Contract Law

Foakes v. Beer (missed last class – interviews)
•    Why doesn’t the ruling in this case come under pre-existing duty?
•    Why do we need a separate rationale?
o    We do not need the rule from Foakes v. Beer – equally analysable under pre-existing duty
o    Separate island of jurisprudence all to itself, very similar to pre-existing duty rule
o    Could be under Stilk v. Meryk
•    Is is a subset of a preexisting duty, but we treat it separately for historical reasons.

•    Why doesn’t the hypothetical situation whereby one promises to write off a $100 debt in exhange for $50 fall under the rule that we saw earlier (stilk v. merit)
o    S & M was a legal dispute
o    The answer is that the s & m type scenario was about a compromising legal dispute
o    Whereas, in our hypothetical situation, there is no legal dispute.  One is not claiming that one does not owe the money.  One is simply admitting that one cannot pay it.

Given the similarity between the Foakes v. Beer and Stott v. Merit Investment Corporation, would the way around exhibited in williams v. roffey brothers be gotten around the same was as in Stott v. Merit?
o    Williams v. Roffy brother scenario takes some of the sting out
o    Why is it not equally applicable to the Foakes v. beer scenario?
•    It would be.
•    The English courts have addressed this.  They have said that one cannot use a Williams approach to defang the approach of Foakes.
•    This is because Foakes is a decision of the house of lords, and it would take a decision of that same house to overturn it.
•    Further, the argument goes that if Williams got one out from under Foakes, there would be nothing left to Foakes.
•    Whereas, in Williams, all three judges said they were not overturning Stilk v. Merit.
•    Why won’t a Williams argument apply?  (Consideration can be found in practical benefit…)
o    The answer is because the courts have said that it won’t.
•    Williams v. Roffy Brothers says that a prac. benefit can be consideration
o    applies only if the parties already have a contract
o    though limited in this way, nevertheless, is a precedent of great interest.
o    The natural question is, “what can Canada do?  Will they follow?”
•    If Gilbert Steel were decided today, would it go another way?
•    Under Quicklaw, search “Roffey” and see what the cndn courts do when they cite Williams v. Roffey Brothers.
•    ***Look and see whether it is being followed in Canada.  This may be important for midterm.
•    Will it stand as a great precedent of our time, or will it be forgotten?
•    P. 309, para 1. – “The case not being one of a composition with a common debtor, agreed to, inter se, by several creditors. “
o    If the first creditor who gets judgment against a credit gets 100%, then the fifth creditor (for instance) may get nothing as there is nothing left.
o    Sometimes, creditors will agree amongst themselves that none of them will actually execute a judgment against the debtor.  They will take the entire assets of the debtor and divide them up.
o    Earl of Selborne says that this arrangment is binding, but cites it in a way that it would seem to be an exception to the Foakes v. Beer way, but does not mean it in this way.  In fact means that there is consideration in this arrangment.
•    This agreement between creditors is called a composition.
o    Note on page 310 para 3 – there is a point that the “chequeness” is not consideration unless it is a bargained-for chequeness.
•    Nothing is consideration unless it is treated as consideration – unless it is bargained for.  Read this over to clarify.
o    P 312 – contracts with a 3rd party.

Criteria to select promises worthy of legal enforcement
•    Promises given in return for something which the law is prepared to regard as consideration.
o    This is narrower than what ordinary people might view as consideration.
•    Promises under seal (will look at later).

•    Does our legal tradition enforce promises merely because the promisee has relied on them?
o    This is against theory, but may exist practically.
•    We now come to a series of cases where this appears to be the scenario.
o    What is going on will look like promise enforcement, but the question is whether it is really promise enforcement, or protecting resonable reliance.
•    Is it harm prevention as opposed to promise enforcement?
•    With promise enforcement, all the attention is on the promisor.
•    With harm prevention, all the attention is on the promisee.
o    The case that discovered the possibility that there might be something that strongly resembled considerationless promise enforcement was Central London Property Trust Ltd v High Trees House ltd.
•    Lord Denning, prior to becoming a Lord.  He is a Justice here – trial judge.
•    One of the few trial cases in our text.
•    Friendly parties – just want an answer, which they will be willing to accept.
•    In this case, one of the two parties (plaintiff) have become insolvent, and is in the hands of a receiver.  The receiver has a fiduciary duty to try to take in as much money as legally possible.
•    99-year leases are quite common in England.
•    The landlord sues for 2 things (which may be the same thing, 2 ways)
o    Full rent prospectively
o    Full rent retrospectively.
•    First thing we look for is consideration (to enforce the landlord’s promise to let them pay ½ rent).
o    The promissee did rely on this promise
o    Consideration:  The tenant did pay the ½ rent, but that is not consideration – that falls under pre-existing duty.
o    There is no seal on the changed contract.  No change vis-à-vis the change.  No consideration vis-à-vis the change.
o    Denning J. does something revolutionary while saying that he is not doing anything revolutionary.
•    Claims to be following jurisprudence.
•    He makes up something and attributes it to the widom of the past.
•    Estoppel – this is the leading case of estoppel.
•    What Denning J. is faced with is a situation where the promisor made a promise to the promisee, the promisee relied reasonably on the promise, and now the promisor wants to break the promise.
•    The landlord gave the tenant a representation of the future – we call this a promise
•    This case is about whether to enforce a promise.
•    Because it is a promise.  Does not fall under trad. Jurisprudence of estoppel.
•    Allows us to make some enforcement.
•    (para 1 on page 316) – “With regard to estoppel, the representation made in relation to reducing the rent was not a representation of an existing fact.  It was a representation, in effect, as to the future, namely, that payment of the rest would not be enforced at a full rate but only at a reduced rate.  Such a representation would not give rise to an estoppel, because, as was said… a representation as to the future must be embodied as a contract or be nothing.”
•    (Para 2) “There have been a series of decisions over the last fifty years which, although they are said to be cases of estoppel, are not really such.  They are cases in which a promise was made which was intended to create legal relations and which to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on.  In such cases the courts have said that the promise must be honoured…  As I have said they are not cases of estoppel in the strict sense.  They are really promises – promises inteded to be binding, intended to be acted on, and in fact acted on.”
•    “In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it.”
•    Continues – is this promise enforcement, or is it something that looks like promise enforcement, but is not?
•    Is there a meaningful difference between ordering a defendant to keep their promise, and ordering a defendant to act consistently with their promise.
•    Para 3 & 5 address the question (which we would never have to address with consideration)
•    How Binding?
•    The tenant had the audacity to argue that the promise was for the entire 99-year lease.
o    Lord Denning says no.  Will enforce the promise to some extent, but not that extent.
o    Says that the promisor can take back their promise to this promise

Reset.
•    It may be that the promisor can take back their promise
•    Estoppel-based promise-enforcement differs.
•    Promisory-estopple, or equitable-estoppel.
o    A different category of estoppel.

Next class:  Down to D & C Builders v. Rees

On TWEN is last year’s midterm.  Address questions 2 & 3 by way of sample.

[It’s been awhile…]

page 311 – review Foakes v. Beer
…long line of sorrows springing from this case…
•    Pinnel’s Case:  A debtor’s promise to pay a creditor a lessor sum is not consideration
•    Foakes v. Beer not altogether satisfactory – note that judges both express sheepishess at their ruling.
•    Note 1 page 311 – Mercantile Law Amendment Act R.S.O. 1990 – intended to overrule Foakes v. Beer.
o    Passed in ON the year after Foakes v. Beer.  Also passed in B.C., AB, SK, and MN (Western Provinces).
o    Rare for a legislature to take steps to reverse a ruling
o    The Atl. Provinces still use Foakes v. Beer.
o    Must understand the hazard of the rule of this case.
•    Think of how Roffey Bros. would apply to Foakes v. Beer.
o    Courts said did not apply.  This is because of precedent.  Foakes was a HoL decision, whereas

Estoppel
High Trees p 315
•    Denning takes time to say that if the other view of estoppel prevails, would undo Foakes v. Beer (indirectly, but estoppel route)
o    Would estop the creditor from acting against the debtor in such a case.
•    Says it again in Combe v. Combe p 318
o    Again, not a Foakes v. Beer case.

D. & C. Builders Ltd. v. Rees
•    Denning ought to end this case with a vidincation of the stance of estoppel.
•    Does not.  The debtor loses.  The creditor triumphs.  Why?
•    Explained against rule of Foakes v. Beer.
•    Must examine against backdrop of estoppel
o    Remember that this is promissory estoppel.
•    Recall that when Denning ‘invented’ this in high trees, the reach of the doctrine was unknown (p 316)
o    Combe v. Combe – Denning pulled back from the potential effect of his own words.
•    Affirmed the principle of promissory estoppel, but added *‘provinded that the promissee is not invoking estoppel offensively [is not suing on the basis of estoppel!]’*
•    Sword / shield distinction.
•    Now on to D. & C. Builders.
•    From structure of the case (fact that it is three judges, all of whom issue agreeing judgements), see that the judges agree on the result, but not how to get there.
o    Same as in Brophy Bros.?
•    Facts of D. & C. Builders – builders do a job for the defendants who claimed shoddy workmanship, and could not pay the £482 balance.  Offerered £300, which the builders had to take as they were in financial trouble.
o    Is the ‘agreement’ to take the £300 binding?
•    Is this a case of ‘promise intended to be relied on, and then relied on’?
•    Denning, in High Trees and Combe v. Combe, has led us to believe that it will – but it does not.
•    Note paragragh 2 page 323:  facts.  “At this stage there was no dispute as to the work done.”
o    What is the significance of this?
o    From Stilk, if prior to entering into the negotiation, there had been a legal dispute between the two sides in regards to how much the Reeses properly owed (with potentially shoddy work in mind), then could  have compromised / settled on £300, and it would have been binding.
•    Each side would have bargained to give up legal claim agianst the other.
•    However, when the fee was reduced, there was no legal dispute
•    For some reason, the complaint that Mrs. Rees makes at top of page 324 does not count – does not seem to have been in correct form?  i.e.  We do not owe you this money because the workmanship was not up to par.
•    Why does estoppel not come to the rescue of Mr. & Mrs. Rees?
o    The court does not allow them to estop the creditors from asserting their strict legal rights to the full balance owing.
o    Why can they not use estoppel as their shield?
•    Mrs. Rees had overstepped – p 325 para 10 – “She had no right to say any such thing.”  She had no right to threaten them with non-payment, knowing that they were on the brink of bankruptsey…
•    This is odd.  Obviously do not normally have to be altruistic in negotiations.
•    Bell:  Don’t get distracted by this point, because it is so strange.
o    Think rather of the larger point – Denning reminds us of High Trees – estoppel doctrine is an equitable doctrine.  EVERYTHING EQUITABLE IS DISCRETIONARY.  This means that the court can exercise its discretion in withholding what it might otherwise grant.
o    Traditionally say law is the realm of rights, and equity is a realm of discretion (not rights).
o    Note para 9 page 325 – “Equity has stretched out a merciful hand to help the debtor…”
o    Para 10 – ‘not going to do it here though.’
o    Note:  Promissee cannot sue on promissory estoppel; Promissory estoppel is equitable and therefore discretionary.
•    To accept Denning’s hint in High Trees and Combe, that promissory estoppel would get one out of rule from Foakes v. Beer, then Dankwerts L.J. and Winn L.J’s reasons for decision might be startling.
o    Do not acknowledge awareness of the idea of promissory estoppel as applied in high trees and Combe.
o    No hint that promissory estoppel might have applied.
•    Lord Denning’s decision from this case is the most famous and referred to.
o    Does not, however, carry a majority
o    What does the case stand for??
o    Question of whether estoppel will get one out from under rule of Foakes v. Beer remains unanswered and ambiguous.
o    Consult readings on reserve…

Waltons Stores (Interstate) Ltd. v. Maher
[Bell:  “The last challenging case of the term]
High Court in Aus.  Seems to be their Supreme Court.
5 judges – 4 wrote…
•    This case seems to abolish the sword / shield distinction
•    Seems to say that there are cases where the promissee can sue on the basis of promissory estoppel.
•    Further difficulty:  in this case, the counsel for Mahar … in this case there isn’t even a promise … the challenge for the counsel for Mahar is to first show that there was an express promise where there was none.
•    Implicit promise gathered from the facts.  Showed that there was in effect a promise.
•    Facts:  Waltons wanted to develop a site for shopping centre.  Bell guesses that Waltons is likely an Aus. Walmart.  Mahars are landowners – there is a site with a building on it, which Waltons wants to occupy as tenant.  Mahars is required to destroy the existing building, and to build a new one to Waltons’ criteria.
o    Get close to a deal.  Waltons’ solicitor sends a draft lease to the Mahar’s solicitor which is pretty close to final form
o    P 333 – notes that have not obtained Waltons’ specific instruction, but would advise the very next day if there was any disagreement.
o    There was no contact the next day, nor for ‘some months’
o    Maher’s, knowing that Waltons’ could only use a new building, tore down the old building in the interim, and began building Waltons’ custom-designed building.
o    40% complete by the time Waltons’ solicitors sent a letter saying that the plan was not going ahead.
•    Before getting to estoppel, must get to a promise.
•    Here there had not been a promise, as such.
•    Somehow, all of the courts accepted that Waltons’ conduct amounted in effect to a promise [do not get hung up on this – Bell]
•    At trial and at first level of appeal, the Mahars won, not on basis of promissory estoppel, but on legal estoppel
o    Legal estoppel turns on representation of existing fact…
o    Whereas in high trees, it was not about existing fact, but on the basis of a promise.
o    Here, this is a case of enforcing a promise
•    Combe v. Combe – sword / shield distinction.
•    Para 16 & 17 page334
o    Para 20 – begin argument by saying that looking back at high trees, ignoring combe, high trees is broad enough to cover this situation.
o    However, thanks to Combe, promissory estoppel is a defensive equity, not an offensive equity.
•    However, being defensive does not mean that it may only be used by defendants…
•    Unless court intervenes, would be to the promisee’s detriment.
o    Trad. objections to using estoppel as a sword is that it would supercede the Doctrine of Consideration.
o    Next trad. objection is that enforcing consideration as promise is to enforce gratutious promises
•    The law does not enforce gift promises.
•    Now to say that all promises without consideration are gift-promises (though within high-theory is high true) is slightly misleading, but this is an objection.
•    Question is that if we did start enforcing gifts, where would it end?
•    Para 23 & 24:
o    23:  talk about Crabbe v. Arun District Council
•    Crabb owned land.
•    Has access to the street (let’s say, at the South)
•    Another access at the North.
•    Crabb gets offer to divide the land
•    Local municipality tells him that though the south access is the normal access to the land, he can use the north access legally.
•    Sells parcel B – the south part of the land.
•    Doesn’t bother reserving a right-of-way, because he has been promised the north access by the municipality.
•    After this deal goes through, the municipality tells him that the North access cannot be used.
•    He sues them, resulting in this case.
•    Crabb has a promise that he wants to enforrce:
•    No seal
•    No consideration
•    Must rely on estoppel – a promise intended to be relied on, and relied on.
o    Problem of course is that he would be using estoppel as a sword not a shield.
o    This case came before Denning…
o    Denning said, “There are estoppels, and then there are estoppels…”  Some can only be used defensively, some others can be used offensively.
o    Allows Crabb to estop the Arun District Council from going back on their promise.
•    This is referred to as proprietary estoppel
o    So-called to distinguish from ordinary promissory estoppel, and because it involves ownership of land.
o    Not subject to sword / shield principle such as promissory estoppel.  Exception to Combe v. Combe rule.
•    This is the first thing that the Aus. court points out – that the sword / shield principle is not one that the law enforeces rigoursly.
•    Para 24 – look at the U.S. and how they handle estoppel
o    S90 of Restatement on Contracts
•    Restatements are not statutes.
•    They are literally restatements by legal thinkers of what they believed the law should be (American Law Institute).
•    “A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such ation or forbearance is binding if injustice can be avoided only by enforcement of the promise.  The remedy granted for breach may be limited as justice requires.”
•    U.S. verstion of estoppel – pitched more aggressively.

Next day – will look up to Formality – At least as far as The Seals.

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

Assignment #2 – “major” research essay.  Due March 13th (tentative).
Will settle on questions in the next week.  Can suggest our own topics.
Read commentary on Dec. exam on TWEN.  Can see Bell about your particular exam.  Would like to see anyone who did ‘poorly’.

Remedies
•    In our legal trad. we usually do not give the victorious plaintiff specific performance.
•    For the most part, translate the promised performance into an award of money.
•    Will study how courts approch this “translation”.
•    Money as a substitute for the performance, because to make the def. perofm literally for the plaintiff would often be to force two adversarial parties to then cooperate.
•    Allows the pl. to go out into the marketplace and buy a replacement performance.
•    Damages – the money remedy that courts award victorious plaintiffs.  This (says Bell) is the only time to use ‘Damages’ with the ‘s’.  ‘Damage’ (no ‘s’) is the injury itself.  This appears to be something that Bell will nail us to the wall for.
•    Though money is the principle remedy used by the courts, there are alternatives.
o    All non-damages remedies are lumped under equitable remedies
o    Damages was the only remedy with the courts of England before the judicature act awarded.
o    Specific performance – some occasions where no amt. of money would give the pl. what he/she wants.  Ex:  If one were buying the Mona Lisa, no amt. of money would allow the pl. to buy a substitute in the marketplace.
o    May want the def. to be prevented from doing something, as once done, it may not be undone.
•    For instance, the publishing of something injurious to one’s reputation, or a neighbour building something that would irrevocably subtract water from one’s land or alter a landscape forever.  In these situations, the pl. desires an injunction – an equitable remedy.
•    We will, however, begin with legal remedies.
•    Law is the realm of right.
o    Equitable remedies are discretionary, not of right.

•    Note quote on page 5 from Wertheim v. Chicoutimi Pulp Co.
o    Damages is not a science… it is an art…
o    Try to give the pl. a money substitute award.

Page 28 – Fuller & Purdue
•    From legal realist period of 1930s.
•    Subject of the article is the reliance interest in contracts.
o    Our excerpt consists of the preface.  The establishment of the vocabulary of the article.
•    Enunciate 3 interests which a court might be seeking to vindicate when seeking to award damages to victorious plaintiff.
•    Contract law is the embodiment of laissez-faire economics.  Mirror-image of Darwinian conception of economics.
•    When people in the 30s began questioning the usefulness of an economic system which led to monopolies; when laissez-faire¬ produced the Great Depression, the public response was the invention of the regulatory/administrative state – ensured that the economy was regulated, in an effort to avert future catastrophes.
•    Legal realists attacked and reconceptualized “the legal heartland” of laissez-faire – contract law.
o    The legal realist approach can often be reduced to what courts do, that is the law.
•    If one wishes to understand the law of contract, one should not look at a treatise on contracts – one should look at what courts do in concrete cases.  Judges often deviate from supposed rules.
•    If real judges in real cases do not use supposed rules, then is a rule a rule?
•    Lord Denning, for example, in High Trees, cited a group of cases since the judicature act in which courts had enforced promises without consideration.  He pointed these out, and gave the phenomenon the name of equitable estoppel.
•    Legal realists were ‘terribly empirical’.
o    Study the law in action.

•    Fuller begins by saying that everyone says that at the end of contracts cases courts contract expectations into monetary terms.  Tries to put the vic. pl. into the same position they would have been had the def. fulfilled their obligations.
o    Label this the expectation measure of damages.
•    Great contribution of this article is to point out two other common approaches to awarding damages (two other interests).

Reliance Interest
•    Commonly, courts do not award expectation interest at all.  In many, courts award what Fuller labels the reliance measure.
•    This differs in that it tries to put the pl. in the pos. that he/she were in before the contract.  Try to make the victim “whole” again.
•    Plaintiff has not only not gained, but has in fact lost something by non-performance of the contract.
•    Para 7, page 30.  The pl. has, in reliance on the promise, changed his position.

Restitution Interest
•    See Deglman v. Guaranty Trust
•    Happens when, in the context of the contract, the pl. has conferred a benefit on the def.
o    The pl. has been impoverished to the extent of this conferral, and the def. has been enriched to the same extent.
o    Court forces the def. to ‘disgorge’ the benefit conferred; to restore the benefit to the pl.
•    If the court does this, it is trying to prevent the def. from being enriched unjustly.
o    In Deglman, court said that the nephew had conferred a benefit on his aunt (and not out of the goodness of his heart).  To prevent unjust enrichment, put his services into a dollar amount, and had the estate disgorge this amount.
o    Could not give him his expectation, as it was non-enforceable.  Instead based the decisionon equity and unjust enrichment.
•    Restitution rarely arises inside of real orthodox litigation.
o    Usually arises while trying to clean up “near-contract” situations.

Economic Analysis of Law
•    Response to Lord Atkin.
•    Page 38 – the basic insight is that the propositions of the common law are economic propositions (as, they would say, are moral propositions [such as, ‘thou shalt not steal’]).
•    The law that exists, has evolved as it has, because it is conducive to economic activity.
o    Bell calls this the “is” proposition
•    The “ought” proposition:
o    Judges ought, in deciding new cases, make the decision that is most conducive to economic efficiency.
o    Make liable the person who could have most cheaply avoided a tort, for instance.

Peevyhouse v. Garland Coal & Mining Co.
•    Garland leased property from the Peevyhouses for the purposes of strip-mining coal.  A clause in the contract obliged Garland to perform “certain restorative and remedial work” at the end of the lease period.  All other obligations of the contract had been lived up to by both parties, but for this one.
•    The cost of performace was expertly estimated at about $29,000.
•    Ma and Pa Peevyhouse win in contract law.  That is not in dispute.
o    Issue: Should the judgment for the plaintiffs be in the amount equal to the cost of performance of the remedial measures, or for the amount that the value that the property was diminished?
o    The debate is over how to give the Peevyhouses their expectation.
•    By spending $29,000 to restore the farm to its “original” condition, its value would be increased by $300.
•    Would awarding the Peevyhouses the $29,000 simply be awarding them an unjust windfall?  Would they restore the property themselves, or pull up stakes and move to Florida?
•    The value of the land to the plaintiffs might be quite different from the actual fairmarket value.

There is no area of contract law in which there is more of a disjuncture between theory and practice, than remedies.
Here, the debate is not over which measure to use.  They both use the same measure, but in different ways.  Remedies jurisprudence is full of sub-jurisprudence.

For Next Monday, do Anglia Television, Bowlay loggin, Jarvis.

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.