Contract Law

Tilden
•    The P here could have read the contract, but did not
•    How does he win?  He does not win on the theory that he went to trial on, but another.
o    He wins on the court’s reasoning that (¶s 13 & 14) an essential part of the test is whether the other party entered into the contract on the belief that Mr. Clendenning had agreed to the contract.
o    If it obvious to one party that though the other is signing they are not assenting to the contract (because there are parts that they don’t know about), the party cannot invoke the rule from L’estrange.
o    Tilden cannot rely on the parts of the contract which it has no reason to believe Clendenning assented to.
o    Waddens alludes to the doctrine of mistake, though this is not a mistake
•    The judges decide to give judgment that defeats the business party, but tries to assure the business world that the decision is not a significant change.
•    ¶17 – which sections are Clendenning subject to?  Not subject to the clauses which the judges believe the consumer would find surprising.
o    Tilden relying on clauses under which it keeps the $2 deductible, but is not obliged to pay out a claim.
•    Bell calls this a clever decision that is very much still a part of the law.

Hunter Engineering v. Syncrude Canada pp. 871-888.
•    In the wake of Photo Production, there was no extra weight given to “fundamental breach” of a contract, as all breaches were treated equally.
•    If on a true construction, a clause covered an incident, then it covered the incident, period.
o    Court in PP, however, noted that they had a clear conscience because what might be the least fair cases had already been covered by legislation.
o    Only commercial cases at common law remained.
•    SCC in Hunter Engineering (1989) takes a considered look at this idea.
•    The decision in Hunter is a 2-2 decision.  There is no majority / minority decision on this point.
o    On the issue of the place of fundamental breach in the modern law, there is a split.
o    everyone typically identifies Dickson J’s decision as the majority, but this is not so.
•    The clauses here are not totally unreasonable.  The purchaser, however, wishes to evade them
•    argument that the breach here is of a fundamental character, and so the limitation of liability clauses do not apply…
•    2 judges here like Photo Production, and would incorporate the decision into Canadian law.
o    ¶17 – Dickson J. says that fundamental breach should be an issue of contract contraction, and that the court should not disturb the bargain that the parties have struck.  He and La Forest go with the true construction model.
•    True construction – simply means that if the clause in question, given various tests of interpretation, still covers (on a fair reading) what happened, then it does cover what happened, and the parties will be left with the contract that they made.
•    This is a business-business case, but Dickson and La Forest do not make their decision turn on this.  They do not distinguish.
•    The effect of this would be to abolish the doctrine of fundamental breach in Canada.
•    Get hints of something else:  ¶17 (last sentence) – ‘the courts should not disturb the bargain that the parties have struck, and I am inclined to replace the doctrine of fundamental breach with a rule that holds the parties to the terms of their agreement, provided the agreement is not unconscionable.’
o    ¶28 – unconscionability again.  “only where the contract is unconscionable, as might arise from situations of unequal bargaining power between the parties, should the courts interfere with agreements the parties have freely concluded.”
o    doctrine of unconscionability – judges can ignore things they don’t like.  Trad. gets a very narrow construction.  Is confined to the narrowest circumstances.  usually, only legit. terrain is seen as inequality bargaining power.
•    if the bargaining power was grossly lopsided, the contract might be struck down by the courts.
•    Wilson J. and L’Heureux-Dubé J.
o    presents more than Dickson, and in a less than coherent order.
o    Says that she agrees with Dickson that fundamental breach as invented by Denning in the Car Sales (?) case and promoted by him in subsequent cases, that it has its problems.
•    agrees that not all the problem clauses in contracts are exemption clauses, but that the doctrine of fundamental breach deals only with limit. of liability or exemption clauses.
•    agrees that not all exemption clauses are unfair, but that the doc. of fund. breach means that if there is a fundamental breach, the exemption clause disappears altogether.
•    So agrees that there are problems.  Goes too far one way, not far enough in another.  But does not think we should go so far as to abolish it.
o    ¶42-43 – goes to trouble of pointing out that while the HoL in Photo Production could reach its decision with a clear conscience because the consumer cases were protected by legis., points out that there is no such legislation in Canada.
•    Wilson qualifies this ¶43 that many of the provs. had already taken care of limitation of liability clauses (contracts fall under prov. jurisdiction)
•    But doesn’t think that this is a completely adequate solution.  Still sees a role for the courts to protect parties who have been victims of some fundamental breaches.
o    ¶43 – ‘in affirming the legitimate role for the courts’; ¶47 “policy matters”; ¶? “residual powers” for courts.
•    saying that courts have a legit. role in invoking its residual power in contracts.  May be cases where freedom of contracts has gone too far, and that there may be a role of the court (even outside the doctrine of unconscionability) to remake a contract.
•    Says that she does not agree with Lord Denning’s approach.  The Doc. of Fund. Breach that she is about to try to save is not as it was articulated by Denning.
o    Denning’s said that if you have a fund. breach (going to the root of the contract; deprives the violated party of the whole benefit of the contract), there is an automatic consequence.  A rule of law kicks in to specify this consequence – that the limitation of liability clause disappears, meaning that the contract breaker can no longer shield themselves behind it from liability.
o    ¶33 – sentence 2 – quite wrong.  “One held that there was a rule of law that a fundamental breach brought a contract to an end…” wrong.  The contract did not come to an end – the limitation of liability clause came to an end.  That is all.
•    Says that her articulation of the doctrine of fundamental breach would be more nuanced:
o    that the courts would still have to classify a breach as fundamental or not, but that it just leads the court to ask a second question:
•    Would allowing the breaching party that has committed the fund. breach, to shield itself, lead to a result that was unfair or unreasonable?
•    Whereas Denning, having once classified a breach as fundamental, would immediately remove the lim. of liability clause, Wilson would say that once this classification is made, the next question is then asked.
•    would not, then, be looking at the moment of formation, but instead the result of the contract – an unfair or unreasonable consequence for a victim of a breach.
o    Says that even if there was a fundamental breach here, there is nothing so unfair as to invoke the doctrine.
•    Makes a reply to Dickson and his flirting with the doctrine of unconscionability:
o    ¶47 “Where there is no inequality of bargaining power, the courts should, as a gen. rule, give effect to the bargain freely negotiated by the parties”
•    ¶48 “To dispense with the doctrine of fundamental breach and rely solely on the principle of unconscionability, as has been suggested by some commentators, would, in my view, require an extension of the principle of unconscionability beyond its traditional bounds of inequality of bargaining power.”
o    The doctrine of unconscionability has trad. not been a result-based analysis, but instead a contract formation-based analysis.
o    questions how the court could say that a validly formed contract was unconscionable…
•    so cannot be a subs. for the doctr. of fund. breach, UNLESS admit to changing the doctr. of unconscionability.
•    Says that even if she could do that, she wouldn’t, because she finds this doctrine even more vague than the doctr. of fundamental breach.

•    ¶52 – Courts over the past 50 years have flirted with the idea that exclusion of liability clauses are worse than limitation of liability clauses.  This is a distinction that is difficult to make.  Limitation of liab. clauses can be so far-reaching as to practically equate them to exclusion of liability clauses.  Wilson J. here points out the same thing.

Conclusion:
The doctrine of fund. breach took hold in Canada, but here we have 2 judges who would abolish it, and 2 who would save it, but prune it.  (5th judge here stayed out of it).
Editors of the case book (note 2, 3, & 6) give us three cases where (note 7 as well?) a good idea can be formed of how lower court judges have handled this 2-2 decision of the SCC.  In effect, the judges seem to be taking what Dickson and Wilson said and synthesized them?  Seized on “unconscionable” in Dickson’s and “unfair and unreasonable” in Wilson’s, and began treating them as the same thing.
Note 2, page 885 – equates the two – says the diff is “unlikely to be large”.
The SCC has touched on fundamental breach in a # of cases since 1989.  It does rather seem that fund. breach is alive and well in Canada – perhaps saved by Wilson J. & L’Heureux-Dubé, but ppl still do use Dickson’s word, “Unconscionability”.
Fundamental Breach:  Dead in England, still kicking in Canada.  Party on, Fundamental Breach.  Party on.

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
•    Result of Ralph Nader’s critiques of the auto industry in the U.S. in the 60s making their way to the legislatures by the late 70s.
•    does not apply to services, except if goods are sold at the same time.
•    2(3)This Act applies notwithstanding any agreement, notice, disclaimer, waiver, acknowledgement or other thing to the contrary.
o    Seems to say that the consumer cannot contract themselves out of the Act.
o    Do have the  Sale of Goods Act, but can contract oneself out its benefit (without even realizing it).

Read the rest of the sections of the Act.  New Syllabus on TWEN.  Meeting tomorrow – reading assignment for tomorrow by email.

Exception Clauses p. 838
•    Warranty, in its technical meaning, is a sub-contract
•    It has a technical meaning
o    Close reading; strict construction
•    Wallis v. Pratt – “warranty” did not apply to exclude the implied statutory “condition” of the Sale of Goods Act that products must correspond to their description.
o    ¶5 - exclusion of “any warranty of condition” does not avail a seller if there has been a ‘negligent misstatement’
o    ¶6 – in the absesnce of an explicit mention of negligence, a judge is likely to find that exemption cluases do not exclude liability for negligence.
•    Judges believe that it should be very difficult to exclude oneself from the possibility of negligence, and that it must at the very least be explicit.
•    “The rule in Canada Steamships” – adopted this extreme example of reading down.  If an exemption clause could be given a meaning but the meaning was not broad enough to extend to negligence, then it does not extend to negligence.
•    If the exemption clause could refer to something other than negligence, then it is deemed to refer to that thing.
•    P. 839 – Inconsistency.
o    A number of ways that judges tackel ‘internal inconsistency’
•    To say that the provision that the parties agreed on explicitly takes precedence over some provision that is simply there as part of a form-document.
o    The passage on 839 is accurate, but misleadingly simplistic.

Parker v. Southeast Railway
•    A case that refers to the imp. of railway
•    Bottom Page 849 – caput lupinum – “Having the head of the wolf”.  Anyone might legally ‘kill’ them.
•    Railway companies were often the targets of juries, as insurance companies are today.
•    Railway takes the pos. that the passenger signed away their rights.
o    There was a notice on the wall of the cloak-room
o    There were conditions written on the ticket
•    Page 847 – “see back”; several clauses relating to articles left by passengers – “The company will not be resonsible for any package exceeding the value of £10.”
•    Bag could not be found.  Claimed that his bag was worth £24 10s.
•    Mellish L.J. – “In and ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absesnce of fraud, it si wholly immaterial that he has not read the agreement and does not know its content …in the case [where the agreement has been reduced to writing so that the writing is the sole evidence of the agreement without signing it]there must be evidence of the agreement itself to prove that the defendant assented to it.”
•    P said that he knew there was writing on the ticket, but not what the writing was.  Said thought it may have been a receipt ¶3.
o    No question that had he read the writing, he would have been bound.
•    Contract law presumes that people, if given something to read, will read it.
•    Bramwell L.J.
o    For this judge, the question is whether the person who does not read the conditions in a better condition than he who does.
•    Bottom 848 – Mellish’s famous repropositions:
o    ¶3 – 3 propositions.  I am of the opionion there fore that the proper direction to leave to the jury in these cases is:
•    1)  That if the person receiving the ticket did not see or know that there was writing on the ticket, he is not bound by the conditions;
•    2)  that if he knew there was writing, and knew or believed that the writing contained conditions, then he is bound by the conditions;
•    [should this be subject to the condition that the writing be relevant and ‘usual’ to the circumstances?; that anything out of the ordinary would be brought specifically to the attention of the purchaser?]
•    3)  that if he knew there was writing on the ticket, but did not know or believe that the writing contained conditions, nevertheless he would be bound, if the delivering of the ticket to him in such a manner that he could see there was writing upon it, was, in the opinion of the jury, reasonable notice that the writing contained conditions.
•    [Would the purchaser be bound to every single condition on the ticket, or just the not-unusual contractual provisions?  Could they insert provisions to do with seizing first-born children and have done with it?]
•    page 849 – Bramwell L.J.
o    Bramwell is skeptical
o    Proposes that putting it into his hand should be no different than saying “read that” by the porter.  Asks what more the railway company could have done
o    Page 850 – qualifies what he says – says that the market has the answer.  If railway companies (or anyone else) began putting unreasonably terms in their contracts, then the public would hear of it and begin using alternative [forms of transportation, for example].
o    “What if there was ome unreasonable condition… Would the depositor be bound?  I might content myself by asking:  Would be be, if here were told ‘our conditions are on this ticket,’ and he did not read them.  In my judgment, he would not be bound in either case.  I think there is an implied understanding that there is no condition unreasonable to the  knowledge of the party tendering the document and not insisting on its being read – no condition not relevant to the atter in hand.”
•    Important qualification regarding ‘unreasonable conditions’

Note 5 page 851
•    J. Spurling Ltd. v. Bradshaw
o    Post-war case involving 8 casks of orange juice.
o    Most of the OJ disappeared while being stored in a bailee warehouse.
o    Decision of Denning L.
•    “I agree that the more unreasonable a clause is, the greater the notice which must be given of it.  Some clauses which I have seen would need t be printed in red ink on the face of the docuent with a read hand pointing to it before the notice could be held to be sufficient.”
•    “Next it was said that the landing account and invoice were issued after goods had been received and could not therefre be part of the cotract of bailment:  but the defendant admitted that he had receive many landing accounts before.  True, he had not troubled to read them.  True, he had not troubled to read them.  On receiving this account, he took no objection to it, left the goods there, and went on paying the warehouse rent for months afterwards.  It seems to be that by the course of business and conduct of the parties, these conditions were part of the contrat.  In these circumstances, the plaintiffs were entitled to rely on this exempting condition…”

read p 851-852

Thornton v. Shoe Lane Parking Ltd. – page 857
•    sign at entrance:  “All cars parked at ownder’s risk”.
•    Then drive up a ramp and press a button for a ticket.
•    Denning L. finds that the ramp is the offer, and driving up the ramp and pressing the button is the acceptance.
•    Even if the ticker were part of the conditions, how could one be bound by conditions that one could not see until after ‘acceptance’?
•    Same as the conditions posted inside the garage.
•    ¶2 – offer accepted when the P drove up the entrance and had the ticket thrust at him by the weight-sensor.  The contract was the concluded, and could not be altered by any words printed on the ticket.
•    ¶3 - Then gives analogy whereby the ticket machine is a booking clerk ‘in disguise’
o    goes back to 3 questions pose by Mellish L.J. in Parker
o    ¶4 – counsel for the ds admitted that the Ds did not do what was reasonably sufficient to give the P notice of the exempting condition.
o    “I do not pause to enquire whether the exempting condition is void for unreasonableness.”
•    BE CAREFUL.  There is no jurisprudence that allows courts to say that an exempting clause was void for unreasonableness.  Denning L.J. was likely trying to begin this jurisprudence, but it didn’t take.
•    Denning determines that the P was not bound by the exempting condition as there was no evi. that he knew of it.

Page 860 – Signed Contracts
•    “When a documet containing contractual terms is signed, then, in the absense of fraud, or I will add, misrepresentation, the party signing is bound, as it is wholly immaterial whether he has read the codument or not.”
o    Ie:  You signed, you’re bound.
•    Courts often want to save people from their own folly.
o    This causes tension.

For next day:  Tilden, Photo Production.