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.

Promissory Estoppel:

•    There are 57 different types of estoppel under our legal system.
•    This is why it must be qualified as promissory estoppel.
o    Invented by Denning L. in 1940s.
o    Original formulation had in it ambiguitiy almost to the point of contradiction.
•    Para 2 on page 316
o    3 or 4 diff formulations just in that one paragraph.
o    Retreats later from “create” legal relations in regards to a promise
o    “Promise must be honoured” – is this retreated from?
o    Most succinct formulation:  “Promises intended to be binding, intended to be acted on, and in fact acted on.”
•    This is acceptable today…
•    “In each case the court held the promise to be binding on the parky parking it,e ven though under the old common law it might be difficult to find any consideration for it.”
•    The courts do not enforce the promise but do not allow the promisor to act inconsistently with it…?
•    Runs around Foakes v. Beer in this way.  Uses estoppel as a work-around.

Combe v. Combe
•    The text points out the absurdity of the fact of a matrimonial case becoming a contract precedent.
o    This is in fact what our legal tradition began doing in the 19th century.
o    The Victorial era began inventing contract law by abstracting out of all the contracts that had always existed and began to find common elements in them all.
•    Led to basic rules such as offer, acceptance, and consideration.
•    Divorced contract law from its particular situation and created a general-field theory – “The law of contracts”
•    The facts are remniscent of Balfour v. Balfour.
o    Here, the couple, during divorce, came to an agreement between them for him to pay her £100 / year.
o    After 6 ¾ years, she sues him for the arrears (he had paid nothing)
o    She wants to enforce a promise.
o    But our legal system doesn’t enforce promises.  We need consideration – a bargain.
o    What is it suggested that she swapped with him?
•    Forbearance – forebore to take him to Divorce Court.
•    This sounds like consideration.
o    Denning L. has 2 answers:
•    1)  Nothing to suggest that this was intended by either the husband or wife.  It was not a bargained-for forbearance.
•    Similar to Dalhousie v. Boutilier
•    2)  Even if she had promised to forebear, she would never lose the right to apply to the Divorce Court – there was (and still is, in a sense – in the sense that it now applies to either sex) a rule that a wife could not bar herself from getting court-ordered maintenance.
•    Denning L. says that she didn’t make this promise anyway, but even if she did, it would not be binding because it has no value.  She cannot contract herself out of this right.
•    This means that the rule, which appears to be solicitous to wives, can be read in a way to be beneficial to husbands (as in this case).
•    Normally, a bargained-for forbearance is consideration.  This is a special case because of this aforementioned rule.
•    Whenever one has a scenario where the enforceability of a promise is in dispute, then consideration must be considered first.
o    If consideration is found, then there is no need to go forth and talk about estoppel.
o    Estoppel is what makes this case famous.
•    Trial judge, having found that there was no consideration, went on and upheld the husband’s promise.
o    Did so because he believed the case fit neatly under the High Trees principle.
•    A promise relied on, and intended to be relied on, is binding.
o    Denning L. says that though it looks like it fits, he had been too broad with his wording in High Trees.
•    Combe v. Combe introduces a refinement on High Trees.
•    Page 318 – para 3:  “…lest it should be endangered.”   In other words, lest it be overruled by a higher court.
•    It is not a creative doctrine – it is a preventative doctrine.
•    “It only prevents a party from insisting on his strict legal rights when it would be unjust to allow him to do so, having regard to the dealings with have taken place between the parties.”
•    Though he says this, he immediately goes on to say that that is not to say that it is only available to defendants.
•    When one thinks of estoppel, naturally equates it with defendants.
•    Denning L. says that plaintiffs can use it just as readily, but it must always be a defensive doctrine.
•    Gives examples on top of 319.
•    Foakes v. Beer comes into play in these examples.
•    “Example 2 is breath-taking” – Bell
o    “Can even say that example #1 is breath-taking.” – Bell
o    Denning gives account of a gov. dept and the war-service disease.
•    There was a statute that said anyone whose disease was due to war service got a pension
•    Robertson made a claim as such.  Ministry accepted it, and Robertson stopped collecting evidence.
•    Then, the ministry changed its mind and said that they needed more evidence.
•    Robertson sues on his statutory entitlement to a pension.
o    Ministry says that they need evidence
o    Roberson claims they are estopped, because he put reasonable reliance on their word that they needed no more.
o    This is a case where the plaintiff estopps a defendant.
•    Robertson wasn’t suing the ministry saying, “You promised me.”  He sued on his statutory right for pension.
•    Then when they raised the inevitable defence, he put forth that they were estopped.
•    In none of these cases were the plaintiffs suing on the promise.
•    Estoppel is never part of the cause of action, but plays a key role in determining whether someone is going to win or lose.  Is a subsidiary feature of the case.
o    Denning gives a new formulation.  Less succinct than previous formulation.  Enormously wordy.  P 319 end of para 3.
•    Has inserted “conduct”
•    Could be relevant – case where a landlord allows rent to be late for 6 months, then on the 7th uses it ‘as an excuse’ to kick the pl. out.  The pl would argue that the conduct of the landlord had led them to believe it was okay.
•    “only by his word” is not accurate.  Should read, “by reasonable reliance”
•    Still has not given qulification.
o    Para 4
•    Says that if we took seriously the principle form high trees, (reasonable reliance), then why would we need consideration?
•    There is an answer…
•    Denning now accepts that this principle would overturn 9/10 of the doctrine of consideration…
•    “Its ill effecta have been largely mitigated of late, but it still remains a cardinal necessit of the formation of a contract, although not of its modification or discharge.  I fear that it was my failure to make this clear in High Trees which misled [the trial judge] in the present case.”
•    SO, cannot sue based on estoppel, but if have another issue, then can bring estopple into play.
•    Likewise, if one is being sued (and is therefore compelled into court), then can use estoppel
•    Unfortunately for Mrs. Combe, she is relying on estoppel.  This is why her action ends up being dismissed.
•    Aside:  There is no difference between variation and modification.
o    Denning says that one can use estoppel defensively, not offensively. (“to be used as a shield and not as a sword”. – Birkett L.J. page 321.  Famous disctinction created by Birkett here.)
•    WHY DIDN’T COMBE APPLY TO…[this is Bell’s favourite exam question.  Figure out what he said.  Was purposefully elusive.]  Wilbur?
•    High trees made it seem as though reasonable reliance alone would be enough to enforce a promise.
o    This would have revolutionized contracts – would have been just about fatal to doctrine of consideration.
o    To sue to enforce a promise requires consideration.
•    This is why the wife cannot win.
•    Promissory Estoppel goes from 2 factors to 3
•    1)  Promise and intention to be relied on
•    2)  And relied on by the promisee
•    3)  except that, a promisee cannot sue on the promise based on estoppel.  It cannot be the foundation of the case – the cause of action.
•    Each side can use estoppel, but the plaintiff can never sue successfully using estoppel as a cause of action.
o    This is for no good reason other than Denning L. says so
o    Denning L. made his career on making cases stand for things that judges could not foresee them standing for…
o    “Law is an awful lot like fairy tales… We often treat the past with as much profundity as a fairy tale.  …We make the wisdom of the past say something that it didn’t say yesterday.”
o    Everyone is happy to see Foakes v. Beer be defanged, so we all go along with it an pretend it makes sense.

Page 322 – Note 5.
•    Suggestion that estoppel principle might have been a substitute for consideration
Note 6
•    A) a profound question that we must eventually be able to think about…
o    The effect of the sword/shield distinction means that my promise to take less from you than I’m entitled to may be binding on me,
•    Suppose B owes A $100.  If A promises to take only $90, then the estoppel principle says that A can take the $90 (enforecable), but, if instead A owes B $100, and A promises to pay $110, then then law won’t enforce the promise.
•    This is despite that in both examples, B is $10 better off.
•    When estoppel works in high-trees, the land-lord is estopped from going back on his promise
•    When it doesn’t work in combe, the wife cannot enforce the husband’s promise that she will get money
•    6a asks us to thing about whether there is a sensible distinction between a promise to take less, versus a promise to pay more…
•    they both amount to one person being $10 richer than they otherwise would be.
•    This case did make its way to the JCPC – they gavem ultiple factors to come into an estoppel, but amounted to what Denning L. has already said.
o    “resile” – abandon a position or course of action.

D. & C. Builders Ltd. v. Rees.
•    15 years later
•    Denning L. by this time the most famous judge in the common-law world.
•    Had been promoted to house of lords, but found there was less influence here.
o    Arranged for his won demotion to chief justice of court of appeal
o    Assigned all good cases to himself.
o    M.R. – master of the roles.

Read this case for next day.  Read on to the two other decisions on pa 326 to think about where Denning’s decision stands in regards to the two others.
Also, go on to Waltons – a potentiall spectacular case from Aus. – goes back to High tress without Combe v. Combe.

Waltons Stores (Interstate) Ltd. v. Maher

Facts:

•    Negotiating towards a lease
•    Waltons leads the prospective landlord to believe that there will be a lease.
•    As such, the landlord does what they have to do get the new building up on time for Waltons
•    New building 40% completed when Waltons walked away.
•    Landlord sues, alleging in effect that Waltons promised to enter into the lease, and that they should be estopped from walk away.
•    Council for Waltons held that there was no promise there.
•    Council had to construct the promise – this was done satisfactorily
o    However, looked like a mere promise
o    Reliance was non-bargained for.
o    Looks like Dalhousie
•    We are in the realm of promissor estoppel.
o    Though cast widely in High Trees, was reigned in in Combe v. Combe.
o    Promisee here is suing to have the promiser esoptted
o    Offensively…
o    Court acknoledges all of this
o    Promissory estoppel usually used as defensive equity, not offensive.
o    Concern is that if we allow ppl to sue on promises alone, then what is left of the doctrine of consideration
•    If we allowed ppl to use estoppel offensively, then in effect, we could be doing the very thing that Dalhousie was accused of doing – allowing the recipient of a promise to retrospectively convert what was meant to be a gratutious promise into an enforceable promise just by relying on it.
o    Would be getting into the business of enforcing gratuitous promises.
•    Will we require the doctrne of consideration or a seal to enforce promises offensively, or is there some other basis?
•    Para 22
•    Normally say, as per combe v. combe that we will not enforce promises offensively
o    However, these is a small area of jurisprudence where we do enforce promises based on nothing more than reasonable reliance.
o    Promissory estoppel
o    If the promisor has promised the promissee an interest in land (real property) and the promissee has relied on this to their detriment, then the law can enforce the promise.
•    They look at the U.S.
•    Second-class enforcement
o    Promise enforced to the extent that the promissee relied on it
o    Only so much enforcement as necessary.
o    Get the value not of the [ticket to florida].  Get the value of the [preparations one made for the trip].
o    In the U.S., the restatement (NOT A STATUTE) is accepted in some states.
•    Accepted generally that one can sue on estoppel.
•    Para 25, 26
o    Start making the point – (26) – make an important point
•    Having just said that in the U.S. they allow Ps to sue on the basis of nothing but an estoppel, they then observe that the words of s. 90 of the restatement, the substance is of promise enforcement.
•    Whereas they say in the Anglo-Australian context that estoppel is not about promise-enforcement, but about injustice prevention (prevention of unconscionability).
•    So does vary in its emphasis with American contract theory.
•    Links U.S> restatement of estoppel with obsession with consideration, and have in common promise enfircement.
•    Even estoppel section cast as if it were about promise enforcement (even though as we look at it (through high trees) that we look at the victim, not the promisor’s promise).
•    It is not that we so love promises that the law will enforce promises no matter what – it is that estoppel has at its root (for us) injustice prevention.
•    Then say something new:
o    Say that promise breaking itself is not unconscionable
o    Say that even the promissee’s reasonable reliance, per se, does not create unconscionability.
o    Why is this not unconscionable?
•    People in our culture just know that the law does not enforce gratuitous promises.
•    People know that reliance on such a promise is at one’s own risk.
o    Something more is required…
•    Making distinction between the sword and the shield
•    In trad. Estoppel, all one needs is a promise intended to be relied upon and relied upon.
•    Now say that to use estoppel offensively need more than this.
o    Whether they intended to create two sets of criteria for estoppel, they seem to have done so.
o    What is this ‘something more’ that is required.
•    In this case, say there are two special factors
o    1)  Sense of urgency because of the tenant’s timeline
o    2)  The tenant’s inaction when it knew the landlord was acting on the promise.
•    Say that the inaction acted as encouragement
•    In this case, doing nothing effected doing something.
•    Note para 25 – “The object of the equity is not to compel the promisor to fulfill the promise, it is to avoid the detriment which, if the promise goes unfulfilled, works to the detriment of the promissee.”
•    Conclusion:
o    The court does estop the tenant from denying that it has a lease with the landlord
•    (though of course they do not have a lease)
o    here, estoppel used as a sword.
o    “Is this just one of many semi-interesting cases which languih unnoticed, or is this considered to be important in the common law?  What is Waltons status in Canada?
Has enough time passed that we can conclude that the idea went nowhere?
Will want to, before the exam, reasearch the case – not whether it has been followed.
Is the hurdle so high (the two conditions) for unconscionability that the cases have just not come up since?

Formality
•    page 226
•    Begin with famous article by a famous U.S. legal realist from 1930s.  German origins.
o    Fuller – we have snippet of introduction
o    Taxonomy on variety of purposes of legal formalities.
o    Not all formaities serves all of these purposes
o    Identification of the three poss. functions
•    Formalities:  No set list – anything that the law requires you to do to have a binding contract:
o    Writing
o    Witnesses
o    Written
o    Handshake
o    Handshake with witnesses
o    Gov. licence, like a stamp
o    A seal
o    Witnessed by a notary
•    Fullers 3 functions:
o    Evidentary:  Something like a written contract generates physical evidence of what the agreement was.
•    A handshake, on the other hand, does not have much evidentary functions (unless, perhaps, it was in front of witnesses)
o    Cautionary:  the more elaborate the formality the law requires one to go through, the more the compeltion of it causes a person to acknowledge the importance of their agreement.
•    Ex:  If the law requires that an agreement be made in front of a lawyer, enforces the seriousness of the legal agreement.
•    To the extent that the formality is awkward or ritualistic, the parties have time for second-thoughts.
o    Channelling:  There could be the sort of formality which, if envoked, would tell the parties that they had the sort of agreement which the courts would enforce.
•    Suppose there were a way to make a gift promise enforceable – such as going to the gov. for a certain type of stamp.
•    A stamped contract then would be channelled into the realm of enforceability
•    We have this in regards to seals.
•    Seals put promises into the realm of enforceability.
•    The only formalities in the common-law tradition are the seal, and writing.
•    The seal is a positive formality.
•    If one seals one’s promise, the promise is destined for a certain outcome – it adds a positive result.
•    Writing is a negative formality.
o    In a certain narrow set of contracts, the law says that the contract can’t be enforced unless it is written.  This is negative – WON’T be enforced unless it is written.
o    The seal is the pos formality.
•    In other words, the common-law tradition puts very little emphasis on formalities
o    Fuller argues that the doctrine of consideration in itself is a type of formality.

Seals
•    A SPECIAL contract
o    This is the term
•    Also called a formal contract – in distinction from a normal contract – a “simple contract”
•    A deed – an instrument under seal.
•    The major significance is that the promissee of this promise has alonger period under which to bring action to enfore the promise, than if the promise were not under seal.
•    Under ordinary promise, have 6 years
o    BUT, under seal, in most provinces (except Ontario), the victim has 20 years with which to sue.
o    Good for the victim, but inconveneintly long – memories fade.
•    Rarely see lawsuits after so long
•    What constitutes a seal?
o    In the past, a seal was a blob of melted wax, into which something was impressed to make it obvious that it was one’s seal.
o    No seal is a seal unless it is one’s personal seal.
o    A blob of wax beside someone’s name is not a seal unless it is adopted as a seal and can be identified as such.
o    A thumbprint would do it.
•    Modern approach:
o    To have it pre-printed on the form – probably intended that the client be handed a seal to put on the document – can be purchased at stationary shops
o    Question arises:  What if the client does not do this?  What if the area to place the seal is there (page 250 – suggest L.S. is the latin for the place for the seal)
•    Is this then the seal?
•    This would defeat the cautionary function.
•    This comes up in the courts, and they go back and forth on the answer.
•    Question is, is this the client’s seal?
•    Doen’t count unless it is someone’s seal.  The client must have done something to adopt it.
•    Argument that signing beside it is enough for adoption
•    Courts reluctant to come to an answer on this.
•    Note recommendations of Ontario commission
•    In Foakes v. Beer
o    Hint at a side-light of the seal – if the parties made a contract under seal, it was the law that both sides could nt vary the contract, except by another contract under seal.

Next day:  will look at writing requirements just notes page 385