Contracts2019-2020

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TableofContents

Chapter1:Introduction...............................................................................................3INTROTODAMAGES.......................................................................................................................4

Chapter2:OfferandAcceptance.................................................................................5INTRO..............................................................................................................................................5

CanadianDyersAssociationLrdvBurton(1920)........................................................................5HarveyvFacey[1893]................................................................................................................6

RULESGOVERNINGOFFERANDACCEPTANCE...............................................................................7PharmaceuticalSocietyofGreatBritainvBootsCashChemists................................................7UnilateralandBilateralContracts..............................................................................................7

ACCEPTANCEOFCONTRACTS:INTRODUCTION...........................................................................11LivingstonevEvans...................................................................................................................11

BATTLEOFTHEFORMS.................................................................................................................12ButlerMachineToolCovEx-Cell-OCorp(1979).......................................................................13TywoodIndustriesLtdvStAnne-NackawicPulpandPaperCoLtd..........................................13ProCDvMatthewZeidenbergandSilkenMountainWebServicesInc.....................................14

ACCEPTANCEINUNILATERALANDBILATERALCONTRACTS.........................................................14DawsonvHelicopterExplorationCo(1995).............................................................................15

RULESOFCOMMUNICATION.......................................................................................................16FelthousevBindley(1892)........................................................................................................16SaintJohnTugBoatCovIrvingRefineryLtd............................................................................17EliasonvHenshaw(1819)........................................................................................................17

MAILEDACCEPTANCES.................................................................................................................18HouseholdFireandCarriageAccidentInsuranceCo.vGrant(1879).......................................18HowellSecuritiesLtdvHughes.................................................................................................19

INSTANTANEOUSMETHODSOFCOMMUNICATION....................................................................19BrinkibonLtdvStahagStahlundStahlwarenhandelsgesellschaftmbH..................................19RuddervMicrosoftCorp...........................................................................................................20

TERMINATIONOFANOFFER........................................................................................................21TERMINATIONBYREVOCATION...................................................................................................21

DicksonvDodds[1876]............................................................................................................21ByrnevVanTienhoven[1880]..................................................................................................21ErringtonvErringtonandWoods[1952]..................................................................................22

TERMINATIONBYLAPSE...............................................................................................................22BarrickvClark[1951]...............................................................................................................22

ChapterThree:CertaintyofTerms.............................................................................23VAGUENESS..................................................................................................................................23

RvCaeIndustriesLtd(1986)....................................................................................................24INCOMPLETETERMS.....................................................................................................................24

May&ButcherLtdvR(1934)..................................................................................................26Hillas&CovArcosLtd(1932)...................................................................................................26FoleyvClassiqueCoachesLtd(1934).......................................................................................27

AGREEMENTSTONEGOTIATE......................................................................................................27EmpressTowersLtdvBankofNovaScotia(1991)...................................................................28MannparEnterprisesLtdvCanada(1999)...............................................................................29

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CONTRACTS

CHAPTER1:INTRODUCTION

• Contract:anagreementgivingrisetoobligationswhichareenforcedorrecognizedbylaw

TheComponentsofaContract

• Anagreement:anagreementiscomposedofanoffertoenterintoacontractandanacceptanceoftheoffer

o Anoffer:anexpressionofwillingnesstocontractoncertainterms,madewiththeintentionthatitshallbecomebindingassoonasitisacceptedbythepersontowhomitisaddressed

o Anacceptance:afinalandunqualifiedexpressionofassenttothetermsofanoffer

§ Thepromisescontainedintheagreementareknownasterms.Theinformingideabehindacontractisthattherehasbeenameetingoftheminds–thatthepartieshaveagreedonwhattheiressentialobligationsaretoeachother

• Mustbecomplete:thismeanstheagreementmustbecomplete,whichmeansitiscertain

o Example:knowwhothepartiesare,whatthematterisabout,whatthepotentialpurchasepriceis,etc.Thiscomesdowntoreasonableness

• Deliberate:theagreementmustbedeliberate,meaningthatbothpartieswanttoenterintoacontractualrelationship.Thismatterisformallyknownasanintentiontocreatelegalrelations.

o Intentiontocreatelegalrelationsmeansthatthepartiesmadetheagreementincontemplationofithavinglegalconsequences

• Voluntary:theagreementmustbefreelychosenandnotinvolvecoercionorotherformsofseriousunfairness

• Betweentwoormorecompetentpersons:thosewhoenterintoacontractareknownaspartiestothecontract.Theremustbeatleasttwopartiestoanycontract,whomusthavelegalcapacity

o Asageneralrule,onlypartiestoacontractcansueandbesuedonit• Supportedbymutualconsideration:acontractinvolvesabargainorexchangebetween

theparties.Thismeansthateachpartymustgivesomethingofvalueintheeyeofthelawinexchangeforreceivingsomethingofvaluefromtheotherparty

o Thisbilateralelementmeansthereismutualconsideration• Notnecessarilyinwriting:asageneralrule,evenoralcontractsareenforceable,though

itispreferablefornegotiatorstogetthecontractinwritingo InmostCanadianjurisdictionstherearecertainkindsofcontacts(likethose

involvinganinterestinland)thatmustbeevidencedinwritingtobeenforceable

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Notes:• Balanceofprobabilities:theplaintiffhastoshowonaBofPthatthereisacontract

betweenthepartiesinordertosueo Thisburdenofprooffallsontheplaintiffo BofPis50%certaintyplusabit

ClassicalTheoryofContract

• Theideathatthereisastablebodyofdoctrinecontaininggeneralprinciplesrelevanttoallcontracts.Conceptsinclude:

o Thatthelawcouldbereducedtoastatementofruleso Thatthelawwasconcernedwiththeobjectivemanifestationofagreementand

nottheparties’privatethoughtso Thatfreedomexistedforpeopletocontractastheychooseo Thatcontractualliabilitywasstrictonceabargainthatthelawrecognizedasa

contractwasstruck• Inreality,thefreemarketoverlapsandexistsintensionwithpublicregulation,markets

arenotlefttooperateuntouchedbydemocraticprocesses,andproblemsofracismandsexismincontracts,ortherefusaltoformcontracts,exists

o Thedoctrineofunconscionabilityofferssomeprotectionfromunfairbargainsbyinsistinguponindividualresponsibilitytoavoidtakingadvantageofinequality

o ThedoctrineofgoodfaithwasshowninthedecisioninBhasinvHrynewandrecognizedadutyofgoodfaithandhonestperformance

FreedomofContract:

• Thisisfocusedonthevoluntarychoicesofindividuals.Theroleofthelawofcontractswasconceivedprincipallyasafacilitationofvoluntarychoicesbygivingthemlegaleffect

• However,thelawhasalwaysplacedsomeexpresslimitsonthepursuitofself-interesto Example:thelawprotectingthosewhoarepresumedtotransactata

disadvantage,likeyouthorthosewithamentaldisability• Anotherlimitationonthisisafiduciary,apersonwhooccupiesapositionoftrustand

confidenceo Becausefiduciarieshaveexpresslyorimpliedlyundertakentodoso,theyare

requiredtorelinquishtheirselfinterestandactsolelyonbehalfofanothero Afiduciarydutyplacesthestrictestlimitationsonthepursuitofself-interesto Example:therelationshipbetweenatrusteeandabeneficiary

INTROTODAMAGES

• Contractualmeasureofdamages:o Theplaintiffisentitledtobeputinthepositiontheywouldhavebeeninhad

thecontractbeenperformed• Dutytomitigate:

o Thelawimposesadutyontheplaintifftomitigateloss

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o Aplaintiffcanonlyrecoverforunavoidablelosses–aplaintiffwillnotbeabletorecovertotheextentthattheyhavefailedtoactreasonablytolimitorreducetheirlosscausedbythedefendant’sbreach

• Typesofdamages:o Expectation:thismeasureaimstoputtheinnocentpartyinthepositionthey

wouldhavebeeninhadthecontractbeenfulfilledo Reliance:thismeasureaimstoputtheinnocentpartyinthepositiontheywould

havebeeninhadtheynotenteredthecontract§ Topermitrecoveryoflossesincurredduetorelianceonthecontract

o Restitution:thismeasureaimstogivebackwhattheinnocentpartytransferredtothecontractbreaker

§ Tohaveaclaimhereyouneedtoshowthreethings:anenrichment,acorrespondingdeprivation,andtheabsenceofajuristic/legalreasonjustifyingtheenrichment

Chapter2:OfferandAcceptance

INTRO

• Therulesofofferandacceptancearetoolsofanalysistoassistindefiningthe“momentofresponsibility”,ratherthanaprioristatementthatcanbeblindlyappliedinavarietyofcircumstances

• Currentcommonlawrulesonofferandacceptancearenottheonlyoptions,manyotherreasonablealternatives

• Invitationtotreat:anexpressionofwillingnesstodobusiness.Thepartydoesnotmaketheofferbutinvitestheotherpartytodoso

• Offer:anexpressionofwillingnesstocontractonspecifiedterms,madewiththeintentionthatitistobecomebindingassoonasitisacceptedbythepersontowhomitisaddressed

• Offeror:thepersonmakingtheoffer• Offeree:thepersontowhomtheofferisaddressed

CanadianDyersAssociationLtdvBurton(1920)• Facts:InMayof1918,CanadianDyersAssociation(CDA)wrotetoBurtonandaskedfor

aquoteofthelowestpriceforthepropertyon25HannaAvenue.BurtonrepliedonJune6thstatingapriceof$1650wasthelowesthewouldsellat.OnOctober16ththefollowingyeartheCDAwroteBurtonagainaskingfortheprice.October21stBurtonrespondedsayingpreviouspriceremainedthelowestoffer.CDAinterpretedthisasanofferandacceptedbysendingachequefor$500onOctober23rd.Onthe27thBurton’ssolicitorsentadraftdeed,suggestingaclosingdateofthe1st.Onthe5thofNovemberBurton’ssolicitorwrotetotheCDAstatingtherewasnocontractandreturnedthe$500

• Issue:Didthewordsandactionsofthedefendantconstituteanoffer?• Reasons:

o Merelyquotingthepricedoesnotmanifestanintentiontosello Middletonheldthattheletterwhichwasmorethanamerequotationofprice,

butratherastatementofthepriceatwhichBurtonwaswillingtosello Thisconstitutesanofferasitindicatesareadinesstosell

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o Burton’sconductafterOct.23rdsuggestedacontracthadbeenmade–hedidn’tsendoutaletterdenyingthesalebutratherwroteupadraftdeed,didatitlesearchandsuggestedaclosingdate

§ Needtobecautiouswhenconsideringconductfollowinganoffer,becausetheperson’sconductcan’t‘travelbackintime’andaffectthecontract

§ Policyrationaletolookatsubsequentconduct:couldleadtotheissueofbuyersremorsewhereadishonestpersoncouldaltertheirsubsequentconductinordertoescapetheoffer

§ Forthisreasonsubsequentconductisgenerallyirrelevant,butsomeexceptionsmade

• Holding:Heldfortheplaintiff.Burton’swordsandactionsconstitutedanoffer• Ratio:CreatedtheDyerstestforassessingcontractualintention

o Anapparentintentiontobeboundmaysufficetocreateacontract.Theallegedofferormaybeboundifhiswordsorconductaresuchtoinduceareasonablepersontobelievethatheintendedtobebound,eventhoughinfacthehasnosuchintention

o Subsequentconductisgenerallyirrelevantbecauseofpolicyrationale–couldleadtoissuesofbuyer’sremorsewhereadishonestpersoncouldaltertheirconducttoescapetheoffer

o DifferencebetweenDyerstestforanofferversusinvitationtotreat:comesdowntointention,andwhetheraproposalistobeconstruedasaninvitationtodealorasanoffer.Thisdependsonthelanguageusedandthecircumstancesoftheparticularcase

HarveyvFacey[1893]• Facts:Would-bepurchasers(theplaintiffs)sentatelegramaskingthewould-bevendors

(thedefendant)thesetwoquestions:“willyousellusBHB(thenameoftheproperty)?Telegraphyourlowestcashprice”.Thedefendantsrespondedbysaying,“LowestcashpriceforBHPis900pounds”.

• Issue:Wasthereanoffer?• Reasons:

o Faceyhadnotdirectlyansweredthefirstquestionastowhethertheywouldsellandthelowestpricestatedwasmerelyrespondingtoarequestforinformationnotanoffer

o TherewasthusnoevidenceofanintentionthatthetelegramsentbyFaceywastobeanoffer.

• Holding:ThePrivyCouncilheldthattherewasnocontractconcludedbetweentheparties

o BUTJusticeRussellcriticizedthiscase,saidthattheJCPCconstruedthetelegramsinsuchanarrowgrammaticalsensethatwassocontrarytotheirobviousmeaningandtheobviousintentionofthepartiesastoshockone’sintelligenceandone’ssenseoffairness

• Ratio:o Aquotationofpricedoesnotevidenceanindicationtosello Thiscasedefineswhenthereisanofferversusanintentiontotreat

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RULESGOVERNINGOFFERANDACCEPTANCE

A. Retailsales:TheDisplayofGoods(Boots)B. Advertisementsofrewards/advertisementsofunilateralcontracts(Carlill)C. Advertisementsofbilateralcontracts(Goldthorpe)D. Tenders(oldlawpreRonEngineering,newlawinRonEngineering)

PharmaceuticalSocietyofGreatBritainvBootsCashChemists• Facts:Defendantsoperatedaself-servicepharmacythatsolddrugsthathadsubstances

inthemthatwereinthePoisonsList.Whenthepharmacywasopenthepharmacistandotherworkerswereinthebuilding,andthepharmacistwasstationednearthepoisonssection.Asignwasclearlydisplayedshowinghisregistration,andineverycasewhereadrugwassoldthepharmacistsupervisedthetransaction

• Issue:DidthesaleofthesubstancesonthePoisonsListbyBootstranspirebyorunderthesupervisionofaregisteredpharmacistasrequiredbythePharmacyandPoisonsAct,1933?

o Thisdependsentirelyonwherethecontractwasformed• Reasons:

o Plaintiffsallegedthepurchasewascompleteonceacustomerputsanarticleintotheirbag,andthereforethecontractwascompleteatthistime,disallowingthepharmacistfrompreventingthedrugfrombeingsoldtocustomersasoccasionallyrequiredundertheAct

o Courtruledthatthecontractisnotcompleteduntilthecustomerhasindicatedtotheshopkeeperwhattheyneedandtheshopkeeperacceptstheoffer

o Ifthiswasnotthecase,thencustomerscouldbeboundtothecontractoftheobjectonceitisintheirbasket,andthencouldbeunabletosubstituteitforanotherobject

o Ifadisplayofgoodsinawindowwereanoffer,theshopkeepercouldbeforcedtocontractwithvirtuallyanyone

• Holding:Infavourofthedefendant• Ratio:establishesthegeneralrulethatadisplayofprice-markedgoodsinastore

window/onastoreshelfisnotanoffertosellatthatprice,butaninvitationtotreat

UnilateralandBilateralContracts1) Unilateralcontract:whereapartymakesanexpressengagementorundertakesa

performance,withoutreceivinginreturnanyexpressengagementorpromiseofperformancefromtheother.

a. Theessenceofthiscontractisthatneitherpartyisbounduntilthepromiseeacceptstheofferbyperformingtheproposedact

b. Consistsofapromiseforanact,theacceptanceconsistingoftheperformanceoftheactrequestedratherthanthepromisetoperformit

2) Bilateralcontract:acontractinwhichthecontractingpartiesareboundtofulfillobligationsreciprocallytowardseachother

a. Thecontractisformedbyexchangeofpromisesinwhichthepromiseofonepartyisconsiderationsupportingthepromiseoftheother,ascontrastedwithaunilateralcontractwhichisformedbytheexchangeofperformanceforanact

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• Inaunilateralcontractonlyoneparty(thepromisor)isboundtoperformbecauseonlyonepartyhasmadeapromise.Inabilateralcontractbothpartiesareboundtoperformasbothhavemadepromises

CarlillvCarbolicSmokeBallCo• Facts:thedefendantsweretheproprietorsofamedicalpreparationcalled"TheCarbolic

SmokeBall",andplacedanadvertisementinanewspaperstatingthattheywouldgivea$100rewardtoanyonewhocontractedacoldafterhavingusedthesmokeballthreetimesadayforaperiodoftwoweeks.Theplaintiffboughtthesmokeballanduseditasdirectedforthreeweeks,andthencaughtacold.Sheheldthatshewasentitledtothe$100

• Issue:IsthereacontractbetweenthepartiessuchthatMrs.Carlillisentitledtobepaid100pounds?

o Wastheadmerely“puff”?• Reasons:

o Theadwasnotaunilateraloffertoalltheworld,ratheranofferrestrictedtothosewhoacteduponthetermscontainedinthead

o Satisfyingtheconditionsforusingthesmokeballconstitutedacceptanceoftheoffer

o Useofthesmokeballandpaymentwerebothformsofconsideration(detrimentandinconveniencesustainedattherequestoftheofferor),andpeoplebuyingthesmokeballsbyrelyingontheadwasaclearbenefittothecompany

o Company’sclaimthatthemoneywasalreadyinthebankshowedtheseriousintentiontobelegallybound

o Thecompanywaiveditsrightstobenotifiedofacceptanceastheyreallyjustwanttohearfromyouonceyou’vegottensickafterusing(completingthenecessarycondition)

• Holding:Infavouroftheplaintiff• Ratio:Advertisementsofrewardsforreturnedpropertyare“invariably”treatedas

offers.Soareadvertisementsofunilateralcontractsgenerallyo Anadvertisementcanconstituteaunilateralcontract,whichcanbeaccepted

byfulfillingtheconditionsofthecontract;noformalacceptancerequiredNote:HarrierFighterJetadasanexampleofaunilateralcontract,butof“puff”

GoldthorpevLogan• Facts:Plaintiffhadhairsonherfaceandwantedthemremoved.Sawanadvertisement

bythedefendantLogan,wenttothebusinessandconsultedthedefendantFitzpatrick.Shewastoldthatherfacecouldbedefinitely"cleared"andthehairremovedpermanently,andthattheresultwasguaranteed.Sheunderwenttreatmentsbutthehairscontinuedtogrowasbefore.Sheclaimedthatthetreatmentsbyoronbehalfofthedefendantswereunskilfullyornegligentlyadministeredorshouldnothavebeenadministeredatall,andthatasaresultshesuffereddamages.Husbandalsoclaimsdamagesfromthedefendantbasedonsufferinglossandexpense.

• Issue:IsthereacontractbetweenGoldthorpeandLogan?Hasitbeenbreached?• Reasons:

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o Throughtheadvertisement,thedefendantsclearlycommunicatedwhattheresultswouldbeandwerecarelessintheirpromise–suggestednoexceptionsfortheirguarantees

§ Theadshouldbereadinplainmeaning.o Thedefendantpanderedtotheweaknessofadistressedclient;thestrong

cannotbeallowedtopreyontheweaknessofthegullibleormisguided(allusiontoinequalityofbargainingpowers)

o Itwasdeterminedthatanofferwasmadetothepublic,theplaintiffacceptedtheoffer(communicatedbyconduct),andconsiderationwasgivenintheformofdetrimentorinconveniencesustainedbytheplaintiffbyundergoingtheprocedure

o Thiswasanadforabilateralcontract,notaunilateralcontract• Holding:Judgeruledinfavouroftheplaintiff.Orderedtopaythesumofthe

treatments,aswellas$100inexpectationdamages.ActionagainstFitzpatrickandactiononbehalfofherhusbandbothdismissedwithoutcosts.

• Ratio:Advertisementsofbilateralcontractsaretypicallynotheldtobeofferssincefurtherbargainingiscontemplated

o Ifyoumakeanunqualifiedpromise,youareboundbyit(theyareenforceableevenifyoutryyourbesttodeliver)

Noteonassessingdamages:

• ThecourtshouldnothaveawardedexpectationdamagesandrestitutiondamagesinthewaythatitdidinGoldthorpe

• Whatwehavehereisdoublerecoverysinceshewasawarded$100inexpectationdamagesand$13inrestitution

• ThismeansGoldthorpeisrecoveringthe$13twice–thecourtshouldhaveeitherawarded$100astheexpectationdamagesandnothingelse,orrefundedthefeeunderrestitution($13)anddeductedthatsameamountfromtheexpectationdamages($87)

• Thisisbecausetogetthevalueofahairlessface($100),Goldthorpewouldhavehadtospend$13

RvRonEngineering&Construction(Eastern)Ltd• Facts:RonEngineeringsubmittedatenderfor$2,748,000inresponsetotheowner’s

call.Ronalsogaveadepositintheamountof$150,000.Upontheowneropeningthetenders,anemployeeofREdiscoveredthatitstenderwas$632,000lowerthatthenextlowesttenderbecausetheyhadaccidentlyomitted$750,000fromthetotalsum.REimmediatelyinformedthegov’toftheerrorandinitiallyaskedtowithdrawitstender.Gov’trefused.Nowandontheassumptionthatthebidwasanoffer,REissayingthatitstenderisincapableofbeingaccepted

• Issue:Isthereacontract?CanREgetitsmoneyback?• Reasons:

o Undertheoldlaw:§ Invitationtotenderwastheinvitationtotreat§ Submissionofthebidswastheoffer§ Choosingthebestbidwastheacceptance

o Underthenewlawcreatedhere

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§ OfferofContractAistheinvitationtotender.ThecontentofContractAcontainstherulesgoverningthebiddingprocess.Thiscontracttypicallyprovidesfortheirrevocabilityofthebidsandforfeitureofdeposit

§ SubmissionofthetenderistheacceptanceofContractAandanirrevocableoffertoenterintoContractB.ContractBcontainsthetermsofthemainagreement

o ThecontractoracceptedcontractAwhenhesubmittedhisbidinaccordancewiththeterms,anditstatesthathehasanobligationtoenterintoContractB(constructioncontract).AcceptingContractAbindsthecontractortoenterintoContractB.ThedepositwastoensurethattheperformanceofthecontractorofitsobligationsunderContractA,whichitfailedtoliveupto

• Holding:Appealallowed,ownertokeepthedeposit • Ratio:Bidsatoncebecomeirrevocableiffiledinconformitywiththetermsand

conditionsunderwhichthecallfortenderswasmade,ifsuchtermssoprovide o Inmanycasesthesubmissionofanofferinresponsetoacallfortenders

constitutesacontractseparatefromtheeventualcontractfortheconstruction Note:MistakeinRelationtotheLawofTender

• Thisisanextremelynarrowdefence–usedinRonEngineeringtoarguethattherewasnoContractAbecauseofthemistakeintender

• Ideaisthatwedon’twantpeopletobackoutofadealafterithasbeenmadebyeasilysayingthattheyhavemadeamistakesoitisn’tavaliddeal

• BUTifyouknowsomeonehasclearlymadeamistake,youcan’tsnapuptheofferyouknowisn’treallythere

• SCCsaysthatweassessthesituationwhenthetenderhasbeensubmitted.Thetenderhastoshowitselfasdeficientatthatverymoment

• Theerrorhastobesoclearthatapersonknowsimmediatelybylookingatitthatitiswrongforittofallunderthecategoryofmistake

MJBEnterprisesLtdvDefenceConstruction(1951)• Facts:MJBsubmittedatenderinthecontextofaprivilegeclausethatstated:“the

lowestoranytendershallnotnecessarilybeaccepted.”DefenceawardedthetendertothelowestbidbySorochanbutSorochan’sbidwasanon-conformingbid.MJB’sbidwasthelowestconformingbid.

• Issue:CandefencerelyonitsprivilegeclauseasdefencetoMJB’saction?• Reasons:

o TheformationofContractA,includingifitisformedatall,dependsontheintentionoftheparties.Therearespecificparametersthatshowintention(alwaysneedstobeacasebycaseanalysis)

o ItisanimpliedtermintendersthatonlycomplyingbidswillbeacceptedandthatSorochan’sbiddidn’tcomplywiththeterms,soitcan’tbeaccepted

o InacceptingthedisqualifiedbidtheownerisinabreachofContractA(outlinedin(RonEngineering)

o Althoughtheprivilegeclausedoesnotoverrulethisobligationtoonlyacceptcompliantbids,itdoesallowtheownertonotsimplyacceptthelowestbidderbecauseofthistheownerwasundernoobligationtocontractwiththeplaintiff

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• Holding:Appealallowed.ThecontractwithSorochanisnotbinding,buttherespondentdoesnothavetocontractwithMJB • Onabalanceofprobabilitiestherecordsupportstheappellant'scontentionthatas

amatteroffactitwouldhavebeenawardedtheContractBifSorochanwasdisqualified,sotheappellantisawardeddamages

• Ratio:o Aprivilegeclauseisonlycompatiblewithacceptingcompliantbidso Withaprivilegeclauseyoudonothavetoacceptthelowestbid,butyoucannot

acceptadeficientbido ThiscaseisimportantbecauseitconfirmsandclarifiesContractAandContract

B(ContractAisbilateral,notunilateral)

ACCEPTANCEOFCONTRACTS:INTRODUCTION

• Acceptanceisafinalandunqualifiedexpressionofassenttothetermsoftheoffer• Importantprinciplesregardingacceptance:

1) Ifpurportedacceptancevariedinanyrespectwiththetermsoftheoffer,thisisacounteroffer

2) AcounterofferkillstheoriginalofferperHydevWrench3) Anofferorcanrevivetherejectedoffer,includingbyimplication,suchthat

itcanbeaccepted(LivingstonevEvans)4) Asimplerejectforinformationisnotarejection(LivingstonevEvans)

LivingstonevEvans• Facts:ThedefendantEvansofferedtoselllandtotheplaintifffor$1800.Theplaintiff,

Livingstone,responded:“Sendlowestcashprice.Willgive$1600.”Thedefendantresponded:“Cannotreduceprice.”Thentheplaintiffpurportedtoaccept

• Issue:Isthisacceptanceeffective?Isthisarequestforinformationorarejection?• Reasons:

o UnderHydevWrenchacounterofferconstitutesarejection–thisisveryfirmlyestablished

o Becauseofthislongstandingprecedent,Livingstone’sfirsttelegramisacounter-offerandaninquirywouldhaveputanendtoEvan’sliabilityunder

o However,Evans’secondtelegramconstitutesarenewaloftheoriginalofferandLivingstone’sacceptancemakesitabindingcontract

• Holding:Thejudgeheldthattherewasabindingcontractforthesaleoflandandtheplaintiffisentitledtospecificperformance

• Ratio:o Themakingofacounterofferisarejectionoftheoriginaloffero Anoffercanberenewedafteracounterofferthroughambiguouslanguage

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BATTLEOFTHEFORMS• Agreementsarecommonlyenteredintobecausebetweenpartiesviastandardform

contracts.Eachpartymayhaveadocumentthatpurportstosetoutthetermsofthecontract

• Battleoftheformsdetermineswhosetermstriumph(PerDenningLJinButlerMachineToolCoLtd)TRADITIONALAPPROACH FIRSTBLOW SHOTSFIREDONBOTHSIDES

• Applythe‘mirrorimage’principleofacceptance:eachsuccessiveformisacounterofferanditispossiblethatnoconsensusiseverreachedifonlyformshavebeenexchanged

• Applythelastshotrule:ifthelastformutilizedisfollowedbyconductbytheothersidewhichamountstoacceptance,thereisacontractthetermsofwhicharecontainedonthelastform

• Thepartywho‘fires’thelastdocumentprevails

• Partyprevailswhoofferstermsfirstunlesstheothersidedrawsmaterialchangesintheirtermstotheattentionofthatfirstparty

• Thetermsandconditionsofbothpartiesaretobeconstruedtogether

• Ifthedifferencesareirreconcilablesothattheyaremutuallycontradictory,thentheconflictingtermsmayhavetobescrappedandreplacedbyareasonableimplication

• Theagreementwouldbeconstitutedbythetermsthatarecommontotheirrespectiveforms,togetherwithimpliedreasonableterms

• Virtueofthemirrorimage/lastshotrule:certainty

o Undermirrorimage,acontractonlycomesintoexistencewhentheformsexactlymatch;alternativelyandbasedonthelastshotrule,thetermsarethosecontainedinthelastdocumentprecedingperformancebytheotherside

• Problemswiththetraditionalapproach:o Whereonlyformsareexchangedtheconclusionwillbethatnocontracthas

beenformed,eventhoughthepartiesmayregardthemselvesashavingbeenboundatthetime

o Whentherehasbeendelivery,thelastshotrulecanproducearbitraryresultso Overall,thevirtueofcertaintyisattainedbyignoringrealityandmechanically

renderingformalisticdecisions

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ButlerMachineToolCovEx-Cell-OCorp(1979)• Facts:OnMay23,1969,inresponsetoaninquirybythebuyers,thesellersquoteda

priceforamachinetoolfor73pounds.Onthebackoftheirofferwasanumberoftermsandconditions,whichstipulatedthattheywereto"prevailoveranytermsandconditionsinthebuyer'sorder".Oneoftheconditionspurportedtoallowthesellertochargethebuyersthepriceforthemachineprevailingatthetimeofdelivery.Thebuyersrepliedbyplacinganorderforthepurchaseofthemachine.Theirdocumentstipulatedthattheorderwassubjecttotermsandconditionsthatdifferedfromthoseputforwardbythesellersanddidn’tmakeanyprovisionfortheincreaseinprice.Thesellerscompletedandreturnedtheformwiththeseconditions,statingthattheorderwasbeingenteredinaccordancewiththeseller'squotationfromMay23rd.Whenthesellerscametodeliverthemachinetheyclaimedtobeentitledtoadditionalmoneyunderthepriceformulaoftheiroffer.Thebuyerssaidthattheirownorderprevailedandtherewasafixedcontract

o BasicallyButler(sellerandplaintiff)saysit’sowedmoremoneyviaapriceescalationclause.Ex-CellOCorp(purchaseranddefendant)saysthatnofurthermoneyisowedbecausethepriceescalationclauseisnotpartoftheircontractofpurchaseandsale

• Issue:Whosetermstriumph?• Reasons:

o Denningsaysthatfactsarecritical–wecan’tlookatthelawinabstraction,needtolookatthelawincombinationwiththeparticularfacts

o Thelastshotmethodisusedhere.May23rdisseenasanoffer,May27ndisarejectionoftheofferandacounterofferbythebuyer.June5thcouldbeacceptanceoftheMay23rdcounteroffer,buttheyincludedacoverlettersayingtheyareenteringthebuyer’sorderinaccordancewiththeseller’squotationofMay23rd

o June5thisthedecisivedocumentasthecoverletterdoesn’tchangeanything,itagreestogothroughwiththearrangementbasedonthepurchaser’sterms

• Holding:Thecourtallowedthebuyer’sappeal.Itfoundthatthebuyer’sorderwasnotanacceptanceoftheinitialofferfromthesellerbutacounter-offer,whichthesellershadacceptedbyreturningthesignaturesectionofthebuyer’sletter.Onthisbasis,thecourtfoundthatthecontractwascompletedwithoutthepricevariationclauseandthereforethesellercouldnotincreasethecostofthetool.

• Ratio:BattleoftheformstestsbyDenning

TywoodIndustriesLtdvStAnne-NackawicPulpandPaperCoLtd• Facts:Theplaintiff(Tywood,theseller)broughtanactionforthepriceofgoodssold,

andthedefendant(St.Anne,purchaser)arguedthattheagreementofsalecontainedaclauseforsubmissiontoarbitration.Thedefendant'sinvitationtotenderdidnotcontainanarbitrationclause,andarevisedproposalwassubmittedtotheplaintiff.Whentwopurchaseordersfromthedefendantweresubmitted,anarbitrationclausewaspresent

• Issue:Underwhosetermswasthecontractformed?• Reasons:

o Judgefoundthatneitherpartyconsideredanytermsotherthanthosefoundonthefaceofthedocument(specificationsandprice)tobeimportant

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o Undertheclassicalmodel,St.Anne'scontractwouldhold.Similarlyundereitherafirstshotoralastshotmodel,St.Annewouldprevail.Grange,however,takesaninterventionisttack.Hewantstopreventinefficiencybyworkingoutwhathethinksisareasonableagreementbetweentheparties.

o Tywoodimposednon-arbitrableconditionswhentheyquotedinitialpriceandneveracknowledgedSt.Anne'sterms.Thedefendanttriedtosmuggleinarbitrationtermsanddidnotcomplainwhenthepurchaseorderswerenotreturned.

o Theconductofthepartiesindicatesbothpartieswereinterestedonlyinthespecificationsandthepriceandthatconsummationofthebusinessdealwasparamountfortheparties

• Holding:Applicationforstaydismissed,Tywood’stermsprevail• Ratio:

o Ifthereisadiscrepancy,looktotheessenceofthecontracto Onecannotsneaktermsintocontractswithoutpropernotificationo Looktoactualconductofbusiness(dopeoplereallyreadtheterms?)o Representsamoveawayfromclassicalcontractingmodeltoreasonable

contracting

ProCDvMatthewZeidenbergandSilkenMountainWebServicesInc• Facts:DefendantboughtaCD-ROMdatabasewithalicenserestriction,limitingthe

consumer-purchasertonon-commercialuse.Theexistenceofalicenserestrictionwasdeclaredbyshrinkwrappackagingbutthetermswereinsidethepackagingandnotontheoutside.DefendantignoredthelicenseandresoldtheinformationontheCDdatabase.

• Issue:IsZeidenbergboundbythetermsofthelicensewhenthetermswerenotknownatthetimeofcontract?

• Reasons:o TheUCC(uniformcommercialcode)permitspartiestostructuretheirrelations

sothatthebuyerhasachancetomakefinaldecisionafteradetailedreview.Thecustomerinspectedthepackage,triedoutthesoftware,learnedofthelicenseanddidnotrejectthegoods,whichthecustomercouldifthelicensewasunsatisfactory

o Abuyeraccepts,under2-206whenafteranopportunitytoinspectthegoods,hefailstomakeaneffectiverejection.Thus,thebuyerhadacceptedandwasboundtoabidebythelicenseashehadtheopportunitytorejectthelicense

• Holding:HeldforProCD.Thebuyermustcomplywiththelicenseterms• Ratio:Ifabuyerispresentedwithadditionaltermsandofferedtheopportunitytoreject

andreturnthegoodsandsubsequentlydoesnotrejectthegoods,thenthebuyerwillhaveacceptedthoseterms

ACCEPTANCEINUNILATERALANDBILATERALCONTRACTS

• Acceptanceisa“finalandunqualifiedexpressionofassenttothetermsofanoffer”• Unilateralcontext:acceptanceisachievedbyfullyperformingtheactorforbearance.

Thereisgenerallynoneedfortheoffereetogiveadvancenoticeoftheacceptancetoofferor

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o Whereasinabilateralcontractacceptancemustbecommunicated• Courtswillendeavortoregardthecontractasbilateralinordertoprotecttheofferee

pendingcompleteperformance(DawsonvHelicopterExplorationCo)

DawsonvHelicopterExplorationCo(1995)• Facts:In1931Dawsonhaddiscoveredandstakedamineraldepositinaremotearea.In

1951Dawsoncommunicatedseveraltimeswiththerespondentconcerningtheexploitationofhisproperty.Therespondentexpressedinterestinmakingarrangementsthenextsummertofinancethestakingoftheclaims,towhichDawsonexpressedinterest.TherespondentwantedDawsontotakehimtothepropertyandgetapilottodoso,andDawsonagainagreedandofferedtoobtainatemporaryreleasefromhisarmypositiontodoso.MonthlatertherespondentrepliedandsaidthattheunfavorableconditionsmeantDawsonshouldn'tbothmakingthetripandtomakeotherarrangements.LateranexplorationpartyoftherespondentinvestigatingtheareaandlocatedshowingsreportedbyDawsonin1931,andhemadearrangementstoenterintothedevelopmentoftheclaims.Dawsondidnotfindoutuntil1953

• Issue:Wasthereabreachofcontract?Thishingesonifthecontractwasunilateralorbilateral

• Reasons:o Springersaidhewasn’tinbreachofcontractbecausetherewasnocontractas

theMarch5thdocumentwasanofferofaunilateralcontractthatcouldonlybeacceptedbyDawsondoingthethingrequested

o Courtssaythisisn’tanofferofaunilateralcontractbecauseitdoesn’tsimplycontemplateanactdonebyDawsonandisn’tarewardsituation–bothsideshadtoundertakethingsandSpringerwassupposedtoparticipateinhisownproposal(expressobligations)

o ItwasnecessarilyimpliedthatSpringerwouldparticipate.Theofferwasunconditionalbutcontemplatedaperformancesubjecttoacondition.Whethertheprimaryobligationcomestofruitiondependsoncontingencies

o Springerwasalsoinanticipatorybreacho Demonstratestheexistenceofprimarilyandsubsidiaryobligations

• Holding:Heldfortheappellant• Ratio:Reliesonbusinessefficacytosupportthepropositionthatwheneverpossible,

courtsinterpretanofferascontemplatingabilateralratherthanunilateralagreement.Thisisdonebecauseinabilateralcontractbothpartiesareprotectedfromaperiodpriortothebeginningofperformanceoneitherside

Note:Thiscaseisalsoanexampleofaconditionalcontract

• Thisiswheretheprimaryobligations(e.g.forSpringertogive10%interestandforDawsontobringhimtothesite)aresubjecttoconditions,andthoseconditionshavetobefulfilledbeforetheprimaryobligationsaretriggered

• Therewillbeimpliedsubsidiarycontractsinthiscase–e.g.goodfaithefforts• Nostandardforwhatconstituteseffortforagoodfaithcontract,needtoapplythe

factstodeterminewhatisreasonable(casebycasebasis)• Conditionsubsequent:Aruleinacontractthatallowsinteresttobedefeatedifa

specificeventoccursordoesn’toccur

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RULESOFCOMMUNICATION(FelthousevBindley)

1) Communicationofacceptance:a. Acceptancehasnoeffect(isnotcomplete)untilitiscommunicatedtothe

offeror2) Purposeofthecommunicationrule:

a. Toprotectofferor–totheofferorknowthattheyareinacontractb. Toprotectofferee–sotheoffereedoesnothavetotakethetroubleof

rejectingeveryoffertheyreceive3) Exceptionstothegeneralrule:

a. Silenceisacceptableasameansofacceptanceinaunilateralcontractbecauseperformanceoftheconditionissufficientacceptancewithoutnotification

i. E.g.CarlillvCarbolicSmokeBallb. Iftheofferorwaivedthecommunicationrequirementinabilateralcontract,

assumingnoprejudicetotheofferee,thewaiveriseffectivei. E.g.FelthousevBindley–questionsaboutwhetherthiscaseiscorrectly

decided(Treiteldoesn’tthinkitis)c. Ifthereisconductbytheoffereethatevidencesacceptance,thismayconstitute

acceptance–seenwheretheconductinquestionplainlysignalsagreementtothetermsoftheofferor

i. E.g.Battleoftheformscaselawd. Theofferee’ssilencecanreasonablyindicateacceptancetotheofferor.

Acquiescencebytheoffereeinreceiptoftheservicespermitstheinferenceofanacceptance

i. E.g.SaintJohnTug

FelthousevBindley(1892)• Facts:Plaintiffhaddiscussedbuyingahorsefromhisnephew,butduetoa

misunderstandingtheunclethoughthehadboughtthehorsefor30pounds,andthenephewthoughtthepricewas30guineas(oneguineaworthabitmorethenonepound).TheunclewrotethenephewonJanuary2ndofferingtosplitthedifferenceandstatingthatifhedidn'thearanythingbackhewouldconsiderthehorsehisat30pounds.Thenephewdidnotreply.OnFebruary25thanauctionsalewasheldandBindley,theauctioneer,wasinstructedtoreservethehorseinquestionfromthesalebutforgottodothis,soitwassoldfor33pounds.Theunclebroughtanactionagainsttheauctioneerfortheconversionofthehorse.Attrial,thedefendantobjectedthatthepropertyinthehorsewasnotvestedintheplaintiffatthetimeofsalebythedefendant

• Issue:Didthenephewaccepthisuncle’soffer,orwasthehorsestillhisatthetimeoftheauction?

• Reasons:o WillesJsaysthattherewasnothingthathadbeendoneatthetimeofthe

actiontoimplythatthepropertyhadchangedhandstotheuncle,andthenephewhadnotgivenacceptance

o Becauseofnoacceptanceorimpliedacceptance,throughactions,thepropertyremainedthatofthenephewatthetimeoftheauctionandtheunclehasnocaseagainsttheauctioneerforconversion

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o Ifthenephewwantedtoenterintothecontractheshouldhavegivenclearindicationofhisacceptance,whichhefailedtodo

• Holding:Appealallowed.Heldinfavouroftherespondent• Ratio:Onecannotimposeanobligationonanothertorejectone'soffer

SaintJohnTugBoatCovIrvingRefineryLtd• Facts:SaintJohnTugBoathadadealwithIrvingtosupplythemtheuseoftheir

tugboatsforassistingincomingoiltankerstotheirshipyard.However,withnofirmarrangementshavingbeenmade,SaintJohntoldIrvingthattheycouldusetheirtwotugboatsiftheypaid$450/daytohavethem"oncall"untilacertaindate.Thisdatepassed,andSaintJohncontinuedtokeepthetugsoncallandIrvingcontinuedtousethemforafewmonths.Whenbilledforthesemonthsaftertheoriginalendofthecontract,Irvingrefusedtopay.SaintJohnsuedforpayment

• Issue:Didthedefendant’scourseofconductduringthemonthsinquestionconstituteacceptanceoftheofferstogiverisetoabindingcontractforthe“standby”servicesofthetug?

• Reasons:o Aftertheoriginaldeadlinepassed,SaintJohnwereessentiallyservingIrvinga

newoffereverytimetheysentthemaninvoiceandkeptthetugsoncall,andthatIrvingcontinuedtoimplyacceptancebytheircontinuationofusingtheservice

o Irvingmusthaveknownthatthetugwasstillstandingby,andthatSaintJohnexpectedtobepaidfortheirservices

• Holding:Heldfortheappellant• Ratio:

o Silencecanconstituteacceptancewhencombinedwithconducto Ifapartyallowsanotherpartytoworkforthemundersuchcircumstances

thatnoreasonablepersonwouldsupposetheworkwasbeingdonefornothing,thenthefirstpartywillbeliabletopayforit

o Thedoingoftheworkistheoffer,thepermissiontodoitortheacquiescenceofitsbeingdoneistheacceptance

EliasonvHenshaw(1819)• Facts:OnFebruary10th,1813,aletterfromEliasontoHenshawwassent,offeringto

purchaseflourfromthematGeorgetownatapriceof9dollarsand50centsabarrelsenttoHarper'sFerry.Theyaskedforananswerbythereturnofthewagon.TheletterwasdeliveredonFebruary14th,butthewagonersaidhewouldnotbereturningtoHarper'sFerry,sotheydespatchedananswerbymailthatleftonthe19thtoGeorgetown.InthisletterHenshawacceptstheofferattheearliestopportunity.Onthe25thofFebruaryEliasonwritesanotherletterstatingthatsincetheydidnothearearlierandhadexpectedaletterthenextday,theynolongerrequiretheflour.Henshawsuedfornon-performance

• Issue:Wasavalidcontractformed(offeracceptedattherightplaceandtime)?• Reasons:

1. Thecontractwasnoacceptedwithinthepropertime(notsentbackbythewagon)2. Thecontractwasnotacceptedintherightplace(acceptanceshouldhavebeensent

backtoHarper'sFerry,nottoGeorgetown)

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3. Thecontractwasnotacceptedintherightmanner(shouldhavebeensentbywagon,buttheysentbymail)

• Holding:judgeholdsthatitwasperfectlyreasonableforEliasontodictatethetermsofthecontractassuch,findsthatnocontractwascreatedsothereisnobreachofcontract

• Ratio:Offereemustfollowthetermsoftheofferor(time/place/mannerofacceptance)foranacceptancetobevalidandbinding

Note:Commonlawruleversusconsumerprotectionlegislation• Weatherby(1832):Jamwassentundercircumstancesshowingthattheofferoraccepted

tobepaid.Ifyoueatthejamyouhavetopayforit(tookthebenefitoftheservice),sounderthisruletheofferorcanrecoverthepriceofthejam.Thisisthecommonlawruleo Underconsumerprotectionlegislation-saysthatyouaren'tliabletopayforgoods

andservicesinthesecircumstances.Goestotheideathatyou'redeliveredsomethingthatyou'llhaveadealunlessyouletthemknowtothecontrary• Essentiallyreversesthecommonlawrule

MAILEDACCEPTANCES

HouseholdFireandCarriageAccidentInsuranceCo.vGrant(1879)• Facts:GranthadnegotiatedtopurchasesharesinHouseholdFire.Hisapplicationwas

accepted,andhisnamewasaddedtothelistofregisteredshareholders.However,theletterinformingtheappellantofthisneverreachedhimandthusGrantneverpaidfortheshares.Hisearningsfromdividendswerecreditedtohisaccount.EventuallyHouseholdFirewentintoliquidationandtheliquidatorappliedformoneyfromtheappellant.Herefusedtopayonthegroundsthathewasnotashareholder–hehadneverreceivedthenotificationinthemailandwasnotaware

• Issue:Whendoacceptancesbecomebindingwhentheyaresentbymail?• Reasons:

o Acontractbecomesbindingwhentheofferissentthroughthepost,thepostofficeisseenastheagent

o BUTanofferorcanalwaysmakeacontractwhereactualcommunicationtothemselvesisnecessaryforthecontracttobeformed

o Iftheruleweren’tthisway,itwouldopenthedoorstofraudanddelaycommercialtransactions.Theacceptorwouldneverbesafeinactingontheacceptanceuntilhehadreceivednoticethattheletterofacceptancehadreacheditsfulldestination

• Holding:Heldfortheappellant• Ratio:Thepostalrule–contractbecomesbindingwhentheletterofacceptanceis

posted(thisdoesNOTapplytorejections)Note:Deviationstothepostalrule

• Criticismofthepostalrule–seenasarbitrary,favourstheofferee• Thepostalruleonlyappliesifitisreasonabletousethepost• Itcanbeexcludedbythetermsoftheoffer(HowellSecuritiesvHughes)• Theruledoesnotapplyifitwouldproduceaninconvenienceandabsurdity(Howell

SecuritiesvHughes)

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Note:Deviationstoacceptances• Iftheofferorhasspecifiedthemannerofacceptance,theycanwaiveitthemselves

(can’twaivetherightsofothers,butcanwaiveyourownrights)• Iftheofferwasacceptedbymeansseenasanimprovementtothemethodof

acceptance,thisstilldoesn’tmatter.Offerorcanchoosetowaivethis,butsafestthingistoacceptexactlyastold

HowellSecuritiesLtdvHughes• Facts:HughesgrantedHolwellasix-monthoptiontopurchaseaproperty,andstated

thattheoptionhadtobeexercised"bynoticeinwriting".Beforethesixmonthswereup,Holwell'slawyerwrotetoHughes'lawyerstatingthathisclientwasexercisinghisoption.Theletteralsoincludedachequeforthedeposit,whichwasnotaccepted.Holwell'slawyersentacopyofthelettertoHughesbymail,butitwasneverdelivered.HughesrefusedtosellthepropertyandHolwellsuedforbreach

• Issue:Doesthepostalrulealwaysapply?• Reasons:

o Thepostalruledoesnotalwaysapplywhentheexpresstermsoftheofferspecifythattheacceptancemustreachtheofferor

o Italsogenerallydoesn’toperateifitsapplicationwouldproducemanifestinconvenienceandabsurdity

o Thefactthatthewords“noticeinwriting”wereincludedmeantthatHughesrequiredactualnoticeinwriting

o Stillneedthegeneralelementsofacontract(communication)• Holding:Heldfortherespondent• Ratio:Thepostalruledoesnotapplywhenthetermsofacontractpointtothe

necessityofactualcommunication,evenifthepostisthedesiredmediumofcommunication

o Thiscasedemonstratesawaytogetaroundthepostalruleo Rememberthattheonusfallsontheofferortomakesurethepostalrule

doesn’tapply,otherwiseitappliesbydefault

INSTANTANEOUSMETHODSOFCOMMUNICATION

BrinkibonLtdvStahagStahlundStahlwarenhandelsgesellschaftmbH• Facts:BrinkibonwasaLondoncompanythatboughtsteelfromStahag,asellerbasedin

Austria.BrinkibonsenttheiracceptancetoaStahagofferbyTelextoVienna.BrinkibonlaterwantedtoissueawritagainstStahagandappliedtoserveanoutofjurisdictionparty.TheywouldonlybeabletodosoifthecontracthadbeenformedinEngland.

• Issue:Inwhatjurisdictionwasthecontractformed?• Reasons:

o ThiscasefollowsthesimilarcaseofEntoresLtd.vMilesFarEastCorp.whichfoundthatincasesofinstantaneouscommunication,thecontractisonlycompletewhentheacceptanceisreceivedbytheofferor,andthecontractismadeattheplacewheretheacceptanceisreceived

o InthiscasetheacceptancewasdeliveredtotheofferorinVienna,thusAustriahasjurisdictionovertheissue

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o Nouniversalruleofacceptancecancoverallcasesofinstantaneouscommunication–theymustberesolvedwithreferencestotheintentionsoftheparties,andthespecificcircumstancesofthecase

• Holding:Appealdismissed• Ratio:Instantaneouscommunicationrule–formationgenerallyoccursintheplace

whereacceptanceisreceived(notnecessarilyauniversalrule)

RuddervMicrosoftCorp• Facts:Plaintiffsbroughtaclassactionforbreachofcontract,fiduciaryduty,

misappropriationandpunitivedamages,allegingthatMicrosofthaschargedmembersofMSNandtakenpaymentfromtheircreditcardsinbreachofcontractandthatMicrosofthasfailedtoprovidereasonableoraccurateinformationregardingaccounts.TheMemberAgreementcontainstheprovisionthatitisgovernedunderthelawsofWashington,andthatthisisthevenueforanydisputearisingfromMSN-thedefendantMicrosoftreliesonthisclausetosupportitsassertionthattheintendedclassproceedingshouldbepermanentlystayed

• Issue:Istheforumselectionclausepartofthecontractandthereforeenforceable?• Reasons:

o Forumselectionclausesshouldbetreatedthesamewayasarbitrationagreements(deferencetoarbitrationagreements-greatercommercialcertainty)

o Plaintiff'ssubmissionthattheforminwhichtheMemberAgreementisprovidedobscurestheforumselectionclause,buttheCourtholdsthatthereisnofineprintaswouldbedefinedinawrittendocument

• Holding:Heldfortherespondent.• Ratio:

o Click-wrapagreementsarevalid.Tonotgivethemeffectwouldleadtocommercialuncertaintyandunderminetheintegrityofanyagreemententeredintothroughthismedium

o Theonusisontheplaintifftoshowstrongcausetooverrideatermofexclusivejurisdiction.Inabsenceofastrongcause,anexclusivejurisdictiontermwillbeenforcedforthebenefitofcommercialcertainty

Note:InstantaneousMethodsofCommunication• Thepostalruledoesnotapplytoacceptancesmadebysomeinstantaneousmodesof

communication(e.g.telephoneortelex).Theseacceptancesaregovernedbythegeneralrulethattheymusthavebeencommunicatedtotheofferor

• Thereasonwhythepostalruledoesn’tapplyisthattheacceptorwilloftenknowatoncethathisattempttocommunicatewasunsuccessful,sothatisuptohimtomakeapropercommunication,butapersonwhoacceptsbyletterwhichgoesastraymightnotknowofthelossuntilitstoolatetomakeanothercommunication

• Forsomethinglikeemail,theeffectsofunsuccessfulattemptstocommunicateshoulddependonwhetherthesenderofthemessageknows(orhasthemeansofknowing)atonceofanyfailureincommunication

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TERMINATIONOFANOFFER1) Anofferisterminatedbywithdrawal/revocation2) Anoffercanberevokedatanytimebeforeitisaccepted(Byrne)3) Asageneralrule,revocationhastobecommunicatedtotheofferee

TERMINATIONBYREVOCATION

DicksonvDodds[1876]• Facts:Doddsmakesawrittenoffertosellproperty,sayshewillkeepitopenuntilFriday.

DickinsonhearsfromhisfriendthatDoddshasbeenofferingtosellthepropertytoothers,soDickinsondelivershisacceptancetoDodd'srelativethatday,whoforgetstogiveittoDodds.OnFridaytheplaintiff'sagentfoundDoddsandgavehimaduplicateoftheacceptance,butDoddshadalreadysoldtheproperty

• Issue:IsDoddsinbreachofcontract?• Reasons:

o Allwehaveisafirmoffer,noconsiderationtoholdtheofferopen(foranopenpromisetobeenforceableweneedanoptioncontract)

o Cannotacceptanofferyouknowisn’topenanymore.TheCourtsaysthatyoudon’thavetoheardirectlyfromtheofferor,itisenoughthatwithdrawaloftheofferhasbeenbroughtup

o ALTHOUGH,Treiteliscriticalbecauseitcreatesuncertainty.Ifyouhearfromtheofferorthattheofferisrevoked,thenthatmakessense.Butwhatthecourtisimplyinghereisessentiallyjustsometalkthatapersoncouldhearissufficient.Treitelsaysthattheruleisthatyouhavetohearfromareliablethirdpartysource

• Ratio:o Revocationfromareliablethirdpartysourceiseffective.Butrevocationhas

tobecommunicatedo Anoffertosellpropertymaybewithdrawnbeforeacceptancewithoutany

formalnoticetowhomtheofferismade

ByrnevVanTienhoven[1880]• Facts:OnOctober1stthedefendantsmailedanoffertosell1000boxesoftinplatesto

theplaintiffsatafixedprice.TheofferwasreceivedonOctober11thandtheplaintiffsimmediatelyacceptedbytelegramonthe11thandbyletteronthe15th.OnOctober8ththedefendantmailedarevocationoftheoffer,whichwasreceivedonOctober20th.Theplaintiffshadalreadyresoldthetinplatesontheassumptionthattheyhadpurchasedthem.Theybroughtanactionforbreachofcontractandforfailuretodeliver

• Issues:o Whetherawithdrawalofanofferhasanyeffectuntilitiscommunicatedtothe

persontowhomtheofferissento Whetherpostingaletterofwithdrawalisacommunicationtowhomtheletter

issent• Reasons:

o ThewithdrawalbythedefendantsonOctober8thoftheirofferonthe1stisinoperativeandacompletebindingcontractwasenteredintoonthe11th,whentheplaintiffsacceptedtheofferofthe1st

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o Ifthedefendant'sopinionwascorrect,thennopersonwhohadeverreceivedanofferbypostandhadaccepteditwouldknowtheirpositionuntiltheywaitedforsometimetomakesurethataletterwithdrawingtheofferhadn'tbeensent(commercialinconvenience)

• Holding:Heldfortheplaintiff• Ratio:Anofferisonlyrevokedbycommunicationwiththeofferee,andthepostalrule

doesnotapplyinrevocation;whilesimplypostingalettercountsasavalidacceptance,itdoesnotcountasvalidrevocation

ErringtonvErringtonandWoods[1952]• Facts:Thefatherboughtahouseforhissonanddaughterinlawunderhisnameand

paidpartofitincash,butfortheresttookoutaloanthathadtoberepaidwithinterest.Hetoldthedaughterinlawthatifshecontinuedtopaythemortgagepayments,onceitwasfullypaidoffthehousewouldbelongtoherandtheson.Althoughshehadcontinuedtorepaytheloanstohim,hediedbeforeitwaspaidoff

• Issue:Cantheofferbeterminatedeventhoughperformancehasalreadybegun?• Reasons:

o Thefather’spromisewasaunilateralcontract(hemadeacollateralundertaking)

o Thepromisecouldnotberevokedoncethecoupleenteredonperformanceoftheact,althoughitwouldceasetobindhimiftheyleftitincompleteandunperformed

o Thefatherexpresslypromisedthatthepropertywouldbelongtothemwhenthemortgagewaspaid,andimpliedlypromisedthataslongastheypaidtheinstallmentstheywouldbeallowedtoremaininpossession(theyactedonthispromisesonoonecandisregardthemfromit)

• Holding:Appealdismissed,noorderforpossessionmade• Ratio:Onceperformancehasbegun,theoffercannotbeterminated.Theamountof

performancecompletedisirrelevantaslongasithasbeenstarted

TERMINATIONBYLAPSE

BarrickvClark[1951]• Facts:Facts:BarrickownedfarmlandthatClarkwantedtobuy.Theyenteredinto

negotiations,whichresultedinClarkmakinganofferof$14,500.Barrickwrotebackstatingthatthepricewas$15,000andifthepricewassatisfactorythedealcouldbeclosedimmediately.AtthistimeClarkwasawayonahuntingtrip.HiswifereceivedtheletterandrespondedaskingBarricktoholdtheofferopenuntilherhusbandreturnedinaroundtendays.Barrickdidnotreply.Thirteendayslater,Barricksoldthepropertytosomeoneelsefor$15,000.Clarkdidnotreturnuntiltwentydaysafterhiswifereceivedtheoffer.ClarksoughtspecificperformanceoftheallegedcontractbetweenhimandBarrick

• Issue:Whatisthereasonabletimeanoffermustbeleftopenforbeforeitlapses?• Reasons:

o Thereasonabletimethatthisspecificoffermustbeleftopenforislongerthanforgoodsthatfluctuateinprice(stocks)orforperishablegoods.Thefieldscouldnotbeuseduntilspringanyways

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o AlthoughhisactionsandinsistenceonreplyingtoBarrick'slettersbywire,Clarkindicatedthathedidnothaveaspringdateinmindbutwantedtogetthesaledone,orgotopursueotheroptions.BarrickalsodidnotrespondtoClark'sletter,sohewasnotboundtoanyparticularperiodofoffer

o Leavingtheofferopenfor13dayswasreasonable,asClarkhadindicatedthathewantedtoacceptandclosethesaleassoonaspossible.Whatthewifesaidwasirrelevant,asitisuptotheofferor

o Kellock,inaconcurringjudgment,discussedhowmuchoftheCourtofAppeal'sreasoningwasbasedoffclaimsthatBarrickmadeconcerninghisintenttosellassoonaspossibleoutsidehiscommunicationwithClark.TheofferbyBarrickwasclearthatitshouldbedealtwithswiftly,sothetimeframewasvalid.Healsostatedthatsincethepurchase-pricewasagreedtobepaidonJanuary1st,onlygiving2weeksinterveningbetweenthereceiptofacceptanceandthisdatewasentirelyunreasonable

• Holding:Appealallowed• Ratio:

o Thereasonabletimetoacceptanoffercanbedeterminedfromtheconductandlanguageofthetwoparties,thenatureofthegoodsandsubjectmatter,themeanstocommunicatetheoffer,andotherreasonableindications

o Lapseofanoffercanoccurafterareasonableamountoftimehaspassed,undertherightconditions,withoutnoticetotheofferor

ChapterThree:CertaintyofTerms

• Generalstatementoflaw:Anagreementisnotabindingcontractifitlackscertainty,eitherbecauseitistoovagueorbecauseitisobviouslyincomplete

• Althoughpartiesmayhavereachedagreementinthesensethattheyrequirementsofanofferandacceptancehavebeencompliedwith,theremightnotbeacontractyetbecausethetermsoftheagreementareuncertainorbecausetheagreementisqualifiedbyreferencetotheneedforafutureagreementbetweenthem

• Twocompetingpropositions:1. Courtswillnotmakeanagreementfortheparties2. Thatiscertainwhichiscapableofbeingrenderedcertain

• Mainquestion:ifthepartieshaveconsensusadidem–trytofigureoutifthepartiesaretrulyinagreement(shareaunambiguousunderstandingoftheirrespectiverightsandobligations)

VAGUENESS

• Generalstatementoflaw:Wherethecourtscannotdetermineonwhattermsthepartieshavepurportedlycontractedduetovagueness,theagreementisunenforceable.Thatsaid,courtsdonotexpectcommercialdocumentstobedraftedwithprecisionandwill(particularlyifthepartieshaveactedonanagreement)dotheirbesttoavoidstrikingitdownonthegroundsthatitistoovague

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• RvCAEIndustriesLtd:Ifpartieshaveexpressedthemselvesinlanguagesufficientlyclearsoastohavecreatedrightsandobligations,thecourtwillenforcethecontractespeciallywhereithasbeenpartlyperformed

• Hillas&CovArcosLtd:Vaguewordsorphrasescanbeinterpretedinlightofwhatisreasonable

RvCaeIndustriesLtd(1986)• Facts:CAEIndustrieswishedtotakeoverandrunanaircraftmaintenancebaseno

longerrequiredbyAirCanadaandtheGov’tofCanada.Anagreementwasmadewhichcontainedmanyvaguestatements,butessentiallystatesthatalthoughthebaseusuallygenerated700thousandmanhoursperannum,theGovernmentcouldnotcommittoguaranteeingmorethan40-50thousand–althoughtheycouldusetheir“bestefforts”toincreasethisnumber.Thecontractwasformed,butthehoursfellbelow40thousandandCAEsuedforbreach.TheyweresuccessfulattrialCrownappealed.

• Issue:Wasacontractintended?Ifso,wasitbreached?• Reasons:

o Stone,writingforthemajority,determinedthatthepartiesdefinitelyintendedtoenterintoacontract–particularlybecausetheyactedasiftheydiduntiltherespondentbroughtthisaction(partperformanceasperFoley)

o TheonusisontheCrowntoprovethatthepartiesdidnotintendtoenterintoacontractandtheyfailedtoprovethis.Stonethenscrutinizedallofthe"uncertain"clausescitedbytheCrownanddeterminedthatnoneofthemaresovagueastorendernomeaningtothecontract

o Hestatedthatinbusinessrelationshipsthecourtsmustmakeeveryefforttointerpretvaguetermsanddeterminetheirintendedmeaningatthetimethecontractwasformed.HedeterminedthattheCrownguaranteedacertainamountofwork,andthiswasnotprovided;therefore,theCrownbreachedthecontract.

• Holding:Appealdismissed• Ratio:Inbusinessrelationships,thecourtswillmakeeveryefforttoapplydefinite

meaningtovaguetermsinacontractsoasnottorenderitunenforceable;thisisespeciallytrueifitisobviousthatthepartiesintendedtoenterintoabindingrelationship,oriftherewaspartperformance

Note:lettersofcomfortareoftenusedincommercialloantransactions-theselettersstatethattheparentcompanyisawareoftheloanprovidedandgivesassurancesofthecontinuingfinancialinvolvement.Oftenraisequestionsofwhetherthewriterintendstocreateacontract,butinaSCCcaseitwasconcludedthatthelackofpreciselanguageindicatedthattherewasnocontractualeffect

INCOMPLETETERMS

• Partiestoanagreementmaybereluctanttocommitthemselvestoarigidlong-termagreement(particularlywhenpricesaffectingperformancearelikelytofluctuate).Theyattempttointroduceanelementofflexibilityintotheagreement

• ThelinebetweendiscoveringanagreementofthepartiesandimposinganagreementonthebasisofwhattheCourtconsidersoughttohaveintendedcanbefine–court

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mustbesatisfiedthatthepartieshaveactuallyconcludedacontract,notjustexpressedwillingnesstocontractinthefuture

o Mayhaveregardtowhathasbeensaidanddone,thecontextinwhichitwassaidanddone,therelativeimportantoftheunsettledmatter,andwhetherthepartieshaveprovidedmachineryforsettlingit

1. Criteriaormachineryspecifiedintheagreement

a. Criteriaspecifiedintheagreement:i. Anagreementmayfailtospecifymatterssuchaspriceorquality,but

laydowncriteriafordeterminingthosemattersii. Example:inHillasanoptiontobuytimberwasbindingeventhoughit

didn’tspecifytheprice,sinceitprovidedforthepricetobecalculatedbyreferencetotheofficialpricelist

b. Machineryspecifiedintheagreement:i. Theagreementmayprovidemachineryforresolvingmattersoriginally

leftopenii. SudbrookTradingvEggleton:Leasegavetenanttheoptiontopurchase

theproperty“atsuchapriceasmaybeagreeduponbytwovaluers,onenominatedbyeachparty”.Themechanismfailedbecausethelessorrefusedtoappointavaluer

iii. Issue:whetherthepricemechanismisanessentialterm(todistinguishfromMay)Ifitisn’tanareasonablenessstandardisconsistentwiththeparties’intent,thecourtcansettheprice

iv. Thevaluer’sclauseamountstoanagreementtosellatareasonablepricetobedeterminedbythevaluers.Thestipulationthateachpartyshouldnominateoneofthevaluerswasmerelysubsidiaryandinessential

v. Theagreementofafairanreasonablepriceismoreimportantthanthemachinerytogetthere

2. Terms“tobeagreed”a. MayvButcher:agreementstoagreearenotenforceableb. FoleyvClassiqueCoach:Oneofthemechanismsherehadbrokendownbut

Maywasdistinguishedi. Indefaultofanagreement,areasonablepricemustbepaidii. Thecourtappearstobesayingthatthepresenceofanarbitration

clauseonthesefactsmeansthatitistobeimpliedinthiscontractatermthatthepetrolshallbesuppliedatareasonablepriceandshallbeofreasonablequality

3. Agreementstonegotiatea. EmpressTowersb. MannparEnterprises:whererenewalclauseistoobroadlyworded,itfails

becausethereisnoobjectivemeasure.Allwehaveisanagreementtoagreewhichisvoid

c. MannparinterpretsEmpresstosaythatthereisadutytonegotiateingoodfaithif:

i. Thereisacontractbetweenthepartiesii. Adutytonegotiateingoodfaithisconsistentwiththeparties’intent

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iii. Thereisanobjectivebenchmarkagainstwhichthecourtcanassesswhetherthepartyinquestionisinbreachornot

May&ButcherLtdvR(1934)• Facts:ArrangementwithasupplierandtheDisposalsBoardforthepurchaseofsurplus

"tentage".Thetermsofthearrangementdidnotspecifythepricestobepaid,thedatesonwhichpaymentistobemade,thequantitiestobesold,orwhendeliverywouldtakeplace

• Issue:Wasacontractformeddespitethelackofincompleteterms?• Reasons:

o Itwasimpossibletoagreetotheprices,sowecan'tholdtheCrownliableforacontractatareasonablepriceorforthearbitrationclauseinthecontractthatwasintendedtogarnerareasonableprice

o Therewasneveraconcludedcontractbytheparties-ifacriticalpartofthematterisleftundeterminedthereisnocontractatall

o Thereisnothinginthearbitrationclausethatenablesacontracttobemadeo Partiesnotentitledtoanofferforfurtherparcelsbecausetheagreementisnot

binding,andthepaymentofthedepositwasnotfortheappellantstohavetherighttothis

• Holding:Appealdismissed• Ratio:Anagreementtoagreeisnotacontract.Acourtcannotreadtermsintoan

impliedcontracto Anagreementbetweentwopartiestoenterintoanagreementinwhichsome

criticalpartofthecontractmatterisleftundeterminedisnocontractatall

Hillas&CovArcosLtd(1932)• Facts:Hillas,anEnglishtimberfirm,broughtanactionagainstAcros,thebusiness

representativesfortheRussiangovernment,forbreachofcontracttosupply100000standardsofRussiantimberduring1931.Underanagreementin1930onwhichtheactionwasbased,Hillashadagreedtobuy22000standardsoftimberandthepricetobepaidwasdeterminedinaccordancewiththeseller'snew"revisedschedule",includingastipulationforreductionofthepriceintheeventthatthesellerspriceswerereducedduring1930.Clause9heldthatthebuyersshallobtainthegoodsonconditionsandatpriceswhichgivethemareductionof5%againstcompetingbuyers.Afterthisagreementwasconcluded,AcrosenteredintoacontractwithCentralSoftwoodBuyingCorporationLimitedforthesaleofitsentiretimberproductionforthe1931season.AcrosclaimedtheagreementhadbeencancelledwithHillaspurportedtoexercisetheoptiongrantedbyclause9

• Issue:Wastheoptionprovisionabindingagreementforthepurchaseoftimber?• Reasons:

o Itisthedutyofthecourtstoconstrueacontractfairlyandbroadly,butthisdoesn'tmeanthecourtshouldmakeacontractforthepartiesorgooutsidewordsused

o Thepartiesheredon'tfixprecisedatesfortheshipments,butthecourtholdsthatthisisokaybecauseifdifferencesemergeduringconsultation,thestandardofwhatisreasonablecanbeappliedbythelawasalastresort

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o Thisisnotacontracttoenterintoacontract-inlawthisdoesn'texist,thereiseitheranenforceablecontractornocontract.Clause9simplymeansthattheappellantshadtheoptionofacceptinganofferinthoseterms

o Theonlythingthathadtobenegotiatedwastheprice,butthiswasbecausepriceschangeyearly.Inhisjudgment,Wrightsaysthat"wordsaretobeinterpretedsothatsubjectmatterispreservednotdestroyed",alegalrealistpositionfocusingontheintentionoftheparties.

• Holding:Appealallowed.Abindingcontractexists• Ratio:

o Acontracttonegotiateisenforceableo Thecourtsshouldintervenetodeterminethetermsofanagreementthrough

contextandintentionalityofthepartieso ThisdepartsfromthepreviousdecisioninMaywherethecourtheldthat

missingtermsresultinacontractnotbeingcreated

FoleyvClassiqueCoachesLtd(1934)• Facts:Thedefendantsoperatedafleetofmotorvehicles.Theyagreedtopurchasea

pieceoflandfromtheplaintiffs,whooperatedaservicestationonadjacentpremises.Thesalewasmadesubjecttothedefendantsenteringasupplementalagreementtobuyallofthepetrolrequiredfortheirbusinessfromtheplaintiffatapricetobeagreedbythepartiesinwritingandfromtimetotime.Thisagreementincludedanarbitrationclause.Later,theplaintiffsthoughttheycouldpurchasetheirsuppliesforacheaperpriceelsewheresotheyattemptedtodisputetheagreement.Theplaintiffssoughtadeclarationthattheagreementwasbinding

• Issue:Wasthisagreementbindingdespitelackinganagreeduponprice?• Reasons:

o Significantdifferenceinthetwocasesprior.InMayitwasdeterminedthatanagreementbetweentwopartiestoenterintoanagreementinwhichsomecriticalpartofthecontractmatterisleftundeterminedisnocontractatall,butinHillasitwasheldthattherewasacontractdespitemissingterms

o Inthiscasethepartiesbelievedthattherewasacontractbecausetheyactedonitforthreeyears.Theyalsohadanarbitrationclausethatrelatedtothesupplyofpetrol

o Thereisanimpliedterminthecontractthatpetrolshouldbesuppliedatareasonableprice

• Holding:Appealfails.Therewasaneffectiveandenforceablecontractdespitenodefinitepriceagreedupon

• Ratio:Pastperformancewillindicatethatacontractisbinding(relianceinterest)

AGREEMENTSTONEGOTIATE

• Conceptualandpolicyreasonsforconcludingthatpartiestoanagreementwhohaveonlyagreedtoagreearen'tinacontract:

o Ifthereisnobasistodeterminethepriceforgoodstobepaidinthefuture,thejudicialdeterminationofapriceatwhichtheintendedbuyerisobligedto

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purchasemaywellimposeonthatpartyariskthattheydidnotandwouldnothavevoluntarilyassumed

• However,abindingpromisetonegotiateisoftenofrealpracticalvaluebecauseitsfulfilmentoffersagreaterlikelihoodthatpartiescompleteatransaction

• Adistinctionmaybedrawnbetweenanagreementtoperformatransactiononunspecifiedtermsorontermstobeagreed,andanagreementtonegotiateinanendeavourtoarriveaytermspursuanttowhichtransactionwillbeperformed

o Inthefirstcasethesubjectoftheagreementisthetransactionitselfo Inthesecond,thesubjectoftheagreementistheprocessbywhichitishopeda

transactionwillbeconcluded• Primaryobjectionsagainsttheviewthatanexpressorimplicitagreementtonegotiate

mayinitselfconstituteacontract:o Itisimpossibletodeterminethecontentofadutytonegotiateo Thereisnobasisuponwhichtodeterminedamagesforbreachofsuchaduty

EmpressTowersLtdvBankofNovaScotia(1991)• Facts:ETandBNShadatwelve-yearleaseagreementwhichwasabouttoexpire.The

agreementstatedthatthepriceofrentforarenewedcontractwouldbetheprevailingmarketrate,conditionalonthe“mutualagreement”oflandlordandtenant,andthatintheabsenceofagreement,thecontractcouldbeterminatedbyeitherparty.AnemployeeofEThadbeenrobbedinabranchofBNSof$30,000andET’sinsurancehadpaidonly$15,000.ThisrobberywasnofaultofBNS.Duringnegotiations,ETdemanded$15,000cashandtherighttocancelBNSleasewith90daysnotice(whichisunreasonable).BNSrefused.ETbroughtapetitionforwritofpossessionagainstBNSforitsofficespace.Thiswasallattheendofthelease,withlittleresponsefromETtoBNS’sreasonablerentoffers

• Issues:o Wastherenewalclausevalidorvoidforuncertainty?o Diditcontainanimplicitobligationtobargainingoodfaith?

• Reasons:o Lambert,writingforthemajority,heldthereweretwocoursesofaction:

§ FollowMayvButcher-iftherearethingstobeagreeduponthenthenthereisnocontract;or

§ FollowHillas-thecourtsshouldstrivetofindmeaningifthereisanagreementbetweenparties

o Heheldthattherewere3approachesfordeterminingrent:§ Renttobeagreed(cannotbeenforced)§ Renttobeestablishedbyaformula,butnomachinerytodoso(courts

willgenerallysupplymachinery)§ Aformulaisgivenbutitisdefective(courtswillcurethedefect)

o Heinterpretsthesectionoftheclauserequiringthepartiestoagreeontherenttomean:

§ Empresscouldnotbecompelledtoenterintoamarketrentalvalue;§ Therewasanimpliedtermthatthelandlordnegotiatedingoodfaith;

and§ Anagreementonthemarketratewouldnotbeunreasonablywithheld

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o Implyingthesetermswasacceptableforreasonabilityandforreasonsofbusinessefficacy.Intheevidenceadduce,Empresshadnonegotiatedingoodfaithbyaddingthe$15000"penalty"

• Holding:Theclausewasvalid.Itdidcontainanimplicitobligationtobargainingoodfaith

• Ratio:Thecourtswilltry,wheneverpossible,togivetheproperlegaleffecttoanyclausethatthepartiesunderstoodandintendedwastohavelegaleffect.”o Thiscaseisspecialbecauseitdoesnotimplyathirdpartytodeterminemarketrate

upondisagreementoftheparties,explicitlycallsongoodfaithofparties.Notthesameassayingthatiftheyareundecided,tothecourtstodecide.Here,ifthecourtweretointervene,wouldgoagainstthewillofthepartiesexpressedintheK,whichexcludedinterventionofthecourts.Troublesomebecauseusuallywhenacontractdoesnothavesetprice,itisnotenforceable

MannparEnterprisesLtdvCanada(1999)• Facts:MannparenteredanagreementwiththeCrowntoextractsandandgravelfrom

anaboriginalreserve.Thecontractwastolastfiveyearswithanoptiontorenewforanotherfiveyearssubjecttosatisfactoryperformanceamongstotherthings.Evidenceindicatesthatbothpartiesexpectedtheprojecttolasttenyears.TheCrownfailedtorenewthecontract,andMannpartookthepositionthattheywererepudiatingtheirobligationtorenew.Mannparlaunchedanactionseekingdamages

• Issue:DidtheCrownhaveanobligationtonegotiateingoodfaith?• Reasons:

o ThelanguageintherenewalclauseallowedtheCrownconsiderableflexibility.Therewasnothingintheclausetosuggestanenforceableagreement,rather,itconveyedonlyanoptiontorenegotiateiftheCrownwantedto.Giventheirdutytotheaboriginalband,itwouldhavebeenrecklessnottopreservesuchflexibility

o ThecourtdistinguishedthiscasefromEmpressTowersvBankofNovaSoctiabecause,here,therewasnomarketvaluethatcouldbeassigned.Withoutsuchanobjectivebenchmark,thecontractisunworkable.Furthermore,therewasnoarbitrationclauseinthecontract,suggestingthattheCrownintentionallyleftitoutbecausetheydidnotwanttobeboundfortenyears

o Theimplicationofatermcanonlybemadeifitisthecasethatbothpartieswouldbelikelytoagreethatsuchatermshouldbeimplied(e.g.tosatisfytheofficiousbystandertest,inordertogivebusinessefficacytoacontract).Acourtwillnotimplyatermjustbecausethecourtmaythinkthatsuchatermwouldbereasonableorlikelytobemoresatisfactory

• Holding:CourtruledagainstMannpar.Nodutytonegotiateingoodfaith

• Ratio:o Arightofrenewaldoesnotalwaysimplyadutytonegotiateingoodfaitho Thiscaseistheauthorityforthegeneralprinciplethatthereisnocontractduty

tonegotiateingoodfaith-theconceptofadutytonegotiateisunworkableintheabsenceofanobjectivebenchmarkorstandardagainstwhichtomeasuretheduty