B. Intention to Create Legal Relations
- Formation of a K need:
• Intention to create legal relations (animus contrahendi)
• Offer and Acceptance (consensus ad idem)
• Consideration (quid pro quo)
- No contract unless requisite intention- test for requisite intention:
• Animus contrahendi- examine language, conduct, who parties are, subject matter
o If you don’t have the willingness to be bound in a legal way, if the other elements
are in place, there is no K
• Expressed or implicit intention that a K should emerge as a result of the language or
conduct of the alleged parties (intention to create legal relations)
• Intention is question of fact
o Question of law: standard of correctness
o Question of fact: standard of reasonableness
- Parties’actual intentions are not determinative; intention is instead determined objectively
• Reasonable person - Would a reasonable person have thought you had an intention to
create legal relations? If they think you did, then you had that intention.
- Presumptions are inevitable because default position is required and there may be no way of
knowing what finite facts are. Most presumptions are rebuttable by facts and parties
- In commercial matters there is a presumed intention to create legal relations but this is a
o General rule: P has to positively prove all elements of the claim on a balance of
probabilities. Persuade judge on each and every side that the plaintiff’s side is probably
right. Default rule is the defendant wins (if they cannot prove balance of probabilities).
Rose and Frank Co v JR Compton and Bros Ltd, 1924 UK
WE PRESUMEAN INTENTION TO COMMERCIALK, BUT IT’S REBUTTABLE.
Facts: Parties were involved in Ks for a number of years. In a new agreement, companies
“honourably pledged” to keep doing business together, but their arrangement was outside legal
jurisdiction of US and English courts. D terminates agreement and P sues for breach.
Issue: Is contractual intention presumed in commercial context? Is this rebuttable?
Ratio: Rebuttable contractual intention in commercial context.
• In a commercial context, we presume the parties have intent to create legal relations
• But the presumption is rebuttable – you can presume, but we can bring in evidence that
says it’s not true
Reasons: Freedom of K (parties are free to enter or not to enter contractual relations). Business
people may want contracts that are not legally enforceable. This agreement may not have been a
K, but when parties acted on it, they created individual contracts of sale that we can enforce. Page 2
Implied that if you deliver paper then it must be paid for.
Obiter: Scrutton: Legal consequences to follow even if no K, by the magic of unjust enrichment.
D must give back value received from P. No legal explanation why purchaser should get the
paper for free. But unjust enrichment ultimately not required.
Balfour v Balfour, 1919 England
Facts: Husband agreed to pay his wife an allowance while he worked away from home
overseas. When they officially separated, wife sued her former husband for alimony,
restitution of conjugal rights (sex), and breach of contract.
Issue: Is contractual intention presumed in domestic context? Is this rebuttable?
Ratio: Rebuttable presumption against intention to create legal relations in the family
Reasons: In family/social context, it will be presumed there is no intention to create legal
relations. Why this presumption? Reflects interests of the creators of the law, who, in a
business context, wanted a rule to clarify matters. Parties did not intend to create
enforceable rights, improper interference with domestic matters, and fear of opening
“floodgates” of litigation. This rule may not be entirely appropriate today.
What other social situations does this presumption extend to?
• Merrit v Merrit (separated before agreement)- if relationship already fell apart, they are
already adversarial parties, so we presume that they intend relations
• Anderson v Luoma- (gay marriage)- rule applies to social context (domestic relationship),
not just traditional values. In Canadian court today, no argument.
Presumptions and Intention to Create Legal Relations
• Presumptions and question begging
o Presumption follows fact but fact follows presumption
o Intention presumed in commercial matters
Presumption rational because of usual expectations
But... reasonable expectation fostered by legal presumption
o Intention not presumed in family matters
• Academic recognition that “intention” decision masks policy decisions
o Malleable “reasonable person” test facilitates desired results
Subjectivity of judicial perception of “reasonableness”
• Concerned with objectively Page 3
Contingency of legal rules
o Intention presumed if enforcement considered desirable
Commercial policies support business agreements as Ks
o Intention not presumed if enforcement not considered desirable
Balfour policies militate against social agreements as Ks
CriticalAnalysis of Presumptions
• Composition of English bench 1919-1923 (judges) was white, male, upper class (largely
remains true today). Decisions regarding intentions guided by class considerations.
Consistent with class’s interests to enforce commercial
o Judge’s circumstances apt to reflect either D’s or P’s. Judge’s commercial
inclinations demand certainty. Contrary to judicial class’s interest to enforce
o Judge’s circumstances very likely to reflect D’s.
- If power imbalance between two parties (powerful party taking advantage of weaker party) then
court may exercise discretion to strike clause (that not a legal agreement) down on basis of
• Absent this little reason to prevent commercial parties from adopting non-enforceable
• Unjust Enrichment: 3 part cause of action: 1) Enrichment to D, 2) corresponding
deprivation to P, and 3) absence of juristic reason for the enrichment. However, it only
involves payment for what you receive; if the product turns out later to be defective,
unjust enrichment provides no course of action.
Toronto Dominion Bank v Leigh Instruments Ltd, 1999 ONCA
Intention to create legal relations almost certainly looks like this
Facts: Pl (parent company) issues ‘letters of comfort’to TD while Pl was involved in
buying out Leigh. Plessey says Leigh will be managed in such a way that they can pay all
of their debts, but has no formal agreement to pay. Leigh goes under, and bank turns to
Plessey. TD sues for breach of contract, and Hedley burn.
Issue: Are comfort letters legally binding? What is a comfort letter?
Holding: trial: dismissed, appeal: dismissed
Ratio: Document is determined by reasonable person test.
Reasons: Interpretation of comfort letters is to state subsidiary is responsible for its own
debts. Business presumption of legal relations is rebutted by wording of the letters.
Purpose of document is to alleviate concerns of bank, but the text repeatedly says they
refused direct guarantee of debt. Comfort letters serve a practical purpose because
increase likelihood of payment due to reputation in business world given sophistication of
parties. Page 4
- Using reasonable person test in K- look at context of sophisticated business partners.
- If 2 parties have a previous business relationship, usually involving written contracts, the lack
of a written contract may lead to presumption that in this instance, they had no intention
- If in social situation, it appears as though both parties would agree to something for protection
or opportunity to increase winnings, K may be found
- Existence of detrimental reliance may be substantial enough to rebut presumption of no K, but
is not guaranteed to be enough to rebut it entirely
-When the elements of contracts are put together you don’t necessarily have to prove detrimental
reliance. But if you can show reliance, the court is more likely to rule in your favour. Soft factor*
C. Offer andAcceptance
Bargain Theory of K- consensus ad idem (meeting of the minds) - bargain occurs through offer
• Offeror- agrees to enter into K on certain terms
• Offeree- accepts offer to enter into K on same terms
Offer: expression of willingness to be bound to K on certain terms
• If you want to have an offer it has to be clear and unequivocal. Once the contract comes
into existence, neither one can walk away. Because of the danger, we often lean against
Danger of Offer: K formed immediately upon acceptance of offer by offeree
• If put offer out for the world and get more acceptances then have of item offered then you
are on the hook for expectation damages
• If you put an ad to the world “e.g. textbook for sale, $25”, not an offer
Invitation to Treat: designed to elicit an offer from the party to whom it is addressed but not
create binding obligations. Considered an offer if viewed as such by reasonable person.
• Malleable reasonable person test allow judicial satisfaction of sufficient reason for
enforcement of K
Recognition of Offers:
• Need not take any special form- unequivocal conduct or words
• Recognition of offer depends on totality of circumstances (prior/subsequent events), and
usually clear on precedents and presumptions
o No offer if “statement of intent.” E.g. we intend to offer...
o No offer if statement is price quotation. E.g. We sell widgets at $x per unit
o No offer if “statement of inquiry.” E.g. would you sell that book...
o If limited supply of a good is stated in advertisement, and offers that good to
people who perform specific task, it may constitute unilateral K
o Advertisements- assumed as invitation to treat (practical difficulty of considering
all responses to ads as offers)
a. Offers and Invitations to Treat
Pharmaceutical Society v Boots Cash Chemists, 1953 Eng CA
Facts: D operates pharmaceutical business where regulated items are available for
consumers to pick up and bring to register. P argues that picking them up constitutes Page 5
acceptance of offer, making the sale binding and violating P’s agreement. D argues shelf
items is invitation to treat, and offer is made at till by customer.
Issue: Is display of items an offer or some other type of communication?
Ratio: Display of item on shelf, advertisement, window, leads to presumption of
invitation to treat.
Reason: Invitation to treat creates non-binding invitation to receive offers. Customer
presents product, this is offer, and cashier’s completion of sale is acceptance (K formed).
This is a legal sale under the Act, since it’s under pharmacist’s supervision. If item on
shelf was offer, once it was picked up, pharmacist couldn’t prevent sale, there could be no
exchange once in basket.
Implications of Boots:
- Fisher v Bell- proposed sale of illegal items. Held that if you can’t offer to sell switchblades in
a store, merely putting them on display does not violate this law, only an invitation to treat.
- R v Dawood- Price-tag switching. Is this theft or fraud? No offer at the item is on shelf, thus she
did not commit theft. Her offer of lower price was accepted by cashier. Fraud, not theft.
- Catalogue shopping and advertisements- limited stock and unlimited acceptability, not an offer
but an invitation to treat
Goldthorpe v Logan, 1943 CA
Facts: D owned clinic claiming to remove all unwanted facial hair. P spoke with nurse at clinic,
who confirmed ad’s claims that it was guaranteed and permanent. P underwent procedure, and
saw increase in growth of facial hair. P sued in tort (negligence) and contract (not 100% satisfied,
should be put in position reasonably expected after procedure).
Judgment: Awarded her $13 payment back, and damages.
Issue: When is an advertisement an offer? Is this a unilateral contract?
Ratio: Purported application of Carbolic. When there is an offer (advertisement or otherwise) to
treat and an acceptance and good consideration is present then a contract enforceable by law is
formed. If that contract is breached D is liable.
Reasons: Ad was offer open to acceptance, P accepted by responding to ad. This was policy
rationale to protect weak and incredulous; extravagance of proposal does not preclude it being an
Problems with Judgment:
- Don’t use this case on exam for ex. of add to be an offer
• Damages awarded- have to put $ value on fact that her expectation was not satisfied, but
court gives her back her payment, and then gives damages. This provides both backward
looking and forward looking damages. If she wanted benefit, should’ve paid $13 to get it.
Sue in both tort and K then get to pick the higher offer. Page 6
- Ad was but should not be offer (no reason to rebut the presumption that ad is not an offer); this
was bilateral K, where her walking into store constituted offer. Reasonable person wouldn’t
guarantee hair removal unless they saw the person first and so no reasonable person would treat
this ad as an offer. Carbolic not needed because no detrimental reliance here and reasonable to
assess people in this case before extending the offer unlike Carbolic.
• Advertisement constituted offer open for acceptance
• P accepted offer by responding to advertisement
• Policy rationale of protecting the weak and credulous
• Extravagance of proposal does not preclude classification as “offer”
o But some claims recognizable by reasonable person as puffery
Carlill v Carbolic Smoke Ball, 1892
Facts: Ad: ingesting smoke = no flu. Money is put in bank to back up claim if flu is
contracted. P uses smoke ball, gets flu, attempts to claim her prize, but is refused. D
claims no offer, since they wouldn’t want to enter into K with entire world, and P didn’t
meet her terms while under supervision (or notify of acceptance), and terms are too
Issue: When is an advertisement an offer capable of acceptance? Is it an offer or
invitation to treat?
Ratio:Advertisements generally invitations to treat, but in these facts, constitute
- Acceptance by offeree through performance of terms, so offeror is obliged to pay terms.
Offer was not open to world, since only those who met conditions of ingestion were
accepting and not courts job to prevent extravagant claims.
- Detrimental reliance and bad faith on Carbolic’s part, combined with clear intentions to
create legal relations through deposit in bank in contemplation of illness of party.
- Not required to notify of acceptance; reasonable person say company would not want to
receive all these useless letters that it was used and now waiting to see if they get sick.
Consideration consisted of inconvenience of using smoke ball for prescribed period.
- Consideration by both parties
• Offeror: promise to pay £100 in event of illness
• Offeree: detriment of using product or purchase of item
Recap Page 7
- Understand cases for:
• Formal rule: if you have a display or advertisement, it looks like an offer but it’s an
invitation to treat because of the mischief. The mischief is of indeterminate liability; if
you treat these as offers you could get way more offers than you can handle.
• Counter-example: Wild Ed Example – even though it’s an advertisement there is no
mischief, because there is no possibility of Wild Ed being exposed to indeterminate
liability. The ad itself is limited to a price of $2,000 and at most three customers. Boots
Cash Chemists’rule not needed. In determining whether we want a different rule, we look
at considerations like detrimental reliance (i.e. camping out overnight) and bad faith. We
displace the presumption.
• Disputed: Carbolic – ad treated as an offer, even though the mischief is in play and even
though there’s a possibility of indeterminate liability. There are many smoke balls out
there and many people could get sick – enormous liability. Even though we would
presume an invitation and an offer, the soft factors (detrimental reliance, bad faith) are so
overwhelming we treat as an offer. Carbolic Smoke Ball Company knew what it was
doing and since it did so in a cynical way, the court said they normally wouldn’t do it but
they’ll take them at face value.
- In law school you don’t just learn the rules, you want to develop an intuition as to when the
courts will soften up the rule (Wild Ed) or fly the other direction (Carbolic).
- Different types of Ks. Most are bilateral Ks (create agreement now but both have something to
do in the future. E.g. promise to sell house and close in a month). Unilateral K is when at the
time the contract is created, only one party has outstanding primary obligations. That’s possible
because the other party has performed all obligations by way of acceptance (e.g. Carbolic).
Problem: rule says unless we have complete acceptance, you can always revoke your offer. But,
as a practical matter there is not a court in Canada that would allow you to revoke if the
acceptance is almost completed.
- Unless there’s a K, no obligations
- Orthodox rules: (a) call for tenders = invitation to treat, and (b) tenders (bids) = offers. Party
submitting tender (bid) is entitled to revoke prior to acceptance, and party calling for tender
entitled to accept or reject all tenders
- Commercial Certainty and Integrity of Tendering Process: Preparing bids is expensive; can’t
allow contractors to withdraw, or for gov’t to accept for any reasons.
The Need for Commercial Certainty and the Integrity of the Tendering Process
- The cost of preparing tenders and the need for binding rules
• Create a rule in the interim to govern the process, to ensure that when one is deciding
bids, you can walk away. More importantly, the rule to govern the process will pick
someone fairly (e.g. pick because of qualification, not because a friend). Until a big K, no
rules. Presumptively, you can walk away whenever, and one could pick any K. Solution:
Harvela Investments v Royal Trust Co of Canada, 1986 Eng
Facts: D invited offer for shares in its company. Offers were sealed, and not open until
invitation expired, at which time highest big was to be picked.Another company made a
bid claiming that if theirs wasn’t the highest, it would outbid the other company by Page 8
$101,000. This other company won the bid. Harvela sued for unfair bids.
Issue: Are terms of invitation to treat binding on eventual offeree?
Ratio: Terms of invitation to treat may be binding on eventual offeree.
Reasons: Different business situations call for different types of offers. In fixed bidding,
one fixed bid is entered, like in this case, so no ‘referential’bids are allowed. Highest one
time bid must be accepted. In an auction ‘referential’bids are allowed. While D has right
to choose which type of bid process (auction or fixed), reasonable person suggests this
bid was a fixed bid. Referential bid therefore invalid.
Problem: Court appeared to hold D to terms of K, but under orthodox rules, there are no
obligations as K is not created in the tendering process and no K until acceptance of offer
is made. So have a rule for tendering process created here but no idea where it came
R v Ron Engineering & Construction (Eastern) Ltd, (1981) SCC
Facts: Government called for tenders for project. Bids submitted with a deposit. Forfeit
deposit if 1) revoke offer after the deadline or 2) refuse to sign K to build if selected.
Once bid is picked, X days to start project. Once P selected it realizes it submitted too
low of a bid; refuses to start project. P sued for return of deposit due to honest mistake.
Issue: What function is served by call for tenders? How are parties bound by this?
Decision: P breached KAby refusing to execute KB. Deposit forfeited.
Ratio: Tender process involves creation of 2 Ks.
- Only avoid K by 1) fundamental mistake (if the mistake makes K completely different)
or 2) by “snapping up” (e.g. $10 instead of $10,000) – cannot be accepted because it’s not
reasonable that it’s an offer
- Treating process as 1 K leads to inadequate results. Crowns view: companies could
withdraw offer at any time, so expense of selection process is wasted. Companies
concern: Crown not obligated to fair decision, and expense of prep is wasted if capricious
selection, since no obligations are created until K is created.
- More favourable outcome- Dual Ks- involves contractA (unilateral K- submission of
bids), and contract B (bilateral- acceptance of submitted tender). Obligation is created for
a fair process for all parties - no early withdrawal by company, fair selection of bid by
Problem: KAcan’t be unilateral- obligations exist for both parties after tender is
submitted. KAmust also be bilateral. Page 9
Two sets of Ks (KAand KB)
KA(Process Contract) KB (Building Contract)
Calls for Tenders Offer Invitation to treat
Bids Submit Acceptance *KAcomes into Offers
Selection Acceptance *by government
- Determine how to get - No K until acceptance by
into KB government – no rules
- As soon as you submit
bid, act of acceptance - Government has no legally
enforceable right for $150k.
- Bilateral K
- Only hire 1 person (1 KB)
- As many bids as
- Ron Engineering appears to fill in gaps, but that’s a danger. Dual Ks only applies in a
tendering context. The ideas underlying Ron Engineering might be imported into a different
- It is possible, even in a tendering scenario, to specify that only KB is valid (multipleA’s are
allowed). Must be intention to create legal relations of KAfor the dual K scenario to be engaged;
this is not automatic for this type of relationship.
- Tender Process:
• Call for tenders- dual purpose
o Invitation by Crown to companies to receive offers on KB
o Offer by Crown to companies to enter KA
• Submission of tender serves dual purpose
o Offer by companies to Crown to enter KB (KB does 2 things: accepts the KAand
is also the offer)
o Acceptance by companies of Crown’s offer to enter KA bound by the terms of
KA(in this case: can’t withdraw after the deadline, if you do then lose $150,000)
KAprovides rules to govern the process (don’t have liberty to withdraw)
If entering into tendering process then intending to enter into KAand if
don’t want this onus then person submitting the tender must make this
• What if no deposit?
o Still in breach of KA: expectation damages. If mistake puts you at lowest price,
you pay the different for the price you mistakenly gave and the next lowest price.
o Deposit is a “liquidated damages clause” – party’s pre-estimate of what the
damage would be Page 10
MJB Enterprises Ltd v Defence Construction, (1999) SCC
Facts: Call for tenders by D contained 1) ‘privilege’clause, which gives D discretion to accept
bid that’s not lowest and 2) not sure what of three materials used. D awards contract to party with
the lowest tender, but it did not comply with specification of tender process. P, the second lowest
bidder, sues for expectation damages of profits not realized because it would have been awarded
K. D invokes privilege clause.
Issue: To what extent is a ‘privilege clause’effective?
Holding: D breached KAby awarding to non-compliant bidder. Reasonably construed that next
lowest bid would receive K, so P gets expectation damages.
Ratio: Privilege clause generally effective only for cost and not for noncompliant bids.
- When you sign K, two types of terms:
1. Express terms (KA) and
2. Implied terms (no one said, but in K) – three possible sources:
a. Nature of business, certain terms always in K;
b. Implied terms by operation of law (e.g. buy goods, unless vendor says otherwise,
Sale of Goods Act implies certain terms);
c. Officious bystander (term so obviously needed in K it’s not mentioned)
• All important because KAincludes not only express terms, but also implied terms
that the government could only select a compliant bit, due to risk and expense of
submitting bids and obtaining deposits.
- No implied term to accept lowest bid; “cost” extends beyond price quotation, and can include
length of project, experience, likelihood of success etc., which all play into awarding of bid.
- Privilege clause only effective with respect to compliant bids.
- Test: Officious bystander- looking for business efficacy- looking for terms which are so
obvious it wouldn’t make sense if you did not have them in the contract
• CANNOT imply a term just because it makes the K better
b. Communication of Offer
Carlill v Carbolic Smoke Ball Co
Issue: Communication of offer of unilateral K.
Ratio: K formed upon performance of act of acceptance of offer.
Reasons: Offeror entitled to make offer of unilateral K to specific person, or entire world. No K
until performance. Page 11
Blair v Western Mutual Benefit Assn, 1972 BCCA
Facts: P is a secretary at the business of D for many years.At Directors meeting, representative
of D declared P would get large settlement when P retired, but this was never told to her. She
only saw it when typing out minutes of meeting. P retired short while later, and sued for failed
payment of retirement package. D claims no offer, since no discussion between parties.
Issue: Must offer be communicated as an offer? Must offeree be motivated by and act in
response to offer?
Ratio: No K unless acceptance motivated by desire to accept offer. No K unless statement
communicated as offer.
Reasons: Either (1) No K because P was not motivated by offer in retiring. No evidence that P
regarded communication as offer (there is no evidence P did it for the right reason) or (2)
Regardless of 1), no K because resolution was not communicated as offer, but for stenographic
purposes only. Must show objective person you’re willing to be bound by the terms, which D has
not. If this is true it’s communication, not an offer. If there’s no offer, no acceptance, and no K.
Problem: Enormous evidentiary burden to prove this motivation. WRONGLY DECIDED,
don’t use on exam.
Williams v Carwardine, 1833 England
Facts: The brother of D was murdered while in the presence of P.Ahandbill was put forth,
declaring award of 20£ to whoever gave information leading to conviction of murderer. P wants
to keep quiet. Murderer thinks P knows about reward and beats her near end of life. Fearing her
life P came forward with information leading to conviction. D contends no K, since no
motivation by reward.
Issue: Must offeree be motivated by desire to perform act of acceptance?
Ratio: Motivation irrelevant if offeree knowingly performs stipulated act.
Reason: P intended to collect the reward, but was led by further motives.As long as she knew of
the reward when performing, and it was communicated as an offer (through the posting), it need
not matter that she didn’t act strictly for the reward. In this instance it is communicated as an
offer and it is accepted as an offer (P has it in mind).
R v Clarke, (1927)Australia
Facts: Crown issues reward for info leading to capture and conviction of two murderers. Three
terms: (1) Information leading to the arrest and conviction (2) of the person or persons (3) who
committed the murders. P lies to protect himself. Four days later police question him again. P
gives information, which leads to conviction of one individual. P admits he had forgotten about
the reward when coming forward, and was only reminded of it after the fact. Crown refuses to
pay out since he wasn’t motivated by the reward and there was no consent.
Issue: Must offeree be motivated by desire to accept offer? Must offeree know of offer when Page 12
performing stipulated act of acceptance?
Ratio: Offeree need not be motivated by desire to accept, but cannot accept offer in ignorance.
Reasons: (1) If P knew of offer he is not precluded from reward by self-reserving motivation (as
long as you know about offer, motive is irrelevant). But because P was ignorant of offer, at no
point did P intend to it, thus no meeting of the minds. (2) Specific terms of K not met either (info
on one, not both, murderers was provided) because in order to have unilateral K, need to have
precise stipulation on the terms (need to get it all right) and this is not true on the facts. Therefore
no proper K here.
- Contracts are about fulfillment of reasonable expectations.
• So long as you know about K and perform, acceptance. Reasonable expectation of getting
reward. If one performs the act without knowing of the offer, no reasonable expectation.
• Motivation- as long as the offer is known, ulterior motivations don’t matter. Courts
should not get involved with people’s motivations; so long as no bad faith.
o Blair- decision must have turned on offer not being communicated as an offer,
since motivation should not come into play
o Expectation of fulfilled promise regardless of motivation
- Acceptance = expression of willingness to enter K on terms stated in offer
- Acceptance, objective theory of K- offeree’s subjective intention not determinative
• Acceptance construed on basis of reasonable person test.Acceptance construed on basis
of circumstances as a whole.
- Consensus ad idem-
• Acceptance in response to offer; no K if offeree performs act in ignorance of offer, no K
if identical offers exchanged (no offer and acceptance, just two identical offers)
- Acceptance must be absolute and unconditional assent to offer
• “Your offer is agreeable” may not constitute acceptance. Accept on exactly the same
• Additional negotiations after acceptance may negate existence of agreement in first place;
depends on ‘trivial addition’or substantial
Livingstone v Evans, (1925) ABSC
Facts: D writes P with offer to sell land for $1800. P responds with offer of $1600 cash. D says
cannot reduce price. P writes to accept original offer, but D wants out.
Issue: Was Ps counter-offer in law a rejection of Ds offer, which freed D from it?
Ratio: Counter-offer is rejection of old offer and creation of new offer.
Reason: Counteroffer kills original offer, and P is incapable of reviving D’s initial offer.
Statement of “cannot reduce price” is an implied counter offer, which rejects price of $1600 and
restores original asking price. P is capable of accepting D’s revived offer, so this is binding. Page 13
Policy: Business efficacy test. It must be clear situation so you know what you are agreeing to.
Obiter: Mere ‘inquiry’is not a counter-off. (“Would you accept $1600”)
ii. Battle of the Forms
- Acceptance and the Problem of the Battle of the Forms
- Standard form Ks are good because they save time and expense (if you needed someone at the
store to haggle with it would take more time and you would have to pay the sales associate
• Widespread use of standard form documents (commercial convenience and efficiency)
• Parties may communicate by means of forms on differing terms
o Offer made on one parties form, acceptance on other parties form
o Different terms = counter offer = rejection of offer
• No K of never an ad idem on terms. Or don’t realize we have a problem until something
goes wrong down the road. I propose my terms, you propose to accept on your terms,
something goes wrong, who’s liable?
o Business – you and I think we have a contract. The courts could create or
recognize a contract or the courts could stick to a legal orthodox, that you and I
didn’t play the game properly, and no game whatsoever. Difficulty is that we
don’t have any rights or obligations besides price.
- Orthodox contract principle and commercial reality
• Malleability of rules and protection of detrimental reliance leads to impetus to enforce
(partially) executed contracts
Butler Machine Tool Co v Ex-Cell O Corp, (1977) Eng CA
Facts: Sellers quotes price to D on form which states that all terms, including escalation in price,
prevail over buyer’s terms. Buyer places order, using own form, which states its terms prevail,
and does NOT have escalation clause. Foot of the form contains slip for seller to sign and mail
back to accept order on terms and conditions stated therein. Seller returns slip with letter
restating its own terms, and upon delivery, price went up by 3000£, citing escalation clause.
Issue: When do offer and acceptance occur under battle of the forms?
Ratio: Various means of resolving battle of forms.
Majority- Traditional view: Mirror Image- Second form was counteroffer, killing original
offer and escalation clause. P acceptance through returning D’s slip- letter reiterated base price,
but no escalation clause, so parties ad idem on D’s (buyers) terms (as determined by objective
reasonable person) D was the last one to say there terms and P played along so reasonable
person would think K on D’s terms (orthodox way).
Denning (concurring): Strong judicial concern to find K if it’s already executed. 3 approaches:
1. Last shot wins- if no objection to last set of terms, there is deemed acceptance
2. First shot wins- later terms irrelevant unless highlighted to the other party
3. Reconciling the shots- all terms construed together. If consistent, valid K on such terms. If Page 14
contradictory, judicially create reasonable terms.
Decision: Documents as whole indicate K not to include escalation clause.
Implication today – in Canada judges often take Denning’s way. Is that good law? We don’t
know in Canada.
Tekdata Interconnections Ltd v Amphenol Ltd,  EWCA Civ 1209
Facts: Rolls Royce G P D. P had onerous form with all about how the widget was supposed
to work. D had document that says they are excluded from all liability. P thought K was created
as soon as it sends the ƒ K to D. Wrong.
Issue: Was there consensus ad idem and therefore a K and therefore making D liable?
Analysis: Need for commercial certainty.
Ratio: In most situations, apply orthodox analysis. But, there’s an exception, which applies if the
parties have made it abundantly clear that the parties are willing to be bound by something other
than the orthodox analysis and they’re willing to look at the terms together. Longmore: this is
rarely the case. Dyson: confined to situations where the parties expressly say so.
Trial: said want a K on P’s terms because dealing with things that could go catastrophically
wrong and so K on P’s terms better. NOT under orthodox analysis. Not on the same page
because under the circumstances they would never have intended this and so K on P’s terms.
Court of Appeal: rejects Denning’s approach
- Apply the orthodox approach that requires the parties be ad idem unless there is very clear
evidence they intended otherwise. Pretty much means that Denning’s approach in Butler is dead
(could argue it in Canada but orthodox approach preferred).
- Contract created by P’s acceptance of D acknowledgement (included D terms)
1. Trial judge constructed desirable K rather than ascertaining actual contract
2. Irrelevant D had contract with G
3. Not surprising D didn’t assert their terms until SOD because that’s how business works,
you don’t go to lawyers right away.
o D initial response reflected business view; legal view only later
a. Go with orthodox, with rare exceptions aside. Denning approach is no longer liable in
England. In Canada we don’t know.
b. If you had a case on the exam like Butler or Tekdata but you need a reasonable explanation,
Denning route would be harder to explain
Problems with traditional view:
• When parties have exchanged forms, mirror image rule leads to conclusion of no K; Page 15
parties may consider themselves as in a K and attempt to perform
• When exchange is followed by performance, terms accepted are likely to be those of last
shot (good delivery) so acceptance = delivery, which is arbitrary advantage
iii. Acceptance by Performance
Acceptance of Incorporated Terms
• General rule: Offer must be accepted or rejected in entirety at outset; cannot add terms
after K accepted as this doesn’t reflect parties initial bargains
• Exception: Terms may be incorporated by reference. Terms exist at outset but details are
discoverable at a later time (as long as reasonable person would know that there are
additional terms then can say K comes into existence as that moment); existence of terms
must then be sufficiently disclosed at outset (e.g. tickets)
o Would have the option to get out of K if and only if the terms were extremely far
out so as the reasonable person wouldn’t expect those terms to be there
ProCD v Zeidenberg, (1996) US CA
Facts: P sells product in two markets: (1) phone books to individuals, fairly low price and to (2)
phone books to commercial organizations for a much higher price. Same phone books. P has
“shrink-wrap licenses” which have few points on exterior of C, but most fine points are
contained in CD. D purchases “individual” product, agrees to terms on CD, but violates terms by
distributing info to firms at lower prices.
Issue: Are shrink-wrap licenses enforceable?
Ratio: Existence of terms must be sufficiently disclosed at outset BUT don’t have to be specified
as long as they are reasonable. Buyer accepts terms when, after having opportunity to inspect
them in greater detail, he fails to reject them.
Reason: Terms incorporated by notice that details are discoverable later is acceptable by
business efficacy test (impossible to state all terms on package or to state any rules if no
package). Rule that product is returnable if terms are unsatisfactory once discovered. Offeror
may stipulate mode of acceptance- K formed when D agreed to terms on screen OR K formed
upon sale, with condition subsequent; could be terminated if conditions unsatisfactory, but
accepted through conduct of clicking “agree” on computer. Something profoundly wrong –
must be more than one K.
Idea of Multiple Contracts: Existence of 3 K. (1) between store and manufacturer (K where
store purchases from manufacturer but should be able to return), (2) between store and consumer
(physical – buying CD), and (3) between consumer and manufacturer (license –‘accepting’terms
on CD). Right to refuse exists and should allow for returns all the way up the line.
Carlill v Carbolic Smoke Ball Co
Ratio: Unilateral K-Acceptance of offer through performance ONLY (use of product) and NOT
promise. Page 16
Williams v Carwardine
Ratio: Motivation irrelevant if offeree knowingly performs stipulated act. Mutual consent is not
necessary. If P fulfilled all conditions of K, she is entitled to recover. NOT the case here.
Form of Acceptance
• Offeror as master of the offer. Offeror entitled to stipulate form of acceptance. If no form
stipulated then any reasonable form presumed is permissible.
• Bilateral K and unilateral K: forms of acceptance
o Offer of bilateral K (generally) accepted through promise
o Offer of unilateral K accepted through complete performance
Carlill v Carbolic Smoke Ball – directed use of product
Williams v Carwardine – provision of information
Dawson v. Helicopter Exploration Co, 1955 SCC
Facts: Dawson (P) discovered mineral deposit and begins communication with HE, via mail,
over exploitation of this property. In March, HE said they should get together. InApril, P
responded, wanting to know when pilot was found (deal was conditional on getting a pilot, this
meant K was up and running but need to satisfy this condition of K). In June, HE says they are
too busy and can’t get minerals, so the deal is off. P never responded. P returns from overseas, to
discover HE had struck deal with someone else for minerals. P sued for breach of K.
Issue: Is this a unilateral K?
Ratio: Court presumes bilateral contract over unilateral K in commercial matters.
Reasons: Unilateral K provides no protection for offeree, since offer is revocable any time prior
to full acceptance (revocable anytime prior to full performance). Bilateral K provides protection
for both parties. P’s acceptance of bilateral K is subject to condition subsequent: P to pay 10%
for successful claim, provided HE uses best effort to arrange for flight (condition). P accepted
offer through promising to perform (guiding HE through area). HE breached by refusing to
transport P (action coupled with a promise). P says nothing when told HE couldn’t perform its
obligations, preventing the K from coming to a close.
iv. Acceptance by Silence or Conduct
Felthouse v Bindley, (1862) England
Facts: P discussed purchasing horse from his nephew (N). Misunderstanding over price resulted,
F sent counteroffer to split distance. N sent no reply, but during an auction, Bindley (D) was
asked not to sell horse since it belonged to P. D forgets, sells it, and is sued for conversion.
Issue: Can silence alone serve as acceptance of an offer? Page 17
Ratio: Silence alone is not acceptance.
Reasons: Reasonable person won’t recognize acceptance unless it’s communicated. Silence can’t
bind you into agreements, or it could do so in everyday transactions. (Explains why statues allow
you to keep unsolicited items in the mail without payment- can foist things upon you). Belief of
all parties that K existed is irrelevant- acceptance must have outward manifestation.
Note: This rule only applies to purely unsolicited cases. If K agreement allows subsequent
silence to be acceptance, this is a valid K (book of the month club)
Note: Apples only if goods are foisted. If parties knew each other, and goods are kept, may be
valid K between parties. Silence + an act can mean acceptance.
Saint John Boat Co v Irving Refinery Ltd, 1964 SCC (silence plus)
Facts: Parties were involved in series of renewed contracts.After last one expired, Irving (D)
continued to use the service of Saint John (P). D makes no changes to how it uses P services, and
does not indicate K has changed. D refuses to pay for services since no agreement to new K.
Issue: Can silent acquiescence (tacit concurrence) be construed as acceptance?
Ratio: Acceptance if so construed on reasonable person test. Silence + something usually =
acceptance. New K is deemed each time tugboat service is provided.
Reasons:Alleged acceptor must consent to work being done on terms it was offered. Must know
consideration is being rendered for his benefit with expectation of payment. If, then, he
acquiesces, and takes the benefit, based on circumstances of all previous undertaking between
parties, contract may be construed. D knew tugboat was for its use, D knew P expected payment,
and D took benefit.
- What relief is available in case of no K?
• Unjust enrichment- P only gets value of services, and no protection of ‘exclusion
- Silence may be reasonably understood by offeror to indicate acceptance
• Tugboat- objective test- would reasonable person understand offeree was assenting to
proposed terms? Usually applied when positive action on part of offeror (sending of
goods, etc.) is received and accepted by buyer, signaling acceptance of terms
- Offeror may also waive requirement of communication by acceptance
• Protects offeree who reasonably assumes notification is not necessary
o Carbolic Smoke Ball, reward context
• Bilateral K- more difficult- can’t foist goods upon parties
d. Communication of Acceptance
i. Waiver of Communication Requirement: Unilateral Contracts
The Significance of Communication ofAcceptance Page 18
• Requirement of consensus ad idem (“meeting of the minds”)
o Parties must objectively agree to enter K on proposed terms. Offeror and offeree
must show willingness to be bound to K on terms.
o Requirement of communicated acceptance protects offeror
Generally no K until acceptance communicated
• No obligations incurred prior to communication. Communication
signals need offeror to withdraw offer.
Carlill v Carbolic Smoke Ball
Unilateral K- acceptance not necessary to communicate until performance is completed.
ii. Mode of Communication
- Offeror (generally) master of the offer, and can stipulate mode of acceptance; acceptance is
effective only if in stipulated mode. Offeror may also waive forms of acceptance (determined
- If no mode stipulated, any reasonable mode is acceptable.
Eliason v Henshaw, (1819) US
Facts: Buyer (B=Eliason) writes to seller (S=Henshaw) saying they’re willing to buy flour at
price, and S should respond by mail through “return of wagon.” S accepts offer by mail, but not
by return wagon, and addresses it to wrong location. B receives letter, but declines the
acceptance since B had not been notified in time, and refuses payment when the flour comes.
Issue: Must offeree communicate precisely as directed by offeror?
Ratio: Offeror can specify means or location that the acceptance must be delivered. Means,
however, specifies a time limitation only, and must be interpreted in context.
Reasons: (1) B expected letter to be returned in reasonable time from wagon. Letter was
returned in about same time as it would have been by return wagon so no issue. BUT (2) the
place the letter was sent to was important (not the place the offeror told him to send it to).
Acceptance at different location from that specified in K, which formed part of the proposal,
imposes no binding obligations on parties.
Carmichael v Bank of Montreal, (1972) MBQB
Facts: D issues counteroffer to P on the sale of a house. D specifies acceptance must be made by
6 PM the following day, and must be made to C (agent) in writing. P tried to accept offer, but C
was not in his office before the deadline, nor was he at home. P phoned bank manager, leaving
message with associate. Manager received message immediately before or after 6, and when
finally received written acceptance at 6:15 PM he declared it not valid. Page 19
Issue: Must offeree always comply with communication requirements? Can offeror frustrate
Ratio: Offeree must make reasonable attempts to comply with required communication
requirements. Offeror cannot frustrate attempts by failing to make acceptance by deadline
possible. If make offer have to give person reasonable way to accept.
Reasons: Court adopted broad and flexible approach (D acting in bad faith because wanting to
weasel out of offer). Acceptance was communicated to manager before 6 PM, and if not, then at
least the fellow employee was informed by 6 PM, and if not, since neither C nor manager were
available immediately before 6, when a specified acceptance time is provided you must be
around to accept that offer. Since not made self reasonably available, can get acceptance in late
within a reasonable time frame.
Problem: Where does this obligation to not frustrate come from? Illustration of where court
makes it up. Do NOT apply this approach on the exam… take the hard line approach.
iii. Instantaneous Communication
Time and Place of Contract Formation
- Easy case: face to face communication: K formed when and where acceptance received
- Hard Case: distance communication of acceptance. K formation varies with mode of
communication and expectations of parties.
- Relevance: determines jurisdictions (Brinkibon), lost acceptance in post (Household Fire,
Holwell), and intervening acceptance/rejection/revocation.
Brinkibon v Stahag,  2 AC 34 (HL)
Facts: Buyer (B) is in England, and seller (S) is in Vienna. S sends counteroffer via telux to B, B
accepts offer using telex. B took additional acts to launch credit line. K broke down, and now
question is which jurisdiction.
Issue: When and where does K formation occur?
Ratio: Instantaneous communication- K is formed when and where acceptance is received. Non-
instantaneous communication- (mail, couriers)- K formed when and where acceptance is sent.
Decision: Telex= instantaneous. Acceptance effective when and where received (Vienna).
Reasons: Rationale of rule for instantaneous communication: precedent- offeree is better able to
determine if attempt fails, where as offeror has no idea acceptance is at place. Offeree can phone
immediately to confirm (most efficient risk avoider), whereas with mail this is not possible. No
reasonable hardship on offeror in K if message works; offeror must reasonably check
messages/monitor machines (K created when reasonable person can get around to getting
acceptance. E.g. if send fax on Friday night K would not come into effect until MondayAM).
Offeror can also displace presumptive rules. This rule is not universal; final determination
depends on circumstances, intentions, and risk. Email considered as instantaneous. Page 20
- Traditional Rules accepted unless failure of offeree to receive communication comes from fault
of offeror or from defect in communication that offeror should have been aware of (i.e., no ink)
- Emphasis is on importance of knowing a message is received indicates that when this is not the
case for instantaneous communication, postal rule may be accepted
- Entores is upheld- if phone goes dead, offeree will appreciate risk of acceptance not being
heard and will have obligation to phone back, but if offeror has not heard acceptance and does
nothing, he may be bound by the terms
iv. Postal Rule
Household Fire & Carriage Accident Insurance v Grant (1879), Eng CA
Facts: D makes offer to purchase P’s share of stocks in writing. P accepts offer and makes
allotment of stocks and issues notification of acceptance via mail. Letter never makes it there, D
never knew they had the stocks, and when P goes bankrupt, D refuses suit as shareholder.
Issue: When and where does posted acceptance become effective?
Ratio: if dealing with non instantaneous form of communication and dealing with acceptance,
effective when it goes into postal system, regardless if it’s received.
Reason: Tension between (1) theoretical requirement of ad idem (no K unless parties on the
same page at the same time) and (2) practical requirement of K through mail.
Policy consideration: Can’t apportion burdens of inevitable hardships, but offeror has ability to
stipulate required acceptance (may also be implied), and there is desire to let offeree have
certainty in existence of K (to act properly).
Dissent: Postal rule works to hardship of offeror if acceptance not received.Although offeror is
able to stipulate actual receipt of communication, the scope of the postal rule should be limited
only if offeror agreed to terms (not here). Rule is instead applied if expressly or impliedly
allowed. Post office is not an agent of both parties, and therefore no meeting of the minds.
- Idea 1: put acceptance into post, don’t have to deliver it in person or telephone
• One way to get to offeror
• Won’t apply if offeror (1) explicitly says, (2) impliedly says, or (3) the reasonable person
won’t think the postal rule applies
- Idea 2: postal idea applies
• Not only effective means, but effective when in the mail system
Holwell Securities v Hughes (1974), Eng CA
Facts: P attempted to exercise option to buy house via mail. Until offer is accepted, can revoke at
any time.Any way around that is an option (K that requires the offeror of bigger K to hold that
offer open for a certain amount of time). P bought option, D said must accept by notice in
writing. P wants to buy property, writes acceptance, puts in mailbox, picks up telephone, says
accepted via mail, so here’s my acceptance. Letter never received. Is there a K? Page 21
Issue: What is the scope of the postal rule? When is the postal rule inapplicable?
Ratio: Postal rule applicable only if reasonable in the situation, and only as letter of acceptance.
Reasons: Short answer: strict construction of terms of option. Notice in writing = option must be
conveyed in writing. Nothing is known until final communication is received, and actual written
receipt is required. (1) Didn’t comply with terms of offer (not in writing) and (2) no reasonable
person would think the postal rule applies, because of “notice in writing”.
- Scope of postal rule: post may be acceptable, but doesn’t mean postal rule applies. Postal rule is
applicable only if reasonable in situation: not the case here. (Postal rule is only a presumption
assume postal rule applies if nothing stipulated but can be displaced in the circumstances).
*See Questions (Oct 16/13)*
• If postal rule applies, it only applies to acceptances, not any other type of communication
• If postal rule applies, K created immediately.
• Policy concern – unfair for one to accept by post and lock you in and watch the market go
up and down while the letter works its way to you. It would allow one to speculate at
your expense. Unfair to allow to overtake acceptance.
• You can’t overtake acceptance with the quick of rejection, but you can overtake
rejection with the quick of acceptance.
e. Termination of Offer
i. Counter-Offer- seeAcceptance-Counter-offer
- Counter-offer kills offer, and counter-offeror cannot unilaterally revive offer, but offeror may
- Court may say it’s not a counteroffer, it’s an inquiry.
- Means of termination of offer
• Counter-offer by offeree
• Revocation by offeror
• Lapse of time
• Occurrence of contemplated terminating condition
Byrne v Van Tienhoven, (1880) Revocation and the Postal Rule
Facts: Oct 1: D mails offer to sell tin plates. Oct 11: Offer is received by P, and accepted by
telegram. Oct 15: Letter sent by P to confirm offer acceptance. Oct 18: D mailed letter of
revocation received on Oct 20. P relies on receiving plates, and is bound in K to sell them.
Issue: Does postal rule apply to revocation?
Ratio: Revocation effective where and when received. Postal rule applies if at all, only to
acceptances. Page 22
Reasons: Idea of postal rule is unacceptable for revocation of offers (postal rule only applies to
acceptance). While no meeting of the minds exists with revocation, commercial reality demands
revocation effective when received, so offeree can know if resale is possible.
Dickenson v Dodds, (1876) Revocation and Firm Offers
Facts: Dodds (D) offers to sell his land to P (on Monday), and will hold offer upon until Friday
at 9am. P learned from agent D that land is already sold, but he still tries to accept. When finally
informed by D it’s sold, he tries to enforce the agreement and firm offer.
Issue: Is offeror bound by “firm offer”? Is knowledge of sale to third party revocation?
Ratio: Firm offer unenforceable unless provided under K. Knowledge of sale is revocation.
Reasons: No contractual obligation until K is formed, so not bound by firm offer. K still requires
consensus ad idem, which is not possible if there is knowledge of sale to third party.
Note: P must be made aware of the sale by a “reasonably” reliable source objectively
determined. Sale alone does not constitute revocation.
- Circumstances are different if it is an option instead of a firm offer. Options may be enforceable
if contractual obligation exists.
- Options- offeror may receive substantial benefit without substantial cost (option under seal)
BUT danger of irrevocable terms in volatile market also exists.
What if you are selling a house and go away for the weekend and someone puts a “SOLD”
sign on your lawn as a joke? Exam question
iii. Revocation of Unilateral Offer
- Unilateral offer is offer to the whole world
- Offer generally revocable by same means of communication as offer, but may also be impliedly
revoked after lapse of reasonable time.
Errington v Errington Woods, (1952) Eng CA
Facts: Father buys house for his son. He makes down payment, and borrows the rest. Son was to
pay off loan, at which point he would receive title. Unable to make full payments, Dad agreed to
pay the “rates” if they paid the mortgage (as a gift). Dad dies, and widow wants to evict P and
revoke the offer. P consistently paid mortgage, but much remains.
Issue: Is unilateral offer revocable after performance begins?
Ratio: Unilateral offer is irrevocable while offeree performs.
Reasons: P is under no obligation to perform the act (no liability if P stops payment, but no title
unless full performance), so this can’t be bilateral K.Also want unilateral K to protect the son. If
he missed payment he can still get UE (may not be the house but he’d still get something), BUT
if missed payment in bilateral K he would breach. Offeror is unable to revoke while performance Page 23
continues. Offeror must allow offeree opportunity to fully perform
Problems: What is the source of the offeror’s obligation to not revoke?
- Substantial performance – if you do mostly everything, courts take it as complete performance.
But, son wasn’t close enough to paying mortgage here.
- Collateral K – little K running alongside big K. Big K says if you make all payments, you get
house. Small (collateral) unilateral K says if you make the first payment, a unilateral K comes
about. The father’s obligation is to give an opportunity to provide acceptance under big K.
What prevents revocation of unilateral Ks once act is being performed?
- If language of K is ambiguous, interpret it as bilateral K.
• Dawson v. Helicopter Exploration Co- business efficacy
- Careful construction of the definition in the offer of the act required to constitute acceptance
• Carbolic- what is necessary? Acquisition? Use? Completion of entire treatment?
- Find collateral arrangement related to firmness of offer implicit in relation of parties.
• Errington- Collateral agreement between parties indicated as long as kids paid, they’d
maintain possession. NOTE: on test could find this OR say no K because not all the
conditions are filled.
iv. Lapse of Time
- Offeror may expressly or impliedly state duration of offer
• Offeror generally able to stipulate unreasonable duration and is free to revoke in interim
• If no limit, reasonable time limit is imposed- determination of reasonable depends on
circumstances- subject matter, other interested parties, trade practices, and parties’
negotiations all come into consideration
Barrick v Clarke, (1951) SCC
Facts: P sends telegram to purchase land on Oct 30, with possession between Jan-Mar. D
responds by mail Nov 15 with counteroffer, saying down payment immediately closes deal, but
no possession until March. Wife receives letter, asks him to hold it open until P returns, but
receives no reply. In Dec D reaches alternative deal and sells land. P sued for land.
Issue: When and why will offer lapse if no duration is stipulated?
Ratio: Lapse after reasonable time based on offeror’s implied intention.
Reason: Offer lapsed. Some factors suggested extended time; non-volatility of farmland, no
possession until March, and land was on market for long time. Some factors suggest limited
duration- third parties were interested, party’s communication indicates urgency. Lapse of time
suggests an offer has been implicitly rejected (although this is rebuttable by wife’s letter) so just
that offer can only be out there for a reasonable amount of time.
- Two points:
• Reasonable person test Page 24
• SCC said reason why lapse = revocation is because the offeror, presumably,
wouldn’t want it open for longer. English view is lapse = revocation because of
offeree waits too long, he’s not interested. If you applied the English rule, it would lead
to a different conclusion here. Canadian rule better than English rule.
Termination by Occurrence of Contemplated Event- existence of offer may be premised upon
state of affairs
- Implied by circumstances (perishable goods remain in merchantable state; volatile market like
gold imply quick responses)
- Condition may be stipulated by offeror (sell you my car as long as you’re in school)
- Offer generally revoked upon death, but only if the offer is particular to the party like their
personal characteristics (not land or widget); a specific service may be dead upon the death of
- Acceptance may be possible prior to notification of death
• Revocation effective only when communicated; offeror’s estate generally liable for
offeror’s existing K’s
- Termination may be automatic upon death of offeree
• Acceptance perhaps possible by estate; more likely if not personal services
D. Certainty of Terms
- Orthodox rule: No K unless terms sufficiently clear. Courts will not create terms.
- PracticalApproach: Courts strive to try to find certainty; seemingly uncertain bargains are often
enforced, but uncertain as to when courts exercise flexibility.
- Recurring themes: detrimental reliance (party relied on appearance of a K), bad faith (party
wants the K struck down so they can sell widgets to a third party at a higher price), reasonable
expectations of concluded K will lead the court to try very hard to find a K (court likely to be
a. Vagueness of Terms
- Courts rarely refuse enforcement due to vagueness alone- want to find K, esp. if reliance.
- Try to find effective meaning- words inherently indeterminate subject to manipulation, and
words are generally capable of being defined from entire context
- Courts may refuse enforcement if clear meaning is impossible, as no K is possible if important
terms are intolerably vague.
• Disputed words may be severed if unnecessary to contract.
R v CAE Industries,  FC
Facts: Fed gov’t ownedAir Canada (AC) and a large maintenance facility, where they brought
allAC planes to get fixed. Wanted to sell offAC, so no longer needed facility. P worried they
will buy facility but might not have enough business. Gov’t says (1) need about 700k hours per
year to turn a profit, we’ll guarantee as a set aside 40-50k man-hours per year. P says that’s nice Page 25
but nowhere close. Gov’t says (2) we’ll give out best efforts to give you the business you need.
P buys facility and doesn’t get much business from the gov’t. P sues for breach of K.
Issue: Do the parties intent to create legal relations? Was the K void for uncertainty?
Ratio: Presumption of intention to create legal relations. Vagueness avoided by definition
gleaned from circumstances (if it’s just a vague term, you can overcome it).
Mischief: Parties need to know what to do and what their obligations are. It doesn’t need to be
absolute, but must be fairly certain. If someone is unclear on terms, courts need to be able to
asset what was supposed to be done (breach, and quantum of damages).
Reasons: Intention to create legal relations
- Strong presumption of intention in commercial matters. Presumption not rebutted by
Certainty of terms
- Political matters are not subject to create intention for legal relations. (1) If gov’t acting
politically, cannot sue. But if gov’t acting in a commercial capacity, nothing inherently political.
Therefor intention to create legal relations. (2) “Guaranteed as a set aside” and “in our best
efforts” are ambiguous. Look at words in document and read them as a reasonable person would.
Severability of Terms
Nicolene v Simmons 
Facts: P says they’d like to buy steel and sends offer to D. D accepts according to ‘usual
conditions.’Phrase had no meaning, since there were no previous dealings or industry norms. D
attempts to sell to someone else for higher