Contract

Question 1

What is a contract?

Answer 1

Agreement between two or more persons
to do or refrain from doing, something in exchange for something of value.
Can be written or entirely verbal.
Failure by a party to live up to his part of the bargain is a “breach”.
The terms of the contract - who, what, where, when, and how - define binding promises of parties to the contract.

Question 2

What are some of the types of contracts?

Answer 2

What areas of social life does contract concern itself with? Practically everything!
Retail store transaction (not documented for practical reasons)
Buying and selling newspaper to large machinery or a fleet of cars;
Employment – (maybe in writing or not).
House purchase; renting real property; renting chattels; renting hotel room
Obtaining services (plumbing, electrical, medical, legal);
buying tickets (movies, concerts, sports events, airlines).

Question 3

What are some of the essentials of an enforceable contract?

Answer 3

Agreement between parties (at least two);
terms of agreement must be certain;
agreement must be lawful;
parties must intend to create legal relations;
promisee must buy the promisor’s promise by giving consideration;
parties must have capacity to enter into a contract.
Contract must comply with requisite formalities, if any [e.g. purchase of land]

Question 4

What are some similarities between Contractual and Tortious obligations?

Answer 4

Both create civil law obligations: duty of care/obligation to do what is promised.
Breach of contract and breach of duty of care gives rise to action for damages.
Civil courts have jurisdiction to hear claims.

Question 5

What are some of the differences between Contractual and Tortious obligations?

Answer 5

Contractual obligations are:
1. Voluntarily undertaken;
2. Obligation/duty only owed to a party to the contract;
3. Liability is strict;
4. Liability is imposed on a person who has not carried out what he has promised to do
5. Object of awarding damages to +`+put the claimant in the position he would have been in if the contract had been performed.
Tort obligations are:
1. Imposed by law
2. Duty owed to everyone we can foresee could be harmed by our actions
3. Liability is based on fault.
4. Liability is imposed on persons for carrying out an activity that causes harm to another (misfeasance)
5. Object of awarding damages to make victim “whole”- to put him in the position he would have been in if the tort had not happened

Question 6

What are some of the distinctions between unilateral and bilateral contracts?

Answer 6

Unilateral contract:
1. Involves only one-sided promise .
2. Promisor expects from the promisee action (not another promise).
3. Acceptance need not be communicated.
4. It is the action of the other party that indicates acceptance.
Ex: Crime stoppers reward ad; Lost item/phone reward; Lost pet reward ad; Offer to treat is not an offer and not a unilateral contract but an invitation to the public to make an offer-e.g. a flyer or window display by a seller of goods-
Bilateral:
Involves two promises;
Acceptance must be communicated for the contract to be completed;
In both, unilateral and bilateral contracts, offeror cannot revoke offer after it’s accepted.
In bilateral contract, it is clear when the offer has been accepted; in unilateral contract it is not always clear at what moment in time the offer is accepted. (e.x. Bike race to SFU example

Question 7

What are the essential elements of an agreement?

Answer 7

1. Offeror decides to make a firm offer to the offeree-firm Offer means a certain offer not “I am thinking of offering you…”.
2. Offeror must communicate the offer to the offeree;
3. When offeree receives the offer he decides whether to accept the offer, reject it, make a counter-offer or ask for more information;
4. If offeree decides to accept the offer, he must communicate the acceptance to the offeror;
5. Agreement is formed when offeror receives the acceptance.
6. Offer + acceptance = Agreement.

Question 8

What is the distinction between an offer and an invitation to treat?

Answer 8

• Not every statement made by one person to another in the course of negotiating a contract is an offer.
• Important to distinguish statements, which are firm offers from statements that are mere invitations to treat.
• An invitation to treat is an invitation to make an offer.- e.g. advertisements, circulars, flyers, realtor’s “For sale” or “For lease” signs, clothes in window displays (on mannequins) with price tags.
• While an acceptance of a firm offer will result in a contract an acceptance of an Invitation to treat will NOT result in a contract.

Question 9

Explain Grainger & Son v. Gough (1896) case that settle offer vs invitation to treat question?

Answer 9

D, wine merchant, circulated a catalogue which contained a price list for its products.;
P ordered a number of bottles of wine from the catalogue;
When D refused to deliver these at the stated price, P alleged that a contract had been formed.
Issue was whether the price list constituted an offer to sell wine at a certain price (in which case the contract was fully formed and P had a valid claim), or an invitation to treat (in which case no contract had been formed).
Rejecting the claim, HL held that the price list must be construed not as an offer, but as an invitation to treat.
In reaching this conclusion, it reasoned that to interpret the list as an offer would mean that in theory the defendant would be obliged to deliver an unlimited quantity of wine at the stated price, upon receipt of an order. This would be unreasonable, and would not reflect the intentions of the parties as the merchant’s stock is necessarily limited.

Question 10

What the significance of the communication of the offer?

Answer 10

The offer will be effective only on communication of the offer to the offeree.
If offer is contained in a letter, and posted, the offer is effective only when the offeree receives the letter. From this it logically follows that the offeree must be aware of the offer before he can accept.

Question 11

What is acceptance?

Answer 11

An acceptance is an unconditional assent/agreement to all the terms of the offer.
If A makes an offer to B and B says I agree, subject to my solicitor’s approval, B has not accepted A’s offer [Winn v. Bull case-written agreement signed by D agreeing to lease P’s property but “subject to the preparation and approval of a formal contract”].
Acceptance can be expressed verbally or in writing or even implied by conduct.

Question 12

What is the distinction between an acceptance and counter offer?

Answer 12

If offeree receives offer and agrees to all the terms he accepts the offer. Acceptance will result in a binding contract.
What is the legal consequence if the offeree adds a new term?
The offeree is then said to have rejected the offeror’s offer and made a counter-offer.
If that counter-offer is accepted by the original offeror a contract will come into existence. If, however, the original offeror rejects the counter-offer there will be no contract. —No consensus of minds-no ad idem.
A counter-offer destroys the original offer. E.g. Hyde v. Wrench
By contrast, a mere request for information does not affect the offer, which remains open for acceptance.

Question 13

What are the rules for communicating the acceptance?

Answer 13

If offeree decides to accept offer, he must communicate to the offeror his decision to accept .
Communication of acceptance may be done personally or through an authorized agent.
Communication through an unauthorized agent will not result in a binding contract.
Example: Insurance brokers-ICBC, home insurance etc.
• The offeree must communicate his acceptance to the offeror for a contract to be concluded/consummated.
• Cannot impose contractual obligations on the offeree by saying that his silence is sufficient acceptance. E.g. purchase of neighbour’s car while he is on holiday.
If offer contained in a fax, it implies offeror expects a quick reply from offeree. If offeree sends a reply by post, this may not be a sufficient acceptance.
What if offeror informs offeree he expects a reply by return of post or mail? Does this mean that offeree cannot reply by telephone, fax or email? Discuss English case of Tinn v. Hoffman. Tinn v Hoffman (1873) 29 LT 271: Another equally fast method would have been successful, such as a telegram or verbal message.
If the offeror has not merely prescribed a method but has insisted on a particular method only been followed, then the method insisted upon by the offeror must be followed. Rule established In English Court of Appeal decision In - Holwell Securities Ltd. v. Hughes [1974] Eng. C.A.

Question 14

What is inter praesentes contract?

Answer 14

If a contract is formed inter praesentes/ between two people in their physical presence, rather than, say, by post.

Question 15

What is the position when a contract is made over the telephone?

Answer 15

Entores case Denning L.J. said: “Suppose, for instance, that I make an offer to a man by telephone and, in the middle of his reply, the line goes “dead” so that I do not hear his words of acceptance. There is no contract at that moment…The contract is only complete when I have his answer accepting the offer.”

Question 16

What are the rules for postal communication?

Answer 16

When acceptance is by means of posting a letter, when is the acceptance complete? Effective when and where posted-i.e. the “post box rule”: Adams v. Lindsell 1818
Post box rule is an exception to the general rule of acceptance that: acceptance must be communicated to the offeror before it is effective.
The rule that acceptance is complete on posting was extended or expanded further by the Eng. Ct. of App. In 1879 in the case of Household Fire Insurance Co. v. Grant where a letter of acceptance which was posted got lost in the post.
Is the rule is unfair on the offeror, as he may be bound by an acceptance, which he does not receive? Law allows the offeror to safeguard himself by excluding the rule that acceptance is complete on posting.

Question 17

What are the ways an offer can come to an end?

Answer 17

An offer can come to an end as follows:
Acceptance -When an offer is accepted it will result in a contract.
Rejection -If the offeree rejects the offer, it comes to an end.
Counter-offer- If the offeree makes a counter-offer, the original offer is destroyed.
Lapse of time if the offer is for a specific period of time, the offer will automatically lapse after the stated time. It expires.
Where no time period is mentioned- Does the offer continue forever? No. The offer will lapse after a reasonable time
Where failure of a condition subject to which the offer was made.
—E.g. subject to financing; subject to inspection, etc.
Death of the offeror - If, after making an offer but before it is accepted, offeror dies, and offeree has notice of offeror’s death, offeree cannot accept.
What if the offeree accepts in ignorance of the offeror’s death? —e.g. Bradbury v. Morgan-if it is a task that can be fulfilled by the executor of the estate such as payment of money.

Question 18

What are the rules for offer revocation?

Answer 18

Revocation means cancelling or terminating the offer/
If offeror revokes offer before it’s accepted, it comes to an end;
If offeror wants to revoke offer he must do so before acceptance is completed.
Is the offeror bound by his promise to leave the offer open for a specific period?
Only if consideration paid to the offeror to keep the offer open
Communication of revocation:
For it to be a valid revocation, the offeror should communicate his decision to revoke to the offeree before the offeree accepts the offer.
E.g. Byrne & Co. v. Van Tienhoven & Co. [offeror posted offer and then posted revocation of offer. Revocation reached offeree only after he posted acceptance of offer. Postal revocation takes effect when receipt by the offeree and not when mailed. Revocation too late in this case.
The revocation does not have to be communicated personally by the offeror. E.g. Dickinson v. Dodds.

Question 19

How does the revocation of an offer in unilateral contract work?

Answer 19

Revocation of offers in unilateral contracts
The Carlill case example-publication of revocation in the same Gazette before the purchaser buys.
Announce or post revocation in the same forum (lamp post, newspaper, lecture, etc.) where offer was made before it is accepted by action.

Question 20

What is a consideration?

Answer 20

Each party must give something of value for receiving something of value from the other. [e.g. I clean your house in exchange for payment; fix your car in exchange for you painting my house, etc.]
It may be something other than money.
Courts do not evaluate adequacy of consideration —weather I made a good deal or not.
However, a clear case of unfair consideration may raise issue of competency of a party. E.g. I sell you a $25,000 diamond for $250.
Capacity to contract is an important element.

Question 21

What is a Gratuitous promise?

Answer 21

No consideration = no enforceable agreement-e.g. If I say I will give you tickets to the Lady Gaga concert but then change my mind. Not an enforceable agreement-no consideration flowing from you to me.
2 exceptions to this rule:
where the promisee (the party who was given a gratuitous promise) relies upon it to his detriment then he may be able to sue in such case. [e.g. uncles promise to pay fro your trip to Europe and you rely upon that promise to your detriment and purchase an airline ticket and pay for hotel]
Where contract made under a seal there is not a requirement of consideration. It is evidence of serious intent and acknowledgment that the contract is enforceable. This is a common law rule.

Question 22

What is the significance of intetnion?

Answer 22

The parties must have intended to contract.
The promise made by one party to another must have been intended to be a contractual one. It cannot have been a joke [e.g. If #135 bus late, I will give you a million $$]
In a business relationship courts presume intention but it is open to a party to rebut or challenge that presumption.

Question 23

What are some factors that can affect contractual relationship?

Answer 23

Mistake
Misrepresentation
Duress and undue influence
Unconscionable transaction
Privity of contract
Assignment

Question 24

Describe mistake and how it affects contracts?

Answer 24

Must have a consensus or a meeting of minds for a contract to be valid and enforceable (ad idem)
Where a mistake goes to the root of the contract and destroys consensus, the contract is void [not voidable].
However, where there is no mistake but simply a bad bargain struck by one party, court will not interfere
Mistake can be made by one or both parties to an agreement- unilateral or mutual mistake

Question 25

Describe mutual mistake?

Answer 25

When both parties make the same mistake, then the mistake is called a shared or a mutual mistake.
The court will review the transaction and see if the mistake goes to a fundamental aspect of the subject matter of the contract to determine whether there is a failed consensus or not; whether the contract is void or not.

Question 26

When can a mistake be rectified?

Answer 26

Where mistake of such nature that it can be rectified or corrected by the court, the court will try to give effect to the reasonable expectations of the parties .
E.g. clerical error in a contract of purchase and sale; price missing a zero or two]

Question 27

What is unjust enrichment?

Answer 27

Unjust enrichment is a benefit obtained by one person at the expense of another, without legal justification for it. The court will remedy the mistake in such case.
E.g. I only have $500.00 in the bank account but when I go to withdraw the full amount, the teller gives me $5,000.00. I will have received a payment that I am not entitled to and there is no legal justification for me to get $5,000.00 when I only have $500.00 in my bank account. The court will order me to return $4,500 of those funds to the bank

Question 28

Describe a reasonable person test.

Answer 28

Where there is a misunderstanding between the parties about the terms of the agreement itself and neither party is aware of the other’s different understanding, the court, in such a case, will apply the “reasonable person test” to determine which interpretation of the contract is more reasonable and then adopt the more reasonable position as the correct interpretation of the contract.
Where court cannot choose between the two positions because both are equally reasonable, the contract will be declared void

Question 29

Describe the unilateral mistake?

Answer 29

A one-sided mistake is called a unilateral mistake.
general rule: there is no recourse for a person who makes a one-sided mistake.
[e.g. Future Shop-buy a television by name-think it is OLED TV but it turns out to be 4K resolution TV instead. Nobody misled me-Ct will not rescind the agreement-one sided mistake]
However, if one party misleads another, the result is different
[e.g. where the salesperson at Future Shop mistakenly confirms to me that the Sony Bravia TV was OLED TV but it turned out to be 4K TV; I will be able to rescind the contract.

Question 30

Describe mistake as to identity mistake?

Answer 30

Ct will also allow rescission or setting aside of the contract where one party is mistaken as to the identity (not the attributes) of the other party she is dealing. Need to show 2 elements:
(i) there must be an identifiable third party with whom one intended to contract; and
(ii) second, the mistake must be as to identity and not attributes.
[e.g. hiring a realtor over the phone and 2 realtors with same name working in the office and you hire the wrong one: mistake as to identity. ]
Mistake as to attributes-also a unilateral mistake-but different result
E.g. you hire a realtor thinking she has experience selling homes on the west side when she actually only has experience selling on the east side. This is mistake as to the attributes and not identity and the Ct will not allow you to rescind contract.

Question 31

Describe “Non est Factum” mistake?

Answer 31

Where a party is unaware of the nature of the document she signed
In such rare cases, the Ct may declare the agreement to be void (void ab initio)on the basis of non est factum which literally means “its not my act”.
E.g. I thought I was signing as a witness but instead I was signing a guarantee under which I was going to be bound in the event of a party’s default under a contract with another. Such document or agreement would be void on the basis of non est factum as it goes to lack of understanding of the nature of the document signed.
Where there is recklessness or carelessness or negligence in signing a document that one does not read, the court will not relieve the person on the basis of non est factum.
a successful plea of non est factum requires existence of 2 factors:
the signer of the agreement was not careless in signing; and
there is a radical difference between the document which was signed and what the signer thought he was signing.

Question 32

What are some rules for cotract interpretation?

Answer 32

where simple misunderstanding between the parties, Ct, will attempt to determine the reasonable expectations of the parties and look at the wording of the agreement to determine “what a reasonable person would have understood the term(s) to mean”
Where words in contract are not ambiguous, the court will read them literally in interpreting the contract.
Where words ambiguous, the court will look at what was behind the agreement and apply the most reasonable meaning of the terms in the contract (Golden rule to avoid absurdity).
In simple misunderstanding cases, Ct. will often look at how the terms are normally used in the particular industry involved. If the contract deals with real estate, the court will look at the practice in the real estate industry to find out how the words in question in the contract are used in that industry.
The court may also look at past dealings between the parties, all with a view to finding the most reasonable interpretation of the words in the agreement.

Question 33

What is Parol evidence rule?

Answer 33

Refers to the rule that oral evidence cannot be used to contradict the terms of a written contract where the terms used in an agreement or written contract are clear and unambiguous.
Agreement must be in writing for this rule to apply
E.g. written contract between S and J for the sale of J’s car to S for $5000. J cannot bring in parole (oral) evidence to contradict the written terms of the contract and say that S agreed to sell the car for $4,000
Exceptions to the parol evidence rule— where a party perpetrates fraud over another or uses duress or undue influence

Question 34

What is a collateral contract?

Answer 34

A collateral contract is a contract where the consideration is the entry into another contract. It co-exists side-by-side with the main contract.
It is an exception to the parole evidence rule.
E.g. a collateral contract is formed when one party pays the other party a certain sum of monies such as a $1,000 signing bonus to enter into a lease agreement (the main agreement) for a property for a fixed term.

Question 35

What is misrepresentation and what types are there?

Answer 35

In context of pre-contract negotiations-a party makes false or misleading statements to the other party to induce that party to enter into a contract.
3 types of false statements may be made:
1. fraudulent statement- person making the statement knows it false and makes it intentionally;
2. negligent statement -when the person making the statement does not bother to verify a particular fact which turns out to be false or wrong; and
3. innocent misrepresentation - where false statement is made without any fault.
Misrepresentation must be an allegation of fact [not misrepresentation about the state of law]
An opinion or promise to do something will not be actionable as a misrepresentation
Silence will not be actionable as a misrepresentation in the normal course

Question 36

What are the requirements for misrepresentation to be actionable?

Answer 36

Requirements for misrepresentation to be actionable:
(1)misrepresentation must be an allegation of fact;

(2) must be incorrect or untrue, and
(3) victim of misrepresentation was induced into entering an 	agreement or a contract by the false statement. [conjunctive requirements]

Question 37

What is an innocent misrepresentation?

Answer 37

Innocent misrepresentation is a false statement but it is:
(i) made honestly and without carelessness and
(ii) the person making it actually believes it to be true.
E.g. I am selling my car and represent to you it is AWD when it is FWD. When I bought it I was told it was AWD. You pay me more for it on the basis it is AWD. This is a case of innocent misrepresentation.
Effect of innocent misrepresentation: It makes the contract voidable not void. Party misrepresented to decides whether she wants to continue to be bound by the contract or rescind (set aside) the contract.
Recission may be done by informing the party that misrepresented to you that you want to rescind the contract or by requesting an order from court.
Recission returns parties to their original positions

Question 38

What are the cases where remedy of rescission is not available?

Answer 38

When victim of misrepresentation affirms the contract; then she is bound by her affirmation;
If parties cannot be returned to their original positions because subject matter of the contract has been destroyed or damaged
and
Where another is involved who will be negatively or adversely affected if rescission is granted

Question 39

What is fraudulent misrepresentation?

Answer 39

Fraudulent misrepresentation is where a party intentionally misrepresents a fact that induces or leads another to enter into a contract
Victim can ask to rescind or set aside the contract and also sue for damages for any loss she suffers as a result of entering into such a contract.

Question 40

What should the victim establish in order to sue for fraudulent misrepresentation?

Answer 40

1. the defendant made a false representation
2. The misrepresentation is “material to the transaction,”– must be in regardsto the transaction at hand (i.e. if you are selling a bracelet and lie about something completely unrelated, like having a house in West Vancouver, the buyer can’t sue you for fradulent misrepresentation.)
3. The misrepresentation is made with knowledge that is false, OR with reckless disregard as to whether or not it’s true. Either you have to know you are lying, or be saying something that you are not technically sure is a lie, but you have no reason to believe it’s true. (i.e. if the seller found the bracelet on the street, he cannot tell the buyer that Michael Jackson used to own it, even if that is technically possible.)
4. The misrepresentation is made with the intention of inducing the other party to act or to refrain from acting. Basically, you must be intentionally trying to affect your transaction with your lie.
5. The Plaintiff relied on the lie (the buyer cannot sue you for lying about the bracelet if he doesn’t buy it).
6. The lie must also proximately cause the other party to suffer damages

Question 41

What remedies exist for victims of fraudulent misrepresentation?

Answer 41

1. rescission (the setting aside of the contract);
2. damages; and
3. the contract may be considered void for failure of consensus of minds.

Question 42

What is negligent misrepresenation and how is it different from fraudulent misrepresentation?

Answer 42

Negligent Misrepresentation is where the defendant carelessly makes a representation while having no reasonable basis to believe it to be true.
Difference is that fraudulent misrepresentation requires either “knowledge that it is false” or “reckless disregard as to the truth of something”, while negligent misrepresentation only requires “no reasonable ground” to assume something is true.

Question 43

What needs to be established to successfully sue for negligent misrepresenation?

Answer 43

1. The defendant made a false representation as to a past or existing fact. Statements about the future do not count, nor do opinions or typical “car-salesman” type phrases (“This is a great car,” “This is a real deal,” and the like).
2. The person making the statement must have no reasonable ground for believing it to be true
3. The representation must have been made with the intent to induce the other party to rely upon it. Basically, you had to be using your misrepresentation in order to help you make the deal.
4. The Plaintiff must have believed the misrepresentation and reasonably relied on it. Most courts are hesitant to protect a buyer if he is unreasonable in relying on whatever the seller told him (for example, in trying to sell him a car, the seller assured him it would last him “forever,” and the buyer believes this).
5. As a result of the reliance on the misrepresentation, the Plaintiff suffered damages. This means the buyer must be actually harmed by the final transaction, otherwise there is no liability.

Question 44

What remedies are available for negligent misrepresentation?

Answer 44

Damages for negligence may also be available, in addition to rescission as a remedy in the right case.
Only where the misrepresentation is truly innocent and without fault (w/o negligence) is the victim restricted to the remedy of rescission

Question 45

What is duress?

Answer 45

For there to be a valid contract, the parties must act freely
Duress involves either physical threats or unacceptable commercial pressure used to make someone sign a contract.
If one party is forced by another to make the contract by violence or the threat of violence, that is duress, and it renders the contract voidable (not void)
In other words, the injured party will be entitled to have the contract set aside for duress, unless she decides to affirm the contract and proceed with it.

Question 46

What types of duress are recognized?

Answer 46

Physical duress- use of force, false imprisonment or compelling someone to act contrary to her wishes or interests.
Duress of goods- when someone will not release goods in order to persuade the other party to sign a document or pay some money. Must be an illegitimate threat. [There are situations where it is perfectly legal to hold onto someone’s goods to pressure them to pay, for example, a mechanic shop holding car until payment for repair work is made]
Economic duress- when some form of unacceptable commercial pressure results in advantages secured by the use of such pressure. E.G. If the Union threatens to strike against your establishment unless you agreed to enter into a contract to hire the brother of the Union’s president.

Question 47

What is undue influence?

Answer 47

Is an equitable doctrine that involves one person taking advantage of a position of power over another person and it prevents free bargaining to occur between the parties
Where an agreement has been obtained by certain kinds of subtle, improper pressure that causes a person who has been induced by that pressure to enter into a contract with another
The contract in such case is not void but voidable by the party who was pressured into it. Undue influence is either actual or presumed.
Presumed undue influence: certain categories or relationships the courts will presume the presence of undue influence. E.g. cases involving parent/child, guardian/ward, priest/member of parish, solicitor/client and doctor/patient. The burden of proof lies on the dominant party to disprove undue influence over the other party.
Undue influence may also be presumed by court where there is, on the facts of the case, a special relationship of such trust and confidence that it should give rise to or leads to the presumption of undue influence. [Nurse and invalid case-undue influence to have the invalid right cheques to her

Question 48

What is Unconscionable Transaction?

Answer 48

It’s an equitable doctrine that permits the court to set aside a contract in which one party has been taken advantage of with factors such as desperation or some other vulnerability or weakness.

an unconscionable contract will contain terms that are unfair to one party and the contract will be unenforceable because the consideration offered is lacking or is so obviously inadequate that to enforce the contract would be unfair to the party seeking to escape the contract.
This is not a case where a party makes a bad deal and tries to get out of it.

Question 49

What is privity of contract?

Answer 49

The doctrine of privity of contract law provides that a contract cannot give rights or impose obligations arising under it on any person except those who are parties to it

Effect of this doctrine is that it prevents any person from seeking the enforcement of a contract, or suing on its terms, unless they are a party to that contract.

Question 50

What are the exceptions to privity of contract?

Answer 50

4 exceptions to this general rule:

If under my contract with you, a third party benefits from it-e.g. I pay plumber to do work on my mother’s home and he fails to complete work. Not an exception per se but my mom would have to join me in the suit against the plumber.

Novation- doctrine at law used to describe the act of either replacing an obligation to perform with a new obligation or replacing a party to an agreement with a new party. A novation must be agreed upon (or consented to) by all the parties to the original agreement—[example of another partner replacing me on the guarantee to the bank, if bank approves];

Where the contractual rights run with the land-[E.g. I lease my property to tenants and then sell it to another. The lease runs with the land-no privity between new owners and tenants and former cannot kick-out the tenants. Lease will be enforceable against new owner, if latter tried to evict].

Where a contract is agreed through agents- An agent is authorized to act on behalf of another (called the principal) to create a legal relationship with a third party— no direct privity but agent will be able to bind the principal with another. [example of selling insurance broker selling car or life insurance to you-he is acting as agent binding principal-insurance co.]

Question 51

What are the ways the contract can be discharged?

Answer 51

Once the contract is formed, it can come to an end or be discharged by:
Performance;
An agreement between the parties to end it or modify it or change it;
Breach by one or another party; or
Frustration.

Question 52

What is performance discharge of the contract?

Answer 52

Both parties satisfactorily complete their obligations under the contract, the contract is discharged
What if a party fails to perform all of the requirements or terms under their contract?
Must determine what type of term the party failed to perform.
Contracts have major terms called (i) conditions (major terms) and (ii) warranties (minor terms).
(i) condition is an essential term, the breach of which gives the claimant the right to terminate contract and claim damages for losses up to termination and beyond (i.e. for loss of the bargain);
(ii) warranty – is a non-essential or subsidiary term, the breach of which yields no right to termination; the claimant can only claim damages for losses up to the time of the action (but not for loss of bargain since the contract continues).

Question 53

What is substantial perfomrance?

Answer 53

Substantial Performance
doctrine protects the contract breaker who has substantially performed his obligations under the contract with slight variances from the exact terms.

The other party (victim) cannot withhold performance but must pay after setting-off (i.e. deducting) any loss suffered from the incomplete or defective performance.
Where Ct. finds subst. performance occurred:
contract will be considered to have been discharged subject to the other party recovering in damages their loss for the failure by the first to fully perform the contract. (mitigation important)
Exception: some contracts require performance exactly and partial performance will not do

Question 54

What is tender of performance?

Answer 54

Tender of Performance -Most common way to discharge a contract; performing the obligations under the contract.

Offering to perform the obligations under a contract is called tender of performance.

For the contract to be discharged (completed) both parties must tender performance.

If one party tenders performance and the other does not accept it, the refusing party is in breach of contract unless he has a valid and lawful reason. In such case, the party who tendered performance need not attempt to tender performance again and may sue the other party for breach of contract.

Question 55

What is breach?

Answer 55

When a party to a contract fails/refuses to fulfil her obligations under the contract without legal justification, it is considered a breach of contract.

Breach of contract happens in one of two ways:
Improper or incomplete performance of an obligation set out in the contract; or
Refusal to perform or repudiation (could be anticipatory).

Question 56

What is Repudiation?

Answer 56

Repudiation (express)–means to renounce or reject an obligation.

Most common form of repudiation:
failing or refusing to perform the obligations of the contract when they become due.
This is known as express repudiation or express breach.
Repudiation must be clear, unambiguous and explicit.
Repudiation (anticipatory)-If repudiation occurs before the date of performance, it is anticipatory breach.

As with express repudiation, the repudiation must be clear, unambiguous and explicit.

Question 57

What is discharge?

Answer 57

“Discharge” means to release.

A discharge of a contract occurs when parties have complied with their obligations or other events have occurred that release one or both parties from performing their obligations.

One way to discharge a contract is by performance-both parties tender performance of their obligations under contract

You can also have a discharge of contract by agreement of the parties…

Question 58

What is discharge by agrement?

Answer 58

Discharge by Agreement- Where parties agree between themselves to not proceed with the contract before the terms of the contract are fully performed; discharges the contract.
Also known as a waiver:
Waiver is a voluntary agreement to relinquish a right
By agreeing to a waiver, neither party can insist on the performance of the other party’s obligations.
If neither party has performed any of the terms of the contract: there is a mutual release of the parties from their obligation; there is consideration for the waiver; it is enforceable.

If one party has performed her obligations but the other has not: waiver lacks consideration; not enforceable. To be enforceable, other consideration should be present, or the waiver should be in writing and under seal.

Question 59

What is condition subsequent?

Answer 59

Condition subsequent-is a future event that, if it occurs, terminates or discharges an existing contract.

In the case of the conditions precedent, the contract does not come into existence until the event occurs. [E.g. financing is approved for the purchase]

With a condition subsequent, the contract exists and performance is required but the contract may be discharged if the event occurs.

Question 60

What is frustration of the contract?

Answer 60

Frustration – a contract may become impossible to perform through no fault of either party and the Ct. may invoke the doctrine of frustration of contract, declaring that the contract has been frustrated and the parties to it should be relieved of their obligations under it.
Frustration may be found where:
The impossibility arises from an act of some third party (a third party negligently destroys the property contracted for);
Some natural or external force (war, natural disaster, act of God such as fire, flood, earthquake, weather or other force majeure -major event that the parties to a contract did not foresee or anticipate that prevents performance of a contract and thus terminates the contract;
The impossibility cannot be prevented by the parties and is beyond their control.
The impossibility is not, directly or indirectly, brought about by the party who is arguing that the contract has been frustrated [cannot be self-induced).

Impossibility maybe caused by the death or serious physical incapacity of a party where a personal attribute of that party was required to perform the contract

Question 61

What are some remedies available for breach of contract?

Answer 61

Rescission 
Quantum Meruit 
Accounting
Demages
Rescission 
Injunction
Mitigation

Question 62

What is quantum merit?

Answer 62

Quantum Meruit – The doctrine of quantum meruit is most commonly relied on in two situations:

where the contract is silent as to the consideration for the goods or services
where the contract has been partially performed and the value of the performance must be determined.

E.g. Cameron hired Deborah to renovate his kitchen for the sum of $5,000. Deborah has completed approximately 75% of the job when Cameron decides he no longer wants the renovations and refuses to pay her or to let her finish. Deborah must prove that Cameron repudiated the contract, and because she did not complete the contract, she must claim the remedy of quantum meruit for compensation for work done. Since she completed 75% of the contract, she may claim 75% of the contract price or $3,750.
Alternatively, in the same example, where Cameron hires Deborah whose business is to renovate kitchens but they do not specify the contract price. In such case, the doctrine of quantum meruit allows the injured party, Deborah, to obtain a valuation of and compensation for the work she performed. The injured party must show that it was in fact the other party who had repudiated the contract or made the completion of the contract impossible in such case.

Question 63

What is accounting?

Answer 63

Accounting –Injured party may not know exactly what sort of potential loss he has suffered, especially when offending party has taken advantage of some opportunity or right belonging to him.
E.g. Case where a fiduciary relationship exists between the parties- where a key employee breaches the contract of employment and starts his own business and takes away from his former employer ripe business opportunities and carries on business with those clients.
Whatever profits he makes from these clients may be ordered to be disgorged in an action by the former employer against the employee, where the former employer asks for an accounting remedy.
Accounting remedy involves the court ordering the offending party to pay over to the injured party all or a portion of the profits made from the wrongful conduct.

Question 64

What is the injunction?

Answer 64

Injunction – remedy governs behaviour of a party: either to perform certain actions or not to do something.
prohibitory injunction directs a person not to do a certain thing.
A mandatory injunction commands a person to do a certain thing.
Most important consideration for the Ct. in determining whether to grant an injunction are (i) whether injured party could be adequately compensated by damages instead of an injunction and (ii) whether it is fair and just to grant the request for the injunction.
Ct. will not grant an injunction if injured party can be adequately compensated by an award of damages, or if it would be unfair or cause irreparable harm to, the party in breach.

Question 65

What is mitigation?

Answer 65

Mitigation – injured party has a duty to mitigate or take steps to minimize or reduce damages he will suffer as a result of another’s breach of contract.

The injured party is not entitled to remain inactive in the face of the other party’s breach but must take positive steps to minimize the loss suffered as a result of the breach, though not required to take extraordinary steps.

Failing to mitigate loss may result in a court not awarding compensation for the full loss suffered.
Specific performance –Ct. orders defaulting party to live up to the terms (promises) of the contract.
It is a remedy given to the injured party when damages are inappropriate or will not do. E.g. Purchase of a Unique property where cannot mitigate- Michael jackson’s glove from a particular concert]

Question 66

What are liquidated damages?

Answer 66

Liquidated damages clause –a term in a contract that attempts to reasonably estimate the damages that will be suffered, if the contract is breached.

Provides for the payment of a specific sum expressed as a pre-assessment of the parties’ loss from non-performance.

The amount agreed to will presumably cover the actual loss that is likely to occur if one or the other party breaches the contract.

Damages-most common remedy for breach of contract. Refers to a sum of money to compensate the injured party.

Damages are intended to put the injured party in the position he would have been in had the contract been fully performed.

Question 67

What is rectification?

Answer 67

Rectification –available to alter the terms of a written agreement where a mistake has been made in the document where, for example, parties have had long negotiations and have reached an agreement that is reduced to a written document BUT clerical error records the agreement inaccurately.
Rectification does not alter the intention of the parties. Rather, it ensures that the wording of the written agreement accurately corresponds to what the parties intended to do.

Question 68

What is Rescission?

Answer 68

Rescission – refers to the cancelation of a contract; purpose of rescission is to put the parties in the position they would have been had they contract never been made. This is in contrast to the purpose of damages, which is to put the parties in the position they would have been in if the contractual obligations had been performed