Contract Law

Consideration
•    Promises – the law does not enforce promises per se.
o    Promises of gifts are not enforceable.
o    The law considers the spirit of altruism rare.
•    What criteria should we use to categorize the subset of promises that attract legal enforceability?
o    What would be a sensible way to do this?
o    The promises which the law should be designed to enforce should be “serious promises”.
•    Non-trivial
•    Or seriously-intended
o    This is approximately the majority approach of the world’s legal systems.
•    The majority of the world uses the civil system
•    In Qc. law, there is a proposition that goes back to Roman law, that a cause is enforceable (from Latin, causa).
•    This is a straightforward approach.  “We’ll enforce where there is a good reason.”
o    This is intuitive.  It is not a technical rule – aligns with the ordinary instinct of ordinary law.
o    This is not the approach that we take.
•    What criteria should be use to categorize the subset of promises that attract legal enforceability…?
o    Could go from the intuitive approach
o    The Roman approach used formality.
•    If ppl want to know that their arrangement is enforceable, then we could have (in our legal scheme), a way to formally attach something to their promise…
•    The act of “attaching” something to the promise could act as a signal that it is meant to be enforceable.
•    Ex:  ‘A promise in writing could signify that a party meant for it to be enforced.’
•    Ex:  Signature – could make it so that something would have to be signed to be an enforceable promise [problem with this is that every contract, in order to be enforceable, would require this – even simple transactions between vendor/purchaser]
•    “stamps” – issued by gov
•    shaking hands, spitting and shaking hands
•    In Rome, the parties stood facing one another, and recited to one another the terms of the contract. Stipulatia
•    Ex:  “I _____, take you _______…”

•    We do not work under this system
o    Exception:  Promises made under seal are enforceable.  This is a hold-over of (at least) the middle ages.
•    In order to give, must have intention (animus) and transfer.
•    (as well as offer, acceptance, and consideration).
o    Some things are not susceptible to manual tradition.
•    Shares (Choses in action) – how does one give a share?

•    Primarily, we no longer use “seals”

•    Scenario:
o    Person A promises person B a plane ticket to Florida.  Person B goes out and makes purchases for the trip, racking up expenses of $150.  Person A’s circumstances change, and the offer for the ticked is revoked.
•    What if Person B sues Person A for the $150, to put them back into the circumstances where they were (it is obvious that they would lose a suit for the cost of the ticket itself).
•    The court, for the most part, does not recognize even reasonable reliance on promises.
o    Our legal system does not enforce any promises that are not contained within a contract.
•    [American language]  The law enforces bargains – something for something – a trade-off.

•    In order to approach these cases, must recontextualize
o    If the problem in front of you has nothing to do with offer/acceptance (more to do with whether there was consideration [I offer you my car for $1000; I accept]), then this type of analysis will get you nowhere.
o    Will need to identify a consideration problem, which will lead to an abandonment of offerer/offeree.
•    “I promise to convey title to my car to you if you pay me $1000.”  “I promise to pay you $1000 if you convey to me the title to your car.”
•    Same sale transaction constructed as an exchange of promises.
•    In a contract, both parties are promisers, and both are promisees.
•    When we try to analyse whether there was consideration, we need to use the language of promisers/promisees.
•    Consideration is what you paid to the other side in exchange for the other side’s promise.
•    Can view the formation of a contract as an exchange of promises.
•    By the time the parties get to court, one party is suing the other (at least).
•    Plaintiff and defendant
•    Plaintiff is always suing in his/her capacity as promisee, and the defendant is defending in his/her capacity as promiser
o    By the time we get to litigation, only one of the original two-fold promiser/promisee relationships is relevant.
o    The one that is relevant is the relation whereby one allegedly promised something to the other, and broke that alleged promise.
o    In a contracts case, every defendant is an alleged promise-breaker; every plaintiff is a disappointed (alleged) promisee.
•    Mu    st understand which of the two promises is broken.
•    All contract litigation (besides the odd exception, of course…), it will always be promisee vs. promiser.
•    “Why is the plaintiff in a contracts case always suing as promisee?”
•    “Why is the defendant in a contracts case always defending in their capacity as promiser?”

Dalhousie College v. Boutilier
•    Boutilier does promise Dalhousie $5000.
•    Dalhousie, however, does not promise Boutilier anything.
o    Yes, they built building, etc., but they did not promise Boutilier that this would be in exhange for this $5000.
o    They promised him nothing – it was not a bargain; not something for something; not an exchange.
o    Even if these buildings, purchasers, etc., had been made on the strength of his promise, that does not retroactively convert his promise into a contract promise.
•    Subscription form:  Does Boutilier not say, “In consideration of the subscription of others…”?
o    Why is this not consideration?
•    His motivation is irrelevant.  Motive is not consideration.
•    They did not promise to rely on his $5000
o    Mere reliance
o    Only kind that matters is “bargained-for reliance” – if they had bargained their ability build buildings for his $5000, it might have been consideration.
•    The difference is how the parties treated the building of the building.
•    Dal did not do it in exachange for his $5000.
•    He promised, and they reacted by building the building – this is not  consideration.
**Nothing is consideration, unless the parties have handled it as consideration.**

“To hold otherwise would be to hold that a naked, voluntary promise may be converted into a binding legal contract by the subsequent action of the promisee alone without the consent, express or implied, of the promisor.” P 357 para 6.

Uncertainty:

•    When we say a contract is uncertain, we mean that there is not enough specificity for a judge to nail down anything to enforce.
•    True that judges do have rules that can be applied to find certainty.
•    Judges make difficult decisions.  Though judges will try hard to find a determination to a contract.
•    There is a point at which the shell of an agreement is so lacking in detail that it is impossible to enforce.

The Agreement to Agree
•    Nothing more than an agreement today that tomorrow we shall agree on something.
•    Judge cannot say what the parties would have agreed had they agreed.
•    It only has the appearance of a contract.
•    Agreements to Agree Simpliciter are bad – naked agreement.  Unenforceable.
•    Not bad if the parties have agreed on a formula whereby the judge can render certain that which is otherwise uncertain, or a mechanism (such as a third party, typically an arbitrator).
•    Arbitration is consensual dispute resolution.
o    Parties have agreed to channel dispute out of court system and into arbitration.
o    2 broad types of Arbitration:  Labour arbitration – usually statutorily provided and imposed by labour regimes.  Doesn’t have one of the characteristics of arbitration – privacy?
•    Non-labour goes under generic term – Commercial arbitration
o    Must remember that an arbitrator is as much bound by the prevailing law as a judge is.
•    How is an arbitrator’s decision enforced?
o    Exactly the same way as a judge’s.
o    “Judgment” is a document which calculates payment, interest, etc.
o    Plaintiff’s lawyer takes it to the Sheriff.  Can seize the property of the defendant to raise the funds for judgments.
o    Arbitration board enforced in same way.  Gives an “award” which looks like a judgement of the court – can again be registered with the Sheriff.
•    Usually refer to the mechanism as an arbitrator.
o    Technically, the arbitrator resolves a legal issue
o    If it is not a legal issue, technically not arbitration
o    Referees and umpires, for example, are different names for someone doing the same thing in a non-legal setting.
•    Agreement to Agree + Mechanism, renders certain what would otherwise be unenforceable.

Foley v. Classique Coaches
o    P 495.  Just because the parties think they have a contract doesn’t mean that they do.  The court decides whether it was and what they intended.
o    “And they worked under it for 3 years…”  Neither here nor there as to whether they had a contract.
o    This case shows that judges will work hard to find an agreement – do not like to disappoint the reasonable expectations of parites.  Do not like to see someone have it “both ways” – have their cake and eat it too.  In this case, would not want the company to get the land and not have to buy their petrol from Foley.

P 497
o    Helpful statement:
o    Notes 7 – diff between relational contract and discreet contract
o    Discrete:  One time deal.  A buy and sell contract, for instance.
o    Relational contract – can last for years, or is a contract in a series of contracts that combine to last for year (ex: a retailer who does all their buying from one wholesaler).
o    Where there is a relational contract courts can more readily find certainty than in a discrete contract
o    discrete |disˈkrēt| |dəˌskrit| |dɪˌskriːt| adjective:  individually separate and distinct

Uncertainty
o    Agreement to agree = bad
o    A2A + Mechanism = good

Silence
o    Better than an Agreement to Agree
o    Courts sometimes will cure gaps like this.
o    1)  If it falls under Sale of Goods Act, for instance.
o    Price, and time of delivery
o    If one has a contract for the sale of goods (e.g.:  contractual rights – the right to buy a car do not apply), and terms are left out (price/date of delivery), the sale of goods act in each province says that the judge can fill in that gap.
o    2)  If the silence is a relatively minor one, judges can fill in the gap, on the theory that they are doing what the parties intended when they formed the contract.
o    3)  If the parties have had a past practice, the court may fill in what might otherwise be a fatal gap, on the basis of past practice.
o    4)  Trade Practice:  If both parties are members of a well-recognized trade, then their (gapped) contract may be filled in based on trade practice.
o    Even though these two parties might never have dealt with one another before, they are assumed to have intended to follow normal trade practice.
o    Mainly remember the first three, in regards to when Silence is not fatal.

“In Good Faith” (IGF)
o    An agreement to negotiate i.g.f.
o    Is this enforceable, or too uncertain?
o    Addressed in Courtney and Fairbairn Ltd V. Tolaini Brothers (Hotels) Ltd.

Courtney and Fairbairn Ltd v. Tolaini Brothers (Hotels) Ltd.
o    Court ruled that despite the “formula”, the word “negotiate” was fatal, rendering the agreement an agreement to agree.
o    If it must be negotiated, then it is not objectively ascertainable.
o    Lord Denning’s judgement (most famous judge of 20th-century) says that it is an agreement to negotiate, which is likened to an agreement to agree.  Not good for practical reasons – how to know what would have been the outcome of the negotiations.
o    Applies general principle that when there is a fundamental matter left undecided and to be the subject of negotiation, there is no contract.
o    Lord Diplock (assenting): points out the area of “dictum” – not part of ratio decidendi.  Says that we can ignore the part of Lord Wright’s part of Hillas v. Argos as it is obiter (dicta).

Walford v. Miles
o    Now dealing with House of Lords – 5 judges present
o    Sueing for the difference between what they would have paid, and what it was actually worth:  £3-million - £2-million.
o    May be something that looks like a contract, but says within it (subject to contract) that it is not a contract. Ie: ‘We do not intend this to be a legal contract / change our legal relationship.’
o    Look at a telephone exchange March 17 – that they allege itself was a contract to continue negotiating until the sale was complete – IGF.
o    It is this contract (the lock-out agreement) that they allege was violated.  Cannot sue on the principle contract, because it is “subject to contract”.
o    Ap’s allege that it was a term of the lock-out necessary to give business efficacy, that as long as the would-be vendors continued to try to sell the business, they would continue to negotiate IGF with the would-be purchasers.
o    Sue on the basis of a contract which they allege was incidental to the contract of purchase/sale.  Was a telephone conversation, so not very exact.
o    Say there was an implied term that they would continue to negotiate IGF
o    IMPLIED terms.
•    Aside:  Contracts have some implied terms.  Usually irrelevant to a dispute, but occasionally instrumental.
•    Some parts of agreements are usually left to implication.
•    There comes a point where the things not made explicit are so obvious that the parties do not bother to spell them out.
•    Ex:  Would “St. John’s” in a contract mean “St. John’s, NL”, or “St. John’s, Caracas”?  It is likely very obvious based on the context.
•    Even in a very elaborate contract, some terms are implicit.  In the case of a non-elaborate  contract, there will be many implicit terms.  Have to establish the implied terms – parties must agree to it.
•    When trying to establish the implied terms (remember the taxi example) must convince that they were clear implications – ex:  The taxi taking the shortest route, and not going to the airport via Woodstock.
•    2 tests:  1)  Business efficacy test:  [Also noted in Dawson – p 448.] In order to give business efficacy to an agreement (make practical sense of), it is necessary to infer some term in the contract, then the court can say that it was intended.  If without the term it does not make business sense, then it can be said that the parties intended it.  The court verbalizes that which they say the parties intended.    2)  Officious  Bystander [noted in Empress towers p. 502]  If a bystander spoke to the parties just after a contract was agreed upon, and asked what an implied term meant, then they would be likely to receive a certain answer (ex: “of course we meant St. John’s, NL).
•    To qualify under these tests, a term cannot be something that one of the parties would obviously have rejected (e.g.: would make business sense, but would have been rejected by one party), then cannot be imposed.
o    The lawyer here argues the business efficacy test – that IGF was implied by both parties.
o    Argue that so long as the would-be vendors (respondents) continued to desire to sell the business and the premises, the respondents would continue to negotiate in good faith with the appellants (would-be purchasers)
•    Aside: “Good faith” – arises in contract law in two contexts:  “good faith” in performance of an already-existing contract, and “good faith” in forming a new contract.
•    In performance – the law does infer that the parties have promised one another to perform their duties in good faith.  Rarely will parties say that they will do something IGF, but it is here a standard implied term (after a contract is formed).
•    In negotiation – in general, courts have said that there is not duty to negotiate in good faith.  One reason is that in contract-law, the law does not enforce promises (only promises inside contracts).  There is only one source – the will of the parties.  How then can one say that there is a legally enforceable duty to negotiate IGF?  So whence would this duty spring?  This is an insurmountable hurdle.

For next day:  Empress, walford and miles, and may finish this first page of syllabus
Come with briefs, as usual.

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.

Privity

•    If C is a stranger to a contract between A & B, then C must fail legal action

•    In a contract between A & B in which C is a beneficiary, the A-B contract contemplates C.  C is still a third party, but not a stranger – is actually named in the agreement.
o    Beneficiary – the recipient of a benefit under the contract.
o    Our system of law treats the third-party beneficiary the same as the third-party stranger.
o    1861 case established this.
o    in earlier cases, C coud sue on the contract
o    once contract theory evolved, C became a victim of the quest for theoretical purity.

•    If A & B form a contract with A working as an agent for C, then C is not a mere third-party beneficiary.  C is a party.  A is not.
•    If A & B have a contract which has not yet been performed (any contract creates private rights – rights are property; choses in action), A has rights against B, and can, if A chooses, “alienate” their rights against B to another party.  Can sell or give incorporeal rights (assign).
o    C gains the rights to what A assigns C.
o    A-C contract.  A had rights under the A-B contract, but sold them to C = assignment.
o    Question:  What rights does C have under the A-B contract?  Suppose B breaks the promise – Can C sue?
•    Equity will allow C to sue B.
•    A is still in the original contract, but so is C.  C could sue B, but might have to sue B using A’s name.
•    Superficially, case would be A v. B,  but would actually be C sueing B.  This is how equity works in this situation.
•    Now there is a statute in every province which simplifies this situation.

Third A-B-C relationship:
•    The trust example
•    A & B have a contract (if unperformed, then each have subsisting rights against the other.  Rights are property.  Choses in action.)
o    A may hold the property (the right against B), not for his or her own benefit, but for the benefit of C.
•    A – trustee (of contractual rights)
•    C – beneficiary of the trust.
•    Referred to as cestqui que trust
o    If A does not act as a vigilant trustee, sueing B for unperformed actions, then C can unequivocally sue B.
o    Here, dealing with property – in the eyes of equity, A’s rights do not belong to A at all.  Belong to C.  Not suing on basis of contract.  Sueing for property.  A has legal title, C has equitable title.

New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.
•    There was a view that courts do not have the authority to change the privity rule, and says that the onus is on the legislature to change it.
•    The tide turned a little in New Zealand Shipping (page 381 onwards)
•    House of Lords, though unwilling to change the rule, softened up on recognizing trust and agency to get around the rule.
o    Did not change the rule – signalled a softening.

London Drugs Ltd. v. Kuehne & Nagel International Ltd.
Page 385
•    Goes much futher than New Zealand Shipping
•    Does in private law something that is rarely seen – grapples with the doctrine itself.
•    Interesting discussion on the issue addressed by Simonds (not the place of the court to change even judge-created laws).
•    SCC addresses the question.  Iocobucci J. says that judges can make incremental changes, but not large changes in well-accepted private-law rules.
•    Agrees that major changes to this would have to come from legislatures – in Canada, this means each provincial legislature, due to the Constitution.
•    Contract between A & B, which agrees that in certain circumstances, B will not sue C.  Shield promise.  Exemption promise.
o    Contrast to contract such as insurance policy where the goal is to confer a benefit on C.
•    Limitation of liability clause.  C’s defence would be based on the contract between A & B.
o    Court reasons that letting C defend itself is less radical than conferring a benefit on C.
•    London Drugs is a bailment case.
o    The bailee is a corporation – a warehouse.
o    Corporations can operate only through human agency – human beings.
o    The employees are negligent in handling the bailor’s chattel.
o    They are tortfeasors
o    The bailor sues the bailee – the human employees of the bailee.
o    Page 385 – the liability clause.
•    The bailor did not pay the additional charge to cover warehouse liability
•    Means, in effect, that the bailor took the risk on themselves.
•    In the suit against the employer (the warehouse) the warehouse was covered against liability by this clause, and was liable for only $40.
o    What of the employees?  Question of whether they were shielded.
o    Note:
•    1)  The reciprocity objection:  would allow a person to sue on a contract when that person could not be sued on the contract.
•    Lack of reciprocity
•    This is a trad. objection allowing C to sue as a third party.
•    2)  A & B contract.  One of the rights is to change their contract (though this is sometimes tricky -  need consideration).  As soon as one says that C acquires a right under A-B contract, that seems to inhibit A & B’s right to alter contracts.
•    The law does not allow us to destroy other people’s rights.
o    Iacobucci J. addresses these issues.
•    Says that rather than trying to find a way around the privity problem, will instead change the doctrine of privity.
•    Do not think that he tries to find that the warehouse contracted on the right of its employees.
•    Does not find any rel. in privity between the bailor and the bailee’s employees
•    Allows the employees to have rights even though they are not in privity
•    Says that in an employment situation, when A deals with B, knowing that B has employees, and that the actions can only be carried out by the employees, to give B’s employees certain rights under the A-B contract is not so very radical (should not take the bailor by surprise).
•    Much turns on C being an employee of B.
•    Paragraph 46, page 395.
o    “I am of the view that employees may obtain such a benefit if the following requirements are satisfied…
•    limitation of liability clause must, expressly or impliedly extend its benefit to employees
•    the employees seeking the benefit of the clause must have been acting in the course of their employment and been performing the very services provided for in the contract between their employer and the plaintiff (customer) when the loss occurred.
o    Said that the bailor was promising the bailee that if the bailee’s employees committed a tort, they would be shielded from liability above $40
•    ends up (on page 397) saying that by implication, the promise to the bailee covered not just the bailee, but also the employees (note – not saying that the bailor promised the employees – promised the bailee).
•    Cannot find the promise expressed – finds it implied.
•    Top of 397 – employees were not to benefit?  Says the language of the clause means inevitably that the employees were not covered.
•    The test of intention here, then, is a very shallow test.
•    Believes, on the facts, that when the bailor and bailee did contemplate (though not expressed) that the employees would be shielded from liability.
•    In the context of employment, employees can raise defences to lawsuits – the SCC has made an enormous practical and symbolic inroad into the doctrin of privity.
•    NOT saying that the employees were parties to the contract – saying they were intended beneficiaries.
•    As such, can invoke this defensively as a shield.  Still would not allow this to be used offensively.
•    The reason courts do not take the trust or agency argument and make them cure-alls is just because they would be cure-alls

Read up to Law Reform Act for next day.
Monday’s class will be review.
Can have another review class on Tuesday – 12:30pm tentatively

Writing
•    Contracts do not have to be either written or oral
o    They can be party written or party oral.
•    All common law jurisdictions have adopted some form of the Statute of Frauds
•    To what does the statute of Frauds apply?
o    What contracts are caught by the contracts?
o    What contracts are within the statute?
o    Chiefly 2 types in ordinary practice that are caught:
•    Contracts of guarantee (or suretyship)
•    When one is a guarantee or surety, one is making oneself answerable for someone else’s legal debts or wrongs
•    One says that even thought one is not the tortfeasor, one will pay the victim for the tortfeasor’s actions
•    The law looks at this as rare, and therefore wants to be very sure that someone did mean to do this – wants to see it in writing.
•    Explains why contracts of guarantee have to comply with the statute of frauds.
•    Banks take the most guarantees – want everything in writing anway.
•    Contracts in issue of land
•    Contracts in sale of fee simple have to be in writing, obviously enough
•    The statute is not confined to fee simple
•    It is confined to interest in land
o    Profits a prendre, etc.
•    Not validly conveyed unless it complies with the statute.
•    Lawyers get sued a lot because they forget that an option to obtain land is an interest.
o    If not done in writing, does not comply with statute of frauds.
•    Keep in mind that statute of frauds applies not only to FS and life estates (and fee tail), but also to anything that is an interest in land, including the option.

•    In most provinces, there is another category – “contracts not to be performed within a year.”
o    The jurisprudence is an exotic one
o    The drift is that if the contract could possibly be performed within a year, then does not apply.
o    Only contracts that could not possibly be performed within a year.

•    If a contract must comply with the Statute of Frauds (page 233)
o    “No action shall be brought…”
•    Note:  Unless the contract is in writing
•    Does not mean that the whole contract in question has to be in writing, only that enough of it has to be in writing.
•    Likewise, signed does not mean “signed” necessarily.  Can be printed, pre-printed on a letterhead – the court might well say that this is enough.
o    Could even be on a cheque – even if in the memo “re: purchase of land” might be enough to satisfy the memorandum in writing requirement
•    Law requires that certain narrow categores are satisfied, but once they are, makes them easy.
•    Quite easy on finding that the requirement has been met, in order to not simply fail valid contracts on technicalities.
o    Make the satisfaction extremely elastic.

•    “No action shall be brought” are the most elastic words of the statute.
o    Can’t sue on such a contract
o    Says plaintiffs cannot sue on such a contract
o    Doesn’t say, “there isn’t such a contract”
o    Logically, implies that the contract is there, but cannot be invoked affirmatively.
o    If somehow a defendant could defend him or herself based on this contract…
•    For example, to explain why they built their castle on Blackacre
•    The defendant could invoke the existence of the contract
o    Might be able to raise an estoppel based on such an agreement, but cannot sue on it.  Another example of a shield but not a sword.

•    Original Statute of Frauds said that contracts above a certain value had to be in writing.
o    Was taken out of the SoF and put into Sale of Goods Act
o    Was a nuisance, because the value probably hadn’t changed since 17th century.
o    The English figure was originally £10 – was, in the 17th century, a staggering amount.
o    Was translated, like many, many English statutes, into $40CA.
o    Most provinces (like NB) have repealed it.
•    Ontario only in 1994.

First propostion:      Few have to be in writing
Second proposition:     Even if yours does, courts are liberal in interpretation.
Remember that contracts which have to comply with the statute that fails with the statue, does not fail as a contract, but just means that pl.’s cannot sue.

Doctrine of Hard Performance
•    A judge-created exception
•    Even though a contract may be caught by the statute, and non-compliance has happened, still, if one falls within an exception, the court will say that you did comply
•    The doctrine of hard performance
•    If can show that the contract has been performed in part by the time of a law suit, then will not be out of luck.
•    Creates a category of contract that otherwise would fail on a technicality, that do not fail on a technicality

Doctrine of hard performance – says that if the plaintiff can show that the alleged contract was partly performed so that it cannot be explained what the parties did except to say that they did it under contract, then the court will use what was done as existence of that contract.

Page 238 – example

Deglman v. Guaranty Trust Co. of Canada and Constantineau [1954]
•    The aunt thought that she promised to give her nephew the house in exchange for his little services.
•    He did do the services – years later, she died, but the will did not note that the house should be left to him
•    He sued the estate
•    The court noted that even though she thought she was giving him the house, she was in fact entering into a contract with him
o    His consideration was the services rendered.
o    A contract made within a lifetime take precedence over a will.
•    Page 239, the court turns to the doctrine of hard performance.
•    SCC says no – in order for an action to count as hard performance, must be uniquely referable to the existence of that alleged contract.
o    must have an unequivocal character.
o    Only way to account for the behaviour must be to resort to the existence of a contract.
o    Says the nephews actions do not constitute this.

•    This case emphasises that the doctrine of hard performance is interpreted quite narrowly.
•    Page 240, send him away with the consolation prize of $3000 (a great sum at the time)
o    We will come back to this in January to look at remedies.

•    The notes after the case show that English courts have moved away from the idea that the acts must be unequivolcally attributable to the existence of a contract.
o    Page 241-242 Steadman v. Steadman case.
o    Say that we must interpret on the balance of probabilities.
o    Yes, must be referable unequivocally, but we judge this on the balance of probabilities.
•    This considerably lowers the barrior to finding hard performance.
•    Bottom of page 242-243-244
o    Loosening of hard performance in Canada?
o    Editors imply that the Canadian courts will follow the English courts, but haven’t done so yet.
•    Even if a contract is caught by the statute, even if one hasn’t literally caught by the statute, then the doctrine of hard performance still gives hope.
o    Oral evidence is admissable to explain what the contract was, once courts have accepted the doctrin of hard performance as applicable.

Third Parties – Privity

Contract between A & B
A promises B the title to car for $1000
B promises A $1000 for title to car
•    A does convey to B the title to the car
•    B has not paid A $1000
•    A meets B to discuss
•    C is a bystander.  Decides on his own to sue B as a promise-breaker to force him to keep his promise.  May even establish a foundation for the suing of promise-breakers.
o    C v. B
•    Will not win.  C is not the promissee.
•    A contract is a private arrangement between [A & B]
•    Each has assumed obligations voluntarily
•    C is not in privy to the contract.
•    C did not give consideration.
•    Cannot enforce any promise against any promisor without consideration

A promises that when B dies, will pay a benefit to C.
B promises to A to pay premiums during his lifetime.
•    B dies
•    A does not pay the benefit to C (the beneficiary)
o    C v. A
•    Promise broken
•    2 objections:
•    C is not the promissee
•    C did not give consideration

•    The common law treats perfect strangers and intermeddlers (as in example 1) the same as beneficiaries.

What if one person makes travel arrangments for a group, and one of that group is the victim of a breach of contract, from the carrier, for instance.
•    Only a person who is party to a contract can sue – Dunlop Tyre
o    Page 378-379 – HoL invited to overturn Dunlop Tyre
•    Lord Denning sitting at this time
•    Would have relaxed the doctrin of privy to allow the intended beneficiary to sue – minority
•    Answered by Viscount Simonds
•    “For to me heterodoxy, or as some might say, heresy, is not the more attractive because it is dignified by the name of reform.  Nor will I easily be led by an undiscerning zeal for some abstrat kind of justice to ignore our first duty, which is to administer justice according to law, the law which is established for us by Act of Parliament of the binding authority of precedent.”

Free Agent
Must understand 3 analyses.
Not really exceptions to privity problem
Mean, in fact, that if they are true, there is no privity problem.
•    1)  Agency – if in a contract between A & B, it turns out that A was acting for someone else (for example, a corporation)
o    principal
o    C is the corp.
o    In fact, C was always a party to the contract.  It was never an A/B contract.  It is a C/B contract.
•    2)

For next class, read notes page 381
Read case page 384
Read London Drugs page 385