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Course: Contracts Summary

13 February 1997






1.     Mutual assent

1.1     6: counter-offer and cross-offer

Tinn v. Hoffman & Co. (1873), 29 L.T. 271


̃       When two parties forward offers to each other simultaneously and in substantially the same terms, there is  no contract.


Livingstone v. Evans, [1925] 4 D.L.R. 769




Butler Machine Tool Co. Ltd. v. Ex-Cell-O Corp., [1979] 1 All E.R. 965

Battle of the forms. First form said all offers are accepted based on their terms which will prevail over all terms and conditions

̃       Usually in battles of the forms, whoever gets the first shot wins. But in this case, the idiots signed the tear-off part of the other party’s form.

2.     Consideration

2.1     Existence and sufficiency of consideration

Thomas v. Thomas (1842), 2 Q.B. 851, 114 E.R. 330 (Q.B.)


̃       Motive is not consideration.

̃       Have to look at the document as a whole sometimes to find consideration.

̃       What the document calls “consideration” is not necessarily the consideration.


Harrison v. Cage and his Wife (1698), 5 Modern 411, 87 E.R. 736 (K.B.)


̃       A promise which is seriously given and exchanged between parties is good consideration.

̃       If there is mutuality of exchange of promises, either party can bring an action.


DeWolfe v. Richards (1908), 43 N.S.R. 34 (N.S.S.C.)


̃       A change in a legal position, however slight, can be good consideration. Whether or not this change was of any benefit to the other is immaterial.


Loranger v. Haines (1921), 50 O.L.R. 268, 64 D.L.R. 364 (Ont. S.C. A.D.)




City and Westminster Properties [1934] Ltd. v. Mudd, [1958] 3 W.L.R. 312, [1958] 2 All E.R. 733

Sleeping in the store even when lease said not to

̃       Loopy decision.

̃       Collateral K.

̃       A request to sign a K can be sufficient consideration for another, collateral, K.

̃       Oral agreement allowed to override written K with inconsistent terms.


Shanklin Pier Ltd. v. Detel Products Ltd., [1951] 2 K.B. 854, [1951] 2 All E.R. 471 (K.B.)

Paint, pier and warranty in tender situation.

̃       Device of unilateral K can be used to enforce a representation made by one party in exchange for a term in another K.

̃       Consideration for the warranty was that the Ps would make the TP buy D’s paint for the project.


Scivoletto v. DeDona (1961), 35 W.W.R. 44 (Alta. Dist. Ct.)

Father brings woman over from Italy to marry son. She falls in love with D and D

̃       Consideration that turns out to be worthless, but was believed to have some value by both parties at the time of the K is sufficient to sustain the K.


Attorney General of British Columbia v. The Deeks Sand and Gravel Co. Ltd., [1956] S.C.R. 336, 2 D.L.R. (2d) 305


̃       If parties had an honest belief that there could be a possible successful legal action then the agreement not to go to court is good consideration.

2.2     Performance of an existing duty

2.2.1     existing contractual duty, same parties     one party seeks add’l rights for performing an existing duty

Dempster v. Bauld (1905), 37 N.S.R. 330 (N.A.S.C. en banc)


̃       The performance of an existing duty is not good consideration.


Peerless Laundry & Cleaners v. Neal (1953), 8 W.W.R. (N.S.) 309, [1953] 2 D.L.R. 494 (Mb.C.A.)

Non-competitionagreement with employees when owner of store changed

̃     Discharge of an obligation by part performance

Foakes v. Beer (1884), L.R. 9 A.C. 605 (H.L.)

Goes after the other party for interest on a previous  judgement.

̃       Part performance

̃       Consideration cannot be found in an agreement to give less than that which you are already obliged to do under some pre-existing legal arrangement.


Bank of Nova Scotia v. MacLellan (1977), 78 D.L.R. (3d) 1, 25 N.S.R. (2d) 181 (N.S.S.C. A.D.)


̃       Promise to help find the co-debtor is sufficient consideration to make an agreement to settle a debt binding.

̃       Consideration can be inferred from the communications of the parties.


Hirachand Punamchand v. Temple, [1911] 2 K.B. 330 (C.A.)


̃       Part payment by a third party can be good consideration to extinguish a debt.


Mercantile Law Amendment Act, R.S.O. 1990, c. M-10


̃     Discharge of obligation by substituted performance

Kaulbach v. Eichel, [1930] 1 D.L.R. 983 (N.S.S.C. en banc)


̃       Substitute consideration

̃       “Payment of a lesser sum cannot be satisfaction for the greater sum; but the gift of a horse, hawk or robe in satisfaction is good ...”

̃       A K required to be in writing by the Statute of Frauds may be rescinded by a subsequent parol agreement notwithstanding that the latter may not be enforceable under that Act.


Van Bergen v. St. Edmunds Properties Ltd., [1933] 1 K.B. 345 (K.B.)

Went out of his way to a particular solicitor’s office to pay.

̃       Doing something, however small, above and beyond the original obligation can be valuable consideration for accord and satisfaction.


Foot v. Rawlings, [1963] S.C.R. 197, 41 W.W.R. 650 (S.C.C.)


̃       Consideration can sometimes be found in part-payment using another means, negotiable instrument.

̃       As long as D continues to abide by the terms of their agreement, the P’s right to enforce the debt is suspended.


D. & C. Builders Ltd. v. Rees, [1966] 2 Q.B. 617, [1965] 3 All E.R. 837 (C.A.) Denning

On the brink of bankruptcy took part payment for debt. Now enforcing the rest of it.


2.3     Existing contractual duty owed to third party

Shadwell v. Shadwell (1860), 142 E.R. 62 (C.P)


̃       A promise to do what you are already bound to do is not good consideration, but a previously existing obligation under K to a TP can constitute good consideration

2.4     Existing duty imposed by law

Ward v. Byham, [1956] 2 All E.R. 318, [1956] 1 W.L.R. 496 (C.A.) Denning


̃       A promise to perform a duty imposed by law is sufficient consideration to support a reciprocal promise to pay £1 child support.


Willaims v. Williams, [1957] 1 W.L.R. 148, [1957] 1 All E.R. 305 (C.A.) Denning


̃       A promise to perform an existing duty is sufficient consideration to support a promise as long as there is nothing in the agreement that is contrary to public interest.

̃       Promise not to pledge his credit is a benefit to the P, so good consideration.


Glassbrook Brothers Ltd. v. Glamorgan County Council, [1925] A.C. 270 (H.L.)

Police protecting a coal mine during a strike

̃       Police were bound to provide protection, but they had discretion as to the form it should take, and an undertaking to provide more protection than in their discretion they deemed necessary was consideration for the promise of reward. [C&F]

2.5     Past consideration and moral obligation

Eastwood v. Kenyon (1840), 11 Ad. & E. 438, 113 E.R. 482 (Q.B.)


̃       For a promise to become legally binding, the law requires some additional factor to the D’s promise. Moral obligation aint’ enough. [C&F]


Webb v. McGowin (1935), 27 Ala. App. 82, 168 So. 196 (Ala. C.A.)


̃       “It is well established that a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has recieved a material benefir, although there was no original duty or liability resting on the promisor.”


Roscorla v. Thomas (1842) 3 Q.B. 234, 114 E.R. 496

Bought a horse with no representations re: quality. Later promised that “it was free from vice.”

̃       Promise/warranty was made after the sale and was not supported by fresh consideration. Doesn’t cut it.


Spencer v. Herrerde, [1922] 2 A.C. 507 (H.L.)

Loans made long before and could not be collected due to statute of limitations.

̃       Possible exception to the necessity of consideration.

̃       A later affirmation of an obligation to pay an old debt is a new K, the old debt being the consideration.

̃       Three conditions: (1) written promise to bring it within Limitations, (2) promise to repay is implied in the acknowledgement, (3) where ack. is coupled with other statements, it is up to the ct. to determine the status of the statement.


Limitation of Actions Act, R.S.N.S. 1989, c. 258




Rex v. Rash (1923), 53 O.L.R. 245 (C.A.)


̃       A person who sells goods, other than necessaries, to an infant, and who has no enforceable claim for the price, is not a “creditor” within the meaning of the CC at the time.

̃       Necessaries are evaluated based on the situation in life of the infant.


Statute of Frauds, R.S.N.S. 1989, c. 442


̃       “No action shall be maintained whereby to charge any person upon any promose made after full age, to  pay any debt contracted during infancy, or upon any ratification after full age of any promise or simple contract made during infancy, unless such pomise or ratification is made by some writing signed by the party to be charged threewith or by his agent duly authorized to make such promise or ratification.”

3.     Estoppel - intention and reliance


Fridman: “estoppel simply refers to the notion that once a person had told a lie s/he canot afterwards tell the truth if in the meanwhile an innocent victim has has acted upon it.”

Ricketts v. Scothorn (1898), 57 Neb. 51, 77 N.W. 365 (Neb. C.A.)


̃       US Case

̃       A promissory note given by the maker to the payee to enable her to cease work, but without any condition being imposed, or promise  exacted,  is without consideration, and may be repudiated, in the absence of circumstances creating an equitable estoppel.

̃       But, where the payee of the obligation has been induced to abandon a paying job in reliance on the note being paid, and has taken the action in accordance with the expectation of the maker, neither the maker nor his representatives will be permitted to resist payment on the ground that there was no consideration for a promise.


Re Boutilier, [1933] 1 D.L.R. 699 (N.S.S.C. en banc)

Subscription made in consideration of the subscription of others.

̃       A provision that a promise is made “in consideration of the subscriptions of others” does not show the existence of consideration moving form the promisee so as to enable him to recover upon the promise.

̃       Relying on a gratuitous promise without specific authorisation for expenditure does not make an otherwise unenforceable K enforceable.

̃       The doctrine of estoppel cannot be invoked where the representation is not one of fact, past or present, but merely a statement of future intention.


Dalhousie College v. Boutilier Estate, [1934] S.C.R. 642


̃       Above affirmed


Public Subscriptions Act, R.S.N.S. 1989, c. 378


̃       Subscriptions to public undertakings will be upheld even if seen as wanting of consideraton.


Hughes v. Metropolitan Railway Co. (1877), 2 App. Cas. 439 (H.L.)


̃       Estoppel comes into play where one party by words or conduct gives an assurance to the other party with the intention of affecting the legal relations between them and where the other party acts on the principle accordingly.


Central London Property Trust v. High Trees House, [1947] 1 K.B. 130, [1956] 1 All E.R. 256 (K.B.) Denning


̃       The big one for estoppel.

̃       Where two parties enter into an arrangement  intended to create legal relations between them and in pursuance of such arrangement one party makes a promise to the other which he knows will be acted on and which is in fact acted on by the promisee, the ct will treat the promise as binding on the promisor to the extent that it will not allow him to act inconsistently with it even although the promise may not be supported by consideration in the strict sense and the effect of the arrangement made is to vary the terms of the K made under seal by one with less value.


Errington v. Errington and Woods, [1952] 1 K.B. 290, [1952] 1 All E.R. 149


̃       Hint that once someone had acted upon a promise, it would be inequtable to go back on it.


Combe v. Combe, [1950] 2 All E.R. 1115 (K.B.)

P wife who had divorced her husband was claiming maintenance from him based on letters. He had promised to pay £100 p.a. free of income tax. She took no steps toward maintenance, he failed to make payments promised and she sued.

̃       Bad itnerpretation of Denning.

̃       Though the husband’s promise was made without consideration, it was made in expectiation of her acting upon it and she did act upon it.

̃       Estoppel used here as a sword to found a cause of action.


Combe v. Combe, [1951] 1 All E.R. 767, [1951] 2 K.B. 215 (C.A.) Denning


̃       Denning stepping back from estoppel.

̃       “The principle stated in High Trees does not create new causes of action where none existed before. It only prevents a  party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have take place between the parties.”

̃       P can use estoppel, but not to found a cause of action. P has to have an independent cause of action to use estoppel.


Conwest Explorations Co. Ltd. v. Letain, [1964] S.C.R. 20, 41 D.L.R. (2d) 198 (S.C.C.)




John Burrows Ltd. v. Subsurface Survey, [1968] S.C.R. 607, 68 D.L.R. (2d) 354 (S.C.C.)

Terms of loan were that if payments were late, then the whole amount would be called in. Most payemnts were late without complaint. Late payment resulted in loan being called in.

̃       Being indulgent and not enforcing your strict rights does not estop you from later enforing them.


W.J. Alan & Co. Ltd. v. El Nasr Export, [1972] 2 All E.R. 127 (C.A.) Denning


̃       Does there have to be real detriment for estoppel to apply? It means only that one has been led to act differently from the way one would otherwise have acted. May just mean a change in position.

̃       “Principle of waiver: if two parties enter into negotiation and one party by his conduct, leads the other to belive that the strict rights arising under the K will not be insisted upon, expecting the other party to act upon that belief and he does act on it, the first party will not be allowed to insist upon those strict legal rights when it would be inequtable to do so.” — May be able to revert with sufficient notice.

3.1     Third party beneficiaries: consideration and privity

A K cannot infer rights or impose obligations on anyone except for the parties to the K. only a party to the agreement can sue on the agreement.

Third party beneficiary: One for whose benefit a promise is made in a contract but who is not a party to the contract.  Chitlik v. Allstate Ins. Co.  A person not a party to an insurance contract who has legally enforceable rights thereunder.  A prime requisite to the status of "third party beneficiary" under a contract is that the parties to the contract must have intended to benefit the third party, who must be something more than a mere incidental beneficiary.  McKinney v. Davis, 84 N.M. 352, 503 P.2d 332, 333.  See also Privity.


Dunlop Penumatic Tyre Company v. Selfridge and Co., [1915] A.C. 847 (H.L.)


̃       If, in strange way, the TP can find a connection through consideration, an action may be sustained.

̃       General rule:TP cannot sue on a K. If one can establish consideration between the two parties, a way might be found to circumvent the general rule.


Drive Yourself Hire v. Strutt, [1953] 2 All E.R. 1475 (Denning)


̃       Denning re-writing the history of K-law.


Scruttons v. Midland Silicones, [1962] A.C. 446 (H.L.) Denning


̃       Strong statement by H.L. that only those party to a K can sue upon it.


New Zeland Shipping Co. v. A. M. Satterthwaite & Co., [1974] 1 All E.R. 1015 (P.C.)

Stevedores tyring to obtain benefit of exclusion clause in bill of lading.

̃       P made an offer to the D that if the D would unload P’s goods from a ship (which the D was already bound to do by a K with a TP), the P would treat the D as exempt from liability for damage to the goods. The PC held that the D’s act of unloading the ship was good consideration.” [C&F]

̃       An attempt to create a direct K between the potential P and the potential D.

̃       “the clause could be treated as an offer by the consignor of a unilateral contract, viz tat if those involved in performance of the man contract would play their part (e.g. in the case of the stevedore, unload the goods) the consignor would hold them free from liabilty. The stevedore was held to have accepted the offer by unloading the goods and the P consigneee by presenting the bill of lading to have contracted on bill of lading terms” [C&F]


Miida Electronics v. Mitsui O.S.K. Lines, [1986] 1 S.C.R. 752, 28 D.L.R. (4th) 641


̃       SCC upholds himalaya clause as facilitator of international commerce. “Court is giving effect to that which the parties themselves clearly agreed to in writing.”


Beswick v. Beswick, [1966] 3 All E.R. 1 (C.A.) Denning

D nephew bought the business of P’s husband. Part of the deal was that he would pay a certan amount to P. D didn’t and P is suing.

̃       Denning, being the weirdo that he is, feels that P has right as adminstratrix of her husband’s estate and on her own. Some srot of trust thing.

̃       HL overrules it (below)


Beswick v. Beswick, [1967] 2 All E.R. 1197 (H.L.)


̃       In her personal capacity, the wife P does not have a right to bring an action.

̃       A satisfactory result for Tps can often be brought by action by the other original party. [C&F]


The Santanita, [1985] P. 248 (C.A.)

Rule in yacht race that if one racer damaged another’s boat, the damager would pay.

̃       No clear ratio. Created a unique exception to the TP rule.


Mulholland v. Merriam (1872), 19 Gr. 288


̃       Trust can be created / constructed to circumvent the TP rule.

̃       Not the law today. Now has to be a clear intention to set up a trust.


Mulholland v. Merriam (1873), 20 Gr. 152




Greenwood Shopping Plaza v. Neil J. Buchanan Ltd (1979), 31 N.S.R. (2d) 168 (N.S.S.C. A.D.)


̃       Employees are not strangers to employer’s contracts, can have benefit of exclusion clauses. Overruled.


Greenwood Shopping Plaza v. Beattie, [1980] 2 S.C.R. 228, 11 D.L.R. (3d) 257


̃       Only way to get around TP rule are through agency or trust. Neither here, so employee loses.


London Drugs v. Kuehne & Nagel International, [1992] 3 S.C.R. 299, 2 Casebook 308 (S.C.C.)

Negligently dropped transformer.

̃       Major relaxation of privity requirement. Employees can take advantage of limitation ofliability in K between employer and another party.

̃       Distinguished Greenwood Shpping Plaza.

̃       Employees may get the benefit of employer’s exemption clauses when: (1) The limitation of liability clause must, either expressly or impliedly, extend its benefit to the employees seeking to rely on it; and (2) the emplyees seeking the benefit of the limitation of liabilty clause must have been acting in the course of the their employment and must have been performing the very services provided for in the K between their  employer and the customer (P) when the loss occureed.

4.     Mistakes preventing formation of a contract

Mistake.: Mutual mistake is where the parties have a common intention, but it is induced by a common or mutual mistake.  "Mutual" as used in the expression mutual mistake of fact expresses a thought of reciprocity and distinguishes it from a mistake which is a common mistake of both parties.  There is something of the thought of a common mistake because it must affect both parties.  Mistake of fact as ground for relief may be neither "mutual" nor common in the strict sense because it may be wholly the mistake of one of the parties, the other being wholly ignorant both of the fact upon the faith of which the other has mistakenly acted and that the other has acted upon such an understanding of the fact situation.

 Unilateral mistake.  A mistake by only one party to an agreement and generally not a basis for relief by rescission or reformation.

4.1     Unilateral and mutual mistakes

Smith v. Hughes (1871), L.R. 6 Q.B. 597, 2 Casebook 313 (Q.B.)


̃       Shows the difficulty sometimes to determine what the parties actually agreed to.

̃       “If whatever a man’s real intention may be, he so conducts himself that a reasonable person would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the K with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.” [Quoted in C&F]


Hartog v. Shields, [1939] 3 All E.R. 566, 2 Casebook 315 (K.B.)


̃       Unilateral mistake: It was held that the buyer must be taken to have known the mistake made by the sellers in the formulation of their offer.

̃       A man in taken to have known what would have been obvious to a reasonable person in the light of the surrounding circumstances. [C&F]


Imperial Glass v. Consolidated Supplies (1960), 22 D.L.R. (2d) 759, 2 Casebook 316 (B.C. C.A.)

Calculation error results in wrong figure being quoted.

̃       A unilateral mistake by a party in the motive or reason for making an offer, e.g., where it uses the wrong figure in computing the price at which it would supply certain goods, does not prevent a valid contract from arising when the offer is accepted. Where the offeree is aware at the time of acceptance of the mistake made by the offeror, it does not necessarily follow that the offeree comes under a duty to reveal its knowledge or awareness or that failure to do so gives ground for rescission, unless the circumstances are such as to support an inference of fraud in concealing awareness of the mistake.

̃       Held, there was no ground for setting aside the contract herein when the offeree, acting upon a price quotation from the offeror before any contract was made, bound himself to a contractor on the basis of the quoted price, even though the offeree became aware before a firm contract was made with its offeror that the latter had based its offer on a mistake in quantitative computations. The unilateral mistake had not been induced by any representation of the offeree; and while the offeree's conduct may not have been ethical, the offeror could not be relieved from its own negligence or carelessness.


McMaster University vWilchar Construction (1971), 22 D.L.R. (3d) 9, 2 Casebook 320 (Ont. H.C.)

Esacalation clause obviously omitted from tender

̃       Equity can step in and make the K void so that the offeree cannot snap up the offeror’s erroneous offer.


Raffles v. Wichelhaus (1864), 2 Hurlstone & Coltman 906, 2 Casebook 322 (Ex.)

Confusion over boats of the same name.

̃       It was open to the D to show that the contract was ambiguous and that he intended the October ship. If the cas had gone to trial it would have been up to the jury to hold either that there was no K or to hold that there was a K for either the Oct. ship or the Dec. ship. In modern times, it would depend upon the reasonable person to find which ship. [C&F]


Lindsey v. Heron (1921), 50 O.L.R. 1, 2 Casebook 323 (Ont. S.C. A.D.)

Buying stocks with similar names. D says to K.

̃       The P used  clear language and the D was ambiguous. The objective bystander would say that the K was aobut P’s stock.

̃       Mistake was on the part of the D by using ambiguous language. D may be thinking of something else, the reasonable person would have interpreted the P’s version of the facts in a clear manner.


Hobbs v. Esquimalt & Nanaimo Ry. Co. (SCC 1899)




Brooklin Heights Homes v. Major Holdings & Development (1977), 17 O.R. (2d) 413, 2 Casebook 325







4.2     Common mistake — both enter k with shared misunderstanding

Sherwood v. Walker (1887), 66 Mich. 568, 33 N.W. 919, Casebook 326 (Mich. S.C.)

A fecund cow is an entirely different species of cow than a barren cow.

̃       “If there is a difference or misapprehension as to the substance of the thing bargained for; if the thing actually delivered ore recieved is different in substance from the thing bargained for, and intended to be sold, — then there is no contract; but it if be only a difference in some quality or accident, even though the mistake may have been the actuating motive to the purchaser or seller, or both of them, yet the K remains binding.”

̃       If the thing you both bargained for turns out to be fundmentally different in the end from what you though you were bargaining for, the K is void. If you both bargain tu buy/sell a pinto and tt turns out to really be a house, the K is void.


Bell and Another v. Lever Brothers, [1932] A.C. 161, 2 Casebook 330 (H.L.)

Parties thought they were dealing with a non-terminable contract when they were dealing with a terminable one.

̃       Courts will be very hesitant to throw out contracts, particularly when both parties get what they thought the were to get out of the K.


Solle v. Butcher, [1950] 1 K.B. 671, 2 Casebook 333 (C.A.) Denning

Rent controlled flats

̃       A common mistake, though clearly fundamental, does not as a general principle nullify a K at common law.

̃       Denning and revisionist doctrine of mistake. Makes up law: Says two kinds of mistake. Some which will make the K void and second kind is that which makes it voidable and can be set aside as the court saw fit and was dealt with by the cts of equity. We now have to say that the scope of mistake is far broader than contemplaed in Bell v. Lever Brothers.

̃       Contracts which are liable to be set aside in equity: if the parties were under a common misapprehension either as to facts or as to their relative rights, provided that the misapprehension was fundamental and that the party seeking to set is aside was not himself at fault.


McRae v. Commonwealth Disposals Commission (1951), 84 C.L.R. 377 (H.C. Australia)


̃       Ct finds a fundamental mistake, but it is not equitable to set the K aside.

̃       The ct found an implied term that the ship existed


Sale of Goods Act, s. 9


̃       If the subject of a K has perished without the knowledge of the seller, the K is void.


F.E. Rose (London) Ltd. v. Wm. H. Pim, Jr. & Co., [1953] 2 All E.R. 739 (C.A.) Denning

feves v. feveroles

̃       Where the parties in a K use incorrect terminology, where the words they use are written down incorrectly, the remedy of rectification may come into play. However, in this case, the court does not allow the K to be rectified because the words used in the K were not erroneous, because Horsebeans was what they wanted to use but the error was only in what they wanted them to mean.

̃       And K could have been set aside in equity, but innocent third party was involved and court will not trample TP.

̃       A K will be void only if there is nothing to contract about, either because the subject matter does not exist at the time of the agreement or because the object of the purported sale already belongs to the buyer; and the ground of such a nullity is not the mistake but the absence of a res. [C&F]


Magee v. Pennine Insurance Co. Ltd, [1969] 2 All E.R. 891 (C.A.) Denning

Insuring a car based on lies about licence, etc.

̃        In almost all cases, a K will not be void even on the basis of a common mistake on a fundamental term but can be set aside by court of equity.

̃       Even though the parties were mistaken about the rights of the insured, each party correctly understood that the purpose of their agreement was to settle the amount to which the P was entitled. Majority found it was enough to set it aside in equity.

4.3     Mistaken identity

Phillips v. Brooks, [1919] 2 K.B. 243 (K.B.)

Bought crap and passed himself off as someone else for credit. P was a jeweller and D was pawnbroker.

̃       Either P intended to sell to whoever wandered into his shop or intended to sell to Sir Bullough only.

̃       If P would sell to whoever, the sale was voidable for the fraudulent misrepresentation that payment would be made by Bullough. Since it was voidable, good title passed to the D via the swindler.

̃       If P would sell to Bullough only, then the P’s mistake would prevent a K from arising and no rights of ownership would pass to D.

̃       Found that P would sell to anyone who darkened his door, so voidable. Good title passed to D. P loses. [C&F]


Ingram and others v. Little, [1961] 1 Q.B. 31 (C.A.)


̃       Court found that the offer was made to PGM Hutchinson and could not be accepted by the rogue. The P succeeded in their claim for the car, or damages.


Lewis v. Averay, [1971] 3 W.L.R. 603 (C.A.) Denning

Thought they were selling car to movie actor.

̃       Despite mistake, the P concluded K with the rogue. He had failed to rebut the prima facie presumption that he had made a K with the rogue when he allowed the car to be taken away. The K was voidable for fraud, but too late since it was now in the hands of an innocent TP. [C&F]

5.     Non es factum

Gallie v. Lee, [1969] 1 All E.R. 1062, 2 Casebook 358 (C.A.) Denning


̃       Denning: If someone signs a document knowing that it has legal consequences and does not take care to read it, they should not be able to plead it was not their act. Particularly if TP has acted upon it.



Sunders v. Anglia Building Society, [1970] 3 All E.R. 961 (H.L.)


̃       Overrules Gallie v. Lee: You can use non es factum if the document you signed was “fundamentally different” than the one you thought you were signing. (1) can’t be negligent. (2) if you think you thing is intended to have legal consequences and you are literate, in almost all case you will be bound to your signature.


Prudential Trust Co. v. Cugnet (1956), 5 D.L.R. (2d) 1 (S.C.C.)


̃       Idiot signed the document but since it was of a different type that what he thought he was signing, he gets to use non est factum. Moron.


Marvco Color Research, 1982 (S.C.C.)


̃       Any person who fails to exercise reasonable care in signing a document is precluded from relying on non est factum as against a person who relies upon that document in good faith and for value.


Northside Economic Development Assistance Corporation v. Strickland and Strickland (N.S.S.C. T.D.)


̃       Co-signed at husband’s request. Finds non est factum for unconscionability reasons. She was mistaken as to type of document and the bank should have told her about it.


Lloyd’s Bank v. Bundy, [1975] 1 Q.B. 326 Denning


̃       Introducing economic duress and inequality of bargaining power.

̃       “The english law gives relief to one who, without independent advice, enters into a contract upon terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is seriously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the other.”

̃       Law has not followed exactly with Denning’s pronouncement, but there are signs it is moving in this direction.

6.     Contractual rights and obligations

6.1     Termination: Repudiation, recission and frustration

6.1.1     Misrepresentation, breaches of warranty and conditions distinguished

Wallis v. Pratt, [1910] 2 K.B. 1003 (C.A.)


̃       If a condition is breached, and the parties have not excluded any liability for the breach of the condition, the innocent party should be able to recover damages, or repudiate the contract.


Sale of Goods Act


̃       Even if you call it a warranty, it is a matter of construction for the court: it can be determined to be a condition


Redgrave v. Hurd (1881), 20 Ch.D. 1 (C.A.)

Selling law practice which turns out to be worhtless.

̃       In 1881, damages only are available if it is a fraudulent misrepresentation. Fraudulent misrepresenation is a common law tort and all common law courts can do is award damages. Cts of equity can’t give damages.

̃       Innocent misrepresentation is dealt with in cts of equity and the remedy is recission.

̃       A man cannot benefit from a statement which turns out to be false.


Redican v. Nesbitt, [1924] S.C.R. 135


̃       Where a conveyance has been executed, it will only be set aside in equity on the ground of fraud.


Heilbut, Symons & Co. v. Buckleton, [1913] A.C. 30 (H.L.)


̃       Trite law: Innocent misrepresentation gives no right to damages.

̃       Was the misrepresentation to be a contractual term? (1) at what stage in the negotations was the statement made? If preliminary, probably not a contractual term. (2) Was it ever reduced to writing? If yes, leads to presumption that it was a contractual term. (3) Did the person who made the statement have special knowledge, skill with regard to the other parties? Ct will be more willing to make it a term. [C&F]

̃       Consider if it is a statement of fact or of opinion. Equality of bargaining power/information.


Dick Bentley Productions v. Harald Smith (Motors) Ltd., [1965] 1 W.L.R. 623 (C.A.) Denning

Seller says car has new engine. Really is old piece of crap.

̃       The test of whether or not a representation is a warranty is based on what the intelligent bystander would say.

̃       Ample foundation for warranty — should have known the answer and he gave it without foundation.

̃       Can look for a colateral contract based on the misrepresentation. Not needed in this case.


Misrepresentation Act [Don’t have one in Canada]


̃       Negligent misrepresentation is the same as fraudulent misrep. as far as damages go.

̃       For a contract that may be struck down, the [ct] can award damages instead where it is equitable to do so.


Zien v. Field (1963), 43 W.W.R. 577 (B.C.C.A.)


̃       Dissent adopted by the SCC.

̃       Test for whether a term is a condition or a warranty comes from Bettini v. Gye: Depends upon the intent of the parties and upon interpretation.

̃       Can make anything a warranty or a condition if we are clear about it.

̃       The court will look at the term in the context of the whole thing. If non-performance of that term would result in a completely different result than that contracted for, it is a condition.

̃       Just because you use the language of “warranty”, “covenant”, “condition”, “term”, they may be used in the non-technical sense. If they don’t convey the true meaning, have to look at what the reasonable person would see the term to mean.

̃       Third class of term. If the degree of breach is minor, it is a warranty. If the degree of breach of this term is major, it is a condition. Objective test of an observer at the time of the K can’t really tell you if it is condition or warranty, since the degree of breach was not known. Only apparent quasi ex contractu.

̃       Brings foreseeability to contract law.


Hong Kong Fir Shipping v. Kawasaki Kisen Kaisha, [1962] 1 All E.R. 474

Charter ship that ends up in the shop for most of the time.

̃       Heading toward a doctrine that you can’t always identify a warranty or a condition.

̃       Some breaches will or wont deprive the non-breaching party of the subbstantial benefit of what was intended by the contract.

̃       Don’t deal with it yourself, let the court decide.

̃       If you see the breach of the other party as a breach of a condition and then repudiate it, it may be found to be a breach of a warranty and you are screwed for wrongful repudiation. Take it to court.


Schuler v. Wickman Machine Tool Sales, [1973] 2 All E.R. 39 (H.L.)

Distributorship agreement calls for 1,400 visits by salesperson. Doesn’t live up.

̃       If you call it a condition, there is a presumption that it is a condition. But if it is unreasonable to say that the breach of the “condition” would kill the K, then you have to construct the meaning of the term within the whole of the K.


Barnett v. Harrison, [1976] 2 S.C.R. 531


̃       Can a party in whose benefit a condition is made waive the condition in his favour and still insist upon specific performance? No clear answer.

̃       An express condition precedent cannot be waived where the outcome of which depends upon the actions or decisions of a TP.

̃       Ratio on p. 411: Obligations under the K [where] the obligations ...


Hedley v. Byrne


̃       There is a tort of negligent misrepresentation.

̃       Requires a special relationship between the parties: The courts are willing to find the special relationship whenever the person giving advice holds himself out as possessing some special skills and knows the other party will rely on the advice given, irrespective of whether or not that person is a professional advisor.


Esso Petroleum v. Mardon, [1976] 2 All E.R. 5 (C.A.) Denning

Grossly inflated estimates of “throughput” induced D to set up a gas station.

̃       Representation by Esso was a collateral warranty that the estimate was sound.

̃       Negligently misrepresented, outside of K but still gives rise to an action in damages. Held out special skills, made representation intended to be relied upon, he relied upon it with disasterous results.


Sodd Corporation v. Tessis (1977), 79 D.L.R. (3d) 632 (Ont. C.A.)


̃       You have remedy in tort for negligent misrepresenation.

̃       In contract, you are restricted to innocent misrepresentation, fraudulent misrepresentation, breach of term or warranty, condition.


BG Checo, [1993] 1 S.C.R. 12


̃       Can bring concurrent actions in tort and contract.

6.2     Rights and remedies of the innocent party

Hochester v. De La Tour (1853), 2 Ellis 678 (Q.B.)


̃       Can an action be brought for breach of a K even before performance is due?

̃       If a person wronfully renounces a contract, the other party is not bound to act as though the contract is still in force. He has option of waiting until performance is due (and maybe or maybe not forthcoming) to sue or can bring an action immediately.

̃       Anticipatory breach can be constructive: Can infer it from actions on part of breaching party.


Canada Egg Products v. Canadian Doughnut Co., [1955] S.C.R. 398


̃       What amounts to an adoption of repudiation?

̃       Can adopt the repudiation with all reasonable dispatch — not immediately — with regard to the circumstances.

̃       Issuance of the writ can be adoption if it is a writ for breach of K. If it just to have the contract constructed, not adoption.


MacNaughton v. Stone, [1949] O.R. 853, 2 Casebook 429 (Ont. H.C.)


̃       Three options for innocent party in anticipatory breach: (1) can treat the K as at an end and demand return of deposit (or whatever), (2) can treat the K as broken as of the date that the other party renounced it and sue for damages, (3) can treat the K as valid and decide to wait and bring an action for specific performance.


White and Carter (Councils) v. McGregor, [1961] All E.R. 1178 (H.L.)


̃       Innocent party has normal options.

̃       Is it ethical to allow the innocent party to go ahead and treat the contract as still on?

̃       The innocent party should not insist on the contract if it has no legitimate interest to do so. If you are vicdictive or wishing to impose a hardship on contract-breaker, you should be limited to a remedy in damages.

̃       It takes two parties to end a contract: one to repudiate it and the other to accept the repudiation. One party, acting alone, cannot end the contract.


Finelli v. Dee (1968), 67 D.L.R (2d) 393 (Ont. C.A.)

Paved driveway while D was away.

̃       Where carrying through with the contract must be done illegally if you don’t have other party’s consent (like paving their driveway), you are stuck with suing for damages.


Decro-wall International v. Practitioners in Marketing, [1971] 2 All E.R. 216 (C.A.)


̃       To be repudiation, an action must go to the root of the contract, must be of a fundamental nature.

̃       Courts can award injunction, recission, specific performance. All are equitable remedies available.

̃       Aside: Contracts for personal services will never give an injuction for specific performance.


General Billposting v. Atkinson, [1909] A.C. 118 (H.L.) NOT ON EXAM!


̃       As soon as there has been a wrongful repudiation and both parties bring the contract to an end, all of the conditions of that contract are dead.

6.3     Problems of remoteness of damages

Hadley v. Baxendale (1954), 156 E.R. 145 (K.B.)


̃       When one party breaks a contract, the other party ought to receive damages which may fairly and reasonably be considered either arising nauarlly (in natural couse of things) from the breach, or such as may reasonably habe been in the contemplation of both parties.


Victoria Laundry v. Newman Industries, [1949] All E.R. 997 (C.A.)


̃       (1) aggrieved party is only entitled to recover the part of the actual loss that was foreseeable at the time of the contract as liable to result from the breach, (2) what isreasonably foreseen depends on the knowledge then possessed by the parties — or at least by the party in breach — either actual or imputed; (3) 

̃       What was at the time foreseeable depends upon actual knowledge then possessed by the parties, or at leas by the breaching party.

̃       This knowledge can be actual or imputed.

̃       “Serious possbility” or “real danger” of happening is sufficient foreseeability.

7.     Fundamental breach

Karsales v. Wallis

Contract for sale of a car. The thing delivered was not a car in a platonic sense.

̃       Clear statement by Denning that the doctrine of fundamental breach exists.

̃       When the thing delivered is not the thing contracted for, the seller cannot rely on exclusion clauses.


Suisse Atlantique Societe d’Armement Maritime v. Rotterdamsche Kolen Centrale, [1966] 2 All E.R. 61 (H.L.)


̃       You can’t avail yourself of exclusion clauses when the breach you are guilty of goes to the root of the contract. Denning-esque doctrine of fundamental breach to get around exclusion clauses.


Harbutt’s Plasticine Ltd. v. Wayne Tank and Pump Co., [1970] 1 All E.R. 225 (C.A.)


̃       When one party has been guilty of a funamental breach of contract which goes to the very root of the contract, and the other side accepts it, (the K comes to an end either due to the acceptance or due to the breach), the guilty party cannot rely on an exclusion clause to escape liability for his breach.


Photo Production v. Securicor Transport, [1978] 3 All E.R. 136 (C.A.)

Idiot guard starts fire at paper factory

̃       The House of Lords has firmly stated that Denning and his fundamental breach boosters are full of shit. Exclusion clauses will not be weaseled around by claiming that the contract has been fundamentally breached.


Photo Production v. Securicor Transport, [1980] 1 All E.R. 556 (H.L.)


̃       The House of Lords firmly did away with the notion of fundamental breach to get around exclusion clauses. If the parties decide to bargain away certain rights, they are free to do so.

̃       Also question of who can best cover the risk. In this case, the factory through its insurance.


Hunter Engineering Co. v. Syncrude Canada, [1989] 1 S.C.R. 426


̃       Majority: In Canada, there is no rule of law preventing the operation of exclusionary clauses in cases of fundamental breach of contract.

̃       Per Wilson, L’H-D: A fundamental breach occurs where the event resulting from the failure of one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit that the parties intended should obtain from the contract. Fundamental breach represents an exception to the rule that the contract continues to subsist and that damages be paid for the unperformed obligation for it gives the innocent party an election to put an end to all unperformed primary obligations of both parties. This exceptional remedy is available only where the very thing bargained for has not been provided. // The "rule of law" approach to fundamental breach should be discarded and the construction approach to exclusionary clauses already adopted by this Court should be reaffirmed. The relevant question for the courts is whether the parties, on a true and natural construction, succeeded in excluding liability at the time the contract was made. After considering the provision's true construction, the court must consider whether or not to give it effect in the context of subsequent events, such as fundamental breach. The courts are quite unable to assess in isolation whether or not a contractual provision is reasonable and any notion that the courts should refuse to enforce a provision for want of its being reasonable should not be imported into the law. Exclusion clauses can be rendered unforceable even if no fundamental breach is found. Legislative protection exists and other judicial avenues such as unconscionability might apply in appropriate circumstances.





























Consensus ad idem

An agreement of parties to the same thing;  a meeting of minds.



Mistake (common)

Both parties make the same mistake. Each knows the intention of the other and accepts it but each is mistaken about some underlying and fundamental fact. The parties, for example, are unaware that the subject matter of their contract has already perished. [C&F]

Presence of the agreement is admitted — the rules of offer and acceptance are satisfied and the parties are of one mind. But the agreement is robbed of all its efficacy.[C&F]

Mistake (mutual)

The parties misunderstand each other and are at cross-purposes. A, for example, intends to offer his Ford Sierra car for sale but B believes that the offer relates to the Ford Granada also owned by A. [C&F]

The very existence of agreement is denied. The argument is that, despite appearances, there is no correspondence of offer and acceptance and that therefore the transaction must necessarily be void. [C&F]

Mistake (unilateral)

Only one of the parties is mistaken. The other knows, or must be taken to know, of his mistake. Suppose, for instance, that A agrees to buy from B a specific picutre which A believes to be a genuine Constable but which is in fact a copy. If B is ignorant of A’s erroneous belief, the case if one of mutual mistake, but, if he knows of it, of unilateral mistake. [C&F]

The very existence of agreement is denied. The argument is that, despite appearances, there is no correspondence of offer and acceptance and that therefore the transaction must necessarily be void. [C&F]

Rescission of contract

To abrogate, annul, avoid, or cancel a contract;  particularly, nullifying a contract by the act of a party.  The right of rescission is the right to cancel (rescind) a contract upon the occurrence of certain kinds of default by the other contracting party.  To declare a contract void in its inception and to put an end to it as though it never were.  Russell v. Stephens, 191 Wash. 314, 71 P.2d 30, 31.  A "rescission" amounts to the unmaking of a contract, or an undoing of it from the beginning, and not merely a termination, and it may be effected by mutual agreement of parties, or by one of the parties declaring rescission of contract without consent of other if a legally sufficient ground therefor exists, or by applying to courts for a decree of rescission.  Abdallah, Inc. v. Martin, 242 Minn. 416, 65 N.W.2d 641, 644.  It necessarily involves a repudiation of the contract and a refusal of the moving party to be further bound by it.  Nonetheless, not every default in a contract will give rise to a right of rescission.  See also Cancellation;  Renunciation;  Repudiation;  Revocation;  Termination.

                An action of an equitable nature in which a party seeks to be relieved of his obligations under a contract on the grounds of mutual mistake, fraud, impossibility, etc.