Contract Law

•    Contracts are a creation – they are legally enforceable obligations that did not previously exist (prior to the contract) [self-imposed obligations]
•    Through the free exercise of our wills we impose these obligations on ourselves.
o    Hence the derivative idea that if our will isn’t free (ex: intoxication or subversion) we are not bound – this is because it was not, in such situations, an exercise of free wills.
•    The basis of contracts is the freely functioning human will.
•    Issue of Intention:  A contract is the product of two intentions meeting.
o    How do we ascertain what the other party intends?
o    How does the court know?
o    The approach that courts take is to say (implicitly, by rulings) that they take the object approach.  The court does not ask what was intended.
o    Ex:  In Carbolic Smoke Ball, did not call the president of the company to the stand to ask what the intent was.  Rather, when one has to decide what the parties intended, the judge decides based on what the party would seem to have intended, to a reasonable observer.
o    We apply the test of reasonableness p481 – par7
o    We must understand the words in the way that an ordinary, resonable person would. P 442 – bottom of para2.
•    Note that we attribute that intention to the parties.
o    Still a product of the will of the parties.
o    We (the court) just get to say what that will is.
o    A person can end up “intending” what was furthest from their mind at the time of the agreement.
o    Do remember that even though the judge decides what was intended, it is imputed to the parties.
•    Headings (abbreviations):
o    Q.B. – Queen’s Bench
o    C.A. – Court of Appeal
o    L.J. – Lord Justice
o    M.R. – master of the roles (the keeper of the records – as result of adjudicature acts, made CJ of the civil cases.  The LCJ fulfilled the same role for the criminal cases.  Lindly M.R. spoken as, “Lord Lindly, Master of the Roles)

Carlill v. Carbolic Smoke Ball Co.
•    Mrs. Carlill suing, alleging a contract between the two.  Not on the basis of a contract of sale, but on a more elusive contract.
•    “The Law is like Prince Philip.  It’s always a step and a half behind life.”
•    What is there in this ad (and its context) that make it different from other ads (which usually cannot be construed as contracts).
o    An advocate would want to know more than just the words – would also want to know the context – type of newspaper (reputation of publication might colour the reading of the advertisement.  I.e.  A gossip rag versus the British Journal of Medicine).  A better lawyer will make such things relevant to the case.
•    What arguments could be made for the Carbolic Smoke Ball Co.?
o    A reasonable person would understand that no company would intend to put themselves into this situation.  £100 would be an incredible amount of money.
o    If this is the offer, then the offeree is everyone whose eyes fell upon that ad.  Is it reasonable to assume that it offered it to the entire world?
o    Either there is no direct offeree, or there is no offeree
o    Company also argues that there is no acceptance.
o    A pamphlet could be viewed as a literay form.  Literary forms are prone to exagerration and hyperbole.
o    There were no instructions given in regards to claiming of the moneys.  In order to be claimed as an offer, something must be fairly complete.  This is essential information.
o    The word “reward” is not a contractual word.
o    Nudum pactum – naked agreement.  A considerationless agreement.  Non-enforceable [from page 444 – para 9]
o    “…any disease” is extravagant.  Tempered somewhat by “…by taking cold”

For Mrs. Carlill
What makes this ad different from other ads?  What makes it an offer?
•    The £1000 deposited into the account adds a ‘sincerity factor’.  It is a preemptive measure against skepticism, meant to convey confidence and promote sales.
•    The detailed instructions amount to an onerous path of acceptance.  The inference is that if this path is followed, then it constitutes acceptance, which means there must also have been an offer.
•    The Offer is made only to the subset of the world who:  buys the product; uses it while strictly adhering to the product’s directions; still contracts influenza.

When one examines a case, not necessarily looking for “rightness” or “truth”.  When analyzing the cases in the book, must look for the rationale and reasoning.  Must be able to make reasonable arguments based on the words.

•    P444:  One of the company’s arguments that were was no acceptance was that Mrs. Carlill did not send a letter, etc. to notify acceptance
•    The first the company knew about it was when the claim was made for the £100.
•    What of the idea that Acceptance is not Acceptance until communication is effected?
o    The judges say that the offeror is entitled to waive the terms of acceptance.
o    Here they say that Carbolic implicitly waived the terms of acceptance.
o    Say that she did accept at the point where she had completed the path of Acceptance and notified them of her claim.

Acceptance (when not in person): a general discussion
•    Contract law is based on old rules.
•    The paradigm for centuries was a contract of sale.
•    In the mind’s eye of trad. contract law, a contract takes place when people are interacting in person.
•    This became problematic once people began interacting by post.
•    In person, easy to say, “I accept,” or “I do not accept”, or to “hear” the silence (rejection)
•    However, by post, there are often complications along the way.  The letter of Offer could get lost on the way, or it may have arrived and been rejected by silence, or that the Offeree did write back, but it got lost on the way.
•    The Offeror, dealing at a distance, after having consigned a letter to the post and received no response, may be perplexed.  Likewise, the Offeree may be in a similar situation.
•    The silence on either end is perplexing.
•    The law has developed a rule that some say help, and some say hinder:
o    The Postal Rule, or The Postal Rule of Acceptance.
o    The ordinary rule of Acceptance is that it is not Acceptance until it is communicated (unless this has been waived by the Offeror)
o    Inter praesentes:  Present parties.
o    Communicated means communicated successfully!
o     The Postal Rule of Acceptance, where it applies, has Acceptance occur as soon as the letter of Acceptance is posted.
o    This applies even if the letter of Acceptance is miscarried enroute.
o    A clause in a contract can contravene this successfully.  The Offeror is the master of the Offer.  Ex:  “We don’t have an offer until your Acceptance reaches me.”
o    The Postal Rule of Acceptance puts the burden of interpreting silence, and therefore the risk of silence, on the Offeror.

Foakes v. Beer (missed last class – interviews)
•    Why doesn’t the ruling in this case come under pre-existing duty?
•    Why do we need a separate rationale?
o    We do not need the rule from Foakes v. Beer – equally analysable under pre-existing duty
o    Separate island of jurisprudence all to itself, very similar to pre-existing duty rule
o    Could be under Stilk v. Meryk
•    Is is a subset of a preexisting duty, but we treat it separately for historical reasons.

•    Why doesn’t the hypothetical situation whereby one promises to write off a $100 debt in exhange for $50 fall under the rule that we saw earlier (stilk v. merit)
o    S & M was a legal dispute
o    The answer is that the s & m type scenario was about a compromising legal dispute
o    Whereas, in our hypothetical situation, there is no legal dispute.  One is not claiming that one does not owe the money.  One is simply admitting that one cannot pay it.

Given the similarity between the Foakes v. Beer and Stott v. Merit Investment Corporation, would the way around exhibited in williams v. roffey brothers be gotten around the same was as in Stott v. Merit?
o    Williams v. Roffy brother scenario takes some of the sting out
o    Why is it not equally applicable to the Foakes v. beer scenario?
•    It would be.
•    The English courts have addressed this.  They have said that one cannot use a Williams approach to defang the approach of Foakes.
•    This is because Foakes is a decision of the house of lords, and it would take a decision of that same house to overturn it.
•    Further, the argument goes that if Williams got one out from under Foakes, there would be nothing left to Foakes.
•    Whereas, in Williams, all three judges said they were not overturning Stilk v. Merit.
•    Why won’t a Williams argument apply?  (Consideration can be found in practical benefit…)
o    The answer is because the courts have said that it won’t.
•    Williams v. Roffy Brothers says that a prac. benefit can be consideration
o    applies only if the parties already have a contract
o    though limited in this way, nevertheless, is a precedent of great interest.
o    The natural question is, “what can Canada do?  Will they follow?”
•    If Gilbert Steel were decided today, would it go another way?
•    Under Quicklaw, search “Roffey” and see what the cndn courts do when they cite Williams v. Roffey Brothers.
•    ***Look and see whether it is being followed in Canada.  This may be important for midterm.
•    Will it stand as a great precedent of our time, or will it be forgotten?
•    P. 309, para 1. – “The case not being one of a composition with a common debtor, agreed to, inter se, by several creditors. “
o    If the first creditor who gets judgment against a credit gets 100%, then the fifth creditor (for instance) may get nothing as there is nothing left.
o    Sometimes, creditors will agree amongst themselves that none of them will actually execute a judgment against the debtor.  They will take the entire assets of the debtor and divide them up.
o    Earl of Selborne says that this arrangment is binding, but cites it in a way that it would seem to be an exception to the Foakes v. Beer way, but does not mean it in this way.  In fact means that there is consideration in this arrangment.
•    This agreement between creditors is called a composition.
o    Note on page 310 para 3 – there is a point that the “chequeness” is not consideration unless it is a bargained-for chequeness.
•    Nothing is consideration unless it is treated as consideration – unless it is bargained for.  Read this over to clarify.
o    P 312 – contracts with a 3rd party.

Criteria to select promises worthy of legal enforcement
•    Promises given in return for something which the law is prepared to regard as consideration.
o    This is narrower than what ordinary people might view as consideration.
•    Promises under seal (will look at later).

•    Does our legal tradition enforce promises merely because the promisee has relied on them?
o    This is against theory, but may exist practically.
•    We now come to a series of cases where this appears to be the scenario.
o    What is going on will look like promise enforcement, but the question is whether it is really promise enforcement, or protecting resonable reliance.
•    Is it harm prevention as opposed to promise enforcement?
•    With promise enforcement, all the attention is on the promisor.
•    With harm prevention, all the attention is on the promisee.
o    The case that discovered the possibility that there might be something that strongly resembled considerationless promise enforcement was Central London Property Trust Ltd v High Trees House ltd.
•    Lord Denning, prior to becoming a Lord.  He is a Justice here – trial judge.
•    One of the few trial cases in our text.
•    Friendly parties – just want an answer, which they will be willing to accept.
•    In this case, one of the two parties (plaintiff) have become insolvent, and is in the hands of a receiver.  The receiver has a fiduciary duty to try to take in as much money as legally possible.
•    99-year leases are quite common in England.
•    The landlord sues for 2 things (which may be the same thing, 2 ways)
o    Full rent prospectively
o    Full rent retrospectively.
•    First thing we look for is consideration (to enforce the landlord’s promise to let them pay ½ rent).
o    The promissee did rely on this promise
o    Consideration:  The tenant did pay the ½ rent, but that is not consideration – that falls under pre-existing duty.
o    There is no seal on the changed contract.  No change vis-à-vis the change.  No consideration vis-à-vis the change.
o    Denning J. does something revolutionary while saying that he is not doing anything revolutionary.
•    Claims to be following jurisprudence.
•    He makes up something and attributes it to the widom of the past.
•    Estoppel – this is the leading case of estoppel.
•    What Denning J. is faced with is a situation where the promisor made a promise to the promisee, the promisee relied reasonably on the promise, and now the promisor wants to break the promise.
•    The landlord gave the tenant a representation of the future – we call this a promise
•    This case is about whether to enforce a promise.
•    Because it is a promise.  Does not fall under trad. Jurisprudence of estoppel.
•    Allows us to make some enforcement.
•    (para 1 on page 316) – “With regard to estoppel, the representation made in relation to reducing the rent was not a representation of an existing fact.  It was a representation, in effect, as to the future, namely, that payment of the rest would not be enforced at a full rate but only at a reduced rate.  Such a representation would not give rise to an estoppel, because, as was said… a representation as to the future must be embodied as a contract or be nothing.”
•    (Para 2) “There have been a series of decisions over the last fifty years which, although they are said to be cases of estoppel, are not really such.  They are cases in which a promise was made which was intended to create legal relations and which to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on.  In such cases the courts have said that the promise must be honoured…  As I have said they are not cases of estoppel in the strict sense.  They are really promises – promises inteded to be binding, intended to be acted on, and in fact acted on.”
•    “In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it.”
•    Continues – is this promise enforcement, or is it something that looks like promise enforcement, but is not?
•    Is there a meaningful difference between ordering a defendant to keep their promise, and ordering a defendant to act consistently with their promise.
•    Para 3 & 5 address the question (which we would never have to address with consideration)
•    How Binding?
•    The tenant had the audacity to argue that the promise was for the entire 99-year lease.
o    Lord Denning says no.  Will enforce the promise to some extent, but not that extent.
o    Says that the promisor can take back their promise to this promise

Reset.
•    It may be that the promisor can take back their promise
•    Estoppel-based promise-enforcement differs.
•    Promisory-estopple, or equitable-estoppel.
o    A different category of estoppel.

Next class:  Down to D & C Builders v. Rees

On TWEN is last year’s midterm.  Address questions 2 & 3 by way of sample.