Contract Law

Consumer Product Warranty and Liability Act (NB) http://www.gnb.ca/0062/acts/acts/c%2D18%2D1.htm ss 1, 2, 4, 5, 7, 23-26

•    2(3) – seems to be saying that one cannot sign away the rights assigned to you in the act.
•    24 - Where there is a contract for the sale or supply of a consumer product, the parties cannot agree to exclude or restrict any warranty or remedy provided by this Act except as provided in sections 25 and 26.
o    this section qualifies s. 2(3) – qualify only in accordancw w/25 & 26
•    25(1) – Subject to subsection (4), where there is a contract for the sale or supply of a consumer product, the parties may agree to exclude or restrict any remedy provided by this Act for breach of an express warranty, but such agreement shall be ineffective to the extent that it is shown that it would not be fair or reasonable to allow reliance on such agreement.
•    25(3) - In determining whether it would be fair or reasonable to allow reliance on an agreement to exclude or restrict any remedy provided by this Act for breach of an express warranty, regard shall be had to all the circumstances of the case.
•    so exclusion is possible as long as it is ‘fair and reasonable’
o    this is where Wilson J. got her language in Hunter v. Syncrude
o    This is the legislature’s response.  Judges do have the auth. to modify contracts in which consumers have signed away their rights.
o    In doing so, must strive for ‘fairness and reasonability’
•    This is more supple than Denning’s ver. of Fundamental Breach, which was an automatic exclusion of the limitation of liability clause.
•    Very little litigation on this act, considering its ubiquity
o    2 poss reasons:
•    The act is so effective that business parties settle rather than go through litigation while knowing that they have treated the consumer unfairly or unreasonably.
•    Consumers are foolish and lazy, especially those who have been foolish enough to sign away their rights in the first place.
•    Professor Door (?) is the drafter of this act.  Just retired from UNB.

Hong Kong Fir Shipping Co. v. Kawasaki Kisen Kaisha Ltd.
•    There is only one context in all of contractdom in which the sub-classification of contract terms is relevant.
o    warranty; condition
o    However, in context of remedies available to victim it is important. If victim of breach of “condition” then you have lrger selection of remedies/options than of warranty.If you are the victim of a beach of a condition, then more options are available.
•    can treat the contract as at an end; can sue for damages
o    Whereas, the victim of a breach of warranty has no other option but to make a claim for damanges – cannot cease to perform the contract.
•    For most contexts – it does not matter.
•    This case concerns a charter (of a ship).
•    When the vessel was leased, the price of shipping was high, but then went down.
•    Reason for high price of charters at this time:  Egypt nationalized the Suez Canal; formed crisis between England/France, and Egypt.  Invaded Egypt, which sank vessels in the Suez Canal.  Voyages between The Atlantic and Asia therefore took much longer.
•    To get out of the contract, tried to claim that the vessel was unsatisfactory and unseaworthy.
o    Diplock ¶2 page 576 – famous sentence for comment on final exams – look up synallagmatic
•    “human prescience being limited, it seldom does so exhaustively and often fails to do so at all.”
•    ¶3 – does the occurrence of the event deprive the party who has further undertakings still to perform of
o    If it was that kind of a breach, as to deprive the victimized party of the whole benefit, then it is a breach of a condition.
o    If it doesn’t deprive of the whole benefit, then it is the breach of a warranty
•    ¶9 – in real life, cannot classify all contract terms into just conditions and warranties.
o    supposed to classify at the point of formation
o    cannot with certainty classify all the terms as such.
•    Ex:  If buying a blue car and got a red car – difficult to say that you were deprived of the full benefit of the contract.
•    Diplock says in ¶10 – “No doubt there are many simple contratual undertakings, sometimes express but more often because of the very…”
o    There are obviously some contractual terms which are conditions
o    And there are some that are conditions
•    ¶11 – come that are of a more complex character
o    Saying that there is a 3rd class of contract term.
o    suggests that it is numerous.
o    cannot say whether or not  breach of it would deprive the victimized party essentially of the full benefit of the contract.
o    Must be classified not a priori, but from the actual consequences of the actual breach.
o    Will turn out to be condition-like, or warranty-like.
•    So we have, at the formation of a contract, conditions and warranties
•    Or they are innominant terms (or complex terms) which are divided into condition-like, or warranty-like – these are classified from the perspective of the breach.

•    In regards to this contract, says that the term that was breached was seaworthiness.
o    can be more or less substantial – depending on the situation (a hole in the hull or engine trouble)
o    Cannot tell at the formation who substantial the breach will be.

Sail Labrador Ltd. V. “Challenge One” (The)
•    SCC had to ask itself whether the contract had within it a term tatamount to a “time is of the essence” provision.
•    This is a common provision.
•    Nothing expressly in the contract to this effect.
•    SCC said ‘no’.  Did not think there was anything to that effect in the contract.
•    Though the breaching party had breached the contract, hadn’t breached a condition…

Page 654 – Misrepresentations and Warranties
•    There are 2 problem areas in Contracts where trouble tends to lie:  Exemption clauses; Pre-contractual words
•    Pre-contractual words:  For instance, the sales person may say something to induce the customer to enter into the contract.  This ‘something’ may turn out to be false.
o    Cutomer wishes to say that while there is nothing wrong with the contract per se, something happened prior to it that is relevant.
o    Evidence rule – where you have an apparently complete contract, extrinsic evidence is not admissible for modifying or contradicting the contract.
o    And yet we have seen situations where evidence does do this, but is being intro’d for another purpose.
•    The words that the ‘sales person’ utters outside the contract, but which critically induce the contract (page 654) might have 1 of 3 classifications:
o    1)  Puffery:  Words which have no legal significance.  They are mere puffery.  Ex:  “This is the best used car in Fredericton.”
o    2)  Misrepresentation:  looks like a statement of fact.  In Gallant v. All State, the assertion that the buckwheat would kill off the weeds were a statement.  If they induced the customer to enter into the ccontract, and if the words were false, then they are called a tortious misrepresentation.   Falls under tort.
o    3)  Warranties (promises):  If the words are not words of statement, but are of promise, those words (if they have legal consequence) can have consequence only in contract (the realm of promises).

Heilbut
•    Customer calls stock broker regarding the launching of a new rubber company.
•    Stock broker:  “We are.”  – entire case turns on these words.
•    Customer agrees to buy 6,000 shares
•    Company turns out not to be shares in what could legitimately be called a rubber company.
•    Does not sue the  company – it is insolvent.
•    Customer sues the stockbroker.
•    Not complaining about anything inside the contract.  He did get the shares.  He didn’t want the shares.
•     “We are” – could be a statement of fact, giving rise to liability, if at all, in tort.
•    Misprepresentation.
o    Could be a promise (warranty), giving rise to liability, if at all, under contract.
•    Problem in giving these words sig. in contract – a naked promise is valueless…
•    page 662 – At trial, the jury found that the company could not properly be called a rubber company.
o    Pre-contractual utterance was false.
o    D’s did not make a fradulant representation.
o    Did find that the SB did promise that it was a rubber compnay.
•    HoL is stuck with the findings of the jury – in particular that there was no fraud. misrepresentation here.
•    Seems that at trial, P argued that “We are” was a misrepresentation – argues under tort law.
o    If one can succeed that “we are” is fradulant misrepresentation, then can get damages.
o    in 1913, the only other type of misrepresentation was “innocent misrepresentation” – remedy is not damages.  It is a return to pre-contractual situation.
•    Only remedy avail. for innocent misrepresentation is recision; calling off the contract.
o    Here, cannot be rescinded, as has already been carried out.
•    If took the tort route, the only buttom to press would be fraudlant misrepresentation but then would be faced with the reality that fraud is extremely difficult to prove, because the courts have a high threshold to accept that the D. was guilty of fraud.

For tomorrow, read this case.
Read Dick Bentley, & Murray