Contracts Framework 2017: Table of Contents

CONTRACTS
FRAMEWORK 2017

TABLE OF CONTENTS
Misrepresentation ........................................................................................................................................................................... 2
Distinguishing between Representation and a term ........................................................................................................... 5
Parole Evidence Rule ...................................................................................................................................................................... 6
Classification of Terms in an agreement ................................................................................................................................. 7
Expressed or Implied terms ......................................................................................................................................................... 8
Exemption Clauses .......................................................................................................................................................................... 9
Unilateral Mistake ......................................................................................................................................................................... 13
Common Mistake [mistaken assumptions] .......................................................................................................................... 14
Mutual Mistake ............................................................................................................................................................................... 16
Frustration ....................................................................................................................................................................................... 16
Duress ................................................................................................................................................................................................ 18
Undue Influence ............................................................................................................................................................................. 19
Doctrine of Unconscionability ................................................................................................................................................... 22
Illegality & Public Policy ............................................................................................................................................................. 23
Remedies for breach of Contract .............................................................................................................................................. 25

1
MISREPRESENTATION
Question:
What is the strength of X’s claim for misrepresentation and the likely remedial consequences?

Law:
Misrepresentation is a statement made that led another party into the contract. Once in the contract, the party wants out of the
contract because they feel that they were misled into it. The requirements of misrepresentation are an untrue, statement of fact,
that induced a party. If a statement was material AND the statement was false, there is a presumption on the inducement by the
misrepresentation.

1. Is there a statement of fact (a representation) that was false?
a) Were there statements or representation?
b) Were the statements false?
c) Were they statements of fact or opinion?
d) Were they statements of inducement?
2. Is this innocent or fraudulent misrepresentation?
3. Was the victim induced by the representation?
4. Assuming there’s an actionable misrepresentation, does a bar to rescission apply?

1. I S T H ER E A ST A T EM EN T O F FA CT TH A T W A S FA L SE
1. Were there statements or representations?

A misrepresentation is only when a statement is made, it can also be known as “untrue representation.” A
representation is a statement of fact which induces the representee to enter into a contract but does not form part of
the contract. A statement of fact distinguished from statement of intention and statement of opinion. Statement of
intention as representation where one misrepresent his state of mind. A statement of opinion as representation
where: opinion not actually held, opinion upon matters on which speaker is entirely ignorant, and opinion based on
facts onlyl know to the representor. One should note that, mere silence is not misrepresenting. It can only be said to
misrepresent when there is a duty to talk (Walters). In some situations, silence may amount to a misrepresentation
where: it distorts a positive assertion, contract founded on utmost good faith (ie. insurance), and fiduciary relations
between parties.
à APPLY THE FACTS OF THE CASE AT HAND

2. Were the statements false?
The statements need to be false at the time the contract was. A representation may be true without being entirely
correct, provided it is substantially correct and the difference between what is represented and what is actually
correct would not have been likely to induce a reasonable person in the position of the claimants to enter the contract
(Avon Insurance Plc v. Swire).

3. Were the statements fact or opinion?
A statement of opinion is generally not a misrepresentation unless: the opinion is withheld, opinion is expressed by
the person is entirely ignorant, and if there is unique information is known to one person and not expressed (Smith).
As in Smith, it was found that the defendant was stating that the tenant occupying the land was “the most desirable”
tenant when in actuality he was a bad tenant.
4. Were the statements material (inducement)?

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A false statement, whether made innocently, negligently or fraudulently does not per se give rise to a cause of action.
To be actionable a misrepresentation must induce the representee to enter into the contract AND it must be material.
Materiality is the representation be one which would have influenced the judgement of a reasonable mind. If found
material, there is a presumption that it was made to induce (Redgrave). A misrepresentation is legally harmless if the
representee never knew of its existence, did not allow it to affect his judgement, or was aware of its untruth. In
Redgrave, the P makes a misrepresentation for the practice income at $400, not knowing that it was actually $200.
Therefore, the courts expressed that there was no evidence suggesting that the P knew of the actual price of the
business.
Conclusion: As a result of the analysis, I find that the requirements of misrepresentation have/have not been
satisfied. The representations made were untrue, statement(s) of fact, they induced a party. The effect of
misrepresentation, regardless of the type of misrepresentation makes a contract voidable not void. This means that
the contract is valid until it is set aside by the representee. In other words, on discovering the misrepresentation the
representee may elect to affirm or rescind the contract. Once this election has been made it cannot be undone.
IS THIS INNOCENT, NEGLIGENT, OR FRAUDULENT MISREPRESENTATION?

To classify the misrepresentation, we must identify the state of mind and the degree of carefulness. It is important to classify
the misrepresentation because it determines the remedies available. There are three types of remedies:
1. Fraudulent Misrepresentation
This is a false statement of fact ‘made knowingly, or without belief in its truth, or recklessly, careless as to whether it
to be true or false.’ The courts must be slow to come to the conclusion of fraudulent misrepresentation.

2. Negligent Misrepresentation
This is a false statement made by the person who had no reasonable grounds for believing it to be true or founded on
a failure by the representor to take reasonable car to ensure that the representation made are true and reliable.

3. Innocent Misrepresentation
This is a false statement which the representor honestly believed to be true.
Conclusion: As a result of the analysis, I find that it is a case of ____________________ misrepresentation. Therefore, the
remedies for misrepresentation must be identified.

WHAT ARE THE APPROPRIATE REMEDIES?

Where a party to a contract expressed by word or act in an unequivocal manner that by reason of fraud or essential error of a
material kind inducing him to enter into the contract he has resolved to rescind it, and refused to be bound by it, the
expression of his election, if justified by the facts, terminates the contract, puts the parties is status quo ante and restores
things, as between them, to the position which they stood before the contract was entered into.

Recession is available for all three types of mispresentation. In this case of __ [insert misrep] __ misrepresentation, the P is
entitled to:
1. Fraudulent Misrepresentation
…P is entitled to rescission in contract law and damages in tort for deceit

2. Negligent Misrepresentation
…P is entitled to recession in contract and damages in tort for negligent misrepresentation.

3. Innocent Misrepresentation
…P is entitled to rescission (setting aside the contract) + indemnity. No damages (unless representation regarded as a
term of the contract).

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Rescission can be done by communicating the decisions to rescind the contract to representor by a way of notice. However,
notice is not required in two situations:
1. Recaption where the representee is able to take ownership of the property
2. Impossibility of communication where the representor makes it impossible to communicate to him.

Conclusion: Since this is a case of ________________________ misrepresentation, the P is entitled to ____________________. The
effects of the rescission, are [below].

WHAT ARE THE EFFECTS OF THE RESCISSION?

The effects of rescission are that it destroys the contract at the date it was entered into. However, there are some limits on
rescission (Kupchak):
1. Is it impossible to unwind or restore back to pre-contract position?
Restitutio Ad Integrum (Spence v. Crawford)
Where it is impossible to unwind or restore back to pre-contract position. An example of this would be that a
car was sold on misrepresentation, it will not be the same car when getting it back because it was driven with
miles added on it and that cannot be restored back. In Kupchak, it was impossible for the shares of the motel
to be returned back to the P and the properties had been torn down.
à APPLY THE FACTS OF THE CASE HERE
a) If it was fraudulent misrepresentation the courts are likely to allow equitable damages (the value
that was lost) à Go to #5
b) If it was innocent representation, there will be no remedy

2. Does the victim want to continue on with the contract regardless?
Affirmative (election)
This applies when after discovering the misrepresentation, the victim chooses to keep on going with the
contract anyways and affirmed the misrepresentation. This bar to rescission focuses on the victim.
a) If it was fraudulent misrepresentation there is no rescission AND no equitable damages
b) If it was innocent misrepresentation there is no rescission AND no equitable damages

3. Was there a significant delay on rescission of contract?
Latches (delay)
This applies when after discovering the misrepresentation, there is a delay of any action. A delay can be
evidence of affirmation that the victim is okay with the contract, and it is unfair to rewind on the party of the
wrongdoer. This bar to rescission focuses on the wrongdoer.

4. Did a third party intervene making it impossible to rescind?
3rd Party Intervenes
It is valid to set aside a contract until the contract is ‘passed on’

5. Are there any other additional remedies to complement rescission?
Compensation to the other to effect substantial restitution where restitution in the form of the return of a thing is
impossible or impracticable. The court have jurisdiction to adjust the rights to the parties by ordering either one to
pay compensation to the other to make good some deficiency in perfect restitution.

Another option is indemnity which only covers the obligations necessarily created by the contract and it is NOT
DAMAGES.

Conclusion: As a result of the analysis, I find that it is a case of ____________________ misrepresentation where the P is
entitled to _____________________. The effects of this misrepresentation is ____________________________.

4
DISTINGUISHING BETWEEN REPRESENTATION AND A TERM
Issue:
Is this a representation or a term of the contract?

Law:
1. Did the parties intend for this to be a term as part of the contract?
Heibut v. Symons sets out the test for whether it is a representation or a term. A term is part of the contract, it is a promise
within the contract. If a term is untrue then the contract has been breached and the P is suing for breach of contract.
Whereas, a representation is a statement that is made that is not part of the contract (about of, peripheral to, outside of).
In those circumstances you are not suing for breach of contract because it is NOT part of the contract.

If a representation is made during the course of dealings of a contract for the very purpose of inducing the other party to
act on it, and it does actually induce the party to act on it by entering into the contract, that is prima facie ground for
inferring that the representation was intended to be a term.

Representation NOT term:
In Heibut v. Symons the court found that the short, flippant, un-detailed oral statement that the P was starting a
rubber company didn’t constitute a term. There was no suggestions throughout the whole of the evidence that he
regarded it as anything other than a representation.
à APPLY THE FACTS OF THIS CASE
Term NOT representation:
In Dick Bentley Productions, there were implicit factors that helped distinguish that it was in fact a term of the
contract. For example, the statement about mileage was very important regarding the subject matter, it was to
induce him into buying the car and it was within the seller’s relative expertise.

2. Would the ORP conclude that the parties intended it to be a term or a representation?
In Leaf v. International Galleries, the court found that the ORP would have assumed that it was very important to
the buyer that the painting was in fact painted by Constable.

Conclusion: In this situation, according to the ORP, the parties did/did not intend it to be a term/representation of the contract. Therefore
the appropriate remedy would be:

3. What would be the remedy for_______________? à APPLY THE FACTS OF THE CASE HERE
a. Representation
In the circumstances that it is found to be a representation, it is appropriate to award rescission.

b. Term
If it was a term of the contract and found to be untrue then the contract has been breached and the remedy
appropriate is expectations. This is because we want to put the P in the position they were in if the contract had
been performed.

5
PAROLE EVIDENCE RULE
**only applies to terms and NOT representations**

Issue:
Can evidence be given that is outside the contract to help understand the contract?

Law:
Obligations are defined by the terms of the contract made by the offeror to the offeree. When establishing terms it is a question of
proof. The rule is when a transaction has been reduced to or recorded in writing by agreement of the parties, extrinsic evidence is, in
general, inadmissible to contradict, vary, add to or subtract from the terms of the document.
The difficulty arises when parties negotiate a contract and they make various statements that do not make it into the contract. In
general, the rule deals with extrinsic evidence, not just oral evidence.

There are many exceptions to the general parole evidence rule. Gallen v. Allstate stated that:
The rule does not extend to cases where the document may not embody all the terms of the agreement…even in cases where the
document seems to embody all the terms of the agreement, there are a number of exceptions to the rule. Evidence of an oral
statement MAY BE admitted, even where its effect may be to add to, subtract from, vary or contradict the document:
a. To show that the contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of
consideration, or lack of contracting intention. In the case of Gallen v. Allstate, oral assurances were given to
farmers that the buckwheat would act as a blanket and smother weeds. The buckwheat ended up destroying the
crop. The courts found that if a contract is induced by an oral misrepresentation that is inconsistent with the
written contract, the written contract cannot stand.

b. Condition precedent to contract

c. A distinct collateral agreement which goes along with the main agreement but does not contradict it nor is
inconsistent with the written document may be accepted. In Hawrish, the bank manager gave an oral assurance
that if they received a joint guarantee from his manager then the contract would end. The courts found that the
oral assurance/evidence contradicted and was inconsistent with the written document. Additionally, in Bauer v.
BMO, the court found that even though the bank failed to register the P’s book debts, the contract was clear that
the bank wouldn’t be responsible if it failed in the security. Therefore, whatever was said after that, would be
inconsistent with the terms of the agreement.

d. To establish a term implied by custom, or to demonstrate the factual matrix of the agreement

e. To support an allegation that the document itself was not intended by the parties to constitute the whole
agreement
Further exceptions have been developed such as:
f. Legislation may modify the application of the rule. In consumer transactions, extrinsic evidence can be used to
understand the written terms. That is found under S.187 of the Business Practices & Consumer Protection Act.

g. Parole evidence rule does not apply to preclude evidence of the surrounding circumstances (Sattva Capital Corp v.
Creston)

h. Rectification is an exception to the parole evidence rule, but which oral evidence is not admissible to alter written
agreements (Jean Coutu Group v. Canada (AG)).

1. Is the parole evidence rule a ‘rule’ or a presumption?
When parties arrive at a definite written contract the implication or presumption is very strong that such contract is
intended to contain all the terms of their bargain.

2. Can you rebut the rule? Is there an entire contract clause?
The purpose of an entire agreement provision is to limit the scope of contractual relevance to the four corners of the
contract. As a matter of law, an entire contract clause constitutes a binding agreement between the parties that the full

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contractual terms are to be found in the document containing the clause and note elsewhere, and that accordingly any
promises or assurances made in the course of the negotiations shall have no contractual force, except insofar as they are
reflected and given effect in that document.

This approach provides certainty for the parties. The inclusion of an entire-agreement clause bars the consideration of
parole evidence. An entire contract clause does not preclude the duty of honest in contractual performance (Bhasin v.
Henry).

Conclusion: On the facts of this case, I find that the extrinsic evidence can/cannot be admitted.
CLASSIFICATION OF TERMS IN AN AGREEMENT
Question:
What kind of term is it?

Law:
1. Is the classification of the term expressly stated in the contract?
The parties may expressly classify a term as a condition, warranty or innominate term. Where parties have not so classified
their terms, it is a matter of construction whether a term is a condition, warranty, or an innominate term. The basic test is
that of the intention of the parties. In Wickman Machine, the courts found that the explicit use of the word ‘condition” was
in fact a warranty by looking at the intentions of the parties in respect to the overall document. The courts are trying to
balance the interests of certainty and flexibility.

2. Is the term a condition, warranty, or innominate term?
a. Condition
A condition may have multiple meanings but most importantly they are defined in case law as terms “going to the
root of the contract. They can either be conditions precedent to contract or conditions precedent to performance
(Law and Equity Act S.54). The breach of a condition substantially deprives the innocent party of the entire benefit
of the contract.
Chitty on Contracts states that a term of a contract will be held to be a condition if:
i. If it is expressly so provided by statute
ii. If it has been so categorized as the result of previous judicial decision
iii. If it is so designated in the contract or if the consequences of its breach, the right of the innocent party to
treat himself as discharged, are provided for in the contract
iv. If the nature of the contract or the subject-matter or the circumstances of the case lead to the conclusion
that the parties must, but necessary implication, have intended that the innocent party would be
discharged from further performance of his obligations in the event that the term was not fuly and
precisely complied with.

b. Warranties
Warranties are subsidiary terms and are the least serious type of terms. A breach of the term(s) would not deprive
the innocent party of the whole contract. There can still be sense in performing the contract even if the warranty is
not true.

c. Innominate Terms
Hong Kong Fir created a third category of terms because the court wanted to enhance the flexibility and control
over contracts, mainly for policy reasons. However, the problem it created was more uncertainty. Innominate terms
lie somewhere between conditions and warranties and may be treated as either.

To determine whether it is an innominate term, the time of the breach (not the time of the formation) is important.
By looking at the time of the breach, we can understand how serious the term is. The seriousness of the breach will
determine whether it went to the “root of the contract,” thus being characterized under the classification of a
condition.

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3. Did the parties intend for a type of remedy? What was the remedy that the parties intended to have
When determining what kind of breach it is, it can be important to look at the remedy that you are trying to seek (Schuler
AG). In Schuler, it was found to be a warranty because it would be unreasonable to repudiate the whole contract solely
based on the failure of visits to clients.

a. Condition
A breach of a condition substantially deprives the innocent party of the entire benefit of the contract; thus that
party can repudiate.
In repudiation, the innocent party can terminate the contract because there was a breach of a condition or
innominate term. This is forward looking and cancels any future obligation. No bars of rescission apply.

b. Warranties
A breach of a warranty is an unwinding (undoing) of a contract. It is to put the innocent party in pre-contract
position. It is a right generated from the act of misrepresentation and bars of rescission may apply.

The key difference between a condition and warranty is that a breach of a condition entitles victim to damages and a right
to terminate the contract.

Conclusion: From the facts at hand, the term is a _________________. Therefore, the appropriate remedy is _______________
because ___________________.

EXPRESSED OR IMPLIED TERMS
Question:
Is this an expressed or implied term?

Law:
1. Is there an expressed term?
Before implying a term it has to be necessary, or it has to be so obvious that the parties would have done it. The court will
not imply a term in a contract to simply improve the contact. Therefore, the courts will look to the contract to see if there
are any expressed terms.

2. If not an expressed term, can you imply a term into the contract?
Since it has been found that the term is not expressed in the contract because ______________. There are two types of
contractual implied term. The first, with which this case (Marks & Spencer v. BNP) is concerned, is a term which is implied
into a particular contract, in light of the express terms, commercial common sense, and the facts known to both parties at
the time the contract was made. The second type of implied term arises because, unless such a term is expressly excluded,
the law (sometime by statute, sometime through the common law) effectively imposes certain terms into certain classes of
relationship.”
à APPLY FACTS OF CASE HERE – is it fact, law, custom?

a. Terms Implied in Fact?
Terms implied by fact the intention of the actual parties is paramount, this is not the intention from the perspective
of the reasonable person. The test of intention is set out in Energy Fundamental Group Inc v. Veresen:
i. Business efficacy test: The law is raining by implication from the presumed intention of the parties, with the
object of giving the transaction such efficacy of both parties must have intended that at all events it should
have. In business transactions such as this, what the law desires to effect by implication is to give such
business efficacy to the transaction as must have been intended at all events by both parties.
In Lucy Lady Duff Gordon, the courts imply an obligation to make reasonable effort and without an
implication to make reasonable efforts the contract would be worthless in business and to the D.
Moorcock: This Lord Justice argued that it was the owners of the wharf who were best positioned
to determine safety of any ship docked and thus they were under an obligation to ensure its
safety.

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Mark & Spencer PLC v. BNP: The courts found a difference between implying terms into a contract
and interpretation of contracts
o Implying terms: essential to give effect to the reasonable expectations of the parties, not
construing the words
o Interpretation = construction of the agreement as a whole in its commercial setting,
interpretation is construing the words.
à APPLY FACT OF CASE HERE [I find that the parties intended/did not intend…]

ii. Officious bystander test: Prima face that which in any contract is left to be implied and need not be
expressed is something so obvious that it goes without saying; so that, if the parties were making their
bargain an officious bystander were to suggest some express provision for it in the agreement, they would
testily suppress him with a common, ‘Oh of course’ (Shirlaw v. Southern Foundries)
à APPLY FACTS OF CASE HERE [In this case, an officious bystander would find that…]

b. Terms Implied by Law?
Terms implied by law may be conceived of as incidents which attach to certain standardized contractual
relationships. Such implied terms are not based on the presumed intention of the parties. Indeed, one can argue
they are an affront to the freedom of contract. The sources of such implied terms can include the common law and
statute (ie. Sale of Goods Act).
There are narrow situations in which this can be done because it overrides the intentions of the parties.
Denning stated that you can always imply a term by law whenever it is reasonable to do so but McLachlin
rejects this because it is too broad and endorses the House of Lords which is no Canadian law; wen it is
necessary in a functional sense to facilitate the fair functioning of a contract.
à APPLY FACTS OF CASE HERE

c. Terms Implied by Custom?
The test of implying terms by custom is one of necessity. An obligation implied by custom is read into the contract
as the nature of the contract itself requires. Customs of the parties, industry, and nature of the contract are all
taken into consideration.

In order for a practice to be regarded as a custom capable of being implied into a contract, it must be:
i. Certain: in the sense that the practice is clearly established
ii. Notorious: in the sense that it is well-known in the market in which it is alleged to exist, that those who
conduct business in the market contract with the practice as an implied term
iii. Reasonable: not contrary to law, and it must exist at the time the contract was made

EXEMPTION CLAUSES
Question:
Is the exemption clause (limitation of liability clause) binding? Is it part of the contract?
Law:
1. Is this a standard form contract?
A standard form contract is a non-negotiated contract that is presented to a succession of contracting parties (eg. Buyers)
on a take-it-or-leave-it basis. The benefits of standard for contracts: reduce transaction costs, benefits associated with
network externalities, and facilitates control of agency costs in mass-market transactions. However, these contract have the
ability to trick or abuse consumers because of the unequal bargaining power between the parties. For example, where a
standard form contract is entered into between an ordinary consumer and the salesperson of a multinational corporation,
the consumer is typically in no passion to negotiate the standard terms.

A key feature of standard form contracts are exemption clauses.

2. Is there an exemption clause?

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An exemption clause is a clause that excludes or limits liability for breach of contract or other sources of liability, such as
tort. It is a unique contractual term in the sense that rather than impose an obligation [as seen with conditions, warranties
and innominate terms] it seeks to regulate the consequences of non-fulfilment of contractual obligations or breach.
a. What type of exemption clause is it?
i. Terms limiting or restricting substantive obligations?
Example: By law party to contract A has to pay taxes, parties can agree to contract to relocate
that responsibility to another party [ex. Tax Free Day]

ii. Terms excluding or limiting liability?
This include: exclusion clauses, limitation of liability clauses, waivers, releases, entire contract
agreements
o Example: Limitation of Liability Clause: “In the event of damage to the property which
is the subject matter of this contract, the liability of the Repairer shall be limited to $100
or the original cost of the item, whatever is lesser.”
o L’Estrange v. Graucob: Exclusion Clause: “This agreement contains all the terms and
conditions under which I agree to purchase the machine specified above, and any
express or implied condition, statement, or warranty, statutory or otherwise not stated
herein is hereby excluded.”
iii. Indemnity?
These are clauses which stipulate that, if one party (A) incurs liability [usually a third party (C)]
as a result of performance of a contract, he (A) shall be entitled to be indemnified by the other
party (B) against the liability to (C)
o Example: Indemnity: “The Consultant will indemnify the Company from all tax liabilities
duties, claims and penalties that may be imposed by the Consultant, or on the Company
as result of the Consultant not fulfilling its obligations/liabilities, as a result of the
Agreement or otherwise.

3. Why do parties include exemption clauses?
Parties include exemption clauses into their contract for a variety of reasons such as: (1) freedom of contract and the reality
of different bargaining strengths; (2) defines or modifies obligations, which provides certainty and allows for planning; (3)
Deterrence, by signing a contract with a specific clause will form how you act; (4) Economic and commercial function, it
allows parties to allocate risks and may provide a lower price for everyone and; (5) it’s effect on weaker parties can be very
adverse.

Conclusion: The exemption clause is/is not binding on the parties and part of the contract because _________________.
E FFEC T IV EN ESS O F T H E E X EM P T IO N C LA U SE
Question: Was ______ incorporated into the contract and effective in the circumstances?

Law:
1. Is the clause part of the contract? Was the clause effectively incorporated? [Thorton]
Only terms incorporated into the contract are binding on the parties. Notice of the term and acceptance thereof [including
through signing] incorporate a terms into a contract and make the term binding on the parties.

a. Was there notice?
An exemption clause will not bind a party if it can be shown that he did not have notice of the clause at the time the
contract was made.
Notice is a question of fact and depends on the circumstances of each case. One might ask themselves, was
the contract signed at home or at the ski resort? Was the writing clear, or bolded?
o In Karroll v. Silver Star Mountain Resort, the Court found that the clause was binding because the
release was in bold print, there was ample time to read the release, and she knew from skiing
before that there were typically exemption clauses
Notice must be sufficient, fair and reasonable
o As seen in Thorton v. Shoe Lane Parking, the terms of the exemption was not highlighted or
printed in red so it was visible. Additionally, it was impossible for the P to withdraw from his

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intended entry. Finally, it was not reasonable for the P to walk around the parking garage to find
the list of terms.
Notice must exist before or at the time contract is concluded
o As seen in Thorton v. Shoe Lane Parking, the notice came in after the contract was concluded;
therefore, came too late and wasn’t before or at the time of the contract.
o In McCutcheon v. David MacBrayne, the Court stated that it is possible to imply exclusion terms
into the contract because of the consistent past dealings. In the case, according to the official
bystander, there was no notice about the exclusion clause in past dealings; therefore, can’t be
implied now.
Surprising and onerous terms require extra notice
o In Tilden Rent-A-Car, the Court found that it is absurd to have not be able to have one sip of
alcohol; therefore, not be covered by the insurance.

b. Was there a signature?
The general rule is where a document containing contractual terms (including an exemption clause) is signed, then,
in the absence of fraud or misrepresentation, the party signing is bound. It is wholly immaterial whether he reads
the document or not (L’Estrange v. F Graucob).

There is not general requirement that a party tendering a document for signature take reasonable steps to inform
the party signing of onerous terms or to ensure that he reads and understands them. It is only where the
circumstances are such that a reasonable person should have known that the party signing was not consenting to
the terms in question that such an obligation arises.
• In Karoll, the P couldn’t rely on the exceptions to L’Estrange since the release was common to skiing and
that the P had entered previous competitions with similar exclusion clauses. Therefore, the Courts found
that the P ‘should have known’ what she was signing.

Historically, the courts struggled with how to deal with exemption clauses that have been incorporated into
contracts. Various legal doctrines were deployed but none were successful until Tercon Contractors. In Tercon, the
SCC reformed the law in this area by laying to rest the doctrine of fundamental breach and instituting a framework
for assessing the effectiveness of “an exclusion clause or other contractual terms” to which a party had previously
agreed”

2. Should the Court give effect to the exclusion clause? [Tercon]

The framework is this:
1. Whether as a matter of interpretation the exclusion clause even applies to the circumstances
established in evidence.
This will depend on the Court’s assessment of the intention of the parties as expressed in the
contract. The clause must clearly cover the situation that has occurred.
o In Tercon, the exclusion clause failed because the clause didn’t actually cover the
breach. The Court took an extremely narrow interpretation of the clause and said that
the clause only covered claims arising as a result of the RFP, not claims resulting from
the participation of other ineligible parties.
The burden is on those who seek to rely on it.
The contract is read as a whole and all principles of interpretation are relevant here. The
words/contract are either given the literal interpretation (give words their ordinary meaning) or
purposive interpretation (interpretation that takes into account the context, purpose,
commercial common sense, risk allocation, ect).
An exemption clause is construed strictly and the contra proferentem rule applies but this is the
last resort. This rule mostly applies when there is ambiguity

2. If the exclusion clause does apply, was the exclusion clause unconscionable at the time the contract
was made?

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The second step of the Tercon framework is the most debated step. Additionally, it must be remembered
that the unconscionability must be assessed at the time of contract formation.
There are 2 different unconscionability tests that exist; however, they have a common theme
that asks whether the transaction was one that would “shock the conscience.”

1. In general, two elements must be established before a contract can be set aside on
the grounds of unconscionability.
(1) Proof of inequality in the position of the parties arising out of some factor such as
ignorance, need or distress of the weaker, which leaves him/her in the power of the
stronger.
(2) Proof of substantial unfairness in the bargain obtained by the stronger person
o In Loychuk, the Courts applied the Tercon test and found that the
contract was not unconscionable for an operator of a recreation sport
facility to require a person who wishes to engage in activities that
release liability. If they don’t want to participate, they don’t have to.

2. In Titus v. William Cooke, the Court suggests that there are four things to consider
which appear to be necessary for unconscionability:
(1) Grossly unfair and improvident transaction;
(2) Victim’s lack of independent legal advice or other suitable advice;
(3) Overwhelming imbalance in bargaining power caused by victim’s ignorance of
business, illiteracy, ignorance of the language of the bargain, blindness, deafness,
illness..ect.
(4) Other party’s knowingly taking advantage of this vulnerability
In ABB v. Domtar, the Court stated that “under the doctrine of unconscionability, a limitation of
liability clause will be unenforceable where one party to the contract has abused its negotiation
power to take undue advantage of the other.” This statement pulled from S.8 of the Business
Practices and Consumer Protection Act states unconscionable acts and practices.

3. If the clause is held to be valid and applicable, can the court nonetheless refuse to enforce the valid
exclusion clause because of the existence of an overriding public policy?
This third and final line of inquiry of the Tercon analysis recognizes the residual power of the court to
decline enforcement of exemption clauses on grounds of overriding public policy. This residual power is
rarely or seldom exercised “in the interest of certainty and stability of contractual relations”
The burden of proof lies on the party who seeks to avoid enforcement of the clause to
demonstrate the public policy considerations that outweigh the strong public interest in the
enforcement of the contract
à WHO IS THE BURDEN WITH THE CASE HERE?

There is a balance that need to be struck here between the public interest to ensure the sanctity
of contracts and the need to ensure other public policies. Public policy is not to be lightly
invoked as a dissolvent of contracts.
Situations that would qualify include:
o Conduct approaching serious criminality or egregious fraud
§ In Tercon, the Courts gave an examples of this conduct through an example of
intentional sale of adulterated baby milk or reckless sale of toxic cooking oil.
o Willful conduct and public endangerment
o Statutory obligations
§ Example: In Niedermeyer, the Courts overruled the TJ finding that the Release
did not impact public policy or the statutory automobile insurance scheme and
that the provision of the scheme allows indemnification of an insured only
when liability has been established, and that the statutory scheme was
essentially irrelevant in the circumstances of the case equaling no public
policy. Courts here state that the longstanding stat. scheme is a strong
indication that there is a public policy interest engaged when motor vehicle
accidents are at issue and this interest overrides freedom of contract.

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o Fraud

3. Is the clause affected by legislation?
Sale of Goods Act, S.20
= includes every contract of sale or lease made by a seller or lessor in the ordinary course of the seller’s or lessor’s
business but does not include a sale or lease of goods

Business Practices and Consumer Protection, S.3
= Any waiver or release by a person of the person’s rights, benefits or protections under this Act is void except that
the waiver or release is expressly permitted by this Act.
o In Loychuk v. Cougar Mountain Adventures, if the Business Practices and Consumer Protection Act,
applied to recreational activities, the release was also not unconscionable within the context of the Act.
The court observed that the test of unconscionability at CL and under the BPCPA were substantially the
same.

Homeowner Protection Act, S.23(1)(2)

Conclusion: The clause was/was not effectively incorporated into the contract because ________________. In the event that it was
incorporated in the contract, it should/should not be given effect because _______________.

UNILATERAL MISTAKE
**Knowledge is KEY in unilateral mistake**

In cases of unilateral mistake, the general rule in common law is that if one party has made a mistake as to the terms of the contract
and that mistake is known (or out to have been known) to the other party, the contract is not binding. However, if one party has
made a mistake of fact which he basis his decision to enter the contract, it is not a term of the contract, and thus, contract will be
binding even if other party knows that the first party was mistaken as to this fact (principle of caveat emptor).
Prior to determining whether a contract vitiated by mistake – if the risk has been allocated in the contract or by other means like
statute, the law of mistake will have no role to play and the rights of the parties will be determined in accordance with how the risk
was allocated.
The rule for deciding whether a contract can be rescinded in equity for unilateral mistake remains unsettled.

Question: Can the contract be vitiated for unilateral mistake? What will the effect be of finding an actionable unilateral mistake?

Law:
The following elements are needed to establish unilateral mistake under common law (Statoil ASA v. Louis Dreyfus).
1. What, objectively, are the terms of the parties’ agreement?
One of the elements requires that one party must actually be mistaken as to the terms of the contract. Smith v. Hughes
shows that mistakes based on mere assumption of the terms or motivations for entering into a contract will not be
successful. Parties must agree under the belief that they were contracted terms & not mere belief. Mistake is about TERMS,
not MOTIVES.
• In Shogun Finance, the identity of the parties to the contract was an essential term. They were contracting to sell
a car Mr. Patel not the fraudster. The contract was found void not voidable -- reasoning: Where two individuals
deal with each other, by whatever medium, and agree terms of the contract, then a contract will be concluded
between them, notwithstanding that one has deceived the other into thinking that he has the identity of a third
party. In such a situation the contract will be voidable not void.

2. What was the state of mind of the 2 parties at the time of the contract?
Hartog shows that the non-mistaken party is taken to have known, either actual or constructive knowledge, what would be
obvious to a reasonable person in the surrounding circumstance. The nature of the non-mistaken party can be a factor in
assessing knowledge of the mistake as a person familiar in the transaction would likely be aware of the mistake. For
example, expert or common business practices. (Hartog; Ron Engineering).

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• In Ron Engineering, a tendering situation, the courts stated that since contract A becomes contract B
automatically without knowledge it is hard to apply the law of unilateral mistake. At the point when the tender
was submitted the owner had not been told about the mistake in calculation. Therefore, if a tender on its face
does not raise suspicion of mistaken, the party receiving the bid is not obligated to investigate.
o MG Logging v. BC: Tendering contracts are subject to a unique and stringent analytical framework
designed to protect the integrity of the tendering process.

3. Have the parties reached a consensus on the terms of the contract? (Hartog)
A promisor taking advantage of another where he knows that there is no real agreement and snaps up the offer, will not be
entitled to insist that the promise be fulfilled to which the promiser did not assent (McMaster Uni).

Statutory:
4. Does the BC Sale of Goods Act apply? [p. 29 of CAN]
There is no obligation on a vendor to inform a purchaser that he is under a mistake, not induced by the act of the vendor.
“Buyer beware.”

Conclusion:
I find that all the elements are established, the contract is void under common law because _______________.
I do not find that all the elements are established, therefore, the contract is not void under common law because ______________.
CONTINUE THE CONCLUSION…
The rule for deciding whether a contract can be rescinded in equity for unilateral mistake remains unsettled. What is certain is that if
such jurisdiction exists it would relate to a fact of affairs which is the basis on which the terms of the contract are agreed, but that
assumption does not become a term of the contract.
As it stands today, the P must come with clean hands. As Statoil ASA v. Louis, stated, it is not a clear test…equity intervenes to
provide justice but there is no clear criterion to use.
COMMON MISTAKE [MISTAKEN ASSUMPTIONS]
**Nothing wrong with the terms of the contract**

Question: Is there an actionable common mistake?
In cases of common mistake both parties make the same mistake. Each knows clearly the intention of the other and accepts it. But
each is mistaken about some underlying and fundamental fact. A contract made under common mistake can either be put aside
under common law or equity.

Law:
Threshold: Prior to determining whether a contract is vitiated by common mistake, either under CL or equity, one should look at the
contract itself to see if the parties have provided for who bears the risk of the relevant mistake (Miller Paving). If the risk has been
allocated in the contract, the law of mistake will have no role to play and the rights of the parties will be determined in accordance
with how risk was allocated (Great Peace).
STEP 1: COMMON LAW
All the elements are needed if common mistake is to avoid a contract at common law (Credit Suisse):
1. Was there a common assumption to the existence of a state of affairs?
There must be a common assumption to the existence of a state of affairs. The parties have to agree on the mistake. It does
not have to be in the terms of the contract but can be an assumption. State of affairs may be the existence of the
consideration to be provided or circumstances that must exist to make the performance of contract possible.

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• In Lee v. 1435375, the Courts stated that there was no evidence to support that the parties had a common
assumption that under the zoning by-law the dry cleaning business was a ‘permitted use.’ The vendor believed
that the premise could be used as a dry cleaning business and could continue to be used for that purpose.
à APPLY THE FACTS OF THE CASE

2. Was there a warranty made by either party that the state of affairs exists? (McRae)
There must be no warranty by either party that state of affairs exists. Warranties are terms/contractual promise assured by
one party in the contract. If it can be said factually, that one of the parties has impliedly promised/warranted that the
mistaken thing is true (state of affairs existed) then the doctrine of mistake does not apply.
• In McRae v. Commonwealth Disposal, the Courts found that C sold salvage rights to McRae, so it implied
promised that the thing being salvaged exists. Therefore, since the tanker didn’t exist that was a breach of
contract, not common mistake.

3. Was the non-existence of the state of affairs attributable to the fault of either party?
The non-existence of the state of affairs must not be attributable to the fault of either party. The contract will not be voided
if one party should have known the truth of the state of affairs OR could have prevented it.
• In Miller Paving, it was the fault of Miller Paving for the sloppy accounting error and signing the contract stating
that all their debts had been paid even though they hadn’t been.

4. Was the non-existence of state of affairs make the performance of the contract impossible?
The non-existence of the state of affairs must render performance of contract impossible. This is the hardest requirement
to fulfill.
• Couturier v. Hastie involved cargo of corn was in transit being shipped to London; the owner of the cargo sold the
corn to buyer. The cargo had been perished and disposed of before the contract was made. The court found that
the contract was void because the subject matter of the contract did not exist at the time the contract was made.
• Cooper v. Phibbs was a case in which involved a sale of property that already belongs to the buyer. Thus, if A
agrees to buy a property from B, which both parties believe to belong to B but which in fact belongs to A, the
contract is of necessity a nullity, B has nothing to sell or convey.

Conclusion:
I find based on the facts, that all the of the elements were not established because _____________. Therefore, I turn to the equity
to see if the contract can be voidable.
I find based on the facts that all the elements were established, therefore the contract is void and the party will receive no remedy.
STEP 2: EQUITY
Historically, Great Peace was the leading authority and there is much debate on the appropriate test to use. However, presently, in
Canadian law, a contract is also able to be set aside if the parties fill the requirements laid out in Solle v. Butcher. Furthermore, in
BC, the Court in Kiddler v. Photon Control suggests that equitable rescission based on Solle v. Butcher is available in this province,
without referring to Great Peace. In conclusion, Solle v. Butcher, states that:
A contract can be put aside if the parties were:
1. Under the common misapprehension as to the fact or their rights.
2. That the misapprehension was fundamental and;
3. That the party seeking to set it aside was not at fault
à APPLY THE FACTS OF THE CASE AFTER EACH STEP

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Conclusion:
In conclusion, I find that the contract can be put aside under equitable common mistake. Therefore, the contract will be voidance
and the party may have remedies available to them. Some examples of remedies include: rescission, discretion to refuse specific
performance, rectification, and setting aside the contract on specific terms.

In conclusion, I find that the contract cannot be put aside under equitable common mistake because __________________.

MUTUAL MISTAKE

Question: Can the contract be set aside under mutual mistake? What would a reasonable third party infer from the parties’ words or
conduct?
In mutual mistake, the parties misunderstand each other and they were at cross purposes. Both parties are mistaken, but do not
share their mistake. The test in Smith v. Hughes is objective. It is what a reasonable third party would infer from the parties’ words
or conduct.

STEP 1: COMMON LAW (Staiman Steel)
The court decides what a reasonable third party’s would infer from the parties words or conduct. This is an objective test in which
the reasonable person’s sense of the promise will bind the parties, if this cannot be determined, there is not a binding contract. It
was further emphasized in Scriven Bros, that despite their different mistakes, it would appear to a reasonable bystander the parties
were in agreement as to the contract and its terms, a contract would exist at common law.
• In Staiman Steel the Court could not find that the reasonable person would infer that the auctioneer was manifesting an
intention to offer for sale the build lot without the building steel.
• In Scriven Bros the court found that there was no contract, no meeting of the minds, because they were not able to
determine the ‘sense of the promise.’

Conclusion: Looking at the words and the conduct of the parties, a reasonable third party would/would not find that there was a
contract.

STEP 2: EQUITY
Equity follows the law in holding that a mutual mistake does not as a matter of principle nullify a contract. The court will determine
the sense of the promise. Equity may, however, refuse specific performance of the contract against a mistaken party.

FRUSTRATION
DIFFERENT FROM MISTAKEN ASSUMPTIONS

• In mistaken assumptions, the focus was on assumption at the time the contract was formed which the parties were
wrong about at that time
• Frustration is subsequent impossibility (impossibility after contract has been entered into). It deals with a type of
mistaken assumption regarding the ‘state of affairs’ at contracting that parties assume will continue up to the date of
performance of the contract…but something happens.
• Both deal with similar policy discussions: risk allocation is crucial because if one party has assumed the risk that the
assumption is false, they should bear the loss (tied to intention of parties)

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Before the doctrine of frustration, contract law was governed by the rule of absolute contract as seen in Paradine: When a
party by his own conduct created a duty upon himself, he was absolutely bound by the contract and could not escape liability
even if events rendered performance futile or impossible.

Doctrine of frustration emerged to mitigate the harshness of the rule of absolute contract. Frustration is a common law
defence for non-performance that excuses parties from performance obligations but is not to be lightly invoked as a dissolvent
of contracts (Davis, Sea Angel). Davis demonstrates that frustration occurs whenever the law recognizes that without default
of either party, a contractual obligation has become incapable of being performed because the circumstances in which
performance is called for would render it a thing radically different from which was undertaken by contract.

Question: Is the contract on its true construction, wide enough to apply to the new situation?

Law:
1. Are their express terms or contingencies in the contract itself?
Before invoking the Doctrine of Frustration, we must examine the terms of the contract to see if the parties have dealt
with the even in their contact. In certain cases, we must interpret the force majeure clauses to determine if the clause
covers the incident.
à ARE THERE ANY TERMS IN THE CONTRACT? NO? Establish the next 3 elements.

2. Are all 3 requirements met to establish frustration?
a. Was there a frustrating event?
= a frustrating event is an event that renders performance of a contract radically different to that which the
parties agreed to. The frustrating event needs to occur before the performance date. A person invoking the
doctrine should be able to pinpoint exactly the time that the frustration event occurred (Davis Contractors
Ltd). It is to be noted that mere commercial inconvenience or expenses is not enough (Kesmat v. Canadian
Indemnity). Cases that have determined frustration include impossibility of performance (Taylor),
supervening illegality (Maritime Fish; Capital Homes), event that frustrates the purpose (Henry)
unavailability of subject matter.
• In Davis, the courts outlined what ‘radically different’ meaning
• In Taylor, the court found that the D was discharged from performing and his failure to perform was
not a breach of the contract but it was a consequence of an unforeseen event. The fire caused the hall
to be burnt down which was a key aspect of the contract.

à APPLY THE FACTS HERE – Was there a frustrating event?

b. Is either party at fault?
= an event that renders performance radically different from that which was envisaged must not be
attributable to the fault of the party seeking to rely on the doctrine. As seen in Maritime Fish, self-induced
frustration is not a frustrating event. Law of frustration says a person cannot rely on his own default to excuse
himself from liability under the contract.
• In Maritime Fish, the contract was not frustrated since the claimant had chosen to keep the three
licences granted for himself rather than using one to fulfil his contractual obligation. He had therefore
induced the frustrating event and was therefore in breach of contract.
à APPLY THE FACTS HERE – Can either party be held liable?

c. Was the event foreseen or provided for in the contract?
The doctrine is concerned with unforeseen, supervening events, not with events which were anticipated and
provided for in the contract itself. If one of the parties assumed the risk that the state of affair might change
before performance they cannot use frustration as a defence. The degree of foreseeability required to exclude
the doctrine of frustration is a high one: there must be a real possibility (Edwinton).
• In Davis, the courts found that the circumstance of the delay, the material and labour shortage which
occurred was not unforeseeable and it was obvious at the time of the contract that these kinds of
things could arise. The possibility of enough labour/material not being available was “before their
eyes.”

Edwinton: “foreseeability will support the inference of risk assumption only hwere the supervening event is one
which any person of ordinary intelligence would regard as likely to occur, or…the contingency must be ‘one which
the parties could reasonably be thought to have foreseen as a real possibility.”

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à APPLY THE FACTS HERE – Was there a substantial degree of foreseeability?

Conclusion: Look at the facts, I find that there was/was not a frustrating event due to __________________.
à If frustration proceed to next step = #3

3. Was there any unjustice?
The doctrine of frustration is flexible; there may be circumstances where we might have to take justice into
consideration in the circumstance beyond the 3 factors laid out above. Assessing what is just is an underlying
principle (Edwinton).

4. What are the effects of Frustration?
Once frustration has been established, the Frustrated Contract Act helps us determine the effects of the common law.
The Frustrated Contract Act only deals with contracts within its scope. It lays out that the Act does not apply to (a)
Charter party or a contract for the carriage of goods by sea; (b) a contract of insurance; (c) Contracts entered into
before May 3, 1974. In those cases, you apply the common law.
à APPLY THE FACTS OF THE CASE – Is the contract covered by the Act? Does it include any of the laid out contracts?
**Key difference = Legislation allows you to recover expenses whereas common law does not**

a. Is the contract covered under the Frustrated Contract Act? [p. 41 of CAN]

Under the Act, parties are entitled to restitution from the other party for benefits created by the party’s
performance or part-performance of the contract. The restitution claimed is based on expenditure incurred in
performing the contract, the amount recoverable must include only reasonable expenditures. They are
relieved from fulfilling obligations under the contract that were required to be performed before the
frustration/avoidance but were not performed, except in so far as some other party to the contract has become
entitled to damages for consequential loss as result of the failure…
• In Capital Quality Homes, there was all the required elements of frustration due to the
implementation of the Planning Act. The courts dealt with the effect of frustration through the
Frustrated Contract Act. [p. 44 – how court dealt]

b. Is the contract exempted from the Frustrated Contract Act? [p. 41 of CAN]
• Ends the contract forthwith, without more and automatically
• Discharge (prospectively) the parties from future performance under contract
• Frustrating event does not give rise to claim for damages
• Partial performance of the contract PRIOR to frustration does not give rise to a restitutionary claim
in respect of that performance, P cannot recover as on a quantum meruit for the reasonable value of
such performance
• Where the is a legal right to receive payment prior to the frustrating event, that sum may be
recovered

Conclusion: This contract was/was not frustrated, there was/was not any unjustice, and the effects of frustration according to
_______Frustrated Contract Act OR common law _________ is __________________.

DURESS
Question: X is pleading that the contract signed has been obtained by duress, can X claim this as a defence?

Law:
The law protects weaker parties to a contract to ensure integrity of the contracting process through distinct doctrines in the
common law. One of the vitiating factors is duress by a coercion of will. For relief to be granted under duress, Pao On stated
that two conditions must be present:
1. Was there a coercion of will? (Pao On)
Coercion of will is a threat that leaves the victim no practical course but to give in. Pao On sets out a list of factors to
consider when determine coercion of will. These include protest, lack of reasonable outcomes to the victim,

18
independent advice, and subsequent steps to avoid the contract. Bell confirmed that these are not an exhaustive list of
factors but some to consider.
a. Did the victim protest? Not conclusive – is it just a complaint?
In Greater Fredericton, Greater Fredericton expressly stated in their letter that “your arbitrary
deadline has forced us to make funds available to Nav Canada under protest”

b. What are the alternatives that the victims could have sought? Important factor – not just an alternative – a
reasonable alternative?

c. Did the victim have the opportunity to seek independent advice? If yes, who was the advice from? An
independent source? When was the pressure exerted and when was the advice sought? Timing?
In Pao On, he had taken legal advice and took no steps to avoid the agreement prior to the claimant seeking
to enforce the guarantee.

d. Did the victim take subsequent steps to avoid the contract? Did the victim complain or take immediate
steps after the contract was entered into? Did they wait years?
à APPLY THE FACTS

2. Was there an illegitimacy of pressure?
There are controversies as to whether this condition is an independent requirement (Nav Canada). In determining
whether this can be satisfied, the factors that must be considered include: the nature of the pressure and the nature of
the demand.
a. What was the nature of the pressure?
i. Was a threat to the person? A threat to your reputation? Was there physical harm?

ii. Was it a threat to goods? Was it a threat to your property? Threat to burn your house down? Slash your
paintings?

iii. Was it a threat to your economic interest? Is your job at stake? Threat to go on strike?
à APPLY THE FACTS

b. What was the nature of the demand?
i. What is the effect of the demand? What is the impact to the victim?
ii. Was there good faith? à DOES NOT MATTER à The intention of the party does not matter. Good
faith is not a defence to duress (Nav Canada)
à APPLY THE FACTS

3. What is the remedy?
The effect of duress is that a contract is voidable. Under duress, damages are not recoverable.

Conclusion: Based on the analysis, I find that X can/cannot claim duress because ______________________________. The remedy that
X will receive is _____________________.

UNDUE INFLUENCE
Question: Can the victim claim undue influence to set aside the contract? What would be the effects?

Law:
Undue influence is “some unfair and improper conduct, some coercion from outside, some overreaching, some form of
cheating and generally, though not always, some personal advantage obtained by the wrongdoer (Alcord v. Skinner).

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Under the equitable doctrine of undue influence, contracts may be set aside when one party’s free will to contract has been
overborne by the other party where either the direct influence of party A, party B made a contract with party A or in cases of
lateral undue influence where as a result of the undue influence of A, B makes a contract with C (ie. financial institutions).
à APPLY THE FACTS – Is it direct or lateral undue influence?
à Lateral à 3rd party go to #3

The doctrine of undue influence is to protect the integrity of the contract and to protect against the abuse of confidence, trust,
and influence in the relationship between the parties.

Undue influence can be proven in different ways, either in (1) presumed or (2) actual.
1. P R ESU M ED U N D U E I N FLU EN C E

Here the influence of A on B exists as a feature of their relationship such as doctor/client, lawyer/client, parent/child, ect. They
are relationships that are founded on trust and confidence. To raise the presumption of undue influence, two things need to be
established.

1. Was there a confidential relationship?
A confidential relationship is one of trust and confidence. This can be established either by turning to the law or
demonstrating it positively on the facts.
a. Was it a relationship like parent/child, doctor/patient?
The law has stated that there are certain categories of relationship are irrefutable. Relationships such as
husband/wife are not included in the list of categories.

b. Can the victim demonstrate the domination of will and/or dependency positively on the facts? What are
the characteristics of the parties?
To find a confidential relationship, the victim has to establish that this relationship was one where the will of
the victim was dominated by the wrongdoer.

2. Was there a transaction not readily explicable by the relationship?
Here, there must be a transaction that calls for an explanation. The victim/plaintiff has to demonstrate that the
transaction can’t be explained by the nature of the relationship. This requirement puts a limit on the scope of the
relationship.

Conclusion:
Undue influence à Once both are established a presumption of undue influence is raised. The burden shifts to the wrongdoer
to prove that the complainant entered into the transaction freely. In other words, the wrongdoer has to rebut the presumption.
For the wrongdoer to rebut, he/she must show evidence that the victim/plaintiff was acting independently and had a full
appreciation of what they were doing (Geffen). They wrongdoer can showing that the victim/plaintiff sought independent
advice or undermining fact that gave rise to the presumption.

Once undue influence has been found and the wrongdoer was not able to rebut the presumption, the contract is voidable. The
remedies that the victim has the ability to be put back into the position that they were in prior to the contract. In these cases,
the bars to rescission apply, such as: restitution, affirmation, innocent BFPV.
A C TU A L U N D U E I N FLU EN C E
Actual undue influence is which the use of influence by A on B to bring about the contract is clear and deliberate and sometime
in the nature of a threat. In actual undue influence there is no need for a pre-existing relationship between the two parties. A
person relying on a plea of actual undue influence must show that:

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1. That the other party to the transaction had the capacity to influence the complainant
2. That the influence was exercised
3. That it’s exercise was undue
4. That its exercise brought about the transaction

If undue influence is actually proved it is not necessary to prove that the transaction was manifestly disadvantageous in order
to obtain relief.

Conclusion:

3. U N D U E I N FLU EN C E B Y A T H IRD P ER SO N
Question: Does this involve a third person? A bank or financial institution?

Law:
In situations where there is undue influence by a third person, is where one party seeks to avoid a contract on the ground of
undue influence by a third person, it must appear either that the third person was acting as the other party’s agent, or that the
other party had actual or constructive notice of the undue influence.
1. Was there a third person acting as the other party’s agent?

2. Did the other party have actual or constructive notice of the undue influence?
In Royal Bank of Scotland, the Court found that the creditor didn’t take reasonable steps to emphasize to the
guarantor of the risks involved. The bank should have ensured that the spouse had independent advice and
that they have formed a truly independent judgement for these types of transactions.
In Lewis v. Central Credit Union, the Court stated that when a party (ie. lender) is trying to enforce the
transaction, there needs to be evidence that the contract was the product of an informed and free mind in
order to rebut the presumption.

Conclusion:


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DOCTRINE OF UNCONSCIONABILITY
Question: Can the contract be set aside under the doctrine of unconscionability?

Law:
The doctrine of unconscionability is where there is an inequality of bargaining power in the formation of the contract and an
unfair deal has resulted. Inequality in the position of the parties arising out of ignorance, need/distress of the weaker party,
which left him in the power of the stronger party (Morrison; Harry).

There has been some debate as to what has been suggested for the test of unconscionability in Marshall and in Harry;
however, the most recent decision in Downer v. Pitcher sets out a two part test.
1. Has there been an inequality of bargaining power between the parties resulting from or created by a special
and significant disadvantage by some reason of some condition or circumstance that provides an opportunity
for the other party to take advantage of the party suffering from the disadvantage?

There needs to be an inequality of bargaining power between the parties resulting from or created by a special and
significant disadvantage by some reason of some condition or circumstance that provides an opportunity for the
other party to take advantage of the party suffering from the disadvantage; and

Inequality may arise from the personal or situational characteristics:
a. Is there personal inequality?
Personal inequality includes special and significant disadvantage resulting from age, immaturity, mental
weakness, ignorance resulting from lack of access to critical info or disability.
Downer, there was no personal special damage that existed between the parties. P was a self-
employed women who was capable of looking out for her own interests.
Morrison, the Court found that the lady was old and lacked experience in mortgaging giving rise to
inequality of bargaining power
Marshall, the Court found that the P was a senile man showing signs of brain damage from the
stroke and didn’t have a good understanding of the contract.

b. Is there situational inequality?
Situational inequality includes special and significant disadvantage resulting from severe financial need or
other pressure or dependence based on a trust or confidential relationship. Inequality of bargaining power
need not be a financial advantage.
Lloyds Banks v. Bundy, the Courts stated that the Mr. Bundy and the bank had a trusting
relationship. Mr. Bundy depended on the knowledge of the bank manager to ensure that he wasn’t
put in a situation where he wouldn’t be able to pay for the loan.

2. Has the other party unfairly or unconscientiously (in the sense of lacking conscience) takes advantage of that
opportunity?

In the second requirement, it must be established that the other party has unfairly or unconscientiously takes
advantage of that opportunity. Parties actions are unconscientious in that in gaining the advantage the other party
knew or ought, as a RP in those circumstance, to have known of the relief-seeker’s vulnerability. This can either be
actual or constructive knowledge.
Morrison, the Courts found that the deal was substantially unfair since she took on a large mortgage with no
way to pay it back, she wouldn’t receive any benefits from it, and the bank should have known that she was
entering into a terrible deal.
Marshall, the old man was incapable of protecting his interest, the price of the actual property and the price
for which it was bought was a significant difference
Harry, there was a substantially unfair deal when the market price of the boat was 4x the cost for which he
sold it. Additionally, the license attached to the boat was something very important which the buyer knew
and assured the seller he could get easily.

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Conclusion: I find that the party claiming relief has been/has not been taken advantage of __________________.
Has been taken advantage à The other party can rebut the claim of unconscionability by demonstrating that the:
1. Resulting transaction was not unfair in the sense that it was not improvident or otherwise did not in fact confer an
undue advantage, whether tangible or intangible, on the other party
2. Relief seeker has the benefit of relevant legal or other advice, knowing of the disadvantage, voluntarily chose to
proceed with the transaction anyway;
3. Other party took step to bring the unequal circumstances to the attention of the relief seeker or otherwise acted
reasonably to be protective of the relief-seeker’s vulnerability.
4. Recognized equitable defence apply.
After looking at these factors that could rebut the claim of unconscionability, I find that it can/cannot be rebutted because
_______________________.

Unconscionable transaction à Since there was a finding of unconscionability, the remedies that the victim could receive is a
contract that is voidable, rescission, equitable compensation, and if the statute applied additional remedies in which it grants.
In common law, the Court in Rick v. Brandsema, found that when rescission is unavailable because restitution, as a practical
matter, cannot be made, damages in the form of “equitable compensation” are imposed to provide relief to the wronged party.
In this case, it was an order for the husband to pay the wife an amount representing the different between the negotiated
“equalization payment and the wife’s entitlement under the Family Relations Act.
Consumer transactions? à Under the Business Practices & Consumer Protection Act, S.7-10, the Act may provide additional
remedies but strictly to consumer transaction not to every unconscionability scenario.

ILLEGALITY & PUBLIC POLICY
Law:
There are two types of illegality; statutory illegality or common law illegality.
ST A T U T O R Y ILLEG A LIT Y ?
Question: Is the statute illegal?

A statute may make the creation of a particular type of contract illegal or unlawful. Additionally, it may make performance of
that contract illegal. In considering whether a contract is illegal it is important to consider the purpose of the statute and
whether, in the light of all the surrounding circumstances, declaring the given contract illegal advances the objects of the
statutes.

The factors to take into account include: the serious consequences of invalidating a contract, the social utility of such
consequences, the class of people for whom the statutory prohibition was directed to.

Conclusion: The effect of statutory illegality depends on the terms of the statute. The statute will usually spell out the effect;
however, if silent, the Court have to make a judgement by looking at the objective and the effect of making it unenforceable.
I S ILLEG A LIT Y U N D ER C O M M O N LA W ?
Question: Is the contract contrary to Canadian public policy? Is it a restraint of trade?

Law:
1. What kind of illegal contract is it?
Contract’s in restraint of trade à go to B
Contracts to commit or perform a legal wrong
Contract prejudicial to good public administration or the administration of justice
Contract prejudicial to good foreign matters [ie. contract to an enemy state; contract to raise money
for terrorist organizations]

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Contracts which involve or encourage immorality
Contract affecting marriage [ie. not re-marry]

a.Is there a contract of restraint of trade? Restrictive covenant?
Yes à Explain why – What does the contract say that shows restraint of trade? What are the words framed?
No à Analysis ends

b. What would the function approach determine? What would the formalist approach determine?
(Rhebergen v. Creston)
Functional = focus is on the effect/function of the clause in practice over its form; most popular today
o Whether the clause at issue attempts to, or effectively does restrain trade, in which case it
will be captured and subject to reasonable scrutiny (Rhebergen).
Formalist = clause must be structured as a prohibition, mere disincentives are not enough to trigger
the doctrine
o Clause must be structured as to prohibition against competition to constitute ‘restraint.’
Mere disincentives to post-emplyment are not sufficient to trigger the doctrine, even if those
disincentives operate as effectively at dissuading competitive conduct and participation in
the marketplace as a prohibition(Rhebergen).

2. Is the clause ambiguous?
If the clause is ambiguous, then it is prima facie unenforceable.
In Rhebergen v. Creston, the courts define restrictive covenants and explained that an ambiguous
restrictive covenant will be prima facie unenforceable because the party seeking enforcement will be
unable to demonstrate reasonableness in the face of ambiguity.

Conclusion:
Yes, restraint on trade à I find from the facts that the contract is a restraint of trade, therefore, it is unenforceable unless it
reasonable in the interest of the contracting parties AND reasonable in the interest of the public.
a. Is it reasonable from the perspective of both parties?
Consider the scope of the clause (what it covers); the time/duration of the clause; subject matter

b. Is it reasonable for the interests of the public?
Consider the subject matter (ie. unique talent that should be available to the world at large, or its special
industry with a monopoly that should be open for competition, ect)
Thorsten, the public have an interest in every person’s carrying on his trade freely: so has the
individual. All interference with individual liberty of action in trading, and all restraints of trade of
themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the
general rule.

c. What is reasonableness? (Dreco Energy)
Test of reasonableness is measured at the time the contract is negotiated and executed.
Relative bargaining strength of the parties needs to be considered
Too broad? Court may sever parts of the covenant but the Courts are reluctant to do this and thus
make over the contract as between the parties.

In conclusion, I find that the contract is unenforceable since it is not reasonable interest of the contracting parties nor
reasonable in the interest of the public. Therefore, the general basic effect of illegality is to render the contract unenforceable.
In other words, no action can be founded on the contract. It is a fundamental legal principle the ex turpi causa noon aritur
action. The courts may also severe the illegal clause using either notional or blue pencil severance (KRG Insurance). Notional
includes interpreting the contract to avoid illegality, which the courts are hesitant to use. Blue pencil is where the court is
striking out the provision of the contract that made it unenforceable (Cora Franchise Group).

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Property à In general property, including money that has been transferred under an illegal contract cannot be recovered. The
courts may; however, allow a party to recover property transferred under an illegal contract where: (a) both parties are not
equally blameworthy, the party seeking to recover repented of the illegality before execution of the contract, and the party
seeking recover is able to base the claim on without relying on the illegal contract (ie. in tort, restitution, trust).

REMEDIES FOR BREACH OF CONTRACT

Question: What is the most appropriate remedy in this case?

Law:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in
respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, for
example, according to the usual course of things from such a breach of contract itself, OR such as may reasonably be supposed
to have been in the contemplation of both parties, at the time they made the contract, as the probably result of the breach of it
(Hadley v. Baxendale).

The rule of the common law is, where a party sustains a loss by reason of a breach of contract, he is, so money can do it, to be
placed in the same situation, with respect to damages, as if the contract had been performed (Baron Parke).

The steps taken by the court to determine damages:
1. Determine that the damages have been caused by the breach (loss should be direct results of breach)
2. Identify the type of loss that was suffered
3. Establish that the loss was not too remote (Hadley)
4. Quantify the loss to compensate the victim (Jarvis)
5. *Mitigation of damages – after the breach. Burden is on the D.
C A U SA TIO N
Question: Where the damages caused by the breach?

Breach must be an effective cause of loss and cannot be something trivial.
In breach of fiduciary duties, where a party can show that but for the relevant breach it would not have entered into a contract,
that party is freed from the burden or benefit of the rest of the bargain. The wronged party is entitled to be restored to the pre-
transaction status quo.

In breach of contract, the more appropriate test is that the damages were directly caused by the breach. It has to be direct to
the kind of damage but not the extent of the damage. For example, the parties envision lost profit – the amount of profit is
irrelevant.

For there to be a break in the change of causation, the true cause of the loss must be the conduct of the claimant rather than
the breach of contract on the part of the defendant; if the breach of contract by the defendant and the claimant’s subsequent
conducts are concurrent causes, it must be unlikely that the chain of causation will be broken.
In circumstances where the defendant’s breach of contract remains an effective cause of the loss, at least ordinarily, the chain
of causation will not be broken.

The claimant’s state of knowledge at the time of and following the D’s breach of contract is likely to be a factor of very great
significance. The more actual knowledge that the claimant has of the breach, the dangerousness of the situation, and of the
need to take appropriate remedial measure, the greater the likelihood that the chain of causation will be broke.
In Borealis AB v. Geogas, Borealis was suing G for contamination of the feed stock which cause damages to their
machine. The machine alarmed them of the higher than normal pH yet they failed to react to the alarm. The courts

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found that even though their reaction to the alarm was slow, it was not unreasonable, thus not breaking the chain of
causation.
C A TEG O R IZA TIO N O F LO SS
Question: What type of loss has the P suffered?

Law:
In general, a plaintiff can recover damages for losses that he has suffered, and not profit which the defendant has made (AG v.
Blake). The types of categories of interest:
1. Expectation loss
2. Reliance loss
3. Restitutionary interest
The application of the three-fold classification of interests should be done with caution. First, the list of categories is not an
exhaustive list. Secondly, interest may overlap or be none of the three listed categories.
E X P ECT A T IO N L O SS [ FO R W A R D ]
Law:
Expectation loss deals with the kind of loss (type of loss), that the P would have received if the contract had not been breached
(Jarvis). This is the weakest claim to protection because it represents something that the victim didn’t have before the
contract was made.
The different ways to quantify expectation damages:
Profit
Income
Enjoyment [Fidler v. Sunlife – Loss of Enjoyment Test] à [p. 65 CAN]
Change

Conclusion:
In this case, the P can/cannot rely on expectation loss because ____________________.
To rebut expectation damages: show that party would not have earned as much or would have lost money. (Sunshine
Vacation Villas).
R ELIA N C E L O SS [B A CKW A R D ]
Law:
Reliance loss compensates the victim for losses they have actually suffered as a result of relying on the contract. Victim cannot
recover wasted expenditures in order to escape a bad bargain (Bowlay). Reliance loss cannot put the victim of the contract in
a better position than if the contract was performed.

Furthermore, P is permitted to claim wasted expenditure in reliance on the contract as an item of damage in additional to or in
place of claiming for loss of profits, but he will not recover for expenditures which he would not have recouped even if the
contract had been performed.
In McRae v. Commonwealth, the only damages that they could recover were the expenses to do with specialized
salvaging equipment, wages, fuel as there were expenditures that relied solely on the promise. They Courts stated that
they could not recover capital expenditures, things that would have been spent anyways. For example, general boat
maintenance, running of electricity.
à APPLY FACTS OF THE CASE – Is it similar to McRae?

In principle, the plaintiff has a free choice whether to quantify his loss on an expectation or reliance basis. It is possible for a
plaintiff to claim for both expectation and reliance loss.
In Bowley v. Domtar, Bowlay could not sue for expectation as they were already in a situation where they were losing
money, therefore, they claimed reliance damages. However, the court held that P is only entitled to reliance damages

26
that don’t exceed expectation. Since if P received all reliance damages, he would have received more money than what
he expected even if contract were successfully performed.
à APPLY FACTS OF THE CASE – Is it a bad bargain?

Conclusion: In this case, the P can/cannot rely on reliance loss because ____________________.
To rebut reliance damages: show that party would have lost money in any event (Sunshine Vacation Villas).
R ESTITU TIO N A R Y I N T ER EST
Restitutionary interest is compensation based on the profit that the wrongdoer made by the breach. Wrongdoer has been
unjustly enriched so that the D may have to pay the victim a sum of money in respect to a gain made as a result of the breach.

Is the P able to profit from the breach of contract?
In AG v. Blake, justified granting restitutionary damages in one way by stating that it is a tool to prevent and
discourage people from acting in a wrongful way. Lord Bingham suggests that restitutionary damages are only
available in exceptional circumstances where there is a legitimate and continuing interest in preventing the D from
undertaking the very profit making activities that arose from the breach.

Conclusion: In this case, the P can/cannot rely on restitutionary damages because ____________________.

R EM O TEN ESS O F D A M A G ES
Remoteness deals with what kind of damage the P is entitled to recover compensation from. It is important to apply the test of
remoteness first before one turns to assessing or measuring damages. “Before one can consider the principle on which one
should calculate the damages to which a P is entitled as compensation for loss, it is necessary to decide for what kind of loss he
is entitled to compensation. A correct description of the loss for which the valuer is liable must precede any consideration of
the measure of damages (South Australia Asset Management).

Damages must be caused by the breach (there must be a causal connection between the D’s breach and the P’s loss) and must be
proven (Borealis.
Damages may be pecuniary (money) or non-pecuniary (forms of emotional distress).

Question: Would allowing the P’s claim represent a fair and reasonable allocation of the risks of the transaction between the
parties? Was the loss too remote?

Law:
The function of the rules on remoteness is to (1) prevent unfair surprises to the D; (2) ensure the fair allocation of the risk of
the transaction; (3) avoid any overly chilling effects on useful activities by the treat of unlimited liability.

Test for remoteness is a type or kind of loss not too remote a consequence of breach of contract if, at the time of contracting
(and on the assumption that the parties actually foresaw the breach in question), it was within their reasonable
contemplation as a not unlikely result of that breach.
In Hadley v. Baxendale, the P’s mill had a broken crank shaft, which they got the D’s to fix. The arrival of the fixed
crank shaft was delayed and P sues for lost profits. The P’s claim failed because it was not within the reasonable
contemplation of the parties that the mill would have to shut down their production. It is unusual for mills not to have
a backup shaft.
Contrary to Hadley, in Victoria Laundry, the Courts found that it was not in the contemplation that they would lose
their special contract with the government; however, what did satisfy remoteness was that it that they delay would
cause loss of ordinary profits.
In Scyrup, it was a clear case that the damage was not too remote since the tractor company had specific knowledge
that the parts for the tractor was important and necessary for them to complete their job.

27

It is enough that the loss claimed ought to have been contemplated. A loss is not too remote simply because the amount of
the extent of the loss (kind) could not have been anticipated.

It is too be noted that over the years and throughout the jurisprudence “foreseeability” was a consideration for remoteness.
However, today the Court in Heron II, has eliminated that requirement.
In Victoria Laundry, the Court approached remoteness on the basis of “reasonable foreseeability.” Furthermore, the
case addressed that there are two types of knowledge: imputed and actual.
Heron II: Eliminating “foreseeability”
In the case of a breach of contract, the Court has to consider whether the consequences were of such a kind that a
reasonable man, at the time of making the contract, would contemplate them as being of a very substantial degree of
probability. Not merely "on the cards" because that may be too low: but as being "not unlikely to occur" (383A, 388F): or
"likely to result or at least not unlikely to result" (406F): or "liable to result" (410G): or that there was a "real danger" or
"serious possibility" of them occurring

à APPLY THE FACTS

Conclusion: I find that the damage was/was not too remote because ___________________________.

Q U A N T IFYIN G /A SSESSIN G D A M A G ES
The measurement of damages deals with the principles upon which damages must be evaluated or quantified in terms of
money.
The rule of the common law is, that where a party sustains a loss by reason of breach of contract, he is, so far as money can do
it, to be placed in the same situation, with respect to damages, as if the contract had been performed (Robinson v. Harman).
Damages other aims include vindication of rights to damages, disgorgement of benefits (restitionary damages), and
punishment and deterrence.

Question: What is the appropriate assessment of damages?

Law:
Damages that are owed to the P will be assessed at the time the contract is breached. However, if P is claiming damages in lieu
of specific performance, then damages will be assessed at the date of trial (Southcott Estates).
There are many challenges in measuring damages. For example, non=pecuniary losses are a difficult area to assess (Jarvis).
Even in some cases where it is difficult to put monetary value on what the P has lost, a wrongdoer, is no relieved of its
obligation to pay damages (Chaplin).
C O ST O F C O M PLETIO N V . D IFFER EN C E IN V A LU E
Question: What is the different between the ‘cost of completion’ and ‘diminution of value’ approaches to quantifying
damages?

Law:
Cost of completion is the starting point/ordinary measure in contract law; the whole point is to correct a defective contract.
However, while assessing damages, the courts will look to the overall fairness (where the conduct of the D may be relevant).

1. Is cost of completion or difference in value?
Cost of completion is the cost of buying substitute performance from another including undoing any defective
performance. Whereas, difference in value, is the market value of the performance the contract breakers undertook
minus that actually given.

28
In Groves v. John Wunder, the majority looked at the D’s conduct which was willful and in bad faith. The D
had the intention to breach the contract by doing exactly what he was told not to do. The majority stated that
“the owner is entitled to compensation for what he has lost – the work or structure which he has been
promised, paid for, and which he has been deprived by the contractor’s breach.
In Groves v. John Wunder, the dissent took an alternative approach. Thought that damages given in a
difference of value approach would compensate the plaintiff better. Since there was no diminished value of
the property by giving the plaintiff more money is to go beyond what the parties had in mind, thus
overcompensating him. Additionally, they stating that you should not fulfill a contract when it is economically
inefficient.

2. Is the cost of completion unreasonable?
If the party placed in a difficult situation by reason of the breach of duty owed to him and has acted reasonably in the
adoption of remedial measures, he should not be held disentitled from recovering the cost of such measure merely
because the party in breach can suggest that other measures are less burdensome to him might have been taken.
In Nu-West Homes, the Courts stated that the owner of the house is entitled to the money which will permit
him to complete (cost of completion approach) unless the cost of completion is grossly and unfairly out of
proportion.
Ruxley Electronic – the Courts found that diminution in value was the appropriate measure. “If a building is
constructed so defectively that it is of no use for its designed purpose the owner may have little difficulty in
establishing that his loss is the necessary cost of reconstructing.” The choice will be based on what is
reasonable.

Conclusion:
On the facts of the case, I find that the Courts should use a cost of completion approach ________________.
On the facts of the case, I find that apply a cost of completion approach would be unreasonable; therefore, a difference in value
would be more appropriate because ______________.

M IT IG A T IO N
Question: Should the P have mitigated their losses?

Law:
Mitigation comes after the breach, and the burden falls on the D to show that P has failed to mitigate on the facts. Law imposes
a duty on P to mitigate their losses. Two aspects of the duty include that a P must take all reasonable steps to reduce or
constrain his loss and it the P must not act unreasonable so as to increase his loss.

Additionally, a plaintiff need not take all possible steps to reduce his losses. A plaintiff need not put his money to an
unreasonable risk including a risk not present in the initial transaction in endeavoring to mitigate his losses.

The duty to mitigate prevails over a please for specific performance unless there is a substantial and legitimate interest
represented by specific performance.
In Southcott Estates, the Court found that the P still had a duty to mitigate since he had the ability to purchase other
properties. Additionally, the property itself was not unique in a way that should have led to specific performance
claim.
à APPLY THE FACTS OF THE CASE – Is there any evidence of mitigation?

Conclusion: The P has taken/not taken these ______________________ steps to mitigate his losses.

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CONTRACTS

1. Were there statements or representations?

4. Were the statements material (inducement)?

IS THIS INNOCENT, NEGLIGENT, OR FRAUDULENT MISREPRESENTATION?

à APPLY THE FACTS OF THE CASE AT HAND

WHAT ARE THE APPROPRIATE REMEDIES?

WHAT ARE THE EFFECTS OF THE RESCISSION?

**only applies to terms and NOT representations**

CLASSIFICATION OF TERMS IN AN AGREEMENT

EXPRESSED OR IMPLIED TERMS

**Knowledge is KEY in unilateral mistake**

COMMON MISTAKE [MISTAKEN ASSUMPTIONS]

**Nothing wrong with the terms of the contract**

STEP 1: COMMON LAW

DIFFERENT FROM MISTAKEN ASSUMPTIONS

Question: Does this involve a third person? A bank or financial institution?

ILLEGALITY & PUBLIC POLICY

Question: Is the statute illegal?

Question: Is the contract contrary to Canadian public policy? Is it a restraint of trade?

REMEDIES FOR BREACH OF CONTRACT

Question: Where the damages caused by the breach?

C A TEG O R IZA TIO N O F LO SS

Question: What type of loss has the P suffered?

R ESTITU TIO N A R Y I N T ER EST

Question: Should the P have mitigated their losses?

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only applies to terms and NOT representations

Knowledge is KEY in unilateral mistake

Nothing wrong with the terms of the contract