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Part 1 Law and Its Social and Business Context

Chapter 1 Law, Society, and Business
The Role of Law
How Do We Define the Law?
Why do we have and need law?
1. Protect persons, property, and society as a whole
Prohibits conduct society believes to be harmful
Prescribes rules that allow us to get on with our everyday lives
2. Gives government the power to act for the benefit of society
Power to provide policing and other essential services and to charge taxes for these
things
Rule of Law
Established legal principles that treat all persons equally and that the government obeys.
EXCEPTION: diplomatic immunity.
Public Law
Law that regulates the conduct of the government and the relations between government and
private persons.
Regulates individuals interactions with each other
Plan and organize affairs
Bargain with others for mutual advantages
Private Law
Law that regulates the relations between private persons and groups of private persons. AKA
Civil Law.

Influences and controls the behaviour of individuals and society
Empowers, influences and controls the actions of the government
Influences and controls interaction between individuals
Is It Ever Right to Break the Law?
There are times, but generally the law should be obeyed
There are unjust laws should be obeyed due to chaotic consequences if many people
do not obey them.
Speed limit is in place with safety in mind
Endangered others to save life of her child she would say she was justified in breaking
the law given the circumstances
Is and unjust law really law?
If it is very unjust, no one needs to abide by it
Is there a point in having laws that no one will obey?
Laws must be rooted in the morals of society in order to be effective.
How Does Law Influence Behavior?
Most people understand the need to comply with the law
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Legal Liability
Responsibility for the consequences of breaking the law.
How offensive society finds the crime determines the area of law that regulates the
behavior and the types of liability it will attract
Criminal Liability
Responsibility arising from commission of an offense against the government or society as a
whole.
Regulatory or Quasi-Criminal Liability
Responsibility arising from breaches of less serious rules of public law, often enforced
through regulatory tribunals set up by government for specific purposes.
Civil Liability
Responsibility arising from a breach of private law, enforced through a lawsuit initiated by
the victim.
It is possible to attract all types of liability with one offence
Who Makes Law?
The constitution
Basic Law
A constitution that is habitually obeyed by the citizens of a country and that they regard as
legitimate and binding.
Created by a monarch or by the government
The basic law from which all others draw their power
All other laws must comply with the constitution in order to be valid and
enforceable
Legislation
AKA statute law, acts
Statute
A piece of legislation passed by government.
Passed by Parliament and provincial legislatures in compliance with the Canadian
Constitution
i. Subordinate Legislation
Passed under authorization of statute by a body designated in the statute, such as a cabinet
or a commission
Regulations
Administrative rules implemented by government as a result of authorization given in a
statute.
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ii. Administrative Rulings
Rulings handed down by administrative bodies created to hear complaints and applications
by individuals, as outlined in legislation
Court Decisions
Judgments handed down by judges after hearing a court case.
Court Law
A collection of individual cases decided by the courts that develop and shape legal principles.
Courts are central to law enforcement
Legislation plays small role in private disputes
Apply principles of case law developed over courts history to deliver decisions
In novel situations, they develop new principles set precident
Courts and Legislation
Courts play important role even where legislation exists
Determine if statute is valid and enforceable (based on constitution)
Decide what the statute means an is it covers the subject of a dispute
Federalism and the Constitution
Two distinct levels of government, each independent with own sphere of activity under
the Constitution Act of 1867
Powers divided between the two under sections 91 (federal) and 92 (provincial)
If conflict arises, courts determine who has jurisdiction
Ultra Vires
Beyond the powers of the enacting government and therefore void.
Residual Powers
Powers that fall within the federal jurisdiction because they are not expressly allocated to the
provinces in the Constitution.
Usually activities developed after 1867 such as telecommunications or air traffic.
Practical problems often overlap the boundaries of jurisdictions
Concurrent Powers
Overlapping powers of both levels of government to regulate the same activities.
When conflict arises, federal legislation prevails
Need for uniformity across Canada in areas of federal jurisdiction
Supreme Court of Canada plays umpire role between levels of government
Does not easily strike down legislation
Respects intent of legislatures
Only strikes down if it is inconsistent with the Constitution
The Charter of Rights and Freedoms
Became part of the constitution in 1982
Limits aspects of government action and protects human rights
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Human Rights
Recognized entitlement encompassing traditional freedoms associated with civil liberty and
basic human necessities
Property and civil rights are part of provincial responsibility
Relate to ownership of property, contract law, and family relations.
Charter is entrenched in the Constitution cannot be repealed by any ordinary act of
legislatures
Amendments require consent from Parliament, legislatures from two thirds of the
provinces representing at least 50% of the population of all the provinces very
difficult to change
Rights in the charter cannot be infringed upon by ordinary legislation
Cannot interfere with right founded on a higher law
Supreme Court will strike down any legislation that violates the explicit rights in
the Charter as per section 52 (1) of Constitution
Has read more into the Charter to prevent discrimination based on aspects not
explicitly listed in the charter
Section 33 allows legislature to override certain other section of the Charter
Shall operate notwithstanding clause allows legislation to do this
Expires after five years unless reenacted
Only do this in special circumstances
Not politically easy to override human rights because it sets bad precedent
No rights in the charter are absolute
Section 1: all are subject to such reasonable limits prescribed by law that can be
demonstrably justified in a free and democratic society
Statute is usually presumed valid
Person must show that one of their guaranteed rights has been infringed
upon by a provision in the statute
Statute then presumed invalid
Unless government can show that the infringement was demonstrably
justified
Burden
The requirement that, unless a party can establish facts and law to prove its case, it will lose
Charter applies to government and governmental activities has little application
between private persons
In private sector, rights are a matter of human rights codes passed by the provinces
Charter states is applies in respect of all matters within the authority of Parliament
and of the legislature of each province not extended to corporations
The Rights and Freedoms Protected by the Charter
Subject to override through use of section 33:
Fundamental Freedoms
2. Everyone has the right to the following fundamental freedoms:
a) Freedom of conscience and religion;
b) Freedom of thought, belief, opinion and expression, including freedom o the press and
other media of communication;
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c) Freedom of peaceful assembly; and
d) Freedom of association.
Legal Rights
7) Everyone has the right to life, liberty and security of the person and the right not to be
deprived thereof except in accordance with the principles of fundamental justice.
8) Everyone has the right to be secure against unreasonable search and seizure.
9) Everyone has the right not to be arbitrarily detained or imprisoned.
10) Everyone has the right on arrest or detention
a) To be informed promptly of the reasons therefor;
b) To retain and instruct counsel without delay and be informed of that right; and
c) To have the validity of detention determined by way of habeas corpus and to be released
if the detention is not lawful.
Sections 11 14 deal with rights of those accused of crimes during criminal proceedings
Equality Rights
15. (1)Every individual is equal before and under the law and has the right to the equal
protection and equal benefit of the law without discrimination and, in particular, without
discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or
physical disability.
(2)Subsection (1) does not preclude any law, program or activity that has as its object the
amelioration of conditions of disadvantaged individuals or groups including those that are
disadvantaged because of race, national or ethnic origin, colour, religion, sex, age or mental
or physical disability.
(2) allows for reverse discrimination
NOT SUBJECT TO SECTION 33: the rights and freedoms are guaranteed to men and women
equally. Does (2) violate this?
Not subject to legislative override:
Democratic Rights
3. Every citizen of Canada has the right to cite in an election of members of the House of
Commons or of a legislative assembly and to be qualified for membership therein.
Mobility Rights
6. (1)Every citizen has the tight to enter, remain in and leave Canada
(2)Every citizen and person with the status of permanent resident has the right
a. To move to and take up residence in any province; and
b. To pursue the gaining of livelihood in any province.
(3)The rights in (2) are subject to
a. Any laws or practices if general application in force in a province other than those
that discriminate among persons primarily on the basis of province of present or
previous residence; and
b. Any laws providing reasonable residency requirements as a qualification for the
receipt of publicly provided social services.
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(4)Subsections (2) and (3) so not preclude any law, program or activity that has its object the
amelioration in a province or conditions of individuals in that province who are socially or
economically disadvantaged if the rate of employment in that province is below the rate in
Canada.
(4) gives affirmative action provision to give preference to local workers in areas with
higher-than-average unemployment
The Significance of the Charter for Business
Government regulates business through legislation
If it violates the Charter, it can be declared invalid
Challenging the Validity of a Statute
Statute is declared invalid if:
Subject matter is ultra vires
It violates the Charter
Supreme Court must determine the purpose and effect of the statute
Narrow interpretation valid
Restrict meaning to small cases
Broad interpretation invalid
Take meaning in all possible ways
Court may interpret it as partially out of the jurisdiction of the government restrict
application to fewer areas legislation does not have desired effect
Courts often criticized for taking too narrow of an interpretation
Avoid interference with existing civil rights
Constitutional defeat more serious than narrow interpretation.
Defeat constitution must be changed in order to overcome court decision
Interpretation introduce an amendment to broaden the application of the statute
Chapter 2 The Machinery of Justice
Classifying Law
To help us understand organize and explain laws that govern us


Business law
draws from both public
and private law
Substantive Law
The rights and duties each
person has in society.
Procedural Law
Rules that deal with how substantive rights and duties may be enforced.
Lawmakers designate the acceptable conduct and a way to enforce it.
Public
Law
Constitutional
Criminal
Taxation
Private
Law
Contracts
Torts
Property
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Substantive: Right to own property
Procedural: How to protect property
Legal Systems: Civil Law and Common Law
Regions of the World Under Each System
Two legal systems around the world:
Roman Law
A system developed by Eastern Roman Emperor Justinian in the 6
th
century.
Civil Law
A system of law involving a comprehensive legislated code, evolved from Roman Law.
Used in Quebec
All law must be collected into a body of legislation called the civil code
The code is more important than any individual case decision
Always refers to code to settle a dispute
Legislation > Case Law
Common Law
A case-based system of law originating in England and covering most of the English-speaking
world. Based on recorded reasons given by courts for their decisions.
Case Law Legislation
The Need for Consistency and Predictability
Like cases should be treated alike
Judges must be influenced or concerned by previous decisions
Reduces the number of cases that go to court
The law itself must be fairly predictable
civil law countries try to decided similar cases in similar ways even through they are not
bound to do so
Common Law: The Theory of Precedent
Certainty vs. Flexibility
Consistency and predictability are the primary goal of common law judges
Theory of Precedent: follow already decided cases
Stare Decisis
To stand by a previous decision.
Not an ironclad rule
Circumstances change, so should the decisions made by the courts
Judges only bound to decisions made by a higher court.
Lower court decisions have influential value only
Precedent only bind the same circumstances
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Vagueness in these definitions allows judges to draw distinctions between situations and not
follow precedents
Distinguish
Identify factual difference that renders precedent inapplicable to the case before the court.
Accommodating Change
Overrule
To declare an existing precedent no longer binding or effective.
To overrule an existing precedent, issue must be addressed by a higher court
Reluctant to override decision by court at the same level takes away from the
consistency and predictability
The Sources of Law
The Variety of Sources
Courts
Legislation
Government
Cabinet
Municipalities
Subordinate Legislation
Law created by administrative agencies whose authority is granted by statute in order to carry
out the purposes of the legislation.
Statutes
Codify
Set down and summarize in a statute the existing common law rules governing a particular area
of activity.
Statutes to codify existing precedents make the law easier to access
In one bill rather than in several cases
Courts often called upon to interpret a statute, whether it applies the facts of a case, and
what its consequences are
Not likely to apply the provisions if the details of the case are not covered specifically
Strict Interpretation
Courts apply the provisions of a statute only where the facts of the case are covered specifically
by the statute.
Liberal Approach
Statutory interpretation that considers legislative intent, purpose, and history of the stature, as
well as the context of the language.
Takes into consideration the state of the law at the time of the passage and the language
used when debating the bill

Interpretation Act tells courts to take a fair, liberal and large interpretation of statutes
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Legislation Framework
Two main classes: passive and active
Passive
Statutes that change the law
Make a formerly illegal activity legal or vice versa
Provides legal framework for people to go about their business
Does not propose to supervise or regulate these activities
Leaves it to an injured party or enforcement official to complain and initiate court
proceedings
Active Legislation
Gives government power to carry out a program
Parliament itself is not the right body to carry out the program
Agencies created through legislation execute the projects authorized by the
government
Subordinate Legislation
Administrative agencies create new law by exercising their regulatory powers
Set out broad or detailed criteria
Important regulations require authorizations by the Cabinet in form of order-in-council
Agency drafts regulations and minister responsible for agency brings it forward for
approval
Less important regulations can be approved by the minister, head of the agency or
designated officer
Case Law: Judge-Made Law
The Common Law
Case law still represents the bulk of private law, especially for contract disputes
System of Courts
The organization of courts into a hierarchy that designates the responsibilities of the court and
determines the importance of the precedent. Usually has three levels: trial, appeal, and final
appeal.
Common law is based on the flow of cases from the system of courts, the decisions need
to be with a recognized level of court in order to influence other judges decisions
Collection of case law precedents = common law
Earliest decisions made without benefit of precedent had to look to outside sources for
direction
Canon Law
Created by the Church, which had its own jurisdiction and courts in matters pertaining to
itself, family law, and wills.
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Feudal Law
A system of land ownership rooted in sovereign ownership: exchange of land handed down
from royals in exchange for military service and loyalty.
Merchant Law
Rules and trade practices developed by merchants and administered by their own courts
As number of precedents increased the need to draw from outside sources was reduced
Equity
Common law system was originally very rigid
Needed specific writ to have case heard by court
Writ
An ancient form required in order to take a grievance to court.
As times changed the appropriate writs were not available, king would hear petitions,
make decisions inconsistent with existing common law
Kings chancellor began to take over this job
Courts of Chancery
A system of courts under the kings chancellor and vice-chancellor developed from the hearing
of petitions to the king
AKA Courts of Equity
Created exceptions to common law rules when they were too harsh, created new
precedents: called principles of equity
Common law remedies were too narrow (money damages only) and did not meet needs
of
Equitable Remedies
New remedies created by the courts of equity to address situations where money damages did
not solve the problem
Courts of equity were prepared to grant equitable remedies
who would not carry our the court order would be jailed
Specific Performance
An order by a court of equity to carry out a binding obligation.
Contempt of Court
A finding by a court that a party refused to obey it and will be punished.
Remedies in court of equity were discretionary
Depended on the innocence of the petitioner and the hardship suffered
Pioneered legal concepts of trust and loyalty and considering the relative positions of
the parties when applying the law
Merger of the Courts
British government decided to merge the courts in 1867, Canadian provinces followed
shortly afterwards
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Judges are now supposed to apply both equity and precedent
The System of Courts in Canada
Provinces have jurisdiction over
the administration of justice
Federal government has
jurisdiction over trade and commerce,
bankruptcy and criminal law
The Provincial Court System
Deals with most matters of private
and public law
Courts of First Instance
Witnesses give evidence and initial
judgments are made
Topic of dispute determines which
trial court it goes to
Inferior Trial Courts
Created by provincial legislation for a specific purpose.
Small Claims Court
Private disputes for small amounts of money
Maximum amounts vary by province
Procedure is simple cost of taking action is small
Consumer and client disputes are handled here
Provincial Division
Decides mostly criminal law
Except most serious criminal offences
No jury trials
Holds preliminary hearings to see of there is enough evidence to go to Superior Court
trial
Some provinces have different division for family law
Superior Trial Courts
Constitutionally created courts presided over by federally appointed judges.
Surrogate Court (Probate Court)
Supervises estates of deceased persons
Appoints an administrator to:
Settle affairs of people without wills
Determine validity of wills and division of assets
Approves accounts of executors and administrators
Some provinces have these as part of their Superior Court system
Supreme
Court of
Canada
Provincial
Court of
Appeal
Superior
Courts of
First Instance
Inferior
Courts of
First Instance
Federal Court
of Appeal
Federal Court
Trial Division
Tax Court
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General Division or Superior Court
Unlimited jurisdiction in civil and criminal actions
Federally appointed judges
Hears criminal matters, and civil cases out of the jurisdiction of Small Claims Court
Court of appeal for less serious criminal matters heard in Provincial Division
Intermediate Appellate Court
The Cr5t6yourt of Appeal
Each province has one
Same function as the Court of Appeal in England
All matters arising out of court of first instance are first appealed here
The Federal Courts
Supreme Court of Canada
Final court of appeal
Hears appeal from provincial courts of appeal and the Federal Court of Canada
Under Supreme Court Act has rule on constitutionality of federal and provincial statutes
Matter has to be of national importance to be granted leave many cases the Court of
Appeal is the final court of appeal
Courts of First Instance
Tax Court of Canada
Hears the appeals of taxpayers against assessments by the Canada Revenue Agency
Only hears tax appeals with simple procedures
Decisions may be appealed to the Federal Court of Appeal
The Federal Court of Canada
Trial and appeal divisions
Appeals on decisions made by the Federal Court of Appeal go to the Supreme Court of
Canada
Disputes concerning ships and navigation, copyright
Some concurrent jurisdiction shared with provincial courts
Intermediate Level Appeal
Federal Court of Appeal
Hears appeals from Federal Tax Court and Federal Court of Canada Trial Division
Procedural Law: Using the Courts
Rules of Civil Procedure
The provincial regulations that set out the steps in a private lawsuit, including forms, fees, and
timelines.
Who May Sue?
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Adult citizens of Canada
Non-Canadians EXCEPTION: during hostilities, enemy aliens lose this right
Corporations
Foreign ones may be subject to more strict regulation and may need a provincial
license before they may do so
Considered a legal person or entity
An action is brought on by a person, either for their own benefit or someone elses
Unincorporated Collectivity
A group of persons that in most cases are not recognized by the courts and that may not sue or
be sued. EXCEPTION: trade unions may sue and be sued in some places
Standing to Sue
Individuals whose rights have been specifically affected have standing to sue
Means must be available to the public to protect their interests if no government body
will do so
Class Actions
One case represents issue felt by a number of individuals
Courts reluctant to take away individuals right to litigate their claim
Do not want to clog the system with multiple identical cases
Case not worth the cost unless multiple plaintiffs pool resources
Plaintiff ()
The party that commences a private legal action against another party
Class Action
And action in which an individual represents a group of possible plaintiffs and the judgment
decides the matter for all the members of the class at once.
Consumers often commence class actions against businesses
Court must approve basis of class action before it can proceed
Identify a common class and common issues
Determine that a class action is the preferable procedure
Res Judicata
A case that has already been decided by a court and cannot be brought before a court again.
Judgment resulting from a class action suit cannot be brought before a court again to
contest legal liability
Settlement Out of Court
Advantages
Settlement
An out-of-court procedure by which one of the parties agrees to pay a sum of money or perform
an act in return for a waiver by the other party of all rights arising from the grievance
4% civil trial rate
Many cases settle out of court
Faster and less expensive than going through the court system
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Avoids risk that court will rule against them
Many actions are settled soon after they have started
Growing Delay in the Court System
Number of cases going to trial has increased (not percentage)
Causes backlog in many cases getting heard
Injured has to wait several years to get compensation
Witnesses cannot recall information as well
Rules have been created to encourage settlement:
1. Parties must attend settlement conferences as part of pre-trial procedure
Judges offer opinions on possible trial outcomes and settlement offers
2. Parties who do not accept reasonable offers of settlement are penalized
If court can show that offer was essentially the same as the court order the party will be
ordered to pay the costs incurred by the other party
3. Alternative dispute resolution is encouraged by courts
Procedure Before Trial
Well defined procedure allows courts to work effectively
Action
Lawsuit.
Issuing
Commencing the lawsuit by filing a copy of the statement of claim with the court office.
Serving
Providing a copy of the issued claim to each defendant.
Cause of Action
An event or set of events that gives rise to a legal liability.
Most litigations goes in form of action initiated by issuing and serving a writ or
statement of claim which describes the cause of action

Defendant is served so they know what they are being sued for and by who.
Entering (filing) an Appearance
Filing a notice of an intention to consent to action.
Statement of Defense
A reply to a statement of claim, admitting facts not in dispute, denying other facts, and setting
out facts in support of the defense.
Counterclaim
A claim by arising form the same facts as the original action by to be tried along with that
action.
1.
sets out in detail the facts that allegedly have given rise to the cause of action and the
damages suffered
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who intends to consent to the action enters and appearance and replies with a
statement of defense
may reply countering the alleged facts presented by the
will then counter claim and the claims can be tried together
Pleadings
Document filed by each party to an action providing information it intends to provide in court.
2.
The documents are assembled to form the main body of the pleadings
Court will refuse to hear surprise evidence
May demand particulars so a claim may be investigated further
Examination for Discovery
Process allowing either party to examine the other or their evidence in order to narrow the
issues.
3.
Form some kind of examination for discovery to narrow issues or decide whether to
proceed with trial at all
Learn about strength of other partys case so a settlement decision can be made if
necessary
If both are satisfied that the action should go to trial, they ask official to place it on the
docket for next sitting of the court
4.
Generally, pre-trial or settlement conferences with a judge or mediator are required after
discovery
Issues in the dispute are reviewed in an attempt to settle or at least narrow issues to that
the eventual trial will be shorter
The Trial
Burden of proof is on
Must prove on a balance of probabilities
Everyone brings all evidence and apply the law to the facts in favorable way
Counsel for calls witnesses favourable to the client
Counsel for can cross-examine the witnesses for aspects of their testimony that were
neglected that would serve position
Counsel for may then reexamine the witness to clarify any points in the cross-
examination
Counsel for may also call witnesses
Admissible Evidence
Evidence that is acceptable to the court.
Hearsay
Words attributed by a witness to a person who is not before the court.
Evidence may not be admissible because they do not add to the facts or they are hearsay
Must separate bad evidence from good
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After all evidence is heard, counsel for each presents arguments in law that are favorable
to their clients
Reserve Judgment
Postpone giving judgment decision after the hearing ends
Judge may give decision right away, usually reserve judgment to review the arguments
and consult other cases
Appeals
Must give notice that they will appeal within a given time frame, usually 30 days
Costs
Who Provides Funds for the Court System
Government pays expenses of sustaining the court system
Salaries
Maintaining the court buildings
Litigants pay overhead costs
Issuing a writ
Registering a judgment
Solicitor-Client Fees
Litigants pay their lawyers fees associated with the litigation
Legal Aid
A system where the government pays for many legal services provided to low-income litigants.
Solicitor-Client Fee
Payment for the time and expenses of a lawyer in preparing a case and representing the client in
negotiations to settle or in court.
Party and Party Costs
Loser pays rule
Party and Party Costs
An award that shifts some of the costs of litigation to the losing side according to a published
scale of fees.
Total Costs of Litigation
Solicitor-client fee is almost always grater than an award of party and party costs
Some times these fees are awarded if the judge feels the losing party behaved
unreasonably
If the client and lawyer cannot come to a reasonable settlement of the bill it is referred to
an officer of the court
Contingent Fees
Origins in the United States
US does not follow loser pays rule
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Contingency Fee
A fee paid for a lawyers services only if the client is successful; therefore, no charge if the client
is unsuccessful.
Contingency fees developed to give access to litigants who do not have the financial
means to pay fees associated with litigation
Criticism
Clogs American justice system with litigants who have small chance of winning
Discourages litigation of small claims
Fails to compensate justly the winner whose claim has been vindicated
Use in Canada
Canada was slow to adopt due to concerns that contingency arrangements would:
Encourage unnecessary litigation;
Expose defendants to the costs of defending themselves against claims that have no
merit;
Encourage clients to agree to unreasonable large percent fees demanded by lawyer;
Cloud judgment of lawyer (becomes stakeholder in litigation)
Was accepted in Canada eventually
Some provinces have limits on the % of the recovery the lawyer can charge.
Alternative Dispute Resolution
Rising delays in court system made informal ways to resolve disputes more popular
Alternative Dispute Resolution
Using private procedures instead of the courts to resolve disputes.
Arbitration
Arbitration Act governs this process
Arbitrator is hired by both parties to adjudicate the matter
Will hear both sides and their witnesses in private
Deliver a decision with reasons
Confidential and binding
Parties design own process for arbitration:
Arbitrator
The rules of the arbitration
The law that will be applied
Can be a pre-dispute term in contracts or agree to arbitration after dispute arises
Mediation
Neutral third party acts a mediator in settlement negotiations
Decision not binding, only to assist in reaching a settlement
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Evaluative
Offers an opinion
Facilitative
Guides the process only
Mediator makes preliminary remarks
Each side presents position
Meetings with each side separately to explore the possible settlements
Confidentiality cannot use information from mediation as evidence, cannot call
mediator as witness in court
Benefits:
Speed
Cost reduced time saves money, usually cooperate to avoid delays, they DO have to pay
for the fees themselves
Choice of adjudicator or mediator can pick someone with expertise in the area of the
dispute, rather than a randomly appointed judge
Confidentiality agree to keep dispute private to minimize the harm to their business
Preserving ongoing relations less adversarial than litigation, usually will be able to
continue to work together after the dispute has ended
ADR created to solve business disputes that domestic legal systems cannot handle
Courts tend to uphold decisions made by adjudicators
Many court systems recommend or require that ADR is attempted before bringing issue
to court
The Legal Profession
Solicitor
An office lawyer in England who interviews clients, carries on legal aspects of the business and
family affairs, and prepares cases for trial.
Barrister
A lawyer in England who accepts cases from solicitors and presents them in court, and also acts
a consultant in complex legal issues.
Brief
Case handed from a solicitor to a barrister.
In Common law provinces, all lawyers are qualified to act a barristers and solicitors
Notary
Solicitor in Quebec.
Advocate
Barrister in Quebec.
Attorney
A lawyer in the United States, encompassing roles of barrister and solicitor.
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Legal profession organized on a provincial basis
Must be a member of the barristers society of that province
Membership in one province does not permit practice in another province
Member from any province may appear before Supreme Court of Canada
Disbarred
Expelled from the law society and deprived of the privilege of practicing law.
Law societies have standards governing lawyers relationship with clients, courts,
administration of justice, and the public
Honesty
Integrity
Confidentiality
Competency
Solicitor-Client Privilege
A clients right to have all communication with his or her lawyer kept confidential.
Paralegal
A non-lawyer who provides some form of legal service to the public.
Unregulated ones provide a risk, they are not subject to educational standards, licensing,
professional standards, or discipline
Must be licensed in Ontario
Business and the Legal Profession
How should businesses go about hiring lawyers?
Retain
Hire as needed
Retain
The contract between a lawyer and client that describes the work that will be done and the fee
that will be charged.
Outside Counsel
Self-employed lawyers who work alone, in small partnerships, or in large national firms, and bill
the business for the service rendered.
Most business use some outside counsel
Can select lawyer with the specialty needed
In-House Counsel
A lawyer who provides legal services to a business as a full-time employee of the business.
For businesses with regular legal needs
May need to hire outside counsel for situations not in their expertise
Often supervises compliance officers
Compliance Officers
Employees that monitor regulatory and legislative requirements applicable to the business and
ensure that the business complies.
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Part 2 Torts
Chapter 3 The Law of Torts
The Scope of Tort Law
Tort
A wrongful act causing harm to the person or property of another.
Purpose: to compensate victims for harm caused by the activities of others
Punishment left to criminal law
A tort identifies a set of circumstances that creates a right to claim compensation
Development of the Tort Concept
Early on: someone who caused direct injury to another has to pay compensation.
No inquiry about the reasons or whether it was intentional or unintentional
Strict Liability
Liability that is imposed based upon causation regardless of fault. Prima face on its face
Idea developed that a person should not be responsible if they acted without fault.
Evolved in two ways:
1. Fault of
2. Causation whether conduct could be considered the cause of the harm
The Basis for Liability
Fault
must show that is at fault
Fault
Unjustifiable injurious conduct that intentionally or carelessly disregards the interests of others.
Deterrent effect
People will be more careful of they have to pay for their carelessness
Highly publicized awards of damages deter others from making the same error
Shortfalls of entirely fault based system
If not fault can be established, a victim may not receive compensation
Tendency for overcompensation
Strict Liability
For activities that are inherently dangerous regardless of amount of care taken
Take into account the risks in cost of product or service or insurance
Most often imposed by legislation
Courts do have raised standards of care as the danger associated with an activity
increases
Often impossible to show that you have met this standard of care
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Public Policy
Change as our social standards change
Force law to adapt
Direct legislation
Judge and jury changing decisions about liability and compensation.
Public Policy
Considerations or objectives that are considered beneficial to society as a whole.
Determine whether liability should be based on fault, strict liability, or other
No-Fault Insurance
A system of compulsory insurance that eliminates fault as a basis for claims.
Car insurance
Workers compensation
In most areas or tort law, liability is imposed on a fault basis.
Vicarious Liability

Victim can sue the employer (who
has greater ability to pay) or the employee
Employee may be compensated by
the employer if they are sued
Employer may sue the employee if
they are sued by the victim
Vicarious Liability
The liability of an employer to compensate
for torts committed by an employee during
the course of his or her employment.
Intentional Torts
Intentional torts are those where the activity
or conduct is done deliberately.
Harm or damage must occur for any tort to be actionable
List of torts grows as courts impose liability for new behaviors causing harm
Trespass
Unlawful entering, or remaining, on the land of another without permission.
Trespass to the Person
Assult
The threat of violence to a person.
Battery
Unlawful physical contact with a person.
May be a criminal offence, may also be liable in tort to compensate victim
Employee
Employer
Victim
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Not usually fruitful actions battery and assult actions against attackers
Nuisance
Public Nuisance
Interference with the lawful use of public amenities.
Prosecuted but government agency on behalf of the public
Individual who is able to shoe special injury that is greater than those suffered by others
may bring action
Private Nuisance
Interference with an occupiers use and enjoyment of their land.
Includes tenants courts weigh the degree of interference with the occupiers use of their
land and the economic importance of the offending activity

False Imprisonment
Unlawful restraining or confining of another person.
False Arrest
Causing a person to be arrested without reasonable cause.
Causing confinement or preventing them from leaving where they are
Does not need to be physical restraint or the threat of it being applied
Liability arises when confronting a member of the public when there is not strong
evidence that a crime has been committed
Malicious Prosecution
Causing a person to be prosecuted for a crime without an honest belief that the crime was
committed.
Defamation
Making an untrue statement that causes injury to the reputation of another person.
Requires publication (communicating the statement to someone other that the person
defamed)
must demonstrate that serious allegation were made about character or ability causing
real and significant injury to their reputation
Libel
Written defamation
Slander
Spoken defamation
Defenses against Defamation Charge
1. Show that the statement is true
must demonstrate or prove this
2. Absolute Privilege
Complete immunity from liability for defamation
Words in parliamentary debate, proceedings in court, before royal commission
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Promotes candid discussion
3. Qualified Privilege
Immunity from liability for defamation provided a statement was made in good faith.
4. Fair Comment
Comment that is researched an offered, it is a reasonable opinion that is honestly held.
5. Responsible communication on matter of public interest
A defense to defamation when the publication of the statement is in the public interest
and was done responsibly
Other Intentional Torts Related to Business
Collectively known as economic torts, two types:
Related to carrying on a business
Inducing a Breach of Contract
Intentionally causing one party to breach their contract with another.
A convinces B to breach contract with C, C may sue A and B
Unlawful Interference with Economic Relations
Attempting by threats or other unlawful means to induce one person to discontinue business
relations with another.
Relating to false advertising in relation to anothers product
Product Defamation
Making false and damaging statements about the products of another person.
Passing Off
Representing ones own goods as those of another.
Unintentional Torts
Involve behavior that is not done deliberately.
Happened unexpectedly, by mistake or accident
Negligence
The careless causing of injury to the person or property of another.
Elements of Proof
The following must be proven by in order to receive damages:
1. owed a duty of care
A relationship so close that one must take reasonable steps to avoid causing harm to the
other.
Duty only arises if could have reasonably foreseen harm to the or someone in their
position
Are there any considerations that should limit:
The scope of the duty
The class of persons to whom it is owed
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Damages to which a breach of it may give rise
2. breached the required standard of care
The level of care that a person must take in the circumstances.
Law puts general duty on people to avoid causing injury to others
Legislation can set this out for particular activities
3. s conduct caused injury or damage to
but for test
If not for the negligent conduct of , injury would not have occurred
No matter how blameworthy, person will not be liable for damage they did not cause
material contribution test
Behavior of created an unreasonable risk and it would offend notions of fairness to
deny recovery
Injury may be result from two or more negligent acts from different
Remoteness of Damage
A person will not be liable for consequences of actions if they are considered to be too remote
Was the damage reasonably foreseeable?
Defenses to Negligence
s own actions can be partial of full defense to negligence
Contributory Negligence
A partial defense to a negligence action when s conduct also contributed to the injury loss
will be apportioned according to the degree of fault
Post-injury conduct can contribute to severity of an injury
is expected to act reasonably to mitigate any damage suffered
Mitigate
Duty to act reasonably and quickly to minimize the extent of damage suffered.
Voluntary Assumption of Risk
A defense to a negligence action when was aware of the risk and continued the activity
anyway.
The Relevance of Insurance
Loss often falls on insurance company
Courts do not consider having insurance a mitigation strategy
Cannot recover from insurance company and
Subrogation
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Where one person becomes entitled to the rights and claims of another.
Insurance company becomes
subrogated to the insured partys rights
after they have collected from them
Usually easier to recover damages
from insurance company then from trying
to sue
Product Liability
A tort imposing liability on manufacturers
for harm caused by defective products.
Circumstantial Evidence Principle
A prima facie case of negligence may be
established by drawing from reasonable
inferences from the circumstances
surrounding the product manufacture and
failure
Up to manufacturer to show that they cannot be held responsible for the cause of the
defect or they took all reasonable precautions to prevent the defective good from
reaching the distribution system.
Burden of Proof
In these cases may often have no way of knowing how the manufacturers actions
caused the injury
Need to show an uncharacteristic malfunction that is the most likely cause of the
injury and the manufacturing process is the likely reason for the malfunction
Then must show they are not at fault
Inherently Dangerous Products
Harm can be caused of product is not used properly
Manufacturers duty to inform consumers of such dangers
Duty to Warn
Manufacturers responsibility to make users aware of the risks associated with the use or misuse
of the product.
Applies after product is distributed
Claim based on a breach of the duty to warn
Show:
Duty was owed
Warning was deficient
Would not have used product in the way they did if they had been provided with the
warning
Tortfeasor
Insurance
Company
T
Victim
Insurance
Company
V
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Occupiers Liability
To whom is a duty owed? What standards should the occupier meet?
Occupiers Liability
A tort imposing liability on occupants ofland for harm suffered by visitors to the property.
Distinctions used to be made between the types of visitors:
Invitee
A person permitted by an occupier to enter the premises for business purposes.
Licensee
A visitor, other than a licensee, who enters the premises with consent of the occupier.
This distinction was abolished in most provinces
Same standard of care is applied to invitees and licensees
Trespasser
A person who enters premises without the permission of the occupier.
Must not set out to deliberately harm them or disregard the possibility that their acts
might injure a trespasser
common humanity
Remedies
The purpose of tort law is to compensate an injured party.
Damages
A sum of money awarded as compensation for a loss or injury.
Used to compensate fro physical (damaged property or injured people) and economic
(lost monetary value) losses
Point is to restore to the position they would have been in had the tort not occurred,
not usually to punish the wrongdoer
Punitive or Exemplary Damages
Damages awarded with the intention of punishing a wrongdoer.
In cases, such as deliberate libel to malicious false imprisonment
Two types of Damages:
1. Special
Damages to compensate for quantifiable injuries.
2. General
Damages to compensate for injuries that cannot be expressed in monetary terms.

Remedies other than damages are available, rarely awarded.
Restitution
An order to restore property wrongfully taken.
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Injunction
An order restraining a person from doing, or continuing to do, a particular act.
Mandatory Injunction
An order requiring a person to do a particular act.
Chapter 4 Professional Liability: The Legal Challenge
Growing reliance on professionals (people with specialized knowledge and skills that
their clients are willing to pay for, usually licensed and belong to a professional
organization)
How to assign liability for professional incompetence and negligence?
Liability of Professionals
Liability can arise from three relationships:
1. Contractual relationship leads to a breach of contract cause of action;
2. Fiduciary relationship leads to breach of fiduciary duty; and/or
3. The duty of care owed in tort leads to a tort cause of action.
Contractual Obligations
Agreement to provide professional services to client comes with promise to perform the
services with competency
Fiduciary Duty
Professionals duty may extend beyond the terms of their contract
Fiduciary Duty
A duty imposed on a person who stands in a special relation of trust to another.
Law can impose this duty on professional to their client
Three characteristics:
1. The fiduciary (often a professional) has scope for the exercise of some discretion or
power.
2. The fiduciary can unilaterally exercise that power or discretion so as to affect the
beneficiarys legal or practical interests.
3. The beneficiary is particularly vulnerable to or is at the mercy of the fiduciary holding the
discretion or power.
Some relationships are inherently so (lawyer-client, doctor-patient), but not all
professional relationships are
If fiduciary duty is found to exist, there are a wider range of obligations than expressed in
the contract.
Must act honestly, in good faith, and only in the best interests of the client.
Liability for breach of this duty can arise without negligence
Conflict of Interest
A situation where a duty is owed to a client whose interests conflict with the interests of the
professional, another client, or another person to whom a duty is owed.
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A fiduciary should not place themselves in a conflict of interest, has a duty not to profit at
a clients expense
Tort Liability
When a professional deliberately or carelessly causes damage to a client.
Contract breach and tort liability may occur at the same time
Expands possible beyond clients who have paid for advice, others can rely on opinion
given to a single client
Third-Party Liability
Liability to some other person who stands outside a contractual relationship.
Choosing a Cause of Action
may be liable under any combination of contract, fiduciary, and tort.
must choose which they will sue for (court will not award triple damages)
Does it matter which they choose?
Rules governing time restrictions may make it advantageous to sue in tort
Clients own negligence may be used a defense
Terms in contract limiting liability will be used to defend contract action.
Might also affect the amount of damages awarded
Measure of damages not the same in contract and tort
In fiduciary, may be under a duty to account for any profit derived from the breach
in addition to damages
Duty to Account
The duty of a person who commits a breach of trust to hand over any profits derived from the
breach.
Tort Liability for Inaccurate Statements
Misrepresentation
Deceit
An intentional tort imposing liability when damage is caused by a false statement made with the
intention of misleading another person.
Also when someone deliberately withholds or conceals information
Victim who relies reasonably on the statement and suffers a loss may recover from the
person who made it
Fraudulent Misrepresentation
An intentional tort imposing liability for an incorrect statement made knowingly with the
intention of causing injury to another.
Deceit and fraudulent misrepresentation require some guilty knowledge or willful
disregard for the falseness of the information
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Negligent Misrepresentation
An unintentional tort imposing liability when an incorrect statement is made without due care
for its accuracy, and injury is caused.
Involving owing a duty of care and breaching the standard of care, reliance on the
statement which resulted in damage
The Duty of Care
Duty of care must exist in order to be liable for negligent misrepresentation
Sufficiently close relationship, with reasonable contemplation on part of they would
conclude carelessness on their part may cause damage to
Eligible must be reasonably foreseeable to the professional
Indeterminate Liability
Inability to be determined so that the magnitude of liability cannot be predicted, anticipated, or
planned for.
Not a component of statutory duty of care
Proving Negligent Misrepresentation
must prove the following:
1. There must be a duty of case based on a special relationship between representor and
representee;
2. The representation in question must be untrue, inaccurate, or misleading;
3. The representor must have acted negligently in making the misrepresentation
Must have fallen below the requisite standard of care of a professional making such a
representation
4. The representee must have relied, in a reasonable manner, on the negligent
misrepresentation; and
5. The reliance must have been detrimental to the representee in the sense that damages
resulted.
Accuracy of the Statement
Professionals often provide opinions and not factual statements
Easy to test the accuracy of a fact
Value judgments are considered facts when expressed by an expert
Accuracy assessed at the time the statement was given
When statements are about future performance they are assessed based on this
Inaccuracy must result from the failure of the professional to meet the required standard of
care.
Standard of Care for Professionals
Must exercise the same level of skill and possess the same level of knowledge as is
generally expected of members of that profession
Determined through:
Code of conduct published by a profession
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Testimony of practitioners who state what they consider proper standard
Not always an adequate defense must commensurate with the particular
task undertaken (when they take on task beyond usual scope of profession)
Omissions
Standard of care includes not omitting essential information
Sometimes partial or incomplete information = negligent misrepresentation
In the case of medical procedures:
If the patient would have decided against the, having been informed of all the risks, the
doctor is liable, otherwise they are not
Reliance and Detriment
Causation in professional-client relationships is based on reliance
The advice must be used by the to make the decision that triggered their loss for
the professional to be liable
Reliance
Acting in a certain way because one believed the information received.
Detrimental Reliance
The worsening of ones position after acting up false information.
Part 3 Contracts
Chapter 5 Formation of a Contract: Offer and Acceptance
Contracts are voluntary legal relationships, unlike legal obligations, such as tort and
criminal liability
Allows parties to create legal obligations that do not already exist
Unfairness can arise when there is a difference in bargaining power
Nature of a Contract
Not all promises are contract, they can be just moral obligations, not legal ones
Contract
A set of promises the law will enforce.
Nature of an Offer
Contract not in existence until offer is made by one party and accepted by the other
Offer
A description of a promise one party is wiling to make, subject to the agreement of the other
party.
Offeror
The person making the offer.
Offeree
The person to whom the offer is made.
Invitation to do business offer to make a contract
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Display of a product is not an offer to sell cannot guarantee all that there will be
enough for everyone who wants to buy them
Advertisement to sell at certain price does not mean they have to sell it to everyone
who reads the ad
Advertisements can be offers
Sell certain quantity at a certain price to a number of customers
Reward for returning lost object
The Communication of an Offer
Form is not important as long as it is heard and understood
Usually orally or in writing, can be by conduct without words (taxis)
Offeree cannot accept an offer until they are aware of it
Do not have to pay people who do work for us without our knowledge
If someone accepts services or uses goods, they are presumed to have accepted the
offer
BC Practices and Consumer Protection Act section 12
1. A consumer has no legal obligation in respect of unsolicited goods or services unless and
until the consumer expressly acknowledges to the supplier in writing his or her intention
to accept the goods or services.
2. Unless the consumer has given the acknowledgment referred to in subsection (1), the
supplier does not have a cause of action for any loss, use, misuse, possession, damage or
misappropriation in respect of the goods or services or the value obtained by the use of
the goods or services.
Ontario Consumer Protection Act
Section 13 has a similar provision to section 12 of BCs
Section 68:
1. Despite section 13, a consumer who applies for a credit card without signing an
application form or who receives a credit card from a credit card issuer without applying
for it shall be deemed to have entered into a credit agreement with the issuer with
respect to the card on first using the card.
Written Offers
Standard Form Contracts: Their Risks and Benefits
Offers not always in writing, but businesses that sell to the general public usually present
terms of offer to customers in written documents or notices on websites
Tickets for theatres, airlines, credit card arrangements, insurance, etc.
Standard Form Contract
An offer presented in a printed document or notice, the terms of which cannot be changed by the
offeree, but must be accepted as is or rejected.
Benefits
Efficient
Standardizing business
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Criticism
Exploits the spread in bargaining power between large corporations and consumers
Often have no other choice but to accept the offer
Protection from inequality in bargaining positions:
1. Business are in area regulated by a government board contracts are subject to the
boards approval
2. Segment of the public are offered protection such as disclosure of requirements and
post-acceptance cancellation options
3. Where there is no regulation consumers have as much protection as the courts can
find under general contract law
Required Notice of Terms
Courts begin by assuming that an unqualified acceptance of an offer is an acceptance of every
term of that offer
If someone is not aware of a clause, court determines if sufficient steps were made to
bring the term to the attention of the customer
What are sufficient steps?
Providing a written document signed by the party
Giving a written notice of specific terms clear before or at the time of the contract
Prominent public notice that is plain for the offeree to see when they make the contract
Unusual or Unexpected Terms
Terms that you would not reasonably assume are part of the contract
These need to be brought directly to the attention of the offeree
The Lapse and Revocation of an Offer
Lapse
When an offer has lapsed the offeree can no longer accept, even if they are unaware that is has
lapsed, the offer becomes void and no longer exists.
An offer can lapse in the following ways:
1. The offeree fails to accept within a time specified in the offer
2. The offeree fails to accept within a reasonable time, if the offer does not have a specified
time limit
3. When either party dies or loses legal capacity prior to acceptance
It is often difficult to determine what a reasonable amount of time is for each situation
Revocation
Offeror is able to revoke at any time before acceptance, even if it has promised to hold an offer
open for a specified time
They must ensure notice of revocation is communicated directly to the offeree
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Options
Offeree may want to bind an offeror to keep its offer for a specified time by
1. The offer itself stating that it is irrevocable
2. A subsequent contract may be made to keep it open
Option
A contract to keep an offer open for a specified time in return for a sum of money.
Offeree agrees to pay a money if in return the offeror agrees to:
1. Keep the offer open for a specified time
2. Not to make any contracts with other parties that would prevent the offeror from
fulfilling its offer
Exercise an Offer
Accept the offer in an option.
Rejection and Counter-Offer by the Offeree
There is no contract until one party accepts an offer from another without alteration
Counter-offer = rejection of the old offer, brings it to an end
Re-offering it is the only way it can be accepted after this
When there are inquiries about whether the terms offered are the best they can expect,
this is not a rejection
The Elements of Acceptance
Positive an Unconditional
Must be certain and unconditional and a positive act, in words or conduct
Shaking hands generally regarded as acceptance of last offer
If conduct happens to comply with the means of acceptance laid out by the other
party, may not amount to an acceptance do not have to abandon normal conduct to
avoid contract
Silence can only be used in certain circumstances (book club)
Negative Option Billing
A practice of adding services and sending bills without request and relying upon the customer to
cancel if they dont wish the service.
Customers can ask for refund for unsolicited goods or negative option billing
Communication to the Offeror
Generally, acceptance has to be communicated to the offeror
Offeror can ask that specific act be performed and that will amount to acceptance
The Moment of Acceptance
Have to be able to analyze business negotiations to identify:
1. Who made the offer;
2. When it was communicated; and
3. When and by whom the offer was accepted.
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Inviting Tenders
Seeking offers from suppliers.
Obtain firm offers for fixed quantity of something over a fixed time period
Explore the market of available suppliers and determine best terms for proceeding
Tender process can be two contracts:
Inviting tenders amounts to an offer to enter into a construction contract of selected
according to the criteria
Promises to consider the tender and to accept the most attractive tender compliant with
the specifications.
Submission of a bid is considered acceptance, then acceptance of that bid enters them
into another contract with the
Some circumstances there is no intention to form a contract
Standing Offer
An offer that may be accepted as needed from time to time.
Terms of the invitation to tender will determine which purpose is intended.
Transactions Between Parties a Great Distance From Each Other
Modes of Acceptance
Offeror can expressly state how acceptance is to be communicated
Otherwise can communicate in any way
Mailbox Rule
If an offeror uses mail to communicate an offer, it is reasonable to assume that the offeree will
respond by mail, although faster methods are usually valid acceptance.
The contract is in place when the letter of acceptance is put into the mailbox
All other methods of acceptance, offeror is not bound until acceptance reaches them and
must reach them before it has lapsed
Mailbox rule does not apply when acceptance by mail is not reasonably
contemplated, valid when received
Modes of Revocation
Revocation by instantaneous methods must reach the offeree to be valid
By post is only effective when it is received by the offeree, unlike the rule with acceptance
Rules:
Unless the offeree knows that the revocation will not reach the offeree at their usual address,
delivery at that address establishes fact and time of revocation.
Determining the Jurisdiction Where a Contract Is Made
Parties to contract often in different provinces or countries
If dispute arises where should it be handled?
Jurisdiction
The province, state, or country whose laws apply to a particular situation.
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Dispute will be handled where acceptance became effective
Unilateral and Bilateral Contracts
The Offer of a Promise for an Act
Unilateral Contracts
A contract in which the offer is accepted by performing an act or a series of acts required by the
terms of the offer.
Offeror can revoke before the necessary actions are complete, offeree could endure
considerable hardships
To avoid this, courts treat offers as calling for bilateral action when the language can
be fairly so constructed
Subsidiary Promise
An implied promise that the offeror will not revoke once the offeree begins performance in good
faith and continues to perform.
The Offer of a Promise for a Promise
Bilateral Contract
A contract where offeror and offeree trade promises and both are bound to perform.
Credit sale (goods not delivered by the seller or not paid for by the buyer)
Promisor
A party who accepts an obligation to perform according to the terms of the contract.
Promisee
A party who has the right to performance according to the terms of a contract.
Both parties are promisor and promisee in bilateral contracts
Formation of Internet Contracts
e-commerce legislation
Modified contract formation to allow clicking an icon to satisfy acceptance and
communication requirements fro contract formation
Ontario Consumer Protection Act
Section 38: before a consumer enters into an internet agreement, the supplier need to
disclose information about:
Total price
Terms of payment
Warranties
Among other things
Section 38 (2) the supplier shall provide the consumer with an express opportunity to
accept or decline the agreement and to correct errors immediately before entering into it.
Contradicts normal contract law
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Uncertainty in the Wording of an Offer
Vague offer may not be an offer may not be an offer, acceptance of it may not form a contract
Of court deems it too ambiguous to enforce
Wording that seems uncertain can be given meaning through local customs to trade
usage that gives it new precision
Courts hold that:
1. Anything is certain that capable of being calculated or ascertained, and
2. Where a contract may be constructed as either enforceable or unenforceable, they will
favour the interpretation that will see the contract enforced
Chapter 6 Formation of a Contract: Consideration and Intention
Bargain
The price each party pays for the promise of the other.
Unilateral = the act done by the offeree
Bilateral = each partys promise
Consideration
The price for which the promise of the other is bought.
An accepted offer is not an enforceable unless it has consideration
Gratuitous Promises
A promise made without bargaining for or accepting anything in return.
Not a contract since no value is exchanged
If promisor does not perform there is no legal remedy for the promise
Charities
Usually rely on donor to honour pledge
Have sued estates of deceased people who died before honouring large pledges
Court have to find implied request that the promisor that the charity undertake a
project as the price for the pledge
Can make pledges legally binding by using donor cards
Adequacy of Consideration
Courts will not make personal value judgments
Only consider adequacy of settlement if there is allegation of wrongdoing by one party
Fraud, duress, undue influence
Settlements can be upset by subsequent information; they are still binding
Motive Contrasted with Consideration: Past Consideration
Motive a persons reason for making a promise is irrelevant
Motive cannot turn a promise into a contract or vice versa
Promising a reward to someone who previously performed a gratuitous act is not binding
This is also gratuitous
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Past Consideration
A gratuitous benefit previously conferred upon a promisor.
Not actually consideration
Moral Cause
Moral duty of the promisor to perform their promise.
Relation Between Existing Legal Duty and Consideration
If a contract already exists, a later promise to pay for the obligation already owed is not binding
Problems arise here when construction companies try to abandon projects and offer to
pay whoever hold their contract in return for this
Third-parties will try to pay sum to promisor for preexisting obligations
Post-midterm Material 1
Gratuitous Reduction of a Debt
Consideration rules can be unrealistic in business transactions
Creditor my find it beneficial to take lesser amount than to insist on payment in full
Bankruptcy debtor may go bankrupt if they have to pay full amount, creditor may
get less than what they would have accepted as a reduced sum by the time other
creditors claims have been settled
Debtor may be able to convince others to help pay the debt so they may make a fresh
start
Creditor may need at least part of the sum urgently, getting some of it back sooner is
better than getting all of it back later
Avoiding the rule in Foakes v. Beer:
Early payment is viewed as consideration
Rule only applies to transfers of money
Can trade a trinket for canceling a debt
Applies to creditor-debtor relationship
A third party can offer to pay a lesser sum to cancel the debt
In some provinces a creditor who accepts part performance and this is acknowledged as
a full settlement of the debt, the entire debt is extinguished
Creditor can cancel this before the sum has been paid
Creditor can agree in writing and under seal to reduce the debt
Equitable Estoppel
Evolution of the Principle
Someone makes an GRATUITOUS PROMISE to another, intending to keep it, later finds it
inconvenient to perform
Promise reasonably relied on the promise and incurs expenses that they wouldnt have
otherwise
If the PROMISOR DEFAULTS, they promise cannot be enforced, promise suffers burden:
spme relief id possible if the estoppel concept is applied
Estoppel Based on Fact
Estopped
Prevented
One person asserts a statement of fact, another relies upon it to their detriment, maker
of statement will be estopped from denying the truth of their original statement in a
court of law, even of it turns out to be untrue
The truth of an existing fact can be easily tested by the courts through hearing evidence,
it is objective
Can this apply to a promise of future conduct?
Foakes v. Beer

Post-midterm Material 2
Courts not bale to ignore those who relied in good faith on a GP and the promisor
changed their mind
Courts estop the promissor from claiming they are not bound to their promise
Equitable (Promissory) Estoppel
The courts exercise of its equitable jurisdiction to estop a promisor from claiming that they were
not bound by their GP where reliance on that promise caused injury to the promisee.
Equitable estoppel limited to use by promisor as defense against claim where legal
relationship already exists
GPs can be withdrawn, but its withdrawal cannot prejudice the promise in respect to
past reliance on it
Equitable estoppel applies when:
1. Some form of a legal relationship already exists
2. One of the parties promises to release the other form some of the others legal duties to
him
3. The other party, in reliance on the promise, alters their conduct in a way that would
cause hardship if the promisor reneges on their promise.
Injurious Reliance
US courts allow the injured party to force the promisor to perform the promise
The promisor induced the promisee to rely on their promise, so they must honour it to
prevent injustice
Injurious Reliance
Loss or harm suffered by a promisee who, to their detriment, relied reasonably on a GP
Is a cause of action, not just a defense
Views the situation from the position of the promisee
The Effect of a Request for Good or Services
When a person requests goods or services from another, the law implies a promise to pay
Applies between strangers and friends if it is rendered in a customary business
transaction, not necessarily between close friends or family
Quantum Meruit
The amount a person deserves to be paid for goods or services provided to the person requesting
them.
Parties agree to a price they cannot refer matter to the courts
The Use of a Seal
Covenant
A serious promise
Hughes v. Metropolitan Railway Co.

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Covenantor
One who makes a covenant.
Document Under Seal
A covenant recorded in a document containing a wax seal, showing that the convenantor
adopted the document as their act and deed
Seal must be affixed at the time that the document is signed
Printing the word seal can present difficulties
Supreme Court views this as anticipatory, not a suitable substitution for the real
thing
Promise made under seal does not require any further consideration
Offer made under seal is irrevocable
Intention to Create Legal Relations
No contract unless both parties intended to create a legal relationship
Agreement on all essential terms
Mutual intention to create legally binding contract
Law presumes intent is present in almost all instances
Difficult to make inquiries about the state of mind when the agreement was made
This presumption is especially strong with dealing between strangers and in
commerce
Rebutting the assumption of intent:
Test of the reasonable bystander if to such a person the outward conduct of the parties
lacked serious intention to make an agreement, no binding contract results
Intention can be assessed based on what a reasonable person would believe
Chapter 7 Formation of a Contract: Capacity to a Contract and Legality of
Object
The Role of Legality in the Formation of a Contract
The object must be legal
Public Policy
Goals or principles benefiting society or good for the general public.
Illegal
Offends the public good (contrary to public policy) or violates a statute.
Courts presume the transaction is legal unless defendant produces evidence otherwise
Easy to tell if it violates a statute
Not as easy to determine if it violates public policy
Leonard v. Pepsi Co.

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Unenforceable
No court assistance or remedy is available to the parties of a contract.
Illegal contracts treated as unenforceable, unless statute states that it is void
Differentiation Between a Void and Illegal Contract
Void
Contract does not exist in the eyes of the court, tries to return everyone to pre-contract
positions
Parties released from performance obligations
Money and property may be returned
Severed
Removed from the contract.
Court can find that only one part of the contract is void and the rest is valid
Sever the void section and enforce the remainder of the contract if it is just
Illegal
Courts will no assist any party who knowingly entered into an illegal contract
Less likely to sever the illegal part and enforce the rest of the contract
Contracts Affected by Statute
Significance of the Wording of a Statute
Most contracts do not consider contracts that conflict with them, leave it to courts to
figure out on public policy grounds
May prevent particular type of contracts from having legal effect by sating that they are
void
Can go further to describe the agreements as illegal, unenforceable, etc.
Can make agreements a criminal offence
Can make legal what was previously considered against public policy
Contracts Void by Statute
Agreements Contrary to the Purpose of Legislation
Workers Compensation Act: provides money to workers injured at work, contract
undermining this is void
Bankrupcy and Insolvency Act: purpose is to gather the assests of a bankrupt person to
pay their creditors, thereafter to release them from further obligation to pay
If a person transfers property as a gift or at an unreasonably low price and becomes
bankrupt within one year, the transfer is void
Insolvent person cannot transfer property to one of several creditors as a way to give
them preference over the others
Statutes Affecting Public Policy
Gaming act of 1845: all bets are void and unenforceable
Post-midterm Material 5
Wager
An agreement between two parties in which each has some probability of winning or losing.
Stakeholder
A person or organization that manages a betting arrangement for a fee and redistributes
winnings.
Important to make the distinction between parties to a wager and a stakeholder
Insurance Contracts
Should the feared loss occur, one will receive a measure of compensation
Insurable Interest
An interest where a person has a financial benefit from the continued existence of the property
or life insured or would suffer financial detriment from its loss or destruction
Insurance acts state that the contract is invalid unless the party making the contract has
an insurable interest in the property or life insured
Stock Exchange Transactions
An agreement that is a wager about the price of a specific security at a future date,
without good faith intention of acquiring, selling, or taking delivery of the shares, the
agreement is an offence and is illegal
Does not apply to futures
Agreements Illegal by Statute
Statutes often dont deal directly with consequences for contracts, just for certain kinds
of conduct, contracts that violate this conduct are illegal
Tax evasion
Smuggling
Business that require a license must have one or they may not be able to sue to collect for
services rendered
Courts made decision to refuse to give relief only where it would be contrary to public
policy to do so
Agreements Made Legal by Statute
Arbitration Agreements
Contracts that requires all disputes to be resolved in arbitration, not the courts.
Courts used to consider contracts that blocked access to the court system unenforceable

To avoid continuous legislation changes, most decisions about legality are left to the
courts
Post-midterm Material 6
Contracts Illegal by the Common Law an Public Policy
Common Law
Common law has identified types of conduct that are harmful to others and grants
remedies to the person harmed by this conduct
When a contract requires a commission of a tort, the contrac it illegal
Torts that typically arise in an agreement:
Slander and libel
Trespass
Fraud
Inducement to break an existing contract
Exceptions to this rule for insurance contracts
Policies promise to pay even if they are negligent in driving or in course of professional
practice
A business can exempt themselves from liability for negligence by terms of a contract
Public Policy
Can be regarded as illegal even if it does not contemplate the commission of a crime or
tort
If a court decides that a contract is prejudicial to:
The interests of Canada,
Its relations with foreign countries,
Its national defense,
Its public service,
The values of society as a whole, or
The administration of justice within the country,
The court will declare it illegal, even though performance is not a tort or crime
Contract to compensate a person who puts up bail fro the accused is illegal
Embezzlement
Embezzlers, once caught, usually offer ot repay all the borrowed funds
Victim of this must remember that this is a crime that demands conviction
Agreement to withhold this information is an obstruction of justice

Agreements that promote unnecessary litigation obstruct the course of justice
Symington v. Vancouver Breweries and Riefel

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Agreements in Restraint of Trade
Agreements in Restraint of Trade
AKA non-competition agreements or restrictive covenants when included in a larger contract
Courts view competition as a necessary part of economic life
Non-competition agreements may be unenforceable or can violate the Competition act,
triggering regulatory or criminal sanctions
Restrictive Covenant
A term in restraint of trade
A contract can contain a restrictive covenant that is found against public policy, court
may strike out the offending term and enforce the rest of the contract
Initially assume a term in restraint of trade is against public policy, a party seeking to
enforce must show that it is a reasonable arrangement between the parties and that it
does not adversely affect the public interest
Agreements Between Vendor and Purchaser of a Business
Purchaser can pay for a business goodwill only if the seller agrees to do nothing in the
future to compromise the value of what they are selling: must promise not to enter into a
business that is likely to compete with the one they are selling
Law must enforce this promise of the purchaser will be deprived of a valuable part of
the asset they have paid for
This is in the mutual interest of the purchaser and vendor and may not offend the
public interest
Can be enforced if:
The restriction place on the vendor are reasonable in the nature of the trade or practice
sold
Up to a court to decide if it offends the public interest
The consider:
Proximity to the business that is being sold
Length of time that they cannot operate in a similar business

Courts rarely narrow these criteria to a reasonable scope
If a clause is too wide the vendor will be free from the restraint
Courts will sever unreasonable restrictions from the contract, which can leave some
restrictions still in place
Agreements Between Employee and Employer
More difficult to show that conditions restricting trade between employee and employer
are not in restraint of trade
Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd.

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Bargaining power is unequal, not payment for goodwill
Can make leaving an employer to accept another position in the vicinity almost
impossible
Courts want to protect mobility of labour
Employer will ask for an injunction to restrain the former employee
Restrictive covenant can be enforced if I can be shown to be:
Unambiguous,
Reasonable between the parties, and
Not injurious to the public
Likely to be binding if the employee had access to trade secrets or represented the
employer in dealings with customers
If a non-solicitation clause would have been sufficient, the ban on competition will be
unenforceable
Courts will not sever the unreasonable section and substitute the lesser requirement

Chapter 8 Grounds Upon Which a Contract May Be Set Aside: Mistake and
Misrepresentation
Setting Aside a Contract
Courts tend to hold parties to bargains they make in the interest of commercial certainty
Equitable principles sometimes allow a party can be released from their obligations
Mistake
Misrepresentation
Undue influence
Duress
The Narrow Meaning of Mistake
Parties enter into a contract and later regret it only some circumstances allow
someone to be released because of a mistake
Errors in judgment to not amount to a legal mistake
Excusing performance too easily makes contracts unreliable
Void
The contract never comes into existence and no rights pass.
Voidable
The contract exists until set aside by a court; rights may pass to third parties before it is set
aside.
Equitable Relief
A discretionary remedy to undo an injustice.
Shafron v. KRG Western
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Rescind
Set aside; undo or revoke a contract and return the parties as nearly as possible to their original
positions.
Mistakes must usually be about factual circumstances, not the law
Void and Voidable Contracts
If a mistake has been made the contact can be:
Void
Voidable
Or the mistake can be corrected (rarely)
Void
The contract was never formed at all
It is ineffective form the beginning
No rights, titles, or ownership pass to anyone

From figure above:
Since the contract between A and B never existed, the contract between B and C also fails
Voidable
Contract exists until it is set aside by the court
Prior to that, rights, title, or ownership pass as set out by the contract
Contract may still be rescinded, courts of equity thought C having to return the goods to
A may be too harsh in some circumstances

For C to have protection they must be a purchaser who is:
1. Innocent
2. Paid good value
If C knows there was fraud, they can be sued for recovery by A

Void and voidable may not make much of a difference when only two parties are involved
Whether it is void or voidable depends on the mistake
A
"Sells" goods to
B
B
Says he will
resell the goods
to C
C
Can be sued by
A for recovery
of the goods
A
"Sells" goods to B
B
B obtains title
Says he will resell the
goods to C
C
Obtains title ot the
goods
Cannot be sued for
recovery if they meet
the proper criteria
Post-midterm Material 10
Mistakes About the Terms
Words Used Inadvertently
One party inadvertently uses the wrong word in stating the terms of a contract
Unilateral Mistake
A situation in which only one of the parties believes there is a mistake in the contract.
Consequences should usually fall on the on who made the error
If it is clear to an objective observer that there was a mistake made in expressing the
terms of the contract, it may be VOIDABLE
Court considers whether the other party should have realized that a mistake was made
Errors in Recording an Agreement
Contract contains an error, but party does not with to be released from the obligation
Wants to have corrected deal enforced
Mutual Mistake
A situation in which both parties believe a mistake exists in the contract but their
understandings of the mistake are different.
Mistake can be rectified
If the parties are under a mutual mistake this is simple
If one party has benefited from the mistake, may resist attempts to correct the document
Can ask the court for rectification if the conditions are met:
1. Court is satisfied that there was a complete oral agreement between the parties, free
from ambiguity and not conditional on further adjustments.
2. The parties did not engage in further negotiations to amend the contract.
3. The mistake in the contract may have, but does not have to have, occurred as a result of
fraud.
4. When the written document was signed, knew or should have known of the mistake
and did not.
5. Any subsequent attempt to enforce the inaccurate document would be equivalent to
fraud.
These are difficult to prove, courts are reluctant to alter the final document
Error about the Meanings of Words
Parties agree that what is written in the contract is correct, they may place different
meaning on the words in the contract
Webster v. Cecil
Raffles v. Wichelhaus
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Court will decide which meaning is more reasonable in the circumstances
Whose ever interpretation is more reasonable, is the one that is binding
If both are equally reasonable to unreasonable, and holding one party to the others
interpretation would be unjust, the contract is void
Mistakes About the Subject Matter
Mistake about the Existence of the Subject Matter of a Contract
If at the time that the contract is made, unknown to both parties, the subject matter dos
not exist
Common Mistake
A situation in which both parties believe the same misunderstanding or mistake about the
contract.
In the case above, the contract was held to be void
Sale of Goods Act: If the good without the knowledge of the seller have perished at the time the
contract is made, the contract is void
Mistake about the Value of the Subject Matter
The subject matter still exists, its qualities are different that what the parties
contemplated
Courts grant relief depending on the reasonability of the parties expectations
Parties may be expected to know that the price of the subject matter is volatile
(commodities)
If subject matter is understood, described, or represented as having qualities that create
value and mistakes are made about these, relief may be available
About quality or quantity
Ceveat Emptor
Let the buyer beware.
Buyers expectd to use caveat emptor principal
When there is a misrepresentation, discovery is impossible, or both parties believe the
same mistaken characteristics, rescission may be available
Voidable is purchaser move quickly
Delayed action prevents rescission
Mistake About the Identity of a Party to a Contract
Unilateral mistake, often involving fraud
Couturier v. Haste
Hyrsky et al v. Smith

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Where an existing identity is assumed, the contract is void
Courts want to limit the application of the above case, as the burden is borne by the
blameless
If a fake identity is used, the contract is voidable
Third party is better protected when the initial transactions are face-to-face
Mistakes About the Nature of a Signed Document
Non Est Factum
It is not my doing
Medieval times, people were illiterate, relied on literate party to describe the document
Literate party misreads the document void
Careless signers cannot avoid liability pleading non est factum

Misrepresentation
Contract Versus Tort
Courts will set aside contracts if a misrepresentation has occurred
If a person innocently makes a misstatement, no tort is committed
Must inform the other party of the true situation as soon as possible
Becomes fraudulent or negligent if the party fails to do this
Material
Could reasonably be expected to influence or induce the decision of a party to enter into a
contract.
Material misrepresentations give right to rescind the contract
If the misrepresentation is fraudulent or negligent the court can award damages
Misrepresentations are usually in the pre-contract bargaining, not included in offer
When they are in the offer they are part of a term , they can gve rise to a breach of
contract
Cundy v. Lindsay

Kings Norton Metal Co. v. Edridge

Saunders v. Anglia Building Society
Post-midterm Material 13
Standard Form Contracts
Contracts prepared in advance by one party and presented on a take it or leave it basis,
without an opportunity to negotiate the terms.
Standard forms usually state that there are not representations other than the ones
contained in the written terms
Statements about goods and services in advertisements can be considered
representations (less commonly terms)
False assertions are misrepresentations only if they are a statement of fact
Expert opinions are considered equivalent to a statement of fact
Consequences of Misrepresentation in Contracts
When a party who relied upon a material representation learns the truth, the contract is
voidable at their option
Have the renounce the agreement promptly
May be compensated for out-of-pocket expenses while preforming the contract
Indemnity or Compensation
A money award given as a supplement to rescission for loss sustained in performing a contract.
Misrepresentations by Silence or Omissions
Some types con contracts give rise to disclosure obligations
Fiduciary relationships disclosure of all pertinent information
Utmost Good Faith
A duty of disclosure owed when a special relationship of trust exists between the parties.
Utmost good faith requirement almost always exists in continuing business relationships
Failure to properly disclose in the following situations render the contract voidable.
Contracts of Insurance
Party seeking insurance must disclose all pertinent information to the insurance
company relating to the risk the company is being asked to assume
Insurers have to investigate applicants before agreeing to insure for public liability (car
insurance and the like)
Contracts Involving the Sale of Corporate Securities
Prospectus
A statement issues to inform the public about a new issue of shares or bonds.
Inaccurate, missing, or misleading prospectus will attract rescission and the right to
claim damages from anyone involved with the document
Contracts Involving the Sale of Goods
Sale of Goods Act restrics the caveat emptor principle for the sale of goods
Consumers can rescind contract if vendor fails to disclose problems with ownership
Does not apply to contracts for services or land
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For land: No obligations to disclose defects, complaints about misrepresentation have to
be raised before title is transferred
Contracts With Consumers
Suppliers are supposed to point out terms in standard form contracts that the consumer
would not reasonably expect
Failure to disclose may give the consumer the right to rescind
Cooling-off Period
A time during which a consumer may cancel a contract without any reason. Length of time is set
by provincial legislation.
Undue Influence
the domination of one party over the min of another to such a degree as to deprive the weaker
party of the will to make an independent decision.
Contract formed as a result of undue influence is voidable at the option of the victim
Can only avoid the contract if they act promptly after they are freed from the
domination
Often an issue in wills
Often arise when the parties have special relationship to each other
Doctor and patient
Lawyer and client
Parent and child
Religious leader and believer
Burden of Proof
Party claiming undue influence must show the court that domination was probable
Easier to do when a special relationship exists
Burden then falls on the other party to show that undue influence was not exerted
Arrangements Involving Spouses
Spouse can set a transaction aside if they can prove actual undue influence
Some marital relationships will raise the presumption of undue influence
The Importance of Independent Legal Advice
Independent legal advice received by the weaker party prior to signing rebuts any undue
influence presumptions
Needs to come from a lawyer not associated with the transaction or other parties
Lenders that are aware of a special relationship between co-debtors have to ask about
possibility of undue influence
Consumer Protection
Courts recognize the unequal bargaining positions in business to customer transactions
Unconscionable Contracts
Contracts where there is unequal bargaining power between the parties and the powerful party
get an extremely advantageous deal.
Post-midterm Material 15
Unconscionable contracts are voidable
Some provinces have legislation that defines deceptive business practices that will make
contracts voidable
Loan transactions require disclosure of cost of borrowing, maximum interest rates,
terms of credit, etc.
Duress
Actual or threatened violence or imprisonment as a means of coercing a party to enter into a
contract.
These contracts are voidable at the option of the victim
Have to act promptly to make it so
The threat does not need to be directed to the individual, does not have to be explicitly
stated
Coercion
Improperly forced payment under protest.
Economic duress is an area where undue influence and duress overlap.
Entirety Clause
A term in a contract stating that the whole agreement is contained in the written documents and
there are no other terms, conditions, representations, or warranties.
Chapter 9 The Requirement of Writing
The Distinction Between Substance and Form
The Benefits of a Written Record
Substance may have many physical forms or none at all
Categories of form:
i. Contracts whose terms are entirely oral
ii. Contracts whose terms are part oral and part written
iii. Contracts whose terms are entirely in writing, whether all in one document or spread
through several documents
Good business practice to keep at least some record of transactions
Memories fail
If the contract is oral the court has to try to determine what the parties agreed to in the
first place
Legislation Dealing With Writing
At common law, oral contracts are just as enforceable as thos written down
Over time legislators identified high risk contracts and required that they be in writing
Writing requirements imposed by three types of legislation:
1. The Statute of Frauds
2. The Sale of Goods Act
3. Consumer Protection Act
Post-midterm Material 16
The Statute of Frauds
Passed in 1677
Makes certain types of contracts unenforceable if they are not in writing
Try to limit the applications because it allows perfectly valid oral contracts to be avoided
Types of Contracts Affected by the Statute of Frauds
1. A Promise to Answer for the Debt, Default, or Miscarriage of Another Guarantee and
Indemnity
Courts have narrowed this definition
Courts distinguish between:
Guarantee
A conditional promise to pay only if the debtor defaults.
Indemnity
A promise by a third party to be primarily liable to pay the debt.
Courts have applied this part of the statute only to guarantees
Promises to indemnify are enforceable if they are not in writing
Has excluded guarantees that are only one of many more important rights and duties
created by the contract
Miscarriage
An injury caused by the tort of another person.
Courts have limited the miscarriage clause to mean that they will pay damages for loss
caused by the tort of another person
2. An Agreement Made in the Consideration of Marriage
Applies to arrangements about assets brought into a marriage as common property
Been replaced by family law reform
Do not necessarily require that marriage and cohabitation arrangements be in
writing
3. A Contract Concerning an Interest in Land
Concerned with the indestructability and permanence qualities land have
Systems of public records that show who owns land
Have to distinguish between contracts where the Statute applies and where the interest
is too remote
Part Performance
Performance begun by a in reliance on an oral contract relating to an interest in land, and
accepted by the court as evidence of the contract in place of a written memorandum.
Courts of equity developed this principle, still applied in modern courts
The following must be satisfied before the courts will enforce the contract:
i. The contract must be one concerning land
Post-midterm Material 17
ii. The acts of performance must suggest clearly the existence of a contract; they must not
be ambiguous or possibly explained as part of a different transaction.
iii. must perform the acts and must suffer a loss by performance if the contract is not
enforced.
If the court accepts the acts as sufficient evidence, the court will enforce the contract
according to the terms orally agreed
4. An Agreement Not to Be Performed by Either Party Within One Year
Memories fail over time, Parliament chose an arbitrary limit
Does not apply to a contract that may last longer than a year, unless the terms specified a
time for performance that was clearly longer than a year
Allows exclusion of contracts for an indefinite period
Does not apply where one party will need more than one year to perform if the other will
wholly perform in one year
5. Ratification of Infants Contracts
Does not apply to contracts that are valid unless rejected
Requirements for a Written Memorandum
Statute requires a note or memorandum of the contract signed by the party to be charged
or by an authorized agent
All Essential Terms Must Be Included
Identities of the parties
Subject matter
Consideration
Exception for guarantees: consideration does not need to appear in writing
Does not have to be in one document, easier if they reference each other
Signed by the Defendant
signature is irrelevant
Lenient on what amounts to a signature, does not need to be in handwriting
Consequences for Contracts Within Its Scope
A contract made unenforceable by the Statue still exists even though no one can get a
remedy
Contract is not void so it can still affect a legal relationship between the parties
1. Recovery of Money Paid Under a Contract
Party who breaches an unenforceable contract will not gain any further advantage
2. Recover for Goods and Services
Quantum meruit still applies, someone cannot accept goods and services and retain
benefit without paying something for them
Post-midterm Material 18
3. Effect of a Subsequent Written Memorandum
As long as it comes into existence before action is brought on the contract, it provides the
necessary evidence
4. Defendant Must Expressly Plea the Statute
Court will decide the case without reference to the Statute if they do not
5. Effect on a Prior Written Contract
The oral contract can vary or dissolve an existing written contract even though it is not
enforced
Chapter 10 The Interpretation of Contracts
The Relationship Between Formation and Interpretation of Contracts
Construing
Interpreting
Important to prevent ambiguity when drafting the terms of a contract
Court applies the most reasonable meaning given the circumstances
The Interpretation of Express Terms
Two Approaches to Interpretation
Strict or Plain-Meaning Approach
An approach that restricts the interpretation to the ordinary or dictionary meaning of a word.
Few words have a plain meaning or have only one dictionary definition
Words change meaning over time and have different meaning in different circumstances
Liberal Approach
An approach that looks to intent of the parties and surrounding circumstances, and tends to
minimize, but dies not ignore, the importance of the words actually used.
An invite endless speculation
Conduct must serve as the primary guide to ones intentions
How the Courts Apply the Approaches
Usually applies both and chooses the best meaning for the circumstances
Will look outside the contract to past contracts between the parties or intentions that
were made clear before the contract was made
How the Courts Choose Between Conflicting Testimony
Court seeks corroboration of their versions, from a non-party of from the parties actions
in relation to the contract
Last resort, choose based on the credibility of the sources themselves
Which version seems more reasonable
Post-midterm Material 19
Special Usage of Words
Court begins with the dictionary definitions of the words then examines meaning in
context
Special usage of words in trade or in areas of the country can come into consideration
This evidence is not always conclusive court can decide that the it was not used in
a special way or that they knew the other party was not aware of the trade usage for
the word
Court construes words most strictly against the party who suggested them
Special Types of Contracts
Contra Proferentem
A rule of contract interpretation that prefers the interpretation of a clause that is least
favourable to the party that drafted the clause.
Used in standard form contracts to deal with the one-sided nature of the contract
Also applied to exemption clauses
Exemption Clause
A clause in a contract that exempts any part from liability.
Interpretation of insurance contracts must:
i. Follow the contra proferentem rule,
ii. Construe coverage terms broadly, and
iii. Interpret exclusion clauses narrowly.
Predicting the Likely Decision in Court
Courts take position of the informed, objective bystander
Closest substitution may be a lawyer
The Goal of the Courts: To Give Validity to Contracts
Often easier for the court to declare agreement void because of ambiguity
They want to see the agreement stay alive so that parties take contracts seriously
The Parole Evidence Rule
The Meaning of the Rule
Party to a contract may realize after signing that a term they believed was part of the
agreement has been omitted (purposely or otherwise)
Parol Evidence Rule
A rule preventing a party to a written contract from later using parole evidence to add to,
subtract from, or modify the final written contract.
Does not prevent parole evidence from being used to address the formation of the
contract
The Consequences of the Rule
Sometimes parties choose to omit terms on the final form o the contract
Courts are reluctant to relax the rule for these situation
Post-midterm Material 20
People would start claiming that there were terms agreed upon that were only part of
negotiations
The Scope of the Rule
Does the document contain the whole contract?
Sometimes courts find that the document was not intended to embody the whole
agreement
Interpretation of the Contract
Does not affect interpretation of express terms in the contract
Does accept parole evidence in explaining the meaning of words used in the contract
Subsequent Oral Agreement
Parole evidence does not exclude evidence that there was an oral agreement between the
parties after they entered into the written one
The new oral agreement can alter the prior written one
Collateral Agreement
A separate agreement between the parties made at the same time as, but not included in, the
written document.
Courts are reluctant to enforce theses unless there is separate consideration can be found
and it does not contradict the written agreement
Condition Precedent
Any set of circumstances or events that the parties stipulate must be satisfies or must happen
before their contract takes effect.
If a party can provide evidence that a condition precedent was agreed upon and not met
a court will recognize it
Implied Terms as a Method of Interpretation
Comparison With Interpretation of Express Terms
When there is an unforeseen disagreement, one approach is to resolve to by determining
the most reasonable interpretation of the terms
Implied Term
A term not expressly included by the parties in their agreement but which, as reasonable people,
they would have included had they thought about it.
Can see if the intention of the parties can only be achieved by admitting an implied term
Only if it is obviously necessary for them to accomplish the purpose of the contract
Terms Established by Custom or Statute
Implied terms often arise from long-standing customs in a trade or type of transaction
These types of terms have been codified in a statute that sets out all the previously
established implied terms in one place
Post-midterm Material 21
Reasonable Expectations of the Parties
Court will not make a new contract for the parties,
Will only go so far as to imply terms that are reasonably necessary
Will not find an implied terms that deals with the same matter in a different way
Will not imply a term that is contrary to the intent of the contract
Chapter 11 Privity of a Contract and the Assignment of Contractual Rights
Privity of Contract
The Limited Scope of Contractual Rights and Duties
Logical that only the parties that agreed to a contract have rights and duties created
between them, a person outside should not have rights or duties under it
Third Party
A person who is not one of the parties to a contract but is affected by it.
Some contracts do affect third parties
Privity of Contract
The relationship that exists between parties to a contract.
To win a contract law case you have to prove privity of contract with the other person
A third party has not given consideration for the promise
Can be too harsh when the object of the contract was to benefit the third party
Comparison With Rights and Duties in Tort
Liabilities of Sellers of Goods
Only the buyer can sue for breach of contract with a seller of goods of they are not
suitable for the intended use
Liability of Manufacturers
Can be sued under tort for negligence, all end-users may do this
Applying the Privity of Contract Rule to Performance
Vicarious Performance
A third party performs contractual obligations on behalf of the promisor who remains
responsible for proper performance.
How it Occurs
Business takes on more than it can complete or it does not have the necessary skills
Still liable for performance, it is not transferred to the third party
Tweedle v. Atkinson
Post-midterm Material 22
When is Vicarious Performance Allowed?
As long as the contract does not specify personal performance
It would not be accepted if personal performance is expected
Can only sue for damages that arose due to the vicarious performance as opposed to
personal
Tort Liability and Vicarious Performance
Employer is liable for defects in vicarious performance by employees in tort and contract
Exemption Clauses and Vicarious Performance
Exemption Clause
A clause in a contract that exempts or limits the liability of a party.
Protects a business from liability for its own breach of contract, negligence and vicarious
liility for the torts of its employees
Other Exceptions to the Privity of Contract Rule
Insurance
Life insurance pays out to a person who is not a party to the contract
These third parties have a right to have the insurance company pay out the contract
Car insurance can cover the owner and anyone who drive their car with consent
The Undisclosed Principle
A contracting party who, unknowing to the other party, is represented by an agent.
When someone can prove that they are an agent of someone else, that someone can sue
or be sued on the contract
Contracts Concerning Land
Privity of contract rules do not apply in land laws
People who acquire land are bound by earlier contracts on public record
The Principled Exemption Exemption Clauses
A third party can rely on exemption clauses if:
1. Did the parties to the contract intend to extend the protection to the third party claiming
it?
2. Are the activities of the third party within the scope of the contract generally, and the
exemption clause in particular?
Principled Exemption
Allows third parties to rely upon a contractual exemption clause when the parties to the contract
intended to include them, and their activities come within the scope of the contract and the
exemption clause.
Third party cannot sue under this principle, only uses it as a defense
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Chapter 12 The Discharge of Contracts
Discharge of a Contract
Cancel or end the obligations of a contract; make and agreement or contract inoperate.
Discharge By Performance
The Nature of Discharge by Performance
The way parties expect a contract to come to an end
Both parties have fulfilled their promises
Tender of Performance
An attempt by one party to perform according to the terms of the contract.
A party may refuse to accept the tender of performance of the other party
Discharge By Agreement
Waiver
An agreement no to proceed with the performance of an existing contract.
If neither has performed, there s automatically consideration for this agreement
If someone has performed or partially performed, there is not consideration for both of
the parties, to waive in this situation it should be under seal
One party cannot impose a waiver on the other
Substituted Agreement
Accord and Satisfaction
A compromise between contracting parties to substitute a new contractual obligation and
release a party from the existing one.
If performance is too difficult a party to a contract can offer the other a substitution for
performance if they are discharged from the original obligation
Material alteration is different because they are concerned with creating a new
arrangement, discharge of the old one is incidental
Novation
The parties to a contract agree to terminate it and substitute a new contract.
Two types:
1. A material change in terms
2. A change in parties
Has to be evidence of intention and agreement to abandon the original contract
Burden of proof is on the party claiming that the obligation switched to the new party to
the contract
S agrees to sell $10000 worth of flour to B, cash on delivery. S wants out of the contract. If B
tenders the money to S in the presence of a witness and S does not deliver, B can sue S for
breach of contract. S cannot claim that B was unable to pay.
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A Contract for Its Own Dissolution
Party might be worries about future event that could affect their ability to perform
Will often include a term that stipulates what will happen if this event occurs
Both parties are obliged to wait to see of the condition precedent ids fulfilled before they
can ignore their obligations to perform
Condition Subsequent
A future event that brings a promisors liability to an end if it happens.
Act of God
The raging of the natural elements.
An act of god may be a condition subsequent in contracts for shipment of goods
Option to Terminate
Contract can give option to being a contract to an end before performance has been
completed
Differs from condition precedent and subsequent in that the party decides to trigger the
discharge of the contract
Discharge By Frustration
Cannot address all possible future events in terms in a contract
Doctrine of Frustration
Courts cannot dismiss performance in all cases
Doctrine of Frustration
The law excuses a party from performance when circumstances beyond the control of the parties
make performance impossible, pointless, or radically different from that intended by the parties.
The change in performance has to happen after the agreement was made
Self-Induced Frustration
Party willfully disables itself from performing a contract in order to claim that the contract has
been frustrated.
Party whose frustration is self-induced cannot rely on the doctrine of frustration
Not all degrees of fault will prevent a party from claiming that the contract is frustrated
The Effect of Frustration
The contract is discharged at the moment of the frustrating event
Partial performance creates losses for innocent parties
Let the loss fall where it lies
The court will enforce the contract up to the moment of discharge. Obligations due before the
frustrating event remain, obligations arising after the frustrating event are discharged.
This make sense on the purchasing end, not so good for seller
If the seller delivers some part of the final product before the frustrating event they will
be able to keep deposits
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Statutory Reform
To fix the unfairness that arises out of the above approach, most provinces have passed
the Frustrated Contracts Act
Allocates the losses between the parties
Recovery or retention is capped at the amount paid or due
If a party has made no deposit and had not received any benefit then the other party is
without remedy
The Sale of Goods
When there is an agreement to sell goods and they perish before the risk has been passed
to the buyer the agreement is void under the following conditions:
1. The goods must be specific must be identified and agreed upon at the time of sale
2. The risk must still be with the seller
3. The cause of frustration must be the perishing or destruction of the goods
Discharge By Operation of Law
Bankruptcy and Insolvency Act discharges debtor from contractual liabilities after the
process has been completed
Statute Barred
An action that may no longer be brought before a court because the party wishing to sue has
delayed beyond the limitation period in the statute.
Chapter 13 Breach of Contract and Its Remedies
Implications of Breach
A breach entitles the non-breaching party to seek damages
Does not discharge the contract automatically
If it warrants discharge the other party has to inform the breaching party
Loses ability to treat it as discharged when they proceed with the contract and accepts
benefits, or the innocent party is not aware of the breach until after the other partys
performance is already complete
Can still claim damages
Minor Breach
A breach of a non-essential term of a contract or of an essential term in a minor respect.
Major Breach
A breach of the whole contract or of an essential term so that the purpose of the contract is
defeated.
Condition
An essential term in a contract.
Warranty
A non-essential term of a contract.
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How a Breach May Occur
1. Expressly repudiating its obligations
2. Acting in a way that makes it impossible to perform its promises
3. Failing to perform at all or tendering an actual performance that falls short of its promise
Express Repudiation
One of the contracting parties advises the other that it does not intend to perform as promised.
If it is of the whole contract or an essential term, the promisee can treat it at an end and
sue for damages
Has to inform the other party that they are treating the contract at an end before
finding a new party to perform
Anticipatory Breach
An express repudiation that occurs before the time agrees for performance.
One Party Renders Performance Impossible
A deliberate or negligent act that makes performance impossible is repudiation
Conduct of this type can take place before or during performance
Failure of Performance
Types of Failure
Usually apparent at the time set for performance
Total failure to perform, inadequate performance, minor failure
Degree of failure determines the remedy
Innocent party may not know whether the failure is severe enough to allow them to treat
the contract as discharged. Can if they can answer yes to the following:
1. Is there good reason to think that future performances will be equally defective
2. Is wither the expected deficiency or the actual deficiency to date important relative to the
whole performance promised
The Doctrine of Substantial Performance
Substantial Performance
Performance that does not comply in some minor way with the requirements of the contract.
Promisor is entitles to enforce a contract when they have substantially performed
Subject to reduction for damages for incomplete performance
Mistakes in Performance
What if someone over-performs?
The recipient of the performance is not able to take benefit that belongs to another
person, court will tell them to return it
Quasi-Contract
An obligation that may arise, not as a result of contractual relations, but because one party has
received an unfair benefit at the expense of the other.
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Unjust Enrichment
An unfair benefit.
Of the court finds that it is an unfair enrichment, they will be obliged to repay it
Exemption Clauses
Purpose
Businesses need to protect themselves from liability for breach of contract
Allocate risk so parties know who should insure against what
Supplier can charge lower prices
Business will be able to recover litigation costs if it offers a complete defense
Work well when bargaining power is equal
Attitude of the Courts
Court will refuse to apply an exemption clause when:
1. The clause does not apply to the circumstances
Interpret in manner consistent with the other terms in the contract
Ambiguity interpreted against the drawing party
Burden of proof is on the drawing party to shoe that the loss is covered by the clause
When intention is shown, court will not defeat bargain freely made
2. The clause was unconscionable at the time of contracting
3. There is a strong public policy reason against enforcement
Injured party has to point to some paramount consideration of public policy
Types of Remedies
Damages
A monetary award to compensate an injured party for the loss caused by the other partys
breach.
Equitable Remedies
Special non-monetary remedies given only when damages alone will not adequately compensate
for a loss.
Quantum Meriut
A fair amount a person deserves to be paid for the benefit conferred.
Damages
The Purpose of an Award of Damages
Compensate for loss caused by failure to perform
Deters parties from committing breaches they can avoid
Prerequisites for an Award of Damages
1. Loss must floe from the breach
2. Mitigation of Damages
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Measurement of Damages
Parties sometimes have the value of possible damages in a term of the contract
Usually courts have to value the loss
Liquidated Damages
An amount agreed on to be paid in damages by a party to a contract f it should commit a breach.
Penalty Clause
A term specifying an exorbitant amount for breach of contract, indeed to frighten a party into
performance.
If the court thinks it was intended to scare the party into performance then they will
assess the damages on their own
Nominal Damages
May award nominal damages to acknowledge breach of contract where there is not a real
lo by the non-breaching party
Acknowledges the validity of the plaintiffs argument
Types of Damages
Expectation Damages
The typical remedy for a breach of contract
Expected gross benefit injured partys costs of performance
Expectation Damages
Amount awarded for a breach of contract, based on expected benefits or profits.
Consequential Damages
Secondary losses incurred by the non-breaching party that were foreseeable at the time of
contracting.
Secondary losses, one stage removed from the immediate effects of the breach
Since they are reasonably foreseeable the defendant is liable to compensate for them
General Damages
Non-monetary harm arising from the breach.
Damage cannot be calculated in precise monetary terms
Court believes that award is necessary to compensate the aggrieved party
Reliance Damages
Costs of expenditures and wasted effort reasonably made in preparation for performance.
Punitive Damages
For malicious and bad faith behavior of breaching party
Rarely used
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Challenges in Measuring Damages
Mental Anguish
Mental distress resulting from a breach of contract is recognized as a non-economic
harm entitled to compensation
Examples:
Wrongful dismissal
Lost holidays
Cost of Performance Versus Economic Loss
Want to end up where the non-breaching party is no worse off as a result of the failure to
perform
Cost of performance for the breaching party may not be comparable to the economic loss
suffered by the non-breaching party
Equitable Remedies
Money damages may be inadequate
Prerequisites for an Equitable Remedy
Court has to be satisfies that damages will not suffice
Requirements:
i. must have clean hands
ii. must not delay in bringing action
iii. It will not negatively effect an innocent purchaser
iv. must have paid substantial consideration for the promise
v. must ordinarily be a party against whom the remedy would be awarded of they were
instead
Specific Performance
An order requiring to do a contracted-for act, usually to complete a transaction.
Court will not do this if they might be obliged to supervise
For sale of one-of-a-kind merch, shares, antiques, etc.
Injunction
A court order restraining a party from acting in a particular manner, such as committing a
breach of contract.
Contract must contain a promise not to do something
Interlocutory Injunction
A temporary injunction preventing immediate harm from being done before the full trial of the
matter.
Common in land transactions
Post-midterm Material 30
Rescission
Setting aside to rescinding a contract in order to restore the parties as nearly as possible to their
pre-contract positions.
Not a usual remedy for breach of contract
If breach is serious enough to release a party from their obligations, they may elect to
have the contract rescinded
Quantum Meruit
When valuable benefit is conferred as a result of a promise
When a non-breaching party has partially performed their obligations
Methods for Enforcing Judgments
Judgment Creditor
A party who has obtained a court judgment for a sum of money.
Judgment Debtor
A party who has been ordered by the court to pay a sum of money.
Levy Execution
To seize and sell a debtors chattels or arrange for a sale of their land.
Garnishee Order
An order requiring the debtors employer to retain a portion of the debtors wages each payday
and surrender the sum to the creditor.
Honest inability to pay is not punished