Contract Law | Contract Attorneys

Contract Law Termination

London Drugs
•    The bailor sueing the bailee in negligence (tort)
•    The most obvious way to invoke the contractual defence is to show that one is a party to the contract.
o    Must determine whether the employees were parties to the contract.
o    On what legal theory can we make the employees party to the contract?
•    3 standard routes:
•    assignment – wouldn’t work
•    agency – the most obvious route.  A claim that when the bailee entered into the contract with the bailor, it did so as an agent for the employees.
o    True that the employees would have to show that they gave consideration, but there would be nothing (theoretically) to stop the consideration of the bailee being shared by the employees – promising safety of the chattel.
o    If this was argued (we don’t know) the answer was likely that yes, it is poss. for the employer to contract on the behalf of the employees, (as well as itself), and for the consideration for both to be the same, but all depends on intention.
o    In this case, the court “must have” concluded (or perhaps was already clear to the lawyers) that it did not happen this way.
•    trust – would work, supposeing there was some factual basis to make the argument – again, intention.  Courts are reluctant to conclude that there is an agency or trust rel. without pos. evidence of intention.
o    This is because these arguments would get around many legal arguments.  It would, if acccepted easily, be a cure-all.
o    Could transform failed gifts (without delivery) into binding agreements by saying that the donor was agreeing to hold the gift in trust for the giftee.
o    Similarly, in the law of contrats could save many third parties from plight of third parties simply by making them parties – by saying that someone else entered into the contracts on their behalf.

•    3rd parties are non-parties.  They are usually helpless and hopeless.
o    In this case, the SCC changes their status – only in the employment context. (very important).
o    Ioccobucci puts much emphasis on the identity of interest between the employer and employee.
o    “relaxes” the rule.  Does not overthrow.
o    In order to relax the doctrine in this context, gives 2 criteria:
•    1)  Parties must have intended (either explicitly or implicitly) that the employees shold benefit from the limitation of liability clause.
•    Ioccobucci finds an implied intention.  This is not that they would be parties, but that despite not being parties, they may benefit from the clause – identity of interest
•    2)  Must be in the performace of their duties, and in performance of the duties contemplated by the contract.

Insurance issue:
•    Courts are aware that the provision
•    Charges the warehouse enterprise with a maximum liability of $40.
o    The warehouse is being charged a much lower premium because of this limitation of liability clause.
o    Places the onus on the bailor to obtain insurance coverage.
o    This provision is really about who has the burden of insuring.
o    It makes sense that the owner of the goods (who knows what’s in the crate, etc.) has the responsibility for insuring it.
•    Carriers have similar contracts.

What, in effet, is the bailor here trying to do?
•    Having benefitted from a low storage-rate, based on accepting the risk on itself, it is now trying to shift the responsibility back onto the bailee.
•    Trying to have it both ways.
•    The employees will not have insurance.
o    Many tort cases are in actuality about insurance.

Is this a good decision or a bad decision?
(in a tort-sense)
•    The real purpose of tort-law is to visit punishment on the tort-feasor, so as to force [them] to ‘clean up [their] act’
•    Hank and Dennis are off the hook…
•    Is this a flaw in the case?

Laing Property Corp. v. All Seasons Display Inc.
•    Not bailor-bailee (and bailee’s employees), but tenant-landlord (and landlord’s emloyees)
•    Contract in question is a lease.
•    Page 400 – Insurance clause.
o    The landlord wants to ensure that the tenant has insurance.  This ensures that if the tenant is a future tort-feasor, the landlord and other tenants can collect damages against them
o    Also in the landlord’s name so that benefits can be collected.
o    Also absolves the landlord from responsibility for any loss, damage, or expenses.
o    Waivor of subrogation.
•    Even if the landlord’s carelessness causes the mall to burn down, and the tenant’s insurance covers the tenant, and under common law the insurance company could sue the landlord for recovery, the tenant has waived this right.
•    The landlord’s employees’ negligence did cause the mall to burn down.
•    The tenant’s insurance company “sues everyone in sight”
o    Sues the landlord (fails), and also its employees.
•    In Greewood Shopping Plaze, the SCC denied the employees any rights under the mall’s contract with the tenant…
•    Here, the B.C. C.A. follows London Drugs as far as it can, and distinguishes Greenwood Shopping Plaza…
•    Greenwood:  Even though at the heard of both cases is a lease (and not a contract of bailment) and does not invoke employees, the B.C. C.A. says that in the lease here, it is a lease, but it has other services mentioned – says that the promotion services meant that the promotion service in question, which needed to be performed by employees (similar to services in London Drugs), meant that the employees were contemplated by the lease.
o    Then apply the two factors in London Drugs to relax the doctrin of privity vis-à-vis employees
o    Was there intention to include the employees?  Did they intend the waivor of subrogation to extend to the employees?
o    It is not express, so must look for implied intention
o    Page 404 – give the intellible basis for finding implied intention – para 99 & 100.
•    1)  Is there identity of interest between the employee and employer as to the performance of the employers’ contractual obligations?  Ie:  the services must be performed by the employee.
•    2)  Did the tenant, in entering into this contract, know that the services could only be performed by human employees?
o    Repeated at para. 115.
•    In all of these cases, the relaxation of the privity rule is for a defensive purpose.
o    It is to act as a shield for a third party.
o    In no case has the courts relaxed the privity rule to allow a third party to sue on a contract.
o    This would require contract.

Law Reform Act  http://www.gnb.ca/0062/pdf-acts/l-01-2.pdf
•    In a contract between A & B that promises a benefit to C, this says that C can sue on the A-B contract to which it is not a party.
•    A & B can prevent this if they say so in the contract.
o    4(1) – a person who is not a party to a contract, but who is intended to receive some peformance under it may enforce that performance by claim for damages or otherwise.
o    Here, can likely be express or implied.  If implied, would use the rule from Laing (or London Drugs).
o    4(3) – may change their contract, but if it causes any loss to C, and C has incurred expense or undertaken an obligation in the expectation of performance, C may recover loss from any party to the contract who ought to have known that the expenses would be or had been incurred or that the obligation had been or would be undertaken.
•    NB has briefly but substantially abolished the privity problem.
•    England’s approach, a few years later (page 411) also greatly abridged the privity problem, but took the opposite approach – did it in great detail instead of sweepingly.
o    This is only part of the English statute.
•    Not sure what effet this prosiion will ultimately have.  Relatively unlitigated as of yet – do not yet know its implications.

Review – Tuesday, 12:30 in 2A
Monday – also review.  Structured.

Contract Law Rights

Privity

•    If C is a stranger to a contract between A & B, then C must fail legal action

•    In a contract between A & B in which C is a beneficiary, the A-B contract contemplates C.  C is still a third party, but not a stranger – is actually named in the agreement.
o    Beneficiary – the recipient of a benefit under the contract.
o    Our system of law treats the third-party beneficiary the same as the third-party stranger.
o    1861 case established this.
o    in earlier cases, C coud sue on the contract
o    once contract theory evolved, C became a victim of the quest for theoretical purity.

•    If A & B form a contract with A working as an agent for C, then C is not a mere third-party beneficiary.  C is a party.  A is not.
•    If A & B have a contract which has not yet been performed (any contract creates private rights – rights are property; choses in action), A has rights against B, and can, if A chooses, “alienate” their rights against B to another party.  Can sell or give incorporeal rights (assign).
o    C gains the rights to what A assigns C.
o    A-C contract.  A had rights under the A-B contract, but sold them to C = assignment.
o    Question:  What rights does C have under the A-B contract?  Suppose B breaks the promise – Can C sue?
•    Equity will allow C to sue B.
•    A is still in the original contract, but so is C.  C could sue B, but might have to sue B using A’s name.
•    Superficially, case would be A v. B,  but would actually be C sueing B.  This is how equity works in this situation.
•    Now there is a statute in every province which simplifies this situation.

Third A-B-C relationship:
•    The trust example
•    A & B have a contract (if unperformed, then each have subsisting rights against the other.  Rights are property.  Choses in action.)
o    A may hold the property (the right against B), not for his or her own benefit, but for the benefit of C.
•    A – trustee (of contractual rights)
•    C – beneficiary of the trust.
•    Referred to as cestqui que trust
o    If A does not act as a vigilant trustee, sueing B for unperformed actions, then C can unequivocally sue B.
o    Here, dealing with property – in the eyes of equity, A’s rights do not belong to A at all.  Belong to C.  Not suing on basis of contract.  Sueing for property.  A has legal title, C has equitable title.

New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.
•    There was a view that courts do not have the authority to change the privity rule, and says that the onus is on the legislature to change it.
•    The tide turned a little in New Zealand Shipping (page 381 onwards)
•    House of Lords, though unwilling to change the rule, softened up on recognizing trust and agency to get around the rule.
o    Did not change the rule – signalled a softening.

London Drugs Ltd. v. Kuehne & Nagel International Ltd.
Page 385
•    Goes much futher than New Zealand Shipping
•    Does in private law something that is rarely seen – grapples with the doctrine itself.
•    Interesting discussion on the issue addressed by Simonds (not the place of the court to change even judge-created laws).
•    SCC addresses the question.  Iocobucci J. says that judges can make incremental changes, but not large changes in well-accepted private-law rules.
•    Agrees that major changes to this would have to come from legislatures – in Canada, this means each provincial legislature, due to the Constitution.
•    Contract between A & B, which agrees that in certain circumstances, B will not sue C.  Shield promise.  Exemption promise.
o    Contrast to contract such as insurance policy where the goal is to confer a benefit on C.
•    Limitation of liability clause.  C’s defence would be based on the contract between A & B.
o    Court reasons that letting C defend itself is less radical than conferring a benefit on C.
•    London Drugs is a bailment case.
o    The bailee is a corporation – a warehouse.
o    Corporations can operate only through human agency – human beings.
o    The employees are negligent in handling the bailor’s chattel.
o    They are tortfeasors
o    The bailor sues the bailee – the human employees of the bailee.
o    Page 385 – the liability clause.
•    The bailor did not pay the additional charge to cover warehouse liability
•    Means, in effect, that the bailor took the risk on themselves.
•    In the suit against the employer (the warehouse) the warehouse was covered against liability by this clause, and was liable for only $40.
o    What of the employees?  Question of whether they were shielded.
o    Note:
•    1)  The reciprocity objection:  would allow a person to sue on a contract when that person could not be sued on the contract.
•    Lack of reciprocity
•    This is a trad. objection allowing C to sue as a third party.
•    2)  A & B contract.  One of the rights is to change their contract (though this is sometimes tricky -  need consideration).  As soon as one says that C acquires a right under A-B contract, that seems to inhibit A & B’s right to alter contracts.
•    The law does not allow us to destroy other people’s rights.
o    Iacobucci J. addresses these issues.
•    Says that rather than trying to find a way around the privity problem, will instead change the doctrine of privity.
•    Do not think that he tries to find that the warehouse contracted on the right of its employees.
•    Does not find any rel. in privity between the bailor and the bailee’s employees
•    Allows the employees to have rights even though they are not in privity
•    Says that in an employment situation, when A deals with B, knowing that B has employees, and that the actions can only be carried out by the employees, to give B’s employees certain rights under the A-B contract is not so very radical (should not take the bailor by surprise).
•    Much turns on C being an employee of B.
•    Paragraph 46, page 395.
o    “I am of the view that employees may obtain such a benefit if the following requirements are satisfied…
•    limitation of liability clause must, expressly or impliedly extend its benefit to employees
•    the employees seeking the benefit of the clause must have been acting in the course of their employment and been performing the very services provided for in the contract between their employer and the plaintiff (customer) when the loss occurred.
o    Said that the bailor was promising the bailee that if the bailee’s employees committed a tort, they would be shielded from liability above $40
•    ends up (on page 397) saying that by implication, the promise to the bailee covered not just the bailee, but also the employees (note – not saying that the bailor promised the employees – promised the bailee).
•    Cannot find the promise expressed – finds it implied.
•    Top of 397 – employees were not to benefit?  Says the language of the clause means inevitably that the employees were not covered.
•    The test of intention here, then, is a very shallow test.
•    Believes, on the facts, that when the bailor and bailee did contemplate (though not expressed) that the employees would be shielded from liability.
•    In the context of employment, employees can raise defences to lawsuits – the SCC has made an enormous practical and symbolic inroad into the doctrin of privity.
•    NOT saying that the employees were parties to the contract – saying they were intended beneficiaries.
•    As such, can invoke this defensively as a shield.  Still would not allow this to be used offensively.
•    The reason courts do not take the trust or agency argument and make them cure-alls is just because they would be cure-alls

Read up to Law Reform Act for next day.
Monday’s class will be review.
Can have another review class on Tuesday – 12:30pm tentatively

Contract Law Briefs

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

Contract Law Requirments

[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.

English Contract Law

Promissory Estoppel:

•    There are 57 different types of estoppel under our legal system.
•    This is why it must be qualified as promissory estoppel.
o    Invented by Denning L. in 1940s.
o    Original formulation had in it ambiguitiy almost to the point of contradiction.
•    Para 2 on page 316
o    3 or 4 diff formulations just in that one paragraph.
o    Retreats later from “create” legal relations in regards to a promise
o    “Promise must be honoured” – is this retreated from?
o    Most succinct formulation:  “Promises intended to be binding, intended to be acted on, and in fact acted on.”
•    This is acceptable today…
•    “In each case the court held the promise to be binding on the parky parking it,e ven though under the old common law it might be difficult to find any consideration for it.”
•    The courts do not enforce the promise but do not allow the promisor to act inconsistently with it…?
•    Runs around Foakes v. Beer in this way.  Uses estoppel as a work-around.

Combe v. Combe
•    The text points out the absurdity of the fact of a matrimonial case becoming a contract precedent.
o    This is in fact what our legal tradition began doing in the 19th century.
o    The Victorial era began inventing contract law by abstracting out of all the contracts that had always existed and began to find common elements in them all.
•    Led to basic rules such as offer, acceptance, and consideration.
•    Divorced contract law from its particular situation and created a general-field theory – “The law of contracts”
•    The facts are remniscent of Balfour v. Balfour.
o    Here, the couple, during divorce, came to an agreement between them for him to pay her £100 / year.
o    After 6 ¾ years, she sues him for the arrears (he had paid nothing)
o    She wants to enforce a promise.
o    But our legal system doesn’t enforce promises.  We need consideration – a bargain.
o    What is it suggested that she swapped with him?
•    Forbearance – forebore to take him to Divorce Court.
•    This sounds like consideration.
o    Denning L. has 2 answers:
•    1)  Nothing to suggest that this was intended by either the husband or wife.  It was not a bargained-for forbearance.
•    Similar to Dalhousie v. Boutilier
•    2)  Even if she had promised to forebear, she would never lose the right to apply to the Divorce Court – there was (and still is, in a sense – in the sense that it now applies to either sex) a rule that a wife could not bar herself from getting court-ordered maintenance.
•    Denning L. says that she didn’t make this promise anyway, but even if she did, it would not be binding because it has no value.  She cannot contract herself out of this right.
•    This means that the rule, which appears to be solicitous to wives, can be read in a way to be beneficial to husbands (as in this case).
•    Normally, a bargained-for forbearance is consideration.  This is a special case because of this aforementioned rule.
•    Whenever one has a scenario where the enforceability of a promise is in dispute, then consideration must be considered first.
o    If consideration is found, then there is no need to go forth and talk about estoppel.
o    Estoppel is what makes this case famous.
•    Trial judge, having found that there was no consideration, went on and upheld the husband’s promise.
o    Did so because he believed the case fit neatly under the High Trees principle.
•    A promise relied on, and intended to be relied on, is binding.
o    Denning L. says that though it looks like it fits, he had been too broad with his wording in High Trees.
•    Combe v. Combe introduces a refinement on High Trees.
•    Page 318 – para 3:  “…lest it should be endangered.”   In other words, lest it be overruled by a higher court.
•    It is not a creative doctrine – it is a preventative doctrine.
•    “It only prevents a party from insisting on his strict legal rights when it would be unjust to allow him to do so, having regard to the dealings with have taken place between the parties.”
•    Though he says this, he immediately goes on to say that that is not to say that it is only available to defendants.
•    When one thinks of estoppel, naturally equates it with defendants.
•    Denning L. says that plaintiffs can use it just as readily, but it must always be a defensive doctrine.
•    Gives examples on top of 319.
•    Foakes v. Beer comes into play in these examples.
•    “Example 2 is breath-taking” – Bell
o    “Can even say that example #1 is breath-taking.” – Bell
o    Denning gives account of a gov. dept and the war-service disease.
•    There was a statute that said anyone whose disease was due to war service got a pension
•    Robertson made a claim as such.  Ministry accepted it, and Robertson stopped collecting evidence.
•    Then, the ministry changed its mind and said that they needed more evidence.
•    Robertson sues on his statutory entitlement to a pension.
o    Ministry says that they need evidence
o    Roberson claims they are estopped, because he put reasonable reliance on their word that they needed no more.
o    This is a case where the plaintiff estopps a defendant.
•    Robertson wasn’t suing the ministry saying, “You promised me.”  He sued on his statutory right for pension.
•    Then when they raised the inevitable defence, he put forth that they were estopped.
•    In none of these cases were the plaintiffs suing on the promise.
•    Estoppel is never part of the cause of action, but plays a key role in determining whether someone is going to win or lose.  Is a subsidiary feature of the case.
o    Denning gives a new formulation.  Less succinct than previous formulation.  Enormously wordy.  P 319 end of para 3.
•    Has inserted “conduct”
•    Could be relevant – case where a landlord allows rent to be late for 6 months, then on the 7th uses it ‘as an excuse’ to kick the pl. out.  The pl would argue that the conduct of the landlord had led them to believe it was okay.
•    “only by his word” is not accurate.  Should read, “by reasonable reliance”
•    Still has not given qulification.
o    Para 4
•    Says that if we took seriously the principle form high trees, (reasonable reliance), then why would we need consideration?
•    There is an answer…
•    Denning now accepts that this principle would overturn 9/10 of the doctrine of consideration…
•    “Its ill effecta have been largely mitigated of late, but it still remains a cardinal necessit of the formation of a contract, although not of its modification or discharge.  I fear that it was my failure to make this clear in High Trees which misled [the trial judge] in the present case.”
•    SO, cannot sue based on estoppel, but if have another issue, then can bring estopple into play.
•    Likewise, if one is being sued (and is therefore compelled into court), then can use estoppel
•    Unfortunately for Mrs. Combe, she is relying on estoppel.  This is why her action ends up being dismissed.
•    Aside:  There is no difference between variation and modification.
o    Denning says that one can use estoppel defensively, not offensively. (“to be used as a shield and not as a sword”. – Birkett L.J. page 321.  Famous disctinction created by Birkett here.)
•    WHY DIDN’T COMBE APPLY TO…[this is Bell’s favourite exam question.  Figure out what he said.  Was purposefully elusive.]  Wilbur?
•    High trees made it seem as though reasonable reliance alone would be enough to enforce a promise.
o    This would have revolutionized contracts – would have been just about fatal to doctrine of consideration.
o    To sue to enforce a promise requires consideration.
•    This is why the wife cannot win.
•    Promissory Estoppel goes from 2 factors to 3
•    1)  Promise and intention to be relied on
•    2)  And relied on by the promisee
•    3)  except that, a promisee cannot sue on the promise based on estoppel.  It cannot be the foundation of the case – the cause of action.
•    Each side can use estoppel, but the plaintiff can never sue successfully using estoppel as a cause of action.
o    This is for no good reason other than Denning L. says so ;)
o    Denning L. made his career on making cases stand for things that judges could not foresee them standing for…
o    “Law is an awful lot like fairy tales… We often treat the past with as much profundity as a fairy tale.  …We make the wisdom of the past say something that it didn’t say yesterday.”
o    Everyone is happy to see Foakes v. Beer be defanged, so we all go along with it an pretend it makes sense.

Page 322 – Note 5.
•    Suggestion that estoppel principle might have been a substitute for consideration
Note 6
•    A) a profound question that we must eventually be able to think about…
o    The effect of the sword/shield distinction means that my promise to take less from you than I’m entitled to may be binding on me,
•    Suppose B owes A $100.  If A promises to take only $90, then the estoppel principle says that A can take the $90 (enforecable), but, if instead A owes B $100, and A promises to pay $110, then then law won’t enforce the promise.
•    This is despite that in both examples, B is $10 better off.
•    When estoppel works in high-trees, the land-lord is estopped from going back on his promise
•    When it doesn’t work in combe, the wife cannot enforce the husband’s promise that she will get money
•    6a asks us to thing about whether there is a sensible distinction between a promise to take less, versus a promise to pay more…
•    they both amount to one person being $10 richer than they otherwise would be.
•    This case did make its way to the JCPC – they gavem ultiple factors to come into an estoppel, but amounted to what Denning L. has already said.
o    “resile” – abandon a position or course of action.

D. & C. Builders Ltd. v. Rees.
•    15 years later
•    Denning L. by this time the most famous judge in the common-law world.
•    Had been promoted to house of lords, but found there was less influence here.
o    Arranged for his won demotion to chief justice of court of appeal
o    Assigned all good cases to himself.
o    M.R. – master of the roles.

Read this case for next day.  Read on to the two other decisions on pa 326 to think about where Denning’s decision stands in regards to the two others.
Also, go on to Waltons – a potentiall spectacular case from Aus. – goes back to High tress without Combe v. Combe.

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