The Law and Business Administration in Canada 13 Ed Summary Notes

Part 1 – Law and Its Social and Business Context

Chapter 1 – Law, Society, and Business

The Role of Law

How Do We Define the Law?

Why do we have and need law?1. Protect persons, property, and society as a whole

Prohibits conduct society believes to be harmful Prescribes rules that allow us to get on with our everyday lives

2. Gives government the power to act for the benefit of society Power to provide policing and other essential services and to charge taxes

for these things

Rule of LawEstablished legal principles that treat all persons equally and that the government obeys. EXCEPTION: diplomatic immunity.

Public LawLaw that regulates the conduct of the government and the relations between government and private persons.

Regulates individuals’ interactions with each other Plan and organize affairs Bargain with others for mutual advantages

Private LawLaw that regulates the relations between private persons and groups of private persons. AKA Civil Law.

Influences and controls the behaviour of individuals and society Empowers, influences and controls the actions of the government Influences and controls interaction between individuals

Is It Ever Right to Break the Law?

There are times, but generally the law should be obeyed There are unjust laws should be obeyed due to chaotic consequences if

many people do not obey them. Speed limit is in place with safety in mind Endangered others to save life of her child she would say she was justified

in breaking the law given the circumstances

Is and unjust law really law?

If it is very unjust, no one needs to abide by it

Is there a point in having laws that no one will obey?

Laws must be rooted in the morals of society in order to be effective.

How Does Law Influence Behavior?

Most people understand the need to comply with the law

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Legal Liability

Responsibility for the consequences of breaking the law.

How offensive society finds the crime determines the area of law that regulates the behavior and the types of liability it will attract

Criminal Liability

Responsibility arising from commission of an offense against the government or society as a whole.

Regulatory or Quasi-Criminal Liability

Responsibility arising from breaches of less serious rules of public law, often enforced through regulatory tribunals set up by government for specific purposes.

Civil Liability

Responsibility arising from a breach of private law, enforced through a lawsuit initiated by the victim.

It is possible to attract all types of liability with one offence

Who Makes Law?

The constitutionBasic Law

A constitution that is habitually obeyed by the citizens of a country and that they regard as legitimate and binding.

Created by a monarch or by the government The basic law from which all others draw their power

All other laws must comply with the constitution in order to be valid and enforceable

Legislation

AKA statute law, acts

Statute

A piece of legislation passed by government.

Passed by Parliament and provincial legislatures in compliance with the Canadian Constitution

i. Subordinate Legislation

Passed under authorization of statute by a body designated in the statute, such as a cabinet or a commission

Regulations

Administrative rules implemented by government as a result of authorization given in a statute.

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ii. Administrative Rulings

Rulings handed down by administrative bodies created to hear complaints and applications by individuals, as outlined in legislation

Court Decisions

Judgments handed down by judges after hearing a court case.

Court Law

A collection of individual cases decided by the courts that develop and shape legal principles.

Courts are central to law enforcement Legislation plays small role in private disputes Apply principles of case law developed over courts’ history to deliver

decisions In novel situations, they develop new principles set precident

Courts and Legislation

Courts play important role even where legislation exists Determine if statute is valid and enforceable (based on constitution) Decide what the statute means an is it covers the subject of a dispute

Federalism and the Constitution

Two distinct levels of government, each independent with own sphere of activity – under the Constitution Act of 1867

Powers divided between the two under sections 91 (federal) and 92 (provincial)

If conflict arises, courts determine who has jurisdiction

Ultra Vires

Beyond the powers of the enacting government and therefore void.

Residual Powers

Powers that fall within the federal jurisdiction because they are not expressly allocated to the provinces in the Constitution.

Usually activities developed after 1867 such as telecommunications or air traffic.

Practical problems often overlap the boundaries of jurisdictions

Concurrent Powers

Overlapping powers of both levels of government to regulate the same activities.

When conflict arises, federal legislation prevails Need for uniformity across Canada in areas of federal jurisdiction

Supreme Court of Canada plays umpire role between levels of government Does not easily strike down legislation Respects intent of legislatures

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Only strikes down if it is inconsistent with the Constitution

The Charter of Rights and Freedoms

Became part of the constitution in 1982 Limits aspects of government action and protects human rights

Human Rights

Recognized entitlement encompassing traditional freedoms associated with civil liberty and basic human necessities

Property and civil rights are part of provincial responsibility Relate to ownership of property, contract law, and family relations.

Charter is entrenched in the Constitution cannot be repealed by any ordinary act of legislatures Amendments require consent from Parliament, legislatures from two

thirds of the provinces representing at least 50% of the population of all the provinces very difficult to change

Rights in the charter cannot be infringed upon by ordinary legislation Cannot interfere with right founded on a higher law Supreme Court will strike down any legislation that violates the

explicit rights in the Charter as per section 52 (1) of Constitution Has read more into the Charter to prevent discrimination based on

aspects not explicitly listed in the charter Section 33 allows legislature to override certain other section of the Charter

“Shall operate notwithstanding” clause allows legislation to do this Expires after five years unless reenacted Only do this in special circumstances Not politically easy to override human rights because it sets bad

precedent No rights in the charter are absolute

Section 1: all are subject to such reasonable limits prescribed by law that can be demonstrably justified in a free and democratic society

Statute is usually presumed valid Person must show that one of their guaranteed rights has been

infringed upon by a provision in the statute Statute then presumed invalid

Unless government can show that the infringement was demonstrably justified

Burden

The requirement that, unless a party can establish facts and law to prove its case, it will lose

Charter applies to government and governmental activities has little application between private persons In private sector, rights are a matter of human rights codes passed by the

provinces

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Charter states is applies in respect of all matters within the authority of Parliament and of the legislature of each province not extended to corporations

The Rights and Freedoms Protected by the Charter

Subject to override through use of section 33:

Fundamental Freedoms

2. Everyone has the right to the following fundamental freedoms:a) Freedom of conscience and religion;b) Freedom of thought, belief, opinion and expression, including freedom o the

press and other media of communication;c) Freedom of peaceful assembly; andd) Freedom of association.

Legal Rights

7) Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

8) Everyone has the right to be secure against unreasonable search and seizure.9) Everyone has the right not to be arbitrarily detained or imprisoned.10) Everyone has the right on arrest or detention

a) To be informed promptly of the reasons therefor;b) To retain and instruct counsel without delay and be informed of that right;

andc) To have the validity of detention determined by way of habeas corpus and to

be released if the detention is not lawful.

Sections 11 – 14 deal with rights of those accused of crimes during criminal proceedings

Equality Rights

15.(1)Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

(2)Subsection (1) does not preclude any law, program or activity that has as its object the amelioration of conditions of disadvantaged individuals or groups including those that are disadvantaged because of race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

(2) allows for reverse discrimination NOT SUBJECT TO SECTION 33: the rights and freedoms are guaranteed to men

and women equally. Does (2) violate this?

Not subject to legislative override:

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Democratic Rights

3. Every citizen of Canada has the right to cite in an election of members of the House of Commons or of a legislative assembly and to be qualified for membership therein.

Mobility Rights

6. (1)Every citizen has the tight to enter, remain in and leave Canada(2)Every citizen and person with the status of permanent resident has the right

a. To move to and take up residence in any province; andb. To pursue the gaining of livelihood in any province.

(3)The rights in (2) are subject toa. Any laws or practices if general application in force in a province

other than those that discriminate among persons primarily on the basis of province of present or previous residence; and

b. Any laws providing reasonable residency requirements as a qualification for the receipt of publicly provided social services.

(4)Subsections (2) and (3) so not preclude any law, program or activity that has its object the amelioration in a province or conditions of individuals in that province who are socially or economically disadvantaged if the rate of employment in that province is below the rate in Canada.

(4) gives affirmative action provision to give preference to local workers in areas with higher-than-average unemployment

The Significance of the Charter for Business

Government regulates business through legislation If it violates the Charter, it can be declared invalid

Challenging the Validity of a Statute

Statute is declared invalid if:

Subject matter is ultra vires It violates the Charter

Supreme Court must determine the purpose and effect of the statute

Narrow interpretation valid Restrict meaning to small cases

Broad interpretation invalid Take meaning in all possible ways

Court may interpret it as partially out of the jurisdiction of the government restrict application to fewer areas legislation does not have desired effect

Courts often criticized for taking too narrow of an interpretation Avoid interference with existing civil rights

Constitutional defeat more serious than narrow interpretation.

Defeat constitution must be changed in order to overcome court decision

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Interpretation introduce an amendment to broaden the application of the statute

Chapter 2 – The Machinery of Justice

Classifying Law

To help us understand organize and explain laws that govern us

Business law draws from both public and private law

Substantive Law

The rights and duties each person has in

society.

Procedural Law

Rules that deal with how substantive rights and duties may be enforced.

Lawmakers designate the acceptable conduct and a way to enforce it. Substantive: Right to own property Procedural: How to protect property

Legal Systems: Civil Law and Common Law

Regions of the World Under Each System

Two legal systems around the world:

Roman Law

A system developed by Eastern Roman Emperor Justinian in the 6th century.

Civil Law

A system of law involving a comprehensive legislated code, evolved from Roman Law.

Used in Quebec All law must be collected into a body of legislation called the civil code The code is more important than any individual case decision Always refers to code to settle a dispute

Legislation > Case Law

Common Law

A case-based system of law originating in England and covering most of the English-speaking world. Based on recorded reasons given by courts for their decisions.

Case Law ≥ Legislation

Public Law

Constitutional

Criminal

Taxation

Private Law

Contracts

Torts

Property

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The Need for Consistency and Predictability

Like cases should be treated alike

Judges must be influenced or concerned by previous decisions Reduces the number of cases that go to court The law itself must be fairly predictable

civil law countries try to decided similar cases in similar ways even through they are not bound to do so

Common Law: The Theory of Precedent

Certainty vs. Flexibility

Consistency and predictability are the primary goal of common law judges

Theory of Precedent: follow already decided cases

Stare Decisis

To stand by a previous decision.

Not an ironclad rule Circumstances change, so should the decisions made by the courts

Judges only bound to decisions made by a higher court.

Lower court decisions have influential value only Precedent only bind the same circumstances

Vagueness in these definitions allows judges to draw distinctions between situations and not follow precedents

Distinguish

Identify factual difference that renders precedent inapplicable to the case before the court.

Accommodating Change

Overrule

To declare an existing precedent no longer binding or effective.

To overrule an existing precedent, issue must be addressed by a higher court

Reluctant to override decision by court at the same level takes away from the consistency and predictability

The Sources of Law

The Variety of Sources

Courts Legislation

Government Cabinet Municipalities

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Subordinate Legislation

Law created by administrative agencies whose authority is granted by statute in order to carry out the purposes of the legislation.

Statutes

Codify

Set down and summarize in a statute the existing common law rules governing a particular area of activity.

Statutes to codify existing precedents make the law easier to access In one bill rather than in several cases

Courts often called upon to interpret a statute, whether it applies the facts of a case, and what its consequences are Not likely to apply the provisions if the details of the case are not covered

specifically

Strict Interpretation

Courts apply the provisions of a statute only where the facts of the case are covered specifically by the statute.

Liberal Approach

Statutory interpretation that considers legislative intent, purpose, and history of the stature, as well as the context of the language.

Takes into consideration the state of the law at the time of the passage and the language used when debating the bill

Interpretation Act tells courts to take a fair, liberal and large interpretation of statutes

Legislation Framework

Two main classes: passive and active

Passive

Statutes that change the law Make a formerly illegal activity legal or vice versa

Provides legal framework for people to go about their business Does not propose to supervise or regulate these activities Leaves it to an injured party or enforcement official to complain and initiate

court proceedings

Active Legislation

Gives government power to carry out a program Parliament itself is not the right body to carry out the program

Agencies created through legislation execute the projects authorized by the government

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Subordinate Legislation

Administrative agencies create new law by exercising their regulatory powers

Set out broad or detailed criteria Important regulations require authorizations by the Cabinet in form of

order-in-council Agency drafts regulations and minister responsible for agency brings it

forward for approval Less important regulations can be approved by the minister, head of the

agency or designated officer

Case Law: Judge-Made Law

The Common Law

Case law still represents the bulk of private law, especially for contract disputes

System of Courts

The organization of courts into a hierarchy that designates the responsibilities of the court and determines the importance of the precedent. Usually has three levels: trial, appeal, and final appeal.

Common law is based on the flow of cases from the system of courts, the decisions need to be with a recognized level of court in order to influence other judges decisions

Collection of case law precedents = common law

Earliest decisions made without benefit of precedent had to look to outside sources for direction

Canon Law

Created by the Church, which had its own jurisdiction and courts in matters pertaining to itself, family law, and wills.

Feudal Law

A system of land ownership rooted in sovereign ownership: exchange of land handed down from royals in exchange for military service and loyalty.

Merchant Law

Rules and trade practices developed by merchants and administered by their own courts

As number of precedents increased the need to draw from outside sources was reduced

Equity

Common law system was originally very rigid Needed specific writ to have case heard by court

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Writ

An ancient form required in order to take a grievance to court.

As times changed the appropriate writs were not available, king would hear petitions, make decisions inconsistent with existing common law

Kings chancellor began to take over this job

Courts of Chancery

A system of courts under the king’s chancellor and vice-chancellor developed from the hearing of petitions to the king

AKA Courts of Equity

Created exceptions to common law rules when they were too harsh, created new precedents: called principles of equity

Common law remedies were too narrow (money damages only) and did not meet needs of π

Equitable Remedies

New remedies created by the courts of equity to address situations where money damages did not solve the problem

Courts of equity were prepared to grant equitable remedies Δ who would not carry our the court order would be jailed

Specific Performance

An order by a court of equity to carry out a binding obligation.

Contempt of Court

A finding by a court that a party refused to obey it and will be punished.

Remedies in court of equity were discretionary Depended on the innocence of the petitioner and the hardship suffered Pioneered legal concepts of trust and loyalty and considering the relative

positions of the parties when applying the law

Merger of the Courts

British government decided to merge the courts in 1867, Canadian provinces followed shortly afterwards

Judges are now supposed to apply both equity and precedent

The System of Courts in Canada

Provinces have jurisdiction over the administration of justice Federal government has

jurisdiction over trade and commerce, bankruptcy and criminal law

The Provincial Court System

Deals with most matters of private and public law

Supreme Court of Canada

Provincial Court of Appeal

Superior Courts of

First Instance

Inferior Courts of

First Instance

Federal Court of Appeal

Federal Court Trial

DivisionTax Court 11

Courts of First Instance

Witnesses give evidence and initial judgments are made Topic of dispute determines which trial court it goes to

Inferior Trial Courts

Created by provincial legislation for a specific purpose.

Small Claims Court

Private disputes for small amounts of money Maximum amounts vary by province Procedure is simple cost of taking action is small Consumer and client disputes are handled here

Provincial Division

Decides mostly criminal law Except most serious criminal offences

No jury trials Holds preliminary hearings to see of there is enough evidence to go to

Superior Court trial Some provinces have different division for family law

Superior Trial Courts

Constitutionally created courts presided over by federally appointed judges.

Surrogate Court (Probate Court)

Supervises estates of deceased persons Appoints an administrator to:

Settle affairs of people without wills Determine validity of wills and division of assets Approves accounts of executors and administrators

Some provinces have these as part of their Superior Court system

General Division or Superior Court

Unlimited jurisdiction in civil and criminal actions Federally appointed judges Hears criminal matters, and civil cases out of the jurisdiction of Small

Claims Court Court of appeal for less serious criminal matters heard in Provincial Division

Intermediate Appellate Court

The Cr5t6yourt of Appeal

Each province has one Same function as the Court of Appeal in England

All matters arising out of court of first instance are first appealed here

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The Federal Courts

Supreme Court of Canada

Final court of appeal Hears appeal from provincial courts of appeal and the Federal Court of

Canada Under Supreme Court Act has rule on constitutionality of federal and

provincial statutes Matter has to be of national importance to be granted leave many cases

the Court of Appeal is the final court of appeal

Courts of First Instance

Tax Court of Canada

Hears the appeals of taxpayers against assessments by the Canada Revenue Agency

Only hears tax appeals with simple procedures Decisions may be appealed to the Federal Court of Appeal

The Federal Court of Canada

Trial and appeal divisions Appeals on decisions made by the Federal Court of Appeal go to the

Supreme Court of Canada Disputes concerning ships and navigation, copyright Some concurrent jurisdiction shared with provincial courts

Intermediate Level Appeal

Federal Court of Appeal

Hears appeals from Federal Tax Court and Federal Court of Canada Trial Division

Procedural Law: Using the Courts

Rules of Civil Procedure

The provincial regulations that set out the steps in a private lawsuit, including forms, fees, and timelines.

Who May Sue?

Adult citizens of Canada Non-Canadians EXCEPTION: during hostilities, enemy aliens lose this right Corporations

Foreign ones may be subject to more strict regulation and may need a provincial license before they may do so

Considered a legal person or entity An action is brought on by a person, either for their own benefit or someone

else’s

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Unincorporated Collectivity

A group of persons that in most cases are not recognized by the courts and that may not sue or be sued. EXCEPTION: trade unions may sue and be sued in some places

Standing to Sue

Individuals whose rights have been specifically affected have standing to sue Means must be available to the public to protect their interests if no

government body will do so

Class Actions

One case represents issue felt by a number of individuals Courts reluctant to take away individual’s right to litigate their claim Do not want to clog the system with multiple identical cases Case not worth the cost unless multiple plaintiffs pool resources

Plaintiff (π)

The party that commences a private legal action against another party

Class Action

And action in which an individual represents a group of possible plaintiffs and the judgment decides the matter for all the members of the class at once.

Consumers often commence class actions against businesses Court must approve basis of class action before it can proceed

Identify a common class and common issues Determine that a class action is the preferable procedure

Res Judicata

A case that has already been decided by a court and cannot be brought before a court again.

Judgment resulting from a class action suit cannot be brought before a court again to contest legal liability

Settlement Out of Court

AdvantagesSettlement

An out-of-court procedure by which one of the parties agrees to pay a sum of money or perform an act in return for a waiver by the other party of all rights arising from the grievance

4% civil trial rate Many cases settle out of court

Faster and less expensive than going through the court system Avoids risk that court will rule against them Many actions are settled soon after they have started

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Growing Delay in the Court System

Number of cases going to trial has increased (not percentage) Causes backlog in many cases getting heard

Injured π has to wait several years to get compensation Witnesses cannot recall information as well

Rules have been created to encourage settlement:

1. Parties must attend settlement conferences as part of pre-trial procedure Judges offer opinions on possible trial outcomes and settlement offers2. Parties who do not accept reasonable offers of settlement are penalized If court can show that offer was essentially the same as the court order the

party will be ordered to pay the costs incurred by the other party3. Alternative dispute resolution is encouraged by courts

Procedure Before Trial

Well defined procedure allows courts to work effectively

Action

Lawsuit.

Issuing

Commencing the lawsuit by filing a copy of the statement of claim with the court office.

Serving

Providing a copy of the issued claim to each defendant.

Cause of Action

An event or set of events that gives rise to a legal liability.

Most litigations goes in form of action initiated by issuing and serving a writ or statement of claim which describes the cause of action

Defendant is served so they know what they are being sued for and by who.

Entering (filing) an Appearance

Filing a notice of an intention to consent to action.

Statement of Defense

A reply to a statement of claim, admitting facts not in dispute, denying other facts, and setting out facts in support of the defense.

Counterclaim

A claim by Δ arising form the same facts as the original action by π to be tried along with that action.

1. π sets out in detail the facts that allegedly have given rise to the cause of

action and the damages suffered

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Δ who intends to consent to the action enters and appearance and replies with a statement of defense

π may reply countering the alleged facts presented by the Δ Δ will then counter claim and the claims can be tried together

Pleadings

Document filed by each party to an action providing information it intends to provide in court.

2. The documents are assembled to form the main body of the pleadings Court will refuse to hear “surprise” evidence May demand particulars so a claim may be investigated further

Examination for Discovery

Process allowing either party to examine the other or their evidence in order to narrow the issues.

3. Form some kind of examination for discovery to narrow issues or decide

whether to proceed with trial at all Learn about strength of other party’s case so a settlement decision can be

made if necessary If both are satisfied that the action should go to trial, they ask official to

place it on the docket for next sitting of the court4. Generally, pre-trial or settlement conferences with a judge or mediator are

required after discovery Issues in the dispute are reviewed in an attempt to settle or at least narrow

issues to that the eventual trial will be shorter

The Trial

Burden of proof is on π

Must prove on a balance of probabilities Everyone brings all evidence and apply the law to the facts in favorable way Counsel for π calls witnesses favourable to the client Counsel for Δ can cross-examine the witnesses for aspects of their testimony

that were neglected that would serve Δ position Counsel for π may then reexamine the witness to clarify any points in the

cross-examination Counsel for Δ may also call witnesses

Admissible Evidence

Evidence that is acceptable to the court.

Hearsay

Words attributed by a witness to a person who is not before the court.

Evidence may not be admissible because they do not add to the facts or they are hearsay

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Must separate bad evidence from good After all evidence is heard, counsel for each presents arguments in law that

are favorable to their clients

Reserve Judgment

Postpone giving judgment decision after the hearing ends

Judge may give decision right away, usually reserve judgment to review the arguments and consult other cases

Appeals

Must give notice that they will appeal within a given time frame, usually 30 days

Costs

Who Provides Funds for the Court System

Government pays expenses of sustaining the court system Salaries Maintaining the court buildings

Litigants pay overhead costs Issuing a writ Registering a judgment

Solicitor-Client Fees

Litigants pay their lawyers fees associated with the litigation

Legal Aid

A system where the government pays for many legal services provided to low-income litigants.

Solicitor-Client Fee

Payment for the time and expenses of a lawyer in preparing a case and representing the client in negotiations to settle or in court.

Party and Party Costs

Loser pays rule

Party and Party Costs

An award that shifts some of the costs of litigation to the losing side according to a published scale of fees.

Total Costs of Litigation

Solicitor-client fee is almost always grater than an award of party and party costs

Some times these fees are awarded if the judge feels the losing party behaved unreasonably

If the client and lawyer cannot come to a reasonable settlement of the bill it is referred to an officer of the court

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Contingent Fees

Origins in the United States

US does not follow “loser pays” rule

Contingency Fee

A fee paid for a lawyer’s services only if the client is successful; therefore, no charge if the client is unsuccessful.

Contingency fees developed to give access to litigants who do not have the financial means to pay fees associated with litigation

Criticism

Clogs American justice system with litigants who have small chance of winning

Discourages litigation of small claims Fails to compensate justly the winner whose claim has been vindicated

Use in Canada

Canada was slow to adopt due to concerns that contingency arrangements would:

Encourage unnecessary litigation; Expose defendants to the costs of defending themselves against claims that

have no merit; Encourage clients to agree to unreasonable large percent fees demanded by

lawyer; Cloud judgment of lawyer (becomes stakeholder in litigation)

Was accepted in Canada eventually

Some provinces have limits on the % of the recovery the lawyer can charge.

Alternative Dispute Resolution

Rising delays in court system made informal ways to resolve disputes more popular

Alternative Dispute Resolution

Using private procedures instead of the courts to resolve disputes.

Arbitration

Arbitration Act governs this process

Arbitrator is hired by both parties to adjudicate the matter Will hear both sides and their witnesses in private Deliver a decision with reasons

Confidential and binding Parties design own process for arbitration:

Arbitrator The rules of the arbitration The law that will be applied

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Can be a pre-dispute term in contracts or agree to arbitration after dispute arises

Mediation

Neutral third party acts a mediator in settlement negotiations Decision not binding, only to assist in reaching a settlement

Evaluative

Offers an opinion

Facilitative

Guides the process only

Mediator makes preliminary remarks Each side presents position Meetings with each side separately to explore the possible settlements Confidentiality – cannot use information from mediation as evidence, cannot

call mediator as witness in court

Benefits:

Speed Cost – reduced time saves money, usually cooperate to avoid delays, they DO

have to pay for the fees themselves Choice of adjudicator or mediator – can pick someone with expertise in the

area of the dispute, rather than a randomly appointed judge Confidentiality – agree to keep dispute private to minimize the harm to their

business Preserving ongoing relations – less adversarial than litigation, usually will be

able to continue to work together after the dispute has ended

ADR created to solve business disputes that domestic legal systems cannot handle

Courts tend to uphold decisions made by adjudicators Many court systems recommend or require that ADR is attempted before

bringing issue to court

The Legal Profession

Solicitor

An “office” lawyer in England who interviews clients, carries on legal aspects of the business and family affairs, and prepares cases for trial.

Barrister

A lawyer in England who accepts cases from solicitors and presents them in court, and also acts a consultant in complex legal issues.

Brief

Case handed from a solicitor to a barrister.

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In Common law provinces, all lawyers are qualified to act a barristers and solicitors

Notary

Solicitor in Quebec.

Advocate

Barrister in Quebec.

Attorney

A lawyer in the United States, encompassing roles of barrister and solicitor.

Legal profession organized on a provincial basis Must be a member of the barrister’s society of that province Membership in one province does not permit practice in another province Member from any province may appear before Supreme Court of Canada

Disbarred

Expelled from the law society and deprived of the privilege of practicing law.

Law societies have standards governing lawyer’s relationship with clients, courts, administration of justice, and the public Honesty Integrity Confidentiality Competency

Solicitor-Client Privilege

A client’s right to have all communication with his or her lawyer kept confidential.

Paralegal

A non-lawyer who provides some form of legal service to the public.

Unregulated ones provide a risk, they are not subject to educational standards, licensing, professional standards, or discipline Must be licensed in Ontario

Business and the Legal Profession

How should businesses go about hiring lawyers?

Retain Hire as needed

Retain

The contract between a lawyer and client that describes the work that will be done and the fee that will be charged.

Outside Counsel

Self-employed lawyers who work alone, in small partnerships, or in large national firms, and bill the business for the service rendered.

Most business use some outside counsel Can select lawyer with the specialty needed

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In-House Counsel

A lawyer who provides legal services to a business as a full-time employee of the business.

For businesses with regular legal needs May need to hire outside counsel for situations not in their expertise Often supervises compliance officers

Compliance Officers

Employees that monitor regulatory and legislative requirements applicable to the business and ensure that the business complies.

Part 2 – Torts

Chapter 3 – The Law of Torts

The Scope of Tort Law

Tort

A wrongful act causing harm to the person or property of another.

Purpose: to compensate victims for harm caused by the activities of others

Punishment left to criminal law A tort identifies a set of circumstances that creates a right to claim

compensation

Development of the Tort Concept

Early on: someone who caused direct injury to another has to pay compensation.

No inquiry about the reasons or whether it was intentional or unintentional

Strict Liability

Liability that is imposed based upon causation regardless of fault. Prima face – on its face

Idea developed that a person should not be responsible if they acted without fault.

Evolved in two ways:

1. Fault of Δ2. Causation – whether Δ conduct could be considered the cause of the harm

The Basis for Liability

Fault

π must show that Δ is at fault

Fault

Unjustifiable injurious conduct that intentionally or carelessly disregards the interests of others.

Deterrent effect

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People will be more careful of they have to pay for their carelessnessHighly publicized awards of damages deter others from making the same error

Shortfalls of entirely fault based system

If not fault can be established, a victim may not receive compensation Tendency for overcompensation

Strict Liability

For activities that are inherently dangerous regardless of amount of care taken

Take into account the risks in cost of product or service or insurance

Most often imposed by legislation

Courts do have raised standards of care as the danger associated with an activity increases

Often impossible to show that you have met this standard of care

Public Policy

Change as our social standards change Force law to adapt

Direct legislation Judge and jury changing decisions about liability and compensation.

Public Policy

Considerations or objectives that are considered beneficial to society as a whole.

Determine whether liability should be based on fault, strict liability, or other

No-Fault Insurance

A system of compulsory insurance that eliminates fault as a basis for claims.

Car insurance Workers compensation

In most areas or tort law, liability is imposed on a fault basis.

Vicarious Liability

Victim can sue the employer (who has greater ability to pay) or the employee

Employee may be compensated by the employer if they are sued

Employer may sue the employee if they are sued by the victim

Employee

Employer

Victim

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Vicarious Liability

The liability of an employer to compensate for torts committed by an employee during the course of his or her employment.

Intentional Torts

Intentional torts are those where the activity or conduct is done deliberately.

Harm or damage must occur for any tort to be actionable List of torts grows as courts impose liability for new behaviors causing harm

Trespass

Unlawful entering, or remaining, on the land of another without permission.

Trespass to the Person

Assult

The threat of violence to a person.

Battery

Unlawful physical contact with a person.

May be a criminal offence, may also be liable in tort to compensate victim Not usually fruitful actions battery and assult actions against “attackers”

Nuisance

Public Nuisance

Interference with the lawful use of public amenities.

Prosecuted but government agency on behalf of the public Individual who is able to shoe special injury that is greater than those

suffered by others may bring action

Private Nuisance

Interference with an occupier’s use and enjoyment of their land.

Includes tenants courts weigh the degree of interference with the occupier’s use of their land and the economic importance of the offending activity

False Imprisonment

Unlawful restraining or confining of another person.

False Arrest

Causing a person to be arrested without reasonable cause.

Causing confinement or preventing them from leaving where they are Does not need to be physical restraint or the threat of it being applied Liability arises when confronting a member of the public when there is not

strong evidence that a crime has been committed

Malicious Prosecution

Causing a person to be prosecuted for a crime without an honest belief that the crime was committed.

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Defamation

Making an untrue statement that causes injury to the reputation of another person.

Requires publication (communicating the statement to someone other that the person defamed)

π must demonstrate that serious allegation were made about character or ability causing real and significant injury to their reputation

Libel

Written defamation

Slander

Spoken defamation

Defenses against Defamation Charge

1. Show that the statement is true Δ must demonstrate or prove this

2. Absolute PrivilegeComplete immunity from liability for defamation

Words in parliamentary debate, proceedings in court, before royal commission

Promotes candid discussion3. Qualified Privilege

Immunity from liability for defamation provided a statement was made in good faith.

4. Fair CommentComment that is researched an offered, it is a reasonable opinion that is honestly held.

5. Responsible communication on matter of public interestA defense to defamation when the publication of the statement is in the public interest and was done responsibly

Other Intentional Torts Related to Business

Collectively known as “economic torts”, two types:

Related to carrying on a businessInducing a Breach of Contract

Intentionally causing one party to breach their contract with another.

A convinces B to breach contract with C, C may sue A and B

Unlawful Interference with Economic Relations

Attempting by threats or other unlawful means to induce one person to discontinue business relations with another.

Relating to false advertising in relation to another’s productProduct Defamation

Making false and damaging statements about the products of another person.

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Passing Off

Representing one’s own goods as those of another.

Unintentional Torts

Involve behavior that is not done deliberately.

Happened unexpectedly, by mistake or accident

Negligence

The careless causing of injury to the person or property of another.

Elements of Proof

The following must be proven by π in order to receive damages:

1. Δ owed π a duty of care

A relationship so close that one must take reasonable steps to avoid causing harm to the other.

Duty only arises if Δ could have reasonably foreseen harm to the π or someone in their position

Are there any considerations that should limit:

The scope of the duty The class of persons to whom it is owed Damages to which a breach of it may give rise

2. Δ breached the required standard of care

The level of care that a person must take in the circumstances.

Law puts general duty on people to avoid causing injury to others Legislation can set this out for particular activities

3. Δ ’s conduct caused injury or damage to π

“but for” test

If not for the negligent conduct of Δ, π injury would not have occurred No matter how blameworthy, person will not be liable for damage they

did not cause

“material contribution” test

Behavior of Δ created an unreasonable risk and it would offend notions of fairness to deny recovery Injury may be result from two or more negligent acts from different Δ

Remoteness of Damage

A person will not be liable for consequences of actions if they are considered to be too remote

Was the damage reasonably foreseeable?

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Defenses to Negligence

π’s own actions can be partial of full defense to negligence

Contributory Negligence

A partial defense to a negligence action when π’s conduct also contributed to the injury – loss will be apportioned according to the degree of fault

Post-injury conduct can contribute to severity of an injury π is expected to act reasonably to mitigate any damage suffered

Mitigate

Duty to act reasonably and quickly to minimize the extent of damage suffered.

Voluntary Assumption of Risk

A defense to a negligence action when π was aware of the risk and continued the activity anyway.

The Relevance of Insurance

Loss often falls on insurance company Courts do not consider having insurance a mitigation strategy Cannot recover from insurance company and Δ

Subrogation

Where one person becomes entitled to the rights and claims of another.

Insurance company becomes subrogated to the insured party’s rights after they have collected from them

Usually easier to recover damages from insurance company then from trying to sue

Product Liability

A tort imposing liability on manufacturers for harm caused by defective products.

Circumstantial Evidence Principle

A prima facie case of negligence may be established by drawing from

reasonable inferences from the circumstances surrounding the product manufacture and failure

Up to manufacturer to show that they cannot be held responsible for the cause of the defect or they took all reasonable precautions to prevent the defective good from reaching the distribution system.

Tortfeasor

Insurance

Company T

Victim

Insurance

Company V

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Burden of Proof

In these cases π may often have no way of knowing how the manufacturer’s actions caused the injury Need to show an uncharacteristic malfunction that is the most likely

cause of the injury and the manufacturing process is the likely reason for the malfunction

Then Δ must show they are not at fault

Inherently Dangerous Products

Harm can be caused of product is not used properly Manufacturer’s duty to inform consumers of such dangers

Duty to Warn

Manufacturer’s responsibility to make users aware of the risks associated with the use or misuse of the product.

Applies after product is distributed

Claim based on a breach of the duty to warn

Show:

Duty was owed Warning was deficient Would not have used product in the way they did if they had been provided

with the warning

Occupier’s Liability

To whom is a duty owed? What standards should the occupier meet?

Occupier’s Liability

A tort imposing liability on occupants ofland for harm suffered by visitors to the property.

Distinctions used to be made between the types of visitors:

Invitee

A person permitted by an occupier to enter the premises for business purposes.

Licensee

A visitor, other than a licensee, who enters the premises with consent of the occupier.

This distinction was abolished in most provinces Same standard of care is applied to invitees and licensees

Trespasser

A person who enters premises without the permission of the occupier.

Must not set out to deliberately harm them or disregard the possibility that their acts might injure a trespasser

“common humanity”

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Remedies

The purpose of tort law is to compensate an injured party.

Damages

A sum of money awarded as compensation for a loss or injury.

Used to compensate fro physical (damaged property or injured people) and economic (lost monetary value) losses

Point is to restore π to the position they would have been in had the tort not occurred, not usually to punish the wrongdoer

Punitive or Exemplary Damages

Damages awarded with the intention of punishing a wrongdoer.

In cases, such as deliberate libel to malicious false imprisonment

Two types of Damages:

1. Special

Damages to compensate for quantifiable injuries.

2. General

Damages to compensate for injuries that cannot be expressed in monetary terms.

Remedies other than damages are available, rarely awarded.

Restitution

An order to restore property wrongfully taken.

Injunction

An order restraining a person from doing, or continuing to do, a particular act.

Mandatory Injunction

An order requiring a person to do a particular act.

Chapter 4 – Professional Liability: The Legal Challenge

Growing reliance on professionals (people with specialized knowledge and skills that their clients are willing to pay for, usually licensed and belong to a professional organization)

How to assign liability for professional incompetence and negligence?

Liability of Professionals

Liability can arise from three relationships:

1. Contractual relationship leads to a breach of contract cause of action;2. Fiduciary relationship leads to breach of fiduciary duty; and/or3. The duty of care owed in tort leads to a tort cause of action.

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Contractual Obligations

Agreement to provide professional services to client comes with promise to perform the services with competency

Fiduciary Duty

Professional’s duty may extend beyond the terms of their contract

Fiduciary Duty

A duty imposed on a person who stands in a special relation of trust to another.

Law can impose this duty on professional to their client

Three characteristics:

1. The fiduciary (often a professional) has scope for the exercise of some discretion or power.

2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.

3. The beneficiary is particularly vulnerable to or is at the mercy of the fiduciary holding the discretion or power.

Some relationships are inherently so (lawyer-client, doctor-patient), but not all professional relationships are

If fiduciary duty is found to exist, there are a wider range of obligations than expressed in the contract.

Must act honestly, in good faith, and only in the best interests of the client.

Liability for breach of this duty can arise without negligence

Conflict of Interest

A situation where a duty is owed to a client whose interests conflict with the interests of the professional, another client, or another person to whom a duty is owed.

A fiduciary should not place themselves in a conflict of interest, has a duty not to profit at a client’s expense

Tort Liability

When a professional deliberately or carelessly causes damage to a client.

Contract breach and tort liability may occur at the same time Expands possible π beyond clients who have paid for advice, others can rely

on opinion given to a single client

Third-Party Liability

Liability to some other person who stands outside a contractual relationship.

Choosing a Cause of Action

Δ may be liable under any combination of contract, fiduciary, and tort.

Π must choose which they will sue for (court will not award triple damages)

Does it matter which they choose?

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Rules governing time restrictions may make it advantageous to sue in tort Client’s own negligence may be used a defense Terms in contract limiting liability will be used to defend contract action.

Might also affect the amount of damages awarded Measure of damages not the same in contract and tort In fiduciary, Δ may be under a duty to account for any profit derived from

the breach in addition to damages

Duty to Account

The duty of a person who commits a breach of trust to hand over any profits derived from the breach.

Tort Liability for Inaccurate Statements

Misrepresentation

Deceit

An intentional tort imposing liability when damage is caused by a false statement made with the intention of misleading another person.

Also when someone deliberately withholds or conceals information Victim who relies reasonably on the statement and suffers a loss may

recover from the person who made it

Fraudulent Misrepresentation

An intentional tort imposing liability for an incorrect statement made knowingly with the intention of causing injury to another.

Deceit and fraudulent misrepresentation require some guilty knowledge or willful disregard for the falseness of the information

Negligent Misrepresentation

An unintentional tort imposing liability when an incorrect statement is made without due care for its accuracy, and injury is caused.

Involving owing a duty of care and breaching the standard of care, reliance on the statement which resulted in damage

The Duty of Care

Duty of care must exist in order to be liable for negligent misrepresentation

Sufficiently close relationship, with reasonable contemplation on part of Δ they would conclude carelessness on their part may cause damage to π Eligible π must be reasonably foreseeable to the professional

Indeterminate Liability

Inability to be determined so that the magnitude of liability cannot be predicted, anticipated, or planned for.

Not a component of statutory duty of care

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Proving Negligent Misrepresentation

π must prove the following:

1. There must be a duty of case based on a special relationship between representor and representee;

2. The representation in question must be untrue, inaccurate, or misleading;3. The representor must have acted negligently in making the

misrepresentation Must have fallen below the requisite standard of care of a professional

making such a representation4. The representee must have relied, in a reasonable manner, on the negligent

misrepresentation; and5. The reliance must have been detrimental to the representee in the sense

that damages resulted.

Accuracy of the Statement

Professionals often provide opinions and not factual statements Easy to test the accuracy of a fact

Value judgments are considered facts when expressed by an expert Accuracy assessed at the time the statement was given

When statements are about future performance they are assessed based on this

Inaccuracy must result from the failure of the professional to meet the required standard of care.

Standard of Care for Professionals

Must exercise the same level of skill and possess the same level of knowledge as is generally expected of members of that profession

Determined through:

Code of conduct published by a profession Testimony of practitioners who state what they consider proper standard

Not always an adequate defense – must commensurate with the particular task undertaken (when they take on task beyond usual scope of profession)

Omissions

Standard of care includes not omitting essential information Sometimes partial or incomplete information = negligent

misrepresentation In the case of medical procedures:

If the patient would have decided against the, having been informed of all the risks, the doctor is liable, otherwise they are not

Reliance and Detriment

Causation in professional-client relationships is based on reliance

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The advice must be used by the π to make the decision that triggered their loss for the professional to be liable

Reliance

Acting in a certain way because one believed the information received.

Detrimental Reliance

The worsening of one’s position after acting up false information.

Part 3 – Contracts

Chapter 5 – Formation of a Contract: Offer and Acceptance

Contracts are voluntary legal relationships, unlike legal obligations, such as tort and criminal liability

Allows parties to create legal obligations that do not already exist Unfairness can arise when there is a difference in bargaining power

Nature of a Contract

Not all promises are contract, they can be just moral obligations, not legal ones

Contract

A set of promises the law will enforce.

Nature of an Offer

Contract not in existence until offer is made by one party and accepted by the other

Offer

A description of a promise one party is wiling to make, subject to the agreement of the other party.

Offeror

The person making the offer.

Offeree

The person to whom the offer is made.

Invitation to do business ≠ offer to make a contract Display of a product is not an offer to sell – cannot guarantee all that

there will be enough for everyone who wants to buy them Advertisement to sell at certain price does not mean they have to sell it to

everyone who reads the ad Advertisements can be offers

Sell certain quantity at a certain price to a number of customers Reward for returning lost object

The Communication of an Offer

Form is not important as long as it is heard and understood Usually orally or in writing, can be by conduct without words (taxis)

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Offeree cannot accept an offer until they are aware of it Do not have to pay people who do work for us without our knowledge

If someone accepts services or uses goods, they are presumed to have accepted the offer

BC Practices and Consumer Protection Act – section 12

1. A consumer has no legal obligation in respect of unsolicited goods or services unless and until the consumer expressly acknowledges to the supplier in writing his or her intention to accept the goods or services.

2. Unless the consumer has given the acknowledgment referred to in subsection (1), the supplier does not have a cause of action for any loss, use, misuse, possession, damage or misappropriation in respect of the goods or services or the value obtained by the use of the goods or services.

Ontario Consumer Protection Act

Section 13 has a similar provision to section 12 of BC’s

Section 68:

1. Despite section 13, a consumer who applies for a credit card without signing an application form or who receives a credit card from a credit card issuer without applying for it shall be deemed to have entered into a credit agreement with the issuer with respect to the card on first using the card.

Written Offers

Standard Form Contracts: Their Risks and Benefits

Offers not always in writing, but businesses that sell to the general public usually present terms of offer to customers in written documents or notices on websites Tickets for theatres, airlines, credit card arrangements, insurance, etc.

Standard Form Contract

An offer presented in a printed document or notice, the terms of which cannot be changed by the offeree, but must be accepted as is or rejected.

Benefits

Efficient Standardizing business

Criticism

Exploits the spread in bargaining power between large corporations and consumers

Often have no other choice but to accept the offer

Protection from inequality in bargaining positions:

1. Business are in area regulated by a government board contracts are subject to the board’s approval

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2. Segment of the public are offered protection – such as disclosure of requirements and post-acceptance cancellation options

3. Where there is no regulation consumers have as much protection as the courts can find under general contract law

Required Notice of Terms

Courts begin by assuming that an unqualified acceptance of an offer is an acceptance of every term of that offer

If someone is not aware of a clause, court determines if sufficient steps were made to bring the term to the attention of the customer

What are sufficient steps?

Providing a written document signed by the party Giving a written notice of specific terms clear before or at the time of the

contract Prominent public notice that is plain for the offeree to see when they make

the contract

Unusual or Unexpected Terms

Terms that you would not reasonably assume are part of the contract

These need to be brought directly to the attention of the offeree

The Lapse and Revocation of an Offer

Lapse

When an offer has lapsed the offeree can no longer accept, even if they are unaware that is has lapsed, the offer becomes void and no longer exists.

An offer can lapse in the following ways:

1. The offeree fails to accept within a time specified in the offer2. The offeree fails to accept within a reasonable time, if the offer does not

have a specified time limit3. When either party dies or loses legal capacity prior to acceptance It is often difficult to determine what a “reasonable” amount of time is for

each situation

Revocation

Offeror is able to revoke at any time before acceptance, even if it has promised to hold an offer open for a specified time

They must ensure notice of revocation is communicated directly to the offeree

Options

Offeree may want to bind an offeror to keep its offer for a specified time by

1. The offer itself stating that it is irrevocable2. A subsequent contract may be made to keep it open

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Option

A contract to keep an offer open for a specified time in return for a sum of money.

Offeree agrees to pay a money if in return the offeror agrees to:1. Keep the offer open for a specified time2. Not to make any contracts with other parties that would prevent the

offeror from fulfilling its offer

Exercise an Offer

Accept the offer in an option.

Rejection and Counter-Offer by the Offeree

There is no contract until one party accepts an offer from another without alteration

Counter-offer = rejection of the old offer, brings it to an end

Re-offering it is the only way it can be accepted after this When there are inquiries about whether the terms offered are the best they

can expect, this is not a rejection

The Elements of Acceptance

Positive an Unconditional

Must be certain and unconditional and a positive act, in words or conduct Shaking hands generally regarded as acceptance of last offer If conduct happens to comply with the means of acceptance laid out by

the other party, may not amount to an acceptance – do not have to abandon normal conduct to avoid contract

Silence can only be used in certain circumstances (book club)

Negative Option Billing

A practice of adding services and sending bills without request and relying upon the customer to cancel if they don’t wish the service.

Customers can ask for refund for unsolicited goods or negative option billing

Communication to the Offeror

Generally, acceptance has to be communicated to the offeror Offeror can ask that specific act be performed and that will amount to

acceptance

The Moment of Acceptance

Have to be able to analyze business negotiations to identify:

1. Who made the offer;2. When it was communicated; and3. When and by whom the offer was accepted.

Inviting Tenders

Seeking offers from suppliers.

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Obtain firm offers for fixed quantity of something over a fixed time period Explore the market of available suppliers and determine best terms for

proceeding

Tender process can be two contracts:

Inviting tenders amounts to an offer to enter into a construction contract of selected according to the criteriaPromises to consider the tender and to accept the most attractive tender compliant with the specifications.

Submission of a bid is considered acceptance, then acceptance of that bid enters them into another contract with the

Some circumstances there is no intention to form a contract

Standing Offer

An offer that may be accepted as needed from time to time.

Terms of the invitation to tender will determine which purpose is intended.

Transactions Between Parties a Great Distance From Each Other

Modes of Acceptance

Offeror can expressly state how acceptance is to be communicated Otherwise can communicate in any way

Mailbox Rule

If an offeror uses mail to communicate an offer, it is reasonable to assume that the offeree will respond by mail, although faster methods are usually valid acceptance.

The contract is in place when the letter of acceptance is put into the mailbox

All other methods of acceptance, offeror is not bound until acceptance reaches them and must reach them before it has lapsed Mailbox rule does not apply when acceptance by mail is not reasonably

contemplated, valid when received

Modes of Revocation

Revocation by instantaneous methods must reach the offeree to be valid By post is only effective when it is received by the offeree, unlike the rule

with acceptance

Rules:

Unless the offeree knows that the revocation will not reach the offeree at their usual address, delivery at that address establishes fact and time of revocation.

Determining the Jurisdiction Where a Contract Is Made

Parties to contract often in different provinces or countries If dispute arises where should it be handled?

Jurisdiction

The province, state, or country whose laws apply to a particular situation.

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Dispute will be handled where acceptance became effective

Unilateral and Bilateral Contracts

The Offer of a Promise for an Act

Unilateral Contracts

A contract in which the offer is accepted by performing an act or a series of acts required by the terms of the offer.

Offeror can revoke before the necessary actions are complete, offeree could endure considerable hardships To avoid this, courts treat offers as calling for bilateral action when the

language can be fairly so constructed

Subsidiary Promise

An implied promise that the offeror will not revoke once the offeree begins performance in good faith and continues to perform.

The Offer of a Promise for a Promise

Bilateral Contract

A contract where offeror and offeree trade promises and both are bound to perform.

Credit sale (goods not delivered by the seller or not paid for by the buyer)

Promisor

A party who accepts an obligation to perform according to the terms of the contract.

Promisee

A party who has the right to performance according to the terms of a contract.

Both parties are promisor and promisee in bilateral contracts

Formation of Internet Contracts

e-commerce legislation

Modified contract formation to allow clicking an icon to satisfy acceptance and communication requirements fro contract formation

Ontario Consumer Protection Act

Section 38: before a consumer enters into an internet agreement, the supplier need to disclose information about: Total price Terms of payment Warranties Among other things

Section 38 (2) the supplier shall provide the consumer with an express opportunity to accept or decline the agreement and to correct errors immediately before entering into it.

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Contradicts normal contract law

Uncertainty in the Wording of an Offer

Vague offer may not be an offer may not be an offer, acceptance of it may not form a contract

Of court deems it too ambiguous to enforce Wording that seems uncertain can be given meaning through local customs

to trade usage that gives it new precision

Courts hold that:

1. Anything is certain that capable of being calculated or ascertained, and2. Where a contract may be constructed as either enforceable or

unenforceable, they will favour the interpretation that will see the contract enforced

Chapter 6 – Formation of a Contract: Consideration and Intention

Bargain

The price each party pays for the promise of the other.

Unilateral = the act done by the offeree Bilateral = each party’s promise

Consideration

The price for which the promise of the other is bought.

An accepted offer is not an enforceable unless it has consideration

Gratuitous Promises

A promise made without bargaining for or accepting anything in return.

Not a contract since no value is exchanged If promisor does not perform there is no legal remedy for the promise

Charities

Usually rely on donor to honour pledge Have sued estates of deceased people who died before honouring large

pledges Court have to find implied request that the promisor that the charity

undertake a project as the price for the pledge Can make pledges legally binding by using donor cards

Adequacy of Consideration

Courts will not make personal value judgments Only consider adequacy of settlement if there is allegation of wrongdoing by

one party Fraud, duress, undue influence

Settlements can be upset by subsequent information; they are still binding

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Motive Contrasted with Consideration: Past Consideration

Motive – a person’s reason for making a promise – is irrelevant

Motive cannot turn a promise into a contract or vice versa Promising a reward to someone who previously performed a gratuitous act

is not binding This is also gratuitous

Past Consideration

A gratuitous benefit previously conferred upon a promisor.

Not actually consideration

Moral Cause

Moral duty of the promisor to perform their promise.

Relation Between Existing Legal Duty and Consideration

If a contract already exists, a later promise to pay for the obligation already owed is not binding

Problems arise here when construction companies try to abandon projects and offer to pay whoever hold their contract in return for this

Third-parties will try to pay sum to promisor for preexisting obligations

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Gratuitous Reduction of a Debt

Consideration rules can be unrealistic in business transactions Creditor my find it beneficial to take lesser amount than to insist on payment

in full Bankruptcy – debtor may go bankrupt if they have to pay full amount,

creditor may get less than what they would have accepted as a reduced sum by the time other creditors claims have been settled

Debtor may be able to convince others to help pay the debt so they may make a fresh start

Creditor may need at least part of the sum urgently, getting some of it back sooner is better than getting all of it back later

Avoiding the rule in Foakes v. Beer:

Early payment is viewed as consideration Rule only applies to transfers of money

Can trade a trinket for canceling a debt Applies to creditor-debtor relationship

A third party can offer to pay a lesser sum to cancel the debt In some provinces a creditor who accepts part performance and this is

acknowledged as a full settlement of the debt, the entire debt is extinguished Creditor can cancel this before the sum has been paid

Creditor can agree in writing and under seal to reduce the debt

Equitable Estoppel

Evolution of the Principle

Someone makes an GRATUITOUS PROMISE to another, intending to keep it, later finds it inconvenient to perform

Promise reasonably relied on the promise and incurs expenses that they wouldn’t have otherwise

If the PROMISOR DEFAULTS , they promise cannot be enforced, promise suffers burden: spme relief id possible if the estoppel concept is applied

Estoppel Based on Fact

Estopped

Prevented

One person asserts a statement of fact, another relies upon it to their detriment, maker of statement will be estopped from denying the truth of their original statement in a court of law, even of it turns out to be untrue

The truth of an existing fact can be easily tested by the courts through hearing evidence, it is objective

Post-midterm Material

Foakes v. Beer

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Can this apply to a promise of future conduct?

Courts not bale to ignore those who relied in good faith on a GP and the promisor changed their mind

Courts estop the promissor from claiming they are not bound to their promise

Equitable (Promissory) Estoppel

The court’s exercise of its equitable jurisdiction to estop a promisor from claiming that they were not bound by their GP where reliance on that promise caused injury

to the promisee.

Equitable estoppel limited to use by promisor as defense against claim where legal relationship already exists

GPs can be withdrawn, but its withdrawal cannot prejudice the promise in respect to past reliance on it

Equitable estoppel applies when:

1. Some form of a legal relationship already exists2. One of the parties promises to release the other form some of the other’s

legal duties to him3. The other party, in reliance on the promise, alters their conduct in a way

that would cause hardship if the promisor reneges on their promise.

Injurious Reliance

US courts allow the injured party to force the promisor to perform the promise

The promisor induced the promisee to rely on their promise, so they must honour it to prevent injustice

Injurious Reliance

Loss or harm suffered by a promisee who, to their detriment, relied reasonably on a GP

Is a cause of action, not just a defense Views the situation from the position of the promisee

The Effect of a Request for Good or Services

When a person requests goods or services from another, the law implies a promise to pay Applies between strangers and friends if it is rendered in a customary

business transaction, not necessarily between close friends or family


Hughes v. Metropolitan Railway Co.

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Quantum Meruit

The amount a person deserves to be paid for goods or services provided to the person requesting them.

Parties agree to a price they cannot refer matter to the courts

The Use of a Seal

Covenant

A serious promise

Covenantor

One who makes a covenant.

Document Under Seal

A covenant recorded in a document containing a wax seal, showing that the convenantor adopted the document as their act and deed

Seal must be affixed at the time that the document is signed Printing the word seal can present difficulties

Supreme Court views this as anticipatory, not a suitable substitution for the real thing

Promise made under seal does not require any further consideration Offer made under seal is irrevocable

Intention to Create Legal Relations

No contract unless both parties intended to create a legal relationship Agreement on all essential terms Mutual intention to create legally binding contract

Law presumes intent is present in almost all instances Difficult to make inquiries about the state of mind when the agreement

was made This presumption is especially strong with dealing between strangers and

in commerce

Rebutting the assumption of intent:

Test of the reasonable bystander – if to such a person the outward conduct of the parties lacked serious intention to make an agreement, no binding contract results

Intention can be assessed based on what a reasonable person would believe


Leonard v. Pepsi Co.

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Chapter 7 – Formation of a Contract: Capacity to a Contract and Legality of Object

The Role of Legality in the Formation of a Contract

The object must be legal

Public Policy

Goals or principles benefiting society or good for the general public.

Illegal

Offends the public good (contrary to public policy) or violates a statute.

Courts presume the transaction is legal unless defendant produces evidence otherwise Easy to tell if it violates a statute Not as easy to determine if it violates public policy

Unenforceable

No court assistance or remedy is available to the parties of a contract.

Illegal contracts treated as unenforceable, unless statute states that it is void

Differentiation Between a Void and Illegal Contract

Void

Contract does not exist in the eyes of the court, tries to return everyone to pre-contract positions

Parties released from performance obligations Money and property may be returned

Severed

Removed from the contract.

Court can find that only one part of the contract is void and the rest is valid Sever the void section and enforce the remainder of the contract if it is

just

Illegal

Courts will no assist any party who knowingly entered into an illegal contract

Less likely to sever the illegal part and enforce the rest of the contract

Contracts Affected by Statute

Significance of the Wording of a Statute

Most contracts do not consider contracts that conflict with them, leave it to courts to figure out on public policy grounds

May prevent particular type of contracts from having legal effect by sating that they are void

Post-midterm Material 4

Can go further to describe the agreements as illegal, unenforceable, etc. Can make agreements a criminal offence Can make legal what was previously considered against public policy

Contracts Void by Statute

Agreements Contrary to the Purpose of Legislation

Workers’ Compensation Act: provides money to workers injured at work, contract undermining this is void

Bankrupcy and Insolvency Act: purpose is to gather the assests of a bankrupt person to pay their creditors, thereafter to release them from further obligation to pay If a person transfers property as a gift or at an unreasonably low price

and becomes bankrupt within one year, the transfer is void Insolvent person cannot transfer property to one of several creditors as

a way to give them preference over the others

Statutes Affecting Public Policy

Gaming act of 1845: all bets are void and unenforceable

Wager

An agreement between two parties in which each has some probability of winning or losing.

Stakeholder

A person or organization that manages a betting arrangement for a fee and redistributes winnings.

Important to make the distinction between parties to a wager and a stakeholder

Insurance Contracts

Should the feared loss occur, one will receive a measure of compensation

Insurable Interest

An interest where a person has a financial benefit from the continued existence of the property or life insured or would suffer financial detriment from its loss or destruction

Insurance acts state that the contract is invalid unless the party making the contract has an insurable interest in the property or life insured

Stock Exchange Transactions

An agreement that is a wager about the price of a specific security at a future date, without good faith intention of acquiring, selling, or taking delivery of the shares, the agreement is an offence and is illegal

Does not apply to futures


Agreements Illegal by Statute

Statutes often don’t deal directly with consequences for contracts, just for certain kinds of conduct, contracts that violate this conduct are illegal Tax evasion Smuggling

Business that require a license must have one or they may not be able to sue to collect for services rendered

Courts made decision to refuse to give relief only where it would be contrary to public policy to do so

Agreements Made Legal by Statute

Arbitration Agreements

Contracts that requires all disputes to be resolved in arbitration, not the courts.

Courts used to consider contracts that blocked access to the court system unenforceable

To avoid continuous legislation changes, most decisions about legality are left to the courts

Contracts Illegal by the Common Law an Public Policy

Common Law

Common law has identified types of conduct that are harmful to others and grants remedies to the person harmed by this conduct

When a contract requires a commission of a tort, the contrac it illegal

Torts that typically arise in an agreement:

Slander and libel Trespass Fraud Inducement to break an existing contract

Exceptions to this rule for insurance contracts

Policies promise to pay even if they are negligent in driving or in course of professional practice

A business can exempt themselves from liability for negligence by terms of a contract

Public Policy

Can be regarded as illegal even if it does not contemplate the commission of a crime or tort

If a court decides that a contract is prejudicial to:

The interests of Canada, Its relations with foreign countries,


Its national defense, Its public service, The values of society as a whole, or The administration of justice within the country,

The court will declare it illegal, even though performance is not a tort or crime

Contract to compensate a person who puts up bail fro the accused is illegal

Embezzlement

Embezzlers, once caught, usually offer ot repay all the borrowed funds Victim of this must remember that this is a crime that demands conviction Agreement to withhold this information is an obstruction of justice

Agreements that promote unnecessary litigation obstruct the course of justice

Agreements in Restraint of Trade

Agreements in Restraint of Trade

AKA non-competition agreements or restrictive covenants when included in a larger contract

Courts view competition as a necessary part of economic life Non-competition agreements may be unenforceable or can violate the

Competition act, triggering regulatory or criminal sanctions

Restrictive Covenant

A term in restraint of trade

A contract can contain a restrictive covenant that is found against public policy, court may strike out the offending term and enforce the rest of the contract Initially assume a term in restraint of trade is against public policy, a

party seeking to enforce must show that it is a reasonable arrangement between the parties and that it does not adversely affect the public interest

Agreements Between Vendor and Purchaser of a Business

Purchaser can pay for a business goodwill only if the seller agrees to do nothing in the future to compromise the value of what they are selling: must promise not to enter into a business that is likely to compete with the one they are selling Law must enforce this promise of the purchaser will be deprived of a

valuable part of the asset they have paid for


Symington v. Vancouver Breweries and Riefel

This is in the mutual interest of the purchaser and vendor and may not offend the public interest

Can be enforced if:

The restriction place on the vendor are reasonable in the nature of the trade or practice sold

Up to a court to decide if it offends the public interest

The consider:

Proximity to the business that is being sold Length of time that they cannot operate in a similar business

Courts rarely narrow these criteria to a “reasonable scope” If a clause is too wide the vendor will be free from the restraint Courts will sever unreasonable restrictions from the contract, which can

leave some restrictions still in place

Agreements Between Employee and Employer

More difficult to show that conditions restricting trade between employee and employer are not in restraint of trade

Bargaining power is unequal, not payment for goodwill Can make leaving an employer to accept another position in the vicinity

almost impossible Courts want to protect mobility of labour Employer will ask for an injunction to restrain the former employee

Restrictive covenant can be enforced if I can be shown to be:

Unambiguous, Reasonable between the parties, and Not injurious to the public Likely to be binding if the employee had access to trade secrets or

represented the employer in dealings with customers If a non-solicitation clause would have been sufficient, the ban on

competition will be unenforceable Courts will not sever the unreasonable section and substitute the lesser

requirement


Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd.

Shafron v. KRG Western

Chapter 8 – Grounds Upon Which a Contract May Be Set Aside: Mistake and Misrepresentation

Setting Aside a Contract

Courts tend to hold parties to bargains they make in the interest of commercial certainty

Equitable principles sometimes allow a party can be released from their obligations Mistake Misrepresentation Undue influence Duress

The Narrow Meaning of Mistake

Parties enter into a contract and later regret it only some circumstances allow someone to be released because of a mistake

Errors in judgment to not amount to a legal mistake Excusing performance too easily makes contracts unreliable

Void

The contract never comes into existence and no rights pass.

Voidable

The contract exists until set aside by a court; rights may pass to third parties before it is set aside.

Equitable Relief

A discretionary remedy to undo an injustice.

Rescind

Set aside; undo or revoke a contract and return the parties as nearly as possible to their original positions.

Mistakes must usually be about factual circumstances, not the law

Void and Voidable Contracts

If a mistake has been made the contact can be: Void Voidable Or the mistake can be corrected (rarely)

Void

The contract was never formed at all It is ineffective form the beginning


No rights, titles, or ownership pass to anyone

From figure above:

Since the contract between A and B never existed, the contract between B and C also fails

Voidable

Contract exists until it is set aside by the court Prior to that, rights, title, or ownership pass as set out by the contract Contract may still be rescinded, courts of equity thought C having to return

the goods to A may be too harsh in some circumstances

For C to have protection they must be a purchaser who is:

1. Innocent2. Paid good value If C knows there was fraud, they can be sued for recovery by A

Void and voidable may not make much of a difference when only two parties are involved

Whether it is void or voidable depends on the mistake

Mistakes About the Terms

Words Used Inadvertently

One party inadvertently uses the wrong word in stating the terms of a contract

Unilateral Mistake

A situation in which only one of the parties believes there is a mistake in the contract.

Consequences should usually fall on the on who made the error If it is clear to an objective observer that there was a mistake made in

expressing the terms of the contract, it may be VOIDABLE


A

"Sells" goods to B

B

Says he will resell the goods to C

C

Can be sued by A for recovery of the goods

A

"Sells" goods to B

B

B obtains titleSays he will resell the goods to C

C

Obtains title ot the goodsCannot be sued for recovery if they meet the proper criteria

10Webster v. Cecil

Court considers whether the other party should have realized that a mistake was made

Errors in Recording an Agreement

Contract contains an error, but party does not with to be released from the obligation Wants to have corrected deal enforced

Mutual Mistake

A situation in which both parties believe a mistake exists in the contract but their understandings of the mistake are different.

Mistake can be rectified If the parties are under a mutual mistake this is simple If one party has benefited from the mistake, may resist attempts to correct

the document

Can ask the court for rectification if the conditions are met:

1. Court is satisfied that there was a complete oral agreement between the parties, free from ambiguity and not conditional on further adjustments.

2. The parties did not engage in further negotiations to amend the contract.3. The mistake in the contract may have, but does not have to have, occurred

as a result of fraud.4. When the written document was signed, Δ knew or should have known of the

mistake and π did not.5. Any subsequent attempt to enforce the inaccurate document would be

equivalent to fraud. These are difficult to prove, courts are reluctant to alter the final document

Error about the Meanings of Words

Parties agree that what is written in the contract is correct, they may place different meaning on the words in the contract

Court will decide which meaning is more reasonable in the circumstances Whose ever interpretation is more reasonable, is the one that is binding If both are equally reasonable to unreasonable, and holding one party to the

other’s interpretation would be unjust, the contract is void

Mistakes About the Subject Matter

Mistake about the Existence of the Subject Matter of a Contract

If at the time that the contract is made, unknown to both parties, the subject matter dos not exist


Raffles v. Wichelhaus

Common Mistake

A situation in which both parties believe the same misunderstanding or mistake about the contract.

In the case above, the contract was held to be void

Sale of Goods Act: If the good without the knowledge of the seller have perished at the time the contract is made, the contract is void

Mistake about the Value of the Subject Matter

The subject matter still exists, its qualities are different that what the parties contemplated

Courts grant relief depending on the reasonability of the parties’ expectations

Parties may be expected to know that the price of the subject matter is volatile (commodities)

If subject matter is understood, described, or represented as having qualities that create value and mistakes are made about these, relief may be available About quality or quantity

Ceveat Emptor

Let the buyer beware.

Buyers expectd to use caveat emptor principal When there is a misrepresentation, discovery is impossible, or both parties

believe the same mistaken characteristics, rescission may be available Voidable is purchaser move quickly Delayed action prevents rescission

Mistake About the Identity of a Party to a Contract

Unilateral mistake, often involving fraud Where an existing identity is assumed, the contract is void


Couturier v. Haste

Hyrsky et al v. Smith

Cundy v. Lindsay

Courts want to limit the application of the above case, as the burden is borne by the blameless

If a fake identity is used, the contract is voidable Third party is better protected when the initial transactions are face-to-face

Mistakes About the Nature of a Signed Document

Non Est Factum

It is not my doing

Medieval times, people were illiterate, relied on literate party to describe the document Literate party misreads the document void

Careless signers cannot avoid liability pleading non est factum

Misrepresentation

Contract Versus Tort

Courts will set aside contracts if a misrepresentation has occurred If a person innocently makes a misstatement, no tort is committed

Must inform the other party of the true situation as soon as possible Becomes fraudulent or negligent if the party fails to do this

Material

Could reasonably be expected to influence or induce the decision of a party to enter into a contract.

Material misrepresentations give right to rescind the contract If the misrepresentation is fraudulent or negligent the court can award

damages Misrepresentations are usually in the pre-contract bargaining, not included

in offer When they are in the offer they are part of a term , they can gve rise to a

breach of contract

Standard Form Contracts

Contracts prepared in advance by one party and presented on a “take it or leave it” basis, without an opportunity to negotiate the terms.


King’s Norton Metal Co. v. Edridge

Saunders v. Anglia Building Society

Standard forms usually state that there are not representations other than the ones contained in the written terms

Statements about goods and services in advertisements can be considered representations (less commonly terms)

False assertions are misrepresentations only if they are a statement of fact Expert opinions are considered equivalent to a statement of fact

Consequences of Misrepresentation in Contracts

When a party who relied upon a material representation learns the truth, the contract is voidable at their option Have the renounce the agreement promptly May be compensated for out-of-pocket expenses while preforming the

contract

Indemnity or Compensation

A money award given as a supplement to rescission for loss sustained in performing a contract.

Misrepresentations by Silence or Omissions

Some types con contracts give rise to disclosure obligations

Fiduciary relationships – disclosure of all pertinent information

Utmost Good Faith

A duty of disclosure owed when a special relationship of trust exists between the parties.

Utmost good faith requirement almost always exists in continuing business relationships

Failure to properly disclose in the following situations render the contract voidable.

Contracts of Insurance

Party seeking insurance must disclose all pertinent information to the insurance company relating to the risk the company is being asked to assume

Insurers have to investigate applicants before agreeing to insure for public liability (car insurance and the like)

Contracts Involving the Sale of Corporate SecuritiesProspectus

A statement issues to inform the public about a new issue of shares or bonds.

Inaccurate, missing, or misleading prospectus will attract rescission and the right to claim damages from anyone involved with the document

Contracts Involving the Sale of Goods

Sale of Goods Act restrics the caveat emptor principle for the sale of goods


Consumers can rescind contract if vendor fails to disclose problems with ownership

Does not apply to contracts for services or land For land: No obligations to disclose defects, complaints about

misrepresentation have to be raised before title is transferred

Contracts With Consumers

Suppliers are supposed to point out terms in standard form contracts that the consumer would not reasonably expect Failure to disclose may give the consumer the right to rescind

Cooling-off Period

A time during which a consumer may cancel a contract without any reason. Length of time is set by provincial legislation.

Undue Influence

the domination of one party over the min of another to such a degree as to deprive the weaker party of the will to make an independent decision.

Contract formed as a result of undue influence is voidable at the option of the victim Can only avoid the contract if they act promptly after they are freed from

the domination Often an issue in wills Often arise when the parties have special relationship to each other

Doctor and patient Lawyer and client Parent and child Religious leader and believer

Burden of Proof

Party claiming undue influence must show the court that domination was probable Easier to do when a special relationship exists

Burden then falls on the other party to show that undue influence was not exerted

Arrangements Involving Spouses

Spouse can set a transaction aside if they can prove actual undue influence Some marital relationships will raise the presumption of undue influence

The Importance of Independent Legal Advice

Independent legal advice received by the weaker party prior to signing rebuts any undue influence presumptions

Needs to come from a lawyer not associated with the transaction or other parties

Lenders that are aware of a special relationship between co-debtors have to ask about possibility of undue influence


Consumer Protection

Courts recognize the unequal bargaining positions in business to customer transactions

Unconscionable Contracts

Contracts where there is unequal bargaining power between the parties and the powerful party get an extremely advantageous deal.

Unconscionable contracts are voidable Some provinces have legislation that defines deceptive business practices

that will make contracts voidable Loan transactions require disclosure of cost of borrowing, maximum interest

rates, terms of credit, etc.

Duress

Actual or threatened violence or imprisonment as a means of coercing a party to enter into a contract.

These contracts are voidable at the option of the victim Have to act promptly to make it so

The threat does not need to be directed to the individual, does not have to be explicitly stated

Coercion

Improperly forced payment under protest.

Economic duress is an area where undue influence and duress overlap.

Entirety Clause

A term in a contract stating that the whole agreement is contained in the written documents and there are no other terms, conditions, representations, or warranties.

Chapter 9 – The Requirement of Writing

The Distinction Between Substance and Form

The Benefits of a Written Record

Substance may have many physical forms or none at all

Categories of form:

i. Contracts whose terms are entirely oralii. Contracts whose terms are part oral and part written

iii. Contracts whose terms are entirely in writing, whether all in one document or spread through several documents

Good business practice to keep at least some record of transactions Memories fail If the contract is oral the court has to try to determine what the parties

agreed to in the first place


Legislation Dealing With Writing

At common law, oral contracts are just as enforceable as thos written down Over time legislators identified high risk contracts and required that they be

in writing

Writing requirements imposed by three types of legislation:

1. The Statute of Frauds2. The Sale of Goods Act3. Consumer Protection Act

The Statute of Frauds

Passed in 1677 Makes certain types of contracts unenforceable if they are not in writing Try to limit the applications because it allows perfectly valid oral contracts

to be avoided

Types of Contracts Affected by the Statute of Frauds

1. A Promise to Answer for the Debt, Default, or Miscarriage of Another” Guarantee and Indemnity

Courts have narrowed this definition

Courts distinguish between:

Guarantee

A conditional promise to pay only if the debtor defaults.

Indemnity

A promise by a third party to be primarily liable to pay the debt.

Courts have applied this part of the statute only to guarantees Promises to indemnify are enforceable if they are not in writing

Has excluded guarantees that are only one of many more important rights and duties created by the contract

Miscarriage

An injury caused by the tort of another person.

Courts have limited the miscarriage clause to mean that they will pay damages for loss caused by the tort of another person

2. An Agreement Made in the Consideration of Marriage

Applies to arrangements about assets brought into a marriage as common property

Been replaced by family law reform Do not necessarily require that marriage and cohabitation arrangements

be in writing


3. A Contract Concerning an Interest in Land

Concerned with the indestructability and permanence qualities land have Systems of public records that show who owns land Have to distinguish between contracts where the Statute applies and where

the interest is too remote

Part Performance

Performance begun by a π in reliance on an oral contract relating to an interest in land, and accepted by the court as evidence of the contract in place of a written memorandum.

Courts of equity developed this principle, still applied in modern courts

The following must be satisfied before the courts will enforce the contract:

i. The contract must be one concerning landii. The acts of performance must suggest clearly the existence of a contract;

they must not be ambiguous or possibly explained as part of a different transaction.

iii. π must perform the acts and must suffer a loss by performance if the contract is not enforced.

If the court accepts the acts as sufficient evidence, the court will enforce the contract according to the terms orally agreed

4. An Agreement Not to Be Performed by Either Party Within One Year

Memories fail over time, Parliament chose an arbitrary limit Does not apply to a contract that may last longer than a year, unless the

terms specified a time for performance that was clearly longer than a year Allows exclusion of contracts for an indefinite period

Does not apply where one party will need more than one year to perform if the other will wholly perform in one year

5. Ratification of Infants’ Contracts

Does not apply to contracts that are valid unless rejected

Requirements for a Written Memorandum

Statute requires a note or memorandum of the contract signed by the party to be charged or by an authorized agent

All Essential Terms Must Be Included

Identities of the parties Subject matter Consideration Exception for guarantees: consideration does not need to appear in writing Does not have to be in one document, easier if they reference each other

Signed by the Defendant

π signature is irrelevant


Lenient on what amounts to a signature, does not need to be in Δ handwriting

Consequences for Contracts Within Its Scope

A contract made unenforceable by the Statue still exists even though no one can get a remedy Contract is not void so it can still affect a legal relationship between the

parties

1. Recovery of Money Paid Under a Contract

Party who breaches an unenforceable contract will not gain any further advantage

2. Recover for Goods and Services

Quantum meruit still applies, someone cannot accept goods and services and retain benefit without paying something for them

3. Effect of a Subsequent Written Memorandum

As long as it comes into existence before action is brought on the contract, it provides the necessary evidence

4. Defendant Must Expressly Plea the Statute

Court will decide the case without reference to the Statute if they do not

5. Effect on a Prior Written Contract

The oral contract can vary or dissolve an existing written contract even though it is not enforced

Chapter 10 – The Interpretation of Contracts

The Relationship Between Formation and Interpretation of Contracts

Construing

Interpreting

Important to prevent ambiguity when drafting the terms of a contract Court applies the most reasonable meaning given the circumstances

The Interpretation of Express Terms

Two Approaches to Interpretation

Strict or Plain-Meaning Approach

An approach that restricts the interpretation to the ordinary or dictionary meaning of a word.

Few words have a plain meaning or have only one dictionary definition Words change meaning over time and have different meaning in different

circumstances


Liberal Approach

An approach that looks to intent of the parties and surrounding circumstances, and tends to minimize, but dies not ignore, the importance of the words actually used.

An invite endless speculation Conduct must serve as the primary guide to ones intentions

How the Courts Apply the Approaches

Usually applies both and chooses the best meaning for the circumstances Will look outside the contract to past contracts between the parties or

intentions that were made clear before the contract was made

How the Courts Choose Between Conflicting Testimony

Court seeks corroboration of their versions, from a non-party of from the parties actions in relation to the contract

Last resort, choose based on the credibility of the sources themselves Which version seems more reasonable

Special Usage of Words

Court begins with the dictionary definitions of the words then examines meaning in context

Special usage of words in trade or in areas of the country can come into consideration This evidence is not always conclusive court can decide that the it was

not used in a special way or that they knew the other party was not aware of the trade usage for the word

Court construes words most strictly against the party who suggested them

Special Types of Contracts

Contra Proferentem

A rule of contract interpretation that prefers the interpretation of a clause that is least favourable to the party that drafted the clause.

Used in standard form contracts to deal with the one-sided nature of the contract

Also applied to exemption clauses

Exemption Clause

A clause in a contract that exempts any part from liability.

Interpretation of insurance contracts must:

i. Follow the contra proferentem rule,ii. Construe coverage terms broadly, and

iii. Interpret exclusion clauses narrowly.

Predicting the Likely Decision in Court

Courts take position of the informed, objective bystander Closest substitution may be a lawyer


The Goal of the Courts: To Give Validity to Contracts

Often easier for the court to declare agreement void because of ambiguity They want to see the agreement stay alive so that parties take contracts

seriously

The Parole Evidence Rule

The Meaning of the Rule

Party to a contract may realize after signing that a term they believed was part of the agreement has been omitted (purposely or otherwise)

Parol Evidence Rule

A rule preventing a party to a written contract from later using parole evidence to add to, subtract from, or modify the final written contract.

Does not prevent parole evidence from being used to address the formation of the contract

The Consequences of the Rule

Sometimes parties choose to omit terms on the final form o the contract Courts are reluctant to relax the rule for these situation

People would start claiming that there were terms agreed upon that were only part of negotiations

The Scope of the Rule

Does the document contain the whole contract?

Sometimes courts find that the document was not intended to embody the whole agreement

Interpretation of the Contract

Does not affect interpretation of express terms in the contract Does accept parole evidence in explaining the meaning of words used in the

contract

Subsequent Oral Agreement

Parole evidence does not exclude evidence that there was an oral agreement between the parties after they entered into the written one The new oral agreement can alter the prior written one

Collateral Agreement

A separate agreement between the parties made at the same time as, but not included in, the written document.

Courts are reluctant to enforce theses unless there is separate consideration can be found and it does not contradict the written agreement


Condition Precedent

Any set of circumstances or events that the parties stipulate must be satisfies or must happen before their contract takes effect.

If a party can provide evidence that a condition precedent was agreed upon and not met a court will recognize it

Implied Terms as a Method of Interpretation

Comparison With Interpretation of Express Terms

When there is an unforeseen disagreement, one approach is to resolve to by determining the most reasonable interpretation of the terms

Implied Term

A term not expressly included by the parties in their agreement but which, as reasonable people, they would have included had they thought about it.

Can see if the intention of the parties can only be achieved by admitting an implied term Only if it is obviously necessary for them to accomplish the purpose of

the contract

Terms Established by Custom or Statute

Implied terms often arise from long-standing customs in a trade or type of transaction

These types of terms have been codified in a statute that sets out all the previously established implied terms in one place

Reasonable Expectations of the Parties

Court will not make a new contract for the parties, Will only go so far as to imply terms that are reasonably necessary

Will not find an implied terms that deals with the same matter in a different way

Will not imply a term that is contrary to the intent of the contract

Chapter 11 – Privity of a Contract and the Assignment of Contractual Rights

Privity of Contract

The Limited Scope of Contractual Rights and Duties

Logical that only the parties that agreed to a contract have rights and duties created between them, a person outside should not have rights or duties under it

Third Party

A person who is not one of the parties to a contract but is affected by it.

Some contracts do affect third parties


Privity of Contract

The relationship that exists between parties to a contract.

To win a contract law case you have to prove privity of contract with the other person

A third party has not given consideration for the promise Can be too harsh when the object of the contract was to benefit the third

party

Comparison With Rights and Duties in Tort

Liabilities of Sellers of Goods

Only the buyer can sue for breach of contract with a seller of goods of they are not suitable for the intended use

Liability of Manufacturers

Can be sued under tort for negligence, all end-users may do this

Applying the Privity of Contract Rule to Performance

Vicarious Performance

A third party performs contractual obligations on behalf of the promisor who remains responsible for proper performance.

How it Occurs

Business takes on more than it can complete or it does not have the necessary skills

Still liable for performance, it is not transferred to the third party

When is Vicarious Performance Allowed?

As long as the contract does not specify personal performance It would not be accepted if personal performance is expected Can only sue for damages that arose due to the vicarious performance as

opposed to personal

Tort Liability and Vicarious Performance

Employer is liable for defects in vicarious performance by employees in tort and contract

Exemption Clauses and Vicarious PerformanceExemption Clause

A clause in a contract that exempts or limits the liability of a party.


Tweedle v. Atkinson

Protects a business from liability for its own breach of contract, negligence and vicarious liility for the torts of its employees

Other Exceptions to the Privity of Contract Rule

Insurance

Life insurance pays out to a person who is not a party to the contract These third parties have a right to have the insurance company pay out the

contract Car insurance can cover the owner and anyone who drive their car with

consent

The Undisclosed Principle

A contracting party who, unknowing to the other party, is represented by an agent.

When someone can prove that they are an agent of someone else, that someone can sue or be sued on the contract

Contracts Concerning Land

Privity of contract rules do not apply in land laws People who acquire land are bound by earlier contracts on public record

The Principled Exemption – Exemption Clauses

A third party can rely on exemption clauses if:

1. Did the parties to the contract intend to extend the protection to the third party claiming it?

2. Are the activities of the third party within the scope of the contract generally, and the exemption clause in particular?

Principled Exemption

Allows third parties to rely upon a contractual exemption clause when the parties to the contract intended to include them, and their activities come within the scope of the contract and the exemption clause.

Third party cannot sue under this principle, only uses it as a defense

Chapter 12 – The Discharge of Contracts

Discharge of a Contract

Cancel or end the obligations of a contract; make and agreement or contract inoperate.

Discharge By Performance

The Nature of Discharge by Performance

The way parties expect a contract to come to an end Both parties have fulfilled their promises


Tender of Performance

An attempt by one party to perform according to the terms of the contract.

A party may refuse to accept the tender of performance of the other party

Discharge By Agreement

Waiver

An agreement no to proceed with the performance of an existing contract.

If neither has performed, there s automatically consideration for this agreement

If someone has performed or partially performed, there is not consideration for both of the parties, to waive in this situation it should be under seal

One party cannot impose a waiver on the other

Substituted Agreement

Accord and Satisfaction

A compromise between contracting parties to substitute a new contractual obligation and release a party from the existing one.

If performance is too difficult a party to a contract can offer the other a substitution for performance if they are discharged from the original obligation

Material alteration is different because they are concerned with creating a new arrangement, discharge of the old one is incidental

Novation

The parties to a contract agree to terminate it and substitute a new contract.

Two types:

1. A material change in terms2. A change in parties

Has to be evidence of intention and agreement to abandon the original contract

Burden of proof is on the party claiming that the obligation switched to the new party to the contract

A Contract for Its Own Dissolution

Party might be worries about future event that could affect their ability to perform

Will often include a term that stipulates what will happen if this event occurs Both parties are obliged to wait to see of the condition precedent ids fulfilled

before they can ignore their obligations to perform


S agrees to sell $10000 worth of flour to B, cash on delivery. S wants out of the contract. If B tenders the money to S in the presence of a witness and S does not deliver, B can sue S for breach of contract. S cannot claim that B was unable to pay.

Condition Subsequent

A future event that brings a promisor’s liability to an end if it happens.

Act of God

The raging of the natural elements.

An act of god may be a condition subsequent in contracts for shipment of goods

Option to Terminate

Contract can give option to being a contract to an end before performance has been completed

Differs from condition precedent and subsequent in that the party decides to trigger the discharge of the contract

Discharge By Frustration

Cannot address all possible future events in terms in a contract

Doctrine of Frustration

Courts cannot dismiss performance in all cases

Doctrine of Frustration

The law excuses a party from performance when circumstances beyond the control of the parties make performance impossible, pointless, or radically different from that intended by the parties.

The change in performance has to happen after the agreement was made

Self-Induced Frustration

Party willfully disables itself from performing a contract in order to claim that the contract has been frustrated.

Party whose frustration is self-induced cannot rely on the doctrine of frustration

Not all degrees of fault will prevent a party from claiming that the contract is frustrated

The Effect of Frustration

The contract is discharged at the moment of the frustrating event Partial performance creates losses for innocent parties

Let the loss fall where it lies

The court will enforce the contract up to the moment of discharge. Obligations due before the frustrating event remain, obligations arising after the frustrating event are discharged.

This make sense on the purchasing end, not so good for seller If the seller delivers some part of the final product before the frustrating

event they will be able to keep deposits


Statutory Reform

To fix the unfairness that arises out of the above approach, most provinces have passed the Frustrated Contracts Act Allocates the losses between the parties

Recovery or retention is capped at the amount paid or due If a party has made no deposit and had not received any benefit then the

other party is without remedy

The Sale of Goods

When there is an agreement to sell goods and they perish before the risk has been passed to the buyer the agreement is void under the following conditions:

1. The goods must be specific – must be identified and agreed upon at the time of sale

2. The risk must still be with the seller3. The cause of frustration must be the perishing or destruction of the goods

Discharge By Operation of Law

Bankruptcy and Insolvency Act discharges debtor from contractual liabilities after the process has been completed

Statute Barred

An action that may no longer be brought before a court because the party wishing to sue has delayed beyond the limitation period in the statute.

Chapter 13 – Breach of Contract and Its Remedies

Implications of Breach

A breach entitles the non-breaching party to seek damages Does not discharge the contract automatically

If it warrants discharge the other party has to inform the breaching party Loses ability to treat it as discharged when they proceed with the contract

and accepts benefits, or the innocent party is not aware of the breach until after the other party’s performance is already complete Can still claim damages

Minor Breach

A breach of a non-essential term of a contract or of an essential term in a minor respect.

Major Breach

A breach of the whole contract or of an essential term so that the purpose of the contract is defeated.

Condition

An essential term in a contract.


Warranty

A non-essential term of a contract.

How a Breach May Occur

1. Expressly repudiating its obligations2. Acting in a way that makes it impossible to perform its promises3. Failing to perform at all or tendering an actual performance that falls short

of its promise

Express Repudiation

One of the contracting parties advises the other that it does not intend to perform as promised.

If it is of the whole contract or an essential term, the promisee can treat it at an end and sue for damages Has to inform the other party that they are treating the contract at an

end before finding a new party to perform

Anticipatory Breach

An express repudiation that occurs before the time agrees for performance.

One Party Renders Performance Impossible

A deliberate or negligent act that makes performance impossible is repudiation

Conduct of this type can take place before or during performance

Failure of Performance

Types of Failure

Usually apparent at the time set for performance Total failure to perform, inadequate performance, minor failure Degree of failure determines the remedy Innocent party may not know whether the failure is severe enough to allow

them to treat the contract as discharged. Can if they can answer yes to the following:

1. Is there good reason to think that future performances will be equally defective

2. Is wither the expected deficiency or the actual deficiency to date important relative to the whole performance promised

The Doctrine of Substantial Performance

Substantial Performance

Performance that does not comply in some minor way with the requirements of the contract.

Promisor is entitles to enforce a contract when they have substantially performed Subject to reduction for damages for incomplete performance


Mistakes in Performance

What if someone over-performs?

The recipient of the performance is not able to take benefit that belongs to another person, court will tell them to return it

Quasi-Contract

An obligation that may arise, not as a result of contractual relations, but because one party has received an unfair benefit at the expense of the other.

Unjust Enrichment

An unfair benefit.

Of the court finds that it is an unfair enrichment, they will be obliged to repay it

Exemption Clauses

Purpose

Businesses need to protect themselves from liability for breach of contract Allocate risk so parties know who should insure against what Supplier can charge lower prices Business will be able to recover litigation costs if it offers a complete

defense Work well when bargaining power is equal

Attitude of the Courts

Court will refuse to apply an exemption clause when:

1. The clause does not apply to the circumstances Interpret in manner consistent with the other terms in the contract Ambiguity interpreted against the drawing party Burden of proof is on the drawing party to shoe that the loss is covered by

the clause When intention is shown, court will not defeat bargain freely made

2. The clause was unconscionable at the time of contracting3. There is a strong public policy reason against enforcement

Injured party has to point to some paramount consideration of public policy

Types of Remedies

Damages

A monetary award to compensate an injured party for the loss caused by the other party’s breach.

Equitable Remedies

Special non-monetary remedies given only when damages alone will not adequately compensate for a loss.


Quantum Meriut

A fair amount a person deserves to be paid for the benefit conferred.

Damages

The Purpose of an Award of Damages

Compensate for loss caused by failure to perform Deters parties from committing breaches they can avoid

Prerequisites for an Award of Damages

1. Loss must floe from the breach2. Mitigation of Damages

Measurement of Damages

Parties sometimes have the value of possible damages in a term of the contract

Usually courts have to value the loss

Liquidated Damages

An amount agreed on to be paid in damages by a party to a contract f it should commit a breach.

Penalty Clause

A term specifying an exorbitant amount for breach of contract, indeed to frighten a party into performance.

If the court thinks it was intended to scare the party into performance then they will assess the damages on their own

Nominal Damages

May award nominal damages to acknowledge breach of contract where there is not a real lo by the non-breaching party

Acknowledges the validity of the plaintiff’s argument

Types of Damages

Expectation Damages

The typical remedy for a breach of contract

Expected gross benefit – injured party’s costs of performance

Expectation Damages

Amount awarded for a breach of contract, based on expected benefits or profits.

Consequential Damages

Secondary losses incurred by the non-breaching party that were foreseeable at the time of contracting.

Secondary losses, one stage removed from the immediate effects of the breach


Since they are reasonably foreseeable the defendant is liable to compensate for them

General Damages

Non-monetary harm arising from the breach.

Damage cannot be calculated in precise monetary terms Court believes that award is necessary to compensate the aggrieved party

Reliance Damages

Costs of expenditures and wasted effort reasonably made in preparation for performance.

Punitive Damages

For malicious and bad faith behavior of breaching party Rarely used

Challenges in Measuring Damages

Mental Anguish

Mental distress resulting from a breach of contract is recognized as a non-economic harm entitled to compensation

Examples:

Wrongful dismissal Lost holidays

Cost of Performance Versus Economic Loss

Want to end up where the non-breaching party is no worse off as a result of the failure to perform

Cost of performance for the breaching party may not be comparable to the economic loss suffered by the non-breaching party

Equitable Remedies

Money damages may be inadequate

Prerequisites for an Equitable Remedy

Court has to be satisfies that damages will not suffice

Requirements:

i. π must have clean handsii. π must not delay in bringing action

iii. It will not negatively effect an innocent purchaseriv. π must have paid substantial consideration for the promisev. π must ordinarily be a party against whom the remedy would be awarded of

they were Δ instead


Specific Performance

An order requiring Δ to do a contracted-for act, usually to complete a transaction.

Court will not do this if they might be obliged to supervise Δ For sale of one-of-a-kind merch, shares, antiques, etc.

Injunction

A court order restraining a party from acting in a particular manner, such as committing a breach of contract.

Contract must contain a promise not to do something

Interlocutory Injunction

A temporary injunction preventing immediate harm from being done before the full trial of the matter.

Common in land transactions

Rescission

Setting aside to rescinding a contract in order to restore the parties as nearly as possible to their pre-contract positions.

Not a usual remedy for breach of contract If breach is serious enough to release a party from their obligations, they

may elect to have the contract rescinded

Quantum Meruit

When valuable benefit is conferred as a result of a promise When a non-breaching party has partially performed their obligations

Methods for Enforcing Judgments

Judgment Creditor

A party who has obtained a court judgment for a sum of money.

Judgment Debtor

A party who has been ordered by the court to pay a sum of money.

Levy Execution

To seize and sell a debtor’s chattels or arrange for a sale of their land.

Garnishee Order

An order requiring the debtor’s employer to retain a portion of the debtor’s wages each payday and surrender the sum to the creditor.

Honest inability to pay is not punished


The Law and Business Administration in Canada 13 Ed Summary Notes

Documents

area of law

breach of private law

aka civil law

law influence behavior

government influences

serious rules of public

conduct society

morals of society