Contract Law

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.

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