Flashcards in Ratios Deck (55):
Third parties cannot sue on contract due to lack of consideration (Tweddle).
Stranger cannot sue to enforce contract (Dunlop).
Woodar overturns Jackson, reaffirms regular rule that recovery for or by a third party is not permitted.
Executor of estate can sue on behalf of estate (Beswick).
Can get around general privity rule because agent relationship (McCannell).
Test for agency (Lord Reid test) (N.Z. Shipping):
1. If the party is meant to be covered by provisions.
2. If the promisor is clearly acting as agent for the party.
3. If the promisor has authority to do this.
4. Consideration moves from party through agent to promisee (intention to create legal relations).
Two-step test for employees being party to a contract made by their employer (London Drugs):
1. The limitation of liability clause must (expressly or impliedly) extend the benefit to the employee(s).
2. The employee(s) must have been acting in the course of their employment performing the services provided for in the contract when the loss occurred.
Subrogation uses same test as employment per Fraser River.
Qualities that must exist for fraudulent misrepresentation:
2. Representation of fact.
3. Fraudulent representation.
4. Intended to induce contract.
5. Is material.
Statement of opinion from a knowledgeable party to one who is not is a representation (Smith).
Statement made to induce another party into a contract is misrepresentation (Redgrave).
Failures or omissions can qualify as misrepresentation if they are half-truths (Wren).
Monetary compensation may be granted under rescission where it is impossible or inequitable to restore the original property and there is fraud (Kupchak).
Innocent misrepresentation leads to rescission, but plaintiff must initiate process for rescission in a reasonable amount of time (Ennis).
The minimization of damages does not preclude the remedy of rescission for misrepresentation (Halleran).
After a reasonable amount of time has passed in cases of a contractual warranty, contract can no longer be rescinded (Leaf).
It is a high/strict standard to apply to find collateral warranty — innocent representations are only referred to as warranties if they have clearly been intended to be warranties by the parties (intention to create legal relations) (Heilbut).
A representation made in the course of dealings for a contract for the very purpose of inducing another party to enter into the contract and there is unequal access to information, it is presumed prima facie to be a warranty of that contract and therefore, a breach of it will lead to a cause of action for damages even if it is innocently made — defendant can rebut by defendant showing the representation was actually innocent (Dick Bentley).
Hong Kong Fir
An innominate term is a “wait and see” situation — examine the consequence of the particular breach in issue and determine whether, in light of those circumstances, the innocent party should be entitled to disaffirm the contract, or just get damages (Hong Kong Fir).
Implied duty to perform in good faith/duty of honest performance (Bhasin).
Parol evidence refers to evidence not contained in the written document (Goss).
There must be clear intent that the parties are creating a separate, collateral agreement and a collateral agreement cannot be established where it is inconsistent with or contradicts the written agreement (Hawrish).
- Where a written agreement appears on its face to be a complete agreement, parol evidence could not be admitted that contradicts, varies, adds to, or subtracts from the terms of the written agreement (Bauer).
- Where there is sufficient evidence of oral misrepresentation which a) induced a party to a contract and b) was relied on by the party, then parole evidence can be included (Bauer).
The Canadian approach is to create presumption in favour of written agreement, and the presumption is:
1. Strongest when alleged oral misrepresentation contrary to written terms; less strong when merely adds to them.
2. Stronger where parties themselves negotiated and prepared written agreement; less strong where printed form used.
3. Less strong where contest was between specific oral representation and general exemption/exclusion clause, in which case can read specific representation as intended to be exception to more general stipulation.
If, but for the lack of consideration, a promise would have been a contract, this can create a relationship “equivalent to contract” where liability can attach to misrepresentation (Hedley Byrne).
The Hedley Byrne principle applies to contract law as well — when two parties in a "special relationship" are parties to a contract, the party with special knowledge has a duty not to be negligent in the representations that they give to the other party (Esso).
One cannot opt out of all liability using an exclusion clause — needs to be fair and reasonable (George Mitchell).
Distilling approach — condition binding if a) customer knew of condition existence or b) defendant gave sufficient notice of conditions on a standard of general public understanding (Parker).
The more onerous the exemption conditions, the greater the notice is that must be drawn to it (the public must be able to predict what the severity of the term is from the notice drawn to it) (Thornton).
Proportionality is applicable to all clauses (not just exemption clauses) — the more onerous, the more notice required (Interfoto).
Knowledge of terms is tested subjectively, thus prior relations are therefore not enough unless there was actual subjective knowledge of the condition (McCutcheon).
A person who signs a contractual document is bound by all the terms even if the person chose not to read them (L’Estrange).
In the consumer context, if a standard form contract is involved that includes an exclusionary clause and is signed in haste, it will likely not form part of the contract (relaxing the traditional rule that signing a document makes you responsible for its terms) — applying Thornton v. Shoe Lane Parking Ltd. to the context of a signed document (Tilden).
If one signed a contract they are bound to the terms if they should expect these terms (Delaney).
Fundamental breach is where the foundation of the contract has been undermined, or where the very thing bargained for has not been provided (Hunter Engineering).
If a breach goes to the root of the contract (a fundamental breach), the exempting clause takes no effect (Karsales).
Limitation clauses implied by statute can be overridden by unconscionability (Solway).
Court won’t lightly interfere with freedom of contract, but it will declare terms to be void if it would be unreasonable and unconscionable to bind the parties to their formal bargains (Davidson).
Three step test to determine whether exclusion clause is applicable (Tercon):
1. Does the exclusion clause apply?
2. If it applies, was it unconscionable at the time the contract was formed?
3. Public policy.
A party to a contract will not be permitted to engage in unconscionable conduct secure in the knowledge that no liability can be imposed upon it because of an exclusionary clause (Plas-Tex).
In order to recover for the work that is “substantially” completed, the party in default who wants to recover must provide evidence from which a new contract to accept and pay for the work done could be inferred (did other party prevent completion, was the new contract entered into for part performance?) (Fairbanks).
Where the work was completed, but completed poorly, and defects have been or can be fixed, courts tend to find substantial performance (more likely to find that contractor is owed something) (Markland).
Expectation damages cannot be awarded where the profitability of the contract is in doubt and where reliance damages can compensate the plaintiff adequately (McRae).
When a plaintiff is better off breaching the contract than continuing to perform and incurring losses, he cannot recover expectation damages for the breach (Bowlay).
Disgorgement damages are available in circumstances where wrongdoer should not be profiting from breach — mere cynical and deliberate (efficient) breach on its own does not attract disgorgement damages (Blake).
Damages would be awarded for intangible injuries only where the (single) object of the contract was a pleasurable experience — the “peace of mind” exception (Jarvis).
Test for whether punitive damages can be awarded (Vorvis):
1. Defendant must not only commit breach of contract, but also act in a “harsh, vindictive, reprehensible, and malicious” manner; and
2. In committing that breach of contract, the defendant must have committed another independently actionable wrong.
Duty of good faith obligation can act as separate actionable wrong (separate actionable wrong is not just limited to tort) (Whiten).
Principle limited to cases where the two requirements for awarding damages for mental distress is met (Fidler):
1. Aggravated damages can be awarded when the object of the contract was to secure a psychological benefit that brings mental distress upon breach that is within the reasonable contemplation of the parties and the degree of suffering was sufficient so as to warrant compensation.
2. Punitive damages should only be awarded exceptionally and in cases of clear bad faith.
Rule for damages recoverable (Hadley):
1. In reasonable contemplation of the parties as probably result of the breach at formation as naturally occurring in the usual course of things (imputed knowledge acceptable).
2. Plus any special circumstances communicated (actual knowledge required).
Damages should be measured by what is reasonably foreseeable as liable to result from a breach; depends on the knowledge of both parties (reasonable foreseeability is test for both rules) (Victoria Laundry).
In order to be recoverable, the loss from the breach must have been foreseeable as a serious possibility at the time of contract formation (Koufos).
In the first Hadley rule, the knowledge may be imputed while in the second, the knowledge must be actual and must express details and magnitude (to foresee extent of loss) (Scyrup).
An innocent party must take steps to mitigate their losses — this means that either steps must be taken to mitigate or steps must be taken to bring matters to a swift legal conclusion (Asamera).