Contractual Obligations – Prof. Helge Dedek Introduction 1

H. Dedek: Contractual Obligations 2008-2009

1.Introduction 1

CML – Bruker v. Marcovitz (2008) SCC CB 1 3

2.Formation of Contract: Moment of Responsibility 4

2.1.Intention to Create Legal Relations 6

CML – Carlill v. Carbolic Smoke Ball Co., [1893] 1 Q.B. 256 (C.A.): CB 106 6

CML – John D.R. Leonard v Pepsico, inc. United States District Court, Southern District of New York 88 F.Supp.2d 116 (S.D.N.Y. 1999), aff’d 210 F.3d 88 (2d Cir. 2000): CB 135 8

CML – Kleinwort Benson Ltd. v. Malaysia Mining Corp. BHD., [1989] 1 All E.R. 785 (C.A.): CB 140 9

2.2.Meeting of the Minds 10

CML – Raffles v. Wichelhaus (1864), 2 H. & C. 906 (Exch.): CB 142 10

CVL – Terrasse Holdings v. Saunders, Quebec, 1989 CB 144 12

Invitation to Treat (invitatio ad offerum) 13

CML – Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern), Ltd., [1953] 1 Q.B. 401 (C.A.): CB 179 13

CML – Entores v. Miles Far East Corporation, [1955] 2 Q.B. 327 (C.A.): CB 180 14

2.3.Revocation and Lapse 15

1.1.1Mailbox Rule 15

CML – Shatford v. B.C. Wine Growers Ltd., [1927] 2 D.L.R. (B.C.S.C.): CB 182 16

CML – Errington v. Errington and Woods, [1952] 1 K.B. 290 (C.A.): CB 197 18

CML - Dawson v. Helicopter Exploration, [1955] S.C.R. 808, [1955] 5 D.L.R. 404 19

2.4.The Mirror Image Rule and the Battle of the Forms 19

CML – Doughboy Industries, Inc., (1962), 233 NYS 2d 488 (C.A.): CB 181 24

2.5.Alternatives to Legal Contracts: The Gentlemen’s Agreement 25

2.5.1.The Option Contract 27

CVL – Cere c. Neely, [1980] C.S. 1160: CB 206 28

2.5.2.Agreements to Agree 28

CML – Empress Towers v. Bank of Nova Scotia [1991] 73 D.L.R. (4th) 400 (B.C.C.A.): CB208dv 29

3.Consideration and Formalities 29

3.1.Civil Law Cause 30

CVL – Hutchinson v. The Royal Institution for the Advancement of Learning, [1932] S.C.R. 57 31

CVL Law and Formality 32

CML and Gifts 32

3.2.Common Law Consideration 33

Origins of Consideration 33

3.2.1.Bargain Theory 34

CML – Holt v Feigenbaum, 52 N.Y. 2d 291 (N.Y. 1981): CB 225 35

CML – Hamer v. Sidway (1891), 124 N.Y. 538 (C.A.): CB 221 36

3.2.2.The Bargain Test 37

CML – Roscorla v. Thomas (1842), 3 Q.B. 234: CB 230 38

3.2.3.The Peppercorn Theory 38

CML – White (Executor) v. William Bluett (1853), 23 L.J. Ex. 36: CB 220 39

CML – Miami Coca-Cola Bottling Co. v Orange Crush Co. 40

3.2.4.Mutuality 41

CML – Wood v. Lucy, Lady Duff-Gordon (1917), 118 NE 214 (C.A.): CB 228 41

Mutual Obligation in Unilateral Cases 42

CML – Dahl v. HEM Pharmaceuticals Corp., United States Court of Appeals, Ninth circuit, 7 F. 3D 1399 (1993): CB 228 42

CML – Stott v. Merit Investment Corp. (1988), 63 O.R. (2d) 545 (C.A.): CB 232 43

3.2.5.Pre-Existing Duty Rule 44

CML – Harris v. Watson (1791), 170 E.R. 94 (H.L.): CB 231 44

Stilk v. Myrick, [1809] EWHC KB J58, (1809) 170 ER 1168; KB 45

CML – Kirksey v. Kirksey 8 Ala 131; 1845 Ala.: CB 245 45

CML – Gilbert Steel Ltd. v. University Construction Ltd. (1976), 12 O.R. (2d) 19 (C.A.): CB 234 46

CML – Williams v. Roffey Bros and Nicholas Ltd., [1991] 1 Q.B. 1 (C.A.): CB 238 47

3.3.Promissory Estoppel 49

CML – Central London Property Trust v. High Trees House, [1947] K.B. 130: CB 236 50

Promissory Estoppel in Different Jurisdictions 51

CML – Walton Stores (Interstate) Ltd. v. Maher., (1988) C.L.R. 387 (H.C.A): CB 241 55

4.Contract Drafting and Interpretation 56

CML – Royal Bank of Canada v. Kiska 57

4.1.Incorporation of Terms 65

CVL - Dell Computer Corp. v. Union des consommateurs, [2007] SCC - Deschamps J. 66

CML – Thornton v. Shoe Lane Parking Ltd., [1971] 2 Q.B. 163 (C.A.) 67

CML – McCutcheon v. David MacBrayne, Ltd., [1964] 1 All E.R. 430 (H.L.): CB 287 68

CML – British Crane Hire Corporation Ltd. v. Ipswich Plant Hire Ltd., [1975] Q.B. 202 (C.A.): CB 290 70

4.2.Doctrine of Good Faith 71

4.2.1.Good Faith in the Civil Law 72

4.2.2.Good Faith in the Common Law 73

Good Faith in Quebec Case Law 75

CVL – B.C.N. v. Soucisse, [1981] 2 S.C.R. 339: CB 295 75

CVL – Houle v. CNB, [1990] 3 S.C.R. 122: CB 314 77

CVL – Provigo Distribution v Supermarche ARG. [1998] R.J.Q. 47 (C.A.): CB 344 78

Common Law and Good Faith 80

CML – McKinlay Motors Ltd. v. Honda Canada Inc. (1989), 46 B.L.R. 62 (Nfld. S.C.): CB 308 80

CML – Martel v. Canada, [2000] 2 S.C.R. 860: CB 336 81

CML – Transamerica Life Canada Inc. v. ING Canada Inc., [2004] 68 O.R. 457 (C.A.): CB 352 83

5.Policing the Agreement 85

5.1.Public Policy and Community Values 86

1.1.2CVL - Severability 88

1.1.3CML – Doctrine of Severance 88

CVL - Brasserie Labatt v. Villa, [1995] C.A. Que – CB2: 5 90

CVL - Cameron v. Canadian Factors, [1971] SCC – CB2: 10 92

CML - In The Matter of Baby M, [1988] Supreme Court of New Jersey CB2: 19 93

5.2.Vitiation of Consent 95

CVL – Thibodeau c. Thibodeau, [1961] – SCC – CB2 :39 96

5.3.Fear/Crainte (CVL)/Duress(CML) 97

5.3.1.Fear/Crainte (CVL) 97

1.1.4CVL – J.J. Joubert c. Lapierre et Lapierre, [1972] CS Que. CB2 : 41 98

5.3.2.Duress (CML) 100

CML – Atlas Express Ltd. v. Kafko Ltd., [1989] QB 833, CB2: 44 101

5.4.Undue Influence (CML) 101

CML – Lloyds Bank Ltd. v. Bundy, [1975] QB 326 (CA), CB2:47 102

CML – Barclays Bank v. O’Brien, [1994] 1 AC 180 (HL), CB2: 51 104

5.5.Lesion (CVL)/Unconscionability (CML) 105

5.5.1.Unconscionability (CML) 105

CML – Harry v. Kerutzinger, [1979] 9 BCLR 166 (CA), CB2 : 53 106

CML – Toker v. Westerman, 1970, 274 A.3d 78 (NJDC) CB2 : 60 107

5.5.2.Lesion (CVL) 108

CVL – Gareau Auto v. B.C. Impériale de Commerce, [1989] RJC 1091 (CA), CB2 : 61 111

CVL – Slush Puppie c. 153226 Canada Inc., [1994] RJQ 1703 (CQ), CB: 67 113

CVL – Quebec (PG) c. Kechichan, [2000] JQ no 2049 (CA), CB2: 70 114

5.6.Fraud/Dol , Error (CVL)/Misrepresentation/Mistake (CML) 115

5.6.1.Fraud/Dol (CVL) 115

CVL – Creighton v. Grynspan, [1987] R.J.Q. 527 (C.A.): CB2 76 116

CVL – Tremblay v. Les Pétroles Inc., [1961] B.R. 856 (C.A.): CB2 80 118

5.6.2.Misrepresentation (CML) 119

CML – Sarvis v. Vermont State Colleges, 172 Vt. 76, 772 A.2d 494 (2001) – CB2 87 120

CML – Esso Petroleum Co. Ltd. v. Mardon, [1976] Q.B. 80 (C.A.): CB2 89 122

CML – V.K. Mason Construction Ltd. v. Bank of Nova Scotia, [1985] 1 S.C.R. 271: CB2 93 123

5.7.Duty to Disclose 126

5.7.1.CVL Duty to Disclose 126

CVL - Bail v. Bank of Montreal, [1992] SCC CB2: 103 127

5.7.2.CML Duty to Disclose 128

Theorists on Economic Efficiency and the Duty to Disclose in CML and CVL 129

5.8.Error (CVL)/Mistake (CML) 130

5.8.1.Error (CVL) 130

CVL – Rawleigh v. Dumoulin, [1926] S.C.R. 551: CB2: 97 132

CVL – Huot v. Ouellette, [1981] C.S. 872: CB2 : 141 133

CVL – Yoskovitch v. Tabor, [1995] R.J.Q.1397 (Sup. Ct.). 135

5.8.2.Mistake (CML) 137

CML – Sherwood v. Walker (1887), 22 NW 919 (Mich S.C.): CB2: 99 139

CML - Bell v. Lever Bros., [1932] A.C. 161 (H.L.) CB2: 138 140

6.Change in Circumstance, Frustration, Hardship 143

6.1.Impossibility of Performance in CVL 143

CVL – Otis Elevator Co. Ltd. v. A. Viglione & Bros. Inc., Mtl., 500-09-000316-786 (C.A.): CB2 22 144

6.2.CML Frustration 145

CML – Alcoa v. Essex Group, 499 F.Supp. 53 (Penn S.C. 1980): CB2 224 146

CML – Amalgamated Investment and Property v. John Walker & Sons Ltd., [1976] 3 All E.R. 509 (C.A.): CB2 225 147

6.3.CML Impracticability 148

CML – H.R. & S. Sainsbury Ltd. v. Street, [1970] 3 All E.R. 1126 (Q.B.): CB2 233 149

7.Breach of Contract 151

7.1.Termination Flowing from Breach – CML 152

CML – Hong Kong Fir Shipping Co. v. Kawasaki Kisen Kaisha Ltd., [1962] 2 Q.B. 26: CB2 258 152

CML – Cehave NV v. Bremeer Handelgeselleschaft mbH, [1975] 3 All E.T. 739: CB2 254 154

7.2.CVL Breaches of Contract 155

8.Remedies to Breach 157

8.1.Specific Performance 157

8.1.1.Specific Performance in CVL 158

CVL - La Compagnie de Construction Belcourt c. Golden Griddle Pancake House Ltd. 1988 CB2: 272 158

8.1.2.Specific Performance in CML 160

CML - Co-Operative Insurance Society v. Argyll Stores (Holdings) Ltd. CB2: 268 160

CML – Warner Bros. Pictures v. Nelson, [1937] 1 K.B. 209: CB2 261 162

8.2.Damages 164

8.2.1.Damages in CVL 164

CVL - Ciment Quebec Inc. v. Stellaire Construction, 2002 Cour d’appel, CB2: 299 165

8.2.2.Damages in CML 166

CML – Hadley v. Baxendale (1854), 9 Exch. 341: CB2 211 167

CML – Victoria Laundry v. Newman Industries Ltd., [1949] 2 K.B. 528: CB2 220 169

CML – Koufos v. C. Czarnikow (The Heron II), [1969] 1 A.C. 350: CB2 224 172

CML - Hawkins v. McGee Supreme Court of New Hampshire 1929 - CB2: 245 176

CML - Security Stove & Mfg. Co. v. American Ry. Express Co., USA – CB2: 181 179

1.2Non-Pecuniary Damages (CML) 180

CML - Ruxley Electronics v. Forsyth, [1995] H.L., Common Law – CB2: 374 181

CML – Jarvis v. Swan Tours, [1972] 1 A.L.L. ER 71: CB2 241 182

Farley v. Skinner [2001] UKHL 49, [2002] 2 AC 732 (H.L.) 183

8.2.3.Evolution of Damages in Canadian CML 184

CML – Vorvis v. Insurance Corporation of British Columbia [1989] S.C.R. 184

CML – Fidler v. Sun Life Assurance Co. of Canada [2006] SCC 30 187

8.2.4.Penalties and Liquidated Damages (CML) 189

H.F. Clarke Ltd v. Thermidaire Corporation Ltd., [1976] 1 S.C.R. 319 190

8.2.5.Penalties vs. Liquidated Damages (CVL) 192

151276 Canada Inc. c. Verville [1994] R.J.Q. 193

9.Third Parties and the Relative Effect of Contracts 194

9.1.CVL Approach 194

CVL - General Motors Products of Canada Limited v. Kravitz [1979] 1 S.C.R. p. 323 CB 194

9.2.CML Approach 195

CML - Beswick v. Beswick, [1966] 3 WLR 396 195

CML - Beswick v. Beswick, [1968] HL 196

CML - London Drugs Inc. v. Kuehne & Nagel International Ltd. [1992] 3 S.C.R. 299. 197