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Contract Law Cases

Agreements to agree cannot be enforced without a mechanism.
Silence (something left out of a contract) is not as bad as an agreement to agree.  Blanks can be filled-in in various ways

Walford v. Miles
•    Addresses a question – whether an agreement to negotiate is enforceable
•    Is there such a thing as an enforceable agreement to negotiate?
•    An oral agreement is no less an agreement than a written one.
•    This case raises the collateral and no-less interesting question – what if an agreement is an agreement to negotiate in good faith (IGF)?
o    Is this distinguishable from an agreement to agree?
•    Express agreement to negotiate, but the pl says that there was an implicit agreement to negotiate IGF.
o    Good faith comes up in two contexts:
•    1) Performance of an already-existing contract – law will normally say that the business efficacy test, or the bystander test will lead to the conclusion that the parties did impliedly promise one another to fulfill duties of a contract IGF.
•    2)  Negotiation in good faith towards having a contract in the first place – the law balks at this.  Says that there is no source of this legal duty
•    In law, duties arise from something – legislation, agreements
•    Cannot locate the origin of a duty to negotiate in good faith.
•    However, what if someone agrees to negotiate IGF?
•    The law does not hold us to any promise to anyone unless that promise is contained within a contract (contract - something the law is prepared to recognize).
•    What is the origin of a duty to negotiate in good faith?
o    The House of Lords declines to impose such a duty
•    P 508 – an agreement to negotiate is no more enforceable than an agreement to agree – too uncertain.
•    Doesn’t help to add an implied promise to negotiate IGF.
•    Cannot translate a promise into an award of money, because do not know what they would have agreed, had they agreed.
•    Contract law presumes that ppl are not altruistic.
•    Presumes that ppl act as egoists – that we are selfish.  Dog-eat-dog, survival-of-the-fittest realm.
•    Presumes that the realm of contracts and the economy is one of warfare.  All’s fair (except lying).
•    P 507 (bottom) – American Jurisprudence tries hard to find an enforceable duty to negotiate in good faith.  Does not sway Lord Ackner.
o    Best endeavors – the law does recognize an obligation (when promised) to use best endeavors.
•    “I want to buy your land to build my shopping mall, but if I can’t get your land re-zoned, then I do not want to buy your land.”  The purchaser will typically enter into an agreement.  The vendor will promise the potential buying that it will use its best endeavors to carry out an application to re-zone the land.  Then, if the vendor of the land does not use best endeavors to procure rezoning
•    Courts, though will not judge whether someone has acted IGF, does involve itself in whether someone has used best endeavors – this is likely because this involves actual actions instead of intentions.
•    This sometimes looks like IGF, but is in fact distinguishable.
•    The parties have a contract, which calls on one of them to do something using best endeavors.
•    P 507 para 2 – “Apart from the absence of any term as to the duration of the collateral agreement, it contained no provision for the respondents to determine the negotiations, albeit that such a provision was essential.”
o    Often law preserves the original meaning of an English word, which in general parlance has changed its meaning.  This can be confusing.
o    “Several” – means in general parlance that there are 3 or more
•    In law, it retains its original meaning of individual – “Several states of the United States” means the individual states.
o    In this paragraph, “Determine” is used in this way.  Here, it means to terminate.

Empress Towers Ltd. v. Bank of Nova Scotia
•    Commercial lease, with renewal clause
o    Renewal clause is common for commercial leases, for stability of presence
o    Leases do, however, want to re-negotiate periodically, to adjust rent for inflation, rising property values, etc.
o    How to balance stability with this idea.
o    In this lease, allowed to do this every five years.
•    Whoever framed this final renewal left out a saving grace of the first renewal – the mechanism to determine the negotiation – an arbitrator.
•    If the words “as mutually agreed between the Landlord and the Tenant” were not in the agreement, the preceding words could be used as a mechanism to determine fair rent.  Could have called experts – likely realtors – to determine what the fair rent was in that neighborhood.
•    But, someone thought it would “sound nicer” to mention an agreement between the parties.  This was fatal.  Takes away all objectivity.  Parties do not typically agree straight-off.
•    Looks like an agreement to agree…
o    Is this in fact what the judges are saying?
o    Look at the first sentence of the case.
o    Distinguishable from Walford v. Miles.
o    An ordinary remedy at the end of a civil case is a legal remedy – money; damages
•    Here, Empress Towers seeking a writ of possession (a writ issued to recover the possession of land - Black’s)
•    Equitable remedy
•    It is discretionary – no one has a right to an equitable remedy – one has a claim.  Equity is not in the realm of rights.
•    Courts will deny an equitable remedy if one has misconducted oneself.
•    Must go to court with clean hands
•    Here, the landlord ultimately cannot have the writ of possession because it has not bargained towards the renewal terms IGF, so not with clean hands.
•    Exercises their discretion in denying the writ of possession.
•    Saying that the landlord failed to negotiate in good faith is not the same as saying that they had a duty to do so.

Canada Square Corp. Ltd.v. Versafood Services Ltd.
•    Here the problem is mostly that of things left out of a contract.
•    Interesting from the p.o.v. of a potential draftsperson.
o    A lawyer’s primary role is not to solve problems, but to prevent them.
•    Certain parts of the desired contract here were too uncertain to determine at that point.
o    The answer is to put in a formula to render the uncertain aspects certain.
o    If a formula is incongruous with the factors left to be determined, then an arbitration clause effectively does the the same thing.
•    Significant things left out of this agreement.
o    Did not specify what area was meant to be leased
o    When the lease was to commence
o    When rent due
•    Versafoods tried to use these as an excuse to get out of the contract.  Said the contract was too uncertain.
o    The real issue is not a legal issue.
•    When judge turns to a US authority (in contracts) one knows that the judge is looking for a slightly unorthodox precedent which will allow the judge to do something that our more conservative Canadian jurisprudence does not allow.
o    Says that the U.S. case law distinguishes between the primary issues of a contract, and subsidiary issues.
o    Says that while the parties have to have agreed up on the fundamental terms (which courts cannot fill in) a lesser issue on which there is silence can (with some hesitation) be filled in by courts.
•    Courts can infer that the parties intended a reasonable term if it is a subsidiary term.
•    Normally, at this point, the court stops and tells the parties they have to agree on something, which the court then endorses.
o    In paragraph 4, the California court refers to these ‘blanks’ as “minor”

*The winners in these cases are never fully compensated – the costs that are paid to the lawyers are never fully reimbursed.  This is likely an discouragement of litigation.

L.C.D.H. Audio Visual Ltd. v. I.S.T.S. Verbatim Ltd.

o    The would-be subcontractor sued and lost.
o    Again refers to the business world as Darwinian and dog-eat-dog

For next day, read down to end of first section of new syllabus.
Consideration section.

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