Law of contract Review Example

Fuller and Perdue, “The Reliance Interest in Contract Damages” There are three principle purposes in awarding contract damages: restitution interest – object is the prevention of unjust enrichment by the defaulting promisor at the expense of the promisee reliance interest – object is to put the plaintiff in a good position as he was before the promise was made expectation interest – object is to put the plaintiff in as good a position as he would have been had the defendant performed the promise Wertheim the ruling principle of awarding monetary damages for breach of contract is to place the plaintiff in the same position as he would have been if the contract had been performed Anglia Television Ltd. Facts:

P is suing D for wasted expenditure arising from D’s breach of K to star in their production wasted expenditure can be recovered when it is wasted by reason of the defendant’s breach of contract and when it is reasonably imputed that if the contract was broken, the expenditure would be wasted cannot prove lost profits so entitled to claim reliance interest Damages for Pre-Contract Expenditure, A. I.

Ogus if the plaintiff is allowed to elect between his reliance and expectation interest, he may be put in a better position than if the defendant had performed his contract Bollenback v. Continental Casualty Co. Facts: P was hospitalized while health policy in effect, D refused to pay, P sued to rescind K. The plaintiff is justified to rescind k and to claim restitution when the breach is substantial; however parties are only given damages for the claims they did not receive benefits for Bolway Logging v. Domtar Facts:

A logging contract was terminated by the timber owner’s own breach when a contract is breached, but the appellant is losing not because of the respondent’s breach, but because of an improvident contract, the respondent will not be held liable to pay damages for breach of contract expectancy with a vengeance Pitcher v. Shoebottom Facts:

P had an oral agreement to buy land, but D breached K by selling it to someone else damages are awarded to put the plaintiff in the same position he would have been in at the time when the contract was breached, this is done by taking the different between the contract price and the value of the land on the date of the breach fiscal expectation Hawkins v. McGee Facts:

A Dr. promised that P’s hand would be 100% after surgery, P believed and gave consent to op. when the defendants words are done with the intention of them being accepted at face value and are used as a means of inducing consent that is accepted by the plaintiff, the utterance represents a contractual obligation PROBLEMS IN MEASURING DAMAGES Cost of Substitute Performance or Economic Value? Carson v. Willits Facts: A K was made to bore 3 oil wells, but D only drilled one and refused to complete the others. the difficulty in estimating the amount of damages to be awarded should not be grounds for refusing to award any damages Groves v.

Wunder Facts: D agreed to remove gravel uniformly, but deliberately removed the best, devaluing land. the rule of damages to be applied when the defendant’s intentional breach results in a defect is that of the cost of the remedy and completion of the project that was contracted to be done Peevyhouse would be unjust enrichment for the plaintiff to give cost of performance where it only is increasing the land by a small amount Lost Volume The Sale of Goods Act use of the expectation principle when there is a breach involving the sale of goods.

Thompson v. Robinson Facts: P is suing D for lost profits due to D’s refusal to accept the car he purchased. when there is no actual market to which the plaintiff can quickly dispose of the product the defendant was contracted to buy, the defendant must compensate the plaintiff for lost profits Charter v. Sullivan Facts: Similar to Thompson v. Rob, but there is evidence that there was a market for the car. when demand exceeds supply, only nominal damages are awarded for breach of contract Loss of Chance Chaplin v. Hicks.

Facts: P was deprived opportunity to be interviewed; “beauty contest case”. 4 criteria must be met to recover damages for a lost chance: (1) Plaintiff must establish, on balance of probabilities, that ‘but for’ defendant’s wrongful conduct, the plaintiff had a chance to obtain a benefit or avoid a loss (on balance of probabilities) (2) Plaintiff must show that the chance lost was sufficiently real and significant to rise above mere speculation (3) Plaintiff must demonstrate that the outcome, that is, whether the plaintiff would have avoided loss or made gain depended on someone or something other than the plaintiff himself (4).

Plaintiff must show that the lost chance had some practical value P was awarded proportionate damages for her loss of chance Multi-Malls v. Tex Malls Facts: D’s breach resulted in a 20% change of rezoning the land for valuable use awarded damages for loss of chance, because lost an opportunity to profit of 20% REMOTENESS B. C. Saw Mills Facts: P sued D, blacksmith, for unskillful repair causing his late arrival to his marriage ceremony.

parties should not be held liable for damages that were not reasonably foreseeable, within the contemplation of the parties at the time the contract was made Hadley v. Baxendale Facts: P sent shaft to be repaired, but the delivery was delayed, thereby delaying final delivery. damages should be such as may fairly and reasonably be considered as either: a) arising naturally, i. e. according to the usual course of things from such breach of contract itself, or b) such special circumstances as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract

Horne v. The Midland Railway Company Facts: P contracted to manufacture and deliver shoes. Gave notice to stationmaster but deliver late. Special circumstances must be indicated if the P hopes to recover exceptional damages Victoria Laundry Facts: D sold P boilers and delivered 5 mos late. D knew nature of immediate use and P’s occupation. damages are assessed based on what the defendant knew or should have known at the time the contract was made based on what was on the cards or a serious possibility lower threshold of liability Munroe.

Facts: P agreed to rent 2nd hand tractor to D, and tractor broke within 2 days. D claimed for lost profits. even when special circumstances leading to such loss have been communicated, it may be held that the nature of the communication was not sufficient needed to define the scope of the contract Scyrup v. Economy Tractor Parts Facts: P purchased 2nd hand attachment for tractor, which was damaged. P lost contract with 3rd party. where the defendant has actual knowledge of the special circumstances, they should be liable for damages arising from the breach.

Koufos v. Czarnikow Facts: P used D’s ship to deliver goods. Vessel deviated, causing delay. D knew there was a market. the market price fluctuations were or should have been in the contemplation of the parties and therefore, the defendant should be held liable for lost profits Cornwall v. Purolator Facts: P contracted D to deliver tender by specific time, which arrived late and resulted in loss profits.

P informed D of importance of K and D reassured P that it would be delivered on time.where damages resulting from the breach are reasonably contemplated by the parties and special circumstances are known, the defendant will be liable for the lost profits which in fact flowed from the breach RESTITUTION use restitution in cases of: unjustly enriched from breach ? payment for services skimped performance ? give back the amount of expenditure he saved by the breach do the very thing you were contracted not to do ? disgorgement of profits Definition ? a person who has been unjustly enriched at the expense of another is required to make compensation to the other Deglman v.

Guaranty Trust Co Facts: Nephew is suing because he made verbal K with deceased aunt to perform services for property. the deceased received the benefit of performance and therefore, she has the obligation to pay the fair value of services rendered to her where one party receives a benefit as a result of a contractual agreement and the other party breaches it that party is entitled to compensation for the services given the contract for the property is unenforceable due to Statute of Frauds which says that no such action can be brought unless it is evidenced by written documentation.

Hunt v. Silk Facts: D agreed to rent house to P and make repairs. P moved in and D refused to make repairs. where a contract is to be rescinded, it must be rescinded in full and the parties put in status quo, the parties could not be put in the same position as before the contract, and therefore no restitution can be paid not a failure total of consideration seems likely that it would be more just in Canada to subtract what you did use from your restituionary claim.

Attorney General v. Blake Facts: Blake was a member of intelligence who sold/published secrets and made a profit. where an individual earned his profit by doing the very thing he had promised not to do and the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity, he is entitled to recover profits INTANGIBLE INJURIES Jarvis v. Swan Tours Ltd.

Facts: plaintiff hoped for a pleasurable vacation, based on claims made in the defendants brochure, but was gravely disappointed awarded plaintiff damages resulting from mental aggravation, set precedent in England that intangible damages may be awarded for contractual breach if nature of contract was one of peace of mind (insurance) or entire purpose was to provide pleasure (vacation) only applies to foreseeable intangible injuries Vorvis v. Insurance Corp.

Facts: plaintiff was abruptly fired without cause and without reasonable notice, prior to dismissal, employer engaged in heavy-handed supervision of plaintiff, made claim for wages and for punitive and aggravated damages since contract never involved clause prohibiting heavy-handed supervision, such conduct by employer does not represent breach of contract, and no damages awarded for this conduct the action complained of must itself constitute breach of contractual duty compensation for intangible injuries is possible, even in wrongful termination cases but only if such injuries are foreseeable at time of contracting PUNITIVE DAMAMGES.

Whitten v. Pilot Insurance Co. Facts: claimant’s house had been destroyed by accidental fire, and her claim under her insurance company was met with scepticism and harsh treatment the defendant insurance company blamed the plaintiffs for arson and terminated interim payments to the claimant, knowing full well that the plaintiff and her husband were in a precarious financial state based on court’s belief that defendant had acted in “malicious, oppressive and high-handed manner that offends court’s sense of decency” punitive damages, although rare, are allowed in cases of extreme misconduct?

and there is no need to prove a corresponding tort what is necessary for punitive damages, in addition to breach of contract constituting failure to pay claim, is a further independent actionable wrong, here the defendant’s behaviour constituted breach of insurer’s duty to act in good faith and engage in fair dealings MITIGATION OF LOSS Payzu Limited v.

Saunders Facts: a buyer of goods confronted with a wrongful breach by the seller, was obliged to accept an offer by the seller to continue their relationship on altered terms rule ? victim of a contract breach must take reasonable steps to mitigate loss, and any losses accruing from failure to do this aren’t compensable SPECIFIC PERFORMANCE Cohen v. Roche

Facts: contract for sale of goods, where the seller breached, refusing to deliver chairs to the plaintiff no specific performance awarded, because chairs were ordinary and substitutes were readily available, therefore expectancy damages would suffice in sale of goods cases, specific performance is only available where plaintiff demonstrates that the subject matter is not readily available in marketplace, typically when goods are unique/unusual equitable remedy, which is only available when damages at common law are inadequate Warner Bros. v. Nelson.

Facts: defendant actress entered into contract with plaintiff to appear exclusively in their films for certain period of time, and agreed that she would not provide her services to anyone else, defendant breached contract by providing services elsewhere courts do not use specific performance when it is a contract for personal service, akin to forced servitude, however courts will enforce an injunction preventing the defendant from rendering any services for anyone other than the plaintiff as long as it does not cause defendant to remain idle or result in a roundabout way of specific performance.

THE ENFORCEABILITY OF PROMISES THE DOCTRINE OF CONSIDERATION The Bargain Theory Definition ? Lord Dunedin (taken from Pollock) on consideration ? “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought and the promise thus given for value is enforceable” White v.

Bluett Facts: D, son, agreed to cease complaining to father in return for discharge of promissory note debt. where an individual agrees to refrain from doing something that he had no right to do, it cannot be found that there was sufficient consideration the forbearance of not complaining did not constitute consideration Hamer v. Sidway Facts: D promised nephew money to refrained from drinking/smoking/etc until age 21. Uncle died. it is not relevant if any benefit was conferred to the promisor, it is the fact that the promisee’s freedom was limited upon the faith of the agreement (forbearance) that constitutes consideration Thomas v. Thomas.

Facts: Husband of P verbally contracted to will his house to wife. Executed in writing for yearly rent. according to the peppercorn theory, as long as something is given in return for the promise, the amount of the payment is not important, however, this cannot include giving money for money there is some value moving from the plaintiff which constitutes good consideration MUTUAL PROMISES The Great Northern Railway Company v. Witham Facts: P advertised for tenders for supply of goods to be delivered at station.

Tender accepted and several orders for iron were given by the co.but ultimately D refused to supply more. made a tender offering to supply the plaintiff for that period at certain fixed prices and the company accepted his offer when an offer is unilateral (“if you will do x, I will give you y”) one parties doing x is a sufficient consideration to make the promise enforceable where a contractor offers to supply goods at a certain price and the purchasing body gives him an order for goods during the stipulated time, then he is under obligation to supply the goods in accordance with the order, but apart from that nobody is bound Tobias v. Dick.

Facts: K was drawn up by P, who tricked D into signing it. an agreement lacks mutuality when an agreement imposed no obligations on the plaintiff hoping to enforce the promise Wood v. Lucy Facts: P had agreement with D to exclusively market her designs. D placed endorsement on fabrics of others and did not share profits as per agreement. there can be an implied obligation in an agreement to take reasonable efforts to bring profits and revenues into existence and therefore constitutes consideration that is necessary to determine the presence of mutuality PRE-EXISTING DUTY Harris v. Watson.

Facts: D promised to pay P (sailor) more to do work when ship was in danger. when there is a pre-existing duty that obliged one to fulfill a certain task, a promise to pay more money for the same task does not constitute good consideration Stilk v. Myrick Facts: During voyage, several crew left and captain agreed to remaining crew to pay them extra wages. where a pre-existing duty exists a new contract can not be created without new consideration Smith v. Dawson Facts:

P agreed to build house for D; fire occurred and D received insurance. P said he would only complete house if he was paid the insurance money. the promise cannot be enforced, because it lacks consideration since it involves paying the plaintiff for what he was already obliged to do Raggow v. Scougall Facts: P agreed to a smaller salary during wartime, but sued to receive the pre-K former rate. where there is mutual consent to create a new agreement, it has the effect of tearing up the old agreement and providing consideration for the new one mutual rescission is good consideration to end the old contract Gilbert Steel v. University Construction Facts: P contracted to deliver D steel.

Price went up; oral agreement that D would pay increased price.when there is a pre-existing to perform a certain task, an agreement to give a “good price” on future deals is not good consideration mutual rescission has to be real and not implied Williams v. Roffey Facts: P contracted by D to refurnish apts. P encountered financial difficulty and asked for more money. D agreed to pay more b/c of penalty clause in other contracts. Then D refused to pay. new contracts made with out coercion or duress creating a benefit or obviating a disbenefit is good consideration new exception to the pre-existing duty rule where:

A has entered into a contract with B At some time before A has completely performed his obligations under the contract, B has reason to doubt whether A will or will not be able to complete his side of the bargain B thereupon promises A additional payment for A to finish (pre-existing duty) B obtains a benefit from giving this promise or avoids a detriment B’s promise is not given under duress or fraud on the part of A, then the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding Pao On economic duress is a factor that may render a contract unenforceable, i. e. when there is coercion of will and the K was not voluntary Foakes v.

Beer Facts: P promised to pay whole sum borrowed in return for D not suing for interest, but D sued anyway acceptance of a lesser sum cannot be good consideration for discharge of a greater debt no consideration given because P had pre-existing duty to pay the debt owed History/Evolution of Foakes v. Beer the Doctrine of Accord and Satisfaction (outside of the consideration doctrine) says that if there is accord (agreement or a different method of payment) and there is satisfaction, then it ought to be considered good consideration however, the case of Foakes v.

Beer seems to negate this principle showing that accord and satisfaction is not an exception to the consideration principle The Mercantile Law Amendment Act (1990) 16. Part performance of an obligation, either before or after breach, when expressly accepted by creditor in satisfaction, though without any new consideration, shall be held to extinguish obligation Law Revision Committee, Sixth Interim Report businessmen recognize and act on ground that prompt payment of part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole this should be legislation COMPROMISES Cook v. Wright Facts: D was an agent who gave promissory notes in exchange for reduced amount/time to pay.

D knew he wasn’t legally obligated as agent, but gave notes to avoid hassle of owner being sued. there was no mistake of law or fact on the part of the defendant and therefore his consideration involves preventing the plaintiff from taking proceedings against the real owner in cases where the wrong individual is being held liable, any compromise made, where the defendant is aware of this mistaken liability and is gaining something in return will constitute good consideration the real consideration therefore, depends, not on the actual commencement of a suit, but on the reality of the claim made and the bona fides of the compromise Fairgrief v.

Ellis Facts: D verbally agreed to give P home if she would become his housekeeper. D then asked her to give up rights under old agreement for a set amount provided she left immediately. even when one is not in law bound to perform the first agreement, a promise made to relieve oneself of an obligation believed to be binding constitutes good consideration for the new promise the first agreement for the house cannot be enforced under the Statue of Frauds which requires transfer of property to be in writing CHARITABLE SUBSCRIPTIONS Dalhousie College v.

Boutilier Estate Facts: D promised to donate money to charity but died before payment was made. charitable subscriptions are gifts and therefore promises to donate do not constitute good consideration detrimental reliance will not constitute good consideration unless it was specifically agreed to use the money for a specific purpose INTENTION determine whether a reasonable person in the position of the promisee would consider that the promisor “intended” to make a promise that would affect the promisor’s legal status Balfour v. Balfour.

Facts: Husband agreed to give allowance to support his wife overseas, but ceased to provide allowance. a contract cannot be enforced if the parties did not intend for the contract to have legal consequences it is a domestic situation among spouses where they never intended these arrangements to be legally binding Merritt v. Merritt Facts: Separated husband/wife had an K where he would transfer home ownership if she payed mtg. the contract is enforceable, because as separated spouses, they were bargaining with the intention that their agreement be legally binding Family Law Act.

55(1) A domestic contract and an agreement to amend or rescind a domestic contract are unenforceable unless made in writing, signed by the parties and witnessed Jones v. Padavatton Facts: Mother breaches K, a promise to support daughter provided she moved/left job/started studying. the situation was one of a family arrangement dependent on good faith of the promises and not binding rigidity the dissent writes that it should be enforceable, because of the daughter’s extreme reliance on the mother and her act of forbearance also at issue was whether the agreement was sufficiently certain to be enforceable.

Rose and Frank Company v. J. R. Crompton & Brothers Facts: Parties wrote up agreement which was specifically stated not to be formal/legal. the contract is not binding, because the clause establishes that there is a clear intention that the agreement is based on faith and does not have legal consequences go by the first clause about whether it is binding or not NON-BARGAIN PROMISES The Seal a contract under seal derives its validity from its form alone the law will enforce a contract under seal even without consideration Fuller, “Consideration and Form”.

The Evidentiary Function ? provides evidence of the existence of the contract The Cautionary Function ? acts as a check against inconsiderate action, encourages deliberation The Channeling Function ? signalizes the enforceable promise, expression of intention Past Consideration Lampleigh v. Brathwait Facts: D requested P’s services, and offered money after completion of task. Subsequent refusal to pay. when the initial service is requested by the party who later promises to pay a fee, the initial act couples itself with the subsequent promise and renders it good consideration Pao On for past consideration to constitute good consideration certain factors must be in place: 1. the act must have been done at the promisor’s request.

2. the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit 3. payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance Roscorla v. Thomas P bought a horse from D with no promise re: quality. Later D promised P it was in good condition but it was not. in general, past consideration is no consideration.

Restatement of Contracts a promise made in recognition of past consideration is binding if it is necessary to prevent injustice past consideration is not binding if it is a gift or if the promisor has been unjustly enriched it will not be enforceable if the value of the promise is disproportionate to the benefit gained Subsequent Reliance Gratuitous Undertakings Baxter Facts: D made gratuitous promise to tell companies that P was placing extra insurance $ on mills; D failed to carry out this promise and companies refused to pay extra/new premiums.

Although there was no consideration for the contract as it was completely voluntary, the defendant undertook the business and performed it negligently and is therefore responsible De La Bere v. Pearson Facts: P followed a newspaper ad for financial advice and ended up losing his investment. a contract may rendered enforceable when the defendant acquires some benefit from an act; i. e. newspaper consented to publication of ad to increase own profits.

Hedley today, the result can and should be achieved by the application of the law of negligence Estoppel by Representation Jordan v. Money, Re Hudson Facts re Jordan: creditor agreed to forgive debt, so P decided to incur other costs, however creditor later demanded payment a future promise to do something is not made enforceable by a promise, since (at the time) estoppel by representation only applied to statement of facts waiver would not apply to a promise to accept a partial payment as a full discharge of an obligation Skidmore

Facts: D promised P sum of $ to buy warehouse; P contracted to buy warehouse after partial payment but then D refused to pay the remaining sum. one who has induced another party to act to his detriment on the faith of a statement of fact will not be allowed in subsequent litigation to deny the truth of the fact in question courts often turn promises into statement of facts so that doctrine of estoppels can be applied when has been subsequent detrimental reliance Waiver.

Hughes v. Metropolitan Rwy Co. Facts: landlord gave notice that repairs had to be made, tenant replied by requesting further negotiations, landlord treated lease as forfeited bc/ repairs were not made and ejected tenant if parties who have enter into definite and distinct terms involving certain legal results afterwards by their own act enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising underthe contract will not be enforced, the person will no longer be allowed to enforce those rights where it would be  inequitable having regard to the dealings that have then taken place between the parties promise or undertaking need not be explicit, can be inferred Central London v. High Trees House Ltd. Facts:

P landlord agreed to reduce rent for D’s lease of flats during wartime but later claimed full rent. rule of promissory estoppel created promise made that is intended to be binding and intended to be acted upon, and is in fact acted upon, is binding when promise has been subsequently relied upon would serve as an effective defence to a claim by the promissor attempting to enforce the original contractual agreement.

Combe v. Combe Facts: Husband promised wife annual $ with no consid, she tries to enforce via promissory estoppel. promissory estoppel could not found a cause of action to enforce the gratuitous promise itself doctrine of promissory estoppels restricted to preventing parties from insisting upon strict legal rights in situations where it would be unjust to allow actions to enforce them – as shield, and not as sword John Burrows Ltd. v. Subsurface Facts: During period of 18 mos D consistently made late payments but they were accepted.

Following disagreement on different matter, P sued D for entire amount. allowing late payments in past doesn’t waive right to insist on timely payment in future (can’t base promissory estoppel on an indulgence) additionally, must be the product of a course of negotiation (Hughes) – erroneous requirement, as this just happened to be factual context in Hughes, and shouldn’t preclude other types of conduct giving rise to similar inferences D & C Builders Ltd. v. Rees

Facts: D refused to pay contractors and offered partial payment for full settlement. P claims in full. D argued that acceptance of lesser payment estopped P from claiming original amount where a new contract is entered into altered under coercion/intimidation, the contract is not enforceable led to overruling of Foakes v. Beer, because if no intimidation was present, partial payment of a debt would constitute sufficient reliance to engage doctrine of promissory estoppels The Post Chaser.

Facts: Buyer of goods waived documented defect but rejected them upon delivery; seller sued on promissory estoppels despite no detrimental reliance detrimental reliance needs to be present for promissory estoppel to be enacted can be inequitable for one party to enforce strict legal rights where the other party has engaged in subsequent reliance where enforcing original terms would lead to an inequitable result Proprietary Estoppel (ownership of land) Crabb v. Arun District Council.

Facts: P acquires undertaking from municipality to have access to roadway, and sells the part next to the roadway (a gratuitious promise). Municipality subsequently says P cannot have access and P sues. exception to general rule that estoppel can only be used as a shield where there is an intention to effect legal rights and subsequent detrimental reliance concerning land rights, estoppel can give rise to a cause of action, invoked when it would be unconscionable to allow the party giving rise to the assumption to ignore it Walton Stores v.

Maher Facts: Supermarket hurriedly negotiating property purchase from P, P goes ahead and demolished building as per pending agreement. Supermarket subsequently does not want to proceed to buy. rests on the unconscionability that results from ignoring an assumption held by another party that one has a played a role in creating and upon which the other has relied unconscionability arises from fact that defendant had played part in generating ‘basic assumption’ upon which other party had acted to his detriment N. M. v. A. T. A.

Facts: Couple agreed that woman would leave job and move if partner would pay off her mtg; relationship went sour and he refused to continue detrimental reliance argument fails since section 90 of Restatement of Contracts (that severe detrimental reliance is sufficient to raise promissory estoppel