Contract Law

Damages
•    When discussing non-pecuniary damages (pain and suffering; loss of state of mind; etc.) law tends to view these heads of loss with suspicion.
o    Though jurisprudence says we will compensate for these, it awards these damages somewhat… begrudgingly.
•    Addis v. Gramaphone Co. – page 99 held that an employee that had been wrongfull dismissed was entitled to compensation for the loss of contractual expectation, but not for any pain and suffering, mental distress, or damage to reputation.
•    The extent that we under-compensate victims, we are forcing victims to subsidize defendents.
o    Tends to stimulate economic activity
o    Similar:  In tort law, one is liable only if one is negligent.  Proving the act alone does not make one liable.
•    This in itself is a rule which undercompensates victims and subsidizes defendents.
•    “The people who are out there breaking legs are those who are out in the economy.”
•    Addis v. Gramophone shows the tendency of contract law whereby there are certain losses which may well be real, but for which we do not compensate.
•    There were at least two trad. exceptions:  Breach of promise of marriage; if a bank dishonoured a legitimate cheque.
o    In these two situations, invisible damages could be awarded.
•    In the last ¼ century, under the influence of Jarvis v. Swans Tours (Thanks to Lord Denning), things have begun to change.

Employment Contracts page 97
•    Indefinite duration – an employer has the right to terminate the employment of an employee either “for cause” or, having given “reasonable notice.”
•    2 kinds of implied terms:  officious bystander; business efficacy
o    implied-in-fact – this is different from what they editors are discussing here.  Here they are discussing implied-in-law.
o    Into contracts, the law implies certain terms, whether the parties would have considered them at the moment of formation or not.
•    The parties can explicitly preclude these implications.
o    Courts tend to, for instance, imply the IGF principle into contracts.

•    Vorvis v. Insurance Corp. of British Columbia – page 99
o    A conscientous lawyer being tormented by his employer
o    Sought damages for mental distress (aggravated damages) – non-pecuniary – compensatory
o    Judges agreed that in a proper case, could get aggravated damages, and could get punitive damages.
•    Clear that the damages would be very limited.
o    Not the end of the line – just the beginning of the SCC jurisprudence on this issue.  Bottom line is that the possibility of damages for non-pecuniary loses in breach of contract cases was legitimized.

Whiten v. Pilot Insurance Co. page 123
•    Page 128-129 – list of 10 factors /  general principles
•    Goes on to discuss in rel. to this particular case
•    Page 126 – against the americanization of our justice system
•    Tells lower courts how to approach damages
o    Upheld the $1-Million award…
o    Hinted that this was the limit of what the SCC would be willing to uphold
•    Binnie authorizes the Run-Away Jury (Grisham) approach in Canada.
o    Punitive damages must be proportionate to the means of the defendant if they are to serve their purpose.

Fidler v. Sun Life Assurance Co. of Canada page 143
•    Disability insurance case
•    Turns into a piece of mind case
o    Should provide the assurance of knowing that if something catastrophic happens, one will be provided for.
o    It is a promise not only of payments, but piece-of-mind.
•    Takes aggravated damages into an new direction.
•    Make defendents compensate victims for ordinary injuries which would be expected to arise from a breach – if these are aggravated damages, then we would award accordingly…
•    Page 148 – distinguishes 2 types of aggravated damages:
o    True aggravated damages – arise from aggravating circumstances.  Not awarded under general principle of Hadley.  Rest on defamation, oppression, fraud, etc.
•    Have nothing to do with type of contract – could, in theory, be awarded for any breach of contract which occasioned aggravated mental suffering
o    Second – mental distress damages which do arise out of contractual breach
•    Are awarded under principles of Hadley v. Baxendale – independent of any aggravating circumstances and are based on parties’ expectations at the moment of contract formation.
•    Says that this is not actually aggravated damages, but simply expectations…
•    Here, Sun Life promised piece of mind to Fidler, and did not provide it
o    Failure to deliver the promised ‘happiness’
o    ‘Aggravated’, under these terms, is a more active phenomenon.
•    Courts now believe that there are such things are ‘injuries’ even if they are invisible.
o    Willing to compensate for these injuries
o    Willing to award punitive damages

Deglman v. Guaranty Trust – page 238
•    Page 240 – the nephew-aunt scenario
•    No one disputes that there was a contract, but didn’t satisfy the Statute of Frauds
o    Deglman loses on the contractual issue, but does not go away empty-handed
•    Page 240-241 – first case where SCC awarded restitutionary (damages?)
•    The acts done were persuent to the contract
•    Accordingly, embrace the propostion that if Deglman was not give something, the aunt (estate) would be rewarded unjustly.
o    The services were not give gratuitously.
•    ¶6 – “It would be inequitable to allow the promisor to keep both the land and the money and the other party to the bargain is entitled to recover what he has paid.”
o    Statute of Frauds doesn’t preclude from bringing a restitutionary claim
o    Not for contract; not for tort; not for trespass – it is to alledge that otherwise a defendant would be unjustly enriched.
•    Quantum meruit.
•    Normally, (F&P language) in a restutitonary scenario, a pl. has given a benefit to a def. (prepaid, for instance)…
o    The pl is minus the payment (say, -$100), and the def is plus the payment (+$100).
o    Court, enforcing its equitable power to police the defendant, can force the D to give back the measure of the benefit.
o    In pure restitutionary theory, to quanitfy what the Pl receives, you look at how the Def was enriched (not how much the pl paid).
o    In Quantum meruit, one asks how much the pl deserves – put a fair market value on what the pl supplied.
o    Could lead to the same conclusion – but may be cases in which it cost the pl more than the def was enriched.
•    Evaluated by a Quantum meruit procedure, would look at what the pl paid.  Pure restutionary, would look at how much the Def benefitted and award that to the pl.
•    Note 5 page 245 – example of the pl incurring much expense, but suing on restitutionary theory… read this note
o    The pl got nothing

For next day:  Do all cases on the rest of the syllabus to this point

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.