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BU231 Complete Notes 48 pages.docx

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Shelley Mc Gill

BU 231 Class Notes Terms  Action- the lawsuit  Cause of Action- type of lawsuit (tort)  Plaintiff/ defendant – parties to the action  Claim- the reason for the lawsuit  Damages- $$$  Prima Facie- on the face of it Tort Law  The object of tort law is to place the injured party back in the position he/she would’ve been, had the tortuous act not occurred o Harm is a required element of any tort. The wrongful act must cause the harm o Our tort system today is fault based (some torts don’t require an element of fault) o When choosing a writ you need to make sure you find the one that best suits your case because you may win a case under one writ but not another that may even be closely related  Strict liability- some torts are still considered to be strict liability and therefore no fault element is required. (public nuisance) Intentional Torts  Nuisance: o Public or Private o Interference with the lawful use of public land or private land o Need to prove Intent  Trespass: o Entering someone else’s land without consent o Harm must be caused o Need to prove intent  Assault and Battery: o Assault- Threat of violence to a person o Battery- Unlawful touching of a person (without consent) o You can have one without the other but they are usually together  Intentional infliction of Mental Distress: o Intent to cause harm o Recognizable physical or psychopathological harm must occur (person can’t just claim they are distressed) o Shows harm does not need to be physical  False Imprisonment o Unlawfully restraining or confining another person o Does not need to be physical (“manager shouts stop thief to innocent person”)  Malicious Prosecution 1 BU 231 Class Notes o Reporting person to the police when there is no good reason to believe that person committed a crime o This is the next step to false imprisonment  Defamation o Making an untrue statement that causes injury to the reputation of another o Slander- spoken, libel- written o The elements are: intent (maliciousness), statement made, statement false, published to 3 party, must cause genuine and significant injury to the reputation of the plaintiff o Defenses: Statement was true or qualified privilege: statement made in good faith and with honest belief in its truthfulness Defenses to Intentional Torts  Consent o Injured party consented to the act that caused the harm, there is no tort o Absolute defense but must be genuine and informed consent  Self-defense o The party asserting the defense needs to show that the self defense was necessary and that no excessive force was used (pull a gun on someone who punches you) o Force for force o Absolute defense  Necessity o Defense to Trespass where the right of way was impassable o No other option but to destroy property (tear down building to stop spread of fire)  Volition o Act must be voluntary o I.e. Getting away with trespassing because someone else forced you onto the property  Capacity o Requirement of mental capacity to inform intent – if absent forms a complete defense Tort Law – Negligence  Negligence – is the careless causing of harm to the person or property of another o Takes up the majority of tort law because most of the time people don’t intentionally harm people  3 Part test for Negligence: 2 BU 231 Class Notes 1) The defendant owed the plaintiff a duty of care 2) The defendant breached that duty of care by falling below the standard of care and 3) The defendant’s actions caused the injury  Duty of Care(DOC) o Take reasonable care to avoid injury to others (must be foreseeable) o Everyone has the duty to not injure their neighbour (good neighbour principle) o Your neighbour is: Wherever you are you must be careful of those around you o Test for DOC: 1) is there a close enough relationship that the act should have been foreseeable 2) are there any considerations which ought to negative or limit (scope, class of people it is owed, damages to which a breach of it may give rise)  Standard of Care o The reasonable and competent ordinary person on the young street subway (lowest level of care) o The professional standard of care o The fiduciary o Children (will be considered adults when engaging in adult activities – driving car)  Causation o ‘but for’ test o Remoteness – element of forseeability need to be present at the time of the tort o Things directly related- not a string of bad events  Vicarious liability o Employers can be held liable for the tortuous actions of their employees when the employee is acting in the course of his/her employment. (Employee still liable)  Burden of Proof o Plaintiff has the onus of demonstrating that the elements of a tort exist o The onus then shifts to the defendant to prove valid reason why they didn’t and use a valid defense o Plaintiff can use Res Ipsa Loquitur – the thing speaks for itself, when there is no other obvious explanation for the harm caused (barrel of flour example) – defendant would need to prove why it was not possible for them to do it. Defenses  Contributory negligence: o The plaintiff in some way acted negligently and contributed to their own harm o Only a partial defense • Can occur in 3 ways 3 BU 231 Class Notes  Plaintiff can contribute to the incident that caused the injury  The plaintiff can expose themselves to a risk of injury  The plaintiff can fail to take reasonable steps to minimize the injury after it has occurred (mitigation) * if they don’t mitigate then it will reduce the amount the defendant must pay  Voluntary Assumption of Risk o The plaintiff is engaged in an inherently risky activity o Knew the risks and accepted them o Complete defense  Illegal Act o Where the plaintiff is harmed while engaged in an illegal activity  The role of insurance in business is to minimize the risk of loss due to tortuous actions on the part of the employer or employees (vicarious liability) 3 Types of Damages: 1) Special – anything that can be calculated (broke leg and off work- thus loss of salary) 2) General – loss of a finger (may be a dollar amount assigned but there is an emotional part as well) 3) Punitive – punishment (rare in negligence unless act is really bad) Tort Law- Special duties, negligent misrepresentation and economic torts  Product Liabilities o Difficulty in demonstrating negligence on part of manufacturer of goods o Need to prove the product was defective and caused harm and then onus shifts to manufacturer o Ongoing duty to warn • Dangerous products • Products that are discovered to be defective  Occupiers Liability o The special standard of care owed by persons who occupy property to persons who enter those premises o Occupier- person who has control over the property (person renting house) o Invitee and licensee – owed the highest standard of care of the three • Occupier has to remove any hazards of which he/ she is aware and those hazards that he/ she ought to have been aware of • Licensee – any person there for a lawful reason (mailman) • Invitee – o Trespassers- still owed a general duty of care (cannot set a bear trap on them)  Professional Liability 4 BU 231 Class Notes o Professionals with certification in their field held to the standard of their field of expertise o Standard – the reasonably competent and diligent person in that field o Doctors and lawyers hold one of the highest standards  Fiduciary Duty o The highest standard of care o Applies to those who stand in a special relationship of trust to another person (parent, doctor, trustee)  Loss/ Harm o requires that one party suffers some sort of harm, injury, or loss to his/ her person or property • Economic loss:  No one and nothing has been physically harmed but the plaintiff has sustained an economic loss  Negligent misrepresentation o A statement o Can be fraudulent misrepresentation (intentionally made statement) or negligent misrepresentation (carelessly made statement) o Test: statement made, statement false, maker of statement owed duty of care, hearer of statement acted on the statement, hearer of the statement suffered loss as a result, are there any policy considerations to consider that may limit the liability? Economic Torts (not to be confused with economic loss)  Inducing Breach of contract o Where one party induces another party to breach his contract with a 3 party  Unlawful interference with economic relations o Where threats or other unlawful means are sued to convince one party to cease doing business with another  Product Defamation o Where one party intentionally makes untrue or disparaging remarks about another’s product in advertising their own product  Passing off o Representing one’s own product as that of another Contract Law Definition of a contract o A promise, or set of promises, that the law will enforce 5 BU 231 Class Notes Contract Formation o How do you know when you have a legal contract? o 7 elements are necessary for the formation of a contract 1. Offer 2. Acceptance 3. Consideration 4. Intention to Create Legal Relations 5. Capacity 6. Legality 7. Certainty of Terms 1. Offer  A tentative promise made by one party, subject to a condition or containing a request to the other party  Must be definite and certain  It is intended to be binding on both of the parties as soon as it is accepted  Most common type of contract: Standard Form Contract (SFC)  The “Take it or leave it” offer o Standard Form Contract  Advantages:  Highly efficient • Fast • Easy  Disadvantages: • Inequality of bargaining power • Little or no room to negotiate terms  Unusual or unexpected terms: • Tilden Rent-A-Car Co. v Clendenning (19780, 18 O.R. (2d) 601 • The need to point out any unusual or unexpected terms to the person signing the contract at the time of contract formation or the term will be struck from the contract by the court  No room for negotiation over terms of the contract  Counter offer o Amending the contract in order to ‘accept’ the contract does not equal acceptance o This amounts to a rejection of the offer and a counter-offer 2. Acceptance  Final unqualified consent to the terms of the offer 6 BU 231 Class Notes  Must be communicated either by word or by conduct  Timing of Acceptance oRevocation – offeror can revoke the offer any time up to acceptance • Exceptions: a. where an offeree has paid money to keep an offer open; b. where the offer was made under seal oLapse – where the offer stipulates a time by which the offer must be accepted and that time passes  Communication of Acceptance omethod of acceptance should be reasonable in the circumstances and reasonable to the offer • (i.e. responding by snail mail on a time sensitive offer is not reasonable)  Jurisdiction oLocation where the contract was formed is determined by where acceptance is completed oJurisdiction is important in aiding in determining what province or country’s laws will govern that contract 3. Consideration  The price paid for the contract ousually $$$$$, but doesn’t have to be  Price could be performance  Price could be in services/goods in trade  Gratuitous Promise oNo consideration = no contract  Adequacy of consideration oPast consideration = No consideration  Existing Legal Duty oNo new consideration, so no new contract  Debtor/Creditor Rule oFoakes v Beer (1884), 9 App. Ca. 605 oNo new consideration for promise to reduce debt = no new contract oExceptions created to avoid unfair results  Mercantile Law Amendment Act, R.S.O. 1990 c. M.10, s.16 oAmended the rule in Ontario  Equitable Estoppel oCourt exercising equitable jurisdiction to prevent a party from denying his or her promise 7 BU 231 Class Notes oAt present, can only be used as a shield not a sword (i.e. a defence not a cause of action)  Seals oAct of sealing a document meant that the covenanter adopted the document as his/her “act and deed” oSolemn promise oNo consideration required 4. Intention to Create Legal Relations  Reasonable bystander test:  Did the outward conduct of the parties lack a serious intention to create legal obligations? 5. Capacity  Some parties lacking the necessary legal capacity to enter contracts or holding diminished capacity: oMinors • Provincial “age of majority” – in Ontario, 18 years of age • Below 18 years a person is considered an “infant” in law • Minors can enter into contracts • Contracts would be enforceable by the minor, but not against the minor • Contracts for necessaries are enforceable oMentally incompetent persons oCorporations oLabour Unions oEnemy Aliens oAboriginal Peoples oBankrupts  Void vs. Voidable contracts oVoid contracts – never existed; failed formation = no contract oVoidable contracts – exist, but can be made void at the option of one of the parties 6. Legality  The object of the contract cannot be illegal oContracts illegal by statute, e.g.: • Criminal Code • Income Tax Act 8 BU 231 Class Notes • Competitions Act oContracts can also be illegal where they breach other Acts or Regulations – e.g. practicing a profession without a license  Contracts illegal by Common Law or Public Policy oContracts considered to be immoral, or a perversion of justice, or prejudicial to the interests of the Canadian public oHistorically, gambling fell into this category oInsurance and stock exchange transactions are excluded 7. Certainty of Terms  Vague or incomplete agreements can be deemed “void” by a court, therefore no contract was ever formed  Vague contracts: oUsing terminology that is not clear e.g. “fair value,” “if satisfied”  Incomplete: oLeaving necessary information out of the contract, e.g. the price of the contract Impeachment of Contracts  Rescission o The setting aside of a contract because of some defect affecting its formation such as mistake, misrepresentation, duress or undue influence o Or, the discharge of the contract by the subsequent agreement of the parties o It is NOT where an innocent party is discharged from his/her obligations under a contract because of the other party’s serious breach of contract or failure to perform under the contract o Court’s decision that even though a contract has been formed, it should not be enforced due to a defect  Object:  To place the parties as closely as possible back to their pre- contractual positions  NOT damages  Mistake o Generally, 2 types of mistake recognized in law: o Mistake in the terms of the contract o Mistake in assumptions about the subject matter of the contract  Typographical errors  Test: Would a reasonable bystander recognize it as a mistake?  If yes, then despite proper formation, K would not be enforceable – it would be voidable at the option of the party that made the mistake 9 BU 231 Class Notes o Mistake when reducing the terms to writing  Court may grant rectification, but only where: 1. Court is satisfied that there was a complete agreement; 2. The parties did not engage in further negotiations; and 3. The change in the written document appears to be an error in recording. o Mistake in Terms  Ambiguity – multiple interpretations of the same term  Raffles v Wichelhaus (1864), 159 E.R 375  A ship called “Peerless” o Mistake in Assumption  Refers to the subject matter of the contract  Mistake in assumption as to the existence of the subject matter – K is void  Mistake as to the value  Court will not interfere in a fluctuating market  Court will interfere if the mistake in value was present from the outset o Hyrsky et al v Smith (1969), 5 D.L.R. (3d) 385  Land purchase for development  Parcel of land significantly smaller than believed to be  Court held that the mistake was so substantial as to change the quality of the subject matter and granted rescission to the purchaser rd o Mistake AND Innocent 3 Parties  Usually occurs in situations of fraud 1. A sells to F 2. F sells to B 3. F takes the $$ and moves to S. America 4. A discovers mistake 5. Who suffers the loss?  If K is deemed void, then there was no K and therefore goods or money must be returned to A  Title did not pass to F, but stayed with A  If K is deemed voidable, then there was a K and therefore goods or money stays with B  Title did pass to F and therefore F could pass title to B  The innocent 3 party must be that – innocent  Must be a BFPVWN: Bona Fide Purchaser for Value Without Notice o Non Est Factum  Another type of mistake = “Not my deed” 10 BU 231 Class Notes  Historical defence devised in a time when people were largely illiterate  Claim of non est factum = this is not the contract I agreed to  Reliance on another person’s word that the document contains the terms agree to  Works for the blind or illiterate o Mistake in Performance  Where someone accidentally pays the wrong party, or overpays the correct party  Funds cannot be kept as it would create an unjust enrichment  If a payment is negotiated in good faith and the payment is properly made, and later the party making the payment discovers the claim would not have been as high as that negotiated – cannot reclaim those funds  Misrepresentation o A statement/representation made during negotiation of a contract, before formation of the contract, that turns out to be false o Can be:  Innocent  Negligent  Fraudulent o Elements 1. Statement/Representation 2. False 3. Intent (if fraudulent); 4. Duty of Care owed (if negligent) 5. Reliance 6. Caused Harm o Experts:  Representation is a statement of fact NOT opinion  Expert opinions are considered to be a statement of fact o Omissions:  Not necessarily a misrepresentation UNLESS there is a duty of utmost good faith owed, e.g. fiduciary  Doctrine of Caveat Emptor applies (less so with consumer goods re: Sale of Goods Act, s. 15) o Omissions – Other Contracts that Require Disclosure 11 BU 231 Class Notes  Directors of companies owe a duty of utmost good faith to their corporations  Partners in a partnership  Insureds to their insurance company  Professionals owe a duty to their clients and must disclose conflicts of interest  Undue Influence o The domination of one party over the mind of another to such a degree as to deprive the latter of the will to make an independent decision o K formed under undue influence would be voidable at the option of the victim o Special Relationships  Often fiduciary relationships  Special case – husband and wife  Need for ILA o Dire Circumstances  Where one party is temporarily desperate and will agree to any terms o Threat of Prosecution  Agreeing to terms to avoid prosecution of a family member o Unconscionable Contracts  Arising from inequality of bargaining power – but the court is reluctant to look at the bad bargain as being a result of unconscionability o Burden of Proof:  Plaintiff who desires to claim undue influence and have the contract voidable at his/her option must show on a balance of probabilities that: 1. There was domination by the other party in the circumstances a) By showing the special relationship exists; or b) That s/he was in desperate circumstances at the time of contract formation 2. That the contract is unfair or disadvantageous to the weaker party o Duress  Actual or threatened violence or imprisonment as a means of coercing a party to enter a contract  Contract would be voidable at the option of the victim o Economic Duress 12 BU 231 Class Notes  Coercion and an illegitimate application of pressure  Pao On v. Lau Yiu Long [1980] A.C. 614  Gordon v. Roebuck (1992), 9 O.R. (3d) 1 1. Plaintiff must demonstrate that his will was coerced and that the pressure exerted to do that was not legitimate, 4 factors: a) Did the plaintiff protest? b) Was there an alternate course open to the plaintiff? c) Was the plaintiff independently advised? d) After entering into K, did the plaintiff take steps to avoid it The Requirement of Writing – Contracts  Statute of Frauds o The need for written evidence of certain types of contracts o It was introduced in 1677 and still exists in Ontario o Historically arose during civil unrest and disputes over long term contracts (foggy memory)  Applies to these type of Contracts: o Promise by an Executor of an Estate(Trustee) to pay a debt of the estate  Where an executor/executrix makes a promise to a creditor of the estate to pay the creditor personally, that promise cannot be enforced by the creditor unless it has been reduced to writing o Guarantees  A conditional promise to pay the debt only if the debtor defaults o Payment by a third party for the miscarriage of another  If a 3 party agrees to pay damages on behalf of another – then it is like an indemnity (3 party paying guarantee) and does not have to be in writing rd  If a 3 party agrees to pay ONLY if the other party defaults, then it is like a guarantee and must be in writing to be enforceable against the 3 party o Contracts in consideration of marriage  Today contracts relating to marriage are governed by Family Law Legislation, but must still be in writing to be enforceable o Ratification of a minors contract  Once a minor reaches the age of majority a ratification (renewal) of the contract must be in writing o Agreement to be performed by either party in over a year  Exception 1: Where one of the parties is expected to perform within the year, but the other is not  Exception 2: Indefinite time period set out in the contract o Contracts concerning land 13 BU 231 Class Notes  Any transaction involving real estate must be in writing to be enforceable (exceptions include: repairs, building a house, and room and board arrangements)  Essential parts of the Memorandum (written document): o Names o Subject Matter o Consideration (with the exception of a guarantee) o Payment Details o Signature of the paying party o * Signature of the defendant in order to sue under the memorandum  What makes up a memorandum o A piece of paper (it can be a letter) o Does not have to be one document but cannot rely on oral evidence connecting the multiple memorandum  Unenforceable Contracts o A contract that still exists for other purposes, but neither party may not enforce the details through court action o * it is NOT void o Contract still exists and can affect the legal interests of the parties o Where they differ from Void contracts  Deposits  Recovery for Goods and Services  Subsequent Memorandums  Defendant must plead the statute  Effect of a subsequent oral contract on a prior written contract  Doctrine of Part Performance o Performance begun by a plaintiff in reliance on an oral contract relating to an interest in land, and accepted by the courts as evidence of the contract in place of a written memorandum o Necessary Criteria for Part Performance  Has to be a contract concerning land  Acts of performance have to clearly indicate the existence of a contract respecting the land in question  Acts have to have been performed by the plaintiff (not the defendant)  Sale of Goods Act o A requirement of a written contract for sales of goods o Applied to any purchase of goods in excess of 10 British pounds (original act) o It was repealed in Ontario but still exists in some provinces o Avoiding the Act 14 BU 231 Class Notes • Where there has been acceptance and actual receipt of the goods by the buyer • Part payment tendered by the buyer and accepted by the seller • Earnest  Consumer Protection Act o Protection of consumers o Some agreements must be in writing, e.g. Direct Agreements under s. 41(1) in excess of $50.00 o Writing must include such details as o Detailed description of goods/services sold o Itemized purchase price o Name, address and contact information of vendor o Notice of statutory cancellation rights Interpretation of Contract  Ambiguity in Language o Multiple Meanings o Special Usage of Words (variations amongst cultures, language etc.)  Trade Customs o Does the final price include materials or not? (discrepancies between norms)  Interpretation of Express Terms o Strict Approach • Dictionary Definitions or the plain (common) meanings of the words used o Liberal Approach • Looks to the intentions of the parties at the time of the contract formation – the reason why the contract was formed in the first place • Looks to the circumstances surrounding the specific contract negotiations  Credibility o Issue of Evidence • Judge must make determination as to whose story is more believable • The more witnesses or other evidence available is great assistance in making the determination • Most contract negations do not occur conveniently before witnesses, but are rather conducted between only the parties to the contract o Often necessary to have a 3 party to settle the dispute o Are judges better at determining credibility than the avg. person? o Courts can make the contract void for uncertainty, but usually an effort to enforce all contracts 15 BU 231 Class Notes  Parol Evidence Rule (PER) o Extrinsic (not parole that means released early from prison) o A rule preventing a party to contract from adding a term previously agreed upon not included in the final written contract o A party cannot go to court and introduce evidence that something outside of the document was excluded from the contract o Rule only applies to terms that a party is trying to have added to the contract o Problems with the rule – effect on the SFC – won’t include “bonus clauses” o How to get around the rule: • Written document was not intended to embody the whole contract • PER does NOT exclude oral agreement reached AFTER the parties have entered into the written contract • Collateral Agreement – separate agreement between the parties, but not included in the written document – needs separate consideration o Another exception to the PER • Condition Precedent  Any set of circumstances or events that the parties stipulate must be satisfied or must happen before their contract takes effect  Not to be confused with a “conditional acceptance”  Interpretation of Implied Terms o A term that is not included in the contract, but as reasonable person would read it would have thought to include it (term that was implied) o Terms established by Custom • Terms implied from long established practices in a particular industry Privity of Contract  Privity of Contract o The relationship that exists between the parties to a contract  Rule o If there is no privity between the parties then there is no right to obtain legal remedy based in contract law o There may be opportunity to obtain legal remedy through tort law where applicable o Rule can have harsh results – therefore systems have been developed to get around the rule  Novation o The termination of one contract and the creation of a new contract with the rd same or similar terms to introduce the 3 party to the contract o Has the effect of releasing the original party to the contract  Vicarious Performance 16 BU 231 Class Notes o Where a 3 party performs on behalf of the promisor who remains responsible for proper performance o Don’t confuse it with vicarious liability in tort law o Eg. Corporation cannot act without an agent who is performing vicariously, but the corporation remains liable for performance  Trusts o Where property has been transferred to a person who administers the property for the benefit of another o The 3 party who is obtaining the benefit has a “beneficial interest” in the property and has the right to enforce the trust agreement as the “true owner” of the property  Constructive Trusts: rd o The relationship that permits a 3 party to obtain performance of a promise included in a contract for his or her benefit o Original contract has to be meant to be irrevocable • A trust must be permanent with no option for the donor of the trust property to later change his/her mind  Exceptions to the Rule : o Insurance o Undisclosed Principals o Contracts concerning land – tenancy agreements o Special concessions to commercial practice • Collateral contracts and Exemption Clauses Assignment of Rights  Assignment of Rights o A transfer by a party of its rights under a contract to a third party o The right to enforce a contract has an independent value from the price of the contract itself (the intangible right is what is being transferred) o This right is referred to as a chose in action o Tangible goods are referred to as chose in possession  Parties to the Assignment o The promisor o The assignor o The assignee  *Equitable Assignment : o The original assignor is left a party to the transaction therefore in order to enforce the contract all three parties must me bade party to the legal action o 17 BU 231 Class Notes  The effect of the Conveyancing and Law of Property Act in Ontario o Where an assignment meets the requirements of the act, that is: • The assignment was absolute (unconditional and complete) • It was in writing • The promisor received notice of it in writing o Then it is a statutory assignment and the assignor is no longer bound to it  Notice to the Promisor o ALL assignments require that the promisor be given notice of the assignment o It is notice to the promisor that is required and NOT consent from the promisor o If the promisor ignore the notice and pays the assignor, then the promisor will be in breach and will be required to pay again to the assignee  Assignee’s Title o The assignee cannot obtain a better title than the assignor o The assignment is subject to any rights that the promisor had against the assignee before the promisor received notice of the assignment  Negotiable Instruments o Defined by the Bills of Exchange Act o A written contract containing a promise express or implied to pay a specific sum of money to the order a designated person or to bearer o Includes • Bills, Cheques, Promissory Notes  Negotiation o The process of assigning a negotiable instrument o Negotiable Instruments can be negotiated by simply signing the item where it is made payable to a specific person or by just handing it over if it is payable to bearer o Parties to the negotiable instrument o Promisor/Drawer o Drawee o Payee o Holder – still subject to equities o Holder in Due Course 18 BU 231 Class Notes POST MIDTERM The Discharge of Contracts  Discharge of a contract is the cancellation of the obligation of a contract, i.e. make the K null and inoperative Discharge by Performance  Most common method by which contracts are discharged  Where both parties to the contract perform their obligations under the contract satisfactorily  Tender of Performance – an attempt by one party to perform according to the terms of the K – stops interest from accruing from that point forward Discharge by Agreement  Where the parties agree not to proceed with the contract  Waiver: o An agreement not to proceed with the performance of a K already in existence o Can only occur when neither party has fully performed – consideration becomes an issue where one party has performed o Must be by agreement of both parties  Substituted Agreement: o Can be an out of court settlement where one party offers to pay money in lieu of performance o Could be novation where the old K is discharged and a new K is entered into in its place  Contract Provides for its Own Dissolution o Condition Precedent: • Neither party can perform unless a certain future event occurs o Condition Subsequent: • An uncertain event that brings a promisor’s liability to an end if it happens o Option to Terminate: • Allows for termination of the K on providing notice to the other party Discharge by Frustration  Courts now excuse parties for failure to perform their contracts in a wide variety of circumstances where they are not at fault  Doctrine of frustration o Where the law excuses one party from performance when external causes have made performance radically different from that contemplated by the parties 19 BU 231 Class Notes  Requirements of Frustration: o Frustrating event must have been unforeseen o Frustrating event must be outside of the control of the parties o Frustrating event must occur AFTER the agreement was made o Frustrating event must make performance impossible or purposeless  Where circumstances have changed and performance is now more onerous than it ought to be is NOT frustration  Self-induced Frustration: o Where a party wilfully disables itself from performing a contract in order to claim that the contract has been frustrated o This is NOT frustration – it is a breach of K  Effect of Frustration: o Where one party has partially performed and the other party has not, then a frustrating event can leave the performing party out of pocket o Issue of fairness  Provides allocation of losses: o Amount due or paid may be retained or recovered but no more than the amount paid or due o But if one party has performed and no money was paid or due, then the performing party bears the loss  Sale of Goods Act R.S.O. 1990 c. S. 1 o Section 8: Where there is an agreement to sell specific goods and subsequently the goods without any fault on the part of the seller or buyer perish before the risk has passed to the buyer, the agreement is thereby avoided o Three conditions must first be present for this section to apply  First, the goods must be specific – that is , “they must be identified and agreed upon at the time the sale is made.”  Second, the risk must still be with the seller – that is, the seller must still be responsible for the safety of the goods.  Third, the cause of the frustration must be the perishing of the goods  Where the Sale of Goods Act does not apply, then  The Frustrated Contracts Act applies in those provinces that have an Act, otherwise  The Fibrosa decision applies o When a frustrating event occurs that the purchaser can reclaim any advance payments or deposits made to the seller even if the seller has incurred some expenses towards the completion of the contract. Meaning the seller has to incur all expenses and repay the deposit, however if the seller had conferred the slightest benefit to the buyer the seller could retain the whole deposit. Discharge by Operation of Law  Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 o The bankruptcy and insolvency act operates to discharge a bankrupt debtor from contractual liabilities after the processes of bankruptcy have been 20 BU 231 Class Notes completed. The debtor is discharged, however only if he qualifies for a certificate stating that the bankruptcy was caused by misfortune and without any misconduct on his part.  Limitations Act, S.O. 2002, c.24, Sch. B o A debt or other contractual obligation that has been neglected by a creditor for a long time becomes a statute barred – that is, the creditor loses the right to bring an action on it. Each province has a limitations act setting out the time at which the creditor loses its remedy. Breach of Contract  Effect: o May discharge the contract, but not always  Minor Breach: o A breach of a non-essential term of the K or of an essential term in a minor respect  Major Breach: o A breach of the whole K or of an essential term, so that the purpose of the K is defeated  Condition – an essential term of the K  Warranty – a non-essential term of the K  Breach of a condition allows the non-breaching party to opt for discharge of the K – the breaching party remains bound  Breach of a warranty, both parties remain bound to the K, but the non-breaching party can sue for damages where it has incurred a loss  How does a breach occur? o Express Repudiation – declaration of intention not to perform; o By rendering performance impossible; o By failure to perform or tendering inadequate performance  Express Repudiation o Options to non-breaching party • Terminate K but reserve the right to sue for damages; or • Insist on performance and wait for non-performance o Anticipatory Breach • Breach before performance is due o Importance of timing • K formation – K is binding from that point  One Party Renders Performance Impossible: o Self induced frustration o Contracts of personal performance (double-booking) o Can be before or at time performance is due  Failure of Performance: o Can only occur when performance is due o Can be total or partial failure o Can be grossly inadequate performance 21 BU 231 Class Notes Doctrine of Substantial Performance  Performance that does not comply in some minor way with the requirements of the contract  Prevents the non-breaching party from avoiding his or her performance Exemption Clauses  A clause in a contract that exempts a party from liability for failing to perform some or all of its contractual obligations  Risk Allocation o Insurance o Keeps costs low o Problem: if used in SFC – inequality of bargaining power, puts risk on party not willing or able to accept it  Defences: o Inadequate notice o Misrepresentation o Non est factum  Fundamental Breach – goes to the heart of the K – court will strike down the clause Remedies for Breach of Contract  Types of Remedies: o Damages o Equitable Remedies o Quantum Meruit Damages  A money award to compensate an injured party for the loss caused by the other party’s breach of contract  Compensatory in nature  Purpose: to place the injured party in the position they would have been had the contract been performed  Economic Breach o Where it is economically advantageous to breach  Mitigation of Damages: o Action by an aggrieved party to reduce the extent of its loss caused by the breach of the other party o The requirement to act reasonably  Must flow from the breach  Special circumstances: o The breaching party may not be held liable for additional damages arising from special circumstances, where the breaching party was not made aware of them o Test: from past experience and knowledge between the parties, should the managers have reasonably expected the loss at the time of K formation Measurement of Damages 22 BU 231 Class Notes o The moment for determining whether damages were foreseeable is at the time of making the contract not when the breach occurs o At the time the contract is made the promisor is liable to uphold the promise and the promisee becomes entitled to a continuous expectation of performance until the time for performance arrives. o In a breach of contract the court will include in its award of damages for breach an amount equal to the expected profits on the aborted transaction  Expectation damages – an amount awarded for breach of contract based on expected profits  Opportunity cost – the lost chance of making a similar contract with a different promisor  Liquidated Damages – an amount agreed to be paid in damages by a party to a contract if it should commit a breach  Penalty Clause – a tem specifying an exorbitant amount for breach of contract, intended to frighten a party into performance Equitable Remedies  Courts of equity o Special non-monetary remedies given where damages are not sufficient o Can order a party to perform the K o Court orders other than money settlements o E.g. Rescission  Discretionary in nature: o Plaintiff must come to court with “clean hands” o Action must be brought in a reasonable time o No innocent 3 party involved o Consideration must be commensurate with promise o Cannot violate Principle of Symmetry  Specific Performance: o An order requiring a defendant to do a specified act; usually to complete a transaction o Only for unique properties (real or personal) o S.P. is almost never granted in employment or personal service K’s o The uniqueness of land: Semelhago v. Paramadevan [1996] 2 SCR 415  Injunctions: o a court order restraining a party from acting in a particular manner o Need for a negative covenant in the K o Injunctions are rare in employment K’s  Injunctions: o Injunction o Interlocutory Injunction • A temporary restraining order – to restrain immediate harm from being done by a breach of contract o Mareva Injunction o Anton Pillar Order 23 BU 231 Class Notes Quantum Meruit  The amount a person merits to be paid for goods or services provided to the person requesting them  What if the part performance is by the breaching party? Is the breaching party still entitled to QM? Enforcing a Judgement  The judgment: o Order by the court requiring one party to pay to the other party damages, or perform as per an equitable remedy o The parties become: • Judgment Creditor; and  A party who has obtained a court judgement for a sum of money • Judgment Debtor  A party who has been ordered by the court to pay a sum of money  The steps to seize assets of the JD: o Judgment must be registered with court; o Writ must be filed with Sheriff’s Office – jurisdiction is important – JC becomes Execution Creditor; o An execution order must be made to the Sheriff and then; o The Sheriff can levy execution – seizes and sells assets for the benefit of ALL execution creditors o NB some assets are exempt from seizure e.g. annuities and pensions  Sheriff’s Office: o Must pay out all secured creditors first o Takes a percentage for Sheriff’s fees o Difference remaining is paid pro rata amongst all of the execution creditors  Garnishment Orders o To access: • Bank accounts • Wages • Accounts receivable o Filed with Sheriff’s Office • Payments made to Sheriff • Sheriff distributes to Execution Creditors  Writs have to be renewed regularly – every couple of years – to stay current as an Execution Creditor  Judgments remain in effect for 21 years  Notice of the judgment can be placed on the various credit bureaux to affect the JD’s credit rating and to notify anyone of the outstanding debt  Follow up: o Examination in Aid of Execution 24 BU 231 Class Notes • Allowed annually • Interview with JD under oath to determine assets, income, liabilities and expenses of JD • JD must bring in all documents related to assets, income, liabilities and expenses Bailments  A transfer of possession of personal property without a transfer of ownership o Contractual o Non-contractual o Involuntary  Parties: o Bailor o Bailee  Nature of Bailment: o Personal property (chattels) only – can include documents containing legal rights o NOT real property o Transfer of Possession without transfer of title (ownership)  Benefits of Bailment: o Contractual  Designed to benefit both parties  Bailment for value o Non-Contractual  Can benefit either party or both parties  Gratuitous • Where there is no consideration or intention to create a legal relationship  Rights and Duties of Bailee: o Tort or contract o Contractual terms can determine the liabilities of the bailee o ALL bailees have a duty of care – the standard of care will depend on the nature of the bailment o While there are elements of both K and tort law – bailments are governed by their own rules!  Sub-bailments o Receiving a bailment from a bailee o Punch v. Savoy Jewellers Ltd. (1986), 26 D.L.R. (4 ) 546  Standard of Care: o Depends on type of bailment o Lowest standard is for the gratuitous bailment where the benefit is for t
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