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Law 2101 - Mar. 20.docx

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Western University
Law 2101

Law 2101 Thursday March 20 Commercial Law Introduction to Contract Law (continued) The Doctrine of Promissory Estoppel • Where A makes a gratuitous promise (one not supported by consideration to B) and B subsequently relies upon that promise to B’s detriment, B may be able to enforce A’s promise • eg. A promises B $1 million, and B goes out and buys a Ferrari. A goes back on their promise and says they aren’t giving B the $1 million. Can B sue A? o No – even though B suffered a detriment (a Ferrari he can’t return), there is no consideration • Sometimes the fact that you have relied on what I’ve said might allow you to sue based on a promise: o Central London Property v. High Trees • Limitations: o Cannot be used as a sword, only as a shield (you can’t sue someone, only use it as a defence) o Must have a pre-existing legal relationship (a contract) • Example: A and B have a contract for a book. A promises to deliver the book on Friday, and B promises to give $100 for the book. A gets sick, and asks B if they can come on Saturday instead. When A comes with the book, B says they have changed their mind and that the contract promised A would bring the book on Friday. The contract has changed, but the promise can be enforced even though consideration has not been exchanged. Intention to Create Legal Relations • It isn’t enough to have offer and acceptance as well as consideration – the plaintiff also has to prove that the parties intended for there to be a contract • The parties must have intended to create legal relations. This is an objective test (what a reasonable person would think about the intention to enter into a contract). • 2 Presumptions: o In the family or social setting, the law will presume you don’t intend to have a contract even if there appears to be offer and acceptance.  eg. when you make a deal with your parents about doing the dishes, you can’t sue (there is a presumption there is no contract)  The presumption is strongest the closer the relationship is (eg. more strong before parents and children, less strong between siblings)  Merritt v. Merritt • The husband (defendant) and wife (plaintiff) were married for 15 years. The husband started dating someone else while they were still married, and he moved out. The husband told the wife he would pay the wife $40/week, the wife would look after the house, and then he would transfer the title. They both followed the deal, but then the husband refused to give the wife title to the house. Was the bargain between the husband and wife meant to be legally enforceable? o The court said it was enforceable because the presumption doesn’t apply when you’re not living in peace, goodwill, and harmony. o In commercial arrangements, there is a presumption that the parties intended to create legal relations  But: If someone says something is binding “in honour only”, it is not legally enforceable (you have rely on the honour or goodwill of the person alone)  Fobasco v. Cogan • The defendants bought Blue Jays tickets every year, and sold 6 to the plaintiff. This went on for 10 years. They had a falling out, and the defendant wanted to keep the tickets, so he refused to give the 6 tickets to the plaintiff. The plaintiff sued for the tickets. • The court said although they were business people, this was a casual setting and therefore the presumption of intention didn’t apply Representations and Terms • Example: A used car salesman promises that the car you are about to purchase was only driven for 20,000 km before it was traded in. What happens if you sign a contract for the purchase of the car (it doesn’t mention anything about the km in the written contract) and then discover that the odometer has been rolled back? • We will look at this question in the following sections Classification of Pre-Contractual Statements 1. Mere Puffs • A puff is mere sales talk (eg. World’s best coffee) 2. Collateral Contract • A collateral contract is 2 contracts – a main contract (eg. a contract for the car written down) and a side or collateral contract (eg. the salesperson promised you the car had 20,000 km) • If you want to make this argument, you have to prove: 1. There was an offer, acceptance, and consideration  Offer: An offer of a unilateral contract “If you sign the contract to buy the car, I will promise the car has 20,000 km”  The acceptance and the consideration are you entering into the main contract to purchase the car 2. Promissory intent • Does it appear that you and the salesperson wanted that statement to be legally binding? • a) The purchaser makes it clear that they regard the matter (the kms) as so important they wouldn’t buy the car without that assurance (eg. through a bad experience) • b) The salesperson has more knowledge than you do on that set of facts (eg. you are buying tools from Home Depot and need the salesperson’s expertise on a certain wrench, the receipt won’t say the salesperson promises a certain wrench will fix your sink) 3. To what extent is the accuracy of the statement (the truth of what is promised) likely to affect the purchase decision? 4. Does it really look like the salesperson guaranteed things to you? (The most important factor) •
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