Chapter 3

1
Chapter 3 Law of Contracts

• Definition and types of contracts
• Six Elements
• In Writing?
• Privity
• Interpretation
• Termination
• Impeachment, Remedies and Damages

2
Definition and types

• an agreement based on an exchange of promises
  that the courts will enforce.
• Void v. Voidable
• Unilateral v. Bilateral
• Carlill v. Carbolic Smoke Ball Company
• Multi-lateral

3
Six elements of a contract

• 1. Offer
• 2. Acceptance
• 3. Consideration
• 4. Intention
• 5. Capacity
• 6. Legality

4
Offer

• Offer always tentative
• Lapsing of an offer
• Revoking of an offer
• Options are irrevocable
• Invitation to treat
• Case R. v Dawood

5
Acceptance

• Must be unconditional positive and unambiguous
• Rejection terminates
• Counteroffer also rejects
• Method of communication
• Post-box rule or when and where received
• CONSENSUS is an unconditional acceptance of an
  offer
• Case Bawitko Investments v Kernels Popcorn Ltd

6
Consideration and Intention

• the price (something of value) a party pays for
  a promise
• Gratuitous promise is not consideration
• Under seal replaces consideration
• Need not be fair consideration but beware
  unconscionable transaction
• Past or illegal consideration
• Intention assumed in business, not family

7
Capacity

• Contract voidable if no capacity
• Mental
• Minors
• Necessaries, but not in B.C.
• Case Tonnelli v Toronto Marlies Hockey Team
• Agents and Principals
• Powers of Attorney
• Spouses and cohabitants

8
Capacity - continued

• Business Partners
• Corporation officers bind
• Native people reserve land
• Diplomats immunity
• Enemy aliens

9
Legality

• Applies to the consideration or the subject
  matter
• Violates statute law or
• Runs counter to public policy
• Immoral acts inconsistent with community
  standards
• Obstruct justice
• Undue restriction on trade
• Restrict competition
• Injurious to public service

10
Requirement of Writing

• Land except Part Performance
• Domestic contracts
• Guarantees
• Estate trustees promise
• Minors
• Longer than a year
• Sale of goods of certain amount not in B.C.
• Consumer protection future delivery or payment

11
Privity of contract

• the obligations and benefits under a contract
  are confined to the parties to the contract
• Nine (9) exceptions
• Tort law bypass
• Trusts
• Life insurance policies

12
Privity of contract - exceptions

• Principals and agents
• Vicarious liability of an employer for breaches
  of employees
• Collateral warranties
• Novation a new contract
• Interests in land purchaser assumes the
  mortgage
• Assignment of rights a creditor assigns the
  rights to collect a debt to a third party

13
Assignment of Risk

• Risk follows title
• But the parties may re-assign the risk
• COD seller has title and risk until goods are
  delivered and paid
• FOB buyer assumes title and risk once goods are
  delivered to the carrier
• CIF buyer has title but seller has the risk of
  delivery although insurance and freight are
  charged to the buyer.

14
Interpretation of Contracts

• Rules of interpretation
• Contra Proferentum Rule
• Parol Evidence Rule
• Precise terms
• Warranties and conditions
• Waivers and disclaimers (Chapter 4)
• Standard form contract

15
Termination of Contracts

• Discharge of contracts
• Impeachment
• Breach

16
Termination - Discharge of contracts

• By Performance
• By Agreement
• By Frustration completion is impossible
• By Operation of the law - bankruptcy

17
Termination Impeachment

• Duress and Undue influence
• Mistake
• Common
• Mutual
• Unilateral
• Misrepresentation
• Innocent
• Negligent
• Fraudulent
• Utmost Good Faith
• Non Est Factum

18
Termination Breach of Contract

• No termination if a minor breach
• Repudiation
• Sabotage
• Failure to perform

19
Remedies to Breach

• Not necessarily terminate
• Two options
• 1. Forgive breach, continue, then sue, or
• 2. Terminate and seek remedies an anticipatory
  breach

20
Remedies

• Limitation period
• Necessity of loss
• Duty to mitigate
• Rectification
• Rescission
• Injunction
• Specific Performance
• Quantum meruit

21
Damages

• Nominal
• Liquidated
• Expenses and Loss of Profit accounting
• General
• Punitive and Exemplary

22
Contract case law

• Liability for breach
• Case - Pitt v Executive Travel Ltd. 89 leased
  Concorde to circle the North Pole and see
  curvature of earth breach of contract?.
• Enforceability of player contract
• Case Sheehy v Edmonton World Hockey 79
  Sheehy traded to Edmonton from New England,
  contract required payment of 10,000 to Sheehy if
  traded, then traded to Birmingham. Edmonton must
  pay 10K, I.e., old contract becomes new contract
  

23
Contract case law

• Interpretation of player contract
• Case Robitaille v. Vancouver Hockey Club
  Robitaille injured, forced to play too soon,
  suffered further devastating injury negligence
  suit.
• Two terms in collective agreement either pay
  till end of year or pay till end of contract
  (several years). Court agree to later

24
Contract test of legality

• Case Broadwalk Regency Corp. v Maalouf 88
• Atlantic City, N.J. gambling debt,
• would Ont. court enforce payment?
• Yes, gambling legal in N.J.

25
Contract sale of facilities

• Case Arrowsmith Mountain Recreation Ltd. V
  Haas
• Land purchased, plan to upgrade ski hill
• Buyer repudiated since municipality would not
  allow development plan
• Successful this was breach of contract

26
Contract misunderstanding, mistake, unilateral
contract

• Case Michaud v. Grand Falls Golf Club
• Hole-in-one on 2 hole of a shot-gun start of a
  18 hole tournament on a 9 hole course. Michaud
  started at 3. When he got to his 11th hole,
  I.e., the hole marked 2, he shot a
  hole-in-one. He claimed his prize (a new car).
  The club claimed it had to be his second hole.
  Plaintiff successful

27
Contract freedom to contract, even if bad deal

• Case Hawes v Sherwood-Parkdale Hockey Club
• Hawes signed a one year contract. Cut after
  one-month, inadequate play. Hawes lost.
• His failure to perform relinquished the Clubs
  obligation court accepted an implied term that
  the normal conditions effecting junior hockey
  contracts (release if not performing) existed.
• breach is the converse of performance

28
Contract breach of contract

• Case Kelly v Canadian Speed Skating Assoc.
• At the last minute, the CSSA changed the
  selection criteria for Cdn Olympic team (top 4 at
  a single competition v top 2 at each of 2
  competitions)
• All agreed but Kelly who subsequently missed the
  cut.
• Kelly appealed citing breach of contract and won
• Victim must receive satisfaction as if there were
  no breach.

29
Contract breach but necessity to mitigate

• Case Neilson v. Vancouver Canucks, 88
• Neilson fired before end of contract
• Compensation reduced because he did not attempt
  to find another job failure to mitigate
• plaintiff must take all reasonable steps to
  minimize loss

30
Contract remedies specific performance

• Specific performance is not normally ordered in
  personal service contracts
• Case Kapp v BC Lions Football Club
• Kapp suspended by BC Lions who, with the CFL,
  received an injunction barring Kapp from playing
  for the remainder of his contract (1 year)
• Kapp appealed court refused appeal
• To accept the appeal would be an order of
  specific performance of a personal service
  contract (and the Lions would not have any
  control over quality)

31
Contract remedies injunction

• prohibitory injunction an order NOT to do
  something,
• mandatory injunction an order to DO something
• Case Hanson v. Ont. U. Athletic Assn.
• Injunction prohibiting a eligibility after a
  number years of play.
• Case Kernaghan v Softball Sask.
• Injunction allowed pregnant player to play in
  league.

32
Contract remedies interim or interlocutory
injunction

• interim injunction a short-term order to
  remedy an immediate problem
• Case Sheddon v Ont. Major Junior Hockey League
• Sheddon suspended from play in the OMJH because
  he played for Kitchener while under contract with
  Guelph.
• Interim injunction allowed him to play since it
  would hurt his possible professional career if he
  could not.
• The remedy to Guelph was still to be determined.

33
Contract remedies interim or interlocutory
injunction

• Case Lennie (guardian) v. North Bay Ski Racing
  Club
• Club had a volunteer agreement by participants to
  fund raise. Parents refused and were assessed a
  participation fee
• Parents sought an interim injunction
• Injunction rejected on the balance of
  convenience it would encourage other parents
  to adopt a similar attitude and thereby halting
  the clubs activities. Also the skier could have
  joined another club

34
Contract remedies permanent injunction

• Case Quebec v Federation quebecoise de hockey
  Inc. (1978)
• Permanent injunction granted prohibiting the
  hockey league from denying players the right to
  participate in games solely on the basis of
  gender.

35
Contract capacity to contract

• Case Gretzky v Ont. Minor Hockey Assoc (1975)
• Interim injunction sought, by the OMH, against
  Gretzky to enforce a contract to play.
• Not granted as contracts with players under the
  age of majority are unenforceable.

36
Contract law - Agency law and assignment of rights

• When an agent negotiates an employment contract
  with a team, the contract is between the
  principal (the player) and the third party (the
  team)
• If the contract stipulates, contractual rights
  may be transferred or assigned to a new party
  (I.e., another team) when a player is traded.
• Case Cranmer v. B.C. Lions Football Club
• Cranmer traded from an eastern conference team to
  a western conference team (BC) which had a longer
  schedule.
• Cranmer refused to play unless he was paid more
  and had moving expenses paid, all of which were
  not part of his contract.
• Cranmers action dismissed his contract was
  fully assignable.