COMM 393

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University of British Columbia
COMM 393
Deborah Meredith

1 Liebmann V. Canada (Minister of National Defense) Facts: Liebmann applied for the position of Executive Assistant to the Commanding Officer in the Persian Gulf Operation. Staff Officers recommended he be appointed and the Commanding Officer agreed. When command staff became aware that Liebmann was Jewish they decided not to select him. Liebmann challenged the decision, as well as CFAO 20-53 (an enactment for which the decision was based upon) under s. 15 of the Charter. Issues: 1. Should the court consider the constitutionality of CFAO 20-53? 2. Does the Charter apply to the decision not to appoint Liebmann? 3. Were Liebmann’s equality rights under s. 15 of the Charter infringed? 4. Could infringement be justified under s. 1 of the Charter? Decisions: 1. The court should not consider the constitutionality of CFAO 20-53 2. The Charter does not apply to the decision not to appoint Liebmann 3. Liebmann’s equality rights under s. 15 of the Charter were infringed 4. The infringement could not be justified under s. 1 of the Charter Reasons: 1. CFAO 20-53 was not the reason that Liebmann was not permitted to serve in the Persian Gulf and was not in effect when the decision not to give him the position was made. CFAO 20-53 was not relevant to the action before the court and thus should not be considered. 2. The Charter applies to decisions made under delegated statutory authority. The decision regarding Liebmann was made under the authority delegated by the National Defense Act and is thus under the authority of the Charter. 3. Liebmann was treated differently from others based on personal characteristics of the type enumerated in s. 15, and there was definite discrimination in a constitutional sense in that his dignity was demeaned. 4. The respondents did not show that it was reasonable to discriminate against Liebmann because he was Jewish. Legal Principles:  The Charter applies to decisions made under delegated statutory authority  Infringement of s. 15 of the Charter occurs if someone is treated differently based on characteristics outlined in s. 15, and as a result the person’s dignity is demeaned 2 Montane Ventures Ltd. V. Schroeder Facts: Montane Ventures (plaintiff) entered into a contract for the purchase of land from Mr. Frank Schroeder (defendant.) After meeting all negotiated requirements to satisfy the leasehold agreement, the plaintiff’s agent inquired, via fax, as to whether additional (separately negotiated) considerations might be provided. On receipt of this inquiry, the defendant saw it within his rights to cancel the prior agreement and substitute for a new contract with a substantially higher offer price. The defendants argument is that this is valid, on the grounds that the inquiry amounted to rejection and counter-offer, thereby terminating the original offer and agreement. Issues: 1. Does the addendum (the inquiry) constitute a rejection/counter offer to the original agreement? 2. If this does not constitute rejection/counter-offer, should specific performance for the original agreement be awarded to the plaintiff? Decisions: 1. The addendum did not constitute rejection/counter-offer to the original agreement, but rather confirmation regarding a prior oral conversation. 2. Due to the circumstances of the contract (that it be for sale of land) specific performance will be awarded. Reasons: 1. Adequate evidence was provided that the defendant discussed the matters of the inquiry with the plaintiff’s representative while meeting all pre-negotiated commitments. Since the addendum did not necessitate a signature or formal acceptance in any manner, it cannot be construed as an offer or formal rejection of prior terms. 2. Seeing that the dispute involved the sale of land, specific performance is the proper award for damages to the injured party. Legal Principles:  Inquiring as to whether the negotiating party can provide additional considerations to the agreement, without explicitly demanding such considerations, does not amount to rejecting a current offer or substituting such for a counter-offer  Specific performance will normally be awarded to the injured party, at their request, when the dispute involves the sale of land 3 Rudder V. Microsoft Corporation Facts: A class action was filed on behalf of two Canadian citizens, representing a common class of Canadian subscribers to the MSN Messenger service, against the Microsoft Corporation. The suit alleges that the corporation engaged in unfair billing practices relating to subscription fees charged to its clients; the suit was filed in the Ontario Supreme Court (OSC.) The defendants have filed for a permanent stay on these proceedings, pursuant to a clause in their “membership agreement” referring all disputes related to the Messenger service to the jurisdiction of King County, WA. The plaintiffs claim that, as they were not aware of this clause when agreeing to the service, they should not be bound by its terms. Issues: 1. If the plaintiffs did not knowingly consent to the “forum selection clause,” should they be bound by its terms? 2. Should the OSC forcibly override this clause to ensure fair and equitable justice is served? Decisions: 1. The plaintiffs will be effectively bound by the terms of the clause. 2. The OSC will not overrule the clause, and a permanent stay will be granted to the defendants. Reasons: 1. The plaintiffs were repeatedly notified of the forum selection clause when registering for the service, and by agreeing to this online contract they should be bound by its terms. As law school graduates, the plaintiffs should especially be aware that agreeing to the terms of a contract equates to agreeing to each and every term stipulated within the contract (bar fine-print that is not effectively communicated to the parties.) 2. There is no evidence that the courts in King County, WA will rule in a biased or inequitable fashion. Furthermore, it will be easier and more efficient to claim any awards that the class may win as a result of the action when the hearings are within Washington’s borders Legal Principles:  Legally defensible exemption clauses will bind parties to all terms and conditions provided within the clause (where defensible means that the clause has consideration) 4 Hong Kong Bank V. New Age Demographics Facts: Ms. Margaret Chronister (defendant) made a personal guarantee on the loan of funds to her husband’s company, New Age Demographics, provided by Hong Kong Bank of Canada (HBC, plaintiff.) The company could not repay the debts outstanding, and subsequently defaulted on the loans. The defendant, who is thus held liable on the debt due to her signing of the loan guarantee, claims that the guarantee is unenforceable (as it provides no direct benefit for her, and therefore has no consideration.) This motion is by the plaintiffs seeking enforcement of the guarantee for repayment of the loan plus applicable interest. Issues: 1. Does the signing of the contract without an affixed wafer constitute signing under seal? 2. Is there consideration for the guarantee? Decisions: 1. The contract is effectively “signed under seal.” Her argument was that it was not sealed. She did sign though and court, taking from precedent decisions, said it was signed under seal. 2. Consideration was given to Ms. Chronister for her signing on the guarantee. Reasons: 1. Contracts which state that they are “under seal” and are notable of this condition will be held to be under seal, even in the event that the formal seal has not be placed on the document when signed. 2. Referring to “the Bank of Nova Scotia v. Hallgarth et al” (1986) consideration does not necessitate that benefits arise directly to the contracting party. If a benefit is provided to a third party (in this case the plaintiff’s husband) to the detriment of the promisee (in this case HBC) then there is cause for consideration in the promisor (Ms. Chronister)’s guarantee. Legal Principles:  There may be consideration for a party’s promise even when there is no direct benefit to the party as a result of the promise. All that is required is that the other party to the contract (promisee) makes a sacrifice resulting in a benefit for some party designated by the promisor.  When contracts are signed under seal, there is no need to establish consideration for promises of the agreement. 5 Saskatchewan River Bungalows V. Maritime Life Insurance Facts: The plaintiffs filed this motion on behalf of Mrs. Fikowski to enforce an insurance policy on the life of her late husband. According to the policy, the insurance would be effective provided the company receive regular payments on or 31 days after the specified due date. If the payments were not received within the grace period, the policy will lapse and the insured will be required to send a written submission for re-instatement. However, and applicable to the argument at hand, MLI has regularly allowed later submissions by the policyholders without actively terminating their insurance coverage. On July 26 , 1984, representatives at SRB mailed a cheque (which was never received) to MLI for payment of premiums. MLI then sent numerous “payment due” and “effective policy lapse” notices to the Fikowski’s, who did not receive these notices immediately due to extenuating circumstances. Once the plaintiffs received these notices, they immediately sent re-payment to the MLI offices (although due to the abnormally late period of payment, MLI did not accept this payment and maintained the revocation of coverage.) Mr. Fikowski passed away shortly afterwards, and Mrs. Fikowski now wishes to enforce the policy on her husband’s life. Issues: 1. Does the postal acceptance rule apply to the premium payment method? 2. Is equitable estoppel applicable to this case? 3. Was the policy in force when Mr. Fikowski passed away? Decisions: 1. The postal acceptance rule does not apply. 2. Equitable estoppel is applicable to this case. 3. The policy was not in force when the insured passed away. Reasons: 1. As the contract explicitly states that payment must be received by MLI in order for the policy coverage to be effective, the postal acceptance rule cannot apply. 2. By accepting premiums and maintaining coverage beyond the stated 31-day grace period, the defendants (MLI) have indicated to their customers that they will not enforce their strict legal rights as defined in the contract. Therefore, since the plaintiffs relied on this practice to their detriment, equitable estoppel may be enacted as a defense. 3. Although equitable estoppel will prevent MLI from enforcing their strict legal rights, it cannot be extended so far as July of 1985 (seven months after the final notice was originally mailed) as this would effectively be using estoppel as an offense. Legal Principles:  When a contract explicitly requires acceptance receive the offeror, the postal acceptance rule cannot apply  When an act on your part indicates that you will not enforce your strict legal rights, and the other party relies on this to their detriment, you cannot take the other party by surprise (equitable estoppel only as a defense) 6 Black Swan V. Goldbelt Resources Facts: On May 29 , 1995, the trial judge ruled that Black Swan might enforce their top-up provision ithholdings of Goldbelt Resources, pursuant to the agreement of companies dated January 14 , 1992. This agreement was constructed in order to prevent the dilution of interest in Black Swan’s holding of Goldbelt to less than 5% of the company less 19,500 shares. Goldbelt has argued that the agreement relates exclusively to new capital issues to Comptoir holdings, and all other new issues are therefore not subject to automatic top-ups. This appeal is made to re- interpret the context of the agreement, as it relates to the issuance of shares of ownership in Goldbelt Resources to a third party (Pegasus Gold Inc.) Issues: 1. Should the context related to which the agreement was made be factored into its interpretation? 2. Does the loan from Pegasus apply to the said contract, and should it be interpreted as an issuance of equity position? 3. Should it be implied that Black Swan’s holdings be topped up conditional to the topping up of Comptoir’s holdings? Decisions: 1. The explicit words alone shall be strictly interpreted as being the final form agreement. 2. Yes, it is both applicable to the contract and a necessary input in the top-up calculation. 3. No, Black Swan’s contract is independent of the contract between Goldbelt and Comptoir. Reasons: 1. The objectives of the parties prior to formalizing an agreement in a written contract are dynamic. As such, the only means to legitimately interpret an agreement is through strict interpretation of the terms found in the final form agreement. Any further interpretation would be speculative as to what was a genuine intention of a party versus what was the give and take of the process of negotiation. 2. The loan from Pegasus (in the form of convertible debentures) implies the offering of “rights to purchase.” As such, the loan stipulates a top-up of Black Swan’s holdings, and the face value of the loan shall be incorporated in the top-up formula. 3. This is contingent upon the evidence found admissible in (1.) As it is not explicitly stated in the contact, and the court could not find this view “giving effect to the intentions of the parties,” the interpretation of Black Swan’s top-up contingent upon Comptoir’s top-up cannot stand. As such, the appeal is dismissed. Legal Principles:  Any agreements between parties not finalized in the contract form may be revoked or altered at any time  In cases of intense negotiations, the final contract is strictly interpreted by the courts  Parties to contracts do not show acceptance of views of interpretations simply by being silent or showing complacency  Liberal interpretation cannot revoke terms explicitly stated or alter their basic meaning 7 Borek V. Hooper Facts: The plaintiff commissioned the defendant (Hooper) to paint for her, for an agreed upon price of $4000. About three years later (it was supposed to last about 10 years), evidence of deterioration presented itself in yellowing of the canvas and paint cracking in the corners. In trial, the judge found that the painting did not maintain merchantable quality for more than half of its (arbitrarily determined) economic life, and as such awarded 50% of the purchase price to the plaintiff in damages. This motion is an appeal to the decision, on the grounds that the contract was for the provision of services rather than the sale of goods, and damages should be determined accordingly. Issues: 1. Does the defendant have a liability for damages? 2. Does the “sale of goods act” apply? 3. Will the appeal succeed? Decisions: 1. The defendant is liable for damages. 2. The sale of goods act does not apply. 3. The appeal will be granted. However, the trial is not upheld but rather sent back to small claims court to be re-tried. Reasons: 1. The defendant did not provide services meeting an appropriate standard as determined by the appeals court. The materials and procedures employed by the respondent were proven to be sub-par in contrast to the expectations of the industry. 2. The contract specified for the provision of a service, not the delivery of a product. It is merely coincidental that materials passed from servant to customer; the fee was meant for the skill and labour provided. 3. The appeals court found that the trial judge erred in his calculation of the appropriate damages. However, as the defendant is still liable for damages, the appropriate calculation of these damages must be re-determined in the small claims court. Legal Principles:  The “Sale of Goods Act” applies only to goods that are of established merchantable quality, and not specific goods for which the application of skill is the main determinant of the good’s value  If you buy a finished product, like a painting from a museum, then the sale of goods act applies 8 Kovacs V. Holtam Facts: The plaintiff made a purchase agreement with the defendant for the sale of a 1963 Falcon Futura for the price of $2500. As stipulated in the agreement, the defendant would retain the vehicle for the purpose of restoring it, at which point he would contact the plaintiff for delivery. Before the restoration was complete, the vehicle was destroyed in a fire (believed to be caused by arson.) The plaintiff has brought this action to the court seeking damages in the amount of the purchase price. Issues: 1. Is the defendant liable for the loss of the car? 2. What remedy does the plaintiff have? Decisions: 1. The defendant is held ultimately liable. 2. The appropriate remedy is the forfeiture by the defendant of the purchase price ($2500) plus applicable legal costs. Reasons: 1. Title remained with the defendant until the appropriate maintenance had been done to the good, and the purchaser had been notified of its completion, as stipulated in the Sale of Goods Act. As such, the risk of loss is born by the defendant in this case, and the purchaser is entitled to a repayment of the funds if the good cannot be delivered. 2. As the defendant is not in the position to perform his obligation as defined in the contract (namely, the delivery of the property from the seller to the buyer,) the plaintiff is entitled to a return of his money. Since the ruling is in favour of the plaintiff, the defendant is also liable for legal costs on scale 3 ($80.) Legal Principles:  If a party must perform an additional act/service to the subject good, title does not transfer until that act/service has been performed, until the good is in a deliverable state, and until the buyer has been notified as such  The party who holds title to the subject good is ultimately for all risks and liabilities associated with this ownership 9 Dawe V. Cypress Bowl Recreations Facts: th The plaintiff (Ted Dawe) was injured in a skiing accident on January 6 , 1991. This accident was allegedly caused by the negligence of the ski-lift operator, “Cypress Bowl Recreations Ltd,” whom the plaintiff argues did not adequately inform him of the risks associated with a section of the skiing area. At argument is whether the exemption clause on the lift purchase ticket should waive Cypress Bowl’s liability for the injuries experienced by the plaintiff. Issues: 1. Did the defendant take reasonable care to inform the plaintiff of the exemption clause (or can we reasonably expect the plaintiff to be aware of this clause)? 2. Should the said clause exempt the defendant from liability to the plaintiff? Decisions: 1. The defendants may all necessary efforts to inform the plaintiff; therefore, we can reasonably expect the plaintiff was aware of the clause. 2. The clause will apply, and the defendant is not liable for damages. Reasons: 1. The clause was printed in bold letters directly on the front of the ticket. As well, numerous signs were placed throughout the ski area indicating that the defendant exempts itself from liability for any accidental injury (including one within the vicinity of the area in which the plaintiff himself was injured.) As well, since the plantiff is a learned individual who is clearly literate, we can definitely expect he would be aware of this clause. 2. Provided the defendant makes a reasonable effort to inform the plaintiff of the exemption clause, and the plaintiff agrees to continue the transaction/relationship, the plaintiff will assume all risks associated with the contractual activity. Continuing the relationship while being aware of the clause’s existence equates to consenting to the exemption clause, whether or not consent is explicitly stated. Legal Principles:  If an exemption clause is communicated to a party, and the party consents to the clause (whether explicitly by acknowledgment or implicitly by continuation of the agreement) the party is bound by the clause and it will be strictly enforced in court o Reasonable attempt must be made to communicate the exemption clause  If a plaintiff is aware that there is writing on a ticket/contract, and is able to read or comprehend this writing, he or she is bound by any conditions stated within this writing (whether he or she is actually aware of the implications or not) 10 Porelle V. Eddie’s Auto Sales Ltd Facts: The plaintiff (Porelle) purchased a used 1987 Oldsmobile Delta 88 from the defendant. After a short period of ownership, the plaintiff experienced problems with the vehicle, requiring repairs to the amount of $2141.42. At the time of the sale, the plaintiff signed a contract with the defendant exempting himself from damages due to defects in the vehicle. At issue is whether the implied conditions in the “Sale of Goods Act,” in reference to the sale of used goods, will override the explicit clause in the contract. Issues: 1. Was there a breach in the “implied term as to fitness” condition? 2. Will the exemption clause in the contract negate all the implied terms of the Act? Decisions: 1. The implied condition has not been breached. 2. The implied terms in the Act can be negated by the express terms in the exemption clause. Reasons: 1. According to the Sale of Goods Act s. 16 (D) in reference to “the implied warranty as to fitness,” if an express condition agreed to by the contracting parties is inconsistent with the implied warranty of the Act, the implied term is waived. As the conditions of the exemption clause were consented to by the plaintiff (by means of signature) the plaintiff effectively exempted the defendant from any liability for a lack of fitness for purpose. The courts must uphold this exemption. 2. In reference to the sale of used goods (as opposed to the sale of new goods) the warranties/conditions implied by the Act only apply when there are no express terms within the contract that come at odds with these implied terms. By seeing the exemption clauses printed clearly on the front and back of the written contract, and signing agreement to these clauses, the plaintiff waived his rights provided to him under the Act. Legal Principles:  Implied terms in the Sale of Goods Act are meant to protect the purchasers of new and used goods  Terms agreed to in contractual negotiations (i.e.// exemption clauses) can alter or negate these implied terms, provided it is not during: a retail sale of new goods to an individual for non-business use. 11 RE: Collins Facts: After the divorce of Mr. Philip Collins and Ms. Andrea Collins, Mr. Collins has made annual spousal support payments and generous child support payments to their two children (Simon and Joely Collins.) Once Ms. Collins remarried to a Mr. Fleming, Mr. Collins ended the spousal support payments, thus relieving Ms. Collins from her state of financial security. Mr. Collins then subsequently purchased a property for his two children, to be held in trust and maintained by their mother until they reach the age of maturity. Ms. Collins, who had no ownership interest in the property, made the children aware of her discomfort with her current financial position. The children each agreed to sign over their ownership of the property to their mother, who would then have ultimate discretion as to the maintenance of the property and estate. Due to the infants act, neither title transfer offer was legally enforceable. Once Joely reached the age of majority, she confirmed her agreement (thus making it legally enforceable); this action is to grant a court order allowing the remaining infant, Simon, to officially transfer his ownership interest to his mother. Issues: 1. Is the agreement to transfer title to Ms. Collins to Simon’s direct benefit? 2. Does Simon Collins require the protection accorded by the Infants Act? Decisions: 1. It is not for the child’s direct benefit (or “best interest”) to have the contract ordered enforceable. 2. Simon will be best served by the protection of the Act. Reasons: 1. The proposed contract does nothing more than offer direct benefit to Ms. Collins at the direct expense of the children. Furthermore, granting such a request will not alter the contributions required by Mr. Collins to Simon, and will therefore provide any financial benefit whatsoever. As such, the proposed contract confers no direct benefit to Simon and should therefore not be ordered enforceable. 2. At this time, Simon requires the protection of the Infant’s Act to maintain his vested interest in the trust created solely for his benefit. If at a later age he wishes to transfer these benefits to his mother he may do so, but if he changes his mind he should not be bound by an illegitimate agreement. Legal Principles:  The age at which a person reaches majority at common law is 21  Contracts entered into by those under this legal age are considered unenforceable against the minor (though they may be enforced by the minor against the other party)  Courts can order contracts enforceable against a minor provided that: a) The contract directly benefits the minor, and b) The minor does not require protection under the “Infant’s Act” 12 Poole V. Shanks Facts: The defendant, due to a terminal illness, was forced to sell his business and retire early. The plaintiff, who was employed by the defendant for the majority of her career, had her employment terminated effective on the date of the defendant’s retirement (for the purchasers of the business made no agreement to continue the employment contracts of the existing staff.) In lieu of proper notice, the plaintiff was paid eight weeks worth of salary and her 4% vacation pay owing. The plaintiff argues that, since she does not have the skills or qualifications necessary to find employment elsewhere in the industry, or in any other industry for that matter, she should be entitled to a more generous severance package. Issues: 1. Did the defendant breach any terms (explicit or implied) in the employment contract? 2. Did the defendant’s illness constitute a frustrating event, thus terminating the existing employment contract? 3. If no such frustration is evident, was adequate notice of termination provided? Decisions: 1. There was no breach of the employment contract. 2. The defendant’s illness and retirement does not constitute a frustrating event. 3. Adequate notice of termination was not provided. The court awards 7.5 months of pay in lieu of notice, less the ten weeks previously provided. Reasons: 1. Since nothing more than an “agreement to agree” on retirement benefits at a later date was provided, the defendant’s lack of providing such benefits did not constitute a breach of warranty or condition. The court will not add terms to the contract that were not explicitly agreed upon by the two parties. 2. The defendant could reasonably foresee the development of this terminal illness, and as such it cannot be construed as a frustrating event. 3. Given the length of employment with the defendant’s firm, along with the clearly presented lack of employable skills on the part of the plaintiff, adequate notice was calculated as 7.5 months. The damages awarded are this amount net any payment already provided by the defendant. Legal Principles:  The Parol Evidence Rule: Courts will not read into contracts terms that were not expressly agreed to at the time the contract was formed  Frustration: Events can only frustrate a contract if they are supervening and uncontrollable that render performance impossible or fundamentally different from that agreed upon in the contract, and are not reasonably foreseeable at the time the contract was formed 13 Westcoast Transmission V. Cullen Facts: Kato engineering, the supplier of power generators to Cullen for assembly into “genset” power units for sale to Westcoast Transmissions, was found liable to Cullen for the sale of unmerchantable (non-workable) products in reference to the Sale of Goods Act. This liability, which Cullen was then liable to Westcoast Transmissions for, was calculated as the purchase price of the defective units. Westcoast Transmissions appeals this decision to include the costs of replacement power generation (i.e.// alternate power generators) required to maintain operations, as well as the purchase price of the units, in the calculation of damages. Issues: 1. Does Cullen’s liability to Westcoast include the costs of backup/replacement power generation? Decisions: 1. The trial judge’s ruling that Cullen is held liable only for the sale price of the “gensets” is upheld. Reasons: 1. Presumably even if the power generators provided by Cullen worked, Westcoast Transmissions would have to incur the costs of backup generation in order to reduce the risks of operating on only one source of power. Since the injured party should take all reasonable steps to minimize the extent of their injury, we should have expected Westcoast to invest in backup power generators and cannot hold Cullen responsible for their mismanagement. Legal Principles:  Damages are meant to be equal to the amount that would return the injured party to the position they would be in presuming the other party performed their contractual obligations; damages are limited to the amount the offending party should reasonably expect the injured party to incur in costs as a result of their breach  The injured party has the obligation to take all necessary steps to minimize their injury due to the breach of the other party 14 Black Comb V. Schneider Facts: The defendant (Darwin Schneider) submitted a deposit for the option to purchase land from the plaintiffs at a later date. After several written exchanges over the year since the option was purchased, the defendant’s solicitor informed Black comb’s representatives that Mr. Schneider could not close on the deal (due to financial difficulties.) The plaintiff offered the defendant a final extension on the agreement, at which point the defendant would be considered in breach and have his rights to purchase and deposit forfeited to the plaintiff. This action is brought by the plaintiff to receive a court order for the amount of the deposit (plus applicable interest) provided for the plaintiff. Issues: 1. Did the plaintiffs breach the agreement by not clearing encumbrances on the property prior to closing? 2. Will the 10% deposit provided by the plaintiff be interpreted as a deposit or a penalty? Decisions: 1. The plaintiffs were not in breach of contract. 2. The fee is considered a deposit, and not a penalty. As such, it must be forfeited to the plaintiffs. Reasons: 1. The agreement specified encumbrances thst be clear before the effective closing date. As the first closing date listed was June 14 of 1999, and the encumbrances were removed well before this date, there was no breach of contractual term. 2. A cash outlay is considered a penalty at the time of contract formation, and not at the time of dissolution. Since the plaintiff (Black comb) only stands to gain by the discharge of contract, as they can then sell the property for a significantly greater market price, they would have no motivation to penalize the defendant for not closing on the agreement. Since the fee was calculated as a genuine pre-estimate of damages at the time the contract was formed, it is considered a deposit regardless of the ensuing events. Legal Principles:  If a party foresees that breach of the contract may cause them to suffer harm, they may include these foreseen consequenes in the contract in the form of mandatory deposit  If the clause is perceived to be a genuine attempt by the firm to pre-estimate damages, the courts will hold that it is a deposit; if it is interpreted as punitive in nature, it will be construed as a penalty and declared invalid  If considered a deposit, the clause will remain enforceable even if the party does not suffer the damages it genuinely expected to incur in breach 15 General Tire Canada V. Aylwards Ltd Facts: The plaintiff seeks summary judgment for money payable to the company under a loan guarantee. The defendant agrees on the principle debt outstanding, but argues against its liability on the debt due to collateral agreements of the debt structure that did not occur. Thus, the defendants argue, the guarantee was contingent upon conditions that were not met and is therefore legally unenforceable. Issues: 1. Should the alleged misrepresentations of the plaintiff automatically discharge the defendant’s liability? Decisions: 1. The defendant is liable to repay the debt outstanding. Reasons: 1. The court finds the collateral representations to be “vague, non-specific, and incompatible with the guarantee.” Where ambiguous agreements made between parties come at odds with the express terms of a written contract, the terms of the contract will stand. Therefore, the collateral agreement receives no consideration, and the defendants remain liable for the balance of the debt outstanding. Legal Principles:  “Parol Evidence Rule”: When terms of a written contract are clear and unambiguous, the parties are not permitted to introduce evidence outside of the contract to alter its fundamental meaning  Exceptions to this include: a) subsequent oral conditions; b) collateral oral agreements; c) written documents not meant to be the final form; or d) an oral condition precedent (subject to…) o In A, B, and C above consideration must be proven to exist for both parties to the agreement, such that it is clear that the intentions of the parties are markedly different from those implied in the written form 16 Collins V. Dodge City East Ltd Facts: The plaintiff purchased a used motor vehicle from the defendant. The defendant’s agent purported that the vehicle would be “fully equipped,” including an Air Conditioning (AC) feature that the agent himself actively demonstrated to the plaintiff. Several months after the plaintiff owned the vehicle (and during the season in which the AC was first needed to be and was used) the plaintiff realized that the AC was not actually installed. Subsequently, the plaintiff had AC installed by a certified mechanic, and brought this action to seek the damages equal to the costs of AC installation. Issues: 1. Did the agent engage in misrepresentation? 2. Should the court award the damages sought by the plaintiff? Decisions: 1. Both the agent’s words and actions are construed to be misrepresentation. 2. The court will award the damages sought by the plaintiff. Reasons: 1. Whether or not the agent knowingly made the misrepresentation, the agent’s words and action lead the plaintiff into a false assumption that AC would be included in the vehicle. This was a material misrepresentation, as it altered her incentives and ultimately to purchase the vehicle that she otherwise would not have. 2. The purpose of damages is to rectify the injury party and return them to the position they would be in if performance was adequately provided by the offending party. In these circumstances, the plaintiff should be awarded the costs required to install the AC so that she would be in the same position as if the AC was installed at the given purchase price. Legal Principles:  Remedies for Misrepresentation: A person need only show that he or she was misrepresented about a material aspect of the contract in order to receive the appropriate remedy 17 Crozman V. Ruesch Facts: The appellants (the Crozmans) completed the purchase of a home with the assistance of their father (a trained realty professional.) At the time of inspection and purchase, the appellants noticed several imperfections in the leveling of the home that caused them some concern. On inquiring as to these imperfections, the respondents informed them that these have been there since the home was first purchased and will not cause a problem. After purchasing the property, the appellants noticed several other imperfections which required significant costs to repaid (in the total of $12,000.) The trial judge found that the defendants have made no fraudulent misrepresentations as to the state of the property, and as such should not be liable for the damages. The appellants here seek a motion to retry the case in provincial trial court. Issue: 1. Did the trial judge err in his initial conclusion? 2. Is there any evidence of fraud or misrepresentation? Decisions: 1. The trial judge was correct in his conclusion and his judgment is upheld. 2. The appeal court had confirmed the trial judges findings, and the case of fraud/misrepresentation is rejected. Reasons: 1. Nothing in the appellant council’s argument was persuasive enough to conclude that the trial judge erred in coming to the correct conclusion. As such, the appeal court determined that the facts of the case, and the conclusions drawn from them, were correctly stated by the trial judge (and the decision is upheld.) 2. As the respondents did act with honest intent and merely conveyed the state of the property, as they knew it, they shall not be held fraudulent or misrepresentative. The respondent’s notice to the appellants of the existence of these defects suggests that there is neither “fraud by half truth” nor “fraud by concealment” Legal Principles:  Contracts regarding real property: It is difficult in relying on misrep
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