Contract Law

Assignment #2 – “major” research essay.  Due March 13th (tentative).
Will settle on questions in the next week.  Can suggest our own topics.
Read commentary on Dec. exam on TWEN.  Can see Bell about your particular exam.  Would like to see anyone who did ‘poorly’.

Remedies
•    In our legal trad. we usually do not give the victorious plaintiff specific performance.
•    For the most part, translate the promised performance into an award of money.
•    Will study how courts approch this “translation”.
•    Money as a substitute for the performance, because to make the def. perofm literally for the plaintiff would often be to force two adversarial parties to then cooperate.
•    Allows the pl. to go out into the marketplace and buy a replacement performance.
•    Damages – the money remedy that courts award victorious plaintiffs.  This (says Bell) is the only time to use ‘Damages’ with the ‘s’.  ‘Damage’ (no ‘s’) is the injury itself.  This appears to be something that Bell will nail us to the wall for.
•    Though money is the principle remedy used by the courts, there are alternatives.
o    All non-damages remedies are lumped under equitable remedies
o    Damages was the only remedy with the courts of England before the judicature act awarded.
o    Specific performance – some occasions where no amt. of money would give the pl. what he/she wants.  Ex:  If one were buying the Mona Lisa, no amt. of money would allow the pl. to buy a substitute in the marketplace.
o    May want the def. to be prevented from doing something, as once done, it may not be undone.
•    For instance, the publishing of something injurious to one’s reputation, or a neighbour building something that would irrevocably subtract water from one’s land or alter a landscape forever.  In these situations, the pl. desires an injunction – an equitable remedy.
•    We will, however, begin with legal remedies.
•    Law is the realm of right.
o    Equitable remedies are discretionary, not of right.

•    Note quote on page 5 from Wertheim v. Chicoutimi Pulp Co.
o    Damages is not a science… it is an art…
o    Try to give the pl. a money substitute award.

Page 28 – Fuller & Purdue
•    From legal realist period of 1930s.
•    Subject of the article is the reliance interest in contracts.
o    Our excerpt consists of the preface.  The establishment of the vocabulary of the article.
•    Enunciate 3 interests which a court might be seeking to vindicate when seeking to award damages to victorious plaintiff.
•    Contract law is the embodiment of laissez-faire economics.  Mirror-image of Darwinian conception of economics.
•    When people in the 30s began questioning the usefulness of an economic system which led to monopolies; when laissez-faire¬ produced the Great Depression, the public response was the invention of the regulatory/administrative state – ensured that the economy was regulated, in an effort to avert future catastrophes.
•    Legal realists attacked and reconceptualized “the legal heartland” of laissez-faire – contract law.
o    The legal realist approach can often be reduced to what courts do, that is the law.
•    If one wishes to understand the law of contract, one should not look at a treatise on contracts – one should look at what courts do in concrete cases.  Judges often deviate from supposed rules.
•    If real judges in real cases do not use supposed rules, then is a rule a rule?
•    Lord Denning, for example, in High Trees, cited a group of cases since the judicature act in which courts had enforced promises without consideration.  He pointed these out, and gave the phenomenon the name of equitable estoppel.
•    Legal realists were ‘terribly empirical’.
o    Study the law in action.

•    Fuller begins by saying that everyone says that at the end of contracts cases courts contract expectations into monetary terms.  Tries to put the vic. pl. into the same position they would have been had the def. fulfilled their obligations.
o    Label this the expectation measure of damages.
•    Great contribution of this article is to point out two other common approaches to awarding damages (two other interests).

Reliance Interest
•    Commonly, courts do not award expectation interest at all.  In many, courts award what Fuller labels the reliance measure.
•    This differs in that it tries to put the pl. in the pos. that he/she were in before the contract.  Try to make the victim “whole” again.
•    Plaintiff has not only not gained, but has in fact lost something by non-performance of the contract.
•    Para 7, page 30.  The pl. has, in reliance on the promise, changed his position.

Restitution Interest
•    See Deglman v. Guaranty Trust
•    Happens when, in the context of the contract, the pl. has conferred a benefit on the def.
o    The pl. has been impoverished to the extent of this conferral, and the def. has been enriched to the same extent.
o    Court forces the def. to ‘disgorge’ the benefit conferred; to restore the benefit to the pl.
•    If the court does this, it is trying to prevent the def. from being enriched unjustly.
o    In Deglman, court said that the nephew had conferred a benefit on his aunt (and not out of the goodness of his heart).  To prevent unjust enrichment, put his services into a dollar amount, and had the estate disgorge this amount.
o    Could not give him his expectation, as it was non-enforceable.  Instead based the decisionon equity and unjust enrichment.
•    Restitution rarely arises inside of real orthodox litigation.
o    Usually arises while trying to clean up “near-contract” situations.

Economic Analysis of Law
•    Response to Lord Atkin.
•    Page 38 – the basic insight is that the propositions of the common law are economic propositions (as, they would say, are moral propositions [such as, ‘thou shalt not steal’]).
•    The law that exists, has evolved as it has, because it is conducive to economic activity.
o    Bell calls this the “is” proposition
•    The “ought” proposition:
o    Judges ought, in deciding new cases, make the decision that is most conducive to economic efficiency.
o    Make liable the person who could have most cheaply avoided a tort, for instance.

Peevyhouse v. Garland Coal & Mining Co.
•    Garland leased property from the Peevyhouses for the purposes of strip-mining coal.  A clause in the contract obliged Garland to perform “certain restorative and remedial work” at the end of the lease period.  All other obligations of the contract had been lived up to by both parties, but for this one.
•    The cost of performace was expertly estimated at about $29,000.
•    Ma and Pa Peevyhouse win in contract law.  That is not in dispute.
o    Issue: Should the judgment for the plaintiffs be in the amount equal to the cost of performance of the remedial measures, or for the amount that the value that the property was diminished?
o    The debate is over how to give the Peevyhouses their expectation.
•    By spending $29,000 to restore the farm to its “original” condition, its value would be increased by $300.
•    Would awarding the Peevyhouses the $29,000 simply be awarding them an unjust windfall?  Would they restore the property themselves, or pull up stakes and move to Florida?
•    The value of the land to the plaintiffs might be quite different from the actual fairmarket value.

There is no area of contract law in which there is more of a disjuncture between theory and practice, than remedies.
Here, the debate is not over which measure to use.  They both use the same measure, but in different ways.  Remedies jurisprudence is full of sub-jurisprudence.

For Next Monday, do Anglia Television, Bowlay loggin, Jarvis.

Essay:  Do not quote essays and books that you’ve never read – quoting quotes.
In order to cite quotes within quotes, cite properly [“…as quoted in…”].

J. Nunes Diamonds v. Dominion Electric Protection Co.  page 725
•    There was a contract between the diamond store and the alarm company for an alarm system.
•    P called D to ask if the alarm was sound in a certain respect.  Was assured that it was.
•    turned out to be negligent, but it was not sound in that certain respect.
•    The store was robbed.
•    Was defended on the basis that as the merch. had a contract with the alarm co., the rights and liabilities had to be ascertianed in reference only to the contract.
•    Alleged that could not sue for tort of negligence outside of the contract.
•    Undoubtedly, there was a limitiation of liability clause within the contract.
•    SCC – for the tort of neg. misrepresentation to be actionable the tort has to be “independent” of the contract.
•    A tort may be “independent” in at least 2 ways:
•    i)  The representation may have been made to a party who was not a party to the contract
•    ii)  the duty owed by the D may be unaffected by the contract.

Central Trust Co. v. Rafuse
•    Lawyer hired to oversee a mortgage and sale of property
•    missearched the title
•    Rafuse had committed the negligence, years later the problem was discovered.  Central trust suing their old lawyer for negligent conduct.
•    Problem:  By the time Central Trust was suing, more than 6 years had passed, so it was too late to sue for breach of contract.
•    sued for negligence in tort.
•    In tort, the limitation period doesn’t begin until the alleged negligence is discovered.
•    SCC said that in context of suing a lawyer, can sue in either contract or tort.
•    Easier in the lawyer context, because rarely have a contract with their lawyers.
•    Have rarely signed away rights via a limitation of liability clause.
Queen v. Cognos page 726
•    SCC does a 180º turn from Nunes Diamonds
•    Can sue concurrently in contract and torts.
•    Begin from proposition that liability is concurrent.
•    Contract does not oust tort.
•    Pre-contractual utterance inducing contract
•    Hired to do a major project.
•    Co. had not yet decided to actually do the project, and then decided not to.
•    P had moved his family from Calgary to Ottawa
•    Company let him go
•    Did not breach contract, as gave the one-month severance that was due.
•    Suing, saying he would not have accepted the position had he been told the truth.
•    On one hand, covers what he was suing on: [employment:  Hiring, course of employment, end of employment]
•    On the other hand, it does not.
•    Say that if Pigeon was right in Nunes Diamonds, then this is one of the exceptions.
•    Iaccobucci ¶3 –  Two different legal questions re. contract and tort.
•    addressses the Pigeon question:  Tackles the issue of having a contract with the other side and suing in tort under that subject matter – Pigeon said no.  Cannot.  Ever  – Iaccobucci is about to say he can.
•    Addresses issue of what if you had signed a contract saying that you will not sue in tort.
•    Subsequent contract may play an imp. role in whether one can succeed in tort.
•    fact that one has a contract does not necessarily preclude sueing in tort, though may play this important role.
•    However, even if the tort claim is not barred altogether by the contract, the duty of liability of the D with respect to neg. misrep. may be limited or excluded by a term of the subsequent contract so as to diminish or extinguish the P’s remedy in tort.
•    So even if the fact that a contract does not oust all duties of error, the wording of the contract may extinguish the ability to sue in tort.
•    Must also ask whether the tort duty was written right into the contract.
•    In this case, say that clauses 13 & 14 does not support an interpretaiont that would protect the respondent from te breach of a duty of care – let alone the breach of the particular duty invoked by the appelland in his action for engligent misrepresentation.

•    Cannot sue in tort merely to escape the fact that one signed away all one’s rights in contract.

First class after break – print provisions of something or other.
Vertical privity
Horizontal privity
Read up to Bow Valley Husky (Bermuda) v. Saint John Shipbuilding 687-701

Contracts and Torts
•    The relevance of tort principles and contract principles differ in different scenarios.
•    when trying to determine whether a pre-contractual utterance is of legal significance, and whether that significance sounds in contract or sounds in tort, it is an either/or choice.
•    Most pre-contractual utterances don’t have any legal significance, but supposing it does (it induced the subsequent contract) that legal sig. is in one or the other.
•    It is either a statement/representation (any legal significance it has will only be in tort).
•    OR it is a promise/warranty (any legal significance it has will only be in contract).
•    Possibilities:  No legal significance; legal sig. in tort; legal sig. in contract
•    This is not a choice.  A pre-contractual utterance has a true characterization.

Murray v. Sperry Rand Corp.  (page 673)
•    Breach of the collateral contract, not the contract of purchase and sale.
•    Entering into the principle contract for purchase was the consideration and the acceptance for the collateral contract.
•    Manufacturer:  After dealing with the Canadian distributor, judge turns his eye to the U.S. manufacturer, who also printed the brochure upon which the plaintiff relied.
•    ¶10 – “representations” – about to tell us that the representations are assurance about the future.
•    Does not formulate how the promises get into the collateral contract.
•    Became a unilateral offer:  “If you offer into a contract to purchase our machine, it will have these characteristics.”
•    [note that there are 3 collateral contracts resting on the shoulders of the main contract here].
•    In general, it would not be true that one can be liable for breach of promise even though the promise is not inside a contract…
•    has just held them liable for breach of promise
•    ¶s 10 &11 are contradictory.  10 – says there is a contract.  11 – says that may be liable for the promise even though no contract.
•    “would be better if we could cross out ¶11”
•    Breach of promise.
•    Has all of them liable – not in contract, but in contracts collateral to the principle contract.

Esso Petroleum v. Mardon
•    Esso lining up a location for a gas station.
•    Estimated, based on access to an adjoining busy street, that the thoroughput would be 200,000 gallons / year.
•    Before built, local planning auth. forced them to build the pumps where they could not be seen from the front, and gave access only from a side-street.
•    Didn’t change estimate.
•    The person who owned the ‘franchise’ eventually was forced to close his business.
•    The pre-contractual study induced him to lease the location and to pay moneys to esso for the use of their brand and what have you.
•    Suing on the pre-contractual ‘utterances’
•    Must determine whether it had any legal sig. at all  – if so, whether in tort or contract.
•    statement/representation=tort.  Promise/warranty=contract.
•    ¶7, saying the well-trod way around Heilbut, Symons, is to take a statement and say that it is a promise.
•    ¶8 – says that Esso warranted (promised) that the forecast / study was sound.
•    ¶10 – negligent misrepresentation – if not warranty, liable for neg. misstatement
•    ¶11 –
•    courts try to find the intersection of contract and tort.
•    Used to be that the easiest conclusion to reach was that if a contract covered a particular incident, then courts would look to the contract and the contract only to determine the responsibilities and liabilities between the parties.
•    Esso saying that because they chose to define their relationship concerning that site in a contract, Marsden must find a way to vindicate his claim in the contract.  Since they are asserting this, it is likely that there is a limitation of liability clause inside the contract.
•    This is not an unorthodox argument.
•    Denning, here, says that there is a certain type of contract, under which, if the undertaker of the contract breaches is, he falls under the standard of care usual for the profession – can equally be characterized as a breach of contract or tort.
•    Most contracts don’t involve a standard of care.
•    Think of the standard of care of a lawyer to a client.  There is a duty of care to the client due to the retainer, but also under tort.  A lawyer’s negligence can equally be characterized under breach of contract or the tort of negligence.
•    Denning says that Esso’s study was a negligent misprepresentation, and Esso is therefore liable in tort for damages.

V.K. Mason Construction v. Bank of Nova Scotia – page 715
•    Mason doesn’t want to enter into contract to build for Courtot Investments Ltd. unless Courtot’s bank ‘stood behind’ the contract.
•    The Bank writes Mason Const. a letter.
•    This pre-contractual utterance doesn’t involve a contract with the ‘person’ making the utterance.
•    Bank says, “…financing sufficient to cover the constrution of the subject complex.”  page 717
•    rather reckless wording… no limit involved.
•    Based on this assurance, Mason signed the building contract with Courtot.
•    Things went bad.
•    Sued in contract; sued in tort.
•    No good to sue Courtot – insolvent.
•    page 718-719-720
•    719 – contract
•    720 – tort
•    Wilson J.  takes the view that intention was lacking to form a contract.  There was no animus.
•    ¶19 – would be a unilateral contract
•    Does not believe that reasonable business people would construe the bank’s letter as a guarantee.  Reasonable – objective test.
•    ¶22 – Negligent Misrepresentation analysis.
•    Finds that the bank was indeed careless.
•    says overlooked the fact that what Mason was seeking was an assurance that Courtot would have sufficient funds
•    Bank should have known that the letter would be construed as an assurance of something over and above the terms of the loan.
•    Says induced Mason to sign a contract with Courtot ¶24

Read:
page 723-24 – suing on election promises
725 – first time  SCC struggled with… something.  Nunes Diamonds Ltd. v. Dominion Electric Protection.
726 – Queen v. Cognos Inc.

Heilbut, Symons, v. Buckleton p. 661 (cont’d from last day)
•    Rubber company case.
•    P not suing on the contract itself.  The contract is not a broken one.
•    The complaint is regarding what went on prior to entering into the contract.
•    At trial, P argued that “we are” is a representation; a statement of existing fact.
•    It has legal significance if it turns out to be a misrepresentation
•    At trial, suing in tort.
•    Jury (page 662) said that there was no fraudulant misrepresentation.
•    The P wanted damages.
•    for fraud misrep., 2 poss remedies:  Damages or remedy (leading to recision)
•    Here, recision was not an avail. remedy since the contract was already executed.
•    On appeal, the tactic changed:
•    argued that “we are” was a promise (as opposed to, at trial, a statement of fact).  It was an assertion about the future.
•    Must establish that “we are” is part of a contract collateral to the main contract.
•    The link is that the consideration for the smaller contract is the entering into of the main contract.
•    Unilateral contracts – “if…then” contracts.
•    entering into the contract to buy shares would be both the acceptance and the consideration of the unilateral (collateral) contract.
•    P is suing on the collateral contract, not the main one.
•    The damages for the breach would be the losses on the main contract.
•    ¶5 – acknowledges that this collateral situation is legally possible.
•    It just doesn’t make sense to make 2 contracts instead of the one.
•    The effect would be to increase the consideration of the main contract and the normal way to do so would be to simply add it to the main contract.
•    This sort of contract must be proved strictly, because they are counter-intuitive.
•    ¶6 – saying that there is an absense of evidence in this case of the existence of the collateral contract
•    innocent misrepresentation gives to right to damages
•    saying that if we allowed people to take pre-contractul utterances and to turn them into contract collateral, then we would be doing an end-run around tort law.
•    tort law won’t give damages for a non-fradulant misrepresentation.
•    This would, however, give people a recourse for non-fradulant misrep.
•    ¶8 – quotes Hold C.J.  “an affirmation at the time of the sale is a warranty, provided it appear on evidence to be so intended.”
•    animus comprehendi – concerns the intention to form a contract.
•    contract was argued on appeal because the tort route would not have worked.
Note 2 p665
•    still a leading case.  However, since the time of Heilbut Symons, there have been developments in tort law – development of 3rd class of misreprentation.
•    Hedley Byrne
•    since mid-60s
•    what was once a vast field of innocent mis rep, was divided.  Not innocent means innocent and non-negligent.
•    New class is ‘innocent, but negligent misrepresntation’
•    To prove innocent but neg. misrepresentation, get damages.
•    So today, do not have to prove fradulant misrepresentation – can prove negligent misrepresentation, which is usuall less onerous.

Dick Bentley Productions Ltd. v. Harold Smith Motors Ltd. (page 666)
•    Denning by now had already invented Promissory estoppel (40s), Fundamental breach (50s).
•    Now it is the 60s and Denning decides to take on Heilbut Symons
•    Car dealership.  Salesperson asserts something which ends up not being true – that the car was owned by a German Baron and was driven on 20k miles since its engine was replaced.
•    pre-contractual utterance (this term denotes neither ‘statement’ nor ‘promise’)
•    says, “If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice.”
•    His approach to get around the ‘problem’ of Heilbut Symons is to make it much easier for ppl to classify collateral contracts as such.
•    Gives a path around Heilbut Symons
•    Hedley Byrne wouldn’t be a way around here, since a salesperson wouldn’t be an expert.
•    Denning saying, “You always argue collateral contract.”
•    In effect, both of these contracts cases have been overtaken by the developments in tort law.
•    neither has been overturned.  They are valid, but practically obsolete.
•    Obviated by this cahnge in tort law.
•    Today, the contract route would not be likely to be taken at all.
Murray v. Sperry Rand Corp.  (page 673)
•    Contract to buy/sell a harvestor.  This contract is not in dispute.
•    It is about what legal significance can be given to the pre-contractual utterances.
•    Purchased on reliance of brochure printed by manufacturer and distributed by local salesman and representative of Canadian distributor.
•    Suing 1)  local dealer, 2)  Canadian distributor, and 3)  American manufacturer.
•    Find that the P was induced to purchase based on oral representations of local dealer/representative, and the brochure
•    ¶3 – local dealer.  P was induced to sign the contract by representations made by or on behalf of the local dealer.
•    ¶5 – collateral warranties – unilateral contract; collateral contract
•    “…the breach of which creates liability in damages…”
•    ¶11 – “a person may be liable for breach of a warranty, otwithstanding that he has no contractual relationship with the person to whom the warranty is given…”

Finish syllabus for next day.

Consumer Product Warranty and Liability Act (NB) http://www.gnb.ca/0062/acts/acts/c%2D18%2D1.htm ss 1, 2, 4, 5, 7, 23-26

•    2(3) – seems to be saying that one cannot sign away the rights assigned to you in the act.
•    24 - Where there is a contract for the sale or supply of a consumer product, the parties cannot agree to exclude or restrict any warranty or remedy provided by this Act except as provided in sections 25 and 26.
o    this section qualifies s. 2(3) – qualify only in accordancw w/25 & 26
•    25(1) – Subject to subsection (4), where there is a contract for the sale or supply of a consumer product, the parties may agree to exclude or restrict any remedy provided by this Act for breach of an express warranty, but such agreement shall be ineffective to the extent that it is shown that it would not be fair or reasonable to allow reliance on such agreement.
•    25(3) - In determining whether it would be fair or reasonable to allow reliance on an agreement to exclude or restrict any remedy provided by this Act for breach of an express warranty, regard shall be had to all the circumstances of the case.
•    so exclusion is possible as long as it is ‘fair and reasonable’
o    this is where Wilson J. got her language in Hunter v. Syncrude
o    This is the legislature’s response.  Judges do have the auth. to modify contracts in which consumers have signed away their rights.
o    In doing so, must strive for ‘fairness and reasonability’
•    This is more supple than Denning’s ver. of Fundamental Breach, which was an automatic exclusion of the limitation of liability clause.
•    Very little litigation on this act, considering its ubiquity
o    2 poss reasons:
•    The act is so effective that business parties settle rather than go through litigation while knowing that they have treated the consumer unfairly or unreasonably.
•    Consumers are foolish and lazy, especially those who have been foolish enough to sign away their rights in the first place.
•    Professor Door (?) is the drafter of this act.  Just retired from UNB.

Hong Kong Fir Shipping Co. v. Kawasaki Kisen Kaisha Ltd.
•    There is only one context in all of contractdom in which the sub-classification of contract terms is relevant.
o    warranty; condition
o    However, in context of remedies available to victim it is important. If victim of breach of “condition” then you have lrger selection of remedies/options than of warranty.If you are the victim of a beach of a condition, then more options are available.
•    can treat the contract as at an end; can sue for damages
o    Whereas, the victim of a breach of warranty has no other option but to make a claim for damanges – cannot cease to perform the contract.
•    For most contexts – it does not matter.
•    This case concerns a charter (of a ship).
•    When the vessel was leased, the price of shipping was high, but then went down.
•    Reason for high price of charters at this time:  Egypt nationalized the Suez Canal; formed crisis between England/France, and Egypt.  Invaded Egypt, which sank vessels in the Suez Canal.  Voyages between The Atlantic and Asia therefore took much longer.
•    To get out of the contract, tried to claim that the vessel was unsatisfactory and unseaworthy.
o    Diplock ¶2 page 576 – famous sentence for comment on final exams – look up synallagmatic
•    “human prescience being limited, it seldom does so exhaustively and often fails to do so at all.”
•    ¶3 – does the occurrence of the event deprive the party who has further undertakings still to perform of
o    If it was that kind of a breach, as to deprive the victimized party of the whole benefit, then it is a breach of a condition.
o    If it doesn’t deprive of the whole benefit, then it is the breach of a warranty
•    ¶9 – in real life, cannot classify all contract terms into just conditions and warranties.
o    supposed to classify at the point of formation
o    cannot with certainty classify all the terms as such.
•    Ex:  If buying a blue car and got a red car – difficult to say that you were deprived of the full benefit of the contract.
•    Diplock says in ¶10 – “No doubt there are many simple contratual undertakings, sometimes express but more often because of the very…”
o    There are obviously some contractual terms which are conditions
o    And there are some that are conditions
•    ¶11 – come that are of a more complex character
o    Saying that there is a 3rd class of contract term.
o    suggests that it is numerous.
o    cannot say whether or not  breach of it would deprive the victimized party essentially of the full benefit of the contract.
o    Must be classified not a priori, but from the actual consequences of the actual breach.
o    Will turn out to be condition-like, or warranty-like.
•    So we have, at the formation of a contract, conditions and warranties
•    Or they are innominant terms (or complex terms) which are divided into condition-like, or warranty-like – these are classified from the perspective of the breach.

•    In regards to this contract, says that the term that was breached was seaworthiness.
o    can be more or less substantial – depending on the situation (a hole in the hull or engine trouble)
o    Cannot tell at the formation who substantial the breach will be.

Sail Labrador Ltd. V. “Challenge One” (The)
•    SCC had to ask itself whether the contract had within it a term tatamount to a “time is of the essence” provision.
•    This is a common provision.
•    Nothing expressly in the contract to this effect.
•    SCC said ‘no’.  Did not think there was anything to that effect in the contract.
•    Though the breaching party had breached the contract, hadn’t breached a condition…

Page 654 – Misrepresentations and Warranties
•    There are 2 problem areas in Contracts where trouble tends to lie:  Exemption clauses; Pre-contractual words
•    Pre-contractual words:  For instance, the sales person may say something to induce the customer to enter into the contract.  This ‘something’ may turn out to be false.
o    Cutomer wishes to say that while there is nothing wrong with the contract per se, something happened prior to it that is relevant.
o    Evidence rule – where you have an apparently complete contract, extrinsic evidence is not admissible for modifying or contradicting the contract.
o    And yet we have seen situations where evidence does do this, but is being intro’d for another purpose.
•    The words that the ‘sales person’ utters outside the contract, but which critically induce the contract (page 654) might have 1 of 3 classifications:
o    1)  Puffery:  Words which have no legal significance.  They are mere puffery.  Ex:  “This is the best used car in Fredericton.”
o    2)  Misrepresentation:  looks like a statement of fact.  In Gallant v. All State, the assertion that the buckwheat would kill off the weeds were a statement.  If they induced the customer to enter into the ccontract, and if the words were false, then they are called a tortious misrepresentation.   Falls under tort.
o    3)  Warranties (promises):  If the words are not words of statement, but are of promise, those words (if they have legal consequence) can have consequence only in contract (the realm of promises).

Heilbut
•    Customer calls stock broker regarding the launching of a new rubber company.
•    Stock broker:  “We are.”  – entire case turns on these words.
•    Customer agrees to buy 6,000 shares
•    Company turns out not to be shares in what could legitimately be called a rubber company.
•    Does not sue the  company – it is insolvent.
•    Customer sues the stockbroker.
•    Not complaining about anything inside the contract.  He did get the shares.  He didn’t want the shares.
•     “We are” – could be a statement of fact, giving rise to liability, if at all, in tort.
•    Misprepresentation.
o    Could be a promise (warranty), giving rise to liability, if at all, under contract.
•    Problem in giving these words sig. in contract – a naked promise is valueless…
•    page 662 – At trial, the jury found that the company could not properly be called a rubber company.
o    Pre-contractual utterance was false.
o    D’s did not make a fradulant representation.
o    Did find that the SB did promise that it was a rubber compnay.
•    HoL is stuck with the findings of the jury – in particular that there was no fraud. misrepresentation here.
•    Seems that at trial, P argued that “We are” was a misrepresentation – argues under tort law.
o    If one can succeed that “we are” is fradulant misrepresentation, then can get damages.
o    in 1913, the only other type of misrepresentation was “innocent misrepresentation” – remedy is not damages.  It is a return to pre-contractual situation.
•    Only remedy avail. for innocent misrepresentation is recision; calling off the contract.
o    Here, cannot be rescinded, as has already been carried out.
•    If took the tort route, the only buttom to press would be fraudlant misrepresentation but then would be faced with the reality that fraud is extremely difficult to prove, because the courts have a high threshold to accept that the D. was guilty of fraud.

For tomorrow, read this case.
Read Dick Bentley, & Murray