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.

Contracts and Torts
•    The relevance of tort principles and contract principles differ in different scenarios.
•    when trying to determine whether a pre-contractual utterance is of legal significance, and whether that significance sounds in contract or sounds in tort, it is an either/or choice.
•    Most pre-contractual utterances don’t have any legal significance, but supposing it does (it induced the subsequent contract) that legal sig. is in one or the other.
•    It is either a statement/representation (any legal significance it has will only be in tort).
•    OR it is a promise/warranty (any legal significance it has will only be in contract).
•    Possibilities:  No legal significance; legal sig. in tort; legal sig. in contract
•    This is not a choice.  A pre-contractual utterance has a true characterization.

Murray v. Sperry Rand Corp.  (page 673)
•    Breach of the collateral contract, not the contract of purchase and sale.
•    Entering into the principle contract for purchase was the consideration and the acceptance for the collateral contract.
•    Manufacturer:  After dealing with the Canadian distributor, judge turns his eye to the U.S. manufacturer, who also printed the brochure upon which the plaintiff relied.
•    ¶10 – “representations” – about to tell us that the representations are assurance about the future.
•    Does not formulate how the promises get into the collateral contract.
•    Became a unilateral offer:  “If you offer into a contract to purchase our machine, it will have these characteristics.”
•    [note that there are 3 collateral contracts resting on the shoulders of the main contract here].
•    In general, it would not be true that one can be liable for breach of promise even though the promise is not inside a contract…
•    has just held them liable for breach of promise
•    ¶s 10 &11 are contradictory.  10 – says there is a contract.  11 – says that may be liable for the promise even though no contract.
•    “would be better if we could cross out ¶11”
•    Breach of promise.
•    Has all of them liable – not in contract, but in contracts collateral to the principle contract.

Esso Petroleum v. Mardon
•    Esso lining up a location for a gas station.
•    Estimated, based on access to an adjoining busy street, that the thoroughput would be 200,000 gallons / year.
•    Before built, local planning auth. forced them to build the pumps where they could not be seen from the front, and gave access only from a side-street.
•    Didn’t change estimate.
•    The person who owned the ‘franchise’ eventually was forced to close his business.
•    The pre-contractual study induced him to lease the location and to pay moneys to esso for the use of their brand and what have you.
•    Suing on the pre-contractual ‘utterances’
•    Must determine whether it had any legal sig. at all  – if so, whether in tort or contract.
•    statement/representation=tort.  Promise/warranty=contract.
•    ¶7, saying the well-trod way around Heilbut, Symons, is to take a statement and say that it is a promise.
•    ¶8 – says that Esso warranted (promised) that the forecast / study was sound.
•    ¶10 – negligent misrepresentation – if not warranty, liable for neg. misstatement
•    ¶11 –
•    courts try to find the intersection of contract and tort.
•    Used to be that the easiest conclusion to reach was that if a contract covered a particular incident, then courts would look to the contract and the contract only to determine the responsibilities and liabilities between the parties.
•    Esso saying that because they chose to define their relationship concerning that site in a contract, Marsden must find a way to vindicate his claim in the contract.  Since they are asserting this, it is likely that there is a limitation of liability clause inside the contract.
•    This is not an unorthodox argument.
•    Denning, here, says that there is a certain type of contract, under which, if the undertaker of the contract breaches is, he falls under the standard of care usual for the profession – can equally be characterized as a breach of contract or tort.
•    Most contracts don’t involve a standard of care.
•    Think of the standard of care of a lawyer to a client.  There is a duty of care to the client due to the retainer, but also under tort.  A lawyer’s negligence can equally be characterized under breach of contract or the tort of negligence.
•    Denning says that Esso’s study was a negligent misprepresentation, and Esso is therefore liable in tort for damages.

V.K. Mason Construction v. Bank of Nova Scotia – page 715
•    Mason doesn’t want to enter into contract to build for Courtot Investments Ltd. unless Courtot’s bank ‘stood behind’ the contract.
•    The Bank writes Mason Const. a letter.
•    This pre-contractual utterance doesn’t involve a contract with the ‘person’ making the utterance.
•    Bank says, “…financing sufficient to cover the constrution of the subject complex.”  page 717
•    rather reckless wording… no limit involved.
•    Based on this assurance, Mason signed the building contract with Courtot.
•    Things went bad.
•    Sued in contract; sued in tort.
•    No good to sue Courtot – insolvent.
•    page 718-719-720
•    719 – contract
•    720 – tort
•    Wilson J.  takes the view that intention was lacking to form a contract.  There was no animus.
•    ¶19 – would be a unilateral contract
•    Does not believe that reasonable business people would construe the bank’s letter as a guarantee.  Reasonable – objective test.
•    ¶22 – Negligent Misrepresentation analysis.
•    Finds that the bank was indeed careless.
•    says overlooked the fact that what Mason was seeking was an assurance that Courtot would have sufficient funds
•    Bank should have known that the letter would be construed as an assurance of something over and above the terms of the loan.
•    Says induced Mason to sign a contract with Courtot ¶24

Read:
page 723-24 – suing on election promises
725 – first time  SCC struggled with… something.  Nunes Diamonds Ltd. v. Dominion Electric Protection.
726 – Queen v. Cognos Inc.

Exception Clauses p. 838
•    Warranty, in its technical meaning, is a sub-contract
•    It has a technical meaning
o    Close reading; strict construction
•    Wallis v. Pratt – “warranty” did not apply to exclude the implied statutory “condition” of the Sale of Goods Act that products must correspond to their description.
o    ¶5 - exclusion of “any warranty of condition” does not avail a seller if there has been a ‘negligent misstatement’
o    ¶6 – in the absesnce of an explicit mention of negligence, a judge is likely to find that exemption cluases do not exclude liability for negligence.
•    Judges believe that it should be very difficult to exclude oneself from the possibility of negligence, and that it must at the very least be explicit.
•    “The rule in Canada Steamships” – adopted this extreme example of reading down.  If an exemption clause could be given a meaning but the meaning was not broad enough to extend to negligence, then it does not extend to negligence.
•    If the exemption clause could refer to something other than negligence, then it is deemed to refer to that thing.
•    P. 839 – Inconsistency.
o    A number of ways that judges tackel ‘internal inconsistency’
•    To say that the provision that the parties agreed on explicitly takes precedence over some provision that is simply there as part of a form-document.
o    The passage on 839 is accurate, but misleadingly simplistic.

Parker v. Southeast Railway
•    A case that refers to the imp. of railway
•    Bottom Page 849 – caput lupinum – “Having the head of the wolf”.  Anyone might legally ‘kill’ them.
•    Railway companies were often the targets of juries, as insurance companies are today.
•    Railway takes the pos. that the passenger signed away their rights.
o    There was a notice on the wall of the cloak-room
o    There were conditions written on the ticket
•    Page 847 – “see back”; several clauses relating to articles left by passengers – “The company will not be resonsible for any package exceeding the value of £10.”
•    Bag could not be found.  Claimed that his bag was worth £24 10s.
•    Mellish L.J. – “In and ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absesnce of fraud, it si wholly immaterial that he has not read the agreement and does not know its content …in the case [where the agreement has been reduced to writing so that the writing is the sole evidence of the agreement without signing it]there must be evidence of the agreement itself to prove that the defendant assented to it.”
•    P said that he knew there was writing on the ticket, but not what the writing was.  Said thought it may have been a receipt ¶3.
o    No question that had he read the writing, he would have been bound.
•    Contract law presumes that people, if given something to read, will read it.
•    Bramwell L.J.
o    For this judge, the question is whether the person who does not read the conditions in a better condition than he who does.
•    Bottom 848 – Mellish’s famous repropositions:
o    ¶3 – 3 propositions.  I am of the opionion there fore that the proper direction to leave to the jury in these cases is:
•    1)  That if the person receiving the ticket did not see or know that there was writing on the ticket, he is not bound by the conditions;
•    2)  that if he knew there was writing, and knew or believed that the writing contained conditions, then he is bound by the conditions;
•    [should this be subject to the condition that the writing be relevant and ‘usual’ to the circumstances?; that anything out of the ordinary would be brought specifically to the attention of the purchaser?]
•    3)  that if he knew there was writing on the ticket, but did not know or believe that the writing contained conditions, nevertheless he would be bound, if the delivering of the ticket to him in such a manner that he could see there was writing upon it, was, in the opinion of the jury, reasonable notice that the writing contained conditions.
•    [Would the purchaser be bound to every single condition on the ticket, or just the not-unusual contractual provisions?  Could they insert provisions to do with seizing first-born children and have done with it?]
•    page 849 – Bramwell L.J.
o    Bramwell is skeptical
o    Proposes that putting it into his hand should be no different than saying “read that” by the porter.  Asks what more the railway company could have done
o    Page 850 – qualifies what he says – says that the market has the answer.  If railway companies (or anyone else) began putting unreasonably terms in their contracts, then the public would hear of it and begin using alternative [forms of transportation, for example].
o    “What if there was ome unreasonable condition… Would the depositor be bound?  I might content myself by asking:  Would be be, if here were told ‘our conditions are on this ticket,’ and he did not read them.  In my judgment, he would not be bound in either case.  I think there is an implied understanding that there is no condition unreasonable to the  knowledge of the party tendering the document and not insisting on its being read – no condition not relevant to the atter in hand.”
•    Important qualification regarding ‘unreasonable conditions’

Note 5 page 851
•    J. Spurling Ltd. v. Bradshaw
o    Post-war case involving 8 casks of orange juice.
o    Most of the OJ disappeared while being stored in a bailee warehouse.
o    Decision of Denning L.
•    “I agree that the more unreasonable a clause is, the greater the notice which must be given of it.  Some clauses which I have seen would need t be printed in red ink on the face of the docuent with a read hand pointing to it before the notice could be held to be sufficient.”
•    “Next it was said that the landing account and invoice were issued after goods had been received and could not therefre be part of the cotract of bailment:  but the defendant admitted that he had receive many landing accounts before.  True, he had not troubled to read them.  True, he had not troubled to read them.  On receiving this account, he took no objection to it, left the goods there, and went on paying the warehouse rent for months afterwards.  It seems to be that by the course of business and conduct of the parties, these conditions were part of the contrat.  In these circumstances, the plaintiffs were entitled to rely on this exempting condition…”

read p 851-852

Thornton v. Shoe Lane Parking Ltd. – page 857
•    sign at entrance:  “All cars parked at ownder’s risk”.
•    Then drive up a ramp and press a button for a ticket.
•    Denning L. finds that the ramp is the offer, and driving up the ramp and pressing the button is the acceptance.
•    Even if the ticker were part of the conditions, how could one be bound by conditions that one could not see until after ‘acceptance’?
•    Same as the conditions posted inside the garage.
•    ¶2 – offer accepted when the P drove up the entrance and had the ticket thrust at him by the weight-sensor.  The contract was the concluded, and could not be altered by any words printed on the ticket.
•    ¶3 - Then gives analogy whereby the ticket machine is a booking clerk ‘in disguise’
o    goes back to 3 questions pose by Mellish L.J. in Parker
o    ¶4 – counsel for the ds admitted that the Ds did not do what was reasonably sufficient to give the P notice of the exempting condition.
o    “I do not pause to enquire whether the exempting condition is void for unreasonableness.”
•    BE CAREFUL.  There is no jurisprudence that allows courts to say that an exempting clause was void for unreasonableness.  Denning L.J. was likely trying to begin this jurisprudence, but it didn’t take.
•    Denning determines that the P was not bound by the exempting condition as there was no evi. that he knew of it.

Page 860 – Signed Contracts
•    “When a documet containing contractual terms is signed, then, in the absense of fraud, or I will add, misrepresentation, the party signing is bound, as it is wholly immaterial whether he has read the codument or not.”
o    Ie:  You signed, you’re bound.
•    Courts often want to save people from their own folly.
o    This causes tension.

For next day:  Tilden, Photo Production.