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Ryerson University
Law and Business
LAW 122
Gil Lan

Chapter 5 – Miscellaneous Torts affecting business BUSINESS TORTS: Deal with situations in which one business may try to gain an advantage over another  Whether the tort must involve behaviour that is otherwise unlawful  Whether the defendant must intend to harm the plaintiff Tort of Conspiracy – Usually occurs when two or more people agree to act together with the primary purpose of causing the plaintiff to suffer a financial loss  One person is generally entitled to use lawful actions toe economically hurt another  Tortuous if they are performed by several people  Hard to prove (they acted in a lawful way): courts are reluctant to find that the defendants co- operated for the primary purpose of hurting the plaintiff o If unlawful: the rules are different, if they violate criminal code or commit a tort, court does not have to be satisfied that the defendants primary purpose was to hurt plaintiff, but enough that they should have known that their actions might have that result  Trade unions during trade disputes are not affected by this tort  Intent to harm o Lawful act – hurting the plaintiff must be defendant’s primary purpose o Unlawful act – hurting plaintiff must be foreseeable Tort of intimidation – occurs when the plaintiff suffers a loss as a result of the defendant’s threat to commit an unlawful act against either the plaintiff or a third party  Unethical business practices  Two party intimidation – occurs when the plaintiff is directly coerced into suffering a loss (Supermarket threatens to hurt owner of small convenience store unless it closes down) o If threatens to sue to break contract, courts say sue for breach of contract  Three party intimidation – occurs when the defendant coerces a third party into acting in a way that hurts the plaintiff o Union member gets airline to fire someone they dislike (Plaintiff can sue union member)  To prove intimidation: o The plaintiff must prove that the defendant threatened to commit an unlawful act, such as a crime, a tort, or even a breach of contract o The tort does not occur unless the threatened party gave into the intimidation (Airline ignoring unions threat to fire plaintiff) o As long as other elements of the tort are established, there is no need to prove the defendant intended to hurt the plaintiff (Intimidation occurs even if the tortfeasor was motivated by a desire to benefit itself, rather than injure plaintiff) o It’s not intimidation if threatened to break contract, if defendant believed it was lawful Tort of Interference with contractual relations – occurs when the defendant disrupts a contract that the plaintiff has with another party  Stealing away workers from a competitor in the business or preventing people from performing their jobs  Direct inducement to breach of contract – occurs when the defendant persuades a third party to break its contract with the plaintiff. Requires 4 factors 1 o The defendant must know the contract that exists between the third party and plaintiff (Does not have to know all the details) o The defendant must intend to cause the third party to breach that contract (Does not have to be hurting plaintiff, will be committed even if it is motivation to benefit itself) o The defendant must actually cause the third party to break its contract with the plaintiff  Make it impossible for that person to work for the plaintiff  Judge will ask whether the defendant encourages third party to commit breach of contract o The plaintiff must suffer a loss as a result of the defendant’s conduct  Requirement is satisfied by the fact that the third party does not perform its contract with the plaintiff o In addition to suing defendant in tort for inducing breach of contract, the plaintiff can also sue the third party in contract for actual breach  Cannot recover full damages under both actions  If defendants actions were outrageous then plaintiff may be able to recover punitive damages and compensatory damages  Indirect inducement to breach of contract – occurs when the defendant indirectly persuades a third party to break its contract with the plaintiff o Physically prevent the third party from going to work, or steal tools that the third party needs to perform the contract with the plaintiff o It depends on the 4 factors from above plus proof that the defendants action were themselves unlawful o Does not work: Union calls strike (defendant), third party breaches contract with customer (plaintiff) Tort of Unlawful interference with economics relations – may occur if the defendant commits an unlawful act for the purpose of causing the plaintiff to suffer an economic loss  Ontario court of appeal adopted a very broad approach to two of the tort’s three elements o Intent to injure – enough that the defendants unlawful act was in some way directed against the plaintiff o Unlawful or illegal act – It is enough for the defendant had done something that it was not entitled to do o The plaintiff must suffer an economic loss  Damages usually equal to the value of lost revenue Torts involving the use of Land (Trespass to land also involved): Tort of Deceit – occurs if the defendant makes a false statement, which it knows to be untrue, with which it intends to mislead the plaintiff and which causes the plaintiff to suffer a loss  Defendant must make false statement – says or writes something untrue. Reflected in other ways: o Defendant may be held liable for half truths (Giving gross profits representing net profits) o Defendant may be held liable for failing to update information (Have deal to sell but things begin to change and I do tell you about the changes) o Caveat emptor – “let the buyer beware” Seller is usually not obligated to volunteer information  Buyer is responsible for investigating and asking questions 2  Exception: In certain situations seller must inform buyer of hidden defect (Unbelievable house or insurance company not informing what customer is covered, if not told they will have to pay)  Business people should avoid lying and avoid creating the wrong perception  Defendant must know at the time of making a statement that it is false (acting reckless without regard to truth also counts) o Not enough it defendant was merely careless  The defendant must make the statement with the intention of misleading the plaintiff o Court must satisfied with that the defendant intended to deceive plaintiff  Plaintiff must suffer a loss as a result of reasonably relying upon the defendant’s statement o A reliance is reasonable if a reasonable person reacted the same way o Consequences: The defendants statement normally has to refer to a past or present fact  Liability is not possible if the defendant offered an opinion, predicted future or made make a boastful claim (puff, salespeople make) Reasonable people don’t rely on such things o Occasionally however, a statement of fact may be implied by an opinion a prediction or a puff  Remedies: dealing with a tort rather than a contract. The plaintiff is entitled to be put into a position that it would have enjoyed if the defendant had not lied – not the position it would have enjoyed if the defendant’s statement had been true Tort of Occupier’s Liability – Requires an occupier of premises to protect visitors from harm  Occupier – is any person who has substantial control over premises, Control NOT ownership (Tenant)  Visitor – any person who enters onto premises  Premises – include more than land (Apartments and offices, elevators, vehicles, ships, trains, and airplanes) Occupier’s liability is quite wide and dangerous to business people  Complicated because it differs between jurisdictions (Legislation has been enacted in every jurisdiction except newfound, Saskatchewan, and the 3 territories) o The common law rules (which were made by judges)  There are a number of problems with the traditional system of occupier’s liability  First it can lump together different types of people (Children are not treated differently)  Second it is often difficult to distinguish between different categories (Different places should have different results, library and amusement park)  Third, a visitors status may change from one moment to the next (A customer who refuses to leave is a trespasser)  Forth, it often is difficult to decide whether a danger is hidden, or unusual (Icy parking lot)  Trespasser – Person who does not have permission to enter the premises (Burglar)  Obligation: not to intentionally or recklessly injure  Licensee – permission to enter with economic interest (Social guest)  Protect from hidden dangers that were known 3  Invitee – person with permission to enter premises and furthers economics interest  To protect an invitee from unusual dangers that the occupier knew or should have known  Contractual entrant – a person who enters into a contract to use the premises rather than to receive services (Hotel guest not restaurant diner)  Contractual obligation to make sure that the premises were safe as reasonably possible o Jurisdictions have modified categorizing visitors and moved toward increasing the occupier’s obligations  First an occupier must do more than simply refrain from intentionally or recklessly hurting a trespasser  Duty of common humanity – strikes balance between the parties  Obligations determined by a number of factors o Age of trespasser o Reason for trespass o Nature of the danger that caused the injury o Occupier’s knowledge of that danger o Occupier’s cost of removing that danger  Second, licensees and invitees are now generally treated the same (Occupier must protect both from unusual dangers, previously licensee was only protected by hidden dangers)  Third, Courts in Newfoundland have gone even further, an occupier in that province is required to use reasonable care toward all lawful visitors o The statutory rules (which were made by legislators)  Although statutes vary somewhat between jurisdictions, the basic principles are the same  6 provinces have enacted legislation  Basic principles are same. Differences between common law and legislation:  The common law generally applies only to dangers that are created by the conditions of the premises (Also applies to activities happening on premise) o Rotten tree falling on person on campsite or failing to prevent drunken guest from attacking another  The standard of care no longer depends upon a visitor’s classification o First, Nor are special distinctions drawn between say hidden or unusual dangers o Second, An occupier must use reasonable care, o In Alberta, occupiers are not required to protect adult trespassers from dangers, merely prohibited from wilfully or recklessly hurting them; in contrast reasonable care must be taken to protect children trespassers that the occupier knows or ought to know that are on the property. In PED does have to use reasonable care to protect some types of trespasser enough, It simply must refrain from intentionally hurting them (Similar rule applies in Manitoba for trespassing snowmobilers) 4 o Third, statues generally allow an occupier to avoid liability by issuing a warning o Fourth, Under common law a landlord generally cannot be held liable for injuries that a person suffers while visiting a tenant (Has ownership but not control) But landlord may be held liable if guest injures itself because it failed repairs to the building Tort of nuisance – occurs when the defendant unreasonably interferes with the plaintiff’s use and enjoyment of its own land  Involves land – Tension between the way in which the defendants want to use its property and the way in which the plaintiff wants to use its property  Occurs in a variety of ways – o physical damage to the plaintiff or its property (Factory omits gas to property) o defendant creates a smell or sound that impair enjoyment of property (Pig farm, nightclub) o A non-intrusive nuisance – without causing anything to travel on the plaintiff’s property (Operating a whore house in neighbourhood) o Will not support a claim in nuisance if:  Defendant builds something on his own property that ruins the plaintiff’s property (Blocking view to lake)  Defendant paints it home a color that reduces the value of the plaintiff’s house  Nuisance occurs only if the defendant’s interference is unreasonable (Always unreasonable if causes physical damage, less likely to hold defendant liable if it impairs the enjoyment of property, especially non-intrusive) o Courts look at:  Nature of the neighbourhood (Reasonable for country to have livestock)  Time and day of the interference (Reasonable to heart construction noise in noon weekday)  Intensity and duration of the interference – a dog barking can be tolerated if it occurs occasionally but not constantly  Social utility of the defendants conduct (Late night screeching of an ambulance is fine but not drag racing)  Defendants motivation – sound of gun if it occurs out of normal activities but not if it is made to ruin plaintiff’s animal by scaring them  Public nuisance – occurs when the defendant commits the crime of common nuisance against the public, but creates a special loss for the plaintiff   Defences to Nuisance – Several defences but courts are reluctant to allow the defendant to escape liability despite unreasonably interfering with the plaintiff’s property o Statutory authority – defendant caused a nuisance while under legislation  Defence applies only if the defendants nuisance is an inevitable result of the statutory authorized activity o Plaintiff cannot complain if it consented, however consent usually requires proof that plaintiff encourages the defendants activity and not just that it merely failed to complain o Defendant is not relieved of liability merely because the nuisance already existed when the plaintiff arrived in the neighbourhood  Remedies: compensatory and injunctions (stop to the nuisance) 5  in other cases injunctions may not be provided o if the damage is little to the plaintiff then compensatory damages can provide adequate relief o Or if the injunction would create a huge intolerable hardship on the defendant or a community The rule in Ryland’s v Fletcher – states that the defendant can be held strictly liable for a non-natural use of land if something escapes from its property and injures the plaintiff  First the defendant must have made a non-natural use of its land o Defendant must create a special and unusual danger (Cant be liable simple because those activities may be non-natural they are not unusual) Collecting fireworks in store display or an unusual amount of water in a reservoir is dangerous and unusual  Second – something associated with a non-natural use must escape from the defendants land and cause the plaintiff to suffer a loss (Fireworks going off and hitting someone on side walk, however RvF doesn’t apply if debris hits spectator at car racing event as it never left the property)  Third – most torts are based on some form of fault, usually liable if it is intentional or careless o But in RvF, it is Strict – defendant may be held liable even though it acted as carefully as possible. Strict liability does not however, mean that liability is imposed every time there is a non-natural use, an escape or an injury. o Defence in exceptional circumstances:  Plaintiff may have consented to the defendants non natural use of land  The escape may have been caused by a third party or a natural force (Tornado) that the defendant could not have guarded against  The plaintiff’s injury may have been the inevitable result of an activity the defendant was statutory authorized to do o Those defences are difficult to prove, so business people should take special precautions whenever they use land in a non-natural way Tort of defamation – occurs when the defendant makes a false statement that could lead to a reasonable person to have lower opinion of the plaintiff. Requirements:  First, it can be satisfied even if the defendant did not intend to refer to the plaintiff. The purpose of the tort is to protect reputation. It is therefore enough if a reasonable person would have thought that the defendant was referring to the plaintiff. Reputations are often by mistake  Second, a claim for defamation can be made by any sort of living person (Corporation)  Third, defamation may be difficult to prove if the defendant made a statement about a group of individuals. Each person must prove that the statement can be reasonably interpreted as referring to them personally o Unlikely if the group is large and the statement is generalization (Lawyers are crooks)  Slander – defamatory statement that is spoken o Required to prove special damages  Libel – defamatory statement that is written o Written words last longer and reach more people  Even a seemly harmless statement may be defamatory once it is considered in context  Defamation cannot occur unless Publication – occurs when a statement is communicated to a third party  A new tort may occur every time that statement is repeated (I commit tort if I sell book about you to publisher, is they publish they commit tort as well) 6  Defences to defamation: o Justification – occurs if the defendants statement is true  Cannot avoid liability if it honestly believed it was true  Defendant has burden of proof and must prove its statement was not false o Privilege – an immunity from liability  Absolute privilege provides a complete immunity  Applies even if the defendant made false statement for a malicious purpose  Only available when the law needs to encourage people to communicate without any fear of being sued  Limited to:  During parliamentary proceedings  Between high government official who are dealing with government business  By a judge, layers, litigant, or witness in the context of legal proceedings  Between spouses  Qualified privilege – Rather than a specific situation it is applied when:  The defendant has a legal, moral, or social obligation to make a statement  The statement is made to someone who had a similar duty or interest in receiving it  Defence of qualified privilege is also limited to statements that the defendant made in good faith (Not available if it was a lie or wanted to harm) o Fair comment – an honest expression of an opinion regarding a matter of public importance  Intended to encourage useful debate on significant social issues. Defence has several requirements:  First, it is intended to protect informed opinions  Defendant has to prove that a reasonable person would have interpreted the state as an opinion based on fact rather than as fact (True for article based with background information to support not just a statement)  Second , defendants opinion must concern an issue of public interest (Possible to criticize public activities of poets, priests and politicians, does not allow attacks on their personal lives  Third, a comment is not fair unless it was honestly held (If correct defendant is protected even if its statement was highly critical and very damaging)  Finally, defence of fair comment is not available if the defendant acted maliciously  Remedies for defamation: compensation, punitive damages (if outrageous), an injunction (highly exceptional circumstances to stop making statement though reluctant to restrict freedom of speech) Tort of injurious falsehood - occurs when the defendant makes a false statement about the plaintiff’s business that causes the plaintiff to suffer a loss  Misleads customers. Variety of forms:  Slander of title – falsely say plaintiff does not own a particular piece of land 7  Slander of quality – Defendant may falsely disparage the plaintiff product in way that causes potential customers to take their business elsewhere o Not committed if the defendant merely suggests that its products are better than plaintiffs o Nor if the defendants comments are true bout the business o Nor if the defendant tries to gain an advantage y making a false statement about the high quality of its OWN products  Other situations – Making some other type of allegation about the plaintiff’s business (Haunted house)  Must prove three elements: o False statement – statement must be made to a third party and has to be false (We are concerned about reputation) o Malice – Defendant must have acted out of malice  To hurt the plaintiff or knew statement was false or reckless o Loss – Defendant’s false statement must have caused the plaintiff to suffer a loss  Customer broke contract and took business elsewhere  Not enough to merely show profits began to decline after statement, a business can fall under hard times (Must show persuasive evidence that defendant caused loss) Chapter 6 Tort of negligence – determines whether the defendant can be held liable for carelessly causing injury to the plaintiff  Requires Plaintiff to prove that the defendant: o Owed Duty of care - required to act carefully toward the plaintiff o Breaches the standard of care – Acting carelessly o Caused harm to the plaintiff (causation of loss/harm)  Defendant may show that at least One of these defences existed o Plaintiff’s injury was caused by its own contributory negligence o Plaintiff voluntarily assumed the risk of being injured by the defendant o Plaintiff was injured while engaged in some form of illegal behaviour Professional negligence – negligence that is committed by a professional person (accountant, banker, lawyer); Special considerations must be taken Cause of action in negligence, the law is flexible to reflect different types of situations  The tension between the desire to provide compensation and the desire to encourage socially useful activities appears in all areas of tort law Duty of care – Occurs when the defendant is required to use reasonable care to avoid injuring the plaintiff  Courts say it is to control the score of liability under the cause of action  Without duty of care there cannot be liability, even if the defendant carelessly injured the plaintiff o Unborn child cannot can sue anyone for negligence except mother but after its born, its fair game 8 o Manufacturers can be held liable by any consumer (they don’t have to bought the product but to be effected by it) o Sometimes special rules may apply  If an injury was reasonably foreseeable and if the parties shared a relationship of proximity, then a duty of care presumable exists. The judge might still deny a duty of care, however, on the basis of policy reasons o If duty of care has not been established in the case then to find it, we must ask 2 questions: 1. Was it reasonably foreseeable that the plaintiff could be injured by the defendant’s carelessness?  Whether a reasonable person in the defendant’s position would have recognized that possibility?  A person cannot take precautions against a hidden danger (difficult to arrange liability insurance for an unpredictable events) 2. Did the parties share a relation of sufficient proximity?  Close and direct connection between the parties o Can be physical proximity but also proximity of a variety of perspectives: social relationships (father), commercial relationship (tavern), direct casual connection (motorist ramming into bridge, liable for bridge not profits lost for people who couldn’t reach the location), plaintiff relied on the fact that the defendant represented that it would act in certain way (railway company gate). Allows courts to look at it from all circumstances before deciding on duty of care Negligent statements – statements made by professionals that are inaccurate, thus resulting in someone to suffer  Strike a balance between the need to compensate people who are hurt by negligent statements and the need to protect businesses from the potentially disastrous consequences of being liable  3 Differences between careless statements and careless actions o Physical is obvious; risks for statements are hidden o Physical is limited in time and space; statements’ are indeterminate amount of time (many) o Physical can cause physical damage; statements usually result in pure economic losses  Duty of care imposed when bad information is given by: o Defendant claimed to possess special knowledge (easy to rely on an expert) o Communication on a serious occasion (Business meeting but not informal party) o Statement was made to an inquiry (info was most likely going to be relied upon) o Defendant received financial benefit in exchange for statement o Defendant communicated a statement of fact or prediction based on fact  Less likely to be imposed when: o Defendant issued a disclaimer along with statement (reasonable person does not rely upon statement if speaker was not willing to take responsibility) Indeterminate liability –defendant made item for specific purpose, not intend for item to be used for something else  Be careful about providing information and advice  If you do not wish to be held liable for your statements, should clearly disclaim responsibility 9  Should be careful about relying on statements made by other Policy – the effect that a duty of care would have on the legal system and on society generally  Duty of care will not exist even if the other 2 factors are true.  Factors courts consider regarding duty of care o Open the flood gates (encouraging a very large number of people to swamp courts with lawsuits) o Interference with political decisions (government can escape responsibility) o Hurt a valuable type of relation (Mother and unborn son) Standard of care – tells the defendant how it should act  Breached when the defendant acts less carefully  Reasonable person test - requires the defendant to act as a reasonable person would act in similar circumstances o It is objective (Means they won’t go easy on you, even if your mentally challenged, only in severe cases) o A child does not have to act like a reasonable adult, but it does have to act as a reasonable child (Rule is different if child was doing an adult activity like driving a boat) o Reasonable person would take precautions (if small chance of it happening but not to big), also to harm and danger o Likely to adopt affordable precautions (Get safety locks rather than an expensive car) o Act in way that has great social utility even though it creates a risk (Ambulance driver driving fast to save a life) o Less care is required under emergencies, the sudden peril doctrine states that even a reasonable person may make a mistake under difficult circumstances Standard of care for professional negligence – a professional must act as a reasonable person would act in similar circumstance  Existence of a close relationship between the parties  Extent to which the client relied upon the professional  Courts use 4 factors when dealing with professionals o a professional must act as a reasonable person would act in similar circumstance (Reasonable expectations)  Live up to training they received (Liable if they lied about qualifications)  More is expected from a specialist then a generalist  Doesn’t matter if your new and inexperienced o Based on information that was reasonably available to the defendant at the time of the accident o A professional who follows approved practice generally cannot be held liable  Its met if organization follows procedures  If found careless, a court will reach that decision o Carelessness is different from mere errors of judgement; a professional does not have to be perfect. (A surgeon cannot be held liable for choosing a procedure over another if another professional would of done the same) Standard of care for manufactured products: Product liability  Tortuous liability – Do not need a contract in order to sue 10  Product liability – can occur when a person is injured by a product o Maybe possible to sue for breach of contract if the victim was the person who actually bought the item (Sales of goods act) o Liability for breach of contract is strict (Defendant does not have to prove that defendant carelessly provided a defective product)  It is enough that the contract was defective in a way that caused harm  It’s in US  Is not strict liability; if it’s in Canada  When suing in product liability, must sue in action of negligence o Standard of care for product liability divided into 3 parts:  Manufacture – The courts usually Impose liability if the defendant carelessly manufactured a product that injured the plaintiff  Manufacturing defect – affect only a few items  Design – Courts are more cautious if the plaintiff’s injury was caused by the design, rather than the manufacturer of a product  Design defect – affects every item that is produced  Courts concerned about imposing a tremendous burden on defendant  Looks at the alternative design that could have been used like expense, difficulty and severity  Failure to warn – Liability may arise if consumers are not reasonably warned about its dangers  The nature and extent of the warning depends upon the circumstances  Warning is needed only for product’s intended use (Warning may be put for an unintended use)  Contact consumers about new warnings or recall  Warning may be required by someone else other then manufacturer like seller, distributor and installer of product  Can avoid liability if it provided a warning to a learned intermediary (If not directly given to consumer); If manufacturer warns the middle man, it will no longer be liable Disgorgement – measure by the defendant’s wrongful gain; opposite of compensation Causation of Harm – Defendant will not be held liable unless its carefulness caused the plaintiff to suffer a loss  But for test – requires the plaintiff to prove that it would not have suffered a loss but for the defendant ‘s carelessness o Question: If the defendant had not acted carelessly, would the plaintiff have still suffered the same loss?  If yes: the defendant cannot be held liable  If no: defendant may be held liable  Plaintiff generally has to prove all the elements of the tort of negligence, including causation, on a balance of probabilities  The law generally adopts an all or nothing approach (Over 51% chance if defendant caused negligence then courts will award all damages; Less than 51% will not reward any damages)  Plaintiff has to prove only that the defendants carelessness was a cause, not necessarily the only cause of a loss (Bad posture = pain but push off bike more pain, owe money to me) 11  If different defendants cause the plaintiff to suffer different injuries then each one is responsible accordingly  Situation is more complication if different defendants create a single injury o People can get jointly and severally liable – recover damages from one of them or some of your damages from both (choice is yours) Court good give percentage of liability, if one person is charged more than the other that person can sue the other for claim o Joint liability – all defendants are liable for the same tort o Several liability – each defendant is individually liable to the plaintiff for the entire amount  Court may reject the but for test if it would lead to an unfair result (Getting shot by 2 people and unable to pin balance of probabilities and duty of test but courts will still awards and they joint) A loss is Remote – if it would be unfair to hold the defendant responsible for it  It has to be reasonably foreseeable  Used to resolve thin skull cases o Thin skull case – occurs if the plaintiff was unusually vulnerable to injury  Responsible for all my losses, since reasonably foreseeable that a normal person would have suffered some damage (courts may decide to reduce damages for reasons like the injury would of have happened thus costs only happened up to the point it would have happened)  For Business people, courts traditionally refused to apply thin wallet principle  Plaintiff is poor, defendant not responsible for the part that plaintiff suffered for being poor  Courts now are suggesting that defendant be fully liable for not reasonably foreseeing that the plaintiffs poverty would cause it to suffer more than usual  Intervening act – An event that occurs after the defendant’s carelessness and that causes the plaintiff to suffer an additional injury (broke leg; a week later I break arm using crutches) o Judge would ask if it was reasonably foreseeable that your initial carelessness would in my later injury o Liability will be imposed if your negligence increased the risk of my subsequent injury Defence – Can avoid liability by providing a defence. Three important defences:  Contributory negligence – occurs when a loss is caused partly by the defendants carelessness and party by the plaintiff’s own carelessness o If plaintiff is guilty of Contributory negligence. Courts use same factors of SOC: Foresee ability of harm, Likelihood of injury, Severity of harm o Can arise when:  Unreasonably steps into a dangerous situation (getting a ride from a drunk)  Unreasonably contributes to the creation of an accident (Standing up when car is moving)  Unreasonably contributes not to the creation of an accident but to the damage that it causes (not wearing a seatbelt) o Damages get reduced, judges place contributory negligence at less than 30 percent o No longer a complete defence  Voluntary assumption of risk (Volenti defence) – applies if the plaintiff freely agreed to be exposed to a risk of injury 12 o A complete defence, plaintiff cannot get any damages o Defendant has to prove the plaintiff expressly or implicitly agreed to be exposed to both the physical and legal risk of injury o Best way to prove is to show that plaintiff signed exclusion clause  Cannot guarantee exclusion from liability if the form is not drawn to the plaintiff’s attention (He not read it or known of its existence or been told)  Illegality – Refuse to award damages if the plaintiff suffered a loss while participating in an illegal act o A complete defence o Only applies when plaintiff attempts to use tort system in a way that would undermine the integrity of the law Chapter 7 Contract – an agreement that creates rights and obligations that can be enforced in law  Meetings of the minds – a mutual agreement to enter into a legal transaction on a particular basis (consensus ad idem)  Exchange of value - occurs when parties each give up something (Quid pro quo)  Contractual agreement can continue even after there has been an exchange of value  By knowing your rights and obligations, you can almost always avoid going to court  Legal proceedings signal an end of a relationship o The long term benefits of retaining a healthy commercial relation are often more important than winning a dispute  Most contracts do not have to be written in order to be enforceable Contract steps: 1. The parties must have an intention to create legal relations 2. They must reach a mutual agreement through the process of offer and acceptance 3. They must enter into a bargain by each giving consideration Intention to create legal agreement – arises if a reasonable person would believe that the parties intended to create a legally enforceable agreement  Judge is concerned with what a reasonable would have thought  Its objective not subjective o Not subjective because a person could easily lie at trial, important goal of the law of contracts is to protect reasonable expectations  A reasonable person ignores unrealistic and exaggerated proposals  Courts believe Intention to create legal relations does not work with friends and family members Offer – an indication of willingness to enter into a contract on certain terms  Offeror – party who is offering to enter into a contract  Offeree – a party who is entitled to accept or reject an offer to enter into a contract  Contract comes into existence as soon as an offer is accepted o Both parties become obligated to fulfill promises contained in agreement  Invitation to treat – an indication of a willing to receive an offer 13 o Invitation for others to make an offer o A person who responds is an Offeror and the person who invited is an Offeree o If communicated and received as an offer does not need a particular form, can be: written, verbal, and through conduct (barber) o Sometimes company just use ads to lure customers, called bait and switch, its illegal o If price was not determined in contract, requires purchaser to pay reasonable price, its called quantum meruit Life of an offer – Does not last forever, may cease to exist in a variety of ways:  Revocation – occurs if the Offeror withdraws an offer o Offeror can revoke it any time  Not effective unless it is reasonably communicated to the Offeree  Until then the offer remains open and the Offeree can create a contract through acceptance o Firm offer – occurs when the Offeror promises to hold an offer open for acceptance for certain period (Can be revoked by Offeror, for it to be effective consideration must be given) o Option – a contract in which the Offeror received something of value in exchange for a binding promise to hold an offer open for acceptance for specific period  Allows some point in the future to create a contract  Immediately create an entirely separate contract requiring the Offeror to wait while you decided whether to buy the land (Take special caution in granting options) o Tender – an offer to undertake a project on particular terms  Offeror  Constitutes an offer to enter into a special contract, called “Contract A” to hold a fair tendering process in exchange for the submission of a irrevocable bid  Also constitutes an invitation to treat to receive offers to enter into a contract, called “Contract B”  Many Contract As  But only one Contract B  Accepter  Constitutes acceptance of the city’s offer to enter into a fair and irrevocable tendering process under Contract A  Constitutes an offer to enter into a contract for the construction of the project under Contract B  Lapse of time – There is a lifespan on offers, option help this but when it’s not stated; courts look at many factors including subject matter of proposed contract, nature of agreement, vitality of the market and practice of industry.  Death or insanity – Offer is revokes if Offeror or Offeree dies o An exception may occur if the proposed contract does not call upon the affected party to perform personally, a dead person can’t perform a duty but if it was an offer to buy land, it works  Rejection – Occurs when the Offeree refuses an offer o Offer is terminated once rejected, cannot accept it later if they change their mind; rejecter must offer and hope they accept 14  Counter offer – Occurs when an Offeree responds to an offer by indicating a willingness to enter into a contract but on different terms o Original offer is rejected and a new one is created; causes parties to switch roles o Sometimes an offeree’s statement is a harmless inquiry rather than a counter offer Battle of the forms – occurs when each party claims to have entered into a contract on the basis of its own standard form document  Too difficult and expensive to make new contracts  Judge will consider several factors including practice in the industry, past dealings between parties, the precise sequence of events, and the forms if any, that the parties actually signed Acceptance – Occurs when an Offeree agrees to enter into a contract proposed by the Offeror  Offeror is master of the offer: can dictate how word must be communicated. Its possible to insists a particular acceptance be communicated in a particular way o If no restrictions then it can be accepted in any reasonable way  An offer may be accepted even through conduct (Nodding) o Silence alone cannot be considered as acceptance (Company sends items and says you will be charged if you don’t respond, you’re not required to pay)  Does not work if you previously allowed a company to treat your silence as acceptance  Acceptance at a distance – Performing contracts from distances o General rule – states that acceptance by instantaneous communication is effective when and where it is received by the Offeror  Rule initially formulated when there was face to face communication  Instantaneous communication – little or no delay  Acceptance is effective only when and where the Offeror actually receives it (Going through a tunnel while accepting something, person didn’t hear) o Postal Rule – States an acceptance that is communicated in a non-instantaneous way is effective where and when the Offeree sends it  Non-instantaneous communication – any form of communication that involves substantial delay between the time that it leaves one person and reaches another  Prevents you from revoking offer when my acceptance is in the postal system  Contract can be formed even if the letter is lost in the mail and never reaches me  Does not apply if sender didn’t put enough stamps or put wrong address  As Offeror, postal rule imposes certain risks upon you, until you clearly receive a clear acceptance or rejection, you cannot be sure if contract has been created  To get around the rule:  Draft your proposal to ensure it is an invitation to tread (Replies will be offers not acceptances)  Eliminate postal rule yourself by making it clear so contract is accepted only when you say it is  Postal rule won’t apply if it was unreasonable  Postal rule only applies to acceptances, does not apply to an offer, a revocation, a rejection, or a counter offer  Revocation is effective only when and where it is receives by the Offeree 15  Counter offer is only effective when and where it is received by the offer  Acceptance by promise - o Bilateral contract – occurs when a promise is exchanged for a promise (All above crap belongs under this)  Acceptance by Performance – o Unilateral contract - Occurs when an act is exchanged for a promise  No contract exists until the Offeree fully performs  If they perform, contract is created, the Offeror now owes  You have to have intention of accepting, if not there was no meeting of the minds, if it wasn’t a response to my offer then no contract was formed  Not effective until the stipulated act is completed (Offeror can revoke anytime before acceptance) Exception if company was unfair  Courts prefer Bilateral over Unilateral because bilateral provide more protection Chapter 8 Consideration – exists when a party either gives (or promises to give) a benefit to someone else or suffers (or promises to suffer) a detriment to itself  A mutual exchange of value, without it a contract cannot exist  Consideration must move from each side of a contract but not necessarily to the other side (I’m giving something to your sister and your giving to my brother) Gratuitous promise – a promise for which nothing of legal value is given in exchange  Can’t be forced to give an item of value, can change mind anytime and keep it unless I actually give you the item (Charity) Sufficient consideration – May be almost anything of value  A contract must be supported by sufficient consideration  Sufficient: giving up smoking, drinking, or swearing. Exception: love and affection (not enough to support an enforceable agreement) Adequate consideration – has essentially the same value as the consideration for which it is exchanged  Basically a rip off deal is allowed Forbearance to sue – a promise to not pursue a lawsuit  Plaintiff promises not to bring lawsuit to court if defendant agrees to pay less money than it allegedly owed  If plaintiff would of lost the judge would still hold agreement in place  Courts will not enforce forbearance agreement if plaintiff knew it would lose but pursued lawsuit to achieve it Mutuality of consideration – Requires that each party provide consideration in return for the other party’s consideration Past consideration – consists of something that a party did prior to the contemplation of a contract  It cannot be given in exchange for other party’s consideration  Not really consideration as it cannot support a contract 16  Work is done before you are told, you don’t have to pay since that was past consideration Quantum meruit – reasonable price for services Pre-existing obligation – an obligation that existed, but was not actually performed, before the contract was contemplated  Three types of pre-existing obligations o Pre-existing public duty – a person who owes pre-existing public duty cannot rely upon that obligation as consideration for a new contract (Police & fire firefighters, they don’t have to protect you during their off hours) o Pre-existing contractual obligation owed to a third party – Pre-existing obligation that previously arose under a contract with a third party can be good consideration for a new contract (Professor is paid to teach but gets asked to be recorded for a documentary)  Danger is that now you have 2 different obligations and must pay if you don’t o Pre-existing contractual obligation owed to the same party – The same person cannot be required to pay twice for the same benefit  If a promise is merely repeated, it does not provide anything new  New considerations have to be made  Courts want to prevent a person from threatening to breach one contract in order to get the other party to enter into a second contract at a higher price  Companies tend to revise their contracts with one another  Novation – discharge their initial contract and enter into a new agreement that includes a higher price  Promise to forgive an existing debt – Lower the amount of money owed to you cause person doesn’t have it. But you can ask for the rest back because a new contract is not made  Promise to a smaller sum is enforceable if it is placed under seal  Promise to a smaller sum is enforceable if debtor (person who owes) gives something new in exchange for it, simple changes like adding car, paying on certain date or paying by cheque  Mercantile Law amendment act of Ontario – Part performance of an obligation either before or after breach thereof when expressly accepted by the creditor or rendered in pursuance of an agreement for that purpose, though without any new consideration, shall be held to extinguish the obligation  Actually receive part of the obligation and not promise  Courts will not allow statute to be used in an unconscionable manner Promises enforceable without consideration  Seals – mark that is put on a written contract to indicate a party’s intenti
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