When a document containing contractual terms is signed, then in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.
If there be a contract which has been reduced into writing, verbal evidence is not allowed to be given of what passed between the parties, either before the written instrument was made, or during the time that it was in a state of preparation, so as to add to, or subtract from, or in any manner to vary or qualify the written contract
Federal Commerce & Navigation Co. Ltd. v. Trade Export S.A.
Ratio:
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Standard Forms will be given Standard interpretations, the intents of the parties will not be considered
Facts:
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Owners of ship charter their ship (Maratha Envoy) to move grain from the Great Lakes to Northern Europe
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The contract states: time for discharge is to count whether in berth or not
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The Maratha Envoy arrives at the Weser Lightship and then makes two voyages up river to be considered an "arrived ship"
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The Maratha Envoy then must wait 18 days to get into berth
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It then takes a further 10 days to unload the ship
Reasons:
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This industry has many standard forms with standard clauses
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Two reasons standard forms and clauses are necessary
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Enables negotiations to be conducted quickly and allows one to compare two separate offers easily
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Helps predictability and allows parties to allocate risk more precisely
Ratio:
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Evidence should be restricted to evidence of the matrix of facts known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively the "aim" of the transaction"
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AKA Negotiations and party's intentions should be excluded.
Facts:
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Dr Simmonds claims under an agreement under seal 1960 he can acquire from Prenn, for 6000 pounds, 4% interest in the ordinary capital of a company controlled by Prenn: now called Controls and Communications Ltd. But formerly called Radio and Television Trust.
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Prenn argues the claim fails because a necessary condition was not satisfied (that 300 000 pounds in profit are available for dividend on the ordinary stock)
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Didn’t break profit threshold
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The issue becomes an interpretive one regarding the definition of "profits"
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If it just includes RTT then the claim falls short by 10 000
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If it includes subsidiaries than it easily meets the condition
Issue:
-
How should the word "profits" be interpreted
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Moreover what methodology should the court use when interpreting contracts
Reasons:
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The present case illustrates very well the disadvantages of allowing outside circumstances to stand as evidence of how a contract should be interpreted
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Evidence of negotiations should not be included because the parties position, in negotiations, is divergent until the actual contract is signed, at which point there is convergence.
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"evidence of negotiations, or of the parties; intentions, and a fortiori of Dr. Simmonds's intention, ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively the "aim" of the transaction."
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Note Cases:
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Investors Compensation Scheme, Ltd. v. West Bromwich Building Society [1998]
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Regarding Simmonds v. Prenn
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What the backround may include is "absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man" subject to the requirement that it should have been reasonably available to the parties.
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Eli Lilly & co. v. Novopharm Ltd. [1998]
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The contractual intent of the parties is to be determined by reference to the words they used in drafting the document, possibly read in the light of the surrounding circumstances which were prevalent at that time.
Notes:
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Merger wouldn’t make sense if the subsidiary companies aren’t included
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“Here is some money, I’ll pay the rest out of the profits from the company”
Farah v. Barki
Ratio:
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Misrepresentation of a fact, prior to entering into a contract, is grounds to void the contract ab initio due to fraud.
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Actions “equivalent to fraud” are included but this is tricky-> someone might argue they meant what they said at the time and then a supervening event occurred
Facts:
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Farah signs a document that states Barki transfers 650 shares in exchange for $6500
-
Originally Barki had invested $6500 in the company, after the company performed terribly Barki proposed the sale of his shares
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Farah believed he would be acting for Barki in controlling the company and carry out a sale of shares to one Joy
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Farah signed relying on this proposal
Issue:
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When there is a finding of fraudulent misrepresentation on the part of the respondent as to the nature of the document which he asked the appellant to sign can the appellant successfully resist an action upon the document when he read and signed it?
Decision:
-
For Farah, on grounds of fraudulent misrepresentation
Reasons:
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Fraud unravels everything
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Common law fraud= Material misrepresentation of fact or existing
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"It would be very dangerous to allow a man over the age of legal infancy to escape from the legal effect of a document he has, after reading it, signed, in the absence of an express misrepresentation by the other party of that legal effect." (emphasis added)
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"where there has been fraud or conduct equivalent to fraud on the part of the defendant, there may be a ground for putting the defendant to elect between having the transaction annulled altogether or submitting to the rectification of the deed in accordance with the plaintiff's intention. This rests on unilateral mistake in one party, fraud or conduct equivalent to fraud in the other party"
Curtis v. Chemical Cleaning and Dyeing Co., Ltd.
Ratio:
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Verbally describing the contract as relating to a particular fact when it in fact refers to something else is misrepresentation
Facts:
-
Plaintiff takes wedding dress into defendant's cleaning company
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Dress is stained through defendant's negligence
-
Plaintiff had signed a receipt exempting defendant's from liabilities for damages
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Plaintiff was told it was because she had to accept responsibility for damage to the beads and sequins on the dress
-
Trial judge awarded damages
-
Defendants appealed
Issue:
-
Can a misrepresentation change the scope of an exempting clause in a contract?
Decision:
Reasons:
-
"any behaviour by words or conduct is sufficient to be a misrepresentation if it is such as to mislead the other party about the existence or extent of the exemption"
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Oral evidence can be given regarding the establishment of a misrepresentation
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A misrepresentation of an exempting clause will limit the exempting clause to how it was misrepresented
Canadian Indemnity Co. v. Okanagan Mainline Real estate Board
NOTE CASE:
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"A party who misrepresents, albeit innocently, the contents or effect of a clause inserted by him into a contract cannot rely on the clause in the face of his misrepresentation"
Hawrish v. Bank of Montreal
Ratio:
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Collateral agreements can be admissible by parol evidence if it is an independent agreement that could be made without writing, and is not inconsistent or contradictory to the main contract.
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The consideration of the collateral agreement must not just alter the consideration of the main contract. In the case that it just alters the consideration of the main contract the court would just incorporated into main contract.
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Parol evidence doesn’t keep out collateral or post-contractual evidence so long as they are supported by consideration
Facts:
-
The plaintiff signed an agreement to cover the existing and future indebtedness of the company up to $6000
-
He had received an oral assurance that he would be released from his guarantee when the bank obtained a joint guarantee from the directors of the company
-
The bank did receive these guarantees
-
The company became insolvent and the bank came after the plaintiff for the $6000
Issue:
-
Can the parol evidence be included even though it directly conflicts with clauses in the document that was agreed to
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The oral agreement doesn't modify a clause in the document it contradicts a clause
Reasons:
For Defendant, parol evidence inadmissable
Reasons:
-
The oral agreement is in plain contradiction of para (d)
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Regarding the argument that the oral agreement constituted a contract that was independent and collateral to the main contract:
-
Collateral agreements can be established by parol evidence on two conditions
-
The agreement is one which as an independent agreement could be made without writing
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The agreement is not in any way inconsistent with or contradictory of the written agreement
Morgan v. Griffith
Facts:
-
Plaintiff becomes tenant of defendant in 1867
-
Plaintiff notices rabbit infestation, agrees to re-sign in 1868 on the defendant's promise he would take care of the rabbits
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Same thing happens next year upon re-signing
-
Plaintiff then brings the action against defendant
-
Defendant pleads parol evidence rule
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Ruling: for Plaintiff
-
Defendant appeals
Issue:
-
Is the promise to destroy the rabbits a valid collateral agreement?
Decision:
Reasons:
-
Verbal agreement was collateral to the lease and founded on good consideration.
-
X agrees to sign the lease if Y agrees to take care of the rabbit problem
-
The promise is not contradictory to the lease
-
Removing rabbits is not a clause typically included in the main document
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Would the verbal agreement make it into the main document?
-
If ambiguous then:
-
See if the side agreement effects the consideration of the main contract
Pym v. Campbell
Ratio:
-
Evidence to vary the terms of the agreement in writing is not admissible, but evidence to show that there is not an agreement at all is admissible.
-
Verbal agreement that attached a condition precedent to the contract is admissible
Facts:
-
Campbell sets up meeting with Pym and two engineers to purchase Pym's invention
-
Pym shows up late, the engineers have left
-
Campbell and Pym agreed to terms and sign the contract but agree orally that it is not to be a binding contract unless they find the two engineers and they both approve
-
They find one who approves, the other does not
Issue:
-
Does the oral agreement nullify the signed contract?
Decision:
-
For defendant, parol evidence is admissible if it shows there was no contract at all
Reasons:
-
If it can be proven that a paper was signed with the express intention that it should not be an agreement, then no party can fix it as an agreement.
-
The meeting of the minds existed but was made explicitly dependant on an extra condition which was not met
-
"Evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is not an agreement at all is admissible"
Corbin on Contracts s24.7 -
The understanding of contracts always comes from the subjective perspective of the parties involves.
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So there may never be an absolutely perfect meeting of the minds as different words will have different meanings to different individuals.
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But courts must come to some concrete interpretation, even if it is flawed.
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"It is therefore invariably necessary, before a court can give any meaning to the words of a contract and can select a single meaning rather than other possible ones as the basis for the determination of rights and other legal effects, that extrinsic evidence be admitted to make the court aware of the "surrounding circumstances," including the persons, objects, and events to which the words can be applied and which caused the words to be used."
Long v. Smith
Ratio:
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Alford thinks they are bending things a bit in this one to arrive at an equitable outcome
Facts:
-
Defendant contracted with plaintiff for the purchase of a piano.
-
Plaintiff stated that he would sell it for $575 and if the plaintiff found in the future that he had been overcharged or the piano wasn't satisfactory he could return it or exchange and get his deposit back.
-
The printed contract had a clause stating it was the entire contract.
-
The defendant found out it was only worth $400
-
The plaintiff wouldn't accept a return
-
Defendant leaves the piano outside the shop
-
Plaintiff brings action against Defendant for the $575 in breach of contract
Issue:
-
Is the oral agreement admissible in the face of the contract stating it was the only document?
Decision:
Reasons:
-
There is a well-marked line of cases establishing this doctrine, that evidence may be given of a prior or a contemporaneous oral agreement which constitutes a condition upon which the performance of the written agreement is to depend.
-
The enforcement of the contract may be suspended or arrested till the stipulation orally agreed on has been satisfied.
-
Defendant was prevented from getting accurate information regarding the value of the piano
-
The promise that he could return it if it wasn't worth the price encouraged him to sign the contract.
-
There was a misrepresentation
What’s going on:
-
If someone relies on a promise as motivation for signing a contract that collateral contract prevails over exemption clauses
City and Westminster Properties Ltd. V Mudd.
Ratio:
-
A collateral agreement that looks like estoppel will be valid consideration
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The promise was made, it was meant to be acted upon, and it was in fact acted upon (they signed the contract). Now there is a detriment
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The promise induces the plaintiff to sign->plaintiff agreeing to sign is valid consideration as otherwise they would not have
Facts:
-
Landlord knows tenant lives in his shop even though his lease prohibits that
-
The two draft a new lease that states the shop will only be used for business
-
The landlord gives an oral agreement that the tenant will be able to continue living in the shop
-
The landlord ten tried to bring an action against the tenant for forfeiture of lease
Issue:
Decision:
-
For defendant, the oral assurance was relied upon by the defendant
Reasons:
-
The defendant relied on the promise and so agreed to sign the lease
-
Without the promise he would have left and signed elsewhere
-
The reasoning is identical to estoppel?
-
Promise meant to be acted upon
-
And in fact was acted upon
-
To the detriment of the party
Notes:
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"Where, as here, the collateral agreement is consideration for the entering into the written agreement, the exclusionary clause cannot prevail against it" (Francis v. Trans Canada Trailer Sales Ltd (1969), 6 D.:.R. (3d) 705 (Sask. C.A.)]
Tilden Rent-A-Car v. Clendenning (Lead Case)
Ratio:
Facts:
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Defendant, a regular traveler, arrives in Vancouver and rents car from plaintiff.
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They offered additional coverage for $2/day and defendant says yes.
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The clerk placed the contract in an envelope and the defendant in the glove box.
-
He never read the contract
-
Clause states $2/day as consideration for limiting customer liability to nil.
Issue:
-
The Tilden employee knew the defendant hadn't read the agreement, and was unaware of the clauses that would limited his no-liability clause. It was reasonable to think that the defendant signed a contract thinking he was covered. Does the plaintiff's exemption clause prevail against the defendant's exemption clause?
Decision:
Reasons:
-
This case goes over the history of the ticket cases as well as parol evidence cases
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Essentially the issue is resolved as the ticket cases are
-
The company needs to make sure that any unusual or unexpected clauses are made aware to the signer
-
If they are not aware it cannot be said that they believed the signer knew what they were assenting to
-
In this case the exemption clauses were not expected and not made clear by the clerk.
Notes:
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Defendant want’s full liability and thinks he gets it
-
Is unaware of exclusion clause regarding any intoxication
-
Defendant wasn’t called to attention of the exclusion and said he was not intoxicated
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Defendant’s incomplete information of the contract induced/motivated the defendant’s signing
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In classic English Common Law:
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If you signed it you represent that you have assented
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In Canadian Common Law:
-
If you see the other party not reading the contract can you rely on the person having assented to all the clauses?
Gallen v. Allstate Grain Co. Ltd. (Alford Doesn’t Like?)
BC Court of Appeal Case (1984)
Ratio:
Outline for determining if oral representation is a part of contract and binding:
-
Determine whether oral representation is admissible
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(WRITE IN ALL THE EXCEPTIONS TO RULE)
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Are the plaintiffs seeking damages or equity for rescission (party must give back all benefit received?)
-
If seeking damages must show the misrepresentation was a warranty that adds to the main contract
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Who bears the risk that the statement might be wrong, the person who makes it or the person who acts on it?
-
If it must be taken to have been intended, and understood when said, to form a part of the contractual relations between the parties, then it is a warranty.
-
Determine how the warranty effects the main contract?
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Can it be harmoniously read to add to the contract? If yes then fine?
-
Is it contrary to the contract? If yes then:
-
Parol evidence principle applies: A collateral agreement cannot be established where it is inconsistent with or contradicts the written agreement
-
Evidence must be examined to determine if oral representation was intended to be consistent
-
The presumption is that the document is the whole contract
-
The strength of this presumption is strong if:
-
The oral rep allegedly contradicts the document
-
The oral rep allegedly contradicts an equally specific clause
-
The parties negotiated a specific contract
-
The strength of this presumption is weaker if:
-
The alleged oral rep adds to the document
-
The alleged oral rep contradicts a general (exemption) clause
-
The alleged oral rep contradicts a standard form contract
-
Examine evidence to determine if the oral representation was intended to prevail, presume in favor of the written document according to the factors above. "If on the evidence it is clear that the oral warranty was intended to prevail, it will prevail"
Facts:
-
The defendant sold seeds to farmers and bought crops
-
They discovered a large market for buckwheat in Japan and advertised to farmers in the Lower Fraser Valley to farm firstcrop buckwheat
-
The plaintiffs answered the advertisement
-
They attended a meeting
-
They asked about weeds
-
They were assured that weeds would not be a problem, the buckwheat was productive enough to smother the weeds.
-
They relied upon this assurance and signed an agreement
-
The Buckwheat was not more productive than the weeds
-
The plaintiffs sued for a bunch of reasons and won
Issue(s):
-
Is the evidence of the oral representation admissible
-
Is the oral representation a warranty?
-
Can the oral representation add to, subtract from, vary or contradict the signed document?
-
Is there a contradiction between the oral representation and the signed document?
Judgment: For Plaintiff; appeal dismissed
Reasons:
Is the evidence of the oral representation admissible?
-
The rule of evidence:
-
Subject to certain exceptions, when the parties to an agreement have apparently set down all its terms in a document, extrinsic evidence is not admissible to add to, subtract from, vary or contradict those terms
-
But there are exceptions if:
-
The agreement contains a warranty giving rise to a claim for damage
-
Evidence can be given of the representation
-
The pleadings are appropriate
-
The party on whose behalf the evidence is tendered asserts that from the factual matrix it can be shown that the document does not contain the whole document
-
Then:
-
The oral representation may either be:
-
Included in the document as part of the agreement
-
Or, may constitute a separate collateral-agreement
Is the Oral Representation a warranty?
-
A warranty will give rise to damages, an "innocent misrepresentation" gives rise to a claim in equity for rescission
-
The distinction turns on whether the representation became a part of the contractual relationship between the maker and the recipient
-
Factors:
-
Does the recipient make it clear that they consider the matter so important that they would not contract without the assurance?
-
"Justice Robertson said that the essence of a warranty is that it becomes plain by the words and actions of the parties that it is indeed that, in the purchase, the responsibility of soundness will rest on the vendor"
-
So:
-
Who bears the risk that the statement might be wrong, the person who makes it or the person who acts on it?
-
If it must be taken to have been intended, and understood when said, to form a part of the contractual relations between the parties, then it is a warranty.
Can the Oral Representation Add to, Subtract from, Very, or Contradict the Signed Document?
-
The crucial parol evidence principle of substantive law:
-
"A collateral agreement cannot be established where it is inconsistent with or contradicts the written agreement"
-
It does not matter if the oral representation constitutes a collateral agreement or is read into the original document
-
This principle is NOT absolute
-
It depends on contextual interpretation of the evidence given
-
"the principle in Hawrish is not a tool for the unscrupulous to dupe the unwary."
-
If the main contract is induced by an inconsistent oral misrepresentation, the main contract cannot stand
-
The presumption is that the document is treated as the whole contract
-
This presumption is strongest when the oral representation is alleged to be contrary to the document
-
This presumption is less strong when the oral representation is alleged to add to the document
-
This presumption is less strong when the parties use a standard form as opposed to negotiating an individual document.
-
This presumption is less strong when an oral representation is contrary to a general (exemption) clause than when it is contrary to a specific clause
Is there a contradiction between the oral representation and the signed document?
-
Oral rep: "Allstate warrants that weeds will not be a cause of loss; the buckwheat will grow up and smother the weeds."
-
Contract's clause: "23. Allstate gives no warranty as to the productiveness or any other matter pertaining to the seed sold to the producer and will not in any way be responsible for the crop"
-
Clause does not exclude ALL warranties, just warranties pertaining to the seed.
-
If the oral rep is a warranty (which the judge thinks it is) then, if possible, the warranty and contract should be read harmoniously.
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In this case they can because the warranty regards weeds, and the exemption clause regards the seed
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