Contract Law

Consideration:
•    Number of plausible ways to look at the different types of agreements that the law will enforce
o    In common law, we enforce almost none of these
o    Consideration:  The type of promises that we enforce end up coinciding with what would be looked at if we said we would enforce “serious promises”, etc.
•    Requires evidence of an exchange.  If an exchange occurs, it ought to be fairly conspicuous.
•    Has an elemet of formality.
•    Although it is at first glance eccentric and non-intuitive, it does largely yield the same approach as if we had taken a more intuitive approach.
•    Analytical vocabulary for consideration as a problem:
o    Must approach the problem in a certain way.
•    Who is the offerer, who is the offeree?
•    Analytical tools involved the vocab of promiser and promisee – not the equivalent of offerer and offeree, in any way shape or form.
•    They are incommensurate ideas.
•    At the formation of a contract, we can conceptualize the formation of a contract as an exchange of promises.
•    If each party is receipt of a promise from the other, then we have two promisers and two promisees
•    This is the formation perspective.
•    But by the time time has passed and we have entered litigation, only one of the orginally dual promiser/promisee relationships is relevant.
•    One promisee sues one promiser.  This is the promise that the promisee must show that they gave consideration in exchange for.
•    This is the promise that has allegdedly been broken.
•    This tells us what the relevant consideration was.
•    Must show the court that the relevant consideration was giving.
•    In a contracts case, the plaintiff is always the promisee; the defendant is always the promisor.
•    The relevant consideration is the one that the promisee must show that he provided to the promisor in exchange for his promise.
o    Our legal system only enforces bargains.
o    In our legal system, a promise of consideration is as good as consideration – this explains how offer/aceptance can result in a binding contract.  The law says that a promise of title (for example), in exchange for money (for example), is equivalent to having made the exchange.
o    There is virtually no reason, but the alleged reason is that the promise is as good as consideration, because the alternative fulfilling the promise is to be sued (and have the court impose payment).
•    Great conclusion:  The relevant consideration is the one that the pl. promisee must show that he/she promised to exchange with the def. promisor in exhange for the defendant’s promise.
•    Dalhousie – one cannot look at just anything and decide that it’s consideration.  Dal built buildings and hired teachers (in theory) on the basis of this pledge, and yet it was not consideration.
•    The point made by the scc is that Dal did not bargain the building of buildings.  It received Arthur’s promise, and then built buildings in response.  It did not exchange the building of buildings for the promise.
•    Cannot be made in reaction to a promise – that is not consideration.  “Here’s a plane ticket.”  “Wow.  Thanks.  I’ll give you some money.”  This is not consideration.  It is a reaction.
o    The essence of consideration is that it won’t be such unless it was exhanged in return for the promise.
•    P 357:  “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.”

Hamer v. Sidway
•    Is a case where one might at first thing that there was not consideration, but yes indeed there was.
•    The “assignee” in this case – a right is a species of property.  The nephew has sold his $5000 claim to some money-lender (likely for a much lesser value).
•    Family promises – not addressed, though this was between family, and at a family gathering where they had no doubt been drinking…
•    The facts of the case is not contested.
•    What is contested is the existence of consideration on the nephew’s part.
•    Uncle’s estate argues that he didn’t receive any benefit, but in actuality the nephew benefitted.
•    The law does not recognize “moral consideration” – could not argue that the uncle received the pleasure of seeing his nephew do well.
•    It is enough that the nephew gave up his legal rights based on the promise of his uncle.  This is enough of a basis to constitute consideration.
o    Consideration does not have to be a benefit traded to the promiser – it can be simply a detriment, loss, or responsibility given, suffered, or undertaken by the other (p 258).
o    Can shorten the benefit concurred / detriment sustained formulation to simply detriment sustained.
•    There is not case where the defendant promisee did not sustain a detriment.  All benefit conferred cases are also detriment sustained.
•    In typical contracts case, what one gives up with typically benefit the other.  However, this is not a universal rule.
•    Can take a formula in currie v. Misa and collapse it into “detriment sustained”
o    This is broader.
•    P 261 is a little more concise.  It is, however, useful to take it to the next level.

Eastwood v. Kenyon
•    A case of the guardian versus the husband.
•    Sarah Eastwood left orphaned.  Guardian borrowed money to spend on her upkeep during her infancy.
•    At 21, Sarah got married.  First promised to compensate her guardian.
•    New husband then made the same promise.  Does not complete this promise
•    Must identify the promise being sued on.
o    The relevant consideration is the one that the the guardian bargained to the husband.
o    Only thing that the guardian could say is that he took care of Sarah during her infancy.
o    Could not have actually been made in consideration of the husband’s promise, as it pre-dated the promise by many years.
o    The thing which is consideration was sustained long before the promise being sued on.  Was already in the past.  Could not have been an exchange or bargain as the law demands.  The guardian is remedyless.

For tomorrow:  will return to Eastwood v. Kenyon – will do entire next section of outline. – 3 cases..

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.

Waltons Stores (Interstate) Ltd. v. Maher

Facts:

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

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

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

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