Contract Law

Writing
•    Contracts do not have to be either written or oral
o    They can be party written or party oral.
•    All common law jurisdictions have adopted some form of the Statute of Frauds
•    To what does the statute of Frauds apply?
o    What contracts are caught by the contracts?
o    What contracts are within the statute?
o    Chiefly 2 types in ordinary practice that are caught:
•    Contracts of guarantee (or suretyship)
•    When one is a guarantee or surety, one is making oneself answerable for someone else’s legal debts or wrongs
•    One says that even thought one is not the tortfeasor, one will pay the victim for the tortfeasor’s actions
•    The law looks at this as rare, and therefore wants to be very sure that someone did mean to do this – wants to see it in writing.
•    Explains why contracts of guarantee have to comply with the statute of frauds.
•    Banks take the most guarantees – want everything in writing anway.
•    Contracts in issue of land
•    Contracts in sale of fee simple have to be in writing, obviously enough
•    The statute is not confined to fee simple
•    It is confined to interest in land
o    Profits a prendre, etc.
•    Not validly conveyed unless it complies with the statute.
•    Lawyers get sued a lot because they forget that an option to obtain land is an interest.
o    If not done in writing, does not comply with statute of frauds.
•    Keep in mind that statute of frauds applies not only to FS and life estates (and fee tail), but also to anything that is an interest in land, including the option.

•    In most provinces, there is another category – “contracts not to be performed within a year.”
o    The jurisprudence is an exotic one
o    The drift is that if the contract could possibly be performed within a year, then does not apply.
o    Only contracts that could not possibly be performed within a year.

•    If a contract must comply with the Statute of Frauds (page 233)
o    “No action shall be brought…”
•    Note:  Unless the contract is in writing
•    Does not mean that the whole contract in question has to be in writing, only that enough of it has to be in writing.
•    Likewise, signed does not mean “signed” necessarily.  Can be printed, pre-printed on a letterhead – the court might well say that this is enough.
o    Could even be on a cheque – even if in the memo “re: purchase of land” might be enough to satisfy the memorandum in writing requirement
•    Law requires that certain narrow categores are satisfied, but once they are, makes them easy.
•    Quite easy on finding that the requirement has been met, in order to not simply fail valid contracts on technicalities.
o    Make the satisfaction extremely elastic.

•    “No action shall be brought” are the most elastic words of the statute.
o    Can’t sue on such a contract
o    Says plaintiffs cannot sue on such a contract
o    Doesn’t say, “there isn’t such a contract”
o    Logically, implies that the contract is there, but cannot be invoked affirmatively.
o    If somehow a defendant could defend him or herself based on this contract…
•    For example, to explain why they built their castle on Blackacre
•    The defendant could invoke the existence of the contract
o    Might be able to raise an estoppel based on such an agreement, but cannot sue on it.  Another example of a shield but not a sword.

•    Original Statute of Frauds said that contracts above a certain value had to be in writing.
o    Was taken out of the SoF and put into Sale of Goods Act
o    Was a nuisance, because the value probably hadn’t changed since 17th century.
o    The English figure was originally £10 – was, in the 17th century, a staggering amount.
o    Was translated, like many, many English statutes, into $40CA.
o    Most provinces (like NB) have repealed it.
•    Ontario only in 1994.

First propostion:      Few have to be in writing
Second proposition:     Even if yours does, courts are liberal in interpretation.
Remember that contracts which have to comply with the statute that fails with the statue, does not fail as a contract, but just means that pl.’s cannot sue.

Doctrine of Hard Performance
•    A judge-created exception
•    Even though a contract may be caught by the statute, and non-compliance has happened, still, if one falls within an exception, the court will say that you did comply
•    The doctrine of hard performance
•    If can show that the contract has been performed in part by the time of a law suit, then will not be out of luck.
•    Creates a category of contract that otherwise would fail on a technicality, that do not fail on a technicality

Doctrine of hard performance – says that if the plaintiff can show that the alleged contract was partly performed so that it cannot be explained what the parties did except to say that they did it under contract, then the court will use what was done as existence of that contract.

Page 238 – example

Deglman v. Guaranty Trust Co. of Canada and Constantineau [1954]
•    The aunt thought that she promised to give her nephew the house in exchange for his little services.
•    He did do the services – years later, she died, but the will did not note that the house should be left to him
•    He sued the estate
•    The court noted that even though she thought she was giving him the house, she was in fact entering into a contract with him
o    His consideration was the services rendered.
o    A contract made within a lifetime take precedence over a will.
•    Page 239, the court turns to the doctrine of hard performance.
•    SCC says no – in order for an action to count as hard performance, must be uniquely referable to the existence of that alleged contract.
o    must have an unequivocal character.
o    Only way to account for the behaviour must be to resort to the existence of a contract.
o    Says the nephews actions do not constitute this.

•    This case emphasises that the doctrine of hard performance is interpreted quite narrowly.
•    Page 240, send him away with the consolation prize of $3000 (a great sum at the time)
o    We will come back to this in January to look at remedies.

•    The notes after the case show that English courts have moved away from the idea that the acts must be unequivolcally attributable to the existence of a contract.
o    Page 241-242 Steadman v. Steadman case.
o    Say that we must interpret on the balance of probabilities.
o    Yes, must be referable unequivocally, but we judge this on the balance of probabilities.
•    This considerably lowers the barrior to finding hard performance.
•    Bottom of page 242-243-244
o    Loosening of hard performance in Canada?
o    Editors imply that the Canadian courts will follow the English courts, but haven’t done so yet.
•    Even if a contract is caught by the statute, even if one hasn’t literally caught by the statute, then the doctrine of hard performance still gives hope.
o    Oral evidence is admissable to explain what the contract was, once courts have accepted the doctrin of hard performance as applicable.

Third Parties – Privity

Contract between A & B
A promises B the title to car for $1000
B promises A $1000 for title to car
•    A does convey to B the title to the car
•    B has not paid A $1000
•    A meets B to discuss
•    C is a bystander.  Decides on his own to sue B as a promise-breaker to force him to keep his promise.  May even establish a foundation for the suing of promise-breakers.
o    C v. B
•    Will not win.  C is not the promissee.
•    A contract is a private arrangement between [A & B]
•    Each has assumed obligations voluntarily
•    C is not in privy to the contract.
•    C did not give consideration.
•    Cannot enforce any promise against any promisor without consideration

A promises that when B dies, will pay a benefit to C.
B promises to A to pay premiums during his lifetime.
•    B dies
•    A does not pay the benefit to C (the beneficiary)
o    C v. A
•    Promise broken
•    2 objections:
•    C is not the promissee
•    C did not give consideration

•    The common law treats perfect strangers and intermeddlers (as in example 1) the same as beneficiaries.

What if one person makes travel arrangments for a group, and one of that group is the victim of a breach of contract, from the carrier, for instance.
•    Only a person who is party to a contract can sue – Dunlop Tyre
o    Page 378-379 – HoL invited to overturn Dunlop Tyre
•    Lord Denning sitting at this time
•    Would have relaxed the doctrin of privy to allow the intended beneficiary to sue – minority
•    Answered by Viscount Simonds
•    “For to me heterodoxy, or as some might say, heresy, is not the more attractive because it is dignified by the name of reform.  Nor will I easily be led by an undiscerning zeal for some abstrat kind of justice to ignore our first duty, which is to administer justice according to law, the law which is established for us by Act of Parliament of the binding authority of precedent.”

Free Agent
Must understand 3 analyses.
Not really exceptions to privity problem
Mean, in fact, that if they are true, there is no privity problem.
•    1)  Agency – if in a contract between A & B, it turns out that A was acting for someone else (for example, a corporation)
o    principal
o    C is the corp.
o    In fact, C was always a party to the contract.  It was never an A/B contract.  It is a C/B contract.
•    2)

For next class, read notes page 381
Read case page 384
Read London Drugs page 385

[It’s been awhile…]

page 311 – review Foakes v. Beer
…long line of sorrows springing from this case…
•    Pinnel’s Case:  A debtor’s promise to pay a creditor a lessor sum is not consideration
•    Foakes v. Beer not altogether satisfactory – note that judges both express sheepishess at their ruling.
•    Note 1 page 311 – Mercantile Law Amendment Act R.S.O. 1990 – intended to overrule Foakes v. Beer.
o    Passed in ON the year after Foakes v. Beer.  Also passed in B.C., AB, SK, and MN (Western Provinces).
o    Rare for a legislature to take steps to reverse a ruling
o    The Atl. Provinces still use Foakes v. Beer.
o    Must understand the hazard of the rule of this case.
•    Think of how Roffey Bros. would apply to Foakes v. Beer.
o    Courts said did not apply.  This is because of precedent.  Foakes was a HoL decision, whereas

Estoppel
High Trees p 315
•    Denning takes time to say that if the other view of estoppel prevails, would undo Foakes v. Beer (indirectly, but estoppel route)
o    Would estop the creditor from acting against the debtor in such a case.
•    Says it again in Combe v. Combe p 318
o    Again, not a Foakes v. Beer case.

D. & C. Builders Ltd. v. Rees
•    Denning ought to end this case with a vidincation of the stance of estoppel.
•    Does not.  The debtor loses.  The creditor triumphs.  Why?
•    Explained against rule of Foakes v. Beer.
•    Must examine against backdrop of estoppel
o    Remember that this is promissory estoppel.
•    Recall that when Denning ‘invented’ this in high trees, the reach of the doctrine was unknown (p 316)
o    Combe v. Combe – Denning pulled back from the potential effect of his own words.
•    Affirmed the principle of promissory estoppel, but added *‘provinded that the promissee is not invoking estoppel offensively [is not suing on the basis of estoppel!]’*
•    Sword / shield distinction.
•    Now on to D. & C. Builders.
•    From structure of the case (fact that it is three judges, all of whom issue agreeing judgements), see that the judges agree on the result, but not how to get there.
o    Same as in Brophy Bros.?
•    Facts of D. & C. Builders – builders do a job for the defendants who claimed shoddy workmanship, and could not pay the £482 balance.  Offerered £300, which the builders had to take as they were in financial trouble.
o    Is the ‘agreement’ to take the £300 binding?
•    Is this a case of ‘promise intended to be relied on, and then relied on’?
•    Denning, in High Trees and Combe v. Combe, has led us to believe that it will – but it does not.
•    Note paragragh 2 page 323:  facts.  “At this stage there was no dispute as to the work done.”
o    What is the significance of this?
o    From Stilk, if prior to entering into the negotiation, there had been a legal dispute between the two sides in regards to how much the Reeses properly owed (with potentially shoddy work in mind), then could  have compromised / settled on £300, and it would have been binding.
•    Each side would have bargained to give up legal claim agianst the other.
•    However, when the fee was reduced, there was no legal dispute
•    For some reason, the complaint that Mrs. Rees makes at top of page 324 does not count – does not seem to have been in correct form?  i.e.  We do not owe you this money because the workmanship was not up to par.
•    Why does estoppel not come to the rescue of Mr. & Mrs. Rees?
o    The court does not allow them to estop the creditors from asserting their strict legal rights to the full balance owing.
o    Why can they not use estoppel as their shield?
•    Mrs. Rees had overstepped – p 325 para 10 – “She had no right to say any such thing.”  She had no right to threaten them with non-payment, knowing that they were on the brink of bankruptsey…
•    This is odd.  Obviously do not normally have to be altruistic in negotiations.
•    Bell:  Don’t get distracted by this point, because it is so strange.
o    Think rather of the larger point – Denning reminds us of High Trees – estoppel doctrine is an equitable doctrine.  EVERYTHING EQUITABLE IS DISCRETIONARY.  This means that the court can exercise its discretion in withholding what it might otherwise grant.
o    Traditionally say law is the realm of rights, and equity is a realm of discretion (not rights).
o    Note para 9 page 325 – “Equity has stretched out a merciful hand to help the debtor…”
o    Para 10 – ‘not going to do it here though.’
o    Note:  Promissee cannot sue on promissory estoppel; Promissory estoppel is equitable and therefore discretionary.
•    To accept Denning’s hint in High Trees and Combe, that promissory estoppel would get one out of rule from Foakes v. Beer, then Dankwerts L.J. and Winn L.J’s reasons for decision might be startling.
o    Do not acknowledge awareness of the idea of promissory estoppel as applied in high trees and Combe.
o    No hint that promissory estoppel might have applied.
•    Lord Denning’s decision from this case is the most famous and referred to.
o    Does not, however, carry a majority
o    What does the case stand for??
o    Question of whether estoppel will get one out from under rule of Foakes v. Beer remains unanswered and ambiguous.
o    Consult readings on reserve…

Waltons Stores (Interstate) Ltd. v. Maher
[Bell:  “The last challenging case of the term]
High Court in Aus.  Seems to be their Supreme Court.
5 judges – 4 wrote…
•    This case seems to abolish the sword / shield distinction
•    Seems to say that there are cases where the promissee can sue on the basis of promissory estoppel.
•    Further difficulty:  in this case, the counsel for Mahar … in this case there isn’t even a promise … the challenge for the counsel for Mahar is to first show that there was an express promise where there was none.
•    Implicit promise gathered from the facts.  Showed that there was in effect a promise.
•    Facts:  Waltons wanted to develop a site for shopping centre.  Bell guesses that Waltons is likely an Aus. Walmart.  Mahars are landowners – there is a site with a building on it, which Waltons wants to occupy as tenant.  Mahars is required to destroy the existing building, and to build a new one to Waltons’ criteria.
o    Get close to a deal.  Waltons’ solicitor sends a draft lease to the Mahar’s solicitor which is pretty close to final form
o    P 333 – notes that have not obtained Waltons’ specific instruction, but would advise the very next day if there was any disagreement.
o    There was no contact the next day, nor for ‘some months’
o    Maher’s, knowing that Waltons’ could only use a new building, tore down the old building in the interim, and began building Waltons’ custom-designed building.
o    40% complete by the time Waltons’ solicitors sent a letter saying that the plan was not going ahead.
•    Before getting to estoppel, must get to a promise.
•    Here there had not been a promise, as such.
•    Somehow, all of the courts accepted that Waltons’ conduct amounted in effect to a promise [do not get hung up on this – Bell]
•    At trial and at first level of appeal, the Mahars won, not on basis of promissory estoppel, but on legal estoppel
o    Legal estoppel turns on representation of existing fact…
o    Whereas in high trees, it was not about existing fact, but on the basis of a promise.
o    Here, this is a case of enforcing a promise
•    Combe v. Combe – sword / shield distinction.
•    Para 16 & 17 page334
o    Para 20 – begin argument by saying that looking back at high trees, ignoring combe, high trees is broad enough to cover this situation.
o    However, thanks to Combe, promissory estoppel is a defensive equity, not an offensive equity.
•    However, being defensive does not mean that it may only be used by defendants…
•    Unless court intervenes, would be to the promisee’s detriment.
o    Trad. objections to using estoppel as a sword is that it would supercede the Doctrine of Consideration.
o    Next trad. objection is that enforcing consideration as promise is to enforce gratutious promises
•    The law does not enforce gift promises.
•    Now to say that all promises without consideration are gift-promises (though within high-theory is high true) is slightly misleading, but this is an objection.
•    Question is that if we did start enforcing gifts, where would it end?
•    Para 23 & 24:
o    23:  talk about Crabbe v. Arun District Council
•    Crabb owned land.
•    Has access to the street (let’s say, at the South)
•    Another access at the North.
•    Crabb gets offer to divide the land
•    Local municipality tells him that though the south access is the normal access to the land, he can use the north access legally.
•    Sells parcel B – the south part of the land.
•    Doesn’t bother reserving a right-of-way, because he has been promised the north access by the municipality.
•    After this deal goes through, the municipality tells him that the North access cannot be used.
•    He sues them, resulting in this case.
•    Crabb has a promise that he wants to enforrce:
•    No seal
•    No consideration
•    Must rely on estoppel – a promise intended to be relied on, and relied on.
o    Problem of course is that he would be using estoppel as a sword not a shield.
o    This case came before Denning…
o    Denning said, “There are estoppels, and then there are estoppels…”  Some can only be used defensively, some others can be used offensively.
o    Allows Crabb to estop the Arun District Council from going back on their promise.
•    This is referred to as proprietary estoppel
o    So-called to distinguish from ordinary promissory estoppel, and because it involves ownership of land.
o    Not subject to sword / shield principle such as promissory estoppel.  Exception to Combe v. Combe rule.
•    This is the first thing that the Aus. court points out – that the sword / shield principle is not one that the law enforeces rigoursly.
•    Para 24 – look at the U.S. and how they handle estoppel
o    S90 of Restatement on Contracts
•    Restatements are not statutes.
•    They are literally restatements by legal thinkers of what they believed the law should be (American Law Institute).
•    “A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such ation or forbearance is binding if injustice can be avoided only by enforcement of the promise.  The remedy granted for breach may be limited as justice requires.”
•    U.S. verstion of estoppel – pitched more aggressively.

Next day – will look up to Formality – At least as far as The Seals.