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.

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.