2. Minors Rex v. Rash
Facts:
Issue:
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Was the magistrate right in holding as a matter of law that a person under the age of 21 years can be convicted of the offence of removing, concealing, or disposing of any of his property, with intent to defraud his creditors?
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Are persons who have supplied goods to an infant trader for the purposes of his trade, and who have not been paid, "creditors' within the meaning of sec. 417?"
Decision:
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Those who supply goods to "infant" traders are not creditors
Reasons:
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An infant cannot enter into a contract of purchase in the strict sense. If an infant receives goods from someone that satisfies the infant's needs, the court will oblige them to repay the supplier, but there was not a contract in the strict sense
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"the obligation arises re and not consensu"
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The law protects infants so as they may have an opportunity to consider the contract and decide whether to ratify it when they reach adulthood.
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So this just means prior to this there is not a proper contract?
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Case law from Mississippi:
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A man who had contracted debts as an infant, conveyed a life interest in his property to his daughter, with reversion to himself, in order to prevent "creditors" from taking his property
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Court upheld conveyance stating the suppliers were not "creditors"
Notes:
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Repudiation must be given within a reasonable time of reaching full age (adulthood).
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This is true in situations in which the contract deals with acquiring an interest in permanent property which has obligations attached.
Nash v. Inman
Ratio:
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An infant is liable for goods sold and delivered provided that they are necessaries of life
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The burden is on the supplier to prove the goods were necessaries of the infant at the time of purchase
Facts:
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The defendant was an undergraduate and university
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The plaintiff sent an employee to the university to solicit business from students
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The plaintiff was a tailor
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The plaintiff supplied the defendant with 145 pounds of clothing
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The plaintiff is trying to get payment
Issue:
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Were the goods sold necessaries within the meaning of the definition in s.2 of the [relevant statute]
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Whose duty is it to prove that they are necessaries?
Decision:
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For Defendant, no evidence that the goods were necessary
Reasons:
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"Necessaries in this section means goods suitable to the condition in life of such infant or minor or other person, and to this actual requirements at the time of the sale and delivery."
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Judge does not think the plaintiff can merely argue that the goods were "suitable to the condition in life" of the infant at the time of purchase
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Must also show the goods are necessary
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Lord Esher: The plaintiff must show not that they were necessary in distinction from luxuries, but that they were actually necessary to the defendant at the time of purchase
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"If an infant can be made liable for articles which may be necessaries without proof that they are necessaries, there is an end to the protection which the law gives him"
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An infant, like a lunatic, is incapable of making a contract of purchase in the strict sense of the words; but if a man satisfied the needs of the infant or lunatic by supplying to him necessaries, the law will imply an obligation to repay him for the services rendered, and will enforce that obligation against the estate of the infant or lunatic. The consequence is that the basis of the action is hardly contract. Its real foundation is an obligation which the law imposes on the infant to make a fair payment in respect of needs satisfied
3. Forfeitures and Penalty Clauses
Shatilla v. Feinstein
Ratio:
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The court may decline to construe the words "liquidated damages" according to their ordinary meaning and may treat such a sum as a penalty if there is the potential for varying breaches some of which are trivial and some which are significant.
Facts:
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Feinstein sold his wholesale dry goods business to Shatilla
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Feinstein agreed to not compete within the corporate limits of Saskatoon for 5 years
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Feinstein agreed to pay $10,000 on breach of this covenant, recoverable for each breach as liquidated damages, and not as a penalty
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Feinstein became involved with a business that also engaged in the wholesale dry goods business
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Shatillah sued to recover the $10,000
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Trial judge claimed the covenant was a penalty, not liquidated damages
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Shatillah appeals claiming the covenant was valid pre-estimate of liquidated damages
Issue:
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Is the sum fixed by the covenant a penalty? Or is it recoverable by way of liquidated damages?
Judgment:
Reasons:
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If sum is in excess of any actual damage that could possibly arise it is not a good faith estimate
-
The questions arise:
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Is the breach one that could only occur once?
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Is the breach one that could occur repeatedly?
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Could the breach occur repeatedly with varying effects?
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The covenant in the contract could have breaches of varying severity but the damages paid is always $10,000
-
The court may decline to construe the words "liquidated damages" according to their ordinary meaning and may treat such a sum as a penalty if there are varying breaches some of which are trivial and some which are significant.
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If the damages caused by a breach could never reach the sum stated then the conclusion that the sum is a penalty can be reached
H.F. Clarke Ltd. v. Thermidaire Corp. Ltd.
Ratio:
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The Court will read "liquidated damages" as a penalty if the amount exacted is a grossly excessive and punitive response to the breach in question.
Facts:
-
Clarke agrees to distribute Thermidaire's products
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Agrees to not sell competing products
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If he breaches he is to pay "liquidated damages" equal to the gross trading profit realized through the sale of such competitive products (239,449.05)
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Clark breaches
Issue:
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Should the liquidated damages be enforced when they are grossly disproportionate to the breach
Judgment:
Reasons:
"The exaction of gross trading profits as a penalty in this case because it is in my opinion, a grossly excessive and punitive response to the problem to which it is addressed.
Stockloser v. Johnson
Ratio:
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When a buyer is attempting to recover money paid to a seller in restitution
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If there is NO forfeiture clause:
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If money is paid and the buyer defaults the buyer cannot recover money so long as the sell keeps the contract open and available for performance
-
If the seller rescinds the contract or treats it as ended due to the buyer's default, then the buyer can recover the money
-
If there IS A forfeiture clause (Or money paid expressly as deposit):
-
The buyer who is in default cannot recover the money at all
-
The buyer MAY have a remedy in equity IF:
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The forfeiture clause is of a penal nature (the sum is out of all proportion to the damage); and,
-
It must be unconscionable for the seller to retain the money
Facts:
-
Plaintiff agreed to buy plant and machinery from defendant
-
Price payable in instalments
-
In case of default by plaintiff, defendant could, after giving notice, retake possession of machinery and retain payments made by purchaser
-
Plaintiff defaulted, no claims return of payments made
Issue:
-
Is the forfeiture clause a penalty?
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Should the forfeiture clause be read as a penal
Judgment:
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For Defendant, defendant can keep the money
Reasons:
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This is not like the previous cases where the seller was trying to impose a penalty on the buyer
-
"the courts decline to give [the seller] their aid because they will no assist him in an act of oppression"
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In this case a buyer is seeking restitution of money already paid
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This requires different principles
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If there is NO forfeiture clause:
-
If money is paid and the buyer defaults the buyer cannot recover money so long as the sell keeps the contract open and available for performance
-
If the seller rescinds the contract or treats it as ended due to the buyer's default, then the buyer can recover the money
-
If there IS A forfeiture clause (Or money paid expressly as deposit):
-
The buyer who is in default cannot recover the money at all
-
The buyer MAY have a remedy in equity IF:
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The forfeiture clause is of a penal nature (the sum is out of all proportion to the damage); and,
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It must be unconscionable for the seller to retain the money
Forfeiture/Penalty notes
Page 547:
Penalty:
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Payment of money stipulated in order to dissuade the party from offending
Liquidated damages:
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A genuine covenanted pre-estimate of damage
Ask Alford about the doctrine of unconscionability and if we need to know it
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