection of
original offer). Then P accepted
- A counteroffer usually acts as a rejection of the 14
original offer. However, a rejection of
the counteroffer may act as a renewal of the
original offer.
- If a purported acceptance varies in any respect the
terms of an offer, it will be treated as a proposal of
new terms and classified as a counter-offer. A
counter-offer constitutes a rejection. However, an
offer can be renewed after a counter-offer through
ambiguous language (such as “cannot reduce price”).

Battle of the Forms – who’s terms apply?

Butler Machine Tool Co. v Ex-Cell-O
Corp. [1979] CA
- Quoted price for tool to be
delivered w/in 10 mos. Sellers
had price variation clause
- There are 2 possible analyses when dealing with the 15
“Battle of the Forms”:
1) Apply the traditional rules of offer and counter-offer
to determine which party succeeds (favours buyer)
2) Look at the documents as a whole to determine which
party succeeds (favours seller)

Three-Pronged Approach to Forms: 1) Last shot, 2) First blow, 3)

Shots from both sides
- In favour of buyer takes traditional approach to offer
and acceptance (last shot)
- Generall,y the last shot wins

The general rules of offer and acceptance are used to

determine what terms prevail in a battle of the forms
scenario. In occasional circumstances, a first offer may
prevail where the buyer purports to accept the offer, but
 provides terms that are materially different, without calling
them to the seller’s attention. This is because the seller in
such a case has no reason to know of the changed terms.
Tywood Industries Ltd. V. St-Anne-
Nackawic Pulp & Paper Co. Ltd.
(1979) (Ont. H.C.)
- Invitation to tender. Later added
in arbitration clause which P
never received
“Constructive” Acceptance; Acts/Inaction Amounting to Valid Acceptance
ProCD v. Matthew Zeidenberg and
Silken Mountain Web Services, Inc.
(1996)
- ProCd has database on CDs.
License with restrictions inside
the box
Dawson v. Helicopter Exploration Co.
[1995] SCC
Leading case on bilateral contracts
- Dawson to show Helicopter land
with mineral deposits (10%). H
said couldn’t go anymore; went
with another company instead
Felthouse v. Bindley (1862) EWHC
CP
- Uncle to buy horse off nephew
- "If I hear no more about him, I
consider the horse mine at £30
and 15s."
Saint John Tug Boat Co. v. Irving
Refinery Ltd. (1964) SCC
- SJ supplied Irving w/tugboats
until certain date. Date passed,
continued supplying them &
Irving kept using
Eliason v. Henshaw (1819) US
- E to purchase flour from H.
Accept to be returned by wagon
to certain place, E didn’t listen
- Attention must be drawn to clauses added that do not 16
mirror the previous version
- Where one party wishes to
- make a change to the standard contract, that party
must specifically bring the change to the attention of
the other party in order for there to be a meeting of
the minds.
- In modern contracts the seller may sell the product 17
which incorporates terms and conditions not
immediately visible but that the buyer accepts by
conduct. Buyer can prevent the contract by returning
the product.
- Silence does not constitute abandonment of 18
contract. Acceptance must be clear, but need not be
expressed, and may be implied in the language and
conduct of the parties.
- Courts will endeavor to regard a contract as bilateral
in order to protect the offeree pending complete
performance (Courts will tend to favour (bias)
towards bilateral contract)
- Rationale for favoring bilateral promises over
unilateral promises (in notes)
- Silence cannot be construed as valid acceptance 19
- Communication of acceptance is required in bi-lateral
contracts
- Acceptance must not only be intended, it must be put
into effect, and communicated.
- An obligation exists not to remain silent if you do not 20
wish to be bound
- Silence combined with actions/conduct can be
inferred as acceptance
- Offers must be accepted accorded to the stipulations 21
provided by the offeror
- Offeror is master of his/her own offer. Acceptance
must be compliant with any mandatory method of

Mailed acceptances
Household Fire & Carriage Accident
Insurance Co. v. Grant 1879 Eng.
- D negotiated to purchase shares
in P. Says he never received letter
that he was accepted so doesn’t
have to pay when they went
bankrupt
Holwell Securities v. Hughes (1974)
WLR
Exception to the postal rule
- Required “notice in writing”;
letter sent but was never
delivered
Instantaneous methods of communication
Brinkibon Ltd. V. Stahag Stahl (1983)
(H.L)
- Suing for breach of contract of
steel; provision which said that
the buyers must show the
contract was made within the
jurisdiction
Rudder v. Microsoft Corp. (1999)
(Ont. S.C.J)
- Guys suing Microsoft
- Clicking “I agree” was sufficient
acceptance
Inukshuk Wireless Partnership v
4253311 Canada Inc. (2013) ONSC
- D’s want to stay proceedings for
want of jurisdiction
TERMINATION OF OFFER
acceptance specified (can stipulate when and how the
offeree must accept in order for a contract to be
formed)
THE POSTAL RULE: A contract is complete when 21
acceptance is placed in the mail box
- However, an offeror’s notice of revocation will be
effective only upon arrival. An acceptance will be
effective on posting and will therefore preclude
revocation of the offer when the notice of revocation
eventually arrives.
- The postal rule does not apply if the offer stipulates 22
otherwise
- The postal rule can be excluded by the terms of the
offer. The postal rule does not apply when the terms
of a contract point to the necessity of actual
communication, even if the post is the desired medium
of communication. (express terms of offer say
acceptance must meet the offeror)
- In cases of instantaneous communication, the contract 23
is only complete when the acceptance is received by
the offeror and the contract is made at the place
where the acceptance is received
- "Click-wrap" agreements in general should be 24
afforded the sanctity that must be given to any
agreement in writing
- Where a term of an agreement is clearly stated and
that agreement is accepted by an offeree, that offeree
will be held to the term regardless of whether or not
he actually read that part of the agreement.
- It is the responsibility of the offeree to read the terms
and conditions of the offer before accepting.
- Email applies to instant method of communication 25
rule (no different than a fax). Contract can be formed
in more than one jurisdiction. Postal rule does not
apply
 • 3 ways to terminate: (1) revocation of offer, (2) rejection/counter-offer, and (3) lapse of time.
• Generally, an offer may be withdrawn at any time before it is accepted.
• Revocation need not be communicated by the offeror himself – it is sufficient that the offeree
knows from a reliable source that the offeror no longer intends to contract with him.
Revocation
Dinckinson v. Dodds (1876) UK
Best Case of Revocation
- Said offer was open until Friday.
Found out someone bought on
Thursday. Tried to accept it after
Byrne v. Van Tienhoven (1880) UK
- D mailed offer about tin plates.
Few days later sent a letter of
revocation. P’s accepted the offer
before receiving letter of
revocation
Errington v. Errington and Woods
(1951) UK - Flagpole Problem
- Father bought house for couple,
said house would be theirs once
mortgage is paid. They’ve been
paying it. Widow trying to take
it
Lapse
Barrick v. Clark (1951) SCC
- C offered to purchase B’s land. B
wanted it sold immediately. B
away on hunting trip; held offer
open but sold on 13th day
CERTAINTY OF TERMS
Vagueness
R. v CAE Industries Ltd. (1997) SCC
- CAE to take over aircraft maintenance
base. Gov. promised “best efforts” to
guarantee certain level of work
- You can revoke an offer expressed or implied any 26
time prior to acceptance; must be communicated
beforehand directly/indirectly (even when limits have
been discussed)
- No binding promise to keep the offer open
- Postal rule DOES NOT apply to the revocation of 27
an offer. (It only applies to acceptance.)
- If the offeree is unaware of revocation, and accepts, a
contract will be formed.
- A person who accepts an offer not known to him to be
revoked shall be in a position to act safely on that
offer.
- Revocation not effective until it reaches the offeree
- A unilateral offer can be made to a single person, it 28
doesn’t have to be made to the world at large.
- The promisor cannot revoke a unilateral contract if
the offeree has started performance of the act that is
required by the offer but the contract would cease to
be binding if the party left it incomplete and
unperformed.
- An offer with no express 29
- provision limiting its duration terminates after the
lapse of a reasonable amount of time.
Reasonableness is determined based on:
1. the nature and the character of the subject matter,
2. normal business practice,
3. circumstances of offer, including conduct of parties
and the course of the negotiations.
- Bias towards finding a binding agreement 32
- Business relationships: courts will try to apply
definite meaning to vague terms in a contract as to

Incomplete terms
May v. Butcher Ltd. (1929) HOL
- P wanted to but extra tentage.
Board defined terms including
that they will sell old ones, at
prices and dates to be agreed
upon when they become
available, that delivery shall be
agreed upon, and that disputes
will be handled through
arbitration
Hillas & Co. v. Arcos Ltd. (1932) HOL
(opposite of May v Butcher)
- P had a contract to purchase
lumber from D, said they would
have the option to purchase more
timber at a reduced rate from the
defendants the next year
- Seller refused saying lacked
certainty
- There was a binding K
Foley v. Classique Coaches Ltd.
(1934) K.B.
- P agreed to sell land to D, as
long as D would buy petrol
supplies from P
- Prices were to be agreed on “from
time to time”
- Contract valid despite lack of
fixed price
ENFORCABILITY OF PROMISES
- 3 ways a promise can become enforceable (contract, deed, by way of estoppel) on p. 36
not render it unenforceable; esp. true if there was part
performance
- Test to determine if there’s a binding contract
between the parties
- Agreements made in unusual form can still be
enforceable
1. Agreements to agree are not enforceable. 34
2. An agreement between parties to agree in future on
essential terms (like price) is no contract at all
Price is an essential term of contract
 when contract does not have a price fixed or a means to
obtain a price based on objective benchmark the contract
isn’t binding it is void for vagueness
 An agreement between two parties to enter into an
agreement in which some critical part of the contract
matter is left undetermined is no contract at all.
 It is not up to the courts to fill in the blanks left by
parties to a contract.
 Price could not be determined by arbitration
clause because in order for there to be an
arbitration clause there must be an agreement.
- Vague words or phrases can be interpreted in light of 34
what is reasonable
- Courts will look to any prior part performance
between the two parties to help determine contract. If
any missing terms, courts may infer them from any
prior part performance between parties, and customs
of trade
- Past performance will indicate that a contract is
binding
- Where you have clause that says price to be fixed 35
from time to time, it may be enforceable where parties
have engaged in course of dealings in the past (had
acted for 3 years as if they had a contract)
- If parties believe they have a contract and act as if
they do, the court will see it as binding (shows
intention). Partial execution is likely to be enforceable
 Gratuitous Promises
- Gratuitous promises are ones not supported by consideration and are therefore not
enforceable
The Governors of Dalhousie College
v. The Estate of Arthur Boutilier,
Deceased (1934) SCC
Pledge case
- D made a pledge to plaintiff to
donate money (vague). Died
before making payment, Dal sues
his estate
Brantford General Hospital
Foundation v Marquis Estate (2003)
(Ont. S.C.J.) - Pledge
- Pledged money to hospital but
died before making full payment.
Hospital planned to name unit
after her
Wood v Lucy, Lady Duff-Gordon
(1917) (U.S.)
- L entered into an agreement with
W allowing him to place her
endorsement on D’s designs and
keep the profits accrued by P’s
“best efforts”. She did her own
thing
- Best efforts = consideration
PAST CONSIDERATION
- Past consideration is no consideration at all – a promise given in recognition of or in
return of for benefits received by promisor in the past is unenforceable
Eastwood v Kenyon (1840) QB
- Father died, E took care of
daughter. Borrowed $ for her
school, she said she would pay
him back when she came of age
- Something must be given in return for a promise 37
(consideration) if it is to be a valid contract. Unless
the promisor receives a specific benefit from the
gratuitous promise, it’s not consideration
- A naked, voluntary promise (for a gift) without
sufficient consideration is not a binding legal contract
simply through the acceptance or action of promisee
without the consent of the promisor
- In a hypothetical: if someone bargains to have their
name on school etc. its consideration, if they don’t –
it’s not. Consideration needs to motivate the gift
- A promise to subscribe to a charity is not enforceable 38
in the absence of a bargain. If what you say is
consideration does not come at the request of the
donor, then that will not be construed as
consideration.
- Specific benefit not enough because she doesn’t care
for what they are giving. Consideration has to be
something you want
- Consideration does not have to be expressly stated in 39
an agreement – courts may imply consideration by
looking at the nature of the agreement.
- Implied promise of one party can be sufficient to
constitute consideration for a contract and to support
cause of action against other party for a breach
- Past consideration is not good consideration 39
- No consideration for voluntary gift not requested by
the person receiving it
- Love and affection are not consideration
 courts don’t want people engaging in voluntary
actions and then expecting something in return
- Benefit received in past, which had not been requested
is not consideration for a future promise

Lampleigh v Brathwait (1615) (U.K.)
- D promised to pay P for labour,
but he never did. Consideration
had already happened
Value of Consideration
Thomas v Thomas (1842) (UK)
(Peppercorn theory)
- Man promises to give his house
to his wife in his will if she
promises to pay 1 pound a year
(consideration) and do repairs
on the home. Man’s brother says
it was a gift, didn’t give her
property rights
PRE-EXISTING LEGAL DUTY
Duty owed to a third party
Pao On v. Lau Yiu Long (1980) JCPC
- common intention payment would be made after
CRITERIA TO SAY THAT PAST CONSIDERATION
HAS BEEN REVIVED AND ENFORCEABLE:
- An act done before the giving of a promise to make a
 distinguished from Lampleigh where request is
made by party
- Past consideration still isn’t good consideration, but 40
its good if it was at the request of the promiser with
the expectation of compensation
- A promise made after performance can be enforced,
only if it was understood by the parties that there will
have some kind of reward prior the performance. To
be enforceable, (1) the act performed must have be at
the request of the promisor, (2) the promisee performs
the act, (3) it must be understood that payment would
be made, and (4) if payment, promised in advance,
would have been legally enforceable
- The Courts do not look at the value of the 40
consideration, but only that consideration moved
from the promisee. Doesn’t matter how much, as long
as it was there. Even if it’s as small as a peppercorn.
- Consideration must be something tangible, love and
affection doesn’t constitute consideration
 Exception to consideration: The parties had a 41
performance by one of the parties – Pao On v Lau
Yin Long [1980].
- A promise to do an act which a party is already
obligated to perform towards a third party may
amount to valid consideration, as the promisor
receives the ability to sue to enforce the obligation
towards the third party-Pre-Existing Duty To 3rd
Party
payment, or give a benefit, can sometimes be
consideration for the promise and this happens when

Duty owed to the promisor
Promise to pay more
Stilk v. Myrick (1809) (Eng. K.B.)
- Stilk was contracted to work on a
ship owned by Myrick, promising
to do anything needed in the
voyage regardless of
emergencies. M said he would
pay more after 2 men deserted
Gilbert Steel Ltd. V. University
Const. Ltd. (1976) ON CA
- 3 contracts for steel, increases in
prices but D kept accepting steel
deliveries that reflected revised
prices but only sent cheques for
old price
- Nothing new going back in
exchange for that promise of the
higher price
Exam: (for below)
 If you want to argue for the defendant in which they received practical benefit than you
would argue based on Williams v. Roffey Bros
 If you they not receive any benefit then you would argue Greater Fredericton Airport
Authority INC. V. Nav Canada
1) the act must be done at the promissory request 2)
parties must have understood that the act was to be
given in exchange for a payment or a conferment of
some benefit 3) payment or the giving of a benefit
must have legally been enforceable had it been
promised in advance.
- Performance of a pre-existing duty is not legally 43
sufficient consideration
- A promise to pay more for something that a party is
already contractually required to provide is no
consideration. To be binding promise needs additional
consideration.
- Neither doing extra work or the promise of doing
extra work can be good consideration if you’re
already bound to do extra work
- Any variation to terms of a K must include fresh 43
consideration unless made under seal.
- Prior duty owed to the promisor is not legally
sufficient consideration. In amending a contract, both
sides must provide fresh consideration.
- Consideration in a former contract is not valid
consideration for a subsequent contract
- A promise to perform a pre-existing legal duty
already owed cannot constitute consideration
Williams v. Roffey Bros. & Nicholls
(Contractors) Ltd. (1990) (UK)
- Contracts hired W. Price they
agreed on was too low. D’s
worried because if project not
finished they would be liable,
agreed to pay more then stopped
paying after 1 payment
Greater Fredericton Airport
Authority Inc. v. NAV Canada (New
Brunswick CA)
- N said to replace airport
instrument rather than locating.
G agreed to pay “under protest”
Richcraft Homes Ltd v Urbandale
Corp, 2016 ONCA
- benefit to both parties and that itself is consideration
PROMISES TO ACCEPT LESS
Accord and Satisfaction
Foot v. Rawlings (1963) SCC
- P owed D money. Made
agreement that he could pay
lower installments. Sued for
balance
- Can’t sue unless he fails to keep
up payments
PROMISSORY ESTOPPEL AND WAIVER
- Explanations chart on p. 50
For exam: The words promissory estoppel and waiver will be used interchangeably due to the
fact that the rules are so similar. (Sask. River Bungalows)
Hughes v. Metropolitan Railway
Company (1877) HOL (PE)
- Leased property to M. had to
repair w/in 6 months but entered
A promise to perform an existing obligation can
amount to good consideration provided there are
practical benefits to the promise
New rule for consideration: practical benefit coupled with
economic duress
1) There must be a pre-existing contract between A and B.
2) B does not believe A will perform.
3) B promises more money to A for A to do the very thing
they are already bound to do.
- As a result, B gets a practical benefit. If the promise
wasn’t made under duress, practical benefit equals
consideration.
- A post-contractual modification, unsupported by 46
consideration, may be enforceable so long as it is
established that the variation was not procured under
economic duress.
- Consideration is unnecessary (opposite from Roffey)
- Test for economic duress in notes
- The court can clarify an unclear term in a long-term 46
contract and that would be considered a mutual
- Paying to creditor in a different way, i.e. guaranteed 49
cheques, can constitute as sufficient consideration to
pay less, much like paying earlier.
- Payment of a lesser sum before the due date of
payment, or payment of a lesser sum at a different
place on the due date, will also constitute good
consideration
- Payment by post-dated cheques or negotiable
instruments is good consideration for a lesser sum
- If entering into negotiations results in one of the 51
parties to believe that the contract will not be
 into negotiations which led M to
believe he didn’t need to do the
repairs until negotiations were up
Central London Property Trust Ltd.
v. High Trees House Ltd. (1956) (K.B)
- High trees leased apartments
from C. Lowered rent during
war. New owner wants to enforce
back taxes missing rent & future
rent
Crosslink Bridge Corp v Canadian
National Railway, 2013 ONSC
- imposes a positive obligation on a party
John Burrows Ltd. v. Subsurface
Surveys Ltd.
- Supposed to pay him monthly for
property. Consistently late but he
always let it go then when they
got into a fight he was late and he
sued for total note
D. & C. Builders Ltd. v. Rees (1968)
SC
- Money owed for work done
- D said P could take less than
what he was owed or nothing. P
signed agreement accepting
lesser sum as satisfying debt (if
he didn’t, would go bankrupt)
- R argues PE as defence
WAIVER
 Waiver: the voluntary relinquishing of a known legal right.
Saskatchewan River Bungalows Ltd.
v. Maritime Life Assurance Co. (1994)
SCC
- S’s July payment never received
by ML. ML sent letters,
eventually sent notice of lapse
(waiver). SRB didn’t see this until
April and tried to make payments
but ML said policy had lapsed
enforced, or will be kept in suspense, other party no
longer able to enforce penalties.
- A promise that was intended to be binding, and 51
intended to be acted upon, which was in fact acted on
should be considered binding (if you say something,
you should be held accountable)
- If a promise is made and only intended to apply under
certain conditions, once those conditions no longer
exist, the promise is no longer binding
- The defence of estoppel is not available if its effect 52
would be to invalidate a statutory provision that
- Friendly indulges are not promises and therefore 53
promissory estoppel does not apply. For PE, there
must be a promise, either by words or conduct, and its
effect must be clear and unambiguous.
- Promise must be given voluntary, cannot be made 53
under economic duress.
- Where there is no true accord and satisfaction for an
agreement by a creditor to accept a lesser sum (i.e.
due to extortion), the creditor cannot be estopped
from insisting on its strict legal right to claim the full
balance owed.
- Waiver can be retracted with reasonable notice. 54
Waiver will be found only where the evidence
demonstrates that the party waiving had:
a) Full knowledge of rights they were alleged to
have waived
b) An unequivocal and conscious intention to abandon
International Knitwear Architects Inc. - One does not need to specify a precise date to waive 55
v. Kabob Investments Ltd. (1995) with reasonable notice
BCLR (C.A.) - A reasonable time period can be implied. What length
- D (landlord) agreed that P of time is required for notice depends on facts and
(tenant) could pay lower rent due equities including the conduct of the parties
to financial difficulties. P stopped - In this case 1 month was sufficient
paying rent, D demanded money
for the year
- P sued for illegal distress and D
counterclaimed for the full
amount of rent and other money
owed

The Reliance

W.J. Alan & Co. v. El Nasr Export &
Import Co. (1972)
- D bought coffee from P under
two separate contracts. Sent and
accepted by sterling. Before
payments ended, sterling was
devalued, but money was again
sent and accepted. Realized
second currency was not
devalued, so P sues for the
difference.
ISSUE: Did the sellers waive their right
to receiving in Kenyon Shillings
HELD: Yes
Société Italo-Belge pour le commerce
et l’industrie S.A. v. Palm and
Vegetable Oils (Malaysia) SDN BHD;
the Post Chaser (1982) (Q.B)
- P sold oil to D who in turn sold it
to sub-buyers. Supposed to give
notice right away but did a
month late. P okay w/it but sub-
buyers protested, had to sell oil
for lower $
- If one party by his conduct, leads another to believe 56
that strict rights arising under the contract will not
be insisted on, intending the other should act on that
belief and he does act on it, the first party will not
afterwards be allowed to insist on strict legal rights
when it would be inequitable for him to do so
- Variation
- If a letter credit (or other negotiable instrument) is
non-conforming and thus introduces variation to the
original contract, then acceptance of such it is a
binding acceptance of the variation
- Accepting the 1st payment in £ was held to be an
acceptance of a variation of the terms of the K.
- In order for P.E. to apply, it must be inequitable to 57
allow the promisor to insist on its legal rights
In order for estoppel to apply, a party must rely on a the
representation in a way which would render it inequitable
for the promisor to enforce their rights.

SWORD OR SHIELD?

Prevailing view: PE can only be invoked as a defence. To allow it to be used in every

circumstance would undermine consideration. PE is an exception to the doctrine of
consideration
Combe v. Combe (1951) K.B.
- Divorced couple. Guy said he
would pay annual maintenance
but refused. She tried to have
promise enforced using PE
Petridis v. Shabinsky (1982) (Ont.
H.C.)
- P leased from the D landlord.
Notice of renewal was required
six months prior to expiry of
lease. P told D he wanted to
renew the lease, and D said they
would meet after the holidays,
which is after the notice date.
They negotiated but could not
agree on rent. D claims that since
the renewal date has passed, and
he can evict P
M. (N.) v. A. (A.T.) (2003) BC CA
- D quit job and moved to Canada
in reliance on P’s promise that he
would pay off her mortgage. P
loaned D promissory note, which
she used to pay off her mortgage,
D never actually paid it off. P
kicked D out of house, and P is
suing for the promissory note.
She’s arguing that he should be
estopped from going back on his
promise
- PE can’t be used as a sword/cause of action. Can’t use 58
PE to instigate litigation, only time you can sue it is if
someone’s trying to sue you and you use it as a
defence. “… but you said” ZERO EXCEPTIONS IN
ONTARIO!
- Hypo: if someone’s trying to use it as a sword, you
automatically shut it down saying Combe v Combe said
this
- If being used as shield:
“this is being used as a shield, as per Combe v Combe
and we can go on with the defence of PE”
- This is covered by waiver doctrine but not 59
promissory estoppel. You cannot use promissory
estoppel when there is no existing contractual
relationship. D waived his rights and did not give
reasonable notice to the P. D must have given p
reasonable notice in order to enact the strict dates
after waiving his right.
-
- PE can’t be used as a cause of action in Canada 59
- The suggestion that Canadian law should move
toward adopting a more generous approach to
promissory estoppel as has been adopted in Australia
and the U.S. has been rejected by the B.C. Court of
Appeal.

Privity of Contracts
Applies in Canada to prevent two types of people from enforcing a contract
1. A person who is a complete stranger to the contract has no legal right to enforce the
promise of any party to that contract
2. The third-party beneficiary, the person identified and intended by the promisor and
promisee to receive all or part of the benefit of the agreed upon performance

Tweddle v. Atkinson (1861) (Q.B.) - Third parties to a contract do not derive any rights 62
- John, father of William, agreed from that agreement nor are they subject to any
with Guy so that Guy would pay burdens imposed by it
 William £200 after marrying his
daughter. Written agreement
contained a clause which
specifically granted William
(husband) the power to sue for
enforcement of the agreement.
Guy died, and the estate would
not pay so William tried suing
executor of the father in law
H: executor doesn’t owe him money
Dunlop Pneumatic Tyre Co. Ltd. v.
Selfridge & Co. Ltd. (1915) HOL
- Sold tires, promise to agree not
to sell for a lower price but
Selfridge who bought from Dew
did
How a third party may acquire benefit – exceptions to the privity of contract on p. 64
Exceptions to the Rule of Privity:
(a) Statute
(b) Specific performance
(c) Trust
(d) Agency
(e) Employment
(f) Subrogation
McCannell v. Mabee McLaren Motors
Ltd
- Multiple car dealers each have an
agreement with Studebaker
(manufacturer) that if they sell a
car to a person who lives in
another dealership’s territory,
they will pay that dealership
50% of the commission. One
dealer wants to sue
another directly for breaching
The Court holds that Studebaker is acting as an agent in this clause to
their agreement to
create a contract between the dealers and creating privity of contract
Studebaker.
between them. Macdonald lays out a test for agency:
H: even though contract was made
w/manufacturer, they can still sue each
other
- Where a 3rd party is a stranger to the consideration
given for an agreement, that 3rd party will not be
allowed to sue on an agreement made between a
promisor and promisee.
- Natural love and affection is not sufficient
consideration in the eyes of the law
- A stranger to the contract cannot sue or be sued on it 62
- A third-party beneficiary cannot enforce a contract if
it is not a party to the contract
- Only parties to a contract can sue for a breach of the
contract
- The only exception to this rule is if a party named in
the contract was acting as an agent of an unnamed
party
- If the promisee is acting as agent for a third party, the 65
doctrine of Privity has no application. The promisor
and third party are in direct contractual relationship;
they are the contracting parties – no need to directly
name agent.
- Test of agency: (1) the function which the agent fills
in bringing the parties together, and (2) the parties’
recognition of this relationship.
- Agency is an exception to privity of contract
- The principal can sue when an agent is the promisee
1. agent brings parties together,
2. the parties’ recognize that agency has been created; a formal
designation is not necessary.

New Zealand Shipping Co v. A.M.
Satterthwaite & Co. Ltd. (Persuasive)
- Expensive drilling machine on a
ship. Limited liability clause.
Stevedores damaged it b/c they
were negligent
H: limited liability clause applies to the
Stevedores
EMPLOYMENT
London Drugs Ltd. v. Kuehne & Nagel
International Ltd. (1992) SCC
Covered
- Employees negligently dropped
transformer causing $33k worth
of damage. There was a limited
liability clause in the contract
stating that the “warehouseman’s
liability was limited to 40$ unless
specifically stated others
H: employees covered under liability
clause
Edgeworth Construction Ltd. v. N.D.
Lea & Associates Ltd. (1993) SCC
Not covered
- P alleging they lost money on
project because engineers errors
in the specifications and
construction drawings
- Suing defendants for negligent
misrepresentation; as the plaintiff
Each of them agreeing to abide by this promise is sufficient
consideration for a contract to be found.
have each agreed that the clause shall be construed as an
agreement between them and not as an agreement as
between each and the company as principals. It is not
necessary that, to constitute an agency, the agent shall be
designated as such”
Agency: look out for a franchise setting where there’s a
parent company and ppl. competing
McDonalds can only advertise in certain areas. Can you
sue another f for ad. in your territory?
Test for agency: 65
1. Party is meant to be covered by provisions
2. Promisor is clearly acting as agent for the party
3. Promisor must have the authority to do so
4. Consideration must move from 3rd party, through the
agent, to the promisee
Consideration then moves from party through agent to
promisee
- Two-step test for identifying if employees should be 67
entitled to benefit from a limitation of liability clause
found in a contract between their employer and the
customer:
1. Limitation of liability clause must extend its benefit
to the employees seeking to rely on it
- 2. The employees must have been acting in the course
of their employment and performing the services
provided for in the contract between their employer
and the plaintiff (customer) when the loss occurred.
- Rule from London Drugs does not apply when third 68
party beneficiary isn’t implied
- Case distinguished from London Drugs because (a) no
evidence of intention that the engineer would be
covered, and (b) engineer would be expected to have
his own professional insurance.
 relied on those drawings when
making their bid to the province
H: No express/implied protection in
contract, engineers liable
SUBROGATION
Fraser River Pile & Dredge Ltd v.
Can-Dive Services Ltd.
- P owned ship thank sank while
under charter by D. D was
negligent
- Contract of insurance between
Fraser and insurer (Dredge)
contained a clause under which
the insurer waived its right of
subrogation against “any
charterer” and extended coverage
to affiliated companies and
charterers
I: Can a third-party beneficiary protect
itself under a contract it was not party
to?
H: D is protected under waiver clause
CONTRACT FORMATION/AGREEMENTS TO NEGOTIATE
Good faith
Empress Towers Ltd. V. Bank of Nova
Scotia (1991)
- Landlord Empress Towers
seeking to obtain a writ of
possession against tenant, Bank
of NS. First lease expired, new
lease made including clause.
Rental rates would be “market
value” prevailing at the start of
the renewal term as mutually
agreed upon. D wanted to
exercise their option to renew the
lease, but P stalled.
- The test in London Drugs does not only apply to 69
employees, but to any third party who meets the
requirements
- Subrogation – assuming the
legal rights of a person for whom expenses or a debt
has been paid. Usually comes up when an insurance
company which pays its insured client for injuries and
losses then sues the party who the injured person
claims caused the damage.
- In order for subrogation to provide an exception
to the doctrine of privity:
(a) The parties to the contract must have intended to
extend the benefit to the 3rd party seeking to rely
on the provision.
(b) The activities performed by the 3rd party seeking
to rely on the provision must be the very activities
that were contemplated as coming within the
scope of the contract in general, or the provision
in particular, as determined by reference to the
parties.
- Agreements to agree cannot be enforced. 70
- The court will try, wherever possible, to give the
proper legal effect to any clause that the parties
understood and intended to have legal effect.
- The exception to the rule that duty to negotiate in
good faith is not contractually binding. If there is a
formula (market value) but no mechanism, then court
can supply a mechanism (Good Faith)
- Where parties agree to agree on a price and there is
an objective benchmark available for determining that
price, the parties may have a duty to negotiate in
good faith.
Mannpar Enterprises Ltd. V. Canada
(1999) BC CA
- Mannpar had permit under
contract w/Crown to remove &
sell sand on reserve. 5-year
permit w/clause to renew for 5
more years. Abs. didn’t want this
so Crown said no. Said Crown
wasn’t acting in good faith and
sued for damages
978011 Ontario Ltd v. Cornell
Engineering Co (2011)
- C unilaterally terminated services
w. 978. Made changes about
compensation upon termination
in contract, told 978 to read it.
978 didn’t read it and signed it.
- Cornell didn’t have a duty to act
in good faith and even if he did he
discharged it by asking the
respondent to read it
CONTRACT INTERPRETATION/CONTRACT PERFORMANCE
Bhasin v. Hrynew, 2014 SCC
- B and H are competing
enrollment directors working for
C. H approached B about
merging their agencies, which B
refused. C appointed H to review
its enrollment directors for
compliance w/securities laws. B
objected to having H competitor,
review his confidential business
records. C mislead B by telling
him that H, as PTO, was under
an obligation to treat the
information confidentially and
that the Commission had rejected
a proposal to have an outside
PTO, neither of which was true.
- There is no common law obligation to negotiate in 71
good faith; it must be in the contract, either expressly
or impliedly.
- A right of renewal does not always imply a duty to
negotiate in good faith.
- Lack of arbitration clause suggests that the Crown
wanted some leeway to get out if they wanted.
- Distinguished from Empress Towers in that there is no
objective benchmark.
5 factors indicative of situations where reliance is 72
justified:
1. A past course of dealing between the parties in
which reliance for advice, etc., has been an
accepted feature;
2. The explicit assumption by one party of advisory
responsibilities;
3. The relative positions of the parties particularly in
their access to information and in their
understanding of the possible demands of the
dealing;
4. The manner in which the parties were brought
together, and the expectation that could create in
the relying party; and
5. Whether "trust and confidence" knowingly has
been reposed by one party in the other.
- Duty of honest performance, which requires the 73
parties to be honest with each other in relation to the
performance of their contractual obligations
- Parties generally must perform their contractual
duties honestly and reasonably and not capriciously
or arbitrarily
 - C was vague when B asked if the
merger was a “done deal”. When
B continued to refuse audit by H,
C threatened to terminate their
agreement. C gave notice of non-
renewal of their Agreement, and
B lost the value in his business,
while the majority of his sales
agents were successfully solicited
by H’s agency.

GENERAL PRINCIPLES OF CONTRACT INTERPRETATION

Scott v. Wawanesa Mutual Insurance - Courts should not interfere in the plain meaning of 74
Co. contracts and imply terms if the contract is clear
- P had D’s fire insurance on their
house. Extended to relatives &
anyone under 21. 15-year-old son
deliberately set house on fire, so
P’s filed for loss. D’s denied
coverage relying on “this policy
does not insure” clause in the
agreement that said losses or
damages caused by willful or
criminal acts will not be covered
H: fire damage not covered

IMPLIED TERMS

Machtinger v. Hoj Industries Terms can be implied by the court based on: 77
- Appellant work for Hoj - custom or usage;
industries. Contract of - if necessary for business efficacy;
employment for indefinite period - legal incidents of a particular class of contract.
but says they can be fired w/o
cause. M – w/o notice. L – 2
weeks’ notice. Gave 4 wk pay.
Employment Standards Act says
they’re entitled to notice of 4
wks.