Contract Formation: Overview

In contracts, there are prior social behavior that leads to some sort of bond (i.e a contract), and this
social encounter leads to an agreement
●​ Contracts allow individuals to step out of their isolated bubbles, cooperate through binding
promises, and enhance each other's position in society by mutually choosing to work together
for shared benefit.
○​ Contracts are a good thing that allows us to pursue our own individual benefit, and they
advance society as a whole

Contracts are will-based

●​ Our liability in contracts is suppose to self imposed
○​ Autonomy, free, decision, free will

Social Realm vs. Legally relevant

●​ The way the law first tries to find out is the test of the intention to be legally bound

But what do you do when one party means it? And one party doesn't?
●​ contract law looks at what a reasonable person would think based on the words and actions,
not the personal intent of either side.

Intention to be legally bound

What is the standard for determining intent to create legal relations?

●​ General standard for intention to be legally bound is the reasonable person standard
 ○​ From the carbolic case

When does the exchange of consents occur?

●​ At what point in the contractual process does the meeting of the minds occur?
○​ At the point of acceptance
○​ Acceptance is the final aspect of exchange

Presumptions of fact for the intention to be legally bound:

A.​ Social and domestic arrangements

○​ Presumed to not be binding
■​ Against an intention to be legally bound
B.​ Business transactions
○​ Assume to be reasonable for the observer to see this as communication that is meant to
be legally bound
■​ In favor of intention to be legally bind

Jones v Padavatton [1968] for familial relationships

●​ They also agreed the mother would help pay the daughter’s living costs so long as the daughter
studied, which the daughter gave up doing after 5 years
●​ There was no binding contract because the terms were “vague” and the case was one of “family
arrangement”, which has a presumption against the intention to create a legal relationship. A
reasonable person would also know it does not take 5 years to pass the bar
●​ Determining whether a contract has been formed and breached requires using the ‘reasonable
person standard
○​ “Family arrangements” have a presumption against the intention to create legal
relationship

Kleinwort Benson Ltd v Malaysia [1989] for more corporate relationships

●​ The court ruled that a comfort letter could still be binding to a reasonable observer but
emphasized the need to analyze the language for promises and context.
○​ The letter's statement about policy was not a promise. The court found no legally
binding promise in the letter, agreeing with the defendant that there was no obligation
to repay.
●​ Comfort letters without a legally binding promise do not create contracts.
○​ A contract requires an intention to create legal relations.

CML CIVIL

A contract is formed through offer and According to the CCQ, a contract is an

acceptance. The "moment of responsibility", "agreement of wills" formed when both parties
also called the "meeting of the minds" or give their consent
"consensus ad idem", is when both parties
become legally bound by the contract’s terms. ●​ Matching of offer and acceptance is
based on objective appearance, not on
what the parties believe about the
Carlill v Carbolic Smoke Ball Co. agreement.
●​ The parties’ actions or words showing
The defendants (vendors of smoke balls) had consent are called "manifestations of
announced in the newspaper that they would will".
●​ The exchange of consent is complete
reward money to anyone who gets the flu after
when the offer is accepted, and the
using a smoke ball as directed contract is formed once the offeror
receives the acceptance.
Unsure whether it was a binding contract. Only ●​ Once acceptance is given, the contract is
thing that exists is this ad in the paper finalized and binding.

Has a contract been formed?

Shopping list used to see if there is an
enforceable contract: Art 1378: Agreement of Wills
This article describes the concept of a contract as
1.​ Do we have a claim that there is a the mutual agreement (or "meeting of wills")
contract? between the parties involved.
○​ For there to be a claim, there
must be a contract. Art 1386 and following: Offer and Acceptance:
2.​ How do we know if there is a contract? These articles define how a contract is formed
through an offer made by one party and accepted
○​ We need an agreement.
by the other.
3.​ How do we know there is an agreement?
○​ Look for an offer and Art 1393 and following: (Modified) Mirror
acceptance. Image Rule:
4.​ In this case, is there an offer and The modified mirror image rule means that an
acceptance? offer must be accepted exactly as proposed, with
○​ Offer and acceptance can happen any changes or additions potentially creating a
counteroffer.
without both parties being
physically present. Art 1388: "L’offre sérieuse, ferme et précise"
5.​ Do we need a two-party relationship? This article establishes that the offer must be
○​ No. An offer can be made to the serious, firm, and precise—meaning it must
world, like promising money to clearly outline the terms and be made with intent
anyone who fulfills certain to form a contract. Outlines willingness to be
bound when you accept an offer
conditions (e.g., catching the flu).
6.​ Does the offer need to be specific? Art 1385: Cause (Objective) and Object
○​ The defendant argued it was not This article requires that a contract must have both
specific. a lawful cause (the reason for the agreement) and
○​ The court asks: How would a a clear object (the subject matter of the contract).
reasonable person interpret the

Richard v. Time Inc. 2007 QCCS

 offer? The plaintiff received a letter in the mail from the
defendant (Time Magazine), which claimed that he was
Contracts are not what we negotiate person to the winner of a large sum of money if he returned the
person, contract means abstract meaning of an grand prize-winning number by mail
agreement. And as such, this relationship
(Carbolic and ms carlili) with no relationship, The letter was not an offer but an invitation to treat
because it required the plaintiff to have the winning
talking or exchange, there is still an agreement.
lottery number. No contract was formed.
Demonstrated the reasonable observer standards
The defendant was found misleading under the
Consumer Protection Act and ordered to pay
Leonard v pepsico damages.

A promotional campaign was produced by the A mere invitation to treat is not binding.
defendant (PepsiCo) that showed one could get a
jet for 7 million points, but the jet was not listed in
the merchandise catalogue

Determining whether a contract has been

formed and breached requires using the
‘reasonable person’ standard. Contracts are
formed when there is an intention to be legally
bound with proper offers not mere puffery/jest

Advertisements are invitation to treat not an offer

●​ Invitation treat? Common example in
commercial setting, when you bring
groceries to counter, you are offering to
buy them, and they accept to buy them by
accepting your payment for the groceries

Offer & Acceptance

Contract is invalid if: (1) Offer and acceptance does not match; (2) Communication was not made to
be legally bound

Meeting of the minds

●​ 1. Invitation to treat; negotiations

○​ Occurs before there is legally manifestation of will (the offer)
●​ 2. Offer
○​ The offer needs to include the entire contract
 ○​ Contract needs to include everything so that respondents just need to say yes
●​ 3. Acceptance

The key is to determine when and where the contract was made. Why does this matter?

1.​ External policy reasons: This impacts applicable law and jurisdiction.
○​ Example: Pharmaceutical Society of GB v. Boots Cash Chemists
○​ Example: Entores Ltd v. Miles Far East Corp.
2.​ Dispute over contract formation: One party may claim no contract exists if the offer and
acceptance didn't match.

Offer vs Initiation

Offer

Offer vs Invitation to treat

●​ Invitation to treat is just an invitation to make an offer
○​ Does not confer any power on party to form a contract
○​ If you have an invitation to treat, it is like putting a house on sale on a website. Just
because you want to buy it, doesn't mean you get it
●​ Initiation to negotiations is willingness to entertain an offer
○​ Once you have offer out there, as long as it is valid, you are conferring the power in the
others person’s hands to form that contract
○​ At that moment, once contract is formed, is when you have acceptance
●​ Note that offer is not always for all time

Examples of invitation to treat

●​ Ex: advertisement on indeed
●​ Ex: taxi on the side of the road, they do not have to pick you up (i.e can you take me here?)
●​ Ex: house on website
 ●​ Ex: stickers

How is a reasonable timeframe determined?

●​ From whose perspective? Reasonable observer

Two ways an offer can lose its legal relevance:

●​ 1. The offer has lapsed (expiration)
●​ 2. The offer has been revoked
○​ Revocation (offeror already changed their mind before the contract is made, and tries
to undo the effect of the offer being in the world)
■​ Basic assumption of both civil and common: Offer can be revoked until
acceptances becomes effective
●​ In CVL, if you attach a term to your offer (i.e this term will be open
until friday), then you are not allowed to revoke it
●​ In CML, you may revoke until it is accepted

CML CIVIL

Shatford v BC Wine Growers Art. 1388: Serious, Clear, and Precise Offer​
An offer must be serious, clear, and precise for it
Shatford (buyer) accepted BC Wine Growers' to be valid. It must provide enough detail for the
offer to sell loganberries after the viable period offeree to understand and accept the terms.
had passed, but the defendant claimed the offer
had expired and sold to someone else. Art. 1389: Acceptance within a Reasonable
Time​
There is an end date to every ofer. Offer lapses Acceptance of the offer must occur within a
within a reasonable time frame (and this case reasonable time, considering the nature of the
there was a perishable item, so they could not wait offer, the circumstances, and the form of
forever) communication used.

Art. 1390: Revocation of Offer​

Pharmaceutical Society of Great Britain v An offer can be revoked at any time before it is
accepted, unless the offer specifies that it will
Boots Cash Chemists remain open for a certain period.
The Pharmacy and Poison Act in the UK required Art. 1391: Irrevocable Offer​
supervision of pharmacists when selling drugs, If an offer states that it is irrevocable or the offeror
and pharmacists can prevent people from buying has promised not to revoke the offer for a specific
drugs time, the offer cannot be withdrawn before the
expiration of that period.
Contracts are made when the items are bought, not
when they are placed in a customer’s basket
Which articles give equivalent to shatford’s
●​ The offer is made by clients to the
reasonable time frame period? Art. 1390
cashier (merchant) when they bring their
desired goods to the cash Terrasses Holdings v Saunders
 ●​ The acceptance is made by the cashier
when scanning items Hired Saunders to rent out properties. His quality
●​ The presentation of products on the of work the first year was good, and since the
shelves is only an invitation to treat (or market was competitive, they promised a bonus,
Sanders sues because he never received the bonus
invitation to make an offer)
Court finds instead that it was an unjust
Therefore, when pharmacists are behind the enrichment. Whenever someone was enriched at
cashier, there is appropriate supervision when someone else’s expense without contract
selling the drug (i.e., when forming a contract) justifying this transfer of wealth
Not reasonable to conclude a sticker is a valid
offer because you cannot hold cashier to that What exactly compromises essential elements is
hard to tell: Those that are so essential that the
forever. Offer formed at counter - when they read contract cannot exist without them
price out you, consumer can decide yes or no
Need basics of economic exchange spelled out in
the contract, or through interpretation you can find
it

Acceptance

What are some characteristics of valid acceptance?

●​ Must be within reasonable time
●​ Mutual understanding

Mirror image rule

●​ In CML, the mirror image rule is a principle that states an acceptance of an offer must exactly
match the terms of the offer for a contract to be formed. In other words, the acceptance must
mirror the offer without any changes or conditions.
○​ There is no contract UNLESS there is a perfect match
○​ Offer needs to contains all the essential elements
●​ What is the equivalent in civil? Art. 1388
○​ Offer has to contain all essential elements of the contract

The offeree must show intention to accept the offer.

●​ The offer must be detailed enough that a simple "yes" is a sufficient answer.
●​ If the contract lacks detail, there is no valid offer.
●​ A "no" response means a counteroffer can be made, changing the roles of offeror and offeree.
●​ Silence does not equal acceptance.
●​ The offeror controls the offer, but acceptance cannot be assumed in either common or civil
law.

What is the Mailbox rule in CML?

●​ Mailbox rule is common law, there is NO mailbox rule in civil
 ●​ Acceptance is done when you post it (right when you put it in the mailbox)
○​ It does not need to reach the offeror
●​ Equivalency in civil law?
○​ No mailbox rule. When offeror receives acceptance

Can silence ever indicate acceptance in either jurisdiction?

●​ Yes if it has been previously established as a rule
○​ Art 1494

CML CIVIL

Entorres v Miles Far East Art 1386: Need for Clear Acceptance​
There must be something that shows acceptance
Entores, a UK company, sent an offer by “telex”, of the offer, whether through conduct or other
which instantly sends messages to others, to clear indicators.
purchase copper cathodes from an Amsterdam Art. 1387: Acceptance of the Offer​
company Acceptance of an offer is the expression of
Postal rule says that the contract is formed consent to the terms proposed. The acceptance
when a person sends. SO acceptance takes effect must be clear, unequivocal, and match the offer
once a person puts an offer in the mail. Agrement for the contract to be valid.
the moment it was posted.
Art. 1393: Mirror Image Rule
In instantaneous communications (i.e verbal,
Acceptance must exactly match the terms of the
phone, telex), the ‘postal rule’ does not apply, so a
offer. Any variation or counteroffer is not
contract is formed when the acceptance of the
acceptance but a rejection and a new offer.
offer is received by the offeror
Art. 1394: Conduct as Acceptance
A party's actions can demonstrate acceptance of
South west Terminal v Achter Land an offer without a formal verbal or written
response, as long as the conduct indicates clear
Contact was sent via text message, and there was intent to accept
an emoji used as an acceptance

What acceptance is does not necessarily need to

be signing a contract, it does not have to say
“yes”. Acceptance is determined on the
circumstance according to a reasonable person, in
this case, thumbs up was enough, but probably not
for a million dollar law contract.

** Note that forms and formalities sometime

require a specific form

●​ I.e Walton v. Stone required it to be

written
 ●​ So unless there is more, form
requirements are determined by the
reasonable observer in that case

Butler Machine Tool v Ex-Cell-O Operation

Offer, counter offer, offer, etc. Are the seller's

terms part of this agreement? No one says there is
no contract at all, but debating what is exactly part
of the contract

Each counteroffer kills the previous offer, and

creates a new blank slate. The party that manages
to make the last offer, their terms prevail

Clarify the principles of battle of the forms.

●​ Each set of terms of conditions has a

clause that deals with the conflict
differently
●​ Rule : whatever the terms were on the last
thing accepted are the rule. So the last
conclusion you came to
●​ Stick with the mirror image rule in battle
of the forms, but be careful to apply a
reasonable person perspective.

Dissent by Lord Denning was the “better way”

approach. Argued that the back and forth of
offer/counteroffer is not useful because they both
agree they are in contract. So he thought we
should set aside the mechanics of the formation
and just focus on the clause.

●​ No it is not good law. Dissent was not

formally accepted.

Unilateral Contract

What does the term unilateral contract mean in CVL versus CML?
●​ Under Art. 1380 CCQ, a unilateral contract in civil law refers to a contract where only one
 party has an obligation, unlike the common law unilateral contract, which is formed by the
performance of an act.
○​ CVL: Unilateral contracts are contracts where two parties agree on something, but this
is something with obligation on only one side
■​ I.e donation: you are completing action by donating and the charity does not
need to do anything in return
■​ This does not hold in CML bc there is no consideration in that contract
○​ CML: Exchange of action for a promise
■​ One person does something, and once they finish, the other promise becomes
binding
■​ In unilateral contract, there is an issue with revocation in common law
●​ 1. If the acceptance is completion of the requested act, the act can be
revoked until 100% is completed
○​ Offeror can revoke therefore for a very long time
●​ 2. The person committing the act can stop doing it whenever they want
bc they are not bound
■​ Ex: smoke ball

VS. Bilateral contract

●​ You speak of mutuality of obligation. Meaning the contract is binding on each part because
they bound themselves as well.

CML CIVIL

Dawson v Helicopter Exploration Art 1380

The plaintiff (Dawson) discovered a mineral It states that a unilateral contract is an agreement
deposit and was promised a vendor interest for his where one party commits to an obligation, but the
exploration, but the defendant revoked the offer other party does not need to reciprocate with a
before exploration began, leading Dawson to sue promise or action. In this type of contract, only
one party has an obligation, and the other party's
for breach of contract.
obligation arises only when they perform the
action required by the contract.
Courts focus on bilateral commitments, where
both parties make promises, rather than assuming
a simple promise for an act. They often look for
promises in communications between the parties
to protect the offeree.

In common law, unilateral contracts are rare

and typically seen in hypothetical scenarios;
they are often interpreted as bilateral
contracts, especially when more details are
involved, to protect both parties.
Hamer v Sidway

Uncle promised nephew to pay if he abstained

from vices until 21. He passes away, and nephew
goes to court

Forbearance refers to the nephew's decision to

refrain from engaging in vices, which is
considered a form of giving something up in
exchange for the uncle's promise

There was consideration and the unilateral

contract was valid. Although the promisor did not
benefit from the promise, it was sufficient to
show the promisee suffered detriment

Consideration

●​ Mutual inducement
○​ Both parties have to exchange something
○​ Does each party have to gain something?
■​ You don't not have to gain something. Just need something that induces you, or
incentivize you
●​ Consideration is given, not necessarily received
○​ I.e Uncle in Sidway did not get anything. He received nothing.
■​ At CML you do not need to get anything out of the contract. You have to give
something up, but you do not need to receive anything from it.
○​ So, in mutual inducement, whatever one parties consideration is, has to be the reason
the other party is doing it
■​ I.e so if nephew was going to give up smoking anyways, he was already doing
it, he was not induced by it, than that is not consideration
○​ You need to be doing it (or not doing) because you want other thing to occur
○​ Red arrow of enforcement (i.e the price of enforcement)
■​ The state needs to know you are serious. So you just need to lose something,
and the state will come in to enforce.
○​ Peppercorn theory? Very tiny thing you are giving up or getting, as long as it has that
mutual inducement
■​ CML does not inquire into the value or fairness of consideration, just considers
if it is there

●​ Consideration has to come from the promisee. It needs to flow from promisee
○​ I.e You cannot say ⇒ “I will give you this, and Dale will mow your lawn”
■​ You cannot have consideration from someone else
 ●​ Factual benefits something that does not necessarily stem from consideration
○​ I.e Hamer Sidway
■​ Seems like something is going to the uncle (i.e uncle is in good health and that
benefits him)
●​ This would be an indirect benefit
○​ So a factual benefit that does not stem from the contract itself
but is supplementary
○​ Factual benefits do no constitute consideration because they are not bargains for

Bargain Theory
Core of this theory is mutual inducement. So there must be a mutual exchange of value or a mutual
reason that justifies each party's agreement.
Mutual inducement: each party's promise or action serves as the inducement or reason for the other
party to make their own promise or take action.
If the promisor receives benefit, that does not come from promisee, that is NOT consideration.
Consideration needs to move from the promisee

Consideration vs Cause

What are formalities good for?

●​ Evidentiary: Writing down important contracts makes it easier to prove the terms if needed.
Informal agreements can be binding, but written ones are safer.
●​ Cautionary: Formalities help prevent hasty or careless decisions, ensuring both parties fully
consider the contract.
●​ Channeling: Legal formalities make promises enforceable, and seals or specific formats show
the contract’s legal power. Parties can choose the legal form and consequences for their
agreement.

Seal and consideration are strictly applicable to common law

●​ Seal in common law allows us to make promises binding without consideration
 ○​ A seal can overcome consideration because it fulfills the idea of seriousness and intent
with the contract.
○​ Only way to discharge consideration. It signals willingness to be bound. Toda, it does
not need to be a waxed seal. But these formalities give other party the peace of mind
that the contract will be enforced’
●​ Considerations are about economic exchange (reciprocity) but not about the fairness of this
exchange
○​ Considerations does not acquire into the adequacy of consideration
○​ It is just about if something has been done or given in return for something that you are
getting in return
●​ In CML an option contract is created when one party offers to keep their offer open for a
specified period (e.g., until Friday at midnight), and the other party provides consideration
(e.g., payment of $x)

The Civil law requires cause for its contracts. Cause is not consideration!!

●​ Cause is about the reason for entering into the contract

●​ Consideration is about reciprocity. As long as one party gets something, and the other party
loses something, there is consideration.

CML CVL

Hamer v Sidway Cause is reason or motivation for entering into a

contract
Uncle promised nephew to pay if he abstained ●​ as long as you are not contracting for
from vices until 21. He passes away, and nephew illegal motivation, than your contract
goes to court stands

Forbearance refers to the nephew's decision to Art. 1410: A contract is formed when there is
refrain from engaging in vices, which is mutual consent, expressed through a clear offer
and acceptance.
considered a form of giving something up in
exchange for the uncle's promise Art. 1411: Acceptance must exactly match the
offer; any changes make it a counteroffer, not an
There was consideration and the unilateral acceptance
contract was valid. Although the promisor did not
benefit from the promise, it was sufficient to
show the promisee suffered detriment Hutchinson v Royal Institute of Advanced
Learning

If someone generously offers to donate money for

Dahl v Hem Pharmaceuticals free, are they still bound by their promise if they
face financial difficulties later?
Dahl entered a clinical trial for a medication, and
was promised by Hem to
have the medication be provided after the trial if it Hutchinson is trying to argue that the contract
proved effective. Once the trial was over, Hem does not have consideration. Given the dispute
ceased providing the medication takes place in QC, the rule of cause applies. No
need for consideration
For a unilateral contract, you do not need
additional consideration. Performance of the
action constitutes acceptance and
consideration.

The agreement was a unilateral contract

(promise of meds for performance in the study).
Consideration was the detriment incurred by the
participant through uncomfortable and intrusive
testing in exchange for the promise of the meds

Roscorla v Thomas

Two separate contracts. Initial contract for

purchase of a horse, and then subsequent
agreement for a warranty (that the horse is in good
vice). Given that there is an initial contract
concluded, the consideration does not carry over
to the second contract. It does not carry over
because there is lack of mutual inducement

Each promise must be supported with new

consideration

Wood v Lucy

The defendant, a celebrity, breached a contract

with the plaintiff by using her name on products
without his endorsement, leading to a lawsuit,
while she argued there was no consideration.

But she did not get anything in return, so she says

it is a one way streak. And no mutuality of
obligation

Courts say they can read the contract in a

reasonable way and come to the conclusion that
they made the agreement on the basis of
mutuality. Implied promise between the parties,
can meet the requirement for consideration.

Lack of Consideration

** Whenever you get a question on promissory estoppel in Canada, you need to know if it is increasing
pact or decreasing pact because it will make a difference

Lack of consideration: one sided variation; one party is changing what they done and the other side is
not (either side)

Increasing Pact:
●​ In an increasing pact, one party promises to do more than they originally agreed to in
exchange for the same or more from the other party.
■​ No in Canada!

Decreasing Pact:
●​ In a decreasing pact, one party promises to do less than they originally agreed to in
exchange for the same or more from the other party.
■​ Can use it as a shield, not a sword in Canada!
●​ A shield where there is an unequivocal promise, it was relied upon,
and they tried to enforce original contract

In Canada, as a general rule (with few exceptions) you cannot use it as a sword and you cannot
use it for increasing pact. Only decreasing pact, bc decreasing pact has a reliance issue.
●​ You cannot use it as a sword means you cannot use it as a cause of action
○​ So if there is no attempt at enforcement of promissory estoppel, then you cannot use it
to try to make other person hold their promise
●​ Meaning you cannot use it to start a lawsuit or as a direct cause of action to make someone
keep their promise. It can only be used as a "shield"—to defend yourself if someone is trying to
enforce their rights unfairly.
○​ Shield vs Sword:
■​ You can defend yourself against me being unfair to you because you relied on
my promise. But you cannot make me keep my promise

Lack of consideration: Promissory Estoppel

Shield: Defensive, to stop unfair enforcement.

●​ Promissory estoppel acts as a defense when one party tries to go back on a promise that the
 other party relied on to their detriment. It prevents the promisor from acting inconsistently with
their promise if it would be unfair to the promisee.
○​ Ex: If a landlord promises not to collect rent during a financial hardship, they cannot
later sue for unpaid rent if the tenant relied on that promise.
●​ For promissory estoppel shield to work, someone needs to be trying to enforce it and you are
trying to stop it.

Sword: Offensive, to enforce reliance on a promise.

●​ Promissory estoppel can also be used as a claim to enforce a promise that does not meet the
strict requirements of a formal contract but has still caused the promisee to act in reliance.
○​ Ex: If someone promises to pay for your tuition and you enroll in school based on that
promise, you may use promissory estoppel to demand payment.

CML

Harris v Watson

While the ship was sailing, the defendant, believing the plaintiff would perform extra work in
navigating the ship, promised him more money. However, the promise was made given that the ship
was in danger.

And in the UK, navigation is very important. So there needs to be public policy to address this. Public
policy may prevent a contract from being formed

Stilk v Myrick

Two seamen decided to leave the ship. Captain promised the other workers that he would increase their
wages if they continue to work, and gave him time to replace the crew members who left

Increasing pact
●​ Not enforceable because not getting that consideration
●​ Asking the sailors to do more for more pay was an increasing pact. Why? Because in that
context, sailors are always required to give their utmost. So telling them to try harder does not
mean there is extra consideration
●​ Giving more for what that either party was already obligated to work doesn't work
●​ Do something you are already obligated to do is known as the pre-existing duty rule
○​ This does not work

Foakes v Beer
●​ Foakes promised to make payments though several installments without interest and Beer in
 exchange promised not to take legal action against Foakes (second contract). However, Beer
took legal action to recover interests, arguing the new contract lacked consideration
●​ Decreasing pact
○​ Not enforceable because not getting that consideration
○​ Agreeing to allow partial performance (so accepting less) for what you are already
obligated to do is unenforceable for lack of consideration

Central London Property Trust v High Trees Ltd.

●​ During the war time they were paying less and less, then the company came and said you owe
us all that money pact. The tenants gathered together and tried to defend themselves for the
enforcement of the contract. So it was a shield to stop the contract from functioning as it
normally would.
●​ Decreasing pact
○​ Corrective measure: Promissory estoppel as a shield
○​ But it is not a sword. Why?
■​ Because this would be like them saying that they want to pay the lower fee
forever.
●​ Instead, it is just a defense against the enforcement of the original
contract
●​ For promissory estoppel shield to work, someone needs to be trying to enforce it and you are
trying to stop it.
○​ Actual reliance would have been a detriment

Gilbert Steel Ltd v University Construction Ltd

●​ The plaintiff agreed to provide the defendant with steel at a fixed price (first contract). Faced
with two price increases from its supplier, the plaintiff demanded the defendant to cover the
increased prices on both occasions (second contract)
●​ In this case, Gilbert Steel agreed to pay a certain price for steel, but when the price of steel
increased, they wanted to modify the contract by raising the price. The issue is that they already
had a pre-existing duty to pay at the original price, and promising to pay more doesn’t
constitute new consideration because they were already obligated to pay something
●​ Promissory estoppel as a sword
○​ Promissory estoppel did not function in this case.
○​ Contract lacks consideration

Evolution of the Consideration?

A practical benefit in contract law refers to a benefit that may not be a strict legal or monetary gain,
but is nonetheless of real, tangible value to the party receiving it.

●​ Circumstances were making the agreement to have that pact, and modify that pact, allowing
that contract to continue. Give them something they would have lost otherwise. Sometimes you
don't need full promissory estoppel.

CML

Williams v Roffey Bros and Nicholls (Contractors Ltd) - UK jurisdiction

●​ The defendant contractor promised to pay the plaintiff subcontractor more to work faster,
fearing penalties for late completion. When the defendant stopped making the higher payments,
the plaintiff (subcontractor) sued for breach of contract.
●​ There was no consideration for the subsequent promise, but given that the defendant was
receiving practical benefit in exchange of the promise, there was a contract
●​ Increasing pact
○​ Corrective measure? Practical benefit as consideration
■​ Him continuing that job had a benefit to the other party
●​ The subcontractor (Williams) continuing to work on the carpentry job
allowed the main contractor (Roffey Bros) to complete the project on
time, thereby avoiding a penalty for late completion under their
primary contract
○​ Thus, since the defendant was receiving a commercial benefit from the promise to
increase the plaintiff’s salary, so the contract was valid

Walton Stores (Interstate) v Maher

●​ The plaintiff agreed with the defendant to demolish a building and construct a new one, but the
contract was never finalized as Walton Stores never signed the lease, and despite the defendant
having second thoughts during demolition, they did not inform the plaintiff, ultimately
announcing no intention to proceed once the new building was nearly complete.
●​ In Australia, promissory estoppel is expanded to be used as a sword
○​ Equitable estoppel
■​ Bc they were able to see them do the demolition, and they did not try to stop
them it would be unequivocally to hold them accountable.
●​ Why might you be against using it as a sword?
○​ It can be very harmful because it allows someone to enforce their unilateral
modifications in their contract.
●​ Difference with high trees?
○​ 1. It is used as a sword bc it is the plaintiff who says they want to enforce this promise
that this contract should have been completed by the defedna t
○​ 2. There is no pre existing agreement
 ■​ This is the first time they do business
●​ Judges depart from the idea that actions are unconscionable. This is how they move away
from high trees. The defendant had watched this train wreck happen without doing anything.
They encouraged this. From perspective of judges, it shocks the conscience’s despicable
conduct

Greater Fredericton Airport Authority v NAV Canada

●​ New Brunswick
●​ The Airport Authority and Nav Canada disagreed over who would pay for new landing
equipment after the runway expansion, with the Authority agreeing "under protest" to pay but
later refusing to do so.
●​ Obiter: persuasive statement in this relevant to primary estoppel
○​ Gratuitous increasing pact (such as a promise to pay more without new
consideration) can be enforceable if it is not incurred under duress
●​ While this was not applied as the ratio (the main legal reasoning), it opened the possibility that,
in the future, such promises might be enforceable under certain conditions—especially if not
induced by duress.

Rosas v Toca

●​ The plaintiff loaned money interest-free to the defendant with an agreement for repayment
within a year, but after multiple requests for extensions without consideration, the plaintiff sued
for breach of contract, arguing the post-contractual modifications were unenforceable due to
lack of consideration.
●​ In BC, there was a contract that was renewed several times.
○​ Rule in BC ⇒ gratuitous promise absent duress is enforceable where you have
that intent to be bound
■​ When parties are agreeing to terms, it is enforceable, as long there is not duress
and other policy concerns
■​ Bc they are making a new promise, need to look at if there was intent to be
bound (shopping list)

Vitiation of Consent : What do you need to vitiate consent? A valid contract!

●​ Possible issues with consent?

○​ Undue influence
○​ Unconscionability
■​ Contract is so unfair it should not stand
 ○​ Fraud
■​ One party deceives the other, it implies intention
■​ What should be the effect of proving you were defrauded?
●​ You would say there is no contract
○​ Misrepresentation: When one party makes a false statement that induces the
other party to enter into the contract.
■​ If you don't know what you're getting into, you should be able to get out
○​ Error in civil law vs mistake in CML: When one or both parties hold a false
belief about a fundamental aspect of the contract
■​ In civil law, the concept of error is more flexible, making it easier to be
released from a contract due to a mistake.
■​ In common law, it is almost impossible to get out of a contract based
solely on a mistake.
●​ The contract will typically only be voided if:
○​ It is illegal (e.g., violates criminal law).
○​ It conflicts with public policy (e.g., a contract promoting
discrimination or exploitation).

Duress / Crainte

What is the difference between the application of duress/crainte in CML vs CVL, respectively?
●​ Duress in CML vs Civil law is fear/crainte
○​ CML says its voidable (voidability)
■​ Whether they want to void it or not
○​ Civil law says it relative nullity
■​ Right to apply for this contract to be annulled, and if contract is annulled
●​ It is null and void from the outset
●​ The CML is much stricter than civil law bc there are other methods vitiating consent
○​ In cases of duress, only releases people where you can demonstrate injury of dire threat
(much more serious than what you would see in the civil law)

What is the consequence of vitiated consent or flawed formation?

●​ Agreement is flawed in the sense that someone did not exercise their free will. What should be
the consequence?
○​ The contract is invalid and should not be enforceable

When duress (or crainte) is found to be present in a contract, the contract becomes voidable. In civil
law, this is referred to as being relatively null.

●​ Relatively null means that the contract is not automatically void, but it can be voided by the
party who was subjected to duress (the one who was coerced). That party has the option to
 either:
○​ Enforce the contract if they choose to do so.
○​ Cancel or nullify the contract if they decide it was made under duress.

Undue influence: Vitiation of consent by the abuse of relationship, which is otherwise trust

●​ Undue influence is an equitable doctrine in CML that allows courts to set aside contracts when
duress or fraud doesn't apply, providing a last resort for situations where these traditional legal
principles don’t fit, especially in third-party cases
○​ Undue influence acts as doctrinal tool to target the danger of free decision making that
arises from vulnerability those relationships
■​ Even though it gives presumption of und

What does the court distinguish as the categories of undue influence?

●​ 1. Actual undue influence
○​ You can actually show that you are manipulated, pressured somehow
●​ 2. Presumed undue influence based on relationship of trust and confidence (no need to prove
actual exercise of undue influence))
○​ 2.A certain legal relationships of influence
■​ Some relationships are legally presumed to involve trust and confidence (i.e
parent and child)
○​ 2.B de facto relationships of influence (claimed here)
■​ Applies to relationships where no automatic presumption exists but, in
practice, one party has placed trust and confidence in the other (i.e romantic
relationships)
■​ Just need to show there was certain relationship that brings certain
vulnerability
●​ Certain relationships are so close that you did not need to prove
anything more, just that this relationship existed

CML CVL

Doctrine of Responsibility: Judge will These provisions protect integrity of your choice,
interfere in the CML contract so it is unfair that it and if it turns out that when contract is made, and
shocks the conscience. Similar to 1406 you did not freely exercise autoneum the law will
allow you to do it later on

Art. 1399 (consent)

Atlas Express Ltd. v. Kafko Ltd. Designates that consent must be free and
enlightened. Cannot be vitiated by fear
Kafko contracted with Atlas Express to transport
equipment by a deadline for a set rate, but when Art 1400 - Erreur (Mistake) - Article 1400​
Atlas discovered the cartons were larger than A contract can be voided if one party made a
expected, they demanded a new agreement with a mistake about an essential aspect of the contract,
pre-load fee, which Kafko signed due to lack of such as the subject matter or terms, and that
alternative carriers, though Kafko did not pay the
outstanding amount. mistake led to their consent being flawed.

The court didn’t initially recognize economic Art 1401 -Dol (Fraud) ​
duress, saying coercion only happens when A contract can be voided if one party was
someone has no other choice. However, this idea deceived or tricked into entering it. Fraud involves
is problematic because, even under extreme intentional deceit, such as lying about important
pressure, you still have a choice. Courts later facts to get someone to agree to the contract.
shifted focus to whether the pressure was
illegitimate, rather than whether the person had a Art 1402 & 1403 - Crainte (Fear/Coercion)​
choice at all. A contract can be voided if one party was forced
or threatened into agreeing to it. The fear or threat
Two modifications: (1) Pressure amounts to must be serious enough to cause the party to lose
compulsion of the will (so there is no other their free will and consent.
practical choice); (2) Illegitimacy of the pressure
exerted (i.e is it illegal like a threat of violence?) Art 1405, 1406, 1437, & Article 8 of the
Consumer Protection Act - Lésion (Lesion)​
Greater Fredericton Airport Authority Inc v Lesion refers to situations where one party is
Nav Canada unfairly taken advantage of in a contract, leading
to an imbalance in the agreement. It’s particularly
relevant in contracts where one party’s benefit is
Barclays Bank v O’Brien far greater than the other’s. The Consumer
Protection Act provides additional protections for
consumers against such unfair terms
O'Brien guaranteed his company's debts with his
house as collateral, requiring his wife’s signature, Art 1407 & 1408
but after the bank advised them to seek legal Application for annulment, damages, reduction
advice, he didn’t read the documents and
pressured his wife to sign, misrepresenting the
Art 1417, 1418
terms, leading her to believe the security was
limited to part of the debt. Absolute nullity are cases of illegality. Occurs
when a contract is illegal or violates public policy.
Constructive notice: In such cases, the contract cannot stand because it
●​ Constructive notice is when the law goes against the law or public interest.
treats someone as knowing a fact because
they reasonably should have known it, Art 1419, 1420
even if they didn’t. Relative nullity. Only this person can apply for
●​ The Bank had enough information to nullity of the contract
suspect that the wife would be subject to
undue influence from her husband, and Art 1420, 1423, 1424 - Possibility of
this created a “positive duty” to ensure confirmation
that she entered the contract knowingly If a contract is initially voidable (e.g., due to
and without that undue influence duress or crainte), the person who was forced into
the contract can later choose to confirm it. By
The suretyship is valid except where undue confirming, they accept the contract as valid,
influence occurs, unless the creditor can satisfy making the issue of duress or crainte irrelevant.
that the surety entered the obligation freely and in
knowledge of true facts by informing the surety of Joubert c Lapierre
his/her potential liability and advising her to seek
legal advice Joubert, the employer, decided to change all
employees’ status to independent contractors. He
Bank of Montreal v Duguid threatened not to renew Lapierre’s contract (and
fire him) unless he agreed to sign on to the new
Mrs. D, a real estate agent, acted as surety for Mr. arrangement, which included the purchase of
D’s failed business. BMO didn’t disclose its equipment. Employer argues that he was perfectly
concerns about the financial viability of Mr. D’s in his right to fire him.
business. Mrs. D claims undue influence
Court says that even if you're within your rights,
Did the bank have constructive notice? this is an abuse of rights.
●​ First step: was there a “duty to inquire”?
Yes if:
Art 1402 protects integrity of consent. The only
○​ Transaction on its face not to the
financial benefit of the guarantor thing that matters for these doctrines if that
○​ Substantial risk that a “wrong” freedom of choice was compromised. Even if it
was committed” was good for you. Your free will is what
●​ Second step: if there was such a duty, did matters!
the bank discharge the duty
○​ Did the bank take reasonable
steps to ensure the consent is
Byrne c Trust Prêt et Revenu
given freely?
■​ If the answer is YES. The
contract is enforceable A commits fraud and is suspended by his
even if there is undue employer T, pressures his wife B to help
influence etc in the reimburse T by threatening suicide, and convinces
relationship of the debtor B to sign a hypothec on her home, but B later sues
with a this party for contract nullity based on fear.
■​ If the answer is NO. The
While she may have experienced fear, fear needs
bank is fixed with
to be introduced by the party in the contract. Trust
constructive notice
is a third party. 1402 says if pressure emanates
■​ The contract is not
from a third party, then the second party
enforceable if the
would have to know about it Not that the Trust
reasoning was procured
that had to prove they didn't know. BUT it would
by undue influence (for
be Byrne that proved they Trust had positive
another “wrong”: was
knowledge of her being pressured. But this is
committed” )
what she couldn't prove
The Bank was on constructive notice of the
undue influence risk because:
●​ The transaction was not financially
beneficial for Mrs. D.
●​ The spousal relationship indicated a
potential for undue influence.
 ●​ The Bank failed to take reasonable
steps to ensure Mrs. D's consent was
freely given.

Remedies

CML CVL

Atlas Express Ltd. v Kafko Ltd. Art. 1419 (relative nullity)

Art. 1422: The end of this chain. If you make

use of these rights, then the contract is
deemed to have ever existed

Why might a judge rule relative nullity over absolute nullity of a contract?

A judge might rule relative nullity over absolute nullity of a contract when the contract, although
potentially problematic (e.g., due to duress, fraud, or lack of capacity), does not violate public policy or
the law in a way that would make it entirely unenforceable. Relative nullity allows the affected party to
choose whether to affirm or annul the contract, whereas absolute nullity would make the contract void
from the start, regardless of any party's choice.

WINTER

CML CVL