CONTRACTS

Prof. Ramshaw
Fall 2018

State the law, state the rebuttals and exceptions, apply to the facts
MacDougall, 17-31

Contracts:
● Were traditionally viewed as fundamentally intangible things that were sometimes
given documentary form by being put into writing.
● A contract cannot be created without consent of both parties
● But parties can unintentionally create contracts under law
● Parties can also believe they are creating a contract but none exists under law.

There is no firm criteria for what a contract must include, but usually a contract contains:
1. Offer
a. Indicates readiness to enter contract if other party agrees
b. Sets terms of contract
2. Acceptance
a. Agreement to be bound by terms in offer
b. Timing is important; creates contract, time for assessment of consideration,
damages, mistakes, etc.
3. Certainty of terms
a. Identifies clearly what was agreed on
4. Intention to create legal obligation
a. Shows intention of parties to have a legally binding agreement

More doubt as to whether consensus ad idem (joint consent) is a separate test, or if it is an

aspect of one or more of the above categories. Additionally, there is ambiguity between the
categories as they have a tendency to bleed into one another.

E.g. Ko v Hillview Homes [2012] ABCA

Validity of contract in question, debate if it is because of lack of offer, or lack of certainty of
terms.

Mistake, Duress, Illegality: Can also affect the legal validity of a contract. Can be seen as
factors that must be absent for a contract to be valid.
(a) Mistake; two parties sign a contract for the sale of a bottle of wine, unbeknownst to
them, the bottle has been destroyed. Contract is considered void because it is founded
on error
(b) Duress; one party has been forced through violence or coercion to sign the contract
making it void because there is no consensus ad idem.
(c) Illegality; does the contract violate public policy? Does this warrant termination?
Contacts can also not be created by those who lack legal capacity to do so. (i.e. children,
individuals with cognitive impairments)

Consideration, while an important part of contracts, becomes more important as a mechanism

of enforcement of the primary obligations. However, consideration must be present, so it is
not entirely removed from contract formation.

1 Offer and Acceptance

Why an Offer is Important:

If a contract is to exist, there must be acceptance. But there cannot be acceptance without an
offer. Offers set the terms of the (eventual) contract.

In a bilateral contract, where both parties have obligations, offer determines the obligations of
both parties, even though the offer is made by one party.

In a unilateral contract, where one party had obligations, the offer is usually made by the
party that will have the obligations.

Must the Offer come from a Single Party?:

Fundamental principle of contract law is that an offer must come from one party. However,
there have been some cases that challenge that principal as it is difficult to accept that one
party was solely responsible for all the terms of a contract, or that all terms were included in
the offer at all.

E.g. Butler Machine Tool Co. v Ex-Cell-O Corp [1979]

Sellers quoted a prince for a machine the buyers had ordered using their own forms which a a
fixed price in the terms and conditions. Resulted in the terms and conditions stating one price,
and the contract another.

Lord Denning: “It is a mistake to think all contracts can be analysed into the form of offer
and acceptance, and that you should look the correspondence as a whole and the conduct of
the parties and see therefrom whether the parties have come to an agreement on everything
that was material”

Demonstrates how terms can be included in a contract that were not included in the offer.
Some terms can be included in the “acceptance”, which means courts could play a large role
in in formulating the contract for the parties.

E.g. Gibson v Manchester City Council [1979]

Rejection of approach taken by Lord Denning in Butler Machine Tools, upholds principle
that all terms originate in offer.
While there may be exceptional contracts, Lord Wilberforce states that “English law, having
committed itself to a rather technical and schematic doctrine of contract, in application takes
a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots
of offer, acceptance, and consideration”

It is also possible that parties may continue to negotiate after the law states they have created
a contract via offer and acceptance. Negotiating parties are rarely aware of the precise way
the law expects them to think and behave.

Incorporating Proposals of Another into One’s Own Offer

(a) Where both parties have been involved in the negotiation of the terms, one may say
this is a joint offer. Legally, the offer still comes from one party, the offeror, to the
other party, the offeree.

Express and Implied Terms

(a) Most contracts have terms that are implied, as well as clearly expressed. Implication
of terms into a contract can be done in a number of ways, but is most commonly done
through statute.

Contracts Created by Conduct, not Negotiations

(a) Contract is created by the actual performance of one or both parties. More difficult to
analyze in offer/acceptance structure.
(b) Contracts created by conduct can also cover pre-contractual performance

Determining Who Makes the Offer

(a) Sale of goods; when is the offer? Advertisement of product? Placing product on the
shelves? When a customer picks up item? When the item is brought to the till?
(i) Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953]
Court ruled that the offer was the customer taking the goods up to the till, and
the sale of goods was the acceptance.
(ii) R v Dawood [1975]
Woman was convicted of theft for putting two items of clothing with seperate
price tags on the same hanger and removing one of the price tags. Cashier
assumed it was one item with with one price tag and scanned items.
(1) Majority: upholds Boots ratio that customer makes the offer, thus sets
terms of price
(2) Dissent: concerned about the ‘mischief’ that upholding Boots ratio
could cause. Argued that advertisement of store prices is and offer, and
customer accepts price by taking the items to cash and paying

Offer vs. Invitation to Treat

Negotiations can produce communications that precede the offer. Such prior statements do
not in themselves constitute and offer, but are invitations to treat and have no legal
significance (except in Contract A/Contract B situation).
Invitation to treat cannot directly lead to a contract, i.e. saying “yes” will not create a
contract. However some of the terms that are communicated in an invitation to treat may
become part of the terms of the contract. Can also be the source of representations or
assumptions, that if untrue or baseless, can affect the continued validity of the contract by
producing mistakes or misrepresentations. May also produce information that is the basis of a
claim for certain types of damages.

Intention cannot be inferred, must be legally determined upon the words and actions of the
parties, making the distinction between an invitation to treat and an offer difficult.

Factors to Distinguish an Invitation to Treat from an Offer

(a) Whether all the details of the eventual contract are clear or can be worked out from
communications made.
(i) If there is uncertainty of terms, then it is an invitation to treat; not bulletproof,
as courts can supply missing details allowing some leeway.
(b) Whether treating the communication as an offer could lead to an absurdity.
(i) E.g. If an offer would lead to multiple contracts for the same item or
opportunity.
(ii) HOWEVER, just because treating a communication like an offer may lead to
multiple contracts does not prevent the law from finding that the
communication is an offer. See Carlill v Carbolic Smoke Ball Co. [1893]

Contract A/Contract B
It is possible for a communication to be both an invitation to treat and an offer. Common in
tendering situations, an invitation to tenders may involve rules and procedures, and often
calls for a payment. Practice most often seen in construction industry.

Invitation to tender, to the extent it promises that certain rules and procedures will be
followed, constitutes not just an invitation to to tender, but also an offer to follow those rules
and procedures. When would-be contractors submit tenders, they accept the offer, thus
producing contract A (KA). Contract B (KB) is formed when an offer (by contractors) is
accepted.

Terms and procedures in contract A can be difficult to determine, and the obligations
produced may be short lived.

E.g Double N Earthmovers Ltd v Edmonton [2007]

Conditions of tender stated that equipment must be 1980 or newer and company must present
serial # at bid. City accepted bid from Sureway, Sureway had some equipment that was 1979.
Conditions also said that City could negotiate with the lowest compliant bidders after initial
evaluation. Double N complained that city had breached KA obligations.
SCC rejects argument that Edmonton had breached KA obligations as K did not require city
to investigate bids made by others. Sureway’s failure to meet KB obligations (having all post-
1980 equipment) is not actionable by Double N, as they are not privy to KB, only KA, which
was terminated with the creation of KB.

To Whom an Offer is Made

Only the person to whom the offer is made (offeree) may accept. If X makes offer to Y, but
Z accepts, no contract.

Courts can prevent a person from accepting an offer in an advertisement if a reasonable

person would not suppose that such person would have seen the ad that constitutes the offer.
Makers of general offers have some duty to limit the offer expressly as to avoid finding
themselves in contracts with unexpected persons.

Termination of Offer
Offer can be terminated by action of offeror (revocation), and action of offeree (refection), or
lapse of time.
(a) Offer gives offeree an ‘election’: accept/reject
(b) Offeror can revoke the offer, thus revoking the election IF the offeree has not yet
accepted.
(c) Lapse in time cannot confirm an election result of status quo ante (no contract)

1. Revocation by Offeror
a. Offeror can terminate via revocation. Revocation can be done in any way as
long as it is communicated.
b. Communication can take any form and can be in multiple statements, but there
MUST be communication. Absent communication does not constitute
revocation, however communication can be implied.
2. Revoking via Indirect Communication
a. Dickinson v Dodds [1876]; neither principle or authority that states that there
must be express withdrawal. Only requires continuing offer until time of
acceptance.
b. Communication to large groups; as long as offeror uses approx. same method
of communication, revocation is effective even if not all offerees see
revocation.
3. Early Revocation
a. Offer can be revoked at any time before acceptance. Until an offer is accepted
and because a contract there is no contractual obligation to keep the offer
open.
b. Early revocation can also come about by the death of the offeror. Offers
cannot be accepted once the offeror is dead.
 4. Option Contracts
a. If an offeree wants an offer to remain open for a promised period the the
offeree should use an option contract to ensure the offer itself becomes the
subject of a preliminary contract. Can be breached.
5. Unilateral Contracts
a. Offer is accepted by the completion of actions, not a simple “yes”; cannot
revoke offer once preparation had begun, or the actions have started.
i. E.g. Paying installments on a car; offer is accepted when the payments
are complete, but the offeror cannot revoke the offer to sell the car
once payments have begun.
ii. Errington v Errington [1952] Mr. Errington promised his children a
house as long as they payed the installment loan. Mrs. Errington
attempted to revoke the offer following death of her husband, but as
the Errington children had begun paying, she could not revoke the
contract.
b. Unclear as to why this is the way the law functions, aside from perhaps a
general idea of fairness. No clear legal theory to support.

Lefkowitz v Great Minneapolis Surplus Store [1957]

Facts: Defendant had refused to sell the Plaintiff a specific fur piece that had been advertised
in the newspaper. Advertisement as follows:

Saturday 9 A.M. Sharp 3 Brand New Fur Coats Worth to $100.00 First Come First
Served $1 Each

On April 13, the defendant again published an advertisement in the same newspaper as
follows:

Saturday 9 A.M. 2 Brand New Pastel Mink 3-Skin Scarfs Selling for $89.50
Out they go Saturday. Each ... $1.00
1 Black Lapin Stole Beautiful, worth $139.50 ... $1.00 First Come First Served

On respective saturdays, Plaintiff was the first to present himself at the counter, denied sale
because defendant had a “house rule” that the offer in the newspaper was intended for women
and sales would not be made to men. Plaintiff aware of rule on second attempt to purchase.
Defendant claims advertisement was a unilateral offer, which could be withdrawn at any
time.

Issues:
(a) Does the advertisement constitute a unilateral offer or an invitation to treat?

Ratio: Appeal allowed

 (a) Relies on precedent to state that newspaper advertisements can constitute an offer
which acceptance of the offer produces a contract. Offer should be clear, definite, and
explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of
which will complete the contract.
(b) Clear terms, clear intent to bind, thus advertisement is a unilateral contract and offeror
cannot alter terms.

Great Wall Construction Ltd. v Lulu Island Winery Ltd. [2016] BCCA
Facts: Email containing a clear and unambiguous withdrawal letter sent to withdraw offer,
not seen by plaintiff or council. Plaintiff wants ability to accept offer as it stood prior to
withdrawal.

Issue:
(a) Does the withdrawal of an offer of settlement communicate only via email that the
recipient did not see prevent the offer from being accepted? Is it a valid withdrawal
despite never being read?
(b) Is email a sufficient delivery method?

Held: Found for defendant.

Ratio:
(a) There is no requirement that the acceptance or the withdrawal of an offer to settle be
in writing or be served, thus email is an accepted mechanism of withdrawal, unless K
specifies explicitly otherwise.
(b) Must be legitimate expectations that correspondence will be read. Cannot notify of
withdrawal via means that are not expected to be read.

Rejection of the Offer by Offeree

An offeree can elect to terminate an offer by rejection. No specified way to communicate
this, and need not be via words (i.e. action is acceptable).

Rejection can also occur through counter-offers. Once a counter-offer is made, the first offer
is terminated. However an offer can be revived. In Livingstone v Evans the original offeror
responded to a counter offer by stating that he “cannot reduce price”, which the courts took to
be a revival of his original offer of sale.

Requests for clarification do not constitute rejection, although it can be difficult to

distinguish. See Stevenson, Jacques & co. v McLean; question of if terms could be modified
(not asking for the terms to be modified) was clarification, not rejection, thus, offer stands.

Lapse of Time
(a) Lapse of Reasonable Time
(i) Offers are not indefinite, passage of time will eventually cause an offer to be
terminated. Can be explicit in terms of the offer (i.e. offer expires in five
 weeks, or on November 10, 2018). Once time arrives, offer is dead unless
renewed by Offeror.
(ii) Determining reasonable time is difficult and is decided based on totality of
circumstance
(1) Barrick v Clark [1950]: Clark wanted to purchase land from Barrick,
Barrick sent offer on November 15, 1950. Clark was away, so his wife
responded requesting offer be held open until Clark returned. Barrick
sold property on 3 December (prior to Clarks return). Clark attempted
to accept after 3 December. Court found that offer was closed.
a) Offeror sets time expiry, not offeree. Upon the offeree to accept
in a reasonable timeframe.
(b) Lapse Viewed as an Implied Rejection
(i) Can also view lapse of time as an implied rejection by the offeree
(ii) Would mean that the same offer to multiple people may lapse at different
times

What Constitutes Acceptance?

(1) Pivotal Role of Acceptance
(a) When acceptance occurs, contract is formed. When consideration and
intention to create legal relations is assessed. Some damages and
consequences for breach also set.
(2) Acceptance as a Way of Saying “Yes”
(a) Acceptance is the legal way of saying “yes” to an offer. Anything more or
less than a “yes” is likely a counter-offer. Must also be made by the offeree, if
made by another, may be an invitation to treat.
(b) How the offeree is permitted to accept is determined by the offeror and is
notionally part of the offer itself.
(c) Alteration of the terms by offeree is not acceptance, any additions or
subtractions would likely constitute a counter offer.
(i) Some exceptions; Canada Square Corp. v Versafood Services Ltd.
[1981]; offeree added “subject to approval of” a third party, held that
this was wanted by both parties, thus was a condition of the contract
(in a sense, was mean to be part of the original offer).
(3) Acceptance by Actions Stipulated in the Offer
(a) Offer may call for acceptance to be in a particular form or to be in writing.
Generally only effective if made in accordance to the prescribed procedure in
offer
(b) Can require completion of performance; when performance is complete,
unilateral contract comes into existence (all contractual obligations are now on
the offeror).
(c) Close approximations of required actions can constitute acceptance if the
offeror has prevented the offeree from performing exactly what is asked.
 (4) Acceptance by Actions Not Stipulated in the Offer
(a) Acceptance can take the form of action even if it is not stipulated in the offer;
word and actions can signal will to be bound (i.e billing according to contract
without having actually said “yes”). Additionally, if both parties behave as is
bound, may be binding contract without explicit acceptance
(5) Electronic and Internet Contracts
(a) Century 21 Canada LP v Rogers Communications Inc. [2015] BCSC
(i) Zoocasa set up web page that accessed Century 21 (C21)’s website and
replicated information on their own site. C21 claims the replication is
prohibited by the Terms of Use on their homepage. Terms were located
at the bottom of the website and they were not drawn to the attention of
users in anyway.
(ii) Zoocasa conceded they were aware the Terms set by C21, but argued
that C21 was attempting to impose a unilateral contract; information
available on a webpage cannot be binding unless there is some
affirmative action by the user; simply accessing web page does not
constitute affirmative action
(iii) Court held that continuing deeper past the “home page” had implied
that the user has accepted the terms of the contract
(iv) Court notes three main categories that have been developed to deal
with internet contracts
1) Shrink-wrap agreements: using software means you accept
terms listed in manuel
2) Click-wrap: clicking “I accept” when using program for first
time is acceptance
3) Browse-wrap: Terms are listed at top of page, continued use
means you accept. To be properly enforceable, must give the
reader opportunity to read the terms before deeming the
consumers use of the website as acceptance
(v) All three have requirement to give notice; similar to principal in
standard contract law
(vi) Court did not address what is proper notice (see North American
Systemshop ltd. v King)

Communication of Acceptance
(1) General Need for Communication
(a) Generally, acceptance must be communicated to be effective. How this is done
is somewhat defined by the offeror in making the offer. Offers can stipulate
that acceptance must be communicated via a specific person or in a particular
way.
(b) If offer stipulates offer must be accepted in a particular way, contract is
formed as soon as offeree does the act in question, regardless of if the offeror
is aware of that fact.
 (c) If offeror has not stated that only one method of acceptance is binding, other
methods are acceptable so long as they are not less advantageous to the offeror
are effective.
(2) Communication by Machine
(a) As long as acceptance reached the machinery or facilities in the offeror’s
control, it has been communicated, even if offeror has not read/listened to the
message
(b) Not applicable if email/machine is not typically used by person
(c) If communication is “cut off” or interrupted by technical error that occurs
before the words of acceptance are made, no contract. Similar rule for
indistinct communication; no contract until second utterance. MUST ask for
clarification before acceptance; accepting an indistinct communication forms a
valid contract, and any issues that arise are handled within the terms of the
contract
(d) Offer can specify that communication is dependent on offeror actually reading
communication of acceptance; then that contract governs
(3) Communication by Post--“the Postal Acceptance Rule”
(a) Acceptance by post occurs when the letter is placed in care of post office
(b) Rule is based on the historical period were the post office was the fasted and
most reliable, and is contextually tied to the size of England (small, maximum
one to two day delay). Post was also a government agency, seen to be able to
be an agent for both parties. Unclear why the rule still remains.
(4) Inapplicability of the Postal Acceptance Rule
(a) Has rather drastic consequences for the offeror; has made courts reluctant to
enforce. Does not apply when:
(i) Express terms of offer state that communication must reach offeror for
acceptance to be effective
(ii) Application would produce absurdity or inconvenience
(b) No equivalent rule for termination
(5) Where Does Communication Occur?
(a) Electronic communication makes it complicated to determine where a contract
is formed (i.e. England, Canada, BC, Manitoba) and thus what law applies to
enforce contract
(b) Usual rule; where the offeror is expected to be located. I.e. “usual place of
business” is the location of the contract
(6) Eliminating the Need for Communication of Acceptance
(a) “If I do not hear from you, I will assume you have accepted”; can impose
unwanted contracts, regulated by statute in some jurisdictions.
Unilateral Contract Acceptance
Two approaches have been taken:
(1) Acceptance occurs at completion of tasks (end of performance)
(a) I.e. “If you go to York, I will give you $100”; contract is formed when person
arrives in York
(b) Raises issue of revocation before the action is complete; you leave on train to
York, but before you arrive, the offer is revoked and you receive no money
(2) Acceptance occurs when efforts to complete the tasks (beginning of performance)
(a) Offeror’s obligations do not become enforceable until completion of actions,
but cannot revoke offer.
(3) Preference is to interpret contracts as bilateral when possible (Dawson v Helicopter
Exploration Co. [1955] SCC)

Ayerswood Development Corp. v. Hydro One Networks Inc. [2004] ONSC

Facts: Ontario Hydro launched incentives for the public to take on energy efficient initiatives.
Not yet required by building code at this time. One of the initiatives included new buildings
(NBC program). Advertised via brochures etc., some very specific. Companies submit
application, if standards are met, 50% upfront, other 50% upon completion demonstrated by
issuance of Occupancy Permit. Plaintiff would have been entitled to $340,000. Prior to
plaintiff submitting application, Hydro puts program on hold. Known that significant reliance
on standards in brochure/program for design existed. Documents also stated an end date
(March 31, 1999). Plaintiff submitted application on March 30, 1999, but Hydro would not
process.

Issue:
(1) Is there a unilateral contract?
(2) Did Ayerswood fulfil requirements to accept?
(3) Could Hydro One revoke or otherwise alter the offer once it was made?
(a) Outstanding powers?
(b) Reserved rights?
(c) Time of acceptance?

Held: Damages granted, found for Ayerswood. Received both halves of the payment
promised via contract.

Ratio:
(a) The guides and brochures put out by Ontario Hydro constitute a unilateral offer;
open to any person who completes the specified tasks. Ont. Hydro promised to pay
those who fulfil requirements, thus those who fulfil requirements are entitled to
payment.
(i) “Reasonable person” test: The intent, or lack thereof, of the offeror is not
relevant, existence of the contract based on whether a reasonable person in the
plaintiff's position would be able to assume that, upon satisfying the
conditions, they are entitled to payment.
 (b) Legislation did not empower hydro with rights greater than any other person; had no
right of unilateral revocation (also means that individuals do not have right to revoke
unilaterally)
(c) Nothing in materials produced by Hydro would indicate a reserved right to cancel or
modify the program (if not expressly reserved, bound by normal contractual
relations). Ambiguity should be read against Hydro (contra proferentem)
(d) Takes approach that acceptance “begins” at start of performance, and offeror cannot
withdraw after that point.
(i) In a unilateral contract, the person making the offer is not entitled to withdraw
it once a party is in the process of performance. (thus, Hydro cannot
withdraw because plaintiff had begun steps to fulfil the acceptance
requirements of the contract)
(ii) Attempting to protect the reliance (costs incurred in design, etc.) of the
offeree; offeror cannot prevent the offeree from completing the task required
for acceptance.
(iii) SUBJECT TO EXPRESS TERM IN OFFER; if offeror actually effectively
reserves right to modify or revoke/cancel, then allowed.

CONSENSUS
Consensus Ad Idem: “Agreement on the same thing at the same time”
(a) Need for consensus is simply another way of saying there must be agreement;
moment both parties agree to be bound by the same set of terms
(i) No requirement of continued consensus, only a true moment of agreement
(b) Need for consensus has had limited role in caselaw, but there has been references to
the importance of the concept
(i) Cases never solely decided on this principal

Contracts without Consensus

(a) Certain cases demonstrate that on occasion the process of making a contract is purely
mechanical process of offer/acceptance
(i) Byrne & Co. v Leon Van Tienhoven [1880]: Acceptance of a mailed offer to
sell tin plates was sent by the offeree AFTER offeror had posted revocation.
No point where both parties wanted a contract at the same time, but still a
binding contract.
(b) Little reverence for consensus within the common law; partly due to the nature of
distance correspondence
Lacroix v Loewen [2010] BCCA
Facts: Car accident. Discussions ensue between ICBC and lawyer regarding settlement.
Plaintiff was unhappy with ICBC’s terms. Trial judge stuck down defence’s argument that a
settlement was reached.

Issue:
(1) Has a settlement been reached? Was there consensus ad idem?
(2) If so, did ICBC repudiate it?

Held: Found for Defendants, appeal allowed

Ratio:
(1) Courts confirm that not only must there by an offer and acceptance; there must be
agreement on all essential terms
(2) ICBC did not repudiate contract by tendering documents with terms that were not
agreed
(3) Agreement to settle is an executory contract, and is binding (agreeing to terms in
documents that will later be signed, and the amount of money paid out); the
signing/pay out is the execution of the existing contract.

INTENTION TO CREATE LEGAL RELATIONS

Not all transactions are thought to be contracts the purposes of the common law, even if it can
be said that there is an “offer” and subsequent acceptance. Can be seen as public policy;
courts are sometimes unwilling to adjudicate certain matters, usually social or domestic
contexts.
1. Commercial Contexts
a. General principles: Ralph Gibson L.J. from Kleinwort
i. Agreement, even supported by consideration, is not a contract without
intention to create legal relations
ii. In ordinary commercial transactions, intention to create legal relations
is assumed; must prove there was NOT intention
iii. Objective test;
1. The importance of the agreement of the parties
2. The fact that one party has acted with reliance
iv. Not uncommon for businesses to deliberately use ambiguous language;
courts may be called on to interpret this ambiguity; can favour one
party or the other
b. Agreements Expressly Not Meant to be Legal
i. References to words or circumstances and express terms can rebut
presumption that all relations are legally binding
ii. Letter of Comfort
 1. Letter given to lender in connection with the lender’s loan to
another party; hope that person sending letter may cover
borrowers debts should they default; NOT binding, moral
responsibility only
2. All parties must be aware that it is not legally binding
iii. Letter of Intent/Memorandum of Understanding
1. Intention to create legal relations in the future; not currently
binding
iv. “Subject to contract”; not binding
1. Often related to land transfer contracts; negotiated terms are not
binding, only binding upon placement in writing/express
intention to be bound (Girouard v Druet)
c. Agreements Silent on Whether Intended to Create Legal Relations
i. When there is no express terms revealing if parties intended to create
legal relations, can be surprising to parties that a contract has indeed
been formed.
1. Upton-on-Severn v Powell [1942]: Defendant forced to pay
for firefighting fees because he was outside of Upton fire’s
district despite no intention to create legal relations through his
call to the fire department
2. Esso v Commissioners [1976]: Question if commemorative
coins produced by Esso were produced in quantity for general
sale. Court held that there was no intent to bind by Esso, coins
were “free gifts”
d. Email Correspondence
i. Girouard v Druet [2012]: Courts should treat rapid-fire email
correspondence between two consumers acting alone as similar to a
phone conversation, and not as intention to create legal relations.
ii. Land/property contracts MUST be in writing; this principle is very
applicable to such contracts, courts may view email negotiations
differently in other sectors
1. What does “rapid-fire” mean?; specifically referencing
preliminary discussions, but unclear on details of what that is
2. Social and Domestic Contexts
a. Common law reluctant to incur on social sphere, even though some conduct
can resemble contract making procedures.
i. Balfour v Balfour [1919]: Wife attempted to sue her husband for a
sum of promised money if she stayed in England for medical reasons.
Wife won at trial on basis she had given sufficient consideration. Court
of Appeal overturned, stating such matters are not matters of the court.
ii. Jones v Padavatton [1969]: Mother promised her daughter a house if
daughter studied law in England. Mother then subsequently tried to
evict daughter. Court held that agreement was nothing more than
 “good faith”; no contract, no legal right to stay in the house; daughter
had to leave
1. Significant reliance; daughter gave up a good paying job. Court
did not discuss this as it was unrelated to the modified contract
(which was the K at question)
iii. Rebuttals: detrimental reliance;
1. Parker v Clark [1960]: detrimental reliance by the Parker’s;
thus court held K was binding
b. Unwillingness of court to take up domestic contract disputes can favour the
powerful members of the family. Based on the historical adage that a “man’s
home is his castle”. Shifting values have called such thinking into question
and provided merrett for judicial scrutiny of domestic affairs.
i. Bruker v Marcovitz [2007]: Court ruled on religious divorce case;
justified ruling because of need to balance protection of equal rights
with domestic privacy

Blair v. Western Mutual Benefit Assn. [1972] BCAA

Facts: Internal memo dictated to Ms. Blair stated that she would be given $8,000 retirement
pay if she were to relinquish her position. She later retires and claims the money.
Issue:
(1) Does the memo constitute an intent to be legally bound?
(2) Was there an actual offer communicated, and accepted?
Held: Found for defendant; No intention resolution was binding; no actual offer
communicated to her, no acceptance; no reliance; no intention to create legal relations
CERTAINTY OF TERMS
What terms is the court objectively able to read into the agreement?
In order for a contract to exist in legally meaningful way, there must be certainty of terms and
other matters relevant to the contract; meaning parties ought to know at the outset of the
contract what their responsibilities and rights are under that contract.
Specific types of contracts have certain things that must be present for it to be a contract
(a) Commercial; three ‘p’s’; parties, the period, and the price (Logikor Inc. v Bessey
Tools Inc. [2013])
Absence of certainty can mean no contract came into existence, however much the parties
may have intended to enter a contract. Despite similarity to the issue of vagueness within
offers, lack of certainty is typically treated as a separate matter from offer and acceptance.
Offer and acceptance must be a mirror image (bargain theory); terms of offer must be known
because they determine terms of acceptance.
NOT up to courts to “make up” contracts for the parties, but there is some variance in how
activist certain courts may be. Courts will not enforce agreements with gaps or missing an
essential term.
Three main categories of uncertainty (Dependent on the type)
(a) Vagueness/ambiguity
(i) Terms are ambiguously expressed
(b) Incomplete terms:
(i) Price
(ii) Quantity
(iii) Period of employment
Absence of an Important Matter
If a contract is missing an important piece of information to make contract work, contract can
fail for lack of certainty. However, courts do try to save contracts when possible. Multiple
methods to provide missing information:
(a) Implication by Statute
(i) Missing terms supplied via implication of law; typically statutes
(1) e.g . Sales of Goods Act (B.C.): ss. 12(2) and (3); if the price is not
listed then the price is a reasonable price
a) “Reasonable price” is fact-dependent
(ii) Despite best efforts, statues may not have sufficient power to remedy the
contract (too little authority to read in implied terms);
(1) May and Butcher Ltd. v R [1934] H.L. Parties had an agreement for
the sale of surplus war tents, but the price was to be agreed upon from
‘time to time’. Also agreed upon that disputes could be solved through
arbitration. Parties could not agree on price, asked court whether price
could be implied by virtue of Sale of Goods Act, or whether matter
could be solved by arbitration, or that there was no contract created.
(2) Court held that there was no contract; until price was fixed, no contract
(3) Court took very strict view; lacked clarity on price; categorized as an
“agreement to agree” which is not an enforceable by law
(b) Implication by Other than Statute
(i) Can also imply a term by virtue of the common law, custom or usage (e.g.
baker’s dozen=13), or by necessary implication from the rest of the “contract”
(c) Missing Element as Indicating a Preliminary Agreement
(i) Missing elements in a “contract” can be important in deciding whether the a
later “formal contract” is a formalization of a contract made by an earlier
agreement (already in force), or is in itself the enforceable contract (meaning
earlier agreement is not enforceable)
(1) Bawitko Investments v Kernels Popcorn [1994] Ont. CA
a) When parties agree on all essential elements to be incorporated
into a formal document with intention for agreement to be
 binding, they have created a contract with is enforceable.
Formal documentation does alter the binding validity of the
original contract
b) However if original contract is incomplete, or the contract is
too general or vague, or if there is no intent by parties to be
bound (meaning legal obligation only come into force AFTER
formal contract), then the initial agreement is not a contract.
There is no “contract to make a contract”
Ambiguity or Internal Contradiction
Contracts can also fail if crucial terms are ambiguous, or if there is a contradiction between
two are more terms. See Raffles v Wichelhaus (1864): Term states that goods would arrive
“ex ‘Peerless” from Bombay. Two ships called “Peerless”; one leaving in october, one i
december; plaintiff and defendant each thought term referred to a different ship. No contract
because vital term of contract was ambiguity.
(a) Statutory Assistance
(i) Possible, though rare, that statutes will be of assistance to resolve ambiguity or
contradiction. Sometimes Interpretation Act is useful.
(b) Interpreting the Contract
(i) Some courts have gone to great lengths to interpret a term as to save the
contract from failure for uncertainty
(1) Hillas and Co. v Arcos (1932) H.L.; High-water mark for saving
contracts
a) Document created by parties not well done, but clearly
indicated intention to make a contract, and belief they had done
so; Court must interpret broadly so that the words can make the
contract effective
b) Contract was about future performance; some degree of
ambiguity necessary, and even desirable in this circumstance,
and what can be made certain, is made certain (used a
benchmark of 5% below market value)
c) NOTE: parties in Hillas had a history of dealings with each
other and were familiar with the specific trade and there was
a benchmark
(2) May and Butcher Ltd. v R [1934] H.L: Court did not attempt to save
contract by reading in; much stricter construction
(3) Klemke Mining Corp. v Shell Canada Ltd. [2008] ABCA; Purposive
interpretation should be used to fulfill intention of parties to be bound
and save contract
(4) Lord Napier and Ettrick v R.F. Kershaw Ltd. [1999] H.L.; goal of
interpretation is to advance the intent of parties when they entered the
contract. Results that are inconsistent with such intent should be
avoided
 (5) Foley v Classique Coaches: Foley rents out land for Classique to store
coaches, with stipulation that Classique must by gas from Foley; no
definitive price; Court held there WAS a contract because actions
(continued purchase provided more certainty)
(ii) Interpretation of contracts has been made easier by canons of construction
(1) Marley v Rawlings [2014] UKSC; courts should identify the meaning
of terms in light of:
a) The natural and ordinary meaning of those words
b) The overall purpose of the document
c) Any other provisions of the document
d) The facts known or assumed by the parties at the time of that
document was executed, and
e) Common sense
(2) In term is clear and unambiguous on its face, generally no need to
bring in extrinsic evidence
a) Eli Lilly v Novopharm Ltd. [1998] SCC; no ambiguity, no
need to consider what is “fair” or what aligns with the
intentions of the parties. Assumed that parties intended the
legal consequences of the text.
(3) Sometimes, contracts are just dead in the water
a) Scammell & Nephew Ltd. v Ouston (1940) H.L.; Multiple
Lords and counsel unable to agree on true construction of the
alleged comment (rental price of vehicle), no contract found.
(4) However, words that are seemingly clear may become unclear in
context
a) Montreal v 2952-1366 Quebec Inc. [2005] SCC; words can
become more unclear when placed in context (McLachlin);
context not always saviour
b) Sattva Capital Corp v Creston Moly Corp [2014] SCC;
Surrounding circumstances will be considered, but they must
not overwhelm the words of agreement.
(5) Be aware that written contract was not properly recorded
“Subject to” Clauses
Common source of ambiguity is when contracts are formed with “subject to” clauses. In such
contracts, there may be what seems to be offer/acceptance, and even a clarity of what is
supposed to happen. Nonetheless, there may be terms in the contract that are, or indeed the
whole agreement that is said to be subject to something else happening. This is called a
condition precedent. Until is it known whether the condition precedent will be satisfied, it is
premature to say that there is a binding contract.
(a) “Payment subject to delivery”; can be viewed to be certain enough to be enforceable
Meaningless or Irrelevant Clauses
(a) Severance of Meaningless Clauses
(i) Might be terms in the contract that might not need to be interpreted because
they have no meaning or are irrelevant to the contract and can be ignored
(1) Nicolene Ltd. v Simmonds [1953] QBCA; contract for steel bars said
that the “usual conditions of acceptance apply” but no such conditions
existed so court disregarded the phrase.
Promises to Negotiate in Good Faith or the Use best Efforts
Not found to be binding because of overwhelming uncertainty; remedy is not known, cannot
pin down status quo ante
(a) Historically “good faith” and “best efforts” have had no legal meaning in relation to
events in the future.Some more recent cases have given limited meaning to to the
terms
(i) Canada v CAE Industries Ltd. [1986] FCA; Court acknowledged the
imprecision of the term “best efforts” but states term must be approached in
light of the contract itself, the parties, and its overall purpose as respective of
the language it contains
(ii) Courtney and Fairbairn Ltd. v Tolaini Brothers (Hotels) [1975] Eng. CA; in
exchange for a builder’s arranging financing (which they did), developer
would negotiate “fair and reasonable” contracts, negotiations broke down, no
money; NO contract
(1) Denning; law does not recognize “contract to make a contract”, thus
cannot recognize a contract to negotiate
(iii) Walford v Miles [1992] H.L.; Courtney principle upheld in House of Lords
(1) An agreement to negotiate lacks certainty; unenforceable
(2) Agreements to use “best endeavors” is very vague; also an inherent
part of negotiations is adversarial parties; however, could be damages
in some circumstances
(b) Some meaning has been given “best endeavors” by BCCA
(i) Empress Towers v Bank of Nova Scotia [1990] BCCA; some meaning and
weight to promises to negotiate; obligations carry the same degree of diligence
as “best efforts”; implied duty to negotiate in good faith around market rental
rate
(1) Renewal of rental agreement lease; renewal based on reasonable rental
rate (provided a benchmark); Court found that this was enough
certainty
(ii) Manpar [1999]: extracting gravel from a reserve, contract had potential for
renewed based on satisfactory performance and royalty rate; court found this
was NOT enough certainty; no benchmark to assist in determining certainty
of terms
(iii) Gateway Realty Ltd. v Arton Holdings [1991] Nova Scotia; stated law
requires that parties to contract exercise rights under that agreement honestly,
 fairly, and in good faith; good faith should guide the manner of conduct;
breached when parties act in bad faith
(iv) Bhasin v Hrynew [2014] SCC; rejects notion that there is any general duty to
act in good faith implied in contracts; does not wholly rule out express
promises being upheld; recognizes duty for honest performance
(v) What is known about duty for honest performance:
(1) Limited to performance; no duty to negotiate honestly
(2) Not a fiduciary duty of loyalty or disclosure; does not compromise
self-interest or parties
(3) Doctrinal; cannot be modified
(4) Breach gives rise to damages
(vi) What is not known about duty for honest performance:
(1) Does performance include enforcement?
(2) What does “knowingly mislead in actions directly linked” to
performance of the contract
(vii) B.C Ltd. v TimberWest Forest Group [2014] BCSC; court recognized an
express promise to negotiate renewal of contract in good faith
(viii) Meaning of “good faith”; means not:
(1) Withholding information
(2) Bargaining with no intention to reach an agreement
(3) Reneging on a promise given in negotiations
(4) Refusal to make reasonable efforts
(5) Breaking off negotiations without notice to take up a better offer

Anchorage v. 465404 B.C. Inc., [1999] BCCA

Facts: Negotiations for the sale of a company via principals. Chmelyk (owner of Artcraft)
looking to sell company, with caveat that he did not want to deal with anyone who was “not
financially substantial”. Ekels able to persuade Chmelyk that he was a serious purchaser with
resources to make sale. Draft sent in 1995 to Chmelyk, no response. Meeting later that month
were minutes were taken by both parties (apparently similar). Issue whether “contract”
discussed “accounts receivable and accounts payable” and accounts receivable and all
payable” (substantially different sums)
Issues: Does the discrepancy between the “accounts receivable and accounts payable” and
accounts receivable and all payable” definitions in the meeting notes indicate lack of
certainty and consensus
Held: No contract; agreement was very unclear about the terms of the sale
Ratio: Cannot uphold a contract when parties do not agree on what is actually being sold.
(a) What would a reasonable person assume the contract meant by the objective evidence
Reasoning: Can differentiate on fact from Hillas because parties in Hillas had a history of
conduct; could use past performance to clarify
WRITTEN CONTRACTS
Formalities
(a) There are two main types of contracts; formal (sealed) and simple (informal)
(i) Formal; contract in which promises are made under seal, very old type of
contract and tends to be used only for very solemn events or when mandated
by statute
(1) Does not require consideration; NOT a bargain
(ii) Simple/Informal; Can be oral or written; if written, the written contract is the
evidence of the contract, contract is formed via the oral agreement of the
parties (Quebec v Services Environnementaux [2013] SCC)
(iii) Signature Rule
(1) L’Estrange [1934] English CA; a signed contract is binding, common
law traditionally accords high difference to signed written contracts
(b) In theory, an oral contract is as valid as a written contract; some statutes call for
certain matters (often consumer or lending) to be written to be valid
(i) Most common statute is the English Statute of Frauds (1677); NOT in force in
BC or Manitoba
(1) E.g. sale of goods worth more than a certain amount, sale of interest in
land, and contracts of guarantee
(ii) Requirement for written documentation in the Statute of Frauds has been
interpreted very broadly; will accept essentially any piece of writing; e.g.
emails (J.Pereira Fernandes S.A. v Mehta [2006]; Girouard v Druet [2012]
NBCA)
(iii) However, written documentation is required to make the contract enforceable;
but if it is not present, does not automatically mean the contract is void
(1) Courts can save contract; equity will save contract if it has been
partially performed and consider the entire contract enforceable despite
lack of writing
(iv) Maddison v Alderson [1883] H.L. The act of partial performance must be
“unequivocal” and done in relation to the actual contract. SCC has upheld this
principle (Degleman v Brunet Estate [1954] SCC)
(c) Other statutes may require stricter or more specific documentation that indicated in
the jurisprudence around the Statute of Frauds
(i) In BC the Law and Equity Act 1996 mandates what transactions must be
written
The Parol Evidence Rule: Regarding terms or assurances external to the written agreement.
Courts give great deference to the written contract, especially when the external
terms/assurances modify or contradict the written contract.
(a) When parties intend that the written evidence of their contract contain the entire
contract, a court will not accept in evidence terms of the contract which are oral and
have not been reduced to writing.
 (i) Rule may be applied in a situation were one party is arguing that some terms
in the contract are written and some are oral
(ii) Other times, one party is arguing that there are two separate contracts, one
written and one oral
(iii) In both cases; there is an attempt by one party to have the oral provisions
discluded
(b) Historically the rule did not pose many issues, as a contract in writing would likely be
carefully drafted and the writing was likely intended to be the complete contract;
(i) However, today it is quite common for the stronger party, particularly in
consumer contexts, to have a written contract that seems complete, but the
agent offers certain promises or assurances orally. Difficult to determine if the
parties indeed intended the written contract
(ii) Can create injustice in favour of the stronger party and leave weaker party (the
consumer) without a remedy
(c) Policy rationale for the parol evidence rule:
(i) administrative/adjudication ease; simply easier to rule on written contracts
(ii) prevention of fraud/perjury; not allowing sales people to promise outlandish
things
(iii) enhanced predictability and certainty
(iv) efficacy of commercial documents
(v) preventing unfair surprise
(vi) controls agents/employees
(d) Problems; sometimes the “true” agreement of the parties is not captured by the
words; party believing that there are terms that are not part of the written
(i) R v Horse (1988): SCC rejects the use of extrinsic evidence
(e) Reaffirmation by the SCC; SCC has affirmed the parol evidence rule on a number of
occasions
(i) Hawrish v Bank of Montreal [1969] SCC; guarantor had signed a written
guarantee that guaranteed all present and future indebtedness. He claimed that
when he signed he was assured that the guarantee only covered existing
indebtedness, and he would be released when the bank received a joint
guarantee from the other directors of the debtor company. Bank called upon
Hawrish for entire amount. SCC found that only the initial written contract
was binding, other assurances were not.
(1) Non-contradictory collateral agreements made orally can be
admissible; can only be admissible when it is supplementary, or adds
to the written agreement
(2) Here there was an issue of factual accuracy
(ii) Reaffirmed again in Bauer v Bank of Montreal [1980] SCC
(1) Evidence of oral representation is inadmissible and any collateral
agreement founded upon such representations may not stand in the face
of a written agreements
(f) Exceptions to the Parol Evidence Rule:
(i) Written agreement is NOT the entire contract
(ii) Interpretive aid; extrinsic evidence can be used to clear up ambiguity
(iii) Invalidity; extrinsic evidence can be introduced to show the contract is invalid
because of lack of intention or lack of capacity
(iv) Misrepresentation; can be introduced to show that there was a
misrepresentation
(v) Mistake and rectification
(vi) Proof of Condition Precedent; eg delivery as condition precedent for payment
(vii) Collateral Contract; oral agreements is a separate contract that is in itself
enforceable
(g) More flexible approaches to the parol evidence rule; more contemporary
(i) J. Evans & Son Ltd. v Andrea Merzario Ltd [1976] UKCA: written carriage
contract said that the carrier had “complete freedom” in procedure in the
shipping and importing of goods, but carrier’s representative assured the
importers that their goods would be shipped below deck. Goods were shipped
above deck, fell overboard and sank.
(1) Denning states that it would be unjust to ignore the oral evidence
(2) Roskill L.J. acknowledged the parol evidence rule, but gave effect to
the oral assurances; stated that the doctrine does not apply to contracts
that are partly oral, partly written, and partly by conduct; took totality
of agreement to include all three aspects
(ii) Gallen v Butterley [1984] BCCA: parol evidence rule becomes a rebuttable
presumption
(1) Lambert J.A. recharacterizes parol evidence rule. When oral terms are
allowed to vary the terms of a written contract, does not matter if they
are a collateral agreement or part of the main contract
(2) Emphasizes that it is a rule of evidence based on the the
unreasonableness of a situation whereby the same parties would enter
into two agreements, one written and one oral at the same time, that
would contradict each others.
(3) The rule is not absolute, may be cases, especially in the interest of
justice, were oral assurances would prevail over a written contract.
(4) Rule simply establishes a principal that can be rebutted
(h) Constraints on the Parol Evidence Rule
(i) General: Intent, reliance, reasonable expectation, unfair surprise
(ii) Nature of change/conflict: how serious is the conflict
(iii) Nature of the document: intended to the be the whole agreement; clarity of
the wording; read by the parties/knowledge
(iv) Bargaining relationship: power dynamics, standard form contracts
(consumer vs corporate?); past relations; evidence of sharp practice
(dishonesty, bad practice. etc.); legal advice obtained
(v) Nature of Representation: quality and credibility of the oral evidence?;
clarity and specificity?; significance?
 (i) Sattva Capital Corp. v Creston Moly Corp. [2014] SCC: Parol evidence rule is
justified on the basis of certainty, but has been subject to numerous critiques
(i) Does the apply to preclude evidence of the surrounding circumstances; such
evidence is needed to aid in interpretation
(ii) Evidence drawn from circumstance must not change or overrule the words of
the contract
(iii) Circumstances=facts known, or reasonably ought to have been known, by the
parties when contract was created; thus no concern of unreliability
(iv) Does not apply to misrepresentations; Does not apply to implied terms in a
contract; oral evidence admissible to determine if such terms are implied; Can
also be excluded by statute
Specific Invocation of Parol Evidence Rule: “Entire Contract” Clauses
(a) Parties to a contract can seek to ensure parol evidence rule applies; cannot rebut the
parol evidence rule if this has been invoked.
Arens v. M.S.A. Ford Sales Ltd., 2002 BCCA
Facts: Used car was sold to the plaintiff on the understanding the engine had been repaired.
Plaintiff then bought the car and drove it a few Km, car broke down. Engine had actually
been repaired with glue. Contract for sale had an entire agreement clause. Plaintiff also had a
private inspection done of the vehicle
Issue: Is the oral assurance admissible evidence?
Held: Parol evidence rule upheld because oral evidence is inconsistent with the written
contract
Ratio: Parole evidence cannot be admitted to vary or contradict the written agreement's
express terms
ENFORCEMENT OF CONTRACTS:
1. Formal Seal; signed, sealed, delivered
2. Simple contract: consideration
3. Equity: promissory estoppel
PRIVITY OF CONTRACT
1. Multilateral Contracts
a. Some contracts are multilateral in that there are several parties to the contract,
with each party have an agreement with each each of the other parities and in
the same terms.
b. Typical of a club or society organization where there are standard terms every
member has with every other member
c. In BC, original shareholders are said to create a company through an
incorporation agreement; creates a multilateral contract
 2. Joint or Several Liability
a. Two or more persons make a promise to another person in single contract;
creates a two-sided contract with one side comprised of multiple persons
i. Typical in debtor-creditor relationships; one person guarantees that
they will pay the debts of another person on the same side of the
contract
b. Partnerships; partnership does not have legal existence separate from the
individual partners involved, so a contract with a partnership is in essence a
contract with all members of the partnership
i. Fact-specific if the members are jointly liable, or severally liable
THE DOCTRINE OF PRIVITY
1. The Rule of Privity
a. Generally, on the parties that created the contract (offeror and offeree) are
parties to the contract.
i. Thus, only the contracting parties can enforce obligations on the other,
and have obligations forced upon them; can only bring a claim in
breach of contract if you are party to a contract.
ii. Anyone outside this relationship is said not to be privy to the contract
b. Some exceptions to privity of contract; Canada has been extremely reluctant to
accept diversions from the rule
c. Third parties can be affected by the contract, and may receive benefits from
the contract, but they cannot enforce the performance of contractual
obligations that would benefit them.
i. Beswick v Beswick [1966] H.L.; Contract between uncle and nephew;
stipulated that the nephew would pay weekly maintenance to the
uncle’s widow upon his death. Nephew made one payment, then
ceased. Widow (who was the administrator of her husband's estate)
sued nephew for breach of contract
1. Lord Denning (Eng. CA) held that privity was a “rule of
procedure” and the obligation could be enforced by the Widow
as a third party.
2. H.L overruled, saying that the widow was not entitled to
enforce the obligations as a third party, but because she was the
executor of the estate, she could act in the capacity of her late
husband, who was party to the contract; same conclusion, but
does not breach privity of contract
3. Granted specific performance as remedy
2. Relationship to the Doctrine of Consideration
a. The doctrine of privity is related to consideration, and consideration is often
used as a justification for why privity is enforced
i. To be able to enforce the promises of another party, must have given
consideration
 ii. A person who is not party to the contract has not given consideration,
thus cannot enforce promises
iii. E.g. A promises B $100 if C washes A’s windows; C is not a party, but
is still doing something; is C’s labour consideration?
1. Labour/giving something up does not inherently constitute
consideration; may still be outside of the contract.
2. More of a gratuitous promise; unlikely to be upheld
iv. Tweddle v Atkinson [1861] Q.B; two fathers, Tweddle and Guy,
promised each other to pay money to Tweddle’s son to marry Guy’s
daughter. Son sued Guy’s executor when Guy failed to pay the
amount. Court dismissed the case because the son had not given
consideration, and thus was not party to the contract
1. Policy concern; could potentially allow a person to opt-in to
sue someone for his/her benefit, and opt-out if sued for breach
of contract
2. Authority for who is party to a contract; not party to a contract,
cannot bring claim.
b. However, privity operates independently of consideration in that even if a
person outside the contract gives something to one or both contracting parties,
the third party still cannot enforce promises
3. Privity Working Fairness and Unfairness
a. Privity has a rational that often serves the interests of justice;
i. It is usually unjust that a person could have obligations imposed on
them by a contract to which they are not party to
ii. Similarly, it is often fair that a person not be able to enforce an
agreement they are not party, especially if they has given nothing in
exchange for the benefit of that contract
iii. Can also deprive a third party of a defence created by that contract;
seen as just because the third party is attempting to “free load” from
the contract
b. Can also create unfairness;
i. Sometimes the third party is created by employment relations, and it is
the third party doing the work contemplated by the contract, but the
employee would not have access to any defences created by that
contract should something go awry.
4. Two Types of Privity
a. Horizontal Privity: arises in a situation where one party, A, enters into a
contract with B, for something that benefits A and C. Sometimes the benefit is
to C alone.
i. A can bring an action, as they are party to the contract, but can only
sue for the damages A has suffered, NOT the damages suffered by C
ii. Can have particularly drastic consequences, often in situations where
one family member enters into a contract for the benefit of the entire
family (i.e. family vacation)
 1. Lyons (Guardian ad litem) v Consumers Glass Co. [1981]
BCSC; Mother bought a glass baby bottle, in process of giving
bottle to child, bottle exploded and put out the baby’s eye.
Baby brought action against Consumer Glass. Court disallowed
the claim on basis that baby was not privy to the contract.
Mother was party to the contract could have brought an action,
but only for her own damages, not those of the baby
b. Vertical Privity: Often seen with chains of contracts, from one seller to a
buyer, and then to a new buyer, etc. Each person has a valid contract with
whom they had direct transactions, but not those above or below them in the
chain of sales.
i. E.g. A sells to B, who then resells to C; C does not have a contract
with A, only with B.
ii. Intended to protect remote manufacturers/distributor from suits in
breach of contract from customers; can cause unfairness when the
ultimate fault falls on said manufacturer or distributor
iii. Dunlop Pneumatic Tyre Co. Selfridge & Co. [1915] H.L.; Distributor
(Dew) contracted to buy tires from a manufacturer (Dunlop) with
stipulation that they be sold at a certain price. Dew complies with
stipulation, and sells to Selfridge’s who sells that below the set price in
the Dew-Dunlop contract. Dunlop tries to launch an action against
Selfridge’s, dismissed because they are not party to the contract.
5. Criticism of Privity
a. Criticized for causing injustice when a third party has legitimate interests to
enforce
i. Darlington B.C. Wiltshier Northern Ltd. [1995] UKCA: Steyn L.J.;
No doctrinal, logical, or policy reason why the law should deny the
effectiveness to a contract for the benefit of a third party where that is
the express benefit of the parties
ii. However, doctrine of privity remains deeply entrenched and relatively
unchanged, especially in Canada
6. Circumventing Privity
a. Suit by a Party to the Contract: Someone who is party to a contract can launch
an action to obtain satisfaction for the person who is not a party; usually will
only get damages for the losses suffered by person who is privy, not the third
party. However, some authority for extending the claim to include the losses
of the third party, especially in England.
i. Jackson v Horizon Holidays Ltd. [1975] UKCA: Jackson sued for
damages suffered by the disappointment and distress caused by breach
of contract for himself, his wife, and children. Denning accepted that
the third parties could be compensated, and held Horizon liable for the
damages suffered by Mrs. Jackson and the children.
 ii. Subsequent cases have doubted the authority of Jackson, at least to the
extent to which it could apply outside of special circumstances like a
family vacation, or where one person hires a taxi for a group
1. Woodar Investment Development Ltd. v Wimpey
Construction Ltd. [1980] H.L.; certain set of cases where third
parties can be compensated; where their losses are an extension
of the losses suffered by whomever is privy to the contract.
iii. Most recently, English courts have recognized that third parties can be
compensated for losses if effects on said third party were contemplated
by the contracting parties. Usually family groups or groups of
companies. Contracts (Right of Third Parties) Act 1999 (England)
1. Alfred McAlpine Construction v Panatown Ltd. [2000] H.L.;
addresses a “black hole” of law that left a gap in the ability of
some parties to seek a remedy for losses
b. Reconstructing the Arrangement as an Agency Situation: Effective in both
horizontal and vertical privity; where A enters into a contract with B for the
benefit of C, with A acting as C’s agent. Resulting contract is in fact between
B and C. Allows C to bring claims unfettered; Can also be said that A is
entering into two contracts simultaneously; one for themselves, and one for the
benefit of C as their agent.
i. Dependant of the presence of an agency relationship, which can be
difficult to establish;
1. Must show that the contract benefits the principal, and
preferably does not benefit the person acting as the agent; can
be difficult to argue agency if the contract directly benefits the
“agent” more than the “principal”
ii. Courts are also reluctant to find agency if there is a conflict of interests
iii. Can also result in the principal being found responsible for certain
burdens of contract they did not intend to be beholden to
iv. New Zealand Shipping Co. v Statterthwaire [1975] PC; carrier was
acting as agent for the stevadors, thus stevadors can benefit from
exclusion clause in contract as defence
1. Contracting parties must have intended that the third party
benefits from contract
2. Contracting party must be also be acting as an agent for third
party
3. The party that acted as the agent must have had the authority to
do so
4. Must be consideration moving from the third party to the non-
agent party
c. Collateral Contract: When A and B entered into a contract that somehow
affects C, it is said that a collateral contract between A and C is also created.
i. Can seem rather artificial as there is no negotiation between A and C,
and there is certainly no consideration
 ii. Courts hesitant to accept; goes against the expectations of parties
(unfair surprise)
iii. Shanklin Pier Ltd. v Detel Products [1951] K.B.; Pier needed to be
painted, defendant’s informed the plaintiff of the paint they had, and
on the basis of that description agreed to have their contractors buy and
use the defendant’s paint. Paint was unsatisfactory; plaintiff launches
claim. Defendant claims they were not part of a contract with Plaintiff,
only the contractors.
1. Judges finds that collateral contracts were made, thus plaintiff
(who is a third party) had a legitimate claim against defendant
for breach of contract.
d. Assignment and Subrogation: Legal device the effecting a transfer of
entitlement to an intangible. A contract right is an intangible. In an
assignment, C buys (is “assigned”) A’s position in the contract between A and
B and C takes over A’s contractual position.
i. Assignment: Law and Equity Act (BC); ability to assign the right or
debt to a particular party; third party is now party to the contract
ii. Usually effected through rules of equity, downside is that C is also
subject to and defence B might have used against A.
iii. Many contracts specifically prohibit the assignment of obligations and
and assignment does not affect B’s obligations (C cannot get anything
more from B than A could have)
iv. Subrogation: Often used in insurance issues were the insurance
company takes over the tort claim of another person; insurance party is
able to sue in your name, even though they were not party to the
original contract.
e. Transfer of the Obligation: CIVIL LAW ONLY
In a context with a chain of contracts for the sale of an object starting with the
manufacturer, it is said that the when the manufacturer sells the object to the
first buyer, the first buyer gets not just a property interest in the object that can
in turn in be sold, but also receives promises with respect to the condition and
quality of the object that are not just personal as between the manufacturer and
the buyer, and are “reified” in the sense that the buyer can pass them along, as
intangible things, to a new buyer when the object is resold.
i. Assurances between A and the manufacturer (B) can be “sold on” to
other parties.
ii. Recognized in civil law; General Motors Products of Canada v
Kravitiz [1979] SCC
iii. Not yet accepted in common law, but theoretically usable. Similar to
subrogation, but only of benefits
1. Some evidence that Lord Strathcona Steamship Co. v
Dominion Coal Co [1926] P.C. could stand as a common law
precedent for such a device; does not give original contractor
 against new owner, only a claim for an injunction for
interference with contractual rights. Only operates in context of
an existing burden that a new owner has express knowledge of,
such that that burden will bind the that party.
f. Trust: A confirs property to B for the use of C; if B uses the property in ways
not in conformity with the terms, C can bring a claim against B for violation of
their beneficial interest. Not breach of contract, but breach of trust. Vandepitte
v Accident Insurance Co. [1932] P.C.
i. Legal relationship is between the grantor and the trustee, benefit goes
to the beneficiary. Beneficiary has a beneficial interest in the property;
not party to the contract.
ii. Beneficiary can enforce the trust if interests are violated (via equitable
remedy); gain certain rights b/c something is held in trust for you
iii. Difficult to establish unless parties have clearly intended to do so;
cannot find a trust if it is clearly not the intention of the parties Re
Schebsman [1944] Eng. C.A.
g. Tort: A claim can be made in tort against a non-contracting party, if a tort can
be established.
i. Frequently, the tort of negligent misrepresentation is used against the
“representor” for providing inaccurate information to a person as to
cause that person to enter a contract. BG Checo International Ltd v
British Columbia Hydro and Power Authority [1993] SCC
7. Exceptions to Privity
a. Abolition: Most common law jurisdictions have abolished to varying extents
horizontal privity, vertical privity, or both
i. Contracts (Right of Third Parties) Act 1999, UK; allows third parties
to bring an action to enforce contractual terms if they are the person or
member of a class of person for whose benefit the contract was created
ii. In canada, there are some statutes that modify or abolish privity; New
Brunswick Law Reform Act 2011
b. Limited Exception: Canadian common law has only had one minor alteration
to privity; specifically to horizontal privity
i. Ability of a person not party to a contract to use the contract as a
defence to a tort claim; “Principled Exception”
1. Parties of the contract intended to confer the benefits of the
contractual defence to the third party
2. The third party performing the activities was contemplated by
the contract
3. Employees must be acting in the scope of their employment
and fulfilling parts of the contract
4. Not available if requirements not met
ii. London Drugs Ltd v K&N [1992] SCC
1. Contract for storage had an exemption clause/defense in
contract; could not go after K&N, went after the employees
 2. K&N There should be judicial reconsideration or relaxation of
doctrine of privity b/c it is out of step with commercial reality,
with the reasonable expectations of the parties and the way
parties allocate risks.
3. Employees can, without consideration or invoking trust or
agency, claim benefit of employer’s contractual limitation
clause when:
a. There is a contractual limitation of liability between
employer and another party;
b. a loss occurs during the employer’s performance of its
contractual obligations to that third party; and
c. the employees are acting in the course of their
employment when the loss occurs
iii. Edgeworth Construction Ltd. v N.D. Lea & Associates [1993] SCC;
not contemplated by parties, no principled exception
iv. Fraser River Pile & Dredge Ltd. v Can-Dive Services [1999] SCC;
moves beyond employer/employee so long as the third party was
contemplated by the contracting parties
1. London Drugs is not limited to employment situation
2. Parties intended third party to benefit from the contract
(explicit reference in insurance contract to waiving right to
subrogation against “any charterer” and extended coverage to
affiliated companies and charterers)
3. Activities performed by third party are the very ones
contemplated as falling within the scope of the contract
4. Sound policy reasons to allow Can-Dive to benefit from the
clause
Holmes v. United Furniture Warehouse [2012] BCCA
Facts: Vouchers given to customers that could be redeemed for cash at a later date, company
who was supposed to fulfil the vouchers declares bankruptcy. Customers then looked to the
issuing company to receive compensation. Issuing company had been bought by another
company. Contract for sale stated that purchaser assumed liabilities of the company. Plaintiffs
attempting to sue the purchasing company for the breach of contract committed by the
previous owners through the doctrine of principled exception.
Issue: Can the purchasing company be held to account for another parties actions by the
customers (who are a third party)?
Held: After considering London Drugs and Fraser River cases, the court decides that, in this
case, there was no suggestion that the defendants, when they entered into the Asset Purchase
Agreement, had any intention of benefitting the plaintiffs. Does not fit into the narrow
conception of privity. Further incremental change to the law was rejected.
Ratio: Must have intent to benefit third party to have access to contractual defenses
PROMISES UNDER SEAL
1. Very formal; not frequently used.
a. Royal Bank v Kiska [1967] ONCA: simply writing “seal” on document is not
enough
i. More recent caselaw; based on intent of parties; if an emblem is
intended by both parties to be used as a seal, then may be acceptable
CONSIDERATION
1. Definition:
a. Determines whether any given promise is enforceable; what has been
negotiated by the parties as what is given by the promisee in exchange for the
promise of the promisor. Must be of “value”; value can be seen as a benefit to
the promisor, or a burden to the promisee, or both.
i. Consideration given by the promisee makes the promisor’s promise not
gratuitous, and therefore enforceable by law
ii. Must be assessed on a promise-by-promise basis; cannot be rightly
assessed on a whole-contract basis (aside from a unilateral contract
iii. Thomas v Thomas [1842] Eng. QB; “Consideration means something
which is of value in the eye of the law moving from the promisee, to
the promisor, or a detriment to the promisee. Can be (and usually is)
both”
iv. Currie v Misa [1875]; “A valuable consideration, in the sense of the
law, may consist of wither in some right, interest, profit or benefit
accruing to one party, OR some forbearance, detriment, loss or
responsibility, given, suffered, or undertaken by the other; does not
need to be both
b. Role of legal formalities:
i. Evidentiary function: evidence of the bargain, and the seriousness
ii. Cautionary function: encourages parties to take the promises
seriously
iii. Channeling function: points to consideration
c. Consideration Must Move from the Promisee; consideration must originate, or
move from the promisee, and not another party.
i. Dalhousie College v Boutilier Estate [1934] SCC; promise to donate
money to build new buildings; given in consideration of the
“subscription of others”; unenforceable because the consideration did
not originate with the promisee. Dalhousie was not giving anything in
return for the promise; College did not specifically benefit; just a gift
1. The “others” were not privy to the contract, so anything they
gave was not a benefit to the promisor, or detriment to the
promisee.
2. Had Dalhousie promised to put his name on a specific building;
then could be enforcable
 ii. If the consideration is in the form of a return promise, although it must
originate with the promisee, the actual benefit of the return promise
does not need to go to the promisor
1. Benefits of the return promise (the consideration) can go to a
third party; e.g. A and B can agree that in return for A’s
obligation, B will pay $100 to C.
iii. In many cases, the consideration will be both a detriment to the
promisee and a benefit to someone else.
d. Consideration Must be Given at the Time of the Promise for which is the
Price; the benefit or the detriment that is the consideration must be given at
the time of the promise, and in exchange for, the promise that is to be enforced
i. Dalhousie College; the College did build the building, it did not
promise to build them in exchange for, or at the time of the promisee-
donor; thus was NOT consideration
ii. PAST consideration is NOT consideration; must be given at the time
of promise
1. E.g. A fixes B’s car; B then says that they will give A $100;
fixing car is not consideration because it is a past action; not
enforecable
e. Implied Consideration: Better if consideration is express, but can be implied
i. Thoresen Car Ferries Ltd. v Weymouth Portland Borough Council
[1977] Q.B.; Implied promise by the promisee found to be implied
consideration, thus enforceable
1. Defense of lack of consideration; not always successful b/c
consideration can be implied
f. Return Promise as Consideration: The benefit or detriment that is
consideration can be an action, or it can be the promise of an action; bilateral
executory contracts
i. One party’s promises are typically the consideration for the other
person’s promises.
ii. Promise to do something, now binding by virtue of being in the
contract, is something of value just as much as the action itself
iii. Can also be a forebarrence; a promise NOT to do something
g. Action as Consideration: Typical in unilateral contracts; the consideration that
is given by the promisee in exchange for that promise is the action completed
by the promisee at the time the contract comes into existence
2. Distinguishing Consideration: Can be confused for other legal concepts; can be
required to be written, must be able to identify what is consideration and what is a
term of the contract
a. Motive: Consideration is not motive; there are a number of reasons a person
may enter into a contract; sympathy, guilt, moral duty; NOT consideration
i. OR Person might desire what is given in exchange for their own
promises in a contract; IS consideration
 ii. Motives might be recorded b/c of statutory requirements; this recitation
is not part of consideration
iii. Thomas v Thomas [1842] Q.B.; Dying wishes are just a moral
obligation, respect for a dying man’s wishes is just a nice practice, not
based in consideration; secondary agreement for the wife to upkeep
house for 1 pound a year
b. Failure of Consideration: Where one party fails to deliver anything that was
promised under contract; related to performance under contract, not creation.
Party who did fulfil obligations is entitled to compensation/damages
i. Consideration is necessary for the formation of a contract, but failure
of consideration is not the legal opposite
ii. Failure of consideration is a type of breach of contract; not the failure
to create a contract/enforceable promise
c. Condition:
i. “I will shovel your driveway when it snows”; condition precedent, not
consideration
ii. “I will shovel your driveway until spring arrives”; condition
subsequent, not consideration
iii. “I will shovel your driveway when you give me the promised $25”;
can be construed as both a condition of the contract (condition
precedent) and consideration
d. Adequacy: In order to be binding, consideration must be of “value”; but is
generally seen as improper for the law to evaluate the value of the
consideration. Adequacy of what is given, not considered.
i. Mountford v Scott [1975] Eng. CA; option to purchase land for $1 is
upheld; does not have to be of any substantive value, simple of value
ii. Chappell & Co. v Nestle Co. [1960] H.L.; a contracting party can
stipulate for what consideration he chooses; customers could send in
three candy bar wrappers for music track. Candy wrappers are pretty
much worthless (just garbage) BUT was still consideration, thus
enforeable
iii. Adequacy of consideration can be relevant to other areas of law;
unconscionability, undue influence, illegality, or the availability of
certain remedies like specific performance
3. Valueless Consideration
a. Equivocal Promises: return promises with qualifications such as “if I feel like
it” cannot be considered consideration
i. Too subjective and unpredictable to allow for any real value
ii. Can also affect certainty of the contract
b. Forbearance: cannot promise not to do something that you had no business
doing in the first place
i. White v Bluett [1853] A complains about B using a public highway too
much, B offers A five dollars to stop complaining; not consideration
because A had no business complaining about A’s use of a public way
 c. Settlements/Bona Fide Compromises: Cannot promise not to bring or continue
a lawsuit where where the promisee ought to have known that such a claim is
groundless
1. B(D.C.) v Arkin [1996] Man. Q.B.; Woman attempted to
recover money paid to Zeller’s for the torts of her son; claimed
that Zellers’ promise not to sue her was not consideration b/c
Zellers did not have a claim against her personally b/c parents
cannot take on the torts of their child; no consideration was
found
2. Forbearance to bring a lawsuit cannot be consideration if the
promisor knows that the promisee has no ability to bring a
claim or has no intention to bring a claim
ii. Often related to prevention of extortion; making of a threat knowling
underpinned by no valid legal position
iii. If the promisee can show they reasonably thought a legal claim had
merit, then the promise not to pursue legal action can be acceptable
consideration
1. Callisher v Bischoffsheim [1870] Q.B.; true belief in the
forbearance of a claim, even if the claim has no merit in truth,
can stand as consideration
4. Problematic Consideration
a. Past Consideration: law has been reluctant to accept actions that have already
occured when the promise is sought; difficult to prove that the consideration is
in exchange for the promise if the action has already occured
i. Eastwood v Kenyon [1840] Q.B.; Plaintiff, as a guardian, had
borrowed money for the benefit of his ward, who when they were of
age, married the defendant. Plaintiff had been given a promissory note
in exchange for the borrowed money; defendant had promised to pay
the plaintiff the amount of money of the promissory note, but failed to
pay.
1. Lord Denman; defendants promise failed for lack of
consideration; the benefit, when conferred on the ward was a
voluntary benefit not requested by the defendant (or even the
ward, who was now married to defendant); benefit was “past
and executed long before” the defendant’s promise
ii. Policy reasons for past consideration:
1. Lack of deliberation; no cautionary function because one party
didn’t even know about other promise
2. Lack of reliance; had no idea that there would be compensation
3. No unjust enrichment; did action for non-financial reasons
4. Distinguishes moral and legal obligations
5. Individualism; not up to the court to make bargains for people;
court should not be imposing contracts
iii. Still frequently upheld, but past consideration does create some issues
 1. Can be abolished statutorily; e.g. Past Property Security Act
2. Ratihibito; subsequent ratification of a contract in
circumstances where a promise was not binding earlier because
the promisor lacked capacity. Subsequent reassertion of the
promise, given when the person does have capacity can be
binding even though nothing is given as the “price”
iv. If past action is done at the request of the promisor, doctrine does not
apply. Performance of request is the acceptance (unilateral contract).
Custom can be of influence; constitutes implied promise; e.g. ordering
take-out; expected to pay
1. Lampleigh v Brathwait [1615] K.B.; plaintiff went to great
lengths to get a pardon for the defendant, who had killed
someone. Defendant had subsequently promised to pay the
plaintiff money, but failed to pay. Plaintiff sued, and defendant
argued that nothing was given in consideration of his promise
to pay, thus making the promise not enforceable. Judge found
for the plaintiff
2. “An act done before giving a promise to make a payment or to
confer some benefit can sometimes be consideration for the
promise. The act must have been done at the promisors’
request; parties must have understood that the act was to be
remunerated either by payment or other benefit; and payment
must have been legally enforceable had it been promised in
advanced
5. Pre-Existing Duties and the Need for “Fresh” Consideration
a. Modification to contractual obligations require fresh consideration for any
changes; modification of contract requires something new
i. Enforcement of modification; requirement to have fresh
consideration helps to make clear that the parties intended to be bound
ii. Protection against extortion
b. Duty Owed to the Public: Can be of a general nature, such as a duty to obey
the law, or they can be more specifically created, such as a duty to perform
their job. Idea behind the prohibition of allowing an existing public duty to
stand as consideration appears to be a public policy rational that a person
should not be rewarded for doing what the state can rightfully ask of them.
i. Can circumvent this by requiring that the public duty be performed in a
specific way that is not demanded by the duty per se, or to do
something beyond the bare public duty
1. Glasbrook Brothers Ltd. v Glamorgan County [1925] H.L.; A
coal mine asked for police security services during a mine
strike; was found to be binding because it was special service
that was not part of the normal obligations of police work;
offered extra staff, thus beyond normal public duty
 ii. Collins v Godfrey [1831] Promise to Collins to pay him to testify in
court; NOT consideration because he already had a duty to testify in
court.
iii. Ward v Byham [1956] Eng. CA; Lord Denning held that a promise by
a father to the mother of his child (born out of wedlock) to pay her one
pound a week provided the child was well cared for (a pre-existing
duty as consideration) was enforceable because the mother was doing
something “extra”, despite the legal obligation for the mother to
maintain the child’s health and wellbeing
c. Duty Owed to a Third Party: IS recognized by law; despite the consideration
not being “fresh”, and the fact that the promisee is effectively getting the
benefit of the promisor’s promise for free; may be concerns about fraud in that
B does not realise that A is in fact already bound to do whatever is offered by
A as consideration
i. Pao On v Lau Yiu Long [1980] P.C.; upheld that a pre-existing duty to
another party CAN act as consideration (see video in slideshow); new
benefit, thus valid consideration despite that the same promise was
made twice.
ii. Scotson v Pegg [1861]; can promise to do the same thing to two parties
iii. Shadwell v Shadwell [1860]; nephew gets engaged;
engagement/marriage viewed to be consideration for promise to wife
and uncle
d. Duty Owed to the Promisor: Can sometimes make the claim that a public duty
or a duty to a third party is “fresh”; more difficult to make that claim when the
duty is a pre-existing duty to the promisor. Two main situations in which this
arises:
i. A promise to pay more: An amount of money is already owed by the
promisee to the promisor, but the promisee agrees to pay more than
previously agreed to.
ii. Stilk v Myrick [1809]: Sailors on a boat; at a certain point two sailors
desert ship; Captain promises the salaries of the two sailors to the rest
of the sailors, once in port Capitan does not pay. Court finds no
consideration for the promise to pay more because the sailors were
simply executing their contractual duty.
1. Significant fear of extortion; sailors will mutiny and refuse to
return until captain agrees to pay more; does not want such
promises to be enforceable
iii. Gilbert Steel Ltd. v University Construction Ltd. [1976] ONCA;
plaintiff had agreed to deliver steel at a particular price to the
defendant, but because of price increases on the supplier side, the
plaintiff got the defendant to agree to pay a higher price; court
accepted that that the price may be enforceable if it was part of an
arrangement to rescind an earlier contract; the promise to rescind
would be the consideration for the new price; court found that the
 parties did not intend to create a new contract and the vague references
to the plaintiff giving a “good price” in the next deal was not
consideration
1. Gilbert Steel argues that it was not a modification, but a
rescission and replacement (did not plead it was rescission in
original filing)
a. Fresh consideration b/c promise of a “good price” in the
future; court found this was too vague
b. Fresh consideration provided by the additional credit
provided due to increase in price
c. Promissory estoppel; estoppel is only a shield, not a
sword
iv. Williams v Roffey Bros. & Nicholls Ltd. [1990] Eng. CA; Defendant
agreed to pay a higher price for construction work; started to pay the
higher price but then stopped; plaintiff then sued defendant for breach.
Court found there was a true agreement to pay the higher amount, in
that there was a benefit to the defendant in having the security of
performance that the new agreement gave; not having to find new
contractors and avoid penalty fines for not completing building on
time. Thus there IS fresh consideration despite the contractors just
doing what they were initially contracted to do. Practical
benefit=consideration.
v. Greater Fredericton Airport Authority Inc. v NAV Canada [2008]
NBCA; NAV Can. had obligation to provide aviation services and
equipment to the airport, but refused to do so without payment. Airport
agreed under protest, but later sought to have the agreement overturned
for lack of consideration and that the promise was made under duress.
Court upheld the duress claim, but denied that there was lack of
consideration. No consideration issue because consideration was
unnecessary; based in economic efficiency, don't need to go back and
find consideration.
a. Should Canada take on the Williams and Roffey
reasoning? Based on the realities of modern commercial
relations; policy issue are valid reasons to change Stilk
and Myrick principal (commercial efficiency)
b. Stilk and Myrick not gone; just not the hardline rule
vi. promise to accept less: Common situation where there is simply a
promise to settle an existing indebtedness for less money
1. Pinnel’s Case [1602]: obligated to pay remainder, lesser sum
cannot be satisfaction for a greater amount; gift of non-money
can be sufficient; i.e. giving a horse, falcon, or robe may be
more helpful than money; agreement is binding if creditor is
satisfied; cannot claim the remaining balance
 2. Foakes v Beer [1884] H.L.; change in payment amount or
payment timing does not make sufficient consideration; part
payment of a debt cannot extinguish a debt in whole
3. Vanbergen v St. Edmunds [1933] KB; can pay a lesser amount
if it at a different time or place
4. Re Selectmove Ltd. [1995] Eng. CA; A promise must have
practical benefits (e.g. greater certainty) for it to be
consideration; simply agreeing to settle for less money does not
offer such benefits. Some money is always a “benefit”; if
allowed then could never enforce debts
5. Hirachand Punamchand v Temple [1911] Eng CA; payment
to a third party
vii. accord and satisfaction: Can substitute any other item for a debt, even
if the item is worth less than the debt owed.
1. Foot v Rawlings [1963] SCC; Court upholds the Sibree v
Tripp (1846) payment by way of a negotiable instrument (post-
dated cheques as opposed to actual cash) is payment in a
different way that is of sufficient value that it can constitute
consideration.
2. Couldery v Bartrum [1880] Eng. CA; Criticised as artificial
viii. Statutory change: can be statutory provisions that allows for the
enforcement to settle for less, even when there is no new consideration
1. BC Law and Equity Act; Part performance of an obligation
either before or after the breach of it, when the creditor has
expressly accepted that, can be upheld without any new
consideration
2. Rommerill v Gardner [1962] BCCA
Rosas v Toca [2018] BCCA
Facts:
Issue: Do the yearly modifications have consideration? If not, does that mean that there is no
claim?
Held: No consideration found for the yearly modifications, but supports binding variation in
contracts without consideration so long as there is no duress or unconscionability.
Reasoning: Pre-existing relationship between parties, no duress and unconscionability, lack
of consideration does not automatically kill a contract. Policy concerns; judge wanted the
lender to be able to recoup costs. Must be a) In relation to a practical benefit, and b) cannot
be any strong holding. Clarifies nav can case; nav can was an obiter, this is in judgment
Policy Considerations: concerns that this case could extend to employment contracts; no
cases on this, but there may be issues of vulnerability and power imbalances (entirely
speculative)
ESTOPPEL
REQUIREMENTS OF PROMISSORY ESTOPPEL:
1. Clear and unequivocal promise by promisor that will not insist on strict legal rights
(pre-existing legal relationship)
2. Promise must have been relied upon by promisee - i.e., promisee changed position
(to their detriment?)
3. Inequitable for promisor to go back on promise
4. Estoppel usually only suspends promisor’s right to payment
5. Shield and not sword (defence not cause of action)
1. Estoppel
a. Estoppel is the term given to a set of doctrines developed by both the common
law and equity to enforce certain types of statements in instances outside of
seal, and where consideration is not present. The justification for holding
someone to promises made without seal or consideration is either:
1) Because the person to whom the statement was made relied on the
promise and has altered their conduct, and would thus suffer detriment
if the maker of that statement could resile or alter it
2) Because the maker of the statement and the other person entered into a
bargain or agreement based on the acceptance of the truth of the
statement made, even if it may not be truth in reality
b. Estoppel is rooted in the law of evidence and procedure, and it is a method
where a person (includes state) is prevented from introducing statements into
evidence that contradict earlier statements that were relied upon.
c. Maclaine v Gatty [1921] H.L: “where A has by his words or conduct justified
B in believing that a certain state of facts exists, and B has acted upon such
belief to his prejudice, A is not permitted to affirm against B that a different
state of facts existed at the same time
2. Types of Estoppel
a. Handful of forms of estoppel; dependent of who is making the statement and
what the subject matter of the statement is
i. Estoppment of Both Parties:
1. Estoppel by Deed: In sealed context or deed; both parties
cannot deny the validity of facts used to enter into bargain,
even if they know they are false
a. Greer v Kettle [1938] H.L.
2. Estoppel by Convention: Outside of deeds, includes contracts;
parties create a convention, accepting certain facts as true for
the purposes of their bargain. Does not create obligations;
“breach” does not give rise to any remedies
a. Ryan v Moore [2005] SCC
b. E.g. both parties agreeing that boxes contain hazardous
waste, thus certain standards of care must be used for
transportation
 ii. Estoppment of One Party (more common):
1. Estoppel by Representation: Content of the statement is an
existing fact
2. Promissory Estoppel: promise or assurance or statement of
intention
3. Proprietary Estoppel: statement by the maker that the
recipient will have an interest in land that the law otherwise
recognizes as belonging to the maker of the statement
3. Constraining the Use of Estoppel
a. If allowed to operate without any constraints, estoppel would “take over”
contract law.
i. Estoppel by deed and estoppel by convention are only available
where there is an agreement, usually another deed or contract that the
parties enter into. Estoppels can only relate to “background facts”, not
the obligations between parties. A.E. LePage Real Estate v Rattray
Publications [1994] ONCA
ii. Promissory estoppel cannot be used to create new obligations, but
only to modify or eliminate an existing one. Gilbert Steel Ltd. v
University Construction [1976] ONCA
iii. Proprietary estoppel is limited to land ad will not necessarily be used
to fully satisfy the expectations created by the maker of the statement.
Maritime Telegraph and Telephone v Château Lafleur [2001] NSCA
4. Estoppel Impacting the Scope of Obligations
a. Operate to create a binding factual matrix in which contractual obligations are
then created through the usual doctrines of offer/acceptance Manitoba
Windmill & Pump v McLelland [1911] Sask. SC.
5. A Larger Role for Estoppel?
a. In the 17th and 18th centuries, it was thought that estoppel presented a viable
alternative to contract law to create and enforce obligations. This was cut
short, outside of U.S. Common Law Jurisdictions, by the Jorden v Money
[1854] H.L decision, in which the majority rejected this role for estoppel.
b. Some judges have criticized the limited role for estoppel. Some judges go as
far as advocating for estoppel to be the basis for the enforcement of promises,
even in the absence of an existing contract. Waltons Stores v Maher [1988]
H.C.A.

VARIATION AND ENFORCEMENT THROUGH NON-CONTRACT DOCTRINES

Promissory estoppel developed out of equity courts. Equity aimed to provide flexibility and
justice that the common law cannot provide. 1873/75, the courts of equity and common law
were fused, thus equitable remedies are available in contract law. Equity has certain
requirements, such as coming to court with “clean hands.”
Motivated by the unfairness created by the doctrine of consideration. Requires that one party
(promisor) makes a promise and the other party changes their position in reliance on that
promise. Thus the promisor is estopped from going back on that promise because of injustice.
1. Promises Usually Unenforceable Absent Consideration
a. Estoppel is an alternative to contracts to enforce promises. In contracts, a
promise is enforceable if the promisee has given consideration for that
promise, or the promisor has placed a seal on the contract. If there is a
problem with either of these methods, there is little recourse within contract
law. This inflexibility has drawn criticism from leading judges. Lord
Mansfield maintained that promises deliberately made ought to be held to be
binding.
b. In Lee v Muggeridge [1813] E.R. Lord Mansfield also stated that “moral”
obligation to do something might be sufficient to make a promise to do that
same thing binding. However, in Canada, there has been little deviation from
standard contract law.
c. Law of Trusts: Where a trustee is held to the terms of the trust. Promises made
are more strictly enforced than in typical contract law, as the trustee owes a
fiduciary duty to the beneficiary. In a trust, all the promises flow in one
direction, from the trustee to the beneficiary
i. Because trusts lack the typical balance of contract law, they are more
difficult to create. Vandepitte v Preferred Accident Insurance [1932]
P.C.
d. Two primary types of estoppel have developed to allow for variation of
obligations in contracts: (1) promissory estoppel, and (2) estoppel by
convention. There are also estoppel related doctrines of (1) election, and (2)
abandonment. However, estoppel is not the primary method for contact
variation, as variation is traditionally achieved through contact law and
consideration.
2. Origins of Promissory Estoppel
a. Estoppel in general
i. Traditionally there has been ridgid requirements about the type of
statements that can be upheld by estoppel by representation; must be a
statement of fact; cannot be a statement of belief or opinion; cannot be
a statement of intent (Jordan v Money)
ii. Future oriented statements are excluded because there are other legal
doctrines that address future matters; namely, contracts and
consideration
iii. In promissory estoppel, estoppel can cover future matters such as
assurances or statements of intention. Equity doctrine.
b. Antecedents of Promissory Estoppel
i. Hughes v Metropolitan Railway [1877] H.L
1. Evidence of “promissory-like” doctrines prior to the landmark
High Trees case that firmly established promissory estoppel
 2. Original date for giving notice on repairs on leased property
was waived for consideration for possible buyout. Three days
before the repairs must be completed, they realize they will not
be bought out, and cannot complete the repairs in time The
court held the landlord could not seek to return to that date for
the purposes of calculating the period which the repairs needed
to be made.
3. Parties entered into an agreement with definite terms (repairs
by a certain date), in the interim, parties negotiate, which
effectively suspends the contractual rights. Landlord cannot
enforce the date for repairs because it would be inequitable.
ii. Prior to the High Trees case, it became recognized that in certain
contexts, promises regarding interests in land could be enforced
through the equitable doctrine of of proprietary estoppel.
1. Proprietary estoppel can be the basis, on its own, for a claim to
an interest in land. Meaning, it can create a cause of action to
enforce such an interest despite the absence of a contract
2. Crabb v Arun District Council [1976] Eng. C.A.; Denning
states “it is commonly supposed that estoppel is not itself a
cause of action. But that is because there estoppels and
estoppels. Some do give rise to a cause of action. Some do not.
Proprietary estoppel can give rise to a cause of action. The new
rights and interests so created by the estoppel, in or over land,
will be protected by the courts.
3. Statements involved in proprietary estoppel can be highly
artificial, and may often be negative (i.e. not asserting a claim
to real property) can it is sometimes implied through the
inaction of the person whom the law recognises as the original
holder of the title. That person’s inaction or statements leads
the other person to believe that they have acquired, or is about
to acquire rights to the property in question.
c. Central London Property Trust v High Trees House [1947] K.B.
i. Landlord and tenant had a lease agreement for rent at a rate of £2,500
per year. As a result of wartime conditions, the landlord agreed to
reduce the rate to £1,250 per year, and the tenant paid accordingly.
After the end of wartime conditions in September 1945, the landlord
claimed to be able to return to the original agreement (£2,500/year) and
claim the reduction in rent. No consideration given; under Foakes and
Beer, plaintiff would be able to get arrears for the reduced rent.
ii. “If there is a promise that is intended to be binding, intended to be
acted on, and is in fact acted on, it should be upheld”;
iii. Denning held that despite the lack of consideration, the promise to pay
less was enforceable while the wartime conditions, but ceased once the
 conditions ended; temporary expedient, only binding while the flats
were partially let b/c it consisted of extenuating circumstances.
iv. Defendant stayed; indicates reliance
v. With reasonable notice, can return to the original agreement without
invoking promissory estoppel.
vi. Denning claimed he was not using estoppel, but was not doing so
exactly, the doctrine he relied on became known as promissory
estoppel. Scope of the doctrine was not entirely clear at this time,
especially as Denning set out two versions; narrow and broad
vii. Narrow version had been predominant in Canada, thus promissory
estoppel is confined in scope and availability
viii. Collier v P&M Wright Holding [2008] UK; promissory estoppel can
extinguish rights
3. Limiting Promissory Estoppel
a. Use as a Defence, not a Cause of Action
i. Shield, not a sword: Cannot base a claim in promissory estoppel, or at
least not solely on it. It is appropriate to use it as a defense to a claim
by another. That other person will have promised in some way not to
make such a claim, and that person will be estopped from going back
on that promise.
ii. Combe v Combe [1951] Eng. CA; Woman sought to have the court
order her former husband to honour his promise to make stipulated
annual payments. No consideration. Denning stated that promissory
estoppel should be supplementary to the main cause of action. Could
not give rise independently to an actionable cause. Consideration is a
firmly fixed doctrine, cannot be unseated so easily and promissory
estoppel must be ancillary to other causes of action.
iii. Prime Sight Ltd. v Lavarello [2014] P.C.; reiterated Denning’s
approach in Combe that estoppel should not, and cannot replace
consideration
iv. Promissory estoppel as part of a cause of action: Unclear what
Denning meant when he said that promissory estoppel could be part of
a cause of action, and how large that part could be. Where is the line
between a relatively large “part” of a claim, and the primary claim it
self?
1. Has been used as part of an existing actionable claim,
particularly in situations where the promisor has promised not
to rely on a limitation period that would otherwise defeat a
plaintiff’s claim ; The “Ion” [1980] Q.B.
v. Acceptance in Canadian Cases: The limited approach, as set out in
Combe, has been followed in Canada; see Gilbert Steel; estoppel can
only act as a shield
 vi. Limited use by plaintiffs: In some cases, plaintiffs can use promissory
estoppel
1. Robichaud v Caisse Populaire [1990] NBCA; Rice JA
accepted that a plaintiff could, in limited circumstances, use
promissory estoppel. Used merely in the context of a
declaration. In essence, plaintiff was asking the court to state
that they had a defense that could be used should the defendant
were to launch an action against the plaintiff.
2. Used in the context of an existing legal relationship, and was
used to modify obligations, not to create the relationship
3. Petridis v Shabinsky [1982] Ont. HCJ; legal relationship must
exist subsequent to the use of promissory estoppel.
b. Beyond a Defence?
i. Promissory Estoppel as Part of a Larger Doctrine: Courts in England
and Australia have questioned, and even removed the restriction on
promissory estoppel that it cannot be used alone as a cause of action
1. Amalgamated Investment v Texas Commerce [1982] Eng.
C.A.; Denning argues that estoppel had become “overloaded”
and had become too fragmented within law. Wanted all
different conceptions to merge into “one general principle
shorn of limitations”
ii. Australian Development: Waltons Stores [1988] HCA: A landowner
and Waltons agreed on redevelopment of the owner’s land for Waltons
to use as a store. There was some urgency, so the owner demolished
the buildings and started to build the new structure. The parties had not
completed all the steps to create a binding contract at this time, and
Waltons purportedly withdrew from the deal. Owners brought an
action (SWORD) to say that contract did exist and they should be
compensated. The court found that promissory estoppel could be
used to enforce a promise that the final steps to create a binding
contract be taken.
1. Used in the absence of existing legal relations; Judges
acknowledged the limitations in Combe should be loosened to
be more flexible
2. Rooted in the avoidance of unconscionability; although no
useful definition of unconscionability given
3. Not damaging to the fundamental principles of contract law;
promissory estoppel was used to finalize the contract that had
already been agreed to. Subsequent cases in Australia have
seen promissory estoppel to enforce promises outside the
context of any contract, either modified or nascent.
iii. Impact of Australian Developments: Such developments takes
promissory estoppel beyond simply a defense for the modifications of
existing obligations, and moves the doctrine towards the bigger
 conception envisioned by Denning in High Trees where a promise
need not be connected to, or made in the context of an existing
relationship
1. Changes have not been universally welcomed; Republic of
India v India Steamships [1998] H.L. Lord Steyn reluctant to
eliminate distinctions between branches of estoppel.
2. Canada; no definitive pronouncement but has been used, not
definitively rejected, but not taken up either. M. (N.) v A. (A.T.)
[2003] BCCA regarded the idea positively, but differentiated
on facts.

c. An Equitable Doctrine:
i. Unavailable Where Inequitable: Limited by the principles of equity;
i.e. must come with “clean hands” and must have a “true accord”
1. D&C Builders v Rees [1965] Eng. CA; authority for the
promisor is barred from use of their legal rights only when it
would be inequitable to use them; only bound if a true accord
exists parties
ii. Necessary to avoid Unconscionability: Promissory estoppel is used to
prevent and avoid unconscionability; thus only available when
unconscionability would be an issue
1. Ryan v Moore [2005] SCC; unconscionability is simply
another way to describe the detriment/detrimental reliance
required for the use of promissory estoppel
2. See also M. (N.) v A. (A.T.)
iii. Suspensory Effect: The court will enforce the promise only to the
extent that equity demands, or to the extent needed to avoid unfairness
1. Presumptively suspensory; does not permanently eliminate a
contractual right
a. Ajayi v R.T. Briscoe [1964] P.C.; emphasis on limited
duration of the suspension of available rights
4. Other Requirements
a. A Promise:
i. Must be unambiguous and precise to form the basis of promissory
estoppel
1. Woodhouse A.C. Israel Cocoa Ltd. S.A. v Nigerian Produce
Marketing [1972] H.L.
ii. Promises MAY be inferred by the court, (The “Henrik Sif”, [1982]
Q.B.), but would have to be exceptional circumstances
iii. Also possible that a series of “waivers” may be constituted as a
promise to continue such waivers in the future.
1. However, authority stands against such a generous
interpretation of waivers
 2. John Burrows Ltd. Subsurface Surveys Ltd. [1968] SCC;
promissory estoppel can only be evoked if there is some
evidence that one of the parties entered into a course of
negotiations that caused the other to believe that certain rights
will not be enforced.
b. Reliances and Detriment: Central to the idea of promissory estoppel (Ryan v
Moore)
i. Reliance: Indicator that the promisee has taken up the promisor’s
statement or assurance and has acted in accordance to it. May be a
burden on the promisee, but can also be a benefit; reliance alone is not
sufficient for promissory estoppel
ii. Detriment: detriment the promisee will sustain should the promisor not
be held to his or her assurance or statement, and has been described as
an unfair or unjust burden
5. Estoppel by Convention
a. Used to modify existing contractual relationships; relatively new
b. Historically, Estoppel by convention was used to establish a factual matrix for
parties when they enter into an agreement.
c. In recent decades, accepted that estoppel by convention can operate “post-
agreement”, that is that parties to a contract or other legal agreement can agree
how that contract is to operate and they are both estopped from denying the
validity of that agreement Le Soleil Hotel Ltd. v Le Soleil Management Ltd.
[2009] BCSC
d. Like promissory estoppel, only actionable if there is detrimental reliance
6. Election and Abandonment: Two other estoppel related doctrines can be used to
modify obligations in a contract (1) election, and (2) abandonment. Sometimes
“waiver” is used indiscriminately to refer to both terms.
a. Election: person has a choice between two inconsistent alternative courses of
action; i.e. to affirm or terminate a contract. One the election is made, one of
the courses of action is “waived” or disappears. Generally, the elector needs to
be aware of the circumstances that gave rise to the election.
i. When a person waives one of the courses of action, the person cannot
then seek to rely on that course of action.
ii. No need for consideration to support waiver by election
iii. Usually arises in the context of a breach. It can arise within a contract
and as a deliberate structure of the contract itself
b. Abandonment: An election arises as a necessary choice for the the elector.
However, possible that a party to a contract does not have to make any choice,
but nonetheless purports to abandon some claim or right under contract
i. Unclear if abandonment is binding outside of election or promissory
estoppel, but SCC has accepted it as a possibility Saskatchewan River
Bungalows Ltd. Maritime Life Assurance Co. [1994] SCC
 ii.
Most usually enforceable (outside of election/promissory estoppel) is
where there is a condition precedent that is to one party’s advantage;
that party can in some circumstances, abandon the condition precedent
7. “Waiver” as Promissory Estoppel
a. Recognized by courts as another term for promissory estoppel Toronto
College Street Centre v Toronto [1986] ONCA

Hansen v. British Columbia, 2000 BCCA

Facts: Disagreement of timeline of filing to receive compensation for expropriation of
property by gov. Hansen relied on a statement made by council for gov, which the gov then
went back on.
Issue: Can Hansen use promissory estoppel as a defense agains the gov?
Held: Found for Hansen; elements of estoppel found
Ratio: The party relying on the doctrine must establish that the other party has, by words or
conduct, made a promise or assurance which was intended to affect their legal relationship
and to be acted on. Furthermore, the representee must establish that, in reliance on the
representation, he acted on it or in some way changed his position.

M. (N.) v. A. (A.T.), 2003 BCCA

Facts: M promises to pay the remainder of A’s mortgage if she will move to Vancouver,
requires her to leave her job in England. Relationship fails and M does not pay off mortgage,
also evicts A from the house they share in Vancouver.
Issue: Can A enforce M’s promise via promissory estoppel?
Held: Appeal dismissed
Ratio: Promissory estoppel cannot be used to enforce any promise, must have intention to
create a legally binding promise to use the Walton Stores doctrine