Liebmann V. Canada (Minister of National Defense)
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.
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?
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
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.
• 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
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.
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.
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’
• 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
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
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.
1. Does the addendum (the inquiry) constitute a rejection/counter offer to the original
2. If this does not constitute rejection/counter-offer, should specific performance for the
original agreement be awarded to the plaintiff?
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.
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.
• 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.
• 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?
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
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
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.
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
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
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
• Legally defensible exemption clauses will bind parties to all terms and conditions
provided within the clause (where defensible means that the clause has
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
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”.
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
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.
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.”
“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
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
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.)
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
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.
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.
• 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.
• 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
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
• 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
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
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.
1. Is the defendant liable for the loss of the car?
2. What remedy does the plaintiff have?
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.
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.)
• 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.
• 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.
• Is the defendant liable to the Plaintiff for the loss of the car, and if so, for what
• 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
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
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.
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?
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.
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
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.
• 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
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
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.
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?
1. The implied condition has not been breached.
2. The implied terms in theAct can be negated by the express terms in the exemption
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.
• 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.
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
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
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.
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.”
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.
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
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
5. This was a sale of a used good.
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.
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?
1. It is not for the child’s direct benefit (or “best interest”) to have the contract ordered
2. Simon will be best served by the protection of the Act.
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
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
• 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
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.
• 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
• 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
• 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
• 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
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
Westcoast Transmission V. Cullen
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
1. Does Cullen’s liability to Westcoast include the costs of backup/replacement power
1. The trial judge’s ruling that Cullen is held liable only for the sale price of the “gensets”
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
• 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
• 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
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.”
Should Cullen receive reimbursement from Kato of the costs incurred by Westcoast in renting
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.
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.
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
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.
1. Did the plaintiffs breach the agreement by not clearing encumbrances on the property prior
2. Will the 10% deposit provided by the plaintiff be interpreted as a deposit or a penalty?
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
1. The agreement specified encumbrances must be clear before the effective closing date. As
the first closing date listed was June 14 of 1999, and the encumbrances were removed well
before this date, there was no breach of contractual term.
2. 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.
• 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
• 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
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
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
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
the first deposit paid and all accrued interest would be forfeited to Blackcomb as
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
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
Strata Lot 1 was subsequently sold in August 1999 for $2,450,000 with title transferred to its
owner on August 31, 1999.
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
Judge notes that:
“The plaintiff was ready, willing and able to close under the contract on the closing date
of June 4, 1999.”
“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.”
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.”
“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
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.”
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
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.
1. Should the alleged misrepresentations of the plaintiff automatically discharge the
1. The defendant is liable to repay the debt outstanding.
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.
• “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
Issue: Should the parol evidence (oral terms) be admitted into the contract?
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
Misrepresentation: the oral representations were vague, non-specific, and incompatible with the
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
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.
1. Did the agent engage in misrepresentation?
2. Should the court award the damages sought by the plaintiff?
1. Both the agent’s words and actions are construed to be misrepresentation.
2. The court will award the damages sought by the plaintiff.
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
• 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
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
- 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
- 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
- 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