Contract Law

Consideration:
•    Number of plausible ways to look at the different types of agreements that the law will enforce
o    In common law, we enforce almost none of these
o    Consideration:  The type of promises that we enforce end up coinciding with what would be looked at if we said we would enforce “serious promises”, etc.
•    Requires evidence of an exchange.  If an exchange occurs, it ought to be fairly conspicuous.
•    Has an elemet of formality.
•    Although it is at first glance eccentric and non-intuitive, it does largely yield the same approach as if we had taken a more intuitive approach.
•    Analytical vocabulary for consideration as a problem:
o    Must approach the problem in a certain way.
•    Who is the offerer, who is the offeree?
•    Analytical tools involved the vocab of promiser and promisee – not the equivalent of offerer and offeree, in any way shape or form.
•    They are incommensurate ideas.
•    At the formation of a contract, we can conceptualize the formation of a contract as an exchange of promises.
•    If each party is receipt of a promise from the other, then we have two promisers and two promisees
•    This is the formation perspective.
•    But by the time time has passed and we have entered litigation, only one of the orginally dual promiser/promisee relationships is relevant.
•    One promisee sues one promiser.  This is the promise that the promisee must show that they gave consideration in exchange for.
•    This is the promise that has allegdedly been broken.
•    This tells us what the relevant consideration was.
•    Must show the court that the relevant consideration was giving.
•    In a contracts case, the plaintiff is always the promisee; the defendant is always the promisor.
•    The relevant consideration is the one that the promisee must show that he provided to the promisor in exchange for his promise.
o    Our legal system only enforces bargains.
o    In our legal system, a promise of consideration is as good as consideration – this explains how offer/aceptance can result in a binding contract.  The law says that a promise of title (for example), in exchange for money (for example), is equivalent to having made the exchange.
o    There is virtually no reason, but the alleged reason is that the promise is as good as consideration, because the alternative fulfilling the promise is to be sued (and have the court impose payment).
•    Great conclusion:  The relevant consideration is the one that the pl. promisee must show that he/she promised to exchange with the def. promisor in exhange for the defendant’s promise.
•    Dalhousie – one cannot look at just anything and decide that it’s consideration.  Dal built buildings and hired teachers (in theory) on the basis of this pledge, and yet it was not consideration.
•    The point made by the scc is that Dal did not bargain the building of buildings.  It received Arthur’s promise, and then built buildings in response.  It did not exchange the building of buildings for the promise.
•    Cannot be made in reaction to a promise – that is not consideration.  “Here’s a plane ticket.”  “Wow.  Thanks.  I’ll give you some money.”  This is not consideration.  It is a reaction.
o    The essence of consideration is that it won’t be such unless it was exhanged in return for the promise.
•    P 357:  “To hold otherwise would be to hold that a naked, voluntary promise may be converted into a binding legal contract by the subsequent action of the promisee alone, without the consent, express or implied, of the promisor.”

Hamer v. Sidway
•    Is a case where one might at first thing that there was not consideration, but yes indeed there was.
•    The “assignee” in this case – a right is a species of property.  The nephew has sold his $5000 claim to some money-lender (likely for a much lesser value).
•    Family promises – not addressed, though this was between family, and at a family gathering where they had no doubt been drinking…
•    The facts of the case is not contested.
•    What is contested is the existence of consideration on the nephew’s part.
•    Uncle’s estate argues that he didn’t receive any benefit, but in actuality the nephew benefitted.
•    The law does not recognize “moral consideration” – could not argue that the uncle received the pleasure of seeing his nephew do well.
•    It is enough that the nephew gave up his legal rights based on the promise of his uncle.  This is enough of a basis to constitute consideration.
o    Consideration does not have to be a benefit traded to the promiser – it can be simply a detriment, loss, or responsibility given, suffered, or undertaken by the other (p 258).
o    Can shorten the benefit concurred / detriment sustained formulation to simply detriment sustained.
•    There is not case where the defendant promisee did not sustain a detriment.  All benefit conferred cases are also detriment sustained.
•    In typical contracts case, what one gives up with typically benefit the other.  However, this is not a universal rule.
•    Can take a formula in currie v. Misa and collapse it into “detriment sustained”
o    This is broader.
•    P 261 is a little more concise.  It is, however, useful to take it to the next level.

Eastwood v. Kenyon
•    A case of the guardian versus the husband.
•    Sarah Eastwood left orphaned.  Guardian borrowed money to spend on her upkeep during her infancy.
•    At 21, Sarah got married.  First promised to compensate her guardian.
•    New husband then made the same promise.  Does not complete this promise
•    Must identify the promise being sued on.
o    The relevant consideration is the one that the the guardian bargained to the husband.
o    Only thing that the guardian could say is that he took care of Sarah during her infancy.
o    Could not have actually been made in consideration of the husband’s promise, as it pre-dated the promise by many years.
o    The thing which is consideration was sustained long before the promise being sued on.  Was already in the past.  Could not have been an exchange or bargain as the law demands.  The guardian is remedyless.

For tomorrow:  will return to Eastwood v. Kenyon – will do entire next section of outline. – 3 cases..

Assignment #1
There are some agreements that seem to have the outwards signals of a contract – offer, etc.  There are some agreements to look like contracts, but courts do not enforce.
For example, “I’ll make supper tonight if you make supper tomorrow night.”  There we have offer, acceptance and consideration.  However, if the person did not make supper the second night, and was sued, the court would likely find in favour of the defendant – not because either offer, acceptance of consideration were missing, but the court would be likely to say that the arrangement was not meant to be binding legally.  This is based mostly on triviality.
This means that the parties did not intend for it to be a legal compact.  Normally, this is no defence.  It is an absurd proposition in a business or commercial context.
Where it typically comes up is in “family arrangements”.
This is where our assignment #1 comes up.
Should these agreements be legally binding?  One had to research, not the law, but one’s mind as to what human factors are relevant in such a situation.
Ultimately, it is about the Offerer.  Did the Offerer intend for the arrangement to be legally binding?
Editors of case book bring to attention two of leading cases.  Be careful when using antiquated cases as a source for modern law.  May also look at some of the books on reserve.  Ultimately not a research essay.

Letter of comfort
•    A letter from a bank or a parent company, designed to ‘comfort’ another party (like a landlord or financial institution).  They are not promises.
•    If something went wrong, the issuer of the letter would argue that they did not have legal effect.

Government program
•    Might see this argument in a non-family arrangement also in a government program setting.
•    For instance, there might be a student employment program that specified in the ad certain criteria for eligibility.
o    If too many students applied, might be sued, construing the ad as an Offer.
•    The court would have to decide whether a reasonable reader would have understood it to be an offer.  Did the government intend this ad to affect its legal relationship with the reader?

Indefiniteness
•    One of the characteristics of an Offer is that it must be sufficiently detailed that, if accepted, the court must be able to enforce it.
•    This means that the contract must have sufficient detail to be enforced by the courts.
•    By getting into a taxi and giving a destination, to which the only response is to put the car in drive, one forms an enforceable contract.  This is all implicit.
•    Uncertainty does not mean that there weren’t enough words exchanged, but that words + context ≠ enforceable.
•    “I offer to sell you my car.”  “I accept.”  No good.  Price missing.  Impossible to enforce.

•    How does a court enforce a transaction?
o    What if one received, for instance, money for a car, but didn’t provide the car?
o    How does the court, in a subsequent suit, enforce this.
o    Judges for the plaintiff, but then what?
o    The court gives to the victorious plaintiff not the thing being fought over, but the value of it.  Translates the issue into an award of money.
o    This works great for things that have a market value, like a new car, but not for things that don’t – like broken legs.

•    Indefiniteness – Courts cannot enforce a contract against a defendant unless there is enough detail present to translate a broken ‘agreement’ into a monetary value.
•    Court does not demand that it have every single detail – can import reasonable terms.  Take the view that they can’t patch up glaring holes in the contract.
•    Notes on indefiniteness (488…).
o    Sometimes, parties deliberately write contracts that are indefinite on some point.  Consider that the point isn’t a critical one.  Parties usually contemplate only the happy performance of a contract.
o    Lawyers are often the ones who have to remind their clients to include clauses “in case something goes wrong.”
o    These points are hard to agree on.
o    Difficulty lies in the fact that these points could be the sticking point in forming a contract.  This is why these are often left out…
o    Takes a risk in assuming that nothing will go wrong – most ppl do, however, keep their promises.  This is what these parties count on.  Dodgy.

•    Another situation where parties often leave something out of a contract:
o    Suppose two parties want to enter into an agreement.
o    Suppose one wants to build a hydro-electric damn
o    This party might not want to spend the money to build without a guaranteed market – may form an agreement with a market that will run many years in the future.
o    The contract is about the purchase and sale of electricity.
•    How do we know what the price of electricity will be in the future??
o    How does one construct a contract that in binding today, but leaves blank a critical term?  (The price term)
o    Such contracts are fairly common.  Long-term procurement contracts with suppliers.
•    Could include a clause to re-negotiate at set terms in the future
•    Could include a way to change the prices to fair market value at set intervals.
o    Option 1 would likely lead to a non-enforceable contract.  Option 2 would likely be enforceable.
o    Enforceability of a promise is sticky.  Can negotiate in good faith, but not agree.
o    How does one know what agreement parties would have reached?  One cannot.  Therefore, cannot translate a decision into dollars.
o    Courts have taken the obvious route, and have been inhospitable to the idea of working in good faith.
o    Whereas if there is some sort of formula, such as to be applied to annually recalculate the fair price of, for instance, electricity.
o    Labour contracts often work this way: “Consumer price index, plus 1%.”

Foley v. Classique Coaches, Ltd.
•    Basically a land purchase agreement, with a tacked-on supplementary agreement.
•    Says that the bus company must buy all petrol from the gas station of Foley, in return for selling them the gas.
•    Stops buying gas from Foley – Foley sues.  Must prove that there was a contract and that it was broken.
•    Price was left out of the contract.  1.  The vendor shall sell to the company… petrol… at a price to be agreed by the parties in writing and from time to time.
•    Those words are often fatal – an agreement to agree.  Unenforceable.
•    How does the court know what the parties would have agreed had they agreed?  Cannot calculate the loss.
•    Agreements to agree simpliciter are unenforceable.  This is an important distinction.
•    A formula to calculate what they have not agreed upon, for instance, is enforceable.
•    Agreement to agree + Mechanism is enforceable.
•    Here, it is clause 8 – the arbitration clause.
•    The arbitrator is the person that the parties have chosen, so is not imposing anything on the parties.  They are agreed by the parties to be suitable to do this.
•    Sale of Goods Act has a provision for where the court may step in, but this is an exception.  Courts do not want to do this.  This exception is statute-authorized.  Note 4&5 on page 505.
•    In order for this to apply, the contract must be a silent contract.
•    Without the arbitration clause in clause 8, one could say that it involves the sale of petrol, which places it under the jurisdiction of Sale of Goods Act.  In this situation, it does not save it, because it applies only when the parties are silent about price – in this clause, on the contrary, there is an agreement to agree.
•    Repeat:  Sale of Goods Act applies only only only where the parties have been silent on the point of price (and typically only to one-off transactions).
•    Note 1:  “The pressure to enforce will be a function of the extent to which one party has relied on the agreement, the degree to which the parties are committed…”
o    If the contract was defective at the moment of creation, then it is defective, and nothing thereafter will redeem it.
o    So this note is somewhat inaccurate.
o    However, the reality is that if parties have worked successfully under a contract for some time (as in Foley), then it is relevant to the question of whether this was a workable, enforceable contract.  Makes the argument less plausible, but not impossible.
o    Judges tend to view the fact that ppl have worked successfully under a contract somewhat pragmatically.  Theoretically, if a contract was flawed at conception, then it is flawed inherently and irredeemably.

P 496 – importance of arbitrators
•    Arbitrators are often included in standard-form contracts.  Many insurance companies now include them in their contracts as standard.
o    This is often to keep out of the public eye events that would be seen as unfavorable, and to avoid the expense of lengthy court battles.
•    Parties can then later agree to skip arbitration.  Sometimes there are clauses to set up an “arbitration court of appeal” in case one party is unhappy with an arbitration.
•    Sometimes people involved in arbitration might feel somewhat under-valued law.
o    However, arbitrators are just as bound by the law as judges are.  They use the same law.
o    They write a legal decision.  They must give the decision based on the law.
o    Should not be second-class justice.

Next day:  Walford v. Miles; Empress Towers v. Bank of NS;