Contract Law

This is the second class.  Last week’s class was replaced by visit to N.B. C.A.

Remedies:  Review from last day
•    Principle remedy for a broken contract is a money-remedy – damages
o    Again, do not confuse damages with damage.  Damage is the injury.  Damages is a technical term for the money remedy awarded by courts.
•    The traditional first principle of damages is that the obj. of the award of damages is to put the plaintiff in the pos. he/she would have been in had the contract been properly performed.  This works on the theory that the pl. can then take this quantum of money to go into the marketplace to buy a replacement for performance.
•    Reliance principle:  To put the pl. back to even.  Calculate how much the pl has relied up on the def’s broken promise… to make the “whole” again.
o    Fuller and Purdue – say that damages could be calculated so as to vindicate what they call the pl’s restitutionary principle.  Often, in pursuance of a contract, a pl. will have conferred a benefit on a def., enriching the def. and impovershing the pl.  Restitution to the pl. in this situation is the unjust enrichment principle, or restitutionary principle.
o    These are not a hierarchy of quantum.

•    In Peevyhouse, both the majority and the minority wish to give the Peevyhouses their expectation, but both camps interpret this expectation differently.

Anglia Television Ltd. v. Reed P. 68
•    Denning L. here brushes aside a traditional problem in contract law.
o    The pl. will not get its expectation here – this is a question of damages.
o    Do not know what the profits of the film would have been.
o    In Fuller and Purdue terms, supposed to put the pl. in the pos. they would have been in had the film been produced, but here, doing so is so speculative that it is in fact impossible.  This is so obvious that it goes largely undiscussed.
o    The courts have a slogan:  The fact that awarding damages may be very difficult does not excuse the court from doing so.
o    Here the pl. is asking for reliance.
•    Problem:  Most of the expenditure for which they seek compensation, was made prior to Reed’s promise.
•    If this is the case, then how can it have been made in reliance to Reed’s promise…?
•    Denning:  “If the pl. claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was concluded.  He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken.” ¶4.
o    Denning here sounds like he is citing a know proposition of law.  It is not.  He is making it up.

Bowlay Logging Ltd. v. Domtar Ltd.  p. 72
•    The twist in this case is that the pl. was losing money on the contract, and was in fact better off having it broken off.
•    In F&P language (and this is the first Canadian case that uses F&P), the pl. is suing, not for their expectation (as they expected to lose money), but for their reliance – the money thrown away in pursuit of a broken contract.
•    The judge does not deny that they can sue for either, but says that the court will not put a pl. into a better position than they would have occupied had the contract been fully performed. ¶4.
o    There is a limit to their recovery under the reliance interest.
o    They would have lost money under the contract.
o    Can give them their reliance, but will make deductions.
o    The court awards, in this case “nominal damages”
•    Any contract victim is entitled to token damages.
•    Unlike negligence, where one is entitled only to the damages one can prove.
•    Contract suit is more like a trespass suit.  Victorious pl. is always entitled to something.
•    Pl. can sue on expectation or reliance theory.  Reliance here would be more than expectation.
o    Though pl. may have that election, reliance recovery may not put one in a better position than had the contract been performed.

Jarvis v. Swan’s Tours p. 92
•    Here the law confronts an invisible emotional injury.
•    Denning notes that the law has had great difficulty bringing itself to a situation where it will award damages for invisible injuries.
o    In this case, the law made a sort of breakthrough.
•    Swan’s Tours’ brochure set up certain expectations of their resort.
o    Whether the brochure promised him these things is an issue.  We will take this up later in the term.
•    Jarvis, after his sub-par vacation, sues for breach of contract.
•    Denning begins by citing two prior railway cases in which he says courts declined to award for mental distress or for “mere inconvenience, sich as annoyance or loss of temper, or vexation, or for being disappointed in a particular thing which you have set your mind upon.”
•    Denning goes on to say, “I think those limitations are out of date.” ¶4.
o    Here lies the basis for the new law.  Denning.  Making it up as he goes along.  What a guy.
•    Denning gives Jarvis twice what he paid for the tour.  The trial judge had given him half his cost.
o    There is no basis for this award of damages.

•    Are employment contracts covered under state-of-mind?
•    Pages 94-97 show the consequences of Denning’s ruling in this case.

Damages:  discussion
•    Divided into two categories:  General and Special
•    General
o    The type that the law presumes a pl. would have to have incurred in the course of the contract.
o    Compensate for damage which the law presumes that such a pl. under such a breach, would have incurred.
o    Can included annoyance, frustration, etc.
•    Special damages are of the type for which one can produce a receipt.
o    Things purchased, etc.
•    Aggrevative and punative / exculport
•    Aggrevative compensate the victim for aggrevated damage.  They are compensatory.
•    Where the breach has occurred in circumstances where the victim of the breach has sustained more annoyance, disappointment, etc. than the norm, then the court can award aggrevative damages to recognize that the victim has suffered aggrevated damage…
•    Punitive damages – Contrasted with aggrevative damages.  When these arise, it is in circumstances similar to aggrevative damages.  Point though, is not to compensate the pl., but to punish and make an example of the defendant.
•    In reading the materials, note that the courts do not like to award aggrevative damages, and really do not like to award punitive damages.
•    When courts do award these types of damages, the damages are most often low.
•    There is one ON case where a civil jury awarded against an insurance company a very large sum.
•    Judges, on the other hand, have had an unwritten vow to not let Canadian civil litigation evolve into that which the U.S.’ has become.

For next day, read the notes.  Of course feel free to read the associated cases.  Read Fidler v. Sun Life Assurance, and Hadley  v. Baxendale.

Heilbut, Symons, v. Buckleton p. 661 (cont’d from last day)
•    Rubber company case.
•    P not suing on the contract itself.  The contract is not a broken one.
•    The complaint is regarding what went on prior to entering into the contract.
•    At trial, P argued that “we are” is a representation; a statement of existing fact.
•    It has legal significance if it turns out to be a misrepresentation
•    At trial, suing in tort.
•    Jury (page 662) said that there was no fraudulant misrepresentation.
•    The P wanted damages.
•    for fraud misrep., 2 poss remedies:  Damages or remedy (leading to recision)
•    Here, recision was not an avail. remedy since the contract was already executed.
•    On appeal, the tactic changed:
•    argued that “we are” was a promise (as opposed to, at trial, a statement of fact).  It was an assertion about the future.
•    Must establish that “we are” is part of a contract collateral to the main contract.
•    The link is that the consideration for the smaller contract is the entering into of the main contract.
•    Unilateral contracts – “if…then” contracts.
•    entering into the contract to buy shares would be both the acceptance and the consideration of the unilateral (collateral) contract.
•    P is suing on the collateral contract, not the main one.
•    The damages for the breach would be the losses on the main contract.
•    ¶5 – acknowledges that this collateral situation is legally possible.
•    It just doesn’t make sense to make 2 contracts instead of the one.
•    The effect would be to increase the consideration of the main contract and the normal way to do so would be to simply add it to the main contract.
•    This sort of contract must be proved strictly, because they are counter-intuitive.
•    ¶6 – saying that there is an absense of evidence in this case of the existence of the collateral contract
•    innocent misrepresentation gives to right to damages
•    saying that if we allowed people to take pre-contractul utterances and to turn them into contract collateral, then we would be doing an end-run around tort law.
•    tort law won’t give damages for a non-fradulant misrepresentation.
•    This would, however, give people a recourse for non-fradulant misrep.
•    ¶8 – quotes Hold C.J.  “an affirmation at the time of the sale is a warranty, provided it appear on evidence to be so intended.”
•    animus comprehendi – concerns the intention to form a contract.
•    contract was argued on appeal because the tort route would not have worked.
Note 2 p665
•    still a leading case.  However, since the time of Heilbut Symons, there have been developments in tort law – development of 3rd class of misreprentation.
•    Hedley Byrne
•    since mid-60s
•    what was once a vast field of innocent mis rep, was divided.  Not innocent means innocent and non-negligent.
•    New class is ‘innocent, but negligent misrepresntation’
•    To prove innocent but neg. misrepresentation, get damages.
•    So today, do not have to prove fradulant misrepresentation – can prove negligent misrepresentation, which is usuall less onerous.

Dick Bentley Productions Ltd. v. Harold Smith Motors Ltd. (page 666)
•    Denning by now had already invented Promissory estoppel (40s), Fundamental breach (50s).
•    Now it is the 60s and Denning decides to take on Heilbut Symons
•    Car dealership.  Salesperson asserts something which ends up not being true – that the car was owned by a German Baron and was driven on 20k miles since its engine was replaced.
•    pre-contractual utterance (this term denotes neither ‘statement’ nor ‘promise’)
•    says, “If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice.”
•    His approach to get around the ‘problem’ of Heilbut Symons is to make it much easier for ppl to classify collateral contracts as such.
•    Gives a path around Heilbut Symons
•    Hedley Byrne wouldn’t be a way around here, since a salesperson wouldn’t be an expert.
•    Denning saying, “You always argue collateral contract.”
•    In effect, both of these contracts cases have been overtaken by the developments in tort law.
•    neither has been overturned.  They are valid, but practically obsolete.
•    Obviated by this cahnge in tort law.
•    Today, the contract route would not be likely to be taken at all.
Murray v. Sperry Rand Corp.  (page 673)
•    Contract to buy/sell a harvestor.  This contract is not in dispute.
•    It is about what legal significance can be given to the pre-contractual utterances.
•    Purchased on reliance of brochure printed by manufacturer and distributed by local salesman and representative of Canadian distributor.
•    Suing 1)  local dealer, 2)  Canadian distributor, and 3)  American manufacturer.
•    Find that the P was induced to purchase based on oral representations of local dealer/representative, and the brochure
•    ¶3 – local dealer.  P was induced to sign the contract by representations made by or on behalf of the local dealer.
•    ¶5 – collateral warranties – unilateral contract; collateral contract
•    “…the breach of which creates liability in damages…”
•    ¶11 – “a person may be liable for breach of a warranty, otwithstanding that he has no contractual relationship with the person to whom the warranty is given…”

Finish syllabus for next day.