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Case Briefs.docx

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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 Case Briefs: R. v. 279707Alberta Ltd. Alberta Court of Appeal: Judgment –April 25, 1991 When directed to the public at large, an advertisement is not usually considered an offer, so the advertiser is not usually bound in contract to sell the goods at the advertised price. There is, however, legislation at both the federal and provincial level containing sanctions against false advertising. In the following case, the court applies the federal Competition Act. The Provincial Court convicted the accused of virtually all the counts. The Court of Queen’s Bench allowed appeal and entered acquittals. This court allowed an appeal and restored the convictions entered in the Provincial Court, except for four counts which were conceded by the Crown. Facts During the period of the advertisement, customers tried repeatedly to buy from the accused a certain television model that had been advertised as on sale at a bargain price. Sales people told potential buyers that the sets were sold out, had been sold for some time, and future inventory of the same model was unlikely. Most potential buyers requested rain checks; some were issued; none were honored. Legal Issues The accused is charged with: a) misleading advertising under s. 52 of the CompetitionAct Law and Application • Accused’s wholesaler had on hand a large and ready supply of the advertised model. It was estimated that a reasonable supply of the model under the operating conditions, would have been 100. The President of the accused strongly disputed this estimate. During the period in question, the accused inventory records showed a very small number of models on hand (2-5 sets) – and the acquisition of none during the time. The President also testified his ignorance as to the behavior of his sales people. • Appellant’s arguments: The charge of false advertising must stand or fall on facts existing at the time the advertisement was run, and that later acts or omissions cannot make an advertisement punishable which was not punishable beforehand. o The events after the advertisement run can be evidence of what were the facts at the time the advertisement was run. o Advertisements with identical wording were run during the ‘shopping’ periods. • Crown’s arguments: The accused never had an honest intent and the whole thing was a scheme from start to finish. o The trial judge agreed, and this court had no inclination to interfere with the fact finding by trial judge. 3 o The court determined that 2-5 sets were too small a reserve to fulfill the advertisement, i.e. Given that the advertisement related to this business, the circulation of the advertisement (Calgary Sun), the phrase ‘Priced to Move’ was not technically false, but misleading. It did not matter that the wholesaler had a large supply, because this was not part of the ad, the accused failed to draw on it, so of no practical use to the customer. Conclusion: The convictions for false or misleading advertising are sound and proper. b) not supplying bargain goods advertised under s. 57 of the CompetitionAct. Law and Application • Section 57 is directed toward ‘bait-and-switch’advertising. Although, ‘switch’is not part of the charge, it was present in the facts of the case. After being unable to buy the advertised model, shoppers were led to other more expensive sets. Still, the charge is failing to supply the goods advertised in reasonable quantities. o The accused failed to have ‘reasonable quantities’(reasons above). o The accused failed to ‘supply’. The court rejected the accused arguments, i.e. ‘supply’is not merely to have on hand or available, he must sell on demand (Shorter Oxford Dictionary). o Defense of Due Diligence (Rejected-Fact Finding); Vicarious Liability (?) • Appellant’s Argument: Kinapple Principle – to suggest that virtually all the elements of the charges under s. 52 and those under s. 57 are the same, i.e. the charges are redundant. o The court disagreed. The essence of the false advertising charge is publishing an advertisement which is then untrue. The essence of the s. 57 charge is failing to sell after the advertisement has come out. Although a fully implemented ‘bait-and-switch’would generally entail a violation of both sections, this might not always occur. Conclusion: The convictions under s. 57 are sound and proper. The court restored the convictions under s. 52 and s. 57 entered in the Provincial Court, except for four counts, which were conceded by the Crown. 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 4 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 Case Brief: Montane Ventures v. Schroeder British Columbia Supreme Court: Judgment: March 27, 2000 The essence of a contract is, in theory, the meeting of minds of the contracting parties. The two parties must have a common will in relation the subject matter of their negotiations and must have struck an agreement. Sometimes it is difficult to tell what constitutes a rejection or a counter-offer. When the offeree is merely requesting information or clarification, that does not constitute a counter-offer or a rejection and the offer remains in force. Facts 5 • On September 3-4, the parties negotiated a contract of purchase and sale of a commercial building. The completion of the contract pursuant (subject to) a term, which allowed Montane to receive and be satisfied with a copy of the leasehold interest (i.e. Internet-Café tenant) by September 10. • After Mr. Schroeder and Mr. Jeeves discussed by phone the property alternations done for the leased premise. Jeeves requests a final inspection report of alterations, to which Shroeder agrees to give. • On September 9, Mr. Jeeves forwards an addendum to the contract removing the original subject to clause and adding “seller agrees to provide final inspection certificates for alterations re: above lease by Sept. 22, 1999. • Schroeder responds to the addendum to be a repudiation or counter-offer by Montane and makes a new offer of $225,000 Legal Issue: Is the addendum a breach, repudiation, counter-offer or an inquiry? Law 1. Chesire, Fifoot, Furmston’s Law of Contract • Is the preparation of a further document a condition precedent to the creation of a contract, or is it an incident in the performance of an already binding obligation? 2. Sing v. Chung (1995) BCLR • Counter-offers generally constitute a rejection of the offer and terminiate it so that it is no longer open for acceptance. However, Not every inquiry or request is to be construed as a counteroffer. • Objective test: Whether the communication is a counter-offer or a request for information depends on the intention, objectivity ascertained, with which it was made. Application: The inclusion of inspection certificates follows from the original condition precedent that Montane be satisfied with the copy of the lease agreement on the tenant. The inclusion of ht inspection certificate and removal of the subject to clause was merely confirmation of a conversation, and not a counter-offer or a new term (which would have required a new signature). Conclusion: The inclusion of the inspection certificates in the addendum was merely a confirmation of responses to early inquiries. It was not a counter-offer or repudiation. Therefore, the courts awarded Montane specific performance and party costs. Rudder V. Microsoft Corporation Facts: Aclass 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 6 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, WAwill 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) Offer andAcceptance – Writing Two important issues arise when a party transacts business with someone in another jurisdiction – which court can deal with a dispute between them, and which law governs resolution of the dispute. Jurisdiction and the choice of law are two different issues. Courts in more than one jurisdiction may have the ability to exercise authority, but the court must decide which law applies to resolve the dispute. Many of the same factors are relevant in determining both issues. Rudder v. Microsoft Corp 7 Ontario Superior Court of Justice October 8, 1999 Facts:  ­ Rudder is the representative of the class.  ­ The plaintiffs claim that Microsoft charged members of MSN and taken payments from their  credit cards in breach of contract.  ­ The plaintiffs are claiming damages for breach of contract, breach of fiduciary duty,  misappropriation and punitive damages.  ­ The contract that the plaintiffs are claiming has been breach is the “Member Agreement”. Issue: Does the forum selection clause apply? Law and Application: ­ The plaintiffs argue they only read parts of the Member Agreement and did not see the forum  selection clause.  ­ Rudder argues since only portion of the Member Agreement was present on the screen, the  clause should be treated like the fine prints in a contract. This means, the clause “must be brought  specifically to the attention of the party accepting the terms”.  ­ They argue Washington courts are not appropriate for the conduct of this lawsuit.  ­ Rudder admits in the trial that the agreement was “viewable using the scrolling function”.  ­ The judge states the all the terms of the Agreement are displayed on the screen. There is no fine  print and the terms are written in plain language. Scrolling of the Agreement is compared to  turning of the pages in a multi­page written document.  Issue:  Is it appropriate to override the forum selection clause? Law and Application: ­ They argue Washington courts are not appropriate for the conduct of this lawsuit.  ­ “Eleftheria” (The) (Cargo Owners) v. “Eleftheria” (The):“As the decision most often followed  in Canada in setting out the factors that a court will consider in determining whether it should  exercise its discretion and refuse to enforce a forum selection clause in an agreement.” ­ International Law: ­ “in which jurisdiction is the evidence on issues of fact situated, and the effect of that on  the convenience and  expense of trial in either jurisdiction” ­ “whether the law of the foreign country applies and its difference from the domestic law  in any respect” ­ “the strength of the jurisdictional connections of the parties” ­ “whether the defendants desire to enforce the forum selection clause is genuine or  merely an attempt to obtain a procedural advantage” ­ “whether the plaintiffs will suffer prejudice by bringing their claim in a foreign court  because they will be: ­ deprived of security for the claim; or ­ be unable to enforce any judgment obtained; or  ­ be faced with a time­bar not applicable in the domestic court; or ­ unlikely to receive a fair trial.” ­ Judge found that most of Microsoft had demonstrated substantial connection to the State of  Washington and that there is nothing to suggest the plaintiff will not receive a fair trial in  Washington.  8 Conclusion: ­ The judge finds the forum selection clause to apply in this case.  ­ Most of the evidence of the trial occurs in Washington State, therefore Washington is  appropriate for the conduct of this lawsuit. ­ Microsoft Corp. was awarded relief as requested.    Consideration – Guarantee and Seal Central to contract law is the bargaining process in which the parties to a contract exchange a promise for another promise or a promise in exchange for an act or service. The exchange is called consideration. Consideration is not restricted to the exchange of money.Abargain may involve the exchange of anything the parties to the contract think is of value. 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. 9 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 Case Brief: Black Swan Gold Mines Ltd. v. Goldbelt Resources British Columbia Court ofAppeal – May 29, 1995 The large majority of contractual disputes are not regarding the formation of contracts, but are about the meaning, or interpretation, of contracts. Whenever there is a dispute involving the meaning of a specific term or terms, the courts have a choice of applying the literal meaning of the term or adopting a more liberal approach that tries to determine the parties’intent. Even determining the literal meaning of the terms of a contract is not as simple as it might first appear. Facts: • Both companies, Black Swan and Goldbelt, negotiated separate contracts with Comptoir, providing $5.5 M in exchange for being a majority shareholder. Instead of going to court, Black Swan and Goldbelt negotiated a settlement agreement, where Black Swan exchanged its shares in Comptoir in exchange for money and $1.2M in Goldbelt, i.e. 31.6% control of the company without dilution. o Included in the settlement agreement was a top-formula to protect Black Swan’s control over Goldbelt, i.e. if Goldbelt sells shares or anything convertible to shares than the top-formula is triggered, and Black Swan would be entitled to the shares which it allow it to retain % control. • After the settlement agreement, Goldbelt entered a loan agreement of $18 M with Pegasus, which could be convertible to shares of Goldbelt. The original trial judge used a literal approach with the contract and found the Pegasus’agreement to trigger the top-formula in the settlement agreement. Issue: To what extent should contextual facts influence the meaning of the text (contractual interpretation)? a) When is the top-up formula triggered for Black Swan - now or when the Pegasus loan is converted to shares? b) Are the top-up formulas linked by an implied term? 10 Law/Analysis: • Goldbelt alleges that the trial judge ignored contextual facts and interpreted the contract in a vacuum. They argued that the top-up formula was linked only to the funding target for the original Goldbelt/Comptoir agreement, and not with financing other operations (i.e. an implied term in the contract). Therefore, the Pegasus’ agreement would not trigger the top-up formula, unless the loan was converted to shares. To this, Goldbelt submitted three pieces of evidence: o Asolicitor’s letter communicating Goldbelt’s intentions prior to negotiations. o An information circular addressed to shareholders describing the top-up formula o An affidavit by Goldbelt’s solicitor. • This appeal judge rejected the evidence and Goldbelt’s arguments and stated the trial judge “properly kept the contextual facts in the background and the text of the agreement in the foreground”. • He found that “where the language used in the deed in its primary meaning is unambiguous, and that meaning is not excluded by the content, and is sensible with reference to the extrinsic circumstances, then such primary meaning must be taken exclusively as that in which the words are used”. In other words, where the words of the contract are sensible and not excluded by context, then the words prevail, i.e. to take the contract as express terms. o The test for an implied term is ‘prima facie’or first glance, the surface of things. An implied term is one that is so obvious that it goes without saying; so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in the agreement, they would testily suppress him with a common ‘ oh, of course!”. Also, an implied term must give effect to the intentions of both parties. Conclusion: The judge dismissed the appeal and reaffirmed the trial judgment, i.e. there is no implied term that the top-formulas are linked, and therefore, the contract dictates that the top-formula is triggered presently for Black Swan. 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: 11 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 GoodsAct. 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 Case Brief: Kovacs v. Holtom Alberta Provisional Court, 1997 The SGAincludes rules that apply to determine when property (title) passes from seller to buyer, unless the parties show an intention that differs from those rules. One reason to determine when property passes is that generally the party holding title will also bear the risk in the event of losses of or damages to goods. Facts • 1992: The plaintiff agreed to purchase a (restored) 1963 Falcon Futra convertible for $2500. The car was still retained by the defendant for the purposes of restoration. • 1995: The vehicle was destroyed by arson in a garage owned by the defendant. Although the defendant had undertaken considerable work on the vehicle, the restoration was not complete, nor was there notification to the plaintiff that restoration was complete. The defendant was still in possession of the car for the purposes of restoration. Issue: 12 • Is the defendant liable to the Plaintiff for the loss of the car, and if so, for what remedy? • Defendant: Plaintiff assumes the relative risk of loss of vehicle. The defendant discharges onus by demonstrating he exercised due and reasonable care for the safety of the vehicle. • Had the motor vehicle (property) passed from the defendant to the plaintiff at time of contract? Law/Analysis 1. SGA, s. 20: The transfer of property in a good from buyer to seller will depend upon the intentions of the parties. 2. SGA, s. 20(2): To determine the intentions of the parties, as to when the property in the goods is to pass from seller to buyer, the court looks to: a) terms of the contract; b) the conduct of the parties; and c) the circumstances of the case. 3. SGA, s. 20(3): In a contract for goods, when the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until the thing is dome and the buyer is notified. Therefore: Does the terms of the contract, conduct of party, and/or circumstances of the case indicate an intention different from SGAs. 20(3)? No! 4. The vehicle had not passed onto the plaintiff because the defendant had not completed the restoration (i.e. putting it into a deliverable state). Payment itself does not indicate a mutal intention for the property to pass from seller to buyer (McDill v. Hillson, 1920). Conclusion: Since the property had not passed at time of fire, and since the defendant is not in a position to perform the contract in a reasonable amount of time, the plaintiff is entitled to end agreement (i.e. return to original position). The court awards the contract amount ($2500) and party costs ($80). Dawe V. Cypress Bowl Recreations Facts: 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: 13 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) Porelle V. Eddie’sAuto 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: 14 1. The implied condition has not been breached. 2. The implied terms in theAct can be negated by the express terms in the exemption clause. Reasons: 1. According to the Sale of GoodsAct 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 theAct, 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 theAct 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 theAct. Legal Principles: • Implied terms in the Sale of GoodsAct 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. Exemption Clause Implied terms in the SGA protect purchases of new and used goods. Those implied terms can be  altered or negated by the contract of purchase and sale, though in many jurisdictions, there is  consumer protection legislation that can give individual purchasers new goods protection  regardless of what the contract says. Porelle v. Eddie’s Auto Sales Ltd. Prince Edward Island Supreme Court – Trial Division January 12, 1996 Facts:  ­ The plaintiff purchased a used automobile from the defendant.  ­ The plaintiff ended up buying a 1987 Oldsmobile Delta 88 for $3,700 but noted from the test  drive that the engine stalled a few times. The defendant replied saying it probably needed a tune­ up.  ­ The plaintiff paid a total of $4,364.53 for the used car, which included taxes and warranty. ­ On September 3, the plaintiff had to replace the engine at a cost of $2,141.42.  Issue: Can the exclusion clause be applied to the contract? 15 Law and application: ­ The plaintiff argues that there was “a breach of an implied warranty of fitness” based on the  Sales of Goods Act.  ­ He also argued that “the defendant engaged in an unfair practice.”  ­ There are “express conditions in the sales contract signed by the plaintiff which are inconsistent  with the warranty of condition implied by the Sales of Goods Act” but there is an exclusionary  clause in the contract. “You have purchased a used vehicle. We, the dealer are not responsible for  any repairs after date of purchase unless stated on contract in writing.”  ­ There is a “condition of sales” on the back of the contract that states “ It is expressly aggressed  that there are no Conditions, no Warranties (either legal or conventional of contractual, including  the legal Warranty for latent defects, the Warranty printed on the back hereof being hereby  expressly accepted in lieu of all other Warranties) or Representations, express or implied,  statutory or otherwise, made by the Dealer or the Manufacturer, its Officers or Agents, on the  Motor Vehicle, Chassis or Part furnished hereunder, nor shall any Agreement collateral hereto be  binding upon the Dealer unless endorsed hereon in writing.”  Conclusion: ­ The judge applied the decision on the case Peters v. Parkway Mercury Sales Ltd. and concluded  there is no breach. “The terms of the agreement when taken together with the words “no warranty  of any kind” made it clear the parties contemplated that the risk of defects in the vehicle was  borne by the buyer.”  ­ “The exclusionary clause on the face of the contract, the additional clauses on the reverse of the  document, and the plaintiff’s knowledge of those clauses when he signed the contract, lead me to  conclude, reluctantly, that the plaintiff’s claim must be dismissed.”  ­ Parties bear their own costs.  **Note: If there was not an exclusion clause, the plaintiff could win the argument of the implied  warranty contained in the Sales of Goods Act.  Exclusion clauses: 1. The seller did do what was reasonable to bring the terms to the buyer’s attention by  clearly stating it on the face of the contract and additional clauses on the reverse of the  contract. 2. There is no gross or criminal negligence because only the engine was unusable.  3. There is no evidence of fraudulent misrepresentation as the seller did not make a false  statement and did not deliberately attempt to mislead the buyer. 4. There is no evidence of fundamental breach of contract because the engine could be  repaired.  5. This was a sale of a used good.  RE: Collins Facts: 16 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” Case Brief: Collins (Re) British Columbia Supreme Court – October, 1991 17 The age of majority or the age at which a person was considered to be an adult was 21 at Common Law. The Common Law rule was that a contract made by a minor was unenforceable against the minor but enforceable by the minor against the other party. Today, the age at which a person becomes an adult in Canada is controlled by statute and varies by jurisdiction. In some situations, it will be necessary or desirable that minor be bound in contract so jurisdictions have made provisions for a process of approval of minors’contracts. The criteria that court should apply in approving a contract made by a minor is considered in this case. Facts • 1975-1980: Ms.Andrea Collins married and divorced Philip Collins. Together they have one son, Simon, and one daughter, Joely (from a prior relationship and adopted by Philip). The court observes that Philip Collins loves his children and intends they benefit from his wealth (i.e. child support over $238,000/year). • After the divorce, Ms. Collins received a lump sum settlement of $100,000 and spousal support of $8000/year. The latter was forfeited when she married a Mr. Fleming, whom she divorced in 1988. • After expressing concerns about the quality of schooling/lifestyle, Ms. Collins and the children moved from Richmond to Vancouver. The Vancouver property was bought by Philip Collins and he created an irrevocable trust for the purpose of providing a home for Joely, Simon, and Ms. Collins until Simon reached the age of 20 at which time Simon and Joely would receive the property as tenants in common. Ms. Collins signed LicenseAgreement requiring her to pay property tax and cost of maintenance. • Ms. Collins believed she would receive a share in ownership, and the reality of the trust arrangement was not known to her until after completion of the purchase and just prior to taking procession. She felt she had no choice but to sign the License agreement, because she was aware Philip Collins had no legal obligation to support her. • Ms. Collins remained unhappy about the arrangement. Ms. Collins states she spent $91,000 for repairs, renovations, and furnishing to make a house a home. This was examined by the court and it was found that the vast majority was spent on furniture or moveable personal property, which did not form part of the trust and remained in possession by Ms. Collins. It was also noted that Phillip Collins paid $102,000 in legal costs of purchase, the trust costs, house improvement repairs, and insurance premiums. • The unhappiness and insecurity of Ms Collins became known to the children, who wished to rectify the problem by giving their share of the trust to their mother. There state of mine was assessed by Michael Elterman, a Clinical and Consulting Psychologist, who found both children to be lucid and reasoned, with no undue influence or pressure by Ms. Collins to enter into the agreement. The children were referred to James Martin, a barrister, for legal advice. • Dec.,1989: The contract in question provides that the children transfer their beneficial interest in the Collins Childrens’trust to Ms. Collins when their interest vests. In return, Ms. Collins agrees to provide financial support for their reasonable 18 maintenance, care, education, and benefit until they are 25 (extended to 28, if still completing education). Should Ms. Collins die or remarry, her interests would transfer back to the children. Both children signed the contract before the age of majority. Joely affirmed the contract after the age of majority. Issue: Should the court make the contract enforceable by obtaining an Order under s.16.4 of the Infants Act granting Simon: “capacity to enter into a contract…specified in the order”? Law/Analysis 1. Infants Act, s. 16.4: The court may grant an infant the capacity to enter a contract. This power is discretionary, and it may be exercised only if: • the contract be in the infant’s benefit, and • considering the circumstances, the infant does not need the protection accorded by the law to infants relating to contracts. (Benefit of the infant = best interest of the infant) • Although the court confirms the autonomy of Simon, the judge believes that it was Ms. Collins who instigated the contract by making known to her children her unhappiness and insecurity. The court views the contract to be a thinly disguised attempt to vary the trust set up by Philip Collins. “In my view the Court’s discretionary power should not be exercised on a pretext of being for the benefit of the infants when in essence it is to have Ms. Collins achieve financial security.” • The court cannot find any benefit to Simon in the contract. He would be giving up a valuable piece of property; the stated consideration to be given up by Ms Collins for the contract is not needed by Simon, given that there is ample evidence his father would continue his monetary support; the exchange is unequal (i.e. Simon’s interest in the trust to purchase the feeling of security for ms. Collins). Conclusion: The decision to give up his interest in the trust is one to be reserved when Simon reaches the age of majority. The court dismisses the petition with costs to opposing parties. 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. 19 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 Breach of Contract and Damages Although damages are designed to compensate the injured party for losses suffered, not all  injuries suffered are recoverable. Remoteness and mitigation are two limitations on the  recoverability of damages. A breaching party is responsible only for those damages that, at the  time the contract was entered into, seem a likely outcome if the contract was breached. A  breaching party would also be responsible for any unusual damages for special circumstances  when communicated at him or her at the time the contract is entered into. Finally, victims of  breach have an obligation to keep the losses as low as is reasonably possible. Westcost Transmission Co. v. Cullen Detroit Diesel Allison Ltd. British Columbia Court of Appeal April 24, 1990 Facts:  ­ Kato Engineering International Inc. supplied two failure generators to the defendant Cullen  Detroit Diesel Allison Ltd. for incorporations with motors to third party Cooper Energy Services  20 Ltd. into “gensets” for uses as an electrical power source for natural gas processing plant being  built by the plaintiff, Westcoast Transmission Company Limited near Chetwynd, B.C.  ­ “On the eve of the trial, Cullen settled the claim brought against it by Westcoast and the action  proceeded as a third party claim by Cullen against its suppliers”.  ­ “The trial judge found that the units failed as a result of faulty manufacture by the third party  Kao which resulted in breaches of warranty of reasonable fitness for the purpose and of  merchantable quality implied by Section 18(a) and (b) of the Sale of Goods Act.  ­ The judge awarded damages costs incurred in repairing the machines but did not allow claim  by Cullen for reimbursement of cost incurred by Westcoast in renting portable power units to  provide electricity for operation of the plant during the two­month period for which the “gensets”  were under repair. ­ Cullen now appeals the dismissal of that claim.” Issue:  Should Cullen receive reimbursement from Kato of the costs incurred by Westcoast in renting  portable power?  Law and Application: ­ The trial judge disallowed the claim because “these rental costs could not be said to have been  foreseeable as arising naturally from the breach of the contract between Kato and Cullen, nor  could they reasonably be supposed to have been in contemplation by Kato at the time that  contract was made as probable result of such a breach, and therefore fell outside both of the rules  in Hadley v. Baxendale.” ­ “The trial judge also held that liability for such consequential damages was excluded by a term  of Kato’s printed contract of sale.” ­ Under the rules in Hadley v. Baxendale, “no evidence was offered to Kato of any of the  operations of Westcoast or the size, configuration or importance of the electrical supply, whether  it was the sole electrical supply or was only addition, whether it was to be used for other uses or  even whether the generators were part of a standby operation or not.” ­ Cullen argues the contract indicated that the generators were to be incorporated into power  plants for “continuous use” and as a “prime power source”.  ­ In the industry, prime power means “generator set is intended to run continuously as a primary  source of power, as against a stand­by type application where it seldom runs.” ­ Westcoast’s intention was that one generator would provide power for the plant while the other  would for stand­by power.  ­ Victoria Laundry v. Newman ­ Only those damages “at the time of the contract reasonably foreseeable as likely to  result from the breach” are recoverable.  ­ There is no evidence to show that a plant powered by “gensets” would normally have  no alternative source of supply for ‘standby’ purposes.  ­ “The claim here is not, however, for rental of replacements for the units supplied by Kato but  for rental of replacements for the much larger units of which they were merely components.” ­ “Prime does not, of course, mean “sole” but rather implies that there will also be a “secondary”  source, and equipment of this sort cannot be expected to operate “continuously” in the sense that  it will not require maintenance or repair.” ­ It does not make sense to assume Westcoast to be without any alternative power source  when it has a locally­generated “prime” power source.  Conclusion: ­ Rental of replacement of ‘gensets’ falls under consequential damages in the contract. 21 ­ “The company assumes no liability for consequential damages in case of failure to meet  conditions of any guarantee.” ­ “Any guarantee” should be taken to include warranties implied by the statue as well as  express warranties, and that expression ‘consequential damages’, refers to damages other  than cost of repair.  ­ Even if rental of equipment to replace the complete ‘gensets’ fell under Hadley v. Baxendale,  the claim would still be consider as consequential damages which is excluded in the contract. ­ Appeal dismissed.  When a party foresees that breach may cause it to suffer damages, the consequences of breach  may be built into the contract. Liquidated damages clauses are common in real estate contracts.  To be enforceable in a court, the clause must represent a genuine attempt by both parties to  estimate the damages that would be suffered if the contract was breached. If the amount attempts  to punish or impose a penalty for failure to perform, the clause may be void. 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 must be clear before the effective closing date. As th 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. Acash 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 22 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 Blackcomb Skiing Enterprises Limited Partnership v. Schneider British Columbia Supreme Court May 2, 2000 Facts:  ­ Blackcomb claims for entitlement to a deposit and accrued interest due to the default of the  defendant under a contract of purchase and sale for property, ­ Schneider argues it was a ‘deposit’ clause not a ‘penalty’ clause.  ­ Schneider also argues that at the time of closing, charges on the title of the property, which  Blackcomb did not undertake to discharge, therefore Blackcomb is in default of the contract. ­ December 31, 1998: Schneider signed a contract of purchase and sale to purchase Strata Lot 1  of Pinnacle Heights developed by Blackcomb. ­ The deposit is 10% of purchase price ($2,290,000) and split into two payments. ­ January 11, 1999: The first deposit is paid after an insufficient fund cheque made on December  31,2009. ­ The completion date is extended multiple times due to the request of Schneider. ­ March 22, 1999: Schneider’s lawyer requested an extension to April 30,1999. Blackcomb’s  solicitor counter­offered by requesting the deposit to be increased by an additional $100,000.  ­ Schneider did not accept. ­ Blackcomb subsequently offered to extend completion date to May 14, 1999 with additional  interest payable from April 30, 1999 to the actual closing date at the prime rate plus 4% per  annum.  ­ Schneider did not agree. ­ No additional extensions agreements were made. ­ May 28, 1999: Blackcomb’s solicitor writes to Schneider’s lawyer: ­ Blackcomb gives Schneider until June 4, 1999 to complete the transaction. If Schneider  fails to complete the transaction, Blackcomb will treat Schneider as being in default.  ­ Section A of the Contract: ­ Blackcomb would have the right to remedies, which would include defaulting the  contract and  the first deposit paid and all accrued interest would be forfeited to Blackcomb as  liquidated damages.  ­ The contract provides as follows: 23 ­ “The Purchaser acknowledges and agrees that the transfer of title may be subject to the  Vendor’s financing for the development provided that the Vendor’s solicitors undertake  to clear title to the Property of encumbrances relating to such financing within a  reasonable time after receiving the balance of the adjusted Purchase Price payable to the  Vendor on closing.” ­ June 4, 1999: Schneider did not attend the tendering of the original Transfer at Land Title Office  scheduled appointment. ­ June 16, 1999: Blackcomb’s solicitors advised in written to Schneider’s lawyer the termination  of the Contract and claiming of the deposit and all accrued interest thereon as liquidated  damages. Blackcomb’s solicitor enclosed a form of Direction of Release with respect to the  Deposit and requested the signature of Schneider returned on or before June 21, 1999. It was not  returned. ­ Strata Lot 1 was subsequently sold in August 1999 for $2,450,000 with title transferred to its  owner on August 31, 1999.  Issue: Did the plaintiff’s solicitor’s undertaking require him to clear title to the property of  encumbrances relating to the plaintiff’s financing? Law and Application: ­ Defendant’s submission: “at the time of closing, there were charges on the title of the property  which the plaintiff had no undertake to discharge and the plaintiff was therefore in default under  the contract” ­ Judge notes that:  ­ “The plaintiff was ready, willing and able to close under the contract on the closing date  of June 4, 1999.” Conclusion:  ­ “I am satisfied that the solicitor’s undertaking provided here was sufficient such as to have  caused title to the property to be cleared of the said financial encumbrances registered against the  title on June 4,1999 on the closing date.” Issue:  Was the 10% deposit under the contract a deposit or a penalty? Law and Application: ­ Court of Appeal: ­ “The question whether a sum stipulated is a penalty or liquidated damages is a question  of construction to be decided upon the terms and inherent circumstances of each  particular contract, judged of as at the time of the making of the contract, not as at the  time of the breach.” ­ Judge: ­ “The contract does not just refer to liquidated damages, but expressly says that the  parties hereby agree that the deposit constitutes a genuine pre­estimate of damages.” ­ Both parties are sophisticated in the sale and purchase of property. “No objection to the  amount of deposit or any deposit being required in a rising market was taken at that  time.” ­ Dunlop Pneumatic Tyre Co v. New Garage and Motor Co.: ­ “To justify interference, there must an extravagant disproportion between the agreed  sum and the amount of any damage capable of pre­estimate.” ­ Williamson Pacific Development Inc. V. Johns, Southward 24 ­ The return of a deposit depends on the terms of the contract. “The general rule being  that, in the absence of an agreement to the contrary, if the contract goes off by the default  of the purchaser, the deposit, being a guarantee of performance, becomes the property of  the vendor, even if he resells the land at an increased price.” ­ 10% deposit is half the usual deposit for new construction luxury condominium. ­ Hughes v. Lukuvka: ­ “But the courts will not grant relief to a party who has no intention of completing and  sues only to recover his deposit.”   Conclusion: The plaintiff was awarded the entitlement to the deposit with interest thereon to date and costs  related to the application on scale 3.  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 25 • 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 26 General Tires Canada, Inc v.Aylwards Ltd. Newfoundland Supreme Court – December 6, 1993 The parole evidence rule states that when the written terms of the contract are clear and unambiguous, the parties will not be permitted to introduce outside evidence to contradict or add to the clear meaning of the contract. The rule prevents a party from relying on a term previously agreed upon but not included in the final written contract. It does not exclude evidence about the formation of the contract, such as legality, capacity, mistake duress, undue influence, fraud, or misrepresentation Issue: Should the parol evidence (oral terms) be admitted into the contract? Law/Analysis The plaintiff (GTC) applied for money payable under a written guarantee, which stated that the plaintiff would supply goods on credit to the debtor and the defendant’s (president/majority shareholder) unconditional guarantee to the plaintiff of payment of the debtor’s account. The defendant (Aylwards) argues he is not liable because of an additional oral guarantee which induced him into the written contract. i.e. Oral terms: “the plaintiff would extend to the company credit terms no more favourable than those available in the industry generally, and that the plaintiff would use normal diligent credit practices to ensure collection of accounts”. Law: Bauer v. Bank of Montreal (1980) Law: Parol evidence rule – “If there be a contract which has been reduced into writing, verbal evidence is now allowed to be given of what passed between the parties…so as to add to or subtract from, or in any manner to vary or qualify the written contract.” Exceptions to the parol evidence rule: Condition Precedent: the bankruptcy of the primary debtor did not occur after the signing of the contract. Misrepresentation: the oral representations were vague, non-specific, and incompatible with the guarantee. Collateral contract: no new consideration In addition, the defendant was an experienced businessman; therefore, it must be presumed that he understood the meaning of their agreement and that they are binding. Conclusion: The parol evidence rule stands and the oral evidence is inadmissible. The plaintiff was awarded its statement of claims and party costs. 27 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 anAir 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 theAC was not actually installed. Subsequently, the plaintiff hadAC installed by a certified mechanic, and brought this action to seek the damages equal to the costs ofAC 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 thatAC 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 theAC so that she would be in the same position as if theAC 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 28 Misrepresentation Remedies are available to victims of misrepresentation that are unavailable to those suffering from mistake. It is necessary to show that the mistake destroyed the very foundation of the contract to escape a contract on the basis of mistake.Aperson claiming misrepresentation need only show that he or she had been misled about some material or important aspect of a contract to receive a remedy. Collins v. Dodge City East Ltd. Newfoundland Provincial Court – Small Claims Division September 3, 1999 Facts: - Collins is suing Dodge City East Ltd. for negligent misrepresentation or breach of a sales  agreement regarding the purchase of a used car. - Plaintiff offered her old car on a trade for a newer model which she purchased from  defendant.  - Plaintiff did a lot of research on the price of the car prior to the transaction. She also  ascertained the identity of the prior owner and had a friend check the car for structural  damage. Defendant gave plaintiff opportunity to have the car independently assessed. - Plaintiff wanted to purchase a vehicle with numerous options. - Defendant approached her with a “fully loaded” 1996 Mazda. - Her friend test drove the car. The control panel showed that the car had air conditioning. A/C  was showed on a button and was not obscured by a cap or cover.  - The salesman manipulated the A/C control and demonstrated its operation. A green light  illuminated and “cold air” emanated from the vents. Test drive took place in January. - In June, plaintiff found out the A/C did not turn on. Her first reaction was to have it repaired  but found out it had never been installed. She tried to negotiate a settlement but was not  successful. Issue: - Is there negligent misrepresentation? Law and Application: - “Where the evidence of the plaintiff is in conflict with the evidence of the defence, I accept  the evidence of Ms. Collins.” o Buyer’s version is taken by the court because their recollection is clearer of the event  compared to the seller who deals with numerous transactions daily.  - Defendant demonstrated the air conditioning as a way of enhancing the attractiveness of the  car according to plaintiff.  - Defendant argues that the buyer had asked someone to look at the car on her behalf and is  negligent in not discovering the absence of air conditioning on her part.  o This is true but the examination was for structural purposes only. Plaintiff wanted to  see if the car had been in any prior accidents. o No examination of the air conditioning was done according to the plaintiff. o The judge says she exercised a reasonable amount of caution and cannot conclude  Collins had any negligence on her part. The plaintiff is entitled to rely on the words  and actions of the seller regarding the air condition. - Seller argues it was an innocent misrepresentation because he didn’t know. - Judge cannot conclude the misrepresentation made by the seller was deliberate but was made  regarding an essential aspect. The judge also says that the air conditioning was important to  the buyer and she would not have bought the car if it wasn’t eq
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