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

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